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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per CHANDRA POOJARI, AM:
These appeals filed by different assessees are directed against the different
orders of the CIT(A), Trivandrum and pertain to the assessment year 2005-06.
The grounds raised by the assessees are common which are as follows:
1) The order of the Commissioner of Income Tax Appeals, Trivandrum is against law, facts and circumstances of the case.
2) The CIT Appeals erred in holding that the re-opening of the assessment, originally completed U/s 153 A r.w.s 143 (3) of the I. T. Act, U/s 147 after 4 years from the end of the relevant asst year was valid inspite of the decision of the Supreme Court in the case of Ref CIT and Anr Vs. Foramer France 264 ITR 566.
3) The CIT Appeals should have noted that when all the material facts were fully and truly disclosed at the time of original assessment , there was no failure on the part of the Appellant to disclose fully and truly all relevant facts before the A.O , who completed the assessment U/s 153A r.w.s 143 (3) of the I.T Act. Ref Macdermott International Inc Vs Addl. CIT and Anr 259 ITR 138 (Uttaranchal).
4) The CIT Appeals should have noted that the Cochin Tribunal in the case of M/s Cordial Company , in which the Appellant was a partner for the asst year 2004-2005, on similar facts held in ITA No. 119/ Coch/2013 dtd 22/11/2013, that the re-opening of the assessment after four years from the end of the asst year was invalid under the proviso to Section 147 of the I. T. Act , since the original asst in that case was completed U/s 153A r.w.s 143 (3) and the assesee has furnished at the time of original assessment, the current account copies of the partners , on specific request from the A.O. So there was no failure on the part of the assessee to disclose the necessary particulars.
I.T.A. Nos.76,94 & 291/Coch/2018 5) The CIT Appeals should have noted that the A.O did not also state what relevant facts , if any, was not disclosed by the Appellant before the A.O at the time of original asst which led him to re-open the asst after 4 years. Ref Yakub Ali Gopal Singh and Party Vs DCIT and Anr 209 CTR (Raj) 136.
6) The CIT Appeals should also have noted that the A.O did not also disclose in the reasons recorded as to which fact or material was not disclosed by the Appellant fully and truly which was necessary for the assessment of the asst year 2005-2006, so as to establish the vital link between the reasons and the evidence. Therefore the re-opening should have been held as invalid. Ref. Hindustan Liver Ltd Vs. R.B. Wadkar AC1T and Anr 268 1TR 332.
7) As the notice U/s 148 was issued without recording that "there was failure on the Appellant's part to disclose fully and truly all material facts necessary for the asst for the asst year 2005-2006, the re-assessment notice issued after 4 years should have been held as invalid by the CIT Appeals . Ref. Titanor Components Ltd Vs. Asst CIT and Ors 243 CTR (Bom) 520.
The assesses herein have also raised additional ground which reads as follows:
The order passed u/s. 143 r.w.s. 147 of the I.T. Act is barred by limitation since the Notice u/s. 148 was issued only on 11/07/2011 i.e. during the assessment year 2012-13, only on the 7th year after the end of the relevant assessment year 2005-06.
At the time of hearing, the Ld. AR made an endorsement to the effect that the
assesses herein did not want to pursue the additional ground. As such, the
additional ground raised by the assessees is dismissed as not pressed.
Since the facts in these appeals are similar, we consider the facts as narrated in
ITA No. 76/Coch/2018. The assessment for the year under consideration was
originally completed u/s. 153A r.w.s. 143(3) of the Act vide order passed on
21/12/2007. The assessment was then re-opened vide notice issued u/s. 148 of the
Act on 11/07/2011. The reason for reopening the assessment was that the closing
balance in the current account of the assesse with the firm M/s. Cordial Company as 3
I.T.A. Nos.76,94 & 291/Coch/2018 on 31/03/2014 was (-) Rs.10,09,073/- whereas the opening balance as on
01/04/2004 was (-) Rs.8,48,477/-. This clearly indicated that the assessee had
credited an amount of Rs.1,60,596/- to the account which is not disclosed in the
return of income filed for the assessment year under consideration. Since an
amount of Rs.1,60,596/- had escaped from the assessment, notice u/s. 148 was
issued which in turn was responded by the assessee vide letter file on 20/07/2011
requesting to treat the return which was filed originally on 01/12/2007 as filed in
response to the notice issued. In response to the notices issued subsequently u/s.
142(1) and 143(2) of the Act, the authorized representative had raised objection
and challenged the very reopening of the assessment which the Assessing Officer
had not entertained. Since the assessee could not furnish any valid explanation
with regard to difference in closing balance with the firm M/s. Cordial Compnay to
the turn of Rs.1,60,596/-, the same was treated as income escaped from
assessment and accordingly, added to the income returned in the absence of
satisfactory explanation offered.
Against this, the assessee went in appeal before the CIT(A). Before the CIT(A)
the assessee relied on the decisions of Hon'ble Supreme Court in the case of CIT vs
Foramer France (284 ITR 66), Hon'ble High Courts of Uttaranchal (259 ITR 138),
Rajasthan (209 CTR 136), Bombay (243 CTR 520) and also the decision of the
Hon'ble ITAT, Cochin Bench in the case of Southern Cashew Exporters vs DCIT in
ITA No.529/Coch/2010 dt. 02.03.2012. The case of the assessee was that the sole
reason for reopening the assessment was based on this current account a copy of
I.T.A. Nos.76,94 & 291/Coch/2018 which was already filed at the time of original assessment and verified by the then
Assessing Officer and only after getting satisfied about the entries therein, the
original assessment was completed and hence, reopening of assessment after
expiry of 4 years was not permissible but according to the CIT(A),this seems to be
factually incorrect since the original assessment was completed u/s 153A rws 143(3)
subsequent to the search carried out where focus would be more on seized
materials than any other materials including on current account which the assessees
claimed to have filed at that point of time. According to the CIT(A), it is not the
case of the assessee that the fact of crediting the current account of him for a sum
of Rs.1,60,596/- has been brought to the notice of the Assessing Officer during the
course of search assessment proceedings which in turn has been accepted by the
Assessing Officer and decided not to take further action and filing the current
account copy alone would not be sufficient enough so as to say that the captioned
issue had already been verified and reopening of assessment at a later date is an
outcome of change of opinion. The CIT(A) observed that the Supreme Court
decision relied on by the assessee in view of the above was not applicable to him
since the original assessment was not completed u/s 143(3) but u/s 153A r.w.s
143(3) where focus was more on seized materials and no addition for the amount
credited to the assessee's current account in the search assessment could be made.
Hence, reopening after four years but before six years u/s 148 in the instant case of
the assessee is found to be within the permissible limit of the Act and the only
condition contemplated in the Act is the escaped amount would be more than Rs.1
lakh as in the case of the assessee. The CIT(A) observed that though the assessee
I.T.A. Nos.76,94 & 291/Coch/2018 claimed to have filed the current account during the course of search assessment
proceedings, never brought into record documentary evidences as the same was
verified by the then Assessing Officer who in turn got satisfied with the source for
the sum of Rs.1,60,596/- credited into it. According to the CIT(A), the assessment
reopened at a later date in view of the above could not be said as based on change
of opinion but on cogent and credible evidence surfaced subsequently which
necessitated reopening without which the damage caused to the Revenue could not
have been compensated. The CIT(A) was of the view that assessment got rightly
reopened based on the fact that the assessee had failed to disclose the amount
credited to the extent of Rs.1,60,596/- into his current account with the firm
mentioned supra and source to be explained for the same had not at all been a
subject matter of discussion during the course of search assessment proceedings.
As a result, the other decisions of the High Courts relied on by the assessee are
also not applicable to his case. According to the CIT(A) another decision of the
ITAT, Cochin Bench in the case of Southern Cashew Exporters was also not
applicable to his case since the original assessment was not completed u/s 143(3)
but u/s 153A rws 143(3) where the focus was more on seized materials. Similarly,
the ITAT Cochin Bench decision in Cordial Company for the AY 2004-05 was also
not applicable to the case of assessee for the year under consideration since source
for the amount credited in to the current account had not been explained yet.
5.1 The CIT(A) observed that the very assessment got reopened in the absence of
assessee disclosing the amount of Rs.1,60,596/- which he credited into his current
I.T.A. Nos.76,94 & 291/Coch/2018 account he had with the firm mentioned supra wherein he was a partner. The
assessee was basically expected not only to disclose the fact of the amount credited
into his current account but also to explain the source for the same. In the absence
of disclosing not only the amount credited into the current but also explaining
source for the same, the CIT(A) was of the considered opinion that the reopening of
assessment was very well within the permissible limit of the Act and doesn't require
further interference. In the absence of source explained for the amount of
Rs.l,60,S96/-credited into current account the assessee had with the firm M/s.
Cordial Corrpany wherein he was a partner, the addition made of Rs.1,60,596/- was
confirmed and accordingly, dismissed the ground of the assessee.
Against this, the assesses are in appeal before us. The assessees placed
reliance on the order of the Co-ordinate Bench of this Tribunal in the case of Dy.
CIT vs. Cordial Company in ITA No. 119/Coch/2013 dated 22/11/2013 wherein it
was held as under:
We have considered the rival submissions on either side and also perused the material available on record. The assessment proceedings were completed earlier u/s 143(3) by an order dated 24-12-2007. The assessing officer reopened the assessment by issuing notice on 29-03-2011. Admittedly, the notice was issued after expiry of four years' period. Proviso to section 147 clearly says that once the assessment was completed u/s 143(3) it cannot be reopened after expiry of four years unless there was negligence on the part of the assessee in furnishing the required details for completing the assessment. By placing reliance on the judgment of the Kerala High Court, the ld. DR submitted that mere production of books of account is not sufficient and that it is the duty of the assessee to bring to the notice of the assessing officer the particular item in the books of account or portion of the documents which are relevant. In this case, according to the ld. DR, the assessee failed to do so, therefore, the assessment can be reopened even after the expiry of four years, 7
I.T.A. Nos.76,94 & 291/Coch/2018 We are unable to accept the contention of the ld. DR, This is not a regular assessment. This is search assessment. The entire books of account and documents were seized and were in the custody of the department-. During the course of original assessment, the assessing officer sought details through a specific questionnaire In fact it is apparent from the assessment order dated 24-12-2007 that the assessing officer had called for all the details specifically. The assessing officer on 10-05-2007 by issuing a questionnaire has called for the following details which are apparent from the assessment order:
".... A questionnaire was also issued to the assessee on 10.5.2007, requesting the assessee to produce books of account and to file statement of bank accounts, cash flow statement, partners capital and current account, details of addition made to fixed assets etc."
The assessing officer, after considering the specific details with regard to bank accounts, cash flow statement, partners capital and current account, details of addition made to fixed assets etc. filed by the assessee has observed as follows:
“After verifying the books of accounts, seized documents and the reply of the assessee along with the details filed in response to the questionnaire the assessee was issued a pre-assessment proposal dated 3.12.12007."
In view of the above, it is apparent that the assessing officer has specifically raised a query with regard to partners’ capital account and current account. This was also brought to the notice of the assessing officer by the assessee by a letter dated 21/11/2007. Therefore, it is not a case of bringing to the notice of the assessing officer the particular item in the books of account or portion of the documents which are relevant. The assessing officer specifically invited the attention of the assessee to the specific item in the books of account and the assessee also clarified to the assessing officer in the original assessment. Therefore, this Tribunal is of the considered opinion that there is no negligence on the part of the assessee in furnishing the required details for completing the assessment. Therefore, the judgment of the Kerala High court in the case of Alappat Jewels (supra) may not be relevant to the facts of this case. Since there was no negligence on the part of the assessee in furnishing the particulars with regard to partners’ capital account and current account and other details, proviso to section 147 would be applicable to the facts of the present case and hence, reopening of assessment after expiry of four years is not permissible. This Tribunal do not find any infirmity in the order of the CIT(A). Accordingly, the same is confirmed.
In the result, the appeal of the revenue stands dismissed.”
I.T.A. Nos.76,94 & 291/Coch/2018 7. The Ld. DR relied on the order of the CIT(A).
We have heard the rival submissions and perused the record. Admittedly, in
these cases, the original assessments were completed u/s. 153A read with section
143(3) of the Act. At the time of completion of the assessments, the authorized
representative of the assesses appeared and filed copy of bank statements,
partners current account as appearing in the books of accounts of the assessee.
The Assessing Officer, after being satisfied with the reply given by the assessee
completed the assessments u/s. 153A r.w.s. 143(3) of the Act. In this situation, it
cannot be said that the assessees had failed to disclose all material facts fully and
truly required for the assessment. The Assessing Officer, after going through the
books of account and other documents filed before him had completed the
assessments and chose not to make addition on the issues raised in the reasons
recorded for re-opening of the assessments. Therefore, we are of the opinion that
there is no negligence on the part of the assessee in furnishing the required details
for completing the assessments.
I.T.A. Nos.76,94 & 291/Coch/2018 8.1 We are of the opinion that the ratio laid down by the Tribunal in the case of
Cordial Company cited supraa is squarely applicable to the facts of the assessees
cases. Accordingly, taking a consistent view with the Tribunal, we vacate the
findings of the CIT(A) and allow the appeals of the assesses herein.
In the result, the appeals of the assesses are allowed. Order pronounced in the open Court on this 06h March, 2019
sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Kochi Dated: 06th March, 2019 GJ Copy to: 1. Shri Kochaniyan Unnithan, T.C. No.9/2196, Narayana Bhavan, Kurup’s Lane, Sasthamangalam, Trivandrum. 2. Shri Ayyappan Unnithan, T.C. No.9/2196, Narayana Bhavan, Kurup’s Lane, Sasthamangalam, Trivandrum. 3. Shri Vijayan Unnithan, T.C. No.9/2196, Narayana Bhavan, Kurup’s Lane, Sasthamangalam, Trivandrum. 4. The Deputy Commissioner of Income-tax, Circle-1(2), Trivandrum. 5 The Pr. Commissioner of Income-tax, Trivandrum 6. D.R., I.T.A.T., Cochin Bench, Cochin. 7. Guard File. By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin
I.T.A. Nos.76,94 & 291/Coch/2018