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2024 Supreme(Online)(ITAT) 1291
INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
SHRI SHAMIM YAHYA, AM, MS. MADHUMITA ROY, JM
BHARTIYA SAMRUDDHI INVESTMENTS AND CONSULTING SERVICES LIMITED DELHI – Appellant
Versus
ACIT CIRCLE 4(2) DELHI – Respondent
ITA 1637/DEL/2023
For the Appellants/Petitioners: Shri Arvind Kumar, Adv.
For the Respondents: Shri Raghunath, Sr. DR.
Reopening of assessment under Income Tax Act requires tangible material; mere change of opinion is not sufficient. Jurisdictional grounds for reassessment were not satisfied.
Headnote:(A) Income Tax Act, 1961 - Section 147/148 - Reopening of assessment - No tangible material available with AO to allege escapement of income - Reopening deemed merely change of opinion - Jurisdictional conditions not satisfied, thus reopening invalid and quashed. (Paras 6.1, 6.3)
(B) Expenditure claimed as sundry advances/assets written off of Rs. 91,47,928/- was previously assessed - No new material to justify reassessment - Claim allowable business expenditure and should not be disallowed. (Paras 2.1, 6.1)
Facts of the case:
The Assessee filed an appeal against the assessment for AY 2012-13, claiming that the reopening of assessment was based on a mere change of opinion and lacked the requisite tangible material to establish income escapement highlighted by AO in their notice under Section 148.
Findings of Court:
The Assessee’s appeal was allowed as the court found the reassessment to be without jurisdiction, primarily due to no new material being unearthed to support the claim being disallowed.
Issues: The main issues addressed include whether the reopening of assessment was within jurisdiction and if the claim on sundry advances/assets written off was warranted based on the original assessment records.
Ratio Decidendi: The court reiterated that reopening assessments must be backed by tangible evidence and that mere changes of opinion cannot justify re-assessment proceedings. The quashing of reassessment in this case reaffirms that the jurisdictional requirement under Section 147 was not met.
Result: The Assessee’s appeal is allowed.
| Table of Content |
|---|
| 1. reopening assessment requires tangible material. (Para 5) |
| 2. court's observation stresses jurisdictional errors in reassessment. (Para 6) |
| 3. final conclusion ruled in favor of the assessee's appeal. (Para 8) |
ORDER
PER SHAMIM YAHYA, AM :
The Assessee has filed this Appeal against the Order of the Ld. CIT(A)/ National Faceless Appeal Centre (NFAC), Delhi dated 27.03.2023 relating to assessment year 2012-13 on the following grounds:-
1. There is no tangible material, which is a pre-condition, available with the AO to allege the escapement of income, the reopening tantamount to only review of original assessment based on change of opinion which is not permissible u/s. 147/148.
2. Neither there is any fresh fact that came to the light which was not previously disclosed by assessee nor there is any material came to the possession of AO which proves any untruthfulness of the facts submitted by the assessee.
3. That on the facts and circumstances of the case, the Deputy Commissioner of Income Tax has erred in fact in adding back the amount of Rs. 91,47,928/- being Sundry Advances / Assets written off considering it as an inadmissible claim without giving any reason. The addition to Returned Income / (Loss) already assessed and is allowable business expenditure and should be deleted.
4. The reopening of assessment is beyond the stipulated time limit of 4 years is not based on any additional material that has come to the notice of AO and merely due to change of opinion.
5. The expenditure claimed by the assessee is as per the provision of the Act. The addition may be deleted.
2. Briefly stated facts, are that as per the records of A.Y. 2012-13, it was noted by the AO that expenditure of Rs. 91,47,928/- claimed as ‘sundry advances/ assets written off’ was debited to the Profit and Loss account. AO observed that the said expenditure being capital in nature should have been added back to the income of the assessee company. AO further noted that the assessee did not furnish details of expenditure of Rs. 91,47,928/- claimed on account of ‘Sundry advances / assets written off’ during assessment proceedings for AY 2012-13, which resulted in over assessment of loss of Rs. 91,47,928/- by reason of failure on part of the assessee. Notice u/s. 148 of the Act was issued on 31.03.2019 after having recorded the reasons thereof u/s. 147 of the Act and after obtaining the sanction u/s. 151 of the Act from the competent authority.
2.1 Further, Assessing Officer issued notice u/s. 142(1) of the Act as under:-
i) During the year under consideration the assessee company has debited Rs. 91,47,928/- to profit and loss account on account of sundry advances / assets written off. This expenditure being capital in nature is not allowable in view of the provisions of Section 37 of the I.T. Act.
ii) Section 37 of the I.T. Act provides that any expenditure, not being in the nature of capital expenditure, laid out wholly or exclusively for the purpose of business is allowable as deduction in computing income chargeable under the had profits and gains of business or profession. Thus, all expenditure, other than capital expenditure which is incurred in relation to the business is allowable.
iii) In view of the above you are required to show cause as to why the above claim of deduction on account of sundry advances / assets written off amounting to Rs. 91,47,928/- may not be disallowed and added back to your income. Please furnish your justification on or before the due date of failing which the addition shall be made to the total income for the year as mentioned above.
2.2 In response to the aforesaid notice, the assessee responded as under:-
“The regular assessment u/s. 143(3) in case of assesse had been conducted for the year and order was passed dated 12.01.2015 accepting the returned loss of Rs. 23,20,15,750/-. The scrutiny was made to confirm the genuineness and correctness of various claims, deductions, etc. made by the taxpayer in the return of income.
Now
