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Income Tax Appellate Tribunal, KOLKATA BENCH ‘C’, KOLKATA
Before: Shri N.V.Vasudevan, J.M. & Dr.A.L.Saini, A.M.)
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘C’, KOLKATA (Before Shri N.V.Vasudevan, J.M. & Dr.A.L.Saini, A.M.)
ITA No. 1974/Kol/2013: Asstt. Year : 2006-2007
I.T.O., Ward-2(2), Burdwan, Vs Nataraj Unemployed Engineers AayakarBhawan, Court Co-operative Society Ltd., 11, Compound, Burdwan- 713101. Raniganj Bazar Bye Lane, Burdwan, Pin- 713 101 PAN: AAAJN 0060H (APPELLANT) (RESPONDENT)
C.O. No.107/Kol/2013 : Asstt. Year : 2006-07 (arising out of ITA No.1974/Kol/2013)
Nataraj Unemployed Engineers I.T.O., Ward-2(2), Burdwan, Co-operative Society Ltd., 11, AayakarBhawan, Court Raniganj Bazar Bye Lane, Vs Compound, Burdwan- 713101. Burdwan, Pin- 713 101 PAN: AAAJN 0060H (APPELLANT) (RESPONDENT)
Department by: Md.Ghyas Uddin, JCIT, Sr.DR Assesseeby : Shri Somnath Ghosh, Advocate
Date of Hearing : 27.07.2016 Date of Pronouncement :03-08-2016
ORDER Per Dr. A.L.Saini, A.M.: The captioned appeal filed by the Revenue pertaining to assessment year 2006-07, is directed against the order passed by the Ld. Commissioner of Income- Tax (Appeals), Durgapur in appeal No.285/CIT(A)/ASL/Ward-2(2)/BWN/2011-12 dated 22.03.2013, which in turn arises out of an order passed by the Income Tax
Officer, Ward-2(2), Burdwan under section 143(3)/147 of the Income Tax Act, 1961 (in short, `the Act`) dated 19th December, 2011.
The facts relating to the issue are stated in brief. The assessee is a co- operative society, working as acivil contractor carrying out government contract jobs. The return of income under section 139(1) of the Income Tax Act, 1961 for the assessment year under dispute was filed by the assessee on 31st October, 2006 disclosing ‘Nil’ income. The assessee has disclosed an amount of Rs.1,09,25,405/- as total of bills received in the Profit & Loss account. In the course of original assessment proceedings, the Ld. Income Tax Officer enquired from the assessee in respect of the gross receipts shown by it. In reply, the assessee made full compliance by filing the payment certificates as well as form No.16A certificates thereof. In fact, the Ld. AO had himself verified such receipts and certificates and got satisfaction. The Ld. AO after proper examination of receipts and certificates framed the assessment order under section 143(3) of the Income Tax Act, on 30th December, 2008 for the assessment year under dispute computing the total income at Rs.2,73,820/-.
Thereafter, the Ld. AO issued notice under section 148 of the I.T. Act on 29.03.2011 on the premise that there was under disclosure of gross receipts by the assessee to the tune of Rs.18,33,547/- as per the Form 16A certificates which was assumed to amount to escapement of income under section 147 of the Income Tax Act, 1961.
During the reassessment proceedings U/s 147/148 of the Act,theassessee had explained that the issue was addressed by way of a reconciliation which was not considered by the Ld. AO. Further, the Ld. AO conceived that the expenses
incurred on account of labour charges had infringed the provisions of section 40(a)(ia) of the Act for non-deduction of tax at source as required under section 194C of the Act. It was explained to the Ld. AO that the payments were made directly to the labourers, and not to any contractor, maintaining muster roll and as such the mischief of section 40(a)(ia) of the Act is inapplicable in the circumstances. However, the Ld. AO was not impressed by such submissions of the assessee on both counts and he accordingly resorted to make an addition of Rs.18,33,547/- on account of undisclosed income within the provisions of section 69 of the Act and also added the sum of Rs.41,50,588/- incurred by the assessee on labour charges on the alleged ground of contravention of section 40(a)(ia) of the Act. The Ld. AO, upon such specious prognosis, framed the assessment order under section 147/148 of the Income Tax Act, on 19th December, 2011 computing the total income at Rs.62,57,960/- for the assessment year under dispute. The instant appeal and the Cross Objection arise out of the order passed by the Ld. Commissioner of Income Tax (Appeals) on dated 22.03.2013, who was pleased to uphold the validity of the notice issued under section 147 of the Income Tax Act, but deleted the purported addition in the sum of Rs.18,33,547/- and Rs.41,50,588/- respectively made by the Ld. AO on both counts.
Though this is an appeal filed by the Revenue, but in this appeal, there is a legal issue involved. The assessee has challenged the validity of notice U/s 147/148 by filing cross objections (CO). Therefore, first we are going to deal with the Cross Objection filed by the assessee.
The assessee has taken three grounds of appeal by way of Cross Objections where he has challenged the validity of notice issued under section 147/148 of the Income tax Act. The solitary grievance of the assessee in these three grounds of
Cross Objections is that the Ld. AO has reopened the assessment without any tangible material available on record and it is merely a change in opinion.
The Ld. A.R. for the assessee has stated that the reopening is bad in law because it is not supported by any tangible material available on the record. In the instant case, the Ld. AO has reopened the assessment only because there is a discrepancy in TDS certificates and the amount shown in the Profit & Loss a/c by way of gross receipts. The reasons recorded by the Ld. AO to reopen the case under section 147/148 reads as under: 1). Perusal of records for the said assessment year 2006-07 construes that the TDS certificates filed by the assessee along with the return shows a gross receipts of Rs.1,27,58,952/- in aggregate as opposed to gross receipts (bills received) of Rs.1,09,25,405/- as per Profit & Loss a/c.
2). The dichotomy in the gross receipts amounts to conspicuous escapement of income within the meaning of section 147 of the I.T.Act, 1961. 3). I have strong reasons to believe that the income of the assessee for the said year has escaped assessments and deserves to be reopened accordingly as per law. The Ld. A/R for the assessee has stated that the above cited grounds to reopen the assessment do not sustain in law because the AO did not find any new evidence or any new tangible material showing escapement of income.Gross receipts shown in return of income by way of TDS certificates and gross receipts shown in profit and loss account is just a matter of reconciliation. The Ld. Assessing Offficer did not make reconciliation between gross receipts of TDS certificates with gross receipts shown in the profit and loss account. These records were available before the Ld.AO at the original assessment proceedings U/s 143 of the Act, and had he reconciled the TDS gross receipts with the gross receipts
shown in Profit and Loss account, he would not have issued the notice U/s 147 of the Act.
The Ld. AR for the assessee vehemently submitted that the AO speciously assumed that the receipts of Rs.18,33,547/- being the difference between the receipts as per Form 16A certificates and the gross bill disclosed by the assessee has escaped assessment within the scope and ambit of section 147 of the Act. In fact, the Ld. AO had himself enquired about the details of gross receipts which was duly complied with by the assessee on 17th October, 2008 by adducing on record the payment certificates along with form 16A certificates to establish that the gross receipts was accurately disclosed by it which was accepted by the AO. In other words, the Ld. AO had formed an opinion in respect of the correctness of the gross receipts disclosed by the assessee in the Profit & Loss a/c. It is an admitted fact that the details of gross receipts were evidenced by payment certificates and form 16A certificates which were duly adduced on record in the course of the original assessment proceedings which culminated in the order under section 143(3) of the Act. In the instant case, there is nothing in the reasons recorded by the Ld. AO to indicate that there is an escapement of income, but, at the most, there is need to verify that the reasons of discrepancy between receipts as per form 16A certificates vis-s-vis the figure as per Profit & Loss account of the assessee. The evidence that the figures of receipts as per form 16A certificates and as shown in the Profit & Loss a/c. vary, but this does not automatically lead to the conclusion that the income has escaped assessment. There may be need for verification but that mere need to verify does not bring the matter within the scope of section 147 of the Act. The jurisdiction to issue notice under section 148 of the Act will depend upon “ reasons to believe” coupled with “ income has escaped assessment” on the part of the Ld. AO, which parameters are completely absent in this case. It is settled that
discrepancy between income from profession as per return vis-à-vis as per TDS certificates cannot be a reason good enough to believe that income has escaped assessment and therefore, initiation of reassessment proceedings on this ground is not valid. In the instant case, the ld. AO has formed his belief basing on the existing materials which were provided by the assessee in the course of the original assessment proceedings. The Ld. A.R. for the assessee further submitted that the Ld. AO, without having any tangible material on record, has assumed jurisdiction under section 147 of the Income Tax Act which has amounted to “change of opinion”. In the instant case, the Ld. AO has reviewed his original assessment order which is ultra vires the scope and ambit of the provisions of section 147 of the Act. Admittedly, no new facts or tangible materials were brought on record to justify the reopening under section 147 of the Act. The AR for the assessee has relied on the following judgments, which are squarely applicable to the instant case, are as follows: 1). [2016] 48 ITR 191 (Chennai) - Universal Power Systems Pvt. Ltd. –vs- ACIT 2) (2013) 151 TTJ (Kol) 545 Meheria Reid & Co. –vs- ITO ITA Nos.53&54/Kol/2010, Kolkata “ B” bench, Kolkata 3) ITA No.709/Hyd./2013, Hyderabad “ B” Bench, RafeeqIqbal 4) ITAT No.108 of 2016, G.A. No.1510 of 2012, High Court at Calcutta, CIT, Central-1 –vs- M/s. Kanoi Industries Ltd.
Hence, the Ld. AR for the assessee has submitted that to consider the variation in the benefit to be given to the assessee for tax deduction at source, the assessment was reopened. The variation did not necessarily lead to escapement of income. The mere need to verify the discrepancy did not bring matter within the scope of cases in which reassessment proceedings could be validly initiated.
On the other hand, the Ld. Departmental Representative for the Revenue has primarily reiterated the stand taken by the Ld. AO. He stated that discrepancy in receipts amounts to escapement of income because the assessee has not given any explanation during the course of assessment proceedings. The Ld. DR furtherrelied on the following judgements. 1) [2015] 56 taxmann.com 157 (Delhi trib.), ITAT Delhi Bench “H”, Delhi, Usha International Ltd. 2) [2010] 194 Taxmann.37 (Karn.), High Court at Karnataka, Smt. J. Rema 3) [2013] 35 Taxmann.com 51 (Kolkata Trib.), ITAT Kolkata bench “ B” , MGB Transport
We have heard both the parties, gone through the facts and circumstances of the case and perused the materials available on record. We noticed that there is merit in the submissions of the assessee, since the proposition canvassed by the Ld. AR are supported by the facts cited by him above.As heexplained above that there was no any tangible material available before the Ld. AO to reopen the assessment under section 147. The reconciliation of difference in TDS certificates vis-à-vis discrepancies with the Profit & Loss a/c. does not lead to be a tangible material available on record. The TDS certificates, Profit & Loss a/c. and other documents were available during the original assessment proceedings and the Ld. AO ought to make a reconciliation and verify them. He did not find any new evidence or tangible material to show that there is escapement of income under section 147 of the Act. We do not find any force in the arguments of the Ld. DR for Revenue and the case laws cited by him, are not relevant to the issue under consideration. Therefore, we do not hesitate to allow the Cross Objections filed by the assessee.
We are not going to deal with the appeal filed by the Revenue because of the legal issue involved, as explained above. The reopening of assessment itself is not valid. Hence,there is no point to hear the appeal filed by the Revenue because the same is not maintainable, as explained above, and liable to be dismissed in limine.
In the result, the Cross Objection filed by the assessee is allowed and that of the Revenue is dismissed.
Order Pronounced in the Open Court on 03-08-2016
Sd/- Sd/- (N.V.Vasudevan) (Dr. A.L.Saini) JudicialMember Accountant Member Dated: 3/8/2016 Talukdar (Sr.PS) Copy of the order forwarded to: 1. Revenue 2 Assessee 3. The CIT-I, 4. The CIT(A)-I, 5. DR, Kolkata Benches, Kolkata