EARTH CRAFT LIMITED,BHUBANESWAR vs. ITO, WARD-1(3), BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

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

ITA No146/CTK/2019 Assessment Year : 2012-2013

Earth Craft Ltd., B-28, First Vs. ITO, Ward -1(3), floor, Saheed Nagar, Bhubaneswar. Bhubaneswar. PAN/GIR No.AACCE 2972 Q (Appellant) .. ( Respondent)

Assessee by : Shri P.R.Mohanty , AR Revenue by : Shri Subhendu Dutta, DR

Date of Hearing : 25/07/ 2019 Date of Pronouncement : 06/08/ 2019

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

CIT(A)-1, Bhubaneswar dated 15.3.2019 for the assessment year

2012-13.

reopening of assessment u/s.147 of the Act by issuance of notice

u/s.148 of the Act in the pretext that income escaped assessment

in absence of any credible additional material evidences is not

permissible in law.

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real estate business. Original assessment u/s.143(3) of the Act

was completed on 13.2.2015 determining the assessed income at

Rs.34,580/-. Thereafter, the Assessing Officer found that the

assessee had understated its income to the tune of Rs.6,80,000/-

which had escaped assessment within the meaning of section 147

of the Act. Accordingly, notice u/s.148 of the Act was served on

the assessee after due approval of the Addl. CIT, Range-1. In

response to notice, the assessee filed revised return on 5.6.2017

and requested to intimate the reason for reopening the

assessment. The Assessing Officer vide his letter dated 9.6.2017

furnished the reasons for reopening of assessment as under:

“The assessee company has paid Rs.6,80,000/- to Sri Panchanan Mohanty on different dates in self cheque towards advance for land which was encashed in the Indusind Bank account maintained by the assessee during the assessment year 2012-13. Since the payments have been made otherwise than crossed cheque or demand draft, the entire advance of R.6,80,000/- should have been disallowed u/s.40A(3) of the Act. Thus, payment to such expenditure is not allowable under the provisions of the I.T.Act, 1961. In view of the above, I have reasons to believe that the income of Rs.6,80,000/- has escaped assessment within the meaning of section 147 of the I.T.Act, 1961 for the A.Y. 2012-13.” 4. The assessee vide his letter dated 14.12.2017 stated that

the reason for proceeding does not stand for escapement being

P a g e 2 | 7 advance to landlord is a current assets which is capital in nature

instead of a revenue expenditure and hence, section 40A(3) of the

Act is not applicable to the assessee company. The Assessing

Officer did not find the explanation of the assessee satisfactory

because the AO found that on enquiry from the Indusind bank, it

is found that the assessee company has issued self cheques in the

name of Sanjay Kumar Rout on 16.2.2012 for Rs.1,00,000/-,

2.3.2012 for Rs.1,00,000/- and in the name of Sisir Kanta Biswal

on 22.2.2012 for Rs.50,000/- but the assessee has claimed to

have paid to Sri Panchanan Mohanty without making entry

through cash book and, therefore, the statement given by the

assessee is contradictory. He also observed that assessee has

made cash payments in excess of Rs.20,000/- in a day to single

parties, which attract the provisions of section 40A(3) of the Act.

Therefore, the Assessing Officer completed the reassessment

determining the total income at Rs.28,02,620/- vide his order

dated 22.12.2017.

upholding, inter alia, the disallowance made u/s.40A(3) of the

Act. Hence, the assessee has preferred appeal before the

Tribunal.

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the relevant materials placed on record of the Tribunal.

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

that the assessee has complied as per questionaries’ u/s.142(1)

dated 28.1.2015 of the Assessing Officer on 5.2.2015 and

furnished the copy of the said letter before the Tribunal and

submitted that at Sl. No.7 furnishing the certificate to the extent

of provisions u/s.40A(3) attached as per Annexure-6. He

submitted that the original assessment u/s.143(3) of the Act was

passed on 13.2.2015 and hence, it cannot be said that details for

claim of expenditure u/s.40A(3) of the Act was not before the

Assessing Officer before completion of the original assessment.

He submitted that thereafter no new material has come to the

knowledge of the AO to initiate the reassessment proceedings.

Hence, the reassessment proceedings on the very same material

on which assessment was completed u/s.143(3) amounts to

change of opinion, which is not permissible in law. He, therefore,

urged to quash the reassessment order.

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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 was no new tangible materials with the AO which was

not before him at the time of framing original assessment order.

Hene, 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.

authorities.

observe that the assessee had furnished the details of claim

u/s.40A(3) of the Act vide his letter dated 5.2.2015 to the

Assessing Officer at the time of original assessment u/s.143(3) 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

P a g e 5 | 7 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.143(3)/147 of the Act in

pursuance of the invalid initiation is bad in law and same is liable

to be quashed. Hence, we 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

22.12.2017 and allow this ground of appeal of the assessee.

adjudicating Ground No.2 of appeal, other grounds raised by the

assessee on merits of the case have become infructuous.

Order pronounced on 6/08/2019

Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Cuttack; Dated 6 /08/209 B.K.Parida, SPS

P a g e 6 | 7 Copy of the Order forwarded to : 1. The appellant: Earth Craft Ltd., B-28, First floor, Saheed Nagar, Bhubaneswar.

By order

Sr.Pvt.secretary ITAT, Cuttack

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