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Income Tax Appellate Tribunal, “DB”, BENCH AMRITSAR
Before: SHRI N.K. CHOUDHRY, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per Dr. A.L. Saini:
The captioned appeal filed by the assessee, pertaining to assessment year 2004-05, is directed against the order passed by the Commissioner of Income Tax (Appeals) Jammu, in appeal no. 420-11-12, which in turn arises out of an assessment order passed by the Assessing Officer u/s 144/147 of the Income Tax Act, 1961 (in short the ‘Act’) dated 26.12.2011.
Facts of the case which can be stated quite shortly are as follows: The assessing officer issued a notice u/s 148 of the Act on Shri Mohd Yousuf Kuchay on dated 25.03.2011 treating him as partnership firm assessed as association of person (PFAOP). The assessing officer asked the PFAOP to file its return of income for the assessment year 2004-05, or before 13-04-2011. In response, the AR of assessee
ITA Nos.473 /ASR/2013 Assessment Year: 2004-05 M/s. Mohd Yousuf Kuchay& Other submitted before AO that “No assessee under the name and style of M/s Mohd Yousuf Kuchay & others ever existed during the period relevant to assessment year 2004-05. After that the assessing officer replied to the assessee about the objections raised by the assessee. Thereafter, the assessing officer again issued notice under section 142(1) of the Act dated 06.07.2011.In response, the AR of assessee submitted before AO that “No assessee under the name and style of M/s Mohd Yousuf Kuchay & others ever existed during the period relevant to assessment year 2004-05. The AO rejected the contention of the assessee. Thenafter, the assessing officer framed the assessment u/s 144/147 of the Act by making the following additions:
(1).Addition to the income of the assessee on account of income worked out by assessee as on 30.09.2003. Rs.39,93,031/-.
(2).Addition to the income of the assessee on account of unexplained investments/expenditure in relation to Namak Factory. Rs.34,29,615/-.
Aggrieved by the addition made by the assessing officer, the assessee carried the matter in appeal before the ld CIT(A), who has deleted the addition in respect to unexplained investments/expenditure of Namak Factory. Rs.34,29,615/-. Aggrieved, the assessee is in appeal before us.
Before us, ld counsel reiterated the submissions made before the authorities below. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
6.We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Let us , first examine the reasons recorded by AO at the time of issuance of notice u/s 148 of the Act, which are reproduced below for ready reference:
“Survey u/s 133A of the Income Tax Act, 1961 was conducted in the case of Sh. Mohd Yousuf Kuchay at Al-Hyder Shopping Complex Hyderpora on 03-03-2009. During the said survey various documents were found and impounded .The perusal of P-27 of Page | 2
ITA Nos.473 /ASR/2013 Assessment Year: 2004-05 M/s. Mohd Yousuf Kuchay& Other Annexure A-6 revealed that the assessee has computed a profit of Rs.39,93,031/- as on 30-09-2003 relevant to the assessment year 2004- 05. While confronting the issue the assessee [Sh.Mohd Yousuf Kuchey] has accepted that the said profit was earned on real estate business which was jointly run by three persons in equal proportion (AOP). As such the above mentioned assessee firm/AOP has earned Rs.39,93,031/- as income on real estate business during the financial year 2003-04. However the assessee firm/AOP did not file its return of income for the relevant assessment year i.e. 2004- 05.Therefore,l have reasons to believe that the income of the assessee firm/AOP for the Assessment year 2004-05 amounting to Rs.39,93,031/- has escaped assessment in the hands of the assessee firm for the assessment year 2004-05. Submitted to the Addl CIT Range-3 Srinagar along with the copy of the statement recorded during on 03-03-2009 for his kind perusal and grant of necessary approval u/s 151(1) [read with section 147] of the IT Act, 1961 for issuance of notice u/s 148 of the IT Act, 1961 in this case for the above said assessment year.”
In response to the notice u/s 148 of the Act, the assessee submitted the reply which is reproduced below:
“Subject: - Notice u/s 148 in the case of M/S Mohd Yousuf Kuchay& Others, Humhama, Budgam -Assessment Year 2004-05.Reg. Kindly refer to notice u/s 148 issued in the aforementioned case vide your office No. 1284 dated 25.03.2011 calling for return of income for the assessment Year 2004-05. In this connection it is submitted that no assessee under the name & style of M/S Mohd. Yousuf Kuchay& Others ever existed during the period relevant to Assessment Year 2004-05. Hence proceedings initiated u/s 148 in the aforementioned case may kindly be filed.”
We note that the reasons recorded by the assessing officer are not sustainable in law for the following reasons:
(1).There is no evidence that Association of person (AOP) was in existence in the name and style of “M/S Mohd Yousuf Kuchay& Others”.
(2) The assessee has submitted before the AO that “no assessee under the name & style of M/S Mohd. Yousuf Kuchay& Others ever existed during the period relevant to Assessment Year 2004-05”.Now the burden shifts on the AO to prove that there was an AOP,however, the AO failed to prove the same.The income is to be taxed in the hands of the right person and in right assessment year.The Hon’ble Supreme Court in ITO Vs. CH. Atchaiah (1996) 218 ITR 239 (SC) has held that the income should be assessed on the right person, right year and it should be on the right income. From the aforesaid Page | 3
ITA Nos.473 /ASR/2013 Assessment Year: 2004-05 M/s. Mohd Yousuf Kuchay& Other decision of the Hon’ble Supreme Court only the right person and the right person alone is liable to be taxed and not the wrong person.
We note that during the reassessment proceedings u/s 147/148 of the Act, the AO has made following addition in the hands of AOP namely, M/s Mohd. Yousuf Kuchay& Others:
(1).Addition to the income of the assessee on account of income worked out by assessee as on 30.09.2003. Rs.39,93,031/-.
(2).Addition to the income of the assessee on account of unexplained investments/expenditure in relation to Namak Factory, Rs.34,29,615/-.
On appeal, ld CIT(A) deleted the second addition of Rs.34,29,615/-. This shows that AO was not certain whether investments/expenditure in relation to Namak Factory, Rs.34,29,615/- belongs to AOP or not.
Statement of the assessee on oath [Sh. Mohd Yousuf Kuchey] recorded by AO are not supported by corroborative evidence. For that we rely on the Judgment of the Hon`ble Madras High Court in the case of M/s S. Khader Khan 300 ITR 157 (Mad), wherein it was held as follows:
“In the instant case, there was a survey operation conducted under s. 133A in the assessee’s premises and a statement was recorded from one of the partners. Assuming there were discrepancies and irregularities in the books of accounts maintained by the assessee, an offer of additional income for the respective assessment years was made by the partner of the firm. But, such statement, in view of the scope and ambit of the materials collected during the course of survey action under s. 133A shall not have any evidentiary value, as rightly held by the CIT(A) and the Tribunal, since such statement was not attached to the provisions of s. 133A. It could not be said solely on the basis of the statement given by one of the partners of the assessee firm that the disclosed income was assessable as lawful income of the assessee. Since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of the assessee, it could not be said that the Revenue had lost lawful tax payable by the assessee. A power to examine a person on oath is specifically conferred on the authorities only under s. 132(4) in the course of any search or seizure. Thus, the IT Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, whereas s. 133A does not empower any ITO to examine any person on oath. Thus, in contradistinction to the power under s. 133A, s. 132(4) enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the IT Act. On the other hand, whatever statement recorded under s. 133A is not given an evidentiary value. What is more relevant, in the instant case, is that the attention of the CIT(A) and the Tribunal was rightly invited to the circular of the CBDT dt. 10th March,2003 Page | 4
ITA Nos.473 /ASR/2013 Assessment Year: 2004-05 M/s. Mohd Yousuf Kuchay& Other with regard to the confession of additional income during the course of search and seizure and survey operations”
Article 265 of the Constitution of India lays down that, “No tax shall be levied or collected except by authority of law”. The Hon’ble Supreme Court of India has held that this provision under Article 265 of the Constitution of India is applicable not only for levy but also for the collection of taxes and the expression “assessment” within its compass covers both the aspects carried out by the executive functionary. Chottabhai Vs. Union of India 1962 SCR Supl.2 1006. Therefore, it is required that whole of the process of taxation must follow the procedures which are valid under the law and must adhere to law i.e. substantive one as well as procedural one too. Therefore, in other words it is provided in the Constitution of India that every step should be taken to ensure that levy and collection of the taxes is strictly in accordance with law – not only substantive one but the procedural law, as well. Therefore, object of the Income Tax Law in India is to collect the tax from right person and in right assessment year. Now, we shall examine the conditions laid down in section 147 of the Act which is given below : “If the A.O. has reason to believe that any income chargeable to tax has escaped assessment for any assessment year.” (i).There must be material for the belief. In the assessee`s case AO has collected material to assess the AOP,“M/S Mohd Yousuf Kuchay& Others”. In fact AOP is not in existence.
(ii).Circumstances must exist and cannot be deemed to exist for arriving at an opinion. In the assessee`s case opinion was framed by AO based on statement of assessee which is not based on tangible material.
(iii).Reasons to believe must be honest and not based on suspicion.
ITA Nos.473 /ASR/2013 Assessment Year: 2004-05 M/s. Mohd Yousuf Kuchay& Other In the assessee`s case the reasons were recorded based on the statement of the assessee during the survey and no tangible material brought on record by AO, hence reasons were based on suspicion.
(iv) There must be nexus between material and belief. In the assessee`s case, the AO has failed to establish nexus between material and belief.
We note that most of the conditions of reopening the assessment u/s 147 of the Act has failed, as demonstrated above, therefore in the assessee`s case the reopening u/s 147 is not valid.
We note that at the primary stage, the assessee has objected notice u/s 148 of the Act which was issued by the AO in the name of AOP which does not exist during the period and therefore the initiation of proceedings u/s 148 of the Act is bad in law.We further note that the object of the Income Tax Act is to tax the right income in the hands of right person in right assessment year. Since the reassessment proceedings have been initiated by the AO on the person which does not exist, therefore the order passed by the AO u/s 144/147 of the Act is null and void and hence we quash the reassessment order passed by the AO u/s 144/147 of the Act.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 30.12.2019
Sd/- Sd/- (N.K. CHOUDHRY) (A.L.SAINI) "या�यकसद�य / JUDICIAL MEMBER लेखासद�य / ACCOUNTANT MEMBER AmritsarAmritsar *दनांक/ Date: 30/12/2019 (BCG, PS)
ITA Nos.473 /ASR/2013 Assessment Year: 2004-05 M/s. Mohd Yousuf Kuchay& Other Copy of the order forwarded to:
M/s. Mohd Yousuf Kuchay& Other, C/o JK Public School, New Airport Road, Humhama, Budgam, Kashmir. 2. Assessing Officer, Range-3,Srinagar. 3. C.I.T(A), Jammu 4. C.I.T.- concerned. 5. The Sr. DR, I.T.A.T., Amritsar.