Nainudevi A. Prajapati Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that reopening of assessment under section 147 of the Income Tax Act initiated on a mere change of opinion without any fresh tangible material unsustainable in law.
Facts- The assessee filed return of income u/s. 139(1) of the Act declaring total income of ₹ 4,50,177/-. The case was selected for scrutiny and assessment order u/s. 143(3) of the Act was passed on 30-12-2011, determining the total income at ₹ 10,39,054/-. After the assessment, it was discovered by the assessing officer that while estimating the income of the assessee, the then assessing officer had failed to add the sundry creditors of ₹ 1,63,03,871/- to the total income of the assessee, even though, the assessee had failed to furnish details and evidence of their genuineness. Therefore, the assessing officer had reason to believe that income to the tune of ₹ 1,63,03,871/- had escaped assessment and the case was reopened u/s. 147 of the Act. The assessee failed to furnish the return of income in response to notice u/s. 148 of the Act. Assessment u/s. 143 (3) r.w.s 147 of the Act was completed on 31-03-2014, determining total income at ₹ 1,77,91,657/- after addition of sundry creditors of ₹ 1,63,03,871/-. Aggrieved by the assessment order, the assessee preferred appeal before CIT (Appeals), who dismissed the appeal of the assessee.
Conclusion- In absence of any such fresh tangible material, the re-opening cannot be resorted to since the same would amount to “mere change of opinion”. Further, the Supreme Court held that “mere change of opinion” cannot be per se “reason to reopen” the assessment proceedings which have already been concluded.
Held that in the instant facts the re-assessment proceedings have been initiated on a “mere change of opinion” and hence the same are not liable to be sustained. Accordingly, we direct, that the re-assessment order having been passed on “mere change of opinion” is liable to be quashed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax(Appeals)-5, (in short “Ld. CIT(A)”), Vadodara in Appeal No. CAB/5-277/2014-15 vide order dated 10.08.2015 passed for Assessment Year 2009-10.
2. The assessee has taken the following grounds of appeal:-
“1. That the learned CIT(A) erred in law and on facts in confirming the addition of Rs.1,63,03,871/- made by the Assessing Officer on account unexplained creditors. That on the facts and circumstances of the case, as also in law, the said addition is grossly unjustified and deserves to be deleted in appeal before the Hon’ble Tribunal.
The appellant requests that leave be granted to add, alter, amend or withdraw any ground of appeal on or before final hearing of the appeal.”
3. Further, the assessee has also taken the following additional ground of appeal before us:
“1. The notice issued u/s. 148 and consequential reassessment order passed u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 dated 31.03.2014 are bad in law for the want of valid jurisdiction to issue notice u/s. 148 of the Act.
2. The challenge to the reassessment notice and reassessment order being a jurisdictional challenge is being taken up before the Hon’ble ITAT on the basis of the well laid down ratio by the Hon’ble Jurisdictional High Court in the case of P.V. Doshi vs. CIT – (1978) 113 ITR 22 (Guj).
The appellant reserves it right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.”
4. The brief facts of the case are that the assessee filed return of income under Section 139(1) of the Act declaring total income of ₹ 4,50,177/-. The case was selected for scrutiny and assessment order under Section 143(3) of the Act was passed on 30-12-2011, determining the total income at ₹ 10,39,054/-. After the assessment, it was discovered by the assessing officer that while estimating the income of the assessee, the then assessing officer had failed to add the sundry creditors of ₹ 1,63,03,871/- to the total income of the assessee, even though, the assessee had failed to furnish details and evidence of their genuineness. Therefore, the assessing officer had reason to believe that income to the tune of ₹ 1,63,03,871/- had escaped assessment and the case was reopened under Section 147 of the Act. The assessee failed to furnish the return of income in response to notice under Section 148 of the Act. Assessment under Section 143 (3) r.w.s 147 of the Act was completed on 31-03-2014, determining total income at₹ 1,77,91,657/- after addition of sundry creditors of ₹ 1,63,03,871/-. Aggrieved by the assessment order, the assessee preferred appeal before CIT (Appeals), who dismissed the appeal of the assessee with the following observations:-
“5.3 I have carefully considered the facts and the circumstances of the case, observations of the Assessing Officer, submissions of the assessee, material available on the record and the relevant judicial pronouncements on the subject. It is not denied in this case that the assessee had maintained books of accounts, which were audited. It is also noticed that the assessee had refused to furnish the said books of accounts before the Assessing Officer on the plea that the same were destroyed in fire. Absolutely no evidence regarding the genuineness of the sundry creditors was furnished by the assessee either at the assessment stage or during the appellate proceedings. The assessee has all along only asserted that she had filed her Return of Income as per the provisions of section 44ad and once her income has been assessed on estimate basis, no further addition can be made on account of non-genuineness of the sundry creditors u/s 68 of the Act.
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5.9. In view of the above discussion, it is clear that the assessee has failed to discharge the burden of primary onus cast on her to establish either the identity or creditworthiness of the alleged creditors and has also failed to prove the genuineness of the transactions. Further, in view of the decision of Hon’ble Allahabad High Court in the case of G.S. Tiwari & Co. (supra), the Assessing Officer is competent to make additions both u/s 44AD and u/s 68 of the Act in the same case in the same year. Therefore, the sundry creditors of Rs. 1,63,03,871/- are held to be unexplained and the order of the Assessing Officer in this regard is upheld. The assessee fails on these grounds of appeal.”
5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) confirming the additions. Before us, the counsel for the assessee submitted that the re-assessment proceedings are liable to be set aside on the ground that the same amounts to “change of opinion”, since the issue of sundry creditors, on the basis of which additions have been made in the re-assessment proceedings, was raised and discussed in detail during the course of the original assessment proceedings. The counsel for the assessee drew our attention to notice dated 06-09-2011 issued by the assessing officer during the course of assessment proceedings, in which the issue regarding “sundry creditors” was raised during the course of original assessment proceedings. The counsel for the assessee then drew our attention to reply of the assessee dated 8th November 2011, which was the response filed by the assessee against the aforesaid notice issued by the assessing officer. Further, the counsel for the assessee submitted that the issue of “sundry creditors” being unverifiable was raised by the assessing officer vide notice dated 20-12-2011 and the assessing officer, after taking into consideration the facts of the case estimated the income @ 5% of the total turnover, on the ground that due to non-production of books of accounts for verification the plea of the assessee to adopt 2% was rejected and the Assessing Officer proceeded to determine total income @ 5% of the total turnover. Therefore, the counsel for the assessee submitted that this is case of “change of opinion” on the part of the assessing officer since the same issue regarding non-verification of “sundry creditors” was raised during the original assessment proceedings and the assessment order was also framed by taking into consideration the fact that the sundry creditors remained unverifiable. Therefore, it is not permissible for the assessing officer to again initiate 147 proceedings on the same set of facts, which would amount to “change of opinion”, given the facts of the instant case.
6. In response, the Ld. DR placed reliance on the observations made by the Ld. CIT(Appeals) in the appellate order.
7. We have heard the rival contentions and perused the material on record. On going to the facts of the case, we observe that in the reasons recorded for issue notice under Section 148 of the Act, the assessing officer has mentioned that the reason why the instant case has been reopened is that the scrutiny of records reveal that the assessee has furnished no supporting evidence regarding genuineness of 9 sundry creditors for amount involved of ₹ 1,63,03,871/-. This shows that assessee had misrepresented facts in the return of income and had concealed the real income. However, we also observe from notice dated 06-09-2011 and in the notice dated 20-12-2011, that the assessing officer had specifically raised the issue regarding the closing balances shown under the head “sundry creditors” and had enquired that since the same are unverifiable, the same should be added to the total income of the assessee. Further, even while passing the assessment order, the assessing officer has specifically taken note of the fact that certain sundry creditors remained unverifiable, and accordingly, the assessment order was framed taken into consideration the aforesaid fact. It would be useful to reproduce the relevant extracts of the original assessment order for reference:-
“3. On perusal of balance sheet it is seen that the assessee has shown Rs. 16303871/- under the head “Sundry Creditor”. To verify the genuineness of the balances as reflected against the name of the party the assessee vide questionnaire dated 07/07/2011 at point No. 2 (vii) was asked to furnish complete address of the sundry creditors. The authorized representative has submitted the name and address of the sundry creditors. The notices u/s 133(6) of the IT Act were issued to the following parties:
