ACIT, Circle-2,Muzaffarnagar. Vs. Barnala Steel Industries Ltd.,Meerut Road,Muzaffarnagar.
December, 13th 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : A : NEW DELHI
BEFORE SHRI G.D. AGRAWAL, HON'BLE VICE PRESIDENT
SHRI A.D. JAIN, JUDICIAL MEMBER
Assessment Year : 2004-05
ACIT, Vs. Barnala Steel Industries Ltd.,
Circle-2, Meerut Road,
PAN : AABCB2772Q
Assessee By : Shri Salil Kapoor &
Shri Ankit Gupta,
Department By : Shri Bhim Singh, Sr. DR
PER A.D. JAIN, JUDICIAL MEMBER:
This is department's appeal for Assessment Year 2004-05 against the
order dated 16.09.2010, passed by the CIT (A), Muzaffarnagar, taking the
"1. On the facts and in the circumstances of the case, the CIT (A)
has erred in law by deleting the addition of Rs.10,00,000/- made by the
A.O. on account of unexplained cash credit under section 68 of the I.T.
Act, 1961 without appreciating full facts of the case. Further in this
case when identity of the share applicants has been amply disproved
as no such share applicants ever existed at the given address, the
order of the Hon'ble Supreme Court as reported in CIT vs. Lovely
Exports (P) Ltd., Taxman Vol.172 page-44 (2008) (supra) as quoted by
CIT (A) for allowing this appeal, is not applicable in this case.
2. On the facts and in the circumstances of the case, the CIT (A)
has erred in law by deleting the disallowance of Rs.3,69,972/- made by
the A.O. on account of short term capital loss without appreciating full
facts of the case.
3. On the facts and in the circumstances of the case, the CIT (A)
has erred in law by deleting the addition of Rs.96,065/- made by the
A.O. on account of unpaid liability under section 43B without
appreciating full fact of the case."
2. The assessee has filed an application under Rule 27 of the ITAT Rules,
which reads as follows:-
"Sub: Application under Rule 27.
In the above noted appeal which is filed by the Revenue, the
Respondent desire to support the order of the CIT (A) by way of
1. That the notice u/s 148 r.w.s. 147 issued by the A.O. is illegal,
barred by limitation and without jurisdiction.
2. That on the facts and circumstances of the case the A.O. has
erred in passing the order under section 147 and the said order illegal
and bad in law.
3. That the proceedings u/s 147/148 has been initiated on wrong
facts and therefore the re-assessment proceedings were invalid,
unjustified and not maintainable in the facts and circumstances. Entire
proceedings are infructuous.
4. That the notice u/s 148 and the reassessment order passed are
illegal, bad in law and without jurisdiction. The notice has been issued
without any application of mind and in a mechanical manner. There is
no income which has escaped assessment.
The respondent desire to support the order of CIT (A) on the
above mentioned ground as per the provision of Rule 27 of Appellate
Tribunal Rules 1963.
(For M/s Barnala Steels Industries Pvt. Ltd.)
Place: New Delhi."
3. In support of the aforesaid application, the ld. Counsel for the assessee
has contended that the notice issued to the assessee u/s 148 read with
Section 147 of the IT Act is barred by limitation and, as such, all proceedings
pursuant thereto are illegal; that the notice u/s 147 read with Section 143 (3)
of the Act was issued on 28.07.2009, i.e., after the expiry of four years from
the end of the relevant assessment year, which is Assessment Year 2004-05;
that such issuance of notice is against the proviso to Section 147 of the Act,
which requires that where an assessment u/s 143(3) of the Act or u/s 147 of
the Act has been made for the relevant Assessment Year, 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 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 u/s 139 or in response to a notice u/s 142 (1)
or Section 148 or to disclose fully and truly all material facts necessary for
his assessment, for that Assessment Year; that the notice was issued to the
assessee despite the fact that the assessee had duly disclosed before the
Assessing Officer fully and truly all material facts necessary for its
assessment for the concerned Assessment Year; that it was merely as a
change of opinion that the assessment earlier completed u/s 143 (3) of the
Act, vide order dated 12.09.2008, was sought to be reopened, which is
impermissible in law; that during the year the assessee company received
share application money of ` 5 lac from M/s Maple Sales Pvt. Ltd., by draft
No.544065 and that of ` 5 lac from RGS Marketing Pvt. Ltd., by draft
No.544066; that these details were fully disclosed by the assessee before the
Assessing Officer in the original assessment proceedings, as required by the
Assessing Officer, along with reply dated 25.10.2006; that it was after having
gone through the details so filed and being satisfied with them, that the
Assessing Officer had completed the assessment, accepting the share
application money as genuine; that specific details were asked for by the
Assessing Officer during the original assessment proceedings, it was in
response to which that the assessee had filed all the details, i.e., copies of
account along with draft details, PAN No. and IT returns; that these details
were found genuine by the Assessing Officer even in the face of the
information from the Investigation Wing of the department, as available with
the Assessing Officer; and that from this, it is amply clear that it was a mere
change of opinion that prompted the Assessing Officer to reopen the
completed assessment, which is not permitted under the law. The ld.
Counsel for the assessee has placed reliance on the following case laws:-
i) `CIT vs. Kelvinator India Ltd.', 256 ITR 1 (FB) (Del);
ii) `CIT vs. Kelvinator India Ltd. & Anr.', 320 ITR 561 (SC);
iii) `Haryana Acrylic Pvt. Ltd. vs. CIT', 308 ITR 38 (Del); and
iv) `ITO, I-Ward, Hundi Circle, Calcutta & Ors. Vs. Madnani Engineering
Works Ltd.', 118 ITR 1 (SC).
4. The Ld. DR, on the other hand, has opposed the application filed by the
assessee. It has been contended that the Ld. CIT (A) has decided this issue
against the assessee. However, the assessee has chosen not to file any
Cross Objection in the appeal filed by the department; and that as per Rule
27 of the ITAT Rules, the respondent may support an order on any issue
decided against him. Reliance has been placed on `CIT-IV vs. Jamnadas Virji
Shares & Stock Brokers (P) Ltd.', 21 taxmann.com 27 (Bom) (copy is placed
on record). The Ld. DR has contended that specific material had been
received by the Assessing Officer from the Investigation Wing of the
Department after the completion of the assessment u/s 143 (3) of the Act.
And as such, the Assessing Officer, on the basis of such information, was
definitely entitled to reopen the completed assessment. Reliance has been
placed on `Raymond Woolen Mills vs. ITO and Ors.', 236 ITR 34 (SC) and
`Rajesh Zaveri', 251 ITR 500(SC).
5. We have heard the parties on this issue. The Ld. CIT (A) has decided
this issue against the assessee, holding as follows:-
"......The Ground of A.O's action of reopening the proceedings u/s 147
of the Act is fully valid and proper. The A.O. had vital information from
a responsible authority. The nature of information was very important,
giving clear-cut indication of tax evasive accommodation entries being
used by a syndicate of persons and groups; the assessee being a major
beneficiary. Thus the A.O. was not only within his rights, but rather
duty bound to reopen the case u/s 147 of the Act. Thus ground of
appeal No.2 is dismissed."
6. The first issue is as to whether the application filed by the assessee u/s
27 of the Act is maintainable in face of the fact that the assessee did not
prefer any appeal or Cross Objection against the CIT (A)'s Order. Rule 27 of
the ITAT Rules reads as follows:-
"Rule 27 Respondent may support Order on grounds decided against
him The respondent, though he may not have appealed, may support
the order appealed against on any of the grounds decided against
7. A bare reading of Rule 27 of the ITAT Rules, 1963 shows that even if
the assessee has not filed any appeal against the order impugned in the
appeal filed by the department, the assessee is entitled, under the said Rule
to support the CIT (A)'s order on any of the grounds decided against him.
Now, the assessee's challenge to the reopening of the completed
assessment was decided by the Ld. CIT (A) against the assessee, as noted
above. Therefore, under Rule 27 of the ITAT Rules, the assessee is entitled
to rake up this issue at this stage before us. In `Jamnadas Virji' (supra), the
CIT (A) had allowed the assessee's appeal in part, deleting the disallowance
to the extent of ` 13.73 lacs and confirming the disallowance to the extent
of ` 14.96 lacs. Before the Tribunal, the assessee's appeal was withdrawn,
perhaps because it was barred by limitation. On an application filed by the
assessee under Rule 27 of the ITAT Rules, the Tribunal set aside the CIT
(A)'s order in its entirety. The Hon'ble High Court held that once the appeal
had been withdrawn, it is only open to the assessee to support the CIT (A)'s
order on any of the grounds decided against him and so, the assessee was
entitled to urge that the deletion of the disallowance to the extent of ` 13.73
lacs by the CIT (A) was correct and proper, but the assessee would not be
entitled to avail the benefit of Rule 27 of the ITAT Rules so far as regards the
action of the Ld. CIT (A) in confirming the disallowance of ` 14.96 lacs.
8. The facts discussed above show that the decision in the case of
`Jamnadas Virji' (supra) is of no avail to the Department. In fact, this
decision reiterates the position as set out in Rule 27 of the ITAT Rules, which
is that an order appealed against may be supported by the respondent,
despite no appeal thereagainst having been filed by the respondent, on any
of the grounds decided against him.
9. Further, as noted in `Jamnadas Virji' (supra) itself, in `D.R. Bamasi vs.
CIT', 83 ITR 223 (Bom), it had been long back settled that the respondent in
an appeal is undoubtedly entitled to support the decree which is in his
favour on any grounds which are available to him, even if the decision of the
Lower Court in his favour may not have raised those grounds and that the
powers of the Tribunal are similar to those of an Appellate Court under
Order XLI Rule 22 of the CPC.
10. In `ITO vs. Smt. Gurinder Kaur', 102 ITD 189 (Del), it has also been
held, noticing `Hukumchand Mills vs. CIT', 63 ITR 232 (SC), that even de
horse Rule 27 of the ITAT Rules, it is open to the respondent in an appeal
before the Tribunal to raise a new ground in defence of the Order appealed
against and that even assuming that Rule 27 is not strictly applicable the
Tribunal has inherent powers u/s 254 (1) of the Act to entertain the
argument of the Respondent which amounted to a new ground; that Rule 27
is not exhaustive of the powers of the Tribunal; and that it is merely not
procedural in character and does not, in any way, circumscribe or control
the powers of the Tribunal under the Act. `Smt. Gurinder Kaur' (supra) has
elaborately dealt with the issue, going into various case laws.
11. Besides, in `Kelvinator India' (supra), the Hon'ble Supreme Court has
observed that the Assessing Officer has power to reopen an assessment,
provided there is tangible material to come to the conclusion that there was
escapement of income from assessment and that the reasons recorded for
the reopening must have a live link with the formation of the belief of
escapement of income. In the present case, as discussed hereinabove, there
was no tangible material with the Assessing Officer to conclude that there
was escapement of income from assessment. Also, the reasons recorded do
not have any link, much less any live link with the formation of belief of
escapement of income. The reopening of the completed assessment, in view
of the full disclosure of the material facts relevant to the assessment of the
assessee for Assessment Year 2004-05, was nothing other than a mere
change of opinion, which is impermissible in law.
12. In view of the above, we hold that the application filed by the assessee
under Rule 27 of the ITAT Rules is, by all means, maintainable.
13. Now, so far as regards the merits of the contents of the application
filed by the assessee, the legal position as per the proviso to Section 147 of
the Act is that where an assessment u/s 143 (3) has been made for the
relevant Assessment Year, no action shall be taken u/s 147 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, inter alia, to
disclose fully and truly all material facts necessary for his assessment, for
that Assessment Year.
14. In the present case, as per the record, the assessee company is
engaged in the business of manufacture and trade of MS Tor, bars, saria,
etc. It filed its return of income for Assessment Year 2004-05, the relevant
year declaring a loss of ` 4,37,126/-. The assessment was completed vide an
order passed u/s 143 (3) of the Act on 12.09.2008 at an assessed income of
` 60,01,200/-. A copy of the said order has been placed at pages 42-46 of
the assessee's paper book (`APB', for short). The notice u/s 147 of the Act
was issued on 28.07.2009. A copy thereof is at APB 47. The reasons
recorded for such action are dated 07.07.2009 (APB 48). Thus, evidently,
the notice u/s 147 of the Act was issued after the expiry of four years from
the end of the Assessment Year 2004-05. Now, this could be done, as per
the proviso to Section 147, if there had been failure on the part of the
assessee to disclose fully and truly all material facts necessary for its
assessment, for Assessment Year 2004-05. The question is as to whether
there was, in fact, any such failure on the part of the assessee.
15. During Assessment Year 2004-05, the assessee company had received
share application money of ` 5 lacs each from M/s Maple Sales Pvt. Ltd. and
RGS Marketing Pvt. Ltd. In the original assessment, the assessee related
before the Assessing Officer that these amounts had been received through
draft Nos.544065 (APB 98) and 544066 (APB 102), respectively. The
assessee, on the Assessing Officer's query, filed reply dated 25.10.2006
(APB 92-104) before the Assessing Officer. This reply was accompanied by
copies of the said drafts, list of shareholders and other evidence. It was
thereafter, that the scrutiny assessment order dated 12.09.2008 was
passed. The department has not rebutted the assessee having filed the said
reply along with the accompanying evidence before the Assessing Officer.
16. The reasons recorded for the reopening of the completed assessment
are as follows:-
"Reasons for issuing notice u/s 148 of IT Act, 1961.
The assessee filed return of income on 4.9.2001 declaring loss of
Rs.4,37,126/-. The assessment was completed u/s 143(3) of the IT Act,
1961 on 22.12.2007 at a total income of Rs.60,01,203/-. On the basis
of information in possession of the department as received from the
Directorate of Income Tax (Inv.)-I, New Delhi it is noticed that the
assessee has taken the following accommodation entry/entries the
details of which are as under:-
1. S.No. ---
2. Beneficiary Name M/s Barnala Steel Industries
Ltd., Meerut Road, M. Nagar.
3. Beneficiary Bank Name SBI M. Nagar
4. Beneficiary Bank Branch Railway Road, M. Nagar
5. Value of Entry Rs.5,01,250/- + 5,01,250/-
6. Instrument Number by which Draft No.544065 & 544066
Entry Received issued by Jai Luxmi
Cooperative Bank Ltd.
7. Date on which Entry received 4.12.2003
8. Name of a/c holder of entry Deepak Gupta
9. Entry operator's bank name Jailaxmi Coop. Bank
10. Entry operator's bank branch Fateh Puri Delhi
11. Account No. of entry giving 15942
On going through the Bank account of the assessee it has been
revealed that the amount of this entry has been credited, but the
assessee has not reflected them either in the form of loan/deposit or as
any advance in the name of Shri Deepak Gupta, in the Balance Sheet.
Enquiries made by Inspector reveal that Shri Deepak Gupta is not
available at the address given in the Bank account i.e. 1756 Nai Basti
Naya Bazar, Delhi. During the assessment proceeding completed on
22.12.2007, when the assessee Company was confronted in respect of
these entries, the assessee Co. vide letter dated 20.12.2006 stated
"1. That the assessee is totally unable to understand the nature of
the entries of Rs.5,01,250/- and Rs.5,01,250/- as alleged to have been
received on 4.12.2003 by the assessee.
2. That the assessee has examined and investigated its entire
books of account and has not found any such entry in the account
books, since these entries are not at all traceable in books of accounts,
on the basis of information as provided by your good self. No such
amount has been credited in the books as company has not received
the same from Shri Deepak Gupta as alleged."
As the assessee Co. has failed to disclose truly the nature and source
regarding these entries, I have reason to believe that the aforesaid
accommodation entry/entries amounting to Rs.10,02,500/- represents
the income of the assessee which has escaped assessment on account
of failure on the part of the assessee to disclose fully and truly all
material facts necessary for his assessment for the assessment year
2004-05 for which action u/s 147 of the IT Act, 1961 is required and
accordingly notice u/s 148 of the IT Act, 1961 is issued for the
Assessment Year 2004-05.
Asstt. Commissioner of Income Tax
17. The aforesaid reasons do not lay out any failure on the part of the
assessee to disclose fully and truly any material fact necessary for its
assessment for Assessment Year 2004-05. And for doing so, the proviso to
Section 147 comes into play. Once the assessee had duly disclosed all
material facts necessary for its assessment fully and truly before the
Assessing Officer in the scrutiny assessment proceedings, for Assessment
Year 2004-05, no action ought to have been taken u/s 147 of the Act, as
envisaged by the proviso to Section 147. Pertinently, the operative word in
the said proviso is `shall', making it obligatory on the Assessing Officer to
definitely not take any such action, all material facts necessary for the
assessment having been fully and truly disclosed by the assessee in the
scrutiny assessment proceedings.
18. In the face of the proviso to Section 147 of the Act, there is no merit in
the contention of the department, as also held by the Ld. CIT (A), that since
the Assessing Officer had vital information from the Investigation Wing of
the department, the Assessing Officer was duty bound to reopen the case
u/s 147 of the Act. `Raymonds Woollen Mills' (supra) is not at all applicable
to the facts of the present case. Therein, it was held that in determining
whether commencement of re-assessment proceedings was valid, it has
only to be seen whether there was prima facie some material on the basis of
which the department could re-open the case and that the sufficiency or
correctness of the material is not a thing to be considered at this stage. The
issue of coming into play of the provisions of the Section 147 of the Act was
not up for consideration before the Hon'ble Supreme Court in that case.
19. `Rajesh Zaveri' (supra) was concerned with an assessment completed
u/s 143 (1) of the Act, which is not the case herein. Therefore, `Rajesh
Zaveri' (supra) also does not aid the case of the department.
20. In view of the above, the application filed by the assessee is allowed
and as such, the order passed by the Ld. CIT (A) is maintained. This being
so, the grounds raised by the department are not required to be gone into.
21. In the result, the appeal filed by the department is dismissed and the
application filed by the assessee is allowed.
The order pronounced in the open court on 05.12.2013.
[G.D. AGRAWAL] [A.D. JAIN]
VICE PRESIDENT JUDICIAL MEMBER
Dated, 05th December, 2013.
Copy forwarded to:
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.