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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
O R D E R This is an appeal filed by the revenue against the order of the ld against the order of the ld CIT(A), NFAC, Delhi , NFAC, Delhi dated 12.10.2023 in Appeal No. in Appeal No.NFAC/2012- 13/101106735 13/101106735 for the assessment year 013-14.
2. The revenue has raised the following ground: revenue has raised the following ground: “Whether in the facts and circumstances of the case and in law, the “Whether in the facts and circumstances of the case and in law, the “Whether in the facts and circumstances of the case and in law, the ld CIT(A) is justified in holding that the case of the assessee is not ld CIT(A) is justified in holding that the case of the assessee is not ld CIT(A) is justified in holding that the case of the assessee is not failing in any one of the five categories as mentioned in CBDT failing in any one of the five categories as mentioned in CBDT failing in any one of the five categories as mentioned in CBDT Notification Notification No.25/40./221/ITBA dated 4.3.2021 to issue notice No.25/40./221/ITBA dated 4.3.2021 to issue notice P a g e 1 | 12
C.O.No.1/CTK/2024 Assessment Year : 2013-14 u/s.148 of the Act, which is contrary to the fact that the case is well within the scope of the referred Board’s notification dated 4.3.2021. 3. The assessee has also filed cross objection in support of the order of the ld CIT(A), raising the following grounds:
“1. For that, the appeal filed by the ITO, Phulbani Ward, Phulbani is devoid of any merit, the ld CIT(A) has rightly quashed the order of reassessment and allowed the appeal of the assessee, as such, the appeal filed by the revenue, being not sustainable in the eye of law, needs to be dismissed in the interest of justice.
For that, when CBDT, vided its instruction dated 4.3.2021 has restricted the reopening of assessment by putting certain conditions and since the case of the respondent is not coming within these conditions, the ld CIT(A) has rightly allowed the appeal of the assessee and quashed the order of reassessment. The CBDT circular being binding on the AO, he has no power and authority to file this appeal against the CBDT circular. As such the appeal filed by him being not maintainable in the eye of law, needs to be dismissed in the interest of justice.
For that since the total quantum of addition in this appeal is of Rs.10,07,414.00 only, it being within the monetary limit, the present appeal filed by the ITO, Phulbani Ward, Phulbani is not maintainable in the eye of law, hence needs to be dismissed in the interest of justice.
4. For that, when the assessee/respondent has made a true and full disclosure of facts at the time of filing of return and regular assessment has been completed u/s.143(3) of the Act, vide order dated 18.1.2016, the impugned initiation of reassessment proceeding after four years from the relevant assessment year, being based on change of opinion in absence of any new tangible material is not sustainable in the eye of law. The ld CIT(A) has rightly quashed the order of reassessment, as such, the present appeal filed by the revenue is not sustainable in the eye of law, hence needs to be dismissed in the interest of justice.”
Shri S.C.Mohanty, ld Sr DR appeared for the revenue and S/Shri P.K.Mishra/Himanshu Jena, ld ARs appeared for the assessee.
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C.O.No.1/CTK/2024 Assessment Year : 2013-14
5. It was submitted by ld Sr DR that there was audit objection in the case of the assessee for the relevant assessment year, wherein, it was mentioned that the shortage as mentioned by the assessee in its records was far higher than the possible and probable shortages as per the notification issued by the Government of India, Department of Petroleum & Natural Gas vide dated 25.9.1990. It was the submission that the total sale of petrol was to the extent of Rs.15,24,210 ltrs and the assessee had shown shortage of 15,478 ltrs, whereas as per the notification, the permissible shortage was only 10,045 ltrs, thus resulting in a difference of 5432 ltrs. In respect of HSD, the total sales was 29,70,411 ltrs and the shortage was shown 18,970 ltrs but the permissible shortage as per the per notification was 6,240 ltrs, thus, there has been excess shortage of 12,729 ltrs. It was the submission that on the basis of revenue audit objection, the Assessing Officer had initiated reassessment proceedings and had completed the assessment bringing to tax the amount of Rs.10,07,414 representing the difference in the valuation of closing stock on account of excess shortages claimed. It was the submission that on appeal, the ld CIT(A) had quashed the reassessment proceedings holding that the conditions for the purpose of reopening as mentioned in the CBDT instruction in F.No.225/40/221/ITA-II dated 4.3.2021 as has been extracted by the CIT(A) in para 13 of his order did not provide for the reopening as the assessee’s case do not fall in any of those conditions. It was the submission that the assessee’ case clearly falls
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C.O.No.1/CTK/2024 Assessment Year : 2013-14 within the first clause of the said instruction being a case where there are audit objections, requires action u/s.148 of the Act. It was the submission that the order of the ld CIT(A) is liable to be reversed. It was the submission that on merits, the ld CIT(A) had not given any findings because he had already held that the reopening was invalid. It was the submission that as the reopening was within the conditions provided, the order of ld CIT(A) is liable to be reversed.
In reply, ld AR referred to the revenue audit objection, which reads as follows:
“Office of the Dy.Director General of Audit (Central)Receipt- Bhubaneswar. Income Tax Revenue Audit(ITRA) Bhubaneswar-751001 AG’s Office complex, Sachivalay Marg, Bhubaneswar, Odissa, India
To Shri H.K.Swar, ITO, Ward, Phulbani. Odisha Audit Memo Audit Memo No.BBN/IT/008/018-19 Title : Other topics. (A) Assessee Tax Type Income tax Name of the assessee Narsingh Dash AGrawala & Sons
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C.O.No.1/CTK/2024 Assessment Year : 2013-14
PAN AABFN 8100F Status Firm Nature of business 0113-Petrolum and Petrochemical (manufacturing) B) Income Tax Department Assessment year 2013-14 Date of filing of return 23.9.2013 Under section assessment made 143(3) Return of income/loss Rs.10,54,170 Assessment income/Loss Rs.11,90,340 Tax Effect Rs.4,16,490 Order & date Scrutiny dated 18.1.2016 Internal audit party No Observation relates to Oth/NA Observation The assessee Firm deals in retail trading of petro, diesel and petroleum product. The return of income was e-filed for the year 2012-13 relevant to the Assessment Year (A.Y.) 2013-14 on 23.09.2013 disclosing total income at Rs. 10,54,1701-.The case was selected for complete scrutiny under CASS reasons that low Net Profit or Loss shown from large gross receipts. Scrutiny assessment u/s 143(3)was completed on 18.01.2016. The AO had determine taxable income at Rs11,90,340 and net demand of Rs 57,000 was raised vide CD & CR No.lll-03/2015-16. Section 143(3) provides that AOs have to determine and assess the income correctly. Different types of claims together with accounts, records and all documents enclosed with the return are required to be examined in details in every scrutiny assessment. CBDT has also issued instructions from time to time in this regard. . Govt of lndia Deptt of Petroleum &Natural Gas Notification issued in Gazette of lndia extraordinary dated 25.09.1990 and published in the Orissa Gazette by Govt of Odisha Food & Supplies Deptt Notification No 36286-PLIC 4/90 dated 05.12.90 laid down percentage of allowability of evaporation handling losses etc at @0.75o/o for Petrol and @0.25%'for
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C.O.No.1/CTK/2024 Assessment Year : 2013-14
HSD up to 600 Kltrs and for more than 600 Kltrs @0.60% in case of petrol, @0.20o/o in case of HSD. Audit Scrutiny of Assessment record revealed in statement of purchase and sale of petrol and HSD submitted by the assessee it was found that the assessee had claimed excess shortage in respect of Petrol & HSD claim which has been shown in the table below: [During the course of assessment the Assessee had submitted the details of closing stock as on31.03.2013. as given below: Item Total Shortag Shortage Differenc Valued as per sales e as per as audit e rate taken for assesse computation of e closing stock by A Petro 15,4,219 15,478 10,045.2 5,432.74 3,60,136 l ltrs ltrs 6 (543.74x66.29) HSD 29,70,41 18,970 6,240.8 12,729.1 (12729.17x50.85 1 ltr ltrs 7 ) Total 10,07,414 (During the course of assessment, the assessee had submitted the details of closing stock as on 31.3.2013 as given below: Sl.No. Item Qty. rate Amount 1. Petrol 9994 66.29 6502.26 2. HSD 10738 50.85 546027.30 ln view of the above table the excess shortage valuing Rs 10,07,414 /- claimed on sale of petrol and HSD by the assessee was to be disallowed and added back to total income. Omission resulted in under assessment of income involving short levy of tax as computed below: Computation of tax liability As per audit As per AO Difference Assessed income as per 11,90,340 11,90,340 - order u/s.143(3) dt.18.1.20167 Add: as discussed above 10,07,414 - 10,07,414 Total income 21,97,754 11,90,340 10,07,414 Or 21,97,750 Tax on above 6,59,325 3,57,10
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C.O.No.1/CTK/2024 Assessment Year : 2013-14
EC+HSEC # 3% 19,780 10,713 Total tax 6,79,105 Add: Int. u/s.234B @ 1% 1,6,887 21,688 on Rs.4,88,600 (679105 170000-2046) for 5 m from 4/13 to 8/13 =Rs.4,430
@1% on Rs.353300 (488679 (146275 (5665+4196) for 9 m from 9/13 to 1/16 =Rs.10457 Add; Int. u/s.234C 4,197 4,197 - Total payable 8,10,189 3,93,700 4,16,489 Less:prepaid taxes 3,36,700 3,36,700 - Balance tax payable 4,73,489 57,000 4,16,489 or 4,16,490 sort levy The fact & figure stated may pleased be confirmed to audit. Sd/- Pavitra Kumar Jena, Receipt Audit Officer (LAP II) dt.21.6.18 6. It was the submission that the audit objection also does not talk of absence of true and full disclosure by the assessee. In fact, the audit objection only shows the true and full disclosure by the assessee insofar as all the figures were very much available to the audit party itself. A perusal of the reasons recorded reads as follows: The assessee is a retail trader of petroleum products. Return of income was filed by the assessee electronically on 23-09-2013 disclosing total income of Rs. L0,54,L70/- which was duly processed u/s. 143(1) on t3-oz- zoL{. Subsequently, the case was picked up for scrutiny under CASS and P a g e 7 | 12
C.O.No.1/CTK/2024 Assessment Year : 2013-14 scrutiny assessment was completed on 1B-01-20L6 on total income of Rs. 11,90,340/-. During the scrutiny proceedings, the following additions have been made to the income of the assessee. Gross total income as disclosed in the return of income - Rs. 11,90,34o/- Add : Car and Scooter maintenance - Rs, 18,380/_ Other Expenses - Rs. 3 3,716 Assessed income u/s.143(3) Rs.11,90,340/- While verifying the assessment record, the Revenue Audit has made the following observations. "Govt. of India Deptt. Of Petroteum & Natural Gas Notification issued in Gazette of India extraordinary dated 25.09.1990 and published in the Orissa Gazette by Govt of Odisha Food & Supplies Deptt. Notification No. 36286-pUC 4/90 dated 05.12.90 laid down percentage of allowability of evaporation handing /osses etc. at @ 0.75o/o for Petrol and @ 0.25o/o for HSD up to 600 Kltrs and for more than 600 Klitres @ 0.600/o in case of petrol, @ 0.20o/o in case of HSD. Audit Scrutiny of Assessment record revealed in statement of purchase and sale of petrol and HSD submitted by the assessee it was found that the assessee had claimed excess shortage in respect of Petrol & HSD claimed which has been shown in the table below,
Item Total Shortage Shortage Difference Valued as sales as per as per per rate assessee Audit taken for computation of closing stock by A Petrol 15,24,210 75,478 10,045.26 5,432.74 3,60,136 Itrs Itrs (5432.74 x 66.29) HSD 29,70,411 18,970 6,240.82 12,729.77 6,47,278 Itrs LTRS (1729.77 x 50.85) Total 10,07,414
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C.O.No.1/CTK/2024 Assessment Year : 2013-14
During the course of assessment the Assessee had submitted the detaits of closing stock as on 31.03.2013 as given below. SI, NO, Item Qty. Rate Amount 1. Petrol 9994 66.29 662502.26 2. HSD 10738 50.85 546027.30
In view of the above table the excess shortage valuing Rs. 10,07,414/- claimed on sale of petrol and HSD by the assessee was to be disallowed and added back to total income." The observation of the Revenue Audit is examined and accepted, In view of the above facts, I have reason to believe that the income of Rs. L0,07,414/- for the F.Y. 2012-13 relevant to A.Y. 2013-14 chargeable to tax, has escaped assessment as per provisions of the Section 147 of I.T Act, 1961. The PCIT-1, BBSR vide F. No. PCIT-1/Hqrs/Rgda/RAP/20L9-20/7924 dated 04-03-2020, has stated as under. "The Pr. Commissioner of Income tax-1, Bhubaneswar has accepted the audit objection but has decided not to invoke revision u/s. 263 ass remedial action. Hence, you are requested to examine the facts and take suitable action on independent application of your mind in accordance with the CBDT Instruction No. 7/2017 dated 2L.07.20L7." In the backdrops mentioned above, necessary approval may kindly be accorded for issue of notice u/s L4B of I.T Act, 1961. “ 7. Ld AR also submitted that the reasons recorded also does not talk of the failure on the part of the assessee to give true and full disclosure . It was the submission that the original assessment in the case of the assessee came to be completed u/s.143(3) of the Act on 18.1.2016, wherein, the AO has specifically recognized that the assessee has submitted the audit report, books of account, purchase and sales register, general ledger, bills and vouchers for verification. It was the submission that notice u/s.148 has been issued on 31.3.2021 which is beyond four years limitation provided
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C.O.No.1/CTK/2024 Assessment Year : 2013-14 under the Act and in view of the proviso to section 147, for the purpose of reopening beyond the period of four years, where an assessment has been completed u/s.143(3), the main criteria is failure on the part of the assessee to fully and truly disclose all the material facts required for assessment. In the present case, there is no such failure recognized either by the audit party or by the Assessing Officer and consequently, the reopening of assessment is liable to be quashed though for the reasons other than that adopted by the ld CIT(A). It was the submission that the order of the ld CIT(A) is liable to be upheld.
I have considered the rival submissions. A perusal of the facts in the present case clearly shows that as rightly mentioned by ld Sr DR that this is a case which has been reopened on the basis of revenue audit objection. The ld CIT(A) has quashed the assessment by applying the instruction issued by the CBDT as extracted by him in para 13 of his order. Admittedly, the cases where audit objection (revenue)/internal, which requires action u/s.148 of the Act does apply to the facts of the assessee’s case. This being so, I am unable to agree with the findings of the ld CIT(A) on this issue and the said findings of the ld CIT(A) stands reversed.
However, on further examination of facts, it is clear that the reopening has been done beyond the limitation of four years from the end of the relevant assessment year and the original assessment in the case of the assessee has been completed u/s.143(3). In such a case, the proviso to P a g e 10 | 12
C.O.No.1/CTK/2024 Assessment Year : 2013-14 section 147 requires that there must be failure on the part of the assessee to truly and fully disclose all material facts required for the assessment. There is no recording of such failure either by the audit party or by the AO in the course of reopening of assessment. Neither is there any whisper by the audit party nor by the AO in regard to the failure on the part of the assessee in the course of assessment proceedings also. This being so, on this ground, the reopening of assessment is liable to be annulled and I do so.
As I have already reversed the findings of the ld CIT(A) in regard to reopening of assessment as quashed by him, under normal circumstances, the assessment would have to be restored to the file of the ld CIT(A) for readjudication on merits as it has not been done by the ld CIT(A). But, as I have already quashed the reopening of assessment on the alternative prayer of the assessee, I am not going into the merits of the addition, which would be academic in nature. Consequently, the appeal filed by the revenue stands dismissed. The cross objection filed by the assessee is allowed.
In the result, appeal of the revenue stands dismissed and cross objection of the assessee is allowed.