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Income Tax Appellate Tribunal, DELHI BENCH “F” DELHI
Before: SHRI KUL BHARAT & SHRI PRADIP KUMAR KEDIA
O R D E R PER PRADIP KUMAR KEDIA, A.M.:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals), Ghaziabad (‘CIT(A)’ in short), dated 28.02.2018 arising from the assessment order dated 30.12.2016 passed by the Assessing Officer (AO) under Section 143(3) r.w. Section 147 of the Income Tax Act, 1961 (the Act) concerning AY 2010-11.
The grounds of appeal
raised by the assessee reads as under:
1. Because the Ld CIT(A) has erred on facts and law in confirming the initiation of reassessment proceedings u/s 147/148 of the Act beyond four years with respect to already concluded assessment u/s 143(3] of the Act which is time-barred, illegal, against the authority of law and without jurisdiction and hence the entire reassessment proceedings were liable to be quashed.
2. Because the Ld CIT(A) has erred on facts and law in confirming the assessment order making an addition on a fresh ground while the additions based on reasons recorded were grossly illegal, against the authority of law and have been struck down by CIT (A) herself 3. Because the Ld CIT(A) has erred on facts and law in confirming the assessment order by reducing the application from Rs 1,38,88,509/- duly assessed in original assessment u/s 143(3] to Rs.1,06,93,623/- in reassessment u/s 147 of the Act (thus adding a difference c Rs.31,94,886/-) which was added in reassessment order without any show cause notice and against the principles of natural justice and thus was grossly arbitrary, illegal an against the authority of law and was liable to be deleted.”
3. When the matter was called for hearing, the ld. counsel for the assessee submitted that the Assessing Officer has illegally assumed jurisdiction under Section 147 of the Act to reopen the assessment without the compliance of the prerequisites of 1st proviso to Section 147 of the Act. The ld. counsel also adverted to the reasons recorded in this regard and submitted that the assessment completed earlier under Section 143(3) of the Act was reopened after four years from the end of the Assessment Year 2009-10 in question on extraneous and untenable grounds. It was also alleged that the reasons for escapement are without any substance and opposed to the provisions of law and well settled judicial precedents also. We shall deal with the arguments of the assessee at the appropriate place in the subsequent paragraphs where considered necessary.
The ld. Sr.DR for the Revenue relied upon the action of the lower authorities.
We have carefully considered the rival submissions. The assessee is a Charitable Educational Trust. The original assessment was completed under Section 143(3) of the Act on 23.12.2011. Thereafter, a notice dated 30.03.2016 was issued under Section 148 of the Act seeking to reopen the completed assessment. The re- assessment proceedings were thus taken up after four years vide reasons dated 30.03.2016 to examine the issues namely; (a) allowability of accumulated surplus of Rs.2 crore vide Form 10 filed on 16.12.2011 in original assessment proceedings, (b) allowability of depreciation already allowed as application as per Income & Expenditure A/c and (c) cash deposits in IDBI Bank already examined as per books of account/bank statements.
The assessee has inter alia challenged the validity of reasons recorded alleging escaped assessment on the touchstone of Section 147 of the Act. Therefore, it may be pertinent to reproduce the reasons recorded hereunder:
“Reasons for the belief that income has escaped assessment: As per AIR information, M/s Rajiv Educational Trust, C- 357, Lohia Nagar, Ghaziabad has done cash deposits of Rs. 10,26,355/- during A.Y. 2009-10. While as per IDBI 44873 book filed by the assessce, it has done cash deposits of Rs. 9,85,970/- during the year under consideration. Further, it is noticed that the surplus of Rs.1,92,65,666/- was allowed to be accumulated u/s.11(2) of I T. Act, 1961 during the assessment proceedings. The assessee has filed Form No.10 on 16.12.2011 i.e. after the due date filing of return of income. Therefore, the surplus of Rs.1,92,65,666/- cannot be allowed to be accumulated by the assessee. Hence the surplus of Rs.1,92,65,666/- was liable to be taxed at MMR. Further, it is noticed that during the assessment proceedings, the assessee has been allowed Rs.65,47,540/- on account of depreciation on account of application of income for charitable purposes which is not allowable as the capital expenditure on acquiring fixed assets has already been allowed in respective years. Hence depreciation amounting to Rs.65,47,540/- should be disallowed and added to income of the assessee. Therefore, I have reason to believe that the income of Rs. 2,58,54,066/- has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961 and is chargeable to tax for the assessment year 2009-10.
Dated: 30.03.2016 Deputy Commissioner of Income Tax Exemption, Circle, Ghaziabad”
As contended on behalf of the assessee, the reopening in the instant case is time barred having regard to the embargo placed by 1st proviso to Section 147 of the Act. On bare reading of the reasons recorded, it is seen that the Assessing Officer has not even cared to allege any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment which is the condition precedent to reopen a completed assessment by issuance of notice under Section 148 beyond four years. There is no allegation of failure which is foundational condition for invoking a provision of Section 147 of the Act beyond four years in the matter of completed assessment. From the reasons recorded, it is not known, what material facts were not brought on record by the assessee in the course of original assessment. The salutary burden placed on the Assessing Officer under the 1st proviso is not discharged at all. The jurisdiction under Section 147 was exercised in a most flippant and nonchalant manner. It is axiomatic that a reopening of completed assessment is special and extra-ordinary and carries civil consequences. Hence, the Assessing Officer is expected to exercise the jurisdiction under Section 147 with scrupulous care. A completed assessment is a valuable right and cannot be rightly ignored. The completed assessment has been reopened in the instant case without satisfying the conditions of 1st proviso to Section 147 of the Act. The jurisdiction assumed thus is clearly time barred owing to non fulfillment of embargo placed in 1st proviso to Section 147 of the Act. Ostensibly, the competent authority under Section 151 of the Act has formed his ‘satisfaction’ of escapement on such unintelligible reasons mechanically. Such symbolic compliance of approval of superior authority under Section 151 cannot also be countenanced.
The Hon’ble Jurisdictional High Court in PCIT vs. Light Cart P. Ltd., (2018) 404 ITR 574 (Alld) has observed that in the absence of any allegation in the ‘reasons to believe’ recorded under Section 148(2) of the Act that the assessee has failed to disclose fully and truly all material facts necessary for assessment which is one of the mandatory conditions for initiating proceedings under Section 147 of the Act, it cannot be said that the Department was justified in initiating the re-assessment proceedings. The reasons recorded must speak for itself. The mandatory jurisdictional requirement in terms of 1st proviso to Section 147 will not be deemed to have been fulfilled if the reasons did not themselves clearly indicate that there was, in fact, a failure by the assessee to make full and true disclosure of all material facts. The reasons have to explain what material was not disclosed by the assessee which the assessee ought to have disclosed in the instant case. This should be apparent from the reading of the reasons itself. Similar view has been expressed by the Hon’ble Delhi High Court in BPTP Ltd. vs. Principal Commissioner of Income Tax, (2020) 113 taxmann.com 587 (Del). The SLP filed against which was dismissed by the Hon’ble Supreme Court as reported in (2021) 125 taxmann.com 81 (SC). The Hon’ble Delhi High Court in Oracle India Pvt. Ltd. vs. ACIT, 397 ITR 480 (2017) also echoed the same view earlier.
The Assessing Officer has plainly overlooked the jurisdictional requirement in terms of 1st proviso to Section 147 of the Act. The jurisdiction assumed under Section 147 in this backdrop is ex facie vitiated and thus requires to be struck down at the threshold. The sanction granted by the CIT also cannot be said to be in accord with Section 151 of the Act and thus vitiates the assumption of jurisdiction. The impugned consequential assessment framed under Section 147 r.w. Section 143(3) is clearly bad in law in the absence of any valid jurisdiction. As a corollary, the impugned assessment order dated 30.12.2016 framed in pursuance of nonest jurisdiction stands quashed.
In this view of the matter, it is not necessary to go into the aspects of the merit of additions/disallowances.
In the result, the appeal of the assessee is allowed.