SMT MAHINDER KAUR CHHATWAL,GURGAON vs. ITO, GURGAON

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “SMC” : DELHI

BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER

ITA.No.1680/Del./2017 Assessment Year 2009-2010

Smt. Mahinder Kaur Chhatwal, C/o. Kunar The Income Tax Officer, Aggarwal & Associates, 226, vs. Ward-2(4), JMD Mwegapolls, 2nd Floor, Gurgaon Sector-48, Sohna Road, Haryana. Gurgaon, Haryana-122001. PAN ACQPC4929A (Appellant) (Respondent)

For Assessee : Shri Kunal Aggarwal, C.A. For Revenue : Shri Koushlendra Tewari, Sr. DR

Date of Hearing : 01.11.2017 Date of Pronouncement : 03.11.2017

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.

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.

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).

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.

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.”

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.

Order pronounced in the open Court.

Sd/- (BHAVNESH SAINI) JUDICIAL MEMBER Delhi, Dated 03rd November, 2017 VBP/-

10 ITA.No.1680/Del./2017 Mahinder Kaur Chhatwal, Gurgaon.

Copy to 1. The appellant 2. The respondent 3. CIT(A) concerned 4. CIT concerned 5. D.R. ITAT ‘SMC’ Bench, Delhi 6. Guard File.

// By Order //

Asst. Registrar : ITAT Delhi Benches : Delhi.