Hanish Singla, Faridabad V. ITO Ward - 1(3), Faridabad

ITA 1740/DEL/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8476 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 01-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Keywords: Opportunity of being heard; Non-deduction of tax; Wrong claim; Difference of opinion; Change of opinion; Reassessment proceedings; TDS; Set aside
• Section: 143(3); 40(a)(ia); 48; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC-1: DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA.NO.1740/DEL./2019 ASSESSMENT YEAR 2008-09 HANISH SINGLA C/O ADV. VIJAY KR. GUPTA, OPP. JAIN MANDIR, MAIN BAZAR, BALLABGARH, FARIDABAD. PAN NO. ALEPS1136N VS. ITO WARD 1(3) FARIDABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI VIJAY GUPTA, ADV. FOR REVENUE : SHRI PRAKASH DUBEY, SR. DR DATE OF HEARING : 0 4 .01.2021 DATE OF PRONOUNCEMENT : .01.20 21 ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT(APPEALS)-FARIDABAD DATED 28.12.201 8 FOR AY 2008-09. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT RETURN DE CLARING INCOME OF RS. 1,33,780/- WAS FILED BY ASSESSEE ON 3 0.09.2008. 2 ITA.NO 1740/DEL./2019 THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3 ) OF THE ACT VIDE ORDER DATED 22.12.2010, DETERMINING THE TO TAL INCOME OF THE ASSESSEE AT RS. 2,32,870/-. IT MAY BE NOTED HERE THAT IN PARA 5 THE AO IN THIS ORDER NOTED THAT A SUM OF RS. 11,13,955/- HAS BEEN CLAIMED ON ACCOUNT OF INTEREST PAID ON LOANS RAISED FROM DIFFERENT BANKS. THE AO ASKED TH E ASSESSEE TO FURNISH BANK/PARTY WISE DETAILS WHICH WAS FILED THE AO NOTED THAT LOAN HAS ALSO BEEN RAISED FOR CONSTRUCTI ON OF HOUSE BUT NO BIFURCATION OF THE LOAN COULD BE GIVEN BY TH E ASSESSEE. IN ABSENCE OF ANY CLEAR BIFURCATION THE ASSESSEE SU RRENDERED A SUM OF RS. 50,000/- ON THE INTEREST PAID WHICH WAS DISALLOWED BY THE AO. THEREAFTER, PROCEEDING U/S 147 OF THE A CT WERE INITIATED AFTER RECORDING THE REASONS, NOTICE U/S 1 48 WAS ISSUED ON DATED 31.03.2015. THE ASSESSEE SUBMITTED BEFORE AO THE RETURN FILED ORIGINALLY MAY BE TREATED AS RE TURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THE AO AFTE R GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE DISALLOW ED THE INTEREST PAID BY ASSESSEE AMOUNTING TO RS. 11,13,95 5/- FOR VIOLATION OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR FAILURE TO DEDUCT TAX AT SOURCE. THE LD. CIT(A) CONFIRMED THE ADDITION BUT DIRECTED THE AO TO REDUCE THE AMOUNT OF RS. 50, 000/- WHICH WAS ALSO DISALLOWED BY THE AO. THE LD. CIT(A ) ALSO DISMISSED THE GROUND OF APPEAL OF THE ASSESSEE, CHA LLENGING THE REOPENING OF THE ASSESSMENT. 3 ITA.NO 1740/DEL./2019 4. LD. COUNSEL FOR ASSESSEE REFERRED TO PB 33 WHICH IS THE REASON FOR REOPENING OF THE ASSESSMENT. THE SAME I S REPRODUCED AS UNDER: - 1. NAME & ADDRESS OF THE ASSESSEE : SH. HANISH SINGL A PROP. M/S PHR INDUSTRIES, B-205, NEHRU GROUND, NIT, FARIDABAD 2. ASSESSMENT YEAR : 2008-09 3. PREVIOUS YEAR : ENDING ON 31.03.2008 4. PAN : AGYPS9747A 5. DATE OF RECORDING OF REASONS : 05-03-2015 REASON FOR ISSUING NOTICE UNDER SECTION 148 OF THE I.T. ACT, 1961 : DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FUR NISHED REQUIRED DETAILS/INFORMATION ALONGWITH BOOKS OF ACC OUNTS. PERUSAL OF THE LEDGER ACCOUNTS REVEALED THAT THE ASSESSEE HAD MADE PAYMENT OF INTEREST OF RS. 11,13,955/- IN THE STATEMENT OF TAX ABLE INCOME WHICH WAS NOT DEBITED IN THE PROFIT AND LOSS ACCOUNT. BY NOT CLAIMING EXPENDITURE THROUGH PROFIT AND LOSS ACCOUNT, IT WOU LD BE CONCLUDED ALL THE BUSINESS TRANSACTIONS WERE NOT AUDITED BY THE C HARTERED ACCOUNTANT RESULTING IN INCOMPLETE AUDIT. SINCE TH E COMPLETE AUDIT WAS NOT CONDUCTED BY THE AUDITOR ASSESSEE SHALL BE TREATED IN DEFAULT FOR NOT CONDUCTING THE AUDIT FOR WHICH HE WAS LIABL E TO PAY PENALTY OF RS. 1,00,000/- U/S 271B. SINCE THE INTEREST ON BOR ROWED CAPITAL AMOUNTING TO RS. 11,13,955/- WAS CLAIMED AS DEDUCTI ON THROUGH STATEMENT OF TAXABLE INCOME, ASSESSEE WAS REQUIRED TO DEDUCT TDS ON SUCH PAYMENT. AS THE PAYMENT WAS MADE OUT OF BO OKS, ASSESSEE HAD NOT DEDUCTED TDS ON SUCH INTEREST WHICH NEEDED TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT. OMISSION RESU LTED IN UNDER ASSESSMENT OF INCOME OF RS. 11,13,955/-. IN VIEW OF THE ABOVE FACTS, I HAVE REASONS TO BEL IEVE THAT THE ASSESSEE HAD AN INCOME OF RS. 11,13,955/- CHARGEABL E TO TAX WHICH HAS ESCAPED ASSESSMENT FOR THE AY 2008-09. TO ASSE SS THE INCOME OF RS. 11,13,955/- AND ANY OTHER INCOME WHICH MAY C OME IN NOTICE DURING ASSESSMENT PROCEEDINGS U/S 147 PERMISSION MA Y KINDLY BE GRANTED TO ISSUE NOTICE U/S 148 OF THE ACT TO BRING UNDISCLOSED INCOME OF RS. 11,13,955/- TO TAX FOR THE AY 2008-09. SD/- (PARMOD PAL SINGH) INCOME-TAX OFFICER, WARD-1(1), FARIDABAD 4 ITA.NO 1740/DEL./2019 5. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT ALL FACT S HAVE BEEN DISCLOSED FULLY AND TRULY FOR THE PURPOSE OF A SSESSMENT ON WHICH THE AO EXAMINED THE ALLOWABILITY OF THE IN TEREST CLAIMED AT RS. 11,13,955/- IN THE ORIGINAL ASSESSME NT ORDER AND DISALLOWED RS. 50,000/-. HE HAS, THEREFORE, SU BMITTED THAT SINCE ORDER HAS ALREADY BEEN PASSED U/S 143(3) OF THE ACT ON THE SAME ISSUE AND THERE IS NO FAILURE ON THE PA RT OF THE ASSESSEE, THEREFORE, NO PROCEEDINGS U/S 147 COULD B E INITIATED AFTER FOUR YEARS AND AS SUCH, LIABLE TO BE QUASHED. 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT SINCE THE ENTI RE AMOUNT OF RS. 11,13,955/- SHALL HAVE TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TDS, THEREFORE, AO COR RECTLY REOPENED THE ASSESSMENT. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. IT IS WELL SETTLED LAW THAT VA LIDITY OF REASSESSMENT PROCEEDINGS IS TO BE DETERMINED ON THE BASIS OF REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. THE REASONS FOR REOPENING OF THE ASSESSMENT ARE REPRODU CED ABOVE IN WHICH AO HAS SPECIFICALLY MENTIONED THAT THE ENT IRE INTEREST OF RS. 11,13,955/- NEEDED TO BE DISALLOWED. THIS O MISSION WHICH RESULTED IN UNDER ASSESSMENT OF INCOME OF RS. 11,13,955/-, THEREFORE, HE FORMED HIS OPINION THAT INCOME CHARGEABLE TO TAX TO THIS AMOUNT HAS ESCAPED ASSESS MENT. IT IS AN ADMITTED FACT THAT ORIGINALLY THE AO PASSED T HE 5 ITA.NO 1740/DEL./2019 ASSESSMENT U/S 143(3) OF THE ACT DATED 22.12.2010 A ND OUT OF THE IMPUGNED AMOUNT OF RS. 11,13,955/- DISALLOWED R S. 50,000/- ONLY. THUS, ASSESSEE DISCLOSED ALL THE PR IMARY FACTS WITH REGARD TO DEDUCTION CLAIMED ON ACCOUNT OF INTE REST PAID ON LOANS AT THE ORIGINAL ASSESSMENT STAGE AND IS CO NSIDERED BY THE AO ALSO AT ORIGINAL ASSESSMENT STAGE, THEREFORE , THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THAT ASSESSMENT. THE ASSESSEE ALSO FILED RETURN OF INCOME ORIGINALLY ON DATED 30. 09.2008 U/S 139 OF THE ACT AND FOUR YEARS HAVE EXPIRED FROM THE RELEVANT ASSESSMENT ORDER, THEREFORE, FIRST PROVISO TO SECTI ON 147 WOULD APPLY IN FAVOUR OF THE ASSESSEE AND NO ASSESSMENT C OULD HAVE BEEN REOPENED IN SUCH CIRCUMSTANCES AGAINST THE ASS ESSEE. FURTHER, THE REASONS RECORDED U/S 148 CLEARLY SHOW THAT ASSESSMENT ALREADY FRAMED U/S 143(3) HAS BEEN REOPE NED BECAUSE OF OMISSION ON THE PART OF THE AO TO MAKE A DDITION IN THE ORIGINAL ASSESSMENT ORDER. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD. VS. AC IT 343 ITR 183 (BOM.) HELD THAT REASSESSMENT TO CORRECT ERROR IN ASSESSMENT IS NOT VALID. IT WAS FURTHER HELD AS UN DER: WHERE A REASSESSMENT IS SOUGHT TO BE MADE AFTER FOUR YEARS THE POWER CONFERRED BY SECTION 147 OF TH E INCOME-TAX ACT, 1961, DOES NOT PROVIDE A FRESH OPPORTUNITY TO THE ASSESSING OFFICER TO CORRECT AN INCORRECT ASSESSMENT MADE EARLIER UNLESS THE MISTAKE IN THE ASSESSMENT SO MADE IS THE RESULT OF A FAILURE OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL 6 ITA.NO 1740/DEL./2019 MATERIALS FACTS NECESSARY FOR ASSESSMENT. THERE IS A DIFFERENCE BETWEEN A WRONG CLAIM MADE BY AN ASSESSEE AFTER DISCLOSING ALL THE TRUE AND MATERIAL FACTS FULLY AND TRULY. IT IS ONLY IN THE LATTER CA SE THAT THE ASSESSING OFFICER WOULD BE ENTITLED TO PROCEED U/S 147. HELD, ALLOWING THE PETITION, THAT THE ASSESSING OFFICER HAD NOT RECORDED THE FAILURE ON THE PART OF THE PETITIONER TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE AY 1997-98. WHAT WAS RECORDED WAS THAT THE PETITIONER HAD WRONGLY CLAIMED CERTAIN DEDUCTIONS WHICH HE WAS NOT ENTITLED TO. THE REASSESSMENT PROCEEDINGS INITIATED IN THE YEAR 2004 WERE NOT VALID. 8. HONBLE DELHI HIGH COURT IN THE CASE OF TECHMA N BUILDWELL 370 ITR 771 HELD THAT AOS OMISSION SOLE BASIS OF INITIATING PROCEEDINGS U/S 148 OF THE ACT, NOTICE N OT VALID. 9. CONSIDERING THE ABOVE DISCUSSION, IT IS CLEAR TH AT AT THE ORIGINAL ASSESSMENT STAGE AO CONSIDERED THE ISSUE O F CLAIM OF DEDUCTION ON ACCOUNT OF INTEREST TO THE BANKS AND O THERS AND AS SUCH, ON MERE CHANGE OF OPINION AO COULD NOT HAV E REOPENED THE ASSESSMENT. THUS, THE OMISSION OF THE AO TO MAKE DISALLOWANCE OF THE FULL INTEREST NOW IS NOT P ERMISSIBLE IN LAW. 10. IN THE RESULT, I SET ASIDE THE ORDERS OF THE AU THORITIES BELOW AND QUASHED THE REOPENING OF THE ASSESSMENT. RESULTANTLY ALL ADDITIONS STAND DELETED. 7 ITA.NO 1740/DEL./2019 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14.01.2021. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 14.01.2021 *KAVITA ARORA COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.