Earth Craft Limited, Bhubaneswar V. ITO, Ward-1(3), Bhubaneswar

ITA 146/CTK/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6142 (ITAT-CUTTACK)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 21-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P R MOHANTY
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Revised return; Change of opinion; Revenue expenditure; Reassessment proceedings
• Section: 40A(3); 147

Judgement Text

P A G E 1 | 7 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO 146 /CTK/201 9 ASSESSMENT YEAR : 2012 - 2013 EARTH CRAFT LTD., B - 28, FIRST FLOOR, SAHEED NAGAR, BHUBANESWAR. VS. ITO, WARD - 1(3), BHUBANESWAR. PAN/GIR NO. AACCE 2972 Q (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.R.MOHANTY , AR REVENUE BY : SHRI SUBHENDU DUTTA, DR DATE OF HEARING : 25 / 0 7 / 201 9 DATE OF PRONOUNCEMENT : 06 / 0 8 / 201 9 O R D E R PER C.M.GARG,JM THIS APPEAL FILED BY THE ASSESSE E AGAINST THE ORDER OF THE CIT(A) - 1, BHUBANESWAR DATED 15.3.2019 FOR THE ASSESSMENT YEAR 2012 - 13. 2. IN GROUND NO.2 OF APPEAL, THE ASSESSEE HAS CHALLENGED THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT BY ISSUANCE OF NOTICE U/S.148 OF THE ACT IN THE PRETEXT THAT INCOME ESCAPED ASSESSMENT IN ABSENCE OF ANY CREDIBLE ADDITIONAL MATERIAL EVIDENCES IS NOT PERMISSIBLE IN LAW. ITA NO146/CTK/2019 ASSESSMENT YEAR : 2012 - 2013 P A G E 2 | 7 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE DERIVES INCOME FROM REAL ESTATE BUSINESS. ORIGINAL ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 13.2.2015 DETERMINING THE ASSESSED INCOME AT RS.34,580/ - . THEREAFTER, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD UNDERSTATED ITS INCOME TO THE TUNE OF RS.6,80,000/ - WHICH HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. ACCORDINGLY, NOTICE U/S.148 OF THE ACT WAS SERVED ON THE ASSESSEE AFTER DUE APPROVAL OF THE ADDL. CIT, RANGE - 1 . IN RESPONSE TO NOTICE, THE ASSESSEE FILED REVISED RETURN ON 5.6.2017 AND REQUESTED TO INTIMATE THE REASON FOR REOPENING THE ASSESSMENT. THE ASSESSING OFFICER VIDE HIS LETTER DATED 9.6.2017 FURNISHED THE REASONS FOR REOPENING OF ASSESSMENT AS UNDER: THE ASSESSEE COMPANY HAS PAID R S.6,80,000/ - TO SRI PANCHANAN MOHANTY ON DIFFERENT DATES IN SELF CHEQUE TOWARDS ADVANCE FOR LAND WHICH WAS ENCASHED IN THE INDUSIND BANK ACCOUNT MAINTAINED BY THE ASSESSEE DURING THE ASSESSMENT YEAR 2012 - 13. SINCE THE PAYMENTS HAVE BEEN MADE OTHERWISE THA N CROSSED CHEQUE OR DEMAND DRAFT, THE ENTIRE ADVANCE OF R.6,80,000/ - SHOULD HAVE BEEN DISALLOWED U/S.40A(3) OF THE ACT. THUS, PAYMENT TO SUCH EXPENDITURE IS NOT ALLOWABLE UNDER THE PROVISIONS OF THE I.T.ACT, 1961. IN VIEW OF THE ABOVE, I HAVE REASONS TO B ELIEVE THAT THE INCOME OF RS.6,80,000/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T.ACT, 1961 FOR THE A.Y. 2012 - 13. 4. THE ASSESSEE VIDE HIS LETTER DATED 14.12.2017 STATED THAT THE REASON FOR PROCEEDING DOES NOT STAND FOR ESCAPEMEN T BEING ITA NO146/CTK/2019 ASSESSMENT YEAR : 2012 - 2013 P A G E 3 | 7 ADVANCE TO LANDLORD IS A CURRENT ASSETS WHICH IS CAPITAL IN NATURE INSTEAD OF A REVENUE EXPENDITURE AND HENCE, SECTION 40A(3) OF THE ACT IS NOT APPLICABLE TO THE ASSESSEE COMPANY. THE ASSESSING OFFICER DID NOT FIND THE EXPLANATION OF THE ASSESSEE S ATISFACTORY BECAUSE THE AO FOUND THAT ON ENQUIRY FROM THE INDUSIND BANK, IT IS FOUND THAT THE ASSESSEE COMPANY HAS ISSUED SELF CHEQUES IN THE NAME OF SANJAY KUMAR ROUT ON 16.2.2012 FOR RS.1,00,000/ - , 2.3.2012 FOR RS.1,00,000/ - AND IN THE NAME OF SISIR KANT A BISWAL ON 22.2.2012 FOR RS.50,000/ - BUT THE ASSESSEE HAS CLAIMED TO HAVE PAID TO SRI PANCHANAN MOHANTY WITHOUT MAKING ENTRY THROUGH CASH BOOK AND, THEREFORE, THE STATEMENT GIVEN BY THE ASSESSEE IS CONTRADICTORY. HE ALSO OBSERVED THAT ASSESSEE HAS MADE C ASH PAYMENTS IN EXCESS OF RS.20,000/ - IN A DAY TO SINGLE PARTIES, WHICH ATTRACT THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THEREFORE, THE ASSESSING OFFICER COMPLETED THE REASSESSMENT DETERMINING THE TOTAL INCOME AT RS.28,02,620/ - VIDE HIS ORDER DATED 22 .12.2017. 5. ON APPEAL, THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE UPHOLDING, INTER ALIA, THE DISALLOWANCE MADE U/S.40A(3) OF THE ACT. HENCE, THE ASSESSEE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL. ITA NO146/CTK/2019 ASSESSMENT YEAR : 2012 - 2013 P A G E 4 | 7 6. WE HAVE HEARD LD REPRESENTATIVES OF THE PARTIES A ND PERUSED THE RELEVANT MATERIALS PLACED ON RECORD OF THE TRIBUNAL. 7. LD A.R. OF THE ASSESSEE HAS OBJECTED TO THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT ON THE GROUND THAT THE INITIATION OF REASSESSMENT PROCEEDINGS ITSELF WAS BAD IN LAW AS THE SAME W AS BASED ON CHANGE OF OPINION. LD A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS COMPLIED AS PER QUESTIONARIES U/S.142(1) DATED 28.1.2015 OF THE ASSESSING OFFICER ON 5.2.2015 AND FURNISHED THE COPY OF THE SAID LETTER BEFORE THE TRIBUNAL AND SUBMITT ED THAT AT SL. NO.7 FURNISHING THE CERTIFICATE TO THE EXTENT OF PROVISIONS U/S.40A(3) ATTACHED AS PER ANNEXURE - 6. HE SUBMITTED THAT THE ORIGINAL ASSESSMENT U/S.143(3) OF THE ACT WAS PASSED ON 13.2.2015 AND HENCE, IT CANNOT BE SAID THAT DETAILS FOR CLAIM O F EXPENDITURE U/S.40A(3) OF THE ACT WAS NOT BEFORE THE ASSESSING OFFICER BEFORE COMPLETION OF THE ORIGINAL ASSESSMENT. HE SUBMITTED THAT THEREAFTER NO NEW MATERIAL HAS COME TO THE KNOWLEDGE OF THE AO TO INITIATE THE REASSESSMENT PROCEEDINGS. HENCE, THE REASSESSMENT PROCEEDINGS ON THE VERY SAME MATERIAL ON WHICH ASSESSMENT WAS COMPLETED U/S.143(3) AMOUNTS TO CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW. HE, THEREFORE, URGED TO QUASH THE REASSESSMENT ORDER. ITA NO146/CTK/2019 ASSESSMENT YEAR : 2012 - 2013 P A G E 5 | 7 8. FURTHER, LD A.R. OF THE ASSESSEE REFERRED TO THE JUDGMENT OF HONBLE ORISSA HIGH COURT IN THE CASE OF IN THE CASE OF B.C.NAYAK VS CIT IN WRIT PETITION (C) NO.797/2012 DATED2.2.2015 AND SUBMITTED THAT IT IS NOT PERMISSIBLE FOR THE AO TO INITIATE REASSESSMENT PROCEEDINGS U/S.147 O F THE ACT ON THE GROUND THAT THE ASSESSEE HAS MADE PAYMENTS IN CONTRAVENTION TO THE PROVISION OF SECTION 40A(3) OF THE ACT. THE LD A.R. VEHEMENTLY POINTED OUT THAT THERE WAS NO NEW TANGIBLE MATERIALS WITH THE AO WHICH WAS NOT BEFORE HIM AT THE TIME OF FRA MING ORIGINAL ASSESSMENT ORDER. HENE, IT IS A CLEAR CASE OF CHANGE OF OPINION AND THUS INITIATION OF REASSESSMENT U/S.147 OF THE ACT AND ALL SUBSEQUENT ORDERS MAY KINDLY BE QUASHED. 9 . ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 10 . ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS, WE OBSERVE THAT THE ASSESSEE HAD FURNISHED THE DETAILS OF CLAIM U/S.40A(3) OF THE ACT VIDE HIS LETTER DATED 5.2.2015 TO THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT U/S.143(3) OF THE ACT, THEREFORE, ON THE SAME VERY ISSUE, THE ASSESSMENT WAS REOPENED U/S.147 OF THE ACT WITHOUT THERE BEING ANY NEW MATERIAL COMING TO THE KNOWLEDGE OF THE ASSESSING OFFICER AFTER COMPLETION ITA NO146/CTK/2019 ASSESSMENT YEAR : 2012 - 2013 P A G E 6 | 7 OF ORIGINAL ASSESSMENT. KEEPING IN VIEW ALL THESE FACTS, AND JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF B.C.NAYAK (SUPRA) WE ARE OF THE CONSIDERED VIEW THAT THE REOPENING OF ASSESSMENT MADE BY THE AO IS BASED ON MERE CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW. WE, THEREFORE, FIND MERIT IN THE LEGA L GROUND RAISED BY THE ASSESSEE THAT REASSESSMENT MADE BY THE AO U/S.143(3)/147 OF THE ACT IN PURSUANCE OF THE INVALID INITIATION IS BAD IN LAW AND SAME IS LIABLE TO BE QUASHED. HENCE, WE HOLD THAT THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT BY ISSUE O F NOTICE U/S.148 OF THE ACT IS BAD IN LAW AND, ACCORDINGLY , WE QUASH THE REASSESSMENT ORDER DATED 22.12.2017 AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 11. AS WE HAVE QUASHED THE REASSESSMENT ORDER WHILE ADJUDICATING GROUND NO.2 OF APPEAL, OTHER GROU NDS RAISED BY THE ASSESSEE ON MERITS OF THE CASE HAVE BECOME INFRUCTUOUS. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 6 / 0 8 /201 9 SD/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 6 / 0 8 /20 9 B.K.PARIDA, SPS ITA NO146/CTK/2019 ASSESSMENT YEAR : 2012 - 2013 P A G E 7 | 7 COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK 1. THE APPELLANT: EARTH CRAFT LTD., B - 28, FIRST FLOOR, SAHEED NAGAR, BHUBANESWAR. 2. THE RESPONDENT. ITO, WARD - 1(3), BHUBANESWAR 3. THE CIT(A) - 1 , BHUBANESWAR 4. PR.CIT - 1 , BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//