SHRI KULWANT SINGH, ALWAR,ALWAR vs. INCOME TAX OFFICER, WARD-1(4), ALWAR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES “B”, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 841/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2011-12 cuke Shri Kulwant Singh, I.T.O., Vs. G-114, Apna Ghar Shalimar, Ward 1(4), Tizara Road, Alwar. Alwar. PAN No.: AEVPS 7104 L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Shri Jai Singh (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 12/12/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 20/12/2018 vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated

09/01/2018 of ld. CIT (A), Alwar for the A.Y. 2011-12.

assessee has filed an application for condonation of delay, which is supported by the affidavit of the assessee.

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of delay has been explained. It has been stated in the affidavit that the

impugned order of the ld. CIT(A) was received by the assessee on

18/1/2018, however, in the mean time, the brother of the assessee

expired on 11/3/2018 and also the assessee suffered from serious ailments

of spondylitis for which the assessee was undergoing treatment at Jaipur

and Delhi from 27/3/2018 onwards. The assessee has produced death

certificate of his brother as well as medical record of the assessee showing

that the assessee was undergoing treatment during the relevant period

from the month of March to April 2018. Considering all these facts and

circumstances of the case, we satisfy that the assessee has explained the

reasonable cause for not filing the appeal within the period of limitation.

Accordingly, we condone the delay of 99 days in filing the present appeal.

“1. Under the facts and circumstances of the case, the reasons recorded for issue of notice U/s 148 and consequent order passed U/s 147 are illegal and bad in law.

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AR of the assessee has submitted that the assessee filed his return of

income U/s 139 of the Income Tax Act, 1961 (in short the Act) on

05/9/2011 declaring total income of Rs. 2,26,290/-. Subsequently the

Assessing Officer proposed to initiate the proceedings U/s 147/148 of the

Act by issuing the notice U/s 148 of the Act on 03/3/2015 by recording the

reasons that he has received the information regarding the cash deposit of

Rs. 15,20,500/- in the savings bank account with State Bank of Patiala.

The Assessing Officer has also recorded in the reasons that the assessee

has not filed any return of income, therefore, the cash deposit made in the

bank account is the income escaped assessment. The ld AR has pointed

out that this recording of reason by the Assessing Officer is factually

incorrect when the assessee has filed return of income and also declared

the turnover of more than 31.00 lacs, therefore, the reopening is not

based on the reasons and application of mind which has direct connection

to the undisclosed income and formation of belief by the Assessing Officer.

The reopening is without application of mind and has no connection with

the facts of the case, therefore, the same is no sustainable. The Assessing

Officer has reopened the assessment on the basis of the information

without independent application of mind and without considering the

return of income filed by the assessee, therefore, prima facie the reasons

ITA 841/JP/2018_ 4 Kulwant Singh Vs ITO

recorded by the Assessing Officer has no direct connection to form a belief

that the income assessable to tax has escaped assessment. In support of

his contention, he has relied upon the decision of this Tribunal dated

07/02/2018 in the case of Narain Dutt Sharma Vs ITO in ITA No.

203/JP/2017.

Assessing Officer has recorded in the reasons that the assessee has not

filed any return of income, however, it is because of the reason that the

information received by the assessee might have not contained PAN of the

assessee and therefore, the Assessing Officer could not verify the fact of

filing of return of income. He has relied upon the orders of the authorities

below.

material on record. The Assessing Officer has reopened the assessment by

recording the reasons as under: “Reason for issuance of Notice U/s 148 Read with section 147 In this case the assessee has not filed the return of Income for A.Y.2011-12. As per information available on record the assessee has deposited a sum of Rs. 15,20,500/- in the Saving Bank account held with State Bank of Patiala during the F.Y.2010-11.

Since the assessee has not filed the return of Income for A.Y.2031-12. Therefore, I have the reason to believe that income of Rs. 15,20,500/-

ITA 841/JP/2018_ 5 Kulwant Singh Vs ITO

chargeable to tax has escaped assessment for the A.Y.2011-12 and thus it is a fit case to initiate proceeding within the meaning of section 147 of Income Tax Act,1951. Notice u/s 148 of Income Tax Act,1961 is issued accordingly.”

Thus, it is manifest from the reasons recorded by the Assessing Officer

that the Assessing Officer begins with the statement that the assessee has

not filed return of income for the A.Y. 2011-12. Further while forming the

belief, again the Assessing Officer has stated that the assessee has not

filed return of income and therefore, he has reason to believe that the

income of Rs. 15,20,500/- to be deposited in the bank account chargeable

to tax, has escaped assessment. This statement of the Assessing Officer in

the reasons recorded is the basis for formation of belief is factually

incorrect as the Assessing Officer himself has recorded this fact in the

assessment order and stated that the return of income was filed by the

assessee through e-filing on 05/9/2011 declaring total income of Rs.

2,26,290/-. Further when the assessee has declared the turnover of more

than Rs. 31.00 lacs then the deposits in the bank account would not ipso

facto a reason to belief that the entire amount is the income assessable to

tax. We find that the Assessing Officer has reopened the assessment in a

mechanical manner without application of mind and solely on the basis of

information. The Assessing Officer has not taken the pain to verify the

return of income filed by the assessee. An identical issue has been

ITA 841/JP/2018_ 6 Kulwant Singh Vs ITO

considered by this Tribunal in the case of Narain Dutt Sharma Vs ITO

(supra) in para 13 to 19 as under:

“13. We have heard the rival contentions and perused the material available on record. Firstly, it is noted that in the instant case, the notice under section 148 in exercise of powers under section 147 has been issued on 23.03.2014 after the expiry of period of four years from the end of the impugned assessment year i.e., AY 2007-08. In terms of proviso to section 147 of the Act, an action under the said provisions can be taken by reason of failure on the part of the assessee to file his return of income or to disclose fully and truly all necessary facts necessary for his assessment for the subject assessment year. The contention of the Revenue at the time of recording the reasons was that the assessee had failed to file his return of income for the impugned assessment year and the same was not reflected in the IT system. Per contra, the Id AR has submitted that return of income for the AY 2007-08 was filed by the assessee manually with ITO Ward 6(1) Jaipur vide acknowledgment no. 2611000925 on 21.05.2008. It is relevant to note that the return of income so filed manually is with ITO Ward 6(1) who is the same officer who has subsequently issued the notice u/s 148 of the Act and therefore, Revenue cannot take the plea that return was filed wrongly by the assessee with another officer not having jurisdiction over the assessee. The related contention of the Revenue that the return so filed manually not uploaded in the IT system therefore cannot be accepted more so in the context of reassessment proceedings and where there is fault on the part of the assessee in filing his return of income.

ITA 841/JP/2018_ 7 Kulwant Singh Vs ITO

income filed under the head Business, you have declared income of Rs 175,510 on gross receipts of Rs 21,93,870 u/s 44AD." It is relevant to note the said return of income was not filed in pursuance to issuance of notice u/s 148 but the same was the return of income which was originally filed by the assessee u/s 139 of the Act. It is therefore clear that the whole foundation of the Revenue's reasoning is contradictory and self-defeating where at the time of issuance of notice u/s 148, it says that the assessee has failed to file his return of income and subsequently, during the proceedings u/s 147, it admits that the assessee has filed his return of income originally under section 139. On this ground itself, the assumption of jurisdiction u/s 147 cannot be sustained and the subject proceedings are liable to be quashed.

"As per AIR information generated from the system, the assessee has made investment of Rs. 1057000/- for purchase of units and SB Account during FY 2006-07 relevant for A Y 2007-08.

Since as per system no return of income has been filed for A Y 2007-08 the above transaction is not verifiable. I have, therefore, reasons to believe that on account of not filing of return by the assessee, income chargeable to tax has escaped assessment Therefore, it is requested to accord approval for issuance of notice u/s 148 of the Act."

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verifiable for the reason that assessee has failed to file its return of income for the subject assessment year as per the Revenue's department IT system. The basis of formation of belief by the ITO that the assessee's income for the impugned assessment year has escaped assessment is therefore the receipt of certain AIR information from an external source i.e., banking institution with which the assessee maintains his saving bank account and the fact that assessee has failed to file his return of income for the impugned assessment year. In this regard, we refer to the decision of the Hon'ble Gujarat High Court in case of Harikishan Sunderlal Virmani vs. Dy. CIT (supra) where it was held as under:

" 5.03......It cannot be disputed that on the basis of the information received from another agency, there cannot be any reassessment proceedings. However, after considering the information and material received from other source, AO is required to consider the material on record in the case of the assessee and thereafter is required to form an independent opinion that the income has escaped assessment. Without forming such an opinion, solely and mechanically, relying upon the information received from other source, there could not be any reassessment for verification."

“20. Keeping the above legal position in view when the cases on hand are examined, it is seen that as far as Indo Arab is concerned white the AO set out the information received from the ED, he failed to examine if that information provided the vitaI link to form the 'reason to believe' that income of the Assessee had escaped assessment for the A Y in question. While the AO has referred to the fact that the ED gave information regarding cash deposits being found in the books of the Assessee, the AO did not state that he examined the

ITA 841/JP/2018_ 9 Kulwant Singh Vs ITO

returns filed by the Assessee for the said AY and detected that the said cash deposits were not reflected in the returns.

In fact, the AO contradicted himself in the reasons recorded by him by noticing the information of the ED to the above effect and then stating that on perusal of the records for the AY in question it was noticed that the Assessee "had not disclosed these transactions in its books of account" Further the AO refers to the ED's information that Mr. Chetan Gupta, partner of the Assessee, failed to explain the sources of the cash deposits as shown in the books of account However, that by itself could not have led the AO to even prima facie conclude that income of the Assessee had escaped assessment. The explanation or the lack of it of the entries in the books of account may have certain relevance as far as ED is concerned but that by itself does not provide the vita! link for concluding that for the purposes of the Act any part of cash deposits constituted income that had escaped assessment There is a long distance to travel between a suspicion that income had escaped assessment and forming reasons to believe that income had escaped assessment. White the law does not require the AO to form a definite opinion by conducting any detailed investigation regarding the escapement of income from assessment, it certainty does require him to form a prima facie opinion based on tangible material which provides the nexus or the link to having reason to believe that income has escaped assessment."

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maintained by the department which shows that the assessee has filed the return of income. When such a conclusion has already been reached, where is the question of examination of such information and its linkage with the return of income. As we have noted above, there is a clear contradiction on part of the AO to hold that assessee has not filed his return when the records so filed before us shows, and a fact which remain undisputed, that the return of income has been filed even though manually and which has been duly acknowledged. In the instant case, the AO has thus failed to examine the AIR information so received which would have provided the nexus or the vital link to form a prima facie opinion that income of the assessee had escaped assessment for the impugned assessment year. In absence of necessary nexus between the tangible material and formation of belief, the reassessment proceedings cannot be sustained in the instant case.

Accordingly, in the facts and circumstances of the case, where the

Assessing Officer has reopened the assessment mechanically without

application of mind and as well as following the decision of this Tribunal in

the case of Narain Dutt Sharma Vs ITO (supra) we hold that the reopening

of the assessment is not valid and the same is quashed.

ITA 841/JP/2018_ 11 Kulwant Singh Vs ITO 8. Since we have quashed the reopening of the assessment and

consequential reassessment, therefore, we do not propose to go into the other grounds regarding the additions sustained by the ld. CIT(A).

Sd/- Sd/- ¼foØe flag ;kno½ ¼fot; iky jko½ (VIKRAM SINGH YADAV) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 20th December, 2018 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Shri Shri Kulwant Singh, Alwar. 1. izR;FkhZ@ The Respondent- The I.T.O., Ward 1(4), Alwar. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 841/JP/2018) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत