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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SHRI SAKTIJIT DEY
ORDER The assessee has filed the present appeal challenging the order dated 05.12.2022 passed by National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2011-12.
In ground nos. 1 to 4, the assessee has challenged the validity of the assessment order passed under Section 147/143(3) of the Income- Tax Act,1961. Whereas, in ground nos. 5 to 11, assessee has contested various additions made by the Assessing Officer.
3. Ground nos. 12, 13 and 14 are of general nature.
At the outset, I proceed to decide legal issues raised in ground nos. 1 to 4 challenging the validity of the assessment order.
Briefly, the facts are, the assessee is a resident corporate entity.
For the assessment year under dispute, assessee did not file any return of income under Section 139(1) of the Income-Tax Act,1961
After calling upon the assessee to furnish return of income, the Assessing Officer ultimately reopened the assessment under Section 147 of the Act alleging that in the year under consideration, the assessee had entered into cash transactions exceeding Rs.10,00,000 in a month, resulting in escapement of income.
In response to notice issued under Section 148 of the Act, assessee filed its return of income on 16.03.2015 declaring income of Rs.16,79,349. After calling for various details from the assessee, the Assessing Officer ultimately completed the assessment determining the total income at Rs.45,71,040. The variation between the income declared by the assessee and income determined was due to the following additions:
i) Share premium under Section 68 : Rs.15,00,000 of the Act. ii) Donations : Rs. 2,16,922 iii) Loss on sale of machinery. : Rs. 2,86,619 iv) ROC fee. : Rs. 2,60,140 v ) Service tax demand : Rs 13,668 vi ) Additional sales-tax : Rs. 12,783 vii) Written claim of depreciation : Rs. 6,01,556
Against the assessment order so passed, assessee preferred an appeal before learned Commissioner (Appeals), inter alia, challenging the validity of the reopening of assessment under Section 147 of the Act. While deciding the appeal, learned Commissioner (Appeals) upheld the validity of the assessment order. As regards, the merits of the additions made, learned Commissioner (Appeals) granted partial relied to the assessee.
Before me, drawing my attention to the reasons recorded for reopening of assessment, learned counsel submitted that there is no live link between the material available with the Assessing Officer and formation of belief. He submitted, though, the Assessing Officer has stated that the assessee has entered into cash transactions exceeding Rs.10,00,000, however, he has neither referred to specific information available with him or the nature of transaction. Further, he submitted, in the reasons recorded, the Assessing Officer has referred to three different assessment years. Thus, he submitted, the reasons recorded shown complete non-application of mind by the Assessing Officer.
Proceeding further, he submitted, though, the Assessing Officer reopened the assessment alleging cash transactions of exceeding Rs.10,00,000 in a month, however, while completing the assessment, the Assessing Officer has not made any such addition. Thus, he submitted, without making the addition for which the assessment was reopened, the Assessing Officer cannot make any other addition. He submitted, prior to reopening of assessment, the Assessing Officer has commenced regular assessment proceedings by issuing notices under Section 142(1) of the Act. He submitted, when the time limit for completion of regular assessment under Section 143(3)/144 of the Act has not expired, Assessing Officer could not have initiated proceeding under Section 147 of the Act. In other words, he submitted, the Assessing Officer could not have initiated two parallel proceedings. In support of his contention, learned counsel for the assessee relied upon the following decisions: i) Medapati Venkayamma Vs. ITO, ITA No.252(Vizag.) of 2013 (ITAT Visakhapatnam) decided on 18.08.2017; ii) Sushil Kumar Jain v. ACIT, decided on 24.06.2016 (Delhi-Trib); iii) CIT vs. Cheil Communication India Pvt. Ltd., ITA No.578/2012 date of oder 17.04.2013 reported as (2013) 354 ITR 0549 (Delhi) –(2013) 259 CTR 0296(Del.); iv) Ranbaxy Laboratories Ltd. vs. CIT (2011) 336 ITR 136 (Del.) – (2011) 242 ITR117.
Learned Departmental Representative relied upon the observations of learned Commissioner (Appeals).
I have considered rival submissions and perused the material on record.
The reasons recorded by the Assessing Officer for reopening of assessment, a copy of which is placed at page 5 of the paper book, reads as under:
“1. As per the information downloaded from I-Taxnet the assessee has entered into cash transaction exceeding Rs.10,00,000 in a month. As verified from the ITD application the assessee has not filed return of income for the F.Y.2010-11, relevant to A.Y. 2011-12. 2. In the absence of any return of income for the A.Y 2010- 11, it is clear that the above referred cash transaction is from unaccounted and unexplained sources.
In view of the above discussion factual matrix, additional information downloaded from I-Taxnet, I have reason to believe that income of Rs.10,00,000/- chargeable to tax has escaped assessment for A.Y. 2008-09, within the meaning of section 147 of the Income-Tax Act, 1961.”
A reading of the reasons recorded would show that the Assessing Officer on the basis of information down loaded from the system of the department found that in the year under consideration, the assessee had entered into cash transaction exceeding Rs.10,00,000 in a month.
The Assessing Officer has not elaborated in the reasons recorded, what is the nature of information received and what is the nature of cash transaction, whether, deposits in any bank account, cash purchases, cash receipts etc. Further, in the reasons recorded, the Assessing Officer has referred to three different assessment years in three paragraphs. While, in paragraph 1, he has referred to assessment year 2011-12, in paragraph 2, he has referred to assessment year 2010- 11 and finally in paragraph 3, he has formed a belief that income of Rs.10,00,000 chargeable to tax has escaped assessment for assessment year 2008-09. Thus, the reasons recorded make it amply clear that the Assessing Officer has acted mechanically and without application of mind to the facts and material on record. Such lackadaisical approach for reopening of assessment under Section 147 of the Act cannot be condoned. For this reason alone, the reopening of assessment under Section 147 of the Act has to be declared invalid as there is no nexus between the information available with the Assessing Officer and formation of belief. Thus, the assessment order has to be declared invalid. Accordingly, I do so.
Even otherwise also, the additions made in the assessment order are unsustainable for the reasons discussed infra. As observed earlier, the Assessing Officer reopened the assessment for cash transaction of Rs.10,00,000 having escaped assessment. Whereas, while completing the assessment, though, the Assessing Officer has made various additions, however, he has not made any addition on account of alleged cash transaction for the escapement of which the Assessing Officer reopened the assessment under Section 147 of the Act. It is fairly well settled, in a proceeding under Section 147 of the Act, the Assessing Officer cannot make any other addition without making addition of the escaped income for which the assessment was reopened. In this context, I place reliance on the following decisions:
i) Medapati Venkayamma Vs. ITO, ITA No.252(Vizag.) of 2013 (ITAT Visakhapatnam) decided on 18.08.2017; ii) Sushil Kumar Jain v. ACIT, decided on 24.06.2016 (Delhi-Trib); iii) CIT vs. Jet Airways (I) Pvt. Ltd. (2011) – 331 ITR 236 (Bom.).
14. Thus, applying the ratio laid down in the aforesaid decisions, the additions made cannot be sustained. Therefore, in the ultimate analysis, I quash the impugned assessment order. Resultantly, the order passed by learned Commissioner (Appeals) is set aside.
In the result, the appeal is allowed, as indicated above. Order pronounced in the open court on 17th February, 2023.