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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI SAKTIJIT DEY & SHRI PRADIP KUMAR KEDIA
PER SAKTIJIT DEY, JM:
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.
Grounds raised by the assessee are as under:
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.
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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.
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/
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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,
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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
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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.”
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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
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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
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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
Sd/- Sd/- (PRADIP KUMAR KEDIA) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 26th May, 2022. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi