The DCIT, Circle-1, RAJKOT-GUJARAT V. Shree Vanraj Besan Mill, JUNAGADH

ITA 560/RJT/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67321 (ITAT-RAJKOT)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-07-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 11-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR DR EJ M
• Assessee Lawyers: J C RANPURA CA M
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 194C; 147; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT . . R . . BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM ITA NO. 560 /RJT/201 2 EJ J / ASSESSMENT YEAR 200 5 - 0 6 THE DCIT, CIRCLE - 1, JUNAGADH ( / APPELLANT) SHREE VANRAJ BESAN MILL CO., DOLATPARA, JUNAGADH PAN NO. AAHFS 6508 E NR / RESPONDENT C.O. NO. 38/RJT/2012 EJ J / ASSESSMENT YEAR 200 5 - 0 6 SHREE VANRAJ BESAN MILL CO., DOLATPARA, JUNAGADH PAN NO. AAHFS 6508 E ( / APPELLANT) THE DCIT, CIRCLE - 1, JUNAGADH NR / RESPONDENT D M / REVENUE BY SHRI AVINASH KUMAR, DR EJ M / ASSESSEE BY SHRI J C RANPURA, CA M / DATE OF HEARING 22.07.2013 M / DATE OF PRONOUNCEMENT 31 .07.2013 / ORDER . . , R / T. K. SHARMA, J. M . : THIS APPEAL BY THE REVENUE AND CROSS - OBJECTION BY THE ASSESSEE ARE AGAINST THE ORDER DATED 31.07.2012 OF CIT(A) - IV, RAJKOT FOR THE ASSESSMENT YEAR 2005 - 06. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A FIRM, ENGAGED IN THE BUSINESS OF MANUFACTURING OF BE S A N. FOR THE ASSESSMENT YEAR UN DER APPEAL, THE ASSESSEE FILED ITS RETURN OF INCOME ON 12.09.2005 DECLARING TOTAL INCOME AT RS.10,55,310/ - . THE ASSESSING OFFICER ORIGINALLY FRAMED ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT ON 27.11.2007 DETERMINING THE TOTAL INCOME AT RS.11,26,160/ - BY MAKING DISALLOWANCE OF RS.70,850/ - OUT OF AGGREGATE OF TELEPHONE EXPENSES, TRAVELLING EXPENSES AND OFFICE EXPENSES. THEREAFTER, THE 560 - RJT - 2012 & CO 38 - RJT - 2012 - SHREE VANRAJ BESAN MILL CO. 2 ASSESSMENT WAS REOPENED U/S 147 OF THE INCOME - TAX ACT BY ISSUING A NOTICE U/S 148 OF THE INCOME - TAX ACT, 1961. THE ASSESSIN G OFFICER FRAMED THE ASSESSMENT ON 19.10.2011 U/S 143(3) READ WITH SECTION 147 OF THE INCOME - TAX ACT,1961AT TOTAL INCOME OF RS.41,72,805/ - . IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED RS.30,46,645/ - U/S 40(A) OF THE INCOME - TAX ACT, 1961. ON A PPEAL, IN THE IMPUGNED ORDER DATED 31.07.2012, THE LD CIT(A) ANNULLED THE ASSESSMEN T FRAMED U/S 143(3) R.W.S. 147, FOR THE DETAILED REASONS GIVEN IN PARAGRAPH 4 OF THE ORDER, WHICH READS AS UNDER: - 4. I HAVE GONE THROUGH THE ASSESSMENT ORDER, SUBMISSION S OF APPELLANT AND ASSESSING OFFICER. I FIND THAT THE REASON GIVEN FOR REOPENING THE ASSESSMENT BY THE ASSESSING OFFICER IS THAT THE TAX AUDITOR HAS COMMENTED IN HIS TAX AUDIT REPORT THAT APPELLANT HAS NOT DEDUCTED THE TAX AT SOURCE AND PAID THE SAME TO CE NTRAL GOVERNMENT. I CALLED FOR THE TAX AUDIT REPORT FROM THE ASSESSING OFFICER DURING THE APPELLATE PROCEEDINGS AND FOUND THAT THE TAX AUDITOR HAS REPORTED JUST THE OPPOSITE IN COLUMN 27 OF FORM 3CD. AS PER THE REPORT OF TAX AUDITOR, APPELLANT HAS DEDUCTED TAX AT SOURCE UNDER CHAPTER XVII - B (DEDUCTION AT SOURCE - SECTION 192 TO 206CA) OF THE I.T. ACT WHEREVER APPLICABLE. THIS SHOWS THAT THE TAX AUDITOR HAS IMPLIEDLY STATED THAT THE APPELLANT HAS DEDUCTED TAX U/S 194 C IF DEDUCTIBLE. THE DEDUCTION OF TAX ON PAY MENT OF TRANSPORT EXPENSES IS COVERED U/S 194C OF THE I.T. ACT AND THE TAX AUDITOR HAS NEVER STATED THAT THE APPELLANT HAS NOT DEDUCTED TAX IF IT WAS REQUIRED TO BE DEDUCTED IN RESPECT OF TRANSPORT EXPENSES. THEREFORE, THE VERY BASIS FOR REOPENING THE ASSE SSMENT BY THE ASSESSING OFFICER IS BASED ON CHANGING THE FACTS WHEN ON CORRECT FACTS SUCH REOPENING WAS NOT POSSIBLE. AN INCORRECT FACT CAN NEVER BE A REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. IN CASE OF GANGA SARAN AND SONS PVT LTD VS ITO 130 ITR 1 (SC), HBLE SUPREME COURT HAD HELD THAT THE BELIEF ENTERTAINED BY THE ITO MUST NOT BE ARBITRARY OR IRRATIONAL AND THE COURT CAN CERTAINLY EXAMINE WHETHER THE REASONS ARE RELEVANT AND HAVE A BEARING ON THE MATTERS IN REGARD TO WHICH ASSESSING OFFI CER IS REQUIRED TO ENTERTAIN THE BELIEF BEFORE HE CAN ISSUE NOTICE UNDER SECTION 148. AS THE VERY REASON TO REOPEN THE ASSESSMENT BY THE ASSESSING OFFICER IN PRESENT CASE IS WRONG, THE NOTICE U/S 148 IS HELD TO BE ISSUED WITHOUT ANY REASON TO BELIEVE AND T HEREFORE WITHOUT THE JURISDICTION TO ISSUE SUCH NOTICE. AS THE NOTICE U/S 148 WAS ISSUED WITHOUT PROPER JURISDICTION, THE CONSEQUENTIAL REASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) RWS 147 IS ANNULLED. 3. AGGRIEVED BY THE ORDER OF LD CI T(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL, ON THE FOLLOWING GROUNDS: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT INCORRECT FACTS WERE RECORDED BY THE AO FOR REOPENING THE ASSESSMENT. 2. THE LD. CIT(A) FAILED T O APPRECIATE THE FACT THAT THE AO HAD IN THE REASONS NOTED THAT IT WAS A YES IN COLUMN 27 OF THE AUDITORS IN RESPECT OF COMMISSION EXPENSES ONLY INCURRED BY THE ASSESSEE 560 - RJT - 2012 & CO 38 - RJT - 2012 - SHREE VANRAJ BESAN MILL CO. 3 AND HENCE HAD DRAWN A CONCLUSION BY INFERENCE THAT IT WAS A NO OF THE AUDITORS IN RESPECT OF THE TRANSPORT EXPENSES INCURRED BY THE ASSESSEE. 3. THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE REOPENING WAS MADE TO BRING TO TAX THE AMOUNT INADMISSIBLE U/S 40(A) OF RS.30,46,645/ - BEING TRANSPORT EXPENSES FROM WHICH NO TDS WAS DEDUCTED BY THE ASSESSEE THOUGH THE SAME WAS COVERED U/S 194C OF THE IT ACT. 4. ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 5. ANY OTHER GROUND THAT THE REVENUE MAY RAISE BEFORE OR DURING HEARING PROCEEDIN GS BEFORE THE HONBLE ITAT. 6. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) - IV, RAJKOT MAY KINDLY BE SET - ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 4. THE ASSESSEE HAS FILED THE CROSS - OBJECTIONS ON THE FOLLOWING GROUNDS: - 1.0 THE GROUND S OF CROSS - OBJECTIONS MENTIONED HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2.0 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - IV, RAJKOT ERRED ON FACTS AS ALSO IN NOT DECIDING THE APPEAL ON MERITS. 3.0 THE LD. CIT(A) ERRED ON FACTS AS ALSO IN LAW IN N OT DECIDING GROUND OF APPEAL RELATING TO DISALLOWANCE OF ENTIRE RAILWAY & TRUCK TRANSPORT EXPENSE OF RS.30,46,645/ - . THE DISALLOWANCE MAY KINDLY BE DELETED. 3.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - I, RAJKOT ERRED ON FACTS AS ALSO IN NOT DECID ING THE APPEAL ON MERITS. 5. AT THE TIME OF HEARING, ON BEHALF OF REVENUE SHRI AVINASH KUMAR, DR APPEARED AND POINTED OUT THAT LD CIT(A) , WHILE ANNULLING THE ASSESSMENT FRAMED U/S 143(3) R.W.S 147 OF INCOME - TAX ACT , FAILED TO APPRECIATE THE FACT THAT ASS ESSING OFFICER HAD IN THE REASONS NOTED THAT IT WAS YES IN COLUMN 27 OF THE TAX AUDIT REPORT IN RESPECT OF COMMISSION EXPENSES ONLY INCURRED BY THE ASSESSEE AND HENCE HAD DRAWN A CONCLUSION BY INFERENCE THAT IT WAS NO OF THE AUDITOR IN RESPECT OF TRANS PORT EXPENSES INCURRED BY THE ASSESSEE. HE FURTHER POINTED OUT THAT REOPENING WAS MADE TO BRING TAX THE AMOUNT IN ADMISSIBLE U/S 40(A) (IA) OF RS.30,36,645/ - BEING TRANSPORT EXPENSES ON WHICH NO TDS WAS DEDUCTED DESPITE THE FACT THAT THE SUM WAS COVERED U/S 194 C OF THE INCOME - TAX ACT, 1961. HE ACCORDINGLY POINTED OUT THAT IT MAY BE HELD THAT THE ASSESSMENT 560 - RJT - 2012 & CO 38 - RJT - 2012 - SHREE VANRAJ BESAN MILL CO. 4 WAS RIGHTLY REOPENED BY ISSUING NOTICE U/S 148 AND THE LD CIT(A) MAY BE DIRECTED TO DECIDE THE APPEAL OF THE ASSESSEE ON MERIT INSTEAD OF ANNULLING THE SAM E. 6. ON THE OTHER HAND, ON BEHALF OF ASSESSEE SHRI J C RANPURA, CA APPEARED AND FILED A PAPER - BOOK CONTAINING 153 PAGES, WHICH INTER - ALIA, INCLUDED THE SUBMISSIONS MADE BEFORE THE LD CIT(A), COPY OF REASONS RECORDED FOR REOPENING THE ASSESSMENT, COPY O F TAX A UDIT R EPORT U/S 44AB OF THE I.T. ACT AND VARIOUS SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. APART FROM THESE, THE ASSESSEE HAS ALSO FURNISHED LIST OF PAYMENT MADE TO EACH VEHICLE/TRANSPORT OWNERS DURING THE RELEVANT ASSESSMENT YEAR AND CONTENDED THAT ENTIRE EXERCISE OF ALLEGED REOPENING OF DULY COMPLETED ASSESSMENT U/S 143(3) OF THE ACT IS BASED ON THE CHANGE OF OPINION OF THE ASSESSING OFFICER. THE ASSESSING OFFICER FAILED TO BRING ANY NEW MATERIAL/FACTS ON RECORD TO JUSTIFY THE REOPENING THE C OMPLETED ASSESSMENT. THEREFORE THE ORDER OF LD CIT(A) ANNULLING THE ASSESSMENT BE UPHELD. 7. THE LD COUNSEL OF THE ASSESSEE FURTHER POINTED OUT THAT FROM THE COPY OF TAX A UDIT R EPORT U/S 44 AB OF THE ACT - COLUMN 27 OF PART B, IT IS CLEAR THAT AUDITOR HAS PUT THE REMARK AS YES MEANS THE TAX HAS BEEN DEDUCTED AT SOURCE UNDER CHAPTER VI - A WHEREVER APPLICABLE. FROM THE REASONS RECORDED BY THE ASSESSING OFFICER, IT TRANSPIRES THAT THERE IS NOT EVEN A WHISPER AS TO ANY FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IN THE ABSENCE OF FORMATION OF ANY SUCH BELIEF BEING R ECORDED IN THE REASONS RECORDED IT IS NOT OPEN FOR THE ASSESSING OFFICER TO EXPRESS FORMATION OF SUCH BELIEF AND ON THIS GROUND ALONE REOPENING IS NOT SU STAINABLE AND LD CIT(A) IS LEGALLY AND FACTUALLY CORRECT IN ANNULLING THE SAME. FINALLY, THE LD COUNSEL OF THE ASSESSEE POINTED OUT THAT THE REASONS FOR REOPENING OF ASSESSMENT WERE BASED ON INCORRECT FACTS, WHICH WERE NOT FURNISHED TO THE ASSESSEE TILL T HE ASSESSMENT U/S 147 OF THE ACT WAS COMPLETED, THEREFORE REOPENING OF ASSESSMENT IS NOT 560 - RJT - 2012 & CO 38 - RJT - 2012 - SHREE VANRAJ BESAN MILL CO. 5 VALID. IN SUPPORT OF THIS, RELIANCE IS PLACED ON THE DECISION OF THE HONBLE HIGH COURT, BOMBAY IN THE CASE OF CIT VS. VIDESH SANCHAR NIGAM LTD. (2012) 340 ITR 66. 8. IN REJOINDER, THE LD DEPARTMENTAL REPRESENTATIVE REITERATED THE SUBMISSIONS MADE BY HIM EARLIER. 9. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT ORIGINAL ASSESSMENT U/S 1 43(3) WAS COMPLETED ON 27.11.2007. A NOTICE U/S 147 WAS ISSUED ON 24.03.2011. THE ASSESSEE VIDE ITS LETTER DATED 28.03.2011 REQUESTED THE ASSESSING OFFICER TO SUPPLY THE REASONS RECORDED FOR INITIATION OF ACTION U/S 148 OF THE INCOME - TAX ACT. THE SAME WE RE PROVIDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREAFTER, THE ASSESSEE FILED A COPY OF THE RETURN OF INCOME AS FILED EARLIER AND STATED THAT THE RETURN OF INCOME FILED BY THE ASSESSEE ON 12.09.2005 MAY BE TREATED AS RETURN FILED IN RESPONSE TO T HE NOTICE U/S 148 OF THE INCOME - TAX ACT. THE TAX AUDIT REPORT U/S 44AB WAS AVAILABLE WHEN THE ASSESSING OFFICER FRAMED ASSESSMENT U/S 143(3) ON 27.11.2007. FROM THE RELEVANT COLUMN OF TAX AUDIT REPORT, IT IS CLEAR THAT THEY HAVE STATED THE TAX HAS DEDUCTE D AT SOURCE WHEREVER APPLICABLE. THE DEDUCTION OF TAX ON PAYMENT OF TRANSPORT EXPENSES IS COVERED U/S 194C OF THE ACT AND TAX AUDITOR HAS NEVER STATED THAT THE ASSESSEE HAS NOT DEDUCTED THE TAX IF IT WAS REQUIRED TO BE DEDUCTED IN RESPECT OF TRANSPORT EXPE NSES. THEREFORE, THE VERY BASIS FOR REOPENING THE ASSESSMENT BY THE ASSESSING OFFICER IS BASED ON CHANGING THE FACTS WHEN ON CORRECT FACTS SUCH REOPENING WAS NOT POSSIBLE. WE ARE THEREFORE OF THE VIEW THAT, KEEPING IN VIEW THE CONSPICUOUS FACTS OF THE CASE , THE LD CIT(A) IS LEGALLY AND FACTUALLY IS CORRECT IN ANNULLING THE ASSESSMENT. WE THEREFORE DECLINE TO INTERFERE. GROUND NOS. 1 AND 2 ARE REJECTED. 10. THE REMAINING GROUNDS I.E. GROUND NOS. 3 TO 6 NEEDS NO ADJUDICATION AS THERE ARE RENDERED INFRUCTUO US IN VIEW OF OUR DECISION ON GROUND NO.1 AND 2 560 - RJT - 2012 & CO 38 - RJT - 2012 - SHREE VANRAJ BESAN MILL CO. 6 (SUPRA) WHEREIN WE HAVE UPHELD THE ACTION OF LD CIT( A) IN ANNULLING THE ASSESSMENT FRAMED U/S.143(3) R.W.S. 147 OF THE I.T. ACT. 12. THE CROSS - OBJECTIONS FILED BY THE ASSESSEE ARE ALSO RENDERED INFRUCTUOUS I N VIEW OF OUR DECISION IN REVENUES APPEAL (SUPRA), WHEREIN WE HAVE UPHELD THE ACTION OF LD CIT(A) IN ANNULLING THE ASSESSMENT. THE CROSS - OBJECTIONS FILED BY THE ASSESSEE ARE ACCORDINGLY DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE AND CROSS - OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( D. K. SRIVASTAVA ) (T. K. SHARMA) , / ACCOUNTANT MEMBER E D / JUDICIAL MEMBER / ORDER DATE 31 . 0 7 .2013 . /RAJKOT *B T B RJO O / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT - THE DCIT, CIRCLE - 1, JUNAG ADH 2 . NR / RESPONDENT - SHREE VANRAJ BESAN MILL CO., DOLATPARA, JUNAGADH 3 . T / CONCERNED CIT - II I, RAJKOT 4 . T - / CIT (A) - I V , RAJKOT 5 . NEE , , / DR, ITAT, RAJKOT 6 . J / GUARD FILE. / BY ORDER , TRUE COPY PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT