BHAGWATIKRIPA PAPER MILLS PVT LTD,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6,, JAIPUR

fu/kZkj.k o"kZ@Assessment Years : 2014-15 Bhagwatikripa Paper Mills Pvt. Ltd. cuke Deputy Commissioner of B-98, Gopalpura By Pass, 10-B, Vs. Income Tax, Scheme, Jaipur. Circile-6, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCB5088Q vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Poddar (Adv.) jktLo dh vksj ls@ Revenue by : Shri Ajey Malik (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 08/08/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 20/08/2024 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by the assessee aggrieved from the order of the Ld. CIT(A), National Faceless Appeal Centre, Delhi [Here in after referred as “CIT(A)/NFAC”] dated 20.06.2024 for the assessment year 2014-15, which in turn arise from the order dated 30.03.2022 passed under section 147 read with section 144B of the Income Tax Act, [Here in after referred as “Act” ] by the NFCA [ for short ld. AO. ].

Bhagwatipripa Paper Mills Pvt. Ltd. 2.1 The assessee has marched this appeal on the following grounds:- “1.Under the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming the addition of Rs. 5,02,688/- as unexplained expenditure u/s 69C of the Income Tax Act, 1961 which is part of purchases and duly accounted for in purchase account without considering the explanation by the assessee.

2. Under the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming the action of the Learned AO for reopening of the assessment which beyond his power.

3. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.”

2.2 The ld. AR of the assessee also filed following additional ground:-

“1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in rejecting the return of income being filed beyond the time given in the notice u/s 148.

3. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in confirming the assessment order passed by the Learned Assessing Officer without furnishing reasons for issuing of notice u/s 148 despite specific request of the assessee.”

3. The fact as culled out from the record is that the assessee is a company and during the year under consideration earned income from business of manufacturing and sale of craft paper.

Bhagwatipripa Paper Mills Pvt. Ltd. The assessee filed its return of income on 29.11.2014 declaring income of Rs.1,38,93,170/- for the AY 2014-15. The assessment proceedings u/s 143(3) was completed on 16.12.2016 on assessed income of Rs.1,39,40,420/-.

Based on the information available with the department, the case was reopened for scrutiny after due verification, application of mind, recording of reasons and due approval obtained from the competent authority u/s 151 of the Income Tax Act, 1961.

The notice under section 148 was issued to the assessee on 31.03.2021. The assessee has filed ITR in response to notice u/s 148 on 16.03.2022. Subsequently. notice u/s 143(2) was issued on 28.04.2021 along with the reasons for re-opening of assessment. During assessment proceedings, assessee replied and provided the explanation and documents regarding the queries raised.

3.1 The Ld. AO noted that the assessee vide Annexure E to column No. 34(a) of the tax audit reported that a sum of Rs.5,75,477/- is amount of tax deducted under section 194H on commission of Rs.57,38,074/-. However, it is to be noted that the assessee has claimed only commission on sale of Rs.52,35,406/-. The difference in amount of Rs. 5,02,668/-remains unexplained.

Bhagwatipripa Paper Mills Pvt. Ltd. Notices dated 09.03.2022 and 10.03.2022 were issued, whereby, assessee was asked to furnish explanation as to why the difference of Rs. 5,02,668/- should not be treated as an unexplained expenditure.

3.2 The ld. AO noted that on perusal of the reasons recorded and the reply of the assessee, it is gathered that TDS has been effected on commission income of Rs. 57.38,074/- and assessee has claimed only Rs. 52,35,406/- as is evident from Annexure E to column No. 34(a) of the tax audit report. It is apparent that the assessee has not fully and truly disclosed the nature of expenditure incurred by it in its computation of income and in his Income Tax Return filed for the year under consideration. Considering the failure on part of the assessee to correctly disclose the commission income for the relevant AY, it can be concluded that shortfall of Rs. 5,02,668/- remains unexplained expenditure u/s 69C read with 115BBE of I.T. Act.

5. As the assessee did not receive any favour from the appeal so filed before ld. CIT(A). The present appeal is filed against the said order of the ld. CIT(A) before this tribunal on the grounds as reiterated in para 2 above. To support the grounds so raised the ld. AR appearing on behalf of the assessee has placed reliance on the following written submission which is extracted herein below:-

“BRIEF FACTS OF THE CASE  The assessee is a private limited company engaged in the business of manufacturing and sale of craft papers. The assessee company filed original return declaring total income of Rs. 1,38,93,180/- for assessment year 2014-15 on 29/11/2014. Copy of the return so filed along with computation of total income is available on Paper Book Page No1-4. The case of the assessee was selected for complete scrutiny under CASS and assessment was completed u/s 143(3) on 16/12/2016, determining total income at Rs. 1,39,40,420/-. The copy of assessment order is available on Paper Book Page No.5-7. It is submitted that while completing the assessment, the Learned Assessing Officer had audited accounts containing all the particulars regarding TDS and payment of commission. Subsequently, assessment has been re-opened with the issuance of notice u/s 148 on 31/03/2021. Assessment has been completed u/s 147/144B on 30/3/2022 determining total income at Rs. 1,43,95,838/-, inter-alia, making addition of Rs. 5,02,668/- u/s 69 C on account of unexplained expenditure of commission. Aggrieved with the order of the Learned Assessing Officer, the assessee filed appeal before the Learned CIT(A), who has unfortunately confirmed the order of the Learned Assessing Officer without appreciating the submissions of the assessee in correct perspective. Hence, the assessee is in appeal before the Hon'ble Bhagwatipripa Paper Mills Pvt. Ltd. Tribunal. The assessee has separately filed application for additional grounds of appeal

, which may kindly be admitted. The additional grounds arise out of the order of the Learned Assessing Officer/learned CIT(A) and are purely of legal nature. The additional grounds do not require support of any additional evidence. The admission of the additional grounds is imperative for imparting justice in the case. The assessee now comes to discuss the additional grounds first. Additional Ground No.1 On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in rejecting the return of income being filed beyond the time given in the notice u/s 148. In the case of the assessee, notice u/s 148 was issued on 31/3/2021. Copy of the notice so issued is available on Paper Book Page No.8 It is further submitted that in the notice issued u/s 148, the Learned Assessing Officer required the returnof income within 30 days of the notice. In compliance to this notice, return of income was filed on 16/3/2022. A copy of the return filed along with computation of income is available on Paper Book Page No.9-12. The fact of filing return of income was intimated to the Learned Assessing Officer under letter dated 16/3/2022 and he was requested to provide the reasons recorded for issuance of notice u/s 148. Copy of this letter is also available on Paper Book Page No.13.The return filed by the assessee was late. The Learned Assessing Officer, in para 5.1 on page 3 of the assessment order, has discussed the issue of filing of return of income beyond the time granted in the notice u/s 148. The Learned Assessing Officer has referred to the decision of the Hon'ble ITAT Bench, Delhi in in the case of Rakesh Aggarwal Vs. ITO , holding that return filed beyond time granted in notice u/s 148 was not valid. Accordingly, the Learned Assessing Officer rejected the return filed by the assessee. It is submitted that the Learned Assessing Officer erroneously followed the decision of ITAT Delhi Bench because there are other decisions holding that return filed beyond the time granted in notice u/s 148 cannot be treated as invalid. The following decisions are quoted in support 1 (1) M/s Bhaval Synthetics (India) Ltd V.s DCIT ITAT, Jaipur Bench, Jaipur Order dated 28/10/2020 In this case, in response to notice u/s 148 dated 14/6/2017, the assessee furnished return on 12/12/2018, which was not taken cognizance by the Learned Assessing Officer, being a return filed beyond the stipulated time of 30 days as specified in the notice u/s 148. The Hon'ble ITAT held " a return of income even though filed Bhagwatipripa Paper Mills Pvt. Ltd. belatedly will still qualify as return furnished u/s 139 of the Act and should, therefore, be taken cognizance by the Assessing Officer." (2) M/s Shri Krishna Dutt Academcy Vs. IT Department, ITAT Lucknow Bench 566 & 568/ Order dated 28/5/2013 The Hon'ble ITAT held that " there is no intention of the legislature to hold the return to be non-est if it is not filed within the period prescribed in the notice issued u/s 148 ". In view of the above facts, there are two different opinions on the same issue. It is settled position of law that if on an issue, there are divergent opinions, the one favourable to the assessee needs to be followed. The following case-laws are quoted in support :- (1) Undercarriage and Tractor Parts P. Ltd Vs. Dispute Resolutation Panel (2024) 460 ITR 401 (Bom) (2) Vegetable Products Vs. ITO

88. ITR 192 The position of law being so, the return of income filed by the assessee was not an invalid return and the Learned Assessing Officer erred in rejecting the same. The submission of the assessee is that the Learned Assessing Officer should have proceeded further for completion of assessment proceedings on the strength of return filed by the assessee on 16/3/2022 instead of rejecting the same. The assessment having been completed without taking into cognizance the return filed by the assessee on 16/3/2022, deserve to be quashed. The Learned CIT(A) erred in confirming the action of the Learned Assessing Officer in holding the return filed by the assessee as invalid. Additional Ground No.2 On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in confirming the assessment order passed by the Learned Assessing Officer without issuing notice u/s 143(2). In view of the discussion made against additional ground No. 1 above, the assessee has made out a case that the return filed by the assessee on 16/3/2022 was a valid return. In view of this position, the Learned Assessing Officer was required to issue notice u/s 143(2) before completion of assessment, which has not been done in this case. Hence, the entire assessment proceedings are ab initio void. The Learned Assessing Officer was wrongly guided by the decision of the ITAT, Delhi Bench in the case of Rakesh Aggarwal and erroneously following the same, did not issue notice u/s 143(2). Having not issued notice u/s 143(2), the assessment completed is ab initio void. The following decisions are quoted in support :-

Bhagwatipripa Paper Mills Pvt. Ltd. (1) M/s Bhaval Synthetics (India) Ltd V.s DCIT ITAT, Jaipur Bench, Jaipur Order dated 28/10/2020 (2) Pr CIT-III Vs. Kamla Devi Sharma Hon'ble Rajasthan High Court DB Appeal No.197/2018 Order dated 10/07/2018 (3) CIT Vs. SPL Siddharth Ltd Hon'ble Delhi High Court (2012) 249 CTR 357 (Del) (4) CIT Vs. Rajeev Sharma Hon'ble Allahabad High Court (2010) 232 CTR 303 (All) In view of the aforesaid facts, the Learned CIT(A) erred firstly in holding the return filed by the assessee as invalid being filed beyond time granted in the notice u/s 148 and secondly in confirming the assessment order, which has been completed without issuance of notice u/s 143(2). Additional Ground No.3 On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in confirming the assessment order passed by the Learned Assessing Officer without furnishing reasons for issuing of notice u/s 148 despite specific request of the assessee. It is submitted that in the case of the assessee, in compliance to notice u/s 148 issued on 31/3/2021, the assessee furnished return of income on 16/03/2022, copy of which is available on Paper Book cited supra. On filing of return of income, the assessee also made a request under letter dated 16/3/2022, to provide details of reasons recorded for issuance of notice u/s 148. Copy of this letter is also available on Paper Book page cited supra. However, the Learned Assessing Officer did not provide the reasons recorded for issuance of notice u/s 148 and completed the assessment on 30/3/2022. It is submitted that non-furnishing of reasons is a serious lapse on the part of the Learned Assessing Officer and invalidates the assessment order. This position of law has been laid none other than the Apex Court of the country. The relevant citations and decisions are quoted below in support :- (1) GKN Driveshafts (India) Ltd. (2003) 259 ITR (19)

Bhagwatipripa Paper Mills Pvt. Ltd. Hon'ble Supreme Court of India (2) CIT Vs. Videsh Sanchar Nigam Ltd 340 ITR 66 – Bombay High Court Reasons are to be supplied before completion of assessment. Failure to do so renders the assessment invalid. (3)L.Sohanraj & Ors Vs. DCIT (2010) 322 ITR 213 (Karnataka High Court) As the Assessing Officer failed to supply the reasons recorded for issuing notice u/s 148, the assessment orders were set-aside. Ground No.1 Under the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming the addition of Rs. 5,02,688/- as unexplained expenditure u/s 69 C of the Income Tax Act, 1961, which is part of purchases and duly accounted for in purchase account without considering the explanation by the assessee. The relevant part of the assessment order (para 5.2 on page 3) is scanned below, where the issue has been discussed by the Learned Assessing Officer, making addition of Rs. 502688/-.

The above para discloses a confused state of mind of the Learned Assessing Officer. The Learned Assessing Officer has failed to appreciate the facts of the case in correct perspective. At one stage, the Learned Assessing Officer is stating that the assessee did not disclose commission income correctly, but on the other than addition is being made on account of unexplained expenditure under section 69 C. The addition has been made as a matter of total confusion. The Bhagwatipripa Paper Mills Pvt. Ltd. Learned CIT(A) has just repeated the order of the Learned Assessing Officer and confirmed the action of the Learned Assessing Officer. The correct facts are as under :- 1 Payment of commission on sales Rs.52,35,406 Service tax on the aforesaid commission 2 Rs. 2,72,085 charged by agent 3 Payment of commission on purchases Rs.2,30,583 Total Rs.57,38,074 4 TDS made Rs. 5,75,477

The Learned Assessing Officer considered that whereas assessee had made TDS on commission payment of Rs. 57,38,074/-, but the expenditure claimed was only Rs.52,35,406/-. Thus, there was short claim of expenditure of commission to the extent of Rs. 5,02,668/- (5738074 – 5235406). In view of this, the Learned Assessing Officer held that there was unexplained expenditure of Rs. 502668/- and accordingly, addition was made u/s 69 C. The Learned Assessing Officer did not consider the vital fact that TDS is effected only on payment basis. No TDS can be made on expenditure made out of the books. The above table clearly shows that the Learned Assessing Officer did not took into consideration the payment of commission on purchases as well as service tax paid by the assessee. These facts were brought to the notice of the Learned Assessing Officer, vide letter dated 22/03/2022. Copy of the same is available on Paper Book Page No.14-15.Details of commission payment on sales as well as on purchases are available on Paper Book Page No.16-17. Copy of audited accounts is available on Paper Book Page No.18-67, where the claim of GST paid is shown under current asset. In view of these facts, the assessee was correct in disclosing payment of commission on sales of Rs. 52,35,406/-. The Learned Assessing Officer failed to take into consideration the other figures of commission paid on purchases of Rs.2,30,583/- and service tax paid of Rs. 272085/-. If the Learned Assessing Officer had correctly appreciated the facts, there would have been no occasion for making the addition. The same deserves to be deleted. Ground No.2 Under the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer for re-opening of the assessment which is beyond his power. NOT PRESSED.

Bhagwatipripa Paper Mills Pvt. Ltd. Ground No.3 The assessee craves your indulgency to add, amend or alter all or any ground of appeal before or at the time of hearing. The Hon'ble Tribunal is requested to consider the submissions and case laws cited by the assessee and decide the appeal in favour of the assessee by deleting the addition made by the Learned Assessing Officer and sustained by the Learned CIT(A).”

6. To the support the contention raised the ld. AR of the assessee filed the following evidence:-

Sr. No. Particulars Page No.

7. Details of commission paid on sales as well as purchases 16-17 8. Copy of audited accounts with audit report 18-67

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open Court on 20/08/2024.