M/S BSN JOSHI & SONS LTD,KHURDA vs. ACIT, BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No.06/CTK/2011 Assessment Year : 2003-2004

M/s. BSN Joshi & Sons Ltd.,Joshi Vs. ACIT, Circle 2(1), Bhubaneswar House, Raja Bazar, Jatni, Khurda PAN/GIR No.AACCB 0427 B (Appellant) .. ( Respondent)

Assessee by : Shri P.C.Sethi, AR Revenue by : Shri Subhendu Dutta, DR

Date of Hearing : 07/08/ 2019 Date of Pronouncement : 08/08/ 2019

O R D E R Per C.M.Garg,JM This appeal is filed by the assessee against the order dated

22.10.2010 of the CIT(A)-II, Bhubaneswar for the assessment year 2003-

04.

“1. That the order of the AO and confirmed by the CIT(A) is erroneous, illegal, arbitrary and contrary to the evidence on record. 2. That, the learned CIT (A) has committed serious error in not considering the written submission and the arguments made during the course of appeal by the appellant and has passed the order in an arbitrary and cryptic manner which is contrary to the decisions of the Hon'ble Apex Court and for that matter the appellate order of the CIT (A) as well the learned Assessing Officer is liable to be quashed and/or annulled.

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separate adjudication.

assessment u/s.147 by issuing notice u/s.148 of the Act.

the business of coal trading and transportation. The Assessing Officer

completed the assessment u/s.143(3) of the Act on 30.3.2006 determining

the total income of Rs.97,27,960/- and demand of Rs.29,12,835/- was

raised and, thereafter, after giving appeal effect, the demand was reduced

to Rs.46,613/-. However, the assessment was subsequently reopened by

issuance of notice u/s.148 served on the assessee on 17.3.2009. The

reasons for which the assessment was reopened were stated to be as

follows:

“1. The assessee had shown Rs.1,47,91,276/- as income from supervision and service charges wherein as per the TDS certificates the total receipts from supervision and service charges was

P a g e 2 | 10 Rs.1,81,50,810/-. As this was not considered while passing earlier assessment order, there was an escapement of income to that effect. Ii,. Further, there was under disclosure of closing stock of Grade-F coal of Rs.4,04,850/- in the P&L account.”

supervision charges has been recorded in the books of account on cash

basis i.e. on receipt basis, the difference was only due to the cash basis of

accounting followed and that the assessee had fully and truly disclosed all

the material facts necessary for his assessment, and that, on the facts of his

case, reassessment proceedings cannot be initiated. The Assessing Officer,

however, did not accept the contention of the assessee and observed as

follows:

1) Though it is claimed by the assessee that the receipts on account of supervision & service charges have been accounted for in the books in cash basis, no documentary evidence in support of its claim was produced by the A/R for verification during this assessment proceedings.

2) From the TDS certificates so furnished along with the return, it is seen that there were receipts on account of supervision & service charges of Rs.1,81,50,810/-. However, receipts of Rs.1,47,91,276/- have been considered as income by the assessee being received during the year and rest receipts of Rs.33,59,534/- though not received but accrued during the year have not been credited to the P & L A/c. The controversy here revolves around chargeability of supervision & service charges to the tax which even though technically accrued as per the mercantile-system of accounting being followed by the assessee, but the same was not accounted for as income in view of the peculiar facts and circumstances of the case wherein there was dispute regarding ultimate collection of such receipts. Under the Income Tax Act 1961, income chargeable to tax is the income received or due to be

P a g e 3 | 10 received in India in the previous year, or income that accrues or arises or is deemed to. accrue or arise in India during such year. The computation of such income is to be made in accordance with the method of accounting regularly employed by the assessee. No doubt the Income Tax Act 1961 takes into account two points of time at which the liability to tax is attracted viz., the accrual of income or its receipt; but the substance of the matter is the income. The provisions of sec. 145 of the Act determines the method of computing the taxable income, it does not effect the range of taxable income or the ambit of taxation.

3) It is not understood why the A.R has explained about the hybrid system of accounting in his submission unless the same was questioned either in this assessment proceedings or earlier.

4) The case laws cited by the A.R relate to cases of much earlier period and thereafter amendment was made by the Taxation Laws (Amendment) Act to the provisions of section 145 of the I.T. Act.

5) As regards disclosure of closing stock of Grade-F coal of Rs.4,04,850/- in the P&L account, the A.R was also not able to furnish any satisfactory explanation as well as documentary evidence in support of the same.”

before the CIT(A). The CIT(A) also rejected the submission of the assessee

and upheld the validity of reassessment proceedings observing that from

assessment year 1989-90 onwards reopening can be done if AO had reason

to believe that income escaped assessment even though there was no

failure on the part of the assessee and referred to various judicial

pronouncement on this issue.

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recorded in the books of account on cash i.e. on receipt basis and the

difference was only due to cash basis of accounting followed and the

accrual basis of accounts maintained by the organisations issued TDS

certificates. He submitted that as per the books of account and auditors

report, there was no closing stock of grade -F coal as on 31.3.2009 and

there is no understatement of closing stock of grade -F coal. Learned A.R.

submits that once all these details were before the Assessing Officer, and

on these facts, he decided not to make disallowance, the Assessing Officer’s

decision to initiate reassessment proceedings on the same issue, without

any new tangible material before him, is nothing but a fresh application of

mind on the same facts is not permissible under the scheme of the Income

tax Act. He also submitted that re-opening of assessments passed

u/s.143(3) after 4 years from the end of the assessment year cannot be

made unless income chargeable to tax has escaped assessment by failure

on the part of the Assessee to disclose fully and truly all material facts

necessary for the assessment. In this case all the material facts were

available on record therefore; it cannot be reopened merely on account of

change of opinion. If the original assessment was passed after considering

various submissions and facts on record, assessment cannot be reopened

u/s.147 particularly, if there is no failure on the part of the Assessee to

disclose fully and truly all material facts necessary for assessments. He

P a g e 5 | 10 referred to the decision of Hon’ble Supreme Court in the case of CIT Vs.

Kelvinator India Ltd. (2010) 310 ITR 561 (SC). Ld A.R. submitted that the

assessment year involved in this appeal is 2002-03 and notice u/s.148 of

the Act has been issued and served on the assessee on 17.3.2009. He

submitted that notice u/s.148 of the Act has to be issued from the end of

the relevant assessment years and since this has not been done, the

reopening of assessment is bad in law and same should be annulled.

below.

of the Tribunal. We find that this issue is squarely covered in favour of the

assessee by the decision of Hon'ble Supreme Court in the case of CIT Vs.

Kelvinator India Ltd. (2010) 310 ITR 561 (SC), wherein newly substituted

provision of section 147 of the Act with effect from 01.04.1989 is

interpreted by observing, that section 147 of the Act, as substituted w.e.f.

01.04.1989 does not postulates conferment of power upon the Assessing

Officer to initiate reassessment proceeding upon his mere change of

opinion. Further, if 'reason to believe' of the Assessing Officer is founded on

an information which might have been received by the Assessing Officer

after the completion of assessment, it may be a sound foundation for

exercising the power under section 147 r.w.s. 148 of the Act. It cannot be

accepted that only because in the assessment order, detailed reasons have

P a g e 6 | 10 not been recorded, an analysis of the materials on the record by itself may

be justifying the Assessing Officer to initiate a proceeding u/s. 147 of the

Act. When a regular order of assessment is passed u/s 143(3) of the Act,

the presumption can be raised that such an order has been passed on

application of mind. We also find that in the present case from the reasons

recorded, as reproduced herein above, it is clearly discernible that there is

no allegation by the AO alleging that there was failure on the part of the

assessee to make a return or to disclose fully and truly all material facts

necessary for the assessment. We also find the initiation of reassessment

proceedings beyond the prescribed period of four years from the end of the

relevant assessment year, was clearly without such allegation in the reasons

is fetal for the revenue.

under section 147 of the Act, and the first proviso to section 147 mandates,

inter alia, that where an assessment under section 143(3) of the Act has

been made, no action shall be taken under section 147 of the Act, after the

expiry of four years from the end of the relevant assessment year, unless

any income chargeable to tax has escaped assessment for such assessment

year by reason of the failure on the part of the assessee to disclose fully

and trully all material facts necessary for his assessment. In present case,

the assessment year involved is 2002-03 and the notice u/s.148 of the Act

has been issued on 17.3.2009, which is beyond four years from the end of

P a g e 7 | 10 the relevant assessment year. We also find that no tangible material has

come to the knowledge of the Assessing Officer to reopen the assessment

u/s.147 of the Act.

applicability of the rasio of the decision of Hon'ble Delhi High Court in the

case of Haryna Acrylic Manufacturing Co. vs CIT & Ors, 308 ITR 38(Del) and

in the case of Sabh Infrastructure Ltd vs ACIT, 398 ITR 198 (Del) has

vehemently relied upon by ld A.R. pressing into with reference to legal

ground of the assessee, wherein, it has been held that when the Assessing

Officer intends to initiate reassessment proceedings after expiry of four

years from the end of the relevant assessment year, then it is incumbent

upon him to bring on record at the time of recording reasons about the

allegation of failure on the part of the assessee to disclose fully and truly all

materials facts necessary for his assessment. The relevant part of the

judgment of Hon’ble Delhi High Court in the case of Sabh Infrastructure Ltd

(supra) reads as follows:

“ Where assessee could not be said to have failed to disclose fully and truly all material facts then assumption of jurisdiction under Sections 147 and 148 of the Act was erroneous and notice issued for reassessment should be quashed.” 14. As we have noted above that since the reassessment proceedings

have been initiated by the Assessing Officer u/s.147 of the Act after expiry

of four years from the end of the relevant assessment year 2003-04 by

issuing notice u/s.148 of the Act on 17.3.2009, then the mandate of first

P a g e 8 | 10 proviso to section 147 of the Act requires that in the reasons such allegation

should have been mentioned and contained that the assessee has failed to

disclose fully and truly all material facts necessary for assessment and that

because of the failure on the part of the assessee to disclose fully and truly

all material facts necessary for assessment and that because of this failure,

there has been an escapement of income chargeable to tax.

Officer while initiating reassessment proceedings u/s.147 of the Act and

prior to issuance of notice u/s.148 of the Act, there is no whisper what to

speak of any allegation that the assessee had failed to disclose fully and

truly all material facts necessary for assessment on the issues of supervision

and services charges and difference in the figures shown by it in the

respective TDS certificate and on the issue of under disclosure of closing

stock of Grade-F coal. Merely having a reason to believe that income has

escaped assessment is not sufficient to reopen the assessment beyond four

years period as per first proviso to section 147 of the Act. The escapement

of income from assessment must also be occasioned due to the failure on

the part of the assessee to disclose material facts, fully and truly. This is a

necessary condition for overcoming the bar set up by the proviso to section

147 of the Act and if this condition is not satisfied, the rigour would operate

against the Assessing Officer and no action under section 147 could be

taken against the assessee.

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and following the decisions quoted above, we are of the considered view

that the reassessment order u/s. 147 r.w.s. 143(3) of the Act is bad in law

a hence, same is quashed and the ground No.2 & 3 of appeal of the

assessee are allowed.

of the Act dated 31.12.2009, other ground raised by the assessee on merits

of the additions has become infructuous and hence, not adjudicated.

Order pronounced on 08/08/2019. Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 08/08/209 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : M/s. BSN Joshi & Sons Ltd.,Joshi House, Raja Bazar, Jatni, Khurda

Sr.Pvt.secretary ITAT, Cuttack

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