M/s. Phoenix Poultry, Jabalpur V. Assistant Commissioner of Income Tax, Circle 2(1), Jabalpur

CO 6/JAB/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3438 (ITAT-JABALPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-07-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 28-02-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Reason to believe; Reassessment proceedings; TDS
• Section: 147; 148; 143(3); 40(a)(ia); 201(1); 194J

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR (through web-based video conferencing platform) BEFORE SHRI SANJAY ARORA, HON‟BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON'BLE JUDICIAL MEMBER I.T.A. No. 03/JAB/2021 (Asst. Year: 2011-12) C.O. No. 06/JAB/2021 (Arising out of I.T.A. No. 03/JAB/2021) (Asst. Year: 2011-12) Revenue by : Shri Shravan Kumar Gotru, CIT-DR Assessee by : Shri Dhiraj Ghai, FCA Date of hearing : 13/07/2022 Date of pronouncement : 22/07/2022 O R D E R Per Sanjay Arora, AM: This is a set of an Appeal and a Cross Objection (CO) by the Revenue and the Assessee respectively, directed against the Order dated 21/09/2020 by the Commissioner of Income Tax (Appeals)-1, Jabalpur („CIT(A)‟, for short), partly Assistant Commissioner of Income Tax, Circle-2(1), Jabalpur. vs. Phoenix Poultry, 201/15, Ratan Colony, Gorakhpur, Jabalpur. [PAN : AAJFP 8511 H] (Appellant) (Respondent) Phoenix Poultry, 201/15, Ratan Colony, Gorakhpur, Jabalpur. [PAN : AAJFP 8511 H] vs. Assistant Commissioner of Income Tax, Circle-2(1), Jabalpur. (Appellant) (Respondent) ITA No. 03/JAB/2021 (AY: 2011-12) C.O.No. 06/JAB/2021 Asst. CIT vs. Phoenix Poultry 2 | P a g e allowing the assessee‟s appeal contesting it‟s assessment under section 143(3) read with section 147 of the Income Tax Act, 1961 („the Act‟ hereinafter), dated 28/12/2018 for Assessment Year (AY) 2011-12. The background facts 2. The assessment in the instant case was completed in the first instance on 28/03/2014 at an income of Rs. 1570.51 lacs, as against a returned income of Rs. 1500.87 lacs, u/s. 143(3) of the Act (PB pgs. 30-33). The adjustments made included a disallowance u/s. 40(a)(ia) at Rs. 4,96,350, being in respect of payment for training and refresher course without deduction of tax at source. Order u/s. 201(1)/201(1A) of the Act was also passed on the same day (i.e., 28/03/2014), holding the assessee as an assessee-in-default for Rs. 147.93 lacs on account of several payments (aggregating Rs. 1513.90 lacs) without or at short deduction tax at source, levying along with interest u/s. 201(1A) at Rs. 61.80 lacs (PB pgs.46- 55). The assessee, prior to it‟s assessment u/s. 143(3), received a notice dated 24/03/2012 in respect of each of these nine defaults listed in the s.201(1) order dated 28/03/2014 (PB pgs.40-41), which it responded to vide reply dated 27/03/2014, i.e., the date specified in the notice u/s. 142(1). The AO referred thereto in his order u/s. 143(3), dated 28/03/2014, as under: (PB pgs. 30-33) “3. Disallowance on the account of Non Deduction of TDS: On 24/03/2014 with a query letter certain explanation were asked. The replies of these queries filed on 27/03/2014 by assessee. After verification of submission it is found that the assessee firm had made payments of Rs. 4,96,350/- on account of Training and Refresher to Miss Gaura Dubey without deducting of TDS at the rate of 10% thus violated the provision of section 194J of the Income Tax Act, 1961. The whole amount is disallowed u/s. 40(a)(ia) and the amount of Rs. 4,96,350/- is added back to total income for assessee.” Notice u/s. 148(1) was issued on 29/03/2018 for the very same payments, i.e., aggregating to Rs. 1513.90 lacs, and for the same reason, i.e., violation of the provisions of Chapter-XVII of the Act, and for which the assessee had been earlier deemed to be in default vide order u/s. 201(1) dated 28/03/2014. The AO in the ITA No. 03/JAB/2021 (AY: 2011-12) C.O.No. 06/JAB/2021 Asst. CIT vs. Phoenix Poultry 3 | P a g e reassessment proceedings accepted the assessee‟s explanation qua four transactions aggregating to Rs. 1266.97 lacs, and effected disallowance u/s. 40(a)(ia), i.e., for nil or short deduction of tax at source, for the balance of Rs. 246.93 lacs, vide order dated 28/12/2018. In appeal, the ld. CIT(A) allowed relief to the assessee on merits, even as he dismissed the assessee‟s legal grounds, holding as under:- “4.1 Ground Nos.1 to 6: through these grounds of appeal, appellant has challenged the legality of assessment order passed u/s. 147 r.w.s. 143(3) of the Act. The AO during the course of search assessment proceedings observed that the assessee has bogus transactions/investment with the dummy/bogus concerns. Therefore, notice u/s. 148 of the Act was issued on 29/03/2018 after recorded reasons for re-opening of the case. In reply various objections were raised by the ld.AR of the appellant, however, the AO has disposed off all the objections raised by the appellant. Thus, the AO has followed due procedure before framing order u/s. 147 r.w.s. 143(3) of the Act and has also obtained necessary approval from concerned authorities. In view of the above, the plea raised by the appellant has not merits and is therefore, rejected. Therefore, appeal on these grounds is dismissed.” Before us, while the Revenue challenges the relief of Rs. 246.93 lacs, i.e., on merits, the assessee assails the non-acceptance of it‟s legal grounds, besides raising grounds in support of the impugned order (on merits). 3. We have heard the parties, and perused the material on record. 3.1 We shall take up the assessee‟s legal grounds first. We are completely at loss to understand the basis of the reopening of assessment in the instant case. The AO had duly considered the assessee‟ reply dated 27/03/2014 and affected disallowance only for Rs. 4,96,350. Without, therefore, specifying material on record that came to his notice later, or bringing on record material, the AO could not have entertained any reason to believe escapement of income from tax. There is no whisper of any such material in the reason recorded (PB pg.103). All that it says, with reference to the order u/s. 201(1) dated 28/03/2014, mentioning para numbers thereof, that there has been non/short deduction of tax at source by the assessee, which is required to be disallowed u/s. 40(a)(ia). It may be that the order ITA No. 03/JAB/2021 (AY: 2011-12) C.O.No. 06/JAB/2021 Asst. CIT vs. Phoenix Poultry 4 | P a g e u/s. 201(1) dated 28/03/2014, as indeed would be the case, came to the notice of the AO after the passing of the order u/s. 143(3) on 28/03/2014. Even so, unless the reason recorded informs as to what fact had been misstated or misrepresented by the assessee in its reply dated 27/03/2014, and on the basis of which no disallowance, save for Rs. 4,96,350, was made, i.e., with reference to the facts mentioned or found in sec. 201(1) order, there could be no valid reason to believe escapement of income in law, except of course where there is a change in law retrospectively or a judicial decision clarifying the law comes to the notice of the AO, impinging clearly on facts of the case. Needless to add, no such fact or statement of law is stated in the reason/s recorded, on the basis of which jurisdiction to reassess stands assumed by the assessing authority. Why, even the amount disallowed in assessment, i.e., Rs. 4.96 lacs, has been included as income escaping assessment. 3.2 For the reasons afore-stated, fairly not disputed before us by the ld. CIT-DR, it is in our view a clear case of mechanical recording of reasons u/s. 148(2), and lack of application of mind, both by the AO as well as by the authority approving the same u/s. 151, or at best a change of opinion consequent to a review. We, accordingly, hold the impugned order as bad in law for want of jurisdiction, accepting Ground Nos. 1 to 4 of the assessee‟s CO, i.e., on which the arguments and pleadings were made before us . 4. We decide accordingly. 5. In the result, the assessee‟s CO is allowed., and the Revenue‟s appeal is dismissed as infructuous/academic. Order pronounced in open Court on July 22, 2022 Sd/- Sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Dated: 22/07/2022 ITA No. 03/JAB/2021 (AY: 2011-12) C.O.No. 06/JAB/2021 Asst. CIT vs. Phoenix Poultry 5 | P a g e vr/- Copy to: 1. The Revenue: AC I T, Circle-2(1), Jabalpur. 2. The Assessee: M/s. Phoenix Poultry, 201/15, Ratan Colony, Gorakhpur, Jabalpur. 3. The Principal CI T-1, Jabalpur. 4. The CI T( Appeals)-1, Jabalpur. 5. The Sr . D.R., I TAT, Jabalpur. 6. Guard File. By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur.