Sarvodaya Trading Co., Sabarkantha V. The ITO, S.K. Ward-2, Himatnagar

ITA 2723/AHD/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7160 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 04-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DIPAK SHAH
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion; TDS; Rule 8D
• Section: 148; 144; 142(1); 14A; 194C; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD [CONDUCTED THROUGH VIRTUAL AT AHMEDABAD] BEFORE Ms. MADHUMITA ROY, JUDICIAL MEMBER & SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER I .T .A . N o . 27 23 /A h d /2 01 7 ( A s s e s s me nt Y ea r : 20 1 2- 13 ) Sar v o da ya T ra din g C o . Nr . S ar da r Ka pa s i y a P la nt , Hi g h w a y Ro a d , I da r , Di s t. S a b a r k a n th a V s . I T O S. K . War d - 2 , Hi m at n a g a r [ P AN N o. A A VF S 8 76 3M ] (Appellant) .. (Respondent) Assessee by : Shri Dipak Shah, A.R. Revenue by : Shri R. R. Makwana, Sr. DR D a t e of H ea r i ng 08.03.2022 D a t e of P r o no u n ce me nt 10.03.2022 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the assessee is directed against the order dated 04.10.2017 passed by the Commissioner of Income Tax (Appeals)-2, Ahmedabad arising out of the order dated 22.06.2016 passed by the ITO, S. K. Ward-2, Himatnagar under Section 144 r.w.s 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y. 2012-13 with the following grounds: “1. The Honorable CIT Appeals-2 has erred in facts and in law, in confirming Amt. of Rs. 9,27,148/- due to non deduction of TDS U/s. 40 (a) (ia) of I.T Act on Payment made to various Laborer on Cash basic. 2. The Honorable CIT Appeals-2 has erred in facts and in law, in confirming Amt. of Rs. 3,31,008/- as Interest income on advances given to party as a interest free advances. ITA No. 2723/Ahd/2017 Sarvodaya Trading Co. vs. ITO Asst.Year –2012-13 - 2 - 3. The Honorable CIT Appeals-2 has erred in facts and in law, in confirming amount of Rs. 2,30,995/- U/s 14A of I. T. Act against exempted Income disclosed in Profit & Loss account as a dividend Income. 4. The Assessment made is bad in law, invalid and illegal. It be so held now and the same be quashed 5. Direction to charge interest under section 234-B without application of mind is unjustified. 5 That the appellant craves leave to add, to alter, to amend, to modify, Substitute, delete and/or rescind all or any of the GROUNDS OF APPEALS on or before the final hearing, if necessary so arises.” 2. After filing the appeal before us the appellant has filed an additional ground of appeal whereby and whereunder the very reopening of the case of the appellant under Section 147 of the Act has been challenged. It is relevant to mention that the Ld. DR has also not objected to the addl. Ground preferred by the assessee. Needless to mention that the said point of maintainability has not been challenged before the Ld. AO or before the Ld. CIT(A). Since it goes to the root of the matter we would like to decide the issue at the threshold. 3. At the time of hearing of the instant appeal it was submitted by the Ld. Senior Counsel appearing for the assessee that during the course of the original assessment proceeding the assessee by and under the notice issued under Section 142(1) of the Act dated 14.08.2014 was asked to furnish the details mentioned therein in respect of different claims made by the assessee. In this respect he has drawn our attention to Page 4 & 5 of the Paper Book filed before us. Upon consideration of all the documents as supplied by the assessee in respect of the said notice dated 14.08.2014 the Ld. AO finalized the assessment on 20.11.2014 without making any addition. ITA No. 2723/Ahd/2017 Sarvodaya Trading Co. vs. ITO Asst.Year –2012-13 - 3 - It was further argued by him that the same ITO has initiated the proceeding by issuance of notice under Section 148 of the Act dated 18.12.2015 which is available at Page 2 & 3 of the Paper Book filed before us. According to the Ld. Senior Counsel the reason to believe that income in respect of certain items has escaped assessment is nothing but a change on opinion particularly when the assessment has been finalized on the same issue taking into consideration the relevant documents submitted by the assessee as per requirement of the Revenue. Under this circumstances he prays for quashing of the said proceeding initiated under Section 147/148 of the Act. In support of his argument the Ld. Senior Counsel has relied upon the judgment passed by the Hon’ble Jurisdictional High Court in the case of Gujarat Power Corpn. Ltd. vs. ACIT, reported in (2012) 26 taxmann.com 51 (Guj.). 4. On the other hand, the Ld. DR relied upon the order passed by the authorities below. Further that he has relied upon a judgment in support of reopening on the issue of change of opinion in the case of PCIT, Vadodara-2 vs. Sun Pharmaceuticals Industries Ltd., reported in (2017) 79 taxmann.com 61 (SC). 5. We have heard the respective parties and also perused the relevant materials available on record. ITA No. 2723/Ahd/2017 Sarvodaya Trading Co. vs. ITO Asst.Year –2012-13 - 4 - 6. It appears that the reason for reopening of assessment dated 18.12.2015 alleges income escaping assessment by the assessee on the following counts: “1. From the balance sheet and p&l a/c of the assessee has paid interest on unsecured loan & has paid interest of Rs.829400/- on secured loan. However, the assessee has not charged interest from uday cotton co. on loan and advances of Rs.3099959/- as no details of confirmation from loan and advances given was on record. Hence, it is presumed that no interest has been charged on loan and advances Rs.3099959/-. Thus it is clear that the assessee diverted the interest bearing loan for giving loan and advances without charging interest for the purpose of business. Hence the interest that may be charged on the advances on Rs. 3099959/- @12% comes to Rs.371995/- required to be disallowed. 2. The assessee has debited processing expenses of Rs.1909391/- in P&L account however the assessee has not deducted TDS on it. Therefore, the nature of payment gets covered under the there should limit laid down u/s 194C of the I T Act for deducting TDS. The processing expenses required to disallowed. 3. As per the provisions of section 14A of the I T Act,1961, no deduction shall be allowed in respect of expenditure incurred by assessee in relation to income which does not from part of the total income under this act. Further as per rule 8D of the income tax rules, 1962, expenditure in relation to income which does not from part of the total income shall be the aggregate of amount. An amount equal to one-half per cent of the average of the value of investment, Income from which does not or shall not from part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year. While passing an order u/s 143(3), no disallowance u/s 14A was made, though the assessee had an exempt u/s 10(34/35) of Rs. 7,66,943/- during the relevant previous year. The assessee had not disallowed the expenditure relatable to the exempt income. Thus, the disallowance of expenses pertaining to earn exempt income was required to be made u/s 14A.” 7. It also appears from Page 5 of the Paper Book being the Annexure of notice under Section 142(1) dated 14.08.2014 whereby and whereunder the assessee was directed to produce relevant documents in respect of the claim made by the assessee wherefrom it further appears that the entire set of documents relating to the issues involved in the original assessment and the reassessment proceeding as well were mentioned. It is relevant to mention that the same set of documents which were submitted by the assessee in ITA No. 2723/Ahd/2017 Sarvodaya Trading Co. vs. ITO Asst.Year –2012-13 - 5 - terms of the said notice dated 14.08.2014 are also made available before us by annexing the same in the Paper Book. Upon perusal of the said documents we find that those are sufficient to deal with the issues raised in the original assessment proceeding which is again being the issues in reopening of the case of the assessee by ITO. We further note that the same ITO has issued the reopening of assessment under Section 148 of the Act by recording reasons on 18.12.2015. According to us the same is nothing but change of opinion of the concerned officer which is per se bad in law particularly when the issue has already been settled after considering the entire set of documents in respect of the said claim as submitted by the assessee in terms of the notice under Section 142(1) dated 14.08.2014. 8. We further note that though the judgment of PCIT, Vadodara-2 vs. Sun Pharmaceutical Industries Ltd., reported in (2017) 79 taxmann.com 61 (SC) has been relied upon by the ld. DR in support of reopening of assessment the Ld. DR has not been able to show as to how the said judgment is applicable to the case in hand before us. 9. On this aspect we have further considered the judgment passed by the Hon’ble Jurisdictional High Court in the case of Gujarat Power Corpn. Ltd. (supra). It was observed by the Hon’ble Jurisdictional High Court that in a situation where the AO during scrutiny assessment, notices a claim of exemption made by assessee and having entertained prima facie doubts raises queries, asks assessee to satisfy him with respect to such a claim and thereafter does not make any addition in final order of assessment, he can be stated to have formed an opinion irrespective of as to whether or not in final ITA No. 2723/Ahd/2017 Sarvodaya Trading Co. vs. ITO Asst.Year –2012-13 - 6 - order, he gives his reasons for not making addition reopening of such assessment be said to be based on change of opinion. 10. We do not find any valid reason for reopening of assessment particularly when the original assessment was finalized on the basis of evidences produced by the assessee on the same claim made by him as per the dictate of the Revenue. Respectfully relying upon the ratio laid down in the above matter of the Jurisdictional High Court the same is found to be based on mere change of opinion and, thus, bad in law and liable to be quashed. With the above reasons we, therefore, quash the entire proceeding which is found to be devoid of any merit. Hence, assessee’s appeal is allowed. 11. In the result, the appeal preferred by the assessee is allowed. This Order pronounced in Open Court on 10/03/2022 Sd/- Sd/- (BHAGIRATH MAL BIYANI) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 10/03/2022 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/ Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad