DCIT CENT CIR 7(1) , MUMBAI V. SHRI MANOJ KUMAR BABULAL PUNAMIYA, MUMBAI

ITA 1550/MUM/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6923 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 06-09-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR
• Keywords: Recovery proceedings; Business income; Tax effect; Tax effect; Reassessment proceedings
• Section: 143(3); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘E‘ BENCH MUMBAI BEFORE: SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA No.1550/Mum/2021 (Assessment Year :2011-12) Deputy Commissioner of Income Tax, CC-7(1) R.No.676B, 6 th Floor Aayakar Bhavan M.K.Road, Mumbai – 400 020 Vs. Shri Manoj Kumar Babulal Punamiya 118/120, 3 rd Floor, Ashok House Zaveri Bazar, Near Mumbadevi Temple Mumbai – 400 002 PAN/GIR No.AAJPP8662L (Appellant) .. (Respondent) Revenue by Shri Brajendra Kumar Assessee by Shri Vimal Punmiya Date of Hearing 14/07/2022 Date of Pronouncement 15/07/2022 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No.1550/Mum/2021 for A.Y.2011-12 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49, Mumbai/10085/2018-19 dated 28/06/2021 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 05/12/2018 by the ld. Dy.Commissioner of Income Tax, Central Circle 7(1), Mumbai (hereinafter referred to as ld. AO). ITA No.1550/Mum/2021 Shri Manoj Kumar Babulal Punamiya 2 2. At the outset, the ld. AR argued that the appeal of the revenue is to be dismissed as not maintainable , in view of the fact that the tax effect of the disputed issue before us is less than the monetary limit prescribed by CBDT for enabling revenue to prefer appeal before this tribunal. This was vehemently objected by the ld. DR by stating that the case falls under the exception to the said CBDT Circular on low tax effect, as in the instant case, the case was reopened based on audit objection which was accepted by the revenue. In support of this, the ld. DR placed on record the copy of the audit objection, which has been accepted by the department. We have verified the same and are in concurrence with the argument advanced by the ld. DR. Accordingly, this is not a fit case to be dismissed on the ground of low tax effect. Hence the parties were allowed to represent the issues ground wise. 3. The first ground raised by the revenue is challenging the action of the ld. CIT(A) who had quashed the reassessment proceedings in the instant case. 3.1. We have heard the rival submissions and perused the materials available on record. In the instant case, the original assessment was completed u/s 143(3) of the Act on 31.3.14 wherein the brought forward loss of Rs 66,44,338/- was allowed by the ld. AO to be set off against current year’s income. This was admittedly granted by the ld. AO based on the Schedule ‘CFL’ of the return of income containing the details of carry forward of losses. Later the ld. AO observed that on verification of records for Asst Years 2009-10 and 2010-11, the business income of the assessee was assessed at Rs 942,05,34,829/- and Rs 198,83,73,570/- respectively under scrutiny assessment. Thus, there was no loss ITA No.1550/Mum/2021 Shri Manoj Kumar Babulal Punamiya 3 available to the assessee for set off and carry forward. In view of this, the set off of brought forward of loss of Rs 66,44,338/- was sought to be withdrawn in the reopened proceedings by the ld. AO after due recording of reasons to this effect. 3.2. The assessee pleaded that the additions made in the hands of the assessee for Asst Years 2009-10 and 2010-11 were only on protective basis and hence the brought forward losses could not be set off against the business income assessed on protective basis. 3.3. The ld. CIT(A) observed that there was no new information or material that had cropped up in the file of the ld. AO having a live link which would enable the ld. AO to form a reasonable belief that income of the assessee had escaped assessment. Moreover, since the reopening was made beyond 4 years from the end of the relevant assessment year, the proviso to section 147 of the Act would come into operation, wherein the ld. AO had to establish the failure on the part of the assessee to make full and true disclosure of income in the original assessment proceedings. The ld. CIT(A) observed that all the details were duly disclosed by the assessee in the return under the column Schedule ‘CFL’ and hence there was no failure on the part of the assessee to make full and true disclosure of particulars of income. Based on these observations, the ld. CIT(A) quashed the reassessment as void abinitio. This is challenged by the revenue before us. 3.4. We find that the scrutiny assessments for Asst Years 2009-10 and 2010-11 were framed after the filing of income tax returns by the assessee for the Asst Year 2011-12 i.e the year under consideration. Hence assessee may be right in claiming the set off of brought forward ITA No.1550/Mum/2021 Shri Manoj Kumar Babulal Punamiya 4 losses against current year’s income and carrying forward the remaining loss to subsequent years. But once the income has been determined at a higher figure in a scrutiny assessment, be it on either substantive or protective basis, the ld. AO is duty bound to set off the loss with the assessed income first and after such set off, if there is no loss left out, then he has to pass an order withdrawing the benefit of carry forward of loss. Obviously, the scrutiny assessment orders of Asst Years 2009-10 and 2010-11 becomes a tangible material available with the ld. AO to come to the conclusion that income of the assessee for the Asst Year 2011-12 had escaped assessment. Moreover, when a protective addition has been made, only the recovery proceedings are to be kept in abeyance. It does not stop the ld. AO from proceeding with the application of other legal provisions of the Act such as – adjusting the brought forward losses with the assessed income and allowing the loss remaining , if any, to be carried forward to subsequent years. Hence we are not in agreement with the arguments advanced by the ld. AR in this regard. 3.5. Moreover, the additions were made on substantive basis for the Asst Years 2009-10 and 2010-11 in the hands of some other assessee. The ld.AR stated that against those substantive additions, that assessee had preferred appeals before the ld. CIT(A) and the same are pending disposal by the ld. CIT(A) as on date. This is a statement made by the ld. CIT(A) from the Bar. We hold that though there may not be apparent failure on the part of the assessee in making full and true disclosure of facts at the time of filing of return, there was certainly failure on the part of the assessee in not bringing to the knowledge of the ld. AO during the course of scrutiny assessment proceedings of Asst Year 2011-12, about the assessments of Asst Years 2009-10 and 2010-11 getting completed ITA No.1550/Mum/2021 Shri Manoj Kumar Babulal Punamiya 5 with huge positive income in the hands of the assessee, though on protective basis. Atleast, the ld. AO suo moto should have brought to the attention of the ld. AO in the course of original scrutiny assessment proceedings for the Asst Year 2011-12 that though he has claimed set off of brought forward loss, but the same would not be eligible in the absence of the said loss. Hence we hold that there was failure on the part of the assessee to make full and true disclosure of facts that are material for the completion of original assessment. Moreover, the reopening has been done in the instant case to address the mistake of fact – rectifying the mistake of allowing wrong set off of brought forward losses which was not available with the assessee company in Asst Year 2011-12. Hence the ratio laid down by the Hon’ble Supreme Court in the case of PVS Beedies reported in 237 ITR 13 (SC) would squarely come to the rescue of the revenue in the instant case. 3.6. In view of the above, we hold that the reopening has been done properly in the instant case and the ld. CIT(A) ought not to have quashed the reassessment as void abinitio. Accordingly, the Grounds raised by the revenue challenging the quashing of reassessment by the ld. CIT(A) are allowed. 4. As stated earlier, the appeals against the substantive additions framed in the hands of some other assessee are pending disposal before the ld. CIT(A). We find that the ld. CIT(A) had not adjudicated the issue of set off brought forward losses against the current year’s income and further allowing the remaining loss to be carried forward, ON MERITS. We find that no opinion is given by the ld. CIT(A) on merits of the issue in dispute before us. Hence we deem it fit and appropriate, in the interest of justice and fair play, to remand this issue to the file of ld. CIT(A) for denovo ITA No.1550/Mum/2021 Shri Manoj Kumar Babulal Punamiya 6 adjudication of the issue on merits and also tag this appeal with the appeals of the assessee where substantive additions were made , so that a cogent and cohesive decision could be taken in this regard. This, in our considered opinion, would meet the ends of justice for both the parties. Accordingly, the ground raised by the revenue on merits is allowed for statistical purposes. 5. In the result, the appeal of the revenue is allowed for statistical purposes. Order pronounced on 15/07/2022 by way of proper mentioning in the notice board. Sd/- (VIKAS AWASTHY) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 15/07/2022 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary / Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//