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Income Tax Appellate Tribunal, ‘’C’’ BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
(Applicant) (Respondent) : Revenue by Shri L.P. Jain, Sr. D.R Assessee by : Shri Vartik R. Chowshi & Shri Biren Shah, A.Rs सुनवाई क� तार�ख/Date of Hearing : 22/08/2019 घोषणा क� तार�ख /Date of Pronouncement: 01/10/2019 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeals have been filed at the instance of the Revenue against the separate order of the Learned Commissioner of Income Tax (Appeals)-4, Ahmedabad [Ld.CIT(A) in short], dated 22/03/2016 & 14/03/2016 arising in the matter of assessment order passed under s. 147 r.w.s 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dated 31/12/2009 relevant to Assessment Year (AY) 2005-06.
-1459/Ahd/2016 A.Y.2005-06 2 First we take Revenue appeal bearing ITA bearing No.1459/Ahd/2016. The Revenue has raised the following grounds of appeal:
The Ld.CIT(A) has erred in law and on facts in quashing the issue of notice u/s.148 and consequently reassessment proceedings.
2. On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer. 3. It is therefore, prayed that the order of the ''Ld.CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent. 4. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.
The 1st issue raised by the Revenue is that the learned CIT (A) erred in quashing the assessment framed under section 147 of the Act.
At the outset, we note that the learned CIT (A) has quashed the assessment framed under section 147 of the Act by observing that it was based on the change of opinion. Before we embark upon enquiry whether the learned CIT (A) was correct in quashing the assessment framed under section 147 of the Act, it is pertinent to refer the reasons recorded for initiating the proceedings under section 147 of the Act. The reasons recorded reads as under: “ On verification of records and the audited accounts, it is noticed that during the year under reference the assessee has received unsecured loans amounting to Rs.7,94,13,180/- and share application money to the tune of Rs.7,97,12,000. However, no details are available on record to establish the fact that the unsecured loans and share application money received by the assessee company are genuine. It is further noticed that no investigation/verification of the loans/share application money received was carried out. Here it is to be mentioned that similar & identical issues came up for consideration during the course of assessment proceedings for AY 2006-07 and the assessee could not prove the genuiness of the transaction. Therefore, part of the unsecured loans/share application money received by the assessee company has been treated as income of the assessee from undisclosed sources. In view of the above facts, I am of the view that through scrutiny/verification of the unsecured loans/share application money is required to be carried out before accepting the genuineness of the same. Therefore, this is a fit case of re-opening u/s.147 of the Act. -1459/Ahd/2016 A.Y.2005-06 3
Therefore, I have reasons to believe that the income chargeable to tax exceedings Rs.1 lac has escapted assessment with the meaning of section 147 of the act.”
The learned CIT (A) has quashed the assessment framed under section 147 of the Act by observing that the initiation of proceedings therein was nothing but the change of opinion based on same set of documents which were examined by the AO in the assessment proceedings framed under section 143(3) of the Act vide order dated 28th December 2007.
However, the learned DR for the Revenue before us submitted that it is not clear whether the impugned issue was examined during the original assessment proceedings under section 143(3) of the Act.
On the other hand, the learned AR before us filed a paper book running from pages 1 to 153 and submitted that the issue regarding the share capital received by the assessee was raised by the AO during the assessment proceedings under section 143(3) of the Act. The learned AR in support of his contention drew our attention on page 112-114 of the paper book where the notice issued under section 142(1) of the Act was placed.
5.1 The learned AR also drew our attention on page 119-120 of the paper book where the reply of the assessee was placed against the notice issued under section 142(1) of the Act.
5.2 The learned AR further submitted that it has also raised the objection before the AO on the issuance of notice under section 148 of the Act but the same was not disposed off by the AO before the completion of the assessment under section 147 of the Act. The copy of the objection filed by the assessee -1459/Ahd/2016 A.Y.2005-06 4 is placed on 135 to 136 of the paper book. The learned AR accordingly submitted that the order passed by the AO without disposing of the objection is against the principles laid down by the Hon’ble Supreme Court in the case of GKN Drive Shaft reported in 125 taxman 963 and Hon’ble Gujarat High Court in the case of Vishwanath engineers versus CIT reported in 21 taxmann.com 5.
Both the learned DR and the AR before us relied on the order of the authorities below to the extent favourable to them.
We have heard both the parties and perused the records, especially the impugned orders and the case laws cited therein and also by the learned counsel for the assessee. In the present case the assessment was framed under section 143(3) of the Act vide order dated 28 December 2007. The AO during the assessment proceeding has questioned about the share capital raised by the assessee in the year under consideration. The relevant query/question raised by the AO reads as under:
Details of increase in share capital along with name and address of the share holder P.A No., shares allotted, amount received, mode of receipt etc. in following format. Name & address No. of shares allotted Amt. Received Mode of receipt and source of payment 1 2 3 4 7.1 The assessee in response to such notice has made a reply vide letter dated 8th March 2007 by furnishing the statement of share capital and unsecured loan which can be verified from page 120 of the paper book. -1459/Ahd/2016 A.Y.2005-06 5 7.2 Thus, it is clear that the AO in the original assessment proceedings has conducted enquiries about the share capital. Therefore, the reopening under section 147 of the Act based on the same set of documents examined during the original proceedings is not sustainable. In this connection we find support and guidance from the judgement of Hon’ble Apex Court in the case of CIT versus Kelvinator India Ltd reported in 320 ITR 561 wherein it was held as under: “the Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment. Under the Direct Tax Laws (Amendment) Act, 1987, the Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section 147. However, on receipt of representations from the companies against omission of the words 'reason to believe', the Parliament re-introduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer.”
Thus, in view of the above we hold that the reopening of the impugned case under section 147 of the Act in itself is invalid and against the laws settled by the Hon’ble Supreme Court in the case cited above.
7.3 We also draw support and guidance from the judgement of Hon’ble Gujarat High Court in the case of Gujarat Power Corporation Ltd versus ACIT reported in 26 Taxmann.com 51 wherein it was held as under: “37. Coming to the second question, as recorded, contention of the petitioner is that as in the present case, once the Assessing Officer examines a certain claim of the assessee in the original assessment proceedings, raises queries, receives replies, but thereafter makes no additions or disallowances, without giving reasons, it would not be permissible to reopen the assessment even within four years on very same grounds. The contention of the revenue is that in absence of any direct discussion in the assessment order, the Assessing Officer cannot be stated to have formed any opinion and that therefore, reopening within a period of four years of such an assessment would be permissible.
In this context, we may recall that as held by the Apex Court in the case of (1) Kelvinator of India Ltd. (supra), even after 1.4.1989, reopening of an assessment previously framed after scrutiny would not be permissible on a mere change of opinion and that the Assessing Officer must have some tangible material to form a belief that income chargeable to tax has escaped assessment. The concept of change of opinion is not done away with in the newly amended section 147 of the Act.” -1459/Ahd/2016 A.Y.2005-06 6 Thus, in view of the above we hold that the reopening of the impugned case under section 147 of the Act in itself is invalid and against the laws settled by the Hon’ble Supreme Court/ Gujarat High Court in the cases cited above.
7.4 We also note that the learned CIT (A) also held the reassessment framed under section 147 of the Act as invalid by observing that the objection raised by the assessee against the issuance of notice under section 148 of the Act was not disposed of by the AO before the completion of the assessment under section 147 of the Act. The learned CIT (A) in support of his order has relied on several judgements including the judgement of Hon’ble Apex court in the case of GKN Drive Shaft reported in 125 taxman 963 and Hon’ble Gujarat High Court in the case of Vishwanath engineers versus CIT reported in 21 taxmann.com 5.
The relevant extract of the judgement in the case of GKN Drive Shaft (supra) reads as under: “There was no justifiable reason to interfere with the order under challenge. However, it was clarified that when a notice under section 148 is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notice. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons had been disclosed in the proceedings, the Assessing Officer had to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment.”
The relevant extract of the judgement in the case of Vishwanath engineers (supra) reads as under: “19. Apart from the aforesaid fact, in case of GKN Driveshafts ( India) Ltd. (supra), the Supreme Court has clearly laid down the law that the Assessing Officer is bound to disclose the reason of reassessment within reasonable time and on receipt of the reasons, the assessee is entitled to raise objection and if any such objection is filed, the same must be disposed of by a speaking order before proceeding to reassess in terms of the notice earlier given. -1459/Ahd/2016 A.Y.2005-06 7 20. In the case before us, in spite of repeated reminders by the assessee even pointing out the above law laid down by the Supreme Court, the Assessing Officer failed to dispose of the said objections and instead of that, straightaway passed the order of reassessment.”
The learned DR at the time of hearing has not brought anything on record contrary to the finding of the learned CIT (A). Therefore, we do not find any reason to interfere in the finding of the learned CIT (A). As we have quashed the assessment framed under section 147 of the Act, therefore we are not incline to decide the issue on merits. In view of the above, the ground of appeal filed by the Revenue, on technical ground as elaborated above, is dismissed.
In the result, the appeal of the Revenue is dismissed.
Coming to Revenue. The Revenue has filed the following grounds of appeal:
1. The Ld.CIT(A) had erred in law and on facts by deleting the penalty pf Rs.1,02,44,500/- u/s.271(1)(c) of the I.T. Act 2. On the facts and in the circumstances of the case, the ''Ld.CIT(A) ought to have upheld the order of the Assessing Officer. 3. It is therefore, prayed that the order of the ''Ld.CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent. 4. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.
At the outset we note that the quantum addition in the appeal of the Revenue in has already been decided in favour of the assessee by us vide paragraph number 7 of this order. As the quantum addition has been deleted and therefore the penalty emanating from such quantum addition is not sustainable. Hence, with not find any reason to -1459/Ahd/2016 A.Y.2005-06 8 interfere in the finding of the learned CIT (A). Thus the ground of appeal of the Revenue is dismissed.
In the result the appeal filed by the Revenue is dismissed.
In the combined result, both the appeals filed by the revenue are dismissed.
Order pronounced in the Court on 01/10/2019 at Ahmedabad.