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2019 (11) TMI 1340 - AT - Income TaxReopening of assessment u/s 147 - addition of fright and crane charges and boki charges - HELD THAT - AO himself did not make addition in respect of the first part of the items of reason recorded i.e. freight to M/s Haryana Concrete. The addition made by the AO on the second part of the reason recorded i.e. disallowance of crane charges and boki charges has been deleted by the Ld. CIT(A). Thus we find that no addition on account of the items of reasons recorded is in existence after the order of the Ld. CIT(A). As per the record, the Revenue is not in appeal against said deletion by the Ld. CIT(A). In the circumstances, following the decision of the Hon ble High Court in the case of Adhunik Niryat Ispat Ltd 2012 (11) TMI 895 - DELHI HIGH COURT and Ranbaxy Laboratories Ltd 2011 (6) TMI 4 - DELHI HIGH COURT the additions made on account of the items other than the items in reasons recorded , cannot survive. We direct the AO to delete the additions accordingly. The issue in dispute involved in the grounds raised by the assessee is accordingly allowed in favour of the assessee. Since we have allowed the appeal on legality of the addition made in reassessment proceedings, we are not adjudicating on merit of the additions. - Decided in favour of assessee.
Issues Involved:
1. Legality of reassessment proceedings under section 143(3) read with section 147 of the Income Tax Act, 1961. 2. Additions made during the reassessment proceedings. Detailed Analysis: 1. Legality of Reassessment Proceedings: The assessee contested the legality of the reassessment proceedings initiated under section 143(3) read with section 147 of the Income Tax Act, 1961. The original assessment was completed on 20/09/2011, with an addition of ?2,00,000 to the returned income. The Assessing Officer (AO) later recorded reasons on 01/03/2013, indicating that the income had escaped assessment, leading to the issuance of a notice under section 148. The reasons for reopening included non-deduction of tax at source under section 194C and 194J on various payments such as freight, crane charges, and consultancy fees. The reassessment resulted in additional disallowances and additions totaling ?34,80,423. 2. Additions Made During Reassessment: The reassessment proceedings led to the following additions: - Disallowance of interest on borrowed funds: ?2,25,912. - Cash expenses in violation of section 40A(3): ?1,07,671. - Disallowance under section 40(a)(ia) for non-deduction of tax on crane charges and Boki charges: ?9,63,058. - Other additions for loans, salary, etc.: ?21,54,000. Upon appeal, the Commissioner of Income-tax (Appeals) [CIT(A)] partially allowed the appeal, upholding some additions and disallowances while deleting others: - Disallowance of interest on borrowed funds: Reduced to ?90,968. - Cash expenses: Deleted. - Disallowance under section 40(a)(ia): Deleted. - Other additions: Reduced to ?19,50,000. Arguments and Findings: The assessee's counsel argued that no addition could be sustained if the CIT(A) deleted the addition based on which the assessment was reopened, citing the Delhi High Court's decision in CIT Vs Adhunik Niryat Ispat Ltd. The counsel highlighted that when the grounds for reopening do not exist any longer, additions on other items not part of the "reasons to believe" cannot be made. The Tribunal examined the reasons recorded by the AO for reopening, which included non-deduction of tax at source on various payments. However, the reassessment order only made additions for crane charges and Boki charges, totaling ?9,92,840, which the CIT(A) subsequently deleted. The Tribunal noted that no addition was made for the initial reason (freight payment to Haryana Concrete), and the CIT(A) deleted the addition for crane and Boki charges. Since no addition on the items of reasons recorded existed after the CIT(A)'s order, and the Revenue did not appeal against the deletion, the Tribunal followed the Delhi High Court's decisions in Adhunik Niryat Ispat Ltd. and Ranbaxy Laboratories Ltd., concluding that additions on items other than those in the reasons recorded could not survive. Conclusion: The Tribunal allowed the appeal in favor of the assessee, directing the AO to delete the additions made during the reassessment proceedings. The Tribunal did not adjudicate the merits of the additions since the appeal was allowed on the legality of the reassessment proceedings. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced in the open court on 14th November 2019.
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