Income Tax Appellate Tribunal - Delhi
Dcit, New Delhi vs M/S. Tilak Exports, New Delhi on 16 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'D', NEW DELHI
BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER
AND
SH. O.P. KANT, ACCOUNTANT MEMBER
ITA No.3048/Del/2013
Assessment Year: 2006-07
DCIT, Vs. M/s. Tilak Exports,
Circle -22(1), Room No. 1205, D-901, New Friends Colony,
12th Floor, Civic Centre, New New Delhi
Delhi
PAN : AAAFT5772A
(Appellant) (Respondent)
Appellant by Sh. Amit Jain, Sr.DR
Respondent by None
Date of hearing 15.02.2018
Date of pronouncement 16.03.2018
ORDER
PER O.P. KANT, A.M.:
This appeal by the Revenue is directed against order dated 18/02/2013 passed by the Ld. Commissioner of Income-tax (Appeals)-XXIII, New Delhi [in short the 'Ld. CIT(A)'] for assessment year 2006-07 raising following grounds:
1. On the facts and on the circumstances of the case the Ld. CIT(A) has erred in quashing the issue of notice u/s 147 of the I.T. Act.
2. On the facts and on the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.9,99,00,265/-
made by the AO u/s 40(a)(ia) of the I.T. Act, 1961.
23. The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal.
2. At the outset, it is mentioned that despite notifying the date of hearing to the assessee, neither anyone attended on behalf of the assessee nor any written submission was filed on behalf of the assessee. On last few occasions also none attended on behalf of the assessee and hence, we were of the opinion that adjourning the case again would not serve the any purpose and thus we proceeded to hear the case ex party qua the assessee, after hearing arguments of the departmental representative.
3. Briefly stated facts are that in the case of the assessee for the year under consideration, assessment under section 143(3) of the Income-tax Act, 1961 (in short 'the Act') was completed on 24/04/2008 accepting the returned income i.e. nil income. Subsequently, the Assessing Officer noticed that the assessee was not entitled for deduction of expenditure of Provident Fund (PF) (Rs.21,69,869/-) and Employees State Insurance Contribution (ESIC) (Rs.3,43,453/-. The Assessing Officer also noticed that tax deducted at source (TDS) amounting to Rs.35,09,901/-had been deposited late and hence, the corresponding expenditure was disallowable under section 40(a)(ia) of the act. Accordingly, he issued notice under section 148 of the act on 31/03/2011. In response, the assessee filed return of income on 06/06/2011 declaring nil income. In reassessment proceedings, the Assessing Officer accepted the submission of the assessee that PF and ESIC deposited before the due date of filing of the Income-tax Return was allowable in view 3 of the decisions of the Supreme Court reported in 213 ITR 268(SC) and 297 ITR 230(SC), however, on the issue of late deposit of TDS, the Assessing Officer found that TDS had been deposited late by several months. According to him under section 40(a)(ia) of the Act expenditure of payment to contractors was deductible only if tax had been deducted and paid before the end of the previous year, and in case where the tax had been deducted during the last month of the previous year, if the tax had been paid before the due date of filing of return of income. The Assessing Officer, accordingly disallowed the claim of deduction of payment to contractors of Rs.9,99,00,265/-. On further appeal before the Ld. CIT(A), the assessee challenged assumption of jurisdiction as well as merit of the addition. The Ld. CIT(A) held the reassessment proceedings under section 147 of the Act as bad in law on the ground of reopening on change of opinion and not disposing off the objections of the assessee to issuance of notice under section 148 of the Act, in compliance to the direction of the Hon'ble Supreme Court in the case of CIT versus GKN Driveshaft (India) Private Limited, 259 ITR 19 (SC). The Ld. CIT(A) also deleted the addition on merit holding that TDS corresponding to payment of Rs.9,99,00,265/- was deposited before the due date of filing of return of income under section 139(1) of the act and thus it was allowable in view of the various judicial decisions.
3.1 Aggrieved, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above.
4. Before us, the Ld. Departmental Representative relied on the order of the Assessing Officer and submitted that the assessment 4 order might be upheld both on the ground of validity of the reassessment proceedings as well as addition on merit. 4.1 We have heard the submission of the Ld. DR and perused the relevant material on record. In the facts of the case reproduced above, it is evident that the Assessing Officer has reopened the assessment on same set of facts available before him without any fresh information or material before him. The Ld. CIT(A) after taking into consideration detailed submission of the assessee challenging the validity of the reassessment proceeding, held the reassessment as bad in law. The relevant finding of the Ld. CIT(A) is reproduced as under:
"4. The above written submissions have been carefully considered. The grounds of appeal nos. 1 and 2 pertain to the objection to the validity of the reassessment proceedings u/s 147. Grounds of appeal nos. 3 and 4 relate to the disallowance made u/s 40(a)(ia) of Rs. 9,99,00,265/- on account of late deposit of TDS. The remaining grounds of appeal are general/consequential in nature. In respect of grounds of appeal nos. 1 and 2, the appellant has submitted that an original assessment was completed u/s 143(3) and the assessment could not be reopened u/s 147, "unless any income chargeable to tax has escaped assessment for such assessment year, by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year". The appellant has submitted that the issue of late payment of TDS was evident from annexure VII of the form 3CD report which had been filed alongwith the return of income. Hence there was no new material before the Assessing Officer, and no failure to disclose material facts on the part of the appellant. Moreover the appellant vide its letter dated 14.11.2011, had objected to the issuance of notice u/s 148, but the Assessing Officer completed the assessment proceedings without disposing of the appellant's objections by a speaking order, as required in view of the Apex Court judgement in the case CIT vs. GKN Driveshafts (India) Pvt. Ltd. 259 ITR 19 the appellant's challenge to the reopening of the assessment, after framing of an assessment u/s 143(3), on the grounds that it amounts to change of opinion, bears considerable merit. The Supreme Court in the case of CIT Vs. Kelvinator India Ltd. (2010) 320 ITR 567 has held that, "The 5 Assessing Officer has no power to review; he has the power to reassess, but the reassessment has to be based on fulfilment of certain pre conditions and if the concept of change of opinion is removed, then in the garb of reopening assessment, review would take place." In the case of CIT vs. Bhanji Lavji (1971) 79 ITR 582 (SC), it was held that, "When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer will not be entitled on change of opinion to commence proceedings for reassessment." The Supreme Court also held in the case of ITO Vs. Nawab Mir Barkat AN Khan Bahadur (1974) 97 ITR 239, that, "having second thoughts on the same material, and omission to draw the correct legal presumption during original assessment do not warrant the initiation of a proceeding u/s 147." There can be no doubt that in this case the reopening has proceeded from a change of opinion on a set of facts which were disclosed in the audit report filed with the return of income, and which had been subjected to a scrutiny assessment u/s 143(3). Hence, on this account alone, the reassessment proceedings u/s 147 are found to be bad in law.
4.1 Moreover, the Assessing Officer failed to deal with the appellant's objection to the reopening of the assessment, made vide its written application dated 14.11.2011. In the case of CIT Vs. GKN Driveshafts (India) Pvt. Ltd. (supra), the Apex Court has held that the Assessing Officer is bound to dispose of objections to issuance of notice u/s 148, by passing a speaking order before proceeding with the assessment. The Assessing Officer in this case has patently failed to dispose of the objections of the appellant to the issuance of the notice u/s 148, either before the assessment was framed, or even in the body of the assessment order. Respectfully following the Apex Court pronouncement, the order of the reassessment u/s 147 is liable to be quashed on this account as well."
4.2 Before us, the Ld. DR, could not controvert the finding of the Ld. CIT(A) that reopening of the assessment was based on mere change of opinion on same set of facts which were available during original assessment proceedings under section 143(3) of the Act. We find that Hon'ble Supreme Court in the case of CIT versus Kelvinator of India reported in 320 ITR 561 held that 'the assessing officer deemed to have applied his mind if facts are on record and reopening under section 147 of the act on change of opinion is not permissible even within 4 years from the end of the 6 assessment year'. The Ld. DR also could not controvert the finding of the Ld. CIT(A) that the Assessing Officer failed to dispose off the objections of the assessee against issuance of notice under section 148 either before framing the assessment order or even in the body of the assessment order, which is a prerequisite in view of the decision of the Hon'ble Supreme Court in the case of CIT versus GKN driveshaft (India) P Ltd (supra). In view of above, we do not find any error in the order of the Ld. CIT(A) in holding the reassessment proceeding as invalid and accordingly, we uphold his finding on the issue and dispute. The ground No. 1 of the appeal of the Revenue is accordingly dismissed.
5. In ground No. 2, the Revenue has challenged the addition on merit. The Ld. CIT(A), deleted the addition on merit observing as under:
"4.2 Further, the appellant is entitled to relief even on the merits of the disallowance, disputed at grounds of appeal nos. 3 and 4. The appellant has submitted that the TDS was paid before the due date for filing of return of income for the year under consideration. The Finance Act, 2010, has amended the provisions of section 40(a)(ia) w.e.f. 01.04.2010, whereby no disallowance is required to be made when the TDS has been paid on or before the due date specified in section 139(1). The Hon'ble Calcutta High Court in the case of CIT Vs. Virgin Creations vide order no. ITA/302 of 2011 dated 23.11.2011, has held that the amendment to section 40(a)(ia) has retrospective operation, since it .is a beneficial amendment. In this connection the Hon'ble High Court placed reliance on the judgements of the Supreme Court in the case of Allied Motors Pvt. Ltd. Vs. CIT (1997) 224 ITR 677, and in the case of CIT Vs. Alom Extrusion Ltd. (2009) 319 ITR 306, wherein it was held 7 that an amendment which is curative in nature is retrospective in operation. The said judgement of the Calcutta High Court in the case of CIT vs. Virgin Creations has been followed by the ITAT, Mumbai, in the case of Piyush C Mehta Vs. ACIT (2012) 52 SOT 27, by the ITAT, Cuttack, in the case of Sanjay Kumar Pradhan Vs. ACIT (2012) 14 ITR (Trib.) 150, and by the ITAT, Bangalore, in the case ACIT Vs. M. K. Gurumurthy (2012) 32 CCH 049.
Moreover the jurisdictional ITAT, vide order no. ITA 3592/Del./2011 dated 22.05.2012 in the case of ITO Vs. Taru Leading Edge (P) Ltd., has also followed the view taken by the Calcutta High Court that the amendment to the provisions of section 40(a)(ia) of the Act by the Finance Act, 2010, is applicable retrospectively from 01.04.2005. Indisputably, in the instant case, the appellant has deposited the tax deducted at source of Rs. 9,99,00,265/- before the due date for filing return of income u/s 139(1) of the Act. In view of the judicial pronouncements, the appellant deserves to succeed at grounds of appeal nos. 3 and 4 as well."
5.1 Though the Ld. DR, supported the order of the Assessing Officer, however, he could not controvert the finding that tax deducted at source corresponding to the payment of Rs.9,99,00,265/- to contractors was deposited in government account before the due date of filing of return under section 139(1) of the Act. The Ld. CIT(A) has referred the amendment introduced to section 40(a)(ia) of the Act by way of Finance Act, 2010, whereby no disallowance is required to be made when the TDS has been paid on or before the due date of filing of return of income as specified in section 139(1) of the Act. Further, the Ld. CIT(A) has relied on various judicial decisions and held that said amendment is applicable retrospectively from 01/04/2005. In view of the above finding, he deleted the addition on merit. In our 8 opinion, finding of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same, accordingly we uphold the same. The ground No. 2 of the appeal is, thus, dismissed.
6. The ground No. 3 of the appeal being general in nature, and dismissed as infructuous.
7. In the result, appeal of the Revenue is dismissed.
The decision is pronounced in the open court on 16th March., 2018.
Sd/- Sd/-
(BHAVNESH SAINI) (O.P. KANT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 16th March, 2018.
RK/-(D.T.D)
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi