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Income Tax Appellate Tribunal, JAIPUR BENCHES “A”, JAIPUR
Before: SHRI RAMESH C SHARMA, AM & SHRI VIJAY PAL RAO, JM vk;dj vihy la-@ITA No. 270/JP/2019
ORDER PER: R.C. SHARMA, A.M. This is an appeal filed by the assessee against the order of ld.CIT(A), Ajmer dated 14/12/2018 for the A.Y. 2011-12 in the matter of order passed U/s 147 r.w.s. 143(3) of the Income Tax Act, 1961 (in short, the Act). Following grounds have been taken by the assessee:
1. On the facts and in the circumstances and in law the initiation of proceedings u/s 147 of I.Tax Act bad in law, void ab-initio and against the provisions of Income Tax Act as the original assessment was completed u/s 143(3) and the ld. AO has not brought any material to show that the income chargeable to tax has escaped assessment by the reason of failure on the part of assessee to disclose fully 2 ITA 270/JP/2019_ Ruchika Agarwal Vs DCIT and truly all material facts necessary for his assessment for the said assessment year.
On the facts and in the circumstances and in law the ld. CIT(A) erred in sustaining the addition of Rs. 2,79,066/- on account of disallowance made under section 14A of Income Tax Act, 1961 considering the average value of investment @ ½% at Rs. 2,54,612 + Rs. 24,454/-.
The assessee prays for leave to add, to amend, to delete, to modify the all or any grounds of appeal
on or before the hearing of appeal.
2. Rival contentions have been heard and record perused. The facts in brief are that the assessee is having income from house property, income from business and profession and from partnership firm. For the year under consideration, the assessee filed her return of income on 29/09/2011 declaring total income of Rs. 48,98,920/-. The case was taken under scrutiny and assessment order U/s 143(3) of the Act was passed on 03/02/2014. Thereafter, the A.O. issued notice U/s 148 of the Act on 20/01/2017 to reopen the assessment. During the course of reassessment proceedings, the A.O. made addition of Rs. 2,79,066/- on account of disallowance made U/s 14A of the Act.
3. The assessee is in further appeal before the ITAT wherein she is aggrieved for validity of reopening in view of proviso to Section 147 in so far as the assessment was reopened after four years from the end of the relevant assessment year when assessment was completed originally U/s 3 ITA 270/JP/2019_ Ruchika Agarwal Vs DCIT 143(3) of the Act. With regard to merit, the assessee is aggrieved for disallowance on the plea that during the year under consideration, there was no exempt income earned by the assessee.
4. It was argued by the ld AR of the assessee that the assessment was already completed U/s 143(3) of the Act and during the course of assessment proceedings, the assessee has disclosed fully and truly all primary and material facts and also placed complete details required by the A.O. during the course of assessment proceedings. He has further contended that no income has been escaped for the year under consideration by reason of failure on part of the assessee, who disclosed fully and truly all material facts necessary for her assessment in the said assessment year. Our attention was also invited to the reasons recorded, according to which there was no any subsequent factual information on the basis of which it was found that the assessee had not fully disclosed the primary facts or had falsified or disclosed incorrect primary facts. As per the ld AR, the facts on the basis of which, the assessment was reopened was already available with the A.O. at the time of assessment proceedings and the same was duly examined in the assessment completed U/s 143(3) of the Act. Our attention was also invited to the letter dated 08/08/2013 submitted during the course of original assessment proceedings wherein complete details of investment made in 4 ITA 270/JP/2019_ Ruchika Agarwal Vs DCIT shares were submitted which indicated that the issue has been examined by the A.O. during the course of assessment proceedings. Accordingly, it was claimed that reopening was not valid. For this purpose, reliance was placed on the following decisions: (i) CIT Vs. M/s Kelvinator of India Limited (2010) 320 ITR 561 (SC) (ii) CIT Vs. M/s Hindustan Zinc Ltd. (2017) 393 ITR 264 (Raj) (iii) CIT Vs. Bhanji Lavji (1971) 79 ITR 582 (SC) (iv) DCIT Vs Purolator (2012) 343 ITR 155 (Del) (v) Kimplas Trenton Fittings Ltd. Vs ACIT (2012) 340 ITR 299 (Bom) (vi) Desai Bros Ltd. Vs DCIT (2005) 272 ITR 335 (Bom) (vii) Bhot Industries Ltd. Vs ACIT (2004) 267 ITR 161 (Bom) (viii) CIT (Addl.) Vs. IFCI (2001) 248 ITR 192 (Del) (ix) CIT Vs. Elgi Ultra Industries Ltd. (2008) 296 ITR 573 (Mad.). For the addition, it was contended by the ld AR that reopening was not valid applying the proposition of law laid down in above judicial pronouncements
5. With regard to merit of disallowance, the ld AR has relied on the following judicial pronouncements in support of the proposition that no disallowance is warranted when there is no exempt income earned by the assessee: (i) CIT (Central)-1 Vs Chettinad Logistics Pvt. Ltd. (2018) 95 taxmann.com 250 (SC). (ii) CIT Vs Walfort Shares & Stock Brokers Pvt. Ltd. 326 ITR 1.
5 ITA 270/JP/2019_ Ruchika Agarwal Vs DCIT (iii) Pr.CIT Vs Shri Prakash Gwalera (2018) (11) TMI 877. (iv) CU Vs Hero Cycles Ltd. 323 ITR 518. (v) ACIT Vs M. Baskaran (2015) 152 ITD 844 (Chennai Trib).
On the other hand, it was argued by the ld DR that the assessee has not disclosed exempt income earned and also the expenditure attributable to such exempt income, therefore, the A.O. was justified in reopening the assessment when he found that the disallowance U/s 14A was not made in the original assessment framed U/s 143(3) of the Act.
We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. AR and ld. DR during the course of hearing before us in the context of factual matrix of the case. From the record we found that the original assessment was completed U/s 143(3) of the Act wherein the assessee has furnished all the details as required by the A.O. with regard to investment made in the shares and securities etc.. The A.O. has examined all the details during the course of original assessment proceedings framed U/s 143(3) of the Act. Thus, we found that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, accordingly, in view of the judicial pronouncements referred above the 6 ITA 270/JP/2019_ Ruchika Agarwal Vs DCIT assessment completed U/s 143(3) of the Act cannot be reopened unless it is shown that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Accordingly, we are inclined to agree with the ld AR that reopening of the assessment was bad in law in terms of proviso to Section 147 of the Act.
In so far as the merit of the disallowance is concerned, we are inclined to agree with the contention of the ld AR that since there was no exempt income during the year under consideration, no disallowance can be made U/s 14A of the Act. Our view is supported by the decision of the Hon’ble Supreme Court in the case of CIT (Central)-1 Vs Chettinad Logistics Pvt. Ltd. and CIT Vs Walfort Shares & Stock Brokers Pvt. Ltd. (supra) and other decisions referred by the ld AR during the course of hearing before us. Accordingly, no disallowance is warranted on merit also.