NEW SUMERPUR GOLDEN TRANSPORT,KANPUR vs. INCOME TAX OFFICER-2(3), KANPUR

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “SMC”, LUCKNOW BEFORE SHRI. A. D. JAIN, VICE PRESIDENT ITA No.579/LKW/2017 Assessment Year: 2010-11 New Sumerpur Golden Transport v. Income Tax Officer 2(3) 76/164, Halsey Road Kanpur Kanpur TAN/PAN:AAGFN4235L (Appellant) (Respondent) Appellant by: Shri Rakesh Garg, Advocate Respondent by: Shri C. K. Singh, D.R. Date of hearing: 19 02 2019 Date of pronouncement: 22 02 2019

O R D E R This is assessee’s appeal for assessment year 2010-11 against the order of the ld. CIT(A)-I, Kanpur, dated 18/8/2017, taking the following grounds:- 01. Because the re-assessment framed under section 147/143(3) of the I.T. Act, 1961 and upheld by CIT(A) is void abinitio, bad in law and be quashed. 02. Because there being no material forming to believe the notice issued under section 148 is without jurisdiction, bad in law, the re-assessment framed thereafter is contrary to principle of law, the CIT(A) has erred in law in upholding the same. 03. Because the entire material having been placed by the assessee before the AO at the time of the original assessment and the AO having applied his mind and accepted the view of the assessee, the assessment cannot be reopened merely on the basis of change of opinion, the reassessment framed be quashed.

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was assessed u/s. 143(3) of I.T. Act, 1961 on total income of Rs.1,57,570/-. During the course of RAP objection, it is found that assessee has debited Rs.58,35,339/- under the head of diesel expenses in the profit & loss a/c. As per sec.40A(3) of I.T Act, 1961, if an assessee Incurred any expenditure in respect of which payment in excess of Rs.20,000/- is made otherwise than account payee cheque or an account payee bank draft, 100% of such expenditure will not be allowable as deduction. Therefore, the expenses under the head of diesel expenses to the tune of Rs.5,05,955/- out of Rs.58,35,339/- which were paid by the assessee on cash which was to be added back to the income of the assessee. After taking into account of case law of apex court in the case of Indian and Eastern Newspapers Society (I.E.N.S. for short) (119 ITR 998), the opinion rendered by the audit party is only an information, AO determined himself and have reason to belief that income has escaped assessment. After consideration the RAP objection and case records of the assessee, it is gathered that assessee made payment in cash to the tune of Rs.5,05,955/- out of Rs.58,35,339/- under the head of diesel expenses. After plain reading of the sec. 40A(3) of I.T. Act, 1961, it is found that assessee is not in preview of rule 6DD of the Income-tax Rules, 1962. Therefore, AO has reason to believe that amount of Rs.'5,05,955/- as debited in profit & loss a/c and payment made in cash is a part of the escaped 'assessment. Dated: 13/10/2014 sd/- (Govind Singh) Income Tax Officer-2(3) Kanpur"

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the provisions of section 40A(3) of the Act, qua such expenditure claimed. The ld. CIT(A), by virtue of the impugned order dated 18/8/2017, has dismissed the assessee’s appeal. 4. Apropos ground Nos. 1 to 4, the ld. A.R. of the assessee has contended that the ld. CIT(A) has erred in confirming the reassessment framed, despite the Assessing Officer having had no material with him to form the belief of escapement of income, since the Assessing Officer had, at the time of framing the original assessment, duly applied his mind and had correctly accepted the claim of the assessee; that the reopening of the completed assessment of the assessee being based on a mere change of opinion, such reassessment requires to be quashed. 5. On the other hand, the ld. D.R. has placed strong reliance on the impugned order. It has been contended that as correctly observed by the Assessing Officer on the basis of his reasons to believe escapement of income, since he found that the assessee had made payment in cash for Diesel expenses, to the tune of Rs.5,05,955/-, in violation of the provisions of section 40A(3) of the Act, without coming within the exceptions provided by Rule 6DD of the I.T. Rules, 1962, such amount was required to be disallowed; that the ld. CIT(A) has also correctly observed that the Assessing Officer had recorded his own independent satisfaction to reopen the assessment. 6. Heard. The question is whether indeed there has been a change of opinion which prompted the reopening of the completed assessment. A perusal of the original assessment order (copy at APB: 44-46) dated 11/3/2013 shows that the issue of Diesel expenses does not find mention/discussion therein. 7. A perusal of the reasons of belief of escapement of income, reproduced hereinabove, shows that it was during the course of RAP

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objection that it came to light that the assessee had debited an amount of Rs.58,35,339/- under the head of Diesel expenses, in its profit & loss account. As per the provisions of section 40A(3) of the Act, such expenses, to the tune of Rs.5,05,955/-, incurred in cash, were required to be added back to the assessee’s income, which had not been done in the original assessment. 8. The stand of the assessee has been that at the time of original assessment proceedings, the books of account and other relevant details, as required by the then Assessing Officer, had been produced and were examined, as is also evident from the original assessment order dated 11/3/2013. The accounts, which were audited, were produced along with the bills and vouchers, etc., and they were examined by the then Assessing Officer. Copy of the account of M/s Kumar Filling Station was filed. Therein, transactions made with the said party were fully disclosed. It was only after examining these details that the original assessment order was framed. It was only thereafter that the Revenue Audit Party pointed that the amount of Rs.5,05,955/- under the head “Diesel expenses”, paid by the assessee to M/s Kumar Filling Station, in cash, needed to be disallowed. The assessee is of the view that the Assessing Officer has examined all the details along with the books of account of the assessee in the original assessment proceedings and he having not made any addition by way of disallowance under the provisions of section 40A(3) of the Act, the completed assessment of the assessee could not have been reopened by way of a mere change of opinion. The ld. A.R. of the assessee has placed reliance on the following decisions for the proposition that no reopening of a completed assessment on the same material is sustainable:-

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(1) Income Tax Officer vs. Tech Span India Pvt. Ltd., 304 ITR 10 (SC). (2) CIT vs. Rajan N. Aswani, 91 taxmann.com 313 (Bombay). (3) Motilal R. Todi vs. ACIT, order (CLPB: 18-36) dated 22/9/2015, passed by the ITAT, Mumbai, in ITA No.2910/Mum/2013. 9. In “CIT vs. Kelvinator of India Ltd.” 320 ITR 561 (SC), it has been held, inter alia, that the Assessing Officer has the power to reopen a completed assessment, provided there is tangible material to come to the conclusion that there is escapement of income from assessment; and that the reasons recorded must have a live link with the formation of belief. In the present case, it is undisputed that in the original assessment proceedings, the assessee had provided before the Assessing Officer, all material, including the books of account and the copy of account of Kumar Filling Station, wherein, the transactions made with the said party had been fully disclosed. Therefore, there was no lapse on the part of the assessee. It did all that was required to be done. It is not in the hands of the assessee as to how an assessment order is to be written, he can merely provide the information desired. In the present case, as discussed, in the original assessment proceedings, all the relevant details were provided. The mere fact that the Assessing Officer did not make any addition under section 40A(3) of the Act, does not entitle reopening of the assessment. 10. The decisions in the cases of ‘Tech Span India Pvt. Ltd.’ (supra), ‘Rajan N. Aswani’ (supra) and ‘Motilal R. Todi’ (supra), amongst numerous others, are to the same effect. Therefore, the assessee is correct in its challenge in this regard.

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Assessing Officer went into the case records of the assessee, does not detract from the fact that all the necessary details with regard to the payments made to Kumar Filling Station were laid bare by the assessee before the then Assessing Officer in the original assessment proceedings and after considering the same, the Assessing Officer did not make any disallowance/addition under section 40A(3) of the Act. 14. Thus, keeping in consideration the aforementioned decisions regarding the impermissible reopening of the completed assessment on the basis of the audit objection raised by the Revenue Audit Party also, I hold that the reopening of the completed assessment in the case of the present assessee, by way of the reasons recorded and all proceedings pursuant thereto, culminating in the impugned order, are unsustainable in law. They are, accordingly, set aside and quashed. 15. In view of the above, nothing further survives for adjudication, nor was anything else argued. 16. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 22/02/2019.

Sd/- [A. D. JAIN] VICE PRESIDENT DATED:22nd February, 2019 JJ:1902 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar