I.S.Leather, Kolkata V. ACIT, Cir.25, Kolkata, Kolkata

ITA 334/KOL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7933 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: VIGYANESHWAR NATH DUTTA
• Keywords: Reopening of assessment; Presumptive income; Search and seizure; Tangible material; Difference of opinion; Assessment record; Capital receipt; Reason to believe; Change of opinion; Reassessment proceedings; TDS
• Section: 143(3); 40(b); 142(1); 194C; 147; 148; 263; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.334/KOL/2017 ( / ASSESSMENT YEAR:2010-11) I.S. LEATHER 15A/10, CHOWBAGA ROAD, KOLKATA-700039 VS. ACIT, CIRCLE-25, KOLKATA ./ ./PAN/GIR NO.: AABFI 1937 M (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI VIGYANESHWAR NATH DUTTA, ADVOC ATE RESPONDENT BY : SHRI ROBIN CHOUDHURY, ADDL. CIT DR / DATE OF HEARING : 25/04/2019 /DATE OF PRONOUNCEMENT : 19/07/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERT AINING TO ASSESSMENT YEAR 2010-11, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-7, KOLKATA, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 147 R.W.S143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 29/02/2016. 2. ALTHOUGH, IN THIS APPEAL, THE ASSESSEE HAS RAI SED MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING, THE SOLITARY GRIEVANCE OF THE ASSESSEE HAS BEEN CONFINED TO THE TECHNICAL ISSUE OF REOPENING OF THE ASSESSME NT U/S 147/148 OF THE ACT, THAT IS THE ASSESSEE HAS CHALLENGED THE REOPENING OF ASSESS MENT. I.S. LEATHER ITA NO334/KOL/2017 ASSESSMENT YEAR:2010-11 P PP PA AA AG GG GE EE E | || | 2 22 2 3. FACTS OF THE CASE WHICH CAN BE STATED QUITE SHOR TLY ARE AS FOLLOWS:THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2010-11, ON 1 2.10.2010 DECLARING TOTAL INCOME TO THE TUNE OF RS.7,09,710/-. THE ASSESSEE W AS A MANUFACTURER OF FINISHED LEATHER DURING AY 2010-11. THE CASE OF THE ASSESSEE WAS RE-OPENED U/S 147 OF THE INCOME TAX ACT, FOR ESCAPEMENT OF INCOME CHARGEABLE TO TAX. THE STATUTORY NOTICE U/S 148 OF THE ACT DATED 02.02.2015 WAS ISSUED AND DULY SERVED UPON THE ASSESSEE REQUESTING HIM TO FILE A RETURN OF INCOME FOR THE S AID AY 2010-11. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE VIDE ITS LETTER DATED 21.12.2015 INTIMATED TO THE ASSESSING OFFICER TO TREAT ITS ORIGINAL RETURN OF I NCOME FILED UNDER SECTION 139(1) OF THE ACT AS RETURN OF INCOME FILED IN RESPONSE TO NO TICE ISSUED U/S 148 OF THE ACT. THE ASSESSING OFFICER NEITHER PROVIDED THE REASONS FOR RE-OPENING U/S 147 OF THE ACT NOR ADJUDICATED THE ISSUE OF VALIDITY OF REOPEN ING. HOWEVER, THE LD. ASSESSING OFFICER MADE ADDITION, BASED ON THE MERITS OF THE C ASE, ON ACCOUNT OF NON- DEDUCTION OF TDS ON FREIGHT CHARGES TO TUNE OF RS. 21,05,955/- AND ADDITION ON BOGUS SUNDRY CREDITORS TO THE TUNE OF RS. 22,30,000 /-. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD CIT(A) NOTE D THAT THE ASSESSING OFFICER HAS RECORDED PROPER REASONS FOR REOPENING THE CASE UNDE R SECTION 147 OF THE ACT. MOREOVER DURING THE APPELLATE PROCEEDINGS ALSO THE ASSESSEE WAS GIVEN COPY OF REASONS AND NO MATERIAL OBJECTION WAS MADE BY THE A SSESSEE WHICH WOULD MADE THE PROCEEDINGS INVALID. THIS WAY, LD CIT(A) HAS C ONFIRMED THE ADDITION MADE BY ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE LD . CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSION MADE BEFORE THE AUTHORITIES BELOW WHEREAS THE LD. THE LD. DR HAS PR IMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREAD Y NOTED IN OUR EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ASSESSEE HAS RAISED THE ISSUE REG ARDING VALIDITY OF REOPENING OF ASSESSMENT U/S 147/148 OF THE ACT, BEFORE THE LD. C IT(A). HOWEVER, THE LD. CIT(A) I.S. LEATHER ITA NO334/KOL/2017 ASSESSMENT YEAR:2010-11 P PP PA AA AG GG GE EE E | || | 3 33 3 REJECTED THE CONTENTION OF THE ASSESSEE AND HELD TH AT REOPENING MADE BY THE ASSESSING OFFICER WAS VALID AND REASONS FOR REOPENI NG WERE PROVIDED TO THE ASSESSEE DURING THE APPELLATE PROCEEDINGS AND THE A SSESSEE DID NOT SUBSTANTIATE THE ISSUE REGARDING REOPENING OF THE ASSESSMENT. WE NOT E THAT THE REOPENING U/S 147 OF THE ACT WAS MAINLYDONE BY THE ASSESSING OFFICER ON ACCOUNT OF NON-EXAMINATION OF FREIGHT CHARGES OF RS.23,30,856/- WHICH WAS PAID TO M/S METRO GLOBAL LOGISTICS WITHOUT MAKING / DEDUCTING ANY TDS U/S 194C OF THE ACT. THE LD. ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSESSEE IS ENGAGED IN PROCESSING AND MANUFACTURING OF LEATHER GOODS AND IS NOT ENGAGED I N THE BUSINESS OF PLYING, HIRING OR LEASING OF GOODS CARRIAGES THEREFORE SUCH EXPENS ES OF RS. 23,30,856/- PAID TO M/S METRO GLOBAL LOGISTICS AS FREIGHT CHARGES SHOUL D HAVE BEEN DISALLOWED U/S 40A(IA) OF THE ACT. THEREFORE, THE ASSESSING OFFICE R WAS OF THE OPINION THAT THE INCOME HAS ESCAPED ASSESSMENT TO THAT EXTENT. FURTH ER THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE WAS NO LIABILITY AT THE END OF THE YEAR ON 31.03.2010 WHEREAS FROM THE AUDITED ACCOUNTS FURNISHED BY THE ASSESSEE IT WAS NOTED BY THE ASSESSING OFFICER THAT THERE WAS A LIABILITY OF RS. 22,30,000 /- TOWARDS PURCHASE OF LEATHER AT THE END OF THE YEAR. THE MAIN GRIEVANCE OF THE ASSE SSING OFFICER WAS THAT PAYMENT MADE TO CREDITORS AGGREGATING TO RS. 22,30,000/- WH ICH WERE FOUND TO BE MADE IN CASH ON VARIOUS DATES AS SEEN FROM THE LEDGER ACCOU NT WERE ACTUALLY NOT ENTERED IN THE FINAL BOOKS OF ACCOUNTS OF THE ASSESSEE THEREFO RE, AS PER AO, THIS PAYMENT TO CREDITORS WERE MADE OUT OF UNACCOUNTED CASH BY THE ASSESSEE AND HENCE THE ASSESSING OFFICER WAS OF THE OPINION THAT INCOME HA S ESCAPED ASSESSMENT TO THAT EXTENT. THE NEXT REASON OF REOPENING WAS THAT PARTN ERS REMUNERATION OF RS. 12,89,569/- WHICH WAS PAID BY THE ASSESSEE AND CLAI MED IN THE PROFIT AND LOSS ACCOUNT WHICH WAS FULLY CLAIMED BY THE ASSESSEE U/S 40(B) OF THE ACT IN THE COMPUTATION OF TOTAL INCOME,HOWEVER, NO DISALLOWANC E OUT OF THIS CLAIM WAS MADE IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER ALSO NOTICED THAT PARTNERS` REMUNERATION AGGREGATING ONLY RS.1,50,000/- WAS ALL OWABLE TO THE ASSESSEE FIRM, WHEREAS PARTNERS REMUNERATION OF RS. 12,89,569/- W AS CLAIMED BY THE ASSESSEE AND ALLOWED IN THE ASSESSMENT ORDER, THUS THERE WAS EXCESS ALLOWANCE OF EXPENDITURE BY RS.11,39,569/-(RS. 12,89,569-RS.1,50 ,000). I.S. LEATHER ITA NO334/KOL/2017 ASSESSMENT YEAR:2010-11 P PP PA AA AG GG GE EE E | || | 4 44 4 7. WE NOTE THAT THE REASONS RECORDED BY THE ASSESSI NG OFFICER DO NOT SPELL OUT THE BELIEF OF THE ASSESSING OFFICER, AS WE NOTE THAT TH E DETAILS OF THESE EXPENSES WHICH WERE NOTED BY THE ASSESSING OFFICER WERE ALREADY AV AILABLE DURING THE NORMAL ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. DURIN G THE NORMAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER IN SPITE OF HAVI NG DETAILS OF THESE EXPENSES HAS NOT VERIFIED THEREFORE THERE IS NO NEW TANGIBLE MAT ERIAL TO REOPEN THE ASSESSMENT IN THE ASSESSEES CASE UNDER CONSIDERATION WAS FOUND B Y AO. WITHOUT ANY NEW TANGIBLE MATERIAL THE ASSESSING OFFICER CANNOT REOP EN THE ASSESSMENT WHICH IS ALREADY CONCLUDED U/S 143(3) OF THE ACT AND FOR THA T WE RELY ON THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF MANMOHA N KEDIA [2015] 370 ITR 649 (CAL) WHEREIN IT WAS HELD AS FOLLOWS: 6. THIS NOTICE UNDER SECTION 148 IS ISSUED WHEN THE DE PARTMENT CONTEMPLATES ACTION UNDER SECTION 147 OF THE ACT. IT IS ISSUED IN THE C ASE OF AN INCOME WHICH HAS, INTER ALIA, 'ESCAPED ASSESSMENT'. THE LAW IS WELL-SETTLED THAT IN THESE PROCEEDINGS, AN ASSESSMENT CANNOT BE REOPENED BEYOND THE ORDINARY P ERIOD OF LIMITATION BECAUSE A MISTAKE THEREIN IS DETECTED OR REALISED OR THAT SOM ETHING WHICH OUGHT TO HAVE COME TO THE NOTICE OF THE DEPARTMENT WENT UNNOTICED. THE RE IS ALSO NO ROOM FOR 'CHANGE OF OPINION'. (SEE CIT V. KELVINATOR OF INDIA LTD./EICH ER LTD. [2010] 320 ITR 561 (SC) WHERE MR. JUSTICE S.H. KAPADIA FOR THE SUPREME COU RT OPINED AS FOLLOWS: 'ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE T O SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, REOPENING COULD BE DONE UNDER THE ABOVE TWO CONDITIONS AND FULFILME NT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFIC ER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE ACT (WITH EFFECT FROM 1ST APRIL, 1989), THEY ARE GIVEN A GO-BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., TH AT WHERE THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSES SMENT, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THEREFORE, POST-1ST APRIL, 1 989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTER PRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, S ECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMEN TS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON T O REOPEN'. 7. AN ASSESSMENT MAY BE REOPENED WHEN IN SPITE OF EXER CISE OF DUE DILIGENCE SOMETHING ESCAPED THE ATTENTION OF THE ASSESSING OF FICER. THE GROUNDS ON WHICH AN ASSESSMENT CAN BE REOPENED ARE VERY LIMITED AND STR ICTLY CONSTRUED. 8. BY HIS LETTER DATED 10TH APRIL, 2013 THE WRIT PETIT IONER REQUESTED THE ASSESSING OFFICER TO TREAT THE ORIGINAL RETURN FILED BY HIM F OR THE SAID ASSESSMENT YEAR AS THE RETURN UNDER SECTION 148. THE WRIT PETITIONER ALSO SOUGHT REASONS. BY A LETTER DATED 16TH MAY, 2013 ISSUED BY THE DEPARTMENT UNDER SECTION 143 (2) OF THE ACT, HE WAS ASKED TO APPEAR BEFORE THE ASSESSING OFFICER ON 28TH MAY, 2013. BY ANOTHER LETTER OF THE SAME DATE THE REASONS FOR ISS UANCE THE NOTICE UNDER SECTION 148 WERE DISCLOSED. IT WAS STATED THAT THE WRIT PET ITIONER RECEIVED RS. 9,54,326/- FROM THE GOVERNMENT OF WEST BENGAL. THIS WAS REIMBU RSEMENT OF VALUE ADDED TAX AND CENTRAL SALES TAX PAID BY THE WRIT PETITIONER. THE PAYMENT WAS MADE BY THE I.S. LEATHER ITA NO334/KOL/2017 ASSESSMENT YEAR:2010-11 P PP PA AA AG GG GE EE E | || | 5 55 5 GOVERNMENT UNDER THE ABOVE SCHEME OF 1994. ACCORDIN G TO THE DEPARTMENT THE RECEIPT DID NOT FULFIL THE REQUIREMENT OF A CAPITAL RECEIPT. IT WAS BEING TREATED AS A REVENUE RECEIPT ON THE BASIS OF THE JUDGEMENT OF TH E SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. V. CIT [1997] 228 ITR 253/94 TAXMAN 368 . 9. IN THE LETTER DATED 16TH MAY, 2013 THE WRIT PETITIO NER WAS FURTHER INFORMED THAT AN AMOUNT OF RS. 14,17,382/- HAD ESCAPED ASSESSMENT . THIS AMOUNT WAS RECEIVED AS SIMILAR SUBSIDY AND SHOWN IN THE ASSESSMENT YEAR 2010-2011. 17. FOLLOWING RADHASOAMI SATSANG V. CIT [1992] 193 ITR 321/60 TAXMAN 248 (SC) THE HON'BLE SUPREME COURT IN CIT V. EXCEL INDUSTRI ES LTD./MAFATLAL INDUSTRIES (P.) LTD. [2013] 358 ITR295/219 TAXMAN 379/38 TAXMANN.COM 100 DISALLOWED RECONSIDERATION OF AN ISSUE IN A SUBSEQ UENT YEAR IF THE SAME 'FUNDAMENTAL ASPECT' PERMEATED DIFFERENT ASSESSMENT YEARS. THE UNDERLYING PRINCIPLE IS THAT AT ONE POINT OF TIME LITIGATION M UST COME TO AN END. IT CANNOT BE REOPENED. A POINT CANNOT BE RE-AGITATED AGAIN JUST BECAUSE A PERSON WITH 'LEGAL INGENUINITY' THINKS THAT THE DECISION COULD HAVE BE EN DIFFERENT IF CERTAIN LAW POINTS NOT CITED WERE PLACED OR A CERTAIN WEIGHT WE RE GIVEN TO A PARTICULAR PIECE OF EVIDENCE. (SEE HOYSTEAD V. COMMISSIONER OF TAXAT ION [1926] AC 155 (PC). IF ONE FOLLOWS THE ORDINARY RULES OF RES-JUDICATA REOP ENING OF AN ISSUE IN A SUBSEQUENT YEAR OR WITH REGARD TO ANOTHER ASSESSEE MAY NOT BE BARRED. BUT ATLEAST, IN TAXATION CASES THE REVENUE IS TAKEN AS ONE PARTY FOR ALL ASSESSMENT YEARS AND THE ASSESSES TOGETHER TAKEN AS THE OTHER PARTY. THAT WHICH IS DECIDED BETWEEN THE REVENUE AND ONE ASSESSEE IN AN ASSESSME NT YEAR, HAVING PERMANENT EFFECTS SHOULD NOT BE DECIDED OTHERWISE OR TREATED IN ANY OTHER WAY BY THE REVENUE WITH REGARD TO ANY OTHER ASSESSEE, SO AS TO MAINTAI N CONSISTENCY AND FAIRNESS IN GOVERNMENT ACTION. 18. IN AMRIT FEEDS LTD. V. ASSTT. CIT [2012] 344 ITR 187/[2011] 196 TAXMAN 244/[2010] 8 TAXMANN.COM 232 (CAL) I HAD REMARKED AS FOLLOWS: 'THE LAW REGARDING REOPENING OF ASSESSMENT IS VERY STRICT. IF AN ASSESSMENT COULD HAVE BEEN DONE BUT HAS NOT BEEN DONE OR ERRONEOUSLY DONE IT CANNOT BE DONE AFTER EXPIRY OF THE PRESCRIBED TIME LIMIT. EXCEPTION CAN BE MADE IN VERY SPECIAL CIRCUMSTANCES. ONE OF THEM, AS I HAVE STATED EARLIE R, BEING 'ESCAPEMENT OF INCOME'/ LINKED TO THIS IS THE PRINCIPLE THAT A CHA NGE OF OPINION WOULD NOT CONSTITUTE SUCH ESCAPEMENT. IN INDIA STEAMSHIP CO. LTD. V. JT. CIT [2005] 275 ITR 155 (CAL) CITED BY THE LEARNED COUNSEL FOR THE WRIT PETITION ER, OUR COURT WAS CONCERNED WITH DEDUCTION OF EXPENDITURE FOR REP AIRING SHIPS. SUCH DEDUCTION WAS SOUGHT TO BE REOPENED AND DISALL OWED IN SECTION 147 PROCEEDINGS AFTER HAVING BEEN ALLOWED IN THE PREVIO US ASSESSMENT YEARS. THE COURT ALLOWED THE WRIT APPLICATION AFTER DISCUSSING IN DETAIL SEVERAL AUTHORITIES ON THE SUBJECT. THE COURT HELD THAT WHEN ALL THE NECES SARY INFORMATION WAS BEFORE THE ASSESSING OFFICER IN THE EARLIER ASSESSMENTS, REOPE NING UNDER SECTION 147 AMOUNTED TO CHANGE OF OPINION. IN MY OPINION, THE FACTS ON THIS CASE ARE QUITE SIM ILAR TO THE ONE DECIDED BY OUR COURT IN INDIA STEAMSHIP CO. LTD. V. JT. CIT [2005] 275 ITR 155 (CAL) . IF THE ASSESSING OFFICERS HAD NOT QUESTIONED THE ENTITLEME NT OF THE ASSESSEE TO DEDUCTION UNDER SECTION 80-IB IN THE ASSESSMENT YEARS IN QUES TION, IT WAS THEIR MISTAKE. ALL INFORMATION REGARDING THE ALLEGED MANUFACTURING PRO CESS OF THE ASSESSEE WAS BEFORE THEM. AFTER THE TIME LIMIT FOR MAKING ASSESS MENT OR REASSESSMENT HAD LONG I.S. LEATHER ITA NO334/KOL/2017 ASSESSMENT YEAR:2010-11 P PP PA AA AG GG GE EE E | || | 6 66 6 EXPIRED, THE REVENUE CANNOT TURN ROUND, TAKE RECOUR SE TO AN EXTRAORDINARY PROVISION WHICH IS SECTION 147 AND ATTEMPT TO REOPE N CONCLUDED ASSESSMENTS. IF SUCH EXERCISE IS PERMITTED THAT WOULD BE QUITE CONT RARY TO THE INTENTION OF THE ACT. IN THAT CASE, THERE WOULD BE NO FINALITY TO ANY ASS ESSMENT. THEN, AT ANY POINT OF TIME AFTER EXPIRY OF TIME THE ASSESSING OFFICER CAN REOPEN ASSESSMENTS. THAT WOULD PLAINLY BE AGAINST THE STATUTORY POLICY.' 19. THAT THIS SUBSIDY WAS TREATED AS A CAPITAL RECE IPT IN SECTION 263 PROCEEDINGS FOR THE ASSESSMENT YEAR 2003-2004 WAS WITHIN THE KN OWLEDGE OF THE DEPARTMENT. THEREFORE, THERE WAS NO GROUND FOR THE INCOME TAX D EPARTMENT TO CONTEND THAT INCOME HAD ESCAPED ASSESSMENT AND PROCEED TO INVOKE THE EXTRAORDINARY PROVISIONS OF SECTION 147 AND 148 OF THE ACT. 20. CONSIDERING ALL THE DECISIONS THERE IS CONSIDER ABLE MERIT IN THE SUBMISSIONS OF MR. SEN THAT THE INITIATION AND PROSECUTION OF THE SECTIONS 147/148 PROCEEDINGS WERE WITHOUT JURISDICTION. AT ANY RATE, THEY WERE I N ABUSE OF POWERS CONFERRED ON THE INCOME TAX AUTHORITIES. 21. FOR THOSE REASONS THIS WRIT APPLICATION HAS TO SUCCEED ORDER IN TERMS OF PRAYER (A) OF THE WRIT PETITION BY QUASHING THE SEC TIONS 147/148 PROCEEDINGS AND THE ORDER DATED 10TH JUNE, 2013. NO ORDER AS TO COSTS. 8. ON SIMILAR FACTS, THE HONBLE CALCUTTA HIGH COUR T IN THE CASE OF DEBASISH MOULIK [2015] 370 ITR 660(CAL) WHEREIN IT WAS HELD AS FOLLOWS: 8. THE DEPARTMENT'S CASE IS THAT BY THEIR LETTER DATE D NOVEMBER 19, 2013, THE ABOVE REASONS WERE ATTEMPTED TO BE SERVED UPON THE PETITIONER. IT WAS REFUSED BY THEM. THIS IN TURN IS DISPUTED BY THE PETITIONER. N OW, MR. DUTTA, LEARNED ADVOCATE FOR THE PETITIONER, ARGUES THAT ON THE BASIS OF THE REASONS DISCLOSED BY THE DEPARTMENT IN THEIR AFFIDAVIT-IN-OPPOSITION, NO CAS E FOR REOPENING OF THE ASSESSMENT UNDER SECTION 147 IS MADE OUT. 9. THEREFORE, TWO ALTERNATIVE CASES ARE RUN BY THE PE TITIONER. FIRST, THE PROCEEDINGS WERE INVALID ON THE GROUND THAT NO REAS ONS WERE SUPPLIED. SECONDLY, EVEN IT WAS ASSUMED THAT THE REASONS WERE ADVANCED BY THE DEPARTMENT THERE WAS NO CAUSE OF REOPENING THE ASSESSMENT UNDER SECTION 147/148. 10. TO DEAL WITH THE SUBMISSION OF MR. DUTTA, LEARNED ADVOCATE FOR THE PETITIONER, THE FACTS IN THE BACKGROUND NEED TO BE NOTICED. FOR THE ASSESSMENT YEAR 2009-10, THE PETITIONER FILED HIS RETURN OF INCOME ON SEPTEMBER 29, 2009, UNDER SECTION 139 OF THE SAID ACT SHOWING A TOTAL INCOME OF RS.2,71,01,034. ON FEBRUARY 19,2011,THE DEPARTMENT ISSUED A LETTER TO THE PETITIONER STATIN G THAT THE RETURN HAD BEEN SELECTED FOR SCRUTINY. ON JUNE 7, 2011, THE DEPARTMENT ISSUE D A NOTICE UNDER SECTION 142(1) OF THE ACT TO THE PETITIONER CALLING FOR CERTAIN IN FORMATION IN A PRESCRIBED FORMAT. SUCH INFORMATION WAS FURNISHED BY THE PETITIONER ON JUNE 17, 2011. ON AUGUST 24, 2011, FURTHER QUERIES WERE RAISED BY THE DEPARTMENT . FINALLY, ON DECEMBER 28, 2011, THE DEPARTMENT COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT AND DETERMINED THE TOTAL INCOME OF THE PETITIONER AT RS . 3,14,06,070 AND COMPUTED THE TAX LIABILITY AT RS. 16,58,280. MR. DUTTA RELIED ON ITO V. NAWAB MIR BARKAT ALI KHAN I.S. LEATHER ITA NO334/KOL/2017 ASSESSMENT YEAR:2010-11 P PP PA AA AG GG GE EE E | || | 7 77 7 BAHADUR [1974] 97 ITR 239 (SC) . IT WAS A DECISION OF THE HON'BLE SUPREME COURT OF INDIA PRONOUNCED BY MR. JUSTICE A. C. GUPTA. IN THA T CASE, THE STATUS OF FOUR MOHAMMEDAN LADIES AND THEIR CHILDREN WERE INVOLVED. UNDER THREE DEEDS OF TRUST OF 1950, THE RELATIONSHIP OF THE LADIES AND THEIR CHIL DREN WITH THE ASSESSEE WERE DISCLOSED. THERE WERE FURTHER TWO TRUSTS OF 1957 WH ICH WERE NOT DISCLOSED BEFORE THE DEPARTMENT. HOWEVER, THE DEEDS OF 1950 CONFORMED IN ALL MATERIAL PARTICULARS TO THOSE OF 1957. HIS LORDSHIP OBSERVED AS FOLLOWS (PA GE 244) : 'CLAUSE (A) OF SECTION 147 OF THE INCOME-TAX ACT, 1 961, UNDER WHICH THE ASSESSMENTS WERE SOUGHT TO BE REOPENED, SO FAR AS IT IS RELEVAN T FOR THE PRESENT PURPOSE, PROVIDES THAT IF THE INCOME-TAX OFFICER HAS REASON TO BELIEV E THAT, BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR ANY YEAR, INCOME C HARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR, HE MAY ASSESS OR REASSESS SUCH INCOME FOR THE ASSESSMENT YEAR CONCERNED. THE HIGH COURT HELD THAT THE REASON S ASSIGNED FOR REOPENING THE ASSESSMENTS DID NOT FALL WITHIN THE SCOPE OF OMISSI ON OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS, THAT ALL THE MATERIAL FACTS WERE BEFORE THE DEPARTMENT WHEN IT MADE THE ASSESSMENTS IN QUESTION AND THE TRUSTS CREATED IN 1957 DID NOT 'THROW A DIFFERENT LIGHT ON THE MATTERS ALREADY DISCLOSED'. . . THE HIGH COURT WAS RIGHT IN HOLDING THAT THE INCOME -TAX OFFICER HAD NO VALID REASON TO BELIEVE THAT THE RESPONDENT HAD OMITTED OR FAILE D TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND CONSEQUENTLY HAD NO JURISDICTION TO REOPEN THE ASSESSMENTS FOR THE FOUR YEARS IN QUESTION. HAVING SECOND THOUGHTS ON T HE SAME MATERIAL DOES NOT WARRANT THE INITIATION OF A PROCEEDING UNDER SECTIO N 147 OF THE INCOME-TAX ACT, 1961.' 11. MR. DUTTA CONTENDED AND, IN MY OPINION RIGHTLY, TH AT DURING SECTION 143(3) ASSESSMENT, ALL INFORMATION, DOCUMENTS AND OTHER RE CORDS RELATING TO THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR WERE BEFORE THE ASSESS ING OFFICER. THE REASONS WHICH ARE ADVANCED SHOW DISCOVERY OF NEW FACTS FROM THE E XISTING RECORDS. SO THE ASSESSING OFFICER WANTS TO CHANGE HIS OPINION REGAR DING THE ASSESSMENT AND TO REOPEN IT. 12. IN MY OPINION 'ESCAPEMENT OF INCOME' SHOULD BE GIV EN A STRICT CONSTRUCTION. NOT ONLY SHOULD IT NOT BE USED TO JUSTIFY A CHANGE OF V IEW IT SHOULD NOT BE USED TO REOPEN AN ASSESSMENT ON FACTS, INFORMATION, DOCUMENTS WHIC H WERE BEFORE THE ASSESSING OFFICER OR COULD HAVE BEEN EASILY FOUND BY HIM WHIL E MAKING THE ASSESSMENT. OTHERWISE, THERE WOULD BE NO FINALITY OF ASSESSMENT . IT WILL GO ON AND ON AND MIGHT BECOME A TOOL IN THE HANDS OF THE DEPARTMENT TO CAU SE HARASSMENT TO THE ASSESSEE. 13. IN THIS CASE, IN THE 143(3) PROCEEDINGS ALL THE DA TA REGARDING THE PETITIONER FOR THE SUBJECT ASSESSMENT YEAR WERE BEFORE THE ASSESSI NG OFFICER. THEREFORE, IT CANNOT BE SAID THAT THERE WAS 'ESCAPEMENT OF INCOME' OR TH AT THE REASONS FOR BELIEVING THAT THERE WAS 'ESCAPEMENT OF INCOME' WERE VALID FOR THE FOLLOWING REASONS. IN THE CASE OF AMRIT FEEDS LTD. V. ASSTT. CIT [2012] 344 ITR 187/[2011] 196 TAXMAN 244/[2010] 8 TAXMANN.COM 232 (CAL.) A COMMON QUESTION WAS INVOLVED IN ALL THE ASSESSMENT YEARS. IN ONE OF THE YEARS, THERE WAS SC RUTINY ASSESSMENT UNDER SECTION 143(3). I HAD HELD THAT THE ISSUE REGARDING DEDUCTI ON UNDER SECTION 80-IB OF THE ACT COULD NOT BE SAID TO HAVE ESCAPED ASSESSMENT. THE Q UESTION IN THE CASE WAS WHETHER THE WRIT PETITIONER-ASSESSEE WAS ENGAGED IN THE PRO DUCTION OF THE CATTLE AND POULTRY FEED. ACCORDING TO THE REVENUE, THE PRODUCTION OF C ATTLE AND POULTRY COULD NOT BE CLASSIFIED AS MANUFACTURE TO ENABLE THE WRIT PETITI ONER TO OBTAIN THE BENEFIT OF SECTION 80-IB(5) OF THE ACT. MY RULING WAS THAT ON THE EVID ENCE BEFORE THE ASSESSING OFFICER I.S. LEATHER ITA NO334/KOL/2017 ASSESSMENT YEAR:2010-11 P PP PA AA AG GG GE EE E | || | 8 88 8 HE HAD HELD THE BUSINESS OF THE ASSESSEE TO BE MANU FACTURE CATTLE AND POULTRY FEED. DURING THE SUBSEQUENT YEAR HE COULD NOT REOPEN THE ASSESSMENT ON THE SAME EVIDENCE. I HAD FOLLOWED A JUDGMENT OF MR. JUSTICE CHATTOPADHYAY IN INDIA STEAMSHIP CO. LTD. V. JT. CIT [2005] 275 ITR 155 (CAL) . 14. BE THAT AS IT MAY ACCORDING TO THE DEPARTMENT BY T HEIR LETTER DATED NOVEMBER 19, 2013, THEY PROPOSED TO SERVE THE REASONS UPON THE P ETITIONER. IT WAS ALLEGEDLY SENT BY THE DEPARTMENTAL PROCESS SERVER ON NOVEMBER 22, 201 3. THE DEPARTMENT'S VERSION IS THAT THE ASSESSEE REFUSED TO ACCEPT THE LETTER. THE REASONS WERE ALSO SENT BY SPEED POST. THE PETITIONER REFUSED TO ACCEPT THE SERVICE AND THE ENVELOPE WAS RETURNED TO THE DEPARTMENT ON DECEMBER 21, 2013. ACCORDING TO T HE PETITIONER, THE REASONS WERE NOT RECEIVED BY HIM AND THAT THE DEPARTMENT IS WRONGFULLY TRYING TO ASSESS HIS INCOME UNDER SECTION 147. 15. LET US ASSUME THAT THE REASONS WERE RECEIVED BY TH E ASSESSEE OBJECTED TO BY HIM AND THOSE OBJECTIONS REJECTED BY THE DEPARTMENT. 16. THE DEPARTMENT, CANNOT REASSESSES THE CASE OF THE WRIT PETITIONER AS THE INITIATION OF SECTION 147 PROCEEDINGS WAS WITHOUT J URISDICTION, IN VIEW OF THE REASONS GIVEN ABOVE. 17. THIS WRIT APPLICATION IS ALLOWED BY PASSING ORDERS IN TERMS OF PRAYERS (A) AND (B) OF THE PETITION. 9. OUR VIEWS ARE FORTIFIED BY THE JUDGMENT OF THE CO-ORDINATE BENCH IN THE CASE OF DEBASISH DEY 59 ITR 335 (TRIB.), WHEREIN THE CO-ORD INATE BENCH, BASED ON THE IDENTICAL FACTS AND CIRCUMSTANCES, HAS HELD AS FOLL OWS: 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO P ERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN ORDER TO APPRECIATE THE CON TENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE ON THE PRELIMINARY ISSUE RAISED IN THI S CASE CHALLENGING THE VALIDITY OF REOPENING OF ASSESSMENT, IT IS RELEVANT TO REFER TO THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING, WHICH ARE EXTRACTE D BELOW : 'THE ASSESSEE AN INDIVIDUAL, CARRIED ON THE BUSINES S OF HIRING TRUCKS. HE WOULD MAINTAIN THE ACCOUNTS SEPARATELY FOR HIS PROPRIETAR Y BUSINESS NAMED AFTER M/S. KIRON ROADLINES AS WELL AS THAT IN HIS SELF NAME. WHILE THE ACCOUNTS OF M/S. KIRON ROADLINES WERE GOT AUDITED UNDER SECTION 44AB OF THE INCOME-TAX ACT, THE ACCOUNTS PERTAINING TO H IM WAS RIOT AUDITED. IN THE UNAUDITED PROFIT AND LOSS ACCOUNT (IN SELF NAME), A LOSS OF RS. 2,46,687 WAS DECLARED WHICH WAS SET OFF AGAINST THE PROFIT OF OT HER UNIT, M/S. KIRON ROADLINES. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED O N DECEMBER 19,2006 ACCEPTING THE SAID LOSS. IT APPEARS FROM THE BALANC E-SHEET FOR HIS SELF BUSINESS THAT THE ASSESSEE OWNED 7 TRUCKS. THE PROFITS EARNED FRO M HIRING THESE TRUCKS WERE NOT OFFERED ON PRESUMPTIVE TAXATION BASIS AS PROVIDED I N SECTION 44AE OF THE INCOME- TAX ACT. SUB-SECTION (7) OF SECTION 44AE LAYS DOWN THAT IN CASE THE ASSESSEE HAS PREFERRED TO CLAIM LOWER PROFIT THAT WHAT HE IS ENT ITLED TO CLAIM ON ESTIMATION AS IN SUB-SECTION (2) OF SECTION 44AE OF THE ACT HE IS RE QUIRED TO GET HIS ACCOUNTS AUDITED UNDER SECTION 44AB OF THE INCOME-TAX ACT. I.S. LEATHER ITA NO334/KOL/2017 ASSESSMENT YEAR:2010-11 P PP PA AA AG GG GE EE E | || | 9 99 9 SINCE THE ASSESSEE HAS FAILED TO GET HIS ACCOUNTS A UDITED AS SUCH, THE TRANSPARENCY OF THE FINANCIAL RESULT OF HIS BUSINESS (SELF) HAD NOT CRYSTALLISED SO AS TO ACCEPT THE LOSS CLAIMED BY HIM. THE FACT OF UNDERSTATEMENT OF SUCH INCOME HAS GOT ITS SUPPORT WHEN THE DISCREPANCY BETWEEN THE DEBTOR'S (M/S. KIR ON ROADLINES) BALANCE IN ITS SELF-BALANCE-SHEET WHICH IS RS. 9,97,533 AND THE CO RRESPONDING CREDITORS BALANCE OF RS.7,21,996 IN THE SEPARATE BALANCE-SHEET OF M/S . KIRON ROADLINES IS DETECTED WITH DUE DILIGENCE. THE ABOVEMENTIONED REASONS APPEAR TO BE SUFFICIENT TO FORM BELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT UNDER SECT ION 147 OF THE INCOME-TAX ACT. THE AFORESAID REASONS ARE HEREBY SENT TO THE LEARNE D COMMISSIONER OF INCOME- TAX-XXI, KOLKATA FOR SANCTION OF ISSUE OF NOTICE UN DER SECTION 148 OF THE INCOME- TAX ACT AS IS PROVIDED UNDER SECTION 151(1) OF THE INCOME-TAX ACT.' 8. A PERUSAL OF THE AFORESAID REASONS RECORDED BY THE ASSESSING OFFICER MAKES IT ABUNDANTLY CLEAR THAT THE ASSESSMENT ORIGINALLY COM PLETED BY HIM UNDER SECTION 143(3) WAS REOPENED BY THE ASSESSING OFFICER ON THE BASIS OF THE SAME RECORDS AS WAS AVAILABLE BEFORE HIM WHILE COMPLETING THE ORIGI NAL ASSESSMENT UNDER SECTION 143(3) AND THERE WAS NO NEW TANGIBLE MATERIAL THAT HAD COME TO HIS POSSESSION ON THE BASIS OF WHICH THE ASSESSMENT WAS REOPENED BY H IM. AT THE TIME OF HEARING BEFORE ME, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT DISPUTED THIS POSITION. THE ONLY CONTENTION RAISED BY HIM IS THAT THE REOPENING OF A SSESSMENT BY THE ASSESSING OFFICER WAS BASED ON ALTOGETHER NEW ISSUES, WHICH HAD NOT B EEN EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF THE ORIGINAL PROCEEDIN GS UNDER SECTION 143(3). HOWEVER, AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSE E, THE RELEVANT RECORDS INCLUDING THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE DULY EXAM INED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ONL Y AFTER HAVING SATISFIED WITH THE SAME, THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY HIM IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3). THE CONTENTION RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THIS REGARD, EVEN OTHERWISE RUNS CONTRARY TO THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF DEBASHIS MOULIK V. ASSTT. CIT [2015] 62 TAXMANN.COM 16/370 ITR 660 (CAL.) , WHEREIN THE ASSESSMENT ORIGINALLY COMPLETED UNDER SECTION 143(3) WAS SOUGHT TO BE REOPENED BY T HE ASSESSING OFFICER ON THE BASIS OF NEW FACTS DISCOVERED FROM THE ASSESSMENT RECORDS AND IT WAS HELD BY THE HON'BLE CALCUTTA HIGH COURT THAT THE ASSESSMENT WAS REOPENE D BY THE ASSESSING OFFICER MERELY ON THE BASIS OF CHANGE OF OPINION, WHICH WAS NOT PERMISSIBLE IN LAW. 9. IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA), C ITED BY THE LEARNED COUNSEL FOR THE ASSESSEE IT WAS HELD BY THE HON'BLE SUPREME COURT T HAT AFTER THE AMENDMENT MADE WITH EFFECT FROM APRIL 1, 1989, THE ASSESSING OFFIC ER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BUT THIS DOES NO T IMPLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON A MERE CHANGE OF OPINIO N. IT WAS HELD THAT THE CONCEPT OF 'CHANGE OF OPINION' MUST BE TREATED AS AN IN-BUI LT TEST TO CHECK THE ABUSE OF POWER AND HENCE THE ASSESSING OFFICER EVEN AFTER THE AMEN DMENTS MADE IN THE RELEVANT PROVISIONS FROM APRIL 1, 1989 HAS THE POWER TO REOP EN AN ASSESSMENT PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. APPLYING THE RATIO LAID DOWN BY TH E HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) AND BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DEBASHIS MOULIK (SUPRA), I HOLD THAT THE REOPENING OF ASSESSMENT MADE BY THE ASSESSING OFFICER IN THE PRESENT CASE WAS BA D IN LAW AS THE SAME WAS BASED MERELY ON THE CHANGE OF OPINION AND THE ASSESSMENT COMPLETED BY HIM UNDER SECTION 143(3) READ WITH SECTION 147 IN PURSUANCE THEREOF I S INVALID AND THE SAME IS LIABLE TO I.S. LEATHER ITA NO334/KOL/2017 ASSESSMENT YEAR:2010-11 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 BE CANCELLED. I ORDER ACCORDINGLY AND ALLOW THE GRO UNDS OF APPEAL RAISED BY THE ASSESSEE. 10. THEREFORE, WE NOTE THAT THE ASSESSING OFFICER S HOULD HAVE TANGIBLE MATERIAL TO REOPEN THE CONCLUDED ASSESSMENT. WE NOTE THAT THE CONCEPT OF 'CHANGE OF OPINION' MUST BE TREATED AS AN IN-BUILT TEST TO CHECK THE AB USE OF POWER BY ASSESSING OFFICER AND HENCE THE ASSESSING OFFICER EVEN AFTER THE AMEN DMENTS MADE IN THE RELEVANT PROVISIONS FROM APRIL 1, 1989 HAS THE POWER TO REOP EN AN ASSESSMENT PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSIO N THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. WE NOTE THAT THE LD. ASSESSING OFFICER MADE ADDITI ON ON ACCOUNT OF NON-DEDUCTION OF TDS ON FREIGHT CHARGES TO TUNE OF RS. 21,05,955/ - AND ADDITION ON BOGUS SUNDRY CREDITORS TO THE TUNE OF RS. 22,30,000/- IN THE REA SSESSMENT PROCEEDINGS. THE INFORMATION ABOUT FREIGHT CHARGES AND SUNDRY CREDIT ORS WERE AVAILABLE BEFORE THE AO IN THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THEREFORE, IT IS NOT A NEW TANGIBLE MATERIAL TO REOPEN THE ASSESSMENT UN DER SECTION 147 OF THE ACT, HENCE THE REASSESSMENT PROCEEDINGS, IN THE ASSESSEE `S CASE IS BAD IN LAW, THEREFORE, WE QUASH THE REASSESSMENT PROCEEDINGS. SINCE WE ALLOWED THE APPEAL OF THE ASSESSEE ON THE TECHNICAL GROUND, THEREFORE WE DO NOT ADJUDICATE THE OTHER GROUNDS RAISED BY THE A SSESSEE ON MERITS. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 19.07.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 19/07/2019 ( SB, SR.PS ) I.S. LEATHER ITA NO334/KOL/2017 ASSESSMENT YEAR:2010-11 P PP PA AA AG GG GE EE E | || | 1 11 11 11 1 COPY OF THE ORDER FORWARDED TO: 1. I.S. LEATHER 2. ACIT, CIRCLE-25, KOLKATA 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES