M/s. The Rama Co-op L/C Society Ltd., Sonepat V. ACIT, Sonepat

ITA 3914/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6812 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 09-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 07-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Keywords: Difference of opinion; Reason to believe; Change of opinion
• Section: 44AD; 143(3); 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE : JUDICIAL MEMBER ITA NOS. 3914/DEL/2014 ASSTT. YR: 2007-08 THE RAMA CO-OP L/C SOCIETY LTD., VS. ACIT, SONEPAT CIRCLE, VPO JAGDISHPUR DISTT. SONEPAT. SONEPAT. PAN: AAEFT 0984 G ITA NOS. 3915/DEL/2014 ASSTT. YR: 2007-08 THE FARMANA CO-OP L/C SOCIETY LTD., VS. ACIT, SON EPAT CIRCLE, 980/31, MALIK COLONY, SONEPAT. SONEPAT. PAN: AAATT 4348 C ITA NOS. 3916/DEL/2014 ASSTT. YR: 2007-08 THE JAI BABA GANGA DASS VS. ACIT, SONEPAT CIRCLE , CO-OP L/C SOCIETY LTD., SONEPAT. SONEPAT. PAN: AAAAT 9314 M ITA NOS. 3917/DEL/2014 ASSTT. YR: 2007-08 THE MODERN CO-OP L/C SOCIETY LTD., VS. ACIT, SONE PAT CIRCLE, PURANI ANAJ MANDI, GOHANA SONEPAT. PAN: AAAJT 1082 B ( APPELLANT ) (RESPONDENT) ASSESSEES BY : SHRI GAUTAM JAIN ADV. REVENUE BY : SHRI T.VASANTHAN DR DATE OF HEARING : 09/02/2016. DATE OF ORDER : 16/02/2016. O R D E R 2 PER S.V. MEHROTRA, A.M: THESE APPEALS HAVE BEEN PREFERRED BY THE ASSESSEES ASSAILING THE RESPECTIVE ORDERS PASSED BY THE CIT(A) RELATING TO AY 2007-08. SINCE COMMON ISSUES ARE INVOLVED FOR ADJUDICATION, ALL TH ESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. AS THE FACTS ARE COMMON IN ALL THE APP EALS, WE ARE REFERRING TO THE FACTS AS OBTAINING IN ITA NO. 3914/DEL/2014.GRO UNDS RAISED ARE AS UNDER: THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) ROHTAK HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS I N UPHOLDING THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT AN D ASSUMPTION OF JURISDICTION TO FRAME AN ASSESSMENT U/S 1471143( 3) OF THE ACT DESPITE THE FACT THAT THERE WAS NO TANGIBLE AND RELEVANT MATERIAL ON RECORD TO FORM 'REASON TO BELIEVE' THAT INCOME OF THE APPELLANT HAD ESCAPED ASSESSMENT AND THUS BOTH DESERVE TO BE QUASHED AS SUCH. 1.1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT INITIATION OF PROCEEDINGS WAS BASED ON THE DIRECTIONS ISSUED BY THE LEARNED COMMISSIONER OF INCOME TAX AND THEREFORE THE SAME W ERE INVALID BEING CONTRARY TO JUDGMENT OF APEX COURT IN THE CASE OF CIT VS. GREENWORLD CORPORATION REPORTED IN 314 I TR 81 1.2 THAT FURTHER MORE SINCE THERE WAS NO FRESH MAT ERIAL ON RECORD THAT SURFACED AFTER THE ASSESSMENT U/S 143(3 ) OF THE ACT AND AS SUCH IN TERMS OF JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. REPORTED I N 354 ITR 536, THE ACTION WAS OTHERWISE INVALID AND HENCE UNS USTAINABLE. 1.3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS OTHERWISE FAILED TO APPRECIATE THAT S INCE ORIGINAL ASSESSMENT HAD BEEN FRAMED U/S 143(3) OF THE ACT, I NITIATION OF 3 PROCEEDINGS WAS BASED UPON CHANGE OF OPINION AND TH EREFORE, WITHOUT JURISDICTION. 1.4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THE FACT THAT RE ASSESSMENT HAS BEEN COMPLETED WITHOUT SUPPLYING THE COPY OF RE ASONS RECORDED FOR ISSUE OF NOTICE U/S 148. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF ASSESSMENT FRAMED U/S 144 OF THE ACT. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH IN LAW AND ON FACT S IN UPHOLDING DETERMINATION OF INCOME BY THE LEARNED AS SESSING OFFICER AT RS. 85203/- BY INVOKING SECTION 44AD OF THE ACT BEING 8% OF THE GROSS RECEIPTS DECLARED BY THE APPE LLANT SOCIETY. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN SUS TAINING AN ADDITION OF RS. 35203/- TO THE INCOME RETURNED BY T HE APPELLANT BEFORE CLAIM OF DEDUCTION U/S 80P OF THE ACT. 5 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN NOT ALLOWING DEDUCTION U/S 80P OF THE ACT ON THE ASSESSED INCOME OF THE APPELLANT SOCIETY 5.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN RES TRICTING THE CLAIM OF DEDUCTION TO RS. 50,0001- U/S 80P(2) OF TH E ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D FILED ITS RETURN DECLARING INCOME OF RS. 45,522/-BEFORE DEDUCTION U/ S 80P(2) OF THE I.T. ACT ON 23.08.2007. ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATED 30.1.2009 AT AN INCOME OF RS. 61,522/- BEFORE DEDUC TION U/S 80P(2) OF THE 4 ACT. SUBSEQUENTLY, THE AO NOTICED THAT ASSESSEE HAD FAILED TO PRODUCE COMPLETE BOOKS OF A/C ALONG WITH BILLS AND VOUCHERS , THEREFORE, PROFIT RATE AT 8% OF THE GROSS RECEIPTS U/S 44AD OF THE I.T. ACT W AS APPLICABLE AS THE ASSESSEE WAS DOING CONTRACT BUSINESS. ACCORDINGLY, HE ISSUED NOTICE U/S 148 RECORDING FOLLOWING REASONS: 4 'RETURN OF INCOME IN THIS CASE WAS LED ON 23.08.2 007, DECLARING INCOME OF RS. 45,5221- BEFORE DEDUCTION U /S 80P(2) OF THE IT. ACT. 961 AND ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) OF THE I.T. ACT AT AN INCOME OF RS. 1,52 2/- BY MAKING AN ADDITION OF RS. 16,000/- VIDE ORDER DATED 30.01. 2009. THE ASSESSEE IS DO; G CONTRACT BUSINESS ASSIGNED BY THE PWD AND IT HAS SHOWN TOTAL RECEIPTS FROM CONTRACT AT RS. 0,65, 0361-. THE ASSESSMENT IN THIS CASE HAS BEEN COMPLETED AT RS. 6 1,522/- WHICH WORKS AU TO BE 5.78% OF THE GROSS RECEIPT. CO NSEQUENTLY IN RESPECT OF WAGES PAID AND MISCELLANEOUS EXPENSES , COMPLETE BILLS AND VOUCHERS WERE NOT VERIFIABLE. THE WAGES P AID ACCOUNT CONSTITUTES THE MAJOR ACCOUNT OF EXPENSE IN THE P & L ACCOUNT IF THE ASSESSEE. THE ASSESSEE HAS FAILED TO PRODUCE CO MPLETE BOOKS OF ACCOUNT ALONG WITH BILLS & VOUCHERS, THEREFORE, PROFIT RATE @ 8% U/S 44AD OF THE 11: ACT, 1961 IS APPLICABLE IN T HE CASE OF THE ASSESSEE WHO IS DOING CONTRACT BUSINESS. THE PR OFIT RATE @ 8% ON GROSS RECEIPT OF RS. 10,65,036/- WORKS OUT TO BE RS. 85,2021-. KEEPING IN VIEW THE FACTS AS STATED ABOVE, I HAVE R EASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT T O THE TUNE OF RS. 23,68 1- I.E. (85203- 61522) BY REASON OF THE F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT JAR THE ASSESSMENT YEA R 2007-08.' 5 3. THE AO, ACCORDINGLY, DETERMINED THE PROFIT U/S 4 4AD BY APPLYING RATE OF 8% ON THE GROSS RECEIPTS AND DETERMINED THE INCO ME AT RS. 85,203/- BEFORE DEDUCTION U/S 80P(2). 4. BEFORE LD. CIT(A) THE ASSESSEE HAD ASSAILED THE INITIATION OF PROCEEDINGS U/S 148 PRIMARILY ON THE GROUND THAT IT WAS A CASE OF CHANGE OF OPINION. LD. CIT(A), HOWEVER, DISMISSED THE ASSESSE ES APPEAL OBSERVING THAT SINCE DISCLOSURE OF FACT HAD NOT BEEN MADE, T HERE WAS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND IT WAS NOT A CASE OF MERE CHANGE OF OPINION BUT A FINDING OF BELIEF THAT INCOME HAD ESC APED ASSESSMENT. 5. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE POINTED OUT THAT IDENTICAL REASONS WERE RECORDED IN THE CASE OF THE MALIK CO-OP L/C SOCIETY LTD. WHEREIN THE ITAT DELHI BENCH SMC-2, IN ITA NO. 3913/DEL/2014 VIDE ORDER DATED 31.07.2015 QUASHED THE REASSESSMEN T PROCEEDINGS OBSERVING IN PARA 5 AS UNDER: 5. CONSIDERING THE ABOVE SUBMISSION, I FIND THAT T HERE IS SUBSTANCE IN THE CONTENTIONS OF THE LEARNED AR AGAI NST THE VALIDITY OF ASSUMPTION OF JURISDICTION BY THE ASSES SING OFFICER UNDER SEC. 147 OF THE ACT. IT IS A MATTER ON RECORD THAT DURING THE ORIGINAL ASSESSMENT FRAMED UNDER SEC:-143(3) OF THE ACT THE ASSESSING OFFICER IN PARA NO.1 AT PAGE NO. 1 HAD SP ECIFICALLY RECORDED AS 'IN RESPONSE TO ABOVE NOTICE, SH. N.K. GUPTA, ADV. OF THE ASSESSEE SOCIETY ATTENDED THE PROCEEDINGS FR OM TIME TO TIME AND FILED THE REQUISITE DETAILS AND DOCUMENTS. BOOKS OF ACCOUNT PRODUCED AND TEST- CHECKED ON RANDOM BASIS. THE CASE IS DISCUSSED WITH HIM.' IN PARA NO.2 OF THE ASSESS MENT, THE ASSESSING OFFICER HAS RECORDED FURTHER AS ' IT HAS MAINTAINED 6 BOOKS OF ACCOUNT AND GOT AUDITED FROM A CHARTERED A CCOUNTANT. THE ASSESSEE FILED A COPY OF AUDIT REPORT WHICH IS PLACED ON ITS RECORD. ON PERUSAL OF RECEIPTS, LEDGER ACCOUNT IT I S FOUND THAT THE ASSESSEE HAS ADOPTED PERCENTAGE OF COMPLETION M ETHOD. THE ASSESSEE WAS ASKED TO FILE DETAILS OF ALL EXPENDITU RE WITH JUSTIFICATION VIDE THIS OFFICE NOTICE UNDER SEC. 14 2( 1 ) DATED 13.1.2009. THE ASSESSEE FURNISHED THE REQUISITE DET AIL AND JUSTIFICATION VIDE ITS LETTER DATED 10.2.2009, WHIC H WAS EXAMINED AND VERIFIED ... ' I THUS FIND THAT IT WAS NOT CORRECT TO SAY ON THE PART OF THE ASSESSING OFFICER IN THE REA SONS OF BELIEF RECORDED FOR INITIATION OF REOPENING PROCEEDINGS, T HAT THE ASSESSEE HAD FAILED TO PRODUCE COMPLETE BOOKS OF AC COUNT ALONG WITH BILLS AND VOUCHERS, THEREFORE, PROFIT RATE @ 8 % UNDER SEC. 44AD OF THE INCOME- TAX ACT, 1961 IS APPLICABLE IN THE CASE OF THE ASSESSEE WHO IS DOING CONTRACT BUSINESS. IT IS THUS APPARENTLY A CASE OF CHANGE OF OPINION ON THE BASIS OF WHICH REOPENING PROCEEDINGS UNDER SEC. 147 CANNOT BE INIT IATED. AS PER THE WELL ESTABLISHED PROPOSITION OF LAW, THE AS SESSING OFFICER WHILE PROCEEDINGS FOR REASSESSMENT IS DUTY BOUND TO FIRST DISPOSE OF THE OBJECTIONS RAISED BY THE ASSES SEES AGAINST THE VALIDITY OF INITIATION OF REOPENING PROCEEDINGS BY PASSING A SPEAKING ORDER. I THUS CONCUR WITH THE CONTENTIONS OF THE LEARNED AR THAT THE REOPENING OF PROCEEDINGS INITIA TED IN THE PRESENT CASES IN ABSENCE OF FRESH AND TANGIBLE MATE RIAL WAS JUST CHANGE OF OPINION AND HENCE WITHOUT JURISDICTION AN D THUS INVALID. THE ASSESSMENTS FRAMED IN FURTHERANCE THER ETO ARE THUS ALSO EQUALLY INVALID AND ARE QUASHED AS SUCH. GROUN D NOS. 1 TO 1.5 ARE THUS ALLOWED. IN VIEW OF THE ABOVE FINDINGS , OTHER GROUNDS OF APPEAL DO NOT SURVIVE, HENCE DO NOT NEED ADJUDICATION. 6. LD. DR RELIED ON THE ORDERS OF LOWER REVENUE AUT HORITIES. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. LD. COUNSEL IN HIS WRITTEN SUBMISSIONS HAS SUBMITTED THAT IN COURSE OF ORIGINAL ASSESSMENT PRO CEEDINGS THE BOOKS OF A/C ALONG WITH THE AUDIT REPORT WERE DULY FURNISHED AND WERE ACCEPTED WHILE PASSING ORDER U/S 143(3). THE ASSESSEE HAS NOT FILE D THE ASSESSMENT ORDER 7 PASSED U/S 143(3) IN THE PRESENT CASE. HOWEVER, IN CASES OF OTHER THREE ASSESSEES THE ASSESSMENT ORDER IS ON RECORD FROM WH ICH IT IS EVIDENT THAT IDENTICAL ORDERS HAVE BEEN PASSED BY AO IN ALL THE CASES. THE DEPARTMENT HAS NOT CONTROVERTED THE SUBMISSIONS ADVANCED BY LD. CO UNSEL FOR THE ASSESSEE ON FACTUAL ASPECT. FURTHER, THE CASES DECIDED BY TRIBU NAL ARE ALSO ON THE IDENTICAL FACTS AND, THEREFORE, THE DECISION IN THE TWO APPEALS DECIDED BY TRIBUNAL IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE OBSERVATION OF TRIBUNAL HAVE BEEN REPRODUCED EARLIE R AND, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF THE MALIK CO-OP L/C SOCIETY LTD. (SUPRA), WE HOLD THAT ON TH E FACTS AND CIRCUMSTANCES OF THE CASES IN HAND, THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT WERE NOT VALID. ACCORDINGLY, ORDERS OF AUTHORITIES BELOW IN ALL THE APPEALS IN QUESTION ARE QUASHED AND THE ASSESSEES APPEALS STAND ALLOWE D. 8. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCEMENT IN OPEN COURT ON ______/02/2016 . SD/- SD/- (SUCHITRA KAMBLE) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16/02/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.