Case Law Details

Case Name : Kaushal Devendra Doshi Vs I.T.O (ITAT Ahmedabad)
Appeal Number : ITA. No: 672/Ahd/2016
Date of Judgement/Order : 18/03/2021
Related Assessment Year : 2008-09

Kaushal Devendra Doshi Vs I.T.O (ITAT Ahmedabad)

As it can be seen after going through the impugned order that Ld. A.O. made reassessment on the basis of audit objection. We are of the considered opinion that Ld. A.O. should have formed independent opinion and copy of the said opinion should have been given to the assesse. As we can see that exercise was not carried out by the Ld. Assessing Officer and merely on the basis of audit objection by the Departmental Officer in reassessment proceedings addition were made and same is not tenable in the eyes of law.

FULL TEXT OF THE ITAT JUDGEMENT

1. This appeal filed by the Assessee is directed against the order of the Commissioner of Income Tax (‘hereinafter called CIT(A)’) order no. CIT(A)-5/ITO. Ward- 10(1)/177/2014-15 order dated 13/01/2016 arising out of assessment order dated 29/01/2014. Assessee has taken following grounds of appeal:

1. In law and in the facts and circumstances of the appellant’s case, the impugned appeal order is bad in law and deserves to be cancelled because on complying with the notice u/s. 148, appellant specifically sought in writing, the reasons recorded but they were not provided to us and hence, the assessment u/s. 143 (3) r.w.s. 147 of the Income Tax Act, 1961 made on 29-01-2014 is contrary to the law laid down by the Hon’ble Supreme Court in the case of GKN Drive Shafts India Limited. V. ITO, 219 ITR 19 [SC].

2. CIT (A) has erred in law and on facts in not properly appreciating and considering various submissions, evidences and supporting placed on record during the course of the assessment proceedings, and not properly appreciating various facts and law in their proper perspective.

3. CIT(A) has erred in law and on fact in upholding the addition to the income by Rs 1,29,01,651/- on the basis of TDS deducted by various parties. Further the Ld. CIT(A) has not considered the Revised TDS certificate submitted by the appellant and made the addition based on the TDS wrongly deducted by various parties.

4. CIT(A) has erred in laws and on facts in not directing the Ld. A.O. not to charging interest under section 234A, 234B, 234C of the Act.

5. CIT(A) has erred in laws and on facts in not directing the Ld. A.O. not to initiate penalty proceedings u/s. 271(1)(c).

2. Facts of the case are that assessed has shown income from business of trading of shares & securities and aluminum and labour work of aluminum section etc. In this case, Ld. A.O. mentioned that as per audit objection by the Department that as per TDS Certificate submitted gross earning u/s. 194C is Rs. 1,35,35,859/- whereas amount declared in profit & loss account is that Rs. 6,34,208/- meaning thereby that assesse has shown less income and thereafter Ld. A.O. issued notice u/s. 148 of the Act and after considering the submission, Ld. A.O. has added the difference amount of Rs. 1,29,01,651/- to the total income of the assesse. .

3. The appellant received a notice u/s. 148 dated 6th March, 2013. Thereafter appellant specifically sought the reasons recorded for the re-opening of the assessment which had not been provided by the Ld. A.O. and assessment u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 made on 29/01/2014 and appellant contention is that same is contrary to the law laid down by the Hon’ble Supreme Court in the case of GKN Drive Shafts India Ltd. vs. ITO, 219 ITR 19 (SC).

4. Thereafter in appeal Ld. CIT(A) held that on account of internal audit objection case has been reopened and he confirmed the order of the Ld. A.O.

5. On the other hand, Ld. A.R. contention was his submissions were not considered by the Ld. A.O. and in mechanical manner as well as Ld. CIT(A) has confirmed the order of the ld. A.O. and he made addition.

6. On behalf of the revenue, Ld. D.R. supported the orders of lower authorities.

7. We have gone through the relevant record and impugned order. It is a case of mis­match of TDS Certificate and income declared by the assesse however appellant requested for the details of reason recorded from the Assessing Officer but same were not supplied to the appellant for the reason best known to the Ld. A.O.

8. In the case of CIT vs. Kelvinator of India Ltd. [2010] 187 com 312 (SC), the Hon’ble Supreme Court has held as under:

“Section 147 of the Income-tax Act, 1961 – Income escaping assessment – General -Whether after substitution of section 147 by Direct Tax Laws (Amendment) Act, 1987, concept of ‘change of opinion’ must be treated as an in-built test to check abuse of power by Assessing Officer – Held, yes – Whether, therefore, after 1-4-1989, Assessing Officer has power to reopen, provided there is ‘tangible material’ to come to conclusion that there is escapement of income from assessment; reasons must have a live link with formation of belief – Held, yes”

9. In the case of Shree Ram Builders vs. ACIT [2017] 81 com 103 (Gujarat), the Hon’ble Gujarat High Court has held as under that “if the reassessment proceedings were initiated merely and solely at the instance of the audit party and there was no independent application of mind by the Assessing Officer with respect to the subjective satisfaction for initiation of the reassessment proceedings, the impugned reassessment proceedings could not be sustained.”

10. And Hon’ble High Court in the said case quashed and set aside the proceedings because Ld. A.O. did not apply his mind and he merely issued notices on the basis of audit objection.

11. In this case also, Ld. A.O. did not apply his mind and made reassessment on the basis of audit objection. Same is contrary to the judgment of above said Gujarat High Court order.

12. In the case of CIT vs. Shilp Gravures Ltd. [2013] 40 com 309 (Gujarat) wherein Hon’ble Gujarat High Court has held as under:

“Section 37(1), read with sections 35AB and 147, of the Income-tax Act, 1961 – Business expenditure – Allowability of [Re-assessment] – Assessment year 2004-05 – Assessing Officer allowed R&D expenses incurred by assessee in respect of in house research as revenue expenditure – Subsequently, audit party raised objection that as per section 35AB assessee was eligible for a deduction of 1/3rd of R&D expenses in previous year and balance amount in two succeeding previous year**” Assessing Officer at instance of audit party applied section 35AB and issued notice under section 148 – Whether since Assessing Officer had initiated reassessment proceedings solely at instance of audit party by recording reasons for which he had no conviction, same was a colourable exercise of jurisdiction by Assessing Officer and could not be sustained – Held, yes [Para 8] [In favour o f assessee]”

13. The Hon’ble Gujarat High Court in the matter of Vodafone West Ltd. vs. ACIT [2013] 37 com 158 (Gujarat) wherein again Hon’ble Gujarat High Court has held that reassessment proceeding cannot be initiated merely on basis of audit objection, where Assessing Officer has no subjective satisfaction.

14. As it can be seen after going through the impugned order that Ld. A.O. made reassessment on the basis of audit objection. We are of the considered opinion that Ld. A.O. should have formed independent opinion and copy of the said opinion should have been given to the assesse. As we can see that exercise was not carried out by the Ld. Assessing Officer and merely on the basis of audit objection by the Departmental Officer in reassessment proceedings addition were made and same is not tenable in the eyes of law.

15. We hold that proceeding u/s. 147/148 are invalid therefore assesse deserve to get relief on this technical ground, we do not want to go into the merit of the case. Thus, respectfully following above said judgments, we allow appeal of the assesse.

16. In the result, appeal field by the assessee is allowed.

Order pronounced in Open Court on 18- 03- 2021

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