Binayak Sahu, V. ITO, Berhampur

ITA 60/CTK/2014

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 101338 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUVENDU DUTTA
• Keywords: Reopening of assessment; Opportunity of being heard; Tangible material; Assessment record; Reason to believe; Reassessment proceedings
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO.60/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 BINAYAK SAHU, CHINGUDIGHAL, PUROSHOTTAMPUR,DIST: GANJAM VS. ITO - 1, BERHAMPUR PAN/GIR NO. AMEPB 8274 H (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI SUNIL MISHRA, AR REVENUE BY : SHRI SUVENDU DUTTA , DR DATE OF HEARING : 1 7 /11 / 2016 DATE OF PRONOUNCEMENT : 17 /11 / 2016 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGA INST THE ORDER OF CIT(A) - BERHAMPUR , DATED 20.11.2013 , FOR THE ASSESSMENT YEAR 2009 - 2010 . 2. IN GROUND NOS.1 TO 3 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT LD CIT(A) ERRED IN UPHOLDING THE NOTICE U/S.148 OF THE ACT. 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE 2 ITA NO.60/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 ASSESSEE IS A CONTRACTOR. DURING THE YEAR UNDER APPEAL, HE DISCLOSED CONTRACT RECEIPTS OF RS.1,48,85,570/ - IN THE RETURN OF INCOME FILED. THEREAFTER, THE ASSESSING OFFICER FOUND THAT IN FORM 26AS, THE GROSS CONTRACT BILL AMOUNT WAS RS.2,50,61,003/ - . THEREFORE, HE ISSUED NOTICE U/S.148(2) OF THE ACT FOR REOPENING OF THE ASSESSMENT ON THE GROUND THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT AND THEREAFTER, THE ASSESSING OFFICER PASSED REASSESSMENT ORDER U/S.144/147 ON 19..12.2012 AND ESTIMATED THE INCOME @ 8% ON GROSS CONTRACT RECEIPT OF RS.2,50,61,003/ - , WHICH AMOUNTED TO RS.20,04,880/ - . 4. THE ASSESSEE FILED APPEAL AGAINST THIS ORDER OF THE ASSESSING OFFICER AND CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT BEFORE THE LD CIT(A). THE LD CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND THE ASSESSING OFFICER IN THE REMAND REPORT WHICH IS QUOTED IN THE ORDER OF THE LD CIT(A) IN PARA 4.2.1 STATED AS UNDER: DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE INCOME OF THE ASSESSEE WAS ESTIMATED @ 8% OF GROSS RECEIPTS OF RS.2,50,61,003/ - WHICH WAS REFLECTED IN FORM 26AS. ACCORDINGLY, THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT RS.20,06,730/ - . DURING TH E APPEAL PROCEEDINGS THE APPELLANT HAS FILED A COPY OF THE 26AS STATEMENT WHICH SHOWS THAT THE TOTAL AMOUNT CREDITED TO THE APPELLANT'S ACCOUNT IS RS. 1,48,85,570/ - . TO EXAMINE THE CONTENTION OF THE ASSESSEE RAISED DUR ING THE APPEAL PROCEEDINGS, AN OPPORTUNITY OF BEING HEARD ON 03 - 09 - 2013 WAS GIVEN VIDE THIS OFFICE LETTER DTD.21 - 08 - 2013 TO PRODUCE THE FOLLOWING DOCUMENTS/PAPERS. I) DETAILS OF PAYMENT RECEIVED FROM M/S IRVCL INFRASTRUCTURE & PROJECT LTD., WITH SUPPORTING DOCUMENTS/EVIDENCES. 3 ITA NO.60/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 II) EXPLANATION IN CONNECTION WITH DIFFERENCE OF GROSS RECEIPT FROM CONTRACT WORKS AS PER 26AS AND SHOWN IN THE RETURN OF INCOME. III) ORIGINAL TD5 CERTIFICATES. THE ASSESSEE HAD REQUESTED FOR TIME AND THE CASE WAS POSTED TO 26 - 09 - 2013. ON 07 - 10 - 2013 THE A/R OF THE ASSESSEE HAS SUBMITTED TDS CERTIFICATE BREAK - UP DETAILS AND ORIGINAL TDS CERTIFICATES ISSUED BY M/S IRVCL INFRASTRUCTURE & PROJECT LTD., HYDERABAD, FOR THE FINANCIAL YEAR 2008 - 09 RELEVANT TO AST.YR.2009 - 10. ON PERUSAL OF TDS CERTIFICATES AS WELL AS DETAILS SUBMITTED THAT TOTAL AMOUNT OF RS.1,48,85,570/ - HAS BEEN PAID/CREDITED TO THE ACCOUNT OF THE ASSESSEE AGAINST WHICH TDS OF RS. 1,68,655/ - HAS BEEN DEDU CTED. A LETTER WAS ALSO ISSUED TO M/S IRVCL INFRASTRUCTURE AND PROJECT LTD., HYDERABAD, THE DEDUCTOR ON 21 - 08 - 2013 FOR FURNISHING THE DETAILS OF PAYMENT CREDITED INTO THE ACCOUNT OF SHRL BINAYAK SAHU AND TAX DEDUCTED AT SOURCE THEREFROM. THE DEDUCTOR VIDE HIS LETTER DTD.03 - 09 - 2013 HAS SUBMITTED THE DETAILS OF PAYMENT CREDITED AND TDS IN RESPECT OF SHRI SAHU FOR THE FIN.YR.2008 - 09 THAT THE TOTAL AMOUNT OF RS.1,48,85,570/ - HAS BEEN PAID/CREDITED AND A SUM OF RS. 1,68,655/ - HAS BEEN DEDUCTED TOWARDS TDS . . 5. HOWEVER, EVEN AFTER THE ABOVE QUOTED REMAND REPORT RECEIVED FROM THE ASSESSING OFFICER, THE LD CIT(A) UPHELD THE REOPENING OF THE ASSESSMENT BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE MATTER AND GONE THROUGH THE ASSESSMENT RECORDS. AS IS CLEAR FROM THE DETAILS AVAILABLE ON RECORD, THE 26AS DETAILS AS DOWNLOADED FROM THE SYSTEM CLEARLY SHOWED THE TOTAL TURNOVER AT RS.2,50,61,003/ - . THE AO IN FACT HAS WORKED OUT A PAGE - WISE TOTAL AND CONSIDERING THE NEGATIVE AMOUNTS FROM SI. NO.55 TO 73 TOTALING TO RS.9,76,157/ - , HE FOUND THAT THE TOTAL AMOUNT WORKS OUT TO RS.2,50,61,003/ - . THIS IS THE BASIS ON WHICH THE ASSESSMENT WAS MADE. THE ID. A/R HAS ARGUED THAT NOW THAT THE AO HAS ACCEPTED THE TOTAL TURNOVER AT RS. 1,48,85,570/ - , THE BASIS OF REOPENING NO LONGER SUSTAINS AND THEREFORE, THE ASSESSMENT VOID. A SIMILAR ISSUE AROSE IN APPEAL IN CASE OF SHRI SUNIL KUMAR PANDA. IN THE SAID ORDER ADJUDICATING SUCH A CONTENTION, I HAD HELD AS UNDER. 4.3 I HAVE CAREFULLY CONSIDERED THE MATTER. DURING THE COURSE OF THE HEARING, AS WELL AS IN THE WRITTEN SUBMISSION THE LD. A/R HAS 4 ITA NO.60/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 CHALLENGED THAT THE SINCE THE BASIS OF REOPENING DOES NOT SURVIVE AND NO ADDITION HAS BEEN MA DE ON ACCOUNT OF REASONS WHICH LED TO REOPENING IN VIEW OF THE DECISIONS OF HON'BLE DELHI HIGH COURT IN RANBAXY LABORATORIES VS. CIT 336 ITR 136(DEL), THE AO IS PRECLUDED FROM MAKING ANY ADDITION TO THE RETURNED INCOME OF THE ASSESSEE. I AM UNABLE TO AGREE WITH SUCH CONTENTIONS OF THE LD. A/R FOR THE REASONS DISCUSSED IN THE FOLLOWING PARAGRAPHS. .3.1 THE AO REOPENED THE ASSESSMENT BECAUSE BASED ON 26AS STATEMENT HE HAD REASON TO BELIEVE THAT THE TURNOVER DISCLOSED BY THE ASSESSEE IS LESS THAN ACTUAL. THE FACT THAT THE 26AS STATEMENT TILL THE COMPLETION OF THE ASSESSMENT DID DISCLOSE A TURNOVER OF RS.8 8,52,292/ - AS AGAINST A TURNOVER OF RS. 75,56,168/ - IS NOT IN DISPUTE. ADMITTEDLY, THE 26AS STATEMENT WAS SUBSEQUENTLY REVISED AND ON THE BASIS OF WHICH THE AO IN THE REMAND REPORT HAS ACCEPTED THAT THE TURNOVER IS RS. 75,56,168/ - . HOWEVER, AT THE TIME OF REOPENING, AO CANNOT BE FAULTED FOR FORMING THE BELIEF AS HE DID BECAUSE HE HAD A VALID AND RELEVANT INFORMATION BY WAY DF26AS STATEMENT IN HIS POSSESSION. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN REYMOND WOOLEN MILLS LTD., VS. ITO(1999) 236 ITR 34 (SC) THAT IN DETERMINING WHETHER COMMENCEMENT OF REASSESSMENT PROCEEDINGS WAS VALID, IT HAS ONLY TO BE SEEN WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERI AL IS NOT A THING TO BE CONSIDERED AT THIS STAGE. IN VIEW OF THE ABOVE POSITION OF LAW PRONOUNCED BY THE HON'BLE SUPREME COURT SINCE IN THE INSTANT CASE THE AO HAD A TANGIBLE MATERIAL IN THE FORM OF 26AS STATEMENT FROM WHICH ANY REASONABLE PERSON WOULD HAV E FORMED A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT, IT IS HELD THAT THE REOPENING IS LEGAL AND THE AO VALIDLY ASSUMED THE JURISDICTION. THE GROUNDS CHALLENGING THE LEGALITY OF THE REOPENING ARE ACCORDINGLY DISMISSED. 6. BEFORE ME, IT IS THE SUBMISSION OF LD A.R. OF THE ASSESSEE THAT SINCE THE ASSESSING OFFICER IN THE REMAND REPORT ACCEPTED THAT THE CONTRACT RECEIPT SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME AT RS.1,48,85,570/ - WAS CORRECT THEN THE VERY BASIS ON WHICH T HE ASSESSING OFFICER FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT NOT BEING THERE, THE 5 ITA NO.60/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 NOTICE U/S.148 IS BAD IN LAW. HE RELIED ON THE DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD., 331 ITR 236 (BOM) AND ARGUED THAT IT HAS BEEN HELD BY THE HONBLE HIGH COURT THAT UNTIL AND UNLESS THE INCOME IN RESPECT OF WHICH THE REASONS HAVE BEEN RECORDED IS ADDED, THE OTHER INCOME CANNOT BE ADDED AND THE ASSESSMENT FRAMED IS ILLEGAL AND BAD IN LAW. 7. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDER OF THE LD CIT(A). 8. I FIND THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JET AIRWAYS (I) LTD (SUPRA) IN PARAS 21 & 22 HAS HELD AS UNDER: 21. EXPLANATION 3 LIFTS THE EMBARGO, WHICH WAS INSERTED BY JUDICIAL INTER PRETATION, ON THE MAKING OF AN ASSESSMENT OR REASSESSMENT ON GROUNDS OTHER THAN THOSE ON THE BASIS OF WHICH A NOTICE WAS ISSUED UNDER S. 148 SETTING OUT THE REASONS FOR THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THOSE JUDICIAL DECISIONS HAD HELD THAT W HEN THE ASSESSMENT WAS SOUGHT TO BE REOPENED ON THE GROUND THAT INCOME HAD ESCAPED ASSESSMENT ON A CERTAIN ISSUE, THE AO COULD NOT MAKE AN ASSESSMENT OR REASSESSMENT ON ANOTHER ISSUE WHICH CAME TO HIS NOTICE DURING THE PROCEEDINGS. THIS INTERPRETATION WILL NO LONGER HOLD THE FIELD AFTER THE INSERTION OF EXPLN. 3 BY THE FINANCE ACT (NO. 2) OF 2009. HOWEVER, EXPLN. 3 DOES NOT AND CANNOT OVERRIDE THE NECESSITY OF FULFILLING THE CONDITIONS SET OUT IN THE SUBSTANTIVE PART OF S. 147. AN EXPLANATION TO A STATUTORY PROVISION IS INTENDED TO EXPLAIN ITS CONTENTS AND CANNOT BE CONSTRUED TO OVERRIDE IT OR RENDER THE SUBSTANCE AND CORE NUGATORY. SEC. 147 HAS THIS EFFECT THAT THE AO HAS TO ASSESS OR REASSESS THE INCOME ('SUCH INCOME') WHICH ESCAPED ASSESSMENT AND WHICH WA S THE BASIS OF THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH, COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS. HOWEVER, IF AFTER ISSUING A NOTICE UNDER S. 148, HE ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE 6 ITA NO.60/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME. IF HE INTENDS TO DO SO, A FRESH NOTICE UNDER S. 148 WOULD BE NECESSARY, THE LEGALITY OF WHICH WOULD BE TESTED IN THE EVENT OF A CHALLENGE BY THE ASSESSEE. 22. WE HAVE APPROACHED THE ISSUE OF INTERPRETATION THAT HAS ARISEN FOR DECISION IN THESE APPEALS, BOTH AS A MATTER OF FIRST PRINCIPLE, BASED ON THE LANGUAGE USED IN S. 147(1) AND ON THE BASIS OF THE PRECEDENT ON THE SUBJECT. WE AGREE WITH THE SUBMISSIONS WHICH HAS BEEN URGED ON BEHALF OF THE ASSESSEE THAT S. 147(1) AS IT STANDS POSTULATES THAT UPON THE FOR MATION OF A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, THE AO MAY ASSESS OR REASSESS SUCH INCOME 'AND ALSO' ANY OTHER INCOME CHARGEABLE TO TAX WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURING THE PROCEEDING S AS HAVING ESCAPED ASSESSMENT. THE WORDS 'AND ALSO' ARE USED IN A CUMULATIVE AND CONJUNCTIVE SENSE. TO READ THESE WORDS AS BEING IN THE ALTERNATIVE WOULD BE TO REWRITE THE LANGUAGE USED BY PARLIAMENT. OUR VIEW HAS BEEN SUPPORTED BY THE BACKGROUND WHICH LE D TO THE INSERTION OF EXPLN. 3 TO S. 147. PARLIAMENT MUST BE REGARDED AS BEING AWARE OF THE INTERPRETATION THAT WAS PLACED ON THE WORDS 'AND ALSO' BY THE RAJASTHAN HIGH COURT IN SHRI RAM SINGH (SUPRA). PARLIAMENT HAS NOT TAKEN AWAY THE BASIS OF THAT DECISI ON. WHILE IT IS OPEN TO PARLIAMENT, HAVING REGARD TO THE PLENITUDE OF ITS LEGISLATIVE POWERS TO DO SO, THE PROVISIONS OF S. 147(1) AS THEY STOOD AFTER THE AMENDMENT OF 1ST APRIL, 1989 CONTINUE TO HOLD THE FIELD. 9. FURTHER, THIS BENCH OF THE TRIBUNAL IN THE CASE OF SAUBHAGYA MANJARI MOHANTY VS DCIT IN ITA NO.316/CTK/2012 FOR A.Y. 2006 - 07 ORDER DATED 22.4.2014 HAS HELD THAT IT IS ONLY WHEN THERE IS SOME ADDITION ON THE GROUND ON WHICH REASSESSMENT HAS BEEN INITIATED THAT THE ASSESSING OFFICER CAN MAKE AD DITION ON ANY OTHER GROUND ON THE BASIS OF WHICH INCOME MAY HAVE ESCAPED ASSESSMENT. RESPECTFULLY FOLLOWING THE ABOVE QUOTED 7 ITA NO.60/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 DECISIONS, I HOLD THAT IN THE INSTANT CASE, THE REOPENING OF ASSESSMENT WAS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE C ONTRACT REC EIPTS SHOWN IN FORM 26AS WAS RS .2,50,61,003/ - WHEREAS THE ASSESSEE HAS SHOWN CONTRACT RECEIPTS OF RS.1,48,85,570/ - IN THE RETURN OF INCOME AND, THEREFORE, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON THE BALANCE AMOUNT OF RS.1,01,75,433/ - . I ALSO FIND FROM THE REMAND REPORT OF THE ASSESSING OFFICER QUOTED BY THE LD CIT(A) IN HIS ORDER THAT THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT THE CONTRACT RECEIPT SHOWN BY THE ASSESSEE IN THE ORIGINAL RETURN OF INCOME AT RS.1,48,85,570/ - WAS COR RECT. THUS, THE VERY BASIS OF THE ASSESSING OFFICER OF FORMING THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON THE BASIS OF WHICH NOTICE U/S.148(2) WAS ISSUED ON THE ASSESSEE DOES NOT SURVIVE. THEREFORE, THE NOTICE U/S.148(2) ALSO DOES NOT SURVI VE AND IS BAD IN LAW. HENCE , THE REASSESSMENT ORDER MADE ON 19.12.2012 IS ALSO BAD IN LAW. ACCORDINGLY, I CANCEL THE SAID REASSESSMENT ORDER AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 10. AS I HAVE CANCELLED THE REASSESSMENT ORDER DATED 19.12.2012, THE OTHER GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ON MERITS HAVE BECOME INFRUCTUOUS AND HENCE, DISMISSED. 8 ITA NO.60/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 1 7 /11 /2016 IN THE PRESENCE OF PA RTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 17 /11 /2016 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK 1. THE APPELLANT : BINAYAK SAHU, CHINGUDIGHAL, PUROSHOTTAMPUR,DIST: GANJAM 2. THE RESPONDENT. ITO - 1, BERHAMPUR 3. THE CIT(A) , BERHAMPUR 4. CIT , BHUBANESWAR. 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//