The ITO, Ward-2(4), Surat V. Shri Vinodkumar Vithalbhai Patel, Surat

ITA 1321/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0942 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-08-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 08-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RICHA RASTOGI
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 194C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJEET SINGH, ACCOUNTANT MEMBER THE ITO, WARD - 2(4), ROOM NO. 119, 1 ST FLOOR, AYAKAR BHAVAN, MAJURAGATE, SURAT (APPELLANT) VS SHRI VINODKUMAR VITHALBHAI PATEL, PROP. V.B. CONSTRUCTION, 202, KINJAL APARTMENT, OPP. CIVIL HOSPITAL, KAILASH NAGAR, SURAT - 3 95002, PAN: AAMPP3007C (RESPONDENT) REVENUE BY : MS. RICHA RASTOGI , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 01 - 08 - 2 016 DATE OF PRONOUNCEMENT : 19 - 08 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2005 - 06 , AR ISES FROM ORDER OF THE CIT(A) - II, SURAT DATED 28 - 02 - 2013 IN APPEAL NO. CAS - II/ 3 57/2010 - 11 , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. OF THE INCOME TAX ACT, 19 61; IN SHORT THE ACT . I T A NO . 1321 / A HD/20 1 3 A SSESSMENT YEAR 200 5 - 06 I.T.A NO. 1321 /AHD/20 13 A.Y. 2005 - 06 PAGE NO ITO VS. SHRI VINODKUMAR VITHALBHAI PATEL, PROP. V.B. CONSTRUCTION 2 2. THE REVENUE S SOLE SUBSTANTIVE GROUND CHALLENGES THE LOWER APPELLATE ORDER QUASHING THE IMPUGNED REOPENING TAKEN RECOURSE TO BY THE ASSESSING OFFICER. 3. CASE CALLED TWICE. NONE APPEARS AT ASSESSE S BEHEST DESPITE SERVICE OF NOTICE. HE IS ACCORDINGLY PROCEEDED EX - PAR TE. 4. WE COME TO RELEVANT FACTS OF THE CASE. THE ASSESSEE - AN INDIVIDUAL CARRIES OUT CIVIL CONSTRUCTION WORK IN THE NAME AND STYLE OF M/S V.B. CONSTRUCTIONS . HE FILED RETURN ON 26 - 010 - 2005. THE ASSESSING OF FICER FRAMED A REGULAR ASSESSMENT ON 21 - 01 - 2007 ASSESSING TAXABLE INCOME AT RS. 3,08,120/ - . 5. WE PROCEED FURTHER TO NOTICE THAT THE ASSESSING OFFICER THEREAFTER FORMED REASONS TO BELIEVE THAT ASSESSEE S TAXABLE INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT FOR THE REASON THAT ONE M/S RANJEET CONSTRUCTION CO. HAD PAID HIM A SUM OF RS. 67,68,887/ - . ITS TDS CERTIFICATE WAS AVAILABLE ON RECORD. THE ASSESSEE S P & L ACCOUNT HAD DEBITED LABOUR AND WAGES EXPENSES OF RS.56,20,445/ - INCLUDING A SUM OF RS. 55,92,658/ - CREDITED TO THE ABOVE ENTITY ACCOUNT. THE ASSESSING OFFICER WAS ACCORDI NGLY OF TH E VIEW THAT THIS LATTER SUM OF R S. 55,92,658/ - HAD NOT BEEN SUBJECTED TO TDS DEDUCTION U/S. 194C OF THE ACT WARRANTING SECTION 40(A)(IA) DISALLOWANCE. HE ISS UED SECTION 148 NOTICE DATED 18 - 03 - 2010. THE ASSESSEE REITERATED HIS EARLIER RETURN. THE ASSESSING OFFICER THEREAFTER FRAMED REASSESSMENT ON 28 - 12 - 2010 DISALLOWING THE ABOVE I.T.A NO. 1321 /AHD/20 13 A.Y. 2005 - 06 PAGE NO ITO VS. SHRI VINODKUMAR VITHALBHAI PATEL, PROP. V.B. CONSTRUCTION 3 STATED SUM OF RS . 55,92,658/ - QUOTING ASSESSEE S FAILURE IN DEDUCTING TDS THEREUPON. 6. THE ASSESSEE PREFERRED APPEAL. HE RAISED FIRST LEGAL GROUND IN CHALLENGING VALIDITY OF THE IMPUGNED REOPENING FOLLOWED BY LATTER CONTENTION ON MERITS OF THE ADDITION. THE CIT(A) ACCEPTS FORMER LEGAL PLEA AS UNDER: - 2.3 I HAVE CONSIDERED THE FACT S OF THE CASE, BASIS OF REOPENING AND SUBMISSIONS OF APPELLANT. AS IT MAY BE SEEN FROM THE REASONS RECORDED BY AO, THE BASIS OF REOPENING THE ASSESSMENT WAS THAT HE WAS NOT ABLE TO MAKE ADDITION ON ACCOUNT OF LABOUR AND WAGES EXPENSES U/S, 40(A)(IA) OF THE ACT DUE TO NON DEDUCTION OF TAX DURING ORIGINAL ASSESSMENT PROCEEDINGS, THEREFORE, HE UNDERTOOK THE REMEDIAL ACTION BY ISSUING NOTICE U/S. 148 OF I.T. ACT, HOWEVER, THE ACTION OF AO OF REOPENING OF ASSESSMENT ON THE BASIS OF ABOVE GROUNDS IS NOT JUSTIFIAB LE, TO START PROCEEDINGS U/S, 147 OF I.T. ACT, AO MUST HAVE 'REASON TO BELIEVE' AND THIS BELIEF SHOULD BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL. THE CHANGE OF OPINION OR FORMING AN OPINION ON ANY ISSUE CANNOT BE TERMED AS REASON TO FORM BELIEF F OR REOPENING THE ASSESSMENT. IN THIS CASE, AO HAS NO NEW MATERIAL TO FORM THE OPINION THAT THERE IS ESCAPEMENT OF INCOME BY APPELLANT. THE DETAILS RELATED TO EXPENSES OF LABOUR AND WAGES WERE ON RECORD IN THE RETURN OF INCOME ITSELF. ALL THE DETAILS IN RES PECT OF INCOME DISCLOSED IN THE ORIGINAL RETURN OF INCOME WERE EXAMINED AND BOOKS OF ACCOUNT WERE VERIFIED BY AO DURING THE REGULAR ASSESSMENT PROCEEDINGS AND SOME ADDITIONS WERE ALSO MADE. NOT BEING ABLE TO DISALLOW THE LABOUR AND WAGES EXPENSES, NOW THE AO HAS TAKEN THE RECOURSE OF REASSESSMENT PROCEEDINGS BY ISSUING NOTICE U/S. 148 OF THE I.T. ACT ON THE BASIS OF FACTS ALREADY AVAILABLE WITH AO DURING THE REGULAR ASSESSMENT PROCEEDINGS. IN SUCH SITUATION, TAKING ACTION U/S. 147 OF I.T. ACT ON THE BASES O F CHANGE OF OPINION CANNOT BE ALLOWED. AS IT WAS HELD IN THE CASE CIT VS. BHANJI LAVJI (79 ITR 582) BY HON'BLE SUPREME COURT THAT WHEN THE PRIMARY FACTS NECESSARY FOR ASSESSMENT ARE FULLY AND TRULY DISCLOSED, THE ITO WILL NOT BE ENTITLED ON CHANGE OF OPINI ON TO COMMENCE PROCEEDINGS FOR THE ASSESSMENT. SIMILARLY, IF HE HAS RAISED WRONG LEGAL INFERENCE FROM THE FACTS DISCLOSED, HE WILL NOT, ON THAT ACCOUNT, BE COMPETENT TO COMMENCE I.T.A NO. 1321 /AHD/20 13 A.Y. 2005 - 06 PAGE NO ITO VS. SHRI VINODKUMAR VITHALBHAI PATEL, PROP. V.B. CONSTRUCTION 4 REASSESSMENT PROCEEDINGS. SIMILARLY, IN THE CASE OF ITO VS, NAWAB MIR B ARKAT ALI KHAN BAHADUR (97 ITR 239), HON'BLE SUPREME COURT HELD THAT HAVING SECOND THOUGHTS ON THE SAME MATERIAL, AND OMISSION TO DRAW THE CORRECT LEGAL PRESUMPTION DURING ORIGINAL ASSESSMENT DO NOT WARRANT THE INITIATION OF PROCEEDINGS U/S. 147 OF I.T. AC T. HOWEVER, FROM THE FACTS OF THIS CASE, IT CAN BE SEEN THAT THE AO WAS NOT HAVING ANY NEW FACTUAL INFORMATION IN HIS POSSESSION TO FORM THE OPINION THAT THERE IS ANY ESCAPEMENT OF INCOME. HE HAS MERELY FORMED HIS OPINION ON THE BASIS OF FACTS AVAILABLE ON RECORD IN THE RETURN OF INCOME OF APPELLANT. FOR A LONG TIME THE FACTS OF THE CASE REMAINED ACCEPTED BY AO AND SUDDENLY AFTER ALMOST FOUR YEARS, AO CHANGED HIS OPINION THAT THE LABOUR AND WAGES EXPENSES ARE NOT ALLOWABLE. SUCH CHANGE OF OPINION CANNOT BE HELD VALID IN THE LIGHT OF AFORESAID DECISIONS OF HON'BLE SUPREME COURT. IN VIEW OF THE FACTS AND LEGAL POSITION AS DISCUSSED ABOVE, REOPENING OF ASSESSMENT CANNOT BE HELD LEGAL, THEREFORE, THE WHOLE REASSESSMENT PROCEEDINGS STAND ANNULLED. THIS GROUND OF APPEAL IS ALLOWED. 7. WE HAVE HEARD THE REVENUE AND GONE THROUGH THE CASE FILE. LD. DEPARTMENTAL REPRESENTATIVE INTER ALIA ARGUES THAT THE ASSESSING OFFICER DID NOT RECORD ANY FINDING AT ALL IN THE ORIGINAL ASSESSMENT FRAMED QUA THIS TDS ISSUE IN QUEST ION. HER FURTHER CONTENTION IS THAT THE IMPUGNED REOPENING WAS RIGHTLY TAKEN RECOURSE TO SINCE ASSESSEE S TAXABLE INCOME HAS ESCAPED ASSESSMENT. SHE FURTHER HIGHLIGHTS THE FACT THAT THE IMPUGNED REOPENING IS VERY WELL WITHIN A TIME SPAN OF 4 YEARS FROM TH E END OF THE IMPUGNED ASSESSMENT YEAR . THE REVENUE S LAST ARGUMENT IS THAT THE CIT (A) HAS ERRED IN NOT DECIDING THE ISSUE OF TDS DEDUCTION ON MERITS. 8. WE HAVE GIVEN OUR THOUGHTFUL CONS IDERA T IO N TO REVENUE S ARGUMENT . WE FIND FIRST OF ALL THAT THIS IS REVENUE S APPEAL AND IT HAS NOT PLACED ON RECORD ORIGINAL ASSESSMENT ORDER DATED 21 - 12 - 2007 SO I.T.A NO. 1321 /AHD/20 13 A.Y. 2005 - 06 PAGE NO ITO VS. SHRI VINODKUMAR VITHALBHAI PATEL, PROP. V.B. CONSTRUCTION 5 AS TO BUTTRESS ITS ARGUMENT THAT THE ASSESSING OFFICER HAD NOT GIVEN ANY FINDING ON THE IMPUGNED TDS ISSUE. THE CIT(A) RECORDS THAT THE ASSESSING OFFICER HAD DU LY EXAMINED THE ISSUE OF QUESTION OF LABOUR AND WAGES EXPENSES AND VERIFIED THE RELEVANT FACTS FROM ASSESSEE S BOOKS OF ACCOUNT SINCE ALL THE RELEVANT DETAILS WERE DULY INCORPORATED THEREIN. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT REBUT THIS FACT BY PLA CING ON RECORD ANY EVIDENCE TO THE CONTRARY. WE ASSUME IN THIS PECULIAR BACKDROP THAT THE ASSESSING OFFICER HAD IN FACT EXAMINED THE ISSUE AND TOOK A CONSCIOUS DECISION NOT TO INVOKE THE IMPUGNED DISALLOWANCE WHILST FRAMING REGULAR ASSESSMENT. WE FURTHER FIND THAT THE CIT(A) HAS NOT EXAMINED THE ISSUE ON MERITS DESPITE THE FACT THAT THE ASSESSEE S ONLY ARGUMENTS WAS THAT HE HAD NOT CREDITED ANY PAYMENT OF RS. 55,92,658/ - ON ACCOUNT OF AVAILING LABOUR AND WAGES SERVICES FROM THE OTHER ENTITY M/S. RANJIT C ONSTRUCTIONS (SUPRA). THIS CLINCHING PLEA HAS ALSO GONE UN - REBUTTED IN THE COURSE OF HEARING BEFORE US. WE FIND NO REASON TO INTERFERE IN WELL REASONED CIT(A) S FINDINGS QUASHING VALIDITY OF THE IMPUGNED REOPENING AFTER CONCLUDING THE SAME AS MERE CHANGE OF OPINION AS PER HON BLE APEX COURT S DECISION IN CASE OF KALVE NATOR INDIA LTD. 320 ITR 561. THE REVENUE S SOLE SUBSTANTIVE GROUND ACCORDINGLY FAILS. 9. THIS REVENUE S APPEAL IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 19 - 08 - 20 1 6 SD/ - SD/ - ( AMARJEET SINGH ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 19 /08 /2016 I.T.A NO. 1321 /AHD/20 13 A.Y. 2005 - 06 PAGE NO ITO VS. SHRI VINODKUMAR VITHALBHAI PATEL, PROP. V.B. CONSTRUCTION 6 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,