Manan Movers Pvt.Ltd., Surat vs Assessee

आयकर अपील सं./I.T.A. No.1159/Ahd/2013 ( नधा रण वष / Assessment Year : 2005-06) Manan Movers Pvt.Ltd. बनाम/ The DCIT B-401, Padam Arcade Vs. Circle-I Beside Handloom House Surat Nanpura, Surat - 395 001 थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AADCM 5017 H (अपीलाथ% /Appellant) .. (&'यथ% / Respondent)

अपीलाथ% ओर से /Appellant by : Shri M.K. Patel, A.R. &'यथ% क) ओर से/Respondent by : Shri Santosh Karnani, Sr.DR

ु वाई क) तार,ख / सन Date of Hearing 23/02/2015 घोषणा क) तार,ख /Date of Pronounce ment 27/03/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-I, Surat ('CIT(A)' in short) dated 18/03/2013 pertaining to Assessment Year (AY) 2005-06. The assessee has raised the following grounds of appeal:-

1. Ld.CIT(A) erred in law and on facts in not dealing with the plea raised by the appellant to quash reassessment proceedings due to failure of AO to pass separate speaking order disposing of the ITA No.1159/Ahd/2013 Manan Movers Pvt.Ltd. vs. DCIT Asst.Year - 2005-06 -2-

objections raised by the appellant against notice issued u/s.148 of the Act. Ld.CIT(A) failed to consider the fact that the reassessment order had no mention of objections filed by the appellant that were to be dealt with first before passing the order by A.O. Ld.CIT(A) ought to have quashed the order that is illegal, void ab initio and against the legal provisions.

2. Ld.CIT(A) erred in law and on the facts in confirming action of AO in framing assessment u/s.143(3) r.w.s. 147 of the Act, when all the relevant material facts disclosed in the original return of income was subjected to scrutiny assessment. Ld.CIT(A) ought to have held that AO is not empowered to reopen a concluded assessment in absence of any fresh material simply on change of opinion.

Ld.CIT(A) ought to have accepted contention of the appellant by quashing reassessment order.

3. Ld.CIT(A) further erred in law and on facts in holding reassessment to be valid in absence of speaking order on issues in earlier scrutiny assessment as it failed to establish application of mind in forming any opinion by AO. Ld.CIT(A) failed to appreciate the fact that AO being satisfied with detailed scrutiny of material disclosed and details furnished formed an opinion that no income escaped assessment. Ld.CIT(A) ought to have quashed re assessment proceedings in absence of any failure on part of the appellant to disclose fully and truly all material facts.

4. Ld.CIT(A) erred in law and on facts in confirming addition made by AO of Rs.5,00,000/- on account of share application money received by the appellant u/s.68 of the Act. Ld.CIT(A) erred in ignoring the fact that the onus to establish genuineness transaction stood discharged by submitting confirmation and evidence. Ld.CIT(A) ought to have deleted addition.

5. Levy of interest u/s.234B & 234C of the Act is not justified.

6. Initiation of penalty u/s.271(1)© of the Act is not justified.

The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.

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2. Briefly stated facts are that the case of the assessee was reopened for assessment for AY 2005-06 and the assessment u/s.147 read with section 143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 31/12/2008. The assessee in response to the notice issued u/s.148 of the Act filed return of income along with the objection against reopening of assessment. However, while framing the assessment, the Assessing Officer (AO in short) made addition of Rs.4,75,01,024/- by invoking the provisions of section 40(a)(ia) of the Act. The AO also made additi9on of Rs.5 lacs by invoking the provisions of section 68 of the Act. Against this, the assessee preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee, dismissed the appeal.

3. At the outset, ld.counsel for the assessee submitted that the assessee in Writ petition bearing Special Civil Application No.142 of 2009 had challenged the validity of the provisions of section 40(a)(ia) of the Act. The Hon'ble Gujarat High Court vide order dated 30/01/2009 stayed the operation of the assessment order dated 31/12/2008 in respect of the addition made by invoking the provisions of section 40(a)(ia) of the Act. It is submitted by the ld.counsel for the assessee that the issue of validity of section 40(a)(ia) travelled before the Hon'ble Supreme Court in Transfer Case (Civil) No.110 of 2011, dated 10/09/2014, in the case of M/s.Ganesh Shipping Agency vs. Union of India & Ors. along with ITA No.1159/Ahd/2013 Manan Movers Pvt.Ltd. vs. DCIT Asst.Year - 2005-06 -4-

other transfer cases. The Hon'ble Supreme Court was pleased to observe that section 40(a)(ia) of the Income-tax Act, 1961 was initially amended by Finance Bill, 2008 with retrospective effect from 01.04.2005. In continuation of this amendment, by Finance Act, 2010, Section 40(a)(ia) of the Income-Tax Act, 1961 was further amended. Having regard to these amendments and the decision of the Gujarat High Court in group of matters being Tax Appeal No.412 of 2013, 'Commissioner of Income Tax vs. Omprakash R.Chaudhari and Others', the grievance of the petitioner has been taken care of. The ld.counsel for the assessee submitted that the ld.CIT(A) did not adjudicate the grounds pertaining to the addition made u/s.40(a)(ia) of the Act, due to stay granted by the Hon'ble Gujarat High Court. He submitted that since the issue is now decided by the Hon'ble Apex Court, therefore the ground be restored to the file of ld.CIT(A) for fresh adjudication. He submitted that even otherwise also, a specific objection was made by the assessee while filing the return in response to notice issued u/s.148 of the Act. The objection so raised was not decided by the AO by way of a separate order. He submitted that in view of the judgement of Hon'ble Gujarat High Court rendered in the case of General Motors India (P.)Ltd. vs. Dy.CIT reported at (2013) 354 ITR 244(Guj.), the objection raised against the reopening of the assessment is required to be decided by a separate order. Therefore, he submitted that ground No.1 may be decided in favour of ITA No.1159/Ahd/2013 Manan Movers Pvt.Ltd. vs. DCIT Asst.Year - 2005-06 -5-

assessee in the light of the judgement of the Hon'ble Gujarat High Court rendered in the case of General Motors India (P.)Ltd. vs. Dy.CIT(supra).

4. On the contrary, the ld.Sr.DR supported the order of the AO and submitted that ground No.1 was not taken before the ld.CIT(A) and the ground in respect of the disallowance u/s.40(a)(ia) of the Act has been taken in additional ground of appeal.

5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the assessee has filed an addition ground of appeal which reads as under:-

"(1) That on facts, and in law, the learned CIT(A) has grievously erred in not deciding the issue regarding disallowance u/s.40(a)(ia) of the Act on merits, and in dismissing it as infructuous for technical reasons.

(2) That on facts, and in law, it be held that the provisions of section 194C of the Act as amended w.e.f. 01/10/2014 are not applicable to payments/expenditure incurred for the period prior to 30/09/2004 and hence no disallowance is called for u/s.40(a)(ia) of the Act.

5.1. The contention of the ld.counsel for the assessee is that the above grounds related to disallowance made u/s.40(a)(ia) of the Act were not adjudicated on technical ground. This contention of the ld.counsel for ITA No.1159/Ahd/2013 Manan Movers Pvt.Ltd. vs. DCIT Asst.Year - 2005-06 -6-

the assessee cannot be accepted as the ld.CIT(A) has rightly not adjudicated the ground in view of the stay order of the Hon'ble Jurisdictional High Court. Therefore, we see no merit into the contention of the ld.counsel for the assessee that the ld.CIT(A) ought to have proceeded for adjudication of the ground de hors the interim stay of operation of the order which was in appeal before the ld.CIT(A). Thus, this contention of the ld.counsel for the assessee is rejected. However, ld.counsel for the assessee has brought to our notice that the issue of disallowance u/s.40(a)(ia) has been decided by the Hon'ble Supreme Court in Transfer Case (Civil) No.110 of 2011 dated 10/09/2014. Therefore, we hereby restore the issue of disallowance made u/s.40(a)(ia) of the Act to the file of the ld.CIT(A) for decision afresh in the light of the judgement of the Hon'ble Apex Court. In respect of the other grounds taken by the ld.counsel for the assessee that the assessment is nullity in view of the fact that the objection raised by the assessee against reopening of the assessment were not disposed of by way of a separate order by the AO. We find that this ground was not taken before the ld.CIT(A), therefore, this issue is also restored back to the file of ld.CIT(A) for deciding the same. Hence, ground No.1 along with additional grounds are restored to the file of ld.CIT(A) for decision afresh. Needless to say that the ld.CIT(A) would afford reasonable opportunity of hearing to the concerned parties.

ITA No.1159/Ahd/2013 Manan Movers Pvt.Ltd. vs. DCIT Asst.Year - 2005-06 -7-

6. Ground Nos.2 and 3 are against the reopening of the assessment on the grounds of change of opinion. The ld.counsel for the assessee submitted that all material evidences were placed before the AO and the AO had applied his mind in the material placed before during the regular assessment proceedings. He submitted that the re-opening is made on the basis of change of opinion which is not permissible under the law.

6.1. On the contrary, ld.Sr.DR supported the order of the ld.CIT(A).

7. We have heard the rival contentions of the Represetnative of the parties, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has dealt with these grounds which read as under:-

"8.2. The appellant's contention has been examined. The appellant ha not enclosed the original assessment order in its submission. However, the legal position on the issue of 'change of opinion' has already been decided by the Hon'ble Delhi High Court in the case of Consolidated Photo Finlease Ltd. reported in 281 ITR 393. The findings of the Hon'ble High Court are as under:-

"AO having indicated the basis on which income exigible to tax has in his opinion escaped assessment which was admittedly not addressed in the assessment order, it cannot be said that the action of reopening of assessment is based on 'change of opinion' and, therefore, same cannot be said ITA No.1159/Ahd/2013 Manan Movers Pvt.Ltd. vs. DCIT Asst.Year - 2005-06 -8-

to be incompetent or otherwise improper, the principle of 'change of opinion' is applicable only to situations where the AO has applied his mind and taken a conscious decision on a particular mater in issue."

Therefore, appellant's contention that re-opening amounts to change of opinion is not correct, as there is no evidence that the earlier assessing officer had examined the issues by way of speaking order, establishing that there was an application of mind in respect of this issues. The appellant had received share application money of Rs.5,00,000/- in cash. Even during the appellate proceedings, the appellant has not been able to furnish details as to whether the shares were actually allotted or not? Moreover, all these parties were located outside Gujarat and application for shares in cash of substantial amounts is highly improbable. The same applies to unsecured loans. The main reason for re-opening was the claim of non-verifiable transport expenses of Rs.11,49,89,112/-.

8.3. The bank statement reflected huge withdrawals in cash during the month of March, totalling to Rs.38.75 lakhs. Since main expenses of the appellant are under the head 'Transport expenses', the assessing officer formed a 'reason to believe' that these expenses had been incurred in cash in violation of section 40A(3). At the stage of issue of notice u/s.148, it is not necessary for the assessing officer to give a final finding regarding escapement of income. A prima facie case of payment towards transport expenses in cash, which violated the provision of section 40A(3) of the Act, existed. This ground alone is sufficient for formation of 'reason to believe' that the income chargeable to tax has escaped the assessment."

ITA No.1159/Ahd/2013 Manan Movers Pvt.Ltd. vs. DCIT Asst.Year - 2005-06 -9-

7.1. We do not agree with the reasoning given by the ld.CIT(A). The basis of not accepting the contention of the assessee is that the assessee failed to enclose the assessment order passed in regular assessment proceedings. Ld.CIT(A) ought to have requisitioned the assessment records. Therefore, the finding of the ld.CIT(A) cannot be sustained as the same is not based on appreciation of facts. The order of ld.CIT(A) is hereby set aside and this ground is restored to him for decision afresh. It is not coming out of the appellate order that as to how the AO failed to make enquiry and apply his mind on the issues which resulted into escapement of income. Therefore, these grounds are also restored to the file of ld.CIT(A) for decision afresh. Thus, these grounds of assessee's appeal are allowed for statistical purposes.

8. Ground No.4 is against confirmation of addition of Rs.5 lacs made on account of share application money received by the assessee. The contention of the ld.counsel for the assessee is that all evidences were available and if the assessee is given another opportunity, he would place all evidences in support its claim. He submitted that the orders of the authorities below are against the settled law. After considering the totality of the facts of the case, this ground is also restored back to the file of ld.CIT(A) for decision afresh.

ITA No.1159/Ahd/2013 Manan Movers Pvt.Ltd. vs. DCIT Asst.Year - 2005-06

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9. Ground No.5 is against levy of interest u/s.234B & 234C of the Act. This ground being consequential in nature is decided accordingly.

10. Ground No.6 is against initiation of penalty u/s.271(1)(c) of the Act. This ground is pre-mature and, therefore, the same is rejected.

11. In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the Court on Friday, the 27th day of March, 2015 at Ahmedabad.

Sd/- Sd/- (जी.डी.अ वाल) (कुल भारत) उपा य या यक सद य ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER Ahmedabad; Dated 27/ 03 /2015 ट,.सी.नायर, व. न.स./T.C. NAIR, Sr. PS

आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :

1. अपीलाथ% / The Appellant

2. &'यथ% / The Respondent.

3. संबं6धत आयकर आयु8त / Concerned CIT

4. आयकर आयु8त(अपील) / The CIT(A)-I, Surat

5. 9वभागीय & त न6ध, आयकर अपील,य अ6धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड< फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स'या9पत & त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad ITA No.1159/Ahd/2013 Manan Movers Pvt.Ltd. vs. DCIT Asst.Year - 2005-06

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1. Date of dictation .. 18.3.15(dictation-pad 11- pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member .. 18.3.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......27/3/15

7. Date on which the file goes to the Bench Clerk.....................27/3/15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................