Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-II’ NEW DELHI
Before: SMT DIVA SINGH
11 AYs. All these appeals are being decided by a common order as facts and circumstances are identical. For ready-reference, Grounds from are reproduced hereunder:-
“That on the facts and circumstances of the case, the CIT(A) was not justified in confirming reopening u/s 148 even though the same was not based on any tangible material and recording of requisite satisfaction and even approval from Commissioner of Income Tax in terms of provisions of sec. 251 of the I.T. Act, 1961.
That reassessment is merely based on change of opinion on the basis of very same facts as existed during the course of original assessment proceedings u/s. 143(3) and as such whole basis of reassessment is illegal, arbitrary and without jurisdiction. 3. That having considered the issue under audit objection and dropped the proceedings u/s, 154, it is not open to assume jurisdiction u/s. 148 of the Income Tax Act, 1961. 4. That even on merits, there is no ground or basis for confirming disallowance of interest amounting to Rs. 3,55,000/- in 2008-09 AY; Rs.2,54,500/- in 2009-10 AY; and Rs.1,33,200/- in 2010-11 AY respectively u/s. 36(l)(iii) of the Income Tax Act, 1961 without proper appreciation of facts and legal principles. 5. That orders of the lower authorities are not justified on facts and same are bad in law.” 2. It was a common stand of the parties that the facts and circumstances addressed in 2008-09 AY would cover the issues in the remaining two years only as it is the very same loans give to the son and the nephew in 2008-09 AY.
Page 2 of 5 3. The Ld.AR inviting attention to the impugned order in 2008-09 AY submitted that the assessee in the year under consideration declared a total income of Rs.6,03,630/- vide his return dated 30.09.2008. This fact it was submitted has been taken note of by the AO in his order dated 31.01.2014 u/s 143(3) r.w.s 147. Inviting attention to the copy of the reasons recorded which are placed at Paper Book page 7 and copy of the original assessment order dated 08.12.2010 which is placed at Paper Book page 9 to 12, it was submitted that issues which have formed the basis for re-opening have already been considered by the AO in the aforesaid order. Referring to the reasons recorded, it was submitted ACIT, Bhiwani notes that assessee has taken secured and unsecured loans and advanced loan of Rs.39.25 lacs to Sh. Sanjay Kumar, son of the assessee and Rs.40 lakhs as a loan to Sh. Suresh Kumar his nephew. These very facts have been noted in the aforesaid assessment order u/s 143(3). Inviting attention to the copy of the show cause notice u/s 154 dated 24.05.2012 copy of which is placed at Paper Book page 12 it was submitted the AO referring to the amounts and the relationship requires the assessee to justify the claim that the loan was advanced to the son for doing the business. The assessee it was submitted is a civil contractor. The AO vide the said notice u/s 154 also required the assessee to justify the advance to nephew for purchasing plot in HUDA.
Considering the detailed reply of the assessee copy placed at pages 13 & 14 of the Paper Book it was submitted the proceedings u/s 154 were dropped by the AO by his order dated 04.02.2013. Accordingly inviting attention again to the reasons record at Paper Book page 7, it was submitted that it is a case of change of opinion on the very same facts. This conclusion is evident from the recording of the reasons of the AO who states that on a perusal of the very same balance sheet as consideration by the AO at the assessment stage in the order u/s 143(3) and without referring to any new material or tangible material has proceeded to re-open a concluded assessment. Re-opening a concluded assessment on the very same facts based on mere change of opinion it was submitted is contrary to the settled legal position. Accordingly relying upon the decision of the High Court in the case of TO 2949/DEL/2016 ISHWAR SINGH VS ACIT
Page 3 of 5 Tushar Turner Broadcasting Systems Asia Pacific Inc. vs Dy.DIT [2016] 380 ITR 412 (Del.) amongst others it was submitted that the assessment order deserves to be quashed.
Inviting attention to the fact that the reassessment is based on the very same facts as were considered in the rectification proceedings which were dropped and where there is no new material it was re-iterated the re-assessment deserves to be quashed. Reliance was placed upon the decision of the Calcutta High Court in the case of Berger paints India Limited vs Asstt. CIT [2010] 322 ITR 369 (Cal.). It was further submitted that in the absence of any new material, the re-assessment cannot stand in the eyes of law.
Reliance was placed on CIT vs Lukas T.V.S.Ltd. [2001] 249 ITR 306 (SC).
3.1. Even on merit, it was submitted that the re-opening is not justifiable as the assessee gave the interest free advances to his Son and Nephew of Rs.39,25,000/- and Rs.40,00,000/- respectively out of his own capital account of Rs.22,67,876/-; unsecured interest free loans of Rs.26,22,585/- and sundry creditors of Rs.1,10,05,262/-. Thus the assessee had more than adequate interest free advance available. These arguments on merit are notwithstanding the arguments advanced that these two relatives extensively helped the assessee in doing its business as being almost 60 years he could not always stand at site and oversee the work. These arguments are before the Commissioner at page 4 of the Paper Book. Thus commercial expediency to have trusted people at work site to ensure work is completed adhering to standard and times were the facts on record.
In 2009-10 AY, the capital available to the assessee was Rs.39,32,703.96/- and the unsecured interest free loans available as per the balance sheet were Rs.31,98,900/- and the sundry creditors were Rs.1,39,95,844. The returned income was Rs.18,19,800/- which was assessed at Rs.19,44,800/- apart from agricultural income of Rs.2,54,420/-. In the said year also a show cause notice u/s 154 had been issued which on considering the reply of the assessee had been dropped.
Page 4 of 5 5. The facts for 2010-11 AY, it was submitted were also identical as the assessee declared income of Rs.20,09,550/- and agricultural income of Rs.3,49,420/- had been shown. The assessment was completed by an order u/s 143(3) at an income of Rs.25,09,350/- and the agricultural income of Rs.3,49,420/- vide order dated 08.12.2010.
In the facts of the said year also, the AO issued a show-cause notice dated 08.08.2012 u./s 154 to consider the very same facts (copy placed at pages 18 to 20) and after considering the reply the proceedings were dropped on 04.02.2013 (copy placed at page 23 of the Paper Book). The capital of the assessee in the year under consideration was Rs.63,86,937.16 unsecured loans were Rs.16,98,900/- with sundry creditors of more than Rs.15 lacs..
The Ld. Sr. DR relied upon the orders of the authorities below. No contrary fact or argument in rebuttal to the arguments advanced were advanced.
I have heard the rival submissions and perused the material available on record. I find on facts that the Ld.AR has successfully argued the case not only on the legal issue but also on merits. It has not been disputed by the Revenue that the subject matter for consideration in the reasons recorded are duly noted by the AO in the assessment orders u/s 143(3). Further the AO in these three years again as per record has issued show cause notice u/s 154 to the assessee requiring an explanation why additions should not be made in the respective years. It is a matter of record and not in dispute that in all these three years after considering the reply of the assessee the 154 proceedings were dropped by the AO. Considering the copy of the reasons recorded, it is seen that the AO does not refer to any new material noticed by him for re-opening the assessment as the AO records that on a “perusal of the balance sheets” the opinion is formed. The consistent claim of the assessee that the re-opening is based on a mere change of opinion has not been rebutted by the Revenue by referring to any fact, argument or evidence which came up for consideration. In the absence of any new material in the peculiar facts of the present case justifying change of opinion income cannot be said to have escaped assessment. Re-appreciating the very TO 2949/DEL/2016 ISHWAR SINGH VS ACIT
Page 5 of 5 same material on facts ad-infintum lays the Revenue open to the charge of arbitrariness and abuse of a power vested in the A.O. Even on merits, I find the consistent claim of the assessee before the tax authorities on facts has wrongly been ignored. It is seen that the assessee in each of these three years though has pleaded commercial expediency for advancing loans to his son and nephew where being a senior citizen i.e. 60 years the presence of his relatives was considered necessary on site to ensure quality and time related compliances in order to avoid penalties and being black listed from Government contract work the son and the nephew are stated to have helped by being present on site and over-seeing the quality and the work. However, if even otherwise the availability of sufficient funds in his own capital account and interest free loans and sundry creditors have not been disputed by the Revenue the occasion to make addition in the peculiar facts of the present case does not arise. The advances have been returned and have not been advanced out of borrowed funds for business purposes. Considering the overall factual aspect and the position of law thereon, I am of the view that in the absence of any rebuttal on these salient facts as referred to hereinabove the assessee succeeds both on the legal issue as well as on merits. The impugned order is set aside and the assessment order accordingly in the respective years are quashed.
In the result, the appeals of the assessee are allowed. The order is pronounced in the open court on 18th of November, 2016.