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Income Tax Appellate Tribunal, DELHI BENCHES “SMC” : DELHI
Before: SHRI BHAVNESH SAINI
ORDER This appeal by assessee has been directed against the order of the Ld. CIT(A)-I, Gurgaon, dated 21st October, 2016 for the A.Y. 2009-2010.
Briefly the facts of the case are that the return declaring an income of Rs.3,92,168 was filed on 28th September, 2009. The assessment was completed vide order dated 22nd December, 2011 under section 143(3) of the I.T. Act at a total income of Rs.5,09,670
2 ITA.No.1680/Del./2017 Mahinder Kaur Chhatwal, Gurgaon. by making certain disallowances of expenditure. Later on, it was noticed that assessee has not paid payable liability of Rs.1,26,105 and TDS of Rs.45,143 into Government account. The A.O. initiated the re-assessment proceedings under section 147 of the I.T. Act after recording the reasons on dated 31st March, 2014. The assessee submitted before A.O. that return originally filed may be treated as return having filed in response to the notice under section 148 of the I.T. Act. The A.O. after considering the explanation of assessee made two additions of Rs.4,19,585 on account of expenditure and made further addition of Rs.6,50,000 on account of unexplained bank deposits. The total income was computed at Rs.15,79,255. The assessee challenged both the additions before Ld. CIT(A). However, the appeal of assessee has been dismissed with the enhancement.
The assessee in the present appeal has challenged the initiation of re-assessment proceedings under section 147 of the I.T.
Act and additions of Rs.6,50,000, Rs.4,19,585 made by the A.O. and also further challenged the additions enhanced by the Ld. CIT(A).
I have heard the Learned Representatives of both the parties and perused the material on record. The assessee filed an 3 ITA.No.1680/Del./2017 Mahinder Kaur Chhatwal, Gurgaon. application for admission of the additional ground stating therein that initiation of re-assessment proceedings vide notice dated 31st March, 2014 is bad in law and without justification as rectification proceedings initiated by the A.O. vide notice dated 7th March, 2014 on the same subject matter was pending till 31st March, 2014. Since the issue of re-assessment proceedings is legal in nature which is taken in the main ground of appeal as well as in the additional ground of appeal and sufficient material is available on record to decide the same. Therefore, additional ground is admitted for hearing.
4.1. It is well settled law that validity of re-assessment proceedings is to be determined on the basis of the reasons recorded for reopening of the assessment. Copy of the reasons recorded for reopening of the assessment is filed at page 93 of the paper book which reads as under :
“Annexure
Reasons for reopening the case u/s 147 of the Income Tax Act, 1961 Name & Address : Smt. Mohinder Kaur Chhatwal, of the assessee : 36/1, East Punjabi Bagh, New Delhi.
4 ITA.No.1680/Del./2017 Mahinder Kaur Chhatwal, Gurgaon. A.Y. : 2009-2010 PAN : ACQPC4929A Status : Indl. Date : 31.3.2014
Reasons :
The assessee has not paid payable liability of Rs.1,26,105/- u/s 43B. Hence the (1) The assessee has no proof of payment in respect of Govt, duty u/s 438 amounting to Rs.1,26,105/- and TDS of Rs.45,143/- was deducted but not deposit in Govt. account. Hence, the same have been omitted to be disallowed u/s 43B.
In view above income of above to the tune of Rs.l,26,105/- 1,71,248/- have escaped assessment,
I therefore, have been to believe that the assessee is in default for non-payment of Govt. liabilities and hence income to the tune of Rs.1,71,248/- has escaped assessment. Sd/- Income Tax Officer, Ward-1(1) Gurgaon.” 4.2. Originally, the assessment order under section 143(3) was passed vide order dated 22nd December, 2011. But the A.O. did not make any addition on account of duty under section 43B of the I.T.
5 ITA.No.1680/Del./2017 Mahinder Kaur Chhatwal, Gurgaon. Act as considered in the reasons for reopening of the assessment. The A.O. issued notice under section 154/155 of the I.T. Act dated 7th March, 2014, copy of which is filed at page No.80 of the paper book to amend the original assessment order dated 22nd December, 2011 by proposing various mistakes, one of the mistake as mentioned at Sl.No.5 i.e., “there are no proof of payment in respect of Government duty covered under section 43B amounting to Rs.1,26,125. This amount is proposed to be added back to assessee’s income”. This notice was replied by assessee vide reply dated 11th March, 2014 copy of which is filed at page 82 of the paper book in which assessee submitted that he already deposited the TDS which is supported by copies of the challans which are also filed in the paper book.
According to Learned Counsel for the Assessee, till recording of the reasons for reopening of the assessment on 31st March, 2014, the rectification under section 154 was pending which have not been disposed by A.O. He has further submitted that A.O. has not made any addition of the Government duty under section 43B of the I.T.
Act in the re-assessment order as well on which reasons for reopening are recorded. He has therefore, submitted that the A.O.
6 ITA.No.1680/Del./2017 Mahinder Kaur Chhatwal, Gurgaon. recorded incorrect and non-existing reasons. Therefore, initiation of re-assessment proceedings is bad in law.
Ld. D.R. however, relied upon the order of the A.O.
Considering the facts of the case in the light of material on record, I am of the view that initiation of re-assessment proceedings is bad in law. The A.O. passed the original assessment order under section 143(3) of the I.T. Act and after examining the books of account and material on record, made various disallowances of the expenditure. The A.O. however, did not make any addition under section 43B of the I.T. Act. Later on, A.O. found certain mistakes in the original assessment order dated 22nd December, 2011 and one of the mistake was that no proof of payment in respect of Government duty covered under section 43B, amounting to Rs.1,26,105 have been filed which was to be added under section 154 of I.T. Act to the income of the assessee. The assessee filed reply before A.O. in the rectification proceedings under section 154 of the Act supported by copies of the challan to show that payment in question have been made to the department. It, therefore, appears that A.O. was satisfied with the explanation of assessee and that is why he did not make any 7 ITA.No.1680/Del./2017 Mahinder Kaur Chhatwal, Gurgaon. amendment in the original assessment order dated 22nd December, 2011 and proposed action under section 154 would be deemed to have been dropped under section 154 of the I.T. Act. It, therefore, shows that A.O. accepted the explanation of assessee that assessee made proper payment under section 43B of the I.T. Act. There were no other material available on record to show that assessee has not made any payment covered under section 43B of the I.T. Act. On the face of the material available on record, it was not proper for the A.O. to initiate the re-assessment proceedings with regard to the same fact that assessee has not made payment in respect of Government duty covered under section 43B of the I.T. Act. Thus, the A.O. recorded incorrect and non-existing reasons for reopening of the assessment.
The same is not permissible under Law and reopening of the assessment is liable to be quashed. I rely upon the decision of Hon’ble Punjab & Haryana High Court in the case of Atlas Cycle India 180 ITR 319. It may also be noted here that the A.O. did not make any addition in the re-assessment order dated 20th March, 2015 in respect of the issue under section 43B which was solely raised in the reasons recorded for reopening of the assessment. Thus, the entire
8 ITA.No.1680/Del./2017 Mahinder Kaur Chhatwal, Gurgaon. exercise made by the A.O. is without jurisdiction and is not sustainable in Law. The Hon’ble Karnataka High Court in the case of Berger Paints India Limited vs. ACIT 322 ITR 369 held “that the re- assessment notice had been issued for virtually the same reason for which rectification proceedings had earlier been initiated but dropped.
The A.O. had not disclosed any new material for reopening of the assessment. The notice for re-assessment was not valid and were liable to be quashed.”
In the facts and circumstances of the case, it is clear that when the A.O. issued notice for rectification under section 154 of the I.T. Act dated 7th March, 2014 and asked for the explanation of assessee with regard to the amount in question whether paid under section 43B of the I.T. Act and assessee filed reply and evidences before A.O. in rectification proceedings that payment in question have been made to the Government account, the A.O. would be satisfied with the explanation of assessee and therefore, did not pass any order under section 154 of the I.T. Act which would amount to dropping of the proceeding under section 154 of the I.T. Act. The A.O. was already having copies of the challan of tax deposited by the 9 ITA.No.1680/Del./2017 Mahinder Kaur Chhatwal, Gurgaon. assessee under section 43B of the I.T. Act thus A.O. was not having any new material with him for reopening of the assessment. It would show that the A.O. deliberately without any justification has initiated re-assessment proceedings particularly when material was available on record to prove that assessee has already made payments under section 43B of the I.T. Act. The A.O. thus recorded the incorrect and non-existing reasons and as such initiation of re-assessment proceedings is without jurisdiction and is bad in law. I accordingly, set aside the orders of the authorities below and quash the reopening of the assessment under section 147/148 of the I.T. Act. In view of the above, there is no need to decide the additions on merit made by the A.O. as well as the enhancement made by the Ld. CIT(A) because they are left with academic discussion only. On quashing the re- assessment proceedings all the additions would stand deleted.
In the result, appeal of assessee is allowed.
Order pronounced in the open Court.