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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI SAKTIJIT DEY & SHRI PRADIP KUMAR KEDIA
This is an appeal by the assessee against order dated 10.01.2019 of learned Commissioner of Income Tax (Appeals)-16, New Delhi, for the assessment year 2010-11.
2. Grounds raised by the assessee are as under:
1. On the facts and circumstances of the case and in law Learned AO has erred in invoking the provisions of section 148 purely on unfounded belief without cogent and tangible material without supplying reasons for such reopening.
2. On the facts and circumstances of the case and in law Learned AO has erred in making addition of 10% of the receipts wrongly credited against the PAN of the assessee despite the positive evidences, such as bank statement.
3. On the facts and circumstances of the case and in law learned AO has erred in making addition of cash deposit of 7,17,000/- in the bank account without considering the submission and material furnished by the appellant. 4. On the facts and circumstances of the case and in law learned CIT(A) has erred in sustaining the additions made by the AO. 5. On the facts circumstances of the case, the order of the Learned AO and sustenance thereof by the Learned CIT (A) is bad in law and is against the tenants of natural justice. 6. The appellant carves to add, alter, modify, or delete any ground of appeal during the pendency of the appeal.
3. As could be seen, in ground no. 1 the assessee has challenged the validity of reopening of the assessment under section 147 of the Income-tax Act, 1961 (for short ‘the Act’).
Briefly the facts are, the assessee is a resident individual.
For the assessment year under dispute, the assessee filed its return of income on 03.03.2011, declaring income of Rs. 2,54,570/-. Subsequently, based on information available on record that during the year the assessee had total receipts of Rs. 33,29,668/- which was subjected to TDS at the rate of 10%, whereas, the income earned by the assessee was liable to be taxed at the rate of 30%, the Assessing Officer reopened the assessment under section 147 of the Act alleging escapement/ under assessment of the income. In pursuance to the notice issued under section 148 of the Act, assessee participated in the assessment proceeding and furnished certain details called for by the Assessing Officer. After verifying the materials on record, the Assessing Officer observed that as per the information available with the department, during the year under consideration, the assessee had receipts of Rs.33,29,668/-. Whereas, the receipts shown by the assessee in his individual account is less. Thus, he called upon the assessee to reconcile the difference. In reply, the assessee submitted that earlier he was proprietor of M/s. Creative Thinks which subsequently was converted into a partnership firm under the name and style of M/s. Creative Thinks Media. He submitted, some of the parties deducted TDS by mentioning the individual PAN. Whereas, the receipts actually belonged to the partnership firm. Alleging that the assessee failed to reconcile the difference with proper evidence, the Assessing Officer added back an amount of Rs.2,59,236/-. That besides, the Assessing Officer also added back an amount of Rs.7,17,000/-, being unexplained cash deposit in bank account. Thus, ultimately, he completed the assessment by determining total income of Rs. 12,30,806/-.
While deciding assessee’s appeal against the order so passed, learned Commissioner (Appeals) granted partial relief to the assessee.
Before us, learned counsel for the assessee submitted that the Assessing Officer has reopened the assessment without having valid reasons. He submitted, after complying with the notice issued under section 148 of the Act, though, the assessee had specifically called upon the Assessing Officer to supply the reasons based on which the assessment was reopened, however, the Assessing Officer never supplied the reasons. Thus, he submitted, non-supply of reasons makes the proceeding under section 147 of the Act invalid. In support of such contention, he relied upon the following decisions:
Principal CIT Vs. Jagat Talkies Distributors, (2017) 85 taxmann.com 189/398 ITR 13 (Delhi)
CIT Vs. Trend Electronics, (2015) 61 taxmann.com 308/379 ITR 456
Kothari Metals Vs. ITO, (2015) 377 ITR 581/288 CTR 606 (Ker.)
The learned Departmental Representative submitted, the Assessing Officer having found that the receipts shown by the assessee are lesser than the actual receipts which have been subjected to TDS, has reopened the assessment under section 147 of the Act.
We have considered rival submissions and perused the materials on record. It is the specific contention of learned counsel for the assessee before us that at no stage of proceeding before departmental authorities, the assessee had been provided with the reasons recorded for reopening of assessment under section 147 of the Act. However, in the body of the assessment order, the Assessing Officer has reproduced the reasons recorded for reopening of the assessment, which are as under:
“The department is having information that during the F.Y. 2009 - 10 total receipts of the assessee are of Rs. 33,29,668/. The TDS has been deducted on these receipts @ 10% as and when the assessee has received the amounts. However, as per tax slab the receipts of the assessee Rs. 5 Lakhs were to be taxed @ 30%. Hence, tax has been charged on the lower side a total receipts of the assessee. The assessee has not filed its return of income even after giving opportunity for filing its return of income. Hence, taxability of Rs. 33,29,668/- remained unexplained m the assessee has failed to explain the same. Further the assessee has not filed return of income for A.Y. 2010 - 11 and the assessee has not its return of income for A.Y. 2010-11. In view of the information as above the case Explanation 2(a) to section 147 is applicable in the case which lays down 'where no return of income has been furnished by the assessee although his total income of the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income tax.”
A careful reading of the reasons recorded would reveal that the Assessing Officer has reopened the assessment on the belief that the assessee had not filed his return of income for the impugned assessment year, thereby, not offering to tax the income received during the year. However, the facts on record reveal that the assessee did file his return of income for the impugned assessment year on 03.03.2011 vide acknowledgment no. 24410048507 declaring total income of Rs.2,54,570/-. A copy of the acknowledgment of return of income placed at page 14 of the paper-book bears testimony to this fact. Thus, the basic premises on which the Assessing Officer formed his belief for reopening of the assessment; that the assessee has not furnished its return of income for the year under dispute, leading to escapement of assessment is totally misconceived and contrary to the facts and materials on record. Thus, it can be safely concluded that the reasons recorded by the Assessing Officer for reopening of assessment are not based on facts and materials on record and reveals complete non-application of mind by the Assessing Officer. For this reason alone, the reopening of assessment under section 147 of the Act has to be declared as invalid. Even otherwise also, the materials on record clearly reveal that, though, after participating in the assessment proceeding, the assessee had called upon the Assessing Officer to supply him the reasons recorded for reopening of assessment, however, the reasons were never supplied to the assessee. Non-supply of reasons recorded for reopening of assessment certainly makes the assessment order vulnerable, as, non-supply of reasons recorded for reopening of assessment deprives the assessee of his valuable right to raise objections against the reopening of assessment under section 147 of the Act. Thus, for this reasons also, the assessment order passed under section 147 read with section 143(3) of the Act is unsustainable.
Thus, in view of our discussions made hereinabove, we hold that the reopening of assessment under section 147 of the Act, having been made based on invalid reasons, has to be declared invalid. Therefore, the assessment order passed in consequence thereof has to be declared as invalid.
In view of the aforesaid, we quash the assessment order passed under section 147 read with section 143(3) of the Act. As a natural corollary, the impugned order of learned Commissioner (Appeals) is hereby set aside. Since, we have quashed the assessment order while deciding the legal issue raised by the assessee, the grounds raised on merits have become academic, hence, do not require adjudication at this stage.
In the result, the appeal is allowed, as indicated above.
Order pronounced in the open court on 26th May, 2022