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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals), Jamnagar [Ld.CIT(A) in short] dated 14/08/2018 arising in the matter of assessment order passed under s. 143(3) r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dated 20/07/2017 relevant to Assessment Year (A.Y) 2011-2012.
The assessee has raised the following grounds of appeal:
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‘’The impugned order is liable to be quashed and set aside on account of following amongst other grounds which are taken independent of and without prejudice to each other: a) Ld. Dy. Commissioner of Income Tax, Circle - 1, Jamnagar has erred in law as well as on the facts in making the assessment on the basis of mere assumption. b) Ld. Dy. Commissioner of Income Tax, Circle - 1, Jamnagar has erred in law as well as on the facts of the case in making addition of Rs.20,01,835/- on account of unexplained investment of gold jewelry under section 69 of the Income Tax Act, 1961. c) That the appellant craves leave to and/or to amend to and/or to alter to and/or to substitute to all or any of the grounds of appeal during the hearing of the appeal’’ The assessee wide letter dated 17th April 2 019 has raised the following 2. additional grounds of appeal: ‘’Additional Grounds of Appeal 1. Ld.CIT(A) erred in law as well as on fact in upholding assessment made u/s.143(3) r.w.s 147, reopened by AO based on reappraisal of material available on record.
Ld.CIT(A) erred in law as well as on fact in upholding assessment made u/s.143(3) r.w.s 147, reopened beyond four years from the assessment year without any failure on the part of assessee to disclose fully and truly all material facts necessary for assessment.’’
At the outset, Ld. AR brought to our notice that assessee has raised additional ground of appeal which is legal in nature and therefore same should be admitted for the adjudication in terms of principles laid down by the Hon'ble Supreme Court in the case of NTPC vs. CIT reported in 229 ITR 383 (SC) wherein it was held that assessee is entitled to raise additional grounds of appeal.
On the other hand, Ld. DR raised no objection on the admission of the additional ground of appeal.
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From the reading of additional ground of appeal, we note that it is legal in nature and arising out from the order of Authorities Below. As such, no separate details/documents are required for adjudicating the same. Therefore, we are inclined to admit the same and accordingly proceed to adjudicate the same.
5.1 The assessee in the additional ground of appeal has challenged the validity of the reopening under section 147 of the Act on the reason that there was no material available with the AO leading to form the belief that the income of the assessee has escaped assessment.
The learned AR before us submitted as under:
We invite your honours kind attention to page no. 3 of paper book, which are reasons recorded for reopening of case. 3. Your honour may appreciate that there was no new or fresh tangible material before AO for reopening of case. The case was reopened on reappraisal of existing material, which is invalid. 4. Reassessment has to be based on "fresh material". A reopening based on reappraisal of existing material is invalid. There was no tangible material before the Assessing Officer to form the belief that the income had escaped assessment and therefore, reopening of assessment under section 147 was not valid. We rely upon following judicial precedents a. Balakrishna Hiralal Wani vs. ITO (2010) 321 ITR 519 (Bom.) b. Dempo Brothers Pvt Ltd. v. ACIT (2018) 403 ITR 196 (Bom) (HC)
c. Golden Tobacco Limited v. DCI [2017] 48 ITR (T) 132(Mum.)(Trib.) d. DIT v. Rolls Royal Industries Power India Ltd. [2017] 394 ITR 547 (Delhi)(HC) e. ACIT v. Tata Chemicals Ltd. (2017) 185 TTJ 123 (Mum.) (Trib.) f. Mahandi Coalfileds Ltd ITA No. 300/CTK/2014 (Page no. 4 to 13 PB1) g. Yasodaben Soni ITA No. 359/AHD/2016 (Page No. 14 to 13 PB1) h. Tupperware India (P) Ltd. 65 Taxmann.com 17 (Delhi) (Page No. 24
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to 30 PB1) i. Deloitte Haskins & Sells v. DCIT (2018) 253 Taxman 490 (Guj)(HC) (Copy enclosed) 5. After assessment made u/s. 143(3) vide order dated 31/03/2014, notice u/s. 148 was issued on 21/03/2017 for AY 2011-12, which is beyond four years from the end of assessment year. As per provisoto section 147, which reads as Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year13, unless any income chargeable to tax has escaped assessment for such assessment year by of the failure73 on part of the to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and trulv all material facts73 necessary for his assessment, for that
Your honour may kindly appreciate that the reopening is based on audit report and there was no failure on the part of assessee to disclose material facts.
On the other hand, the learned AR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. At this juncture we are inclined to refer the reasons recorded by the AO for initiating the proceedings under section 147 of the Act which reads as under:
‘’ The assessment u/s 143(3) was completed on 14.03.2014 determining assessed income at Rs.15,90,250/- against returned income of Rs.15,90,250/- 2. On verification of the case records, it is seen that the assessee has obtained loan against gold to the tune of Rs.19,97,794/-. However, there is no gold jewellery appearing in the balance sheet. Therefore the assessee has made unexplained investment in the purchase of gold jewellery whyich has been pawned with the bank to obtain loan. Since bank usually advance loan on gold to the extent of 60% of market value of gold. The said loan amount represents 60% of the assessee’s investment. Accordingly 100% said loan amount represents 60% of the assessee’s investment. Accordingly 100% unexplained investment works out at Rs.33,00,000/- which requires to be brought to tax.
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I have, therefore, reasons to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961 and also by reason of the failure on the part of the assessee to disclose fully and truly all material facts for the assessment. Accordingly the case is re-opened. 3. Issue Notice u/s.148 of the I.T. Act, 1961.’’
8.1 On perusal of the above reasons recorded by the AO, it is revealed that the AO has formed his belief on the verification of the assessment records. As such, there was no tangible material available before the AO from any outside source, suggesting that the income of the assessee has escaped assessment. In such circumstances the Hon’ble Gujarat High Court has held that the reassessment proceedings under section 147 of the Act are not justified in the case of Deloitte Haskins & Sells VS DCIT reported in 90 taxmann.com 421. The relevant extract of the order is reproduced as under: “All these details were on record before Assessing Officer, when the original assessment proceedings were being made and there was nothing outside of the record which could have thrown any light on the nature of payment and its deductibility in terms of provisions of the Income-tax Act. It could not be said that though such payments were recognized in partnership deed, as per the Income-tax law, the payments were not allowable deductions, being the nature of payments made to the outgoing partner and therefore were in the nature of capital expenditure. In this respect, the revenue has completely failed in satisfying that there was any failure on the part of the assessee in disclosing truly and fully, all material facts. From the reasons recorded by the Assessing Officer as well as material produced, it is completely visible that all necessary facts were already on record, duly disclosing and that there was no failure on the part of the assessee in this regard. If the Assessing Officer had any dispute about deduction of the said sum from the profit of the firm, he could have and ought to have raised such objection during the original assessment. At any rate, on such ground, the assessment framed after scrutiny cannot be reopened beyond the period of four years from the end of relevant assessment year.” 8.2 The facts of the above case are squarely applicable to the facts of the case on hand. In the case on hand, the AO formed his belief that the income of the assessee has escaped assessment on the verification of the case records. Thus it is inferred that all the facts were already available before the AO and there was no information about the statement of income from any
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external/independent source. Therefore, we hold that the reopening under section 147 of the Act on the basis of the case records is not sustainable. Accordingly, we quash the same. Hence the additional ground of appeal of the assessee is allowed.
8.3 As the assessee has succeeded on the technical issue raised by him in the additional ground of appeal; therefore we are not inclined to adjudicate the issue on merit. Hence the issue raised by the assessee on merit becomes infructuous and does not require any separate adjudication. Therefore we dismiss the same.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the Court on 25/06/2019 at Ahmedabad. -Sd- -Sd- (Ms MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 25/06/2019 manish