Shri Hitesh C. Jariwala, Surat V. The Income Tax Officer, Ward-2(4), Surat

ITA 3571/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1196 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K
• Assessee Lawyers: RASESH SHAH
• Keywords: Audit objection; Difference of opinion; Change of opinion
• Section: 143(3); 142(1); 147; 148

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO.3571 AND 3572/AHD/2015 / ASSTT. YEAR: 2007-2008 HITESH C. JARIWALA (PRP: VINAYAK FASHION) 3, NAVSARJAN SOCIETY BHATAR CHAR RASTA SURAT. PAN : ABGPJ 0668 Q VS ITO, WARD - 2(4) SURAT. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI RASESH SHAH REVENUE BY : SHRI B.P.K. PANDA, SR.DR / DATE OF HEARING : 31/05/2016 / DATE OF PRONOUNCEMENT: 12/07/2016 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE O F THE ASSESSEE AGAINST THE ORDERS OF THE LD.CIT(A) DATED 7.10.2015 AND 21.10.2015 PASSED IN THE ASSTT.YEAR 2007-08. 2. FIRST WE TAKE UP ITA NO.3571/AHD/2015. 3. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) AS ERRED IN UPHOLDING THE REASSESSMENT OR DER PASSED UNDER SECTION 147 R.W.S. 143(3) OF THE INCOME TAX ACT. T HE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME AT RS.3,04,737/-. AN ASSESSMENT ITA NO.3571 AND 3572/AHD/2015 2 ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT ON 24.12.2009. THE LD.AO HAS DETERMINED TAXABLE INCOME OF THE ASSESSEE AT RS.7,06,670/-. THE AO, THEREAFTER, ISSUED A NOTICE UNDER SECTION 1 48 OF THE INCOME TAX ACT ON 12.10.2012 AND REOPENED THE ASSESSMENT. THE ASSESSEE HAS CHALLENGED REOPENING BUT FAILED TO GET ANY RELIEF A T THE LEVEL OF LD.FIRST APPELLATE AUTHORITY. 4. THE LD.COUNSEL FOR THE ASSESSEE, AT THE VERY OUT SET, SUBMITTED THAT THE ASSESSEE HAS FILED APPLICATION UNDER THE R TI, BUT FAILED TO GET REASONS. COPY WAS NEVER SUPPLIED TO THE ASSESSEE I N SPITE OF REPEATED REQUESTS. HE FURTHER CONTENDED THAT THE LD.CIT(A) HAS CALLED FOR A REMAND REPORT ON THE CHALLENGE MADE TO THE REOPENIN G OF THE ASSESSMENT. COPY OF THE REMAND REPORT SUBMITTED BY THE AO IS AVAILABLE AT PAGE NO.8 OF THE PAPER BOOK. HE TOO K US THROUGH THE REMAND REPORT AND POINTED OUT THAT A PERUSAL OF PAR A-3.1 WOULD REVEAL THAT THE ASSESSMENT WAS REOPENED ON THE BASIS OF AU DIT OBJECTION, WHICH COULD NOT BE A VALID REASON FOR REOPENING OF THE ASSESSMENT. IN SUPPORT OF HIS CONTENTIONS, HE RELIED UPON THE JUDG MENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF JAGAT JAYANTILAL PARIKH VS. DCIT, 32 TAXMANN.COM 161 (GUJ). HE HAS PLACED ON RECORD COY OF THE JUDGMENT. HE FURTHER CONTENDED THAT THE AO HAS SOUGHT TO REOP EN THE ASSESSMENT ON THE GROUND THAT THE ASSESSEE HAD MADE PAYMENT OF RS.60,000/- TOWARDS ACCOUNTANT FEE AND RS.5,43,450/- TOWARDS DE SIGNING EXPENSES, OUT OF WHICH THE PAYMENT AMOUNTING TO RS.5,13,291/- WERE MADE WITHOUT DEDUCTING TDS UNDER SECTION 194J OF THE INC OME TAX ACT. IN REGULAR ASSESSMENT, THIS ISSUE WAS SPECIFICALLY INQ UIRED BY THE AO. HE DREW OUR ATTENTION TOWARDS PAGE NO.31 OF THE PAPER BOOK, WHERE REPLIES SUBMITTED BY THE ASSESSEE IN RESPONSE TO THE QUESTI ONNAIRE ISSUED UNDER SECTION 142(1) IS AVAILABLE. HE TOOK US THRO UGH SERIAL NO.15. AT THE SERIAL NO.15 OF THE LETTER, FOLLOWING NARRATION IS AVAILABLE. ITA NO.3571 AND 3572/AHD/2015 3 I HEREBY SUBMIT THE LEDGER A/CS. OF ALL EXPENSES ( PAGE NO.84 TO 126) 5. ON THE STRENGTH OF THESE DETAILS, HE CONTENDED T HAT THE ASSESSEE HAS SUBMITTED COMPLETE DETAILS ABOUT ALL THE EXPENS ES. THE AO MUST HAVE GONE THROUGH THE NATURE OF EXPENSES AND HE DID NOT MAKE ANY DISALLOWANCE. THEREFORE, REOPENING MADE BY THE AO IS BASED ON CHANGE OF OPINION. ON THE OTHER HAND, THE LD.DR, RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE TH ROUGH THE RECORD CAREFULLY. WE FIND THAT THE ASSESSEE HAS PL ACED ON RECORD COPY THE LETTER DATED 8.4.2016 SUBMITTED TO THE DY.COMIS SIONER OF INCOME TAX FOR SUPPLY OF REASONS. WE ALSO FIND THAT THE A SSESSEE HAS FILED AN APPLICATION UNDER RTI ACT. TAKING COGNIZANCE OF TH E ASSESSEES DIFFICULTY TO LAY HIS HAND ON THE COPY OF THE REASONS, WE HAD DIRECTED THE LD.DR TO SUBMIT COPY OF THE REASONS. BUT INSPITE OF EXPIRY OF MORE THAN ONE MONTH, NO SUCH COPY HAS BEEN SUPPLIED BY THE LD.DR. THEREFORE, WE PROCEED TO DECIDE THE ISSUE IN THE ABSENCE OF THE R EASONS. THOUGH THE AVAILABILITY OF REASONS COULD BE AN IDEAL SITUATION TO ADJUDICATE THE ISSUE WHETHER THE AO HAS RIGHTLY REOPENED THE ASSESSMENT OR NOT, BUT CONSIDERING SMALLNESS OF THE AMOUNT INVOLVED IN THI S APPEAL AND THE DIFFICULTY EXPRESSED BY THE ASSESSEE, WE DO HAVE MU CH CHOICE EXCEPT TO APPRECIATE THE MATERIAL AVAILABLE ON RECORD. ADMIT TEDLY, NOTICE UNDER SECTION 148 HAS BEEN ISSUED AFTER EXPIRY OF FOUR YE ARS. IT HAS BEEN ISSUED ON 12.10.2012 WHEREAS FOUR YEARS HAVE ENDED FROM THE ASSTT.YEAR 2007-08 ON 31.3.2012. THE AO HAS NARR ATED THE REASONS IN HIS OWN WORDS IN PARA-1 OF PAGE NO.2 OF THE ASSESSM ENT ORDER. THIS PARAGRAPH DISPELS THE REASONS FOR REOPENING OF THE ASSESSMENT. CONSIDERING THIS PARAGRAPH THAT NOTICE UNDER SECTIO N 148 OF THE INCOME TAX ACT WAS ISSUED ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT TDS WHILE MAKING PAYMENT OF RS.5,13,291/-, IN THE L IGHT OF THE REMAND REPORT SUBMITTED BY THE AO, IN RESPONSE TO THE QUER Y RAISED BY THE ITA NO.3571 AND 3572/AHD/2015 4 LD.CIT(A) WE FIND THAT NOTICE FOR REASSESSMENT HAS BEEN ISSUED ON THE BASIS OF AUDIT OBJECTION. THE AO HAS SPECIFICALLY PLEADED THIS ASPECT IN THE REMAND REPORT. THE AO HAS NO WHERE MADE OUT A CASE THAT THE ASSESSEE HAS FAILED TO DISCLOSE ANY PARTICULAR ITEM FULLY AND TRULY, WHICH HAS CAUSED ESCAPEMENT OF INCOME. INTERDICTION PROV IDED IN THE PROVISO APPENDED TO SECTION 147 OF THE INCOME TAX ACT PUT A N EMBARGO UPON THE POWER OF THE AO TO ISSUE NOTICE UNDER SECTION 1 48 IN THE CASES WHERE FOUR YEARS HAVE EXPIRED AND THE ORIGINAL ASSE SSMENT WAS MADE UNDER SECTION 143(3) OF THE ACT. IN SUCH CASE, NO NOTICE SHALL BE ISSUED UNDER SECTION 147 FOR REOPENING OF THE ASSESSMENT U NLESS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE OF THE ASSESSEE TO DISCLOSE ALL THE MATERIAL FACTS FULLY A ND TRULY IN RESPECT OF THE INCOME. THERE IS NO ALLEGATION EITHER IN THE A SSESSMENT ORDER OR IN THE APPELLATE ORDER, OR IN THE REMAND REPORT TO THI S EFFECT. THE HONBLE GUJARAT HIGH COURT HAS OBSERVED IN THE CASE OF JAGA T JAYANTILAL PARIKH (SUPRA) THAT IF THE ASSESSMENT HAS BEEN REOPENED ME RELY ON THE BASIS OF AUDIT OBJECTION, AND THERE IS NO APPLICATION OF MIND AT THE END OF THE AO, THEN SUCH REOPENING WOULD BE BAD IN LAW. IN TH E PRESENT CASE, WE ARE SATISFIED THAT THE AO FAILED TO DEMONSTRATE ANY PLAUSIBLE REASON WHICH HAS HELPED HIM TO HARBOR A BELIEF THAT THE IN COME HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE OF THE ASSESSEE TO DISCLOSE ALL THE MATERIAL FACTS FULLY AND TRULY IN RESPECT OF HIS IN COME. THEREFORE, WE ALLOW THE FIRST GROUND OF APPEAL AND QUASH THE ASSE SSMENT ORDER BY HOLDING THAT THE AO HAS ERRED IN REOPENING THE ASSE SSMENT. APPEAL IS ALLOWED. ITA NO.3572/AHD/2015 7. IN THIS APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.5,13,291/ - IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. ITA NO.3571 AND 3572/AHD/2015 5 8. IT EMERGES OUT FROM THE RECORD THAT THE AO HAS M ADE DISALLOWANCE OF RS.5,13,291/- ON THE GROUND THAT TH E ASSESSEE HAS FAILED TO DEDUCT TDS UNDER SECTION 194J OF THE INCO ME TAX ACT. THIS ADDITION WAS MADE WITH THE AID OF SECTION 40(A)(IA) OF THE INCOME TAX ACT. THE AO HAS COMPUTED THE PENALTY OF RS.1,89,30 0/- ON THIS DISALLOWANCE, WHICH IS EQUIVALENT TO TAX SOUGHT TO BE EVADED ON THIS ISSUE. THE ASSESSEE HAS WRONGLY STATED IN THE GROU ND THAT PENALTY OF RS.5,13,291/- HAS BEEN IMPOSED UNDER SECTION 271(1) (C) OF THE ACT, WHERE PENALTY OF RS.1,89,300/- HAS ONLY BEEN IMPOSE D BY THE AO. 9. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE ACT HA S A DIRECT BEARING ON THE CONTROVERSY, THEREFORE, WE TAKE NOTE RELEVANT P ROVISION, WHICH READS AS UNDER: '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE C OMMISSIONER (APPEALS) OR THE CIT IN THE OF COURSE OF ANY PROCEE DINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B) ** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIREC T THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL N OT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULA RS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INAC CURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMM ISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE ITA NO.3571 AND 3572/AHD/2015 6 COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OR SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' 10. A PERUSAL OF SUB-CLAUSE (III) OF SECTION 271(1) (C) WOULD INDICATE THAT IN CASE AN ADDITION IS BEING MADE TO THE INCOM E OF AN ASSESSEE, AND IT IS ESTABLISHED THAT THE ASSESSEE HAS CONCEAL ED OR FURNISHED INACCURATE PARTICULARS QUA THAT ADDITION, THEN APART FROM TAX TO BE PAYABLE BY THE ASSESSEE, HE WOULD PAY AN AMOUNT EQU IVALENT TO THE TAX OR THREE TIMES OF THE TAX AS PENALTY UNDER SECTION 271(1)(C) OF THE ACT. MEANING THEREBY, THE PENALTY WOULD BE COMPUTED EQUI VALENT TO THE TAX OR THREE TIME OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE ON THE ADDITIONS MADE TO HIS INCOME FOR WHICH HE HAS HELD GUILTY OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. IN THE PRESENT CASE, THE ADDITION ON WHICH PENALTY HAS BEEN IMPOSED BY THE AO HAS BEEN DELETED BY THE ITAT, AND THEREFORE, THE VERY ADDITION ON WHICH THE AMOUNT OF TAX SOUGHT TO BE EVADED WAS TO BE CALCULATED, HAS BEEN EXTINGUISHED. IN VIEW OF THE ABOVE DISCU SSION, PENALTY IS NOT IMPOSABLE UPON THE ASSESSEE, WHICH IS ACCORDINGLY D ELETED, AND THE GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN RESULT, THE APPEALS OF THE ASSESSEE ARE ALLO WED. ORDER PRONOUNCED IN THE COURT ON 12 TH JULY, 2016 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 12/07/2016