M/s. Narasimha Murthy & Co., Hyderabad V. Income Tax Officer, Ward-4(4), Hyderabad

ITA 1167/HYD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69735 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 02-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAKIR HUSSAIN SHAIK
• Assessee Lawyers: K NEERAJA
• Keywords: Reopening of assessment; Reason to believe; Reassessment proceedings
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1167/HYD/2012 ASSESSMENT YEAR:2006-07 M/S NARASIMHA MURTHY & CO., APPELLANT HYDERABAD. (PAN AACFN0570E) VS. INCOME-TAX OFFICER, RESPONDENT WARD 4(4), HYDERABAD. APPELLANT BY : SHRI K. NEERAJA RESPONDENT BY : SHRI SHAKIR HUSSAIN SHAIK DATE OF HEARING : 07/08/2013 DATE OF PRONOUNCEMENT : 1 4/08/2013 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-V, HYDERABAD, DATED 08/05/2012 FOR THE ASSESSMENT YEAR 2006-07. 2. AT THE OUTSET, THE LEARNED AR SUBMITTED A PETITI ON PRAYING FOR ADMISSION OF THE FOLLOWING ADDITIONAL GROUND: REOPENING OF THE ASST. U/S 147 OF THE ACT ON THE GR OUND THAT INCOME ESCAPED ASSESSMENT, ONLY FOR RECONCILING THE GROSS RECEIPTS WITH RECEIPTS BASED ON TDS CERTIFICATES IS WITHOUT JURISDICTION, IN VALID AND BAD IN LAW AND IS LIABLE TO BE QUASHED. ITA NO. 1167/HYD/2012 M/S NARASIMHA MURTHY & CO. 2 3. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES WIT H REGARD TO ADMISSION OF THE AFORESAID ADDITIONAL GROUND. SINCE THE ADDITIONAL GROUND IS RAISED BY THE ASSESSEE PURELY ON A LEGAL ISSUE G OING TO THE ROOT OF THE MATTER AND DOES NOT REQUIRE INVESTIGATION INTO FRES H FACTS AND SINCE IT CAN BE DECIDED ON THE BASIS OF THE FACTS AVAILABLE ON R ECORD, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF NTPC VS. CIT, 229 ITR 383, WE ADMIT THE ADDITIONAL GROUND AN D PROCEED TO DECIDE THE SAME. 4. BRIEFLY THE FACTS ARE, THE ASSESSEE A PARTNERSH IP FIRM IS ENGAGED IN THE PROFESSION OF COST AUDITORS AT HYDERABAD, O F COMPANIES ALLOTTED TO IT BY THE MINISTRY OF COMPANY AFFAIRS, GOVERNMENT O F INDIA. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME O F RS. 2,80,344/- AND THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE AC T. SUBSEQUENTLY, THE AO NOTICING DISCREPANCY BETWEEN THE RECEIPT SHOWN I N THE TDS CERTIFICATE FILED ALONG WITH THE RETURN WHICH DISCLOSED THE AMO UNT OF RS. 22,12,907/- AND THE RECEIPT SHOWN BY THE ASSESSEE IN THE P&L AC COUNT AT RS. 15,79,087/- REOPENED THE ASSESSMENT BY INITIATING ACTION U/S 147 OF THE ACT. THOUGH IN COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSEE CONTENDED THAT THE ASSESSEE WAS FOLLOWING CASH SYST EM OF ACCOUNTING AND SHOWING THE INCOME ON RECEIPT BASIS, THE AO COMPLE TED THE ASSESSMENT ON THE BASIS OF RECEIPTS SHOWN IN THE TDS CERTIFICA TES BY TREATING THE ACCOUNTING SYSTEM ADOPTED BY THE ASSESSEE AS MERCA NTILE AND ACCORDINGLY COMPLETED THE ASSESSMENT BY BRINGING TO TAX THE DIFFERENTIAL AMOUNT OF RS. 7,79,792/-. 5. THE ASSESSEE CHALLENGED THE ADDITION MADE BY PRE FERRING AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE FI RST APPELLATE AUTHORITY HOWEVER SUSTAINED THE ADDITION BY DISMISSING THE AP PEAL OF THE ASSESSEE. 6. WE HAVE HEARD CONTENTION OF THE PARTIES ON THIS ISSUE AND PERUSED THE MATERIALS ON RECORD. IT IS THE CONTENT ION OF THE LEARNED AR ITA NO. 1167/HYD/2012 M/S NARASIMHA MURTHY & CO. 3 THAT REOPENING OF ASSESSMENT COULD NOT HAVE BEEN MA DE ONLY FOR RECONCILING THE DISCREPANCY BETWEEN THE GROSS RECEI PTS BASED ON TDS CERTIFICATES. ON THE OTHER HAND THE LEARNED DR STRO NGLY SUPPORTED THE ACTION OF THE LOWER AUTHORITIES. 7. AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES IN THE LIGHT OF THE DECISIONS RELIED UPON, WE FIND THE ISSUE TO BE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. THE ITAT, KOLKATA BENCH IN CASE OF MEHERIA REID & CO. VS. ITO, 81 DTR (CAL. TRIB.) 376 WHILE EXAMININ G IDENTICAL ISSUE OF REOPENING OF ASSESSMENT ON THE BASIS OF DISCREPANCY OF RECEIPTS IN TDS CERTIFICATE HELD AS FOLLOWS: IN THE INSTANT CASE, ASSESSMENT HAS BEEN REOPENED O N THE GROUND THAT THERE IS DISCREPANCY BETWEEN PROFESSIONAL INCO ME DECLARED BY THE ASSESSEE AND THE PROFESSIONAL INCOME AS PER TDS CERTIFICATES AND THAT IT REQUIRES VERIFICATION TO FIND OUT WHETH ER ANY TAXABLE INCOME HAS ESCAPED ASSESSMENT THERE IS NOTHING IN THE REASONS TO INDICATE THAT THERE IS ESCAPEMENT OF INCOME A VARIATION IN THESE TWO FIGURES DOES NOT NECESSARILY LEAD TO ESCAPEMENT OF INCOME MERE NEED TO VERIFY THE DISCREPANCY DOES NOT BRING THE MATTER WITHIN THE SCOPE OF CASES IN WHICH REASSESSMENT PRO CEEDINGS CAN BE VALIDLY INITIATED THERE IS SUBTLE, THOUGH SIGNIFI CANT, DISTINCTION BETWEEN REASON TO BELIEVE AND REASON TO SUSPECT W HILE THE FORMER IS GOOD ENOUGH TO HOLD THAT INCOME HAS ESCAPED ASSE SSMENT AND INITIATE SUITABLE REMEDIAL MEASURES IN RESPECT THER EOF, THE LATTER CAN, AT BEST, BE THE GROUND TO VERIFY AND EXAMINE T HE MATTER FURTHER MERE FACT THAT MATTER NEEDS TO BE VERIFIE D AND EXAMINED FURTHER CAN NEVER BE A REASON GOOD ENOUGH TO BELIEV E THAT INCOME HAS ESCAPED ASSESSMENT AND TO INVOKE THE REASSESSME NT PROCEEDINGS THEREFORE, THE VERY INITIATION OF REA SSESSMENT PROCEEDINGS ON THE FACTS OF THE INSTANT CASE WAS DE VOID OF LEGALLY SUSTAINABLE MERITS REASSESSMENT QUASHED. 8. FOLLOWING THE AFORESAID DECISION OF THE KOLKATA BENCH, THE ITAT HYDERABAD BENCH ALSO IN CASE OF M/S VANSUN ERECTOR S PVT. LTD. VS. ITO IN ITA NO. 456/H/12 DATED 05/04/13 ALSO CANCELLED REAS SESSMENT MADE U/S 143(3) READ WITH SECTION 147 OF THE ACT FOR ASSESSM ENT OF ESCAPED INCOME ON THE BASIS OF RECEIPTS SHOWN IN TDS CERTIFICATE. NO DECISION CONTRARY TO THE AFORESAID RATIO LAID DOWN BY THE COORDINATE BEN CHES OF THE TRIBUNAL ITA NO. 1167/HYD/2012 M/S NARASIMHA MURTHY & CO. 4 WAS BROUGHT TO THE NOTICE BY THE LEARNED DR. IN THE AFORESAID CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF THE TRIBUNAL, WE SET ASIDE THE ORDER OF THE CIT(A) AND QUASH ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 147 OF TH E ACT. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 14/08/2013. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED: 14 TH AUGUST, 2013. KV COPY TO:- 1) M/S NARASIMHA MURTHY & CO., 3-6-365, HIMAYAT NAG AR, HYDERABAD 500 029. 2) IT), WARD 4(4), HYDERABAD. 3) CIT(A)-V, HYDERABAD. 4) CIT-V, HYDERBAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T ., HYDERABAD.