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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI N.K. SAINI & SHRI K.N. CHARY
ORDER PER SHRI K.N. CHARY, JUDICIAL MEMBER
This is an appeal by the assessee challenging the order dated 31.08.2015 in appeal no. 184/2014-15/GZB passed by the Ld. Commissioner of Income Tax (Appeals)-Ghaziabad (hereinafter for short called as the “Ld. CIT (A)”).
Briefly stated facts are that the assessee is an individual deriving income from the manufacturing and sale of bricks. For the AY 2010-11 assessment u/s 143(3) of the Income Tax Act, 1961 (for short called as the ‘Act’) was completed on 26.03.2013 determining the income of the assessee at Rs. 69,16,140/-. Subsequently assessment was reopened u/s 147 of the Act by issuance of notice u/s 148 and the AO made an addition of Rs. 1,24,500/- on account of commission on sales to three persons. Appeal preferred by the assessee was dismissed by the Ld. CIT (A) vide impugned order.
Assessee challenges the orders of the authorities below both on the basis of jurisdiction and on merits. In so far as the jurisdiction is concerned, it is submitted by the Ld. AR that the reasons recorded by the AO read that it is only later on observed that the assessee has made cash payments of Rs. 1,24,500/- on account of commission on sales to three persons and the reasons clearly show that no new material has come into the position of the AO. It is submitted that when there is no fresh material in the position of the Ld. AO to initiate proceedings u/s 147 of the Act the proceedings were without jurisdiction. For this principle he placed reliance on the decision of the Hon’ble Apex Court in CIT vs. Kelvinator of India Ltd. 320 ITR 561, CIT vs. Usha International Ltd. 348 ITR 485, Orient Craft Ltd. (2013) 354 ITR 536 (Del) and Donaldson India Filters Systems Private Limited (2015) 54 taxmann.com 253 (Del). Per contra, Ld. DR heavily relied upon the orders of the authorities below.
We have perused the material papers on record in the light of the arguments on either side. We find that the Hon’ble Jurisdictional High Court in the case of Orient Craft Ltd. (supra) has held as under:
“15. In the present case the reasons disclose that the Assessing Officer reached the belief that there was escapement of income “on going through the return of income” filed by the assessee after he accepted the return u/s 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer, both strongly deprecated by the Supreme Court in CIT vs. Kelvinator (supra). The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of the words “reason to believe” vis-à-vis an intimation issued u/s 143(1) can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the Assessing Officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred u/s 147.”
Similarly in the judgment in the case of Donaldson India Filters Systems Private Limited (supra), the Hon’ble Jurisdictional High Court has held as under:
“28. The reopening of the assessment in the case at hand through notice u/s 148 of the Income Tax Act issued on 22.03.2010 fails to pass the muster on both the tests. The satisfaction note does not disclose the foundation of “reasons to believe” as it vaguely refers to the perusal of “the records” without specifying the fresh “tangible material” that had come to light giving rise to a need for such action. Since the assessment had earlier been concluded u/s 143(3) by order dated 21.09.2007, the restrictions on the exercise of the power of reassessment as contained in the first proviso to section 147 would inhibit further action in absence of material showing default by the assessee to fully or truly disclose.
In the above facts and circumstances, we concur with the view taken by the CIT (A) that it is a case of impermissible change of opinion. The order whereby the proceedings have been reopened for assessment u/s 147/148 of Income Tax Act, thus, is found to suffer from jurisdictional error. Consequently, the proceedings taken out in its wake cannot sustain.”
6. In this case also the Hon’ble High Court has observed that the requirement of section 147 are not satisfied where reasons reference to merely perusal of the records without specifying any fresh tangible material that had come to light for initiating the reassessment. It is, therefore, clear that in absence of any tangible material, the reassessment proceedings have been held to be without jurisdiction by the Hon’ble High Court.
Coming to the facts involved in this matter the reasons recorded by the AO on 10.02.2004 do not speak of any fresh material coming into the possession of the AO. As a matter of fact the said reasons read as follows:
Reasons for Issuance of Notice u/s 148 of the Income Tax Act, 1961 for the AY 2010-11 In this case, the assessment was completed u/s 143(3) on 26.03.2013 at the income of Rs. 69,16,140/-. It was later observed that the assessee has made cash payments of Rs. 1,24,500/- on account of commission on sales to three persons viz. Shri Visal Kumar, Culaothi; Shriv Vinod Kumar,
Hapur and Shri Ashok Chopra, Hapur, in violation to Section 40A(3) of the Income Tax Act, 1961. I have, therefore, reasons to believe that the said sum of Rs. 1,24,500/- has escaped assessment within the meaning of Sec. 147 of the Income Tax Act, 1961.” 8. We, therefore, find that the complete assessment was reopened only on the basis of the record that was already available with the Assessing Officer and no fresh tangible material has come into the possession the AO, as such, the exercise of jurisdiction by the Assessing Officer to reopen the matter is impermissible in the light of the decisions of the Hon’ble Apex Court and jurisdictional High Court. We, therefore, hold that the assessment order dated 27.06.2014 u/s 147/143(3) of the Act cannot be sustained. Since we quash the assessment order on the question of law, we do not deem it necessary to deal with the merits of the case.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 20.10.2017