Sagplan Academy Pvt Ltd., Gurgaon V. ITO,Ward-4(1), Gurgaon

ITA 2399/DEL/2022

AI Insights

The case involves Sagplan Academy Pvt. Ltd., which appealed against the reassessment order for the assessment year 2015-16. The reassessment was initiated under Section 147 of the Income Tax Act following the discovery of cash payments violating Section 40A(3) during a test-check of assessment records. The original assessment had been completed under Section 143(3) without such findings. The Tribunal examined whether the reopening of the assessment was justified, considering the legal provisions and the facts presented during the original and reassessment proceedings.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 300803 (ITAT-DELHI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-11-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 27-09-2022
• Other Referred Cases: Ranjans Aggarwal Vs. ITO, M/s. EH Associated Hotels Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Audit objection; Tangible material; Reassessment proceedings; Set aside
• Section: 147; 148; 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.2399/Del/2022 Assessment Year: 2015-16 Sagplan Academy Pvt. Ltd., C/o CA M R Sahu, M Sahu & Associates, CA, House No.651, Ist Floor, Sector 10A, Nr. Meenashi Public School, Gurgaon 122001 Haryana. Vs. ITO, Ward-4(1), Gurgaon (Haryana) PIN: 122022 PAN :AAQCS5763C (Appellant) (Respondent) ORDER Assessee by Shri M.R. Sahu, CA Respondent by Shri Narpat Singh, Sr. DR Date of hearing 15.11.2022 Date of pronouncement 28.12.2022 2 ITA No.2399/Del/2022 This is an appeal by the assessee against order dated 14.09.2022 passed by the National Face Centre (NFC), Delhi for the assessment year 2015-16. 2. The grounds raised by the assessee are as under: 1. That on the facts, and in the circumstances of the case and in law, CIT(A) erred in sustaining income escaped assessment proceedings initiated against the assessee u/s. 147 in the case of completed assessment made u/s. 143(3) without appreciating the fact that reasons to believe recorded by the AO was silent regarding any fault on the part of the assessee to disclose fully and truly all material facts necessary for assessment thus proviso to section 147 was not satisfied, thus, income escaped assessment proceedings are without jurisdiction, accordingly assessee prays that the income escaped assessment order dated 16/03/2022 passed u/s. 147 r.w.s. 144B deserves to be quashed. 2. That on the facts, and in the circumstances of the case and in law, CIT(A) erred in sustaining income escaped assessment proceedings initiated against the assessee u/s. 147 without appreciating the fact that same issue was examined during the scrutiny assessment proceedings, again initiating income escaped assessment proceedings without any tangible material is a ‘mere change of opinion’, thus reassessment proceedings initiated u/s. 147 is without jurisdiction, thus assessee prays that the income escaped assessment order dated 16/03/2022 passed u/s. 147 r.w.s. 144B deserves to be quashed. 3. That on the facts, and in the circumstances of the case and in law, CIT(A) erred in sustaining income escaped assessment 3 ITA No.2399/Del/2022 proceedings initiated against the assessee u/s. 147 after lapse of nearly six years from the end of the relevant assessment year on the basis of audit objection and reasons to believe was recorded on borrowed facts without application of mind thus reassessment proceedings are without jurisdiction thus assessee prays that the income escaped assessment order dated 16/03.2022 passed u/s. 147 r.w.s. 144B deserves to be quashed. 4. That on the facts, and in the circumstances of the case and in law, CIT(A) erred in sustaining income escaped assessment proceedings initiated against the assessee u/s. 147 without appreciating the fact that reason to believe was recorded under wrong facts, accordingly assumption of jurisdiction u/s. 147 is bad in law thus assessee prays that the income escaped assessment order dated 16/03/2022 passed u/s. 147 r.w.s. 144B deserves to be quashed. 5. That based on the facts, and in the circumstances of the case and in law, Pr. CIT accorded the sanction towards issuance of section 148 notice in a mechanical manner without application of mind, accordingly issuing section 148 notice was without jurisdiction thus reassessment order dated 16/03/2022 deserves to be quashed. 6. That based on the facts, and in the circumstances of the case and in law, CIT(A) erred in sustaining addition amounting Rs.2,12,,000/- under Section 40A(3) without appreciating the fact that disallowance made u/s. 40A(3) amounting Rs.2,12,000/- was not high value payments and no evasion of tax was made by recording false or fictitious transactions rather profit for the current assessment year was increased in comparison to the last previous year thus assessee prays for deletion of disallowance made u/s. 40A(3) amounting to Rs.2,12,000/-. 4 ITA No.2399/Del/2022 7. That the assessee craves the right to amend, add, delete, replace, all or any of the grounds of appeal either during the course of hearing or at any time before hearing of this appeal 3. Briefly the facts are, the assessee is a resident corporate entity. For the assessment year under dispute, assessee filed its return of income on 30.10.2015 declaring income of Rs.2,44,840. The return of income so filed by the assessee was selected for scrutiny under ‘CASS’ and assessment was completed under Section 143(3) of the Act vide order dated 16.11.2017 determining total income at Rs.5,18,020. Subsequently, as observed by the Assessing Officer in the body of the assessment order, during test-check of assessment record for the impugned assessment year, it was observed that the assessee had made cash payment during the year to certain entries aggregating to Rs.2,12,000. As observed by the Assessing Officer, since, the assessee could not furnish any tangible explanation in respect of the cash payment, the Assessing Officer formed a belief that income has escaped assessment. Accordingly, he reopened the assessment under Section 147 of the Act by issuing a notice under Section 148 of the Act on 30.03.2021. Subsequently, reassessment proceedings were transferred to faceless assessment scheme under 5 ITA No.2399/Del/2022 Section 144B of the Act. Be that as it may, in course of assessment proceedings, the Assessing Officer called upon the assessee to explain the cash payment. After verifying the details furnished by the assessee, the Assessing Officer observed that while making cash payment, the assessee has violated the provisions of section 40A(3) of the Act. Thus, he completed the assessment by adding back the amount of Rs.2,21,000 to the income of the assessee by invoking the provisions of section 40A(3) of the Act. Against the assessment order so passed, assessee preferred an appeal before learned Commissioner (Appeals), inter alia, challenging the validity of reopening of assessment under Section 147 of the Act. However, learned Commissioner (Appeals) did not find merit in the grounds raised. Accordingly, he dismissed the appeal. 4. Before me, first contention of learned counsel for the assessee is, the reopening of assessment under Section 147 of the Act is invalid as the Assessing Officer has failed to establish that there is failure on the part of the assessee to disclose truly and correctly all material facts relating to its assessment. Drawing my attention to the reasons recorded for reopening of assessment, learned counsel submitted, 6 ITA No.2399/Del/2022 apart from making bald allegations, the Assessing Officer has failed to establish on record that there is failure on the part of the assessee to disclose truly and correctly all material facts necessary for its assessment. He submitted, the reasons recorded as well as observations made in the assessment order clearly reveal that the Assessing Officer has proceeded to initiate proceedings under Section 147 of the Act without having any tangible material in his possession and purely on the basis of having a relook at the material available during the original assessment proceedings. Thus, he submitted, since, the conditions of proviso to section 147 are not fulfilled, the reopening of assessment under Section 147 of the Act is invalid. 5. In support of his contention, learned counsel for the assessee relied upon the following decisions: 1. Delhi Tribunal ‘SMC’ Bench order in the case of “Ranjans Aggarwal Vs. ITO” ITA No.17/Del/2020, Order dated 06.04.2022. 2. Madras High Court Order in the case of “M/s. EH Associated Hotels Ltd. Vs. ACIT, W.P. No.25229 of 2019. Order dated 19.07.2022” 7. The learned Departmental Representative, relying upon the observations of the learned Commissioner (Appeals), submitted that 7 ITA No.2399/Del/2022 the assessee did not disclose all material facts truly and correctly, therefore, the proviso to section 147 would not apply. 8. I have considered rival submissions in the light of decisions relied upon and perused the material available on record. 9. Undisputedly, original assessment in case of assessee was completed under Section 143(3) of the Act vide order dated 16.11.2018. Whereas, reasons for reopening of assessment were recorded by the Assessing Officer on 28.03.2021 and notice under Section 148 of the Act was issued on 30.03.2021. Thus, it is quite obvious, the action for reopening of assessment was taken after expiry of four years from the end of the relevant assessment year. In such a scenario, the proviso to section 147 of the Act, as applicable to the impugned assessment year, would come into play. As per the said proviso, in a case where the original assessment has been completed either under Section 143(3) or under Section 147 of the Act, no reopening of assessment can be made unless there is failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. On perusal of the impugned assessment order as 8 ITA No.2399/Del/2022 well as reasons recorded, it is very much clear that the Assessing Officer has observed that during the test-check of assessment record for the impugned assessment year, it came to his notice that the assessee has made certain cash payment in violation of section 40A(3) of the Act. In the aforesaid premises, he formed a belief that income has escaped assessment. Thus, the aforesaid facts clearly reveal that the Assessing Officer had no fresh tangible material in his possession while reopening the assessment under Section 147 of the Act. Apparently, revisiting the material available on record at the time of completion of original assessment, the Assessing Officer has initiated proceedings under Section 147 of the Act. Though, in the reasons recorded, the Assessing Officer has made a bald allegation regarding failure of the assessee in disclosing truly and correctly all material facts, however, there is no substance in such allegation. Rather, the allegation has been made only to escape rigours of the proviso to section 147 of the Act. It is further relevant to observe that in course of original assessment proceedings, the Assessing Officer had specifically enquired into the details of payments made to Monad University and rent. In reply to the query raised, the assessee had 9 ITA No.2399/Del/2022 furnished its reply vide letter dated 30.01.2017. Thus, it is evident, in course of the original assessment proceedings the Assessing Officer did make inquiry regarding the cash payment and took a conscious decision that no violation to section 40A(3) of the Act was made. That being the factual position emerging on record, in my view, the proceeding initiated under Section 147 of the Act is on a mere change of opinion, hence, amounts to review of the earlier assessment order. In any case of the matter, the Assessing Officer has failed to establish any failure on the part of the assessee to declare truly and correctly all necessary facts for its assessment. Therefore, conditions enshrined in proviso to section 147 of the Act, applicable to the impugned assessment year, are not satisfied. The decisions relied upon by the learned counsel for the assessee support the aforesaid view. Accordingly, I hold that reopening of assessment under Section 147 of the Act in the instant case is invalid. Consequently, the assessment order passed in pursuance thereto has to be held as invalid. Accordingly, I quash the impugned assessment order. As a natural corollary, the impugned order of learned Commissioner (Appeals) deserves to be set aside. Accordingly, I do so. 10 ITA No.2399/Del/2022 10. In view of my above decision, the grounds raised on merits having become academic, are not required to be adjudicated. 11. In the result, the appeal is allowed, as indicated above. Order pronounced in the open court on 28 th December, 2022. Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 28 th December, 2022. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi