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Facts
The assessee's return for AY 2007-08 was originally scrutinized under section 143(3). The case was later reopened under section 147 based on an audit objection alleging non-deduction of TDS on machinery rental payments. The Assessing Officer (AO) made an addition of Rs. 65.04 Lacs.
Held
The Tribunal held that the reopening of the assessment was based on an audit objection without independent satisfaction of the AO, and no fresh tangible material was brought on record. The Apex Court's decision in CIT vs. Kelvinator of India Ltd. was cited, stating that reassessment proceedings vitiate if not based on independent satisfaction.
Key Issues
Validity of reassessment proceedings initiated on audit objection without independent satisfaction of the AO.
Sections Cited
143(3), 147, 194I
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “DB” BENCH, AGRA
Before: HON’BLE SHRI SATBEER SINGH GODARA, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रणवष� / Assessment Year:2007-08) M/s. Tomar & Brothers ACIT, Circle 5, बनाम/ 843-A, Moti Jheel Colony, Firozabad. Vs. Etawah (UP). �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAAFT-7229-D (अपीलाथ�/Appellant) : (� थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Sh. Anurag Sinha, Adv. – Ld. AR � थ�कीओरसे/Respondent by : Sh. Shailender Shrivastava – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 19-02-2025 घोषणाकीतारीख /Date of Pronouncement : 22.04.2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2007-08 arises out of an order of learned Commissioner of Income Tax (Appeals)- II, Agra [CIT(A)] dated 31-03-2014 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s. 147 of the Act on 29-12-2011. Both sides made vehement arguments. Having heard rival submissions and upon perusal of case records, the appeal is disposed- off as under. The Ld. AR has assailed the validity of reassessment proceedings.
Upon perusal of assessment order, it could be seen that assessee’s return of income was scrutinized u/s. 143(3) on 18-11-2009. However, the case was reopened vide notice u/s 07-01-2011 on the allegation that the assessee did not deduct tax at source on machinery rental payments.
The Ld. AO accordingly, made addition of Rs.65.04 Lacs to the assessed income.
In the first appeal, the assessee raised pertinent legal ground that the case was reopened on audit objection whereas Ld. AO was not in agreement with the view of audit party. Despite that, the case was reopened without there being independent satisfaction of Ld. AO. The assessee also relied on the decision of Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. (320 ITR 561). However, Ld. CIT(A) dismissed the legal ground and partly allowed the appeal on merits. Aggrieved, the assessee is in further appeal before us.
Upon perusal of assessment order passed u/s 143(3) dated 18-11- 2019 (Page Nos.135 to 140 of Paper book), it could be seen that after considering assessee’s various replies, Ld. AO made adhoc disallowance of Rs.1 Lacs out of expenses claimed under the head ‘Mitti, JCB Proclane and Tractor Charges’. The assessee had placed its financial statements as well as tax audit report during the course of assessment proceedings. The same was duly been considered by Ld. AO. Apparently, the case has been reopened at the behest of audit objection to make disallowance u/s 194I. However, there is no fresh tangible material before Ld. AO to reopen the case of the assessee to come to a conclusion that certain income escaped assessment. Secondly, the issue of expense was well addressed by Ld. AO during the course of regular assessment proceedings and an opinion was already formed. It is quite clear that the returned income was subjected to scrutiny assessment proceedings u/s 143(3) wherein the books of accounts were duly verified by Ld. AO. The case was reopened at the behest of third-party opinion which is impermissible unless there is independent satisfaction by Ld. AO that there was escapement of income. However, in the present case, there was no new tangible material before Ld. AO to arrive at conclusion of escapement of income which would vitiate entire proceedings in terms of decision of Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. (320 ITR 561). Considering all these facts, the assessment order is liable to be quashed. Delving into the merits of the case has been rendered academic in nature.
The appeal stands allowed. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.