Income Tax Appellate Tribunal - Chennai
Acit, Nagercoil vs Shri J. Raj Prabhu, Nagercoil on 28 March, 2017
आयकर अपील य अ धकरण, ' ए ' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, CHENNAI
ी ए.मोहन अलंकामणी, लेखा सद य एवं ी जी. पवन कुमार, या"यक सद य के सम#
BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER
आयकर अपील सं./ I.T.A. No. 2652/Mds/2016
नधा रण वष /Assessment Year : 2011-12
Assistant Commissioner of Income Tax, Shri J. Raj Prabhu,
Circle-1, Vs. 315, Joshuva Street,
Nagercoil. WCC Road, Nagercoil,
Kanyakumari.
[PAN: AEOPR 1899G]
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ% क& ओर से/Appellant by : Shri Shiva Srinivas, IRS JCIT
)*यथ% क& ओर से/Respondent by : None
सन
ु वाई क& तार ख/Date of Hearing : 06.03.2017
घोषणा क& तार ख/Date of Pronouncement : 28.03.2017
आदे श /O R D E R
PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The Revenue filed an appeal against the order of Commissioner of Income Tax (Appeals)-3, Madurai, in ITA No. 0012/2015-16 dated 13.06.2016 passed u/s. 143(3) r.w.s. 147 of the Income Tax Act.
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2. The Revenue has raised the following grounds:
2.1 The CIT(A) has erred in holding that the AO is barred from initiating re-
assessment proceedings u/s. 147 of the Income Tax Act, 1961 when the time limit for issuance of notice u/s. 143(2) of the Income Tax Act 1961 had not expired.
2.2 The CIT(A) ought to have seen that the Income Tax Act, 1961 has no provision barring the Assessing Officer from issuing notice u/s. 148 of the Income Tax Act, 1961 when time for issue of notices u/s. 143(2) of the Income Tax Act, 1961 has not expired and hence ought to have held the re-opening of assessment as valid.
2.3 The CIT(A) ought to have considered the fact that when the capital gains is computed, the relevant claims of deductions and exemptions are also to be considered.
3. The brief facts of the case are that the assessee is an individual and in the business of electronic work services and filed the Return of income for the assessment year 2011-12 on 30.03.2013 with total income of Rs. 12,94,190/-. The Return of income was processed u/s. 143(1) on 25.04.2013. The Ld. AO based on AIR information found that the assessee has transferred the property in the financial year 2010-11 for Rs. 2,13,62,400/- and worked out the capital gains of Rs. 54,34,807/- further the assessee has claimed exemption u/s. 54F of the Act to the extent of Rs. 43,01,975/- without any supporting proof and the Ld. AO having the Reason to believe that the income has escaped assessment and :-3-: I.T.A. No. 2652/Mds/2016 issued notice u/s. 148 of the Act dated 20.08.2013. The assessee filed letter dated 22.05.2014 to treat the original Return of income filed on 30.03.2013 as due compliance of notice and subsequently, the assessee was served with notice u/s. 143(2) of the Act The Ld. AR appeared from time to time and filed the details. The Assessing Officer considered the financial statements and found that the assessee could not substantiate the claim of exemption u/s. 54F of the Act nor produced any evidence to the extent of Rs. 4,09,239/- and in respect of second claim of exemption of Rs. 66,95,823/-. The Assessing Officer dealt on the disputed issue at Page 3 of the order and observed that the assessee could not produce the evidence of construction or purchase of Residential house and brought to tax long term and Assessed income of Rs. 74,84,961/- and passed order u/s. 143(3) r.w.s. 147 on 27.02.2015.
4. Aggrieved by the order, the assessee filed an appeal with the CIT(A). In the appellate proceedings, the Ld. AR of the assessee argued the grounds and reiterated the submissions made before the Assessing Officer and also raised grounds on the validity of re-opening of assessment u/s. 147 of the Act, where Ld. AO has issued notice u/s. 148 of the Act irrespective of the time period for issue of notice u/s. 143(2) of the Act notice has not been expired under the provisions of section 143(2) of the Act notice has to be issued within a period of 6 months from the end of the financial year in which the Return of income was filed. Whereas, the Ld. AO has issued notice u/s. 148 on 20.08.2013, irrespective of the fact that the Return of income was filed by the assessee :-4-: I.T.A. No. 2652/Mds/2016 Belatedly on 30.03.2013. With these observations, the Assessing Officer has erred in issuing notice u/s. 148 of the Act though the time limit of six months was available from the date of end of the financial year in which Return of income was filed. The Ld AR relied on the jurisdictional of the Hon'ble High Court of Madras in the case of CIT vs Qatalys Software Technologies Ltd., 308 ITR 249 (Mds) held that the Tribunal was right in coming to the conclusion that the Assessing Officer was barred from initiating re-assessment proceedings u/s. 147 of the Act when the time limit of issue of notice u/s. 143(2) of the Act had not expired. The Ld. CIT(A) observed the findings at Page 3 to 7 of the order and concluded at Para 3.4 in cancelling the impugned order and allowed the appeal which is read as under:
"3.4 have considered the submissions of the representative. It is seen from the reasons recorded that the assessment was reopened for the purpose of taxing the alleged difference in the sale consideration admitted and as per the AIR information. However, during the course of scrutiny assessment proceedings the Assessing Officer was satisfied with the reply of the appellant and accepted the fact that the share of appellant was only as admitted in the return of income and thereby did not make any addition. In the light of the above facts, the validity of addition made by the Assessing Officer on other issues have to be considered. Sec. 147 provides that while completing the reassessment, the Assessing Officer has to assess the escaped income and any other income which comes to his notice subsequently. The important word here is "and" in sec. 147. When the Assessing Officer has not made any addition in respect of issues for which he reopened the assessment, he has no power to make any other addition which comes to his notice subsequently. Even after :-5-: I.T.A. No. 2652/Mds/2016 introduction of Explanation-3, the position is the same as Explanation
-3 only explains the scope of sec.147 and it does not extend the scope of main section. Explanation - 3 was inserted because some judicial authorities were taking the view that the Assessing Officer could not make addition other than the issues for which the assessment was reopened even though addition was made in respect .of issues mentioned in the reasons recorded for reopening. To overcome such decisions, Explanation-3 was inserted providing that if the Assessing Officer makes any addition in respect of issues for which the assessment was reopened, he can make addition in respect of other issues for which the reasons have not been recorded and the condition is that he has to necessarily make addition in respect of issues for which the assessment was reopened. This is clear from the Explanatory Notes for Finance Act (No.2) of 2009 as per Circular NO.05/2010 dated 03.06.2010 which reads as under:-
"47.1 The existing provisions of section 147 provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of section 148 to 153, assess or reassess such income and also any other income chargeable to tax, which has escaped assessment. Further, Assessing Officer may also assess or reassess such other income which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section. Assessing Officer is required to record the reasons for reopening the assessment before issuing notice under section 148 with a view to reassess the income of assessee.
:-6-: I.T.A. No. 2652/Mds/2016 47.2 Some Courts have held that the Assessing Officer has to restrict the reassessment proceedings only to the reasons recorded for reopening of the assessment and he is not empowered to touch upon any other issue for which no reasons have been recorded. The above interpretation is contrary to the legislative intent.
47.3 Therefore, to articulate the legislative intention clearly Explanation 3 - have been inserted in section 147 to provide that the assessing officer may examine, assess or reassess any issue relevant to income which comes to is notice subsequently in the course of proceedings under this section, notwithstanding that the reason for such Issue has not been included in the reasons recorded under sub-section (2) of section 148.
47.4 Applicability - This amendment has been made applicable with retrospective effect from 1st April, 1989 and will apply accordingly in relation to assessment year 1989-90 and subsequent years."
In the case of the appellant, the Assessing Officer has not made any addition in respect of reasons recorded by him and, therefore, no other addition can be made. In view of the above, I find that the Assessing Officer was not justified in restricting the claim of deduction u/s.54F for which he had not recorded the reasons while reopening the assessment.
3.5 In view of the above discussion, the impugned order is cancelled. As I have cancelled the irnpugned order, I do not find it necessary to deal with the other grounds raised by the appellant on merits.
4. In the result, the appeal is ALLOWED."
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5. Aggrieved by the CIT(A) order, Revenue has filed an appeal with the Tribunal. Before us, the Ld. DR argued that the Ld. CIT(A) has erred in observing that the AO is barred from initiating re-assessment proceedings when the time limit for issue of notice u/s. 143(2) has not expired. The Ld. CIT(A) should have considered the merits of the case before cancelling the impugned order u/s. 143(3) r.w.s. 147 of the Act and prayed for resorting the order of the Assessing Officer. Contra, the Ld. AR relied on the orders of CIT(A) and supported with the decision of the jurisdictional High Court.
6. We heard the rival submissions, perused the material on record and judicial decisions. The sole substantive dispute alleged by the Ld. DR that the Ld. CIT(A) has quashed the re-assessment proceedings as the Ld. AO has issued notice u/s. 148 of the Act when the time limit has not expired for issuance of notice u/s. 143(2) of the Act was available for the said assessment year. We find the issue is squarely covered by the jurisdictional High Court decision CIT vs Qatalys Software Technologies, 308 ITR 249 (Mds) held as under:
"3. We have heard the argument of the learned counsel for the revenue, who submitted that the issue has already been decided against the revenue by the above cited Judgement of the Division Bench of this Court.
4. We have also perused the above referred Judgment of the Division Bench of this Court dated 4.7.2007, wherein it is held as follows:-
"Applying the principles enunciated in the judgments of the Supreme Court as well as the Delhi High Court, cited supra, the Tribunal is right in coming to a conclusion that no action could be initiated under section 147 of the Act, when there is :-8-: I.T.A. No. 2652/Mds/2016 a pendency of the Return before the Assessing Officer. The reasons given by the Tribunal are based on valid materials and evidence and we do not find any error or illegality in the order of the Tribunal so as to warrant interference".
5. Following the said decision, these appeals are dismissed. Consequently, connected miscellaneous petition is also dismissed. We respectfully following the jurisdictional High Court decision and Apparent facts, found the Ld. CIT(A) has dealt exhaustively on the provisions of law and facts vis-a-vis explanations of the assessee and allowed the appeal. Accordingly, we are not inclined to interfere with the order of the CIT(A) and uphold the decision and dismiss the grounds of the Revenue.
7. In the result, the Revenue appeal is dismissed.
Order pronounced on Tuesday, the 28th day of March, 2017 at Chennai.
Sd/- Sd/-
(ए. मोहन अलंकामणी )
(जी. पवन कुमार)
(A. MOHAN ALANKAMONY)
(G. PAVAN KUMAR)
लेखा सद#य /ACCOUNTANT MEMBER )या यक सद#य/JUDICIAL MEMBER
चे नई/Chennai,
0दनांक/Dated: 28th March, 2017
JPV
आदे श क& )"त2ल3प अ4े3षत/Copy to:
1. अपीलाथ%/Appellant 2. )*यथ%/Respondent 3. आयकर आय5
ु त (अपील)/CIT(A)
4. आयकर आय5
ु त/CIT 5. 3वभागीय )"त"न ध/DR 6. गाड9 फाईल/GF