TMI Blog2019 (8) TMI 1454X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal of the Revenue has become only academic. Keeping in view all these facts and circumstances of the case, we find no merit in the appeal of the Revenue and dismiss the same. - I.T.A. No. 842/KOL/2018 & C.O. No. 52/KOL/2018 (arising out of I.T.A. No. 842/KOL/2018) - - - Dated:- 9-8-2019 - Shri P.M. Jagtap, Vice-President (KZ) AND Shri S.S. Viswanethra Ravi , Judicial Member For the Appellant : Shri A.K. Nayak. CIT, D.R. For the Respondent : Shri S.M. Surana, Advocate ORDER Per Shri P.M. Jagtap, Vice-President (KZ): - This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-2, Kolkata dated 07.02.2018 and the same is being disposed of along with the Cross Objection filed by the assessee being C.O. No. 52/KOL/2018. 2. The assessee in the present case is a Company, which is engaged in the business of trading of Ball Bearings. The return of income for the year under consideration was originally filed by it electronically on 12.10.2010 declaring total income of ₹ 1,30,45,430/-. In the assessment completed under section 143(3) vide an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the materials available on record before the assessing officer during the assessment proceedings. The AO has stated that the appellate company did not file return of income in prescribed manner as asked by the AO as per letter dated 20.04.2017. The AR of the appellant has submitted that the assessment completed u/s 147/144/143(3) is bad in law since no notice u/s 143(2) was issued in spite of the fact that the return of income was duly filed in response to notice u/s 147 by filing a letter to treat the return originally, filed as return in response to notice u/s. 147. The order of the AO passed u/s 143(3)/147 on 27.3.2015 was cancelled by the CIT(A) on 26.12.2016 in appeal No. 924/CIT(A)-2/15-16 on the ground that notice u/s. 143(2) was not issued within the time allowed a fresh notice u/s. 148 was served on the assessee by the AO on 31.3.2017 through e-mail. The assessee immediately on receipt of notice on 31.03.2017 itself complied with the same and filed a letter requesting the AO to treat the original return filed u/s. 139 as return in response to the notice U/S 148 issued on 3l.l2.2017. The AO have been insisting on filing of the fresh e return. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly informed to the AO that the first return and even the second return in response to the earlier notice u/s 148 was filed in the prescribed format thorough e mail as per rule 12 of the IT rules. It was also informed to the AO that the assessee's letter to treat the original return filed u/s 139 as return u/s 148 is sufficient compliance of the notice u/s 148. Section 148 itself prescribes that all the provisions of section 139 shall apply and accordingly the return filed originally u/s 139 was specifically requested to be treated as return, filed in response to notice u/s 148. The Judgement as referred by the AR of the appellate are being discussed below:- The Allahabad High Court in the case of Anand Kumar Sharma reported under 1992 Tax Pub(DT) 0608 (All. HC): (1992) 198 ITR 0121 has held that The sold grievance raised on behalf of the petitioner is that, after service of the notice under section 148 for the asst. Yrs. 1986-87 and 1987-88 and the petitioner informing the assessing authority that the return filed originally may be treated as a return filed in compliance with the notice u/s 148 for the said two assessment years and the assessing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nection the order of undersigned passed in the earlier reassessment proceedings is cited wherein undersigned has relied on a number of judgements to conclude that if notice u/s 143(2) is not issued, the assessment is bad in law . From Pages 20 to 23: I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessment proceedings, The AR of the appellate has submitted that the AO erred in initiating proceedings u/s. 148 when such proceedings u/s. 147 were initiated earlier, same additions were made in the assessment which was completed u/s 143(3)/147 but was quashed since notice u/s 143(2) was not issued and served as per law and therefore, action u/s 147 on the same additions was bad in law treating the additions made as income escaped assessment since the same very additions were were the subject matter of the earlier assessment proceedings. The original return in this case was filed on 12.10.2010 and the first assessment was completed u/s 143(3) vide order dated 17.01.2013. The AO r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was accepted u/s 143(1), the issue was known to the AO and further any disputed finding in that order and for that matter unproved and disputed findings cannot give rise to the reasons that any income has escaped assessment. The AR of the appellate also placed his reliance on the judgements of Smt. Anchi Devi v. CIT (P H-HC): (2008) 218 CTR 0011: (2008) 005 DTR 0311, CIT vs,- Air Craft Radio Corporation (P H HC): (2007) 292 ITR 0064, Sang Fastners P. Ltd. ITAT E Bench, Mumbai lin ITA No. 6871/Mum/2008, ITA No. 5639/Mum/2010 for A.Y. 2000-01 and in the case of Manoo Lal Kedarnath vs. Union of India 114 ITR 884 (All) and CIT vs.- V.R. Durgamba 223 ITR 96 (Mad.). The P H High Court in the case of Air Craft Radio Corporation reported 2007 tax Pub (DT) 0909 (P H-HC): (2007) 292 ITR 0064 has held that on the basis of some complaints of tax evasion, AO issued notice under section 148 in a vague manner without recording his own satisfaction only on the basis of those complaints. After dissatisfied with assessee s reply the AO made reassessment order on 31.7.1976. The first appellate authority allowed assessee s appeal and set aside (annulled) order of reasse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessment was made on 14-22003 and which was quashed being barred by limitation. Thus, from the facts itself, it is crystal clear that though the present proceedings were initiated by the AO within the prescribed period of limitation; yet, it was clear that the same were initiated only to circumvent the earlier order of the Tribunal vide which the assessment dated 14-2-2003 was held to be time-barred. Thus, the AO cannot be allowed to initiate fresh proceedings on identical facts as the first assessment proceedings had failed to result in a valid assessment due to lapse on the part of the Income tax authority [Para 18). It is apparent from the record that the assessment was reopened on the same two grounds which were the subject matter of the earlier assessment order which was quashed by the CIT(A). In view of the above judgments, and in view of the fact that the assessment was again reopened only for those two issues which were the subject matter of earlier assessment, the reassessment now made is liable to be quashed. In view of the above judgments, and in view of the fact that the assessment was again reopened only for those two issues which were the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT, Inv. Mumbai only and has not recorded for his own satisfaction Simply relying on the information from Inv. Wing without examining the issue himself and then reopened the assessment is bad in law. The AO has not applied his mind to the issue. If the AO has simply relied on the information from DGIT without applying his mind reopening of the assessment is bad in law. It was on record that the purchase from Darshan Sales Corpn was not bogus for which evidence was available on record as well as in the order of CIT(A) wherein the entire issue was explained with regard to the purchase and corresponding sale as also the addition made in the original assessment u/s, 143(3) on account of sales to M.s Reliance Indus of the same material which was purchased from Darshan Sales Corpn Therefore, as on the date Le. 31.3.2017 if there was proper application of mind assessment could not have been reopened. Similarly, Audit objection by the Audit Party cannot be a ground for reopening of the assessment u/s 148. It is apparent from the assessment order itself that it was revenue audit which raise the objection that there was under valuation of closing stock. Neither in the reasons r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it objection by the Audit party cannot be a ground for reopening of the assessment u/s. 148. It is apparent from the assessment order itself that it was Revenue Audit which raised the objection that there was under valuation of closing stock. Neither in the reasons recorded nor even in the assessment order any factual mistake have been recorded or pointed out to show that there was in fact under valuation of closing stock. Simply because there was opinion of the audit party it cannot be a ground to reopen the assessment u/s 148. The basis for alleged under valuation has not been spelt out anywhere in the reasons or in the order itself. Moreover the information from Investigation cannot alone be the reason for reopening of the assessment with regard to the first issue and the AO has to apply his own mind. No such application of mind is visible in the reasons recorded. The following judgments are cited in support of the proposition:- The Allahabad High Court in the case of Pradeshiya Industrial Investment Corpn of U.P. Ltd. 2011 Tax Pub(DT) 0086 (All.HC): (2010) 034(I) ITCL 0160: (2011) 332 ITR 0324: (2010) 230 CTR 0167: (2010) 035 DTR 0267 has held that Reassessment- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Any lack of comprehension on the part of the assessing officer in understanding the details placed before him cannot confer a justification for reopening the assessment, long after the period of four years had expired. On the facts of this case, it is clear that the escapement of income if any on this account is not on account of any failure on the assessee's part to disclose the material facts fully and truly. The notice issued by the assessing officer in exercise of his power under section 147, therefore, cannot be sustained. The Gujarat High in the case of Garden Silk Mills Ltd. 1996 Tax Pub(DT) 1170 (GupHC) : (1996) 222 IT~QQ27 : (1996) 135 CTR 0409 : (1997) 092 TAXMAN 0022 has held that the notice was issued after four years when there was no failure on the part of the assessee to disclose material facts necessary for assessment. The notice of reassessment was not valid and was liable to be quashed. The Gujarat High Court in the case of Garden Silk Mills Ltd. 1996 Tax Pub(DT) 1170 (Guj-HC): (1996) 222 ITR 0027: (1996) 135 CTR 0409: (1997) 092 Taxman 0022 has held that the notice was issued after four years when there was no failure on the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Bombay High Court in the case of Grindwell Norton Ltd.2004 TaxPub(DT) 11 S.1 (Born-HC) : (2004) 267 ITR 0673 : (2004) 186 CTR 0530 : (2004) 138 TAXMAN 0033 has held that Nowhere in the reasons recorded by the assessing officer, it is stated that there is failure, on the part of the assessee to disclose material facts in the return filed by the assessee. It is not in dispute that in the present case, reopening of the assessment is beyond the period of four years from the end of the relevant assessment year, therefore, notice issued under section 148 beyond four years relevant assessment year was barred by limitation. In the case in hand it is not in dispute that the assessment year involved is 1996-97. The last date of the said assessment year was 31-3-1997 and from that date if four years are counted, the period of four years expired on 1.3.2001. The notice issued on dated 5-11-2002 and received by the assessee on 7.11.2012. Under these circumstances, the notice is clearly beyond the period of four year, by the assessing officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 : (2001) 165 CTR 0193 : (1999) 106 T AXMAN 0508 has held that After completion of the assessment, the assessing officer had issued notice under section 148 read with section 147, to the petitioner, asking the petitioner that its income had escaped as deduction under section 32AB(5) allowed more than the amount permissible under section 32AB of the Act. The petitioner has challenged this notice on the ground that the notice has been issued after four years from the end of the relevant assessment year. Therefore, before the issue of notice, the Income Tax Officer should satisfy whether any income has escaped and that the assessee has failed to disclose fully and truly all material facts necessary for the assessment Sustainable. In circumstances of case, there is hardly any case of escapement of income and Secondly, department has failed to prove that assessee has failed to disclose fully and truly all material facts required for assessment of its income, therefore, notice issued after 4 years from completion of assessment is quashed. Before issue of notice under section 148, if he wants to issue notice after 4 years from the assessment years, the Income Tax Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factual mistake is pointed out. Simply on the basis of audit objection without any positive finding assessment cannot be reopened. The issue of bogus Purchase has already been discussed by the AO while passing the first order dated 11.01.2013 and added back the amount of ₹ 136,197/- stating that on verification of ITS details it has been found that the assessee has received sale consideration of ₹ 136197/- from Reliance Industries Limited which has not been found to be credited in the P/L account and made addition accordingly. The CIT(A} 6 vide his order dated 30.08.2013 has confirmed the addition stating that no explanation has been offered in respect of sale consideration of ₹ 1,36,971/- and accordingly the addition of ₹ 1,36,197/- is confirmed, The AO while framing. the second assessment order dated 27.03.2015 has again made an addition of ₹ 25,192 on account of bogus purchase from Darshan Sales Corporation. As regards to Purchase made from Darshan Sales of ₹ 25,792/- and sale to Reliance Industries for ₹ 1,36,197/-, the AR of the appellate during the second appellate proceedings submitted as under which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase made with M/s. Darshan Sales Corporation amounting to ₹ 25,792/- through Howala and further revenue audit objection for same AY i.e. 2010-11 was raised against the order u/s 143(3) dated 17.1.2013 with regard to Under valuation of stock shown in the books of account of the assessee company for FY 2009-10 relating to AY 2010-11 amounting to ₹ 11,40,63,880/-. As regards to under valuation of stock, the AO in his third order has mentioned at page 4 of the order as under: The assessee as noncompliance on the above said facts. Accordingly, the transaction of the assessee with M/s. Darshan Sales Corporation amounting to ₹ 25,792/- and revenue audit objection for the same assessment year 2010-11 was raised against the order u/s 143(3) dated 17.2.2013 with regards to under valuation of stock shown in the books of account of the assessee company for FY 2009-10 relating to AY 2010-11 amounting to ₹ 11,40,63,880/- is added back to the total income of the assessee. It is clear from the above that one of the reasons for reopening of the case was on the basis of revenue audit objection. In this regard, the reliance is place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities only which are specifically authorised to exercise adjudicatory junctions The Comptroller and Auditor-General's (Duties, Powers Condition) Act does not also envisage such a power. Neither statute supports the conclusion that an audit party can pronounce on the law, and that such pronouncement amounts to information within the meaning of section 147(b), In every case, the ITO must determine for himself what is the effect and consequent of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice, he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot for the purpose of such belief, add to or colour the significance of such law. The true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO. 3. In the instant case, the ITO had, when he made the original assessment, considered the provisions of sections 9 and 10, Any different view taken by him afterwards on the application of those, provisions would amount to a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue s appeal:- Ld. CIT(A) has erred in not considering the provision of Rule 12 of the I.T. Rules, as per which it is mandatory to submit return of income electronically in response to notice under section 148 . Grounds in assessee s Cross Objection: (1) For that the ld. CIT(A) should have considered the entire set of submissions made with regard to the initiation of proceedings u/s 147 which were not initiated in accordance with law. (2) For that the ld. CIT(A) should have held that even on merits the addition was not called for. 5. We have heard the arguments of both the sides and also perused the various relevant materials available on record. The only contention raised by the ld. D.R. in support of the ground raised by the Revenue in its appeal is that there was no compliance on the part of the assessee to the notice issued by the Assessing Officer under section 148 on 31.03.2017 and there was not even any request made by the assessee in writing to treat the return of income originally filed as the return filed in response to notice issued under section 148. However, as pointed out by the ld. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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