Income Tax Appellate Tribunal - Kolkata
Infinity Infotech Parks Ltd, Kolkata vs Department Of Income Tax on 18 December, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA
[Before Shri Shamim Yahya, A.M. & Shri George Mathan, J.M.]
I.T.A. No.1316/Kol/2012
Assessment Year : 2006-07
DCIT, Circle-2, Kolkata ..(Appellant)
-Vs-
M/s. Infinity Infotech Parks Ltd. ..(Respondent)
Date of concluding the hearing : 18.12.2013
Date of pronouncing the Order : 20.12.2013
Appearances : For the Appellant :Shri Sanjoy Mukherjee, JDIT, Sr.(DR)
: For the Respondent :Shri D.S.Damle
ORDER
Per Shri Shamim Yahya, A.M.
This appeal by the Revenue is directed against the order of the CIT(A) dated 13th June, 2012 and pertains to the assessment year 2006-07.
2. Grounds of appeal raised read as under:
"1. That, the Ld. CIT(A) erred in holding that Explanation 3 to Section 147 of the Income-tax Act, 1961, is not applicable in the instant case and, therefore, the Order u/s 147 of the Act is ab initio void.
2. That the Ld. CIT(A) erred in deleting the addition of Rs.85,19,876/-, being unaccounted receipt of the assessee, while computing the book profit u/s 115 JB of the Income-tax Act, 1961."
3. Apropos the issue of reopening In this case the assessment was reopened for the following noted reasons:
"During the course of the assessment proceedings in the Asst. Year 2007-08, it was noticed that the assessee company was showing deposit of Rs.86.74 lakhs 2 ITA No.1316/K/12 M/s. Infinity Infotech Parks Ltd.
received from the buyer of the office space developed by the assessee company. The said deposit was being claimed as refundable after 270 years to the buyer. On this ground, the said deposit was not shown as part of the sale consideration.
As this was a ploy adopted by the assessee to suppress the sale proceeds, the said deposit was treated as part of sale consideration while finalizing the assessment order for the Asst. year 2007-08.
During the course of the said assessment proceedings, it was noticed that the assessee company has shown the said deposits in Asst. year 2006-07 also, which was not considered as part of the sale proceeds."
4. In the written objections filed before the AO the assessee claimed that the reasons and the grounds on which the AO had formed his reasons to believe were found not acceptable by the appellate authorities in the assessee's own case for A.Y. 2007-08. In the assessment for A.Y. 2007-08 addition to the returned income was made by the AO on the ground that refundable security deposit received from the lessee was assessee's income chargeable to tax. The addition made in A.Y. 2007-08 was however deleted in appeal and the Revenue accepted the order of the ITAT by not preferring an appeal u/s 260A of the Income Tax Act. In these facts the assessee claimed that the proceedings u/s 147 in A.Y. 2006-07; on the same ground could not be proceeded with because on the same ground it could not be held by AO that any income had escaped assessment. The AO accepted this factual aspect of the A/R's submissions and therefore he did not pursue the issue on which the assessment was reopened. Accordingly in the impugned order no addition was made by him with reference to the reasons recorded u/s 148(2) of the Act.
5. However, the AO proceeded with the reassessment proceedings with reference to some other issues for which reasons were not recorded. The AO proceeded to compute the total income of the assessee under section 115JB at Rs.2,06,31,753/- as opposed to total income originally assessed under section 115JB at Rs.1,21,11,877/-.
3 ITA No.1316/K/12M/s. Infinity Infotech Parks Ltd.
6. Upon assessee's appeal, the ld. CIT(A) accepted the contention of the assessee that the AO was not competent to continue with the proceeding under section 147 on some other issues or grounds which were not mentioned in the reasons recorded under section 148(2). The ld. CIT(A) held as under:
"9. A plain reading of Explanation (3) to Sec. 147 shows that for the purpose of reassessment u/s 147 the AO can reassess income in receipt of an issue which escaped assessments and such other income which comes to his notice subsequently in the course of proceedings under the said section even though the reasons for such issue/income were not included in the recorded reasons. The explanation (3) however pre-supposes that the issue with reference to which the reason was recorded, was found to be legally & judicially tenable and with reference thereto the AO is able to prove that income had indeed escaped assessment. It is only when the AO is able to establish valid initiation of reassessment proceedings with reference to the recorded reasons and in the reassessment u/s 147; such income is also assessed; only then the AO will be able to be expand the scope of reassessment proceedings by assessing any other escaped income which comes to his notice in the course of reassessment. If on the other hand the AO is not able to justify the reopening of a concluded assessment with reference to reasons recorded u/s 148(2) or where on examination of assessee's submissions AO agrees that on the basis of reasons recorded it cannot be held that income had escaped assessment within the meaning of Sec. 147 then in such an event the very reopening of a concluded assessment stands vitiated and therefore the AO can not expand the scope of reassessment by including some more issues or reasons which did not find mention in the reasons recorded u/s 148(2).
10. This proposition is supported by the decision of the Bombay High Court in the case of CIT Vs Jet Airways India Ltd (331 ITR 236) and the Delhi High Court in the case of Ranbaxy Laboratories Ltd. Vs CIT (336 ITR 136)."
Accordingly, the ld. CIT(A) held that the impugned order suffered from infirmity, which was without jurisdiction and ab initio void. Therefore, the same was cancelled. Against the above order, the Revenue is in appeal before us.
4 ITA No.1316/K/12M/s. Infinity Infotech Parks Ltd.
7. The ld. Counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. Vs CIT (336 ITR 136) and the Hon'ble Bombay High Court in the case of CIT Vs Jet Airways India Ltd (331 ITR 236) and the decision of the Coordinate Bench of the Tribunal in the case of Bhagirath Chandak -vs- ACIT in ITA No.545/Kol/2012 for the assessment year 2002-03 vide order dated 15.03.2013. He contended that according to ratio emanating from the above decisions that when the AO recorded the reasons for disallowance on a particular item but made addition entirely on new issue, the same was not sustainable.
8. The ld. DR, on the other hand, relied upon the orders of the AO. He further placed reliance upon Explanation 3 to section 147 of the I.T. Act. He contended that the AO's order in this regard may be sustained.
9. We have carefully considered the submissions of both the Counsels and perused records. It is undisputed in this case is that the proceedings under section 147 were initiated by the AO because he had reasons to believe that refundable security deposits collected by the assessee from the lessees during financial year 2005-06 escaped assessment as these were not assessed as income in order under section 143(3). However, when the assessee objected to these reasons and submitted that additions for the same reasons were earlier deleted by the appellate authorities, AO accepted the objections and agreed with the assessee that refundable security deposits collected were not chargeable as income of the assessee. However, the AO made addition of Rs.85,19,576/- on some other issue being unaccounted receipt of the assessee.
10. In these circumstances, we find that the decisions cited by the ld. Counsel of the assessee are applicable to the facts of the case. In this regard, we can gainfully refer to the exposition by this Tribunal in the case of Bhagirath Chandak (supra), which is reproduced as hereunder:
5 ITA No.1316/K/12M/s. Infinity Infotech Parks Ltd.
"5. We find that this is a purely jurisdictional issue and being a legal issue but factually the AO has made disallowance while invoking the provisions of section 14A of the Act but reasons recorded for issuance of notice u/s. 148 of the Act by the AO are entirely different that the assessee has deducted interest on loan from salary income. We find from section 148 of the Act, which is supplementary and complementary to section 147 of the Act that subsection (2) of section 148 of the Act mandates reasons for issuance of notice by the AO and sub-section (1) mandates service of notice to the assessee before AO proceeds to assess reassess or recomputed escaped income. Section 147 of the Act mandates recording of reasons to believe for the reason that income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. We are of the view that the AO has the jurisdiction to reassess the issues other than the issues in respect of which proceedings were initiated but he was not justified with the reasons for the initiation of the proceedings ceased to survive. Even in explanation (3) if during the course of proceedings, the AO comes to a conclusion that some items have escaped assessment than notwithstanding that those items were not included in the reasons to believe as recorded for initiation of proceedings and the notice, he would be competent to make assessment of those items. But once the reasons for initiation of those proceedings ceased to survive, the AO has no jurisdiction to reassess the issues other than the issues in respect of which proceedings were initiated and those ceased to survive. Here in the present case also, AO recorded the reason for disallowance of expenses by invoking the provisions of section 14A of the Act but made addition entirely on new issue i.e. disallowance of interest on borrowed funds. As cited by Ld. counsel for the assessee the issue is squarely covered by the decision of Hon'ble Delhi High Court in the case of Ranbaxy Laboratory Ltd. (supra) as well as the case law of Hon'ble Bombay High Court in the case of Jet Airways India Ltd. (supra). Respectfully following the same, we allow the appeal of assessee on jurisdictional issue.
11. We further find that similar view was taken by the Hon'ble Bombay High Court in the case of CIT-vs- Jet Airways India Ltd. (supra) and Hon'ble Delhi High Court in the case of Ranbaxy Laboratories India Ltd. (supra). The ratio laid down in these 6 ITA No.1316/K/12 M/s. Infinity Infotech Parks Ltd.
decisions is that reassessment must be in the first place, be in respect of income escaped assessment for which the reasons were recorded and only thereafter in respect of some other items of escaped income. If, however, the income, escapement of which was the foundation for recording of reasons to believe, is not assessed or reassessed in the order under section 147, then it is not mere open to the AO to independently assess any other income, which comes to his notice subsequently.
12. In the background of aforesaid discussion and precedents, we uphold the order of ld. CIT(A) that the AO was not competent to continue with the proceedings under section 147 in this case and the assessment lacks jurisdiction and hence the same is void ab initio. Since we have allowed the jurisdictional issue in favour of the assessee, adjudicating on the merits of the case is only of academic interest. Hence, we are not dealing with the same.
13. In the result, this appeal filed by the Revenue stands dismissed.
This Order is pronounced in the court on 20th December, 2013.
Sd/- Sd/-
(George Mathan) (Shamim Yahya)
Judicial Member Accountant Member
th
Dated : 20 December, 2013
Copy of the order forwarded to:
1. M/s. Infinity Infotech Parks Ltd., Plot A-3, Block-GP, Infinity Towers, Sector-V, Salt Lake, Kolkata - 700 091.
2 DCIT, Circle-2, Kolkata
3. The CIT(A),
4. CIT,
5. DR, True Copy, By order, Asstt. Registrar, ITAT, Kolkata Talukdar(Sr.P.S.) 7 ITA No.1316/K/12 M/s. Infinity Infotech Parks Ltd.