SHRI RAJ KUMAR MAHESHWARI,JAIPUR vs. INCOME TAX OFFICER, WARD-4-4, JAIPUR

PER VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 21st February, 2019 of ld. CIT (A) for the assessment year 2009-10. The assessee has raised the following grounds of appeal :-

“ 1. On the facts and in the circumstances of the case, ld. AO erred in reopening of assessment u/s 148 and ld. CIT (A) erred in sustaining the same which is illegal, unjustified and liable to be quashed. 2. On the facts and in the circumstances of the case, ld. AO erred in assessing income u/s 144 by ignoring all the evidences of TDS and deduction under chapter VIA claimed in return of income filed u/s 139(4) and simultaneously, ld. CIT (A) erred in sustaining the same, which is illegal, unjustified and liable to be quashed.

2 ITA No. 536/JP/2019 Shri Raj Kumar Maheshwari, Jaipur.

Ground No. 1 is regarding validity of reopening of the assessment.

AIR data information received from the Office of the DIT CIB Rajasthan, Jaipur

showing that the assessee has paid Rs. 3,85,336/- against credit card bills in the

financial year 2008-09 relevant to the assessment year under consideration, hence it

was not possible to verify the tax liability in this transaction. Further, the assessee

has not filed return of income for the year under consideration, therefore, believing

that the income to the tune of Rs. 3,85,336/- has escaped assessment, the AO

reopened the assessment. Since assessee has not responded to the notice under

section 148 as well as the other notices issued by the AO, accordingly the

reassessment under section 147 was completed under section 144 of the IT Act. The

assessee challenged the action of the AO before the ld. CIT (A) and objected against

the reopening of the assessment but could not succeed.

reopened the assessment based on incorrect information and merely on the

suspicion without having a reason to believe that the income on account of payment

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of credit card bill has escaped assessment. The ld. A/R has pointed out that the assessee duly filed his return of income under section 139(1) on 9th July, 2010 which

was also acknowledged by the department as per the computation sheet under

section 143(1), copy of which is placed t page 9 of the Paper Book. The ld. A/R has

pointed out that in the said computation the department took the return of income

as for the assessment year 2010-11 instead of assessment year 2009-10. The return

of income was duly acknowledged vide Acknowledgement Number given in the said

computation sheet. Therefore, ignoring the return of income filed by the assessee

for the year under consideration declaring the salary income and further when all

the transactions of payment of credit card bills are through the bank account then

the reopening is not valid merely for the purpose of verifying whether the income on

account of the said payment of bills has escaped or not. The ld. A/R has thus

contended that the reopening based on incorrect facts and ignoring the return of

income filed by the assessee is not valid and liable to be quashed. In support of her

contention, she has relied upon the decision of the coordinate Bench of this Tribunal

dated 10.10.2019 in case of Shri Ram Mohan Rawat vs. ITO in ITA No.

1014/JP/2018 and submitted that the Tribunal on identical facts where the AO

without considering the return of income under section 139(1) has reopened the

assessment by recording reasons that the assessee has not filed any return of

income has held to be invalid. The ld. A/R has also relied upon the decisions of this

Tribunal in case of Rajendra Prasad Choudhary vs. ACIT in ITA No. 1495-

1496/JP/2018 dated 12.06.2019 as well as in case of Smt. Nirmala Agarwal vs. ACIT

dated 11.04.2018 in ITA Nos. 995 & 996/JP/2016. Thus the ld. A/R has pleaded

that the reopening of assessment is not valid and the same is liable to be quashed.

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assessment based on the AIR information regarding the credit card payment of Rs.

3,85,336/-. Thus at the time reopening of assessment what is required to be seen is

the prima facie reason to believe that income assessable to tax has escaped

assessment. She has relied upon the orders of the authorities below.

record. It is manifest from the reasons recorded by the AO in the assessment order

that the AO received the information about the credit card bills payment of Rs.

3,85,336/- and further the AO recorded the fact that since the assessee has not filed

any return of income, therefore, it is not possible to verify the said transaction and

tax liability in this transaction. These reasons recorded by the AO are factually not

correct and the formation of belief by the AO is actually based on assumption of

incorrect facts. We find that the assessee has filed his return of income on

09.07.2010. Though the return was belated, however, the same was acknowledged

by the department vide Acknowledgement No. 3471, the copy of the computation

sheet has been placed at page 9 of the Paper Book which shows the details

regarding the return of income declared by the assessee in the said return and the

amount of tax payable on the said income. All the details are matching with the

return of income filed by the assessee except the assessment year which is mistaken

by the department as 2010-11 instead of 2009-10. Therefore, the assessee has duly

filed the return of income declaring the total income at Rs. 2,34,560/- which was

acknowledged by the department. We further note that for the assessment year

2010-11 the assessment was again reopened by the AO by issuing a notice under

section 148 on 30.03.2017. However, the AO has not made any addition but

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accepted the return of income declared by the assessee in the original return of

income while passing the order on 08.08.2017. Thus it is clear that the AO has

reopened the assessment only on suspicion of escapement of income on account of

credit card payment of Rs. 3,85,336/- without considering the fact that the assessee

already filed his return of income declaring total income of Rs. 2,34,560/- as income

under the head ‘Salary’. The AO during the course of assessment proceedings

verified the income of the assessee from M/s. Genpact India as well as the details of

the credit card payment from Citibank and the AO has received the requisite details

from the said company. The assessee explained these facts before the ld. CIT (A)

which were duly recorded by the ld. CIT (A) in para 2.2 as under :-

“ 2.2. The relevant extract of the submission of the appellant is as under :- “ This appeal was preferred against the order u/s 144 read with section 148 of the I.T. Act, 1961 for A.Y. 2009-10. At the outset, I request to admit the new grounds of appeal, which may be treated as replaced with originally raised grounds and are as under :- 1. On the facts and in circumstances of the case, ld. AO erred in reopening of assessment u/s 148 of the I.T. Act, 1961, which is unjustified and liable to be quashed.

Your honour, the AO has reopened the assessment stating two grounds.

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Your honour, in both the observations, no belief of positive escapement of income emerged. Section 148 does not give mandate to ascertain the tax liability. Pre-condition of jurisdiction u/s 148 was reason to believe that any income has escape assessment. The word used here is belief. No re-opening is possible on suspicion and on surmises. Further, the allegation that return of income was not furnished is wrong, Assessee had furnished the return of income for the year. In fact, due to oversight, omission or clerical mistake the departmental staff punched the data of return of assessee for A.Y. 2009-10 in A.Y. 2010-11. And that’s why the system at the time of re-assessment showed the status of non-filing of return. Return of income for A.Y. 2009-10 was filed on dated 09.07.2010 in paper form. The income and deductions and TDS were as under :- A. Income Rs. 285414.00 Verifiable from Form No. 16 B. Deduction u/s 80C Verifiable from Form No. 16, LIP Receipts and Bank Statement. C. TDS of Rs. 27810.00 Form No. 16 & Form No. 26AS

But, assessee was unfortunate and the blunder was made departmental staff by making entries of the return in the AY 2010-11. And by this mistake, assessee suffered the demand of tax and interest by disallowing TDS credit, since the claimed credit was not shown in AY 2010-11 rightfully. Further, the mistake of departmental staff become belief of escapement and assessee was slapped notice u/s 148.

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I, therefore request your honour to drop the re-assessment notice as bad in law for the sake of justice and the resultant assessment u/s 144 may kindly be quashed.

However, the ld. CIT (A) has summarily dismissed the ground of challenging the

validity of reopening in para 2.3 as under :-

“ 2.3. I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer had reason to believe on record for this year. There was information that assessee made payment of Rs. 3,85,336/- through credit card and Assessing Officer had thus reason to believe that income to this extent had escaped assessment. This ground of appeal is dismissed.”

Once the assessee has pointed out the filing of return of income as well as all other

details of source of payment of credit card bills which are all through banking

channel and moreover transactions are on-line payment from the bank account of

the assessee, then without considering all these facts, the order passed by the ld.

CIT (A) rejecting the ground is highly arbitrary. The Coordinate Bench of this

Tribunal in case of Shri Ram Mohan Rawat vs. ITO (supra) has considered this issue

in para 5 as under :-

“5. I have considered the rival submissions as well as the relevant material on record. The AO has reopened the assessment by recording the reasons as under :-

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“ As per information, the assessee has made bogus purchases of Rs. 24,02,235/- during the year under consideration as per information provided by DGIT (Inv.), vide his office letter dated 14.03.2014. Since assessee has not filed the return of income, purchases amounting to Rs. 24,02,235/- are not verifiable. In view of above given facts, I have reason to believe that Rs. 24,02,235/- has escaped assessment in term of section 47 of I.T. Act, 1961. It is a fit case for issuance of notice u/s 148 of I.T. Act, 1961.

Sd/- (Umesh Jakhar) Dated : 27.03.2014. Income Tax Officer, Ward 2(1), Jaipur.”

Thus the reasons recorded by the AO for formation of belief that income assessable to tax has escaped assessment are based on two counts. One, the assessee has made bogus purchases and the second, that the purchases are not verifiable as the assessee has not filed the return of income. Thus the formation of belief is based on these two factual aspects that the assessee has made bogus purchases which are not verifiable as assessee has not filed the return of income. The reasons for non-verifiable of the purchases made by the assessee due to non filing of the return of income as stated by the AO is absolutely incorrect and wrong and contrary to the record when the assessee has filed the return of income electronically on 29.10.2007. This fact was also subsequently accepted by the AO that the assessee filed the return of income under section 139(1). The second aspect of the reasons that the assessee has made bogus purchases is also not based on any enquiry or verification of record by the AO but this is simply reproduction of information received from the Investigation Wing. The said information is also incomplete as regards the details of the purchases and the parties from whom such purchases were made by

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the assessee. Thus the reasons recorded by the AO manifest that there is no application of mind and the averments as recorded in the reasons are very vague and general and rather inconsistent with the facts available on record so far as the filing of return of income by the assessee. The formation of belief on such incorrect and vague reasons would lead the reopening of the assessment as invalid. The Hon’ble Gujarat High Court in case of Mumtaz Haji Mohmad Memon vs. ITO (supra) while considering an identical issue has observed in para 10 & 11 as under :-

“ 10. We are conscious that in the present case, the return filed by the assessee was not taken in scrutiny. Nevertheless, in such a case also the requirement that the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment, would apply. Reference in this respect can be made to the decision of this Court in case of Inductotherm (India) P. Ltd. vs. M. Gopalan, Deputy Commission of Income-Tax reported in (2013) 356 ITR 481 (Guj.). Validity of the reasons recorded by the Assessing Officer would therefore be one of the issues. 11. In this context, we have noted that the reasons proceeded on two fundamental grounds. One, that the property in question was sold for a sum of Rs. 1,18,95,000/- and two; that the assessee had not filed the return and that therefore his 1/3rd share out of the sale proceeds was not offered to tax. Both these factual grounds are totally incorrect as is now virtually admitted by the Revenue. It is undisputed that the assessee had actually filed the return of income for the said assessment year and income also offered his share of the declared sale consideration to tax as capital gain. The Assessing Officer may have dispute with respect to computation of such capital gain, he cannot simply dispute the fact that the assessee did file the

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return. Importantly, even the second factual assertion of the Assessing Officer in the reasons recorded is totally incorrect. He has referred to said sum of Rs. 1,18,95,000/- as a sale price of the property. The assessee had produced before the Assessing Officer, the sale deed in which, the sale consideration disclosed as Rs. 50 lakhs.”

Thus making the wrong statement in the reasons recorded and ignoring the relevant and correct facts available on record established that the AO has not applied his independent mind while forming the opinion. The Chandigarh Bench of the Tribunal in case of Baba Kartar Singh Dukki Educational Trust vs. ITO (supra) has also considered an identical issue and held that the AO proceeded for reopening of the assessment for non-existent and factually incorrect reasons and has not applied his mind. The Tribunal has concluded in para 19 as under :-

“ 19. In view of the above discussion, I hold that the AO had taken an irrelevant fact into consideration and reopened the assessments on the basis of suspicion. Further more, the Assessing Officer proceeded for re-opening of the assessment on non-existent and factually incorrect basis/reasons and has not applied his mind and did not verify the assessment records/returns filed by the assessee prior to recording of the reasons, therefore, re-opening of the assessments for assessment year 2001-02, 2002-03 and 2003-04 is invalid and liable to be set aside/quashed. Accordingly, the orders of the authorities below are not sustainable and hence deserve to be quashed. I order accordingly.”

Accordingly, in view of the above facts and circumstances of the case, when the AO has initiated the proceedings on the basis of non-existent

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and factually incorrect facts and reasons without application of mind and without verification of the facts available on record, then the proceedings initiated under section 147/148 are not sustainable in law. The same are set aside and consequential reassessment order is quashed.”

In the case in hand, the assessee has duly brought to the notice of the ld. CIT (A) that the return of income was filed on 9th July, 2010. However, without considering

the same, the ld. CIT (A) upheld the reopening of the assessment by recording the

reasons on incorrect facts. Hence in the facts and circumstances of the case, we find

that the reopening of the assessment by the AO is without application of mind and

simply going by the information received as per AIR Data. Hence the reopening of

the assessment is quashed being invalid.

not propose to go into the issue of merits of the addition made by the AO.

Order pronounced in the open court on 18/03/2020. Sd/- Sd/- ¼foØe flag ;kno½ ¼ fot; iky jkWo ½ (VIKRAM SINGH YADAV) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 18/03/2020. das/

12 ITA No. 536/JP/2019 Shri Raj Kumar Maheshwari, Jaipur.

आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant-Shri Raj Kumar Maheshwari, Jaipur. 2. izR;FkhZ@ The Respondent-The ITO Ward 4(4), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA No. 536/JP/2019}

vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत