SARIN AUTO SUPPLY CO., Jaipur V. ITO, BHARATPUR

ITA 821/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99410 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 02-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA CIT DHK
• Assessee Lawyers: PC PARWAL
• Keywords: Bonafide belief; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Capital expenditure
• Section: 147; 148; 37; 143(3); 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH IH-DS-CALY] YS[KK LNL; DS LE{K BEFORE: SHRI P.K. BANSAL, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 821/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06. M/S. SARIN AUTO SUPPLY CO., GULAB BAGH, AGRA MUMBAI ROAD, DHOLPUR. CUKE VS. THE INCOME TAX OFFICER, WARD-3, BHARATPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAEFS 1616 S VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, C.A. JKTLO DH VKSJ LS@ REVENUE BY : SHRI O.P. BHATEJA, ADDL. CIT LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03/11/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 5/11/2015 VKNS'K@ ORDER PER P.K. BANSAL, A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A) DATED 29.10.2014 BY TAKING THE FOLLOWING EFFECTIVE GROUND OF APPEAL :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN UP HOLDING THE VALIDITY OF THE ASSESSMENT ORDER PASSED BY THE AO U/S 148. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CO NFIRMING THE DISALLOWANCE OF RS. 1,73,750/- ON ACCOUNT OF LOSS O N SALE OF CAR BY HOLDING THAT ASSESSEE HAS FAILED TO PRODUCE THE NEC ESSARY EVIDENCES TO SUBSTANTIATE ITS CLAIM. 2 ITA NO. 821/JP/2014 A.Y. 2005-06. M/S. SARIN AUTO SUPPLY CO. VS. ITO 2. THE FIRST GROUND RELATES TO THE VALIDITY OF AS SESSMENT ORDER PASSED UNDER SECTION 148 OF THE IT ACT. THE LD. A/R BEFORE US VEHEMENTL Y CONTENDED THAT ASSESSMENT UNDER SECTION 147 HAS BEEN REOPENED ON THE GROUND THAT TH E ASSESSEE HAS DEBITED A SUM OF RS. 1,73,750/- ON ACCOUNT OF LOSS ON SALE OF CAR. THE SAID EXPENDITURE IS NOT ALLOWABLE UNDER SECTION 37(1) OF THE IT ACT. IT WAS POINTED OUT THAT DURING ORIGINAL PROCEEDINGS, THE ASSESSEE HAS DULY BEEN ASKED QUERY IN RESPECT O F LOSS ON SALE OF CAR WHICH WAS REPLIED BY THE ASSESSEE VIDE ITS LETTER DATED 2.8.2 007, COPY OF WHICH WAS PLACED ON THE PAPER BOOK AT PAGE 2. THE ASSESSEE HAS SPECIFICALLY ENCLOSED UNDER PARAGRAPH 5 THE COPY OF DEED FOR SALE OF CAR. THE ASSESSEE VIDE ITS LETTER DATED 15 TH DECEMBER, 2009 HAS ALSO GAVE THE NAME AND ADDRESS OF THE PURCHASER OF THE CAR AND HAS ALSO STATED THAT ALL THE SALE CONSIDERATION HAS BEEN RECEIVED BY CHEQUE. IN VIEW OF THIS FACT THE ASSESSEE CONTENDED THAT THIS FACT HAS DULY BEEN VERIFIED BY THE AO THAT THE ASSESSEE HAS SOLD THE CAR AND INCURRED THE LOSS AND THE SAME HAS BEEN CHA RGED TO THE PROFIT & LOSS ACCOUNT. THE ASSESSEE HAS ALSO SUBSEQUENTLY FILED THE OBJECT ION ON 8.8.2012 BEFORE THE AO CHALLENGING THE VALIDITY OF THE PROCEEDINGS INITIAT ED UNDER SECTION 147. THUS HE CONTENDED THAT SINCE THE AO HAS DULY APPLIED HIS MI ND AND THERE IS NO FRESH MATERIAL, THE REASONS RECORDED BY THE AO WERE NOT BONAFIDE AN D CONSEQUENTLY THE PROCEEDINGS INITIATED UNDER SECTION 147 WERE INVALID. 3. THE LD. D/R ON THE OTHER HAND RELIED ON THE ORDE R OF THE AO. 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. I NOTED T HAT IN THIS CASE THE ASSESSMENT HAS BEEN REOPENED BY THE AO BY RECORDING THE FOLLOWING REASONS :- 3 ITA NO. 821/JP/2014 A.Y. 2005-06. M/S. SARIN AUTO SUPPLY CO. VS. ITO REASONS FOR INITIATING PROCEEDINGS U/S 147 OF T HE I.T. ACT, 1961. IN THIS CASE, ASSESSMENT WAS COMPLETED U/S 143(3) V IDE ORDER DATED 20.10.2007 AT TOTAL INCOME OF RS. 404510/- AG AINST RETURNED INCOME OF RS. 281700/-. ON PERUSAL OF RECORD, IT REVEALS THAT IN PROFIT & L OSS ACCOUNT ASSESSEE ASSESSEE DEBITED A SUM OF RS. 173750/- ON ACCOUNT OF LOSS ON SALE OF CAR. ASSESSEE MERELY ON STAMP OF RS. 10/- S HOWN SALE OF CAR WHICH WAS NEITHER GOT REGISTERED IN STAMP AND REGIS TRATION DEPARTMENT NOR GOT ATTESTED BY NOTARY AND EVEN TITLE/NAME WAS ALSO NOT TRANSFERRED IN THE NAME OF PURCHASER TILL THE DATE OF SCRUTINY OF THE CASE. THIS CAPITAL EXPENDITURE IS NOT ALLOWABLE UNDER SECTION 37(1) OF INCOME TAX ACT, 1961. KEEPING IN VIEW THE ABOVE FACTS, I HAVE REASONS TO BELIEVE THAT THE INCOME TO THE EXTENT OF RS. 173,750/- HAS ESCAPED A SSESSMENT. IT IS A FIT CASE FOR INITIATING ACTION U/S 147 OF THE I.T. ACT. THEREFORE, NOTICE U/S 148 ISSUED. SD/- ( R.P. MEENA ) INCOME-TAX OFFICER, DATED 27.03.2012. WARD-3, BHARATPUR. FROM THE REASONS RECORDED IT IS APPARENT THAT THE A O HAS REOPENED THE ASSESSMENT ON THE BASIS THAT THE ASSESSEE HAS DEBITED A SUM OF RS . 1,73,750/- IN THE PROFIT & LOSS ACCOUNT ON ACCOUNT OF LOSS INCURRED ON THE SALE OF THE CAR WHICH WAS NOT ALLOWABLE UNDER SECTION 37(1) OF THE IT ACT. I NOTED THAT TH E ASSESSING OFFICER HAS DULY ENQUIRED OF FROM THE ASSESSEE ABOUT THE SAID TRANSACTION FOR WHICH THE ASSESSEE HAS DULY SUBMITTED BEFORE THE AO BY LETTER DATED 2.8.2007 AN D 15.12.2009 ABOUT THE CAR SOLD BY THE ASSESSEE AND THE PERSON TO WHOM THE CAR HAS BEE N SOLD, HOW THE CONSIDERATION HAS BEEN RECEIVED. AFTER CONSIDERING THESE FACTS, THE AO PASSED THE ASSESSMENT ORDER AND 4 ITA NO. 821/JP/2014 A.Y. 2005-06. M/S. SARIN AUTO SUPPLY CO. VS. ITO DID NOT MAKE ANY DISALLOWANCE IN COMPUTING THE TOTA L INCOME OF THE ASSESSEE. THUS IT IS A CASE WHERE THE ASSESSEE HAS DULY SUBMITTED THE EVIDENCE DURING THE COURSE OF ASSESSMENT AND THE AO BY APPLYING HIS MIND ALLOWED THE DEDUCTION TO THE ASSESSEE. REOPENING OF THE ASSESSMENT OR RECORDING THE REASON S ON THE BASIS OF THE SAME FACTS ON WHICH THE AO HAS ALREADY MADE A DECISION WILL TA NTAMOUNT, IN MY OPINION, TO CHANGE OF OPINION. MERE CHANGE OF OPINION CANNOT BE FORM ED THE BASIS OF REOPENING OF THE ASSESSMENT. THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. KELVINATOR INDIA LTD. (2010) 320 ITR 561 (SC) IN THIS REGARD HAS HELD AS UNDER :- THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLI TERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME-TAX A CT, 1961, BY THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989. AF TER THE AMENDMENT, THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT THIS DOES N OT IMPLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON M ERE CHANGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER. HENCE AF TER APRIL 1, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN AN ASSESS MENT, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUS ION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MU ST HAVE A LINK WITH THE FORMATION OF THE BELIEF. IN THIS CASE, EXCEPT THE MATERIAL SUBMITTED BY THE ASSESSEE FOR CLAIMING THE DEDUCTION U/S 37 OF THE ACT, NO FRESH TANGIBLE MATERIAL WAS B ROUGHT ON RECORD. THEREFORE, IT IS A CASE WHERE THERE IS MERELY A CHANGE OF OPINION BY T HE ASSESSING OFFICER ON THE MATERIAL, WHICH WAS AVAILABLE AT THE TIME OF MAKING THE ASSESSMENT U/S 143(3) OF THE ACT. THE WORD USED IN THIS CASE IS REASON TO BELI EVE WHICH SIGNIFIES THAT THE ASSESSING OFFICER HAS BONAFIDE BELIEF THAT THE INCOME HAS ESC APED ASSESSMENT OR THERE HAD BEEN 5 ITA NO. 821/JP/2014 A.Y. 2005-06. M/S. SARIN AUTO SUPPLY CO. VS. ITO UNDER ASSESSMENT. WHENEVER THERE IS A CHANGE OF OPI NION, THE REASONS CANNOT BE REGARDED/BONAFIDE. NO CONTRARY DECISION WAS BROUGH T TO MY KNOWLEDGE, I THEREFORE, SET ASIDE THE ORDER OF THE LD.CIT (A) AND QUASH THE ASSESSMENT PASSED U/S 148 OF THE ACT. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED. 5. SINCE I HAVE ALREADY QUASHED THE ASSESSMENT, THE REFORE, THE GROUND NO. 2, IN MY OPINION, DOES NOT REQUIRE ANY ADJUDICATION. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5/11/2015. SD/- IH-DS-CALY ( P.K. BANSAL ) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 5/11/ 2015 DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. SARIN AUTO SUPPLY CO., DHOLPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO WARD-3, BHARATPUR. 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 821/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR