Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”: HYDERABAD
Before: SHRI SATBEER SINGH GODARA & SHRI LAXMI PRASAD SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A”: HYDERABAD BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA No. 497/Hyd/2019 and CO No. 16/Hyd/2019 Assessment Year: 2010-11 Dy. Commissioner of Vs. Coastal Projects Pvt. Income-tax, Circle – 1(2), Ltd., Hyderabad. Hyderabad. PAN – AABCC 1907E (Appellant) (Respondent) Revenue by: Shri Rajendra Kumar Assessee by: Shri H. Srinivasulu Date of hearing: 17/03/2022 Date of pronouncement: /03/2022
O R D E R PER L.P. SAHU, A.M.: This appeal filed by the Revenue is directed against CIT(A) – 1, Hyderabad’s order dated 08/01/2019 for AY 2010-11 involving proceedings u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 ; in short “the Act. The assessee also filed C.O. against the said order of the CIT(A).
First we dispose of the C.O wherein the assessee has raised the following cross objections:
:- 2 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
“1. Learned CIT(A) has erred on facts and in law while passing her appellate order. 2. (a) Learned CIT (A) is not justified in ignoring the several objections along with case law raised against the reopening of assessment made u/s. 143(3) r.w.s. 153A more than four years after the end of the Assessment Year. (b) Learned CIT(A) is not justified in not accepting the applicability of the judgment of jurisdictional High Court of Telangana & Andhra Pradesh in the case of CIT Vs. Quality Care India Ltd [20161 74 taxmann.com 45(AP) according to which assessment made uj s. 143(3) r.w.s 153A in search case cannot in law be reopened u/s. 147 of the I.T. Act. 3. Standard Operating Procedure (SOP) laying down successive steps by CBDT for reopening assessment has not been followed at all. 4. A.O had no belief u/s. 147 at the time of recording the reasons u/s. 148(2) which is clear from the order sheet entry recorded after issue of notice u/s. 148(2) forwarding letter to the Investigation Wing for reasons to reopen the assessment. 5. A.O recorded the alleged transaction of the assessee with one Trishul Vinimay Ltd as reason for reopening the assessment, while completing assessment A.O has not referred to any transaction with Trishul Vinimay Ltd. Reopening cannot be justified on any other reason than the one on the basis of which, reasons are recorded u/s. 148(2) of the I.T. Act. 6. The belief entertained is not the A.O’s own belief but borrowed belief of the Investigation Wing Kolkata. The proceedings of reopening are invalid in law.
:- 3 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
The grounds of appeal raised by the A.O do not arise either from the assessment order or from the Appellate Order. Addition has been made u/ s. 68 of the LT. Act. 8. Learned CIT(A) allowed the appeal because the money received from Safeco Projects Pvt Ltd was passed on to Brightmoon constructions Pvt Ltd and Aravali Infra power Ltd and that in any case the assessee admitted profit on the same @ 12.5%. 9. Even otherwise, there is absolutely no evidence to show that assessee is the beneficiary of the entry because the funds were not shown to have been paid in cash to safeco Projects Pvt Ltd or received back in cash from Safeco Projects Pvt Ltd. 10. Statement of Akash Agarwal was not furnished to the assessee on the sole basis of which addition is made u/ s. 68 of the I.T. Act.”
Briefly the facts of the case are that the appellant filed his return of income for the AY 2010-11 on 31.0.2011 declaring total income at Rs.1,77,62,71,250/-. In response to notice u/s.153A, the appellant filed return of income on 17.12.2012 declaring total income at Rs.1,85,75,05,030/-. The assessment was completed u/s.143(3) r.w.s.153A on 31.03.2014 by assessing the total income at Rs.1,86,97,32,733/-. An information received from the Investigation wing, Kolkata that it is found that the bank account of the companies got credited by way of RTGS transfer through various intermediaries and the amount got debited by transfer of funds through RTGS/cheque clearing to various firms/related intermediary companies for
:- 4 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
layering purpose and sometimes directly to ultimate beneficiary. As per the list, M/s. Coastal Projects Pvt. Ltd is one of the beneficiary company and transferred Rs. 7,50,00,000/- into the appellant account during FY 2009-10 through Axis bank. To verify this, the Assessing Officer reopened the case u/s.147 by issuing notice u/s.148 on 31.03.2017. Accordingly, the assessment u/s.143(3) r.w.s. 153A r.w.s. 147 was completed on 10.11.2017 by making addition of Rs. 7,65,30,644/ - and assessed the total income at Rs.1, 94,62,63,377/-.
When the assessee preferred an appeal before the CIT(A), the CIT(A) dismissed the ground regarding the validation of section 147 of the Act and directed the AO to delete the addition made of Rs. 7,65,30,644/- made by the AO u/s 69 of the Act as unexplained income.
Aggrieved by the order of CIT(A), the revenue is in appeal before the ITAT against the action of the CIT(A) in deleting the addition made u/s 69 of the Act and the assessee filed C.O. against the action of the CIT(A) in confirm the action of the AO in reopening the assessment u/s 147 of the Act.
:- 5 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
With regard to the reopening of the assessment u/s 147 of the Act, the assessee has filed the written submissions, which are as under:
“7.1 The assessment completed u/s 143 (3) r.w.s. 153 A on 31-3-2014 cannot be reopened u/s 147 because section 147 is excluded from its applications to search assessments completed u/s 153A. Section 153 A is a special provision and starts with non-obstante clause with the expression "Not with standing anything contained in section 139, section 147, section 148, section 149, section 151 and section 153 . Therefore, an assessment completed u/s 143 (3) r.w.s. 153 A cannot fall in the ambit of section 147 and 148. A special provision prevails over the general provision. Section 153A specially excludes the operation of section 147 and the assessment cannot be reopened. Thus, the action of the A.O in reopening of the search assessment completed u/s 153 A is not in accordance with the provisions of the Act. The appellant relies on the following decisions for the proposition that that the search assessment completed u/s143(3) r.w.s. 153 A cannot be reopened u/s 147- proviso.( PB- Caselaws-Vol.1- Pages 1 to 58) (i) CIT Quality Care India Ltd. 74 Taxmann.com 45(AP) (ii) Rajbhushan Om Prakash Dixit 416 ITR 89(Bom) (iii) Audhut Timblo and another 420 ITR 62(Bom) (iv) Smt.Mira Ananta Naik -183 Taxmann 40(Bom) PB-l to 58 (Caselaws) (v) Sunill<umar Jain 367 ITR 370 (chatisgharh) (vi) H.B. Stock Holdings Ltd-325 ITR 320 (Del) ; (vii) Cargo clearing Agency (Gujrat) 307 ITR 1 (Guj) (viii) Rajram and Brothers 274 ITR 122 (MP) I 7.2 It is stated in the reasons recorded that Trishul Vinimay (p) Ltd is into the business of share Trading
:- 6 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
and on verification of the accounts of the said company, it is found that the appellant received a sum of Rs.7,50,000 by way of transfer of funds through banking channels for layering purpose. In other words, the A.O in the satisfaction note stated that the appellant received a sum of Rs.7,50,00,000 through AXIS Bank from Trishul Vinimay (P) Ltd which escaped assessment, despite the fact that it is not clearly stated that the transaction was an accommodation entry. The appellant humbly submits that it had no transactions with Trishul Vinimay (P) Ltd. The learned AO did not even whispered in the assessment order about Trishul Vinimay (P) Ltd. Therefore, the Appellant submits that assumption of jurisdiction by the AO under proviso to 147 was on the basis of wrong facts. The Appellant relies on the following decisions in this context. [PB-Caselaws Vol.1- Pages 59 - 65] (i) Anita A.choksey- 411 ITR 207 (Bom) (ii) sagar Enterprises-257 ITR 335 (Guj) (iii) Mumtaz Haji Mohammed Memon- 408 ITR 268 (Guj) , PB - 59 - 65 (caselaws) (iv) Misra Preserves (P) Ltd -350 ITR 222 (All) (v) Fair Investment Ltd- 357 ITR 146 (Del) Further, the AO has not adverted to the dates of payment by Safeco Project (I)) Ltd. A portion of RS.7.65 Cr was received in FY 2009-10 and not the total amount. Thus, the reopening is on the mistaken facts. 7.3 The Appellant submits that there was no independent application of mind or enquiry by the AO before reopening the assessment u/s 147. Thus, reopening is based on borrowed satisfaction. The Appellant relies on the following decisions:[PB- Vol.1- Pages- 83 - 127]
:- 7 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
(i) Gateway leasing (P) Ltd - 426 ITR 228 (Bom) (ii) Shodiman Investments (P) Ltd- 422 ITR 337 (Born) (iii) Skyview consultants (P) Ltd - 423 ITR 677 (Del) Pages - 83-127 (PB-Vol.1) (iv) Meenakshi Overseas (P) Ltd - 395 ITR 677 (Del) (v) SFIL Stock Broking - 325 ITR 285 7.4 Conditions stipulated in proviso to section 147 are not complied with by the AO while reopening the assessment. The assessment u/s 143 (3) r.w.s. 147 was completed on 10-112017 relating to AY 2010-11. Thus, the assessment was completed after 4 years from the end of the relevant assessment year i.e 2010-11. The first proviso to section 147 stipulates that the income chargeable to tax has escaped assessment on account of failure of the assessee to disclosure fully and truly the material facts relating to the assessment. After the search on 25-11-2011, the ADIT (Inv) had issued a Letter directing the appellant to furnish the complete details relating to subcontractors from Kolkata including Bright Moon Constructions (P) Ltd and in response, the the appellant furnished the complete details such as contract payments, TDS, Certificates issued and payment received from the contractor etc. The ADIT (Inv) had thoroughly verified and an appropriate intimation was sent by him while handing over the seized material to the assessment circle. Therefore, the primary facts were fully disclosed at the time of original assessment and the AO did not state in the satisfaction note the manner of suppression of material facts by the Appellant. Therefore, the conditions prescribed in the proviso to section 147 are not fulfilled. In this context, the Appellant relies on the following Decisions [PB-Vol.1-Pages 128 to 153] (i) Northern Exim (P) Ltd -357 ITR 586 (Del) (ii) Tantia Constructions Co Ltd -257 ITR 84 (Cal) Pages-128 to 153
:- 8 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
(iii) 5abharwal properties industries (P) Ltd -382 ITR 547 (Del) (iv) AV TEe Ltd -395 ITR 434 (Del) 7.5 The earned PClT, Central has mechanically and without application of mind has approved the proposal of AO to reopen the assessment. The reasons recorded, as furnished to the Appellant, are incomplete and defective because in Annexure 1 to his proposal AO has not appraised the Learned PClT that there was a failure to disclose the material particulars necessary for the assessment as required under the proviso to section 147. The satisfaction of the Learned PClT recorded on 31-3-2017, the same day on which a proposal was submitted to him, turns out to be mechanical and suffers from non-application of mind. The learned PClT while according approval simply stated "Yes, fit case". Thus, the satisfaction was recorded in a hurry without any information from AO to the effect that there was failure on the part of the Appellant to furnish fully and truly all the material particulars a sine qua non for reopening the assessment. In this context, the Appellant relies on the following decisions:[PB case laws -Vol.1-Pages 154-172] (i) ITOV Virat Credit and Housing (P) Ltd, ITAT, (Del) ITA-89/Del/2012 (order Dt 9/2/2018) I Pages-154-172 (ii) S. Goyendra lime chemical Ltd -231 Taxman 73 (MP) (iii) Central India Electric Supply Co Ltd V ITO 51 DTR 51 7.6 No full Satisfaction by AO:-
:- 9 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
The AO himself is not satisfied on the information communicated to him because the order sheet entry [P.B-l0] reflects that he asked the investigation wing reasons once again for reopening of the case. Thus, Letter makes it clear that there was deficiency in the communication On the basis of which reasons were recorded, proposal was made to the PCIT and a notice was issued u/s 148 (2). Reply received on such reasons requested by the AO from the Investigation wing, Kolkata have not been supplied to the appellant. It is submitted that the Letter from Kolkata, Investigation wing, does not provide tangible material to believe that any income escaped assessment. The Apex court in Kelvinator of India 320 ITR 561 held that without tangible information, initiation proceedings u/s 147 is not valid. Further, there is no reference to any of the various intermediaries or the amount debited by Transfer through RTGS/cheques or to the companies used for layering purpose. Thus, the Appellant submits that the assessment is validly reopened and proceedings there from are null and void. 7.7 The AO has not adverted to the Information in respect of Trishul Vinimay (P) Ltd on the basis of which assessment has been reopened .It is submitted that if the assessment is made of the amounts on the basis of which reasons are recorded, then any other escaped income cannot be brought to Tax . In this contract the Appellant relies on the fallowing decisions.[PB-Caselaws-Vol.l-Pages173 to 196] 1. CIT Vs Jet Airways (I) Ltd 331 ITR 236(Bom) . 2. Shri ram singh -306 ITR 343(raj) Prayer: The assessee's appeal may kindly be allowed.”
:- 10 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
6.1 Before us, the ld. AR of the assessee reiterated the submissions made before the lower authorities and submitted that the AO has erroneously reopened the case of the assessee u/s 147 of the Act as the then AO in course of original assessment proceedings had instigated scrutiny wherein he verified every aspect of line items of financials. He further submitted that the AO reopened the assessment only based on the information already available during the course of original assessment proceedings u/s 143(3) of the Act and no evidence was available with the AO with respect to the addition made by him and simply made the addition based on the information available in 143(3) proceedings towards unexplained investment u/s 69 of the Act. He contended that the AO reopened the assessment without any tangible material on hand and without satisfying himself as to the escapement of income and, thus, the basic requirement of satisfaction of the AO for reopening the assessment is missed in this case. He further submitted that the case of the assessee has been reopened beyond 4 years and the case was scrutinized u/s 143(3) and the assessee had fully and truly disclosed all the material facts before the AO for completing the assessment. He submitted that even the AO has not alleged upon the assessee regarding any deficiency in regard to the disclosures of fully and truly all material facts which were necessary for completion of assessment. Therefore, the reasons recorded
:- 11 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
by the AO is not in conformity with the law. He, therefore, submitted that the order passed u/s 143(3) rws 147 may be quashed.
6.2 The ld. AR also submitted that the AO made reopening of the assessment beyond 4 years. He relied on the following cases:
Intentionally left space
:- 12 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
:- 13 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
The ld. DR, on the other hand, relied on the orders of lower authorities and submitted that the lower authorities have rightly disallowed the amount u/s 69 of the Act when the assessee failed to explain the source. Further, the ld. DR submitted that there was tangible material available with the AO in the form of investigation report mentioned in the reasons recorded. He, therefore, submitted that there is no change of opinion as argued by the ld. AR of the assessee. He further submitted that each and every word is not required to record in the reasons for reopening the case. There must be reasons to believe for escapement of income in the opinion of the AO at the time of reopening of the case.
We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. In this connection, we refer to the provisions of section 147, which read as under:
“Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections
:- 14 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, 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, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :— (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax;
:- 15 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (d) where a person is found to have any asset (including financial interest in any entity) located outside India.
Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue
:- 16 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.” 8.1 The AO has recorded the reasons for reopening the assessment which are as under: “In response to the letter filed by your Authorised Representative on 06.04.2017, the reasons recorded u/s 148(2) of the Act for reopening the assessment is furnished as under: As per the information received from the Investigation Wing, Unit:-4, Kolkata, the Kolkata based company viz., Trishul Vinimay Pvt. Ltd., is into the business of Share Trading and on verification of accounts of the said company it is found that the bank account of the company got credited by way of RTGS Transfer through various intermediaries and the amount got debited by transfer of funds through RTGS/Cheque clearing to various firms/related intermediary companies for layering purpose and sometimes directly to ultimate beneficiary. As per the list of beneficiaries enclosed by the Investigation Wing, Kolkata, it 'is found that M/s Coastal Projects Ltd., is one of the beneficiary of the' said company and an amount of Rs.7,50,00,000/- was transferred into the account of MIs Coastal Projects Ltd. during the F.Y.2009-10 through Axis Bank.
In view of the above I have reason to believe that the transferred amount of Rs.7,50,OO,OOO/- has escaped assessment for Assessment Year 2010-11 and it is a fit case for issue of Notice u/s 148 of the Act, since there
:- 17 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
was a failure in the part of the assessee to disclose the correct income".
8.2 On perusal of the said reasons recorded, the AO, inter-alia, recorded that “I have reason to believe that the transferred amount of Rs. 7,50,00,000/- has escaped assessment for AY 2010-11”. Whereas the language used in section 147 is that “where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, 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, for that assessment year”. In the reasons recorded, there is no allegation upon the assessee to disclose “fully and truly” all material facts necessary for assessment. Therefore, we are of the view that the AO has failed to record the reasons to the satisfaction of the section 147, under which, the assessment was reopened. Further, as contended by the ld. AR that there is neither any new information available with the AO nor any new tangible material in hand other than the information already existing in original assessment and further, there
:- 18 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
was no failure on the part of the appellant company to fully and truly disclose the material facts necessary for the assessment. Thus, there is no sufficient and impeccable reason for reopening the assessment u/s 147 of the Act. Therefore, in the facts and circumstances of the case the issuance of notice u/s 148 and consequently passing of assessment u/s 147 of the Act is unsustainable. Accordingly, we quash the assessment order passed by the AO u/s 143(3) read with section 147 of the Act. Since the assessment itself is quashed, addition made on such assessment do not survive.
In the result, the C.O. filed by the assessee is allowed in above terms.
As regards the revenue’s appeal being ITA No. 497/Hyd/2019, since the reopening of the assessment made by the AO u/s 147 is quashed by us in adjudicating the C.O. filed by the assessee on legal ground, therefore, the appeal filed by the revenue becomes infructuous. Accordingly, the appeal of the revenue is dismissed as infructuous.
:- 19 -: ITA No.. 497/Hyd/2019 and CO 16/H/2019 Coastal Projects Pvt. Ltd., Hyd.
In the result, appeal of the revenue is dismissed and the C.O. filed by the assessee is allowed in above terms. A copy of this common order be placed in the respective case files. Pronounced in the open court on 29th March, 2022.
Sd/- Sd/- (S.S. GODARA) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 29th March, 2022. kv Copy to : 1 DCIT, Circle – 1(2), Room No. 724, 7th Floor, “B” Block, Income Tax Towers, Hyderabad – 500 004 2 M/s Coastal Projects Pvt. Ltd., Plot No. 304, Road No. 78, Film Nagar, Jubilee Hills, Hyderabad. 3 CIT(A) – 1, Hyderabad 4 Pr. CIT – 1, Hyderabad. ITAT, DR, Hyderabad. 5 Guard File. 6