PRAMOD PALIWAL,KHANWA vs. ACIT KHANWA, KHANWA

PER MANISH BORAD, AM.

The above captioned appeal filed at the instance of assessee

pertaining to Assessment Year 2009-10 is directed against the

orders of Ld. Commissioner of Income Tax (Appeals)-III (in short

‘Ld.CIT(A)’], Indore dated 14.12.2017 which is arising out of the

order u/s 147 r.w.s. 143(3) of the Income Tax Act 1961(In short the

‘Act’) dated 28.12.2016 framed by ACIT,Khandwa. 1

Pramod Paliwal ITA No.271/Ind/2018 2. Brief facts as culled out from the records are that the assessee

is an individual engaged in the business of civil contracts under the

sole proprietorship concern M/s. Pragati Constructions. Return of

income was e-filed on 29.09.2009 showing net income of

Rs.19,40,040/-. Case selected for scrutiny through CASS and

statutory notices u/s 143(2) and 142(1) were issued and

assessment u/s 143(3) of the Act was completed on 18.12.2011 on

total income of Rs. 25,61,110/-. However later on when the Ld. A.O

found mismatch of gross receipt as per TDS certificates claimed in

the return of income vis-à-vis gross receipt shown in the Profit &

Loss account, the alleged difference of Rs.92,05,981/- was

considered to be an income escaped from the assessment. Notices

u/s 148 of the Act were issued on 21.3.2016 for carrying out re-

assessment proceedings u/s 147 of the Act. Assessee challenged

the re-assessment proceedings and did not attend on various dates

of hearing which left no option to Ld. A.O except to issue an ex-

parte order for which a show cause notice was issued and in reply

assessee attended through its authorized representative submitting

that the alleged amount was difference received during the year

which has been shown as revenue in the subsequent year when the 2

Pramod Paliwal ITA No.271/Ind/2018 work was performed. Ld. A.O was not satisfied and he completed

the assessments after making addition for undisclosed receipt of Rs.

92,05,981/- and assessed the income at Rs.1,17,67,091/-.

could not succeed on in all the grounds.

following grounds of appeal.

“la). That, the learned CIT(A) grossly erred, both on facts and in law, in upholding the validity of the reassessment framed by the learned AO under s.147 r.w.s. 143(3) of the Act without considering and appreciating the facts and circumstances of the case and in particular, without considering the material fact that the learned AO was not having any cogent material to form belief that any income of the appellant chargeable to tax for assessment year under consideration has got escaped.

1 b). That, the learned CIT(A) also grossly erred in upholding the validity of the assessment proceedings under s.147 r.w.s. 143(3) of the Act without considering the material fact that in the instant case, the original assessment was duly framed under s.143(3) of the Act and during the course of the original assessment proceedings, there was no failure on the part of the appellant to disclose fully and truly all material facts necessary for his assessment.

2.That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.92,05,981/- made by the AO in the appellant's income on account of alleged difference in 3

Pramod Paliwal ITA No.271/Ind/2018 contract receipts as shown in the books of account of the appellant and that shown in the various TDS Certificates issued in favour of the appellant by invoking provisions of s.199 of the Act without properly appreciating the provisions of s.199 of the Act and as also, without rejecting the books of account maintained by the appellant. That, the appellant further craves leave to add, alter or amend the foregoing ground of appeal as and when considered necessary.”

assessment proceedings u/s 147 r.w.s. 143(3) of the Act. Ld.

Counsel for the assessee referring to the written submissions

submitted that the assessee’s case has been re-opened after 4 years

from the end of the relevant assessment year. There was no failure

on the part of the assessee to furnish the details and no material

evidence has been brought on record which was not before the Ld.

A.O during the course of assessment proceedings u/s 143(3) of the

Act. It is thus a mere change of opinion and said re-opening is bad

in law and the proceedings are liable to be quashed. Ld. Counsel

for the assessee further referred to the following written

submissions;

1.01 That, the learned AO invoked the provisions of s.148 of the Act in the appellant's case on a ground that there was a difference of Rs.92,05,981/- in the contract receipts shown by the appellant in 4

Pramod Paliwal ITA No.271/Ind/2018 his books of account and that appearing in TDS Certificates.

1.02 That, the learned AO has recorded his reasons for reopening the case of the appellant which have been given by him at page no. 1 & 2 of the impugned assessment order. In these reasons, the learned AO has made the assessment record for the A. Y. 2009-10 as the basis for invoking the provisions of s.14 7 of the Act.

2.01 Your Honours, it is a settled law that in a case where for any assessment year, original assessment was completed under s.143(3) of the Act and such assessment is sought to be reopened after expiry of a period of four years, then, by way of issuance of a notice under s.148, it is imperative that there must be a clear finding by the AO in the notice itself that during the course of original assessment proceedings, there was a failure on the part of the assessee to make a full and true disclosure of all material facts for its assessment.

2.02 Apparently, in the notice under s.148 so issued by the AO [kindly refer PB Page No. 37], such assertion is lacking and therefore, the notice so issued cannot be said to be a valid notice in the eyes of the law. It is submitted that in view of such fact, the entire reassessment proceedings deserve to be quashed. For such proposition, reliance is placed on the following judicial pronouncements :

i) Duli Chand Singhania vs. ACIT (2004) 269 ITR 192 (PHHC)

ii) Swarovski India Limited v. Deputy CIT' [2014} 368 ITR 601 (Delhi)

iii) CITvs. ITW India Ltd. (2015) 377 ITR 195 (P&H)

Pramod Paliwal ITA No.271/Ind/2018 State Bank of Patiala vs. CIT & Anr. (2015) 375 ITR 109 iv) (P&H)

HCL Technologies Ltd. vs. DCIT (2015) 93 CCH 146 (DeI HC) v)

vi) Global Signal Cables (India) Pvt. Ltd. vs. DCIT (2014) 368 ITR 609 (Del.)

vii) Great Eastern Energy Corporation Ltd vs. DCIT (2014) 89 CCH 208 (DeI HC)

3.00 Your Honours, without prejudice to the above, it is submitted that the learned AO, by making reference of the assessment record of the appellant for the relevant assessment year and particularly, by making a reference of the TDS deducted on behalf of the appellant, had attempted to review an issue already taken into consideration in the assessment order passed for the relevant assessment year which is not permissible in the law. It is submitted that the TDS certificates and the information regarding the TDS of the appellant, which became the basis for reopening of the assessment in the instant case, were very well available on the record of the AO framing the original assessment and therefore, by no stretch of imagination, it can be inferred that there was any failure on the part of the appellant to make a full and true disclosure of all necessary facts for making the assessment as contemplated under the first proviso to section 147 of the Act. It is a settled law that merely for the reason of change of opinion, a notice under s.148 cannot be issued.

3.01 Reliance is placed on the following judicial pronouncements:

i) CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC)

ii) Sun Pharmaceutical Industries Ltd. (2016) 95 CCH 15 (DeI 6

Pramod Paliwal ITA No.271/Ind/2018 HC)

iii) Direct Information (P) Ltd. vs. ITa (2012) 349 ITR 150 (MumHC)

iv) Arvind Mills Ltd. vs. DCIT (2000) 242 ITR 173 (GujHC)

v) Dell India (P) Ltd. vs. JCIT (2015) 127 DTR 291 (Kar.)

vi) CITvs. Hewlett Packard Globalsoft Pvt. Ltd. (2016) 380 ITR 386 (Kar.)

vii) CITvs. Indian Rare Earths Ltd. (2015) 374 ITR 105 (Bom.) viii) Asteroids Trading & Investments (P) Ltd. vs. DCIT (2009) 308ITR 190 (Born.)

ix) CITvs. Usha International Ltd. (2012) 348 ITR 485 (Del.)

x) PVP Ventures Ltd. vs. ACIT (2015) 94 CCH 147 (Chen HC)

xi) Patel Plastics Corporation vs. ACIT-Central-24, Mumbai 2014 (7) TMI 953 (ITAT Mum.)

xii) M/s. Asianet Star Communications Pvt. Ltd. vs. ACfT, Chennai 2019 (6) TMI356 (Mad.HC)

xiii) CIT vs. M/s. t.c.c. Infotech Ltd. 2018 (5) TMI853 (CaI.HC)

xiv) M/s. Capri Global Advisory Services Pvt. Ltd. vs. DCIT, Mumbai 2019 (4) TMf 777 (fTAT Mum.)

xv) DCIT vs. ICICI Bank Ltd. 2019 (7) TMI531 (ITAT Mum.)

xvi) Narendra Manpuria vs. DCIT, Kolkata 2018 (6) TMI292 (ITAT Kol.)

In view of the facts and circumstances of the case and various judicial pronouncements, it is submitted that the invocation of the provisions of s.148 in the appellant's case is illegal and the same deserves to be knocked down on this legal count alone.

Pramod Paliwal ITA No.271/Ind/2018 6. Per contra Ld. Departmental Representative vehemently

argued and supporting the order of Ld. CIT(A).

placed before us. Assessee has challenged the validity of re-

assessment proceedings which os initiated by issuance of notice

u/s 148 of the Act after expiry of 4 years from the end of relevant

assessment year. Provisions of Section 147 of the Act read as

follows;

Assessing Officer can initiate the reopening of assessment after 8

Pramod Paliwal ITA No.271/Ind/2018 expiry of 4 years from the end of the relevant assessment year in

case any income chargeable to tax has escaped the assessment for

such assessment year by reason of the failure on the part of the

assessee to make the return u/s 139 or in response to the notice

issued u/s 142 or section 148 or to disclose fully and truly all

material facts necessary for the assessment, for the assessment

year.

to initiate the reassessment proceedings. In the instant case the

reason for reopening of the assessment is that there is a mismatch

of the gross receipts shown by the assessee in the audited Profit &

Loss account as against the gross receipts appearing in Form 26AS

which gives details of tax deducted at source. We observe that the

assessee has filed the details of tax deducted at source along with

computation of income while filing the return of income. When the

case was selected for scrutiny assessment audited financial

statements were provided. Ld. A.O categorically observed in the

assessment order u/s 143(3) of the Act about the details furnished

by the assessee. So the details pertaining to tax deducted at source,

Pramod Paliwal ITA No.271/Ind/2018 gross receipts as per Form 26AS and gross receipts appearing in the

Profit & Loss account were very much before the Ld. A.O during the

course of assessment proceedings u/s 143(3) of the Act. There is

no mention about any other evidence or information which the

assessee has not disclosed during the course of assessment

proceedings u/s 143(3) of the Act or has not furnished the details

fully and truly in the income tax return. It can be safely concluded

that there was no failure on the part of the assessee to disclose fully

and truly all material facts necessary for his assessment for that

assessment year. Situation may have been favouring to the revenue

if the notice u/s 148 of the Act had been issued before the expiry of

4 years from the end of the relevant assessment year which is not

the case before us.

Kelvinator of India Ltd (supra) held that “the escapement of income

by itself is not sufficient for reopening assessment after expiry of 4

years unless and until there is failure on the part of the assessee to

disclose fully and truly all the material facts necessary for

assessment”. Hon'ble Apex Court in the case of CIT v/s Kelvinator

Pramod Paliwal ITA No.271/Ind/2018 of India Ltd (supra) further observed that “post 1.4.1989 power to reopen is much wider. However, one needs to give a schematic

interpretation to the words “reason to believe” failing which, we are

afraid section 147 would give arbitrary powers to the Assessing

Officer to re-open assessments on the basis of “mere change of opinion”, which cannot per se be a reason to re-open. We must also

keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review;

he has the power to re-assess. But re-assessment has to be based on

fulfillment of certain pre-condition and if the concept of “change of

opinion” is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place.

One must treat the concept of “change of opinion” as an in-built test

to check abuse of power by the Assessing Officer. Hence after 1.4.1989 the Assessing Officer has power to reopen provided there is “tangible material” to come to the conclusion that there is

escapement of income from assessment. Reasons must have a live

link with the formation of the belief.”

Pramod Paliwal ITA No.271/Ind/2018 11. Respectfully following the above judgment and in the given

facts and circumstances of the case wherein the reopening after 4

years from the end of the relevant assessment year is not based on

any tangible material evidence or fact not disclosed by the assessee

in the income tax return filed by it or information not provided

during the course of assessment proceedings u/s 143(3) of the Act.

Thus such reopening is bad in law and resultantly the

reassessment proceedings carried out by issuance of notice u/s 148

of the Act is liable to be quashed. In the result Ground No. 1 (a) &

(b) of the assessee’s appeal stands allowed and assessment order

u/s 143(3) of the Act dated 11.10.2011 stands restored.

to addition of Rs.92,05,981/- made by the Ld. A.O during

reassessment proceedings, Ld. Counsel for the assessee has

contended that the issue raised in Ground No.2 is squarely covered

in favour of the assessee by the decision of the Co-ordinate Bench,

Hyderabad in the case of Vijaya Bhaani Construction Pvt. Ltd V/s

DCIT (2017) 50 CCH 0132. We however are of the view that

adjudication of this ground will be academic in nature since we

Pramod Paliwal ITA No.271/Ind/2018 have already quashed the reassessment proceedings. We therefore

without going in to the merits of the case dismiss the assessee’s

Ground No.2 as infructuous since the reassessment proceeding in

which the impugned addition was made has already been held by

us as bad in law and liable to be quashed.

The order pronounced in the open Court on 17.10.2019.

Sd/- Sd/-

( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 17 October 2019 /Dev Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file.

By Order, Asstt.Registrar, I.T.A.T., Indore