TaxTMI 
TaxTMI 
2024 (9) TMI 1792
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.... the ld. CIT(A). Further, the Ld. CIT (A) erred to substantiate as to whether the expenditure was excessive or unreasonable. 2) Whether on the facts and circumstances of the case and in law, the learned CIT (A) is justified in estimating the income @6% without appreciating the fact that the comparison of NP % to disallowance as compared by the Ld. CIT (A) is not substantiated by any provision of the Income-tax Act and which is based on conjectures and surmises. 3) Whether on the facts and circumstances of the case and in law, the learned CIT (A) is justified in estimating the income @6% without appreciating the fact that the assessee has not furnished any cogent documentary evidence before the Assessing Officer to prove that such expenditure is actually incurred and allowable u/s 40A(2)(b) of the Act. 4) Whether on the facts and circumstances of the case and in law, the learned CIT (A) is justified in estimating. the income @6% without appreciating the fact that the assessee has itself reported in the Return of Income that no part of the expenditure covered u/s 40A(2)(b) of the Act is allowable. 5) The appellant craves to leave to add, alter, ame....
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....nbsp;1/2011 (F No. 187/12/2010-IT(A-1) dated 31.01.2011 issued by CBDT, pecuniary limit for jurisdiction for non-corporate assessee having returned income of more than Rs. 15 Lakhs, falls under the jurisdiction of ACIT /DCIT and hence the entire additions are bad in law. LEGAL/TECHNICAL GROUNDS 8. For that vide Para 7 of the order u/s 148A(d) dated 29.07.20,2, the Ld A.O had dropped the case by mentioning being NOT A FIT CASEJO ISSUE NOTICE U/S 148. The order u/s 147 dated 31.03.2022 becomes infructuous, the moment the Ld. AO decided to follow judgment of the Apex Court in the case of Ashish Agrawal and proceeded with issuance of notice u/s 148A(b) dated 02.06.2022 and subsequent passing of order u/s 148A(d) dated 29.07.2022. 9. For that non issuance of fresh order u/s 147, even after following the judgment of the Apex Court in the case of Ashish Agrawal and proceeded with issuance of notice u/s 148A(b) dated 02.06.2022 demonstrates acceptance of the case by the department being not a fit case to proceed further and hence no order u/s 147 was issued. Keeping the order u/s 147 alive which has become infructuous, is bad in law. 10. For th....
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....iness of coal for MCL and the assessment was completed u/s. 143(3) of the Act vide order dated 07.12.2017 at a total income of Rs. 29,92,380/-. Thereafter based on some report it was gathered that the assessee has made payments to the related party of Rs. 5,44,88,752/- but no part of such expenditure was disallowed u/s. 40A(2)(b) of the Act in the return of income filed. Based on these information, the AO has recorded the satisfaction and reopened the case by issue of notice u/s. 148 on 31.03.2021. 7. Before us, the ld. AR submitted that in this case the assessment has already been completed u/s. 143(3) of the Act and thereafter the proceedings u/s. 148 of the Act were initiated by issue of notice u/s. 148 of the Act dated 31.03.2021, which were issued after obtaining the necessary approval from JCIT, Range Rourkela. The ld. AR further submitted that since the notice u/s. 148 of the Act was issued after the expiry of the four years from the end of the relevant assessment years, therefore, in terms of Section 151(1) of the Act, necessary approval should have been obtained from the ld. PCCIT or CCIT or PCIT. However, in the present case, the approval was obtained from JC....
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....hish Agarwal (2022) 444 ITR 1 (SC). He also submitted that the proceedings u/s. 148A of the Act were also initiated in the case of the assessee and the same were dropped by passing the order u/s. 148A(d) of the Act dated 29.07.2022 by holding that it is not a fit case for issue of notice u/s. 148 of the Act as the necessary order has already been passed u/s. 147 of the Act against the notice issued u/s. 148 of the Act dated 31.03.2021. 11. The assessee in another Cross Objection has challenged the reassessment order on the ground that the income declared by the assessee was more than Rs. 15 lakhs and in view of the Instruction No. 1 of 2011 dated 31.01.2011 issued by the CBDT, the jurisdiction over the assessee lies with the JCIT/DCIT, however, in the instant case the reassessment proceedings were initiated by issue of notice u/s. 148 of the Act after recording satisfaction by the ITO Ward-1, Jharsuguda and the reassessment order was passed thereafter by the NFAC. He submitted that since the jurisdiction in terms of Instruction NO.1 of 2011 over the assessee lies with the ACIT/DCIT and not with the AO, therefore, the initiation of reassessment proceedings by the ITO, W....
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....; PRESENT APPEAL WITH ITAT 16. Revenue filed appeal with ITAT Most respectfully, we submit as under: A) ABOUT THE RESPONDENT The respondent assessee is a registered Cooperative Society before the Deputy Registrar of Co-operative Societies, Sambalpur on 01.03.2011 as amended on 16.07.2014 and formed by project effected persons (of MCL for Coal Mining) to obtain work from MCL as per rehabilitation policy of the PSU company, during period under appeal were engaged in the business of transportation and other allied activities. The respondent assessee for the AY 2015-16 filed return of income on 29.09.2015 declaring a net income of Rs. 29,01,910.00 (PB page 13-47). The return of income was selected for scrutiny and the income was determined at Rs. 29,92,3801- in the order u/s 143(3) passed by the Assessing Officer on 07.12.2017 (PB page 48-51). B) BACKGROUND OF THE CASE The Finance Act' 2021 revamped the existing reassessment provisions u/s 147 to 151 with effect from 01/04/2021. However....
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.... assessment was reopened u/s 147 and a notice u/s 148 dated 31.03.2021 was issued to the appellant assessee. The appellant did not file any return in response to the notice u/s. 148 rather filed a submission on 29.11.2021 objecting to the reassessment proceedings. Subsequently, the assessment proceedings was completed in faceless matter under Faceless Assessment Scheme by adding the entire sum of Rs. 5,44,88, 752.00 vide order dated 31.03.2022. Being aggrieved with the order u/s 147 dated 31.03.2022, the respondent assessee filed an appeal before the CIT (A) on 28.04.2022. The Ld. CIT -A deleted the entire sum of Rs. 5,44,88,752.00 by observing at Para 6.9 as under: It is s affirmed that the Assessing Officer has failed to establish beyond doubt. that the payments made to such persons is excessive and unreasonable. Thus the condition laid down u/s 40A(2)(a) has not been fulfilled by the FAO" (Page 128A of PB). However the Ld. CIT -A went one step ahead and determined the net income of the appellant assessee at Rs. 46,64,000.00 on adhoc basis. While doing so, the Ld. CIT-(A) apparently invoked the powers vested by provisions of sect....
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....against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The [Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.-In disposing of an appeal, the [Commissioner (Appeals)] may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals)] by the appellant. 4. The powers of the CIT (A) u/s 251(1)(a) of the Act, includes the power to "Enhance the Assessment". Whether such power is absolutely unlimited or the interest of the Assessee has been protected by the statue or court of laws. 5. Hon'ble Delhi High Court in the case of Gurinder Mohan Singh Nindrajog vs [CIT [2012] 18 taxmann.com 176 (Delhi), while considering the issue of power of CIT (A) to enhance, has held that - 14. We have considered....
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....ter of appeal. 7. The court has held that CIT (A) cannot travel beyond the subject matter of the assessment while enhancing the assessment within the meaning of Section 251(1)(a) of the Act. The main logic behind the above interpretation is inspired from the interpretation adopted by the Supreme Court in the case of CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443(SC), wherein it is held that: "the principle that emerges as a result of authorities of this Court is that the appellate Asst. Commissioner has no jurisdiction under section 31 (3) of the Act (1922) to assess a source of income which has not been processed by the Income Tax Officer and which is not disclosed either in the returns filed by the assessee or in the assessment order and therefore, the appellate Asst. Commissioner cannot travel beyond the subject matter of the assessment. In other words the power of enhancement under section 31 (3) of the Act is restricted to the subject matter of assessment or the source of income which have been considered expressly or by clear implications by the Income Tax Officer from the point of view of the taxability of the assessee". 8. In CIT....
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....CIT (2022) 141 taxmann.com 127 held that as per provisions of Sec, 151(1) sanction of Commissioner or Principal Commissioner is a pre-requisite for issuance of a reopening notice under section 148 after expiry of four years from end of the relevant assessment year therefore the impugned notice issued with sanction of Addl. Commissioner and not Pr. CIT being legally invalid was liable to be set aside, 15, The Hon'ble Bombay High Court also in the case of Sidhmicro Equities (P) Ltd vs. DCIT (2023) 150 taxman.com 460 held that where AO issued reopening notice after obtaining necessary sanction from Addl. Commissioner since notice was issued beyond period of four year approval ought to have been obtained from Pr. Chief Commissioner /Chief Commissioner /Pr. Commissioner as per section 151 and thus, impugned notice was to be quashed. 16. Since in the case of the respondent assessee four years had already expired from the end of relevant assessment year as provided u/s 151 (1) of the Act (pre-amended), therefore, only the Pr. Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner could have accorded the sanction and not the Joint Commissio....
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....t because of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment which must not be fanciful or based on suspicion. Both the conditions must co-exist in order to confer jurisdiction on the assessing officer. Of course} the assessee is required to make a true and full disclosure of the primary facts at the time of the original assessment. 22. Having concluded that all the material facts were fully and truly disclosed by the assessee at the time of original assessment} invoking the provisions of S. 147 after the expiry of four years from the end of the relevant asst. year was not valid. German Remedies Ltd v. DCIT (2006) 287 ITR 494 (Bom.)(HC) CIT v. Former France (2003) 264 ITR 566 (SC) Tata Business Support Services Ltd. v. Dy. CIT (2015) 232 Taxman 702 (Bom.)(HC). G) ILLEGAL ASSUMPTION OF JURISDICTION OWING TO DELAY G) ILLEGAL ASSUMPTION OF JURISDICTION OWING TO DELAY IN ISSUANCE OF NOTICE U/S. 148 23. Notice under Section 148 of the Act, 1961 for the Assessment Year 2015-16 was digitally signed by the Assessing Officer on 31.3.2021. It was sent to the respondent assessee through e- mail and e-mail w....
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....originator then that point of time would be the time of issuance of notice. 28. Honorable Allahabad High Court vide Para 29, in the case of Daujee Abhushan Bhandar Vrs UOI Writ Tax No. 78 of 2022 dated 10.03.2022 has held as under: "Thus, considering the provisions of Section 282 and 282 A of the Act, 1961 and the provisions of Section 13 of the Act, 2000 and meaning of the word "issue" we find that firstly notice shall be signed by the assessing authority and then it has to be issued either in paper form or be communicated in electronic form by delivering or transmitting the copy thereof to the person therein named by modes provided in section 282 which includes transmitting in the form of electronic record. Section 13(1) of the Act, 2000 provides that unless otherwise agreed, the dispatch of an electronic record occurs when it enters into computer resources outside the control of the originator. Thus, the point of time when a digitally signed notice in the form of electronic record is entered in computer resources outside the control of the originator i.e. the assessing authority that shall the date and time of issuance of notice under section 148 read with Section ....
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....Metro Cities, having returned income of more than Rs. 15 Lakhs, the jurisdiction lies with ACIT /DCIT. 33. The returned income for Asst Year 2015-16, in the case of the respondent assessee was Rs. 29,01,910.00. 34. In the case on hand, 'Income Tax Officer' instead of ACIT / DCIT (Page 52) has assumed jurisdiction to proceed with reassessment and thereby violated the instructions of CBDT Instruction dated 31.01.2011. 35. Where pecuniary Jurisdiction given to the particular Income Tax Authorities on the basis of CBDT Instruction NO: 01 OF 2011 dated 31/01/2011, is not being followed and the assessment order is passed by a non-competent authority, such assessment order is null and void. 36. The above proposition of law is supported by following decisions of the honorable Income Tax Tribunals: (a) ITO Vs. Arti Securities & Services Ltd (Lkw Trib.) (b) Bhagyalaxmi Conclave Pvt Ltd Vs. DCIT (Kol Trib.) (c) Soma Ray Vs. ACIT (Kol Trib.) (d) Krishendu Chowdhury Vs. ITA (Kol Trib.) OUR SUBMISSION ON LEGAL/ TECHNICAL ISSUE: I) ORDER U/S 147 ISSUED UNDER OLD LAW BECOMES INFRUCTUOUS AFTER INITIATING THE PROCESS OF 148A FOL....
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....ety. 11. In the case of Shivamrut Doodh Utpadak Sahakari Sangh (supra) the question raised was whether the words "Association Of Persons" (A.O.P.) in section 40A(2) would include a co-operative society? It was held that the word A.O.P' in section 40A(2) would not include a co-operative society, because firstly, section 2 (19) of the Act defines a co- operative society to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any other law for the time being in force. Section 40A(2) applies to the persons specifically namely therein and since 'Cooperative Society' does not appear in section 40A(2) (b), the said Section would not apply to a Co-operative Society. Secondly, a co- operative society formed on the doctrine of mutuality is entitled to deduction under section 80P of the Act, whereas, no such deduction is not available to an A.O.P. This clearly shows that under the Income-tax Act, Co-operative Society is different from A.O.P. Thirdly, co-operative societies are distinctly referred to in various sections of the Act e.g., [sections 2(18)(ad), 2(24) (vii), 27(iii), 36(1)(ia), 40(ba), 45(3), 80L(1) (ii]. (vi), (via), (viii....
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.... a person specified in section 40A(2)(b) (hereinafter referred to as specified person or related person) In respect of such expenditure [iii] the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to: [a] the fair market value of the goods, services or facilities for which payment is made; or [b] the legitimate business needs of the assessee's business or profession; or (c) the benefit derived by or accruing to the assessee from the payment. If any of the above conditions is satisfied, then so much of the expenditure as is so considered by the Assessing Officer to be excessive or unreasonable, shall not be allowed as a deduction. 49. It has been held in the case of CIT vs Johnson & Johnson Ltd. (2017) 80 taxmann.com 337 (Born) that where no exercise was done by revenue nor even a remote attempt was made to establish that professional fees paid to advocate firm was excessive, no disallowance could be made on such payment. 50. The reasonableness of any expenditure is to be judged having regard to the fair market value of the goods, services or facilities for which the payment i....
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....he purposes of Section 148 and Section 148A shall be,- (i) Principal Commissioner or Principal Director or Commissioner Director, if three years or less than three years have elapsed from the end of the relevant assessment year, (ii) Principal Chief Commissioner or Principal Director General or*** Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year:] Provided that the period of three years for the purposes of clause (1) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of section 149.] 15. As per Section 151(1) of the Act, any notice issued after four years from the end of the relevant assessment year should contain an approval from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner wherein satisfaction has to be reached on the sufficiency of reasons recorded by the AO being a fit case for issue of notice u/s. 148 of the Act. In the instant case, as is clear from the notice u/s. 148 of the Act itself that the approv....
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....reassessment has already been done as a consequence of proceedings initiated u/s. 148 of the Act vie notice dated 31.03.2021. This being so, we are of the considered view that when the notice u/s. 148 of the Act dated 31.03.2021 was not issued nor served upon the assessee within the closing hours of 31.03.2021 and the proceedings under amended Act vide Finance Act, 2021 stood dropped by the department, the consequential order passed is liable to be quashed. 18. With regard to the Cross Objection of the assessee that the notice u/s. 148 of the Act was violated the Instruction No. 1/2011 issued by the CBDT, we find that similar issue came before us in the case of Shree Deosharwali Oil Industries, passed in ITA No. 167/CTK/2024, order dated 29.07.2024, wherein by following the decision of the Hon'ble Kolkata High Court in the case of Shree Shoppers Ltd., passed in ITAT/39/2023 IA No. GA/1/2023, dated 15.03.2023, the proceedings initiated u/s. 148 of the Act were quashed by observing as under:- 10. We have considered the rival submissions. CBDT vide its instruction No. 1/2011 (supra) has issued specific instruction in regard to pecuniary jurisdiction....
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....d the payments are made to its members, the same is not covered under the provisions of Section 40A(2)(b) of the Act as a cooperative society forms on the principle of mutuality where the income distributed between the members is exempted in the hands of the members. Similar issue has been decided by the Hon'ble Bombay High Court in the case of CIT Vs. Manjara Shetkari Sahakari Sakhar Karkhana Ltd., reported in 301 ITR 191 (Bom), wherein the Hon'ble High Court has held that provision u/s. 40(2)(b) of the Act are not applicable to the cooperative societies. We, thus, respectfully following the order of the Hon'ble Bombay High Court in the case of Manjara Shetkari Sahakari Sakhar Karkhana Ltd. (supra), hold that the provision u/s. 40A(2)(b) of the Act are not applicable in the case of the assessee being a cooperative society. 21. In view of the above discussions, we are of the considered view that the notice u/s. 148 is without jurisdiction and, therefore, bad in law and thus, all the consequential proceedings are hereby quashed. 22. Since we have allowed the cross objections taken by the assessee without regard to the legality of notice issued u/s. 148 of the Act, the othe....