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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI N. K. BILLAIYA & SHRI YOGESH KUMAR U.S.
This appeal is filed by the Revenue against the order dated 14.02.2019 passed by CIT(A)- 28, New Delhi for Assessment Year 2010-11.
The Revenue has raised the following ground of appeal:-
"1. On the facts and circumstances of the case, the Id. CIT(A) erred in quashing the reassessment proceedings made by the Assessing Officer. The Ld. CIT(A) has quashed the reassessment proceedings merely on the assumption that notice u/s 143(2) of the Act in response to the return filed in response to notice u/s 148 of the Act
DCIT Vs. Three Sixty Degrees Marketing Support was issued without examining the return of the income. However, as per para 5 of the Assessment Order, the Ld. Assessing Officer has quoted from the notesheet of the case for the date 11.12.2017 i.e. the date of filling of the copy of ITR before AO and issuance of notice under section 143(2).
Also, Ld. CIT(A) erred in asserting that there was no application of mind on behalf of assessing officer while issuing the notice under section 143 (2) is not correct.
2. The Ld. CIT (A), while deciding the matter has relied upon the belief that the application of mind and the consequent expression in this regard by Assessing officer w.r.t. return filed in response to notice under section 148 is a precondition for issuance of notice under section 143(2). However, there has not been referred any relevant authority to substantiate the stated conclusion. The pronouncements relied upon by Ld. CIT (A) and the observations made are as follows:
a) Director of Income-Tax v. Society for Worldwide Interbank Financial, Telecommunications (323 ITR 249): Ld. CIT (A) has referred to this Judgment of Hon Tile High Court of Delhi, where by proceedings under section 148 were quashed. However, it is to be noted that this case can be distinguished from the present one, as in the referred case, the notice u/s 143 (2) was issued prior to the date of filling of the ITR. Hence the decision is not applicable in the present case. b) Pr. CIT vs. Sh. Jai Shiv Shankar Traders Pvt. Ltd, 383 ITR 448: This case was referred by Ld. CIT(A), however it is seen that in the referred case, the notice under section 143(2) was not issued at all.
DCIT Vs. Three Sixty Degrees Marketing Support
Therefore this case is also not applicable in the present matter. “
Brief facts of the case are that, the assessee was not filed its return of income for the A.Y.2010-11 even after receipt of substantial income, as reported in the system (ITS Data). Hence the case was picked up by the system, under NMS module and letter was generated and issued under NMS module, but no compliance was received. Thus after recording reason of believe that the income reported in system/ITS has not been brought to tax, the case was reopened, after getting approval as required under section 151 of the I.T. Act. Notice u/s. 148 of the I.T. Act dated 30.03.2017 was issued on 31.03.2017 through electronic mail on the address/email of the assessee Company as available in the database, but no compliance was received from the assessee. Hence notices u/s. 142(1)/129 of the Act dated 04.07.2017 along with reason for selection of case and copy of ITS Data were issued on ail the addresses available on record. In compliance of the notice issued u/s, 142(1) dated 04.07.2017 as well as notice u/s. 148 of the Act dated 30.03.2017, the authorized representative appeared on behalf of the assessee company and attended the assessment proceedings. The assessee is asked to submit certain information to substantiate its income and expenditure as well as to file ITR in compliance of the notice issued u/s. 148 of the Act. After that the authorized representative appeared on behalf of the assessee company. The valid return as required in compliance of the notice u/s. 148 of the Act has not been filed by the assessee, therefore, a show cause notice for completion of assessment u/s. 144 of the Act is issued on 30.11.2017 and also on 05.12.2017 based on the issues involved. The authorized representative has filed the return on 11/12/2017 along with some other documents related to the case.
4. The assessment order came to be passed on 27/02/2017 u/s 147 of the Act by computing the income of the assessee at Rs. 1,63,35,751/-. As against the Assessment order dated 27/12/2017, the Assessee has filed an DCIT Vs. Three Sixty Degrees Marketing Support appeal before the CIT(A). The Ld. CIT(A) vide order dated 14/02/2019 quashed the assessment order by allowing the Appeal has allowed Appeal on 14/02/2019.
Aggrieved by the order dated 14/02/2019, the Department of Revenue has preferred the present Appeal on the grounds mentioned above.
The Ld. DR submitted that, the Ld.CIT(A) has committed grave error in quashing the reassessment proceedings on the wrong assumption that notice u/s 143(2) of the Act in response to the return filed in response to notice u/s 148 of the Act was issued without examining the return of the income. Further, contended that the Ld. A.O has quoted the note of order sheet dated 11/12/2017, which clearly shows that the A.O has applied his mind. Thus, submitted that, Ld.CIT(A) erred in observing that there was no application of mind by the Assessing Officer while issuing the notice u/s 143(2) of the Act.
Per contra, the Ld. Counsel of the assessee has relied on the judgment of the Jurisdictional High Court in the case of Director of Income Tax Vs. Society of Worldwide Inter Bank City Communication in ITA No. 441/2010. The Ld. AR submitted that, the said judgment squarely applicable to the case of the assessee.
We have heard the parties, verified the material on record and gave our thoughtful consideration. It is found that in compliance with Section 199 of the Act, the assessee has been show caused to explain the matter by the Ld. A.O. The order sheet entry dated 11/12/2017 has been mentioned by the A.O in paragraph 5 of the assessment order, which is reproduced hereunder:-
“Ca Madhuri Garg (AR) appeared in the case and filed ITR Complying the notice issued u/s.148 of the Act. Notice u/s. 143(2). of the Act issued and ' served. On perusal of the ITR filed in 11.12.2.017 it is noticed that the’ assessee has shown business receipts of Rs. NIL. On the DCIT Vs. Three Sixty Degrees Marketing Support other side receipts reported in 26AS is found to Rs.70,76,560/- on the PAN AACFT8444H and Rs. 92,91,451 /- on the PAN- AAACF5782H on which TDS of Rs.8,01,753/- and Rs. 3,96,283/- respectively are found deducted thereon. The assessee in its return filed on 11.12.2017 has claimed TDS credit of 11,98,067/- [i.e. 8,01,753 & 3,96,283 reflecting on both the pan mentioned above], resulting in refund of the same amount i.e. Rs. 11,98,070/-. As far as merit of the case is concern the assessee is required to disclose its true particular of receipt/income and should claim corresponding TDS within the meaning of section 199 of the Act, which is not applied in this case. Hence the AR is show caused as to why the corresponding Receipt (as reported in 26AS on both the PAN) of TDS as claimed in 1TR should not be treated as your income and may be taxed accordingly. As the particulars of income declared in ITR and audit report it doesn’t matches with the relevant information available with the department in the form of 26AS, hence the assessee is also show caused as to why the books of accounts maintained in this case should not be rejected within the meaning of section 145(3) of the Act and assessment should not be completed u/s. 144 of the Act.
In compliance with the above said show cause notice dated 11/12/2017, at the behest of the assessee, the representative of the assessee has filed reply dated 14/12/2017 which is as under:-
“The assessee has accounted/disclosed the receipts and has claimed the corresponding TDS within the meaning of Section 199 of the Income Tax Act, 1961, As per the amendment in Section 199 of the Act, the matching concept is not relevant now The assessee company has accounted all the receipts under section 145(3) and has transferred the same to the buyer company as per the Business Transfer Agreement.
DCIT Vs. Three Sixty Degrees Marketing Support
Under the binding conditions of the agreement the income was transferred ’to the buyer company. The buyer company has offered this income to tax and has not claimed the TDS deducted under the assessee company PAN. This can be verified by the buyer company. There has been no loss to the revenue on account of the income in subject."
Further, we observed that the Ld. A.O has gone through the explanations and other materials produced by the assessee, the assessment order came to be passed by computing the income of the assessee were Rs.1,63,35,751/-. By looking into the above factual aspect, we are of the opinion that the Ld. A.O has applied his mind and since the submissions made by the assessee found contrary to the terms of Section 199 of the Act read with Rule 37BA of the Income Tax Rules, made addition. The Ld. CIT(A) failed to appreciate the said facts while deciding the Appeal, therefore, the order of the CIT(A) requires interference.
The judgment cited by the Ld. Counsel for the assessee is factually differentiable. In the case of Society of Worldwide Inter Bank City Communication (Supra), it is observed that, the notice was served on the assessee simultaneously on his filing of the return and the notice was ready even the prior to filing of the return. But in the present case the factual aspect is entirely different. The Ld. A.O in compliance with Section 199 of the Act issued show cause notice on 11/12/2017 which has been reproduced in the assessment order and the assessee has also filed his reply on 14/12/2017.
The Ld.CIT(A) without appreciating the factual differences in the case of Society of Worldwide Inter Bank City Communication and that of the assessee, relied on the said judgment and erroneously allowed the Appeal. Further, CIT(A) has also relied on the case of Principal CIT Vs. Sh. Jai Shiv Shankar Travel Ltd. 383 ITR 443. In the said case, the notice u/s 143(2)of the Act itself
DCIT Vs. Three Sixty Degrees Marketing Support was not issued. Therefore, the said case is also not applicable to the case of the Assessee.
In our opinion, the Ld.CIT (A) has committed error in allowing the appeal without deciding the matter on merit. Therefore, we deem it fit to set aside the order of the CIT(A) and remit the matter to the file of Ld.CIT(A) with a direction to decide the matter on merit in accordance with law after providing the opportunity of being heard to the Assessee. Accordingly, the Grounds of Appeal are allowed for statistical purpose.
In result, the appeal filed by the assessee is allowed for statistical purpose.
Order pronounced in the open court on : 07th July 2022.