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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
Per Dr. M. L. Meena, AM:
This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dtd. 12/08/2020, wherein the assessee has raised the following grounds:
1.That the order under appeal is against law and facts of the case.
2. That the Ld. CIT(A) has erred in law in not accepting that the Ld. AO erred in law in not accepting the loss return filed in reply to notice issued Under Section 148 of the I.T. Act.
3. That the Ld. CIT(A) has also erred in law in not accepting that in view of Section 152 of the I.T. Act the Ld. A.O erred in not dropping the proceeding started U/s 148.
4. That the Ld. CIT(A) has also erred in law in not accepting that the addition made of Rs. 27500/- U/s 40A(3) is not sustainable in law.
5. That the Ld. CIT(A) has also erred in law in not accepting that earlier years losses as determined by rectification order by the Ld. A.O. in rectification order for the Assessment Year 2004-2005 be carried forward and adjusted against the income determined for the Year under consideration.
It is prayed that the Hon’ble Tribunal may kindly be pleased to allow the appellant to amend or file additional / alternate ground of appeal at the time of hearing.
2. None appeared on behalf of the assessee, in spite of the fact that the assessee has been given multiple opportunities by fixing case for hearing on 26/05/2022; 20/10/2022; 21/02/2023; 13/04/2023; 1206/2023 and 07/06/2023 six independent dates. Therefore, after considering the fact of the case on record and hearing the Ld. DR, it is decided to adjudicate the appeal on merits. The Ld. DR has supported the impugned order. He has demonstrated that the AO and Ld. CIT (A) has given finding of facts and adjudicated the matter judiciously. He pleaded that the findings of the Ld. CIT(A)/NFAC may be sustained.
It is noted that there was a delay of seven days in filing the present appeal due to late delivery by speed post on account of Covid-19 Pandemic situation in the country. Accordingly, short delay of seven days in filing the appeal is hereby condoned and appeal of the assessee is admitted for adjudication on merits.
The first grounds raised is general pertaining to consideration of fact of the case and applicable law shall be taken up in adjudicating the issue based grounds and hence, it does not require an independent adjudication.
In ground no. 2 and 5 are inter-linked to each other, whereby the appellant has challenged that the Ld. CIT(A) and the Ld. AO erred in law in not accepting the loss return filed in reply to notice issued Under Section 148 of the I.T. Act.
5.1 It is seen that in the proceedings under section 147 of the Act, the AO had charged items of income which has escaped assessment other than or in addition to that item or items which have led to the issuance of notice under section 148 and where the assessment is made under section 147 in respect of income which has escaped tax, the AO's jurisdiction is confined to only such income which has escaped tax or has been under assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to agitate questions which had been decided in the original assessment proceedings. It is only the underassessment which is set aside and not of the entire assessment when the assessment proceedings are initiated. The AO cannot make an order of re-assessment inconsistent with the original order of assessment in respect of matters which are not the subject matter of proceedings under section 147. In our view, the claims which have not been made in the original assessment proceedings cannot be permitted to be the agitated in the assessment being re-opened for bringing to tax certain income which had escaped assessment because the controversy on re- assessment is confined to matters which are relevant only in respect of the income which had not been brought to tax during the course of the original assessment. 5.2 From the impugned order, it is evident that the Ld. CIT(A) has observed that a matter not agitated in the concluded original assessment proceedings cannot be permitted to be agitated in the re-assessment proceedings unless relatable to that item sought to be taxed as "escaped income". In the reassessment proceedings for bringing to tax items which had escaped assessment, it would be open to an assessee to put forward claims for deduction of any expenditure in respect of that income or the non-taxability of those items. Thus, keeping in view the object and purpose of the proceedings under section 147 of the Act which are for the benefit of the Revenue by way of deterrent to Tax Evasion, an assessee cannot be permitted to convert the re- assessment proceedings as his appeal or revision, in disguise and seek relief or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to "escaped income" and re-agitate the concluded matters. Even in cases where the claims of the assessee during the course of re-assessment proceedings relating to the escaped assessment are accepted, still the allowance of such claims has to be limited to the extent to which they reduce the income to that originally assessed. The income for the purpose of "reassessment" cannot be reduced beyond the income originally assessed. 5.3 In view of that matter, we find no infirmity in the order of the Ld. CIT(A) on the issue of confirming the finding of the AO in not accepting the loss return claim on account of carry forward of losses by the assessee and hence, no interference is called for. Thus, this ground of the appellant assessee is rejected.
6. In ground No. 3, the appellant has challenged that the Ld. CIT(A) has erred in law in not accepting that in view of Section 152 of the I.T. Act the Ld. A.O erred in not dropping the proceeding started U/s 148.
6.1 The Ld. CIT (A) has discussed that as per the provisions of section 152(2), where an assessment is reopened under section 147, it is open for the assessee, if he has not impugned any part of the original assessment order for that year under section 246 to 248 or under section 264, to claim that the proceedings under section 147 should be dropped on his showing that he had been assessed on an amount or to a sum not lower than what he would be rightly liable for even if the income alleged to have escaped assessment had been taken into account, or the assessment or computation had been properly made, subject to the fact that in so doing, he shall not be entitled to reopen matters concluded by an order under sections 154, 155, 260, 262, or 263.
6.2 We are of the considered view that the CIT(A) has been justified in observing that the grievance against the AO for not having invoked the provisions of section 152 to drop the re-assessment proceedings cannot be addressed in the appellate proceedings. At this stage, the appellant can only be advised, if it feels so aggrieved, to invoke the provisions of section 119 (2) (b) before the competent authority pleading admittance of application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim.
6.3 Under the circumstance, we find no error or perversity in the impugned order to the facts on record and accordingly, all the issues raised in the grounds of appeal challenging the non-acceptance of the enhanced loss by way of the return under section 148 as well as repudiation of the claim of earlier year losses to be carried forward for adjustment against income of the assessment year under consideration are rejected.
7. The next grievance of the assesse is that the Ld. CIT(A)/NFAC, Delhi erred in confirming the addition of Rs. 27,500/- under section 40A(3) of the Act, against the provisions of law.
The Ld. CIT(A)/NFAC, Delhi has discussed in the impugned order that the assessee has challenged the addition of an amount of Rs. 27,500/- for contravening the provisions of Section 40A(3) on the ground that cash payment of the said amount was made on account of exceptional circumstances of financial crunch. However, it was argued additionally that even if the disallowance under section 40A(3) was to be made only 20% of the amount paid in cash was to be disallowed.
7.2 We find that the Ld. CIT(A) has discussed that the alleged cash payment by the appellant was in excess of the stipulated amount does not correspond with any of the circumstances or situation set out in Rule 6DD. Accordingly, he observed that the rigor of Section 40A(3) does not get mitigated and the disallowance of such payment is in contravention of the statutory provisions.
7.3 We make it clear that the provisions of Section 40A(3) have undergone changes many times whereby the quantum of disallowance kept on being changed. Accordingly, the Ld. CIT(A)/NFAC, has directed the Assessing Officer to apply the provisions of Section 40A(3) for the assessment year under consideration and modify the amount of disallowance accordingly.
7.4 That the Ld. CIT(A) has categorically stated reasons for making cash payment in excess as stipulated amount does not correspond with any of the circumstances or situation set out in Rule 6DD. It is noted that the Ld. CIT(A)/NFAC, Delhi has issued direction to the Assessing Officer to examine the matter in the light of the amended provisions of Section 40A(3) applicable for the assessment year under consideration and modify the amount of disallowance, accordingly. In our view, the Ld.CIT(A) has been quite reasonable and generous to the assessee in allowing him another opportunity to establish its claim if it being covered under exception set out in Rule 6DD of the Income Tax Rule before the Assessing Officer in the fresh proceedings.
In the backdrop of the aforesaid discussion, we dispose of the appeal of the assesse in the manner discussed as above.