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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee firm is directed against the order passed by the CIT(Appeals)-I, Raipur, dated 30.11.2017, which in turn arises from the order passed by the A.O under Sec 144 r.w.s. 147 of the Income-tax Act, 1961 (in short ‘the Act’) dated 31.03.2015 for assessment year 2008-09. The assessee has assailed the impugned order on the following grounds of appeal before us: “On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) was erred and not justified in: 1. Upholding addition of Rs.7,98,278/- made by the Assessing Officer on account of Interest & Remuneration paid to partners out of Income surrendered during survey. 2. Upholding Disallowance of Rs.49,599/- made by the Assessing Officer out of Depreciation on Plant & Machinery. 3. Upholding Addition of Rs.7,100/- made by the Assessing Officer out of interest of Chola Mandalam, DBS Finance Limited. 4. The order of the learned CIT(Appeals) is erroneous in law as well as in facts.” Also, the assessee has raised additional grounds of appeal which reads as under: "1. On the facts and circumstances of the case and in law, reopening of the concluded assessment u/s.143(3) dt.6-12-10 in absence of any fresh/new material, be treated merely on change of opinion on the same material facts, is not permissible as per law, is liable to be quashed, as held in Kelvinator (2010) (SC); Techspan India (P) Ltd (2018) (SC); Marico Ltd (2020) (SC)."
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"2. On the facts and circumstances of the case and in law, initiation of reassessment u/s.147/148 is invalid; bad in law, since it is beyond 4 years and assessment made u/s.143(3) dt.6-12-10 and there is no allegation in the reasons recorded which indicate any failure on the part of the assessee to disclose fully & truly all material facts necessary for the assessment made u/s.143(3) dt.6- 12-10; initiation u/s.147/l48 cannot be made as per first proviso to sec147; it is invalid & void-ab-initio and is liable to be quashed."
The assessee by raising the additional grounds of appeal has sought our indulgence for adjudicating a legal issue, i.e., validity of jurisdiction assumed by the A.O for framing of the impugned assessment. As the adjudication of the aforesaid issue involves purely a question of law which would not require looking any further beyond the facts available on record, therefore, we have no hesitation in admitting the same. Our aforesaid view that where an assessee, had raised, though for the first time an additional ground of appeal before the Tribunal which involves purely a question of law and requires no further verification of facts, then, the same merits admission finds support from the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) 229 ITR 383 (SC).
Succinctly stated, the assessee which is engaged in the business of trading of rice had under Sec. 139 of the Act filed its original return of income for the assessment year 2008-09 on 29.03.2009, declaring an income of Rs.27,01,890/-. Original assessment in the case of the assesee
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was framed by the A.O vide his order passed u/s.143(3) dated 06.12.2010 determining its total income of Rs.27,68,410/-.
Subsequently, the case of the assessee was reopened by the A.O u/s.147 of the Act for three-fold reasons viz. (i) that the assessee had wrongly offered certain income which was surrendered in the course of survey proceedings u/s.133A of the Act as its business income, against which, deduction was claimed for the amount the remuneration and interest paid to the partners; (ii) that the assessee had wrongly claimed depreciation on truck without having any hiring income @40% as against its entitlement for the same @30%; and (iii) that the assessee had claimed deduction of interest paid on loan without deducting tax at source, which, thus, rendered the same liable for disallowance u/s.40(a)(ia) of the Act. Notice u/s 148 of the Act, dated 05.02.2014 was issued to the assessee. In compliance the assessee vide its letter dated 11.03.2014 requested that its original return of income be treated as the return in compliance to notice issued u/s 148 of the Act. The A.O accepted the aforesaid request of the assessee and issued Notice u/s 143(2) of the Act, dated 26.09.2014. However, it was for the reason that the assessee did not comply with the notice(s) u/s 142(1) of the Act that the A.O was constrained to frame the assessment vide his order passed u/s.144 r.w.s. 147 of the Act, dated
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31.03.2015, wherein the income of the assessee was reassessed at Rs.36,23,390/-.
Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without any success.
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
As the assessee has assailed the validity of jurisdiction that was assumed by the A.O for framing of the impugned assessment, therefore, we shall first deal with the same.
It is the claim of the Ld. Authorized Representative (for short ‘AR’) that the A.O had wrongly assumed jurisdiction and framed the impugned assessment vide his order passed u/s.144 r.w.s. 147 dated 31.03.2015 for two-fold reasons, viz. (i) that the reassessment proceeding had been embarked upon by the A.O merely on the basis of “change of opinion”; and (ii) that as the original assessment in the case of the assessee was earlier framed by the A.O u/s.143(3) dated 06.12.2010, therefore, as per the “1st
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proviso” to Sec. 147 in the absence of any failure on its part to disclose fully and truly all material facts which were necessary for its assessment its case could not have been reopened beyond four years from the end of the relevant assessment year.
As the Ld. AR has assailed the validity of jurisdiction that was assumed by the A.O for framing of the impugned assessment, therefore, for the sake of clarity on the facts we had directed the Ld. Departmental Representative (for short ‘DR’) to produce the assessment records. The Ld. DR on the next date of hearing had produced the assessment records. On a perusal of the assessment records it transpired that the case of the assessee was reopened on the basis of the following “reasons to believe”:- “05/02/2014 The assessee filed return of income on 29/03/2009 declaring total income of Rs.27,01,890/-. The case was scrutinized and assessment order u/s.143(3) of the Act was passed on 6/12/2010 determining total income of Rs.27,68,410/-. In the due course of further verification, it was found that during the relevant accounting period, the assessee had credited the income surrendered during the course of survey in the P & L a/c and claimed partners interest and remuneration on it. The surrendered income cannot be treated as business income hence the claim of Rs.7,98,278/- is irregular. Further, the assessee had claimed higher rate of depreciation of 40% on commercial vehicles. Hence, there is an excess allowance of Rs.49,599/- as depreciation. Thirdly, no TDS was done on hire purchase interest paid to NBFC violating the provisions of section 40(a)(ia) of the IT Act, 1961. Considering the facts and circumstances of the case, I have reason to believe that the income of the assessee escaped assessment to the extent of Rs.8,54,977/- and therefore, notice u/s.148 of the Act is issued reopening the case for assessment of the escaped income u/s.147 of the Act after giving approval of the Commissioner of Income Tax, Raipur on 21.01.2014.
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Sd/- DCIT”
On a perusal of the aforesaid “reasons to believe”, it can be gathered beyond any doubt that the reopening of the concluded assessment of the assessee was taken recourse to by the A.O on the basis of a mere “change of opinion” on the basis of the same set of facts as were there before his predecessor while framing the original assessment and not on the basis of any fresh tangible material which had come to his notice after conclusion of the original assessment that was framed vide order passed u/s.143(3), dated 06.12.2010. As stated by the A.O in the “reasons to believe” the case of the assessee firm was reopened u/s 147 of the Act, for the reason that its income chargeable to tax had escaped assessment for three-fold reasons, viz. (i) the offering of the income surrendered in the course of the survey proceedings as business income and claiming of interest and remuneration as a deduction against the same was not as per the mandate of law; (ii) there depreciation on truck was wrongly claimed at a higher rate i.e @40%; and (iii) the failure on the part of the assessee to deduct tax at source on interest paid on loan to a non-banking finance company rendered its claim for deduction of the same liable for disallowance u/s 40(a)(ia) of the Act.
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On a careful perusal of the aforesaid “reasons to believe”forming the basis for reopening of the assessee’s case u/s.147 of the Act, it transpires beyond doubt that the same as stated by the Ld. AR and, rightly so, is nothing but a mere “change of opinion” of the A.O, on the basis of the same facts as were there before his predecessor while framing of the original assessment u/s. 143(3) dated 06.12.2010. In our considered view, the reopening of a concluded assessment on the basis of same set of facts as were there available on record in the course of original assessment is not permissible under law. Our aforesaid view is supported by the judgment of the Hon’ble Supreme Court in the case of Commissioner of Income-Tax Vs. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC). We, thus, in terms of our aforesaid observation concur with the contention advanced by the Ld. AR that as the case of the assessee had been reopened on the basis of a mere “change of opinion”, therefore, the A.O had wrongly assumed jurisdiction, and thereafter framed the impugned assessment u/s.144 r.w.s 147 of the Act, dated 31.03.2015.
Alternatively, we also concur with the claim of the Ld. AR that as the assessment in the case of the assessee was originally framed vide order passed u/s. 143(3), dated 06.12.2010, therefore, in the absence of satisfaction of either of two conditions as contemplated in the “1st Proviso” to Sec. 147, which had allegedly resulted to the income of the assessee
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chargeable to tax having escaped assessment, viz. (i). there was failure on the part of the assessee to make a return under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148; or (ii). there was failure on the part of the assessee to fully and truly disclose all material facts necessary for its assessment, its case could not have been reopened beyond four years from the end of the relevant assessment year. Admittedly, there had been no failure on the part of the assessee to make a return under section 139 or in response to notice under sub-section (1) of section 142 or section 148 of the Act. As observed by us herein above, the assessee in compliance to Notice u/s 148, dated 05.02.2014 had requested that its original return be treated as a return in compliance to the said notice. The said request of the assessee was accepted by the A.O who thereafter had issued Notice u/s 143(2), dated 26.09.2014. Also, a perusal of the “reasons to believe” clearly reveals that it is neither a fact nor the case of the department that there was any failure on the part of the assessee to fully and truly disclose all material facts necessary for its assessment for the year under consideration i.e AY 2008-09. Rather, a perusal of the reasons forming the very basis for reopening of the assessee’s case reveals that there is no allegation of the A.O that the income of the assessee chargeable to tax had escaped assessment because of failure on its part to make a full and true disclosure of all material facts necessary for its assessment. On the contrary, the A.O holding a belief that
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the assessee’s claim for certain deductions had either been wrongly and/or excessively allowed by his predecessor, thus, for the said reason had reopened its concluded assessment. On the basis of our aforesaid observations, we are inclined to accept the claim of the Ld. AR that as the concluded assessment in the case of the assessee had been reopened by the A.O by issuing notice u/s.148 of the Act, dated 05.02.2014 i.e. beyond four years from the end of the relevant assessment year i.e A.Y 2008-09, therefore, the assessment so framed in absence of valid assumption of jurisdiction on his part could otherwise also not be sustained and is liable to be struck down on the said count itself. Our aforesaid view that as per the mandate of the “1st proviso” to Sec. 147 of the Act, the reopening of a concluded assessment beyond four years from the end of the relevant assessment year, inter alia, in the absence of any failure on the part of the assessee to disclose fully and truly all material facts which were necessary for its assessment is not permissible is supported by the judgment of the Hon’ble High Court of Delhi in the case of Haryana Acrylic Manufacturing Company Vs. CIT (2009) 308 ITR 38 (Del). Also, a similar view had been taken by the Hon’ble High Court of Punjab & Haryana in the case of Duli Chand Singhania vs Assistant Commissioner of Income (2004) 269 ITR 192 (P& H). Apart from that, we find that the Hon’ble Supreme Court in the case of New Delhi Television Ltd. vs Deputy Commissioner of Income Tax, (2020) 116 Taxmann.com 151 (SC) had, inter alia, held, that though
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the assessee is obligated to disclose the “primary facts”, but it is neither required to disclose the “secondary facts” nor required to give any assistance to the A.O by disclosure of the other facts and it is for the A.O to decide what inferences are to be drawn from the facts before him. As in the present case before us the assessee had disclosed fully and truly all the material facts, therefore, by no means he could have been saddled with any failure to disclose fully and truly all material facts that were necessary for framing of its assessment, which would have otherwise justified bringing its case within the realm of the extended time period contemplated in the “1st proviso” of section 147 of the Act for validly reopening the same.
We, thus, in terms of our aforesaid observation being of the view that the A.O had wrongly assumed the jurisdiction and reopened the concluded assessment of the assessee, which, was earlier framed by his predecessor vide order passed u/s.143(3) dated 06.12.2010, therefore, quash the consequential assessment order passed by him u/s.144 r.w.s. 147 dated 31.03.2015.
As we have quashed the assessment framed by the A.O for want of valid assumption of jurisdiction on his part, therefore, we refrain from adverting to and therein adjudicating the other contentions that have been
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advanced by him as regards the sustainability of the addition on the merits of the case, which, thus, are left open.
In the result, appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board.
Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 17th October, 2022 ***SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��यथ� / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.