2021 (6) TMI 146 - HC - Income Tax

Reopening of assessment u/s 147 - addition u/s 40A(3) - HELD THAT - In the case on hand, admittedly, the Department had filed an appeal before the ITAT questioning the order passed by the appellate authority in favour of the assessee. When the appeal proceedings are still pending, it is clearly not open to the respondent to initiate proceedings u/s 147 of Income Tax Act. It is barred under third proviso to Section 147 of the Act. On this sole ground, the notice impugned in the writ petition is liable to be quashed and it is accordingly quashed. The petitioner has today filed a typed set of papers. It can be seen therefrom that one of the petitioner's agent namely Kannan, Pollachi had given a certificate confirming that he had acted as agent for the petitioner and that the amount required for the payment to the farmers was received from the petitioner by self cheque and the same was distributed to the farmers who supplied copra. In fact, along with the said certificate, the details regarding the bank transactions as reflected in the ledger account has also been placed. Appearing for the petitioner would also draw my attention to the fact that even the Pollachi bank account of the petitioner was brought to the notice of the assessing officer in the previous proceedings. It is obvious there is no new material discovered by the respondents. On mere change of opinion, the impugned proceedings could not have been initiated. This is all the more so because, the proceedings have been initiated after a lapse of four years from the end of the assessment year. Since the impugned proceedings are sought to be initiated after a lapse of four years from the end of the assessment year, the authority has to necessarily bring the case within the exceptional circumstances set out in the provision. Since it has been convincingly established that the case of the respondent will not fall under any of the exceptional circumstances, have no hesitation to quash the impugned proceedings as totally lacking in jurisdiction.

Summary

Issues:
1. Assessment under Section 153C of Income Tax Act for the assessment year 2012-13.
2. Disallowance under Section 40A(3) and Rule 6DD(k) for payment through self cheques.
3. Reopening of assessment under Section 147 of Income Tax Act, 1961.

Assessment under Section 153C of Income Tax Act for the assessment year 2012-13:
The petitioner, a copra trader, filed his return for the assessment year 2012-13, admitting total income of ?6,25,210. Subsequently, the assessing officer conducted a scrutiny assessment under Section 143(3) and determined the total income as ?21,25,210. The petitioner did not challenge this order. Later, assessment proceedings were initiated under Section 153C due to transactions with M/s.V.V.D & Sons Private Limited. The assessing officer reassessed the income by adding ?5,45,52,015. The Appellate Authority partly allowed the appeal, citing Rule 6DD(k) exemption for payment through self cheques, which was upheld based on a similar judgment by the Madras High Court.

Disallowance under Section 40A(3) and Rule 6DD(k) for payment through self cheques:
The Appellate Authority allowed the appeal against disallowance under Section 40A(3) based on Rule 6DD(k) exemption for payments made through self cheques to agents who further disbursed to farmers. The Tribunal is yet to decide on the Department's appeal against this decision. The petitioner's counsel argued that the payments fall under Rule 6DD(k) and were supported by evidence, including a certificate from an agent and bank transaction details. The petitioner contended that the impugned proceedings lacked new material and were initiated after a lapse of four years from the assessment year, thus lacking jurisdiction.

Reopening of assessment under Section 147 of Income Tax Act, 1961:
The Department issued a notice for reopening the assessment for the year 2012-13 under Section 147. The petitioner challenged this notice citing the third proviso to Section 147, which prohibits initiating proceedings when matters are subject to appeal. The Court quashed the notice, emphasizing that ongoing appeal proceedings prevent the Department from reopening assessments under Section 147. The Court also noted that the impugned proceedings lacked jurisdiction and were initiated after a lapse of four years without exceptional circumstances, leading to the quashing of the notice.

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