I.T.O Wd - 2(2),Burdwan, Burdwan V. Natraj Unemployed Engineers Co - Operative Society Ltd, Burdwan

ITA 1974/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4779 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 19-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Non-deduction of tax; Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 194C; 147; 69; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C, KOLKATA (BEFORE SHRI N.V.VASUDEVAN, J.M. & DR.A.L.SAINI, A. M.) ITA NO. 1974/KOL/2013: ASSTT. YEAR : 2006-2007 I.T.O., WARD-2(2), BURDWAN, AAYAKARBHAWAN, COURT COMPOUND, BURDWAN- 713101. VS NATARAJ UNEMPLOYED ENGINEERS CO-OPERATIVE SOCIETY LTD., 11, RANIGANJ BAZAR BYE LANE, BURDWAN, PIN- 713 101 PAN: AAAJN 0060H (APPELLANT) (RESPONDENT) C.O. NO.107/KOL/2013 : ASSTT. YEAR : 2006-07 (ARISING OUT OF ITA NO.1974/KOL/2013 ) NATARAJ UNEMPLOYED ENGINEERS CO-OPERATIVE SOCIETY LTD., 11, RANIGANJ BAZAR BYE LANE, BURDWAN, PIN- 713 101 PAN: AAAJN 0060H VS I.T.O., WARD-2(2), BURDWAN, AAYAKARBHAWAN, COURT COMPOUND, BURDWAN- 713101. (APPELLANT) (RESPONDENT) DEPARTMENT BY: MD.GHYAS UDDIN, JCIT, SR.DR ASSESSEEBY : SHRI SOMNATH GHOSH, ADVOCATE DATE OF HEARING : 27.07.2016 DATE OF PRONOUNCEMENT :03-08-2016 ORDER PER DR. A.L.SAINI, A.M .: THE CAPTIONED APPEAL FILED BY THE REVENUE PERTAININ G TO ASSESSMENT YEAR 2006-07, IS DIRECTED AGAINST THE ORDER PASSED BY TH E LD. COMMISSIONER OF INCOME- TAX (APPEALS), DURGAPUR IN APPEAL NO.285/CIT(A)/ASL /WARD-2(2)/BWN/2011-12 DATED 22.03.2013, WHICH IN TURN ARISES OUT OF AN OR DER PASSED BY THE INCOME TAX 2 OFFICER, WARD-2(2), BURDWAN UNDER SECTION 143(3)/14 7 OF THE INCOME TAX ACT, 1961 (IN SHORT, `THE ACT`) DATED 19 TH DECEMBER, 2011. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS A CO- OPERATIVE SOCIETY, WORKING AS ACIVIL CONTRACTOR CAR RYING OUT GOVERNMENT CONTRACT JOBS. THE RETURN OF INCOME UNDER SECTION 139(1) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR UNDER DISPUTE WAS FILED BY THE ASSESSEE ON 31 ST OCTOBER, 2006 DISCLOSING NIL INCOME. THE ASSESSEE HAS DISCLOSED AN AMOUNT OF RS.1,09,25,405/- AS TOTAL OF BILLS RECEIVED IN THE PROFIT & LOSS ACC OUNT. IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE LD. INCOME TAX OFFICER ENQUIRED FROM THE ASSESSEE IN RESPECT OF THE GROSS RECEIPTS SHOWN BY IT. IN REPLY , THE ASSESSEE MADE FULL COMPLIANCE BY FILING THE PAYMENT CERTIFICATES AS WE LL AS FORM NO.16A CERTIFICATES THEREOF. IN FACT, THE LD. AO HAD HIMSELF VERIFIED S UCH RECEIPTS AND CERTIFICATES AND GOT SATISFACTION. THE LD. AO AFTER PROPER EXAMINATI ON OF RECEIPTS AND CERTIFICATES FRAMED THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT, ON 30 TH DECEMBER, 2008 FOR THE ASSESSMENT YEAR UNDER DISPUT E COMPUTING THE TOTAL INCOME AT RS.2,73,820/-. THEREAFTER, THE LD. AO ISSUED NOTICE UNDER SECTION 148 OF THE I.T. ACT ON 29.03.2011 ON THE PREMISE THAT THERE WAS UNDER DISC LOSURE OF GROSS RECEIPTS BY THE ASSESSEE TO THE TUNE OF RS.18,33,547/- AS PER THE F ORM 16A CERTIFICATES WHICH WAS ASSUMED TO AMOUNT TO ESCAPEMENT OF INCOME UNDER SEC TION 147 OF THE INCOME TAX ACT, 1961. DURING THE REASSESSMENT PROCEEDINGS U/S 147/148 OF THE ACT,THEASSESSEE HAD EXPLAINED THAT THE ISSUE WAS ADDRESSED BY WAY OF A RECONCILIATION WHICH WAS NOT CONSIDERED BY THE LD. AO. FURTHER, THE LD. AO CONCE IVED THAT THE EXPENSES 3 INCURRED ON ACCOUNT OF LABOUR CHARGES HAD INFRINGED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SO URCE AS REQUIRED UNDER SECTION 194C OF THE ACT. IT WAS EXPLAINED TO THE LD. AO THA T THE PAYMENTS WERE MADE DIRECTLY TO THE LABOURERS, AND NOT TO ANY CONTRACTO R, MAINTAINING MUSTER ROLL AND AS SUCH THE MISCHIEF OF SECTION 40(A)(IA) OF THE ACT I S INAPPLICABLE IN THE CIRCUMSTANCES. HOWEVER, THE LD. AO WAS NOT IMPRESSE D BY SUCH SUBMISSIONS OF THE ASSESSEE ON BOTH COUNTS AND HE ACCORDINGLY RESO RTED TO MAKE AN ADDITION OF RS.18,33,547/- ON ACCOUNT OF UNDISCLOSED INCOME WIT HIN THE PROVISIONS OF SECTION 69 OF THE ACT AND ALSO ADDED THE SUM OF RS.41,50,58 8/- INCURRED BY THE ASSESSEE ON LABOUR CHARGES ON THE ALLEGED GROUND OF CONTRAVENTI ON OF SECTION 40(A)(IA) OF THE ACT. THE LD. AO, UPON SUCH SPECIOUS PROGNOSIS, FRAM ED THE ASSESSMENT ORDER UNDER SECTION 147/148 OF THE INCOME TAX ACT, ON 19 TH DECEMBER, 2011 COMPUTING THE TOTAL INCOME AT RS.62,57,960/- FOR THE ASSESSME NT YEAR UNDER DISPUTE. THE INSTANT APPEAL AND THE CROSS OBJECTION ARISE OUT OF THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON DATED 22.03 .2013, WHO WAS PLEASED TO UPHOLD THE VALIDITY OF THE NOTICE ISSUED UNDER SECT ION 147 OF THE INCOME TAX ACT, BUT DELETED THE PURPORTED ADDITION IN THE SUM OF RS .18,33,547/- AND RS.41,50,588/- RESPECTIVELY MADE BY THE LD. AO ON BOTH COUNTS. 3. THOUGH THIS IS AN APPEAL FILED BY THE REVENUE, B UT IN THIS APPEAL, THERE IS A LEGAL ISSUE INVOLVED. THE ASSESSEE HAS CHALLENGED T HE VALIDITY OF NOTICE U/S 147/148 BY FILING CROSS OBJECTIONS (CO). THEREFORE, FIRST WE ARE GOING TO DEAL WITH THE CROSS OBJECTION FILED BY THE ASSESSEE. THE ASSESSEE HAS TAKEN THREE GROUNDS OF APPEAL BY W AY OF CROSS OBJECTIONS WHERE HE HAS CHALLENGED THE VALIDITY OF NOTICE ISSU ED UNDER SECTION 147/148 OF THE INCOME TAX ACT. THE SOLITARY GRIEVANCE OF THE ASSES SEE IN THESE THREE GROUNDS OF 4 CROSS OBJECTIONS IS THAT THE LD. AO HAS REOPENED TH E ASSESSMENT WITHOUT ANY TANGIBLE MATERIAL AVAILABLE ON RECORD AND IT IS MER ELY A CHANGE IN OPINION. 4. THE LD. A.R. FOR THE ASSESSEE HAS STATED THAT TH E REOPENING IS BAD IN LAW BECAUSE IT IS NOT SUPPORTED BY ANY TANGIBLE MATERIA L AVAILABLE ON THE RECORD. IN THE INSTANT CASE, THE LD. AO HAS REOPENED THE ASSESSMEN T ONLY BECAUSE THERE IS A DISCREPANCY IN TDS CERTIFICATES AND THE AMOUNT SHOW N IN THE PROFIT & LOSS A/C BY WAY OF GROSS RECEIPTS. THE REASONS RECORDED BY THE LD. AO TO REOPEN THE CASE UNDER SECTION 147/148 READS AS UNDER: 1). PERUSAL OF RECORDS FOR THE SAID ASSESSMENT YEAR 2006-07 CONSTRUES THAT THE TDS CERTIFICATES FILED BY THE ASSESSEE ALO NG WITH THE RETURN SHOWS A GROSS RECEIPTS OF RS.1,27,58,952/- IN AGGREGATE AS OPPOSED TO GROSS RECEIPTS (BILLS RECEIVED) OF RS.1,09,25,405/- AS PER PROFIT & LOSS A/C. 2). THE DICHOTOMY IN THE GROSS RECEIPTS AMOUNTS TO CONSPICUOUS ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE I.T.ACT, 1961. 3). I HAVE STRONG REASONS TO BELIEVE THAT THE INCOM E OF THE ASSESSEE FOR THE SAID YEAR HAS ESCAPED ASSESSMENTS AND DESERVES TO B E REOPENED ACCORDINGLY AS PER LAW . THE LD. A/R FOR THE ASSESSEE HAS STATED THAT THE AB OVE CITED GROUNDS TO REOPEN THE ASSESSMENT DO NOT SUSTAIN IN LAW BECAUSE THE AO DID NOT FIND ANY NEW EVIDENCE OR ANY NEW TANGIBLE MATERIAL SHOWING ESCAP EMENT OF INCOME.GROSS RECEIPTS SHOWN IN RETURN OF INCOME BY WAY OF TDS CE RTIFICATES AND GROSS RECEIPTS SHOWN IN PROFIT AND LOSS ACCOUNT IS JUST A MATTER O F RECONCILIATION. THE LD. ASSESSING OFFFICER DID NOT MAKE RECONCILIATION BETW EEN GROSS RECEIPTS OF TDS CERTIFICATES WITH GROSS RECEIPTS SHOWN IN THE PROFI T AND LOSS ACCOUNT. THESE RECORDS WERE AVAILABLE BEFORE THE LD.AO AT THE ORIGINAL ASS ESSMENT PROCEEDINGS U/S 143 OF THE ACT, AND HAD HE RECONCILED THE TDS GROSS RECEIP TS WITH THE GROSS RECEIPTS 5 SHOWN IN PROFIT AND LOSS ACCOUNT, HE WOULD NOT HAVE ISSUED THE NOTICE U/S 147 OF THE ACT. THE LD. AR FOR THE ASSESSEE VEHEMENTLY SUBMITTED TH AT THE AO SPECIOUSLY ASSUMED THAT THE RECEIPTS OF RS.18,33,547/- BEING T HE DIFFERENCE BETWEEN THE RECEIPTS AS PER FORM 16A CERTIFICATES AND THE GROSS BILL DISCLOSED BY THE ASSESSEE HAS ESCAPED ASSESSMENT WITHIN THE SCOPE AND AMBIT O F SECTION 147 OF THE ACT. IN FACT, THE LD. AO HAD HIMSELF ENQUIRED ABOUT THE DET AILS OF GROSS RECEIPTS WHICH WAS DULY COMPLIED WITH BY THE ASSESSEE ON 17 TH OCTOBER, 2008 BY ADDUCING ON RECORD THE PAYMENT CERTIFICATES ALONG WITH FORM 16A CERTIF ICATES TO ESTABLISH THAT THE GROSS RECEIPTS WAS ACCURATELY DISCLOSED BY IT WHICH WAS A CCEPTED BY THE AO. IN OTHER WORDS, THE LD. AO HAD FORMED AN OPINION IN RESPECT OF THE CORRECTNESS OF THE GROSS RECEIPTS DISCLOSED BY THE ASSESSEE IN THE PROFIT & LOSS A/C. IT IS AN ADMITTED FACT THAT THE DETAILS OF GROSS RECEIPTS WERE EVIDENCED B Y PAYMENT CERTIFICATES AND FORM 16A CERTIFICATES WHICH WERE DULY ADDUCED ON RECORD IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS WHICH CULMINATED IN THE ORDE R UNDER SECTION 143(3) OF THE ACT. IN THE INSTANT CASE, THERE IS NOTHING IN THE R EASONS RECORDED BY THE LD. AO TO INDICATE THAT THERE IS AN ESCAPEMENT OF INCOME, BUT , AT THE MOST, THERE IS NEED TO VERIFY THAT THE REASONS OF DISCREPANCY BETWEEN RECE IPTS AS PER FORM 16A CERTIFICATES VIS-S-VIS THE FIGURE AS PER PROFIT & LOSS ACCOUNT O F THE ASSESSEE. THE EVIDENCE THAT THE FIGURES OF RECEIPTS AS PER FORM 16A CERTIFICATE S AND AS SHOWN IN THE PROFIT & LOSS A/C. VARY, BUT THIS DOES NOT AUTOMATICALLY LEA D TO THE CONCLUSION THAT THE INCOME HAS ESCAPED ASSESSMENT. THERE MAY BE NEED FO R VERIFICATION BUT THAT MERE NEED TO VERIFY DOES NOT BRING THE MATTER WITHIN THE SCOPE OF SECTION 147 OF THE ACT. THE JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 OF THE ACT WILL DEPEND UPON REASONS TO BELIEVE COUPLED WITH INCOME HAS ESCA PED ASSESSMENT ON THE PART OF THE LD. AO, WHICH PARAMETERS ARE COMPLETELY ABSENT IN THIS CASE. IT IS SETTLED THAT 6 DISCREPANCY BETWEEN INCOME FROM PROFESSION AS PER R ETURN VIS--VIS AS PER TDS CERTIFICATES CANNOT BE A REASON GOOD ENOUGH TO BELI EVE THAT INCOME HAS ESCAPED ASSESSMENT AND THEREFORE, INITIATION OF REASSESSMEN T PROCEEDINGS ON THIS GROUND IS NOT VALID. IN THE INSTANT CASE, THE LD. AO HAS FORM ED HIS BELIEF BASING ON THE EXISTING MATERIALS WHICH WERE PROVIDED BY THE ASSES SEE IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS. THE LD. A.R. FOR THE ASSESS EE FURTHER SUBMITTED THAT THE LD. AO, WITHOUT HAVING ANY TANGIBLE MATERIAL ON REC ORD, HAS ASSUMED JURISDICTION UNDER SECTION 147 OF THE INCOME TAX ACT WHICH HAS A MOUNTED TO CHANGE OF OPINION. IN THE INSTANT CASE, THE LD. AO HAS REVIE WED HIS ORIGINAL ASSESSMENT ORDER WHICH IS ULTRA VIRES THE SCOPE AND AMBIT OF THE PROVISIONS OF SECTION 1 47 OF THE ACT. ADMITTEDLY, NO NEW FACTS OR TANGIBLE MATER IALS WERE BROUGHT ON RECORD TO JUSTIFY THE REOPENING UNDER SECTION 147 OF THE ACT. THE AR FOR THE ASSESSEE HAS RELIED ON THE FOLLOWING JUDGMENTS, WHICH ARE SQUARE LY APPLICABLE TO THE INSTANT CASE, ARE AS FOLLOWS: 1). [2016] 48 ITR 191 (CHENNAI) - UNIVERSAL POWER S YSTEMS PVT. LTD. VS- ACIT 2) (2013) 151 TTJ (KOL) 545 MEHERIA REID & CO. VS - ITO ITA NOS.53&54/KOL/2010, KOLKATA B BENCH, KOLKAT A 3) ITA NO.709/HYD./2013, HYDERABAD B BENCH, RA FEEQIQBAL 4) ITAT NO.108 OF 2016, G.A. NO.1510 OF 2012, HIGH COURT AT CALCUTTA, CIT, CENTRAL-1 VS- M/S. KANOI INDUSTRIES LTD. HENCE, THE LD. AR FOR THE ASSESSEE HAS SUBMITTED TH AT TO CONSIDER THE VARIATION IN THE BENEFIT TO BE GIVEN TO THE ASSESSEE FOR TAX DED UCTION AT SOURCE, THE ASSESSMENT WAS REOPENED. THE VARIATION DID NOT NECESSARILY LEA D TO ESCAPEMENT OF INCOME. THE MERE NEED TO VERIFY THE DISCREPANCY DID NOT BRING M ATTER WITHIN THE SCOPE OF CASES IN WHICH REASSESSMENT PROCEEDINGS COULD BE VALIDLY INITIATED. 7 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE LD. AO. HE STATED THAT DISCREPANCY IN RECEIPTS AMOUNTS TO ESCAPEMENT OF INCOME BECAUSE TH E ASSESSEE HAS NOT GIVEN ANY EXPLANATION DURING THE COURSE OF ASSESSMENT PROCEED INGS. THE LD. DR FURTHERRELIED ON THE FOLLOWING JUDGEMENTS. 1) [2015] 56 TAXMANN.COM 157 (DELHI TRIB.), ITAT DE LHI BENCH H, DELHI, USHA INTERNATIONAL LTD. 2) [2010] 194 TAXMANN.37 (KARN.), HIGH COURT AT K ARNATAKA, SMT. J. REMA 3) [2013] 35 TAXMANN.COM 51 (KOLKATA TRIB.), ITAT K OLKATA BENCH B , MGB TRANSPORT 6. WE HAVE HEARD BOTH THE PARTIES, GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERUSED THE MATERIALS AVAILABLE ON REC ORD. WE NOTICED THAT THERE IS MERIT IN THE SUBMISSIONS OF THE ASSESSEE, SINCE THE PROPOSITION CANVASSED BY THE LD. AR ARE SUPPORTED BY THE FACTS CITED BY HIM ABOVE.AS HEEXPLAINED ABOVE THAT THERE WAS NO ANY TANGIBLE MATERIAL AVAILABLE BEFORE THE L D. AO TO REOPEN THE ASSESSMENT UNDER SECTION 147. THE RECONCILIATION OF DIFFERENCE IN TDS CERTIFICATES VIS--VIS DISCREPANCIES WITH THE PROFIT & LOSS A/C. DOES NOT LEAD TO BE A TANGIBLE MATERIAL AVAILABLE ON RECORD. THE TDS CERTIFICATES, PROFIT & LOSS A/C. AND OTHER DOCUMENTS WERE AVAILABLE DURING THE ORIGINAL ASSESSMENT PROCE EDINGS AND THE LD. AO OUGHT TO MAKE A RECONCILIATION AND VERIFY THEM. HE DID NOT F IND ANY NEW EVIDENCE OR TANGIBLE MATERIAL TO SHOW THAT THERE IS ESCAPEMENT OF INCOME UNDER SECTION 147 OF THE ACT. WE DO NOT FIND ANY FORCE IN THE ARGUMENTS OF THE LD. DR FOR REVENUE AND THE CASE LAWS CITED BY HIM, ARE NOT RELEVANT TO THE ISSUE UNDER CONSIDERATION. THEREFORE, WE DO NOT HESITATE TO ALLOW THE CROSS OB JECTIONS FILED BY THE ASSESSEE. 8 7. WE ARE NOT GOING TO DEAL WITH THE APPEAL FILED B Y THE REVENUE BECAUSE OF THE LEGAL ISSUE INVOLVED, AS EXPLAINED ABOVE. THE REOPE NING OF ASSESSMENT ITSELF IS NOT VALID. HENCE,THERE IS NO POINT TO HEAR THE APPEAL F ILED BY THE REVENUE BECAUSE THE SAME IS NOT MAINTAINABLE, AS EXPLAINED ABOVE, AND L IABLE TO BE DISMISSED IN LIMINE. 8. IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03-08-2016 SD/- SD/- (N.V.VASUDEVAN) (DR. A.L.SAIN I) JUDICIALMEMBER ACCOUNTANT MEMBER DATED: 3/8/2016 TALUKDAR (SR.PS) COPY OF THE ORDER FORWARDED TO: 1. REVENUE 2 ASSESSEE 3. THE CIT-I, 4. THE CIT (A)-I, 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, ASST. REGISTRAR , ITAT, KOLKATA BENCHES