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Before: Shri Sanjay Arora & Shri Duvvuru RL Reddy
आयकर अपील�य अ�धकरण, ’बी’ �यायपीठ, चे�नई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI �ी संजय अरोड़ा, लेखा सद�य एवं �ी धु�वु� आर.एल रे�डी, �या�यक सद�य के सम� Before Shri Sanjay Arora, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member I.T.A. Nos.1284 & 1285/Mds/2017 Assessment Years: 2003-04 & 2004-05 M/s. Sakthi Poultry Farm, The Income Tax Officer, Buddareddiyur, Bukkampatty PO, Vs. Ward III(1), No. 3, Gandhi Road, Mecheri, Salem. Salem 636 007. [PAN:ABAFS3031L] (अपीलाथ� /Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से / Appellant by : Shri T.S. Lakshmivenkataraman, CA ��यथ� क� ओर से/Respondent by : Smt. Veni S. Raj, JCIT सुनवाई क� तार�ख/ Date of hearing : 01.08.2017 घोषणा क� तार�ख /Date of Pronouncement : 27.09.2017 आदेश /O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: Both the appeals filed by the same assessee are directed against different orders of the ld. Commissioner of Income Tax (Appeals), Salem, both dated 28.03.2017 relevant to the assessment years 2003-04 and 2004- 05, whereby, the assessee has challenged confirming the order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 [“Act” in short] and thereby sustaining the addition for both the assessment years. The assessee also challenged sustaining the interest charged under section 234B of the Act.
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Brief facts of the case are that the assessee is engaged in the business of poultry farm. For the assessment year 2003-04, the assessee filed its return of income on 01.11.2004 admitting an income of ₹.7,000/-. The assessment was completed under section 143(3) of the Act on 03.05.2005 on a total income of ₹.19,400/-. Subsequently, a survey under section 133A of the Act was conducted on 18.02.2005. After survey proceedings, it was noticed that the assessee has not disclosed any income by way of sale of culled birds and moreover, the profit on sale of lorry was also omitted to be assessed. In view of the above, a notice under section 148 of the Act was issued on 12.03.2010. In response thereto, the assessee filed the return of income on 04.05.2010 admitting the same income of ₹.7,000/- as shown in the original return of income. Thereafter, notices under section 143(2) and 142(1) of the Act were issued. After considering the submissions, the assessment was completed under section 143(3) r.w.s. 147 of the Act by determining the taxable income of the assessee at ₹.3,39,710/- by making various additions.
2.1 Similarly, for the assessment year 2004-05, the assessment was completed under section 143(3) of the Act by assessing the total income of the assessee at ₹.24,19,260/-. On appeal, the ld. CIT(A) enhanced the income of the assessee to ₹.87,93,960/-. On further appeal before the Tribunal, the ITAT vide its order in I.T.A. No. 409/Mds/2006 dated
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21.04.2006 remanded the issue to the file of the Assessing Officer to consider the same de novo. Consequent to the above order, the assessment was passed on 31.12.2007 under section 143(3) r.w.s. 254 of the Act and the income was determined at ₹.87,93,960/-. After conduct of survey under section 133A of the Act on 18.02.2005, the above said assessment was reopened by issue of notice under section 148 of the Act. Thereafter, the assessment under section 143(3) r.w.s. 147 of the Act was completed by determining the taxable income of the assessee at ₹.90,48,510/-.
The assessee carried the matter in appeal before the ld. CIT(A) for both the assessment years. Considering the facts and circumstances as well as submissions of the assessee, the ld. CIT(A) dismissed the appeal filed by the assessee for both the assessment years.
On being aggrieved, the assessee is in appeal before the Tribunal for both the assessment years. With regard to reopening of assessment, the ld. Counsel for the assessee has submitted that the reassessment was barred by limitation without any fresh materials in possession of the Assessing Officer for reopening the assessment already completed under section 143(3) of the Act by considering all the details furnished by the assessee including statement recoded during the course of survey under section 133A of the Act on 18.02.2005. Hence, the Assessing Officer has no jurisdiction to reopen the assessment already completed on mere change of opinion and
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the ld. CIT(A) went in wrong to confirm the reassessment order passed under section 143(3) r.w.s. 147 of the Act after a lapse of four years. Therefore, the ld. Counsel has prayed that the reassessment order passed by the Assessing Officer should be quashed. On the other hand, the ld. DR strongly supported the orders of authorities below.
We have heard both sides, perused the materials available on record and gone through the orders of authorities below. The first paragraph of the original assessment orders for the assessment years 2003-04 and 2004-05 completed under section 143(3) of the Act on 03.05.2005 runs as under:
“A survey u/s 133A was conducted in the premises of M/s. Sakthi Poultry Farm on 18.02.2005. During the course of survey operation the assessee has not possessed Day book, Ledger, purchase bills, sale bills, expenses bill etc. Since survey conducted the case has been taken up for scrutiny. Notice u/s 143(2) issued on 25.02.2005 post the case on 04.03.2005. The notice was duly acknowledged by the assessee.”
From the above, it is apparent that scrutiny assessment in this case has been taken up since survey under section 133A of the Act was conducted. However, the Assessing Officer failed to take cognizance of the statement recorded under section 133A of the Act on 18.02.2005 from Shri S. Periasamy, Managing Partner of the assessee firm while finalizing the assessment under section 143(3) of the Act, thereby income escaped assessment was not brought to tax by the Assessing Officer, which lead to reopening of assessment under section 147 of the Act.
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5.1 With regard to the argument of the ld. Counsel for the assessee that the reassessment proceedings have been initiated after a lapse of four years from the end of relevant assessment year is bad in law is not acceptable, because, as per section 149(1)(b) of the Act, time limit upto 6 year is available for issue of notice under section 148 of the Act, where the income escaping assessment is likely to amount to ₹.1 lakh or more for the relevant year. In the present, as the income escaping assessment exceeds ₹.1 lakh, the said condition is satisfied and therefore, the ground raised by the ld. Counsel cannot survive.
5.2 With regard to reopening of assessment, in the case of Kalyanji Mavji & Co. v. CIT [1976] 102 ITR 287 (SC), after exhaustively examining the issue, the Hon’ble Supreme Court, rendered its judgment in the context of section 34(1)(b) of the 1922 Act, which is pari materia with the extant provision (section 147) are as under:
“Section 34(1)(b) would apply to the following categories of cases: (1) where the information is as to the true and correct state of the law derived from relevant judicial decisions; (2) where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the Income Tax Officer; (3) where the information is derived from an external source of any kind: such external source would include discovery of new and
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important matters or knowledge of fresh facts which were not present at the time of original assessment; and (4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record or the facts disclosed thereby or from other enquiry or research into facts or law. Where, however, the Income Tax Officer gets no subsequent information, but merely proceeds to reopen the original assessment without any fresh facts or materials or without any enquiry into the materials which form part of the original assessment, section 34(1)(b) would have no application.”
5.3 Subsequently, doubts were expressed with regard to proposition (2) afore-stated by the Hon’ble Court by its larger Bench in Indian & Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) in-as-much as the same also allowed reassessment in case of change of opinion, which, clearly, could not be as the Assessing Officer has no power to review his order. The Apex Court, per its larger bench decision in A.L.A. Firm v. CIT [1991] 189 ITR 285 (SC), again reviewed the matter and clarified that the proposition (2) in Kalyanji Mavji & Co’s case (supra) was indeed widely expressed, as it would also include cases in which the Income Tax Officer, having considered all the facts and law, arrived at a particular conclusion, yet initiates proceedings on a reappraisal of the same material which had been considered earlier and in light of the same legal aspects to which his attention had been drawn earlier, and comes to a conclusion that an item of income, which he had consciously left out from the earlier assessment
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should have been brought to tax. In other words, the proposition (2) is to be read with caveat that it does not allow a change of opinion, i.e., a reappraisal of the same material/aspect of the matter in the absence of a change in law (pg. 298). In the facts of the present case, we have clarified that there has been a failure on the part of the Assessing Officer to consider the material in the form of the statement. The same cannot, by itself, stop him from considering the same to form a reason to believe an escapement of income. Reference in this context is also drawn to Explanation 1 to section 147 of the Act, which clarifies that production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by him will not amount to disclosure within the meaning of the provision. We clarify that this as, without doubt, the statement disclosing the income, sought to be brought to tax in the reassessment proceedings, was available with the Assessing Officer at the time of the original assessment, though was not been considered by him, at least in its relevant part. The issue of consideration of an aspect of the matter and formation of opinion in its respect, it may be appreciated, is essentially a matter of fact, the law only barring a change of opinion. Where, therefore, there is a live and clear nexus between the said information and the reasons to believe escapement of income, formed on that basis, the assumption of jurisdiction to reassess cannot be called into question as was sought to be canvassed before us. Thus, we hold that the entire assessment
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in this case is valid and therefore, the reopening of assessment is upheld for both the assessment years.
With regard to confirmation of additions of ₹.3,20,306/-, in the reassessment proceedings, the Assessing Officer made the additions under various heads and the same are reproduced as under:
Income from sale of culled birds ₹. 2,00,000 2. Profit on sale of lorries ₹. 47,796 3. Income from sale of birds’ dropping as manure ₹. 50,000 4. Mistake in capital accounts of partners ₹. 22,510 Total ₹. 3,20,306
The Managing Partner of the assessee firm, during the course of survey under section 133A of the Act, admitted to have earned an income of ₹.3,97,620/- on the sale of culled birds during the past two years, 50% of the same i.e., ₹.2,00,000/- [roundly] was assessed to tax as income from the sale of culled birds. The above admission by the Managing Partner was not disputed during the course of reassessment proceedings. The second addition was with regard to profit on sale of lorries to the extent of ₹.47,796/-, which was omitted to be assessed in the regular assessment. The third additions is income from sale of birds dropping as manure, which was estimated to the extent of ₹.50,000/- and assessed to tax. The fourth head of addition was totaling mistake in the capital account of the partners to the extent of ₹.22,510/- and the same was assessed to tax. The assessee has
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not filed any details to controvert the above additions made by the Assessing Officer either before the ld. CIT(A) or even before the Tribunal. Thus, we find no reason to interfere with the orders of the ld. CIT(A) on this issue.
With regard to confirmation of interest charged under section 234B of the Act, the ld. CIT(A) has observed that the Assessing Officer has computed the interest chargeable under section 234B of the Act correctly in accordance with the law and confirmed the same. Hence, the same stands sustained.
With regard to reopening of assessment as well as confirmation of addition on the sale of culled birds in the assessment year 2004-05 was also based on the confession during the course of survey under section 133A of the Act on 18.02.2005 by Shri S. Periasamy, Managing Partner of the assessee firm, which was not controverted by the assessee during the course of assessment proceedings or appellate proceedings. Since the facts and circumstances of the present case are similar to that of the assessment year 2003-04, we sustain the order of the ld. CIT(A) with regard to confirmation of reassessment passed under section 143(3) r.w.s. 147 of the Act, addition of ₹.2,00,000/- made towards sale of culled birds as well as levy of interest under section 234B of the Act and dismiss the appeal filed by the assessee.
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In the result, both the appeals filed by the assessee are dismissed. Order pronounced on the 27th September, 2017 at Chennai.
Sd/- Sd/- (SANJAY ARORA) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 27.09.2017 Vm/- आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant, 2.��यथ�/ Respondent, 3. आयकर आयु�त (अपील)/CIT(A), 4. आयकर आयु�त/CIT, 5. �वभागीय ��त�न�ध/DR & 6. गाड� फाईल/GF.