C I T vs. MANISH AJMERA

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ITA/522/2008HC RajasthanRJHC02032132200720 November 2010Author: MOHAMMAD RAFIQ,ARUN MISHRA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the order passed by the ITAT did not suffer from any legal infirmity. The Tribunal had correctly found that the assessment was reopened essentially due to a change of opinion, which is not permissible even under the amended provisions of Section 147. Furthermore, when reopening occurs after four years from the end of the assessment year, escapement of income must be due to the assessee's failure to file a return or failure to disclose fully and truly all material facts. The Assessing Officer had not alleged any such non-disclosure at the time of the original assessment. The sole basis for reopening was the change in the Assessing Officer's view on the appropriateness of the assessee's accounting system. The ITAT's reliance on the Supreme Court judgment in CIT & Anr. vs. Foramer France, holding that reopening on mere change of opinion without non-disclosure is not permissible, was upheld. Consequently, the appeals filed by the Revenue did not raise any question of law and were dismissed.

What were the facts?

The Revenue (CIT, Jaipur-II) filed two appeals against a common judgment of the ITAT, Chandigarh, dated March 14, 2005. These appeals, pertaining to assessment years 1995-96, 1996-97, and 1997-98, were filed with a significant delay of 1138 days, which the High Court condoned. The assessee, Shri Manish Ajmera, engaged in the lottery business, had his income initially assessed at Rs. 2,46,12,260. Subsequently, a notice under Section 148 was issued on March 22, 2002, for reassessment. The Assessing Officer rejected the assessee's books of accounts under Section 145(3) and applied a 3% net profit rate, leading to an assessment of Rs. 15,12,97,910. The CIT(A) upheld the reopening but provided some relief on merits. The ITAT allowed the assessee's appeals and dismissed the Revenue's appeals, holding that the reopening of assessment for AY 1995-96 and 1997-98 was invalid.

What were the issues?

1. Whether the reopening of assessment under Section 147 read with Section 148 of the Income Tax Act, 1961, for the assessment years 1995-96 and 1997-98 was valid, considering it was done after four years from the end of the assessment year. Assessee's Contention (as understood from the Revenue's argument and ITAT's finding): The reopening was based on a change of opinion by the Assessing Officer and not on any failure of the assessee to disclose material facts. Therefore, it was impermissible, especially after four years. Revenue's Contention: The Assessing Officer had correctly identified escaped income related to prize-winning tickets shown as current assets, which amounted to Rs. 3,69,257. The ITAT erred in not relying on the Supreme Court judgment in Raymond Woolen Mills vs. ITO, as there was a clear non-disclosure and evasion of income, justifying reopening under Section 143(3) read with Section 148.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3),Section 145(3),Section 260A

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR 1.D.B. Income Tax Appeal No.522/08 CIT, Jaipur-II, Jaipur vs. Shri Manish Ajmera

2.

D.B. Income Tax Appeal No.430/2008 CIT, Jaipur-II, Jaipur vs. Shri Manish Ajmera Date of order :: 20.11.2010. HON'BLE THE ACTING CHIEF JUSTICE MR. ARUN MISHRA HON'BLE MR. JUSTICE MOHAMMAD RAFIQ Mr. R.B. Mathur for appellant. *** (PER HON'BLE MOHAMMAD RAFIQ, J.) The appeals are barred by limitation having been filed with delay of 1138 days. The reason that is given in application seeking condonation of delay is that the ITAT, Chandigarh decided the appeal on 14.3.2005, but no intimation was given by the Departmental Representative to Jaipur office of ITAT, Jaipur or concerned CIT, Chandigarh. As per the ITAT Rules, copy of the order is required to be sent to D.R., ITAT and concerned CIT(A). No such copy was dispatched to either of them at Jaipur. But it appears to have been sent to their counter parts at Chandigarh, whereas the matter was transferred to Chandigarh bench for certain other reasons, though it actually did not have any juri iction over the dispute. We are satisfied that appellant was 2 prevented by sufficient cause in not filing appeal within limitation. Delay in filing the appeals are condoned. The application u/s.5 of the Limitation Act is allowed. The appeals are heard on merits. These two income-tax appeals have been filed u/s.260A of the Income Tax Act, 1961 (for short- the Act) against the common judgement passed by the learned Income Tax Appellate Tribunal (for short-ITAT) dated 14.3.2005. Though these appeals pertain to two different assessment years i.e. 1995-96, 96-97 and 97-98, by this common judgement, three appeals filed by the assessee and two appeals filed by revenue before the ITAT have been decided together; while the appeals of the assessees were allowed, the appeals filed by the revenue were dismissed. It was held that the reopening of the assessment for the assessment year 1995-96 and 1997-98 was not valid. Both the matters are therefore heard together and are being decided by this common judgement. For the purpose of deciding both the matters, we have taken the facts of the appeal no.522/08 as basis. The assessee is engaged in lottery business through its proprietary concern M/s. Manish Lottery Agencies, Jaipur. He filed return declaring income of Rs.2,44,85,735, which was revised at Rs.2,44,65,460. Initially income of the assessee was assessed by Assessing Officer u/s.143

3 (3) at Rs.2,46,12,260 on 23.3.1998. However, subsequently notice u/s.148 was issued on 22.3.2002 stating that (i) prize winning ticket amount reflected in the balance sheet on the current asset side not taken to the profit and loss a/c by the assessee, (ii) valuation of closing stock at the end of the year was not claimed in the books of accounts, (iii) advance purchases and advance sales have not been taken to the profit and loss a/c. The order u/s.143(3) and 148 was passed on 31.3.2003 at Rs.15,12,97,910. The Assessing Officer rejected the books of accounts u/s.145(3) of the Income Tax Act and applied the net profit rate of 3% on the turnover of Jaipur Branch and Delhi Branch. Appeal preferred by assessee thereagainst before the CIT (A) was dismissed on 27.10.2003, which upheld the reopening of assessment with some reliefs on merits. The assessee and revenue both filed appeals before the ITAT and ultimately the matter came to be transferred to ITAT, Chandigarh, which decided the appeals by the common order which is impugned in the present appeals. Mr. R.B. Mathur, learned counsel for the appellant has argued that the Assessing Officer categorically mentioned prize winning tickets that the assessee had shown on 31.3.1994 at Rs.19.01,533/-

and as on 31.3.1995

at Rs.15,32,276/- in the balance sheet of “Manish

4 Lottery Agency” under `current assets' head, therefore, the assessee received Rs.3,69,257/- against the prize winning ticket which was not disclosed by him. This income has escaped assessment. The learned ITAT has also committed illegality in not relying the binding judgement of Supreme Court in Raymond Woolen Mills vs. ITO-236 ITR 34 (SC). It failed to appreciate that there was no discloser of this fact to the Assessing Officer. It was a clear case of evasion. The assessment was therefore rightly reopened by recourse to Section 143(3) read with Section 148 of the Act. We have analysed the arguments so made in the light of the findings recorded by the ITAT. The ITAT in para 17 of its order has held that the assessment in the present case was reopened essentially not because of escapement of income, but because of change of opinion, which was not permissible even in the amended provisions under Section 147. Moreover, when the assessment was reopened after the expiry of four years from the end of the assessment year, escapement of income has got to be by reason of failure of the assessee to file return or failure of the assessee to disclose fully and truly all material facts for assessment. In this case, even the Assessing Officer has not alleged that there was any non- disclosure of material facts by the assessee at 5 the time of original assessment. The sole basis on which the assessment has been reopened is that while framing the original assessment order, the Assessing Officer has accepted the system of accounting adopted by the assessee as valid, whereas in the re-assessment made u/s.147, the system of accounting adopted by the assessee has not been considered to be appropriate. It is therefore change of opinion on the basis of which re-assessment is made. The learned ITAT has relied on the law laid down by the Supreme Court in CIT & Anr. vs. Foramer France-264 ITR 566 to hold that reopening of assessment on mere change of opinion especially when there is no non-disclosure of material fact by assessee, is not permissible. In our view, the order passed by the ITAT does not suffer from any legal infirmity and therefore the appeals do not raise any question of law. Both the appeals are therefore dismissed.

(MOHAMMAD RAFIQ), J. (ARUN MISHRA),ACTING CJ. RS/-

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