Referred Sections:
Section 147 to 151 of the Income Tax Act, 1961.
Section 154 of the Income Tax Act, 1961
Section 80 HHC,
Section 115 JB
Section 143(3)
section 148 of the Act
Referred Cases / Judgments:
C-Scheme, Jaipur vs. The ACIT, Circle-6, Jaipur and ITA No. 206/JP/2015
DCIT Circle-6, Jaipur vs. M/s Rajasthan State Industrial Development & Investment Corp.
Jaipur and Indira Exports Private Limited vs. ACIT
Anil Gupta vs. AO, (2005) 96 TTJ 0798 (Delhi)
Sterilite Industries India Ltd. vs. ACIT(supra)
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `SMC' NEW DELHI
BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER
I.T.A. No. 308/Del/2019
Assessment Year: 2011-12
Sh. Ram Kishore Rathore, vs. ACIT, Circle-53(1),
C/O M/S RRA TAXINDIA New Delhi
D-28, South Extension,
Part-I, New Delhi
(PAN:AAAPR4260P)
(ASSESSEE) (RESPONDENT)
Assessee by: Sh. Somil Aggarwal, Advocate
Revenue by : Sh. Pradeep Singh Gautam, Sr. DR.
ORDER
This appeal is filed by the assessee against the Order dated
22.11.2018 passed by the Ld. CIT(A)-18, New Delhi relating to Assessment
Year 2011-12 on the following grounds:-
"1. That having regard to the facts and circumstances of the case, Ld. CIT(A)
has erred in law and on facts in not quashing the impugned reassessment
order passed by Ld. AO u/s 143(3)/147 and that too without assuming
jurisdiction as per law and without complying the mandatory conditions of
section 147 to 151 of the Income Tax Act, 1961.
2. That in any case and in any view of the matter, Ld. CIT(A) has erred in law
and on facts in not quashing the impugned reassessment order passed by
Ld. AO u/s 147/143(3) and that too without assuming jurisdiction as per law
and without serving the mandatory notice u/s 148, 143(2) and 142( 1) of
the Income Tax Act, 1961.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A)
has erred in law and on facts in confirming the action of Ld. AO in not
allowing the deduction of interest paid on Housing Loan amounting to Rs.
8,01,501/- while calculating Income under the head House property and
that too by recording incorrect facts and findings and without observing the
principles of natural justice.
4. That in any case and in any view of the matter, action of Ld. CIT(A) in
confirming the action of Ld. AO in not allowing the deduction of a sum of Rs.
8,01,501/- paid as interest on Housing Loan while calculating Income under
2
the head House property, is bad in law and against the facts and
circumstances of the case.
5. That having regard to the facts and circumstances of the case, Ld. CIT(A)
has erred in law and on facts in confirming the action of Ld. AO in
calculating the loss from House property at Rs. 4,95,742/- instead of Rs.
13,41,638/-, as claimed by the assessee in the return of income and that
too by recording incorrect facts and findings and without observing the
principles of natural justice.
6. That in any case and in any view of the matter, action of Ld. CIT(A) in
confirming the action of Ld. AO in calculating the loss from House property
at Rs. 4,95,742/- instead of Rs. 13,41,638/- as claimed by the assessee in
the return of income, is bad in law and against the facts and circumstances
of the case.
7. That having regard to the facts and circumstances of the case, Ld. CIT(A)
has erred in law and on facts in confirming the action of Ld. AO in rejecting
the claim of assessee that appellant was using first floor for the business
purpose and has erred accordingly in computing the income from house
property correctly in accordance with law and facts
8. That having regard to the facts and circumstances of the case, Ld. CIT(A)
has erred in law and on facts in confirming the action of Ld. AO in computing
the rental income of the second floor for the complete period of occupation.
9. That in any case and in any view of the matter, action of Ld.CIT(A) in
confirming the action of Ld. AO in not allowing the deduction and in
calculating the figure of loss from house Property and framing the impugned
reassessment order are bad in law, illegal, unjustified, barred by limitation,
contrary to facts & law and based upon recording of incorrect facts and
finding, without giving adequate opportunity of hearing, in violation of
principles of natural justice and the same deserves to be quashed.
10. That having regard to the facts and circumstances of the case, Ld. CIT(A)
has erred in law and on facts in confirming the action of Ld. AO in charging
interest u/s 234A, 234B, 234C and 234D of the Income Tax Act, 1961."
2. At the time of hearing, learned counsel for the assessee stated that
the issue in dispute has already been adjudicated and decided in favour of
the assessee by various Benches of the ITAT and requested that respectfully
following the orders passed by the ITAT, the addition in dispute may be
deleted and appeal filed by the assessee may be allowed. In support of his
contention he filed a copy of common dated 20.02.2018 order passed by
3
the ITAT Jaipur Benches, Jaipur in ITA No. 92/JP/2015 for Assessment Year
2008-09 in the case of M/s Rajasthan State Industrial Development &
Investment Corp. Ltd., Udyog Bhawan, Tilk Marge, C-Scheme, Jaipur vs.
The ACIT, Circle-6, Jaipur and ITA No. 206/JP/2015 for Assessment Year
2008-09, in the case of The DCIT Circle-6, Jaipur vs. M/s Rajasthan State
Industrial Development & Investment Corp. Ltd., Udyog Bhawan, Tilak
Marge, C-Scheme, Jaipur and Indira Exports Private Limited vs. ACIT in ITA
Nos. 391/2007, 338/2007 and 294/2006 dated 31.10.2011 (Indore) which
the assessee has attached in the paper book at pages 11 to 16 and also the
decision of Delhi Bench in the case of Anil Gupta vs. AO, (2005) 96 TTJ
0798 (Delhi) which the assessee has attached at pages 17 to 25 of the
paper book.
3. Learned DR relied upon the orders passed by the Revenue authorities.
4. I have heard both the parties and perused the orders passed by the
Revenue authorities alongwith the case laws relied upon by the learned
Counsel for the assessee on the issue in dispute and I am of the considered
view that there are many orders have been filed by the learned counsel for
the assessee to support his contention. But he especially draw my attention
towards the order dated 20.02.2018 of ITAT Jaipur Benches, Jaipur passed
in ITA No. 92/JP/2015 Assessment Year 2008-09 in the case of M/s
Rajasthan State Industrial Development & Investment Corp. Ltd., Udyog
Bhawan, Tilak Marge, C-Scheme, Jaipur vs. The ACIT, Circle-6, Jaipur.
5. I have gone through the orders passed by the ITAT on the issue in
dispute and I am of the view that the ITAT Jaipur Benches, Jaipur, order
4
dated 20.02.2018 is very much relevant on the issue in dispute in which the
Jaipur Bench has discussed the various case laws and many decisions
passed by the Hon'ble High Courts and decided the issue in favour of the
assessee. For the sake of convenience, the findings given by the ITAT Jaipur
Benches in para no. 5 at pages 7 to 18 is reproduced as under:-
5. We have considered the rival submissions as well as relevant material on
record. The scrutiny assessment u/s 143(3) was completed on 22.12.2010
whereby the AO accepted the claim of deduction u/s 80IA of Rs.
95,11,66,038/-. Thereafter, the AO issued a notice u/s 154/155 of the Act
dated 8.06.2012 to rectify the mistake of not adjusting the loss of the
previous year of Rs. Rs. 1,36,34,565/- in respect of two units while allowing
the deduction u/s 80IA of the Act. For ready reference we reproduce the gist
of the notice issue u/s 154 dated 08.06.2012 as under:-
"Notice under Section 154 of the Income Tax Act, 1961
The assessment/refund order u/s 143(3) for the assessment year 2008-09
made on 22.12.2010 requires to be amended as there is a mistake apparent
from the record within the meaning of Section 154 / 155 of the Income Tax
Act, 1961. The rectification of the mistake, as per particulars given below,
will have the effect of enhancing the assessment / reducing the
refund/increasing your liability.
In respect of allowing units loss of A.Y. 2007-08 h as been not set off as per
provisions of Sec. 80IA CS before the profit of the subsequent year as
under:-
S. Unit Initial Year Profit of the Loss of the
No. year 08-09 A.Y. 07-08
1. EPIP Sitapura-1st A.Y. 2005- Rs. 16770973 Rs. 5020008
06
2. Borhada A.Y. 2005- Rs.38561187 Rs. 8614556
06
Total 1,36,34,564
It is apparent from the notice u/s 154 of the Act that the AO proposed to rectify
the mistake in respect of the loss of Rs. Rs. 1,36,34,564/- to be adjusted against
the profits of the eligible undertaking for deduction u/s 80IA of the Act. In
response to the said notice issued u/s 154 the assessee filed its reply dated
15.06.2012 as under:-
5
"We are in receipt of your aforesaid notice in which you have propose
to reduce deduction u/s 80IA by Rs. 1,36,34,564/-, in this connection
we are to submit that during the year assessee has claimed deduction
u/s 80IA in respect of various industrial area and for which audit
certificate u/s 80IA has also been submitted during the course of as
assessment proceedings completed u/s 143(3). Total eligible profit
u/s 80I A of all these industrial area works out to Rs.98,13,07,585/-
against which assessee has claimed deduction u/s 80IA at Rs. 95,1
1,66,037/-. If the loss of two unit i.e. EPIP, Sitapura & Boranada of
Rs. 1,36,34,564/- is considered while working out eligible amount of
deduction u/s 80IA then eligible deduction works out to Rs.96,76,73,
021/- (98,13,07,585- 1,36,34,564) against which assessee has
claimed deduction u/s 80IA at Rs. 95,11,66,037/- only. Since
assessee has already claimed deduction u/s 80IA at lesser amount as
compared to computed by your good self, thus there is no need to
make any adjustment u/s 154/155."
Thus, the assessee clearly explained that the profit of the assessee eligible
deduction u/s 80IA is Rs. 96,76,73,021/- even after the adjustment of the said
loss of Rs. 1,36,34,564/-. Hence, the deduction allowed in the assessment order
of Rs. 95,11,66,037/- is not a mistake as stated in the notice u/s 154 of the Act.
The AO then issued notice u/s 148 of the Act on 21.11.2012 by recording the
reasons as under:-
" Reasons for initiating proceedings u/s147 and issue of notice u/s 148 of the
I.T. Act, 1961 in the case of M/s Rajasthan State Industrial Development &
Investment Corporation Ltd., Jaipur (PAN No. AABCR4695 A.Y. 2008-09.
The assessment in case was completed u/s 143(3) on 22.12.2010. Later
it has been noticed that the assessee has worked out Deduction u/s 80IA
in respect of various eligible projects at Rs. 98,13,07,575/-. However, it
has claimed the deduction at Rs. 95,11,66,028/- anticipating that
deduction allowed in earlier years to certain units may be withdrawn
(though not withdrawn till date). While calculating the deduction u/s 80IA the
assessee has not considered the loss in respect of two units viz. Sitapura
EPIP-I at SEZ Boranada amounting to Rs. 50,20,009/- and Rs. 86,14,565/-
respectively totaling to Rs. 1,36,34,565/- which would have further reduced
from Rs. 95,11,66,028/- while working out the deduction u/s 80IA.
2. In view of above facts and circumstances I have sufficient reasons to believe
that an amount of Rs. 1,36,34,565/- has escaped assessment within the
meaning of sec. 147 of the I.T. Act, 1961.
3. Issue notice u/s 148 for the A.Y. 2008-09 in which the sand transaction falls."
It is apparent that the reasons for issuing the notice u/s 154 as well as the
reasons recorded for reopening of the assessment u/s 147/148 of the Act
are same to re-compute the deduction u/s 80IA after adjustment of loss of
6
Rs. 1,36,34,564/-. The assessee has raised a legal objection against the
initiation of proceeding u/s 147/148 while the proceeding u/s 154 of the Act
were pending and not reached to the finality either by dropping the same or
passing any order u/s 154 of the Act, the initiation of proceeding u/s
147/148 is not permissible. The Bench asked the ld. CIT DR to produce the
assessment record to show that the status of the proceeding u/s 154 on the
date of initiating of proceedings u/s 147/148 of the Act. It was found that
the AO has not passed any order either for dropping the proceeding or
concluding the proceeding u/s 154 prior to issuing notice u/s 148 of the Act.
Thus, it is not disputed that there is no record of closing the proceeding u/s
154 of the Act. There is no quarrel that the doctrine of estoppel is not
applicable against the initiation of proceedings u/s 147/148 even when the
AO initiated the proceedings u/s 154 of the Act. However, when the issue in
the two proceedings initiated u/s 154 as well as u/s 147of the Act is the
same than without considering the proceeding u/s 154 of the Act the AO
cannot initiate parallel proceeding u/s 147/148 of the Act on the same
issue. The Hon'ble Madras High Court in case of Sterilite Industries India
Ltd. vs. ACIT(supra) while dealing with an identical issue of jurisdiction of
the AO has held in paras 28 o 30 as under:-
"28. As already pointed out, in respect of the assessment year 2003-04, the
first respondent herein issued notice under Section 154 on 20.7.2006, wherein,
the Officer proposed to disallow the claim under Section 80 HHC, provision for
bad debts and diminution of value of current investment and income tax debited
in respect of Section 115 JB assessment and on the regular assessment
under Section 143(3) in respect of the alleged mistake in granting deduction
under Section 80 IB, for income tax and wealth tax debited in the profit and loss
account and the share issue expenses and FRN issue expenses written off to be
disallowed, being capital in nature.
29. A reading of the notice under Section 154 of the Act and the
reassessment notice dated 11th May 2009 shows that there is absolutely no
material difference on the issues sought to be considered under these
notices, except the fact that while in the proceedings under Section 154, the
notice is based on the view that there was a mistake apparent on the face
of the record warranting a rectification, the proceedings under Section 147
alleged that by reason of the untrue and incorrect particulars given by the
assessee, there had been an escapement of tax. Given the fact that the area
of operation of both these provisions are on totally different fields, the
simultaneous assumption of jurisdiction under Sections 154 and 147 on
the self same issue, plainly shows the contradiction in the reasoning of
the second respondent and as without logic or reason.
7
30. As rightly pointed out by the learned senior counsel appearing for
the petitioner placing reliance on the decision reported in Premier
Automobiles Ltd. (supra), when once the assessment order has been the
subject matter of rectification under Section 154, the self same issue
cannot be the subject matter of reassessment by taking recourse to
Section 147 of the Act. Thus, on the facts that are available today, as far
as the assessment year 2003-2004 is concerned, there are two
proceedings, one under Section 154 and another under Section 147 of
the Act. The jurisdiction given under both the Sections thus operating on
different fields, (as far as this assessment year is concerned), and with
the doubt in the mind of the Officer as to which direction he has to go, I
have no hesitation in holding that the notice lacks the very basis for
assumption of jurisdiction under Section 147 of the Act. For the reasons
that there cannot be two parallel proceedings on the self same issue as
one based on the view that there were materials available on record
which warranted exercise of jurisdiction under Section 154 and the other
initiated under Section 147 that there was escapement of income from
tax on account of the failure of the assessee from disclosing the full and
correct particulars, I have no hesitation in quashing the notice on
reassessment."
The Hon'ble High Court as held that then cannot be two parallel proceedings
on the self same issue as are based on the view that there were materials
available on record which warranted exercise of jurisdiction u/s 154 and the
other initiated u/s 147 that there was escapement of income from tax. The
Mumbai Bench of the Tribunal in case of Mahinder Freight Carrier vs. DCIT
129 ITD 278 has held in para 10 as under:-
"10. In this case, the Assessing Officer initiated the proceeding under section
154 of the Act and said proceeding, as per record, has not reached the
finality, either by dropping the same or passing any order in the said
proceeding. As per the reasons recorded by the Assessing Officer as the
assessee did not respond to the notice issued under section 154, the
Assessing Officer initiated the proceedings under section 147 and in
consequence issued the notice under section 148. It is also admitted fact
that except the return of income of the assessee and its enclosures, no other
extra material or information was in possession of the Assessing Officer. It is
true that the assessee filed the return of income in response to the notice
issued by the Assessing Officer under section 148 of the Act showing the rental
income as an income from house property, but the assessee has every right to
challenge proceeding initiated by the Assessing Officer under section 147
of the Act. Now it is well-settled principle by different judicial
pronouncements that there cannot be any 'estoppel' against the statutory
provisions. Admittedly, in this case, the mandate of section 147 is not
fulfilled for the reasons that the Assessing Officer himself was not sure
whether the issue in controversy could be the subject-matter of section 154
or the same can be the subject-matter of proceedings under section 147. Ld.
8
D.R. placed his heavy reliance in the case of Damodar H. Shah(supra). In
the said case the Hon'ble High Court has explained in details the difference
between section 154 viz-a-viz section 147. As per said decision there is no bar
to evoke section 147 but Assessing Officer has to demonstrate why he was
required to do so. Nothing has been demonstrated by Assessing Officer in
this case. In our opinion, for the reasons given above, the Assessing Officer
was not justified in issuing the notice to the assessee under section 148 and
we, accordingly, hold the same as void ab initio and quash the
proceedings initiated by the Assessing Officer under section 147. Accordingly,
this issue is decided in favour of the assessee and Ground Nos. 1 to 3 are
allowed. As the assessee succeeds on the issue of the validity of the notice
under section 148, we do not consider it necessary to go into the merits of
the case."
It is manifest from the record that all relevant materials and facts
necessary for assessments were available with the Assessing officer at the
time of original assessee passed u/s 143(3) of the Act and further the claim
of deduction allowed while passing the order u/s 143(3) would not be
excessive even if proposed adjustment of loss of previous year is made
against the profit of the current year. The assessee reminded the AO in its
reply to the notice u/s 154 that even after the adjustment of loss of Rs.
1.36 Crores allowable deduction would be more than Rs. 95.11 Crores
allowed in the original assessment. Thereafter, the AO without bringing the
proceedings u/s 154 of the IT Act to a logical conclusion had initiated the
proceedings u/s 147 of the Act on the basis of the same fact and material
available on the assessment record. Thus, reopening on the basis of the
material available on assessment record is nothing but based on change of
opinion. The Hon'ble Calculta High Court in case of Berger Paints India Ltd.
vs. DCIT (supra) has held in paras 42 to 53 are as under:-
"42. However, if the Assessing Officer is of the view that income has escaped
assessment by reason of a mistake apparent from records, and takes recourse
to section 154, but finds later, that there is no apparent mistake, then he cannot,
in the absence of any other ground on the basis of which he still has reason to
believe that the income has escaped assessment, start reassessment
proceedings under section 147 of the Act. In other words, the Assessing
Officer cannot again start reassessment proceedings on the basis of the same
reasons.
43. The Assessing Officer has not disclosed the reasons for the Assessing
Officer to still believe that income that was the subject- matter of rectification had
still escaped assessment though that was not due to any obvious mistake, borne out
from existing records.
9
44. The judgment in GKN Driveshafts (India) Ltd. v. ITO reported in [2003] 259
ITR 19, cited by Mr. Bhowmik was rendered by the Supreme Court in the
particular facts of that case. The Supreme Court held (page 20) :
"We see no justifiable reason to interfere with the order under challenge.
However, we clarify that when a notice under section 148 of the Income-tax Act
is issued, the proper course of action for the noticee is to file a return and if he so
desires, to seek reasons for issuing notices. The Assessing Officer is bound to
furnish reasons within a reasonable time. On receipt of reasons) the noticee is
entitled to file objections to issuance of notice and the Assessing Officer is bound
to dispose of the same by passing a speaking order. In the instant case, as the
reasons have been disclosed in these proceedings, the Assessing Officer has
to dispose of the objections, if filed, by passing a speaking order, before
proceeding with the assessment in respect of the abovesaid five assessment
years."
45. The condition precedent for initiation of reassessment proceedings is, in
any case, the formation of the belief, based on new materials that any income
had escaped assessment. A notice under section 148 of the Income-tax Act may
not be issued merely on change of opinion.
46. In normal circumstances, on receipt of a notice of reassessment under section
148 of the Income-tax Act, the assessee should file a return, ask for the reasons
and then file its objection. However, where the condition precedent for issuance
of a notice are absent, the notice might be challenged by filing a writ petition under
article 226 of the Constitution of India.
47. In Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 201, the Supreme Court
held that in exercise of power under article 226, the court might examine whether
the conditions precedent for exercise of jurisdiction to reassess existed. The
Supreme Court, inter alia, held as follows (page 207 and 208) "The existence of
such alternative remedy is not however always a sufficient reason for refusing a
party quick relief by a writ or order prohibiting an authority acting without
jurisdiction from continuing such action.
In the present case, the company contends that the conditions precedent for
the assumption of jurisdiction under section 34 were not satisfied and came to
the court at the earliest opportunity. There is nothing in its conduct which
would justify the refusal or proper relief under article 226. When the
Constitution confers on the High Courts the power to give relief it becomes the
duty of the courts to give such relief in fit cases and the courts would be failing to
perform their duty if relief is refused without adequate reasons."
48. Moreover, in this case, where the writ petition had been entertained
and kept pending for about six years and directions issued for filing of
affidavits, this court is not inclined to decline relief only on the ground of
existence of an alternative remedy of filing an objection before the Assessing
Officer and then taking recourse to an appeal upon reassessment.
49. In Raymond Woollen Mills Ltd. v. ITO reported in [1999] 236 ITR 34
(SC) cited by Mr. Bhowmick, the Supreme Court was satisfied on facts that
10
jurisdiction to reassess had validly been assumed.
50. If there are reasons to believe that income has escaped assessment,
and jurisdiction to issue notice of reassessment under section 148 of the
Income-tax Act has been exercised, the court ought not to weigh the
sufficiency of the reasons in exercise of its extraordinary writ jurisdiction under
article 226 of the Constitution of India.
51. The court may, however, in exercise of its power of judicial review
examine whether the conditions precedent for exercise of jurisdiction to reopen
assessment at all exist. In the absence of any new and/or fresh materials, on
the basis of which the Assessing Officer could have formed the opinion that
income has escaped assessment, the Assessing Officer lacked jurisdiction to
reopen assessment.
52. The reassessment notice has been issued for virtually the same reasons
for which rectification proceedings had earlier been initiated but dropped. The
Assessing Officer has not disclosed any new materials for reopening assessment.
Assessment cannot be reopened merely on change of opinion, as has apparently
been done in this case. The Assessing Officer on being satisfied that there was
no apparent error in computation of income, on the basis of existing records,
dropped the rectification proceedings. In the absence of any new and/or fresh
materials and in the absence of any reason for formation of belief that
even otherwise, income had escaped assessment even though there was no
apparent mistake or error, the Assessing Officer lacked jurisdiction to issue the
impugned notice.
53. For the reasons discussed above, the impugned notice under section 148 of
the Income-tax Act is set aside. The writ petition is disposed of accordingly."
In view of the above discussion as well as the decisions cited (supra) we are
of the considered opinion that the reopening is not sustainable when the
proceedings u/s 154 of the Act were pending on the same issue.
Accordingly, we set aside the initiation of proceeding u/s 147/148 of the Act
and consequential reassessment order. As we have set aside the initiation
of proceeding u/s 147/148 and consequential reassessment order,
therefore, the other grounds raised on the merits becomes infructuous.
In the result, the appeal of the assessee is allowed and Revenue
appeal is dismissed.
Order pronounced in the open court on 20/02/2018."
6. Keeping in view the facts of the present case and the order dated
20.02.2018 by the ITAT Jaipur Benches as reproduced above, I am of the
11
view that the Assessing Officer has reopened the case of the assessee when
the proceedings under section 154 of the I.T. Act, 1961 were pending on
the same issue. The ITAT Jaipur Benches has decided this issue in favour of
the assessee and set aside initiation of proceeding u/s 147/148 of the Act
and consequential reassessment order, as a result thereof the grounds on
merits have become infructuous.
7. Keeping in view the facts and circumstances of the present case, I am
of the view that the issue in dispute has already been adjudicated and
decided in favour of the assessee by the ITAT Jaipur Benches (supra).
Therefore, I have no other alternative except to respectfully following the
above said order and cancel the proceedings initiated u/s 147/148 and
consequential reassessment order. Since I have cancelled the proceeding
initiated u/s 147/148 and consequential reassessment order, the grounds
raised on merit becomes infructuous.
8. In the result, the appeal filed by the assessee is allowed.
Order pronounced on 03/02/2020.
Sd/-
[H.S. SIDHU]
JUDICIAL MEMBER
Date: 03/02/2020
SH
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
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