SMT. SHOBHA SURENDRA NAHATA, NAGPUR V. PRINCIPAL COMMISSIONER OF INCOME TAX-1, NAGPUR

ITA 24/NAG/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5580 (ITAT-NAGPUR)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 05-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P.M. GUPTA
• Keywords: Revision of order; Question of law; Assessment record; TDS
• Section: 148; 263; 143(3); 40(a)(ia); 194A

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ, नागप ु र मɅ । IN THE INCOME TAX APPELLATE TRIBUNAL BENCH, NAGPUR (Through Virtual Hearing at Raipur) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D BATTULL, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 24/NAG/2021 Ǔनधा[रण वष[ / Assessment Year : 2011-12 Smt. Shobha Surendra Nahata, Shop No.21, General Merchant Market, Gandhibagh, Nagpur-440 002 PAN : AAGPN3371H .......अपीलाथȸ / Appellant बनाम / V/s. The Pr. Commissioner of Income Tax-1, Nagpur. ......Ĥ×यथȸ / Respondent Assessee by : Shri P.M. Gupta, AR Revenue by : Shri Pradeep Headoo, CIT-DR स ु नवाई कȧ तारȣख / Date of Hearing :15.02.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 30.03.2022 2 Smt. Shobha Surendra Nahata Vs. Pr. CIT ITA No. 24/NAG/2021 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Principal Commissioner of Income Tax, Nagpur-1 (for short ‘Pr. CIT’) under Section 263 of the Income-tax Act, 1961 (for short ‘the Act’), dated 22.02.2021, which in turn arises from the order passed by the A.O under Sec. 143(3) r.w.s. 147 of the Act, dated 23.11.2018 for assessment year 2011-12. Before us the assessee has assailed the impugned order on the following grounds of appeal: “1. That, the order passed u/s 263 by the Pr. CIT-I is illegal, bad in law and without jurisdiction as the issues on which Pr. CIT-I wants to revise and reassess the assesse are not the subject matter of reassessment order passed u/s 147 r.w.s. 143(3). 2. That, the order passed u/s 263 by the Pr. CIT-I is illegal, bad in law and without jurisdiction as the issues on which Pr. CIT-I wants to exercise revisional jurisdiction bars by limitation. 3. That, the order passed u/s 263 by the Pr. CIT-I is illegal, bad in law and without jurisdiction as detailed replies filed before the Pr. CIT-I, in response to the notice issued u/s 263, have not been considered while passing the final order. Hence the order u/s 263 is liable to be quashed. 4. That the notice issued u/s 263 and the order passed by the Pr. CIT-I u/s 263 is illegal, bad in law and without jurisdiction. The order passed by the Assessing Officer ("AO") u/s 147 r.w.s. 143(3) is neither erroneous nor prejudicial to the interest of revenue. 3 Smt. Shobha Surendra Nahata Vs. Pr. CIT ITA No. 24/NAG/2021 5. That, the order passed u/s 263 by the Pr. CIT-I is illegal, bad in law as regards to reassess the loan of Rs. 2,09,32,548/- outstanding as on 31/03/2011, since no fresh loans were taken during the year and necessary documentary evidences to the said facts were enclosed with the reply. 6. That, the order passed u/s 263 by the Pr. CIT-I is illegal, bad in law as regards to disallowance u/s 40(a)(i) of interest Rs. 9,16,221/- paid on loan, since assesse has obtained form no. 15G from the respective lenders and hence, not required to deduct TDS u/s. 194A of the I.T. Act. 7. That, the order passed u/s 263 by the Pr. CIT-I is illegal, bad in law since the same is passed against the facts of the case and law applicable thereto. 8. That the order passed u/s.263 by the Pr. CIT-I is illegal, bad in law since the same is passed against the facts of the case and law applicable thereto. 9. That, without prejudice to the ground raised above, the Pr. CIT-I has erred in directing the assessing Officer to reassess the income of the assessee afresh after examining the relevant details and other issues. 10. That, the assessee craves leave to alter, amend or withdraw all or any objections herein or add any further grounds as may be considered necessary either before or during the course of hearing.” 2. Succinctly stated, the assessee who is engaged in the business of trading of electrical wires and cables had filed her return of income for the assessment year 2011-12, declaring an income of Rs.4,69,130/-. Observing, that the assessee during the year under consideration had made cash deposits aggregating to Rs. 27,15,500/- in her Savings bank account with State Bank of Bikaner & Jaipur, the Assessing Officer reopened her case u/s. 147 of the Act. In compliance, the 4 Smt. Shobha Surendra Nahata Vs. Pr. CIT ITA No. 24/NAG/2021 assessee e-filed her return of income on 25.09.2018, declaring an income of Rs. 4,69,130/-. 3. During the course of re-assessment proceedings, it was submitted by the assessee that the source of cash deposits in her Savings bank account in question was out of cash-in-hand that was available with her as per her personal “balance sheet”. As regards the cash deposits in her current account it was the claim of the assessee that the same was sourced out of her cash sales. Finding favor with the aforesaid claim of the assessee the A.O assessed her income vide his order passed u/s. 143(3) r.w.s 147, dated 23.11.2018 at Rs.4,69,718/- i.e, without making any addition as regards the issue on the basis of which her case was reopened. 4. After culmination of the re-assessment proceedings the Pr. CIT called for the assessment records of the assessee. Observing, that the Assessing Officer while framing the re-assessment had failed to make any enquiry as regards the unsecured loans of Rs.76,63,484/- that were raised by the assesee during the year from seven parties; and had also failed to disallow under Sec. 40(a)(ia) her claim for deduction 5 Smt. Shobha Surendra Nahata Vs. Pr. CIT ITA No. 24/NAG/2021 of interest of Rs.9,16,221/- that was paid to the aforesaid lenders i.e, without deduction of tax at source, the Pr. CIT was of the view that the order passed by the Assessing Officer u/s. 143(3) r.w.s 147 of the Act, dated 23.11.2018 was erroneous in so far as it was prejudicial to the interest of the revenue. 5. Backed by his aforesaid conviction the Pr. CIT issued a ‘Show cause’ notice (SCN), dated 04.02.2021 to the assessee, therein, calling upon her to explain as to why the order passed by the Assessing Officer u/s. 143(3) r.w.s 147 of the Act, dated 23.11.2018 may not be revised. As the explanation of the assessee did not find favor with the Pr. CIT, therefore, he vide his order passed u/s. 263 of the Act, dated 22.02.2021 held the assessment order passed u/s. 143(3) r.w.s.147 of the Act, dated 23.11.2018 as erroneous in so far as it was prejudicial to the interest of the revenue. 6. Aggrieved with the order passed by the Pr. CIT under Section 263 of the Act, dated 22.02.2021 the assessee has carried the matter in appeal before us. 6 Smt. Shobha Surendra Nahata Vs. Pr. CIT ITA No. 24/NAG/2021 7. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. After deliberating at length on the issue under consideration, we find substance in the claim of the Ld. AR, that now when the Assessing Officer while framing the re-assessment u/s. 143(3) r.w.s 147 of the Act, dated 23.11.2018 had not made any addition as regards the very “reason” on the basis of which the case of the assessee was reopened i.e., source of cash deposits of Rs. 27,15,500/- in the assessee’s Saving bank account with State Bank of Bikaner & Jaipur, therefore, in absence of any addition on the said count, it was not permissible for him to have made any independent verifications and/or additions/disallowances in the hands of the assessee. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Jet Airways (I) Limited (2011) 331 ITR 236 (Bom), wherein it was held as under : “20...........The corrective exercise embarked upon by "Parliament in the form of Expln. 3 consequently provides that the AO may assess or reassess 7 Smt. Shobha Surendra Nahata Vs. Pr. CIT ITA No. 24/NAG/2021 the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice under s. 148(2). The decisions of the Kerala High Court in Travancore Cements Ltd. (supra) and of the Punjab & Haryana High Court in Vipan Khanna (supra) would, therefore, no longer hold the field. However, insofar as the second line of authority is concerned, which is reflected in the judgment of the Rajasthan High Court in Shri Ram Singh (supra), Expln. 3 as inserted by Parliament would not take away the basis of that decision. The view which was taken by the Rajasthan High Court was also taken in another judgment of the Punjab & Haryana High Court in CIT vs. Atlas Cycle Industries (1989) 180 ITR 319 (P&H) : (1989) 46 Taxman 315 (P&H). The decision in Atlas Cycle Industries (supra) held that the AO did not have jurisdiction to proceed with the reassessment, once he found that the two grounds mentioned in the notice under s. 148 were incorrect or nonexistent. The decisions of the Punjab & Haryana High Court in Atlas Cycle Industries (supra) and of the Rajasthan High Court in Shri Ram Singh (supra) would not be affected by the amendment brought in by the insertion of Expln. 3 to s. 147. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under s. 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the AO could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Expln. 3 by the Finance Act (No. 2) of 2009. However, Expln. 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of s. 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Sec. 147 has this effect that the AO has to assess or reassess the income ("such income") whichescaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. We have approached the issue of interpretation that has arisen for decision in these appeals, both as a matter of first principle, based on the language used in s. 147(1) and on the basis of the precedent on the subject. We 8 Smt. Shobha Surendra Nahata Vs. Pr. CIT ITA No. 24/NAG/2021 agree with the submissions which has been urged on behalf of the assessee that s. 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the AO may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Expln. 3 to s. 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of s. 147(1) as they stood after the amendment of 1st April, 1989 continue to hold the field. In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand answered against the Revenue and in favour of the assessee. The appeal is, accordingly, dismissed. There shall be no order as to costs.” 8. Backed by our aforesaid deliberations, we are of the considered view, that now when in absence of any addition having been made as regards the issue on the basis of which the case of the assessee was reopened, the AO stood divested of his jurisdiction of making any independent additions/disallowances, therefore, no infirmity could be related to the order passed by him under Sec. 143(3) r.w.s 147 of the Act, dated 23.11.2018, for the reason, that he had failed to have carried out verifications as regards the unsecured loans of Rs.76,63,484/- (supra) that were raised by the assessee during the 9 Smt. Shobha Surendra Nahata Vs. Pr. CIT ITA No. 24/NAG/2021 year from seven parties, and also failed to disallow under Sec. 40(a)(ia) her claim for deduction of interest of Rs.9,16,221/- that was paid to the aforesaid lenders i.e, without deduction of tax at source, as both of the said issues were independent issues that were unconnected with the “reason” on the basis of which her case was reopened under Section 147 of the Act. In sum and substance, as the view taken by the Assessing Officer i.e., not making of any independent addition/disallowance in the absence of any addition as regards the issue on the basis of which the case of the assessee was re-opened, is found to be in conformity with the judgment of the Hon’ble High Court of Bombay in the case of Jet Airways (I) Ltd. (supra), therefore, we are unable to concur with the view taken by the Pr. CIT that the failure on the part of the AO to carry out verifications and/or make addition/disallowance as regards such independent and unconnected issues would render the order passed by him under Sec. 143(3) r.w.s 147, dated 23.11.2018 as erroneous in so far as it was prejudicial to the interest of the revenue under Sec. 263 of the Act. We, thus, in terms of our aforesaid observations set-aside the order 10 Smt. Shobha Surendra Nahata Vs. Pr. CIT ITA No. 24/NAG/2021 passed by the Pr. CIT under Section 263 of the Act, dated 22.02.2021 and restore the order passed by the Assessing Officer u/s.143(3) r.w.s.147, dated 23.11.2018. Thus, the appeal filed by the assessee is allowed in terms of our aforesaid observations. 9. In the result, appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in open Court on 30 th day of March, 2022. Sd/- Sd/- JAMLAPPA D. BATTULL RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 30 th March, 2022 SB आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The Pr. CIT, Nagpur-1 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, नागप ु र/ DR, ITAT, Nagpur. 5. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 11 Smt. Shobha Surendra Nahata Vs. Pr. CIT ITA No. 24/NAG/2021 Date 1 Draft dictated on 23.03.2022 Sr.PS/PS 2 Draft placed before author 23.03.2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order