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TMI Blog2018 (7) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to believe that income chargeable to tax had escaped assessment and the assessment was completed on total income of Rs. 3,17,12,953/-. The Assessing Officer(AO) made the addition of Rs. 3,06,54,982/- representing the unpaid service tax u/s 43B of the I.T.Act. After completion of the original assessment, the assessee has expired, hence the AO has issued the notice u/s 148 in the name of Shri C.D.V.Subba Rao, the legal heir. Subsequently, the notice was issued in the name of Shri C.D.S.Prakasa Rao and the assessment was also completed in the name of Shri C.D.S.Prakasa Rao who has already expired. 3. Aggrieved by the order of the AO, the assessee went on appeal before the Ld.CIT(A) and challenged the order of the AO both on technical grounds as well as on merits. The assessee challenged the validity of the issue of notice on dead person and also the reopening of assessment. The Ld.CIT(A) has verified the assessment records and found that the notice u/s 148 was issued in the name of Shri C.D.V.Subba Rao, the Legal heir of Late Shri C.D.S.Prakasa Rao, thus held that the grounds raised by the assessee with regard to the issue of notice u/s 148 in the name of dead person was false ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veri Stock Brokers P. Limited 291 ITR 500 (SC). In this case, the assessment is reopened as the AO has observed that there was outstanding amount of unpaid service tax under the head sundry creditors, which required to be brought to tax and the AO has omitted to examine the issue at the time of original assessment. Though the AO has noted the decision of Hon'ble Kolkata High Court in the case of CIT Vs.Associated Pigments Ltd. 71 Taxman 244 (Cal.), the AO merely taken support of the decision to fortify his belief, but not relied on the decision of Hon'ble Kolkata High Court for reopening the assessment. Plain reading of the reasons recorded clearly shows that the AO has formed a belief that the expenditure grouped under sundry creditors is covered by section 43B of I.T.Act and not allowable expenditure, hence had a belief that the income had escaped the assessment. Therefore, argued that the AO has not committed any error in reopening the assessment. The Ld.DR further argued that the assessment is reopened on the basis of audit objection and as held by Hon'ble Supreme Court in the case of CIT Vs. P.V.S.Beedies Pvt. Ltd. 237 ITR 13 SC, the audit party is entitled to point out factua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l show cause notice was issued on 14.12.2011 correctly in the name of Sri C.D.V. Subba Rao, Legal Heir of Sri C.D.S. Prakasa Rao. The Ld. DR further argued that the legal heir of the assessee responded to the notice issued and understood the purpose and intention of issue of notice and the assessment proceedings. Having complied with the terms and conditions of issue of notice u/s 143(2) and subsequent proceedings, the assessee cannot challenge the validity of assessment made u/s 143(3). The mention of the name of the dead person in the assessment order is a mere clerical error and no injustice is caused to the assessee and the same is curable mistake u/s 292B of I.T.Act. The Ld.DR relied on the decision of Hon'ble ITAT in the case of Gautam Paul Vs. ACIT, Circle Agartala in I.T.A Nos. 31-37/Gau/2017 dated 01.11.2017 for the assessment year 2007-08 to 2013-14 and also the decision of Hon'ble Supreme Court in the case of Sky Light Hospitality LLP Vs. ACIT (2018) 92 taxmann.com 93 (SC). The Ld.DR further submitted that the Ld.CI(A) dismissed the assessee's ground on this issue and the assessee has neither challenged the order of the Ld.CIT(A) nor filed cross objections, hence, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue and held in favour of the assessee. For ready reference, we extract relevant paragraph of the order of the Coordinate Bench in para No.8 which reads as under : 8. We have heard the learned representatives and the records perused. We are in agreement with the plea of the learned counsel for the assessee that he can support the ultimate decision of the CIT(A) on a ground decided against the assessee i.e. on the question of allowance of deduction as bad debt. Rule 27 of the ITAT Rules permits the assessee to raise the issue of allowability of the claim of bad debt before the Tribunal though he did not succeed on this issue before the CIT(A) and no appeal was filed before the Tribunal against the decision of the CIT(A). 8.2. Similar view is expressed by the Hon'ble 3rd member in ITAT Mumbai 'D' Bench in the case of Dy.CIT Vs. Bifora Watch Co. Ltd. The decision of Hon'ble High Court of Gujarat in the case of Dahod Sahakari Kharid Vechan Sangh Ltd. Vs. CIT 282 ITR 0321 supports the view that the assessee is entitled to defend his case under Rule 27 on the issues decided by the CIT(A) against him. For ready reference, we extract para Nos. 17 to 19 of the Hon'ble High Court which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment. 9. In this case, the assessee was expired and the AO had issued the notice u/s 148 and initiated reassessment proceedings on legal heir Sri D.V.Subba Rao correctly. Subsequently, scrutiny notice was issued on Sri C.D.S. Prakasa Rao, the dead person and the assessment was framed on him. In response to the notice, issued u/s 148, the legal heirs of the assessee have responded to the notice issued and for the subsequent notice of hearing also, the legal heir of the assessee has responded and filed objections for making the assessment. However, legal representative of the assessee did not raise any objection for the notice issued u/s 143(2) dated 1.7.2011 in the name of dead person, and filed the necessary information which was considered by the AO. Subsequently on 14.12.2011, the AO had issued the show cause notice in the name of legal heir which was served on the legal heir of the assessee on 14.12.2011 who responded without raising any objection. The AO in the process has given sufficient opportunity to the assessee. Though the hearing notice was given in the name of dead person, the assessee has not objected but understood the intent and purpose of issue of notice an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in terms of section 292B of the Act. Hence the reliance placed by the Ld AR on this decision does not advance the case of the assessee. 7.4. We find that the reliance placed by the Ld DR on the decision of the Hon 'ble Punjab & Haryana High Court in the case of Smt Swaran Kanto vs CIT reported in (1989) 176 JTR 291 (P&H/) squarely supports the case of the revenue and the facts of the assessee herein. It was held that - 3.The situation would have been different if the ]TO had not impleaded the legal heir and if he hod not given any hearing to the legal heir In that event, it could have been said that the order was passed on the deceased Since, the legal heir was impleaded and she was being heard, it could not be said that the order was passed on the deceased The order will be deemed to have been passed on the person who was heard In the instant case, the legal heir was being heard by the ITO through her representative. The AAC has proceeded on the assumption that the order was passed on the dead person. From the facts of the cash, it is clear that the order was not passed against the dead person. No doubt, an order passed on a dead person Is null and void but in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment if the assessment is in substance and effect inconformity with or according to the intent and purpose of the Act As already noticed, the entire proceedings were conducted after death of the original assessee in accordance with law After death the legal representative is also deemed to be assessee Therefore the title of the order, which was not happily worded would not make the assessment order invalid as was sought to be declared by the AAC. The Tribunal was fully justified in restoring the order of the assessment in exercise of its powers under section 292B. (Underlining supplied by us) 6. The learned counsel for the assessee has cited some cases to support the order of the MC but none of those cases is close or relevant to the facts of this case, and therefore, it would be futile to notice or discuss them. 7. For the reasons recorded above, we answer the question in the affirmative, that is, in favour of the revenue and against the assessee but with no order as to costs. We find that the facts of the instant case and the facts before the Hon'ble Punjab & Haryana High Court supra are one and the same and the ratio laid down thereon would be squarely applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee's case is that the AO has reopened the assessment on the basis of audit information and also on the basis of the decision of Hon'ble Kolkata High Court in the case of CIT Vs.Associated Pigments Ltd (supra), thus it constitutes change of opinion, hence the reassessment is invalid and the CIT(A) has rightly struck down the notice issued u/s 148. 10.1. In this case, the AO has recorded the reasons for reopening the assessment as under : "It was noticed that an amount of Rs. 3,06,54,982/- of Service tax is payable which is shown as liability by grouping it under 'sundry creditor'. As per provisions of section 43B of I.T.Act it is not an allowable expenditure. It forms part of income of assessee irrespective of fact that whether it is claimed as expenditure by debiting it to profit & loss account or not as can be seen from decision rendered in case of C..I.T. Vs. Associated Pigments Ltd. (1973) 71 Taxman 244(Cal.). Therefore, the taxable income to the extent of Rs. 3,06,54,982/- has escaped assessment." 10.2. Plain reading of the reasons recorded by the AO shows that the service tax was shown in the liabilities grouping under sundry creditors which is to be disallowed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CIT Vs. P.V.S.Beedies Pvt. Ltd.(supra) is squarely applicable in the case of the assessee. Further, the Honb'ble Delhi High Court in the case of Dalmia Brothers (P.) Ltd. Vs. CIT, has held that reopening of assessment is valid on the basis of audit objection as per the information available on records. For ready reference, we extract relevant paragraph No.8 of the order of the Hon'ble Delhi High Court which reads as under : "8. The facts of the case are very peculiar and unusual. The Assessing Officer in the original assessment proceedings had asked the petitioner to furnish complete details/confirmations in respect of sundry creditors amounting to Rs, 1,66,37,402/-. The petitioner had submitted confirmations in respect of creditors amounting to Rs. 1,13,53,344/- and the balance amount of Rs. 52,84,058/- remained unconfirmed. The Assessing Officer in the original assessment order, which has been quoted in paragraph 2 of the decision dated 26th September, 2011, made an addition of Rs. 19,86,551/- under Section 41 (1) but not in respect of other unconfirmed creditors of Rs. 32,97,507/-. This was a factual lapse, which was pointed out in the audit objection and then examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). 17. The scope and effect of section 147 as substituted with effect from 1-4-1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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