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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
PER R.S.SYAL, VP :
This appeal by the assessee is directed against the order dated 31-01-2014 passed by the Commissioner of Income-tax (Appeals), Kolhapur in relation to the assessment year 2009-10.
The first ground is against the validity of initiation of re- assessment.
2 ITA No.769/PUN/2014 Mr. Kailash Kanhaiyalal Gidwani and others
Briefly stated, the facts of the case are that the Assessing
Officer (AO) initiated re-assessment by means of notice u/s.148 of
the Income-tax Act, 1961 (hereinafter also called `the Act’) which
was issued on 19-03-2012 alleging that the source of loan given by
the assessee to Kanhaiyalal Vishandas Gidwani to the tune of
Rs.7.00 lakh was not substantiated. The assessee filed return in
response to such notice and then sought reasons leading to the
issuance of notice u/s.148. Objections were raised after receiving
the reasons, which were dealt with by the AO by means of a
separate order. Thereafter, the AO espoused the assessment
determining total income at Rs.46,03,300/- as against the returned
income of Rs.9,96,340/-. The assessee, inter alia, challenged the
initiation of re-assessment before the ld. CIT(A) but without success
and thus is now aggrieved before the Tribunal.
We have heard both the sides and gone through the relevant
material on record. The reasons which led to the issuance of notice
u/s.148, a copy supplied on page 9 of the paper book, read as under:
“According to information gathered from informed sources, local enquiries and media reports, it has come to be known that Shri Kanhaiyalal Gidwani, owns three flats, one in his name and two in the names of his two sons - Kailash and Amit in the Adarsha Housing Society. Again, one flat is learned to be booked in the name of Shri Gajanan S. Koli, where apparently it is believed that Shri Sunil K. Gidwani, son of Kanhiyalal Gidwani, has lent finance to purchase the same. All payments for the same were apparently made through
3 ITA No.769/PUN/2014 Mr. Kailash Kanhaiyalal Gidwani and others
Gidwani Family's various bank accounts in which apparently cash amounts were deposited and the same were transferred into the accounts of Gidwani's wife, son and daughter-in-law in HDFC Bank at Worli. Thereafter the said amounts were apparently transferred into the account of M/s Jay Maharashtra CPL, HFDC Bank, Worli, in which Gidwani's sons are directors for making payments towards cost of the flats. On verification, it is seen that Shri Kanhaiyalal Vishandas Gidwani has taken interest free loan of Rs.500,000 on 08-03-2007 and Rs.200,000 on 25-11-2008 from the assessee Smt. Devi Gidwani. Genuineness of all these loans is not proved. The sources of the loans advanced by Sou. Devi Gidwani are not substantiated. Therefore, in view of the above, I have reasons to believe that the income chargeable to tax has escaped assessment within the meaning of s ection 147 of the I. T. Act, 1961.”
It can be seen from the above extracted reasons that the first
para talks of Kanhaiyalal Gidwani acquiring three flats, one in his
name and two in the names of his sons in Adarsha Housing Society,
which has no relation with the assessee in question. Second para
relates to the assessee as per which Kanhaiyalal Vishandas Gidwani
took two interest free loans of Rs.5.00 lakh and Rs.2.00 lakh from
the assessee on 08-03-2007 and 25-11-2008. The first loan of
Rs.5.00 lakh is dated 08-03-2007, which transaction falls in the
previous year ending 31-03-2007 with the relevant assessment year
2007-08 and hence, is not relevant for the assessment year 2009-10
under consideration.
The only loan which relates to the relevant year is of Rs.2.00
lakh which as per the AO was given by the assessee to Kanhaiyalal
4 ITA No.769/PUN/2014 Mr. Kailash Kanhaiyalal Gidwani and others
Vishandas Gidwani. Here, it is relevant to mention that the assessee
filed her original return of income on 31-03-2010, much before the
initiation of section 147 proceedings, declaring total income of
Rs.9,96,340/-. Copy of acknowledgement of income-tax return has
been placed at page 3 of the paper book. The computation of
income is at pages 1 & 2 of the paper book. The assessee’s Profit
and loss account and Balance sheet find place at pages 5 & 6 of the
paper book. It can be seen from the assessee’s Profit and loss
account that there is net profit of Rs.10,89,380/-. The same amount
has been carried to the assessee’s capital account, whose copy is
available at page 7 of the paper book. Net closing balance of
Rs.32,33,246.34 in the capital account has been taken to the balance
sheet. It is with reference to these Annual accounts that the assessee
filed the original return on 31-03-2010 declaring total income of
Rs.9,96,344/-. In the said balance sheet of the assessee, which
accompanied the original return of income, there is depicted a loan
liability in favour of Kanhaiyalal V Gidwani at Rs.17,68,500/-.
Copy of account of Kanhaiyalal Vishandas Gidwani has been
placed at page 25 of the paper book, which shows opening credit of
balance of Rs.20.00 lakh. Then there are two payments made by the
assessee to Kanhaiyalal Vishandas Gidwani through HDFC bank
5 ITA No.769/PUN/2014 Mr. Kailash Kanhaiyalal Gidwani and others
amounting to Rs.2.00 lakh and Rs.31,500/- with closing balance of
Rs.17,68,500/-, which finds place in the assessee’s balance sheet
filed with the original return of income.
From the above narration of facts, it is amply clear that firstly
the assessee did not advance any loan to Kanhaiyalal Vishandas
Gidwani amounting to Rs.2.00 lakh as has been alleged in the
reasons. On the contrary, it is a case of repayment of loan of
Rs.2.00 lakh as against the opening balance of loan of Rs.20.00
lakh. The reasons noted by the AO that it was a case of advancing
loan by the assessee to Kanhaiyalal Vishandas Gidwani, is
therefore, not correct to that extent. Be that as it may, the substance
of the reasons is that “the sources of the loans advanced by Sou.
Devi Gidwani are not substantiated”. This is the main reason
which led to the initiation of re-assessment proceedings in the hands
of the assessee. We are unable to find any justification for initiation
of re-assessment on such ground as it is a case where the assessee
had made repayment of loan out of regular books of account
maintained by her. As against the opening balance of Rs.20.00
lakh, the assessee paid Rs.2.00 lakh vide cheque dated 25-11-2008.
This transaction was properly recorded in the assessee’s books of
account. The assessee is payer and not the recipient of loan. Once
6 ITA No.769/PUN/2014 Mr. Kailash Kanhaiyalal Gidwani and others
the assessee paid Rs.2.00 lakh to Kanhaiyalal Vishandas Gidwani
out of her regular books of account, there cannot be any question of
the assessee not substantiating the source of loan, which is overtly
from the regular books of account maintained by her. This sort of
enquiry, if warranted, ought to have been conducted in the hands of
the recipient to justify the source of the loans received and not the
payer of the loan, who has given loan out of her regular books of
account. In view of the foregoing discussion, it is clear that the
reasons recorded by the AO for initiating re-assessment proceedings
are invalid and do not justify initiation of re-assessment.
Even though the original summary assessment was made u/s
143(1) of the Act and the period of four years from the end of the
assessment year had not expired before issuing notice u/s 148 of the
Act, still, the AO, having missed the opportunity of making
assessment u/s 143(3) after issuing notice u/s 143(2) of the Act
within the stipulated period, could have made assessment or
reassessment u/s 147 only on the basis of the some reasons to
believe about the escapement of income. Existence of reasons for
escapement of income are sine qua non to embark upon the
assessment or reassessment u/s 147 of the Act. Change or no change
of opinion, as argued by the ld. DR, are the factors to be considered
7 ITA No.769/PUN/2014 Mr. Kailash Kanhaiyalal Gidwani and others
after fulfilling the jurisdictional condition of there being an
escapement of income, in the absence of which no assessment or
reassessment can be made u/s 147. As it is apparent from the above
discussion that no valid reasons exist about the escapement of the
assessee’s income, we hold that the AO was not justified in taking
recourse to the provisions of section 147 of the Act. We, therefore,
strike down the initiation of assessment proceedings and the
consequential assessment order passed u/s 147 of the Act and also
the impugned order.
In the result, the appeal is allowed. Order pronounced in the Open Court on 11th September, 2019.
Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 11th September, 2019 सतीश आदेश क� क� क� �ितिल क� �ितिल �ितिलिप �ितिल िप अ�ेिषत अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश िप िप 1. अपीलाथ� / The Appellant; ��यथ� / The Respondent; 2. 3. The CIT(A), Kolhapur 4. The CIT-I, Kolhapur िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “बी / 5. DR ‘B’, ITAT, Pune; 6. गाड� फाईल / Guard file. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
ITA No.769/PUN/2014 Mr. Kailash Kanhaiyalal Gidwani and others
Date 1. Draft dictated on 09-09-2019 Sr.PS 2. Draft placed before author 11-09-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *