M/S. JAYA MANGALA CONSTRUCTION,KORAPUT vs. ITO, WARD-1, JEYPORE

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ITA 54/CTK/2017Status: DisposedITAT Cuttack15 June 2017AY 2006-074 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that reopening of assessment must be based on the Assessing Officer's own belief that income has escaped assessment, not merely on an audit objection. Therefore, the reassessment order was deemed untenable.

What were the facts?

The Assessing Officer reopened the assessment for AY 2006-07 based on an audit objection regarding excess depreciation claimed by the assessee. The assessee argued that reopening based solely on an audit party's information, without the Assessing Officer forming his own belief, is invalid.

What were the issues?

Whether reopening of assessment based solely on an audit objection, without the Assessing Officer forming an independent belief, is valid under Section 147 of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, CUTTACK

Before: SHRI N.S SAINI

For Appellant: Shri P.K. Mishra, AR
For Respondent: Shri D.K.Pradhan, DR

This is an appeal filed by the assessee assessee against the order of

CIT(A)-1, Bhubaneswar, dated 16.9.2016 for the assessment year 2006-

07.

2.

In Ground No.2 of the appeal, the assessee has challenged the

reopening of assessment by the Assessing Officer u/s.148 of the Act.

3.

At the outset, during the course of hearing, ld A.R. of the assessee

submitted that the reopening of assessment was made on audit objection

and, therefore, was bad in law. For this proposition, he referred to para 1

of the assessment order and pointed out therefrom that the Assessing

2 ITA No. 54/ CTK/2017 Asse ssment Year :20 06- 07

Officer has observed that “ the assessee has filed return of income on

31.01.2007 disclosing total income of Rs.20,010/-. The same was

processed u/s 143(l)(a) of the I.T.Act,1961 on 31.01.2007 raising refund

of Rs.71,620/-. Subsequently, the Revenue Audit Party, has given Audit

objection vide IR -No.18/2008-09/ Para 3, dated 05.11.2008 raising the

point that the assessee -firm had claimed excess depreciation at

Rs.1,82,965/-(Rs.7,31,865/- minus Rs.5,48,900/- allowable as per IT

rules) is required to added back to the total income of the assessee

and determined the short levy of Rs.69,133/-. Accordingly, the case

was reopened u/s 147 of the I.T.Act,1961 with the prior approval of

Addl.CIT,B/R,Berhampur vide approval letter no. Addl.CIT/BAM/J-30/2009-

10/1734, dt.18.05.2009 and issued notice u/s 148 of the I.T.Act,1961 by

RPAD vide this office letter No-17, dt.03.04.2009. Hence, he submitted

that the issue was covered by the decision of Hon’ble Supreme Court in the

case of Indian And Eastern Newspaper Society vs CIT, 119 ITR 996

(SC),wherein, it was held that information of an internal audit party of the

Income Tax Department on a point of law cannot be regarded as

“information” within the meaning of Section 147(b) of the I.T.Act, 1961.

He submitted that the issue of depreciation on vehicles was allowable to

the assessee @ 40% or 30% was a question of law. Therefore, in view of

the decision of Hon’ble Supreme Court in the case of Indian And Eastern

Newspaper Society(supra), the assessment order passed should be

cancelled.

4.

On the other hand, ld D.R. supported the orders of lower authorities.

3 ITA No. 54/ CTK/2017 Asse ssment Year :20 06- 07

5.

I have heard the rival submissions, perused the orders of lower

authorities and materials available on record. I find that the reasons

recorded for reopening of the assessment as narrated by the Assessing

Officer in the assessment order reads as under:

“the assessee has filed return of income 31.01.2007 disclosing total income of Rs.20,010/-. The same was processed u/s 143(l)(a) of the I.T.Act,1961 on 31.01.2007 raising refund of Rs.71,620/-. Subsequently, the Revenue Audit Party, has given Audit objection vide IR -No.18/2008-09/ Para 3, dated 05.11.2008 raising the point that the assessee -firm had claimed excess depreciation at Rs.1,82,965/-(Rs.7,31,865/- minus Rs.5,48,900/- allowable as per IT rules) is required to added back to the total income of the assessee and determined the short levy of Rs.69,133/-. Accordingly, the case was reopened u/s 147 of the I.T.Act,1961 with the prior approval of Addl.CIT,B/R,Berhampur vide approval letter no. Addl.CIT/BAM/J-30/2009-10/1734, dt.18.05.2009 and issued notice u/s 148 of the I.T.Act,1961 by RPAD vide this office letter No-17, dt.03.04.2009.

6.

A bare reading of the above recording categorically proves that

reopening of assessment was done by the Assessing Officer merely on the

audit objection and not on his own opinion that income chargeable to tax

has escaped assessment. As per the provisions of Section 147 of the Act,

if the Assessing Officer has reason to believe that any income chargeable

to tax has escaped assessment for any assessment year, he may, subject

to the provisions of sections 148 to 153, assess or reassess such income.

Thus, it is clear that there has to be own believe only of the Assessing

Officer that income chargeable to tax has escaped assessment. After

receipt of the information, the Assessing Officer has to apply his own mind

and after such application of mind, if he forms own believe that any income

4 ITA No. 54/ CTK/2017 Asse ssment Year :20 06- 07

which was chargeable to tax has escaped assessment then only he can

invoke the provisions of section 148 of the Act. In the instant case, the

above quoted recordings reveal that the reopening of assessment was

made on the basis of believe or information of the audit party. I, therefore,

hold that the impugned order of reassessment is untenable. Therefore, I

cancel the said reassessment order passed u/s. 147 r.w.s 143(3) of the

Act dated 11.11.2010 and allow the ground of appeal of the assessee.

7.

Since, I have cancelled the reassessment order dated 11.11.2010

under section 143(3)/147 of the Act, other grounds of appeal raised by the

assessee on merits of the addition have become infructuous and hence not

adjudicated upon.

8.

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

Order pronounced in the open court on 15 /06/2017 in the presence of parties. Sd/- (N.S Saini) ACCOUNTANT MEMBER Cuttack; Dated 15 /06/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The appellant : M/s. Jaya Mangala Construction, At” Bhejaput, PO: Damonjodi, Dist: Koraput. 2. The Respondent :ITO, Ward-1, Jeypore 3. The CIT(A) -1, Bhubaneswar 4. Pr.CIT-1, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//

BY ORDER, SR.PRIVATE SECRETARY ITAT, Cuttack

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