Income Tax Appellate Tribunal - Chandigarh
Dcit, Chandigarh vs M/S Goyal Builders, Chandigarh on 30 January, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'A', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.90/Chd/2015
(Assessment Year : 2009-10
The D.C.I.T., Vs. M/s Goyal Builders,
Central Circle-II, # 245, Industrial Area,
Chandigarh. Phase-I, Chandigarh.
P A N : AACCP1419K
(Appellant) (Respondent)
Appellant by : Shri Gulshan Raj, CI T DR
Respondent by : Shri Tej Mohan Singh
Date of hearing : 02.11.2017
Date of Pronouncement : 30.01.2018
ORDER
Per ANNAPURNA GUPTA, A.M.:
Th i s a p p e a l h a s b e e n p r e f e r re d by t h e R e v e n u e a ga i n s t t h e o r d e r o f L d . C o m m i s s i o n er o f I n co m e Ta x ( A p p e a l s ) - 3, G u r g a o n ( h e re i na f t e r r e f e rr e d to a s ' C I T( A p p eal s ) ' ) d a t e d 2 7 . 1 1 . 2 0 14 r e l ati n g t o a ss e s s m ent y e a r 2 00 9 - 1 0 .
2. Th e s o l e i s s ue i n t h e pr e s e n t ap p e a l p er t a i n s to t h e v a l i d i t y o f t h e as s e s s m e n t f r a m ed u / s 1 4 7 o f t he I n c o me Ta x A c t , 1 9 6 1 ( i n s h o r t ' t he A c t ) .
B r i e f f a c ts i n t hi s c a s e a r e th a t t h e a s s e s se e d e al s i n t h e b u s i ne s s o f sa l e a n d pu r c h a se o f p r o pe r t i e s. Se a r c h a n d seizure o p e r at i on was c o n d u c te d on the assessee on 1 6 . 0 1 . 2 0 09 , i n p u r s u a n c e t o whi c h a s s e s s me n t w a s f r a m e d u / s 1 5 3 A ( 1 ) ( b) r . w . s . 1 4 3 ( 3 ) o f t he A c t o n 2 9 . 1 2 . 20 1 0 a t N I L income. S u b s e qu e n t l y th e c a se of t he a s s es s e e w as 2 reopened u/s 148 of the Act and addition made of R s . 4 8 , 5 6 ,0 0 0 / - by a p p l yi n g t he provisions of section 4 0 A ( 3 ) o f t he A ct , o n a c c o u nt o f p u r c h a se o f l a nd m a d e i n cash.
3. B e f o r e t h e L d. CI T( A p p e a l s ) , t h e a s s e s s e e c h al l e n g e d t h e r e o pe n i n g o n t h e g ro u n d th a t i t w a s b a s ed o n c h a n g e o f opinion, w h i ch the Ld . CI T( Ap p e a l s ) a g r e ed with and q u a s h e d th e r e- as s e s s m e n t p r o c ee d i n g s ho l d i n g at p a r a 5. 1 o f h i s or d e r a s un d e r :
5.1. I have considered the assessee's submission and the impugned order. It is seen that copy of the reasons for re-
opening the case was provided to the assessee. Assessee had filed his objection before the AO, stating inter-alia that the reopening proceedings were on account of change of opinion as in the original assessment proceedings, specific query was made in that regard and that the compelling circumstances under which the cash payments were made to the sellers of land had been explained. That thereafter no additions had been made by the AO.
Before me, the assessee contended that section 147 read with section 148, did not confer jurisdiction based on change of opinion. Copy of letter dated 16.12.2010 addressed to the AO on the subject of cash payment for purchase of land was filed. A copy of the original order u/s 153A(l)(b) r.w.s 143(3) passed on 29.12.2010 was also furnished. The AO noted that the return was accompanied with the audit report in form No. 3CA and 3 CD alongwith audited balance sheet, P/L account and its allied annexure. The outcome being the loss return of Rs.2,06,819/- was not allowed to be carried forward and the income was assessed at NIL. The assessment order was passed after obtaining prior approval of the Addl. CIT Central Range on 29.12.2010. As the search was conducted on 16.1.2009, this instant AY would be the relevant assessment year.
Needless to say re-examining of issues already examined in the original assessment without any fresh evidence coming into play would tantamount to change of opinion, thereby making the reassessment proceedings invalid. The impugned order is silent on the assessee's objection on legal grounds to the reopening proceedings, though it contains a reproduction of the assessee's contentions. Only the merits had been considered. The provisions of sec 153A pertain to special procedures prescribed for assessment of 3 search cases and it starts with a non obstante clause. To reiterate, this is a search case and assessment stood framed u/s 153A with the prior approval of the Addl.CIT. There is nothing in the impugned order in defence of the action of reassessment or that such query on the cash payments had not been asked or that no opinion had been formed on the issue at the time of original proceedings. It is apparent that there is no external fresh evidence in the possession of the AO. Needless to say, there has to be a finality of to an assessment; that too framed consequent to search with prior approval as per sec 153D. Thus considering the discussion above, I am compelled to quash the reopening proceedings and treat the impugned assessment as invalid. Assessee succeeds on this ground of appeal."
4. A g g r i e v e d b y t he s a m e , t h e Re ve n u e h a s c o me u p i n a p p e a l b ef o r e us , r a i s i n g f o l l o w i ng g r o u n d :
" W h e th e r o n th e f ac ts an d c ir c u ms t an c e s o f th e c as e , th e L d . C IT ( A © , G u r g ao n is ju s tif ie d i n q u as h in g th e a s s e s s me n t f r a me d u / s 1 48 by c al l in g i t c h an g e o f o p in io n e v e n wh e n n o q u e r y wa s r ai s e d wi th r e s p e c t to c as h p ay me n ts n o r an y c o n c l u s io n was d e r iv e d . "
5. We have heard the learned representatives of both the parties. The Ld. DR has contended that the present is not a case of reopening resorted to on the basis of mere change of opinion, since no query was raised by the AO vis a vis the impugned issue of cash payments having been made, exceeding the prescribed limit, for purchases. Ld. DR contended that the reply filed by the assessee on 16-12-10 appears to be suo moto. Ld. DR contended that since no query was raised, the AO could not be said to have formed an opinion ,though the assessee had filed a reply relating to the issue. Submissions to this effect were also filed in writing before us vide letter dated 11.1.2017 which are reproduced hereunder:
"The case is listed for hearing on 11.01.2017.
2. The only ground of appeal raised by the Revenue is that 4 Ld CIT (A) has erred in quashing the assessment order passed u/s 147 r.w.s. 153A(1)(b) r.w.s 143(3)of the Act on the ground the reassessment proceedings was wrongly initiated as it involved' change of opinion'.
3. Facts in brief are that order u/s 153A(1)(b) r.w.s. 143(3) was passed in this case on 29.12.2010. Subsequently the assessment was reopened vide notice u/s 148 dated 23.10.2013. The reasons of reopening was that the assessee had made payments in cash amounting to Rs.48,56,000/- in contravention to section 40A(3) r.w. Rule 6DD. After considering the detailed explanation submitted by the assessee in this regard, the Ld AO made the said additions u/s 40A(3).
4. The assessee challenged the reopening on the ground that the AO had examined this issue in the original proceedings u/s 153A. And that the reopening on this issue amounted to 'change of opinion'.
5. The Ld CIT(A) agreed with the assessee and quashed the reassessment order passed u/s 147 r.w.s.153A(1)(b) r.w.s.143(3). This has been discussed at para 5.1 of the CIT(A)'s order. The Ld CIT(A) did not decide the issue on merits. The Revenue is in appeal before the Hon'ble Bench against the order of the Ld CIT(A).
6. The above decision of Ld CIT(A) is not acceptable for the simple reason that the Ld CIT(A) erred in not examining the assessment records to find out whether the Ld AO had formed any opinion on this issue or not. If the Ld AO had not formed any opinion on the said issue the question of any 'change of opinion' does not arise at all. Various courts of held that change of opinion' involves initial formation of opinion by the assessing officer. If the assessment records show that the assessing officer had not formed any opinion on an issue (involving escapement of income) in the original assessment proceedings, reopening the said assessment on the said issue will not amount to 'change of opinion'.
6.1 Perusal of the assessment records show that the assessing officer did not raise any query pertaining to any disallowances to be made u/s 40A(3). There is, however, a letter dated 16.12.2010 from Ashwani K Gupta & Associates, CA explaining reasons for making payments in cash. It is very surprising as to why the assessee has submitted this letter when there was no questionnaire issued by the assessing officer in respect of section 40A(3) nor was there any query raised vide order sheet noting nor was there any mention of this issue being examined by way of office note to the assessment order. It means the assessee suo moto has submitted this explanation for reasons best known to him. However, the fact remains that the assessing officer did not raise this issue in the original assessment proceedings nor did he take note of the above letter submitted by the assessee. The assessment records clearly show that no enquiry/opinion was made /formed by the assessing officer on this issue. So the question of any change of opinion does not arise at all [Assessment records for the relevant year is furnished before Hon'ble Bench for perusal].\ 6.2 Reliance in this regard is placed on the following case laws: a. Tilak Raj Bedi vs JCIT [2009] 319 !TR 385 (PUNJ. & HAR.):
5
"4. After following the due procedure, reassessment was made and claim of the assessee under section 80-1B of the Act was negatived. On appeal, the Commissioner of Income-tax(Appeals) rejected the objection of the assessee to reopening of assessment. It was held that from the original order of assessment, it could not be inferred that the Assessing Officer had formed any opinion on admissibility of deduction under section 80-IBoftheAct and thus, no change of opinion was involved in initiating proceedings. The judgment of this court in Vipan Khanna v. CIT [2002] 255 ITR 220 was, accordingly, distinguished
8. After hearing learned counsel for the parties, we are of the view that no substantial question of law arises as the impugned judgment of the Tribunal is consistent with the settled law on the point. The power of reassessment can be validly exercised if satisfaction is arrived at after following due procedure that income had escaped assessment. Such satisfaction may involve change of opinion but was not at par with "mere change of opinion". If satisfaction is arrived at on the basis of any relevant material, such satisfaction cannot be assailed, in the present case, the Assessing Officer has referred to proceedings for the subsequent assessment years. In such a situation, the judgments relied upon on behalf of the assessee are clearly distinguishable. The law for exercise of power of reassessment has been authoritatively settled by the hon'ble Supreme court, inter alia, in A. L. A. Firm v. CIT 11991] 189 ITR 285: [1991] 2 SCO 558. The view of the Tribunal is consistent with the settled law."
b. DCIT vs Zuari Estate Development & Inv. Co. Ltd [2015] 63 taxmann.com 177 (SC) "2. After going through the detailed order passed by the High Court, we find that the main issue which is involved in this case is not at all addressed by the High Court. A contention was taken by the appellant-Department to the effect that since the assessee's return was accepted under Section 143(1) of the Income Tax Act, there was no question of "change of opinion"
inasmuch as while accepting the return under the aforesaid provision no opinion was formed and therefore, on this basis, the notice issued was valid."
7. In view of the above it is submitted that the Ld AO has rightly initiated the reassessment proceedings. Therefore, it is humbly submitted that the order of Ld CIT(A) be set aside and that of the Ld AO be restored.
8. The above submissions may please be taken on records." Ld. Counsel for the assessee vehemently objected to this, stating that even in the objections raised to the AO against the initiation of reassessment proceedings the assessee had pointed out this fact of the issue having 6 already been examined during assessment proceedings. The Ld. counsel for assessee drew our attention to the objections to the re-assessment proceedings made to the Assessing Officer reproduced in the assessment order and pointed out therefrom the fact that it was stated to the Assessing Officer that specific query was raised on the issue. The same is reproduced as under:
"At the outset, it is submitted that during the c o u r s e o f o r i g i n a l a s s e s s me n t p r o c e e d i n g s , t h e r e was a specif ic query in th is regard by your off ice. T he assessee vide its re ply dated 16th D e c e mb e r 2 0 1 0 h a d e x p l a i n e d t h e c o m p e l l i n g c i r c u ms t a n c e s u n d e r wh i c h t h e c a s h p a y m e n t s we r e m a d e t o t h e s e l l e r s o f l a n d wh o we r e basically f rom rural background and insisted on c a s h p a y m e n t s . T h e A s s e s s i n g O f f i c e r , af t e r d u e consideration of the reply, did not make any d i s a l l o wa n c e u / s 4 0 A ( 3 ) o f t h e A c t . A s s u c h , a n y a c t i o n wh i c h i s b e i n g t a k e n n o w i s n o t h i n g b u t a c h a n g e o f o p i n i o n o n t h e s a m e s e t o f f ac t s wh i c h we r e a l wa y s a v a i l a b l e o n r e c o r d a n d d u l y considered during the course of original a s s e s s me n t p r o c e e d i n g s . "
7. The Ld. counsel for assessee thereafter drew our attention to the reply filed by the assessee dated 16.9.2010, as mentioned in the objections, placed at Paper Book pages 9 to 13. The Ld. counsel for assessee further relied on the findings of the Ld.CIT(Appeals) in this regard at para 5.1 of his order, that despite the assessee having pointed out to the Assessing Officer in his objections filed to the re-assessment proceedings that specific query on the issue had been raised and reply filed by the assessee, nothing had been stated by the Assessing Officer in his assessment order and, therefore, it was apparent that the issue had been examined by the 7 Assessing Officer and there was no fresh evidence in the possession of the Assessing Officer so as to initiate re- assessment proceedings. Ld. Counsel for assessee stated that for all purposes specific query in this regard was raised by the Assessing Officer, to which the assessee has filed reply during assessment proceedings and, therefore, re-opening on the same issue had been rightly held by the Ld.CIT(Appeals) to be based on mere change of opinion.
8. At this juncture the assessment records were called for and on going through the same the following order sheet entry was revealed to have been made on 07-12- 2010 & 16-12-2010:
"7.12.2010 Shri Arvinder Singh, AR appeared, f iled a reply dated 7.12.2010. He is asked to f ile details of purchases and sales including details and mo d e of payment made for purchasing the land. He is also asked to f i l e r e p l y wi t h r e s p e c t t o s e i z e d b o o k s o f account. The hearing adjourned to 1 0 . 1 2 . 2 0 1 0 a t 1 1 . 3 0 a m.
16.12.2010 Shri Arvinder Singh, AR appeared, f iled reply in respect of seized books of account and other details. He is asked to f ile his r e p l y wi t h r e s p e c t o f p a g e N o s . 4 7 t o 5 1 o f d o c u me n t s A - 1 0 s e i z e d f r o m t h e r e s i d e n c e o f Shri Amit Mittal. The hearing is adjourned to 20.12.2012"8
9. It is evident from the above that during assessment proceedings a query was raised to the assessee by the AO on 7.12.2010 regarding the purchase of land and their mode of payment, in response to which the assessee filed reply dated 16.12.2010. Thus it is clear that the said letter containing the explanation of the assessee regarding the cash purchases made was filed in response to the query raised on 7.12.2010 relating to purchase of land. In such circumstances we cannot agree with the Ld.DR that the reply filed on 16.12.2010 was suo moto and not in response to any query raised by the Assessing Officer. Since this was the only argument of the Revenue against the finding of the CIT(A) that the reassessment was a mere change of opinion of the AO on the same set of facts before him, it remains an uncontroverted fact that due reply was filed by the assessee vis a vis the issue of payment made in cash in violation of the provisions of section 40A(3) of the Act. Therefore, in the facts of the present assessee, it can be unhesitatingly stated that the issue of disallowance of expenditure u/s 40A(3) had been examined during assessment proceedings and re-opening on the same issue merely tantamounted to change of opinion, which as per the decision of the Hon'ble Apex Court in the case of CIT Vs. Kelvinator India, reported in 320 ITR 561 is not warranted. We, therefore uphold the order of the CIT(A) quashing the reassessment proceedings for this reason.
9
10. The appeal filed by the Revenue is therefore dismissed.
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 30.01.2018
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh