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Facts
The assessee's assessment for AY 2010-11, originally completed u/s 143(3), was reopened u/s 148 after four years. The reopening was based on the recognition of interest income to the extent of TDS deducted, while a larger provision for interest was made, and an enhancement of income by Rs. 11,04,564/-. The assessee argued that all material facts were fully disclosed in the original assessment proceedings and notes to accounts.
Held
The Tribunal held that since the material facts were duly disclosed in the assessee's notes to accounts, the reopening of assessment beyond four years was not justified. It found no failure on the assessee's part to disclose material facts, thus rendering the Section 148 notice invalid.
Key Issues
Whether the reopening of assessment under Section 147/148 beyond four years was valid, given the assessee's full disclosure of material facts. Whether the confirmation of interest income and enhancement of income by CIT(A) was justified.
Sections Cited
Section 250(6), Section 148, Section 139, Section 143(3), Section 147, Section 143(2), Section 154, Section 4, Chapter XVII-B
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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: SH. KULBHARAT & DR.B. R.R. KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’, NEW DELHI
BEFORE SH. KULBHARAT, JUDICIAL MEMBER AND DR.B. R.R. KUMAR, ACCOUNTANT MEMBER ITA No.1393/DEL/2020 Assessment Year: 2010-11 Decent Financial Services DCIT Pvt. Ltd. A-86, DDA Shed, Vs Circle – 7 (1) Okhla Industrial Area, New Delhi Phase-I, New Delhi PAN No.AAACD2899P (APPELLANT) (RESPONDENT)
Appellant by Sh. Amit Sharma, Advocate Respondent by Sh. Vivek Kumar Upadhyay, Sr DR Date of hearing: 12/03/2024 Date of Pronouncement: 15/03/2024 ORDER PER B. R. R. KUMAR, AM
The present appeal has been filed by the assessee against the orders of ld. CIT(A)-13, New Delhi dated 05.02.2020.
Following grounds have been raised by the assessee :
(1) On the fact and circumstances of the ease and in law, the order passed under section 250(6) of the Act by the learned commissioner of Income Tax (Appeal)-13, New Delhi is bad in law and deserved to be set aside.
(2) On the fact and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal)-13. New Delhi, erred in: (a) Confirming the action of Learned assessing officer whereby the amount of Rs. 3.16.95.872/- being treated as interest income of the concerned assessment year and (b) Further, enhance the income by Rs.11.04,564/- of the concerned AY, even without affording any opportunity to the appellant. Which is based on surmises, conjecture and whims, hence the outcome of proceedings is vitiated and bad in law.
Grounds on section 148 of the act
(3) On the fact and circumstances of the case and in law, learned Commissioner of Income Tax (Appeal)-13. New Delhi erred in confirming that the action initiated by the LD AO under section 148 of the act which is bad in law.
(4) On the fact and circumstances of the case and in law, learned Commissioner of Income Tax (Appeal)-13. New Delhi erred in upholding the action of learned Assessing Officer of reopening the assessment after the period of four years without appreciating the fact that appellant had truly and fully disclosed all the material facts necessary for his assessment at the time of filing its return filed under section 139 of the act as well as assessment proceedings held under section 143(3) of the Act, which is bad in law.
(5) On the fact and circumstances of the case and in law, Learned Commissioner of Income Tax (Appeal)-13. New Delhi erred in upholding the action of learned Assessing Officer without appreciate the fact that the learned assessing officer reopened the concluded assessment only on the base of borrowed satisfaction as hired from the objection of audit party.
(6) On the fact and circumstances of the case and in law, learned Commissioner of Income Tax (Appeal)-13. New Delhi erred in upholding the action of learned Assessing Officer of reopening of assessment under section 147 r/w/s 148 of the act without appreciating the fact that the learned assessing officer reopened the concludes assessment only on the base of change of opinion rather having any tangible material hand which firm the basis of reason to believe which is highly unjustified and unwarranted.
(7) On the fact and circumstances of the case and in law, learned Commissioner of Income Tax (Appeal)-13, New Delhi erred in holding that during the course of assessment proceedings held u/s 147 r.w.s 143(3) of the Act, the LD. AO had issued the statutory and mandatory notice under section 143(2), of the Act which is wrong and based on misconceived notions.
(8) On the fact and circumstances of the case and in law, learned Commissioner of Income Tax (Appeal)-13, New Delhi erred in holding that the learned assessing officer correctly had issued the notice under section 148 of the act which was not pending for adjudication under rectification proceedings ton 154 of the act. As, no subject matter has been simultaneously been presented under two different section of the act, hence the action of the learned assessing officer for initiation of proceedings under section 148 is non application
mind and against the provision of law which required to be quashed as such. (9) On the fact and circumstances of the case and in law, learned Commissioner of Income Tax (Appeal)-13, New Delhi erred in confirming the action of learned Assessing Officer of completing the assessment under section 147 r.w.s 143(3) of the Act without disposing the objections raised by the Appellant vide its letter dated 11/12/2017 which makes whole proceedings void ab initio rather Ld. CIT(A) gave a misconceived finding in her order passed as on 05.02.2020 that the objection was duly disposed by the LD AO in her assessment order which is wring and non-appreciation of facts
Grounds regarding interest income of Rs. 3,16,95,872/-
(10) On the fact and circumstances of the case and in law, learned Commissioner of Income Tax (Appeal)-13, New Delhi erred in holding the action of learned assessing officer in treating the interest income amounting to Rs 3,16,95,872/- (3,64,44,929 11.04,564 (interest recognize in AY 2011-12) Rs.36,44,493(TDS)) as the income of concerned assessment year without acknowledging the facts that such income is not being accrued to the appellant due to its nature.
(11) On the fact and circumstances of the case and in law, learned Commissioner of Income Tax (Appeal)-13, New Delhi erred in holding the action of learned assessing officer for treating interest income amounting to Rs. 3,16,95,872/- as a income of concerned assessment year only on the basis of machinery provision as enunciated under chapter XVII-B of the act without acknowledging the facts that chargeability under section 4 of the act would be depend on the real income as earned on the basis of substantive
provision read with general accepted accounting principle used by the appellant.
Grounds regarding enhancing the income of Rs. 11,04,564/-
(12) On the fact and circumstances of the case and in law, learned Commissioner of Income Tax (Appeal)-13. New Delhi erred in enhancing the assessed income of the concerned AY of the appellant without providing any opportunity to being heard which is bad in law and against the principle of natural justice.
(13) On the fact and circumstances of the case and in law, learned commissioner of Income Tax (Appeal)-13, New Delhi erred in holding the action of learned assessing officer for treating interest income amounting to Rs.11,04,564/- as an income of concerned assessment year only on the basis of machinery provision as enunciated under chapter-XVII-B of the act without acknowledging the facts that chargeability under section 4 of the act would be depend on the real income as earned on the basis of substantive provision read with general accepted accounting principle used by the appellant.
Pertinent facts examined for adjudication of the case are that,
(i) The assessee filed return of income for the A.Y.2010-11 on 15.10.2010 declaring Income of Rs.1,22,87,615/-.
(ii) The order u/s. 143 (3) was passed on 09.01.2013.
(iii) Subsequently, notice u/s.148 was issued on 29.03.2017 i.e. beyond 4 years from the end of the Assessment Year. (iv) The ground of issue of notice u/s.148 under the I.T. Act, 1961 was that the assessee had claimed TDS credit of Rs.36.44 lacs but had afford an amount of Rs.36.44 lacs as income and made a provision of interest income of 327.55 lacs. (v) The reasons for recognition of revenue on receipt basis in respect of interest income were mentioned in notes to account no. (3) which is reproduced as under:-
“(1) to (2)________________________________
During the year, company has purchased assigned loan of Himachal futuristic company limited (the borrower) Rs. 30.00 crore from M/S Rebo India Finance Limited (the lender) at a consideration of Rs. 9.50 crore as per triparty agreement dated 10/08/2009. The said loan is disclosed as "Loan agreement" under the head "Investment" at cost.
The Borrower has created interest provision of Rs. 3.64 crore for said loan in his books of accounts and deduct the TDS as per the provisions of Income tax act of Rs. 36.09 lacs. However, taking into consideration the uncertainty in collection of sum due, company has recognized the interest income only to the extent of TDS deducted by the borrower of Rs. 36.09 lacs.”
The provisions of section 147 are as under :-
“5 147. If the 6[Assessing] Officer 7[has reason to believe 8] that any income chargeable to tax has escaped assessment 8 for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess 8 such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year):
Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or
section 148 or to disclose fully and truly all material facts 9 necessary for his assessment, for that assessment year:
[Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.]
Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily 9 amount to disclosure within the meaning of the foregoing proviso. …………… (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.]
[Explanation 3.- For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassessee the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the
reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.]”
Since the material facts relating to the issue were duly shown in the notes of accounts, the reopening of the case of the assessee after four years in the absence of any reasons of the failure on the part of the assessee to disclose fully and truly all material facts is not justified. Accordingly, the notice issued by the Assessing Officer is treated as bad in law.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 15.03.2024.
Sd/- Sd/- (KUL BHARAT) (DR. B R R KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* Date:- .03.2024 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI