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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR (SMC
Before: SH. SANJAY ARORA
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. No. 538/Asr/2017 Assessment Year: 2008-09
Ghulam Nabi Beigh vs. Income Tax Officer, s/o Ghulam Ahmed Beigh Ward 3(1), Rajbagh, Bul Bul Bagh, Barzulla, Srinagar, Kashmir-190008 Srinagar, Kashmir-190015 [PAN: AHQPB 1551L] (Appellant) (Respondent)
Appellant by : Written Submissions Respondent by: Sh. Charan Dass (D.R.) Date of Hearing: 05.02.2019 Date of Pronouncement: 15.02.2019
ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-1, Amritsar ('CIT(A)' for short) dated 30.06.2017, dismissing the assessee’s appeal contesting his assessment u/s. 143(3)/147 of the Income Tax Act, 1961 ('the Act' hereinafter) dated 17.01.2013 for the Assessment Year (AY) 2008-09. The assessee relying on written submissions, the hearing in the matter was proceeded with.
The appeal raises the following grounds: ‘1. The ld Commissioner of Income Tax (Appeals), J&K was not right in ignoring the fact that the Assessing Officer was acting without Jurisdiction since the assessee's case fell in Anantnag Ward of the J&K Range and not Srinagar Ward of the J&K Range. The assessment order is liable to be quashed on this ground alone.
2 ITA No. 538/Asr/2017 (AY 2008-09) Ghulam Nabi Beigh v. ITO 2. The ld Appellate Commissioner was not justified in not considering the fact that the assessee had actually filed the ROI for the relevant assessment year and the worthy AO had failed to link the FDRs with return of income so filed. 3. The ld Commissioner of Income Tax (Appeals) has not considered that the assessee had been filing his return of income on presumptive basis u/s 44AD of the Income Tax Act, 1961 and accordingly, Section 69 of the Act could not be invoked in such a case since section 69 of the Act pre-supposes the maintenance of the books of account by the assessee. 4. Despite the fact that the impugned FDRs were not purchased in the AY 2008-09 but in AY 2002-03 (85,000/- and AY 2005-06 (Rs.7,00,000/-), the worthy Assessing Officer did not ask for the ROI for these assessment years but continued to assess the investment in the AY 2008-09 in which the FDRs were just reinvested on a revolving basis. 5. The worthy Assessing Officer has recorded a finding that the investments were held by the assessee jointly with his daughter but has failed to record a finding that the daughter was a minor to justify the clubbing of the investment in the hands of the father, the assessee, under the clubbing provisions of the Act. This fact has been ignored by the Id. Appellate Commissioner in his impugned order. The income clubbed amounts to Rs.4,13,828/00. 6. The worth Assessing Officer has not allowed any relief on account of the taxes paid by the assessee on interest income deducted by the bank.’
Ground 1 raises a preliminary objection, questioning the territorial jurisdiction of the Assessing Officer (AO) framing the impugned assessment. The same stands also raised before the ld. CIT(A) (as Ground 1), though not addressed by him. The said objection, as appears from the assessment order, was not raised before the AO, whereat it has under law to be raised and, further, within 30 days of the receipt of the notice u/s. 148 or, as the case may be, u/s. 143(2) (Se. 124(3)).The ITO Ward-(3)(1), Srinagar, is the AO on the basis of the assessee’s address as available on the record of the Revenue, i.e., Bul Bul Bagh, Barzulla, Srinagar (as mentioned in the assessment and the appellate order). The law in the matter is in fact well-settled, and toward which the ld. Departmental Representative (DR), Sh. Charan Dass, would during hearing rely on the decisions in CIT v. Shri Shyam Sunder Infrastructure (P.) Ltd. (in ITA No. 236/2014, dated 4/2/2015) and Dy. CIT v. Monica Sehgal (in ITA No. 4802/Del/2012, dated 16/5/2008), both rendered following judicial precedents. There is in fact no
3 ITA No. 538/Asr/2017 (AY 2008-09) Ghulam Nabi Beigh v. ITO submission of the assessee in the matter. The assessee’s plea is patently inconsistent with the law and, therefore, without merit, and accordingly dismissed.
The assessee’s second ground assails the reasons recorded u/s. 148(2), claiming that the AO had failed to link the FDRs with the return of income as filed. The ld. DR would object, stating that there is no question of linking the reason/s recorded with the return of income when, as per the AO, no return has been filed by the assessee, as noted by the AO in the reasons/s recorded.
I have heard the party before me, and perused the material on record. 5.1 The assessee has, as I understand, challenged the validity of the reason/s recorded in-as-much it does not give rise to any reason to form a belief as to the escapement of income from assessment. Sh. Dass would though strongly object, stating that the assessee having not filed any return of income for the relevant year, i.e., as per the record of the AO, he was, in its’ absence, entitled to draw an inference that the investment in FDRs, not denied at any stage, is not out of explained source/s. Upon this, he was enquired by the Bench as to whether it would materially alter the situation if the assessee had filed the return of income, i.e., with the concerned AO? This is as a return is not generally accompanied by, in view of the Board instructions, the statement of assets and liabilities, much less a cash flow statement, i.e., even assuming that regular books of account of his business are maintained by an assessee. Even if a balance-sheet, disclosing the stated assets, is filed, the source thereof may not necessarily be apparent from the record or, in any case, one which may, on examination, satisfactorily explain the same. Again, for all we know, the FDR/s, being a personal asset, may not stand to be recorded in the regular books of account of the assessee’s business, though may have been purchased out of accounted funds. In a case, as the instant one, where
4 ITA No. 538/Asr/2017 (AY 2008-09) Ghulam Nabi Beigh v. ITO the return, as subsequently transpires, has been filed u/s. 44AD, i.e., the assessee admittedly not maintaining any books of account, the requirement of law is only of disclosing the trading assets and liabilities of the business (Explanation (f) to section 139(9)), so that no adverse inference could be drawn from the non- statement of the personal assets, as the FDRs, along with. In fact, as per the Board instructions, in view of electronic/centralized filing/processing of the returns, the enclosures as per Explanation to section 139(9) are not to be filed alongwith, but kept handy and may be called for later during assessment.
5.2 The question therefore is if an inference as to the assessee’s investment found by the Revenue could be regarded as the deemed income on the basis of non furnishing of the return of income for the relevant year? In my view: Not. The same may give rise to a reason to suspect, but not to a belief which requires further information about the income status of the assessee, enabling the AO to draw a reasonable and permissible inference/s therefrom. This is particularly so where, as in the present case, the investment is made during the first month of the year. There being apparently no receipt in the assessee’s bank account – as in that case that itself would become an apparent source of investment, the presumption that would arise is of the investment having been made out of brought forward (existing) capital; i.e., from the earlier year/s. It would be a different matter where the AO has examined the assessee’s past record to find that no returns had been filed for the preceding years as well. In that case, without doubt, it would, in my view, be permissible for the AO to draw a reasonable inference of the assessee having no disclosed source/s or, in any case, the same is not below the maximum amount not chargeable to tax and, accordingly, no satisfactory explanation for the investment of nearly Rs. 9 lacs under consideration. It would, in that case, be open for the assessee to, in the reassessment proceedings, explain the source/s of the said
5 ITA No. 538/Asr/2017 (AY 2008-09) Ghulam Nabi Beigh v. ITO investment/s. Or, even explain it by way of preliminary objections, as where from brought forward (existing) capital, requesting for dropping of proceedings u/s. 152(2). There is, however, in the facts of the case, no reference to the non furnishing of the returns for the preceding years, i.e., other than the current year, in the reason/s recorded. Again, there is no reference to the interest income on the said FDRs. This may be for the reason that even considering the same would not result in the assessee’s income for the year becoming taxable, so that income to that extent could be deemed to have escaped assessment, i.e., in terms of Explanation 2(a) to section 147. There is, in any case, no reference to the interest income in the reasons recorded for me to consider the impact thereof.
5.3 In my view, therefore, it is a case of reason to suspect. There is no material on record with the AO to form a reason to believe escapement of ‘income’ from assessment, which must inform the AO’s mind to validly assume jurisdiction to asses u/s. 147; it being trite with the said reason should have a direct, live, and rational nexus with the reason to believe (as to the relevant income escaping assessment), the law on which is well-settled (refer, inter-alia, decisions in S. Narayanappa & Ors. v. CIT [1967] 63 ITR 219 (SC); Sheo Nath Singh v. AA CIT [1971] 82 ITR 147 (SC); and ITO v. Lakhmani Mewal Dass [1976] 103 ITR 437 (SC)). The decisions relied upon by the AO, which stand perused, nowhere contradict the proposition on the basis of which the reassessment is being held as without jurisdiction in the present case. Rather, the same, in ratio, support what has been said. For example, in ALA Firm v. CIT [1991] 189 ITR 285 (SC) it stands clarified that information in the context of sec. 147 means instruction or knowledge concerning facts or particulars, or as to law relating to a matter bearing on the assessment, again pointing to the need for credible material and, two, of it having a
6 ITA No. 538/Asr/2017 (AY 2008-09) Ghulam Nabi Beigh v. ITO direct bearing on the income escaping assessment for the relevant year. The reliance, in my view, is clearly misplaced. I decide accordingly.
In the result, the assessee’s appeal is allowed. Order pronounced in the open court on February 15, 2019 Sd/- (Sanjay Arora) Accountant Member Date: 15.02.2019 /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: Ghulam Nabi Beigh s/o Ghulam Ahmed Beigh Bul Bul Bagh, Barzulla, Srinagar, Kashmir-190015 (2) The Respondent: Income Tax Officer, Ward 3(1), Rajbagh, Srinagar, Kashmir-190008 (3) The CIT(Appeals)-1, Amritsar (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order