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Income Tax Appellate Tribunal, GAUHATI ‘E’COURT, ATKOLKATA
Before: SHRI A. T. VARKEY, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per Dr. A. L. Saini:
The captioned appeal filed by the assessee, pertaining to assessment year 2010-11, is directed against the order passed by the Commissioner of Income Tax (Appeal)-Dibrugarh, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3)r.w.s 147 of the Income Tax Act, 1961 (in short the ‘Act’) dated 07/12/2016.
Grounds of appeal raised by the Assessee are as follows: 1. That the Id. CIT(A) erred in concluding that the reopening proceedings were not valid in law thereby leading to the quashing of the re- assessment order. 2. That the Id. CIT(A) erred in concluding that the assessee had fully and truly disclosed all material facts during the proceedings u/s 143(3).
T & T Projects Ltd. ITA No.208/Gaul/2017 Assessment Year:2010-11 3. That the Id. CIT(A) did not take into account the letter of the assessee dated 25.03.2015, where the assessee misled the AO by asking to complete the assessmentat 5% and thus did not disclose fully and truly all material facts regarding the estimate of 5% to be made. The assessee did not specifically mention "5% of the turnover" or "5% of the Gross Receipts" which led to the AO erroneously passing the assessment order.
That the Id. CIT(A) ignored the fact that once the assessee agreed for addition of 5% against proposed addition of 5.5% by the AO, it was the duty of the assessee to pay taxes on the actual taxable income. As the department is liable to give the benefits and deductions even if not claimed by the assessee,the assessee should also be liable to pay the due taxes on its own even if it is left by AO due to any reason.
Whether on the facts and in the circumstances of the case, the tax payer is liable to pay full amount of tax on the amount of taxable income that is within the knowledge of the tax payer.
That the Id. CIT(A) has given the relief only on the basis of decision in the case of CIT - v – Sonitpur Solvex Ltd. (2013) 352 ITR 305 (Gau) without properly appreciating the facts and circumstances of the present case. The decision of the jurisdictional Hon'ble High Court is distinguishable from the facts and circumstances of the present case.
The appeal filed by Revenue for Assessment Year 2010-11, is barred by limitation by 5 days. The Revenue has moved a petition requesting the Bench to condone the delay.We heard the party on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal of Revenue for hearing.
Brief facts qua the issue are that the Assessee filed its return of income on 30.09.2013 declaring total income of Rs.2,27,08,650/-. The original assessment of the assessee was completed under section 143(3) of the Income Tax Act, 1961, on 31.03.2013 by computing the net profit of the assessee @ 5% of gross receipts at Rs.4,11,14,825 ( 5% of the gross receipts Rs.82,22,96,500). However, later on, it was observed by AO, that the assessee, besides Income from operations of Rs.82,22,96,500/-, earned income from joint venture of Rs.5,42,548/-, interest of fixed deposit of Rs.1,34,99,632/-, dividend of Rs.54,773/- and miscellaneous Page | 2
T & T Projects Ltd. ITA No.208/Gaul/2017 Assessment Year:2010-11 income of Rs.57,740/-. The AO, while computing the assessed total income, allowed deduction of Rs.54,733/- and Rs.5,42,548/- as dividend and profit from joint Venture respectively but did not add back in income from fixed deposits of Rs.1,34,99,632/- and miscellaneous income of Rs.57,740/-. Hence, there was an escapement of income to the tune of Rs.1,35,57,372/-( Rs.1,34,99,632 +Rs.57,740). Accordingly, the case was selected for reassessment under section 147 of The Act. Thereafter, notice u/s 148 was issued on the assessee on 12.09.2016. The Assessee responded the noticed U/s 148 of the Act, by stating that the return filed u/s 147 dated 11.06.2016 may be treated as return filed in response to that notice. The AO informed assessee (Vide letter dated 30.05.2016), the reason recorded for re-opening of assessment. Reason recorded as per that letter is given below: “During the course of scrutiny proceedings for AY 2010-11, it was found from the submissions (scheduled annexed to and forming part of balance sheet as on 31- 03-2010) of the, assessee that the assesse has earned Rs. l,34,99,632/- as interest on fixed deposit and miscellaneous income of Rs. 57,740/ - during the FY 2009-10 which were not taken into account during the course of scrutiny proceedings for the AY-2010-11. It may be mentioned that the scrutiny assessment for AY 2010- 11 has been completed on 31.03.2013"
Thereafter, the AO issued show cause notice to assessee stating as follows: “Please explain why incomes of the assessee to the tune of Rs. 1,34,99,632/- as interest on fixed deposits and Rs. 57,740/- as miscellaneous income should not be added to the assessed income of Rs. 4,07,22,470/- as these incomes were not considered during the assessment done for AY 2010-11.”
In response to the show cause notice, the assessee submitted that assessing officer has completed the assessment under section 143(3) of the Act after obtaining a number of details/documents/explanations. The interest income from fixed deposits and miscellaneous income, which is sought to be escaped as per the reason mentioned in the notice, was clearly mentioned in the face of the profit and loss account. The assessee submitted profit and loss account and Balance Sheet during the original assessment under section 143(3) of the Act, and the AO has examined the same. At the time of original assessment under section 143(3) of the Act, in the noticed u/s 142(1), dated 04.12.2012, details of fixed deposits on which interest has been earned has been sought by AO and assessee replied the said show
T & T Projects Ltd. ITA No.208/Gaul/2017 Assessment Year:2010-11 cause notice on 13.12.2012 and assessee had provided the AO a complete details of fixed deposits. Therefore, assessee submitted that there was no tangible material, hence reassessment proceedings should not be initiated. However, AO rejected the contention of the assessee and made reassessment under section 147/148 of the Act, and made addition to the tune of Rs.1,35,57,372/-( Rs.1,34,99,632 interest on FD and +Rs.57,740 misc. income)
6.. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has quashed the reassessment proceedings and deleted the consequential addition. Aggrieved, the Revenue is in appeal before us.
7.We have heard both the parties and perused the material available on record. We note that the AO had passed the assessment order u/s 143(3) dated 31.3.2013 after obtaining a number of details / documents / explanations and the assessee had duly complied with the requirement so made by the AO in such proceedings and as such, the assessment u/s 143(3) had been completed after detailed scrutiny.The assessing officer in his original assessment U/s 143(3) of the Act had assessed the income @ 5% on the gross receipts only on the premises that certain creditors did not respond to notices u/s 133(6) of the Act. Undisputed fact in this case is that assessment u/s 143(3) of the Act was completed more than four years before reassessment proceeding u/s 147 was resorted to. The scheme of section 147 in so far as it is applicable in case of completed assessment like the case in hand is that reopening will be valid only if escapement of income is due to assessee's failure to file return u/s 139 of the Act or in response to notice issued u/s 142(1) or section 148 of the Act or failure to disclose fully and truly, all material facts necessary for its assessment. Assessee had filed its return of income u/s 139 of the Act, meaning thereby that the first condition is not applicable in its case. In response to first notice dated 25.04.2016 issued u/s 148 too, assesse had filed its return of income on 11.06.2016. Second notice u/s 148 dated 12.09.2016 was also complied with on 07.10.2016 by way of a letter wherein assessee requested the AO to treat the earlier return filed in response to first notice u/s 148 as return filed in compliance to second notice issued u/s 148 of the Act. Only residual issue to be seen is Page | 4
T & T Projects Ltd. ITA No.208/Gaul/2017 Assessment Year:2010-11 whether assessee falls within the ambit of third limb of proviso to section 147 i.e. it failed to disclose fully and truly all material facts necessary for its assessment. This issue has to be decided after taking into consideration, the reason recorded for re-opening of assessment and materials already in the possession of the Assessing Officer at the time when the order u/s 143(3) was initially passed four years earlier.We note that in the reason recorded for re-opening the assessment, the AO stated that during scrutiny proceeding for AY 2010-11, it was found that from schedules annexed to and forming part of balance sheet, assessee had earned Rs. 1,34,99,637/- as interest on F.D. and miscellaneous income of Rs. 57,748/- which were not taken into account in scrutiny proceeding. It is clear from the reason recorded that specific items of incomes which allegedly escaped assessment were obtained from documents submitted by the assessee and also forming part of the audited accounts. The reason recorded is silent about the particular failure on the part of the assessee to disclose full materials. Burden is cast upon the AO to show that there has been failure on the part of the assessee to fully and truly disclose all material facts. Explanation 1 to Section 147 will not relieve the AO from the burden of demonstrating assessee's failure. In the reason recorded itself, the AO has to state that assessee had failed to disclose all material facts and such failure should be demonstrated by the A.O. In the present case under consideration, there is no mention anywhere, either in the reason recorded or in the body of assessment order, of assessee having failed to disclose fully and truly, all primary materials regarding the impugned interest income and miscellaneous receipts which were required for completion of assessment.
We note that Hon'ble High Court of Bombay in the case of Too Publishing (P) Ltd v Dy. CIT (2015) ITR 135, wherein the facts were that completed assessment was sought to be reopened after recording of reason and issuing of notice. Specific materials which assessee failed to disclose were not mentioned in the reason recorded. The Hon'ble High Court of Bombay held as follows: "10. As stated above. the reasons supplied to the Petitioner do not disclose that there was any failure on the part of the Petitioner to provide all the material facts. That being the position, this ground could not have been taken up against the Petitioner at the time of
T & T Projects Ltd. ITA No.208/Gaul/2017 Assessment Year:2010-11 disposing of the objections. Once this was not the basis for issuance of notice for Reassessment, it cannot be held against the Petitioner that the Petitioner had fail to make a full and true disclosure. It will have to be held that the Petitioner did not fail to make full and true disclosure of all material facts. The jurisdictional requirement for carrying out the reassessment, after the expiry of period of four years, is not fulfilled in the present case.”
Decision on similar line was held by the Hon'ble Bombay High Court in the case of Sound Casting (P) Ltd vs Dy. CIT (2012) 250 CTR 119(Bom). The Hon'ble Court held as follows: "There is no allegation in the reasons which have been disclosed to the assessee that there was any failure on his part to fully and truly disclose material facts necessary for assessment for that assessment year. Hence, we find merit in the contention that the jurisdictional condition for reopening the assessment beyond a period of four years has not been fulfilled. Even during the course of hearing, it has not been the submission of the Revenue that there was any suppression of material facts on the part of the Petitioner"
We note that AO has failed to point out that there was failure on the part of assessee to disclose material facts during the original assessment proceedings.It is relevant at this stage to see whether assessee had not fully and truly disclosed material facts regarding those receipts, which were subject matter of reassessment. We note that as per audited Profit &Loss Account and Balance Sheet filed at the time of original scrutiny proceeding, assessee had shown the aforesaid receipts as forming part of income and specific details of interest on F.D. and miscellaneous income were given in Schedule 11 of the Profit &Loss Account. It is clear from the Profit &Loss Account that assessee had offered the receipts as income in its return of income. There is no allegation that the receipts are not disclosed by assessee in its return of income. According to assessee's submission, as per requisition, details of F.D. interest were submitted to AO vide letter dated 13.12.2012. There is no allegation that incorrect figures of F.D. interest and that of miscellaneous income were furnished to the AO. In the backdrop of those undisputable facts, it will not be proper to take the view that assessee had not disclosed true and full facts regarding the receipts under consideration.
T & T Projects Ltd. ITA No.208/Gaul/2017 Assessment Year:2010-11 We note that disclosures in Balance Sheet and Profit & Loss Accounts are held to be sufficient disclosure. Hon'ble Gujarat High Court, in the case of Pr. CIT v Lincoln Pharmaceuticals Ltd (2016) 66 taxmann.com 355 (Guj) held that when primary facts regarding value of plant and machinery was available in the Balance Sheet, reopening could not have been done after four years to disallow assessee's claim of deduction u/s 80-IB on the ground that the value of plant and machinery exceeded Rs. 1 crore. Similar views that disclosure in Balance Sheet amounts to disclosure for purpose of section 147 of the Act, had been held in the following cases: i) Corporation Bank Ltd (2002) 254 ITR 791 (SC) ii) Arthus Anerson& Co v AClT (2010) 324 ITR 240 (Bom)
We note that when there is no failure on the part of the assessee to disclose material facts and when income is reassessed based on same sets of facts that were available earlier, the assessee cannot be said to have failed in its duty of disclosing material facts. In view of the facts of the case and ample number of decision on the subject, it cannot be said that assessee had failed to fully and truly disclosed all primary facts for completion of its assessment. We note that when primary facts were already disclosed, Assessing Officer has no power to review and reopen the assessment.[ClT v Jet Speed Audio Pvt Ltd (2015) 372 ITR 762 ]. Hence, it is rather a settled position of law that when primary materials were already with the AO at the time of original assessment, there is no power for reviewing of the same. We note that Hon'ble Jurisdictional Guwahati High Court had occasion to deal with similar kind of issue in the case of CIT Vs. Sonitpur SolvexLtd.[2013] 352 ITR 305. In that case, assessee filed NIL return of income and it was accordingly assessed u/s 143(3) of the Act on 05.05.1999. The case was reopened on the reasoning that assessee had received transport subsidy which was taxable. Reassessment was completed on 10.03.2005 wherein transport subsidy of Rs. 24,70,559/- was brought to tax. Relevant part of the detailed judgment is given below: "25. Unless, therefore, there is an omission or failure, on the part of an assessee, to disclose, fully and truly, all material facts, which were necessary for his assessment for a given assessment year, the power to re-open assessment, under Page | 7
T & T Projects Ltd. ITA No.208/Gaul/2017 Assessment Year:2010-11 Section 147, cannot be taken resort to. Merely on the ground that the assessee has received greater reliefs, than what he was entitled to, cannot give jurisdiction to the Assessing Officer to make a re-assessment.
What becomes abundantly clear from the above discussion is that neither Explanation 1 nor Explanation 2 to Section 147 enlarges the scope of the proviso to Section 147. If, therefore, there is no omission or failure, on the part of an assessee, to disclose 'fully and truly' all material facts, which were necessary for his assessment for a given assessment year, the Assessing Officer cannot reopen an assessment by taking resort to either Explanation 1 or Explanation 2 to Section 147 inasmuch as these Explanations do not enlarge the scope of the proviso to Section 147. This position of law is rendered beyond dispute if one carefully reads the following observations made in Calcutta Discount Co. Ltd. (supra): "It may be pointed out that the Explanation to the sub-section has nothing to do with "inferences" and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose "inferences" - to draw the proper inferences being the duty imposed on the Income-tax officer. We have, therefore, come to the conclusion that while the duty of the assessee is to disclose 'fully and truly' all primary relevant facts, it does not extend beyond this. " (Emphasis supplied)
The reason for re-opening of the assessment, in the present case, is that the assessee had not included the amount received as transport subsidy in the annual income of the asessee. An Assessing Officer's duty is not merely to look at the total annual income given by an assessee. What the assessee has to lay before the Assessing Officer is his annual income, that is, the income, which, according to the assessee, is taxable and deductions, if any, which, according to the assessee, he is entitled to receive. A sum, received by an assessee, may not be treated by the assessee as an income. An 'Assessing Officer cannot blindly accept the annual income, which an assessee furnishes to him, or the taxable income, which an assessee presents before him, or the deductions, which an assessee considers himself entitled to receive. It is the duty of an Assessing Officer to examine each of the material aspects of a return and, then, make his assessment. If the Assessing Officer is negligent or rash, he cannot blame the assessee for escapement of taxable income and, in this regard, neither Explanation 1 nor Explanation 2 would help such an assessment to be re-opened after the same is barred by limitation, because of a period of four years having elapsed since the date of making of the assessment.
In the case at hand, the transport subsidy, which had been received by the assessee, was duly disclosed by the assessee in the audited accounts and statements submitted by the assessee along with the assessee's return of income for the assessment year 1997-1998. In fact, the Paper Book, filed before the Tribunal, contains copies of the assessee's audited balance sheet and statement submitted along with the return. The balance sheet, admittedly, contains the details of receipt of transport subsidy.
T & T Projects Ltd. ITA No.208/Gaul/2017 Assessment Year:2010-11 29. To be more precise, it may be pointed out that the transport subsidy reserve, shown by the assessee as on 31.03.96, was Rs. 35,00,330/-. By 31.03.97, the transport subsidy reserve rose up to Rs. 59,70,889/-. The difference of Rs. 24,70,559/- has been added by the Assessing Officer in the total income of the assessee, while le-assessing the assessee's income. by re-assessment order, dated 10.03.2005. When the assessee had already disclosed, very clearly and thorouqtu», that his transport subsidy reserve was, as on 31.03.96, Rs. 35,00,330/- and that by 31.03.97, this amount had risen to Rs. 59,70,889/-, the assessee cannot say that the assessee did not disclose all such material facts, which were necessary for making a valid and effective assessment of income for the purpose of realization of tax. In fact, in CIT v. Corporation Bank Ltd. [2002] 254 ITR 791/122 Taxman 826 (SC), it has been pointed out by the Supreme Court that disclosure, in the balance sheet, amounts to full and true disclosure of material facts necessary for assessment. The observations, made in this regard, which are relevant for our purpose, read as under:
"Turning attention to the first question as regards the provisions under Section 147(a) be it noted and as the facts depict, there is no failure on the part of the assessee in furnishing the particulars pertaining to the above noted sum as not recoverable for the relevant accounting year and the statements filed along with the original return disclosed the full details of the aforesaid account. There is, therefore, no failure on the part of the assessee to disclose 'fully and truly' the material facts necessary for the assessment years for the respective years and as such section 147(a) has no manner of application and is not attracted in the facts of the matter under consideration. The High Court on consideration of the facts came to the conclusion that the Tribunal was justified in coming to the said finding and we also record our concurrence therewith." (Emphasis supplied)
The reason, assigned by the Assessing Officer, at the time of making re- assessment, in the present case, reads as under:
“ On verification of the records it is seen that the assessee company has received subsidy Rs. 2470559/- from the Govt. of Assam which was not included in the total income of the assessee during year 1996- 1997 relevant to the assessment year 1997-1998.”
The reason, so assigned by the Assessing Officer, shows that the information, regarding transport subsidy, was available in the audited accounts and statements furnished by the assessee to the Assessing Officer along with the assessee's return. These details being available before the Assessing Officer, the Assessing Officer cannot say that there was omission or failure on the part of the assessee to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year.
In fact, there is not even a particle of accusation in the re-assessment order to show that the escapement of income, in the present case, was because of the omission or failure, on the port of the assessee, to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year. A finding to the effect that there was omission or failure on the part of the assessee to make return under Section 139 or in response to a notice Page | 9
T & T Projects Ltd. ITA No.208/Gaul/2017 Assessment Year:2010-11 issued under Sub-Section (1) of Section 142 or 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year, is sine qua non for assumption of jurisdiction by the Assessing Officer for re-assessment of income, which escaped disclosure. We are fortified in taking this view from the decision in Duli Chand Singhania (supra). 33. In the present case, re-assessment proceeding was initiated beyond the period of limitation of four years as prescribed by Section 147. This could have been overridden had there been, on the part of the assessee, omission or failure to disclose 'fully and truly' all material facts necessary for his assessment for the given assessment year. 34. Since the present case did not suffer from non-disclosure or omission to disclose 'fully and truly' the facts by the assessee, the Assessing Officer could not hove been held, and was rightly not held by the learned Tribunal, to have had the jurisdiction to re-open the assessment and make assessment as in the present case. 35. While considering the case of Honda Siel Power Products Ltd. (supra), which Mr. Hazarika has relied upon, it needs to be noted that Honda Siel Power Products Ltd. (supra) was a case, wherein there was an omission on the part of the petitioner to disclose the expenses incurred relatable to tax free/exempted income and since expenses were not disclosed, inference by way of re-assessment of income was upheld. The facts of Honda Siel Power Products Ltd. (supra) are, as already discussed above, quite different from the facts of the present case inasmuch as all the material facts, which were necessary for making a correct assessment, had been furnished, in the case at hand, to the Assessing Officer and when the Assessing Officer had failed to make correct assessment, the Revenue cannot blame the assessee and take recourse to the proviso to Section 147 for the purpose of re-opening the assessment. 36. What crystallizes from the above discussion is that in the facts and circumstances of the present case, re-opening of the assessment and making of the re-assessment were bad in law and the learned Tribunal committed no error, either in fact or in law, in allowing the assessee's appeal and in setting aside the order of re-assessment. We, thus, notice no infirmity, legal or factual, in the re- assessment order. 37. In the result and for the reasons discussed above, we find no merit in this appeal. The appeal, therefore, fails and the same shall accordingly stand dismissed.”
We note that the factual matrix in assessee’s case and that of the case decided by Hon’ble jurisdictional High court are similar. Primary facts were already available before the respective assessing officer. The Hon’ble Court had held that re- opening after the lapse of 4 years was bad in law. The Hon’ble Court also held that explanation 1 & 2 of section 147 cannot come to rescue the case of the Department. Page | 10
T & T Projects Ltd. ITA No.208/Gaul/2017 Assessment Year:2010-11
Therefore, considering the principles enunciated by the various High Courts, we note that mere reason to suspect cannot be reason to believe and therefore the reassessment in the assessee’s case is bad in law. It is settled position of law that when primary materials were already with the Assessing Officer at the time of original assessment u/s 143(3), there is no power for reviewing the same. Moreover, in the present case, there is no omission or failure on the part of the assessee to make the return of income u/s 139 to disclose fully and truly all material facts necessary for his assessment. That being so, we decline to interfere in the order passed by the Ld. CIT(A), his order on this issue, is hereby upheld and the grounds of appeal raised by the revenue is dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 02.08.2019
Sd/- Sd/- (A.T. VARKEY) (A.L.SAINI) �या�यकसद�य / JUDICIAL MEMBER लेखासद�य / ACCOUNTANT MEMBER
�दनांक/ Date: 02/08/2019 (SB, Sr.PS) Copy of the order forwarded to: 1. ACIT, Circle-2, Dibrugarh 2. T & T Projects Ltd. Guwahati 3. C.I.T(A)- 4. C.I.T.- Guwahati. 5. CIT(DR), Gauhati Bench, Guwahati. 6. Guard File.