LAMBA BRICKS PVT. LTD.,BHIWANI vs. ACIT, BHIWANI

All the appeals by assessee are directed against different orders of Ld. CIT(A) Rohtak dated 25th November, 2016 for asstt. Years 2009-

10, 2010-11, 2011-12.

assessment year 2009-10 and submitted that issues are same in the

remaining appeals. Therefore, order for asstt. year 2009-10 may be

followed in other years.

Page 1 of 8

ITA Nos. 706,707,708/Del/2017 Lamba Bricks Pvt. Ltd. vs. ACIT

the material on record. For the purpose of disposal of all the appeals,

the appeal for asstt. Year 2009-10 is decided as under :-

Assessment Year- 2009-10

u/s 143(1). In the return of income ,all the columns of the balance sheet

as well as profit and loss account have been filled, the gross receipts

have been shown at Rs. 69,67,218/- from where net profits of Rs.

1,99,990/- have been declared. In the computation of income, assessee

has not shown income under other heads. A survey u/s 133A of the Act was conducted at the business premises of the assessee on 21st March,

2012. Thereafter reasons u/s 147 of the I.T. Act were recorded by the AO and notice u/s 148 of the I.T. Act was issued on 17th February, 2014

which was served upon assessee. The assessee stated that return

already filed u/s 139 (1) may be treated as return filed in response to

notice u/s 148 of the I.T. Act. The objections of the assessee regarding

issuance of notice u/s 148 were rejected. The AO accordingly framed the

reassessment order u/s 143 (3) /147 of the I.T. Act vide order dated 30th March, 2015 whereby the returned income declared in a sum of Rs.

1,99,990/- was accepted and further additions were made on account of

disallowance of rent and electricity charges for a sum of Rs.30,000/- and

ITA Nos. 706,707,708/Del/2017 Lamba Bricks Pvt. Ltd. vs. ACIT

Rs.36,294/-. Further addition was made on account of unexplained share

application money for a sum of Rs. 14,50,000/- u/s 68 of the I.T. Act.

additions on merit However appeal of assessee has been dismissed.

jurisdiction u/s 147 / 148 of the I.T. Act as well as above additions on

merits.

book in which AO recorded the reasons for escapement of income on

account of lower net profit declared by the assesse in a sum of Rs.

59,725/- however this addition was not made in the reassessment order.

AO did not record in the reasons about disallowance of the expenses on

account of rent and electricity and addition on account of unexplained

share application money. Therefore the AO accepted the contention of

the assessee and holds that the income on which he has initially formed

a belief had escaped assessment, has as a matter of fact has not

escaped assessment, it is not open to him to independently assess

some other income. If he intends to do so, a fresh notice u/s 148

should be necessarily issued. He has relied upon decision of Bombay

High Court in the case of CIT vs. Jet Airways (I) Ltd. 239 CTR 183 and

ITA Nos. 706,707,708/Del/2017 Lamba Bricks Pvt. Ltd. vs. ACIT

decision of Delhi High Court in the case of Oriental Bank of Commerce

vs. Addl. CIT 272 CTR 56. He has therefore submitted that reassessment

proceedings may be quashed. On the other hand, Ld. DR relied upon

orders of the authorities below and submitted that reassessment

proceedings were initiated after survey was conducted in the premises of

the assessee where no books of accounts were found and produced. The

objections of the assessee against reopening of assessment has been

rejected. There were discrepancy in the books of accounts. Therefore

prima facie case was made out for reopening of the assessment. Ld. DR

submitted that on making the above additions the profit of the assessee

has increased. Therefore, there is no illegality in initiation of the

reassessment proceedings.

validity of the reassessment proceedings have to be determined with

reference to the reasons recorded for reopening of the assessment.

Copy of which is filed at page 1 of the paper book which reads as under

:-

“M/s. Lamba Bricks Co. Pvt. Ltd. H. No. 1751, Sec-13, Bhiwani A.Y. 2009-10 PAN-AABCL0419J

Reasons for re-opening the case u/s 148 read with section 147 of the Income-tax Act, 1961.

Return declaring an income of Rs. 1,99,990/- filed on 14.09.2009 and same was processed u/s 143(1). The assessee derieves income from running of BKO.

ITA Nos. 706,707,708/Del/2017 Lamba Bricks Pvt. Ltd. vs. ACIT

Subsequently survey operation u/s 133A of the income-tax Act, 1961 was carryout on 21.3.2012 at the business premises of M/s. Lamba Bricks Co. Pvt. Ltd. No books of A/cs and any other documents founded belonging to the assessee M/s. Lamba Bricks Co. Pvt. Ltd. The assessee stated about below Banks A/cs numbers in his statement during survey operation. Later on, the information was called for u/s 133(6) of the Income-tax Act, 1961 from the Bank is as under :-

Sr. No. Name of Bank Account No. Amt. Deposited (Rs.) 1. Indian Bank, Bhiwani 527103076 70,000/- 2. Axis Bank, Bhiwani 40201200001878 86,16,110/- Grand Total Rs. 86,86,110/-

The assessee has filed his return for A.Y. 2009-10 in which gross turnover has shown at Rs. 66,91,608/- with net profit declared at Rs. 1,99,990/-. As per banks statements total turnover works out at Rs. 86,86,110/-. As per return of income for A.Y. 2009-10, net profit rate of the assessee’s company works out at @2.99% by applying the same rate. Income of the assessee for the A.Y. 2009-10 works out at Rs. 2,59,715/-. Adding disallowance of Rs. 59,725/- and total income is works out at Rs. 2,59,715/-.

I have therefore reasons to believe that income of Rs. 59,725/- chargeable to tax has escaped assessment for the A.Y. 2009-10 and also any other income chargeable to tax which has escaped assessment and which comes to the notice of the AO subsequently in the course of the proceedings under this section.

Notice under section 148 of the Income Tax Act, 1961 issued.

Date 13.2.2014 (Jitender Singh) Asstt. Commissioner of Income-tax Bhiwani”

8.1 It is admitted fact that the assessee filed return of income

declaring income of Rs. 1,99,990/-. The AO while passing the

reassessment order accepted the returned income but made other

independent additions on account of disallowance of rent and electricity

charges and addition made on account of unexplained share application

ITA Nos. 706,707,708/Del/2017 Lamba Bricks Pvt. Ltd. vs. ACIT

money. The AO however in the reasons recorded for reopening of the

assessment formed his belief on sole reason that assessee has shown

the lessor net profit in the return of income, in a sum of Rs. 59,725/- .

The AO however in the reassessment order did not make any addition of

Rs. 59,725/- and accepted the returned income of Rs. 1,99,990/-

.Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd.

239 CTR 183 held as under :-

“Conclusion : AO may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice ; however, if after issuing a notice under s. 148, the AO accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assessee some other income.”

Commerce vs. ACIT 272 CTR 56 held as under :-

“Conclusion : If no additions were made in respect of the reasons (a) and/or (b) it was not open to the AO to make additions on some other ground such as the disallowance of the deduction under section 36(1) (viia) without first issuing a note under section 148.”

Ltd. vs. CIT 336 ITR 136 similarly held that “items of income said to

have escaped assessment on which reassessment proposed not added

but other deductions reduced not permissible”.

recorded for reopening of assessment and in the light of above

ITA Nos. 706,707,708/Del/2017 Lamba Bricks Pvt. Ltd. vs. ACIT

decisions, it is clear that the very basis of initiation of reassessment

proceedings for which reasons to believe were recorded were income

escaping assessment in respect of lower net profit, the same having not

been escaped, the AO proceeded to make additions on account of

disallowance of rent and electricity charges and additions made on

account of share application money which as per the above decisions

was not permissible u/s 148 of the I.T. Act. In my humble view if no

additions were made in respect of the reasons i.e. lower net profit, it

was not open to the AO to make additions on other grounds such as

disallowance of expenses and addition on account of share capital

money without first issue a notice 148 of the I.T. Act. The AO was

therefore not justified in reopening of the assessment when the reasons

for the initiation of reassessment proceedings ceased to survive/exist.

reassessment order and the resultant proceedings to the notices u/s 148

can not be sustained. I accordingly set aside and quash the

reassessment proceedings. Resultantly all additions stand deleted. In

the result appeal of assessee is allowed.

Assessment Year : 2010-11

Assessment year : 2011-12

reasons for decisions for asstt. Year 2009-10, I set aside and quash the

ITA Nos. 706,707,708/Del/2017 Lamba Bricks Pvt. Ltd. vs. ACIT

reopening of the assessment u/s 147 / 148 of the I.T. Act and delete the

entire additions. Both appeals of assessee are allowed.

Pronounced in the Open Court.

Sd/- ( BHAVNESH SAINI ) JUDICIAL MEMBER Dated: 7th June, 2017 *Veena* Copy forwarded to: - 1. Appellant 2. Respondent 3. Principal CIT 4. CIT(A) 5. DR, ITAT TRUE COPY By Order,

ASSISTANT REGISTRAR