The Income Tax Office, Ward-1, Bhuj V. Shri Rajendrasinh A. Jadeja, Bhuj

ITA 74/RJT/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1192 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 02-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MJ RANPURA
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings; TDS; Set aside
• Section: 40A(3); 143(3); 40(a)(ia); 194C; 147; 148

Judgement Text

: : IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.74/RJT/2013 / ASSESSMENT YEAR: 2005-06 INCOME TAX OFFICER, WARD-1, BHUJ. VS. SHRI RAJENDRASINH A. JADEJA, PROP. PRANAV ROADLINES, BHUJ-KUTCH. [PAN: ADSPJ 8286C] ( / APPELLANT) ( /RESPONDENT) /ASSESSEE BY : SHRI M.J. RANPURA, A.R /REVENUE BY : SHRI JITENDER KUMAR, CIT(DR) /DATE OF HEARING : 22-11-2018 / DATE OF PRONOUNCEMENT : 26-11-2018 / ORDER PER C.M. GARG, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, RAJKOT (C IT(A) FOR SHORT) DATED 26.11.2012 FOR THE ASSESSMENT YEAR (A.Y) 2005 -06. 2. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLOW S: 1. THE HONBLE CIT(A) HAS ERRED IN LOW AND ON FACT S, IN DELETING THE ADDITION OF RS. 4,04,27,421/- AND RS. 1,53,31,244/- MADE ON FOLLOWING POINTS. A) THE PROCEEDINGS INITIATED U/S. 147 OF THE ACT WA S BAD IN LAW AND DIRECTED TO BE QUASHED. 2 ITA NO.74/RJT/2013 (A.Y: 2005-06) SHRI RAJENDRASINH A. JADEJA B) DISALLOWANCE OF TRANSPORTATION EXPENSES OF RS. 4 ,04,27,421/- U/S. 40(A)(IA) OF THE I.T. ACT. C) DISALLOWANCE OF TRANSPORTATION EXPENSES OF RS. 1 ,53,31,244/- BEING 20% OF RS. 7,66,56,222/- U/S. 40A(3) OF THE I .T. ACT. 2. THE HONBLE CIT(A) OUGHT TO HAVE UPHELD THE ORD ER OF THE ASSESSING OFFICER. 3. IT IS THEREFORE PRAYED THAT THE ORDER OF THE H ONBLE CIT-(A) BE SET ASIDE TO THE ABOVE EXTENT AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE T RIBUNAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN LOW AND ON FACTS, IN DELETING THE ADDITION OF RS . 4,04,27,421/- AND RS. 1,53,31,244/- MADE ON THE LEGAL GROUND THAT THE RE- ASSESSMENT PROCEEDINGS INITIATED U/S. 147 OF THE INCOME TAX AC T, 1961 (IN SHORT THE ACT) WAS BAD IN LAW AND DIRECTED TO BE QUASHED. T HE LD. DR SUBMITTED THAT FROM THE REASONS RECORDED BY THE AO, AS REPROD UCED AT PAGE 4 OF THE FIRST APPELLATE ORDER, IT IS DISCERNABLE THAT THERE WAS NO NEW TANGIBLE MATERIAL WITH THE AO AS THE TIME OF INITIATING REAS SESSMENT PROCEEDINGS THEREFORE, THE LD. CIT(A) WAS RIGHT IN QUASHING THE REASSESSMENT ORDER BEING BAD IN LAW. 4. THE LD. DR ALSO SUBMITTED THAT THE FINDINGS ARRI VED BY THE LD. CIT(A) IN PARA 5.1 TO 5.5 ARE NOT CORRECT AND SUSTAINABLE AS AT THE TIME OF INITIATION OF REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT AND ISSUANCE OF 3 ITA NO.74/RJT/2013 (A.Y: 2005-06) SHRI RAJENDRASINH A. JADEJA NOTICE U/S. 148 OF THE ACT ONLY ESCAPEMENT OF INCO ME HAS TO BE SEEN AND SATISFACTION OF THE AO IN THIS REGARD IS SUFFICE TO JUSTIFY THE INITIATION OF REASSESSMENT PROCEEDINGS AND ISSUANCE OF NOTICE THE REFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. THE LD. AR PLACING RELIANCE ON THE DECISION OF HONBLE HIGH CO URT OF DELHI N THE CASE OF CONSOLIDATED PHOTO & FINVEST LTD. VS. ACIT REPORTED IN 151 TAXMAN 41 (DEL.) AND SUBMITTED THAT THE AO HAVING INDICATED THE BAS IS ON WHICH INCOME EXIGIBLE TO TAX HAS IN HIS OPINION ESCAPED A SSESSMENT WHICH WAS ADMITTEDLY NOT ADDRESSED IN THE ASSESSMENT ORDER, I T CANNOT BE SAID THAT THE ACTION OF REOPENING OF ASSESSMENT IS BASED ON C HANGE OF OPINION. 5. REPLYING TO THE ABOVE, THE LD. AR STRONGLY SUPPO RTED THE FIRST APPELLATE ORDER AND SUBMITTED THAT FROM THE REASONS RECORDED, IT IS CLEARLY DISCERNABLE THAT THERE WAS NO NEW TANGIBLE MATERIAL WITH THE AO, WHICH WAS NOT WITH HIM AT THE TIME OF FRAMING ORIGINAL AS SESSMENT ORDER, THEREFORE IT IS A CLEAR CASE OF CHANGE OF OPINION O NLY ON THE BASIS OF AMENDMENT IN THE PROVISION OF S. 40A(3) OF THE ACT THEREFORE, THE SAME IS NOT SUSTAINABLE AND WAS RIGHTLY QUASHED BY THE LD. CIT(A) BEING BAD IN LAW. 6. THE LD. DR ALSO DREW OUR ATTENTION TOWARDS RELEV ANT PARAS 5.1 TO 5.5 OF THE FIRST APPELLATE ORDER AND SUBMITTED THAT IN ABSENCE OF ANY FRESH MATERIAL THE REASSESSMENT OF ORIGINAL ASSESSMENT TA NTAMOUNT TO CHANGE 4 ITA NO.74/RJT/2013 (A.Y: 2005-06) SHRI RAJENDRASINH A. JADEJA OF OPINION, WHICH IS NOT PERMISSIBLE U/S. 147/148 O F THE ACT THEREFORE, THE AO WAS NOT IN REOPENING THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT. 7. PLACING RELIANCE ON THE DECISION OF HONBLE DELH I HIGH COURT (FULL BENCH) IN THE CASE OF CIT VS. USHA INTERNATIONAL LTD. 348 ITR 485 (DEL.), THE LD. AR SUBMITTED THAT WHERE THE ASSESSEE HAS FU RNISHED FULL AND TRUE PARTICULARS AT THE TIME OF ORIGINAL ASSESSMENT WITH REFERENCE TO THE INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT, THE AO, EVEN WI THIN 4 YEARS FROM THE END OF THE AY, COULD NOT BE SAID TO HAVE FORMED AN OPINION AND TO HAVE NO JURISDICTION TO REOPEN THE ASSESSMENT EVEN THOUGH HE HAD NOT RAISED ANY QUERY WITH RESPECT TO THE ISSUE. THE LD. AR SUBMITTED THAT IN THE PRESENT CASE THE ASSESSMENT OF AY 2005-06 WAS R EOPENED BY WAY OF ISSUING NOTICE U/S. 148 OF THE ACT ON 22.06.2010 I. E., BEYOND FOUR YEARS WITHOUT ANY ALLEGATION REGARDING FAILURE OF ASSESSE E IN FURNISHING TRUE AND FULL PARTICULARS OF INCOME THEREFORE, THE LD. CIT(A ) WAS RIGHT IN QUASHING THE ASSESSMENT ORDER BEING BAD IN LAW AND INVALID. 8. IN THE PRESENT CASE, THE AO RECORDED FOLLOWING R EASONS FOR INITIATION OF REASSESSMENT PROCEEDINGS AND ISSUANCE OF NOTICE U/S. 148 OF THE ACT ON 22.06.2010, WHICH ARE BEING REPRODUCED BELOW FOR THE SAKE OF COMPLETENESS OF THIS ORDER: (A) THE ASSESSEE DURING THE A. Y. 2005-06 RELEVANT TO P.Y 2004 - 05 HAS DEBITED TO P&L ALC. RS. 11,71,92,053/- ON AC COUNT OF 5 ITA NO.74/RJT/2013 (A.Y: 2005-06) SHRI RAJENDRASINH A. JADEJA TRANSPORTATION CHARGES OUT OF THAT RS.4,04,27,421/- WERE PAID TO VARIOUS PARTIES ON WHICH TAX AT SOURCE WERE REQUIRE D TO BE DEDUCTED AS ALL PAYMENTS TO ABOVE PARTIES WERE EXCEEDING RUPEES TWENTY THOUSAND. HOWEVER AS PER CLAUSE 27 OF 3CD REPORT, THE AUDITOR REPORTED THAT NO TDS WAS DEDUCTED ON ANY PA YMENT. AS PER PROVISION OF SECTION 194C OF THE ACT, TDS WAS REQUIRED TO BE MADE ON ABOVE PAYMENTS. THUS PROVISIONS OF SECTION 194C OF THE IT ACT WERE VIOLATED. THEREFORE PAYMENT AMOUNTING T O RS . 4,04,27 , 421/- REQUIRED TO BE DISALLOWED UNDER SECTION 40(A) (IA) OF THE ACT WERE NOT DISALLOWED WHICH RESULTED IN UNDER ASSESSMENT OF INCOME OF RS. 4,04,27,421/-. (B) THE ASSESSEE HAD DEBITED P&L A/C . FOR RS. 11,71,92,053/- ON ACCOUNT OF TRANSPORTATION CHARGES OUT OF THAT RS. 7,67,64,632/- WAS PAID IN CASH AND RS.7,66,56,222/- WAS EXCEEDING RS. 20,000/. AS PER THE PROVISION OF SECTION 40A(3) OF THE ACT, RS. 1,53,31 , 244/- (20% OF RS. 7,66,56,222/-) WAS REQUIRED TO BE DISALLOWED AND ADDED BACK IN ASSESSEE'S INCOME. 9. FROM THE RELEVANT PART OF THE FIRST APPELLATE OR DER, WE OBSERVE THAT THE LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE O N TWO COUNTS I.E., 1) THERE WAS NO NEW TANGIBLE MATERIAL WITH THE AO, WHI CH WAS NOT WITH HIM AT THE TIME OF ORIGINAL ASSESSMENT THEREFORE, MERE CHANGE OF OPINION CANNOT JUSTIFY REASSESSMENT PROCEEDINGS AND ORDERS SPECIALLY WHEN THE ORIGINAL ASSESSMENT HAS BEEN FARMED U/S. 143(3) OF THE ACT. FROM THE REASONS RECORDED BY THE AO, AS REPRODUCED HEREIN AB OVE, WE CLEARLY OBSERVE THAT THERE WAS NO FRESH OR NEW TANGIBLE MAT ERIAL WITH THE AO, WHICH WAS NOT WITH HIM AT THE TIME OF ORIGINAL REAS SESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT AND THE INITIATION OF REASSE SSMENT BEYOND FOUR YEARS HAS BEEN MADE WITHOUT ANY TANGIBLE MATERIAL ONLY ON THE BASIS OF AUDIT 6 ITA NO.74/RJT/2013 (A.Y: 2005-06) SHRI RAJENDRASINH A. JADEJA REPORT AND THUS, IT IS A CLEAR CASE OF CHANGE OF OP INION ON THE SAME MATERIAL BEYOND FOUR YEARS. 10. THE SECOND BASIS FOR TREATING THE REASSESSMENT PROCEEDINGS AND ORDERS AS BAD IN LAW IS NON-COMPLIANCE OF FIRST PRO VISO TO S. 147 OF THE ACT. UNDISPUTEDLY AND ADMITTEDLY, THE INITIATION OF REAS SESSMENT PROCEEDINGS FOR AY 2005-06 WAS DONE BY THE AO BY WAY OF RECORDI NG REASONS AND ISSUING NOTICE U/S. 148 OF THE ACT ON 22.06.2010 I. E., BEYOND FOUR YEARS OF COMPLETION OF RELEVANT ASSESSMENT YEAR. AS PER REQU IREMENT OF FIRST PROVISO TO S. 147 OF THE ACT FOR INITIATION OF REAS SESSMENT PROCEEDINGS REGARDING ASSESSMENT ORDER FRAMED U/S. 143(3) OF TH E ACT, BEYOND FOUR YEARS, IT IS REQUIRED FROM THE AO TO RECORD A CLEAR FINDING THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR OTHERWISE REOPENING OF ASSESSMENT ORDER FRAMED UNDE R SCRUTINY U/S. 143(3) OF THE ACT CANNOT BE MADE. 11. IN THE PRESENT CASE, THE INITIATION OF REASSESS MENT PROCEEDINGS OF ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT HAS BEEN MADE BEYOND FOUR YEARS BY ISSUING NOTICE U/S. 148 OF THE ACT ON 22.06.2010 WITHOUT ANY ALLEGATION THAT THE INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON TH E PART OF THE ASSESSEE 7 ITA NO.74/RJT/2013 (A.Y: 2005-06) SHRI RAJENDRASINH A. JADEJA TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR THEREFORE, THE LD. CIT(A) WAS NOT IN HOLDING THAT THE INITIATION OF REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT IS BAD IN LAW AND THE FIRST APPELLATE ORDER IS CORRECT IN QUA SHING THE INITIATION OF REASSESSMENT AND ALL CONSEQUENT PROCEEDINGS AND ORD ERS INCLUDING IMPUGNED REASSESSMENT AND FIRST APPELLATE ORDER. 12. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE BENEFIT OF THE RATIO OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CONSOLIDATED PHOTO & FINVEST LTD. (SUPRA) IS NOT AVAILED FOR THE REVENUE AS IT WAS NOT A CASE OF CHANGE OF OPINION AND INITIATION OF REASSES SMENT BEYOND FOUR YEARS OF RELEVANT ASSESSMENT YEAR. THEREFORE, WE RE SPECTFULLY HOLD THAT THE BENEFIT OF RATIO OF THIS DECISION HAVING DISSIM ILAR FACTS AND CIRCUMSTANCES FROM THE PRESENT CASE IS NOT AVAILABL E IN FAVOUR OF THE REVENUE IN THE EXTANT CASE. PER CONTRA, THE RATIO OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE USHA INTERNATI ONAL (SUPRA) IS APPLICABLE TO THE PRESENT IN FAVOUR OF THE ASSESSEE WHICH AGAIN SUPPORTS THE CONCLUSION RECORDED BY THE LD. CIT(A) IN QUASHI NG THE REASSESSMENT ORDER. ACCORDINGLY, THERE IS NO VALID REASON TO IN TERFERE WITH THE FIRST APPELLATE ORDER AND THUS, WE UPHOLD THE FINDINGS AR RIVED BY THE LD. CIT(A). CONSEQUENTLY, LEGAL GROUND OF REVENUE BEING DEVOID OF MERITS IS DISMISSED. 8 ITA NO.74/RJT/2013 (A.Y: 2005-06) SHRI RAJENDRASINH A. JADEJA 13. SINCE, IN THE EARLIER PART OF THIS ORDER, WE HA VE UPHOLD QUASHING OF REASSESSMENT PROCEEDINGS AND ORDER THEREFORE, OTHER GROUNDS OF REVENUE HAVE BECOME IN-FRUCTUOUS AND WE ARE NOT ADJ UDICATION UPON THEM AS HAVING BECOME IN-FRUCTUOUS. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED UPHOLDING THE CONCLUSION OF LD. FIRST APPELLATE AUTHORITY ON LEGA L GROUND. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 6 TH NOVEMBER, 2018 RAJKOT/ ; & / DATED : 26 TH NOVEMBER, 2018/ EDN, SR. P.S ! #$ %$ / COPY OF THE ORDER IS FORWARDED TO : 1. * / THE APPELLANT ; 2. +,* / THE RESPONDENT ; 3. . ( ) / THE CONCERNED CIT(A); 4.THE CONCERNED PRL. CIT; 5. / + , , / DR, ITAT, / RAJKOT; 6. / GUARD FILE . // BY ORDER // ASSISTANT REGISTRAR, ITAT, RAJKOT BENCH, RAJKOT SD/- SD/- ( . . /O.P.MEENA) / ACCOUNTANT MEMBER ( . . /C.M.GARG) /JUDICIAL MEMBER