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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM & SHRI S RIFAUR RAHMAN, AM
आदेश / O R D E R Per Amit Shukla, Judicial Member:
The aforesaid appeal has been filed by the Assessee against order dated 09.01.2016, passed by Ld. CIT (Appeals)- 36, Mumbai for the quantum of assessment passed u/s 143(3) r.w.s. 147 of the Act, for the AY: 2008-09.
AJABNARAYAN PANDEY LL 2. In the grounds of appeal the assessee has mainly challenged the validity of re-opening u/s. 147.
Facts in briefs are that, the assessee is an individual carrying out business from his two proprietorship concerns, in the name and style of ‘A.S. Pandey and Company’; and ‘M/s. Pankaj Traders’. Assessee is into business of distribution rights of movies, serials, etc. and selling it to respective clients and from other proprietor concern he was doing business of trading in paints. For the assessment year 2008-09 Return of income was filed on 16.09.2008 at an income of Rs. 5,77,256/-. The return of income was selected for scrutiny and assessment order 143(3) was passed assessing the income at Rs. 6,42,982/- vide order dated 24.12.2010.
Subsequently, assessee against was re-opened u/s 147by issuance of notice u/s. 148 on 28.03.2013, on the following reasons recorded.
In this case, the return of income was filed on 16.09.2008 declaring total income of Rs. 5,77,255/- and the assessment was completed u/s 143(3) vide order dated 24.12.2010, determining taxable income at Rs. 6,42,982/-.
AJABNARAYAN PANDEY LL It is observed from the record that the assessee follows cash system of accounting and have received an amount of Rs.89,30,396/- from M/s Hathway cable & Datacom pvt ltd out of which the assessee has offered only amount of Rs.83,68,698/ Accordingly I have reasons tobelieve that an amount of Rs.5,61,703/- (89,30,396-83,68,698) have escaped assessment. It is further observed from the balance sheet the assessee have shown amounts payable to Bawaja movies pvt ltd Rs. 74,715/- Zee entertainment pvt ltd Rs. 7,94,185/- and Vyakti vikas Kendra Rs.26,600/- as on 31.03.2008. Since the assessee follows cash system of accounting and have not incurred these expenses during the year, the same cannot be claimed and this requires to be examined as the amount to the extent of Rs.8,94,960/- have escaped assessment. It is observed that the assessee has shown VAT payable of Rs.3,35,726/- and Rs.2,70,000 in its proprietary concerns M/s A.S.Pandey & Co. and M/s Pankaj Traders respectively Since the assessee follows cash system of accounting the same is allowable on actual payment as per provisions of section 438 of the Act. The same requires to be examined as failure to do so have resulted in escapement of income of Rs. 5,05,726/- It is observed from the profit & loss account and balance sheet the assessee has shown audit fees of Rs. 15,000/- and TDS on commission Rs. 1,77.577/- outstanding as on 31 03.2008.
AJABNARAYAN PANDEY LL Since the assessee follows cash system of accounting, the same should have been disallowed. Accordingly an income of Rs.1,92,577/- have escaped assessment. From the details submitted it is observed that the assessee have spent an amount of Rs.67,016/- in cash on account of business promotion. As per provisions of sec 40A(3) of the Act, any expenses exceeding Rs. 20,000/- is to be incurred by of crossed cheque. Failure to do entails disallowance of 20% of such expenses claimed, which have not been done by the assessment order. In view of the same an amount of Rs. 13,403/- have escaped assessment on this account. The assessee have not deducted TDS on purchases made from H.R. Enterprises Rs.3,18,336/- and Mateshwari Rs.3,20,000 event hough these purchases pertain to movie/ TV serial rights. The assessee have also failed to deduct TDS on payments made to M/s Global Video Vision amounting to Rs. 1,55,900/- in respect of conversion / transfer of recording of serial "Prema" from "Avid" format to "DG-BETA" Failure to do so have resulted in escapement of income amounting to Rs. 6,38,336/- and Rs.1,55,900/- respectively.
The Ld. AO, during the course of assessment proceedings had proceeded to make addition on the account of amount shown as payable to 3 parties as on 31.03.2008, totaling to Rs. 8,94,960/- and observed that since assessee follows cash system of accounting
AJABNARAYAN PANDEY LL and only purchases which has been paid during the year can be allowed as expenses not which are payable. Accordingly, amount of Rs. 8,94,960/- was disallowed and added back to the income of the Assessee. He further, made addition of Rs. 2,70,000/- u/s. 43B on account of late payment of VAT on the ground of assessee was not paid or incurred any expenditure. Apart from that, he was also made addition on account of audit fees of Rs. 15000/- and TDS & commission of Rs, 1,77,577/- shown as payable aggregating to Rs. 1,92,577/-. All the addition has been made on the premise by the AO that the assessee was following cash system of accounting therefore any sum payable cannot be allowed.
Apart from that, AO has also made disallowance u/s. 40A (3), of Rs. 13,403/-for some cash payments; disallowance of prior period expenses relating to purchases of Rs. 6,38,336/-; addition on account of non deduction TDS of Rs. 1,55,900/- and lastly, addition account of sales of Rs. 5,61,703/- stating that assessee follows cash system of accounting and when assessee has received amount of Rs. 89,30,396/- from Hatchway Cable and Datocom. P. Ltd. out of which assessee has offered amount of Rs. 83,68,693/-,
AJABNARAYAN PANDEY LL accordingly the difference has been added by him. Finally, the assessment has been the completed the income of Rs. 36,39,860/-.
Before the Ld. CIT (A) assessee has challenged the validity of reopening u/s. 147 on various grounds which has been rejected for the Ld. CIT(A), holding that Assessing Officer has followed the proper procedure of law and the reopening has been done on the basis of material available with him showing the under assessment of income and he referred to judgment Hon’ble Gujarat High Court in the case of Praful Chunnilal Patel Vs. ACIT, 236 ITR 832 (GUGO Gujarat).
None appear on behalf of the assessee and therefore, appeal is being decided on the basis of material available on record and the paper book filed by the Assessee.
Since, assessee has only challenged the validity of reopening and, therefore we are confining our decision only on the validity of reopening u/s. 147.
As discussed above, already assessment u/s. 143(3) was made by the AO while order dated 24.12.2010, wherein assessee’s audited
AJABNARAYAN PANDEY LL accounts and return of income have been accepted after details scrutiny. The case has been reopened u/s.147 mostly on the ground that, assessee follows cash system of accounting and certain amounts which has been received by the assessee has not been reflected completely; and secondly, there were certain amounts payable in the balance sheet which is not allowable, because of cash system of accounting. Apart from that, certain amount on VAT payable has been made by invoking provision u/s.43B and other items as discussed above. First of all, ‘reasons recorded’ nowhere refers as to what was the material coming on record before the AO indicating that any income chargeable to tax has escaped assessment or there is any tangible material coming after the completion of assessment on the points which has been raised in the reasons recorded have not been examined by the AO during the scrutiny proceedings. If, all these items of balance sheet and profit & loss account have been examined by the AO, which is evident from the copy of notices appearing in the paper book at the page of 73-75 and reply of the assessee from pages 76-86, wherein all the explanation regarding the same very items as raised in the reasons recorded has been asked by the AO and Assessee has given
AJABNARAYAN PANDEY LL categorical explanation along with the supporting documents. Once the same very issue has been dealt and inquired upon by the AO and same has been accepted, then without any tangible material coming on record reopening cannot be done on the same facts and material which tantamount to ‘change of opinion’. The assessee has also explained before the AO regarding the differences in the amounts of purchase which was shown in the current year was pertaining to the purchases of the previous year and all these facts and re conciliation was given before the AO. Similarly, with regard to payment of VAT also assessee has given the vouchers of payments. Each and every item of income which has been discussed in the reasons recorded has been duly explained not only in the course of assessment but also in the course of re assessment proceedings. Accordingly, we find that the reasons recorded by the AO is based on ‘change of opinion’ which cannot be sustained and therefore, entire reassessment proceedings is quashed and consequently the assessment order passed by the AO u/s 147/143(3) is held as bad in law.
Accordingly, appeal of the assessee is allowed.
AJABNARAYAN PANDEY LL Orders pronounced in the open court on 24th March, 2023.