ESS KAY BHATTA COMPANY, MOGA V. INCOME TAX OFFICER, WARD-1, MOGA

ITA 278/ASR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8976 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-04-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 11-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SSH ARUN GUPTA; BHASI N AGGARWAL C AS
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 40A(3); 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO. 278/ASR/2018 A SSESSMENT YEAR: 2010-11 ESS KAY BHATTA CO., VILLAGE DHUDIKE, MOGA. [PAN: AABFE 8945P] VS. INCOME TAX OFFICER, WARD-I, MOGA (APPELLANT) (RESPONDENT) APPELLANT BY : S/SH. ARUN GUPTA & BHASI N AGGARWAL (C.AS.) RESPONDENT BY: SH. CHARAN DASS (SR. D.R.) DATE OF HEARING: 01.04.2019 DATE OF PRONOUNCEMENT: 28.06.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE ORD ER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-3, LUDHIANA ('CIT(A)' FOR S HORT) DATED 23.3.2018, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS AS SESSMENT U/S. 143(3) R/W S. 147 OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) VI DE ORDER DATED 01.12.2016 FOR THE ASSESSMENT YEAR (AY) 2010-11. 2. THE FIRST CHALLENGE TO THE IMPUGNED ORDER IS QUA THE VALIDITY OF THE NOTICE U/S. 148 OF THE ACT WHICH, RAISED PER GROUNDS 2 & 3 OF THE APPEAL, WAS ARGUED FIRST IN-AS-MUCH AS AN ACCEPTANCE OF THE SAME MAY RENDER AS OF NO CONSEQUENCE THE OTHER GROUNDS IMPUGNING THE ASSESSMENT UNDER APPEAL . THE SAME IS ACCORDINGLY TAKEN UP FIRST. ITA NO. 278/ASR/2018 (AY 2010-11) ESS KAY BHATTA CO. V. ITO 2 3. THE FACTS, IN-SO-FAR AS ARE RELEVANT, ARE THAT T HE ASSESSEE-FIRM, RUNNING A BRICK- KILN, WAS ASSESSED IN THE FIRST INSTANCE U/S . 143(3) OF THE ACT VIDE ORDER DATED 02.11.2012, MAKING AN ADDITION FOR RS.1,20,000/- TO THE RETURNED INCOME (ON 16/9/2010) OF RS.1,81,850, ASSESSING THE INCOME AT RS.3,01,850/- (PB PAGES 21- 22). NOTICE U/S. 148(1) WAS SUBSEQUENTLY ISSUED ON 10.12.2015 ON THE GROUND THAT THE COAL FREIGHT ACCOUNT FOR THE YEAR REVEALED FREI GHT PAYMENTS, AGGREGATING TO RS.2,36,755/-, MADE IN CONTRAVENTION OF SEC. 40A(3) , WHICH HAD BEEN OMITTED TO BE DISALLOWED WHILE FRAMING THE ORIGINAL ASSESSMENT U/ S. 143(3). THE ASSESSEE FAILING TO PROVE THAT THE CASH PAYMENTS TO THE TRUCK DRIVER S HAD IN FACT BEEN MADE IN SUMS OF RS.19,000/- EACH OVER SEVERAL DAYS, AS CLAIMED, THE ASSESSING OFFICER (AO) EFFECTED THE DISALLOWANCE THEREOF. THE ASSESSEE CHA LLENGED THE SAME ON SEVERAL GROUNDS, INCLUDING THE VALIDITY OF THE NOTICE U/S. 148(1) DATED 10.12.2015 AND, THUS, OF THE REASSESSMENT PROCEEDINGS, ON THE GROUND THAT THE SAID NOTICE, ISSUED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, COULD NOT HAVE BEEN IN LAW ISSUED AS THERE WAS NO FAILURE ON THE PART OF THE A SSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE COMPUTATION OF HIS INCOME FOR THE RELEVANT YEAR. THERE WAS IN FACT NO ALLEGATION BY THE AO TO THAT E FFECT (REFER GROUNDS 2 & 3 OF THE APPEAL). THE LD. CIT(A), AFTER RELYING ON A NUMBER OF DECISIONS, HELD AS UNDER: 4.6 THE ABOVE DISCUSSION MAKES IT VERY CLEAR THAT FOR VALID REOPENING OF ASSESSMENT, WHICH IS COVERED WITH (BY) PROVISO TO SEC.147, (THE) A.O. HAS TO SPECIFICALLY MENTION (IN) THE REASONS TO BEL IEVE THAT THE INCOME HAS BEEN ESCAPED. IN THE INSTANT CASE, REASONS RECO RDED AS MENTIONED IN PARA NO.2.2 ABOVE, I DO NOT FIND ANY INFIRMITY IN T HE REOPENING (OF) PROCEEDINGS. ACCORDINGLY, THESE GROUNDS OF APPEAL A RE DISMISSED. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 4. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. WITHOUT DOUBT, THERE HAS BEEN AN ESCAPEMENT OF INC OME CHARGEABLE TO TAX FROM ASSESSMENT, I.E., PRIMA-FACIE , INASMUCH AS INCOME HAS BEEN UNDER-ASSESSED ON ITA NO. 278/ASR/2018 (AY 2010-11) ESS KAY BHATTA CO. V. ITO 3 ACCOUNT OF NON-DISALLOWANCE U/S. 40A(3) (REFER EXPLANATION 2(C) TO SEC.147), VALIDATING THE AOS REASON TO BELIEVE QUA THE SAME AS WELL AS THE RECORDING THEREOF U/S. 148(2). THAT, HOWEVER, IS NOT THE ONLY CONDITI ON TO BE POSITIVELY SATISFIED FOR THE ISSUE OF A VALID NOTICE U/S. 148 (1). WHERE BEI NG ISSUED BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, IN A CASE WHERE THE ASSESSMENT FOR THE RELEVANT YEAR HAD EARLIER BEEN MADE U/S. 14 3(3), AS IN THE INSTANT CASE, THE SAID NOTICE CAN BE ISSUED ONLY WHERE THERE IS, INTER ALIA , A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR THE COMPUTATION OF HIS INCOME FOR THE RELEVANT YEAR (REFER FIRST PROVISO TO S. 147). NOW, TO BEGIN WITH, THERE IS NO ALLEGATION IN ITS RESPECT EITHER IN THE REASONS RECORDED OR EVEN IN THE ENSUING ASSESSMENT ORDER. I N FACT, EVEN WHERE MADE, IT WOULD NOT HOLD AS THE STATEMENT OF COAL FREIGHT AC COUNT RELIED UPON BY THE AO IN FORMING HIS REASON TO BELIEVE AN ESCAPEMENT OF INCO ME FROM ASSESSMENT ON ACCOUNT OF NON-DISALLOWANCE OF FREIGHT EXPENDITURE OSTENSIBLY INADMISSIBLE U/S. 40A(3), STANDS FURNISHED DURING THE COURSE OF THE O RIGINAL ASSESSMENT PROCEEDINGS. THAT IS, THE VERY SAME LEDGER ACCOUNT, ON THE BASIS OF WHICH THE AO DISCOVERS THE OMISSION TO MAKE THE DISALLOWANCE U/S. 40A(3) AND, THUS, AN ESCAPEMENT OF INCOME IN THE INSTANT CASE, IS THAT ALREADY FURNISHED BY T HE ASSESSEE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, AND TOWARD WHICH THE LD. CO UNSEL FOR THE ASSESSEE, SH. GUPTA, WOULD DURING HEARING DRAW THE ATTENTION OF T HE BENCH TO PARA-1 OF THE IMPUGNED ASSESSMENT ORDER, NOTING THE SAME. HOW COULD, THEN, ONE WONDERS, IT BE SAID OR CONSTRUED THAT THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE COMPUTATION OF HIS INCOME, WHICH IS A CONDITION PRECEDENT FOR A VALID ISSUE OF NOTICE U/S. 148(1), I.E., IN TERMS OF THE FIRST PROVISO TO SECTION 147 ? IT IS TRITE LAW THAT THE OBLIGATION ON THE ASSESSEE EXTENDS TO FURNISHING THE RELEVANT, PRIMAR Y FACTS, AND THE INFERENCE TO BE DRAWN THEREFROM, VIZ. AS TO ADMISSIBILITY OR OTHERW ISE OF A SPECIFIC CLAIM OR ITA NO. 278/ASR/2018 (AY 2010-11) ESS KAY BHATTA CO. V. ITO 4 ALLOWANCE, IS TO BE BY THE REVENUE AUTHORITIES (REF ER, INTER ALIA, CIT V. BURLOP DEALERS LTD . [1971] 79 ITR 609 (SC) . THE IMPUGNED ORDER COMPLETELY FAILS TO ADDRESS THIS SPECIFIC CHARGE BY THE ASSESSEE. FURTHER STILL, IT COULD ALSO BE ARGUED THAT THE REL EVANT ACCOUNT HAVING BEEN FURNISHED ON BEING CALLED FOR DURING THE ORIGINAL P ROCEEDINGS, THE SAME CAN ONLY BE REGARDED AS HAVING BEEN EXAMINED THEREAT BY THE ASS ESSING AUTHORITY, WHO THOUGH CHOSE NOT TO MAKE ANY DISALLOWANCE U/S. 40A(3). REF ERENCE TO THE SAID ACCOUNT IN THE INSTANT PROCEEDINGS, THUS, AMOUNTS TO A REVIEW, A CHANGE OF OPINION, IMPERMISSIBLE IN LAW. THE ARGUMENT, VALID IN PRINCI PLE, WOULD HOWEVER REQUIRE THE ASSESSEE TO SHOW THAT IT WAS SHOW CAUSED QUA THE IMPUGNED DISALLOWANCE (U/S. 40A(3)), OR OTHERWISE QUERIED IN ITS RESPECT, IN TH E ORIGINAL PROCEEDINGS. AND WHICH HAS NOT BEEN AT ANY STAGE. THE REVENUE HAS THUS NOT BEEN ABLE TO SHOW THE ASSE SSEES FAILURE TO DISCLOSE THE RELEVANT FACTS, ONLY WHICH WOULD QUALI FY ITS ACTION FOR REOPENING AS VALID IN LAW, WITH, ON THE CONTRARY, THE ASSESSEE E XHIBITING OTHERWISE. THOUGH, STRICTLY SPEAKING, THE LD. CIT(A) FAILING TO ADDRES S THIS SPECIFIC ISSUE RAISED BEFORE HER PER GDS. 2 & 3, THE MATTER SHOULD TRAVEL BACK T O HER FILE FOR ADJUDICATION, IT IS NOT CONSIDERED EITHER NECESSARY OR ADVISABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE TO DO SO. THE ISSUE RAISED IS PURELY LEGAL, WI TH ALL THE FACTS NECESSARY FOR ITS ADJUDICATION BEING ON RECORD AND, IN FACT, NOT IN D ISPUTE. 5. IN VIEW OF THE FOREGOING, I HAVE, ACCORDINGLY, N O HESITATION IN HOLDING THE INITIATION OF THE RE-ASSESSMENT PROCEEDINGS, AND TH E CONSEQUENT RE-ASSESSMENT, IN THE INSTANT CASE, AS BAD IN LAW. THE ASSESSEE HAS R AISED SEVERAL OTHER GROUNDS, INCLUDING QUA THE MERITS OF THE DISALLOWANCE UNDER REFERENCE. TH E SAME, HOWEVER, WOULD NOT SURVIVE IN VIEW OF THE CATEGORICAL FINDIN G AS TO THE INVALIDITY OF THE INITIATION OF THE REASSESSMENT PROCEEDINGS IN LAW. THE SAME, ACCORDINGLY, EVEN AS ITA NO. 278/ASR/2018 (AY 2010-11) ESS KAY BHATTA CO. V. ITO 5 CLARIFIED DURING HEARING ITSELF, ARE NOT BEING ADVE RTED TO, BEING, IN FACT, IN THIS VIEW OF THE MATTER, NOT SUBJECT TO ARGUMENTS. I DECIDE A CCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN CO URT ON JUNE 28, 2019 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 28.6.2019 /PK PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: M/S. ESS KAY BHATTA CO., VIL LAGE DHUDIKE, MOGA. (2) THE RESPONDENT: INCOME TAX OFFICER, WARD-I, MOGA (3) THE CIT(APPEALS)-3, LUDHIANA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER