Case Law Details
Roop Raj Hospitality (P) Ltd Vs ITO (ITAT Delhi)
Admittedly, in the present appeal, the assessee has not raised any ground on merits challenging the addition sustained by learned Commissioner (Appeals). On a query from the Bench, learned counsel appearing for the assessee submitted that assessee has accepted the addition sustained by learned Commissioner (Appeals). Thus, only issue which arises in the present appeal is relating to validity of reopening of assessment under section 147 of the Act. The main plank of assessee’s argument is, while recording reasons for reopening of assessment, the Assessing Officer has relied upon wrong facts. The second line of argument is, approval under section 151 of the Act has been granted mechanically.
As could be seen from the facts on record, the assessee in spite of having income from operations to the tune of Rs.29,85,471/-, as shown in the profit and loss account furnished before learned Commissioner (Appeals), did not file any return of income under section 139(1) of the Act. In fact, neither in response to notice issued under section 148 nor under section 142(1) of the Act, the assessee filed any return of income for the year under consideration. Further, the assessee neither complied with any of the statutory notices issued by the Assessing Officer, nor appeared in course of assessment proceeding. Therefore, the Assessing Officer had to complete the assessment ex-parte, to the best of his judgment under section 144 of the Act. It is evident, the Assessing Officer had tangible material available with him to indicate that, though, in the year under consideration, the assessee had earned income, but it was not offered to tax. Based on such material, the Assessing Officer has reopened the assessment under section 147 of the Act. Merely because certain purchases made by the assessee was shown as contractual receipts in the reasons recorded, that by itself, will not invalidate the proceeding under section 147 of the Act. This is so because, the assessee from the very beginning has not only defaulted in filing the return of income but has remained non-cooperative. The assessee never appeared before the Assessing Officer to explain the correct factual position. Therefore, in absence of any material brought on record by the assessee, the Assessing Officer had no other option but to proceed based on materials available on record.
Considering the fact that the assessee had not filed any return of income for the year under consideration, the reopening of assessment, based on tangible material available with the Assessing Officer, in my view, is valid. As regards satisfaction recorded by the approving authority for issuance of notice under section 148 of the Act, I do not find any fault therein. When the assessee has suppressed material facts by not filing return of income and other details in the course of assessment proceeding, he cannot challenge the validity of the reassessment proceeding. More so, when he has accepted the additions sustained by learned first appellate authority. As regards the decision of the Tribunal in case of Space Chem Engineers Pvt. Ltd. (supra), on careful examination, I have found it to be factually distinguishable, hence, not applicable to the assessee’s case. Firstly, in case of Space Chem Engineers Pvt. Ltd. (supra), unlike the present assessee, the assessee there had filed the return of income voluntarily. Moreover, in the reasons recorded, the Assessing Officer had mentioned names of the companies from whom the assessee allegedly accepted share application money, which are completely different from the companies mentioned in the assessment order. Whereas, facts in assessee’s case are completely different.
In view of the aforesaid, I do not find merit in the grounds raised.
FULL TEXT OF THE ORDER OF ITAT DELHI
This is an appeal by the assessee against order dated 12.09.2019 of learned Commissioner of Income Tax (Appeals)-7, New Delhi, for the assessment year 2011-12.
2. The grounds raised by the assessee are as under:
1. The Id. Commissioner of Income Tax (Appeals) – 7, New Delhi (hereafter the CIT(A)) erred in upholding the validity of the initiation of the proceedings under section 147 of the Income Tax Act. 1961 (hereafter the Act) by the Id. Income Tax Officer, ward 21(4), New Delhi [hereafter the ITO].
1.1 The Id. CIT(A) failed to appreciate the fact that Id. AO has formed the ‘reason to believe’ on the basis that the Assessee has contractual receipt of Rs. 5,36,462 and interest income of Rs. 88,000, both of which are factually incorrect, as is evident from Form 26AS. As a matter of fact the amount of Rs. 5,36,462 is the purchases, which attracted Tax Collected at Source (TCS) and the amount of Rs. 88,000 is the contractual receipt;
Without prejudice, even the said purported information was available with the Id. AO on 23-03-2018, whereas the ‘reason to believe’ were recorded on 22-03-2018.Rs. 46,126
1.2 The Id. AO initiated the proceeding u/s 147 mechanically and without application of mind.
1.3 The Id. AO has not provided any logic or basis to conclude that income exceeding Rs. 1 Lakh has escaped assessment. This conclusion is only to meet the requirement of section 149.
1.4 The proceedings under section 147 were initiated only to verify the transaction, which
is not permissible by law.
1.5 There is no valid satisfaction of the Pr. CIT, as required by section 151, inter alia, because the satisfaction is (a) based on the opinion and recommendation of the Ld. Addl. CIT, which is extraneous; (b) without recording reasons and (c) without going through any material; (d) without providing any opportunity of hearing.
3. As could be seen from the grounds raised, they are on the validity of reopening of assessment under section 147 of the Income-tax Act, 1961 (for short ‘the Act’) and the assessment order passed in pursuance thereof.
4. Briefly the facts are, the assessee, a resident company, is engaged in the hospitality business. For the assessment year under dispute, the assessee did not file any return of income under section 139(1) of the Act. Subsequently, based on information available in the system of the department, the Assessing Officer noticed that the assessee during the year had contract receipts of Rs.5,36,462/- and interest income of Rs.88,000/-. Whereas, the assesse did not file any return of income for the year under consideration. Having reason to believe that income has escaped assessment, the Assessing Officer initiated proceeding under section 147 of the Act. In course of assessment proceeding, the Assessing Officer issued noticed under section 142(1) of the Act on more than one occasion. However, there was non-compliance from assessee’s side. Even, the notice issued under section 148 of the Act remained un-complied. In absence of any cooperation from the assessee, the Assessing Officer issued notices under section 133(6) of the Act to the payers who have deducted tax at source on payments made to the assessee. However, there was no response to the notices issued under section 133(6) of the Act. Finding no other alternative, the Assessing Officer proceeded to complete the assessment to the best of his judgment under section 144 of the Act, based on materials available on record. Since, the assessee did not offer the contract receipts and interest income as reflected in Form 26AS, the Assessing Officer, in absence of any explanation by the assessee, treated them as income of the assessee and determined the total income at Rs.6,24,462/-.
5. The assessee challenged the assessment order by filing an appeal before learned Commissioner (Appeals), both, on the issue of validity of reopening of assessment under section 147 of the Act as well as on the addition made. In course of appellate proceeding, learned Commissioner (Appeals) found that as per the profit and loss account furnished by the assessee, it had income from operations amount to Rs.29,85,471/-. Therefore, applying the provisions of section 44AF of the Act, he estimated profit at 5%. In the process, he sustained addition to the extent of Rs.1,49,274/-while deleting the balance amount. Further, learned Commissioner (Appeals) dismissed the grounds raised by the assessee challenging the validity of reopening of assessment under section 147 of the Act.
6. Before me, learned counsel for the assessee challenged the validity of reopening of assessment under section 147 of the Act primarily on two reasons; firstly, the approving authority has not recorded a valid satisfaction for issuance of notice under section148 of the Act. Secondly, the reasons recorded for reopening of assessment are based on wrong facts. In this regard, learned counsel for the assessee submitted, as per Form 26AS, the assessee had income of Rs.88,000/-, whereas the Assessing Officer has wrongly taken an amount of Rs.5,36,462/- as contract receipts subjected to TDS under section 194C of the Act. Whereas, the said amount actually represents purchases made by the assessee which have been subjected to TCS. Thus, he submitted, since the reopening of the assessment has been made by the Assessing Officer based on wrong facts, such reopening is invalid. He submitted, while granting approval under section 151 of the Act, the approving authority has failed to apply his mind and recorded his satisfaction in a mechanical manner. Therefore, the reopening is invalid. In support of such contention, learned counsel for the assessee relied upon a decision of the Coordinate Bench in case of Space Chem Engineers Pvt. Ltd. Vs. ITO (ITA No. 1791/Del/2019, dated 18.03.2021)
7. Learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned Commissioner (Appeals).
8. I have considered rival submissions in the light of decision relied upon and perused the materials available on record. Admittedly, in the present appeal, the assessee has not raised any ground on merits challenging the addition sustained by learned Commissioner (Appeals). On a query from the Bench, learned counsel appearing for the assessee submitted that assessee has accepted the addition sustained by learned Commissioner (Appeals). Thus, only issue which arises in the present appeal is relating to validity of reopening of assessment under section 147 of the Act. The main plank of assessee’s argument is, while recording reasons for reopening of assessment, the Assessing Officer has relied upon wrong facts. The second line of argument is, approval under section 151 of the Act has been granted mechanically.
9. As could be seen from the facts on record, the assessee in spite of having income from operations to the tune of Rs.29,85,471/-, as shown in the profit and loss account furnished before learned Commissioner (Appeals), did not file any return of income under section 139(1) of the Act. In fact, neither in response to notice issued under section 148 nor under section 142(1) of the Act, the assessee filed any return of income for the year under consideration. Further, the assessee neither complied with any of the statutory notices issued by the Assessing Officer, nor appeared in course of assessment proceeding. Therefore, the Assessing Officer had to complete the assessment ex-parte, to the best of his judgment under section 144 of the Act. It is evident, the Assessing Officer had tangible material available with him to indicate that, though, in the year under consideration, the assessee had earned income, but it was not offered to tax. Based on such material, the Assessing Officer has reopened the assessment under section 147 of the Act. Merely because certain purchases made by the assessee was shown as contractual receipts in the reasons recorded, that by itself, will not invalidate the proceeding under section 147 of the Act. This is so because, the assessee from the very beginning has not only defaulted in filing the return of income but has remained non-cooperative. The assessee never appeared before the Assessing Officer to explain the correct factual position. Therefore, in absence of any material brought on record by the assessee, the Assessing Officer had no other option but to proceed based on materials available on record.
10. Considering the fact that the assessee had not filed any return of income for the year under consideration, the reopening of assessment, based on tangible material available with the Assessing Officer, in my view, is valid. As regards satisfaction recorded by the approving authority for issuance of notice under section 148 of the Act, I do not find any fault therein. When the assessee has suppressed material facts by not filing return of income and other details in the course of assessment proceeding, he cannot challenge the validity of the reassessment proceeding. More so, when he has accepted the additions sustained by learned first appellate authority. As regards the decision of the Tribunal in case of Space Chem Engineers Pvt. Ltd. (supra), on careful examination, I have found it to be factually distinguishable, hence, not applicable to the assessee’s case. Firstly, in case of Space Chem Engineers Pvt. Ltd. (supra), unlike the present assessee, the assessee there had filed the return of income voluntarily. Moreover, in the reasons recorded, the Assessing Officer had mentioned names of the companies from whom the assessee allegedly accepted share application money, which are completely different from the companies mentioned in the assessment order. Whereas, facts in assessee’s case are completely different.
11. In view of the aforesaid, I do not find merit in the grounds raised. Accordingly, grounds are dismissed.
12. In the result, the appeal is dismissed.
Order pronounced in the open court on 30th June, 2022
