GAURAV KUMAR AGARWALLA,KALAHANDI vs. DCIT, CENTRAL CIRCLE, SAMBALPUR

At the time of hearing, ld counsel for the assessee referring At the time of hearing, ld counsel for the assessee referring At the time of hearing, ld counsel for the assessee referring to additional ground of appeal filed in both the appeals, has to additional ground of appeal filed in both the appeals, has to additional ground of appeal filed in both the appeals, has submitted that the additional ground filed by the assessee goes to submitted that the additional ground filed by the assessee goes to submitted that the additional ground filed by the assessee goes to the root of the matter being legal in nature and the root of the matter being legal in nature and the root of the matter being legal in nature and same may be admitted and adjudicated on merits, to which, ld DR would have admitted and adjudicated on merits, to which, ld DR would have admitted and adjudicated on merits, to which, ld DR would have no objection. Therefore, I admit the additional ground in view of no objection. Therefore, I admit the additional ground in view of no objection. Therefore, I admit the additional ground in view of

The additional ground of appeal raised in both the appeals read as follows:

Replying to above, ld D.R. dutifully supported the orders of lower authorities.

I find that the fact and circumstances in both the appeals are identical. Therefore, I adjudicate the appeal for the assessment year 2014-15 and the decision will apply mutatis- mutandis to the assessment year 2015-16.

On careful consideration of the rival submissions, I find the assessee, prop. Of M/s. Sajam Motors is operating its business as sub-dealer of Hero Honda Motor Cycles. The assessment in this case was processed u/s.143(1) of the Act accepting the income shown by the assessee. Later on a survey operation was conducted in the business-cum-office premsies of the firm M/s. Arundhati Automotives by Investigation Wing of Sambalpur u/s.133A of the I.T.Act at Bhawanipatana on 9th & 10th November, 2015 and books of accounts marked as AA-01 to AA-10 were found and impounded. On perusal of the ledger account of Sanjam Motors in the books of account Arundhati Automotives maintained in tally account bearing tally No.10001 which was impounded with identification mark AA-10, the AO observed that the assessee has made cash payments of Rs.6,15,079/- during the relevant assessment year under consideration in contravention of provisions of section 40A(3) of the Act. Therefore, the AO has reason to believe that income amounting to Rs.6,15,079/- is chargeable to tax and has escaped assessment. Accordingly, a notice u/s.148 of the Act dated 27.3.2018 asking the assessee to file return. In response to notice u/s.148 of the Act for reopening the assessment u/s.147 of the Act, the assessee requested the Assessing Officer to provide the reasons recorded vide note sheet

The assessee filed return on 3.12.2018 showing total income of Rs.2,06,990/-. Thereafter, the Assessing Officer completed the assessment u/s.144/147 of the Act and made addition of Rs.6,15,079/- u/s.40A(3) of the Act.

On appeal, the CIT(A) dismissed the appeal of the assessee upholding the disallowance made u/s.40A(3) of the Act. Hence, the assessee has preferred appeal before the Tribunal.

Ld A.R. of the assessee has objected to the reopening of assessment u/s.147 of the Act on the ground that the initiation of reassessment proceedings itself was bad in law as the same was based on change of opinion. Ld A.R. of the assessee submitted in response to notice u/s.142(1) dated 11.12.2018, the assessee furnished copy of his ledger account in the books of M/s. Arundhati Automotives, purchase ledger showing purchase of 2 wheeler vehicles from Arundhati Automotive, copy of unaudited balance sheet, bank statements, copy of dealer agreement and copy of cash book, etc Ld A.R. submitted that it was the contention of the assessee before the Investigation Wing as well as before the authorities below that the payments were made directly by customers to Arundhati Automotives. Hence, it

Further, ld A.R. of the assessee referred to the judgment of Hon’ble Orissa High Court in the case of in the case of B.C.Nayak vs CIT in Writ Petition (C) No.797/2012 dated2.2.2015 and submitted that it is not permissible for the AO to initiate reassessment proceedings u/s.147 of the Act on the ground that the assessee has made payments in contravention to the provision of section 40A(3) of the Act. The ld A.R. vehemently pointed out that there were no new tangible materials with the AO which was not before him at the time of framing original assessment order. Hence, it is a clear case of change of opinion and thus initiation of reassessment u/s.147 of the Act and all subsequent orders may kindly be quashed.

On the other hand, ld D.R. supported the orders of lower authorities.

On careful consideration of the rival submissions, I observe that the assessee had submitted that though the sales have been effected by him, but payments have been made by the customers directly to M/s. Arundhati Automotives, which facts was before the AO at the time when return was processed u/s.143(1) of the Act, therefore, on the same very issue, the assessment was reopened u/s.147 of the Act without there being any new material coming to the knowledge of the Assessing officer after completion of original assessment. Keeping in view all these facts, and judgement of Hon’ble Jurisdictional High Court in the case of B.C.Nayak (supra) we are of the considered view that the reopening of assessment made by the AO is based on mere change of opinion, which is not permissible in law. We, therefore, find merit in the legal ground raised by the assessee that reassessment made by the AO u/s.144/147 of the Act in pursuance of the invalid initiation of reassessment is bad in law and same is liable to be quashed. Hence, I hold that the reopening of assessment u/s.147 of the Act by issue of notice u/s.148 of the Act is bad in law and, accordingly, we quash the reassessment order dated 24.12.2018 and allow this ground of appeal of the assessee.

As the facts for the assessment year 2015-16 are identical to assessment year 2014-15, and the AO has reopened the

In the result, appeals of the assessee are allowed.