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Friday, 03 June 2016 11:41

Reassessment u/s 147 - If the Addition as Mentioned in the Satisfaction is Not Made in the Assessment Order, Other Additions Cannot be Made - Ahmedabad Tribunal Featured

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Validity of Reassessment u/s 147 Validity of Reassessment u/s 147

Addition on Other Grounds u/s 147 Cannot be Made When No Addition has been made of the Income, which was Initially the Basis of Reopening

1. AO has to restrict the assessment or reassessment proceedings only to the issues in respect of which reasons were recorded for reopening the assessment

2. AO has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings

3. However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him to independently assess some other income

4. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee

Facts

1. This is an appeal filed by the Revenue and the Cross-Objection filed thereof by the assessee, both against the order of the Commissioner of Income-Tax (Appeals)-XI, Ahmedabad dated 25/04/2012 for Assessment Year 2002-03

2. Assessee is a company stated to be engaged in the business of manufacturing and supply of drip and sprinkler irrigation system equipment and contract for laying pipeline

3. Assessee filed its return of income for AY 2001-02 declaring total loss of Rs.2,91,44,958/-

4. The return of income was initially processed u/s.143(1) of the Income Tax Act, 1961

5. Later on, the case was reopened u/s.147 of the Act by issuing notice u/s.148 of the Act on 08/09/2005 and the reason for reopening was on account of difference in amount of sub-contract income shown by the assessee in its P&L Account and that shown in the TDS certificates, the difference being to the extent of Rs.3,38,508/-

6. Assessment was framed u/s.143(3) r.w.s. 147 and 144A vide order dated 18/12/2006 and the total income was determined at Rs.33,97,402/- inter alia by making addition on account of contract income, labour site expenses, site vehicle expenses, machinery rent expenses and unexplained cash credits, the aggregate of such additions being Rs.3,25,42,360/-

7. Aggrieved by the order of the Assessing Officer, assessee carried the matter before the ld.CIT(A), who vide order dated 30/05/2007 (in Appeal No.CIT(A)-XI/258/2006-07) deleted the additions made by the AO and thereby allowed the appeal of the assessee

8. Aggrieved by the order of the ld.CIT(A), Revenue preferred an appeal before the Tribunal

9. Tribunal (ITAT “A” Bench Ahmedabad) vide order dated 31st July-2009 in ITA No.3359/Ahd/2007 for AY 2002-03 set aside the orders of the departmental authorities and restored the assessment to the file of AO with a direction to complete the assessment de novo in accordance with law

10. Pursuant to the directions of the Tribunal, AO passed the order u/s.144 r.w.s. 254 of the Act vide order dated 14/02/2010and determined total income of Rs.65,26,337/-

11. Aggrieved by the order of the AO, assessee carried the matter before the ld.CIT(A), who vide order dated 25/04/2012 (in Appeal No.CIT(A)-XI/407/Wd-5(2)/10-11) granted substantial relief to the assessee and also held that the assessment framed in response to notice u/s.148 of the Act dated 08/09/2005 to be void ab initio and, therefore, quashed the assessment order

12. Aggrieved by the order of the ld.CIT(A), Revenue is now in appeal before Tribunal

13. Assessee filed cross objections

14. Honb. Tribunal dismissed department's Appeal and confirmed the order of CIT(A)

Adjudication

The issue in the present case is with respect to reopening of the assessment and the additions made in reassessment. On perusing reasons for reopening of the assessment as noted in the assessment order, it is seen that reassessment was initiated on account of under assessment of income to the extent of Rs.3,38,508/-, being the difference between the sub-contract income shown by the assessee in its P&L Account and that reflected in the TDS certificates submitted by the assessee. The aforesaid addition was made by the AO while framing assessment u/s.148 of the Act but the same were deleted by the ld.CIT(A) vide order dated 30/05/2007 as those receipts were duly declared by the assessee and further we find that the ld.CIT(A) has also noted that AO in the Remand Report dated 28/03/2012 and opined that the impugned suppressed receipts were declared by the assessee in the income-tax return. We further find that in the assessment order framed u/s.144 r.w.s.254 of the Act vide order dated 14/12/2010 in the second round of appeal also, no addition of suppressed receipts has been made by the AO. Thus, there is no addition of suppressed receipts of Rs.3,38,508/- in the reassessment proceedings, meaning thereby that no addition was made on the ground which was the basis for reaching the conclusion of escapement of income in the reasons recorded for issuance of notice u/s.148 of the Act. We find that the Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. reported at (2011) 331 ITR 236 (Bom.) on the issue as to whether addition on other grounds could be made when no addition has been made of the income, which was initially the basis of reopening has decided the issue in favour of assessee....

Before us, Revenue has not brought any contrary binding decision in its support. In view of the aforesaid facts, we do not see any reason to interfere with the order of the ld.CIT(A). Thus, this ground of Revenue is dismissed.

Cases Referred to

1. Raymond Woollen Mills Ltd. vs. ITO 236 ITR 34 (S.C.)

2. CIT vs. Kelvinator of India Ltd., 320 ITR 561 (S.C.)

3. CIT vs. Shri Ram Singh 306 ITR 343 (Raj.)

4. CIT vs. Jet Airways (I) Ltd., 331 ITR 236(Bom)

5. DCIT vs. Allied Construction (2007) 291 ITR 16

6. Pandit Brothers vs. CIT 26 ITR 159 (Punj)

7. Ashoka Refractors Pvt.Ltd. vs. CIT 279 ITR 457 (Cal.)

8. Vidhya Traders Vs. CIT 74 ITR 279 (Mys)

9. CIT vs. Margadarse Chit Funds Pvt.Ltd. (1985) 155 ITR 442 (AP)

Additional Info

Read 21194 times Last modified on Friday, 03 June 2016 12:43
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