Deepak Soni, Ratlam V. ACIT, Ratlam

ITA 331/Ind/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9292 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 19-11-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tangible material; Difference of opinion; Change of opinion; Revenue expenditure
• Section: 147; 69; 148; 143(3); 191

Judgement Text

आयकर अपीलȣय अͬधकरण, इंदौर Ûयायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING ITA No.331/Ind/2020 Assessment Year:2011-12 Shri Deepak Soni, Ratlam बनाम/ Vs. ACIT, Ratlam (Appellant) (Respondent ) P.A. No.BCOPS5514E Appellant by Shri Kunal Agrawal, CA Respondent by Shri P.K. Mitra, CIT-DR Date of Hearing: 20.01.2022 Date of Pronouncement: 07.02.2022 आदेश / O R D E R Shri Deepak Soni, Ratlam 2 PER MANISH BORAD, A.M: The above captioned appeal filed at the instance of the Assessee for Assessment Year 2011-12 is directed against the order of Ld. Commissioner of Income Tax(Appeals) (in short ‘Ld.CIT], Ujjain dated 21.09.2020 which is arising out of the order u/s 143(3)/147 of the Income Tax Act 1961(In short the ‘Act’) dated 19.12.2018 framed by ACIT, Ratlam. The assessee has raised following grounds of appeal : 1. On the facts and in the circumstances of the case, the ld. CIT(A) erred in not allowing the ground challenging the reopening u/s 147 r.w.s. 148 of the I.T. Act. 2. On the facts and in the circumstances of the case, the ld. CIT(A) erred in sustaining the addition of Rs.50,26,200/- on the basis of perverse findings, irrelevant grounds and ignoring assessee’s pleadings. 2. First legal ground raised by the assessee relates to challenging the reopening u/s 147 r.w.s. 148 of the I.T. Act. Facts, in brief, are that assessee’s case was assessed u/s 143(3) of the Act vide assessment order dated 25.10.2013. However, assessee’s case was reopened u/s 147 of the Act vide notice dated 28.03.2018. In the Shri Deepak Soni, Ratlam 3 assessment order passed u/s 147 r.w.s 143(3), the Ld. AO made an addition of Rs. 50,26,200/- considering 3Kg of Gold taken on lease from alleged dubious person u/s 69 of the Act. This addition was based on going through the sales and purchase register for the period 28.04.2010 to 05.05.2010. Being aggrieved, the assessee approached the learned CIT(A) raising the ground in respect of challenging the reopening u/s 147. But, the learned CIT(A) dismissed the legal ground holding that the Assessing Officer was perfectly justified in reopening the assessment and he was well within his powers to reopen the case as he had recorded the reasons properly and had also disposed of the objection raised before him by passing an speaking order. Being aggrieved, the assessee is before this Tribunal raising the legal ground. 3. Before us, learned Counsel for the assessee reiterated the submissions made before Revenue Authorities and submitted that the reopening initiated was bad in law as the reasons recorded do not mention any fact relating to failure on the part of assessee to disclose truly and fully all material facts necessary for his assessment as during the course of original assessment Shri Deepak Soni, Ratlam 4 proceedings u/s 143(3), the Ld. Assessing Officer had already verified books of accounts and relevant papers and the reason recorded is based on information already available on record which clearly highlights the fact there is no new tangible material available for reopening of the case. There was a fresh application of mind to the information already examined earlier by the department and therefore it constitutes “change of opinion” which is not justified in view of the various relevant judicial pronouncements. 4. Per contra, ld. CIT-DR relied upon the orders of the Revenue Authorities and submitted that the learned CIT(A) was justified in rejecting the legal ground because the Assessing Officer within his powers reopened the case as he had recorded the reasons properly and had also disposed of the objection raised before him by passing an speaking order. 5. We have considered rival contentions and gone through the material available on record. We find that that assessee’s case was assessed u/s 143(3) of the Act vide assessment order dated 25.10.2013 and the same was reopened u/s 147 of the Act vide notice dated 28.03.2018. Therefore, the reopening is beyond 4 years Shri Deepak Soni, Ratlam 5 and thus, in the instant case, the proviso to section 147 is squarely applicable which states that “there should be failure on the part of assessee to disclose truly and fully all material facts necessary for his assessment.” We find that in the assessment order passed u/s 147 r.w.s 143(3), the Ld. AO made an addition of Rs. 50,26,200/- considering 3Kg of Gold taken on lease from alleged dubious person u/s 69 of the Act. This addition was based on going through the sales and purchase register for the period 28.04.2010 to 05.05.2010. However, we find that during the course of original assessment proceedings u/s 143(3), the Ld. Assessing Officer had already verified books of accounts which include purchase and sales register, purchase vouchers, sales vouchers and issues relating to cash deposit etc. as is evident from the Para 1 of the Assessment order dated 25.10.2013. Further, we find that while disposing the objections raised by the assessee vide order dated 26.11.2018, the Ld. AO had refuted the objections simply on the ground that no addition was made on the issues on which case is reopened and not admitting anywhere that reopening is based on any new fresh tangible material. This fact is evident from the perusal of order dated 26.11.2018 of the Assessing Officer passed Shri Deepak Soni, Ratlam 6 on objections raised by the assessee at page no. 38 of the paper book at second last para. Thus, we are of the view that the reopening initiated was bad in law as the reasons recorded do not mention any fact relating to failure on the part of the assessee to disclose truly and fully all material facts necessary for his assessment because during the course of assessment proceedings u/s 143(3), the Ld. AO had already verified books of accounts (includes purchase and sales register), purchase vouchers, sales vouchers and issues relating to cash deposit etc. Therefore, the fact relating to alleged addition on account of 3 kg gold taken on lease is just replica to the reason recorded which only establishes the fact that information was already available on records and there is “Change of opinion” to the same set of facts. Thus, the reasons recorded were based on information already available on record which clearly highlights the fact there is no new tangible material available for reopening of the case. There is fresh application of mind to the information already examined earlier by the department and therefore it constitutes “change of opinion”. Our view is supported by the following judicial pronouncements: Shri Deepak Soni, Ratlam 7 Calcutta Discount Co. Ltd. v. Income-tax Officer [1961] 41 ITR 191 (SC) There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet the possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the ITO might have discovered, the Legislature has put in the Explanation to section 34(1). The duty, however, does not extend beyond the full and truthful disclosure of all primary facts. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else-far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law - he would draw from the primary facts. Income-tax Officer V. LAKHMANI MEWAL DAS [1976] 103 ITR 437 (SC) The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the ITO to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the ITO with regard to the inference which he should draw from the primary facts. If an ITO draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. Shri Deepak Soni, Ratlam 8 Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd [2010] 187 Taxman 312 (SC) One needs to give a schematic interpretation to the words 'reason to believe', failing which section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. One must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess, but the reassessment has to be based on fulfilment of certain pre-conditions and if the concept of 'change of opinion' is removed as contended on behalf of the department, then in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment. Pr. Commissioner of Income Tax v. M/s. Balaji Neemuch Infrastructure Pvt. Ltd. (2019) 7 ITJ Online 52 (MP HC) In view of the above, as we have already noted that in the reasons there is no indication that the assessee failed to furnish truly and fully all material facts necessary for assessment, therefore, respectfully following the decision of the Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. (supra), we hold that the initiation of reassessment proceedings and reopening under section 147/148 of the Act was bad in law. Sound Casting (P.) Ltd. v. Deputy Commissioner of Income-tax [2013] 33 taxmann.com 374 (Bombay HC) Held that the reopening of the assessment had admittedly taken place beyond a period of four years from the end of the relevant assessment year. There was no allegation in the reasons which had been disclosed to the assessee that there was any failure on his part to fully and truly disclosed material facts necessary for Shri Deepak Soni, Ratlam 9 assessment for relevant assessment year. Hence, the jurisdictional condition for reopening the assessment beyond a period of four years had not been fulfilled. HCL TECHNOLOGIES Ltd. [2017] 84 Taxmann.com 316 (Delhi HC) The fourth reason is pertaining to the payment made by the assessee for software licence. The Assessing Officer formed the opinion contrary to what was formed when the original assessment was framed that the deduction claimed was capital expenditure and not revenue expenditure. Even here, there was no basis for the Assessing Officer to form an opinion that the software license expenses were not revenue expenditure but capital expenditure. The question of there being any failure by the assessee to make full and true disclosure of all material facts in this regard has not even been mentioned by the Assessing Officer. Even this reason, therefore, is untenable in law. [Para 22] Titanor Components Ltd. v. Assistant Commissioner of Income-tax [2012] 20 taxmann.com 805 (Bombay) The power conferred by section 147 does not provide a fresh opportunity to the Assessing Officer to correct an assessment made earlier, unless the mistake in the assessment so made is the result of a failure of the assessee to fully and truly disclose all material facts necessary for its assessment. Indeed, where the assessee has fully disclosed all the material facts, it is not open for the Assessing Officer to reopen the assessment on the ground that there is a mistake in assessment. Moreover, it is necessary for the Assessing Officer to first observe whether there is a failure to disclose fully and truly all material facts necessary for assessment and having observed that there is such a failure, he has to proceed under section 147. It must follow that where the Assessing Officer does not record such a failure, he would not be entitled to proceed under section 147. Shri Deepak Soni, Ratlam 10 ACIT Khandwa V. M/s Rajshree Fibers, Bistan Road, Khargone (M.P) ITA No.550/Ind/2017 6. On consideration of above facts in the light of the judicial pronouncements (supra), we find that in the instant case, there was no allegation in the reasons which had been disclosed to the assessee that there was any failure on his part to fully and truly disclosed material facts necessary for assessment for relevant assessment year. Hence, the jurisdictional condition for reopening the assessment beyond a period of four years had not been fulfilled. It was necessary for the Assessing Officer to first observe whether there was a failure to disclose fully and truly all material facts necessary for assessment and having observed that there was such a failure, he had to proceed under section 147. But, in the present case, the Assessing Officer failed to do so and where the Assessing Officer does not record such a failure, he would not be entitled to proceed under section 147. Thus, we quash the reassessment order dated 19.12.2018, so passed, u/s 147 of the I.T. Act. Accordingly, the legal ground no.1 raised in the appeal of the assessee stands allowed. Shri Deepak Soni, Ratlam 11 7. So far as the second ground on merit is concerned, we are refraining ourselves to decide the same considering it infructuous as it would not serve any purpose being academic in nature because we have already quashed the reassessment proceedings initiated u/s 147 of the I.T. Act. 8. In the result, the assessee’s appeal bearing ITA No.331/Ind/2020 is partly allowed. The order pronounced as per Rule 34 of ITAT Rules, 1963 on 07.02.2022. Sd/- Sd/- (MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Ǒदनांक /Dated : 07.02.2022 !vyas! Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore