Sh. Nirmal Singh, Kanpur V. Dy. Commissioner of Income Tax-2, Kanpur

CO 05/LKW/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3811 (ITAT-LUCKNOW)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-05-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 06-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Audit objection; Difference of opinion; Change of opinion
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 702/LKW/2016 ASSESSMENT YEAR: 2010 - 11 DCIT - 2 KANPUR V. SHRI NIRMAL SINGH 117/H - 1/35 4, MODEL TOWN PANDU NAGAR KANPUR T AN /PAN : ABYPS6506L (APP ELL ANT) (RESPONDENT) C.O. NO.05/LKW/2018 [ARISING OUT OF ITA NO. 702/LKW/2016] ASSESSMENT YEAR: 2010 - 11 SHRI NIRMAL SINGH 117/H - 1/354, MODEL TOWN PANDU NAGAR KANPUR V. DCIT - 2 KANPUR T AN /PA N : ABYPS6506L (APP LIC ANT) (RESPONDENT) DEPARTMENT BY: SHRI R. K. VISHWAKARMA, D.R. ASSESSEE BY: SHRI RAKESH GARG, ADVOCATE DATE OF HEARING: 15 0 5 201 8 DATE OF PRONOUNCEMENT: 16 0 5 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL P REFERRED BY THE REVENUE AND CROSS OBJECTION PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A) - 1, KANPUR DATED 3/9/2016. ITA NO.702/LKW/2016 & C.O. NO.05/LKW/2018 PAGE 2 OF 7 2 . SO FAR REVENUE IS CONCERNED, THE GROUNDS OF APPEAL APPEARING ON RECORD. THE ASSESSEE HAS PREFERRED CROSS OBJECTION ON THE BASIS OF LEGAL GROUND THAT THE ORDER PASSED UNDER SECTION 147/143(3) OF THE ACT WAS WITHOUT JURISDICTION, BAD IN LAW AND THE SAME MAY BE QUASHED. 3 . IT IS THE CASE OF THE ASSESSEE THAT AFTER INITIAL ORDER PASSED UNDER SECTION 143(3) OF THE ACT AND THAT T HERE BEING NO NEW MATERIAL FOR RECONSIDERATION EXISTING ON RECORD, THEREFORE, REASSESSMENT FRAMED IS NOTHING BUT A CHANGE OF OPINION WHICH IS NOT ALLOWED AS PER LEGAL PRINCIPLES. BOTH THE APPEAL AND THE CROSS OBJECTION WERE HEARD TOGETHER. SINCE THE FACT S SIMILAR AND THE ISSUES COMMON, BOTH THE APPEAL AND CROSS OBJECTION ARE DISPOSED OF IN THIS CONSOLIDATED ORDER. 4 . THE BRIEF FACTS IN THIS CASE ARE THAT ASSESSEE IS AN INDIVIDUAL CARRYING ON PROFE S SION OF TEACHING. DURING THE ASSESSMENT YEAR 2010 - 11, ASSESS EE HAS PROVIDED HIS PROFESSIONAL TEACHING SERVICES TO PANKAJ AGARWAL CLASSES AND EARNED PROFESSIONAL INCOME. ASSESSEE HAS ALSO EARNED AUTHORSHIP INCOME THROUGH PROVIDING WRITINGS FOR VARIOUS CHEMISTRY BOOKS. FOR THE RELEVANT ASSESSMENT YEAR, ASSESSEE FILED HIS RETURN OF INCOME ON 22/09/2010 SHOWING NET INCOME OF RS.24,39,820/ - . THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY ASSESSMENT. THEREAFTER D ETAILED SCRUTINY WAS DONE AND ALL THE BOOKS OF ACCOUNT ALONG WITH VOUCHERS OF EXPENSES WERE PRODUCED AND CHECK ED. ORDER UNDER SECTION 143(3) OF THE ACT WAS PASSED BY THEN DCIT - II, KANPUR ACCEPTING THE RETURNED RS. 24,39,820/ - . 5 . DURING THE AUDIT OF RAP, IT WAS POINTED OUT THAT ASSESSEE IS NOT ENTITLED TO CLAIM THE EXPENDITURES AMOUNTING TO RS.33,67,691 OUT OF TOTA L EXPENDITURES AMOUNTING TO RS.44,23,132 BECAUSE OF NON NEXUS OF THESE EXPENDITURES WITH THE ASSESSEE'S PROFESSION. BASED ON THIS AUDIT OBJECTION, DCIT - 2 K ANPUR ISSUED A NOTICE DATED 24/12/2013 REQUIRING PROOF OF EXPENDITURES NEXUS WITH THE PROFESSION AND SUPPORTING ITA NO.702/LKW/2016 & C.O. NO.05/LKW/2018 PAGE 3 OF 7 VOUCHERS. AT THIS TIME, THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT ALL THE DETAILS OF EXPENDITURE WERE SUBMITTED BY THE ASSESSEE AT THE TIME OF SCRUTINY AND ASSESSMENT THEREAFTER WHY AGAIN THEY ASKED TO PROVIDE PROOF OF EXPENDITURE NEXUS WIT H THE PROFESSION OF THE ASSESSEE. WHEN THE COPY OF REASON FOR REASSESSMENT WAS PROVIDED TO THE ASSESSEE, IT WAS MENTIONED THAT AUDIT PARTY HA S POINTED OUT THAT ASSESSEE WAS NOT ENTITLED TO CLAIM T HE EXPENDITURES AS SHOWN IN THE PROFIT & LOSS ACCOUNT BECAU SE OF NON NEXUS OF EXPENDITURES WITH THE ASSESSEE'S PROFESSION. THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER FRAMED UNDER SECTION 147/143(3) OF THE ACT ANALYSED THE FACTS THAT SO FAR AS PANKAJ AGARWAL CLASSES ARE CONCERNED AND RELATIONSHIP WITH THE ASSESS EE IS THAT OF CONTRACT OF SERVICE AND THAT THERE EXIST S AN EMPLOYEE - EMPLOYER RELATIONSHIP AND THEREFORE FOLLOWING THE DECISION OF HYDERBAD ITAT IN THE CASE OF DCIT VS. WOCKHARDT HOSPITALS LTD., THE ASSESSING OFFICER WAS OF THE OPINION THAT ASSESSEE WAS CHA RGEABLE TO TAX UNDER THE HEAD SALARIES AND LIABLE FOR DEDUCTION UNDER SECTION 192 OF THE ACT AND NOT UNDER THE PROVISIONS OF SECTION 194J OF THE ACT. ACCORDING TO THE ASSESSING OFFICER, RESORTING TO SECTION 194J OF THE ACT BY THE ASSESSEE AND SHOWING HIS INCOME AS PROFESSIONAL RECEIPT WAS NOTHING BUT A COLOURABLE DEVICE TO REDUCE THE TAX LIABILITY. 6 . WHEN THE MATTER TRAVELLED UPTO THE LD. CIT(A), A DETAILED WRITTEN SUBMISSION WAS FILED BEFORE HIM BY THE ASSESSEE. THE LD. CIT(A) AFTER CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, REFERRED TO THE CASE OF SIMILAR NATURE IN ITA NO.6540/MUM/2010 FOR ASSESSMENT YEAR 2006 - 07 IN THE CASE OF HARDIK BHADRESH BENGALI. THEREAFTER THE LD. CIT(A) ANALYSED THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THAT OF THE CASE BEFORE ITAT MUMBAI AND AFTER DETAILED DISCUSSION WHICH IS THERE ON RECORD COMES TO THE CONCLUSION THAT IT IS A CONTRACT FOR SERVICE. ONCE IT IS DECIDED THAT IT IS A CONTRACT FOR SERVICE, THEN ASSESSEES INCOME IS TO BE A SSESSED UNDER ITA NO.702/LKW/2016 & C.O. NO.05/LKW/2018 PAGE 4 OF 7 THE HEAD INCOME FROM B USINESS OR PROFESSION AND RELIEF WAS GIVEN TO THE ASSESSEE. AGAINST THIS ORDER, REVENUE HAS PREFERRED AN APPEAL WHILE CROSS OBJECTION WAS PREFERRED BY THE ASSESSEE BECAUSE THE LD. CIT(A) HAS NOT GONE INTO THE LEGALITY O F THE VALIDITY OF REASSESSMENT FRAMED BY THE ASSESSING OFFICER AFTER PROVIDING REASONS FOR REOPENING AND WHETHER THOSE REASONS WERE LEGALLY TENABLE OR NOT. THIS WAS NOT DEALT WITH BY THE LD. CIT(A) IN HIS ORDER. 7 . AT THE TIME OF HEARING BEFORE US, THE LD. A .R. OF THE ASSESSEE IN SUPPORT OF HIS CROSS OBJECTION HEAVILY RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ITO VS. TECHSPAN INDIA PVT. LTD . IN CIVIL APPEAL NO.2732 OF 2007, ORDER DATED 24/4/2018 WHEREIN THE HON'BLE APEX COURT HAS CA TEGORICALLY HELD THAT ONCE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) AND A L L THE DETAILS AND EVIDENCES WERE EXAMINED IN THAT ASSESSMENT, THEREAFTER IF ANY REASONS ARE RECORDED FOR REOPENING OF ASSESSMENT WHICH IS DEVOID OF ANY NEW MATERIALS ON REC ORD, THEN SUCH REASONS FOR REOPENING AND THE ASSESSMENT FRAMED AMOUNTS TO CHANGE OF OPINION WHICH IS NOT THEREFORE ACCEPTABLE IN LAW. IN ORDER TO REOPEN ASSESSMENT BY FURNISHING REASONS, THERE MUST BE ENOUGH MATERIALS ON RECORD TO SHOW THAT INCOME HAS ESC APED ASSESSMENT. IF IT ONLY RELATES THOSE ISSUES WHICH HAS ALREADY BEEN EXAMINED AT THE TIME OF SCRUTINY ASSESSMENT, THEN THAT REASON IS MERELY A CHANGE OF OPINION FOR REOPENING OF ASSESSMENT WHICH IS NOT ALLOWED IN LAW. THE DEPARTMENT MUST BRING IN NEW EVIDENCES AND RECORDS WHICH WERE NOT DEALT WITH AT THE TIME OF SCRUTINY ASSESSMENT, ONLY THEN IT CAN BE SAID THAT THE REASONS FOR REOPENING OF ASSESSMENT IS VALID. 8 . WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE WILL ADDRESS THE CROSS OBJECTION FIRST AND THE LEGAL ISSUE RAISED BY THE ASSESSEE THAT WHEN ALL THE DETAILS AND EXPENDITURE AND ITA NO.702/LKW/2016 & C.O. NO.05/LKW/2018 PAGE 5 OF 7 OTHER ITEMS WERE MADE SUBJECT MATTER OF SCRUTINY ASSESSMENT AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT , THEREAFTER WHETHER ON THE SA ME MATERIALS REASONS CAN BE FORMED THAT INCOME HAS ESCAPED ASSESSMENT SO TO FRAME A REASSESSMENT UNDER SECTION 147/143(3) OF THE ACT. IT IS ON RECORD IN THE CASE OF THE ASSESSEE WHEN RETURN WAS E - FILED SHOWING TOTAL INCOME OF RS.24,39,820/ - , F IRST IT WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND THEREAFTER WHEN IT WAS SELECTED FOR SCRUTINY, SCRUTINY ASSESSMENT WAS ALSO COMPLETED UNDER SECTION 143(3) OF THE ACT ON THE TOTAL INCOME OF RS.24,39,820/ - VIDE ORDER DATED 18/6/2012. THIS IS NOT DISPUTED BY TH E DEPARTMENT. WHEN WE REFER TO THE REASONS FOR REOPENING OF ASSESSMENT, WE FIND THAT IT IS STATED THAT THE AUDIT PARTY OF THE DEPARTMENT HAS STATED THAT ASSESSEE WAS NOT ENTITLED TO CLAIM CERTAIN EXPENDITURE BECAUSE THOSE EXPENDITURES WERE NOT DIRECTLY RE LATED TO THE WORK DONE BY THE ASSESSEE. THE DEPARTMENT WANTED TO HAVE PROOF OF THE NEXUS OF THOSE NEXUS VIS - - VIS WORK DONE BY THE ASSESSEE. WE FIND THESE WERE ALREADY EXAMINED BY THE DEPARTMENT AT THE TIME OF SCRUTINY ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT AND RETURNED INCOME WAS ACCEPTED. THERE IS NO OTHER NEW MATERIALS OR EVIDENCES ON RECORD FOR REOPENING DONE. THE HON'BLE APEX COURT HAS CATEGORICALLY POINTED OUT IN THE CASE OF ITO VS. TECHSPAN INDIA PVT. LTD. (SUPRA) THAT BEFORE INTERF ERING WITH THE PROPOSED RE - OPENING OF THE ASSESSMENT ON THE GROUND THAT THE SAME IS BASED ONLY ON A CHANGE IN OPINION, THE COURT OUGHT TO VERIFY WHETHER THE ASSESSMENT EARLIER MADE HAS EITHER EXPRESSLY OR BY NECESSARY IMPLICATION EXPRESSED AN OPINION ON A MATTER WHICH IS THE BASIS OF THE ALLEGED ESCAPEMENT OF INCOME THAT WAS TAXABLE. IF THE ASSESSMENT ORDER IS NON - SPEAKING ONE , IT MAY BE DIFFICULT TO ATTRIBUTE TO THE A SSESSING O FFICER ANY OPINION ON THE QUESTIONS THAT ARE RAISED IN THE PROPOSED RE - ASSESSMEN T PROCEEDINGS. BUT IF IT REFLECTS FROM THE ASSESSMENT ORDER THAT POINT ON WHICH THE RE - ASSESSMENT ITA NO.702/LKW/2016 & C.O. NO.05/LKW/2018 PAGE 6 OF 7 PROCEEDINGS WERE INITIATED, WAS ALREADY WELL CONSIDERED IN THE ORIGINAL PROCEEDINGS , IN WHICH CASE IT IS NOTHING BUT A CHANGE OF OPINION ON THE SAME FACTS AN D CIRCUMSTANCES WHICH WAS ALREADY IN THE KNOWLEDGE OF THE ASSESSING OFFICER EVEN AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. SO A MERE CHANGE OF OPINION CANNOT BE SUBJECT MATTER OF REASONS TO REOPEN AN ASSESSMENT, THERE HAS TO BE SOMETHING NEW MATERIA LS AND EVIDENCES ON BOARD. IN THE INSTANT CASE BEFORE US, WHEN SCRUTINY ASSESSMENT WAS COMPLETED ENTIRE NEXUS OF EXPENSES WAS EXAMINED BY THE ASSESSING OFFICER AND IN THE REOPENING OF THE REASONS THERE IS NO NEW FACTS AND CIRCUMSTANCES BROUGHT IN WHICH TH E ASSESSING OFFICER HAS NOT CONSIDERED EARLIER. WE ARE THEREFORE OF THE VIEW THAT REASSESSMENT FRAMED UNDER SECTION 147/143(3) OF THE ACT BY ISSUING NOTICE UNDER SECTION 148 AND THE REASONS RECORDED THEREIN IS NOT LEGALLY ACCEPTABLE AND THUS BECOMES ARBIT RARY AND ILLEGAL IN NATURE AND LIABLE TO BE QUASHED. WE, THEREFORE, QUASH THE REASSESSMENT FRAMED UNDER SECTION 147/143(3) OF THE ACT. 9 . SINCE WE HAVE ANSWERED THE CROSS OBJECTION OF THE ASSESSEE IN HIS FACOUR, THE REVENUES APPEAL IN ITA NO.702/LKW/2016 BE COMES INFRUCTUOUS. 10 . IN THE RESULT, REVENUES APPEAL IS DISMISSED BEING INFRUCTUOUS AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 / 0 5 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16 TH MAY , 201 8 JJ: 1505 ITA NO.702/LKW/2016 & C.O. NO.05/LKW/2018 PAGE 7 OF 7 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR