CKK Catering Services, Mangalore V. Asst.C.I.T., Mangalore

ITA 1098/BANG/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2348 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-08-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 23-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI
• Assessee Lawyers: V SRINIVASAN
• Keywords: Reopening of assessment; Unexplained cash credit; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 1 098 /BANG/201 5 ASSESSMENT YEAR : 20 06 - 07 M/S. C. K. K. CATERING SERVICES, PLATFORM NO. 2, MANGALORE RAILWAY STATION, MANGALORE 575 001. PAN : A ABFC 1416 B VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), C. R. BUILDING, MANGALORE 575 001. APPELLANT RESPONDENT ASSESSEE BY : SHRI. V. SRINIVASAN, ADVOCATE REVENUE BY : SMT. PADMAMEENAKSHI , JCIT DATE OF HEARING : 12 . 0 6 .201 8 DATE OF PRONOUNCEMENT : 3 1 . 0 8 .201 8 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER THE CIT(A). INITIALLY GROUNDS RAISED BY THE ASSESSEE WERE VERY EXHAUSTIVE AND THE ASSESSEE WAS DIRECTED TO FILE THE REVISED GROUNDS OF APPEAL. ACCORDINGLY AMENDED GROUNDS OF APPEAL ARE FILED AND THE SAME ARE TAKEN ON RECORD IN PLACE OF ORIGINAL GROUNDS. THE AMENDED GROUNDS OF APPEAL ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: ITA NO. 1098/BANG/2015 PAGE 2 OF 8 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ORDER OF RE-ASSESSMENT IS BAD IN LAW AND VOID-AB-INITIO FOR WANT OF -REQUISITE JURISDICTION ESPECIALLY, THE MANDATORY REQUIREMENTS TO ASSUME JURISDICTION U/S 148 OF THE ACT DID NOT EXIST AND HAVE NOT BEEN COMPLIED WITH AND CONSEQUENTLY, THE RE-ASSESSMENT REQUIRES TO BE CANCELLED. 3. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS.25,00,000/- RECEIVED BY THE APPELLANT FROM ONE KUNJIPU HAJEE THAT WAS PARTLY RECEIVED BY THE APPELLANT IN CHEQUE OF RS. 5,00,000/- AND THE BALANCE AMOUNT WAS PAID ON BEHALF OF THE APPELLANT OF RS. 20,00,000/- IN FAVOUR OF CTC AS UNEXPLAINED CREDIT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 4. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE HON'BLE CCIT/DG, THE APPELLANT DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST U/S 234-B AND 234-D OF THE ACT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE AND THE LEVY DESERVES TO BE CANCELLED. 5. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. 2. APROPOS GROUND NO. 1 IS GENERAL IN NATURE AND NEEDS NO INDEPENDENT ADJUDICATION WHEREAS THROUGH GROUND NO. 2, IT WAS CONTENDED THAT MANDATORY ITA NO. 1098/BANG/2015 PAGE 3 OF 8 REQUIREMENTS TO ASSUME JURISDICTION UNDER SECTION 148 OF THE ACT DO NOT EXIST THEREFORE THE REASSESSMENT REQUIRES TO BE CANCELLED. NO SPECIFIC GROUNDS HAVE BEEN RAISED TO DEMONSTRATE AS TO FOR WHAT REASON THE REOPENING IS BAD AND REASSESSMENT IS TO BE CANCELLED. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE REOPENING WAS DONE AFTER 4 YEARS WITHOUT RECORDING THAT ESCAPEMENT OF INCOME WAS DONE ON ACCOUNT OF NON-FURNISHING OF THE COMPLETE PARTICULARS BY THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE ASSESSMENT WAS COMPLETED WITHOUT DISPOSING OFF THE OBJECTIONS AGAINST REOPENING OF THE ASSESSMENT FILED BY THE ASSESSEE. THEREFORE, THE ASSESSMENT ITSELF DESERVES TO BE QUASHED AS IT WAS PASSED WITHOUT THE DISPOSAL OF THE OBJECTIONS. IN SUPPORT OF HIS CONTENTIONS, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., (2010) 320 ITR 561 (SC) AND CALCUTTA DISCOUNT CO. VS. ITO 41 ITR 191 (SC). BESIDES IT WAS CONTENDED ON BEHALF OF THE ASSESSEE ON MERIT THAT ASSESSEE HAS FURNISHED THE CONFIRMATION OF THE CREDITOR. THE TRANSACTIONS WERE UNDERTAKEN THROUGH BANKING CHANNELS, THEREFORE IT CANNOT BE DOUBTED. 3. THE LEARNED DR ON THE OTHER HAND HAS PLACED HEAVY RELIANCE UPON THE ORDER OF THE CIT(A). IT WAS CONTENDED THAT REOPENING WAS DONE ON THE BASIS OF THE FINDINGS IN THE ASSESSMENT YEAR 2010-11 IN THE ASSESSEES OWN CASE WHERE THE LOAN TAKEN FROM SHRI. T. V. MOIDEEN KUTTY FOR RS.15,50,000/- WAS NOT GENUINE. IN THAT YEAR, APPELLANT WAS UNABLE TO FURNISH EITHER ANY CONFIRMATION OR THE ADDRESS OF SHRI. KUNHIPPU HAJI AGAINST WHOM THE OUTSTANDING CREDIT BALANCE WAS RS. 25 LAKHS. DURING THE COURSE OF STATEMENT, SHRI. T. V. MOIDEEN KUTTY HAS ACCEPTED THAT A SUM OF RS.15,50,000/- WAS LENT BY THE APPELLANT. THE AO ALSO OPINED THAT THIS LOAN CANNOT BE CONSIDERED TO BE GENUINE AS IT IS NOT ITA NO. 1098/BANG/2015 PAGE 4 OF 8 POSSIBLE FOR A PERSON WHO IS DRAWING SALARY OF RS. 65,000 RS.1,00,000/- TO LEND SUCH SUM WHICH IS 15 TIMES MORE THAN HIS ANNUAL SALARY. SINCE THESE CREDITS ARE PERTAINING TO ASSESSMENT YEAR 2006-07, THE AO RE-OPENED THE ASSESSMENT AFTER RECORDING THE REASONS ON MERIT. THE LEARNED DR FURTHER CONTENDED THAT BEFORE THE AO, ASSESSEE HAS NOT FILED THE OBJECTIONS AGAINST THE RE-OPENING OF THE ASSESSMENT. WHATEVER OBJECTION WAS FILED, IT WAS FILED AFTER COMPLETION OF THE ASSESSMENT. THEREFORE, THE AO HAD NO OCCASION TO DEAL WITH THE OBJECTIONS BEFORE COMPLETING THE ASSESSMENT. SINCE THE OBJECTION WAS FILED AFTER COMPLETION OF THE ASSESSMENT, THE AO HAD NO OCCASION TO DEAL WITH IT. THUS THE ASSESSMENT CANNOT BE CALLED TO BE BAD ON ACCOUNT OF NON-DISPOSAL OF THE OBJECTIONS FILED BY THE ASSESSEE. THE LEARNED DR HAS ALSO PLACED A RELIANCE UPON THE JUDGMENTS OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. SAFETAG INTERNATIONAL INDIA (P.) LTD., 332 ITR 622. ON MERIT ALSO, THE LEARNED DR HAS CONTENDED THAT ASSESSEE HAS NOT FURNISHED THE EVIDENCE WITH REGARD TO CREDIT WORTHINESS OF THE CREDITORS. IN SUPPORT OF HIS CONTENTION THAT TRANSACTION THROUGH BANKING CHANNELS IS NOT SACROSANCT AND THE ASSESSEE IS REQUIRED TO PROVE THE GENUINENESS OF THE TRANSACTION, IDENTITY AND CREDITWORTHINESS OF THE CREDITORS, HE PLACED RELIANCE UPON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SARAVANA CONSTRUCTIONS PVT. LTD., [2012] 22 TAXMANN.COM 259 IN WHICH IT IS HELD THAT THERE IS NO PRESUMPTION THAT MERELY BECAUSE PAYMENT IS MADE BY CHEQUE, IT IS A GENUINE LOAN TRANSACTION AND, THEREFORE, TRIBUNAL WAS NOT JUSTIFIED IN TREATING UNSECURED LOANS AS GENUINE AND BONA FIDE MERELY BECAUSE THEY WERE RECEIVED BY CHEQUES WITHOUT CONDUCTING AN ENQUIRY WITH REGARD TO IDENTITY OF THE PAYER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND WE FIND THAT UNDISPUTEDLY, THE ASSESSMENT WAS ITA NO. 1098/BANG/2015 PAGE 5 OF 8 REOPENED AFTER A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AS THE ASSESSMENT YEAR INVOLVED IS 2006-07 AND THE ASSESSMENT WAS REOPENED BY ISSUING A NOTICE ON 27.03.2013. THEREFORE, BEFORE REOPENING THE ASSESSMENT, THE AO HAS TO RECORD HIS SATISFACTION IN THE REASONS RECORDED THAT THE INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OF THE ACT OR TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT ASSESSMENT YEAR. WE HAVE CAREFULLY EXAMINED THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT AVAILABLE AT PAGE NOS. 27 AND 28 OF THE COMPILATION IN WHICH THE AO HAS RECORDED THE ENTIRE HISTORY AS TO HOW THE ASSESSMENT WAS REOPENED. THE ASSESSMENT WAS REOPENED ON THE BASIS OF THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2010-11 IN WHICH THE STATEMENT OF SHRI. T. V. MOIDEEN KUTTY WAS RECORDED AND HE ADMITTED THAT HE HAS LENT A SUM OF RS.15,50,000/- DURING THE FINANCIAL YEAR 2005-06 AND AN AMOUNT OF RS. 9 LAKHS WAS OUTSTANDING AFTER SOME REPAYMENT. IN CONCLUDING PARAS OF THE REASONS RECORDED, THE AO HAS MENTIONED THAT HE HAS REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT BUT HE HAS NOT RECORDED IN THE ENTIRE REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT FOR SUCH ASSESSMENT YEAR BY THE REASON OF FAILURE ON THE PART OF ASSESSEE TO MAKE RETURN UNDER SECTION 139 OF THE ACT OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THAT ASSESSMENT. OUR ATTENTION WAS INVITED TO THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CHAITANYA PROPERTIES (P) LTD., (2016) 140 DTR (KAR) 224 IN WHICH IT HAS BEEN HELD THAT INITIATION OF REASSESSMENT PROCEEDINGS WILL HAVE TO BE HELD AS INVALID FOR THE REASON THAT REASONS RECORDED BY THE AO DO NO SPELL OUT THAT ESCAPEMENT OF INCOME WAS DUE TO THE ASSESSEE NOT FULLY AND TRULY DISCLOSING ALL MATERIAL FACTS NECESSARY FOR COMPLETION OF ASSESSMENT FOR RELEVANT ASSESSMENT YEAR. THE ITA NO. 1098/BANG/2015 PAGE 6 OF 8 RELEVANT OBSERVATION OF THE HONBLE HIGH COURT IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: WE ARE ALSO OF THE VIEW THAT INITIATION OF REASSESSMENT PROCEEDINGS WILL HAVE TO BE HELD AS INVALID FOR THE REASON THAT REASONS RECORDED BY THE AO DO NO SPELL OUT THAT ESCAPEMENT OF INCOME WAS DUE TO THE ASSESSEE NOT FULLY AND TRULY DISCLOSING ALL MATERIAL FACTS NECESSARY FOR COMPLETION OF ASSESSMENT FOR RELEVANT ASSESSMENT YEAR. IN THIS REGARD, WE ARE ALSO OF THE VIEW THAT ALLEGATIONS IN PARA 19 OF THE REASONS RECORDED DO NO SPELL OUT THE BELIEF THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS. IN FACT, THE ASSESSEE HAD DISCLOSED ALL FACTS IN THE ORIGINAL ASSESSMENT PROCEEDINGS UNDER S. 143(3) OF THE ACT. 24. WITH REGARD TO RELIANCE PLACED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON EXPLANATION TO S. 147, WE ARE OF THE VIEW THAT EXPLN. 1 ONLY LAYS DOWN THAT FACTS AND CIRCUMSTANCES OF EACH CASE WILL HAVE TO BE LOOKED INTO TO ASCERTAIN AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE MATERIAL FACTS. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE EXPRESSION WILL NOT NECESSARILY IN EXPLN. 1 WILL ONLY MEAN THAT FACTS AND CIRCUMSTANCES OF EACH CASE WILL HAVE TO BE SEEN AS TO WHETHER PRODUCTION OF BOOKS OF ACCOUNT AND OTHER EVIDENCE BEFORE THE AO WILL AMOUNT TO FULL AND TRUE DISCLOSURE OF MATERIAL FACTS. IN THE PRESENT CASE, AS WE HAVE ALREADY SEEN, EVIDENCE WAS PRODUCED BEFORE THE AO IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS UNDER S. 143(3) OF THE ACT AND THE SAME WAS PERUSED BY THE AO AND HE HAD NOT CHOSEN TO DRAW ANY CONCLUSION THAT THERE WAS A TRANSFER BY THE ASSESSEE TO PEPL. THE FACT THAT ASSESSEE WAS FOLLOWING COMPLETION METHOD OF ACCOUNTING FOR INCOME FROM THE JDA, HAS ALSO BEEN ITA NO. 1098/BANG/2015 PAGE 7 OF 8 ACKNOWLEDGED BY THE AO. IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE VIEW THAT EXPLN. 1 CANNOT BE RESORTED TO BY THE REVENUE. EXPLN. 1 TO S. 147 CANNOT BE READ IN A MANNER SO AS TO OVERRIDE PROVISO TO S. 147 OF THE ACT. 25. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAD PLACED RELIANCE ON THE ORDER OF THE CIT(A)ON THE ISSUE OF VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS. IN OUR VIEW, THE LEARNED CIT(A) HAS MERELY PROCEEDED ON THE BASIS THAT INCOME ARISES ON EXECUTING JOINT DEVELOPMENT AGREEMENT TO THE ASSESSEE. HE HAS NOT ADDRESSED THE ISSUE WITH REGARD TO APPLICABILITY OF PROVISO TO S. 147 OF THE ACT OR THE QUESTION WHETHER REASSESSMENT PROCEEDINGS WERE INITIATED MERELY ON CHANGE OF OPINION. 26. WE ARE, THEREFORE, OF THE VIEW THAT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, INITIATION OF REASSESSMENT PROCEEDINGS UNDER S. 147 OF THE ACT IS HELD TO BE ILLEGAL AND CONSEQUENTLY, ORDER PASSED UNDER S. 147 OF THE ACT IS CANCELLED ON THIS GROUND. 5. UNDISPUTEDLY, IN THE ENTIRE REASONS RECORDED FOR REOPENING THE ASSESSMENT, NO WHERE THE AO HAS SPELL OUT THAT ESCAPEMENT OF INCOME WAS ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY TO THE COMPLETION OF THE ASSESSMENT IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, IN THE ABSENCE OF SPECIFIC FINDING OF THE AO IN THE REASONS RECORDED, WE ARE OF THE VIEW THAT REOPENING OF ASSESSMENT IS NOT VALID IN THE LIGHT OF AFORESAID JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT. THOUGH ON MERIT ASSESSEE MAY NOT HAVE A STRONG CASE AS THE CREDITOR DOES NOT HAVE CREDITWORTHINESS TO ADVANCE SUCH A HUGE AMOUNT TO THE ASSESSEE BUT WE REFRAIN OURSELVES FROM GIVING SUCH A FINDING ON MERIT AS REOPENING ITSELF IS BAD FOR THE ITA NO. 1098/BANG/2015 PAGE 8 OF 8 REASONS GIVEN IN THE FOREGOING PARAS. WE, THEREFORE, HAVE NO HESITATION IN QUASHING THE ASSESSMENT FRAMED CONSEQUENT TO THE BAD REOPENING. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ENTIRE ADDITION. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2018. SD/- SD/- BANGALORE. DATED: 31 ST AUGUST, 2018. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE. ( A. K. GARODIA ) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER