M/s. G.N.Mohanty and Co., Bhubaneswar V. ITO, Ward-1(2), Bhubaneswar

ITA 397/CTK/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7586 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 13-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Reopening of assessment; Search and seizure; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; TDS
• Section: 147; 154

Judgement Text

P A G E 1 | 5 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK SMC BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER ITA NO. 397 /CTK/201 7 ASSESSMENT YEA R: 2007 - 08 M/S. G.N.MOHANTY AND CO., PLOT NO.2060/2061,2062 S, SAMATARPUR CHHAK, BHUBANESWAR. VS. ITO, WARD 1(2), BHUBANESWAR. PAN/GIR NO. AAEFG 3478 J (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI B.K. MOHAPATRA, AR REVENUE BY : SHRI SUBHENDU DUTTA, DR DATE OF HEARING : 10 / 0 7 / 201 9 DATE OF PRONOUNCEMENT : 24 / 0 7 / 201 9 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) - 1, BHUBANESWAR DATED 10.3.2017 FOR THE ASSESSMENT YEAR 20 07 - 08 . 2. IN GROUND NO.1 OF APPEAL, THE ISSUE INVOLVED IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS), CUTTACK WAS NOT JUSTIFIED IN CONFIRMING THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM AND DERIVES INCOME FROM TRADING IN FERTILISERS AND PESTICIDES AND COMMISSION INCOME. THE ASSESSEE FILED THE RETURN OF INCOME ON 31.10.2017 SHOWING TOTAL INCOME OF RS.2,12,292/ - . THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 26.10.2009 DETERMINING THE TOTAL INCOME AT RS.2,44,290/ - AND THER EAFTER , ORDER WAS RECTIFIED AND TOTAL INCOME WAS DETERMINED AT RS.2,24,290/ - . HENCE, NOTICE U/S.148 OF THE ACT WAS ISSUED ON 17.6.2011 ON THE GROUND THAT ON VERIFICATION OF THE ASSESSMENT DETAILS, IT WAS NOTICED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FIRM HAS FILED ITA NO.397/CTK/2017 ASSESSMENT YEAR: 2007 - 08 P A G E 2 | 5 STATEMENTS OF GROSS COM MISSION/BROKERAGE, CONTRACT RECEIPTS, ETC. OF RS.31,58,934/ - WITH CLAIM OF TDS CREDIT OF RS.1,74,926/ - . BUT ON GOING THROUGH THE PROFIT AND LOSS ACCOUNT, IT WAS SEEN THAT A SUM OF RS.19,88,231.01 HAS BEEN SHOWN AS ITS GROSS RECEIPT/INCOME WITH TDS CREDIT OF RS.1,74,926/ - . SO THE ASSESSEE FIRM HAS SUPPRESSED BALANCE RECEIPT/INCOME AMOUNTING TO RS.11,70,702.99 (RS.31,58,934. RS.19,88,231.01). 4. IN RESPONSE TO NOTICE U/S.148 OF THE ACT, THE ASSESSEE REQUESTED TO TREAT THE RETURN FILED U/S.139(1) DATED 31 .10.2007 AS VALID RETURN. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S.143(2) OF THE ACT AND THE ASSESSEE APPEARED AND MATTER WAS DISCUSSED. THE ASSESSING OFFICER VIDE ORDER DATED 31.10.2011 U/S.143(3)/147 OF THE ACT, DETERMINED THE TOTAL INCOME AT RS.16,58,990/ - , MAKING VARIOUS DISALLOWANCES. 5. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL CHALLENGING THE REOPENING OF ASSESSMENT U/S.147 AND ALSO ON MERITS. HOWEVER, THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. HENCE, THIS APPEAL IS BEFORE THE TRIBUNAL. 6. AT THE OUTSET, LD A.R. OF THE ASSESSEE CHALLENGED THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT. BOTH THE PARTIES AGREED THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT U/S.147 OF THE ACT, INTER ALIA, RECORDING THE FOLL OWING REASONS: ON VERIFICATION OF THE ASSESSMENT DETAILS, IT WAS NOTICED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FIRM HAS FILED STATEMENTS OF GROSS COMMISSION/BROKERAGE, CONTRACT RECEIPTS, ETC. OF RS.31,58,934/ - WITH CLAIM OF TDS CREDIT OF RS.1,74,926/ - . BUT ON GOING THROUGH THE PROFIT AND LOSS ACCOUNT, IT WAS SEEN THAT A SUM OF RS.19,88,231.01 HAS BEEN SHOWN AS ITS GROSS RECEIPT/INCOME WITH TDS CREDIT OF RS.1,74,926/ - . SO THE ASSESSEE FIRM HAS SUPPRESSED BALANCE RECEIPT/INCOME AMOUNTING T O RS.11,70,702.99 (RS.31,58,934. RS.19,88,231.01). ITA NO.397/CTK/2017 ASSESSMENT YEAR: 2007 - 08 P A G E 3 | 5 7 . IT WAS FURTHER SUBMITTED BY LD A.R. OF THE ASSESSEE THAT NO NEW MATERIAL HAD COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER AFTER FRAMING OF ASSESSMENT U/S.143(3) OF THE ACT ON 2 6.10.2009 FOR ASSESS MENT YEAR 200 7 - 08 , WHICH MAY AFFORD REASON TO BELIEVE THAT INCOME OF THE APPELLANT HAD ESCAPED ASSESSMENT. IT IS CLEARLY EVIDENT FROM THE REASONS RECORDED THAT NO NEW TANGIBLE INFORMATION/MATERIAL CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICER SUBSEQUE NT TO THE CONCLUSION OF THE ORIGINAL ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING OFFICER DO NOT EVEN INDICATE OR ALLEGE THAT ANY FRESH INFORMATION CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICER WARRANTING EXERCISE OF JURISDICTION UNDER SECTION 147/14 8 OF THE ACT. 8 . HE RELIED ON THE DECISION OF THE HONBLE APEX COURT IN CIT V. KELVINATOR OF INDIA LTD.: 320 ITR 561(SC). THE RELEVANT OBSERVATIONS OF THE APEX COURT ARE AS UNDER: 'ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987, RE - OPENING COULD BE DONE UNDER ABOVE TWO CONDITIONS AND FULFILLMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTI ON ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE - ACT [WITH EFFECT FROM 1 ST APRIL, 1989], THEY ARE GIVEN A GO - BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO RE - OPEN THE ASSESSMENT. THEREFORE, POST - L ST APRIL, 1989, POWER TO RE - OPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, SEC TION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO RE - OPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO RE - OPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER T O RE - ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE ASSESS. BUT RE - ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTME NT, THEN, IN THE GARB OF RE - OPENING 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 ST APRIL, 1989, ASSESSING OFFICER HAS POWER T O RE - OPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF.' ITA NO.397/CTK/2017 ASSESSMENT YEAR: 2007 - 08 P A G E 4 | 5 9. IT WAS FURTHER ARGUED THAT IN THE PRESENT CASE ON THE BASIS OF BOOKS OF ACCOUNT AND OTHER MATERIALS , THE ASSESSING OFFICER HAV E EXAMINED THE ISSUE OF DISALLOWANCE GROSS COMMISSION/BROKERAGE, CONTRACT RECEIPTS, ETC. AND, THEREFORE, IT IS PRESUMED THAT HE APPLIED HIS MIND TO THE MATERIAL ON RECORD AND FORMED AN OPI NION. THEREFORE, IN THE ABSENCE OF ANY FRESH MATERIAL, THE REAPPRAISAL OF SAME MATERIAL TO INITIATE REASSESSMENT PROCEEDINGS TANTAMOUNTS TO CHANGE OF OPINION AND HENCE BAD IN LAW. 10. REPLYING TO ABOVE, LD D.R. SUBMITTED THAT PRODUCTION OF BOOKS OF ACCOUNT AND OTHER DETAILS BEFORE THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS CANNOT STAND IN THE WAY OF INITIATING REASSESSMENT PROCEEDINGS U/S.147 OF THE ACT IF ALL THE CONDITIONS LAID DOWN UNDER LAW ARE SATI SFIED. IN THE INSTANT CASE, ALL THOSE CONDITIONS APPEAR TO HAVE BEEN SATISFIED FOR INITIATING REASSESSMENT PROCEEDINGS. THEREFORE, THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT IS VALID. 11. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. T HE ARGUMENT OF LD A.R. OF THE ASSESSEE IS THAT THE IMPUGNED REASSESSMENT ORDER WAS NOTHING BUT A CHANGE OF OPINION AND THERE WAS NO FRESH INFORMATION AVAILABLE ON RECORD TO JUSTIFY THE REOPENING OF ASSESSMENT. MY ATTENTION HAS ALSO BEEN DRAWN TO THE ORDER DATED 5.5.2010 U/S.143(3)/154 OF THE ACT, THROUGH WHICH THE AO RECTIF IED THE DISCREPANCY IN THE ORDER U/S.143(3) OF THE ACT . SO THE ARGUMENT IS THAT THE REVENUE DEPARTMENT WANTED TO INITIATE THE PROCEEDINGS BOTH U/S.147 AS WELL AS U/S.154 OF THE I.T.ACT, WHICH ITSELF HAS ESTABLISHED THAT THE INFORMATION AS WELL AS THE ACCOUNTS WERE VERY MUCH ON RECORD, WHICH WERE VERY MUCH IN THE NOTICE OF THE AO AS HE WANTED TO INVOKE THE PROVISIONS OF SECTION 154 OF I.T.ACT TO RECTIFY THE MISTAKE. BECAUSE T HE AO HAD ISSUED 0NOTICE U/S.154 OF I.T.ACT, THEREFORE, IT WAS ALSO NOT IN DISPUTE THAT THE ALLEGED DISCREPANCIES WERE NOTHING BUT MISTAKE APPARENT FROM RECORD. CONSIDERING ITA NO.397/CTK/2017 ASSESSMENT YEAR: 2007 - 08 P A G E 5 | 5 THE PECULIAR SITUATION UNDER WHICH THE PROCEEDINGS WERE STARTED U/S.147/148 OF I.T .ACT, I HEREBY HOLD THAT THE LAW DOES NOT PERMIT A SETTLED ISSUE TO GET UNSETTLED BY REOPENING THE SAME. I ALSO FIND THAT L AW RELATING TO CHANGE OF OPINION BEING NOT PERMISSIBLE FOR INVOKING PROCEEDINGS U/S 147 OF THE ACT IS NOW WELL SETTLED BY HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD., (SUPRA). IN THIS CASE, ON THE BASIS OF CHANGE OF OPINION, THE ASSESSI NG OFFICER HAS RESORTED TO SECTION 147 OF THE ACT IN REOPENING OF ASSESSMENT AND, THEREFORE, I QUASH THE REASSESSMENT PROCEEDINGS U/S.147 OF THE ACT AND ALLOW THIS GROUND OF APPEAL. 12. SINCE, I HAVE QUASHED THE REASSESSMENT PROCEEDINGS U/S.147 OF THE ACT ON LEGAL GROUND, HENCE, OTHER GROUNDS TAKEN BY THE ASSESSEE ON MERITS HAVE BECOME INFRUCTUOUS. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 24 / 0 7 /201 9 . SD/ - ( CHANDRA MOHAN GARG ) JUDICIALMEMBER CUTTACK; DATED 24 / 0 7 /20 9 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. SECRETARY, ITAT, CUTTACK 1. THE APPELLANT : M/S. G.N.MOHANTY AND CO., PLOT NO.2060/2061,2062 S, SAMATARPUR CHHAK, BHUBANESWAR 2. THE RESPONDENT. ITO, WARD 1(2), BHUBANESWAR. 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//