M/s. S G Estates Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 5642/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7475 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 19-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GAUTAM JAI
• Keywords: Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SH. I.C. SUDHIR, JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 5642 /DEL/ 2013 ASSESSMENT YEAR: 2007 - 08 M/S. S.G. ESTATES LTD., 105 - 106, DEEP SHIKHA TOWER, RAJENDRA PLACE, NEW DELHI. VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE - 7, NEW DELHI. GIR/PAN : AAACS2843L (APPELLANT) (RESPONDENT) APPELLANT BY SH. GAUTAM JAI, ADV. RESPONDENT BY SMT. RISHPAL BEDI, SR. DR DATE OF HEARING 19.04.2016 DATE OF PRONOUNCEMENT 10.06.2016 ORDER PER O.P. KANT, A. M. : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 20/09/2013 OF LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) - X, NEW DELHI FOR ASSESSMENT YEAR 2007 - 08 RAISING FOLLOWING GROUNDS : 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) X, NEW DELHI HAS ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT AND, COMPLETION OF ASSESSMENT UNDER SECTION 143(3)/147 OF THE ACT WITHOUT APPRECIATING THAT THEY W ERE WITHOUT JURISDICTION AND, THEREFORE DESERVES TO BE QUASHED AS SUCH. 1.1 IT IS SUBMITTED THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THERE WAS NEITHER NO FRESH MATERIAL IN THE POSSESSION OF THE LEARNED ASSESSING OFFICER T O INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT AND IN ABSENCE THEREOF THE PROCEEDINGS WERE WITHOUT JURISDICTION. 1.2 THAT FURTHER MORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO FAILED TO APPRECIATE THAT NOTICE U/S 147 IS INVALID ON MERE CHANGE OF OPINION FORMED ON THE SAME SET OF FACTS WHICH WERE ON RECORD DURING THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 14 3(3) OF THE ACT AS HAS BEEN HELD BY APEX COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. REPORTED IN 320 ITR 561 AND FULL BENCH OF HON BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. USHA INTERNATIONAL LTD. REPORTED IN 348 ITR 485. 2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING AN ADDITION OF RS. 2,50,000/ - BY ENHANCING THE CLOSING STOCK (WIP) ON MISCONCEPTION OF FACTS AND, STATUTORY PROVISION OF LAW. 2 ITA NO. 5642/DEL/2013 AY: 2007 - 08 IT IS THEREFORE, PRAYED THAT TH E IMPUGNED ASSESSMENT MAY KINDLY BE QUASHED AND FURTHERMORE ADDITION SUSTAINED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALONGWITH INTEREST LEVIED MAY KINDLY BE DELETED AND APPEAL OF THE APPELLANT BE ALLOWED. 2. THE F ACTS IN BRIEF ARE THAT THE ORIGINAL ASSESSMENT IN THE CASE WAS COMPLET ED UNDER SECTION 143(3) OF THE INCOME - T AX ACT, 1961 (IN SHORT THE ACT ) AFTER ACCEPTING THE RETURNED IN COME OF THE ASSESSEE AT RS. 16,35, 030/ - . SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT AND N OTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 23/03/2012 , I.E. , WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, AFTER RECORDING REASONS TO BELIEVE THAT INCOME ESCAPED ASSESSMENT. IN RESPONSE , THE ASSESSEE REQUESTED TO TREAT THE RETURN OR IGINALLY FILED AS RETURN IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. THE REASONS RECORDED WERE ALSO PROVIDED TO THE ASSESSEE ON 09/05/2012. IN THE RE - ASSESSMENT COMPLETED, THE ASSESSING OFFICER MADE ADDITION OF RS. 2, 50,000/ - AS THE DIFFERENCE BETW EEN CLOSING ST OCK (WORK - IN - PROGRESS) AS PER THE PROFIT AND LOSS ACCOUNT AND AS DETAILS FURNISHED BY THE ASSESSEE IN ASSESSMENT PROCEEDINGS . BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) , THE ASSESSEE CHALLENGED THE REASSESSMENT PROCEEDINGS AS WEL L AS THE ADDITION OF RS. 2, 50, 000/ - ON MERIT. THE ASSESSEE COULD NOT SUCCEED BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) AND BEING AGGRIEVED, IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS OF APPEAL AS REPRODUCED ABOVE. 3. IN GROUND S N O. 1 TO 1.2 , THE ASSESSEE HAS CHALLENGED THE JURISDICTION IN REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT ON THE GROUND THAT THERE WAS NO FRESH MATERIAL IN POSSESSION OF THE LD . ASSESSING OFFICER , A S ALSO IT WAS MERE CHANGE OF OPINION ON THE SAME SE T OF FACTS ON RECORD IN ORIGINAL ASSESSMENT PROCEEDINGS. 3.1 BEFORE US , LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ADDRESSING THE GROUNDS SUBMITTED THAT THERE WAS NO FRESH TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSME NT AND IT WAS REOPENED MERELY ON THE CHANGE OF OPINION ON THE MATERIAL ALREADY BEFORE THE ASSESSING OFFICER IN 3 ITA NO. 5642/DEL/2013 AY: 2007 - 08 ORIGINAL ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT AND IN ABS ENCE OF FRESH TANGIBLE MATERIAL , THE REASSESSMENT PROCEEDINGS ARE WITHO UT JURISDICTION AS HELD BY THE HON BLE DELHI HI GH COURT IN THE CASE OF ORIENT C RAFT LTD . (2013) 354 ITR 536 (DEL) AND IN THE CASE OF THE DONALDSON INDIA FILTERS SYSTEMS PRIVATE LIMITED (2015) 54 TAXMANN.COM 253 (DELHI). 3.2 ON THE OTHER HAND , LEARNED SR . D EPARTMENTAL R EPRESENTATIVE RELYING ON THE ORDERS OF THE AUTHORITIES BELOW , SUBMITTED THAT NO FULL AND TRUE DISCLOSURE OF FACTS WAS MADE ON THE PART OF THE ASSESSEE AND IT WAS A GLARING MISTAKE OF THE CLAIM, THE REASSESSMENT PROCEEDINGS WERE IN ACCORDANC E TO LAW. 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE HON BLE J URISDICTIONAL HI GH COURT IN THE CASE OF ORIENT C RAFT LTD (SUPRA) HAS HELD AS UNDER : 15. IN THE PRESENT CASE THE REASONS DISCLOSE THAT THE ASS ESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME 'ON GOING THROUGH THE RETURN OF 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 EA RLIER PROCEEDINGS AND AN ABUSE OF POWER BY THE ASSESSING OFFICER, BOTH STRONGLY DEPRECATED BY THE SUPREME COURT IN CIT VS. KELVINATOR (SUPRA). THE REASONS RECORDED BY THE ASSESSINGOFFICER IN THE PRESENT CASE DO CONFIRM OUR APPREHENSION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS 'REASON TO BELIEVE' VIS - A - VIS AN INTIMATION ISSUED UNDER SECTION 143(1) CAN CAUSE TO THE TAX REGIME. THERE IS NO WHISPER IN THE REASONS RECORDED, OF ANY TANGIBLE MATERIAL WHICH CAME TO THE POSSESSION OF THE ASSESSI NG OFFICER SUBSEQUENT TO THE ISSUE OF THE INTIMATION. IT REFLECTS AN ARBITRARY EXERCISE OF THE POWER CONFERRED UNDER SECTION 147. 3.4 THUS IN AB SENCE OF ANY TANGIBLE MATERIAL , THE REASSESSMENT PROCEEDINGS HAVE BEEN HELD TO BE WITHOUT JURISDICTION BY THE HON BLE HIGH COURT. 3.5 SIMILARLY IN THE JUDGMENT IN THE CASE OF DONALDSON INDIA FILTERS SYSTEMS PRIVATE LIMITED(SUPRA), THE HON BLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER: 28. THE RE - OPENING OF THE ASSESSMENT IN THE CASE AT HAND THROUGH NOTICE UNDER SECTION 148 OF INCOME TAX ACT ISSUED ON 22.03.2010 FAILS TO PASS THE MUSTER ON BOTH THE TESTS. THE SATISFACTION NOTE DOES NOT DISCLOSE THE FOUNDATION OF REASONS TO BELIEVE AS I T VAGUELY REFERS TO THE PERUSAL OF THE RECORDS WITHOUT SPECIFYING THE FRESH TANGIBLE MATERIAL THAT HAD COME TO LIGHT GIVING RISE TO A NEED FOR SUCH ACTION. SINCE THE ASSESSMENT HAD EARLIER BEEN CONCLUDED UNDER SECTION 143(3) BY ORDER DATED 21.09.2007, THE RESTRICTIONS ON THE EXERCISE OF THE POWER OF RE - ASSESSMENT AS CONTAINED 4 ITA NO. 5642/DEL/2013 AY: 2007 - 08 IN THE FIRST PROVISO TO SECTION 147 WOULD INHIBIT FURTHER ACTION IN ABSENCE OF MATERIAL SHOWING DEFAULT BY THE ASSESSEE TO FULLY OR TRULY DISCLOSE. 29. IN THE ABOVE FACTS AND CIRCU MSTANCES, WE CONCUR WITH THE VIEW TAKEN BY THE CIT(A) THAT IT IS A CASE OF IMPERMISSIBLE CHANGE OF OPINION. THE ORDER WHEREBY THE PROCEEDINGS HAVE BEEN RE - OPENED FOR ASSESSMENT UNDER SECTION 147/148 OF INCOME TAX ACT, THUS, IS FOUND TO SUFFER FROM JURISDIC TIONAL ERROR. CONSEQUENTLY, THE PROCEEDINGS TAKEN OUT IN ITS WAKE CANNOT SUSTAIN. 3.6 IN THE ABOVE CASE ALSO THE HON BLE HIGH COURT HAS OBSERVED THAT THE REQUIREMENT OF SECTION 147 ARE NOT SATISFIED WHERE REASONS REFERENCE TO MERELY PERUSAL OF THE RECORDS WITHOUT SPECIFYING ANY FRESH TANGIBLE MATERIAL THAT HAD COME TO LIGHT FOR INITIATING THE REASSESSMENT. 3. 7 WHEN WE ADV ERT TO THE FACTS OF THE CASE IN HAND WE FIND THAT IN THE REASONS RE CORDED BY THE ASSESSING OFFICER, THERE IS N O WHISPER OF ANY FRESH MATERIAL , WHICH IS CLEAR FROM THE REASONS REPRODUCED AS UNDER: REASONS U/S 147/148: - PERUSAL OF THE RECORDS REVEAL THAT THE ASSESSEE CREDITED RS. 170234386/ - IN THE CLOSING STOCK (P&L) ACCOUNT ON ACCOUNT OF (WIP). HOWEVER, AS PER DETAILS FURNISHED BY THE ASSESSEE WORK IN PROGRESS WAS RS. 17,06,49,474/ - . THE DIFFERENCE OF R S. 3,15,088/ - WAS NEEDED TO BE ADDED BACK TO THE INC OME OF THE ASSESSEE. THE MISTAKE RESULTED IN UNDER ASSESSMENT BY RS. 3,15,088/ - . 3.8 THUS, WE FIND THAT THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT HAS BEEN REOPENED WITHIN FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR ONLY ON THE BASIS OF T HE RECORDS ALREADY AVAILABLE WITH THE ASSESSING OFFICER AND WITHOUT ANY FRESH TANGIBLE MATERIAL AND WHICH IS NOT PERMITTED IN VIEW OF THE ABOVE JUDGMENTS OF THE JURISDICTIONAL HIGH COURT. 3.9 IN A RECENT JUDGMENT DATED 18 TH MAY 2016 IN THE CASE OF INDU LATA RANGWALA IN WRIT PETITION (C) 1393/2002 , THE HON BLE J URISDICTIONAL HIGH COURT HAS ANALYZED ALL THE JUDGMENTS AVAILABLE ON THE ISSUE IN DISPUTE AND IN PARA 35.6 OF THE JUDGMENT UPHELD THAT WHERE THE INITIAL ASSESSMENT ORDER IS UNDER SECTION 143(3) OF THE ACT AND IT IS SOUGHT TO REOPEN WITHIN FOUR YEARS FROM THE EXPIRY OF THE RELEVANT ASSESSMENT YEAR, THE AO HAS TO BASE HIS REASON TO BELIEVE THAT 5 ITA NO. 5642/DEL/2013 AY: 2007 - 08 INCOME HAS ESCAPED ASSESSMENT ON SOME FRESH TANGIBLE MATERIAL THAT PROVIDES THE NEXUS OR LINK TO THE FORM ATION OF SUCH BELIEF. 3.10 IN VIEW OF THE ABOVE DISCUSSION, RESPECTFULLY FOLLOWING THE FINDING OF THE HON BLE J URISDICTIONAL HIGH COURT IN THE CASES CITED ABOVE, WE HOLD THAT IN THE CASE IN HAND THE ASSESSMENT COMPLETED UNDER SECTION 143(3), REOPENED UND ER SECTION 147 OF THE ACT IN ABSENCE OF ANY FRESH TANGIBLE MATERIAL IS WITHOUT JURISDICTION AND INVALID IN LAW, ACCORDINGLY, WE QUASH THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE GROUNDS OF APPEAL FROM 1 TO 1.2 ARE ACCORDINGLY ALLOWED. 4. SINCE WE HAVE ALREADY QUASHED THE REASSESSMENT PROCEEDINGS, THE GROUND NO. 2 OF THE ASSES SEE CHALLENGING THE ADDITION ON MERIT IS NOT REQUIRED TO ADJUDICATE UPON. 5. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED. THE DECISION IS PRONOUNCED IN TH E OPEN COURT ON 1 0 T H JUNE , 2016 . S D / - S D / - ( I.C. SUDHIR ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 0 T H JUNE , 2016 . LAPTOP / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI