TaxTMI 
TaxTMI 
2026 (9) TMI 237
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....nge of CBDT's order rejecting the condonation petition before the Hon'ble High Court and on a due consideration of these facts itself, the matter deserves to be restored to the ld. CIT(A) for deciding the appeal afresh after affording a reasonable opportunity of being heard to the appellant. 2. BECAUSE the ld. CIT(A) while upholding the validity of re-assessment proceedings u/s 147 of the Act failed to appreciate that the assessment proceedings were neither initiated nor concluded as per relevant provisions of law, vitiating the entire proceedings commencing from recording of reason and ending with passing of the assessment order dated 19.03.2022 passed u/s 147 r.w.s. 144B of the Act. 3. BECAUSE the ld. CIT(A), while upholding the validity of re-assessment proceedings u/s 147 of the Act, failed to appreciate that the reasons recorded for initiating the re-assessment proceedings suffered from following infirmities:- (i) proceedings initiated based on dictates of higher authorities without independent application of mind of the Assessing Officer; (ii) there was no live link or nexus between the material coming into the possession of the Ass....
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....Act for alleged underreporting of income in consequence of misreporting is on a misconception of the provisions of law and wholly unjustified on the facts of the case. 7. BECAUSE initiation of penalty u/s 271B of the Act is unjustified where no query on audit report was raised during assessment either under section 143(3) or 147 of the Act. 8. BECAUSE the order appealed against is contrary to facts, law and principles of natural justice. 9. BECAUSE each ground taken in appeal is mutually exclusive and without prejudice to each other. 10. The appellant craves leave to add, delete or modify any of the grounds before or at the time of hearing of appeal." 2. The case of the assessee for the assessment year 2017-18 was selected for scrutiny through CASS. Subsequently, the ld. Assessing Officer noticed that the assessee had not filed return under section 139(1) or section 139(4) of the Income Tax Act, but had filed the same on 28.03.2019, under section 119(2)(b) of the Income Tax Act. The same had been filed without any condonation of delay by the CBDT and thus, in the opinion of the ld. Assessing Officer, the return was, "nonest". Since no return o....
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....section 74, or sub section (3) of section 74A. He also reproduced the provisions of section 139(3) of the Act, which stated that the person claiming the loss had to furnish a return within the time allowed under sub section 1 of section 139. The ld. Assessing Officer held that if the return had not been filed within the time allowed under section 139(1), then the loss sustained could not be carried forward to subsequent years for setting off. In view of the fact that the returns for the remaining years were filed belatedly i.e. after a delay of almost 5 to 6 years, hence loss sustained could not be determined by the ld. Assessing Officer. The ld. Assessing Officer held that the assessee provided misleading information in "Schedule-CFL" and quoted wrong dates of filing. He also noted that since there was no condonation of delay from the competent authority, there was in fact no return which had been filed and therefore, he disallowed the losses of Rs. 66,19,663/- that were sought to be carried forward and adjusted in this year. Furthermore, the ld. Assessing Officer noted that the assessee had debited his P&L account with an amount of Rs. 86,52,722/- under the head, "other provision....
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....lding it to be a prior period expenditure. The assessee submitted that the delay in the filing of the return was because the RBI vide its notice dated 9.05.2012 under section 35A of the Banking Regulation Act, 1945 had cancelled the license of the assessee for accepting fresh deposits, but permitted the assessee to continue renewal of existing deposit. Subsequently, in order to revive the bank, a grant of Rs. 45,11,00,000/- was provided to the bank from the State Government and subsequently contributions were also received from NABARD, the Central Government and the State Government for revival of the bank. It was submitted that during this period of transition, the bank did not have any permanent management and there was no proper staff. While the bank was not permitted to grant any fresh loans, the expenses of the bank continued in these years including fixed expenses, interests on deposits etc,. It was further submitted that almost all the loans advanced earlier by the bank were NPA and the bank did not earn sufficient funds to meet out its expenses. The profits in the current year were mainly due to interest received on grant amount kept as fixed deposits. Furthermore, this int....
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.... of provision for penal interest of Rs. 76,49,456/-, he noted that the assessee had not been able to furnish any evidence to demonstrate that the liability of such, "prior period expenses" accrued in this year. In the circumstances, he confirmed the disallowance. 5. The assessee is aggrieved by these orders passed by the ld. CIT(A) and has accordingly come before us. Sh. P.K. Kapoor, C.A. (hereinafter referred to as the ld. AR) took us through the facts of the case and pointed out that the return had been filed under section 119(2)(b) on 28.03.2019 alongwith a condonation petition to the Board to condone the delay in the filing of the return, in view of the circumstances involved. However, even while this condonation petition was pending for a decision, a notice under section 143(2) issued to the assessee on 22.09.2019, whereby the case of the assessee was picked up for scrutiny. In response to the various notices issued by the Department which was placed on record at pages 35 to 38 and 40 to 41 of the paper books, the assessee filed replies on 21.11.2019 and 7.12.2019 in which all the queries were responded to. Subsequent to the issue of notices, the CBDT issued an instruction ....
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....hmani Mewal Das, (1976) 103 ITR 437 (SC) for this proposition. The ld. AR further pointed out that the case had been selected for scrutiny through CASS with the reason of investment / advances / loans; disallowance under section 40A(7) (gratuity provision). Thus, the reopening was based on material already available on record during the regular assessment proceedings. These details had been examined by the ld. Assessing Officer during scrutiny proceedings and there was no fresh tangible material that came into possession of the ld. Assessing Officer subsequently. Since there was no new information, the reopening amounted to a review/reappraisal of the same material and was therefore hit by the change of opinion. Reliance was placed on the following decisions as under:- i. CIT, Delhi vs. Kelvinator of India Ltd., (2010) 187 taxman 312 (SC) On account of all these factors, the ld. AR argued that the order of the assessment was bad in law. On the merits of the issue, the ld. AR argued that till the time of the passing of the assessment order, the petition under section 119(2)(b) had not been disposed of by the CBDT. Thus, the ld. Assessing Officer should not have disallowe....
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...., the Board had influenced the ld. Assessing Officer and therefore, rendered the reopening bad in law. Accordingly, he prayed that the entire proceedings should be quashed. 6. Responding to the ld. AR, Smt. Sonal Singh, Addl CIT DR (hereinafter referred to as the ld. DR) pointed out that the invalid return filed by the assessee was there on the system. Therefore, the reason for escapement of income was available with the Department. She submitted that at the stage of reopening, it was only the amount of credits which were required to be seen as the expenditures were something that had to be proved by the assessee. Hence, there was no mistake by the ld. Assessing Officer in taking the entire credits as the income because reasons were recorded only upon prima facie belief. She further pointed out that the earlier return being an invalid return, no assessment was completed and order issued. No processing was done either. Therefore, when the ld. Assessing Officer had simply closed the proceedings on the instructions of the Board, as the proceedings were invalid in law, the assessee could not claim that there was any change of opinion by the ld. Assessing Officer because the ld. Asse....
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....ng on account of the directions of the Board or whether it has been reopened on the basis of the independent satisfaction of the ld. Assessing Officer regarding income escaping assessment, has to be examined with reference to the reasons recorded. On consideration of the reasons recorded, which are contained on pages 79 to 82 of the assessee's paper book, it is noticed that the ld. Assessing Officer has come to the conclusion that the assessee failed to disclose income of Rs. 5,16,54,097/- during the financial year 2016-17 relevant to the assessment year 2017-18, despite huge investment at banks and from this he has come to the conclusion that income amounting to Rs. 5,16,54,097/- chargeable to tax has escaped assessment for the assessment year 2017-18. Now as per the AO's own records, the assessee had filed a return (which was invalid) in which it had shown earning of interest income of Rs. 5,16,54,097/- and claimed various expenses for payment of rent, interest on deposits, salary expenses, payment of interest on borrowed fund, making of provisions of Rs. 86,52,722/- and thereafter shown a net profit of Rs. 66,19,663/-. Subsequently, this Rs. 66,19,663/- had been set off agai....