TaxTMI 
TaxTMI 
2020 (8) TMI 146
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..... CIT (A) has erred in deleting addition of Rs. 6,48,000/- made by AO on account of disallowance of freight payment without appreciating facts discussed by the AO in the assessment order. 4. The appellant craves liberty to raise additional ground/s and to modify/amend the ground of appeal at the time of hearing." 2. Due to the prevailing situation of COVID 19 pandemic, the hearing of the appeal was concluded through Video Conference. The assessee is a private limited company and engaged in the business of manufacturing/processing and trading of Agro based products. The assessee has e-filed its return of income for the year under consideration on 30.09.2011 declaring total income of Rs. 4,52,11,888/-. Scrutiny assessment under section 148 was completed on 29th March, 2014 at the total income of Rs. 4,66,65,470/-. Thereafter the AO reopened the assessment by issuing notice under section 148 on 29th March, 2018 on the basis of information received from DIT Investigation, Chandigarh regarding accommodation entry received by the assessee from M/s. Shree Ram Trading Co. The reassessment was completed on 12.12.2018 whereby the AO has made addition under section 68 of the IT Ac....
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....e has relied upon the following decisions :- CIT vs. BPL Systems & Projects Ltd. 227 ITR 779 (Ker.) PCIT vs. Sun Pharmaceuticals Industries Ltd. 86 taxmann.com 148 (Guj.) The ld. A/R has further submitted that since the original assessment was completed under section 143(3) and reopening of the assessment is after the expiry of 4 years from the end of the assessment year, therefore, in the absence of failure on the part of the assessee to disclose fully and truly all relevant facts necessary for assessment, the reopening of the assessment is bad in law. He has referred to the proviso to section 147 of the IT Act and submitted that it is a pre-condition to reopen the assessment in case of the original assessment completed under section 143(3) and notice under section 148 is issued after 4 years from the end of the assessment year that there is a failure on the part of the assessee to disclose fully and truly all the relevant facts necessary for assessment. The AO has not made any such allegation in the reasons recorded for reopening of the assessment. Therefore, the reopening of the assessment is bad in law and liable to be quashed. He has further contended that....
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....sions of section 147 of the Act and the same is liable to be quashed. 3. On the other hand, the ld. CIT D/R has objected to the objections raised by the assessee under Rule 27 of the ITAT Rules. He has contended that the jurisdiction of the Tribunal is to consider the subject matter in the appeal and not beyond that. The issue of validity of reopening is not the subject matter of appeal of the revenue and, therefore, in the absence of any cross appeal or cross objection by the assessee such an issue cannot be allowed to be raised. Thus the ld. CIT D/R has contended that the Tribunal cannot entertain and consider an issue which is not subject matter of appeal before it. In support of his contention, he has relied upon the judgment of Hon'ble Allahabad High Court in case of Kanpur Industrial Works vs. CIT, 59 ITR 407 (All.) and submitted that the Hon'ble High Court has held that no relief can be granted to an assessee unless he asked for it and is entitled in law to get it. The Tribunal has no jurisdiction to give any relief though he may be entitled to it, if he does not ask for it in the appeal. The powers of the Tribunal though are very wide but only within the subject matter o....
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....espond to support or defend the order of the ld. CIT (A) on any of the grounds decided against him without filing any cross appeal or cross objection. For ready reference, we quote Rule 27 of the ITAT Rules as under :- "27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him." Thus Rule 27 of the ITAT Rules is only a provision to defend the impugned order by the respondent, if the said order is challenged by the other party and the respondent choose not to file cross appeal or cross objection can still defend the said order on the ground which was decided against him by the ld. CIT (A). This provision is not a provision to challenge the order of the ld. CIT (A) in respect of the ground which is decided against the respondent but it is only a provision to defend the said order and that too only on the ground which is decided against the assessee. Thus Rule 27 of the ITAT Rules can be invoked only in a case where a ground which is decided against the respondent if agitated before the Tribunal and the respondent succeeds in the said plea and that would render the appeal filed by the other party i....
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...., there appears to be no reason why a respondent in support of the decree in his favour passed by the lower court should not be entitled to agitated a new ground and subject to the same limitation. A Division Bench of the Allahabad High Court has taken a similar view in Kanpur Industrial Works v. Commissioner of Income-tax. That judgment has considered the position of an appeal under section 33 of the Income-tax Act along with the relevant Rules and that of an appeal under the Code of Civil Procedure and the provisions of Order XLI, rule 22. The judgment holds that when the department files an appeal for an increase in the assessed income, the subject-matter of the appeal is the increase claimed by the department and the assessee can urge any ground of defence even though it might have been rejected by the Appellate Assistant Commissioner for showing that there should be no increase. It has further held that that the assessee is not liable to be assessed at all is a ground for showing that there should be no further assessment and the department's appeal can therefore be resisted on that ground and that there is no incongruity in maintaining the assessment order passed against ....
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....The Tribunal refused to allow the assessee to take up allowed to be urged and succeeded, the Tribunal would have not only to dismiss the appeal, but also to set aside the entire assessment. The point would have served as a weapon of defence against the appeal, but it could not be made into a weapon of attack against the order in so far as it was against the assessee". (emphasis supplied by us) The Hon'ble High Court after considering the judgment of the Hon'ble Allahabad High Court in case of Kanpur Industrial Works vs. CIT (supra) has held that even if the assessee has not filed any cross appeal or cross objection, it would be entitled to raise a ground of law which would not only be a defence to the appeal filed by the revenue but may also affect the validity of the entire assessment proceedings. If the ground raised by the assessee succeeds, the only result would be that the appeal of the revenue would fail. The acceptance of the ground would show that the assessment itself would be invalid and vitiate. The Hon'ble High Court has further observed that if such a ground is allowed to be urged and succeeded, the Tribunal would have not only to dismiss the appeal but also to s....
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....ward a contention that the entire sum of Rs. 80,000/- covered by Exs. A and B went for the discharge of antecedent debts. We do not see any substance in this objection, because the respondent is entitled to canvass the correctness of findings against it in order to support the decree that has been passed against the appellant." 13. Likewise, in case of S. Nazeer Ahmed v. State Bank of Mysore AIR 2007 SCW 766 it was held and observed as under: "7. The High Court, in our view, was clearly in error in holding that the appellant not having filed a memorandum of cross-objections in terms of Order XLI Rule 22 of the Code, could not challenge the finding of the trial court that the suit was not barred by Order II Rule 2 of the Code. The respondent in an appeal is entitled to support the decree of the trial court even by challenging any of the findings that might have been rendered by the trial court against himself. For supporting the decree passed by the trial court, it is not necessary for a respondent in the appeal, to file a memorandum of crossobjections challenging a particular finding that is rendered by the trial court against him when the ultimate decree itself i....
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....orandum of cross objections verified in the prescribed manner and such memorandum shall be disposed of by the Tribunal as if it were an appeal presented within the period of limitation prescribed under sub-section (3). Therefore, on a plain reading of the provision, it transpires that a party has been granted an option or a discretion to file cross objection. 19. In case a party having succeeded before Commissioner (Appeals) opts not to file cross objection even when an appeal has been preferred by the other party, from that it is not possible to infer that the said party has accepted the order or the part thereof which was against the respondent. The Tribunal has, in the present case, unfortunately drawn such an inference which is not supported by the plain language employed by the provision. 20. If the inference drawn by the Tribunal is accepted as a correct proposition, it would render Rule 27 of the Tribunal Rules redundant and nugatory. It is not possible to interpret the provision in such manner. Any interpretation placed on a provision has to be in harmony with the other provisions under the Act or the connected Rules and an interpretation which makes other....
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....ause, section 253(4) of the Act endorses the situation of finality with regard to the orders passed by the Appellate Tribunal. In view of the above reasons, the Appellate Tribunal under resort to rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, would be justified to consider the contention raised by the assessee in regard to which the first appellate authority had decided against him. Question No. 1 thus gets answered in the affirmative, against the Revenue and in favour of the assessee." Therefore, in view of the above settled proposition of law, the assessee is allowed to raise this plea under Rule 27 of the ITAT Rules. The decisions relied upon by the ld. CIT D/R are in respect of the facts where a part relief was granted by the ld. CIT (A) in respect of the same issue and the assessee without filing the appeal or cross objection attempted to raise the plea under the shelter Rule 27 of the ITAT Rules to get the full relief on the same issue which was partly allowed in favour of the assessee and the revenue challenged the order of the ld. CIT (A). Under Rule 27 of the ITAT Rules, the assessee cannot seek relief more than what was granted by the ld. CIT (A). Therefor....
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....modation entry from Shree Ram Trading Co. It appears that the AO has just narrated the contents as received by him from the Investigation Wing without having all the details and Investigation Report. The AO even in the assessment order has not made any reference of investigation carried out by him during the course of reassessment proceedings but he has simply relied on the information received from the Investigation Wing and the queries raised to the assessee which was replied by the assessee. Apart from seeking the explanation from the assessee, the AO has not conducted any enquiry in respect of the said information from the party concerned who has allegedly made the statement of providing accommodation entries. Thus it is apparent that the reasons recorded by the AO are vague and do not reveal even the nature of transactions in the garb of which the alleged accommodation entries were received by the assessee. Further, the AO in the reasons recorded has not even alleged that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the absence of such an allegation or failure on the part of the assessee, the reop....
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....es were not verifiable and accordingly an addition of 25% of such purchases were made by the AO. Therefore, the issue of genuineness of purchases was duly examined by the AO while completing the scrutiny assessment under section 143(3). The AO, thereafter, issued a notice under section 148 on 21.11.2014 which is after four years from the end of the assessment year under consideration. The reasons recorded for reopening of the assessment are as under :- "As per information it had been established that bogus sales entries were made in favour of M/s Dwarka Gems on various dated during F.Y. 2007-08 i.e. A.Y. 2008-09 total amounting to Rs. 31,40,818/-. These entries were provided by M/s Meridian Gems & M/s Millenium Stars which are some of the bogus concerns of Bhanwar Lal Jain & Group." Thus it is clear that the reopening of the assessment is based on the information received and to assess the income in respect of the purchases made by the assessee which was examined by the AO during the original scrutiny assessment under section 143(3). The AO after an enquiry and investigation during the original assessment proceedings held that the purchases made ....
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....e in hand, when the AO has already conducted an enquiry on the issue and the assessee is not expected to furnish more than what was already furnished during the assessment proceedings, then the reopening based on the information from the Investigation Wing on the same issue is nothing but change of opinion and to review the order passed by the AO under section 143(3) which is not permissible under law. Accordingly, in the facts and circumstances of the case, we hold that the reopening is not valid and, therefore, the reassessment framed by the AO is without jurisdiction and consequently the reassessment order passed is quashed." This Bench of the Tribunal in the case of M/s. Zari Silk India Pvt. Ltd. in ITA No. 1103/JP/2019 dated 17.12.2019 has also considered identical issue at pages 11 to 16 as under :- "The first part of the reasons recorded by the AO is nothing but the details of share capital received by the assessee from various entities which were already recorded in the books of account and also shown in the Balance Sheet as on 31st March, 2008. The second part of the reasons recorded by the AO is regarding the information received from the Investigation Wing Mu....
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....se fully and truly all the relevant facts necessary for assessment, the reopening after 4 years from the end of the relevant assessment year is hit by the proviso to section 147 of the IT Act. Once the transaction of share capital received by the assessee as well as purchases made from the said entity are duly recorded in the books of account and were subjected to the verification and examination of the AO, then the reopening of the assessment even on the basis of information received from the Investigation Wing Mumbai after 4 years from the end of the assessment year is not permitted as it will amount to review its own order by the AO and rejecting the documentary evidence produced by the assessee which was already accepted by the AO. This Tribunal in case of ITO vs. M/s. Silver Sand Builders Pvt. Ltd. (supra) has considered an identical issue in para 6 as under :- "6. We have considered the rival submissions as well as the relevant material on record. The original return of income filed under section 139(1) for all the three years were subjected to scrutiny assessment under section 143(3). Subsequently the AO has proposed to assess the income being notional rent in respe....
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....reason to believe that income to the tune of Rs. 1,06,87,168 (12722.82 sq. ft. x 70 per sq. ft. per month x 12 months) has escaped assessment to tax under the head Income from house property for the A.Y. 2008-09 within the meaning of provisions of sec. 147 of the I.T. Act. Therefore, permission is being sought for issue of notice u/s 148 of the I.T. Act." Accordingly, the AO issued notices under section 148 of the IT Act for the assessment year 2008-09 on 30th March, 2015, for the assessment year 2009-10 on 22nd March, 2016 and for the assessment year 2010-11 on 29th March, 2017. Thus the notices issued under section 148 for all the three years are after the expiry of four years from the end of the respective assessment year. The revenue has not disputed this fact that the reopening in respect of all the three years is after the expiry of four years from the end of the assessment year. It is apparent from the reasons recorded by the AO that the AO proposed to assess the notional rent after determining the ALV of the unsold space at 4th Floor of the commercial complex in question in view of the decision of Hon'ble Delhi High Court in case of CIT vs. M/s. Ansal Housing Finan....
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....rt in case of CIT vs. Hindustan Zinc Ltd. 393 ITR 264 (Raj.) wherein it was held that the duty of the assessee to disclose fully and truly all material facts necessary for his assessment does not extend beyond the furnishing of all the primary facts before the assessing authority and the AO was satisfied with the said disclosure of the assessee in the original assessment. Therefore, once the assessee has disclosed all the relevant facts whatever assessee was supposed to disclose, then treating a particular transaction as bogus would not amount to non disclosure of the necessary facts by the assessee. In view of the above facts and circumstances of the case as well as the various decisions as relied upon by the ld. A/R of the assessee, we are of the considered view that when there is no allegation of the AO in the reasons recorded that income assessable to tax has escaped assessment due to failure on the part of the assessee to disclose all facts necessary for assessment, the notice issued by the AO under section 148 on 5th February, 2015 after 4 years from the end of the assessment year is hit by the first proviso to section 147 and thereby the AO cannot exercise the jurisdiction t....
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....o any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under section 147, or recompute the loss or the depreciation allowance or any other allowance, as the case may be for the concerned assessment year. However, where an assessment under sub-section (3) of section 143 has been made for relevant assessment year, no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reasons of the failure on the part of the assessee to disclose all material facts necessary for his assessment for that assessment year. [Emphasis supplied] 19. In the case in hand it is not in dispute that the assessment year involved is 1996-97. The last date of the said assessment year was 31st March, 1997 and from that date if four years are counted, the period of four years expired on 1st March, 2001. The notice issued is dated 5th November, 2002 and received by the assessee on 7th November, 2002. Under these circumstances, the notice is clearly beyond the period of....
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....n 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside." Further, the Hon'ble Bombay High Court in case of OHM Stock Brokers Pvt. Ltd. vs. CIT, 351 ITR 443 (Bom.) has held in para 7 to 9 as under :- 7. Under the proviso to Section 147, where an assessment has been completed under Section 143(3), the validity of a reopening beyond four years of the end of the relevant year is pre conditioned by the requirement that there is a failure on the part of the assessee to fully and truly disclose material facts necessary for the assessment for that assessment year. Section 147 in its present form was brought into the statute by an Amending Act of 1997 with effect from 1 April 1989. There must be a failure on the part of the assessee to fully and truly disclose material facts for the assessment for the jurisdiction of A.O. to be invoked. 8. In the present case, the notices purporting to reopen the assessments for both A.Y.2005-06 and 2006-07 do not even allege that th....