ITO, Ward-1, Bhubaneswar V. M/s. Illiyas Granites, Ganjam

ITA 84/CTK/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7552 (ITAT-CUTTACK)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 11-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: G NAIKRAJAT KAR
• Keywords: Reopening of assessment; Search and seizure; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO.84/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 INCOME TAX OFFICER, WARD - 1, BERHAMPUR VS. M/S. ILLIYAS GRANITES, MAHURIKALUA ROAD, BHAHGAJHARI PO: DAKHINAPUR, DIST: GANJAM. PAN/GIR NO. AACFI 1843 D (APPELLANT ) .. ( RESPONDENT ) C.O.NO.05/CTK/2016 (ARISING OUT OF ITA NO.84/CTK/2016) ASSESSMENT YEAR : 2010 - 2011 M/S. ILLIYAS GRANITES, MAHURIKALUA ROAD, BHAHGAJHARI PO: DAKHINAPUR, DIST: GANJAM VS. INCOME TAX OFFICER, WARD - 1, BERHAMPUR PAN/GIR NO. AACFI 1843 D (CROSS OBJECTOR) .. ( RESPONDENT ) ASSESSEE BY : S/ SHRI G.NAIK/RAJAT KAR REVENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 11 /11 / 2016 DATE OF PRONOUNCEMENT : 11 /11 / 2016 2 ITA NO.84/CTK/2016 C.O.NO.05/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 O R D E R THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGA INST THE ORDER OF CIT(A) - 1, BHUBANESWAR , DATED 2.12.2015 , FOR THE ASSESSMENT YEAR 2010 - 2011. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.2,21,116/ - MADE BY THE AO U/S.40(A)(IA) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT (A) HAS ERRED IN FACTS AND LAW IN ACCEPTING THE DATE OF PAYMENT I.E. 11.10.2011 AS MUCH BEFORE THE DUE DATE OF FILING OF RETURN WHEREAS THE DUE DATE FOR THE SAID ASSESSMENT YEAR WAS 15.10.2010. 3. IN GROUND NO.1 OF CROSS OBJECTION, THE ASSESSEE HAS CHALLENGED THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT BY THE ASSESSING OFFICER. 4. THE FACTS IN BRIEF ARE THAT THE ORIGINAL ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 29.6.2012 ASSESSING THE INCOME OF THE ASSESSEE AT RS.6,66,660/ - AS AGAINST TH E RETURNED INCOME OF THE ASSESSEE AT RS.6,25,810/ - . THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S.148 OF THE ACT ON 7.2.2014 RECORDING THE FOLLOWING REASONS: 'IN THE PROFIT & LOSS ALE YOU HAD CLAIMED EXPENSE OF RS. 4,38, 120/ - TOWARDS INTEREST ON LO AN FROM SUNDERAM FINANCE FOR EXCAVATOR & COMPRESSOR DURING THE PREVIOUS YEAR 2009 - 10 RELEVANT TO THE 3 ITA NO.84/CTK/2016 C.O.NO.05/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 ASSESSMENT YEAR 2010 - 11. DURING THE COURSE OF SCRUTINY, YOU HAD SUBMITTED THE COPIES OF LEDGER OF LOAN ACCOUNT OF SUNDER FINANCE (ESCAVATOR), SUNDERAM FI NA NCE(COMPRESSOR) AND INTEREST ACCOUNT OF SUNDERAM FINANCE. ON VERIFICA TION OF SUCH COPIES OF LEDGER A/C S, IT WAS REVEALED THAT NO TAX WAS DEDUCTED FROM THE PAYMENT/CREDIT OF SUCH INTEREST INCOME TO SUNDER FINANCE. SINCE, THE PAYMENT OF INTEREST WAS MADE TO THE PRIVATE FINANCE INSTITUTIONS AND SUCH PAYMENT WAS LIABLE FOR DEDUCTION OF TAX. NON DEDUCTION OF TAX AT SOURCE 'VIOLATES THE PROVISION OF SECTION 194A WHICH ATTRACTS DISALLOWANCE UNDER THE PROVISION OF THE I. T. ACT TO THE EXTENT OF RS, 4,38,120/ - ON V ERIFICATION OF BALANCE SHEET OF THE FIRM FOR THE YEAR ENDING ON 31.03.2010, IT WAS NOTI CED THAT AN AMOUNT OF RS. 4,555/ - WAS SHOWN AS TDS PAYABLE. FURTHER, THE TAX AUDITOR IN HIS CERTIFICATE DATED 28.09.2010 IN FORM NO. 3CD AT COLUMN - 27(B) HAD CERTIFIED THAT THE TAX OF RS. 4 ,555/ - DEDUCTED FROM CONTRACTOR WAGES DURING THE PREVIOUS YEAR WAS NOT PAID TILL DATE. DURING THE COURSE OF ASSESSMENT PROCEEDING,' NO EVIDENCE IN SUPPORT OF DEPOSIT OF SUCH DEDUCTED TAX INTO GOVT. A/C COULD BE PRODUCED. NON - DEPOSIT OF TAX DEDUCTED AT SOURCE I NTO . GOVT, ACCOUNT ON OR BEFORE THE DUE DATE OF SUBMISSION OF RETURN U/S 139(1), THEREFORE, ATTRACTS DISALLOWANCE OF PAYMENT MADE/CREDITED TO CONTRACTOR UNDER PROVISION U/S 40(A)(IA) OF THE I, T. ACT TO THE EXTENT OF RS. 2,21,116/ - . THE AMOUNT PAID/CREDITED TO CONTRACTOR IS COMPUTED AS BELOW: THE RATE OF DEDUCTION OF TAX AT SOURCE FROM CONTRACTORS = 2.06% PAYMEN T AMOUNT OF TAX DEDUCTED AT SOURCE - RS. 4,555/ - AMOUNT PAID/CREDITED TO CONTRA CTOR RS, 4 ,555/ - X 100 RS; 2,21,116/ - ' 2,06%' IN VIEW OF THE ABOVE THERE WAS REASON TO BELIEVE THAT INCOME OF RS.6,59,236/ - (RS.4,38,120/ + R S .2,21,116/ - ) CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 5. BEFORE THE LD CIT(A), THE ASSESSEE CHALLENGED THE REOPENING OF ASSESSMENT ON THE GROUND THAT IT WAS WITHOUT ANY BASIS AND THERE WAS NO FRESH MATERIAL IN THE POSSESSION OF THE ASSESSING OFFICER FOR FORMING A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. 4 ITA NO.84/CTK/2016 C.O.NO.05/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 6. LD CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE UPHELD THE REOPENING OF ASSESSMENT U/S.147 OF THE ACT ON THE GROUND THAT REASSESSMENT PROCEEDINGS CAN BE INITIATED WITHIN FOUR YEARS OF THE PASSING OF THE ASSESSM ENT ORDER U/S.143(3) OF THE ACT E VEN THOUGH THE INCOME CHARGEABLE TO TAX HAS NOT ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR FOR THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. 7. BEFORE ME, LD A.R. OF THE ASSESSEE CONTENDED THAT A READING OF THE RECORDED REASONS BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSMENT, IT WILL BE OBSERVED THAT THE REASS ESSMENT PROCEEDINGS HAS BEEN INITIATED ON THE BASIS OF VERY SAME FACTS AND MATERIALS WHICH WERE BEFORE THE ASSESSING OFFICER AT THE TIME OF PASSING THE ORIGINAL ASSESSMENT ORDER. THEREFORE, THE REASSESSMENT PROCEEDINGS ON THE VERY SAME SET OF FACTS IS A C HANGE OF OPINION AND NOT VALID IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD (2010) 320 ITR 561 (SC) WHICH WAS FOLLOWED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF MADHUKAR KHOSLA VS ACIT, 367 ITR 165 (DE LHI), WHEREIN, IT WAS HELD THAT WHERE THERE WAS NOTHING TO SHOW WHAT TRIGGERED ISSUANCE OF NOTICE OF REASSESSMENT AS THERE WAS NO INFORMATION OR NEW FACTS WHICH COULD LED THE ASSESSING OFFICE R TO BELIEVE THAT FULL DISCLOSU RE HAD NOT BEEN MADE, SAID NOTICE COULD NOT BE 5 ITA NO.84/CTK/2016 C.O.NO.05/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 SUSTAINED. HE, THEREFORE, PRAYED THAT THE REASSESSMENT ORDER PASSED U/S.14343(3) R.W.S 147 OF THE ACT SHOULD BE CANCELLED. 8. ON THE OTHER HAND, LD DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 9. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACT S OF THIS CASE ARE THAT THE ASSESSMENT U/S.143(3) WAS COMPLETED IN THE CASE OF THE ASSESSEE ON 29.6.2012 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.6,66,660/ - AS AGAINST THE RETURNED INCOME OF RS.6,25,800/ - . THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S.148 OF THE ACT TO REOPEN THE ASSESSMENT ON 17.6.2014 FOR THE FOLLOWING REASONS: 'IN THE PROFIT & LOSS A/C YOU HAD CLAIMED EXPEN SE OF RS. 4,38, 120/ - TOWARDS INTEREST ON LOAN FROM SUNDERAM FINANCE FOR EXCAVATOR & COMPRESSOR DURING THE PREVIOUS YEAR 2009 - 10 RELEVANT TO THE ASSESSMENT YEAR 2010 - 11. DURING THE COURSE OF SCRUTINY, YOU HAD SUBMITTED THE COPIES OF LEDGER OF LOAN ACCOUNT OF SUNDER FINANCE (ESCAVATOR), SUNDERAM FI NANCE(COMPRESSOR) AND INTEREST ACCOUNT OF SUNDERAM FINANCE. ON VERIFICA TION OF SUCH COPIES OF LEDGER A/C S, IT WAS REVEALED THAT NO TAX WAS DEDUCTED FROM THE PAYMENT/CREDIT OF SUCH INTEREST INCOME TO SUNDER FINANCE. SINCE, THE PAYMENT OF INTEREST WAS MADE TO THE PRIVATE FINANCE INSTITUTIONS AND SUCH PAYMENT WAS LIABLE FOR DEDUCTION OF TAX. NON DEDUCTION OF TAX AT SOURCE 'VIOLATES THE PROVISION OF SECTION 194A WHICH ATTRACTS DISALLOWANCE UNDER THE PROVISION OF THE I. T. ACT TO THE EXTENT OF RS, 4,38,120/ - ON VERIFICATION OF BALANCE SHEET OF THE FIRM FOR THE YEAR ENDING ON 31.03.2010, IT WAS NOTI CED THAT AN AMOUNT OF RS. 4,555/ - WAS SHOWN AS TDS PAYABLE. FURTHER, THE TAX AUDITOR IN HIS CERTIFICATE DATED 6 ITA NO.84/CTK/2016 C.O.NO.05/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 28.09.2010 IN FORM NO. 3CD AT COLUMN - 27(B) HAD CERTIFIED THAT THE TAX OF RS. 4 ,555/ - DEDUCTED FROM CONTRACTOR WAGES DURING THE PREVIOUS YEAR WAS NOT PAID TILL DATE. DURING THE COURSE OF ASSESSMENT PROCEEDING,' NO EVIDENCE IN SUPPORT OF DEPOSIT OF SUCH DEDUCTED TAX INTO GOVT. A/C COULD BE PRODUCED. NON - DEPOSIT OF TAX DEDUCTED AT SOURCE I NTO . GOVT, ACCOUNT ON OR BEFORE THE DUE DATE OF SUBMISSION OF RETURN U/S 139(1), THEREFORE, ATTRACTS DISALLOWANCE OF PAYMENT MADE/CREDITED TO CONTRACTOR UNDER PROVISION U/S 40(A)(IA) OF T HE I, T. ACT TO THE EXTENT OF RS. 2,21,116/ - . THE AMOUNT PAID/CREDITED TO CONTRACTOR IS COMPUTED AS BELOW: THE RATE OF DEDUCTION OF TAX AT SOURCE FROM CONTRACTORS = 2.06% PAYMEN T AMOUNT OF TAX DEDUCTED AT SOURCE - RS. 4,555/ - AMOUNT PAID/CREDITED TO CONTRA CTOR RS, 4 ,555/ - X 100 RS; 2,21,116/ - ' 2,06%' IN VIEW OF THE ABOVE THERE WAS REASON TO BELIEVE THAT INCOME OF RS.6,59,236/ - (RS.4,38,120/ + RS. .2,21,116/ - ) CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 10. A READING OF THE ABOVE RECORDED REASONS SHOWS THAT THE REOPENING OF ASSESSME NT HAS BEEN MADE ON TWO GROUNDS . F IRSTLY, I N THE PROFIT & LOSS A/C, THE ASSESSEE HAS CLAIMED EXPENSE OF RS. 4,38,120/ - TOWARDS INTEREST ON LOAN FROM SUNDERAM FINANCE FOR EXCAVATOR & COMPRESSOR DURING THE YEAR UNDER APPEAL. FROM THE COPY OF EDGER OF LOAN ACCOUN T OF SUNDER FINANCE (ESCAVATOR) AND SUNDERAM FINANCE(COMPRESSOR ) AND INTEREST A CCOUNT OF SUNDERAM FINANCE , IT IS OBSERVED THAT NO TAX WAS DEDUCTED FROM THE PAYMENT/CREDIT OF SUCH INTEREST INCOME AND, THEREFORE, THE INTEREST PAYMENT WAS NOT ALLOWABLE DEDUCTION TO THE ASSESSEE. SECONDLY, IT HAS BEEN STATED IN THE RECORDED REASONS TH AT FROM THE BALANCE SHEET OF THE FIRM FOR THE YEAR ENDING ON 31.3.2010, IT IS OBSERVED THAT RS. 4,555/ - WAS SHOWN AS TDS PAYABLE. IN THE TAX AUDIT REPORT IN FORM NO. 3CD AT COLUMN - 27(B) , IT HAS 7 ITA NO.84/CTK/2016 C.O.NO.05/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 BEEN STATED THAT THE TAX DEDUCTED FROM CONTRACTOR WAGES WAS N OT PAID TILL DATE INTO GOVERNMENT ACCOUNT AND NO EVIDENCE IN SUPPORT OF DEPOSIT OF SUCH DEDUCTED TAX INTO GOVT. A/C COULD BE PRODUCED. NON - DEP OSIT OF SUCH TAX DEDUCTED AT SOURCE ON OR BEFORE THE DUE DATE OF SUBMISSION OF RETURN U/S 139(1) ATTRACTS PROVISION S OF SECTION 40(A)(IA) OF THE I, T. ACT AND CONTRACTOR WAGES TO THE EXTENT OF RS. 2,21,116/ - HAS TO BE DISALLOWED. 11. FROM THE RECORDED REASONS, IT IS CLEAR THAT THE REOPENING OF ASSESSMENT HAS BEEN MADE BY THE ASSESSING OFFICER ON THE VERY SA ME SET OF FACTS WHICH WERE BEFORE HIM AT THE TIME OF MAKING ASSESSMENT U/S.143(3) OF THE ACT. THERE IS NO WHISPER IN THE RECORDED REASONS ABOUT ANY NEW FACTS OR MATERIAL WHICH HAS COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER TO TRIGGER THE ISSUANCE OF N OTICE OF REASSESSMENT ON THE GROUN D OF ESCAPEMENT OF INCOME CHARGEABLE TO TAX . THEREFORE, THE NOTICE ISSUED U/S.148 OF THE ACT IS BAD IN LAW IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD(SUPRA) , WHEREIN, IT WAS HE LD AS UNDER: HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO BELIEVE FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINIO N, WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE - ASSESS. BUT RE - ASSESSMENT HAS TO BE BASE D ON FULFILLMENT OF CERTAIN PRE - CONDITION AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPIN ION AS AN IN - BUILT TEST TO CHECK ABUSE OF POWER BY THE 8 ITA NO.84/CTK/2016 C.O.NO.05/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 ASSESSING OFFICER. HENCE, AFTER 1 ST APRIL, 1989, ASSESSING OFFICER HAS POWER TO REOPEN PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSME NT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF . 12. FOLLOWING THE ABOVE DECISION OF HONBLE SUPREME COURT, T HE HONBLE DELHI HIGH COURT IN THE CASE OF MADHUKAR KHOSLA (SUPRA) HAS HELD AS UNDER: THE FOUNDATION OF THE AO'S JURISDICTION AND THE RAISON D'ETRE OF A REASSESSMENT NOTICE ARE THE 'REASONS TO BELIEVE'. NOW THIS SHOULD HAVE A RELATION OR A LINK WITH AN OBJECTIVE FACT, IN THE FORM OF INFORMATION OR FACTS EXTERNAL TO THE MATERIALS ON THE RECORD. SUCH EXTERNAL FACTS OR MATERIAL CONSTITUTE THE DRIVER, OR THE KEY WHICH ENABLES THE AUTHORITY TO LEGITIMATELY RE - OPEN THE COMPLETED ASSESSMENT. IN ABSENCE OF THIS OBJECTIVE 'TRIGGER', THE AO DOES NOT POSSESS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS AT THE NEXT STAGE THAT THE QUESTION, WHETHER THE RE - OPENING OF ASSESSMENT AMOUNTS TO 'REVIEW' OR 'CHANGE OF OPINION' ARISES. IN OTHER WORDS, IF THERE ARE NO 'REASONS TO BELIEVE' BASED ON NEW, 'TANGIBLE MATERIALS', THEN THE REOPENING AMOUNTS TO AN IMPERMISSIBLE REVIEW . 13. I, THE REFORE, HOLD THAT THE ISSUE OF NOTICE U/S.148 OF THE ACT DATED 7.2.2014 IN THE INSTANT CASE IS BAD IN LAW AND CONSEQUENTLY THE REASSESSMENT FRAMED U/S.143(3)/147 OF THE ACT DATED 27.11.2014 IN PURSUANCE TO SUCH NOTICE IS NOT SUSTAINABLE AND HENCE, I CANCE L THE REASS ESSMENT ORDER DATED 27.11.2014 AND ALLOW THIS GROUND OF CROSS OBJECTION OF THE ASSESSEE. 14. AS I HAVE CANCELLED THE REASSESSMENT ORDER DATED 27.11.2014 PASSED U/S.143(3)/147 OF THE ACT, THE OTHER GROUNDS OF APPEAL OF THE ASSESSEE IN CROSS OBJ ECTION ON MERITS OF THE ADDITION AND THE APPEAL OF THE REVENUE HAVE BECOME INFRUCTUOUS AND HENCE, DISMISSED. 9 ITA NO.84/CTK/2016 C.O.NO.05/CTK/2016 ASSESSMENT YEAR : 2010 - 2011 15. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 11 /11 /2016 IN THE PRESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 1 1 /11 /2016 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK 1. THE APPELLANT : INCOME TAX OFFICER, WARD - 1, BERHAMPUR 2. THE RESPONDENT. /CROSS OBJECTOR : M/S. ILLIYAS GRANITES, MAHURIKALUA ROAD, BHAHGAJHARI PO: DAKHINAPUR, DIST: GANJAM 3. THE CIT(A) - 1, BHUBANESWAR 4. CIT , BHUBANESWAR. 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//