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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: SHRI CHANDRA MOHAN GARG & LAXMI PRASAD SAHU
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.
In Ground No.2 of appeal, the assessee has challenged the
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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The facts in brief are that the assessee derives income from
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
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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.
On appeal, the CIT(A) dismissed the appeal of the assessee
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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We have heard ld representatives of the parties and perused
the relevant materials placed on record of 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
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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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 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.
On the other hand, ld D.R. supported the orders of lower
authorities.
On careful consideration of the rival submissions, we
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
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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.
As we have quashed the reassessment order while
adjudicating Ground No.2 of appeal, other grounds raised by the
assessee on merits of the case have become infructuous.
In the result, appeal of the assessee is allowed.
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
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Copy of the Order forwarded to : 1. The appellant: Earth Craft Ltd., B-28, First floor, Saheed Nagar, Bhubaneswar.
The Respondent. ITO, Ward -1(3), Bhubaneswar 3. The CIT(A)-1, Bhubaneswar 4. Pr.CIT- 1, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//
By order
Sr.Pvt.secretary ITAT, Cuttack
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