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Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
Before: SHRI A. D. JAIN & SHRI T. S. KAPOOR
IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA No.207/JAB/2016 Assessment Year:2007-08 Smt. Lalita Bai Khandelwal v. Income Tax Officer Mangalwara Chouraha Ward 1 Babai, Hoshangabad Itarsi, Hoshangabad TAN/PAN:CQUPK3308R (Appellant) (Respondent) Appellant by: Shri L. L. Sharma, Advocate Respondent by: Shri P. D. Chougale, D.R. Date of hearing: 03 04 2019 Date of pronouncement: 04 04 2019 O R D E R PER A. D. JAIN, V.P.: This is assessee’s appeal against the order of the ld. CIT(A)-2, Bhopal, dated 4/7/2016, for the assessment year 2007-08, taking the following grounds: 1. On the facts and in the circumstances of the case the assessment order passed under section 143(3)/147 of the Income Tax Act, 1961 is illegal, invalid and untenable in law being contrary to the provisions of the Income Tax Act rendering the entire assessment as illegal and bad in law and the learned CIT(A) erred both in law and facts in confirming the impugned assessment order. 2. Considering the fact that Shri Om Prakash Khandelwal had filed an affidavit that he has given a sum of Rs.6,98,500/- to the appellant at the time of purchase of the agricultural land, the learned CIT(A) grossly erred both in law and on facts in not accepting the submission of the appellant and treating the said amount as unexplained investment of the appellant. 3. On the facts and in the circumstances of the case the Hon'bie C.I.T.(A) should have accepted that the appellant had received a sum of Rs.60,000/- (Rs.50,000 withdrawn on 21/11/2006 and Rs.10,000/- withdrawn on 23/11/2006) from her son
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which has been utilized in the purchase of the immoveable property. 4. On the facts and in the circumstances of the case the learned CIT(A) should have accepted the appellant's submission that an amount of Rs.4,40,000/- was received from her husband, Shri Radhey Shyam Khandelwal for investment in the purchase of agricultural land from agricultural income from 21.06 acres of agricultural land. 5. On the facts and in the circumstances of the case the learned CIT(A) has grossly erred in confirming the addition of Rs.9,38,500/- on account of unexplained investment without properly appreciating the facts of the case. At any rate the addition of Rs.9,38,500/- sustained by the learned CIT(A) is exorbitantly high and unwarranted in the facts and circumstances of the case. 6. On the facts and in the circumstances of the case the appellant respectfully prays that if any addition is sustained by the Hon'ble Tribunal then in that event appropriate set off may kindly be allowed in respect of any other ground of appeal. 2. At the outset, the ld. A.R. of the assessee has drawn our attention to APB-8, which is a copy of the reasons recorded by the A.O. for formation of belief of escapement of income, as follows:
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The ld. A.R. of the assessee has contended that the reasons recorded by the A.O. for reopening the assessment u/s. 147 of the Act shows that the A.O. wanted to verify the investment made by the assessee in the purchase of immoveable property which, according to the A.O., escaped assessment. It was further contended that verification of the source of investment cannot be termed as escapement of income and hence the order passed by the A.O. is void ab-initio, in the light of the following decisions: 1. ITO vs. Lakhmani Mewal Das, 103 ITR 437. 2. C.I.T. vs. Jet Airways (I) Ltd. [2011] 311 ITR 236. 3. ITO vs. Shri Khajanchand Chhabra in ITA No.164/JAB/2006, passed on 2/8/2006. 3. The ld. D.R., on the other hand, has placed strong reliance on the impugned order. 4. A reading of the reasons recorded by the A.O. for forming belief of escapement of income shows that such reasons are with regard to the verification of the investment made by the assessee in the purchase of the immoveable property. 5. In ‘ITO vs. Lakhmani Mewal Das’ (supra), the Hon'ble Supreme Court held, as follows: "There must be materials to come to the conclusion that there was omission or failure to disclose fully & truly all material facts necessary for the assessment of year". This postulates a duty on every assessee to disclose fully and truly all material facts necessary for the assessment. Therefore, the obligation is to disclose facts; secondly; those facts should be material; thirdly the disclosure must be full, & fourthly, true. What facts are material and necessary for assessment will differ from case to case. In every assessment proceedings, for computing or determining the proper tax due from assessee, it is necessary to know all the facts which help the assessing authority in coming to correct conclusion. From the primary fact in his possession whether the
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disclosure by the assessee, or discovered by him on the basis of the facts disclosed or otherwise, the assessing authority has to draw inferences as to certain other facts. But on the primary facts it is for the taxing authority to draw inferences. It is not necessary for the assessee to draw inferences for him. "Reason to believe" is not the same thing as "reason to suspect". 6. In ‘C.I.T. vs. Jet Airways (I) Ltd.’, the Hon'ble Bombay High Court held, as follows: “That when Expln. 3 to s. 147 was introduced, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain Courts that the AO has to restrict the assessment or reassessment proceedings only to the issues in respect of which reasons were recorded for reopening the assessment, However, Expln. 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of s. 147 AO has to assess or reassess the income (“such income”) which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings. However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him to independently assess some other income. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of challenge by the assessee.” 7. The Jabalpur Bench of the Tribunal in ‘ITO vs. Shri Khajanchand Chhabra’ (supra) held, as follows: "8………………………………………As per the provisions contained in section 147, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of assessment under this section, or recomputed the loss or the depreciation
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allowance or any other allowance, as the case may be, for the assessment year concerned. But in this case the Assessing Officer has not recorded his belief that any income has escaped assessment but he has recorded that income to the extent given in the reasons has escaped verification and in my considered view, such could not be the ground for reopening of the assessment. Therefore, learned CIT(A) is justified in annulling the assessment made under such circumstances. As such, his action being legally valid, is upheld and appeal of the revenue being devoid of any merits is dismissed.”
No decision contrary to the above decisions has been cited before us. 9. As per the provisions contained in section 147, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153 of the Act, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of assessment under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has, as a matter of fact not escaped assessment, it is not open to him to independently assess some other income. 10. In such a case, the settled legal position is that the AO has to restrict the addition in assessment or reassessment proceedings u/s. 148 only to the issues in respect of which the reasons were recorded for formation of belief of escapement of income. 11. Therefore, evidently, the assessment order is bad in law and liable to be annulled. In the light of the above legal proposition, we are of the view that in the instant case also the assessment framed
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consequent to the reopening does not survive, as no addition was made on the issue in respect of which assessment was reopened by the Assessing Officer under section 147 of the Act. We accordingly set aside the order of the ld. CIT(A) and annul the assessment framed consequent to the bad reopening. No other issue survives for adjudication, nor was anything else argued. 12. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 04/04/2019.
Sd/- Sd/- [T. S. KAPOOR] [A. D. JAIN] ACCOUNTANT MEMBER VICE PRESIDENT DATED:04/04/2019 JJ:0304 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR