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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
आदेश /O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
The Revenue filed this appeal against the order of the Commissioner of Income Tax (Appeals)-1, Trichy, dated 10.09.2019 and pertains to assessment year 2010-11.
The Revenue has raised the following grounds of appeal: “1. The order of the learned CIT (Appeals], Trichy is contrary to the law, facts and circumstances of the case. 2. The Ld. CIT(A) failed to note(that reopening was done within four years from the end of the assessment year and requirement for re-opening that failure on the part of the assessee to disclose
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fully and truly all materials facts as specified in first proviso to Section 147 of the Act is not applicable^ 3. The Ld. CIT(A) failed to appreciate the facts that the Assessing Officer did not make elaborate discussion on the issue and not form an opinion on the material in the original assessment order, hence there is no question of change of opinion. 4. The Ld. CIT(A) failed to observe the decision in the case of A.L.A Firm Vs Commissioner of Income-Tax (102ITR622 Mad), wherein the Hon'ble High court, Madras held that the statute does not require that the information 'must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income -tax Officer subsequent to the original assessment. 5. The Ld. CIT(A) failed to appreciate the facts that the assessee had not expressed his objection for re-opening the assessment at any point of time during the assessment proceedings. 6. For these and other reasons that may be adduced at the time of hearing , the order of the CIT(A) may be cancelled and that of the Assessing Officer be resorted.”
The brief facts of the case are that the assessee is a civil contractor, filed its return of income estimating his income at 8% of the total turnover u/s. 44AD. The case was selected for scrutiny to examine refund claim of TDS and the regular assessment was completed on 31.10.2012 accepting the income returned. Subsequently, it was found that his total turnover exceeds Rs. 40 lakhs and is required to maintain books of accounts and accounts are to be audited by a CA. Further, the assessee’s credit transaction in his SB a/c is Rs. 60,80,390/- out
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of which Rs. 48,45,067/- was considered for assessment as contract receipts and the balance credit transaction of Rs. 12,44,293/- remains unexplained. Notice u/s. 148 of the Act was issued on 27.10.2014. The assessee by his letter dated 14.11.2014 replied that the return of income already filed on 22.11.2010 may be treated as return filed in response to notice u/s. 148 of the Act. Notice u/s. 143(2) of the Act was issued on 22.01.2015. Shri. A. Anbum ITP, Jayamkondam appeared for the hearing posted and produced the documents.
The AO, however was not convinced with explanation furnished by the assessee and accordingly, made additions of Rs. 3,87,197/- u/s. 69 of the Act, an unexplained investment towards cash deposits made in SB account over and above the net contract receipts during the year on the ground that the assessee was unable explain the sources. Similarly, the AO has made additions of Rs. 6 lakhs towards cash deposits on 20.02.2010 maintained with SBI by rejecting the explanation of assessee that the source for cash deposit is out of loan received from his wife Smt. R. Mageshwari.
Being aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A). Before the Ld.
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CIT(A), the assessee submitted that the return of income filed for the assessment year 2010-11 declaring income of Rs. 3,41,660/- and has been accepted the assessment was completed u/s. 143(3) after verification of bank account statement.
The Ld. CIT(A) after considering relevant submissions of the assessee and also by following the decisions of the Hon’ble Supreme Court and the Hon’ble High Court of Madras in the case of (i) ITO vs SanjeevGhei (2019) 104 Taxmann.com 81(SC), (ii) PCIT vs Century Textiles & Industries Ltd (2018) 99 Taxmann.com 206(SC), (iii) ITO Ward No16(2) vs TechSpan India (P) Ltd (2018) 92 Taxmann.com 361(SC), (iv) Gay Travels (P) Ltd vs DCIT, (2017) 85 Taxmann.com 131 (Mad), (v) TANMAC India vs DCIT, (2017) 78 Taxmann.com 155 (Mad) and came to the conclusion that as long as assessee has given truthful disclosure of the primary facts, he cannot be hit with reopening u/s 148 of the IT Act, 1961. It is for Income Tax Department to assess or reassess the case in the light of primary facts and not for the assessee to act as his own AO. As can be seen from the original assessment order and the reasons for reopening furnished by the AO and the comments of AO in the remand report, the details relied upon by the AO were fully
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present in the assessment record. There appears to be no new information corning to AO and from the facts and circumstances it also appears that there was no apparent failure on part of assessee to disclose true facts. In light of above case laws and facts and circumstances of the case, it appears that reassessment proceedings are more in nature of review and change of opinion and hence are untenable. The relevant findings of the Ld. CIT(A) are as under: 2. Analysis and decision on the issue involved 2.1 Assessment was completed u/s 143(3) r.w.s, 147 dated 26.02.2015. 2.2. Additions have been made on two accounts a) Excess credits in SB! Bank Account, Jyankondam of Rs.3,87,197/- b) Cash deposit of Rs.6,00,000/- received from wife. 2.3. Assessee has filed form no. 35 dated 30.03.2015 and grounds of appeal are as under: 1. The order of the Income Tax Officer is had in law and erroneous. 2. The assessing officer has compared the sales reported in profit and loss account with credits appealing in the account maintained with Stale Bank of India, Jayankondsm. The difference so arrived al by him was Rs.3,87,197/- which is on account of the following credit entries made in the bank account. Sl.No Date of Credit Amount Particulars 1 27.07.2009 Rs.61,545/- Refund of deposit from Panchayat union. 2. 16.09.2009 Rs.69,290/- Refund of deposit from Panchayat Sales fax refund 3. 15.10.2009 Rs.3,000/- Excess payment 4. 05.02.2010 Rs.71,907/- Sales Tax refund 5. 24.02.2010 Rs.1,81,455/- Contract Receipts of Rs.2,71,458/-credited in State Bank of India, consists of Rs.1,81,455/- and Rs.90,003/-
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3.The Assessing Officer has added Rs.6,00,00/- as unexplained investment, which is nothing but a loan received from Mrs. R. Mageswari on 20.02.2010. It was explained at the time of hearing that she is engaged in the business of buying and selling cashew nuts. She has received Rs.6,00,000/- as advance from customers, winch was given to her husband as loan. The loan was repaid on 22.02.2010. She is having the PAN and filed the Income Tax Return for the subsequent years. 4. The Assessing Officer has made the above additions under surmise. I therefore request the honorable commissioner of Income Tax (Appeal), to direct the Assessing Officer to delete the erroneous addition, 2.4. Case was fixed for hearing on 26.03.2019, there was no attendance on this date. Case was heard on 09.04.2019 when the AR was asked to furnish balance sheet, P & L Account for his wife, who has given loan in cash of Rs.6,00,000/-.
2.5 AR sought time till 24.04.2019 when he furnished a profit and loss account to show that Smt, R. Mahsiiwati, wife of assessee had shown gross receipts of Rs. 18.20 lakhs from sale of cashew nut and the net profit shown was Rs.1,50,000/- and (hat on 31.03.2009 she had cash In band of Rs.53,000/- and that in 31.03.2010 she had cash in hand of Rs.21,500/- and cash In bonk of Rs.1,51.500/- 2.6 AR, Mr S.. Keeithirajan, CA appeared on 03.05.2019 and pleaded that the case has been reopened without any specific or new Information In the hands of assessee and pleaded that the reopening is merely based on a change of opinion by the AO and is hence not sustainable. 2.7 following this a remand report doted 00,05.2019 was called for asking the AO. AC IT (OSD). Wafd-2, Perambalur to give copy of original Assessment Order passed u/s 143(3) of the IT Act. 1901 and whether reasons for reopening are given to the assessee. 2.8. Remand report dated 13.05.2019 has been received with forwarding letter dated 24 05.2019 from Mr. B. Naveen Kumar, JClT, Range-1, Trichy. In this report it Is stated that assessee had not requested any reason for reopening and hence none were provided to him. 29 On Perusal of Assessment Order shows that original Assessment Order u/s. 143(3) of the IT Act, 1901 dated 30.10.2012 was passed In a very cryptic manner and income returned of Rs.3,41,660/- has been accepted after as AO says verification of copy of bank accounts and other documents produced That AO, Mr. P. Kubendiran, ITO, Ward-IV(2), Trichy Is same Mi P. Kubendiran who is now ITO, Ward-2, Perambalur.
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In the remand report, the reasons for reopening are stated to be that assessee's turnover is more than Rs.40 lakhs and he should have maintained books of accounts and (hat Rs,12 44 lakhs of credit transactions In his bank of account remained unexplained. These details were very much available to the AO even at (he time of first assessment. 3.1. This remand report was forwarded to assessee by letter dated 04.08.2019 for comments by 14.08 2019. Comments have been received by a letter dated 13.08.2019 In which appellant has again contested reopening and has stated that all the bank accounts and other details were available with the AO a( the time of original assessment and that addition of Rs.3,07,197/- has already been explained and that oven on merits his wife was a regular return filer and would have sufficient sources from earlier savings to have cash of Rs. 6,00,000/-. 3.2. It is undisputed fact that assessment was earlier completed u/s 143(3) of IT Act, 1961. Over and above, what has been stated by AR reference can be made to the following cases which explain the intent and meaning of change of opinion and these cases along with headnotes are being reproduced below: Case-1 2019] 104 taxmann.com 81 (SC) SUPREME COURT OF INDIA Income-tax Officer v. SanjsevGhei* DR. D. Y. CHANDRACHUD AND HEMANT GUPTA, JJ SPECIAL LEAVE PETITION (CIVIL) DIARY NO. 4301 OF 2019f MARCH 8, 2019 Section 2(22), read with section 147 of the Income-tax Act 1961 - Deemed dividend (Loans or advances to shareholders) - Assessment year 2010- 1 1 - For relevant year, assessment was completed in case of assesses determining certain taxable income -Subsequently, Assessing Officer received information from investigation Wing that assesses was a shareholder to extent of over 20% in '!' Ltd. and that, he had received a sum of Rs. 70 lakhs from said company - Assessing Officer taking a view that amount so received fell within meaning of deemed dividend tinder section 2(22)(o). initiated reassessment proceedings - Assesses filed a writ petition challenging validity of reassessment proceedings - High Court held that since assessee had made full disclosure of all material facts at time of assessment initiateion of reassessment proceedings merely on basis f change of opinion was not justified. - Accordingly, impugned reassessment proceedings were quashed - Whether, on facts. SLP filed against decision of High Court was to be dismissed - Held, yes (Para 3 Case-2 •
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12018] 99 taxmann.com 206 (SC) SUPREME COURT OF INDIA Principal Commissioner of Income-tax v. Century Textiles & industries Ltd. * ROHINTONFALINARIMAN AND NAVIN SINHA, JJ. SPECIAL LEA VE PETITION (CIVIL) DIARY NO. (S) 34277 OF 2018f OCTOBER 5, 2018 Section 80-IC, read with section 147, of the Income-tax Act, 1981 - Deductions -Special provisions in respect of certain undertakings or enterprises in certain special category States (Reopening of assessment) - Assessment year 2007-08 ~ Assesses was engaged in manufacture of cotton piece goods, denim, yarn, caustic soda, salt, pulp and paper, etc. - Assesses filed its return claiming deduction under section 80-IC in relation to its paper and pulp unit on basis of audit report in Form 10CCA - During scrutiny proceedings under section 143(3), Assessing Officer raised specific queries with regard to above claim which was duly responded to by assesses - Assessing Officer thus allowed a part of deduction claimed - Subsequently, Assessing Officer initiated reassessment proceedings taking a view (hat assesses had made excessive claim of deduction under section 80-IC - Tribunal finding that Assessing Officer had made detailed enquiries while allowing assessee's claim in scrutiny assessment, set aside reassessment proceedings initiated on basis of change of opinion - High Court Case-3 upheld order passed by Tribunal - Whether on facts, SLP filed against High Court's order was to he dismissed - Held, yes [Para 2] {2018] 92 taxmann.com 361 (SC) SUPREME COURT OF INDIA Income Tax Officer, ward No. 16(2) v. TechSpan India (P.)Ltd. * R.K. AGRAWAL AND MOHAN M. SHANTANAGOUDAR, JJ. CIVIL APPEAL NO. 2732 OF 2007 f APRIL 24, 2018 I. Section 10A, read with section 147, of the Income-tax Act, 1961 - Free trade zone -(Reassessment) - Assessment year 2001-02 ~ Whether where question as to how and to what extent deduction should be allowed under section 10A was well considered in original assessment proceedings itself, initiation of re-assessment proceedings under section 147 by issuing a notice under section 148 merely because now Assessing Officer was of view that deduction under section 10A was allowed in excess, was hased on nothing but a change of opinion on same facts and circumstances which were already in his knowledge even during origins! assessment proceedings - Held, yes [Para 13] [
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Case 4 (2017J85taxmann.com 131 (Madras) HIGH COURT OF MADRAS Gay Travels (P.) Ltd. Deputy Commissioner of Income-tax, Company Circle !i{2) Chennai-34* T.S. SIVAGNANAMJ W.P. NOS. 35606 & 35607 OF 2002 JULY 31, 2017 Section 148, read with section 2(14) of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for (Second Notice) - Assessment years 1997-98 and 1998-99 - Assesses sold its agricultural lands - Reassessment notice under section 148 was setved upon assesses on grounds that land sold was not agricultural land, thus, income pertaining to fax had escaped assessment - However, after examination and proper hearing, notice was dismissed - Whether since there was no fresh material in possession of Assessing Officer suggesting escapement of income at lime of issuance of second notice, said notice was a mere change of opinion - Held, yes /Paras 73 and 14] Case-5 [2017] 78 taxmann. com 155 (Madras) HIGH COURT QF MADRAS TANMAC India v. Deputy Commissioner of Income-tax, Circle I, Pondicherry* HULUVADI G. RAMESH AND DR. ANITA SUMANTH, JJ. TAX CASE (APPEAL) NO 1426 OF 20071 DECEMBER 19,2016 . Section 37(1), read with sections 147 and 148, of (lie Income-tax Act, 1961 -Business expenditure - Allowability of (Reassessment) - Assessment, year 1998-99 ~ Assesses a partnership firm, paid Rs 5.50 lakhs to a partner, who retired from firmon 1-4-1997, and claimed deduction of same as business expenditure- Assessing Officer processed return of income filed by assessee and issued an intimation under section 143(1)(a) - Later on, h& issued to assessee a notice under section 148 to reopen its assessment - Whether since reassessment was sought to be initiated on basis of return of income and enclosures thereto which were already part of record, reopening of assessment was not justified - Held, yes [Paras 8,12 and 15] (In favour of assessee] Words and Phrases : Expression 'reason to believe' used in section 147 of Income-tax Act, 1961 3.3. What these 5 cases cited above show that as long as assessee has given truthful disclosure of the primary facts, he cannot be hit with reopening u/s 148 of the IT Act, 1961. It is for Income Tax Department to assess or reassess the case in the light of primary facts and not for the assessee to act as his own AO. As can be seen from the original assessment order and the reasons for
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reopening furnished by the AO and the comments of AO in the remand report, the details relied upon by the AO were fully present in the assessment record There appears to be no new information coming to AO and from the facts and circumstances it also appears that there was no apparent failure in part of assessee to disclose true facts. , 3.4. In light of above case laws and facts and circumstances of the case, it appears that reassessment proceedings are more in nature of review and change of opinion and hence are untenable.”
Aggrieved by the order of the Ld. CIT(A), the Revenue has filed an appeal before this tribunal. The assessee challenged the reopening of the assessment on the ground that the AO has reopened the assessment on mere change of opinion without any fresh tangible material, which is evident from the fact that in the Proceedings the AO examined the cash deposits into the bank account.
The Ld. DR made the following submissions: “2. The addition to the total income is on account of unexplained credits appearing in bank account in excess of contractual receipts received during the year. The particulars provided in page 2 of the assessment order as brought on record that credits in bank account held by the assessee for Rs.9,87,197/- stands unexplained. 3. The order u/s 143(3) r/w 147 is passed subsequent to the objection raised by the revenue audit which has been accepted by the department hence filing of further appeal despite low tax effect, before the Hon'bie ITAT requires to be admitted. 4. For the sake of easier comprehend on the intriguing aspect of taxation, the content of the RAP objection is captured and provided below. "The assessee filed return of income of Rs.3,41,660/- for the A.Y 2010-11 and the assessment u/s 143(3) was completed accepting the returned income after verification of Bank account statement at the estimated income @8%
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contract receipts for Rs. 48,45,067/-. However the assessee is having two S/B bank-account Viz. Indian Bank SB A/c 57313483/Andimadam and SB1 SB A/c 11250348430 Jayankondam having credit transaction for Rs,40,78,966/-& Rs.20,10,394/- respectively during the F.Y.2009-10, Total Rs.60,89,390/- out of which, Rs.48,45,067/- was considered for assessment as contract receipts, leaving the balance credit transaction of Rs. 12,44,293/~ unexplained. As the assessee is doing only contract business, and the unexplained deposit has no nexus with the business, the unexplained credit of Rs.12,44,293/- has to be brought to tax u/s 68. On this being pointed out, it was replied that audit points would be clarified from the assessee and further action would be taken"' 5. The assessee preferred an appeal and the CIT(A) Trichirapaili had granted total relief to the assessee in order dated 10.09.2019. Such relief was not extended based on the merits of the case but on inappropriate appreciation of facts that the reassessment proceedings were on account of changed opinion which the assessee had given truthful disclosure of the primary facts. 6. The findings of the CIT(A) is erroneous as the order failed to appreciate the conditions laid down by the Hon"b!e Supreme Court in the case of M/s. Techspan India Pvt. Ltd, Civil appeal No.2732 of 2007 dated 24.04.2018 (kindly to peruse 7th to 10th lines in para 12 of the said order) Though the order of the Hon'ble court favours the assessee, in that case the court had observed that if the records speak that the issue involved has remained untouched in the original assessment order (Techspan India Pvt. Ltd) then it cannot be a change of opinion. It can be seen from the contents of the reassessment order that the issue of taxation u/s69 was never touched by the AO in the original assessment order. There had been no queries raised so as to infer that the AO then was satisfied with the disclosure made. It postulates that there had been no disclosure of primary facts at the time of original assessment. Thus the reason recorded for reopening is certainly a clear reason to believe income had escaped assessment and not a case of change of opinion as wrongly made out by the CIT(A).” 9. None appeared for the assessee. We have heard the Ld. DR and perused materials on record. We are of the opinion that the assessee has already disclosed all the information before
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the Ld. AO in the original proceedings itself and the entire information is already available in the assessment record and also this fact is already confirmed in the remand report. There is no fresh tangible material with the AO to form reasonable basis of escapement of income which is evident from the fact that the AO is in the reasons referred to return of income. Hence, it is clear that there is no fresh material available with the Ld.AO to re-open the assessment. Therefore, we are of the view that it is only change of opinion on the existing information. Accordingly, re-opening has to be quashed. The Ld. CIT (A)after considering relevant facts has rightly quashed the re opening of assessment. Hence , we are inclined to uphold order of the Ld. CIT (A) and dismiss revenue appeal.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on 31st January, 2022 at Chennai. Sd/- Sd/- (वी दुगा� राव) (जी. मंजुनाथ) (V. DURGA RAO) (G. MANJUNATHA) �या�यकसद�य/Judicial Member लेखासद�य/Accountant Member
चे�ई/Chennai, �दनांक/Dated, the 31st January, 2022 JPV आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु�/CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF