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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi
I.T.A. No. 1258/KOL./2012 Assessment year: 2004-2005 & C.O. NO. 91/KOL/2012 (in ITA No. 1258/KOL/2012) Assessment year: 2004-2005 Page 1 of 9
IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA ‘B’ BENCH, KOLKATA
Before Shri P.M. Jagtap, Accountant Member and Shri S.S. Viswanethra Ravi, Judicial Member
I.T.A. No. 1258/KOL/ 2012 Assessment Year: 2004-2005
Income Tax Officer,............................................................Appellant Ward-56(4), Kolkata, 3, Government Place (West), Kolkata-700 001 -Vs.-
M/s. Nopany & Sons,.........................................................Respondent 3, Pretoria Street, Kolkata-700 071 [PAN : AACFN 5493 N] & C.O. No. 91/KOL/2012 (arising out of ITA No. 1258/KOL/2012) Assessment year : 2004-2005
M/s. Nopany & Sons,.........................................................Cross Objector 3, Pretoria Street, Kolkata-700 071 [PAN : AACFN 5493 N] -Vs.-
Income Tax Officer,............................................................Respondent Ward-56(4), Kolkata, 3, Government Place (West), Kolkata-700 001
Appearances by: Shri Niraj Kumar, CIT, D.R., for the Department Shri S.K. Tulsiyan, Advocate, for the assessee
Date of concluding the hearing : May 05, 2016 Date of pronouncing the order : June 15, 2016
O R D E R Per Shri P.M. Jagtap :- This appeal is preferred by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals), Central-I, Kolkata dated
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14.06.2012 for the assessment year 2004-05 and the same is being disposed of along with Cross objection filed by the assessee being C.O. No. 91/KOL/2012.
The assessee in the present case is a partnership firm, which is engaged in the business of dealing in shares. The return of income for the year under consideration was filed by it on 01.11.2004 declaring a loss of Rs.24,747/-. In the assessment originally completed under section 143(3) vide an order dated 12.12.2006, the total income of the assessee was determined by the Assessing Officer at Rs.98,090/-. Thereafter the said assessment was reopened by the Assessing Officer and after recording the reasons for doing the same, a notice under section 148 was issued by him to the assessee. In pursuance of the said notice issued under section 148, the assessment under section 143(3) read with section 147 was completed by the Assessing Officer vide an order dated 08.12.2008 computing the total income of the assessee at Rs.22.07 Crores after making additions of Rs.3.61 crores and Rs.18.45 Crores on account of sale proceeds of shares of M/s. Shruti Spinners Ltd. treating the same as unexplained cash credits under section 68 and difference in sale consideration of shares respectively.
Against the order passed by the Assessing Officer under section 143(3) read with section 147, an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the validity of the said assessment as well as disputing both the additions made therein aggregating to Rs.22.06 crores. After considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted both the additions made by the Assessing Officer to the total income of the assessee in the assessment completed under section 143(3) read with section 147 after passing a detailed order discussing all the relevant aspects of the case. Keeping in view the
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deletion by him of the entire addition made by the Assessing Officer in the assessment completed under section 143(3) read with section 147, the ld. CIT(Appeals) did not consider it necessary to adjudicate upon the issues raised by the assessee challenging the validity of the said assessment. Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal disputing the deletion by the ld. CIT(Appeals) of the additions made by the Assessing Officer in the assessment completed under section 143(3) read with section 147 while the assessee has filed its Cross Objection raising the issue of validity of the assessment made by the Assessing Officer under section 143(3) read with section 147.
As the issue involved in the Cross Objection filed by the assessee relating to the validity of assessment made by the Assessing Officer under section 143(3) read with section 147 is a preliminary issue which goes to the root of the matter, the ld. representatives of both the sides have advanced their arguments on the same seeking the Bench to decide the same first. In this regard, the ld. counsel for the assessee invited our attention to the reasons recorded by the Assessing Officer for reopening the assessment as given at page no. 51 of the paper book to point out that the assessment originally completed by the Assessing Officer under section 143(3) was reopened by him on the basis of the same records as was available before him while completing the assessment originally under section 143(3). He contended that there was no new fact or new material that had come to the possession of the Assessing Officer after completing the assessment originally under section 143(3), which formed the basis of reopening and thus the reopening of assessment by the Assessing Officer was clearly based on a mere change of opinion. Reliance was placed by him on the decision of the Hon’ble Supreme Court in the case of Hon’ble Supreme Court in the case of CIT –vs.- Kelvinator of India Limited reported in 320 ITR 561, the Hon’ble Calcutta High Court in the
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case of Debashis Moulik –vs.- ACIT reported in 370 ITR 660 and the Hon’ble Delhi High Court in the case of Pr. CIT –vs.- Tupperware India (P) Limited reported in 236 Taxman 494 to contend that the reopening of assessment originally made under section 143(3) by the Assessing Officer without there being any new tangible material coming to his possession was based on mere change of opinion, which is not permissible in law. He contended that the assessment completed by the Assessing Officer under section 143(3) read with section 147 thus is bad in law and the same is liable to be cancelled.
The ld. D.R., on the other hand, submitted that the assessment originally completed under section 143(3) in this case was reopened on the basis of objections raised by the audit party. In this regard, he invited our attention to Ground No. 4 raised by the assessee in the appeal filed before the ld. CIT(Appeals) and submitted that the fact that the assessment was reopened by the Assessing Officer on the basis of some objections raised by the Revenue Audit is accepted by the assessee himself. He contended that the new tangible material in the form of audit objections thus was there and since the assessment completed under section 143(3) was reopened by the Assessing Officer on the basis of this new material coming to his possession, it was not a case of reopening of assessment made by the Assessing Officer merely on the basis of change of opinion as alleged by the ld. counsel for the assessee. Reliance was also placed by the ld. D.R. on the decision of the Hon’ble Supreme Court in the case of CIT –vs.- PVS Beedies Pvt. Ltd. reported in 237 ITR 13, wherein the reopening on the basis of factual mistake pointed out by the audit party was held to be valid.
In the rejoinder, the ld. counsel for the assessee submitted that there is no reference to any audit objection made by the Assessing Officer in the reasons recorded for reopening and the ld. D.R., therefore, cannot
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expand the scope of reasons recorded by the Assessing Officer by submitting that there was new tangible material in the form of audit objections on the basis of which the assessment was reopened by the Assessing Officer. He also invited our attention to the Ground No. 4 raised by the assessee in the appeal filed before the ld. CIT(Appeals) and submitted that the assessment was presumably taken by the assessee as reopened on the basis of some objections raised by the Revenue Audit as the assessee was not privy to the relevant record. He contended that the ld. D.R., however, is privy to entire information and record and he cannot raise an argument on the basis of assessee’s presumption without bringing anything on record to show that there was such audit objection by the Revenue Audit and the same formed the basis of reopening.
We have considered the rival submissions and also perused the relevant material available on record. In order to appreciate the stand taken by both the sides on the preliminary issue raised in this case regarding the validity of reopening of assessment by the Assessing Officer, it is relevant to refer to the reasons recorded by the Assessing Officer for reopening the assessment, which are as under:- “Closer scrutiny of the affairs disclosed in the assessee’s case as well as other evidences indicate that the assessee has shown sale of shares of Shruti Spinners Limited to M/s. Shruty Ltd. where as the record of Shruty Ltd. for the AY 2004-05 as well as 2003-04 & 2005-06 do not show any sale transaction. Therefore, it is clear that assessee has wrongly claimed sale of shares and got the credit for cost of such shares, hence it is clear that actual cost of shares has been wrongly allowed else the entire sale consideration as claimed, should have been assessee’s income u/s 68 of the I.T. Act, 1961. Issuing notice u/s 148 to re-assess the income u/s 147”.
A perusal of the reasons recorded by the Assessing Officer clearly shows that the assessment originally completed by him under section 143(3) was reopened on the basis of the same records as was available
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before him while completing the original assessment under section 143(3) and there was no new tangible material that had come to his possession on the basis of which assessment was reopened by him. At the time of hearing before us, the ld. D.R. has contended that the assessment was reopened by the Assessing Officer on the basis of objections raised by the Revenue Audit and, therefore, there was a tangible material in the form of such audit objection, which formed the basis of reopening. To support and substantiate this contention, the ld. D.R. has relied on Ground No. 4 raised by the assessee in its appeal filed before the ld. CIT(Appeals), which reads as under:- “4. For that in view of the facts and in the circumstances, the present order of the AO and initiation of proceedings u/s 147 was simply a change of opinion and presumably on the basis of some objections raised by the Revenue Audit, which is not permissible under law”.
As is evident from Ground No. 4 raised by the assessee before the ld. CIT(Appeals), the validity of initiation of proceeding under section 147 was challenged by the assessee, inter alia, on the ground that the same was based on a mere change of opinion and while supporting its case on this issue, it was further submitted by the assessee that such initiation presumably on the basis of some objections raised by the Revenue Audit was not permissible under law. This stand thus was taken by the assessee on presumption that the reopening was based on some objections raised by the Revenue Audit and it was apparently because the assessee was not privy to the relevant information and record as contended by the ld. counsel for the assessee. In our opinion, it, therefore, cannot be said merely on the basis of Ground No. 4 raised by the assessee before the ld. CIT(Appeals) that the reopening was made by the Assessing Officer on the basis of some audit objections, especially when there is nothing brought on record by the ld. D.R. before us to show that there was such audit objection actually raised by the Revenue Audit
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and the reopening was made on the basis of the same. It is also pertinent to note here that there is no mention of such audit objections even in the reasons recorded by the Assessing Officer for reopening the assessment. As rightly contended by the ld. counsel for the assessee in this regard, the validity of reopening has to be judged on the basis of the reasons recorded and the information or material referred to therein and it is not permissible to extend the scope of reasons by relying on some exterior material, which does not find mention in the reasons recorded by the Assessing Officer.
In the case of CIT –vs.- Kelvinator of India Limited (supra), the Hon’ble Supreme Court has held that the concept of “change of opinion” must be treated as an in-built test to check the use of power and hence the Assessing Officer even after the amendments made in the relevant provisions from April 1, 1989 has the power to reopen an assessment provided there is tangible material to come to the conclusion that there was escapement of income from assessment. In the case of Debashis Moulik –vs.- ACIT (supra), all information, documents and other records relating to the assessee for the relevant assessment year were placed before the Assessing Officer during the assessment proceedings under section 143(3) and the assessment completed under section 143(3) was sought to be reopened by the Assessing Officer on the basis of new facts discovered from the existing records and in these facts and circumstances of that case, it was held by the Hon’ble Calcutta High Court that the reassessment was reopened by the Assessing Officer merely on the basis of change of opinion, which was not permissible in law.
As already noted by us, there was no new material that had come to the possession of the Assessing Officer and since the assessment originally completed under section 143(3) was reopened by him on the basis of the same material, which was available at the time of completion
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of original assessment under section 143(3), we are of the view that the reopening of assessment made by the Assessing Officer merely on the basis of change of opinion was bad in law. The assessment completed by the Assessing Officer under section 143(3) read with section 147 in pursuance thereof thus is invalid and the same is liable to be cancelled. We order accordingly and allow the relevant grounds originally raised in the Cross Objection of the assessee. 12. During the course of appellate proceedings before the Tribunal, the assessee has raised an additional ground in its Cross Objection raising a legal issue that there being no addition made by the Assessing Officer in the assessment completed under section 143(3) read with section 147 on the issues raised in the reasons recorded while reopening the assessment, the other additions made by him on the issues which did not find place in the reasons recorded are not sustainable. Keeping in view the decision already rendered by us on the preliminary issue cancelling the assessment made by the Assessing Officer under section 143(3) read with section 147 holding the same to be illegal, the issue raised by the assessee in the additional ground taken in the Cross Objection as well as the other issues raised by the Revenue in its appeal challenging the deletion by the ld. CIT(Appeals) of the additions made by the Assessing Officer in the assessment under section 143(3) read with section 147 have become infructuous or academic. We, therefore, do not consider it necessary or expedient to decide the same on merit.
In the result, the appeal of the Revenue is dismissed, while the Cross Objection of the assessee is allowed. Order pronounced in the open Court on June 15, 2016.
Sd/- Sd/- (S.S. Viswanethra Ravi) (P.M. Jagtap) Judicial Member Accountant Member Kolkata, the 15th day of June, 2016
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Copies to : (1) Income Tax Officer, Ward-56(4), Kolkata, 3, Government Place (West), Kolkata-700 001
(2) M/s. Nopany & Sons, 3, Pretoria Street, Kolkata-700 071
(3) Commissioner of Income-tax (Appeals), Central-1, Kolkata, (4) Commissioner of Income Tax, Kolkata (5) The Departmental Representative (6) Guard File By order
Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.