M/S. THE RAMA CO-OP L/C SOCIETY LTD.,SONEPAT vs. ACIT, SONEPAT

PER S.V. MEHROTRA, A.M:

These appeals have been preferred by the assessees assailing the

respective orders passed by the CIT(A) relating to AY 2007-08. Since Common issues are involved for adjudication, all these appeals were heard together and are being disposed of by this common order for the sake of

convenience. As the facts are common in all the appeals, we are referring to the facts as obtaining in ITA no. 3914/Del/2014.Grounds raised are as under: “That the learned Commissioner of Income Tax (Appeals) Rohtak has grossly erred both in law and on facts in upholding the initiation of proceedings u/s 147 of the Act and assumption of jurisdiction to frame an assessment u/s 1471143(3) of the Act despite the fact that there was no tangible and relevant material on record to form "reason to believe" that income of the appellant had escaped assessment and thus both deserve to be quashed as such. 1.1. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that initiation of proceedings was based on the directions issued by the learned Commissioner of Income Tax and therefore the same were invalid being contrary to judgment of Apex Court in the case of CIT vs. Greenworld Corporation reported in 314 ITR 81 1.2 That further more since there was no fresh material on record that surfaced after the assessment u/s 143(3) of the Act and as such in terms of judgment of jurisdictional High Court in the case of CIT vs. Orient Craft Ltd. reported in 354 ITR 536, the action was otherwise invalid and hence unsustainable. 1.3. That the learned Commissioner of Income Tax (Appeals) has otherwise failed to appreciate that since original assessment had been framed u/s 143(3) of the Act, initiation of

proceedings was based upon change of opinion and therefore, without jurisdiction. 1.4. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate the fact that reassessment has been completed without supplying the copy of reasons recorded for issue of notice U/S 148. 2. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the order of assessment framed u/s 144 of the Act. 3. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding determination of income by the learned Assessing Officer at Rs. 85203/- by invoking section 44AD of the Act being 8% of the gross receipts declared by the appellant society. 4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining an addition of Rs. 35203/- to the income returned by the appellant before claim of deduction u/s 80P of the Act. 5 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in not allowing deduction U/s 80P of the Act on the assessed income of the appellant society 5.1 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in restricting the claim of deduction to Rs. 50,0001- U/S 80P(2) of the Act.

declaring income of Rs. 45,522/-before deduction u/s 80P(2) of the I.T. Act

on 23.08.2007. Assessment was completed u/s 143(3) vide order dated

30.1.2009 at an income of Rs. 61,522/- before deduction u/s 80P(2) of the

Act. Subsequently, the AO noticed that assessee had failed to produce

complete books of a/c along with bills and vouchers, therefore, profit rate at

8% of the gross receipts u/s 44AD of the I.T. act was applicable as the

assessee was doing contract business. Accordingly, he issued notice u/s 148

recording following reasons:

4 "Return of income in this case was led on 23.08.2007, declaring income of Rs. 45,5221- before deduction u/s 80P(2) of the IT. Act. 961 and assessment in this case was completed u/s 143(3) of the I.T. Act at an income of Rs. 1,522/- by making an addition of Rs. 16,000/- vide order dated 30.01.2009. The assessee is do; g contract business assigned by the PWD and it has shown total receipts from contract at Rs. 0,65,0361-. The assessment in this case has been completed at Rs. 61,522/- which works au to be 5.78% of the gross receipt. Consequently in respect of wages paid and Miscellaneous expenses, complete bills and vouchers were not verifiable. The wages paid account constitutes the major account of expense in the P & L account if the assessee. The assessee has failed to produce complete books of account along with bills & vouchers, therefore, profit rate @ 8% u/s 44AD of the 11: Act, 1961 is applicable in the case of the assessee who is doing contract business. The profit rate @ 8% on gross receipt of Rs. 10,65,036/- works out to be Rs. 85,2021-. Keeping in view the facts as stated above, I have reason to believe that the income has escaped assessment to the tune of Rs. 23,68 1- i.e. (85203- 61522) by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment jar the assessment year 2007-08."

of 8% on the gross receipts and determined the income at Rs. 85,203/-

before deduction u/s 80P(2).

proceedings u/s 148 primarily on the ground that it was a case of change of

opinion. Ld. CIT(A), however, dismissed the assessee’s appeal observing

that since disclosure of fact had not been made, there was reason to believe

that income had escaped assessment and it was not a case of mere change of

opinion but a finding of belief that income had escaped assessment.

identical reasons were recorded in the case of “The Malik Co-op L/c Society

Ltd.” wherein the ITAT Delhi Bench “SMC-2”, in ITA no. 3913/Del/2014

vide order dated 31.07.2015 quashed the reassessment proceedings

observing in para 5 as under:

“5. Considering the above submission, I find that there is substance in the contentions of the Learned AR against the validity of assumption of jurisdiction by the Assessing Officer under sec. 147 of the Act. It is a matter on record that during the original assessment framed under sec:-143(3) of the Act the Assessing Officer in para No.1 at page No. 1 had specifically recorded as "In response to above notice, Sh. N.K. Gupta, Adv. of the assessee society attended the proceedings from time to time and filed the requisite details and documents. Books of account produced and test- checked on random basis. The case is discussed with him." In para No.2 of the assessment, the Assessing Officer has recorded further as " It has maintained

books of account and got audited from a chartered accountant. The assessee filed a copy of audit report which is placed on its record. On perusal of receipts, ledger account it is found that the assessee has adopted percentage of completion method. The assessee was asked to file details of all expenditure with justification vide this office notice under sec. 142( 1 ) dated 13.1.2009. The assessee furnished the requisite detail and justification vide its letter dated 10.2.2009, which was examined and verified ... " I thus find that it was not correct to say on the part of the Assessing Officer in the reasons of belief recorded for initiation of reopening proceedings, that the assessee had failed to produce complete books of account along with bills and vouchers, therefore, profit rate @ 8% under sec. 44AD of the Income- tax Act, 1961 is applicable in the case of the assessee who is doing contract business. It is thus apparently a case of change of opinion on the basis of which reopening proceedings under sec. 147 cannot be initiated. As per the well established proposition of law, the Assessing Officer while proceedings for reassessment is duty bound to first dispose of the objections raised by the assessees against the validity of initiation of reopening proceedings by passing a speaking order. I thus concur with the contentions of the Learned AR that the reopening of proceedings initiated in the present cases in absence of fresh and tangible material was just change of opinion and hence without jurisdiction and thus invalid. The assessments framed in furtherance thereto are thus also equally invalid and are quashed as such. Ground Nos. 1 to 1.5 are thus allowed. In view of the above findings, other grounds of appeal do not survive, hence do not need adjudication.” 6. Ld. DR relied on the orders of lower revenue authorities. 7. We have considered the submissions of both the parties and have perused the record of the case. Ld. counsel in his written submissions has submitted that in course of original assessment proceedings the books of a/c along with the audit report were duly furnished and were accepted while passing order u/s 143(3). The assessee has not filed the assessment order

passed u/s 143(3) in the present case. However, in cases of other three assessees the assessment order is on record from which it is evident that identical orders have been passed by AO in all the cases. The department has not controverted the submissions advanced by ld. counsel for the assessee on factual aspect. Further, the cases decided by Tribunal are also on the identical facts and, therefore, the decision in the two appeals decided by Tribunal is squarely applicable to the facts of the present case. The observation of Tribunal have been reproduced earlier and, therefore, respectfully following the decision of the Tribunal in the case of “The Malik Co-op L/c Society Ltd.” (supra), we hold that on the facts and circumstances of the cases in hand, the initiation of proceedings u/s 147 of the Act were not valid. Accordingly, orders of authorities below in all the appeals in question are quashed and the assessee’s appeals stand allowed. 8. In the result, assessee’s appeals are allowed. Order pronouncement in open court on ______/02/2016.

Sd/- Sd/- (SUCHITRA KAMBLE) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 16/02/2016. *MP* Copy of order to: 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, New Delhi.