2018 (9) TMI 144 - AT - Income Tax

Tribunal sets aside reassessment, directs re-examination of sales promotion expenses.

Sandeep Jain Versus Income Tax Officer, Ward 1 (4), Kanpur

The Tribunal allowed the appeal in ITA No. 811/Lkw/2017, setting aside the reassessment and related additions as barred by limitation. It allowed the ... Reopening of assessment - addition u/s 68 - period of limitation - Held that:- In the present case, undoubtedly, the case was reopened in view of CIT(A)’s order dated 22.12.2015 and on that date the assessment order for 2003-04 were already barred by limitation by the provisions of Section 149 of the Act. Therefore, we accept the contentions of the Learned A.R. and following the above judicial precedent allow the appeal of the assessee. Order u/s 143(3) without rejection of books of account - Held that:- CIT(A) could have examined the assessment record, wherein the assessee has filed complete details of vouchers to verify the genuineness of expenses and simply by holding that the assessee did not produce the books of account and vouchers, he sustained the addition. The findings of the Assessing Officer clearly states that the assessee had produced books of account and had also produced bills and vouchers, therefore, in view of these contradictions and for the sake of justice, we set aside the order to Learned CIT(A), who should pass a speaking order regarding the arbitrary disallowance made by the Assessing Officer. Issues Involved:1. Legality of reopening the assessment based on CIT(A) directions.2. Validity of notice under Section 148 being barred by limitation.3. Confirmation of addition under Section 68.4. Adequacy of opportunity provided by CIT(A).5. Ad-hoc disallowance of sales promotion expenses.6. Excessiveness and arbitrariness of additions/disallowances.Detailed Analysis:1. Legality of Reopening the Assessment Based on CIT(A) Directions:The appellant argued that the reopening of the assessment based on CIT(A)'s directions was beyond the permissible time limit. The Tribunal referred to the case of Emgeeyar Pictures (P.) Ltd. vs. DCIT, which established that reassessment or re-computation can only be done if it could have been made at the time the original order was passed. The Tribunal concluded that the reopening was barred by limitation as the original assessment year 2003-04 was beyond six years from the date of the notice issued on 31.03.2016.2. Validity of Notice Under Section 148 Being Barred by Limitation:The Tribunal examined the provisions of Section 150(2), which restricts the reopening of assessments if the time limit had expired at the time the order, which was the subject matter of appeal, was passed. The Tribunal found that the notice issued under Section 148 was beyond the permissible six-year period, thus barred by limitation. This was supported by the judgment in KM. Sharma v. HO, which emphasized that reassessment is not permissible if the limitation period had expired.3. Confirmation of Addition Under Section 68:The appellant contested the addition of Rs. 1,56,660 under Section 68 for unexplained cash credits. Given the Tribunal's finding that the reopening itself was barred by limitation, the addition under Section 68 was also set aside.4. Adequacy of Opportunity Provided by CIT(A):The appellant claimed that CIT(A) did not provide proper and adequate opportunity to present their case. The Tribunal noted contradictions in the findings of the Assessing Officer and CIT(A) regarding the production of books of account and vouchers. The Tribunal directed CIT(A) to re-examine the assessment records and pass a speaking order, ensuring the appellant had adequate opportunity to present their case.5. Ad-Hoc Disallowance of Sales Promotion Expenses:The appellant argued that the 30% disallowance of sales promotion expenses was arbitrary and excessive. The Tribunal found that the Assessing Officer made the disallowance without pointing out any specific defects in the books of account or vouchers. Since the books and vouchers were produced during the assessment, the Tribunal directed CIT(A) to re-verify the expenses and pass a reasoned order.6. Excessiveness and Arbitrariness of Additions/Disallowances:The Tribunal agreed with the appellant that the disallowances made were arbitrary and excessive. It emphasized the need for a detailed examination of the books of account and vouchers by CIT(A) to justify any disallowance.Conclusion:The Tribunal allowed the appeal in ITA No. 811/Lkw/2017, setting aside the reassessment and related additions as barred by limitation. It allowed the appeal in ITA No. 812/Lkw/2017 for statistical purposes, directing CIT(A) to re-examine the disallowance of sales promotion expenses and provide a reasoned order after verifying the records.Order Pronounced:The judgment was pronounced in the open court on 24/08/2018.