K.L. Arora, New Delhi V. ITO, New Delhi

ITA 5011/DEL/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69199 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-07-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 11-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SATPAL SINGH
• Keywords: Question of law; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 43B; 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI R. P. TOLANI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 5504/DEL/2011 ASSESSMENT YEAR: 2003-04 ITO VS. K.L.ARORA PROP. WARD-19(2) M/S. K.L. ARORA & ASSOCIAT ES, B-1/107, A SHOK VIHAR, PHASE-II DELHI NAINITAL AADPA9085G (APPELLANT) (RESPONDENT) ITA NO. 50 11/DEL/2011 ASSESSMENT YEAR : 2003-04 K.L.ARORA PROP. VS. ITO M/S. K.L. ARORA & ASSOCIATES, WARD-19(2) B-1/107, ASHOK VIHAR, PHASE-II NAINITAL DELHI AADPA9085G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATPAL SINGH , DR RESPONDENT BY : RAJ KUMAR, CA ORDER PER SHAMIM YAHYA, A.M : THESE CROSS APPEAL BY THE REVENUE AND BY THE ASSES SEE EMANATE OUT OF ORDERS CIT(A) DATED 5.9.2011 AND PERTAIN TO ASSESSMENT YEAR 2003- 04. THE GROUNDS RAISED IN ASSESSEES APPEAL READ AS UNDER :- . ITA NO. 5504/DEL/2 011 ITA NO. 5011/DEL/2 011 2 1.THAT UNDER THE FACTS AND CIRCUMSTANCES, PROCEEDINGS INITIATED U/S 147/148 ARE ABSOLUTELY IL LEGAL, WITHOUT JURISDICTION AND UN-SUSTAINABLE IN LAW AS W ELL AS ON MERITS, AND SO ALSO THE CONSEQUENTIAL ASSTT. ORD ER PASSED U/S 143(3)/148 OF THE I.T.ACT. 2.1. THAT UNDER THE FACTS AND CIRCUMSTANCES, THE ADDITION OF RS. 33,70,981/- U/S 41(1) FOR OUTSTANDI NG LIABILITY PAYABLE TO DDA, NEW DELHI IS ABSOLUTELY I LLEGAL AND UN-JUSTIFIED IN LAW AS WELL AS ON MERITS. 2.2. THAT WITHOUT PREJUDICE, IN CASE, NO ADDITION S TANDS MADE/ SUSTAINED U/S 43B, WHICH IS THE ONLY REASON F OR INVOKING PROVISIONS U/S. 147/148, ADDITION ON ANY O THER ISSUE INCLUDING FOR SEC. 41(1) CANNOT BE MADE, THUS , FOR THIS MUTUALLY EXCLUSIVE REASON, APART FROM OTHER RE ASONS, THE ADDITION OF RS. 33,70,981/- MADE U/S 41(1) DESE RVES TO BE DELETED. 2.THE GROUND RAISED IN REVENUES APPEAL READ AS UN DER :- 1. ADDITION DELETED U/S 43B OF THE I.T. ACT AMOUNT ING TO RS. 77,29,146/-, THE TAX AFFECT IN THIS CASE IS MORE THAN RS. 3 LAC. 2.ADDITION DELETED ON ACCOUNT OF CESSATION OF LIABI LITY ON ACCOUNT OF MCD AMOUNTING TO RS. 29,09,173/- AND ADD ITION DELETED ON ACCOUNT OF CESSATION OF LIABILITY ON ACC OUNT OF ISBT AMOUNTING TO RS. 11,75,977/-. THE DELETION MAD E BY THE LEARNED CIT(APPEALS) OF RS. 40,85,150/- WITHOUT EXAMINING THE FACTS AS TO WHETHER, THESE LIABILITIE S HAS BEEN PAID BY THE ASSESSEE SUBSEQUENTLY. THE LD. CIT(APPE ALS) HAD ONLY EXAMINED SOME LETTER ISSUED BY THESE AUTHO RITIES ASKING FOR PAYMENT OF THE SAID LIABILITY BUT NO EVI DENCE HAD BEEN BROUGHT BY THE ASSESSEE TO PRODUCE THAT THESE WERE PAID BY THE ASSESSEE AT ANY POINT OF TIME. 3.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ALL OR ANY OF THE AFORESAID GROUNDS OF APPEAL AND ADD ANY OTHER G ROUND OF APPEAL. 3. ASSESSEES APPEAL. THE FIRST ISSUE RAISED PERTAINS TO VALIDITY OF PROCEEDING INITIATED U/S 147/148 OF THE IT ACT. . ITA NO. 5504/DEL/2 011 ITA NO. 5011/DEL/2 011 3 4. IN THIS CASE, ORIGINAL RETURN DECLARIN G INCOME OF RS. 20,756/- WAS FILED ON 2.12.2003. THIS WAS PROCESSED U/S 143(1) O N 29.3.2004 AT THE RETURNED AMOUNT. SUBSEQUENTLY, THE ASSESSMENT WAS R E-OPENED AND ASSESSMENT U/S 143(3)/ 148 WAS FRAMED ON 31.12.2010 . IN THIS ASSESSMENT ASSESSING OFFICER HAD DISALLOWED LICENCE FEE AMOUNT ING TO RS. 77,29,146/- UNDER THE PROVISIONS OF SECTION 43(B) OF IT ACT. AS SESSING OFFICER ALSO DISALLOWED 74,56,151/- ALREADY INCLUDED IN THE ABOV E DISALLOWANCE AS DISALLOWANCE U/S 41(1) OF THE IT ACT. BEFORE THE LD . CIT A ASSESSEE RAISED THE ISSUE OF JURISDICTION AS WELL AS MERITS OF THE CASE. AS REGARDS, JURISDICTION THE LD. CITA REJECTED THE ASSESSEES S UBMISSION. ON MERITS, HE GAVE PART RELIEF TO THE ASSESSEE. 5. AGAINST THE ABOVE ORDER ASSESSEE AND REVENU E ARE IN APPEAL BEFORE US. 6. AT THE THRESHOLD, WE ARE ADJUDICATED THE IS SUE OF JURISDICTION RAISED IN THE ASSESSEES APPEAL. IN THIS CASE, ORIGINAL RETUR NED DECLARING INCOME OF RS. 20,756/- WAS FILED ON 2.12.2003. THIS WAS PROCE SSED U/S 143(1) ON 29.3.2004 AT THE RETURNED INCOME. SUBSEQUENTLY, ASS ESSMENT WAS REOPENED AFTER REGARDING FOLLOWING REASONS :- IN THIS CASE RETURN DECLARING INCOME OF RS. 20,760 /- WAS FILED ON 2.12. 2003. THIS WAS PROCESSED U/S 143(1) ON 29.03.2004 AT THE RETURNED AMOUNT. THE ASSESSEE HAS SHOWN INCOME UNDER TH HEADS BUSINESS, PROPERTY AND OTHER SOURCES. . ITA NO. 5504/DEL/2 011 ITA NO. 5011/DEL/2 011 4 AS PER PROFIT & LOSS A/C, THE ASSESSE HAS SHOWN REC EIPT AS PARKING CONTRACTOR AT RS. 92,35,983/- AND AGAINS T THIS HAS SHOWN EXPENDITURE AS LICENCE FEE OF RS. 79,34,016/-. THIS EXPENDITURE HAS BEEN ALLOWED WHIL E PROCESSING THE ASSESSEES RETURN ON 29.3.2004, AS CLAIMED. A PERUSAL OF THE BALANCE SHEET FILED BY THE ASSESSE E WITH THE RETURN OF INCOME, REVEALS THAT UNDER THE H EAD CURRENT LIABILITIES THE ASSESSEE HAS SHOWN THE FOLL OWING AMOUNTS :- (I) PAYABLE TO DDA RS. 33,70,981/- (II) PAYABLE TO (NDR) RS. 2,72,995/- (III) PAYABLE TO ISBT RS. 11,75,997/- (IV) PAYABLE TO MCD RS. 29,09,173/- TOTAL RS. 77,29,146/ - THESE PAYMENTS HAVE NOT BEEN MADE BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF HIS RETUR N, AS THIS LIABILITY OF RS. 77,29,146/- ALSO APPEARS AS OUTSTANDING AS PER BALANCE SHEET AS ON 31.3.2004. A S PER PROVISIONS OF SECTION 43B THIS AMOUNT CANNOT BE ALLOWED AS EXPENDITURE, SINCE PAYMENT OF THIS AMOUN T HAS NOT BEEN MADE BY THE ASSESSEE WITHIN THE PRESCRIBED TIME. TO MEAN AN INADMISSIBLE DEDUCTION OF RS. 77,29,146/ - HAS BEEN CLAIMED BY THE ASSESSEE AND ALLOWED BY THE DEPARTMENT AS SUCH. IN VIEW OF THESE FACTS, I HAVE REASON TO BELIEVE TH AT INCOME TO THE EXTENT OF RS. 77,29,146/- CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT IN TERMS OF SECTION 147 OF THE INCOME TAX ACT, 1961. 7. IN THIS CONNECTION, ASSESSEE HAS SUBMITTED THA T RE-OPENING PROCEEDING ARE UN-SUSTAINABLE FOR THE FOLLOWING REASONS :- PROCEEDINGS ARE UNSUSTAINABLE FOR FOLLOWING 3 REASONS :- ONE - THE ASSESSEE IS A PARKING CONTRACTOR OF SITES OF DDA, RAILWAYS, MCD ETC. - HE HAS TO PAY CONTRACTUAL PAYMENT TO THESE AUTHORITIES FOR COMMERCIALLY EXPLOITING THE PARKING SITES AS PER AGREEMENTS. . ITA NO. 5504/DEL/2 011 ITA NO. 5011/DEL/2 011 5 - RS. 77,29,146/- WAS OUTSTANDING CONTRACTUAL LIABI LITIES AS ON 31.03.2003. - THESE ARE NOT STATUTORY LIABILITIES WHICH ARE COV ERED IN SEC. 43B. - HENCE, SEC. 43B IS NOT APPLICABLE. - CIT(A) HAS ALSO HELD THESE LIABILITIES NOT COVE RED U/S 43B. - PROCEEDINGS HAVE BEEN INITIATED BY WRONGLY CONSIDERING THESE LIABILITIES AS STATUTORY LIABIL ITIES COVERED U/S 43B. - THERE IS NO ESCAPED INCOME. - THERE IS NO REASON TO BELIEVE THAT THERE IS ANY E SCAPED INCOME. - HENCE, PROCEEDINGS HAVE BEEN INITIATED WITHOUT JURISDICTION. TWO - OUT OF ABOVE RS. 68,11,154/- IS THE OPENING LIABI LITY AS ON 31.03.2002. - OPENING LIABILITIES CANNOT BE ADDED U/S 43B. - THUS, REASONS ARE BASED ON WRONG FACTS. - THE PROCEEDINGS INITIATED ON WRONG FACTS NEEDS T O BE QUASHED. THREE - EARLIER ASSTT. / INTIMATION COMPLETED U/S 143(1 ). - THE FACTS AND FIGURES OF LIABILITIES HAVE BEEN DE CLARED IN THE B/S. AS ON 31.03.2002 AND 31.03.2003. - NO NEW MATERIAL AND NO NEW INFORMATION HAS COME I N POSSESSION OF AO. - IT IS ONLY ON THE BASIS OF REVIEW OF THE RETURN A LREADY ACCEPTED U/S 143(1) THAT THE PROCEEDINGS HAVE BEEN INITIATED WHICH IS NOT PERMISSIBLE IN LAW. LD. DR ON THE OTHER HAND ARGUED THAT REOPENING WAS VALID AND HE SUPPORTED THE LD. CITAS ORDER IN THIS REGARD. 8. WE NOTE THAT THE EARLIER ASSESSMENT, IN T HIS CASE, WAS INTIMATION U/S 143(1) OF THE IT ACT. SUBSEQUENTLY, ASSESSMENT WAS RE-OPENED FOR DISALLOWING FOLLOWING SUMS U/S 43(B) OF THE IT ACT. (I) PAYABLE TO DDA 33,70,981/- (II) PAYABLE TO NDR RS. 2,72,995/- . ITA NO. 5504/DEL/2 011 ITA NO. 5011/DEL/2 011 6 (III) PAYABLE TO ISBT RS. 11,75,997/- (IV) PAYABLE TO MCD RS. 29,09,173/- TOTAL 77,29,146/- 9. WE FIND THAT THE ABOVE FACTS AND FIGURES OF LIABILITIES WERE ALREADY DECLARED BY THE ASSESSEE IN THE BALANCE SHEET FILED FOR THE CONCERNED ASSESSMENT YEAR. WE FIND THAT NO NEW MATERIAL AND N O NEW INFORMATION HAS COME IN POSSESSION OF ASSESSING OFFICER. IT IS ONLY ON THE BASIS OF THE REVIEW OF THE RETURN ALREADY ACCEPTED U/S 143(1) TH AT THE PROCEEDINGS HAVE BEEN INITIATED WHICH IS NOT PERMISSIBLE IN LAW. 10. IN THE REASONS FOR RE-OPENING, ASSESSING O FFICER HAS REFERRED TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AS WELL AS PERUSAL OF BALANCE SHEET FILED BY THE ASSESSEE WITH THE RETURN OF INCOME. FR OM THESE STATEMENTS, ASSESSING OFFICER HAS PICKED UP CERTAIN ITEMS OF CU RRENT LIABILITIES, AND OBSERVED THAT THEY ARE NOT ALLOWABLE U/S 43B. 11. IN OUR CONSIDERED OPINION, THIS IS NOTHING BUT REVIEW OF THE EARLIER PROCEEDINGS WHICH IS NOT PERMISSIBLE. IN THIS CONN ECTION, WE FIND THAT HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE C ASE OF CIT VS. ORIENT CRAFT LTD. IN ITA NO. 555/2012 DATED 12 DECEMBER, 2 012 SUPPORTS THE CASE OF THE ASSESSEE. IN THIS CASE FOLLOWING EXPOSITION WAS LAID DOWN :- 14. CERTAIN OBSERVATIONS MADE IN THE DECISION OF R AJESH JHAVERI (SUPRA) ARE SOUGHT TO BE RELIED UPON BY THE REVENUE TO POINT OUT THE DIFFERENCE BETWEEN AN ASSESSMENT AND AN INTIMATION. THE CONTEXT IN WHICH THOSE OBSERVATIO NS WERE MADE HAS TO BE KEPT IN MIND. THEY WERE MADE TO POIN T OUT . ITA NO. 5504/DEL/2 011 ITA NO. 5011/DEL/2 011 7 THAT WHERE AN INTIMATION IS ISSUED UNDER SECTION 143(1) THERE IS NO OPPORTUNITY TO THE ASSESSING AUTHORITY TO FORM AN OPINION AND THEREFORE WHEN ITS FINALITY IS SOUGHT T O BE DISTURBED BY ISSUING A NOTICE UNDER SECTION 148, TH E PROCEEDINGS CANNOT BE CHALLENGED ON THE GROUND OF :CHANGE OF OPINION. IT WAS NOT OPINED BY THE SUPRE ME COURT THAT THE STRICT REQUIREMENTS OF SECTION 147 C AN BE COMPROMISED. ON THE CONTRARY, FROM THE OBSERVATIONS (QUOTED BY US EARLIER) IT WOULD APPEAR CLEAR THAT T HE COURT REITERATED THAT SO LONG AS THE INGREDIENTS OF SECT ION 147 ARE FULFILLED AN INTIMATION ISSUED UNDER SECTION 1 43(1) CAN BE SUBJECTED TO PROCEEDINGS FOR REOPENING. THE COUR T ALSO EMPHASIZED THAT THE ONLY REQUIREMENT FOR DISTURBING THE FINALITY OF AN INTIMATION IS THAT THE ASSESSING OFF ICER SHOULD HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN OUR OPINION, THE SAID EXPRES SION SHOULD APPLY TO AN INTIMATION IN THE SAME MANNER AN D SUBJECT TO THE SAME INTERPRETATION AS IT WOULD HAVE APPLIED TO AN ASSESSMENT MADE UNDER SECTION 143(3). THE ARGUMENT OF THE REV ENUE THAT AN INTIMATION CANNOT BE EQUATED TO AN ASSESSMENT, RELYING UPON CERTAIN OBSERVATIONS OF THE SUPREME COURT IN RAJESH JHAVERI (SUPRA) WOULD ALSO APPEAR TO BE SELF-DEFEATING, BEC AUSE IF AN INTIMATION IS NOT AN ASSESSMENT THEN IT CAN NEVER BE SUBJECTED TO SECTION 147 PROCEEDINGS, FOR, THAT SEC TION COVERS ONLY AN ASSESSMENT AND WE WONDER IF THE RE VENUE WOULD BE PREPARED TO CONCEDE THAT POSITION. IT IS N OBODYS CASE THAT AN INTIMATION CANNOT BE SUBJECTED TO SE CTION1 47 PROCEEDINGS; ALL THAT IS CONTENDED BY THE ASSESS EE, AND QUITE RIGHTLY, IS THAT IF THE REVENUE WANTS TO INVO KE SECTION 147 IT SHOULD PLAY BY THE RULES OF THAT SECTION AND CANNOT BOG DOWN. IN OTHER WORDS, THE EXPRESSION REASON TO BELIEVE CANNOT HAVE TWO DIFFERENT STANDARDS OR SET S OF MEANING, ONE APPLICABLE WHERE THE ASSESSMENT WAS EA RLIER MADE UNDER SECTION 143(3) AND ANOTHER APPLICABLE WH ERE AN INTIMATION WAS EARLIER ISSUED UNDER SECTION 143( 1). IT FOLLOWS THAT IT IS OPEN TO THE ASSESSEE TO CONTEND THAT NOTWITHSTANDING THAT THE ARGUMENT OF CHANGE OF OPI NION IS NOT AVAILABLE TO HIM, IT WOULD STILL BE OPEN TO HIM TO CONTEST THE REOPENING ON THE GROUND THAT THERE WAS EITHER N O REASON TO BELIEVE OR THAT THE ALLEGED REASON TO BEL IEVE IS NOT RELEVANT FOR THE FORMATION OF THE BELIEF THAT I NCOME . ITA NO. 5504/DEL/2 011 ITA NO. 5011/DEL/2 011 8 CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN DOING SO, IT IS FURTHER OPEN TO THE ASSESSEE TO CHALLENGE THE RE ASONS RECORDED UNDER SECTION 148(2) ON THE GROUND THAT TH EY DO NOT MEET THE STANDARDS SET IN THE VARIOUS JUDICIAL PRONOUNCEMENTS. 15.IN THE PRESENT CASE THE REASONS DISCLOSE THAT TH E ASSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME ON GOING THROUGH THE RETURN O F INCOME FILED BY THE ASSESSEE AFTER HE ACCEPTED THE RETURN UNDER SECTION 143(1) WITHOUT SCRUTINY, AND NOTHING MORE. THIS IS NOTHING BUT A REVIEW OF THE EARLIER PROCEED INGS AND AN ABUSE OF POWER BY THE ASSESSING OFFICER, BOTH ST RONGLY DEPRECATED BY THE SUPREME COURT IN CIT VS. KELVINAT OR (SUPRA). THE REASONS RECORDED BY THE ASSESSING OFFI CER IN THE PRESENT CASE DO CONFIRM OUR APPREHENSION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS REASON TO BELIEVE VIS--VIS AN INTIMATION ISSUED UNDER SECTI ON 143(1) CAN CAUSE TO THE TAX REGIME. THERE IS NO WHISPER IN THE REASONS RECORDED, OF ANY TANGIBLE MATERIAL WHICH CA ME TO THE POSSESSION OF THE ASSESSING OFFICER SUBSEQUENT TO THE ISSUE OF THE INTIMATION. IT REFLECTS AN ARBITRARY E XERCISE OF THE POWER CONFERRED UNDER SECTION 147. 16.FOR THE ABOVE REASONS, WE ANSWER THE SUBSTANTIAL QUESTION OF LAW FRAMED BY US IN THE AFFIRMATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. THERE SHALL BE NO ORDER AS TO COSTS. 12. WE, THUS, FIND THAT ON THE BASIS OF AFORESA ID JURISDICTIONAL HIGH COURT DECISION, THE REOPENING IN THIS CASE IS NOTHING BUT A REVIEW OF EARLIER PROCEEDINGS WHICH CANNOT BE SUSTAINED. 13. WE FURTHER, FIND THAT IN THE REASONS OF REO PENING IT HAS BEEN MENTIONED THAT THE SUMS MENTIONED THEREIN WERE LIAB LE TO BE DISALLOWED U/S 43(B). IN THIS CONNECTION WE AGREE WITH THE ASSESSE S SUBMISSION THAT SECTION 43(B) WAS NOT AT ALL APPLICABLE AS THE CONC ERNED LIABILITIES WERE NOT, STATUTORY LIABILITIES. THUS THERE IS NO ESCAPED INC OME BY APPLICATION OF . ITA NO. 5504/DEL/2 011 ITA NO. 5011/DEL/2 011 9 SECTION 43B. THIS WAS SO HELD BY THE LD. CIT ALSO I N HIS APPELLATE ORDER. WE, THUS, FIND THAT THE BASIC PREMISE THAT THERE IS REASON TO BELIEVE THAT THERE IS ESCAPE INCOME IS NOT AT ALL SUSTAINABLE. T HUS, PROCEEDINGS INITIATED ON A WRONG PREMISE CANNOT BE SUSTAINED. 14. IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT, WE HOLD THAT REOPENING IN THIS CASE AS NOT VALID. SINCE, WE HAVE HELD THAT THE RE- ASSESSMENT PROCEEDING WAS INVALID ALL THE OTHER ISS UES RAISED IN THESE CROSS APPEALS HAVE BECOME INFRUCTUOUS. ACCORDINGLY, ASSESSES APPEAL IS PARTLY ALLOWED AND REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 AUGUST, 20 13. SD/- SD/- (R.P.TOLANI) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 8 AUGUST, 2013 B.RUKHAIYAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT (ITAT), NEW DELHI