Deputycommissioner of Income tax, Bangalore V. M/s Gowrishankar & co., Bangalore

ITA 1693/BANG/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8659 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-01-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 30-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAMALADHAR
• Keywords: Reopening of assessment; Reason to believe
• Section: 143(3); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ITA NO.1693/BANG/2014 ASSESSMENT YEAR : 2005-06 DEPUTY/ASST. COMMISSIONER OF INCOME TAX, CIRCLE-7(2)(1), BANGALORE. VS. M/S. GOWRISHANKAR & CO. NO. 263/42, 5 TH MAIN, 4 TH BLOCK, JAYANAGAR, BANGALORE-560011. PAN:AACFG7571Q APPELLANT RESPONDENT REVENUE BY : SHRI. KAMALADHAR, STANDING COUNSEL ASSESSEE BY : SMT. SHEETAL, ADVOCATE DATE OF HEARING : 2.1.2017 DATE OF PRONOUNCEMENT : 6 .1.2017 ITA NO. 1693/BANG/2014 PAGE 2 OF 6 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE CIT(A) IS OPPOSED TO THE FACTS OF THE CASE. 2. THE CIT(A) HAS FAILED TO APPRECIATE THAT THE STA TUTE PROVIDES SIX YEARS FOR REOPENING THE ASSESSMENT U/S. 151 OF THE INCOME-TAX ACT. AT PARA 3 ON PAGE 4 OF THE ORDER THE CIT(A) HE LD THAT THE AO SHOULD HAVE REOPENED THE ASSESSMENT ON OR BEFORE 31.3.2010 IN TERMS OF THE PROVISIONS OF SEC.147. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSMENT WAS REOPEN ED ON 29.3.2012 I.E., WITHIN SIX YEARS FROM THE END OF TH E A.Y.2005-06 WITH PRIOR APPROVAL OF THE CIT, BANGALORE-II, BANGA LORE AS PER THE PROVISIONS OF SEC.151. THEREFORE, THE REOPENING OF ASSESSMENT IS VALID. THE ORDER OF THE CLT(A) SUFFER S FROM TECHNICAL INFIRMITY. 3. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE AO, IN THE REASONS RECORDED, DID NOT MAKE AN ALLEGATION THAT I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF ASSESSEE'S FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FA CTS NECESSARY FOR ASSESSMENT. THE LEARNED CIT(A) HAS FAILED TO APPREC IATE THE CONDITION PRECEDENT FOR INITIATING PROCEEDINGS U/S. 147 IS THAT, THE AO SHOULD HAVE REASON TO BELIEVE THAT THE INCOME HA S ESCAPED ASSESSMENT AT THE TIME OF INITIATION OF PROCEEDINGS U/S.147. THIS VIEW IS WELL SUPPORTED BY THE DECISION OF THE SUPRE ME COURT IN THE CASE OF RAJESH JHAVERY STOCK BROKERS PVT. LTD. 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING THE APPEAL, THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASIDE AND THAT THE ORDER OF THE AO MAY BE RESTORED. ITA NO. 1693/BANG/2014 PAGE 3 OF 6 2. DURING THE COURSE OF HEARING, THE LEARNED DR HAS INVITED ATTENTION TO THE FACT THAT CIT(A) HAS MADE ASSESSME NT ON THE GROUND THAT THE ASSESSMENT WAS REOPENED BY THE AO WITHOUT RECORDING THE REASONS THAT INCOME HAS ESCAPED ASSESSMENT ON ACCOU NT OF ASSESSEES FAILURE TO DISCLOSE FULLY ALL MATERIAL FACTS NECESS ARY FOR THE ASSESSMENT FOR THE RELEVANT AY WITHOUT REALIZING THE FACT THAT THE AO HAS BROUGHT THE RELEVANT FACTS ON RECORD FOR WHICH THE INCOME H AS ESCAPED ASSESSMENT. BESIDES, HE ALSO PLACED THE RELIANCE U PON THE ORDER OF THE AO. 3. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHE R HAND HAS SUBMITTED THAT UNDISPUTEDLY THE ASSESSMENT WAS REOP ENED ALMOST AFTER SIX YEARS FROM THE END OF THE RELEVANT FINANCIAL YE AR I.E., 2005-06 AND AS PER SECTION 147 OF THE ACT, THE AO IS REQUIRED T O MAKE OUT THE CASE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSES SMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N U/S 139 AND ALSO DISCLOSE FULLY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THE ASSESSMENT YEAR. HE HAS ALSO INVITED OUR ATTENTION TO THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT WIT H THE SUBMISSION THAT IN THE ENTIRE REASONS NO SATISFACTION WAS RECO RDED THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF THE FAILURE ON THE PART OF THE ASSESSEE. THEREFORE, THE CIT(A) HA S RIGHTLY HELD THE REOPENING TO BE INVALID AND ANNUL THE ASSESSMENT. ITA NO. 1693/BANG/2014 PAGE 4 OF 6 4. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITY IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UN DISPUTEDLY THE REOPENING WAS DONE AFTER A PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR I.E., 2005-06. SINCE THE REOPENING WAS DONE AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSES SMENT YEAR, THE AO IS REQUIRED TO RECORD THE REASONS THAT INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THE ASSESSMENT YEA R. SINCE NO REASONS WERE RECORDED IN THIS REGARD, THE CIT(A) HAS RIGHTL Y HELD THAT REOPENING TO BE BAD AND INVALID. RELEVANT OBSERVAT ION OF THE CIT(A) IN THIS REGARD IS REPRODUCED BELOW FOR THE SAKE OF REFERENCE: 4.2 I HAVE CAREFULLY CONSIDERED THE APPELLANTS S UBMISSIONS AND ALSO PERUSED THE REASSESSMENT ORDER IN QUESTION . THIS IS NOT A CASE WHERE THE PROCEEDINGS STOOD AT THE STAGE OF TH E RETURN HAVING BEEN PROCESSED U/S 143(1) AND INTIMATION SENT ACCOR DINGLY BUT ONE WHERE THE RETURN HAD BEEN SELECTED AND THE ASSESSME NT CONCLUDED U/S 143(3) AFTER SUBJECTING THE SAME AND THE ACCOMPANYI NG STATEMENTS OF ACCOUNT TO SCRUTINY. IT IS CLEAR EVEN FROM THE REA SSESSMENT ORDER DATED 28.03.2013 THAT THE FACT THAT THE APPELLANT HAD DIS CLOSED THE REEIPT OF RS.23,12,409/- THOUGH IT WAS CLAIMED AS DIVIDEND AN D THAT THE AO, WHO HAD MADE THE ORIGINAL ASSESSMENT, HAD ACCEPTED THE SAME. THE APPELLANT HAD NOT, THEREFORE, FAILED TO DISCLOSE TH E RECEIPT OF RS.23,12,409/-. HENCE, THERE WAS NO NEW INFORMATIO N AVAILABLE TO THE AO, WHO HAS COMPLETED THE REASSESSMENT, FOR REOPENI NG THE ORIGINAL ASSESSMENT CONCLUDED ON 29.12.2007. IT WAS IN SIMI LAR CIRCUMSTANCES MUTATIS MUTANDIS THAT THE HONBLE ITAT, BANGALORE B ENCH C HELD IN THE CASE OF M/S. AMCO BATTERIES LTD. VS. DCIT, CIRC LE 11(1), BANGALORE (ITA NO. 94/BANG/2013 DATED 31.07.2013) T HAT REOPENING OF ASSESSMENT WITHOUT ESTABLISHING THAT THE ASSESSEE H AD FAILED TO DISCLOSE FULLY AND TRULY ALL THE FACTS NECESSARY FOR COMPLET ION OF THE ASSESSMENT WAS IT BY THE PROVISO TO SECTION 147 OF THE ACT AND ANNULLED THE ASSESSMENT ORDER. THE RELEVANT PORTION FROM THE HO NBLE TRIBUNALS ORDER IS REPRODUCED BELOW: ITA NO. 1693/BANG/2014 PAGE 5 OF 6 8. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THEIR RIVAL CONTENTIONS, THE UNDISPUTED FACTS ARE THAT THE NOTICE U/S 148 HAS BEEN ISSUED A FTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR, AND, THEREFORE, THE PROVISO TO SEC . 147 CLEARLY APPLIES. AS SEEN FROM THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT, THE AO HA S NOT MENTIONED THEREIN ANYWHERE THAT THE ASSESSEE HA S FAILED TO DISCLOSE TRULY AND FULLY ALL MATERIAL FAC TS NECESSARY FOR COMPUTING ITS INCOME DUE TO WHICH THE INCOME HAS ESCAPED TAX. FURTHER, IN THE NOTICES ON ACCOUNTS MENTIONED AT SCHEDULE 19 OF THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2004, THE ASSESSEE HAS DISCLOSED THE JVA WITH A PROPERTY DEVELOPMENT COMPANY FOR DEVELOPMENT OF COMPANYS LAND AT HEBBAL AND RECEIPT OF R.8 CRORES IN MARCH 2004 AND THAT THIS AMOUNT HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT. THEREFORE, THE ASSESSEE H AS DISCLOSED ALL THE FACTS BEFORE THE AO AND IT IS TO BE PRESUMED THAT THE AO HAS APPLIED HIS MIND TO THESE DETAILS BEFORE COMPLETING THE ASSESSMENT U/S 143(3) OF THE IT ACT. 4.3 OBSERVING THUS, THE HONBLE TRIBUNAL ANNULLED T HE ASSESSMENT ORDER IN THE CASE OF M/S AMCO BATTERIES LTD. FOR TH E ASSESSMENT YEAR 2004-05. IN COMING TO THIS CONCLUSION, THE HONBLE ITAT REFERRED TO ITS OWN DECISION IN THE CASE OF DHFL VYSYA HOUSING VS. ACIT IN ITA NO. 1416/BANG/2010 WHEREIN AT PARAGRAPH 14 IT WAS H ELD THAT, WHERE THE AO CONCERNED HAS NOT, IN THE REASONS RECORDED, MADE AN ALLEGATION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T BY REASON OF THE ASSESSEES FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE RELEVANT ASSES SMENT YEAR, THE PROVISO TO SECTION 147 WAS CLEARLY ATTRACTED AND TH E REASSESSMENT ON THE BASIS OF SUCH REASONS RECORDED IN VOID AB INITI O AND HAS TO BE ANNULLED. THEREFORE, THE ADDITION OF RS.23,12,409/ - MADE IN THE APPELLANTS CASE IS DELETED. MOREOVER, THE NOTICE U/S 148 OF THE ACT FOR REOPENING THE ASSESSMENT U/S 147 WAS ISSUED ON 28.3 .2012 I.E., TWO YEARS AFTER THE EXPIRY OF THE FOUR-YEAR PERIOD FROM THE END OF THE ASSESSMENT YEAR 2005-06, RENDERING THE ACTION OF R EOPENING INVALID. ITA NO. 1693/BANG/2014 PAGE 6 OF 6 5. SINCE NO SPECIFIC INFIRMITY OR DEFECT IS POINTED OUT IN THE ORDER OF THE CIT(A), WE FIND NO JUSTIFICATION TO INTERFERE W ITH IT AND ACCORDINGLY WE CONFIRM THE ORDER OF THE CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 6 TH JANUARY, 2017. SD/- SD/- (S. JAYARAMAN) (SUNIL KUMAR YA DAV) ACCOUNTANT MEMBER JUDICIA L MEMBER BANGALORE. DATED: 6 TH JANUARY, 2017. /NS/ COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.