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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
Before: SHRICHANDRA MOHAN GARG, JUDICIAL & LAXMI PRASAD SAHU & LAXMI PRASAD SAHU & LAXMI PRASAD SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI SHRICHANDRA MOHAN GARG, JUDICIAL JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA No.57/CTK/2008 Assessment Year : 2001-02 M/s. Exim India Oil Company M/s. Exim India Oil Company Vs. DCIT, Circle 1(1), DCIT, Circle 1(1), Ltd., At: N.H.5, Tiberwal Nagar, Ltd., At: N.H.5, Tiberwal Nagar, Cuttack Jagatpur, Cuttack Jagatpur, Cuttack An No.AAACE 3929 An No.AAACE 3929 K (Appellant) (Appellant .. ( Respondent Respondent) Assessee by : Shri B.K.Tibrewal,, AR , AR Revenue by : Shri M.K.Gautam, CIT DR DR Date of Hearing : 12 /3/ 2021 Date of Pronouncement : 10/5/20 /2021 O R D E R Per Bench This is an appeal filed by the assessee against the order of the This is an appeal filed by the assessee against the or This is an appeal filed by the assessee against the or CIT(A), Cuttack dated 24.10.2007 CIT(A), Cuttack dated 24.10.2007 for the assessment year for the assessment year 2001-02.
This appeal was disposed appeal was disposed of by the Tribunal on 16.5. of by the Tribunal on 16.5.2017 on the ground that the assessee was default in appearing before the Tribunal at ground that the assessee was default in appearing before the Tribunal at ground that the assessee was default in appearing before the Tribunal at the time of hearing as well as for want of condonation petition for delay of the time of hearing as well as for want of condonation petition for delay of the time of hearing as well as for want of condonation petition for delay of 1415 days. However, the appeal was recalled for fresh hearing vide order 1415 days. However, the appeal was recalled for fresh hearing vide order 1415 days. However, the appeal was recalled for fresh hearing vide order dated 15.11.2019. dated 15.11.2019. As per office note, the appeal is time barred by 1415 As per office note, the appeal is time barred by 1415 days. Vide application dated 12.12.2019, the assessee has furnished the days. Vide application dated 12.12.2019, the assessee has furnished the days. Vide application dated 12.12.2019, the assessee has furnished the
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reasons in reply to the notice issued by the Registry regarding condonation of the delay in filing the appeal.
We have heard the rival submissions and perused the petition. Ld CIT DR agreed to the fact that the impugned first appellate order was passed by the Ld. CIT(A) on 24.10.2007 and served on the assessee on 29.12.2007. The appeal to the Tribunal has been presented within the prescribed time period of two months i.e. on 20.2.2008 but with a short payment of appeal fees. The Registry issued a defect notice to the assessee to deposit the balance fees to the Tribunal. It is the prayer of the assessee appeared in person that such defect of short fees payment occurred due to acute financial stringency of the appellant company as the same was completely paralyzed due to huge financial losses and the company was under liquidation. However, the assessee has deposited the deficit appeal fees belatedly with many difficulties; therefore, the payment of fees does not make appeal time barred especially when the defect has been rectified by way of submitting proof of payment of complete fees.
In view of above, we are of the considered opinion that this appeal has been filed by the assessee within the prescribed time period and there is no delay in filing the appeal before the Tribunal. The payment of short fee cannot be a ground for alleging the appeal as time barred. Therefore, the application of the assessee is disposed of by holding that this appeal has been filed by the assessee within the time limit and there is no delay. P a g e 2 | 12
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The assessee has raised the following grounds:
“A. That the re-opening of assessment based on a suggestion of the Learned C.I.T.(A) to modify the defect of the Learned Assessing Officer while deciding another Appeal of the Appellant. There is no independent exercise of judicial mind of the Assessing Officer and the Learned Commissioner has also confirmed the said action, therefore both the orders are glaring examples of non-application of mind and liable to be quashed on this ground only. B. There is no fresh materials available before the Learned Assessing Officer to reopen the assessment under section 147 of the Act and the entire re-opening process is an afterthought against the Acts and Rules made thereunder, therefore not sustainable. C. That the Learned Assessing Officer as well as the Learned C.I.T.(A) have properly verified the unpaid liability of Sales Tax amounting to Rs.51.,44,508.00 under section 43B of the Act by confirming the said figure arising out of an a of rectification under section 154 of the Act, therefore the additional is not sustainable. D. That both the authorities by following the rectification order under section 154 of the Act have also added and confirmed Rs.51,36,150.00 on account of alleged excess claim of depreciation of under ground Storage Tank and Empty Barrels whereas the Appellant is entitled for 100% depreciation but both the authorities restricted the same to 25% under a wrong impression, therefore depreciation should be allowed as claim.” Ground Nos.A & B
On behalf of the assessee, Shri B.K.Tiberwala, Managing Director of the company appeared in person and drew our attention towards Ground No.A & B. He submitted that there is no independent exercise of judicial mind by the Assessing Officer and the ld CIT(A) confirmed the said action. Therefore, the orders of lower authorities are glaring example of non- application of mind and liable to be quashed on this count. He submitted
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that there was no fresh or tangible materials available before the AO to reopen the assessment and initiate reassessment proceedings u/s.147 of the Act and the entire reopening process u/s.147 of the Act and issue of notice u/s.148 of the Act is an afterthought against the Acts and Rules made thereunder, therefore, not sustainable and deserves to be quashed.
Replying to above, ld CIT DR placing reliance on the judgment of Hon’ble Supreme Court in the case of CIT vs. Rajesh Jhaveri Stock Brokers Pvt Ltd. (2007) 291 ITR 500 (SC) and submitted that taxing income escaping assessment in the case of an intimation under section 143(1)(a) is covered by the main provision of section 147 as substituted w.e.f April 1, 1989 and initiating reassessment proceedings in the case of intimation would be covered by the main provision of section 147 and not the proviso thereto. Ld CIT DR further submitted that only one condition has to be satisfied. Failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings when intimation under section 143(1) has been issued. Further, placing reliance on the order of ITAT Delhi Bench ‘A’ in the case of Hanemp Properties Pvt Ltd., vs ACIT (2006) 101 ITD 19 (Delhi), ld CIT DR submitted that in a case provisions of section 150 were attracted, no limitation of time is applied as provided under section 149 of the Act. Ld CIT DR also referred to the decision of Hon’ble Supreme Court in the case of DCIT Vs. Zuari Estate Development & Investment Co. Ltd, 373 ITR 661 (SC).
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The main bone of contention of ld CIT DR supporting the initiation of reassessment proceedings u/s.147 of the Act and issuance of notice u/s.148 of the Act are precisely as under:
i) In a case where assessment has not been made u/s.143(3) of the Act and only an intimation u/s.143(1)(a) of the Act has been issued, then the AO will not render powerless to initiate reassessment proceedings. ii) In a case where proceedings u/s.150 of the Act are attracted, no limitation period (for initiation of reassessment proceedings u/s.147 of the Act and issuance of notice u/s.148 of the Act as prescribed u/s.149 of the Act) is applied. 9. It is true that no assessment order is passed when the return of income is merely processed u/s.143(1) of the Act and an intimation to that effect is sent to the assessee. This situation has been considered by Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt Ltd (supra) by holding that even where proceedings under section 147 are sought to be taken with reference to an intimation framed earlier under section 143(1) of the Act, the ingredients of section 147 have to be fulfilled; the ingredients is that there should exist ‘reasons to believe’ that income chargeable to tax has escaped assessment to that assessment has to be fulfilled. In this judgement, Their Lordships speaking for Hon’ble Supreme Court categorically held that this provision does not provide a blanket power to the AO to disturb the finality of the intimation under section 143(1) at
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his whims and caprice and he must have reasons to believe within the meaning of the section. In absence of any tangible material, there will be a review in guise of reopening, which is not permissible as per subsequent decision of Hon’ble Supreme Court in the case of CIT vs Kelvinator of India Ltd., 320 ITR 562 (SC), wherein, it was observed that after 1.4.1989, the AO has power to reopen the assessment provided there is ‘tangible material’ to come to the conclusion that there is escapement of income. In this judgment, Hon’ble Supreme Court has also pressed into service two more aspects that there can be no review of an assessment in the guise of reopening and that a bare review without any tangible material would amount to abuse of the power. In the present case from the Ground Nos.A & B and arguments advanced by Shri Tiberawal, we are unable to see any contention that in a case where intimation u/s.143(1) has been issued, no initiation of reassessment u/s.143(3) is not permitted. At the same time, we clearly observe that the main bone of contention is that there was no independent exercise and application of judicial mind by the AO and there was no fresh tangible material available before the AO to reopen the assessment u/s.147 of the Act and thus, the reassessment process is an afterthought and against the provisions of the Act and Rules made thereunder. Therefore, same is not sustainable and deserves to be quashed.
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As agreed by both the sides, no copy of satisfaction note is available on record nor in the respective files of the ld representative of parties. Both the sides have agreed that the AO at page 3 of the assessment order dated 29.12.2006 has reproduced the satisfaction note, which reads as follows:
“The assessee company filed its return of income alongwith audited account disclosing total income of Rs.4,54,680/-. The return was processed u/s.143(1)(a) of the I.T.Act, 1961. While processing the return, it was found that the assessee has not computed its total income as per provisions of section 115 JB of the I.T.Act, 1961 and paid taxes accordingly. Therefore, prima facie, adjustment of Rs.48,53,607/- was made U/S.115JB of the Act and charged tax accordingly. Being aggrieved with this adjustment, the assessee preferred appeal before the CIT(A). While disposing off the appeal, the Learned CIT(A) although deleted the prima-facie adjustment due to procedural mistake appreciated the ! escapement of income and loss of revenue and observed that "However, the suitable course of action available to the assessee under the Act is application of Provisions of Section 147 of the I.T.Act as the appellant has understated its income by not applying the Provisions of Section 115JB of the I.TAct. In view of the above, the Assessing Officer had reason to believe that income chargeable to tax in this case escaped assessment within the meaning of Section 147 of the Act by not applying the provisions of Section 115JB of the I.T.Act.” 11. From the above satisfaction note, it is clearly discernible that initiation of reassessment proceedings has been made by the AO by alleging that the return was processed u/s.143(1)(a) of the Act but while processing, the assessee has not computed the income as per the provisions of section 115JB of the Act and paid tax accordingly. Therefore, prima facie, adjustment of Rs.48,53,607/- u/s.115 JB and charged tax accordingly. Being aggrieved by this, the assessee preferred appeal and the ld CIT(A)
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has deleted the addition due to procedural mistake and also appreciated the escapement of income and loss of revenue and observed that “however, the suitable course of action available to the assessee under the Act is application of provisions of section 147 of the I.T.Act as the appellant has understated its income but not applying the provisions of section 115JB of the I.T.Act. It is ample clear that there was no fresh or new tangible material before the AO which was not before him during processing of return u/s.143(1)(a) of the Act. We are in agreement with the contention of ld CIT DR that in this case, the direction issued by ld CIT (A) while deleting the addition and on procedural mistake, he has directed the AO to take suitable course available to him u/s.147 of the Act. Therefore, the limitation as prescribed u/s.149 of the Act for initiation of proceedings u/s.147 of the Act and issuance of notice u/s.148 of the Act does not apply but it is not the case of the appellant/assessee in the present appeal that the initiation of reassessment proceedings is time barred. Therefore, the proposition rendered by ITAT Delhi in the case of Hanemp Properties Pvt Ltd (supra) does not provide any fruitful support of the revenue in the peculiar facts and circumstances of the legal contention and grounds of the assessee in the present case. 12. So far as proposition rendered in the case of Rajesh Jhaveri Stock Brokers Pvt Ltd (supra) is concerned, definitely, the Hon’ble Supreme Court has clearly rendered the proposition that in a case where after processing
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the return of income, an intimation u/s.143(1)(a) has been issued by the department then also, the AO is debarred or precluded to initiate proceedings u/s.147 of the Act but Hon’ble Supreme Court also provided a condition that he must have reason to believe within the meaning of section 147 of the Act based on new tangible material which was not before the AO during processing of return of income u/s.143(1)(a) of the Act, otherwise, there will be a review in guise of reopening. In the subsequent judgement, Hon’ble Supreme Court in the case of Kelvinator of India Ltd (supra), the Hon’ble Supreme Court has categorically held that after 1.4.1989, the AO has power to reopen the assessment provided there is ‘tangible material’ to come to the conclusion that there is escapement of income. At the cost of repetition, we may also point out that the Hon’ble Supreme Court in the case of Kelvinator India Ltd (supra) also directs that there can be no review of an assessment in the guise of reopening and a bare review without any tangible material would amount to abuse of the power. 13. The Hon’ble Supreme Court in the case of Zuari Estate Development & Investment Co. Ltd(supra) has not disturbed the decision of Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt Ltd (supra) but in fact, makes a specific reference to its decision to hold that where assessment has been completed by intimation u/s.143(1) of the Act, there can be no question of change of opinion. We also find that Hon’ble Apex Court in Zuari Estate Development
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& Investment Co. Ltd (supra) has not dealt with the issue whether before invoking section 148 of the Act, the AO must have reason to believe that income chargeable to tax has escaped assessment, where original assessment has been completed by intimation u/s.143(1) of the Act. Therefore, we observe that the Apex Court has come to the conclusion that there is reason to believe that income had escaped assessment and consequently, restored the matter to the Tribunal to decide the reassessment proceedings afresh.
But in the present case, from the reasons recorded by the AO before initiating reassessment proceedings u/s.147 of the Act and issuance of notice u/s.148 of the Act, we are unable to see any tangible material in the hands of the AO which was not before him at the time of processing return of income u/s.143(1)(a) of the Act. Therefore, the provisions rendered by Hon’ble Supreme Court in the case of Kelvinator of India Ltd (supra) is applicable in favour of the assessee and consequently, we hold that the AO proceeded to initiate reassessment proceedings u/s.147 of the Act and issuance of notice u/s.148 of the Act without any new tangible material and without application of mind merely on the strength of direction of Ld CIT(A) that the suitable course of action available to the AO under the Act is application of provisions of section 147 of the I.T.Act as the appellant has understated its income by not applying the provisions of section 115 JB of
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the I.T.Act. But there was no new or tangible material before the AO to initiate reassessment proceedings u/s.147 of the Act. 15. From the reasons recorded by the Assessing Officer, as reproduced in para 10 of this order (supra), we clearly see that in the first para, the AO has mentioned the facts and noted that the ld CIT(A) has deleted the prima facie adjustment due to procedural mistake and thereafter reproduced the observation of the ld CIT(A) . In the second para of the reasons, he directly jumped to note that the AO had reasons to believe that income chargeable to tax in this case escaped assessment within the meaning of section 147 of the Act. From the reasons, we are unable to see application of mind by the AO of the materials available before him. The AO has not recorded any basis or factum gathered by him after application of mind of the assessment already completed which could reflect that before initiation of reassessment proceedings u/s.147 of the Act, he applied his mind and thereafter reached to a conclusion that he had reasons to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act empowering him to issue notice u/s.148 of the Act. Therefore, we have no hesitation to hold that the application of mind and reason to believe are absent in the satisfaction note recorded by the AO before initiation of reassessment proceedings u/s.147 of the Act and issuance of notice u/s.148 of the Act.
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Accordingly, Ground No.A & B of the assessee are allowed and the reassessment proceedings u/s.147 of the Act are quashed. 17. As we have quashed the reassessment proceedings u/s.147 of the Act while deciding Ground Nos.A & B, other grounds taken by the assessee on merits have become infructuous. 18. In the result, appeal of the assessee is allowed.
Order pronounced under rule 34(4) of I.T.Rules on 10/5/2021.
Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 10 /5/2021 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : M/s. Exim India Oil Company Ltd., At: N.H.5, Tiberwal Nagar, Jagatpur, Cuttack 2. The Respondent. DCIT, Circle 1(1), Cuttack 3. The CIT(A)-, Bhubaneswar 4. Pr.CIT-, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//
By order
Sr.Pvt.secretary ITAT, Cuttack
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