ITO, Ward-1(2), Bhubaneswar V. M/s. Subham Estcon Private Limited, , Bhubaneswar

ITA 05/CTK/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4983 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 17-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P K MISHRA
• Keywords: Reopening of assessment; Audit objection; Tangible material; Difference of opinion; Tax effect; Change of opinion; Reassessment proceedings

Judgement Text

P A G E 1 | 6 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO . 05 /CTK/201 9 ASSESSMENT YEAR : 2011 - 2012 INCOME TAX OFFICER, WARD - 1(2), BHUBANESWAR. VS. M/S. SUBHAM ESTCON PRIVATE LIMITED, PLOT NO.HIG/128 - B, H. B COLONY, BDA DUPLEX, BARAMUNDA, BHUBANESWAR PAN/GIR NO. AAHCS 4353 C (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.K.MISHRA, ADV REVENUE BY : SHRI SUBHENDU DUTTA, DR DATE OF HEARING : 24 / 0 9 / 20 20 DATE OF PRONOUNCEMENT : 07 / 10 /20 20 O R D E R PER C.M.GARG,JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A),1, BHUBANESWAR DATED 5.10.2018 FOR THE ASSESSMENT YEAR 2011 - 12 . 2. IN THE GROUNDS OF APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD CIT(A) IN QUASHING THE REOPENING OF ASSESSMENT ORDER U/S.147 OF THE ITA NO.05/CTK/2019 ASSESSMENT YEAR : 2011 - 2012 P A G E 2 | 6 ACT, WHICH IS AGAINST THE PROVISIONS OF CBDT CIRCULAR NO.03 OF 2018 DATED 11.7.2018. 3 . AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE , SUPPORTING THE ORDER OF THE LD CIT(A), SUBMITTED THAT THE REOPENING OF ASSESSMENT WAS INITIATED ON MERE CHANGE OF OPINION. HE SUBMITTED THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING O FFICER HAD EXAMINED THE BOOKS OF ACCOUNT, PURCHASES, SALES AND STOCKS AND ACCEPTED THE BOOK RESULTS. HOWEVER, ON THE BASIS OF AUDIT OBJECTION ON THE ALLEGATION OF UNDER VALUATION OF THE CLOSING STOCK TO THE EXTENT OF RS.81,07,000/ - , THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT. HE SUBMITTED THAT WHEN ALL THESE MATERIALS WERE FURNISHED BEFORE THE AO DURING THE ORIGINAL ASSESSMENT, ON THE SAME FACTS, THE REOPENING IS BAD IN LAW. 4. FURTHER, LD A.R. SUBMITTED THAT THE APPEAL IS ALSO NOT MAINTAINABLE IN VIEW OF THE CBDT CIRCULAR NO. 17/2019 DATED 08.08.2019 IN F.NO. 279/MISC. 142/2007 - ITJ (PT.) WHEREIN MINIMUM THRESHOLD LIMIT OF TAX EFFECT FOR FILING OF APPEALS BY REVENUE IN INCOME TAX APPELLATE TRIBUNAL HAS BEEN ENHANCED TO RS. 50,00,000/ - BY REVISING THE EARLIER CBDT CIRCULAR NO. 3 OF 2018, DATED 11.07.2018. 5 . REPLYING TO ABOVE, LD. DR, SUBMITTED THAT IN THIS CASE, THE ASSESSING OFFICER HAD REOPENED THE ASSESSMENT AFTER BEING SATISFIED WITH THE REASON RECORDED BY HIM. THUS, QU ASHING OF REASSESSMENT ORDER BY THE LD CIT(A) IS ITA NO.05/CTK/2019 ASSESSMENT YEAR : 2011 - 2012 P A G E 3 | 6 AGAINST THE PROVISIONS OF CBDT CIRCULAR NO.03 OF 2018 (SUPRA). HE SUBMITTED THAT THE ABOVE CIRCULAR IS N OT A BLANKET BAR ON FILING OF APPEALS BEFORE ITAT AND PARA 10 DETAILS THE EXCEPTIONS TO FILE THE APPEA L WHERE TAX EFFECT IS LESS THAN RS.20 LACS . 6 . WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED REPRESENTATIVES OF PARTIES . WE FIND THAT THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT WAS INITIATED ON THE BASIS OF AUDIT OBJECTION THAT THE ASSESSEE HAS UNDERSTATED THE VALUE OF ITS CLOSING STOCK TO THE EXTENT OF RS.81,07,000/ - . THE ASSESSING OFFICER HAS ALSO RECORDED THE REASONS STATING THAT IN RESPECT OF BUDHA VIHAR AND IG PROJECT, THE TOTAL VALUE OF LAND PURCHASED IS SHOWN AT RS.81,07,000/ - AND SINCE THE OPENING OF STOCK, SALE AND CLOSING STOCK OF LAND IN RESPECT OF THE SAID PROJECT WAS NIL, THE ASSESSEE SHOULD HAVE SHOWN THE VALUE OF LAND PURCHASED DURING THE YEAR AS CLOSING STOCK , WHICH THE ASSESSEE HAS NOT DONE. ON PERUSAL OF ORIGINAL ASSESSMENT OR DER PASSED U/S.143(3) OF THE ACT, WE NOTE THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FURNISHED ALL SUCH DETAILS RELATING TO PURCHASE AND SALE OF LAND AND ALSO CLOSING TOCK IN RESPECT OF VARIOUS PROJECTS, FROM WHICH, THE AO MADE DISAL LOWANCE U/S.40A(3) OF THE ACT ON THE GROUND OF CASH PAYMENTS. IT IS ALSO NOTED THAT THE LAND PURCHASED DURING THE YEAR FOR THE PROJECTS WERE SOLD DURING THE YEAR ITSELF AND HENCE, THERE WAS NO CLOSING STOCK. ON THE FOREGOING REASONS, THE LD CIT(A) QUAS HED THE REASSESSMENT PROCEEDINGS PASSED U/S.147 OF THE ACT FOLLOWING ITA NO.05/CTK/2019 ASSESSMENT YEAR : 2011 - 2012 P A G E 4 | 6 THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD., 320 ITR 561 (SC) AND ALSO OTHER JUDICIAL PRONOUNCEMENTS ON THE ISSUE THAT WHERE THERE IS NO TANGIBLE MATERIALS COME TO THE KNOWLEDGE OF THE AO, THE ASSESSMENT CANNOT BE REOPENED ON MERE CHANGE OF OPINION. ON MERITS ALSO, THE LD CIT(A) OBSERVED THAT THE ADDITION CANNOT BE SUSTAINED, OBSERVING AS UNDER: IN THE GROUND INCORPORATED IN APPEAL MEMO, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.81,00,000/ - ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK. THOUGH THE REASSESSMENT IS BEING QUASHED ON THE ADDITIONAL GROUNDS, IT IS FELT NECESSARY TO ADJUDICATE THIS GRO UND SINCE FROM THE MATERIALS ON RECORD IT IS QUITE CLEAR THAT THERE IS NO JUSTIFICATION TO MAKE ANY ADDITION FOR UNDERSTATEMENT OF CLOSING STOCK. FROM THE DETAILS AVAILABLE IN THE ORIGINAL ASSESSMENT ORDER AT PAGES 2 - 7, IT IS CLEAR THAT THE ASSESSEE HAD P URCHASED LAND FOR RS.81,08,000/ - FOR IG COLONY - I PROJECT DURING THE RELEVANT FY 2010 - 2011 AND SUBSEQUENTLY ON SALE OF THE SAME DURING THE YEAR ITSELF HAD DEBITED THE COST OF RS.81,07,000/ - TO THE P&L ACCOUNT. THE SALE PROCEEDS OF THE LAND HAD BEEN DULY CR EDITED TO THE P&L ACCOUNT AT RS.92,48,415/ - . SINCE THE LAND PURCHASED DURING THE YEAR RELATING TO THE PROJECT IN QUESTION WAS SOLD DURING THE YEAR ITSELF, NO CLOSING STOCK WAS SHOWN IN THE BALANCE SHEET RELATING TO THE PROJECT. IT IS NOT THAT THE AO WHILE MAKING THE REASSESSMENT WAS NOT AWARE OF THESE FACTS. IN FACT, THE AO APPEARS TO BE FULLY AWARE OF THE FACT THAT THE LAND IN QUESTION HAD BEEN SOLD DURING THE YEAR LEAVING NO CLOSING STOCK IN RESPECT OF THE SAME AT THE END OF THE YEAR. EVEN THEN, THE AO PROCEEDED O N A WRONG PRESUMPTION WHICH IS CONTRARY TO THE FACTS THAT THE ASSESSEE HAD NOT DISCLOSED ANY SALES IN RESPECT OF THE PROJECT IN QUESTION AND MADE THE IMPUGNED ADDITION OF RS.81,00,000/ - (EXCLUDING RS.7,000/ - FOR WHICH DISALLOWANCE U/S.40A(3 ) WAS ALREADY MADE IN THE ORIGINAL ASSESSMENT ORDER). ON THE FACTS OF THE CASE, THEE IS NO JUSTIFICATION TO MAKE ANY ADDITION ON ACCOUNT OF UNDERSTATEMENT OF CLOSING STOCK. HENCE, THE ADDITION CANNOT BE SUSTAINED ON MERIT AND THE ABOVE GROUND IS TO BE ALLOWED. ITA NO.05/CTK/2019 ASSESSMENT YEAR : 2011 - 2012 P A G E 5 | 6 8. FROM THE ABOVE, WE OBSERVE THAT THE DISALLOWANCE WAS DELETED BY THE LD CIT(A) ON MERITS. HENCE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF LD CIT(A). 9 . EVEN OTHERWISE, I N OUR CONSIDERED OPINION, THE ISSUE IS COVERED BY THE CIRCULAR N O. 17/2019 DATED 08.08.2019, WHICH HAS TO BE READ IN CONJUNCTION WITH THE CBDT CIRCULAR NO.3/18 DATED 11.07.2018, VIDE WHICH THE CBDT HAD REVISED THE MONETARY LIMIT TO RS.20,00,000/ - FOR NOT FILING THE APPEAL BEFORE THE TRIBUNAL. IN THIS CASE, THE TAX EFFECT IS BELOW THE THRESHOLD LIMIT OF RS.50,00,000/ - FIXED BY THE CBDT AND, THEREFORE, KEEPING IN VIEW THE CBDT CIRCULARS CITED (SUPRA), WE ARE OF THE VIEW THAT THE REVENUE SHOULD NOT HAVE FILED THE APPEAL BEFORE THE TRIBUNAL . 10 . IN THE RESULT, APPEA L OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 07 / 10 /20 20 . S D/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 07 / 10 /20 20 B.K.PARIDA, SPS (OS) ITA NO.05/CTK/2019 ASSESSMENT YEAR : 2011 - 2012 P A G E 6 | 6 COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK 1. THE APPELLANT : INCOME TAX OFFICER, WARD - 1(2), BHUBANESWAR. 2. THE RESPONDENT. M/S. SUBHAM ESTCON PRIVATE LIMITED, PLOT NO.HIG/128 - B, H. B COLONY, BDA DUPLEX, BARAMUNDA, BHUBANESWAR 3. THE CIT(A) - 1 , BHUBANESWAR 4. PR.CIT - 1 , BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//