Shri Rajnikant Chimanlal Patel, Ahmedabad V. The ACIT, Circle-2(2), Ahmedabad

ITA 1925/AHD/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6732 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 29-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.S. SHUKLA
• Keywords: Non-deduction of tax; Difference of opinion; Change of opinion; TDS; Set aside
• Section: 148; 143(3); 142(1); 194C; 271B; 44AB; 194J

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद यायपीठ अहमदाबाद यायपीठअहमदाबाद यायपीठ अहमदाबाद यायपीठ ‘ए एए ए’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD (through web-based video conferencing platform) BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER ITA No.1925/Ahd/2019 (िनधा रण िनधा रणिनधा रण िनधा रण वष वष वष वष / Assessment Year : 2012-13) Shri Rajnikant Chimanlal Patel, Prop. Mukhi Construction, 4A, Achalayatan Society, Nr. Thumbelina School, Naranpura, Ahmedabad बनाम बनामबनाम बनाम / Vs. The ACIT, Circle-2(2), Ahmedabad थायी लेखा सं./जीआइआर सं./PAN/GIR No. : ABC PP4789Q (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri A.C. Shah, AR यथ क ओर से/Respondent by : Shri S.S. Shukla, Sr DR सुनवाई क तारीख / Date of Hearing 08/03/2022 घोषणा क तारीख /D ate of Pronouncement 17/03/2022 आदेश/O R D E R PER BHAGIRATH MAL BIYANI, A.M.: This appeal filed by the assessee is directed against the order of learned Commissioner of Income-Tax (Appeals)-10, Ahmedabad [“Ld. CIT(A)” in short] dated 01.11.2019, arising out of the assessment-order dated 22.12.2017 passed u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 [“the Act” in short] by the ACIT, Circle-2(2), Ahmedabad [“Ld. AO” in short]. 2. The assessee has raised following grounds:- “1. The learned CIT(A) has erred in confirming the reopening of the assessment under Section 147 in as much as there is no tangible material for reopening of the assessment and that the conditions for reopening are not fulfilled. I T A N o . 1 9 2 5 / A h d / 2 0 1 9 S h r i R a j n i k a n t C P a t e l V s . A C I T A Y : 2 0 1 2 - 1 3 - 2 - 1.1 The original assessment order was passed under section 143(3) and the AO was satisfied on a reply by the assessee that the booking- advance received is not a turnover and therefore it is nothing but change of opinion. 2. The learned CIT(A) has erred in confirming addition of Rs. 1,66,47,147 being the amount of construction labour expenditure under Section 194-C, commission under Section 194H and fees for technical services under Section 194-J on the ground for failure to deduct TDS in as much as the provision of Section 194C, 194H and 194J are not applicable during the current financial year as the assessee being a proprietor was not subject to tax audit under Section 44AB during the previous year. 2.1 The appellant says and submits that the learned CIT(A) has erred in making observations that during previous year the assessee was required to gets accounts audited under Section 44AB on the ground that advances for members exceeded the prescribed limit in as much as the tax audit under Section 44AB is applicable for turnover or gross receipts and the advances from members cannot be constituted as turnover or gross receipt.” 3. The brief facts are such that the assessee is an individual engaged in the business of construction activity. For the relevant assessment year 2012- 13, the original assessment of assessee was made on 25.03.2015 u/s 143(3) of the Act. Subsequently the Ld. AO re-opened the assessment by taking action u/s 147 of the Act, on the reasoning that the assessee has failed to deduct tax at source out of certain payments and yet those expenses had not been disallowed in the original assessment which has led to the escapement of income. The assessee made submissions before the Ld. AO to justify that there was no alleged failure of non-deduction of tax at source but the Ld. AO rejected assessee’s submissions and completed assessment after making a disallowance of Rs. 1,66,76,447/-. Aggrieved by the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). However, the Ld. CIT(A) upheld the action of Ld. AO and dismissed assessee’s appeal. Again the order of Ld. CIT(A), the assessee has filed this appeal and now before us. I T A N o . 1 9 2 5 / A h d / 2 0 1 9 S h r i R a j n i k a n t C P a t e l V s . A C I T A Y : 2 0 1 2 - 1 3 - 3 - 4. In Ground No. 1 and 1.1, the assessee has challenged the very legality of the proceeding conducted by the Ld. AO u/s 147. To resolve these grounds, we start with the reasons recorded by the Ld. AO for taking action u/s 147 and supplied to the assessee vide Letter No. DCIT/Cir.2(2)/A’bad/Reason Recorded/2016-17 dated 14/09/2016, reproduced below: “Reason Recorded for proceedings u/s. 147 of the IT. Act. "On verification of the case record it was found from B/s, P/L, 3CD report, computation of income and submission of the assessee in respect of non-deduction of TDS revealed that assesses has not deducted tax on construction labour expenditure of Rs. 1,23,41,47/-, on commission expenses of Rs. 22,39,300/- and fees for technical services Rs. 20,95,670/- (Rs. 2,78,700 as consultancy expenditure + Rs. 2,24,270 as audit fees + Rs. 15,92,700/- as legal & professional charges) on the plea that he was not liable for deducting TDS as he was not liable to tax audit u/s 44AB as he had no sales/turnover in the previous FY 2010-11 (AY 2011-12). The same was accepted by assessing officer. It was however noticed from the P/L of current FY 2011-12 (AY 2012- 13) that assessee has shown sales of Rs. 4,02,82,500/- and closing stock of work in progress at Rs. 3,83,74,915/-. The assessee has shown opening stock of Rs. 2,57,25,542/- in the form of work in progress indicating that closing stock of work in progress in FY 2010-11 was Rs. 2,57,25,542. It was noticed from balance sheet and schedule attached to it for FY 2011-12 that assessee has shown current liabilities at Rs. 3,91,91,024 which consisted of Rs. 2,53,33,244 as sundry creditors and Rs. 1,38,57,780 being advance from booking. It was noticed from balance sheet of FY 2010-11 that assessee has current liabilities of Rs. 1,74,07,686 which is entirely grouped as sundry creditors. It was however noticed from copy of group summary of current liabilities for FY 2011-12 that total current liability at the end of FY 2010-11 (indicated OB of FY 2011-12) was only Rs. 7,49,407 which included creditors for labours, creditors for material and creditors for professional but did not include advance from booking. As balance sheet exhibited total current liability at the end of FY 2010-11 at Rs. 1,74,07,686, the amount of advance booking from the customers at the end of FY 2010-11 comes to Rs. 1,66,58,279 (Rs. 1,74,07,686 – Rs. 7,49,407). As the assesses has started construction activities only in I T A N o . 1 9 2 5 / A h d / 2 0 1 9 S h r i R a j n i k a n t C P a t e l V s . A C I T A Y : 2 0 1 2 - 1 3 - 4 - FY 2010-11, the amount of booking was undisputedly received in FY 2010-11. As the assesses fulfilled the either of criteria i.e. value of work done and amount of receipt in the form of advance against booking for tax audit, he was liable for tax audit in FY 2010-11 (AY 2011-12) and as a consequence of this, he was liable to deduct tax u/s 194C, 194H and 194J of the Act in respect of such payments made in AY 2011-12 (AY 2012-13). Failure to do so resulted in an underassessment of income of Rs. 166,76,447/- [on TDS deductible u/s 194C on construction labour expenditure of Rs. 1,23,41,477/- + TDS deductible u/s. 194H on commission expenses of Rs. 22,39,300/- + TDS deductible u/s 194J on fees for technical services Rs. 2095670/-).” In view of the above fact, I am of the opinion and I have reason to believe that the income has escaped assessment/and has been under- assessed to the above extent within the meaning of provision of sec. 147 of the I.T. Act and also for the failure on the part of the assesses to disclose fully and truly material facts relevant to it's assessment. Therefore the case is considered as fit for issuance of notice u/s 148 of the I.T. Act.” 5. Before Ld. AO, the assessee categorically submitted that during the original assessment-proceedings, the Ld. AO has already raised queries with regard to the TDS and the assessee has made adequate submissions. It is only after accepting the assessee’s submission that the Ld. AO completed the original assessment u/s 143(3). Hence to re-examine the assessee on the very same issue is only a change in opinion, therefore the reassessment is bad in law as held by the Hon’ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. 320 ITR 561. However, the Ld. AO rejected submissions of assessee by observing as under: “On perusal of the case records it was observed that no query regarding applicability of Se. 44AB of the Act was raised by the then AO in Notice issued u/s 142(1) dated 27.08.14. You have provided the Guidance for Tax Audit u/s 44AB of the Act as submission. The AO has not expressed any satisfaction on the submission provided by you. The AO, based on the information which comes to his notice I T A N o . 1 9 2 5 / A h d / 2 0 1 9 S h r i R a j n i k a n t C P a t e l V s . A C I T A Y : 2 0 1 2 - 1 3 - 5 - subsequent to the earlier assessment, may issue notice for reassessment. "Information" means communication or reception of knowledge or intelligence. It includes knowledge obtained from investigation, study or instruction. To inform means to impart knowledge. A detail available in file before AO does not by its mere presence or availability become an item of information. It is transmuted into an item of information only, if and when its existence is realized and its implications are recognized. Whether a particular fact or material constitutes information has to be decided w.r.t the facts of that case and there cannot be a definite rule of universal application. (Shiva Exports 28 SOT 512(Chd)). In case of A Roman & Co 67 ITR 11(SC), it is held that the word information means instruction or knowledge derived from external source or as to law relating to a matter bearing on the assessment. Similarly, in the case of Kalyanji Mavji 102 ITR 2S7(SC) it has been held that information can come from external sources or even from material already on record and the word information would include the true and correct state of law.” 6. Before Ld. CIT(A), the assessee re-iterated the same submissions but the Ld. CIT(A) agreed with the Ld. AO and dismissed the appeal. 7. Before us, the Ld. AR instantly referred to the notice u/s 142(1) dated 27.08.2014 issued by the Ld. AO and attracted our attention to the Query No. 9 and 18 raised by the Ld. AO in this notice, which read as under: “9. Please submit detail of TDS deducted and paid to the Government with evidence. Also furnish copy of quarterly TDS statement along with annexures filed by you for the relevant year. .... 18. Please furnish whether you have deducted TDS on expenses incurred/claimed, wherever applicable, along with supporting evidence in the following format:--” Thereafter, the Ld. AR referred to the following response submitted by the assessee in his reply-letter dated 20.01.2015: “9. As we have not exceeded turnover limits during the last year, provisions of TDS are not applicable to us during the FY 2011-12. I T A N o . 1 9 2 5 / A h d / 2 0 1 9 S h r i R a j n i k a n t C P a t e l V s . A C I T A Y : 2 0 1 2 - 1 3 - 6 - .... 18. As we have not exceeded turnover limits during the last year, provisions of TDS are not applicable to us during the FY 2011-12.” The Ld. AR strongly contended that the Ld. AO has specifically raised queries in relation to the TDS in the notice u/s 142(1) which is a statutory notice and the assessee has categorically replied that since the turnover limit had not exceeded during the last year i.e. the financial year 2010-11 relevant to the assessment year 2011-12, the provisions of TDS were not applicable to him during the financial year 2011-12. According to Ld. AR, the Ld. AO has re-opened the assessment on the very same point of TDS which stood duly examined and concluded in the original assessment. The Ld. AR submitted that the Ld. AO did not have any new or fresh material for conducting the proceeding of re-assessment. In such circumstances, according to the Ld. AR, the re-opening is nothing but a change of opinion which is impermissible under the scheme of section 147. The Ld. AR placed strong reliance on following decisions: ACIT Vs. Marico Ltd. (2020) 117 taxmann.com 244 (SC): “12. Thus we find that the reasons in support of the impugned notice is the very issue in respect of which the Assessing Officer has raised the query dated 25 September 2017 during the assessment proceedings and the Petitioner had responded to the same by its letters dated 10 December 2017 and 21 December 2017 justifying its stand. The non- rejection of the explanation in the Assessment Order would amount to the Assessing Officer accepting the view of the assessee, thus taking a view / forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts. Accordingly, the impugned notice dated 27 March 2019 is quashed and set-aside.” Head note in E-Infochips Ltd. Vs. ACIT (2018) 99 Taxmann.com 84 (Gujrat HC): I T A N o . 1 9 2 5 / A h d / 2 0 1 9 S h r i R a j n i k a n t C P a t e l V s . A C I T A Y : 2 0 1 2 - 1 3 - 7 - “It was noted that during assessment proceedings, Assessing Officer has raised multiple queries before allowing assessee’s claim – Moreover, there was noting on record showing that assessee had failed to disclose truly and fully all material facts at the time of assessment – Whether in view of aforesaid, impugned reassessment prcoeedings initiated merely on basis of change of opinion, deserves to be set aside – Held, Yes [Paras 7 and 8].” With this submission, the Ld. AR claimed that the very action u/s 147 undertaken by the Ld. AR is totally illegal. The Ld. AO, therefore, urged to quash the order passed by Ld. AO u/s 147. 8. Per contra, the Ld. DR supported the orders of lower authorities. The Ld. DR submitted that in the present case, the re-assessment has been done due to the reason that subsequent to the completion of assessment of the assessment-year 2012-13 under consideration, the Ld. AO came to know that the assessee was liable to deduct tax at source during the financial year 2011- 12 relevant to the assessment year 2012-13. Therefore, the basis adopted by the Ld. AO fulfills the requirement of section 147 and the re-assessment order is valid. Hence the Ld. AR strongly urged to uphold the validity of re- assessment. 9. We have considered submission of both sides and also perused the material held on record. As submitted by Ld. AR, we observe that vide Point No. 9 and 18 of the notice dated 27.08.2014 u/s 142(1) of the Act, the Ld. AO has raised specific queries with regard to the deduction of tax at source. We also observe that in response to this notice of Ld. AO, the assessee has given an pin-pointed reply vide his letter dated 20.01.2015 that “As we have not exceeded turnover limits during the last year, provisions of TDS are not applicable to us during the FY 2011-12.” We observe that this reply of the assessee is not incomplete or vague. On a careful examination of the aforesaid notice u/s 142(1) and aforesaid reply-letter dated 20.01.2015 of I T A N o . 1 9 2 5 / A h d / 2 0 1 9 S h r i R a j n i k a n t C P a t e l V s . A C I T A Y : 2 0 1 2 - 1 3 - 8 - assessee, we further observe that the Ld. AO has also raised following queries and the assessee has submitted replies as reproduced below: Query No. Query raised by Ld. AO Reply filed by assessee 1 A brief note of the nature of business activities undertaken in the previous year and the status of the activities undertaken in the earlier years. After long time, we have undertaken only scheme for construction of residential flats and shops named as PANCHRATNA during the year. 2 Submit a brief note on how the revenue have been recognized in the books of accounts during the year and demonstrate that revenue has been recognized following the same method for all the receipts. We have booked income on Sales basis realized during the year on the basis of actual sales deed made. 19 Please furnish party wise details of Construction labour expenses. The Ld. AO has given tabular format, in which there is a column of “Details of TDS deductions”. As stated above, we are not under purview of TDS provisions, we have not made TDS on Construction labour Expense. Thus, the Ld. AO has raised multiple queries with regard to the nature of business of assessee and the TDS out of payments. The assessee has given adequate replies and the Ld. AO has not raised any objection. We also note that the assessment is a sacred function of the assessing authority. When the assessing authority raises queries vide statutory notices u/s 142(1) and the assessee gives reply, it is the duty of the assessing authority to examine the submission of assessee. We believe that the Ld. AO must have done this duty perfectly and passed the order of original assessment u/s 143(3) after accepting the reply of assessee since the assessment-order does not demonstrate any rejection. As can be seen from ACIT Vs. Marico Ltd. (2020) 117 taxmann.com 244 (Supra), the Hon’ble Supreme Court has also accepted that “The non-rejection of the explanation in the Assessment Order would I T A N o . 1 9 2 5 / A h d / 2 0 1 9 S h r i R a j n i k a n t C P a t e l V s . A C I T A Y : 2 0 1 2 - 1 3 - 9 - amount to the Assessing Officer accepting the view of the assessee, thus taking a view / forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts.” During the course of hearing, the Bench also posed a specific query before the parties as to whether the revenue has also initiated penalty proceedings u/s 271B against the assessee for not getting the accounts of the immediately preceding assessment-year 2011-12 audited u/s 44AB. In response to this query, the Ld. AR made a clear submission that no such action has been taken by the revenue. Therefore, taking an overall consideration of all facts and having regard to the decisions of Hon’ble Supreme Court and Hon’ble Gujrat High Court, cited by the Ld. AR, we are inclined to hold that the re-assessment made by the Ld. AO in present case is only a change in opinion which is not legal. Being so, we quash the order passed by Ld. AO u/s 147 in this case. Accordingly, Ground No. 1 and 1.1 of the assessee are allowed. 10. Since we have already quashed the order u/s 147 as mentioned above, there is no need to adjudicate upon other grounds which are on merit. 11. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 17 th March, 2022 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) (BHAGIRATH MAL BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER A h meda b a d: Da te d 1 7 / 0 3 / 2 0 2 2 *Bt I T A N o . 1 9 2 5 / A h d / 2 0 1 9 S h r i R a j n i k a n t C P a t e l V s . A C I T A Y : 2 0 1 2 - 1 3 - 1 0 - आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबंिधत आयकर आयु / Concerned CIT 4. आयकर आयु )अपील (/ The CIT(A)- 5. िवभागीय ितिनिध ,आयकर अपीलीय अिधकरण/DR,ITAT, Ahmedabad , 6. गाड फाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण ITAT, Ahmedabad