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Facts
The assessee, a sugar factory, filed its return for AY 2013-14. The original assessment was completed under section 143(3). The AO later initiated reassessment proceedings under section 147, issuing a notice under section 148 after the expiry of four years from the end of the assessment year, alleging unexplained cash credits of Rs. 9,02,82,885/-.
Held
The Tribunal held that the reassessment proceedings were initiated beyond the statutory time limit prescribed under the first proviso to section 147 as the assessee had disclosed all material facts during the original assessment. Therefore, the notice under section 148 was considered illegal and void ab-initio.
Key Issues
Whether the reassessment proceedings under Section 147 were validly initiated after the expiry of four years from the end of the assessment year, considering that all material facts were disclosed in the original assessment under Section 143(3).
Sections Cited
147, 143(3), 148, 142(1), 69A, 115BBE, 115JC, 143(1), 250, 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the Order of the learned CIT(A)/NFAC vide DIN and Order No. ITBA/ NFAC/S/250/2023-24/1062009734(1) dated 05.03.2024 for the Assessment Year (in short “AY”) 2013-14 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’).
The assessee has originally raised the following grounds of appeal:
2.1 The Assessee has filed the revised grounds of appeal as follows:
2.3 We have perused the petition of the AR of the assessee for submission of revised form no. 36 and revised grounds of appeal. The assessee has filed the revised grounds of appeal as directed by this bench during the last hearing proceeding on 03.07.2024 and therefore we are admitting the same for adjudication as there was no new fresh facts otherwise on record and the action of the assessee is bonafide.
The brief facts of the case are that assessee is a sugar factory 3. and filed its original return of income for the AY 2013-14 on 30.11.2013 declaring the total income at Rs. NIL. Subsequently, the assessee filed the revised return on 02.12.2013 declaring total income of Rs. NIL. Thereafter the return was processed under 143(1) of the Act. Subsequently, the case was selected for scrutiny Nandi Sahakari Sakkare Karkhane Niyamit, Bangalore Page 5 of 11 under CASS and accordingly notices u/s. 143(2) and 142(1) of the Act were issued calling for details, books of accounts and bills and vouchers. In response to notices issued, the assessee appeared from time to time and submitted the details called for along with the books of accounts, bills and vouchers which were verified by the AO. Thereafter, the AO concluded the assessment u/s. 143(3) of the Act vide order dated 01.03.2016 on a total income of Rs. NIL and agriculture income of Rs. 15,32,936/- and accordingly, tax payable was also NIL. The AO calculated the alternate minimum tax payable u/s. 115JC amounting to Rs. 1,59,210/-.
3.1 Thereafter, the case was reopened u/s 147 of the Act on the basis of the following reasons- “The assessee NANDI SAHAKARI SAKKARE KARKHANE NIYAMIT (AAAAN0815F) has received deposit amounting to Rs. 9,02,82,885/- in its Axis bank branch Jamkhandi a/c. no. 910010038062624. The amount is received from Sri Ranukamata. The findings of aforementioned Search u/s. 132A on the depositor and modus operandi of cash deposit and transfer to first level beneficiaries has been studied. The nature and source of cash credit and the purpose and genuineness of the cash credit is to be ascertained, considering the suspicious profile and activities of the prayer Sri Renukamata. The disseminated information is verified from the insight portal and through ITBA and e-filing portal. The details of return filed, income declared and scrutiny records persued for said Assessment year. It is pertinent to mention here that the assessee may have received money not only from Sri Renukamata, but also from a number of other bogus companies as well as other cooperative societies. Hence, the assessee has to prove the genuineness of all major cash credits, in the light of new information that the assessee is part of channel to route unexplained cash into the banking system. The trail of cash from source to destination needs to be investigated, and brought to tax.”
3.2 Accordingly, notices u/s. 148 of the Act dated 31.03.2021 were issued requiring the assessee to file return of income within 30 Nandi Sahakari Sakkare Karkhane Niyamit, Bangalore Page 6 of 11 days from the service of notice. Thereafter, several notices u/s. 142(1) of the Act were issued from time to time. In response to notice dated 03.02.2022 which the assessee has replied on 18.02.2022 by submitting that the assessee is neither having any business nor the assessee has deposited any cash in the said society. However, on inquiry, they found that the traders of sugar and other byproducts are depositing cash and getting demand drafts, RTGS facilities in the name of the assessee for purchase of sugar and its byproducts. The assessee factory sells their products only through demand drafts, RTGS payments and no cash sale is made or collection thereon. Therefore, the deposits made by the traders is not connected with the factory. The assessee also offered to furnish the names of the parties to whom sugar and other byproducts is sold along with invoice if needed.
3.3 During the course of reassessment proceedings, the following observations are made by the AO: i. The assessee could not reconcile the payments received from M/s. Renuka Mata Multi State Urban Co-operative Credit Society Ltd. ii. There are very huge transactions / payments received from M/s. Renuka Mata Multi State Urban Co-operative Credit Society Ltd. and assessee in its reply could not explain a single receipt up to satisfaction. iii. It is highly unlikely that such a voluminous transactions are there on records [in bank statement] and the assessee does not have any details available about such party.
3.4 In view of the above, the AO held that the transactions with M/s. Renuka Mata Multi State Urban Co-operative Credit Society are presumed to be dubious in nature. The assessee by way of not Nandi Sahakari Sakkare Karkhane Niyamit, Bangalore Page 7 of 11 filing any relevant details specific to the transaction has strengthened this presumption. The amount received from M/s. Renuka Mata Multi State Urban Co-operative Credit Society and other such bodies are effectively found to be the own money of the assessee. Since the assessee could not provide specific details of the transactions and their respective places in books of account, the AO presumed that these receipts are recorded into the books. The same was therefore considered to be Unexplained money of the assessee as per Section 69A of the Act and is to be taxed as per Section 115BBE. Accordingly, the AO concluded the assessment on a total taxable income of Rs. 9,02,82,885/- and taxable income u/s 115JC to be Rs. 15,93,17,654/-.
Aggrieved by the Assessment completed under section 147 r.w.s. 144B of the Act, dated 31.03.2022, the assessee preferred an appeal before the ld. CIT(A)/NFAC.
The ld. CIT(A)/NFAC dismissed the appeal of the assessee stating that by no stretch of imagination it can be concluded that the assessee had successfully discharged the statutory onus cast upon it in terms of provisions of the Sec. 69A of the Act to explain the nature and source of the ADMITTED credits aggregating to Rs. 9,02,82,885/- in its bank account during the year under consideration. Resultantly, in the facts and circumstances of the matter relying on the decision of the Hon’ble Apex Court in the case of Kale Khan Mohammed Hanif V. CIT [1963] 50 ITR 1 (SC) it CANNOT be concluded that the assessee had discharged the statutory onus cast upon it in the present matter. Hence, the action of the Ld. AO in making the addition of credits aggregating to Rs. 9,02,82,885/- by holding that the assessee had failed to explain the nature and source thereof-does not call for any interference. Resultantly, the instant appeal is dismissed.
Aggrieved by the Order of the ld. CIT(A)/NFAC dated 05.03.2024, the assessee has filed the present appeal before the Tribunal. The assessee has also filed the paper book comprising of 136 pages containing therein written submission, Annexure A – D, Order of the CIT (A) and assessment order along with various case laws relied upon by the assessee.
Before us, at the outset the learned AR of the assessee vehemently submitted that the notice issued u/s. 148 of the Act is barred by limitation due to the fact that the regular scrutiny assessment u/s. 143(3) of the Act is concluded on 01.03.2016 and therefore notice for reassessment issued after 7 years from the end of the relevant assessment year is bad in law. Further, during the course of original assessment proceeding, the assessee appeared from time to time and submitted all the details as called for by the AO along with books of account, bills and vouchers which were verified. The assessee has fully and truly disclosed all the material facts necessary for concluding the assessment u/s. 143(3) of the Act.
The Learned DR on the other hand supported the Order of the authority below and filed a written submission along with the report of AO dated 26.06.2024 on the submissions filed by the assessee. Further, ld. DR submitted that notice u/s. 148 of the Act issued under the extended time period allowed under TOLA, 2020 up to 31.03.2021.
We have heard the rival submission and perused the material on record. It is an undisputed fact that originally the assessment in the case of the assessee was completed u/s. 143(3) of the Act vide order dated 01.03.2016. Thereafter, the AO initiated the re- Nandi Sahakari Sakkare Karkhane Niyamit, Bangalore Page 9 of 11 assessment proceeding u/s. 147 of the Act by recording his reasons and accordingly, notice u/s 148 of the Act dated 31.03.2021 was served upon the assessee. The order u/s. 147 was passed on 31.03.2022 determining the total income of the assessee at Rs. 9,02,82,885/- Before us, the counsel for the assessee challenged the initiation of the reassessment proceeding u/s. 147 on the ground that notice u/s. 148 of the Act dated 31.03.2021 is barred by limitation due to the fact that the regular scrutiny assessment u/s. 143(3) of the Act is concluded on 01.03.2016 and the notice for reassessment is issued after a gap of 7 years from the end of the relevant assessment year.
9.1 As per the first proviso to section 147 of the Act, where an assessment under subsection (3) of section 143 has been made for the relevant assessment year, no action shall be taken u/s. 147 of the Act after the expiry of four years from the end of the relevant assessment years 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 truly all material facts necessary for the assessment for that assessment year. In the case under consideration, the notice u/s. 148 was issued and served on 31.03.2021 i.e. after a lapse of more than 4 years from the end of the assessment year 2013-14. Hence, we are of the opinion that the proceedings u/s. 147 of the Act would be valid only if assessee had not disclosed fully & truly all the material facts necessary for the completion of the original assessment proceedings u/s. 143(3) of the Act for the assessment year 2013-14.
9.2 On going through the assessment order passed by the AO u/s. 143(3) of the Act, we find that as observed by the AO, the AR of the assessee appeared from time to time and submitted the details as called for. Books of accounts, bills and vouchers were also Nandi Sahakari Sakkare Karkhane Niyamit, Bangalore Page 10 of 11 produced by the assessee which were also verified by the AO and no discrepancies were found during the course of Assessment Proceedings. Further during the course of the Reassessment proceedings also there is even no whisper by the AO about non disclosure/ suppression of any material facts. From the perusal of the facts stated above, it is clear that the AO’s action in initiating proceedings under 147 of the Act is invalid as per the first proviso of Sec. 147 of the Act as all material facts necessary for assessment of income were before him during the 143(3) proceedings. We are of the opinion that the “material facts” contemplated in the Proviso to sec. 147 of the Act connotes ‘primary facts’ necessary for assessment in relation to the assessment year. There is no duty cast on the assessee to indicate or draw attention of the Income Tax Officer to what factual, legal or other inference can be drawn from the primary fact disclosed. We are also of the considered opinion that the reasons for reopening itself is based on assumptions and presumptions without any tangible materials to show that assessee has escaped assessment. The assessing officer in our view has failed to substantiate with evidence that the assessee himself deposited such cash into the bank account and merely added by stating that the transactions with M/s. Renuka Mata Multi State Urban Co-operative Credit Society are presumed to be dubious in nature.
9.3 We are of the opinion that since the assessee has disclosed fully and truly all material facts necessary for the assessment and the assessment in the case of the assessee is already completed u/s. 143(3) of the Act, the notice issued u/s. 148 of the Act dated 31.03.2021 i.e. after the expiry of four years from the end of the relevant assessment year is illegal, bad in law and void ab-initio. Accordingly, the entire reassessment proceedings are annulled.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 6th Jan, 2025.