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Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.1472/Del/2023 [Assessment Year : 2011-12] The New Vikash Co-op. House vs ITO, Building Society Ltd., Adv. Vijay Ward-II(4), Kumar Gupta, Opp. Jain Mandir, Faridabad. Main Bazar, Ballabgarh, Faridabad-121004. PAN-AAAJT1595P APPELLANT RESPONDENT Appellant by Shri Vijay Kumar Gupta, Advocate Respondent by Shri Om Parkash, Sr. DR Date of Hearing 18.07.2023 Date of Pronouncement 21.07.2023
ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee for the assessment year 2011- 12 is directed against the order passed by Ld. CIT(A), National faceless Appeal Centre (“NFAC”), Delhi dated 21.03.2023.
The assessee has raised following grounds of appeal:-
“THAT the assessment order dated 06/11/2013 in the present case relevant to the AY 2011-12 having been passed by Shri Bhopal Singh, IRS, Dy. CIT, Circle-I, Faridabad could not be rectified u/s. 154 of the IT Act, 1961 vide impugned rectification order dated 16/03/2018 by Shri Yog Raj, ITO, Ward II[4], Faridabad, an officer being lower in rank to Shri Bhopal Singh, IRS, Dy. CIT, Circle-I, Faridabad. 2. THAT the impugned rectification order has been passed without providing any opportunity of being heard as the only notice for 12/03/2018 having been said to be issued was not communicated
to the appellant society. As such, the impugned order deserved to be quashed on this ground only. 3. THAT the impugned order dated 16/03/2018 having been passed without service of only notice issued for 12/03/2018 on the appellant society, any action u/s. 154 of the IT Act, 1961 as on today is barred by time. 4. THAT the issue of interest income Rs.41, 64, 620-00 having been neither discussed nor decided in the assessment order dated 06/11/2013, this issue could not be subject matter of rectification u/s. 154 of the IT Act, 1961. 5. THAT in the impugned rectification order the Ld. Authority below has added Rs.34,39,460-00 under head 'Disallowance of interest u/s. 36[1[iii] in the taxable income already determined at Rs.7,35,160=00 vide assessment order 06/11/2013. Dated In the present case the appellant society did not claim any expenses to the amount of Rs.34,39,460=00; how, this amount could be disallowed as expenses u/s. 36[1][iii] and added in taxable income. 6. THAT before the Ld. First Appellate Authority the appellant society filed written submissions supported with various documents and judgments enclosed therewith. The Ld. First Appellate Authority has reproduced those submissions in the impugned appeal order, but without considering appreciating the same has confirmed the addition made by the AO in the order of rectification dated 16/03/2018. 7. THAT the appellant craves leave to add, amend, revise, modify, substitute or delete any or all grounds of appeal or/and prayer made.” 3. Facts giving rise to the present appeal are that the assessment u/s 143(3) of the Income Tax Act, 1961 (“the Act”) was concluded at income of INR 7,35,160/- against the declared income at NIL. Thereafter, the Assessing Page | 2
Officer (“AO”) issued a notice u/s 144 r.w.s. 155 of the Act on 07.03.2018. No one attended the proceedings on behalf of the assessee in response to the said notice. Therefore, the AO passed the impugned order. Thereby, he made addition by disallowing interest u/s 36(1)(iii) of the Act amounting to INR 34,29,460/-.
Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, dismissed the appeal of the assessee.
Aggrieved against this, the assessee preferred appeal before this Tribunal.
Apropos to grounds of appeal, Ld. Authorized Representative (“AR”) of the assessee made multifold submissions. He contended that firstly, the AO did not give opportunity of being heard and adequate opportunity was not provided to the assessee which is evident from the assessment order. Further, he contended that the issue related to interest income was not discussed in the assessment order. Moreover, the addition cannot be subject matter of section 144 of the Act.
On the other hand, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below. He reiterated the submission of the assessee and filed a letter dated 26.06.2023. For the sake of clarity, the relevant contents of the letter are reproduced as under:-
“Kindly refer to your office letter F.No. Sr. DR (SMC- Bench)/ITAT/Delhi/2023-24/21 dated 20.06.2023 on the above subject.
In this regard, the brief facts of the case are that the return at an income of Rs NIL was filed by the assessee for AY 2011 12 on 30.03.2012 which was processed u/s 143(1). Later on the case of the assessee was selected for compulsory scrutiny as per CBDT guidelines and assessment in this case was completed u/s 143(3) on 06.11.2013 at an income of Rs.7,35,160/- making addition of Rs 7,35,160/- on account of disallowance of interest u/s 36(i)(iii) of Rs 6,76,154/ and disallowance of expenses u/s 40(A)(3) of Rs.60,000/ and a demand of Rs.2,24,074/-was created. Further, assessee filed an application u/s 154 on 02.01.2014 requesting that credit of TDS was not given while making calculations at the time of assessment u/s 143(3). Order u/s 154 was passed by the AO on 11.02.2014 and refund of Rs 1,84,880/ was issued to the assessee with the prior approval of Addl. Commissioner of Income Tax Range 1. Faridabad. 3. Further, Revenue Audit Party raised objection during audit observing that assessee has received / earned interest amounting to Rs.41,64,620/-, whereas AO has considered interest of Rs.7,35,160/ only during assessment proceedings. Therefore, amount of Rs 34,29,460/ should be added to the income of the assessee. Considering the above notice u/s 154 of the Act was issued to the assessee on 07.03.2018 to furnish the reply on or before 12.03.2018. In response thereto no reply filed by the assessee and order u/s 154 of the Act, was passed by the AO on 16.03.2018 creating a demand of Rs 13,98,808/-. 3.1 Aggrieved with the order passed by the AO u/s 154, assessee filed appeal before the Ld. Commissioner of Income Tax (appeals), Faridabad. The Ld.CIT(A) in his decision Vide Appeal No. CIT(A), Faridabad/10020/2018-19 and order dated 21.03.2023 confirmed the addition made by the AO. Further, Aggrieved with the order of Ld. CIT(A) assessee filed appeal before the Hon'ble ITAT, which is pending before the Hon'ble ITAT for adjudication. 4. The point wise report is submitted hereunder as desired:-
S.No. Queries Comments of the AO 1. That the assessment order dated it is submitted that the income Tax 06/11/2013 in the present case Department has a system of concurrent relevant to the AY 2011-12 having jurisdictions wherein the case of an assessee been passed by Shri Bhopal Singh, can be assessed by the Range IRS, Dy CIT, Circle-1, Faridabad could Head(CIT/Addl CIT), DCIT/ACIT or an ITO not be rectified u/s 154 of the IT Act, posted at the same station. Hence the ITO 1961 vide impugned rectification order was having the jurisdiction of the case and dated 16.03.2018 by Shri Yog Raj, the rectification order passed by the Income ITO, Ward-II(4), Faridabad, an officer Tax Officer is correct. being lower in rank to Shri Bhopal Singh IRS, Dy CIT, Circle 1, Faridabad. 2. That the impugned rectification order Notice u/s 154 of the Act was issued to the has been passed without providing assessee on 07/03/2018 requiring to file any opportunity of being heard as the reply on or before 12/03/2018 In response only notice for 12/03/2018 having thereto no reply filed by the assessee After been said to be issued was not that order under section 154 was passed by communicated to the applicant society. the A.O and demand was created. As such, the impugned order deserved to the quashed on this ground only. 3. That the impugned order dated Notice u/s 154 of the Act was issued to the 16/03/2018 having been passed assessee vide notice I No ITO/W without service of any notice issued 2(41/1BD/2017 18/16404 on 07/03/2018 for 12/03/2018 on the appellant requiring to file reply on or before society, any action u/s 154 of the IT 12/03/2018 by the assessee. After that Act, 1961 as on today is barred by order under section 154 was passed by the time. AO within the time limit and demand was created. 4. That the issue of interest income Assessment in this case was completed u/s Rs.41,61,620/ having been neither 143(3) on 06 11 2013 at an income of Rs discussed nor decided in the 7,35,160/- making addition of Rs.7.35.160/- assessment order 06/11/2013, this on dated account of disallowance of interest issue could not be subject matter of u/s 36(1)(ii) of Rs.6,76,154/ and rectification u/s 154 of the 11 Act, disallowance of expenses u/s 40(A)(3) of 1961. Rs.60,000/ and a demand of Rs.2,24,074/ was created Later on, Revenue Audit Party raised objection during audit observing that assessee has received / earned interest income of Rs 41,64,670/ whereas AO has considered interest of Rs 7,35,160/ only while passing order u/s 143(3), Of the Act. Therefore, amount of Rs.34,29,460/ should be added to the income of the assessee. Thereafter Notice u/s 154 of the Act was issued to the assessee on 07/03/2018 to rectify the mistake and requiring to file reply on or before 12/03/2018 by the assessee. In response thereto no reply filed by the assessee.. After that order under section 154 was passed by the A.Q within the time limit and demand was created. 5. that in the impugned rectification order Assessee has received interest income of R$ the to Authority below has added Rs. 41.64,670/ whereas AO has considered) 34,39,460/ under head 'Disallowance interest of Rs.7.35,160/ during assessment of interest u/s 36(1)() is the taxable proceedings. Therefore, amount of Page | 5
income already determined at Rs.34,29,460/- should be added to the Rs.7,35,160/- vide assessment order income of the assessee. Considering the dated 06/11/2013. above. Notice u/s 154 of the Act was issued In the present case the appellant to the assessee on 07/03/2018 to rectify the society did not claim any expenses to mistake and requiring to file reply on or the amount of Rs 34 39.460/ how, before 12/03/2018 by the assessee in this amount could be disallowed as response thereto no reply filed by the expenses u/s 36(1)(m) and added in assessee After that order under section 154 taxable income. was passed by the AO within the time limit and demand was created. 6. That before the Ld. First appellate The The documents and judgements submitted documents and judgments submitted by the assessee before the Ld.CIT(A) are by the Authority the appellant society different from the facts of the case of the filed assessee before the Ld. CIT(A) assessee. are different from written submissions supported with the facts of the case of the assessee. various documents and judgments enclosed therewith. The Ld First Appellate Authority has reproduced those submissions in the impugned appeal order, but without considering/ appreciating the same has confirmed the addition made by the AO in the order of rectification dated 16/03/2018. 8. I have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The only issue which needs adjudication is whether the impugned order passed by the AO is in accordance with law. The AO had carried out rectification by way of the impugned order after giving a single opportunity of being heard to the assessee. In my considered view, the AO did not provide adequate opportunity to the assessee. Further, the AO invoked the provision of section 154 of the Act for making disallowance u/s 36(1)(iii) of the Act. For the sake of clarity, section 154 of the Act is reproduced as under:-
“Rectification of mistake. 154. (1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,— (a) amend any order passed by it under the provisions of this Act ;
(b) amend any intimation or deemed intimation under sub-section (1) of section 143; (c) amend any intimation under sub-section (1) of section 200A; (d) amend any intimation under sub-section (1) of section 206CB. (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided. (2) Subject to the other provisions of this section, the authority concerned— (a) may make an amendment under sub-section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee or by the deductor or by the collector, and where the authority concerned is 71[the Joint Commissioner (Appeals) or] the Commissioner (Appeals), by the Assessing Officer also. (3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee or the deductor or the collector, shall not be made under this section unless the authority concerned has given notice to the assessee or the deductor or the collector of its intention so to do and has allowed the assessee or the deductor or the collector a reasonable opportunity of being heard. (4) Where an amendment is made under this section, an order shall be passed in writing by the income-tax authority concerned. (5) Where any such amendment has the effect of reducing the assessment or otherwise reducing the liability of the assessee or the deductor or the collector, the Assessing Officer shall make any refund which may be due to such assessee or the deductor or the collector.
(6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee or the deductor or the collector, the Assessing Officer shall serve on the assessee or the deductor or the collector, as the case may be a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 156 and the provisions of this Act shall apply accordingly. (7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed. (8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee or by the deductor or by the collector on or after the 1st day of June, 2001 to an income-tax authority referred to in sub-section (1), the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it,— (a) making the amendment; or (b) refusing to allow the claim.” 9. As per section 154 of the Act, the AO is empowered to amend any order passed by it under the provision of Act. With a view to rectifying any mistake apparent from record but where such amendment has effect of enhancing assessment, shall not be made unless the assessment authority concerned, has given notice to the assessee of its intention so to do and allow the assessee a reasonable opportunity of being heard. From the records available, it is seen that the assessee was not provided reasonable opportunity of being heard by the AO. Ld. Counsel for the assessee has relied upon the judgement of Hon’ble Supreme Court rendered in the case of CIT vs Hero Cycle Pvt.Ltd. [1997] 228 Page | 8
ITR 463. He further relied upon the decision of Co-ordinate Bench of the Tribunal in bunch appeals in ITA Nos. 878/CHD/2011 & others in Shri Harinder Singh vs ITO & Others order dated 29.12.2011. Considering the totality of the facts, I am of the considered view that invokation of provision of section 154 of the Act, is not justified under the facts of the present case since the addition made by the AO has resulted into enhancing of assessed income without giving adequate opportunity to the assessee, deserves to be quashed. Therefore, impugned addition is hereby, deleted. The grounds raised by the assessee in this appeal are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 21st July, 2023. Sd/- (KUL BHARAT) JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI