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Income Tax Appellate Tribunal, KOLKATA BENCH ‘SMC’, KOLKATA
Before: Shri P.M. Jagtap, AM]
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘SMC’, KOLKATA [Before Shri P.M. Jagtap, AM] Assessment Year: 2009-10 Devi Prasad Sarawgi...............................………………………………………................Appellant Flat No. 2B, ‘Gokul Dham’, 32/1B, R.K. Samadhi Road, Kolkata – 700 054 [PAN: AIWPS 7838 N] I.T.O. Ward 45(1) Kolkata,...................……………………………………………........Respondent 3, Government Place (West), Kolkata – 700 001 Appearances by: Shri J.M. Thard, Advocate appearing on behalf of the Assessee. Shri Sailen Samaddar, Addl. CIT appearing on behalf of the Revenue. Date of concluding the hearing : March 20, 2018 Date of pronouncing the order : March 23, 2018
ORDER Per P.M. Jagtap, AM This appeal is preferred by the revenue against the order of Ld. CIT(Appeals) – 13, Kolkata dated 18.09.2017.
The assessee in the present case is an individual who is carrying on the business of job placement and consultancy under the name and style of his proprietary concern M/s. Precision Engineering Works. The return of income for the year under consideration was filed by him on 29.09.2009 declaring a total income of Rs. 5,29,323/-. In the assessment originally completed under section 143(3) vide an order dated 01.11.2011, the total income of the assessee was determined by the A.O. at Rs. 6,43,399/-. Thereafter, it was noticed by the Assessing Officer that the interest of Rs. 8,25,707/- paid by the assessee on unsecured loan was purely personal in nature and there was an Assessment Year: 2009-10 Devi Prasad Sarawgi escapement of income by way of allowing deduction claimed by the assessee on account of such interest. He, therefore, reopened the assessment and issued a notice under section 148 on 27.08.2012 after recording the reasons. In reply, a letter dated 14.09.2012 was filed by the assessee stating therein that the return originally filed by him on 29.09.2009 may be treated as the return filed in response to the notice under section 148. In pursuance of the notice issued under section 148, assessment was completed by the A.O. under section 147/143(3) of the Act vide an order dated 31.03.2014 whereby he made an addition of Rs. 8,25,707/- on account of disallowance of interest on unsecured loans.
Against the order passed by the A.O. under section 143(3)/147, an appeal was filed by the assessee before the Ld. CIT(A) challenging therein on account of disallowance of interest. The Ld. CIT(A) rejected the objection of the assessee regarding the validity of reassessment and upheld validity of the order passed by the A.O. under section 147/143(3). He also confirmed the addition of Rs. 8,25,707/- made by the A.O. on account of disallowance of interest. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal on the following grounds: “
1. For that the Ld. CIT(Appeals) was wrong and unjustified in confirming the initiation of proceedings u/s 147 by the A.O. even though the reason for which proceedings were initiated u/s 147 were thoroughly examined and discussed in the original assessment order passed u/s 143(3) dtd. 01.11.2011.
2. For that the Ld. CIT(Appeals) erred in not cancelling the reassessment proceedings u/s 147 even though the substantial material was furnished before the Ld. A.O. and the Ld. CIT(A).
Assessment Year: 2009-10 Devi Prasad Sarawgi 3. For that the Ld. CIT(Appeals) was wrong and unjustified in confirming the initiation of proceedings u/s 147 by stating wrong and incorrect facts and citing irrelevant case laws. 4. For that the Ld. CIT(Appeals) was wrong and unjustified in confirming the disallowance of Rs. 8,25,707/- in respect of interest on unsecured loans even though details of utilization of loans were furnished before the Ld. A.O. and the Ld. CIT(A).”
In ground no 1 to 3, the assessee has raised a preliminary issue challenging the validity of assessment made by the A.O. under section 147/143(3) on the ground that the initiation of the said proceedings itself was bad in law. In this regard, the learned counsel for the assessee has invited our attention to the reasons recorded by the A.O. for reopening which read as under: “From verification of assessment records which was scrutinized u/s 143(3) of the Act, it is found that assessee has paid interest of Rs. 8,25,707/- from his personal account against the unsecured loan amount to Rs. 69,60,219/-. Since the assessee has paid Rs. 8,25,707/- towards interest payment against unsecured loan which was purely personal in nature. In view of that, I have reason to believe that the income on you has escaped assessment within the meaning of section 147 of the I.T. Act, 1961.”
The learned counsel for the assessee has also invited our attention to the copies of notices along with questionnaire issued by the A.O. during the course of assessment proceedings as well as the replies filed by the assessee to show that the issue relating to the assessee’s claim for deduction on account of interest was examined by the A.O. and on such examination, the claim of the assessee for deduction on account of interest was allowed by the A.O. in the assessment completed under section 143(3). He contended that the A.O. however still reopened the assessment on the issue of Assessment Year: 2009-10 Devi Prasad Sarawgi allowability of interest on the basis of same material as available before him while completing the assessment under section 143(3) and such reopening, therefore, was based merely on a change of opinion, which is not permissible in law. In support of this contention, he relied on the decision of the Hon’ble Supreme Court in the case of CIT vs Kelvinator of India Ltd. 320 ITR 561.
The learned DR, on the other hand, relied on the impugned order of the Ld. CIT(A) in support of the revenue’s case on this issue.
I have considered the rival submissions and also perused the relevant material available on record. As rightly submitted by the learned counsel for the assessee, the assessment originally completed in this case under section 143(3) was reopened by the Assessing Officer on the basis of same set of facts and material as were available before him while completing the assessment under section 143(3) without there being any new tangible material coming to his possession and this position clearly evident from the reasons recorded by the A.O. has not been rebutted or controverted by the learned DR. It is thus clear that the assessment originally completed under section 143(3) was reopened by the Assessing Officer merely on the basis of change of opinion which is not permissible in law as held inter alia by the Hon’ble Supreme Court in the case of CIT vs Kelvinator India Ltd. (supra) cited by learned counsel for the assessee. If, therefore, follows that the assessment completed by the A.O. under section 147/143(3) in pursuance of such improper and invalid initiation is liable to be cancelled being bad in law. I order accordingly and allow ground no 1 to 3 of the assessee’s appeal.
Assessment Year: 2009-10 Devi Prasad Sarawgi
As result of the decision rendered above on the preliminary issue cancelling the assessment made by the A.O. under section 147/143(3), the issue raised in ground no 4 of the assessee’s appeal relating to the disallowance made in the said assessment has become infructuous.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 23rd March, 2018.