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Income Tax Appellate Tribunal, ‘C’ BENCH, BENGALURU
Before: SHRI A.K. GARODIA & SHRI PAVAN KUMAR GADALE
IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, BENGALURU BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER and SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No.318, 319 & 320/Bang/2017 (Assessment years:2007-08, 2006-07 & 2005-06 ) M/s. Raicon Engineers, No.501, site No.140/4, 2nd Cross, 1st Main, Behind Old Syndicate Bank, Krishnarajapuram, Bengaluru-560036. … Appellant PAN:AAFFR 9137 A Vs. Income-tax officer, Ward 8(1), Bengaluru. … Respondent Appellant by : Shri V.Chandrashekar, Advocate. Respondent by : Shri K.N.Dhandapani, JCIT(DR). Date of hearing : 13/02/2019 Date of pronouncement : 15/02/2019 O R D E R Per PAVAN KUMAR GADALE, JM : These are the appeals filed by the assessee against the common order of the CIT(A)-4, Bengaluru, in Appeal Nos.633/746/W-4(2)(1)/CIT(A)-4/14-15, 634/747/W-4(2)(1)/ CIT(A)-4/14-15, 635/748/W-4(2)(1)/CIT(A)-4/14-15, dated 31/08/2016. Since the issues are common in all these appeals, they are heard together and disposed of by way of consolidated order for the sake of convenience.
We shall take up the assessee’s appeal in ITA No.320/Bang/2017 for the assessment year 2005-06 and the
ITA Nos.318 to 320/Bang/2017 Page 2 of 9 facts narrated therein. The assessee has raised the following grounds of appeal: 1. “The order passed by the learned Commissioner of Income-Tax (Appeals) to the extent which is against to the Appellant are opposed to law, weight of evidence, natural justice, facts and circumstances of the case. 2. The Appellant denies itself liable to be assessed on a sum of Rs.63,93,880/- as against the returned income of Rs.6,88,760/- under the facts and circumstances of the case. 3. The learned Commissioner of Income-tax (Appeals) is not justified in law in confirming the disallowance of Rs.53,87,554/- made under section 40a(ia) of the Income-tax Act,1961, on the facts and circumstances of the case. 4. The learned Commissioner of Income-Tax (Appeals) is not justified in law in confirming the disallowance to the extent of Rs.3,17,566/- under Section 40A(3) of the Income- Tax Act, 1961 on the facts and circumstances of the case. 5. The learned Commissioner of Income-Tax (Appeals) is not justified in not adjudicating the legal grounds on the provisions of section 40a(ia) and 40A(3)f the Act under the facts and circumstances of the case. 6. Without prejudice to the above the authorities below are erred in disallowing the same amount under section 40A(3) of the Act as well under section 40a (ia) of the Act, which amount to double taxation on the same amount on the facts and circumstance of the case. 7. Without prejudice, the order of the learned Commissioner of Income-Tax (Appeals) is in violation of the principles of natural justice as the appellant was not afforded reasonable opportunity of hearing under the facts and circumstances of the case. 8. The learned Commissioner of Income-Tax (Appeals), is not justified in not adjudication the appeal with independent application of mind under the facts and circumstances of the case. 9. The Appellant denies itself to be charged to interest under 234A and 234B of the Income Tax Act, 1961 under the facts and circumstances of the case. The levy is bad both on the extent levied and the rate levied which are not discernable from the order. Without prejudice to the quantification of the extent of interest it appears to be excessive and requires to be corrected.
ITA Nos.318 to 320/Bang/2017 Page 3 of 9 10. The Appellant craves to leave to add, alter, delete or substitute any of the grounds urged above. 11. In the view of the above and the other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed in the interest of equity and justice. Further, the assessee raised the additional ground of appeal of before us in respect of legality of issue of notice u/s 148 of the Income-tax Act,1961 ['the Act' for short] for making re- assessment, as under: 1. The order of re-assessment passed under section 143[3] r.w.s. 147 of the Act is bad in law and void-ab-initio as the mandatory conditions to invoke the provision of section 147 did not exist and thereby the very notice issued under section 148 is also bad in law under the facts and circumstances of the case. 1.1. The reasons recorded if at all it is recorded by the learned assessing officer utmost may be considered as reason to suspect and under no stretch of imagination the same cannot constitute reason to believe which is a basic ingredient for a valid assumption of re-assessment under the facts and circumstances of the case. 1.2. The notice issued under section 148 of the Act is very vague and the learned assessing officer has not specified as regard to which limb he has issued the notice whether to assessee or reassess the income of the appellant and consequential proceedings becomes bad in law, under the facts and circumstances of the case. 2. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 3. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed and appropriate relief may be granted in the interest of justice and equity.
Before we go into the merits of the grounds of appeal, we consider it appropriate to adjudicate on the legal ground of issue of notice u/s 148 of the Act. Brief facts of the case are that the assessee is a partnership firm engaged in the business
ITA Nos.318 to 320/Bang/2017 Page 4 of 9 of civil construction and engaged in skilled and unskilled labour carrying out construction activities at various locations. For the assessment year 2005-06 the assessee filed Return of income on 22/6/2006 with total income of Rs.6,86,760/-. Subsequently notice u/s 148 was issued and assessment was completed u/s 143(3) r.w.s 147 of the Act dated 29/12/2009 with addition u/s 40(a)(i) amounting to Rs.1,02,98,748/-, disallowance u/s 40A(3) of Rs.27,97,571/-.
Aggrieved by the order, the assessee challenged the validity and addition with the CIT(A). The CIT(A), considering the grounds of appeal and the additions, has partly allowed the appeal of the assessee by restricting the disallowance u/s 40A(3) to the extent of 20% of the actual payments made. In respect of other grounds, the CIT(A) has upheld the action of the AO. and partly allowed the appeal of the assessee.
Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Hon’ble Tribunal. The Hon’ble Tribunal, vide common order in ITA Nos.521 to 523/Bang/2012 dated 24/5/2013 set aside the assessment and directed the AO for detailed examination of material available on record has observed at page 9 para.9.1 of the Tribunal order:
“9. We have heard both sides and carefully perused and considered the material on record. In respect of the disallowances under section 40(a)(ia), the learned Authorised Representative has submitted before us that in several instances the disallowances were made of payments made to traders for supply of goods, who were neither contractors or sub-contractors, in which cases such payments should not attract disallowance under section 40a(ia). The sample invoices filed before us appears to demonstrate that these could be pure purchases of materials and in that eventuality would have no element of contract
ITA Nos.318 to 320/Bang/2017 Page 5 of 9 payment for labour or any other services rendered. Further, in respect of the disallowances under section 40A(3) of the Act, the learned Authorised Representative contends that only 20% of those cash payments which are in excess of Rs.20,000 are liable for disallowance relying on the decision of the Hon’ble Karnataka High Court in the case of Shankar S. Kolivad (supra). On a perusal of the zrders of assessment for all three years, it is observed that the assessee agreed to the disallowances under section 40(a)(ia) and 40A(3) of the Act. In this regard, the proposition canvassed by the learned Authorised Representative before us is that though the disallowances were made were agreed to, they do not stand the test of law as they ought not to have been made since they do not constitute income as per the provisions of law irrespective of the fact whether they were agreed to or not. It is admitted that this position is supported by the decisions cited by the learned Authorised Representative. We also find from perusal of the record as submitted by the learned Authorised Representaative, that the orders of assessment for all three assessment years, 2005-06 to 2007-08 are cryptic and no detailed examination of the material on record has been carried out before making the disallowances u/s. 40(a)(ia) and 40A(3) of the Act. In this view of the matter, we are of the considered opinion that in the interest of equity and justice, the orders of assessment for Assessment Year 2005-06 to 2007-08 be set aside and direct the Assessing Officer to re-do the assessments de novo for all three assessment years, keeping all contentions open both on legal issues as well as on merits of the matter and to pass fresh orders in accordance with law expeditiously in abundance with law after affording the assessee adequate opportunity of being heard and to present its case. We, therefore do not wish to go into other legal issues raised by the assessee as the assessments are set aside to the file of Assessing Officer. It is ordered accordingly.”
In pursuance to the directions of the Hon’ble Tribunal, the AO has passed the order considering the material on record by disallowing the payments for non-deduction of tax u/s 40(a)(i) and disallowance u/s 40A(3) of the Act determination of the total income at Rs.63,93,880/- and passed the order u/s 143(3) read with sec.254 of the Act, dated 30/06/2014.
ITA Nos.318 to 320/Bang/2017 Page 6 of 9 7. Aggrieved by the order, the assessee has filed appeal before the CIT(A). The CIT(A), having considered the grounds of appeal, submissions and the provisions of law and the ITAT order has confirmed the action of the AO and dismissed the assessee’s appeal.
Aggrieved by the order, the assessee has filed an appeal with the Tribunal with the grounds f appeal and raised additional grounds on legality of issue of notice u/s 148 and reassessment.
The learned AR submitted that the legal issue be decided first and prayed that information and judicial decisions filed in the paper book be considered supporting the assessee’s case.
Contra, learned DR, relied on the orders of the CIT(A).
We heard the rival submissions and perused the material on record. Prima facie, the assessee has raised the additional ground on legality of issue of notice u/s 148 and reassessment. We, having considered the submissions of the learned AR on re-assessment proceedings, find that the Tribunal in its earlier order in ITA Nos.521 to 523/Bang/2012 in assessee’s own case, dated 24/5/2013 has dealt on the re-assessment and issue of notice u/s 148 whereas the assessee again has raised the additional ground before the Tribunal. The observation of the Tribunal at pages 4 and 5 paras.4 to 4.2 admitting the additional ground for adjudication are as under: 4. In addition to the grounds (supra), the assessee has also raised identical additional grounds of appeal for all three assessments years which are as under: " 1. The order of reassessment is bad in law and void- ab-initio in as much as the notice issued under section
ITA Nos.318 to 320/Bang/2017 Page 7 of 9 148 of the Act is invalid and therefore, the order of assessment passed founded on the in valid and illegal notice under section 148 of the Act deserves to be cancelled. 2. Without prejudice to the above, the order of reassessment is bad in law and void-ab-initio for want of requisite jurisdiction especially, the mandatory requirements to assume jurisdiction under section 148 of the Act did not exist and have not been complied with and consequently, the reassessment requires assesssment requires to be cancelled. 3. The appellant craves leave to add, alter, amend, substitute, change and delete any of the grounds of appeal. For the above and other grounds that may be urged at the time of hearing of the appeal, the appellant prays that the appeal maybe allowed and justice rendered" The learned Authorised Representative submitted that these additional grounds of appeal were not specifically urged before the authorities below due to inadvertence and pleaded that since these grounds being purely legal issues, they be admitted and disposed off on merits for the advancement of substantial course of justice. 4.2 We have heard both parties on the additional grounds raised. We are of the view th in the interest of justice and equity, the additional grounds being purely question of law, be admitted for adjudication. It is ordered accordingly.”
When a query was raised to the learned AR that the additional ground on reassessment and legality of issue of notice u/s 148 was raised before the Tribunal and was admitted. The learned AR submitted that the AO has not complied with the directions of the Tribunal and also the assessee has not challenged on this ground before the assessing authority in the proceedings u/s 143(3) r.w.s 254.
ITA Nos.318 to 320/Bang/2017 Page 8 of 9 The learned DR submitted that having raised the additional ground in the earlier round of proceedings before the Tribunal, the assessee again cannot file additional ground on similar issues.
We, having considered the facts and circumstances and the submissions of the learned AR and the learned DR on the provisions of law, are of the substantive opinion that the Tribunal has admitted the additional ground in ITA Nos.521 to 523/Bang/2012. Therefore, the additional ground now raised in the present appeal becomes infructuous. Accordingly we found there is no observations or finding by the CIT(A) and the assessee has not raised ground of appeal before the CIT(A), as per grounds of appeal, we are of the substantive opinion that the matter has to be relooked on the basis of reasons recorded for issue of notice u/148 and reassessment and the assessee has to substantiate the case on legality. Therefore, in the interests of substantial justice, we restore the entire disputed issue to the file of the CIT(A) to consider the additional ground on validity of reassessment proceedings admitted by the Tribunal earlier in ITA Nos.521 to 523/Bang/2012 in the order (supra) and pass a reasoned and speaking order. Further the assessee shall be provided adequate opportunity of hearing and co-operate in submitting information expeditiously for earlier disposal of appeal.
In the result, the assessee’s appeal is allowed for statistical purposes.
Since the issues and facts are common in the appeals for assessment years 2006-07 and 2007-08, therefore the reasons given by us while dealing with the appeal for assessment year
ITA Nos.318 to 320/Bang/2017 Page 9 of 9 2005-06 will equally apply and accordingly these appeals are also restored to the file of the CIT(A) for adjudication on validity of the re-assessment proceedings and allow the appeals of the assessee for statistical purposes.
In view of this decision in all three years, no adjudication on merits is called for at the present stage. We direct ld.CIT(A) that if the assessee fails on the legal issue, then the issue on merits should be decided afresh because decision on issues on merits should be after decision on technical/legal issue.
In the result, the assessee’s appeal for assessment years 2005-06, 2006-07 and 2007-08 are allowed for statistical purposes.
Order pronounced in the open court on 15th February, 2019.
Sd/- sd/- (A.K.GARODIA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Place : Bengaluru Dated : 15/02/2019 srinivasulu, sps Copy to : 1 Appellant 2 Respondent 3 CIT(A)- 4 CIT 5 DR, ITAT, Bangalore. 6 Guard file By order
Assistant Registrar Income-tax Appellate Tribunal Bangalore