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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA [Before Shri Rajesh Kumar, Accountant Member & Shri Sonjoy Sarma, Judicial Member] I.T.A. No. 1775/Kol/2019 Assessment Year : 2009-10
M/s SPPL Property Management Vs. DCIT, Circle-3(1), Kolkata Pvt. Ltd. (PAN: AAICS 7168 Q) Appellant Respondent
Date of Hearing 11.05.2022 Date of Pronouncement 13.05.2022 For the Appellant Shri Siddharth Jhajharia, FCA For the Respondent Shri Manish Kanojia, CITDR
ORDER Per Shri Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Commissioner of Income Tax(Appeals)-10, Kolkata [hereinafter referred to as ‘CIT(A)’] dated 20.06.2019 for the assessment year 2009-10.
The assessee has challenged the order of Ld. CIT(A) on legal issues as well as on merit. The ground raised on jurisdictional issue are ground nos. 1 to 4 wherein the order of Ld. CIT(A) has been assailed for the reason that the proceedings u/s 147 of the Act were not quashed by ld CIT(A) which were wrongly initiated by the AO in violation of 1st proviso to section 147 of the Act.
Facts in brief are that the assessee filed return of income on 29.09.2009 declaring total income of Rs. 12,45,14,027/- which included deduction u/s 80IA of Rs. 10,44,52,044/-. The assessment was framed u/s 143(3) vide order dated 27.12.2011 accepting the claim of the assessee u/s 80IA of the Act and assessing income at Rs. 2,00,64,081/-. Thereafter the case of the assessee was reopened u/s 147 of the act issuing notice u/s 148 of the Act on 10.03.2016 which was duly served on the assessee. The reason recorded u/s 148(2) for reopening the assessment reproduced are as under:
2 ITA No. 1775/Kol/2019 AY: 2009-10 M/s SPPL Property Management Pvt. Ltd. “It was seen from the assessment order u/s 143(3) dated 27.12.2011 that the Provision for “Bad & doubtful debtors” amounting to Rs. 9422355/- as shown in the Schedule-2 under the head Administration Expense to the P/L account for the year ended 31.03.2009 required to be added was not considered for the purpose of computing the Book Profit u/s 115JB of the Act. The another point comes to the assessment proceeding of AY 2013-14 that the SPPL Property Management is claiming deduction u/s 80IA(4)(iii) for operation and maintenance of six industrial parks. Salarpuria Touchstone was one of the six projects but 80IA(4)(iii) is not allowable for this project. The assessee company claimed Rs. 7719600/- as deduction u/s 80IA for Salarpuria Touchstone which is not allowable. In view of the above I have reason to believe that income to the tune of Rs. 1,71,41,955/- has escaped assessment.” As is clear from the above, the assessment was reopened for two reasons namely i) that the provisions for bad and doubtful debtors amounting to Rs. 94,22,355/- shown in Schedule-2 under the head administration Expenses to the P/L account for the year ended 31.03.2009 required to be added as these were not allowable. Similary said provisions are also required to be added in computing the book profit u/s 115JB and ii) the assessee has wrongly claimed the deduction u/s 80IA(4)(iii) in respect of Salarpuria Touchstone project to the tune of Rs. 77,19,600/- and therefore the income has escaped to the tune of Rs. 1,71,41,955/-. Finally the assessment was framed vide order dated 13.12.2016 passed u/s 147/143(3) of the Act.
The Ld. CIT(A) dismissed the appeal of the assessee on jurisdictional /legal issue by holding that the AO has own bonafide belief on the basis of information available with him and further noted that AO has followed due process of law in the reopening the assessment.
The Ld. Counsel of the assessee, at the outset, submitted that the reopening has been made by the AO without satisfying the conditions as envisaged in the 1st proviso to section 147 of the Act. The Ld. A.R. submitted that assessment in the case was framed u/s 143(3) vide order dated 27.12.2011 and the reassessment proceedings were initiated u/s 147 of the Act by issuing notice u/s 148 of the Act on 10.03.2016. The ld. A.R. submitted that the assessment is obviously reopened after a period of four years from the end of relevant assessment year 2009-10-. The Ld. A.R. argued that for reopening the assessment after a period of four years from the end of relevant assessment year where the assessment u/s 143(3) of the Act was also framed, the
3 ITA No. 1775/Kol/2019 AY: 2009-10 M/s SPPL Property Management Pvt. Ltd. reopening can only be made in terms of first proviso to section 147 of the Act which provides that no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, 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 make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment. The Ld. A.R. contended that the assessment has been reopened for two reasons as stated hereinabove namely the provision for bad and doubtful debtors amounting to Rs. 94,22,355/- shown in the profit and loss account not considered for the purpose of normal income and for computing book profit u/s 115JB and that deduction u/s 80IA of Rs. 77,19,600/- was wrongly allowed in respect of Salarpuria Touchstone. The ld. A.R submitted that the assessee had fully and truly disclosed all the material facts pertaining to these two items in the return of income . Moreover, the assessment was framed u/s 143(3) vide order dated 27.12.2011 and therefore reopening has been made by AO in contravention to first proviso to section 147 of the Act and therefore the reopening proceedings deserves to be quashed. In defense of the argument the Ld. Counsel relied on the decision namely Haldia Petrochemicals Ltd. vs. ACIT in ITA no. 2455/Kol/2019 for AY 2008-09 dated 24.03.2021 which has been passed by the Tribunal after following the decision of Kolkata Tribunal in the case of Beekay Steel Industries Ltd. vs. DCIT in ITA No. 105/Kol/2015 dated 31.05.2017 wherein the issue has been allowed by quashing the assessment as well as the reopening proceedings. The Ld. A.R. prayed that various assessment proceedings as well as consequent assessment may kindly be quashed.
The ld. D.R. on the other hand relied heavily on the order of authorities below by submitting that while reopening the assessment, the proper reasons have been recorded u/s 148(2) of the Act as to how the income of the assessee has escaped and therefore the legal/jurisdictional issue raised by the assessee may kindly be dismissed.
After hearing the rival parties and perusing the material on record, we find that assessment in this case was framed u/s 143(3) of the Act vide order dated 27.12.2011
4 ITA No. 1775/Kol/2019 AY: 2009-10 M/s SPPL Property Management Pvt. Ltd. whereas the reopening was made by issuing notice u/s 148 on 10.03.2016 apparently after a period of four years from the end of relevant assessment year. We observe from the reasons recorded by the AO u/s 148(2) of the Act that reopening was made for two reasons namely i) provision for bad and doubtful debtor amounting to Rs. 94,22,355/- shown under the head administration expense in the profit and loss account are to be added to the income beside considering the same for the purpose of computing book profit u/s 115JB of the Act and ii) the assessee has wrongly been allowed deduction u/s 80IA(4)(iii) of Rs. 77,19,600/- in respect of Salarpuria Touchstone project. We note that on the basis of above reasons recorded that all the information were duly disclosed in the books of account, audited financial statement and return of income filed by the assessee and it cannot be construed as in respect of which the assessee has not truly and fully disclosed all the material facts leading to escapement of income. In fact, the assessee has disclosed all the material facts in respect of two items on the basis of which the AO formed his belief u/s 148 of the Act. Under these facts and circumstances, we find merits in the contentions of the Ld. A.R. that the reopening was made in violation to provisions as contained in first proviso to section 147 of the act which stipulates that reopening cannot be made where the assessment was framed u/s 143(3) after a period of four years from the end of relevant assessment year if the escapement of income has occurred due to non- disclosure of material facts by the assessee which led to the escapement of the income. But this is not the case before us. In our considered opinion, the reopening of the assessment has been made incorrectly and in violation to 1st proviso to section 147 of the Act and therefore cannot be sustained. The case of the assessee finds support from the decision of co-ordinate bench in the case of Haldia Petrochemicals Ltd. (supra) which has been passed by following the decision of co-ordinate bench in the case of Beekay Steel Industries Ltd. (supra). We note that the co-ordinate bench in the case of Beekay Steel Industries Ltd. has followed the decisions of various High Courts deciding the similar issue. The Hon’ble Bombay High Court in the case of Tao Publishing (P) Ltd. v. Dy.CIT reported in (2015) 370 ITR 135 (Bom.), Sound Casting Pvt. Ltd. vs. DCIT in 250 CTR 119 (Bom), Hon’ble Delhi High Court in the case of
5 ITA No. 1775/Kol/2019 AY: 2009-10 M/s SPPL Property Management Pvt. Ltd. CIT vs. Orient Craft Ltd. reported in (2013) 354 ITR 356 (Del) and in the case of Haryana Acrylic Manufacturing Co. vs. CIT reported in (2009) 308 ITR 38 (Del) have held the reopening made beyond four years has to be in accordance with the first proviso to section 147 of the Act failing which the reopening as well as reassessment order are bad in law. We, therefore respectfully following the above legal position , quash the reassessment proceedings u/s 147 as well as the consequent order framed by the AO.
Since we have allowed the appeal of the assessee on legal issue the ground raised on merit are not being adjudicated at this stage and are left if need arises in future.
In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 13th May, 2022
Sd/- Sd/- (Sonjoy Sarma) (Rajesh Kumar) Judicial Member Accountant Member Dated: 13th May, 2022 SB, Sr. PS
Copy of the order forwarded to: 1. Appellant- M/s SPPL Property Management Pvt. Ltd., C/o, M/s Salarpuria Jajodia & Co., 3rd Floor, 7, Chittaranjan Avenue, Kolkata-700072. 2. Respondent – DCIT, Circle-3(1), Kolkata 3. The CIT(A)- 10, Kolkata (Sent through e-mail) 4. Pr. CIT- Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order
Assistant Registrar ITAT, Kolkata Benches, Kolkata