Reddipalli Srinivas, Kakinada V. The Assistant Commissioner of Income Tax, Central Circle-1, , Visakhapatnam

ITA 616/VIZ/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9353 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 18-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B RAMA KRISHNA
• Keywords: Tax effect; Reassessment proceedings
• Section: 143(3); 133A; 48; 13; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 616 / VIZ /201 8 (ASST. YEAR : 20 1 0 - 11 ) REDDIPALLI SRINIVAS, D.NO. 17 - 11 - 4AB, OPP. : SAI BABA TEMPLE STREET, REVENUE COLONY, SAMABAMURTHY NAGAR, KAKINADA. V S . A CIT, CENTRAL CIRCLE - 1 , VISAKHAPATNAM. PAN NO. AFMPR 7649 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI B. RAMA KRISHNA , SR. DR DATE OF HEARING : 10 / 1 2 /201 9 . DATE OF PRONOUNCEMENT : 10 / 01 /20 20 . O R D E R PER V. DURGA RAO , JUDICIAL MEMBER TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 3 , VISAKHAPATNAM , DATED 24 /0 8 /201 8 FOR THE ASSESSMENT YEAR 20 1 0 - 11 . 2. THER E IS A DELAY OF 32 DAYS IN FILING THIS APPEAL. THE ASSESSEE HAS FILED A NOTARIZED AFFIDAVIT BY EXPLAINING THE DELAY IN FILING THE APPEA L . WE HAVE GONE THROUGH THE AFFIDAVIT AND FIND 2 ITA NO. 616/VIZ/2018 ( REDDIPALLI SRINIVAS ) THAT THERE IS A SUFFICIENT CAUSE TO CONDONE THE DELAY. ACCORDINGLY, DELAY IS CONDONED. 3 . THE GROUNDS RAISED IN THIS APPEAL ARE AS FOLLOWS: - SL.NO. GROUNDS OF APPEAL TAX EFFECT RELATING TO EACH GROUND OF APPEAL 1. THE ORDER OF THE LD. CIT(A) - 3, VISAKHAPATNAM IS CONTRARY TO THE FACTS AND ALSO THE LAW APPLICABLE TO THE FACTS OF THE CASE --- 2 THE NOTICE ISSUED U/S.148 IS NOT IN ACCORDANCE WITH LAW AND IS LIABLE TO BE QUASHED AND CONSEQUENTLY THE ENTIRE RE - ASSESSMENT PROCEEDINGS ARE LAIBEL TO BE CANCELLED AS VOID - AUTHORITIES BELOW - INITIO. --- 3 WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) - 3, VISAKHAPATNAM IS NOT JUSTIFIED IN PARTLY SUSTAINING THE ADDITION OF RS. 56,19,351/ - OUT OF THE TOTAL ADDITION OF RS. 1,03,23,682/ - MADE BY THE ASSESSING OFFICER TOWARDS LABOUR CHARGES 17,07,158/ - 4 ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF APPEAL HEARING. --- TOTAL TAX EFFECT 17,07,158/ - 4 . FACTS OF THE CASE, IN BRIEF, ARE THAT THERE IS A SURVEY OPERATION IN THE CASE OF THE ASSESSEE. BEFORE THE ASSESSING OFFICER , THE ASSESSEE HAS STATED THAT AS PER THE REGISTER MAINTAINED BY HIM, A TOTAL EXPENDITURE INCURRED WAS RS. 11,53,77,094/ - AND NOT AS RS. 9,94,34,061/ - . WHEN T HE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE DIFFERENCE , IT WAS SUBMITTED THAT HE WAS UNEDUCATED AND REGISTERS ARE MAINTAINED BY HIS SUPERVISORS, THEREFORE, AS PER THE REGISTERS MAINTAINED BY ONE OF THE SUPER VISOR , TOTAL EXPENDITURE IS 3 ITA NO. 616/VIZ/2018 ( REDDIPALLI SRINIVAS ) RS. 11,53,77,094/ - . THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE AND AS ADMITTED BEFORE THE SURVEY TEAM, THE TOTAL EXPENDITURE HAS BEEN CONSIDERED ONLY RS.9,94,34,061/ - . THE ASSESSEE HAS BROUGHT A NEW THEORY AND THEREFORE THE TOTAL EXPENDITURE INCURRED BY HIM OF RS.11,53,77,094/ - CANNOT BE CONSIDERED , HENCE ADDITION OF RS. 1,59,53,033/ - WAS MADE , BY ORDER DATED 28/03/2013 U/SEC. 143(3) R.W.S. 153C OF THE ACT. SUBSEQUENTLY, THE ASSESSIN G OFFICER ON 23/03/2017 ISSUED A NOTICE U/SEC. 148 TO THE ASSESSEE FOR REOPENING THE ASSESSMENT ON THE GROUND THAT THERE IS AN ESCAPEMENT OF INCOME BY RECORDING THE FOLLOWING REASONS: - 'DURING THE C OURSE OF SURVEY U/S 133AOF THE I .T . ACT, 1961 ON 24.11.2010 IN THE BUSINESS PREMISES OF THE FIRM M/S VEER ENTERPRISES WHERE THE ASSESSEE SRI REDDIPALLI SRINIVAS IS A MANAGING PARTNER AND MATERIALS PERTAINED TO THE ASSESSEE IS FOUND AND IMPOUNDED AS ANNEXED VEI70 THAT THE ASSESSEE HAS. LABOUR CHARGE PAYABLE OF RS 1 3,56,741/ - WHERE AS SHOWN IN THE BALANCE SHEET AT RS 2 05 22 103/ - FOR THE ASST. YEAR 2010 - 11. IN THE SWORN STATEMENT IN CO URSE OF SURVEY U/S 133A OF THE I .T.ACT, HE WAS ASKED TO RECONCILE BUT COULD NOT RECONCILE RS.1,50,00,000/ - AND ADMITTED TO BE CLAIMED EXCESS OF PAYABLE IN THE RETURN OF INCOME FURTHER ON RECONCILIATION OF THE ABOVE FIGURES IT IS FOUND THAT HE HAS CLAIMED TO BE PAID LABOUR CHARGE OF RS. 9,94,34,0611 - WHEREAS HE CLAIMED RS. 11,53,77,094/ - IN THE RETURN OF INCOME FOR THE ASST. YEAR 2010 - 11. FROM THE ABOVE MATERIALS, FACTS AND FIGURE FOUND IN COURSE OF SURVEY IT IS ASCERTAINED THAT ASSESSEE HAS INFLATED LABOUR CHARGES OF RS. 1,59,43,033/ - (RS.11,53,77,094 RS. 9,94,34,061) FOR THE ASST. YEAR 2010 - 11 IN THE CASE OF ASSESSEE IN D IVIDUAL. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX IN THE HANDS OF THE ASSES S EE HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I . T . ACT, 4 ITA NO. 616/VIZ/2018 ( REDDIPALLI SRINIVAS ) 1961 FOR THE AY 2010 - 11.' ASSESSMENT IS COMPLETED U/SEC. 143(3) R.W.S. 147 OF THE ACT DATED 31/10/2017 . 5 . THE ASSESSEE CHALLENGED THE REOPENING BEFORE THE LD. CIT(A). THE LD. CIT(A) SIMPLY UPHELD THE REOPENING WITHOUT CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND WITHOUT CONSIDERING THE REASONS RECORDED. 6 . ON APPEAL BEFORE US, LD.AR HAS SUBMITTED THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER DATED 23/03/2017 U/SEC. 148 BEYOND THE PERIOD OF FOUR YEARS AND THEREFORE THE ASSESSING OFFICER HAS TO ESTABLISH THAT THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY A LL THE MATERIAL FACTS TO COMPLETE THE ASSESSMENT AND THE REASONS RECORDED , NOWHERE THE ASSESSING OFFICER HAS STATED THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE REASONS GIVEN BY THE ASSESSING OFFICER FOR REOPENING ON ACCOUNT OF PAYMENT MADE TO THE LABOUR CHARGES WHICH HA VE ALREADY BEEN CONSIDERED BY THE ASSESSING OFFICER DATED 28/03/2013 U/SEC. 143(3) R.W.S. 153C OF THE ACT, THEREFORE REOPENING OF THE ASSESSMENT IS CHANG E OF OPINION WHICH IS NOT PERMISSIBLE IN ACCORDANCE WITH LAW AND SUBMITTED THAT NOTICE ISSUED MAY BE QUASHED. 5 ITA NO. 616/VIZ/2018 ( REDDIPALLI SRINIVAS ) 7 . ON THE OTHER HAND, LD.DR STRONGLY SUPPORTED THE NOTICE ISSUED BY THE ASSESSING OFFICER AND ALSO REASONS RECORDED AND SUBMITTED THAT THERE IS AN ESCAPEMENT OF INCOME THEREFORE REOPENING IS VALID. 8 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. 9 . IN THIS CASE, THERE IS A SURVEY AND SUBSEQUENTLY, ASSESSMENT WAS COMPLETED U/SEC. 143(3) R.W.S. 153C DATED 23/03/2017 ON ACCOUNT OF DIFFERENCE OF LABOUR CHARGES AMOUNTING TO RS.1,59,53,033/ - THIS ASPECT WAS DULY CONSIDERED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. NOW THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY ISSUING THE REASONS. FROM THE READING OF THE ABOVE REASONS , THE ASSESSING OFFICER NOWHERE SAID THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE NOT ONLY THAT WHAT IS THE NEW MATERIAL CAME TO THE NOTICE OF THE ASSESSING OFFICER FOR REOPENING BEYOND THE FOUR YEA RS ALSO NOT MENTIONED. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT ONCE THE ASSESSING OFFICER WANT TO REOPEN THE ASSESSMENT BEYOND THE FOUR YEARS, HE HAS TO SATISFY THE CONDITIONS LAID DOWN BY THE PROVISO TO SECTION 147 OF THE ACT. FOR THE SAKE OF CONVENIENCE, PROVISO TO SECTION 147 READS AS UNDER: - 6 ITA NO. 616/VIZ/2018 ( REDDIPALLI SRINIVAS ) PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB - SECTION(3) OF SECTION 143 OR THIS SECTION H AS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY R EASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB - SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR: 10 . FROM THE ABOVE , IT IS VERY CLEAR THAT IT IS THE DUTY OF THE ASSESSING OFFICER TO ESTABLISH THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS TO COMPLETE THE ASSESSM ENT , BUT NOWHERE THE ASSESSING OFFICER HAS STATED THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE. THAT APART, NOWHERE IN THE REASONS RECORDED WHAT IS THE NEW MATERIAL FACT HAS COME TO THE NOTICE OF THE ASSESSING OFFICER IN RESPECT OF ESCAPEMENT OF INCOME. THE SAME ASPECT OF DIFFERENCE OF LABOUR PAYMENTS WHICH HAS ALREADY BEEN CONSIDERED BY ORDE R DATED 28/03/2013 , THE VERY SAME ASSESSMENT IF HE WANTS TO REOPEN AFTER FOUR YE ARS WHICH IS NOT PERMISSIBLE IN ACCORDANCE WITH LAW . 1 1 . IN THE CASE OF SADBHAV E NGINEERING LTD. VS. DCIT IN S PECIAL C IVIL A PPLICATION NO. 5846 / 2010 , THE HON'BLE GUJARAT HIGH COURT HAS HELD THAT FOR THE PURPOSE OF INVOKING SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE INCOME CHARGEABLE TO TAX SHOULD HAVE ESCAPED ASSESSMENT , 7 ITA NO. 616/VIZ/2018 ( REDDIPALLI SRINIVAS ) INTER ALIA BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECES SARY TO COMPLETE THE AS SESSMENT . IN THE ASSESSMENT ORDER, NOWHERE IT IS INDICATE D THAT THE ASSESSMENTS ARE SOUGHT TO BE REOPENED BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT S RELEVANT TO THE ASSESSM ENT YEAR, THUS, INITIATION OF THE PROCEEDINGS U/SEC. 147 BY ISSUING NOTICE U/SEC. 148 AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS IS BAD AND CANNOT SUSTAIN. 1 2 . IN THE PRESENT CASE ALSO, FOR THE REASONS RECORDED BY THE ASSESSING OFFICER U/SEC. 1 48 NOWHERE HE HAS STATED THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS TO COMPLETE THE ASSESSMENT. 13 . IN THE CASE OF CIT VS. ELGI FINANCE LTD., [ ( 2006 ) 286 ITR 674 (MAD) ] , THE HON'BLE MADRAS HIGH COURT HAS HELD THAT AS PER PROVISO TO SECTION 147 IS CONCERNED, THE LAW PRESCRIBES A PERIOD OF FOUR YEARS TO INITIATE REASSESSMENT PROCEEDINGS, UNLESS THE INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT WAS MADE OUT A S A RESULT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT MADE OUT THERE IS A FAILURE ON THE PART OF THE ASSESSEE . 8 ITA NO. 616/VIZ/2018 ( REDDIPALLI SRINIVAS ) 14 . IN THE CASE OF FENNER (INDIA) LTD. VS DCIT (241 ITR 672) THE HON'BLE MADRAS HIGH COURT HAS HELD THAT IN ORDER TO REOPEN THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER MUST NECESSARILY RECORD NOT ONLY HIS REAS ONABLE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT BUT ALSO THE DEFAULT OR FAILURE COMMITTED BY THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS . ISSUANCE OF N OTICE U/SEC. 148 AFTER EXPIRY OF FOUR YEARS CANNOT BE SUSTAINED AS ESCAPEMENT OF INCOME , IF ANY IS NOT ON ACCOUNT OF ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIAL FACTS FULLY AND TRULY. IN THE PRESENT CASE, NO NEW MATERIAL FACT HAS BEEN CONSIDERED BY THE ASSESSING OFFICER , ONLY ON THE BASIS OF SUBMISSIONS EARLIER, THE ASS ESSING OFFICER SOUGHT TO REOPEN THE ASSESSMENT. THE ASSESSING OFFICER NOT RECORDED ANY REASONS THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS FULLY AND TRULY . 15 . RESPECTFULLY FOLLOWING THE ABOVE REFERRED TO PRECEDENTS, WE HOLD THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER U/SEC. 148 IS BEYOND FOUR YEARS IS NOT VALID AND THEREFORE SAME IS HEREBY QUASH ED . 9 ITA NO. 616/VIZ/2018 ( REDDIPALLI SRINIVAS ) 16 IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 0 TH DAY OF JANUARY , 2020 . SD / - S D / - (D.S. SUNDER SINGH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 0 T H JANUARY , 20 20 . VR/ - COPY TO: 1. THE ASSESSEE REDDIPALLI SRINIVAS, D.NO. 17 - 11 - 4AB, OPP.:SAI BABA TEMPLE STREET, REVENUE COLONY, SAMABAMURTHY NAGAR, KAKINADA. 2. THE REVENUE ACIT, CENTRAL CIRCLE - 1, VISAKHAPATNAM. 3. THE PR. CIT (CENTRAL), VISAKHAPATNAM. 4. THE CIT(A) - 3, VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.