Case Law Details
DCIT Vs G.S. Atwal & Company (Engineers) Pvt. Limited (ITAT Kolkata)
ITAT Kolkata held that original assessment was made under section 143(3)/147, i.e. scrutiny assessments. Further, there was no fresh information available with the revenue. Hence, reopening of assessments relying on the same information is invalid.
Facts-
The assessee was engaged as Del-credere commission agent by Tata Steel Limited. Post finalization of the assessment, the assessments was reopened via issuance of notice u/s 148 of the Income Tax Act. Additions was made by the AO with the aid of section 68 of the Act. On appeal it was submitted by the assessee that reopening of assessments is not in accordance with law.
Conclusion-
In both the years, original assessments were made under section 143(3)/147, i.e. scrutiny assessments on the same information. There is no fresh information available with the Revenue. Four years have expired from the end of the relevant years and, therefore, protection provided to the assessee in the proviso appended to section 147 is available. The ld. 1st Appellate Authority has rightly quashed the assessments by holding that reopening is not valid in both the years.
The assessee has made payments to Tata Steel Limited through banking channel for purchase of materials. It has worked as an agent, where it took the money from the ultimate purchasers of the coal residua. There is no dispute with regard to the sales made by the assessee. There is no dispute with regard to purchase of material through account payee cheques. The only doubt raised by the ld. Assessing Officer is that the cash payments received by it as a middleman is to be treated as unexplained credit. The ld. CIT(Appeals) was of the view that the ld. Assessing Officer did not verify the quantum, did not verify the RTGS details. The RTGS and cheque can easily be traced about the drawer of the concerned Bank. The assessee had paid sales tax/GST on the sales made by it. In such circumstances, the total purchase price, if collected by the assessee in cash as a middleman, cannot be added with the help of section 68.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present two appeals are directed at the instance of Revenue against the separate orders of ld. Commissioner of Income Tax (Appeals)-4, Kolkata dated 18.03.2019 and 20.03.2020 passed in assessment year 2011-12 & 2012-13 respectively.
2. A perusal of grounds of appeal taken by the Revenue in both these years would reveal that the first issue agitated by the Revenue in both the years relates to the issue that the ld. CIT(Appeals) has erred in quashing the reassessment order by holding that proceedings under section 147 of the Income Tax Act have not been validly initiated and hence the reassessment orders are not sustainable in the eyes of law.
3. The facts on all vital points are common in both the years therefore, for the facility of reference, we are taking up the facts mainly from assessment year 2011-12. However, if we find any variation on the facts, then we will make a mention of that especially.
4. The brief facts of the case are that the assessee-company at the relevant time was engaged as Del-Credere Commission Agent by Tata Steel Limited. The assessee used to earn commission income for sale of by-products of coal, i.e. Tailings, Washery Rejects, etc. to the Brick-Bhatta Owners, Hardcoke Owners and other users at a fixed price. In this process, it would get commission @ Rs.133/- per Ton for Tallings and Rs.25/- per Ton for Washery Rejects. In other words, different representative of Brick Kilen owners and other assessees would approach the assessee. It would collect money from them, deposit that money in its Bank account and made payment to Tata Steel Limited through cheque/RTGS. It works as an agent for purchase of those goods by alleged brick-Kilen owners, etc. It has filed its return of income for A.Y. 2011-12 on 12.08.2011 disclosing total income of Rs.2,68,79,830/-. Similarly in A.Y. 2012-13, it has filed its return of income on 18.09.2012 declaring total income at ‘NIL’. The assessment order was passed on 30.03.2015 [under section 147 read with section 143(3) in A.Y. 2011-12 and on 26.03.2015 under section 143(3)]. This assessment was reopened and a fresh assessment order was passed on 28.08.2017.
5. The assessments in both the years have been reopened by issuance of a notice under section 148 of the Income Tax Act. Copies of the reasons for reopening have been placed on page no. 619 in A.Y. 2011-12 and page no. N-2 of A.Y. 2012-13. We deem it appropriate to take note of these reasons in both the years, which read as under:-
6. The assessee raised objections qua the reopening, but its objections were jetissioned by the ld. Assessing Officer in both the years. In A.Y. 2011-12, the ld. Assessing Officer has made addition of Rs.46,76,77,656/-with the aid of section 68. He did not make any addition qua the Issue No. 2 mentioned in the reasons. Similarly in A.Y. 2012-13, the ld. Assessing Officer made addition of Rs.27,70,88,000/-. Both these additions are being made under section 68 on account of unexplained cash credits.
7. On appeal, it was submitted by the assessee that reopening of assessment is not in accordance with law. The same information was available with the Department during the original assessment proceedings and no addition was made. The ld. 1st Appellate Authority in a detailed order running into around 96 pages accepted this contention and quashed the reassessment orders.
8. Before us, the ld. CIT(DR) relied upon the assessment order and submitted that the ld. Assessing Officer got the information demonstrating escapement of income and accordingly he reopened the assessments. On the other hand, ld. Counsel for the assessee relied upon the ld. CIT(Appeals)’s order and brought to our notice, details compiled in tabular form and submitted before the ld. CIT(Appeals). It was brought to our notice that in A.Y. 2011-12, the ld. Assessing Officer has made reference to the two issues. As far as the second issue is concerned, i.e. the alleged bogus entry for bogus expenses of Rs.8,44,85,526/- is concerned, the ld. Assessing Officer himself did not make any addition because this allegation in the reasons has no connection with the assessee-company. As far as the first issue is concerned, this Bank account is within the knowledge of Department not in this year but right from A.Y. 2007-08. The assessee is in the same line of business. This account has been used by it and it was subject to scrutiny by the Department. He submitted that in A.Y. 2007-08, similar transactions were there amounting to Rs.16,99,01,794/-. The total turnover of the assessee was Rs.147,91,93,662/- and it earned the commission of roughly Rs.1,68,00,965/-. This was accepted by the Revenue. For buttressing the details of deposits in other years and a turnover achieved by the assessee has been compiled in a table, which has been noticed by the ld. CIT(Appeals) on page no. 20 of the impugned order. With the help of these details, it was demonstrated that all the information were in the knowledge of the Revenue. These have been considered by the ld. Assessing Officer in the earlier assessment orders, though specific finding may not be discernable. He pointed out that 2nd proviso to section 147 of the Income Tax Act, 1961 as applicable in the relevant year, prohibits the ld. Assessing Officer of taking any action after expiry of four years from the end of the relevant assessment year, unless the income chargeable to tax has escaped assessment on account of failure of the assessee to disclose all material facts fully and truly. He contended that in both the years, scrutiny assessment was there, the Bank account where alleged deposits were made was in the financial statement duly disclosed to the revenue. Thereafter no adverse inference was drawn by the ld. Assessing Officer and not only in this year but in earlier years and subsequent years. Therefore, the case of the assessee is fully protected by the 1st Proviso to Section 147 of the Income Tax Act. It is the onus upon the ld. Assessing Officer to demonstrate which material fact was not disclosed by the assessee fully and truly, which leads to escapement of income and only thereafter he can reopen the assessment. He further contended that this aspect has duly been considered by the ld. 1st Appellate Authority, more particularly ld. CIT(Appeals) has made reference to two orders of the ITAT, Kolkata, where identical facts were available. In other words, the proposition considered by the ld. 1st Appellate Authority was, whether on the basis of same information, which was available with the Assessing Officer when original scrutiny assessment was passed under section 143(3) or 147 and four years have expired from the end of the relevant assessment year, then, can Revenue reopen the assessment or not? This proposition has been answered in favour of the assessee after a detailed analysis of the facts in the light of various authoritative pronouncements of the Hon’ble High Court as well as of Hon’ble Supreme Court. He drew our attention the list of judgments considered by the ld. CIT(Appeals) while taking cognizance of the complete text of ITAT orders in the case of ITO –vs.- M/s. Epkon Associates (ITA No. 1425/KOL/2014) as well as in the case of DCIT –vs. M.D. Garments.
9. We have duly considered the rival contentions and gone through
the record carefully. The relevant part of section 147 as applicable in A.Ys. 2011-12 and 2012-13 reads as under:-
“Income escaping assessment:-
147- If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year):
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
…………………………………………”
10. A bare perusal of the above provision would indicate that if ld. Assessing Officer has reasoned to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of sections 148 to 153 assessed or reassessed such income. It is pertinent to observe that the formation of belief exhibiting escapement of income should have a direct nexus with the information available with the ld. Assessing Officer, which authorize him to believe escapement of income. Thus first of all, the ld. Assessing Officer should have information which enable him to believe that income has escaped assessment. The interdiction provided in the first proviso appended to this section puts an embargo upon the powers of the ld. Assessing Officer to issue notice under section 148 for reopening of an assessment. This interdiction contemplates that where an assessment under section 143(3) has been made for the relevant assessment year, then no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless income chargeable to tax has escaped assessment for such assessment year by the failure of the assessee to disclose all material facts fully and truly.
11. Thus in order to uphold the reopening in these two assessment years, the first and foremost aspect is to determine whether scrutiny assessment was made or not. It is pertinent to observe that A.Y. 2011-12 has already undergone scrutiny on the same points in an assessment passed under section 147. In other year, 143(3) assessment was made. Four years have expired in both the years. Therefore, the first condition of the proviso is fulfilled. The second condition is income should have escaped on account of the failure of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. This is an aspect, which is required to be demonstrated by the ld. Assessing Officer in the reasons itself. We have extracted the reasons in the earlier part of this order and at the cost of repetition, we would like to take note of the reasons under Issue No. 1 in A.Y. 2011-12 again, because on Issue No. 2, no addition has been made by the ld. Assessing Officer and it is no more in the litigation. This reasons read as under:-
“This office is in the possession of the information in respect to the abovementioned assessee pertaining to financial year 2010-11 (AY 2011-12), where the assessee was the ultimate beneficiary of unaccounted money to the extent of Rs.46,76,77,656/- which was routed through Bank Account No. 1160050010371, United Bank of India. The said Bank Account reflects that huge amount was deposited mainly through clearing/transfer/RTGS which were followed by transfer of the said fund through cheque and ultimately transferred to the beneficiary company. The assessee company M/s. G.S. Atwal & Co. Eng. Pvt. Ltd., is one of the such ultimate beneficiary, who received an amount of Rs.46,76,77,656/- during the previous year 2010-11 relevant to the AY 2011-12”.
12. A perusal of the above, it would reveal that nowhere ld. Assessing Officer has alleged failure of the assessee demonstrating which information was not disclosed by the assessee fully and truly. Similar is the point in A.Y. 2012-13 also in the reasons nowhere it is discernable.
13. Apart from the above, we would like to take note of the submissions of the assessee noticed by the ld. CIT(Appeals) in tabular form explaining the points fully and truly:-
14. A perusal of the above pleadings would indicate that this Bank Account with United Bank of India was brought to the notice of Revenue. It is available in the financial statements produced before us. This Bank Account was not only examined by the Revenue in this year, rather in F.Y. 2007-08, i.e. A.Y. 2008-09 to A.Y. 2012-13 and thereafter 2016-17. The ld. Assessing Officer is also the same Officer, who has examined these transactions. Thus we are of the view that there is no evidence with the Revenue to demonstrate that assessee has failed to disclose all material facts fully and truly for assessments of its income in A.Y. 2011-12 and 2012-13. In both the years, original assessments were made under section 143(3)/147, i.e. scrutiny assessments on the same information. There is no fresh information available with the Revenue. Four years have expired from the end of the relevant years and, therefore, protection provided to the assessee in the proviso appended to section 147 is available. The ld. 1st Appellate Authority has rightly quashed the assessments by holding that reopening is not valid in both the years.
15. With regard to merits, the ld. 1st Appellate Authority has recorded the following finding for A.Y. 2011-12:
16. We perused the assessment order also and we find that the ld. CIT(Appeals) has deleted this addition on the ground that the assessee has made payments to Tata Steel Limited through banking channel for purchase of materials. It has worked as an agent, where it took the money from the ultimate purchasers of the coal residua. There is no dispute with regard to the sales made by the assessee. There is no dispute with regard to purchase of material through account payee cheques. The only doubt raised by the ld. Assessing Officer is that the cash payments received by it as a middleman is to be treated as unexplained credit. The ld. CIT(Appeals) was of the view that the ld. Assessing Officer did not verify the quantum, did not verify the RTGS details. The RTGS and cheque can easily be traced about the drawer of the concerned Bank. The assessee had paid sales tax/GST on the sales made by it. In such circumstances, the total purchase price, if collected by the assessee in cash as a middleman, cannot be added with the help of section 68, worst to worst the accounts could be rejected and profit could be estimated. But again that was exercised, which was required to be done by the ld. Assessing Officer. This fact could be appreciated with different angle also because the assessee itself has offered an income of Rs.2.68 crores in A.Y. 2011-12 on a turnover of Rs.130,44,74,169/-. These details were submitted by the assessee before the authorities and we have extracted from the order of ld. CIT(Appeals) in A.Y. 2011-12, while taking note of the details in a tabular form. Since we have upheld the quashing of the reassessment proceedings, therefore, we do not deem it necessary to explore further investigation on the additions on merit.
17. As far as Cross Objection filed by the assessee in A.Y. 2011-12 is concerned, it is in support of the ld. CIT(Appeals)’s order and ld. Counsel for the assessee did not press this Cross Objection at the time of hearing. Sub-section (4) of section 253 authorises a respondent to file Cross Objection on receipt of notice in an appeal demonstrating the part of the impugned order against which respondent is aggrieved. In the Cross Objection, no such part is being demonstrated by the assessee. It pleaded the grounds in support of the ld. CIT(Appeals)’s order. Therefore, it is not maintainable and accordingly rejected.
18. In the result, both the appeals of the Revenue and Cross Objection filed by the assessee are dismissed.
Order pronounced in the open Court on October 19th, 2022.
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