RAM KISHORE RATHORE,NEW DELHI vs. ACIT, CIRCLE- 53(1), NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘SMC’ NEW DELHI BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER I.T.A. No. 308/Del/2019 Assessment Year: 2011-12 Sh. Ram Kishore Rathore, vs. ACIT, Circle-53(1), C/O M/S RRA TAXINDIA New Delhi D-28, South Extension, Part-I, New Delhi (PAN:AAAPR4260P) (ASSESSEE) (RESPONDENT)

Assessee by: Sh. Somil Aggarwal, Advocate Revenue by : Sh. Pradeep Singh Gautam, Sr. DR.

ORDER This appeal is filed by the assessee against the Order dated

22.11.2018 passed by the Ld. CIT(A)-18, New Delhi relating to Assessment

Year 2011-12 on the following grounds:-

“1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned reassessment order passed by Ld. AO u/s 143(3)/147 and that too without assuming jurisdiction as per law and without complying the mandatory conditions of section 147 to 151 of the Income Tax Act, 1961. 2. That in any case and in any view of the matter, Ld. CIT(A) has erred in law and on facts in not quashing the impugned reassessment order passed by Ld. AO u/s 147/143(3) and that too without assuming jurisdiction as per law and without serving the mandatory notice u/s 148, 143(2) and 142( 1) of the Income Tax Act, 1961. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in not allowing the deduction of interest paid on Housing Loan amounting to Rs. 8,01,501/- while calculating Income under the head House property and that too by recording incorrect facts and findings and without observing the principles of natural justice. 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in not allowing the deduction of a sum of Rs. 8,01,501/- paid as interest on Housing Loan while calculating Income under

the head House property, is bad in law and against the facts and circumstances of the case. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in calculating the loss from House property at Rs. 4,95,742/- instead of Rs. 13,41,638/-, as claimed by the assessee in the return of income and that too by recording incorrect facts and findings and without observing the principles of natural justice. 6. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in calculating the loss from House property at Rs. 4,95,742/- instead of Rs. 13,41,638/- as claimed by the assessee in the return of income, is bad in law and against the facts and circumstances of the case. 7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in rejecting the claim of assessee that appellant was using first floor for the business purpose and has erred accordingly in computing the income from house property correctly in accordance with law and facts 8. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in computing the rental income of the second floor for the complete period of occupation. 9. That in any case and in any view of the matter, action of Ld.CIT(A) in confirming the action of Ld. AO in not allowing the deduction and in calculating the figure of loss from house Property and framing the impugned reassessment order are bad in law, illegal, unjustified, barred by limitation, contrary to facts & law and based upon recording of incorrect facts and finding, without giving adequate opportunity of hearing, in violation of principles of natural justice and the same deserves to be quashed. 10. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in charging interest u/s 234A, 234B, 234C and 234D of the Income Tax Act, 1961.”

the issue in dispute has already been adjudicated and decided in favour of

the assessee by various Benches of the ITAT and requested that respectfully

following the orders passed by the ITAT, the addition in dispute may be

deleted and appeal filed by the assessee may be allowed. In support of his

contention he filed a copy of common dated 20.02.2018 order passed by

the ITAT Jaipur Benches, Jaipur in ITA No. 92/JP/2015 for Assessment Year

2008-09 in the case of M/s Rajasthan State Industrial Development &

Investment Corp. Ltd., Udyog Bhawan, Tilk Marge, C-Scheme, Jaipur vs.

The ACIT, Circle-6, Jaipur and ITA No. 206/JP/2015 for Assessment Year

2008-09, in the case of The DCIT Circle-6, Jaipur vs. M/s Rajasthan State

Industrial Development & Investment Corp. Ltd., Udyog Bhawan, Tilak

Marge, C-Scheme, Jaipur and Indira Exports Private Limited vs. ACIT in ITA

Nos. 391/2007, 338/2007 and 294/2006 dated 31.10.2011 (Indore) which

the assessee has attached in the paper book at pages 11 to 16 and also the

decision of Delhi Bench in the case of Anil Gupta vs. AO, (2005) 96 TTJ

0798 (Delhi) which the assessee has attached at pages 17 to 25 of the

paper book.

Revenue authorities alongwith the case laws relied upon by the learned

Counsel for the assessee on the issue in dispute and I am of the considered

view that there are many orders have been filed by the learned counsel for

the assessee to support his contention. But he especially draw my attention

towards the order dated 20.02.2018 of ITAT Jaipur Benches, Jaipur passed

in ITA No. 92/JP/2015 Assessment Year 2008-09 in the case of M/s

Rajasthan State Industrial Development & Investment Corp. Ltd., Udyog

Bhawan, Tilak Marge, C-Scheme, Jaipur vs. The ACIT, Circle-6, Jaipur.

dispute and I am of the view that the ITAT Jaipur Benches, Jaipur, order

dated 20.02.2018 is very much relevant on the issue in dispute in which the

Jaipur Bench has discussed the various case laws and many decisions

passed by the Hon’ble High Courts and decided the issue in favour of the

assessee. For the sake of convenience, the findings given by the ITAT Jaipur

Benches in para no. 5 at pages 7 to 18 is reproduced as under:-

The assessment/refund order u/s 143(3) for the assessment year 2008-09 made on 22.12.2010 requires to be amended as there is a mistake apparent from the record within the meaning of Section 154 / 155 of the Income Tax Act, 1961. The rectification of the mistake, as per particulars given below, will have the effect of enhancing the assessment / reducing the refund/increasing your liability. In respect of allowing units loss of A.Y. 2007-08 h as been not set off as per provisions of Sec. 80IA CS before the profit of the subsequent year as under:-

S. Unit Initial Year Profit of the Loss of the No. year 08-09 A.Y. 07-08 1. EPIP Sitapura-1st A.Y. 2005- Rs. 16770973 Rs. 5020008 06 2. Borhada A.Y. 2005- Rs.38561187 Rs. 8614556 06 Total 1,36,34,564

It is apparent from the notice u/s 154 of the Act that the AO proposed to rectify

the mistake in respect of the loss of Rs. Rs. 1,36,34,564/- to be adjusted against

the profits of the eligible undertaking for deduction u/s 80IA of the Act. In

response to the said notice issued u/s 154 the assessee filed its reply dated

15.06.2012 as under:-

“We are in receipt of your aforesaid notice in which you have propose to reduce deduction u/s 80IA by Rs. 1,36,34,564/-, in this connection we are to submit that during the year assessee has claimed deduction u/s 80IA in respect of various industrial area and for which audit certificate u/s 80IA has also been submitted during the course of as assessment proceedings completed u/s 143(3). Total eligible profit u/s 80I A of all these industrial area works out to Rs.98,13,07,585/- against which assessee has claimed deduction u/s 80IA at Rs. 95,1 1,66,037/-. If the loss of two unit i.e. EPIP, Sitapura & Boranada of Rs. 1,36,34,564/- is considered while working out eligible amount of deduction u/s 80IA then eligible deduction works out to Rs.96,76,73, 021/- (98,13,07,585- 1,36,34,564) against which assessee has claimed deduction u/s 80IA at Rs. 95,11,66,037/- only. Since assessee has already claimed deduction u/s 80IA at lesser amount as compared to computed by your good self, thus there is no need to make any adjustment u/s 154/155.”

Thus, the assessee clearly explained that the profit of the assessee eligible deduction u/s 80IA is Rs. 96,76,73,021/- even after the adjustment of the said loss of Rs. 1,36,34,564/-. Hence, the deduction allowed in the assessment order of Rs. 95,11,66,037/- is not a mistake as stated in the notice u/s 154 of the Act. The AO then issued notice u/s 148 of the Act on 21.11.2012 by recording the reasons as under:-

“ Reasons for initiating proceedings u/s147 and issue of notice u/s 148 of the I.T. Act, 1961 in the case of M/s Rajasthan State Industrial Development & Investment Corporation Ltd., Jaipur (PAN No. AABCR4695 A.Y. 2008-09. The assessment in case was completed u/s 143(3) on 22.12.2010. Later it has been noticed that the assessee has worked out Deduction u/s 80IA in respect of various eligible projects at Rs. 98,13,07,575/-. However, it has claimed the deduction at Rs. 95,11,66,028/- anticipating that deduction allowed in earlier years to certain units may be withdrawn (though not withdrawn till date). While calculating the deduction u/s 80IA the assessee has not considered the loss in respect of two units viz. Sitapura EPIP-I at SEZ Boranada amounting to Rs. 50,20,009/- and Rs. 86,14,565/- respectively totaling to Rs. 1,36,34,565/- which would have further reduced from Rs. 95,11,66,028/- while working out the deduction u/s 80IA. 2. In view of above facts and circumstances I have sufficient reasons to believe that an amount of Rs. 1,36,34,565/- has escaped assessment within the meaning of sec. 147 of the I.T. Act, 1961. 3. Issue notice u/s 148 for the A.Y. 2008-09 in which the sand transaction falls.”

It is apparent that the reasons for issuing the notice u/s 154 as well as the reasons recorded for reopening of the assessment u/s 147/148 of the Act are same to re-compute the deduction u/s 80IA after adjustment of loss of

Rs. 1,36,34,564/-. The assessee has raised a legal objection against the initiation of proceeding u/s 147/148 while the proceeding u/s 154 of the Act were pending and not reached to the finality either by dropping the same or passing any order u/s 154 of the Act, the initiation of proceeding u/s 147/148 is not permissible. The Bench asked the ld. CIT DR to produce the assessment record to show that the status of the proceeding u/s 154 on the date of initiating of proceedings u/s 147/148 of the Act. It was found that the AO has not passed any order either for dropping the proceeding or concluding the proceeding u/s 154 prior to issuing notice u/s 148 of the Act. Thus, it is not disputed that there is no record of closing the proceeding u/s 154 of the Act. There is no quarrel that the doctrine of estoppel is not applicable against the initiation of proceedings u/s 147/148 even when the AO initiated the proceedings u/s 154 of the Act. However, when the issue in the two proceedings initiated u/s 154 as well as u/s 147of the Act is the same than without considering the proceeding u/s 154 of the Act the AO cannot initiate parallel proceeding u/s 147/148 of the Act on the same issue. The Hon’ble Madras High Court in case of Sterilite Industries India Ltd. vs. ACIT(supra) while dealing with an identical issue of jurisdiction of the AO has held in paras 28 o 30 as under:-

“28. As already pointed out, in respect of the assessment year 2003-04, the first respondent herein issued notice under Section 154 on 20.7.2006, wherein, the Officer proposed to disallow the claim under Section 80 HHC, provision for bad debts and diminution of value of current investment and income tax debited in respect of Section 115 JB assessment and on the regular assessment under Section 143(3) in respect of the alleged mistake in granting deduction under Section 80 IB, for income tax and wealth tax debited in the profit and loss account and the share issue expenses and FRN issue expenses written off to be disallowed, being capital in nature. 29. A reading of the notice under Section 154 of the Act and the reassessment notice dated 11th May 2009 shows that there is absolutely no material difference on the issues sought to be considered under these notices, except the fact that while in the proceedings under Section 154, the notice is based on the view that there was a mistake apparent on the face of the record warranting a rectification, the proceedings under Section 147 alleged that by reason of the untrue and incorrect particulars given by the assessee, there had been an escapement of tax. Given the fact that the area of operation of both these provisions are on totally different fields, the simultaneous assumption of jurisdiction under Sections 154 and 147 on the self same issue, plainly shows the contradiction in the reasoning of the second respondent and as without logic or reason.

The Hon’ble High Court as held that then cannot be two parallel proceedings on the self same issue as are based on the view that there were materials available on record which warranted exercise of jurisdiction u/s 154 and the other initiated u/s 147 that there was escapement of income from tax. The Mumbai Bench of the Tribunal in case of Mahinder Freight Carrier vs. DCIT 129 ITD 278 has held in para 10 as under:-

“10. In this case, the Assessing Officer initiated the proceeding under section 154 of the Act and said proceeding, as per record, has not reached the finality, either by dropping the same or passing any order in the said proceeding. As per the reasons recorded by the Assessing Officer as the assessee did not respond to the notice issued under section 154, the Assessing Officer initiated the proceedings under section 147 and in consequence issued the notice under section 148. It is also admitted fact that except the return of income of the assessee and its enclosures, no other extra material or information was in possession of the Assessing Officer. It is true that the assessee filed the return of income in response to the notice issued by the Assessing Officer under section 148 of the Act showing the rental income as an income from house property, but the assessee has every right to challenge proceeding initiated by the Assessing Officer under section 147 of the Act. Now it is well-settled principle by different judicial pronouncements that there cannot be any 'estoppel' against the statutory provisions. Admittedly, in this case, the mandate of section 147 is not fulfilled for the reasons that the Assessing Officer himself was not sure whether the issue in controversy could be the subject-matter of section 154 or the same can be the subject-matter of proceedings under section 147. Ld.

D.R. placed his heavy reliance in the case of Damodar H. Shah(supra). In the said case the Hon'ble High Court has explained in details the difference between section 154 viz-a-viz section 147. As per said decision there is no bar to evoke section 147 but Assessing Officer has to demonstrate why he was required to do so. Nothing has been demonstrated by Assessing Officer in this case. In our opinion, for the reasons given above, the Assessing Officer was not justified in issuing the notice to the assessee under section 148 and we, accordingly, hold the same as void ab initio and quash the proceedings initiated by the Assessing Officer under section 147. Accordingly, this issue is decided in favour of the assessee and Ground Nos. 1 to 3 are allowed. As the assessee succeeds on the issue of the validity of the notice under section 148, we do not consider it necessary to go into the merits of the case.”

It is manifest from the record that all relevant materials and facts necessary for assessments were available with the Assessing officer at the time of original assessee passed u/s 143(3) of the Act and further the claim of deduction allowed while passing the order u/s 143(3) would not be excessive even if proposed adjustment of loss of previous year is made against the profit of the current year. The assessee reminded the AO in its reply to the notice u/s 154 that even after the adjustment of loss of Rs. 1.36 Crores allowable deduction would be more than Rs. 95.11 Crores allowed in the original assessment. Thereafter, the AO without bringing the proceedings u/s 154 of the IT Act to a logical conclusion had initiated the proceedings u/s 147 of the Act on the basis of the same fact and material available on the assessment record. Thus, reopening on the basis of the material available on assessment record is nothing but based on change of opinion. The Hon’ble Calculta High Court in case of Berger Paints India Ltd. vs. DCIT (supra) has held in paras 42 to 53 are as under:-

“42. However, if the Assessing Officer is of the view that income has escaped assessment by reason of a mistake apparent from records, and takes recourse to section 154, but finds later, that there is no apparent mistake, then he cannot, in the absence of any other ground on the basis of which he still has reason to believe that the income has escaped assessment, start reassessment proceedings under section 147 of the Act. In other words, the Assessing Officer cannot again start reassessment proceedings on the basis of the same reasons. 43. The Assessing Officer has not disclosed the reasons for the Assessing Officer to still believe that income that was the subject- matter of rectification had still escaped assessment though that was not due to any obvious mistake, borne out from existing records.

jurisdiction to reassess had validly been assumed. 50. If there are reasons to believe that income has escaped assessment, and jurisdiction to issue notice of reassessment under section 148 of the Income-tax Act has been exercised, the court ought not to weigh the sufficiency of the reasons in exercise of its extraordinary writ jurisdiction under article 226 of the Constitution of India. 51. The court may, however, in exercise of its power of judicial review examine whether the conditions precedent for exercise of jurisdiction to reopen assessment at all exist. In the absence of any new and/or fresh materials, on the basis of which the Assessing Officer could have formed the opinion that income has escaped assessment, the Assessing Officer lacked jurisdiction to reopen assessment. 52. The reassessment notice has been issued for virtually the same reasons for which rectification proceedings had earlier been initiated but dropped. The Assessing Officer has not disclosed any new materials for reopening assessment. Assessment cannot be reopened merely on change of opinion, as has apparently been done in this case. The Assessing Officer on being satisfied that there was no apparent error in computation of income, on the basis of existing records, dropped the rectification proceedings. In the absence of any new and/or fresh materials and in the absence of any reason for formation of belief that even otherwise, income had escaped assessment even though there was no apparent mistake or error, the Assessing Officer lacked jurisdiction to issue the impugned notice. 53. For the reasons discussed above, the impugned notice under section 148 of the Income-tax Act is set aside. The writ petition is disposed of accordingly.” In view of the above discussion as well as the decisions cited (supra) we are of the considered opinion that the reopening is not sustainable when the proceedings u/s 154 of the Act were pending on the same issue. Accordingly, we set aside the initiation of proceeding u/s 147/148 of the Act and consequential reassessment order. As we have set aside the initiation of proceeding u/s 147/148 and consequential reassessment order, therefore, the other grounds raised on the merits becomes infructuous.

In the result, the appeal of the assessee is allowed and Revenue appeal is dismissed.

Order pronounced in the open court on 20/02/2018.”

20.02.2018 by the ITAT Jaipur Benches as reproduced above, I am of the

view that the Assessing Officer has reopened the case of the assessee when

the proceedings under section 154 of the I.T. Act, 1961 were pending on

the same issue. The ITAT Jaipur Benches has decided this issue in favour of

the assessee and set aside initiation of proceeding u/s 147/148 of the Act

and consequential reassessment order, as a result thereof the grounds on

merits have become infructuous.

of the view that the issue in dispute has already been adjudicated and

decided in favour of the assessee by the ITAT Jaipur Benches (supra).

Therefore, I have no other alternative except to respectfully following the

above said order and cancel the proceedings initiated u/s 147/148 and

consequential reassessment order. Since I have cancelled the proceeding

initiated u/s 147/148 and consequential reassessment order, the grounds

raised on merit becomes infructuous.

Order pronounced on 03/02/2020.

Sd/- [H.S. SIDHU] JUDICIAL MEMBER Date: 03/02/2020 SH Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order,

Assistant Registrar, ITAT, Delhi Benches