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Income Tax Appellate Tribunal, DIVISION BENCHES ‘A’, CHANDIGARH
Before: MS. DIVA SINGH & DR. B.R.R.KUMAR
PER DR. B.R.R.KUMAR, AM:
The present appeal has been filed by the assessee against the order of the Ld. CIT(A)-3 Gurgaon dt. 22/08/2016.
The assessee has raised the following grounds of appeal:
That the impugned order is against facts and law.
That on law, facts and circumstances of the case, the Worth CIT(A) was not justified in confirming the action of the Ld. AO, wherein the Ld. AO has initiated, and concluded the re-assessment u/s 147 r.w.s. 148 of the Income Tax Act, 1961 even when the original assessment was concluded u/s 153A r.w.s. 143(3) and the reopening was initiated at fag end of 6th year from the end of assessment year even when the case did not deserve to be re-assessed. 3. That on law, facts and circumstances of the case, the Worth CIT(A) was not justified in confirming the action of the Ld. AO, wherein the Ld. AO has made an addition of Rs. 5,51,755/- by erroneously holding that various advances received from customers are unexplained cash credits taxable u/s 68 of the Act. 4. That on law, facts and circumstances of the case, the Worth CIT(A) was not justified in confirming the action of the Ld. AO, wherein the Ld. AO has erred in passing the impugned re-assessment order u/s 147 of the Act without obtaining statutory approval of JCIT u/s 153D of the Act even when the original assessment was framed u/s 153A of the Act after taking necessary approval of JCIT u/s 153D.
Brief facts of the case are that the assessee is a HUF represented by its
Karta Sh. Jawahar Lal Jain. The assessee is proprietor of M/S Nikka Mai Babu Ram
Jewellers and is running retail business of jewellery. A search action was
conducted at the premises of the appellant on 27.10.2006. In response to notice
u/s 153A of the Act, the assessment was completed u/s 153A for AYs 2001-02 to
A.Y. 2007-08.
The Ld. AO issued notice u/s 148 of the Act for AY 2007-08 after recording
reasons on 28-03-2014 The moot reason for re-opening is that the advances from
customers have not been investigated. The reasons recorded are as under:
A.Y. 2007-08 28.03.2014 : The assessment in the case of the assessee was completed u/s 143(3) of the IT. act, 1961 for the A.Y. 2008-09 at a total income of Rs.92,95,327/-. In the impugned assessment order an addition of Rs.92,95,327/- was made on account of unexplained advances received from the customers. The CIT (A) vide her order appeal no.01/413/CIT(A)(C)/GGN/2010-11 dated 19.09.2013 upheld the addition of Rs.82,50,250/- out of total addition Rs.92,95,327/-holding that only the amount accepted during the year i.e. 2007-08 can be treated as unexplained cash credits u/s 68 of the act and the amounts brought forward from previous years can not be added in income of the year i.e. 2007-08. The unexplained advances of Rs. 10,45,077/- pertains to A.Y. 2007-08. The assessment of the assessee for A.Y. 2007-08 has been completed u/s 153A r.w.s. 143(3) at a total income of Rs.3,07,70,530/-. The unexplained cash credit of Rs. 10,45,077/-was not considered at the time of original assessment since the information was not in possession of the Department. It is therefore, apparent from the record that income to the extent of Rs. 10,45,077/- has escaped assessment in A.Y. 2007-08.
Therefore, in view of the above, I have reason to believe that the income of Rs. 10,45,077/- has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961 Notice u/s 148 of the IT. Act, 1961 issued
Thus it can be observed that the original assessment was concluded u/s 153A
and the reopening is in 6th year from end of assessment year after the finding of
the Ld. CIT(A) that certain additions made in the A.Y. 2008-09 pertains to the A.Y.
2007-08. During assessment under section 148, the Ld. AO, made the impugned
addition of Rs. 5,51,755/- consisting of the advance received of Rs. 4,50,000/-
from one Mr. Ravish Goel and the remaining amounts are of petty amounts. The
Ld. CIT(A) has confirmed the addition on the grounds that the assessee could
only prove the identity but could not prove the credit worthiness of the creditor.
Aggrieved the assessee filed the appeal before us.
The Ld. AR drew our attention to the following details fled before the lower authorities :
Copies of ledger account of above referred advances for the year in question i.e. A Y 2007-08 are enclosed. 3. It is evident from list referred at (2) above and ledger accounts referred at (3) above that out of aggregate advances of Rs. 10,45,077/-, advances aggregating to Rs. 4,93,322/- were even brought forward from preceding years and balance advances- aggregating to Rs. 5,51,755/- were in respect of transactions executed during the year in question. 5. The question involved in the present case is the taxability of these advances aggregating to Rs. 10,45,077/- u/s 68 in re-assessment for AY 2007-08. Out of these advances, advances of Rs. 4,93,322/- are old and hence the same can not be added in assessment for the year in question as rightly held by Hon'ble CIT(A) in the case of assessee itself for A Y 2008-09 that only advances received during the relevant year can at maximum be added in assessment for that year 6. As regards advances aggregating to Rs. 5,51,755/- which are in respect of transactions executed during the year in question, it is submitted that most of these. advances were petty amounts, were received from customers against future sales and were settled in subsequent periods. Hence, the same may not please be added u/s 68 of the Act. One of the advance out of this list is Rs. 4,50.000/- from Sh. Ravish Goyal. In regard to this advance, we have to submit as under:
a. Sh. Ravish Goyal is the son-in-law of karta of assessee HUF.
b. Copy of affidavit of Sh. Ravish Goyal confirming the payment of advance to the assessee from his bank account is enclosed.
c. Copy of PAN card of Sh. Ravish Goyal is enclosed.
d. Copy of Bank statement of Sh. Ravish Goyal for the year in question duly marking the payment of relevant advance to the assessee is enclosed.
e. The above referred advance of Rs. 4,50,000/- alongwith advance of Rs. 4,00,000/- accepted during succeeding FY 2007-08 was repaid as Rs. 8,50,000/- in FY 2011-12. Copy of relevant page of bank statement of Sh. Ravish Goyal for FY 2011-12 duly marking the repayment by assessee is enclosed.
f. It is evident from above facts that the assessee has established the identity of the creditor. Further, since the creditor was son-in-law of the assessee and intended to buy some gold, the genuineness of the transaction cannot be doubted. Further-more, since the amount was paid from regular bank account of the creditor and he is a regular income tax assessee, the credit-worthiness of the creditor cannot be doubted. Above all, the advances from customers for sale of goods cannot be added u/s 68 of the Act. Hence, this advance cannot be held as unexplained cash credit and therefore the same may not please be added u/s 68 of the Act.
It was further submitted that the assessment for succeeding A.Y. 2008-09 was
also completed u/s 143(3) wherein one of the addition was for Rs. 92,95,327/-
made u/s 68 on account of alleged unexplained advances from customers. In
appeal before the Hon'ble CIT(A) on this issue, she deleted addition to the
extent of Rs. 10,45,077/- by holding that these amounts cannot be added in A.Y.
2008-09 as the same has been brought forward from A.Y. 2007-08. By noticing
this observation from the order of Hon'ble CIT(A) for A.Y. 2008-09, re-opening has
been done for the A.Y. 2007-08.
It was further argued by the Ld. AR that the year in question is A.Y. 2007-08 and
the reasons have been recorded on 28.03.2014 and therefore the reasons have
been recorded in the 6th year from the end of the A.Y. in question. The
assessment having been completed u/s 143(3), therefore 1st proviso to s. 147 is
relevant and important.
It was argued that in the present case, the ITR u/s 139 has been duly filed
and therefore the provision is not applicable. Regarding the 2nd limb that there is
failure to disclose fully and truly all material facts necessary for the assessment,
the Ld. AR argued that all material facts have been duly disclosed. He further
relied on the following judgments:
i) The figure of advance from customers finds duly mentioned in the audited balance sheet and therefore it cannot be said that the assessee has failed to disclose fully and truly all material facts necessary for this assessment. When the assessee had disclosed complete facts, re-opening beyond 4 years was impressible. For this proposition, we rely upon ratio of judgements in :
a. Jashan Textiles Mills P. Ltd. Vs. DCIT (2006) 284 ITR 542 (Bom) b. German Remedies Ltd vs. DCIT (2006) 287 ITR 494 (Bom) c. CIT vs. Foramer Finance (2003) 264 ITR 566 (SC)
The reasons recorded do not mention at all or allege that escapement of income is due to the failure to disclose fully and truly all material facts necessary for this assessment. In the absence of this mention in the reasons, the re-opening cannot
be sustained. For this proposition, we rely upon the ratio of judgment in Sound Casting (P) Ltd v. Dy.CIT (2012) 250 CTR 119 (Bom.)
The allegation in the reasons is that the alleged unexplained cash credit of Rs. 10,45,077/- was not considered at the time of original assessment since the information was not in possession of department. Even this allegation is factually incorrect. Information about advance from customers was part of audited balance sheet. Therefore, re-opening of an assessment concluded u/s 143(3), after 4 years from end of relevant assessment year, is not sustainable since the allegation in the reasons is based on incorrect facts. When the facts stated in the reasons are themselves incorrect, re-opening is impressible. For this proposition, we rely upon ratio of judgement in Wei Intertrade (P) Ltd & Anr vs. ITO (2009) 308 ITR 22 (Del).
It is further submitted that even during original assessment proceedings completed u/s 143(3), a specific query was raised calling for details of advances received from customers. The same was duly replied. A copy of relevant questionnaire and reply of the assessee is enclosed. It is therefore evident that the issue in present reassessment proceedings was enquired and examined and after appraising the same, no addition was made. Therefore, re-opening the same issue amounts to change of opinion, which is impressible in law and therefore the re-opening deserves to be quashed. For this proposition, we rely upon ratio of judgement in CIT vs. Kelvinator of India 320 ITR 561 (SC).
The Ld. DR relied on the reasons of reopening on the order of the Ld.
CIT(A).
We have gone through the material on record and find that the
assessment has been reopened after four years. The relevant provisions of the
Act are as under:
"Provided that where an assessment under sub-section (3) o f section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) o f section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year"
It is evident from above extract that re-opening is permissible after the 4th year but before end of 6th year only if the assessee failed to file return u/s 139/143(1)/148 or to disclose fully and truly all material facts necessary for this assessment.
On going through the record it is found that in the satisfaction the Assessing Officer has nowhere mentioned about the default on the part of the assessee to furnish complete and full details. Notwithstanding, there was no new
material available before the Assessing Officer as mentioned in the reasons for reopening as the advances stated to be enquired into are already been before the Assessing Officer. During the proceeding conducted under section 153A. The relevant reply of the assessee along with depicting of the advances in the balance sheet is as under:
These advances have already been enquired during the proceedings for the AY 2008-09. The assessee has filed return under Section 139, hence as per the first proviso of Section 147 the assessee cannot be said to be in default.
Keeping in view that the advances have already been enquired into during the proceeding under section 153A for the AY 2008-09, and Keeping in view the fact that the assessee has already disclosed in the balance sheet and
all material facts necessary for the assessment have already been disclosed and no new material has been brought to the notice of the Assessing Officer, the notice issued under section 148 do not stand the test of legality and hence the assessment stands annulled.
In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court.
Sd/- Sd/- (DIVA SINGH) (DR.B.R.R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER
‘AG’ Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR