Royal Agencies, Visakhapatnam V. The Income Tax Officer, Ward-1(2), Visakhapatnam

ITA 276/VIZ/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2255 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 12-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R L N SOMAYAJULU
• Keywords: Non-deduction of tax; Reassessment proceedings; TDS; Set aside
• Section: 147; 148; 154; 139; 143(3); 142(1); 40(a)(ia); 143(1)

Judgement Text

आयकर अपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.276/Viz/2019 (ननधधारण वर्ा / Assessment Year :2005-06) M/s. Royal Agencies, Visakhapatnam. PAN: AABFR 5572 M Vs. The Income Tax Officer, Ward-1(2), Visakhapatnam. (अपीलधथी/ Appellant) (प्रत्यथी/ Respondent) अपीलधथी की ओर से/ Appellant by : Sri RLN Somayajulu प्रत्यधथी की ओर से / Respondent by : Sri SPG Mudaliar, Sr. AR सुनवधई की तधरीख / Date of Hearing : 08/06/2022 घोर्णध की तधरीख/Date of Pronouncement : 28/06/2022 O R D E R PER S. BALAKRISHNAN, Accountant Member : This appeal is filed by the assessee against the order of the Ld. CIT(A)-1, Visakhapatnam in appeal No.422/2012-13/ITO-W- 1(2), VSP/2018-19, dated 29/01/2019 passed U/s. 143(3) r.w.s 147 and U/s. 250(6) of the Act for the AY 2005-06. 2 2. The assessee has raised 11 grounds originally and thereafter vide letter dated 23/01/2020 filed revised grounds of appeal which read as under: “1. The order of the Ld. CIT(A) is contrary to the f acts and also the law applicable to the f acts of the case. 2. The Ld. CIT(A) is not justif ied in sustaining the addition of Rs. 3,58,789/- towards f reight charges paid to M/s. East Cost Transport Company as no TDS was deducted U/s. 194C and the total payments exceeded Rs. 50,000 in aggregate during previous year. 3. The AO issued an order U/s. 154 adding Rs. 3,58,789/- the income of the assessee which was arrived as per order u/s. 143(3) dated 18/12/2007. 4. The assessee preferred an appeal before CIT(A) and the CIT(A) confirmed the AO order. 5. Thereaf ter the assessee pref erred an appeal bef ore the ITAT, Visakhapatnam and the Hon’ble ITAT set aside the order of the Ld. CIT(A) and also the order passed U/s. 154 of the AO vide order dated 12/4/2011. 6. The Assessing Off icer reopened the case U/s. 147 vide notice dated 20/09/2011. 7. The AO completed the Assessment proceedings U/s. 143(3) r.w.s 147 adding Rs, 3,58,789/- U/s. 40(a)(ia). 8. The reopening of the assessment U/s. 147 by the AO is wrong as the AO issued the notice U/s. 148 without an y new f acts coming into light only to prolong litigation. The assessment was already completed U/s. 143(3). 9. The AO did not mention any valid reason in the notice U/s. 147 merely a change of opinion cannot constitute a reason to be believed. 10. The assessee has disclosed all the basic and true f acts during the scrutiny proceedings U/s. 143(3) and the assessment was completed. Hence notice U/s. 148 cannot be issued merely because there is another interf erence of the same documents. 3 11. Taking the above grounds and any further grounds that may be presented during the hearing proceedings we request your goodself to uphold the appeal f iled by the assessee and set aside the order passed by the Ld. CIT(A).” 3. The sole issue is with respect to disallowance of Rs. 3,58,789/- u/s 40(a)(ia) for non deduction of tax at source. Brief facts of the case are that the assessee is a dealer in G.I. Pipes and Fittings filed its return of income for the AY 2005-06 on 30/10/2005 declaring total income of Rs. 34,570/-. The return was processed U/s. 143(1) and selected for scrutiny under CASS. Accordingly, the AO completed the assessment U/s. 143(3) of the Act on 18/12/2007. Thereafter, notice U/s. 154 was issued and the amount of Rs. 3,58,789/- was added to the total income of the assessee as this amount being freights charges on which no Tax was deducted at source. Aggrieved by the addition made by the Ld. AO, the assessee went on appeal before the Ld. CIT(A) and the Ld. CIT(A) confirmed the AO’s action and sustained the addition. Thereafter, the assessee filed an appeal before the ITAT and the Hon’ble ITAT set-aside the order of the Ld. CIT(A) and also the order passed U/s. 154 of the Act vide its order dated 12/04/2011 and restored the matter back to the file of the Ld. AO. Accordingly, the AO issued notice U/s. 148 of the Act on 20/09/2011 and completed the assessment U/s. 143(3) r.w.s 147 4 of the Act and determined the total income at Rs. 4,28,600/- which includes disallowance U/s. 40(a)(ia) of the Act amounting to Rs. 3,58,789/- and raised a demand of Rs. 3,16,815/-. Aggrieved by the order of the Ld. AO, assessee went on appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A) confirmed the disallowance made by the Ld. AO and placed reliance in the judgment of the Hon’ble Supreme Court in the case of Palam Gases 81 Taxman.com 43(SC). Aggrieved by the order of the Ld. CIT(A), the assessee is in further appeal before us. 4. Before us, the Ld. AR argued that since the assessment was completed U/s. 143(3) of the Act and the rectification order was passed U/s. 154, no reopening of assessment shall be made by the AO. He further submitted that the Ld. AO issued the notice U/s. 148 of the Act without any new material facts. Moreover, the Ld. AO did not mention any valid reason in the notice U/s. 147. The Ld. AR also mentioned that during the scrutiny proceedings, assessee has disclosed all the material facts and hence the issue of notice u/s. 148 of the Act is bad in law. On merits, the Ld. AR contended that the provisions of section 40(a)(ia) of the Act are applicable only to the expenditure which is payable on 31 st March of every year and cannot be invoked to 5 disallow the amounts which have already been paid during the year without deducting the tax. In the assessee’s case, the amount of Rs. 3,58,789/- was paid to East Coast Transport Corporation during the year and no amount is payable as on 31/3/2005. The Ld. AR therefore submitted that the decision of Ld. AO in making the disallowance U/s. 40(a)(ia) of the Act and the Ld. CIT (A)’s decision in upholding the same is not sustainable in law. In support of his argument, the Ld. AR relied on the decision of the ITAT in the case of Merilyn Shipping & Transports, Visakhapatnam vs. Addl. CIT. On the other hand Ld. DR relied on the orders of the Ld. Revenue Authorities and vehemently argued in support of the same. 5. We have heard the rival submissions and gone through the material available on record as well as the decision of the Authorities below. This is the second round of proceedings before us. The core issue to be decided in this case is the validity of the reopening of assessment. We find from the order of the Ld. AO that the intimation was processed U/s. 143(1) of the Act and the case was selected for scrutiny under CASS. Subsequently, the assessment was completed U/s. 143(3) on 18/12/2007. The AO had issued a notice U/s. 148 on 20/09/2011 for the AY 2005-06. 6 We find force in the Ld. AR’s argument that since the assessment was completed U/s. 143(3) of the Act and no new material has been found by the Ld. AO warranting the reopening of assessment U/s. 147 and the assessee has disclosed fully and truly all the material facts before the Ld. AO. It is evidenced from para 2 of the Ld. AO’s order which is as under: “........The fact of non-deduction of tax at source is also evidenced from the 3CD report in Col.No.27(3) in which it was mentioned that the provisions of TDS are not applicable.....” 6. The Ld. AO has scrutinized the tax audit report which proves that the assessee has not failed to disclose any material facts before the Assessing Officer. The Ld. AO erred in inferring non-deduction of tax mentioned in Form 3CD and has resorted to pass rectification order U/d. 154 of the Act which was later on quashed by the Hon’ble ITAT vide order dated 12/4/2011. 7. On plain reading of the provisions of section 147 of the Act, the Assessing Officer can reopen the assessment after four years from the end of the relevant assessment year only when both the conditions provided in section 147 of the Act are satisfied. That is: 7 1. “The Assessing Officer must have reason to believe that income or profits or gains chargeable to tax had escaped assessment and; 2. The Assessing Officer must have reason to believe that such escapement has occurred by reason of either omission or failure on part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year or failure on part of the assessee to make a return of income under section 139 or in response to notice issued under section 142(1) or 148.” 8. In the instant case, it is noticed that notice U/s. 148 of the Act was issued on 20/09/2011 for the AY 2005-06. The action of the AO while initiating the notice U/s. 148 of the Act after a period of four years from the end of the relevant AY 2005-06 which expired on 31/3/2009, should have examined the conditions provided U/s. 147 of the Act should have been satisfied for reopening of the proceedings to be valid. The Assessing Officer having verified the facts from Form 3CD as mentioned in the AO’s order proves the contention of the Ld. AR that in the instant case, the assessee has disclosed fully and 8 truly all the material facts in the course of original assessment proceedings before the AO. The Assessment Order also has not established that the assessee has not made disclosure of fully and truly all material facts. Since in the present case, the conditions stipulated u/s. 147 of the Act have not met, the reassessment proceedings could not be sustained in view of the judgment of the Hon’ble Madras High Court in the case of CIT vs. Schwing Stetter India P. Ltd reported in 378 ITR 380 (Mad.). Respectfully following the judgment of the Hon’ble Madras High Court in the case of CIT vs. Schwing Stetter India P. Ltd (supra), we set-aside the order of the Ld. CIT(A) on this issue and quash the reassessment proceedings U/s. 143(3) r.w.s 147 of the Act. 9. In the result, appeal of the assessee is allowed. Pronounced in the open Court on the 28 th June, 2022. Sd/- Sd/- (द ु व्वूरु आर.एल रेड्डी) (एस बालाकृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याधयकसदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated : 28.06.2022 OKK - SPS 9 आदेश की प्रनतनलनप अग्रेनर्त/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee – M/s. Royal Agencies, D.No.28-9-29, Suryabagh, Visakhapatnam, Andhra Pradesh – 530 020. 2. रधजस्व/The Revenue – Income Tax Officer, Ward-1(2), The Pratyakshkar Bhavan, Ward-1(2), MVP Colony, Visakhapatnam, Andhra Pradesh – 530 017. 3. The Principal Commissioner of Income Tax, 4. आयकर आयुक्त (अपील)/ The Commissioner of Income Tax-1, Visakhapatnam. 5. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/ DR, ITAT, Visakhapatnam 6. गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam