DCIT Vs Gujarat State Road Development Corporation Ltd (ITAT Ahmedabad)
ITAT Ahmedabad held that reopening of assessment under section 147 of the Income Tax Act is unsustainable as prerequisite laid down in law for reopening of the case beyond four years is not found to be fulfilled.
Facts- The reopening had been resorted to by an order passed in terms of provision of section 147 of the Act on an identical issue. The addition so made by the AO had been challenged before the ld.CIT(A) both on legal ground challenging validity of the assessment framed ,as well as on merits of the additions made; that the ld.CIT(A) while deleting the addition made on merits found no merit in the legal ground raised by the assessee. Against this order of the ld.CIT(A), the Revenue has filed appeal challenging deletion of addition on merits by the ld.CIT(A) while the assessee has come in cross-objection raising legal ground before us.
Conclusion- The material fact in this case is the incurrence of expenditure, which the assessee has clearly disclosed. The assessee has also clearly disclosed all facts relating to the government grants received and also its treatment. Moreover, as rightly pointed out by the ld.counsel for the assessee, it is not even the case of the AO that the assessee had failed to disclose truly and fully all material facts relating to incurrence of expenditure, claimed as revenue by the assessee.
Held that prerequisite laid down in law for reopening of the case beyond four years is not found to be fulfilled in the present case. The reopening by the AO therefore, we hold, in both the cases is without jurisdiction; the assessment orders, therefore, passed as a consequence are invalid and directed to be set aside.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
These appeals have been filed by the Revenue and Cross Appeals by the assessee against order passed by the ld.Commissioner of Income Tax(A), Gandhinagar, Ahmedabad of even dated 8.8.2019 passed under section 250(6) of the Income Tax Act, 1961 [hereinafter referred to as “the Act” for short]for the Asst.Year 2011-12 and 2012-13.
2. At the outset, it was pointed out that in both the cases, reopening had been resorted to by an order passed in terms of provision of section 147 of the Act on an identical issue. The addition so made by the AO had been challenged before the ld.CIT(A) both on legal ground challenging validity of the assessment framed ,as well as on merits of the additions made; that the ld.CIT(A) while deleting the addition made on merits found no merit in the legal ground raised by the assessee. Against this order of the ld.CIT(A), the Revenue has filed appeal challenging deletion of addition on merits by the ld.CIT(A) while the assessee has come in cross-objection raising legal ground before us. It was common ground that reopening was resorted to on identical issue on both the cases, and therefore, both the appeals are taken together for hearing and adjudication.
3. We shall first deal with the COs filed by the assessee together, since the reopening was resorted to in both the years on an identical issue, and arguments of the ld.counsel for the assessee in both the years against re-opening were also identical. Since identical issues have been raised by the assessee in the CO, for the sake of convenience the grounds raised in the Asst.Year 2011-12 in CO No.3/Ahd/2020 are reproduced as under:
“The Learned CIT(A) has erred in dismissing all the grounds raised against reopening of the assessment.
It is submitted that applying the principle laid down by Supreme Court in the case of CIT Vs. V. Corporation Bank Limited 254 ITR 791, the appellant has disclosed truly and fully fact in Note no. 6 of the Annual Report of the Company. There is no failure on the part of the appellant to disclose fully and truly the material facts necessary for the assessment year and hence re-assessment notice u/s 147 which is issued beyond 4 years is bad in law and is required to be quashed. The appellant relies on decision of Jurisdictional High Court of Gujarat in the case of Lincoln Pharmaceuticals Limited 375 ITR 561 (Gujarat).
It is also submitted that re-opening cannot be done when all the material facts of which reassessment has been opened was filed at the time of original assessment vide its letter dated 01.11.2013 and 09.01.2014. The Learned CIT (A) has erred in not considering the decision Hon. Supreme Court in case of CIT Vs Kelvinator of India Ltd. (2002) 256 ITR 1 (Del.) (FB) (Asst. Yr 1997-198) approved by Supreme Court in (2010) 320 ITR 561 (SC). It is also submitted that Ld. A.O. has not disposed off objection by passing a speaking order. The Ld. CIT (A) has erred in not considering the decision of Hon’ble Supreme Court in case of GKN Driveshafts Ltd which prescribed the procedure to deal with the initial objections raised against the issuance of notice u/s 148 of the Act.
It is also submitted that re-assessment cannot be done on the basis of audit objections. The Honourable Apex Court held that the re-assessment based on opinion of audit party is not valid CIT Vs. Lucas TVS Ltd.249 ITR 306 (SC). Similar view has been taken in the following cases:
