Case Law Details
Samridhi Stocks Pvt Ltd Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT) in Kolkata recently passed a crucial judgment in the case of Samridhi Stocks Pvt Ltd vs Income Tax Officer (ITO). The case pivots on the reopening of an assessment more than four years after the end of the relevant assessment year and the invalidation of that reopening by the ITAT.
In this case, the assessee contended that the reopening of the assessment was unjustified as it was initiated after four years from the end of the relevant assessment year, despite the absence of any failure on the part of the assessee to disclose all material facts fully and truly. The ITAT found that the assessment was reopened solely based on information received from the investigation wing, without verifying the authenticity of the data.
Interestingly, the reasons recorded for reopening the assessment suggested that the assessee had booked a bogus profit, but during the reassessment, the Assessing Officer disallowed a loss relating to a commodity transaction. This discrepancy was noted by the ITAT, adding to the determination that the reopening of the case was based on inaccurate facts.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal has been preferred by the assessee against the order dated 23.11.2021 of the National Faceless Appeal Centre (hereinafter referred to as the ‘CIT(A)’) passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).
2. There is a delay in filing the present appeal. A separate application for condonation of delay has been filed, wherein, it has been pleaded that the impugned order was passed by the CIT(A) on 23.11.2021 during the Covid period and that the assessee did not receive any email or copy of the order. The copy of the order was originally served by uploading the same on the Income Tax portal. That subsequently on the advice of legal consultant, the assessee checked the Income Tax portal on 21.01.2023 and it was noticed that the order has already been passed. However, the assessee immediately from the date of notice of the order preferred the present appeal. The ld. counsel therefore has submitted that the delay in filing the present appeal was not intentional, rather, due to circumstances that the assessee was not aware of the passing of the impugned order of the CIT(A). The ld. counsel has relied upon the decision of the Coordinate Bench of the Tribunal in the case of West Bengal Power Development Corporation Limited vide ITA Nos. 333, 334, 335 & 336/KOL/2020 pronounced on 20.01.2023 wherein in the identical facts and circumstances of the case, the delay has been condoned by the Coordinate Bench of the Tribunal by observing as under:
“The ld AR submitted before the bench that the hard copy of the appellate order dated 27.11.2019 was not served upon the assessee and the order was in fact uploaded in the ITBA portal of assessee’s company however the concerned staff of the assessee company omitted to look at the ITBA portal which has resulted into late filing of appeal. The Ld. A.R therefore prayed that the delay may kindly be condoned and the appeal of the assessee may kindly be admitted for adjudication by relying on the decision of Collector, Land Acquisition Vs. Mst. Katiji(1987)167 ITR 471(SC). The ld DR on the other hand strongly opposed the condonation of delay in filing the appeal and prayed that the appeal of the assessee may be dismissed as being barred by limitation. After perusing the condonation petition and after hearing the rival contentions of both the parties and reasons attributable to delay in filing the appeal the delay of filing the appeal, we of the considered view that the delay is purely due to the reasons which cannot be attributed to the assessee. Therefore, we condone the delay of 52 days and admit the appeal for adjudication.”
Considering the above submissions, the delay in filing the present appeal is hereby condoned.
3. The assessee in this appeal has taken the following grounds of appeal:
“1. For that the Ld. CIT(A) erred in confirming the action of AO since the assessment was reopened beyond four years from end of the relevant assessment year when the original assessment was completed u/s. 143(3) and there was no whisper in the reasons recorded that income has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.
2 For that the Ld. CIT(A) erred in confirming the action of AO only on the basis of information from Investigation Wing without any tangible material or application of his own mind and therefore the reassessment proceedings initiated without his own satisfaction were bad in law.
3. For that on the facts and circumstances of the case, the reopening of assessment was unjustified and not in accordance with law.
4. For that the Ld. CIT(A) erred in confirming the assessment completed by the Ld. A.O and making addition of some other amount when there was no addition of any escaped income for which the assessment was reopened.
5. For that on the facts and circumstances of the case, the Ld. CIT(A) should have deleted the addition made by the Ld. AO by disallowing commodity transaction loss of Rs. 50,84,830/- when full details were filed.
6. For that the order of the AO be modified and the assessee be given relief prayed for.”
4. At the outset, the ld. counsel has submitted that the reopening in this case was bad in law. He has submitted that the assessment order involved in this case is A.Y 2010-11 and the reasons of the reopening of the assessment were recorded on 24.03.2017. He has further submitted that the original assessment in this case was carried out u/s 143(3). He therefore has submitted that Proviso to section 147 of the Act is attracted in this case which provides that where original assessment has been carried out u/s 143(3) of the Act, no action shall be taken u/s 147 of the Act after the expiry of four years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for that assessment year. He has submitted that the assessee has fully disclosed all the material facts relating to the transactions carried out by the assessee. He has invited our attention to the reasons recorded by the Assessing Officer. That there is no mention in the said reasons recorded that there is any failure on the part of the assessee to fully disclose the material facts necessary for the assessment. He has further submitted that it has been mentioned in the reasons recorded that the assessee has booked bogus profit of Rs.39,53,250/-, whereas, in the assessment order, the Assessing Officer has disallowed the loss relating to the commodity transaction. The assessee did not book any profits as alleged in the reasons recorded, therefore, the reopening of the case was based on wrong facts. The Assessing Officer did not have any reason to believe that the income of the assessee has escaped assessment.
5. The ld. DR could not rebut the aforesaid factual contentions raised by the assessee.
6. We find force in the contention raised by the ld. counsel for the assessee. We find that the Assessing Officer has reopened the assessment merely based on the information received from investigation wing without verifying the veracity and truthfulness of such information. The information was wrong and the Assessing Officer reopened the assessment on the basis of borrowed satisfaction without correlating the same with the facts of the case. Even there is no allegation that the income of the assessee has escaped assessment due to non-disclosure of the facts necessary for the assessment and since the assessment has been reopened after four years of the end of relevant assessment year, hence, the exception provided under 1st Proviso to section 147 is attracted. In view of this, the reopening of the assessment is held as bad in law.
7. In the result, the appeal of the assessee stands allowed.
Kolkata, the 13th July, 2023.
