VASUDEV GANGWANI,JAIPUR vs. ADIT, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh Hkkxpan] ys[kk lnL;] ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 576/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2001-02 cuke Vasudev Gangwani, ADIT(International Vs. E-14-16, GT Bazar, Malviya Taxation), Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFLPG 8130 P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Smt. Poonam Roy (DCIT) lquokbZ dh rkjh[k@ Date of Hearing : 28/09/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 06/10/2017 vkns'k@ ORDER

PER: BHAGCHAND, A.M.

This is an appeal filed by the assessee emanates from the order

of the ld. CIT(A)-42, New Delhi dated 22/03/2016 for the A.Y. 2001-02

wherein the assessee has raised following grounds of appeal: 1. The Ld. CIT(A) has erred on facts and in law in holding that order passed by AO u/s 147 of the IT Act, 1961 is not barred by limitation and thereby affirming the legality of the order. 2. The Ld. CIT(A) has erred on facts and in law in upholding the addition of Rs. 10,11,791/- u/s 69C on account of unexplained investment in building by incorrectly holding that Hon’ble ITAT has already given a

2 ITA 576/JP/2016_ Vasudev Gangwani Vs. ADIT (IT)

conclusive findings of facts on this issue in AY 2002-03 and thereby not deciding the merit of the addition made by AO.”

readymade garments in the name of proprietory concern M/s Your’s

Fashion. A survey U/s 133A of the Income Tax Act, 1961 (in short the

Act) was carried out on 18/12/2001, in which the assessee had

surrendered Rs. 12.00 lacs on account of undisclosed investment in

building, furniture and electrical goods for the previous year relevant

to assessment year 2002-03. This amount was added U/s 69 of the

Act. The relevant portion of the order is as under:

“Keeping in view that above discussions, the nature of the loose paper found, the replies of the assessee and statements of the assessee and his father, an addition of Rs. 12,00,000/- is made to the income of the assessee under sec. 69 of the IT Act, 1961. Out of the above addition of Rs. 12 lacs, addition of Rs. 10,11,791/- is being made protectively in this year to be made substantively in assessment year 2001-02 i.e. the year of purchase of building. Thus, an addition of Rs. 12,00,000/- is made to the income of the assessee under section 69 of the Income Tax Act, 1961.”

In this order, the Assessing Officer has clearly mentioned that out of

the addition of Rs. 12.00 lacs, the addition of Rs. 10,11,791/- being

3 ITA 576/JP/2016_ Vasudev Gangwani Vs. ADIT (IT)

made protectively in this year to be made substantively in the

assessment year 2001-02 i.e. the year under consideration. The

Assessing Officer did not initiate the proceedings for the assessment

year 2001-02 for making substantive addition.

addition of Rs. 10,11,791 is to be included and assessed in assessment

year 2001-02, for which the Assessing Officer has himself written in

the body of the assessment order. In the appeal against the order, the

Hon’ble ITAT Jaipur Benches has given the finding on his issue, which

is as under:

"The Ld. CIT(A) vide para 2.3 of his order has observed that the AO has given correct finding that considering the year of purchase of the building the relevant unaccounted investment of Rs. 10,11,791/- is to be assessed substantively in the assessment year 2001-02 and remaining addition of Rs. 1,88,209/- was confirmed for the impugned order. The Ld. CIT(A) deleted the protective addition of Rs. 10,11,791/- which has to be included and assessed during the assessment year 2001-02 which has been referred by the AO. The Ld. CIT(A) dismissed the ground of the assessee.

We have heard the rival contentions and persued the facts of the case. The Ld. CIT(A) has rightly observed vide para 2.3 of his order that Shri Ramchand Gangwani, the manager, father and power of attorney holder of the business of the assessee and the evidence found in the

4 ITA 576/JP/2016_ Vasudev Gangwani Vs. ADIT (IT)

shape of the documents having clear noting regarding total investment mentioning cash payment particulars. The statement of Shri Ramchand Gangwani has evidentiary value against the assessee. Subsequent affidavit could not be proved and are devoid of truth and unsubstantiated. In such circumstances and facts of the case, we find no infirmity in the order of the Ld. CIT(A). Thus, Ground No. 2 of the assessee is dismissed." On the basis of this order, the Assessing Officer issued notice U/s 148

of the Act for the assessment year 2001-02 and the reasons recorded

as under:

"A survey u/s 133A was carried out at the business premises of Shri Vasudev Gangwani Prop M/s Yours Fashion on 18.12.2001. During the course of survey proceeding some loose papers, documents were found in which investment in building, furniture and electrical goods was found. The business was found operated by the father of the assessee, POA holder, who has admitted that the assessee has made undisclosed investment in building, furniture and electrical goods. During the course of survey proceeding he has surrendered Rs. 12 Lacs on account of undisclosed investment. The building was purchased in AY 2001-02 and investment in show Room was made. Therefore, addition of Rs. 12 Lakhs was made. Out of which Rs. 1,88,209/- was pertain to AY 2002- 03 and Rs. 10,11,791/- pertain to AY 2001-02. During the course of assessment proceeding of Rs. 10,11,791/- was also added in AY 2002- 03 on protective basis. The assessee preferred appeal before Ld. CIT(A)- II, Jaipur. The Ld. CIT(A) has confirmed the addition of Rs. 12 lakhs but the Ld. CIT(A) has directed that Rs. 10,11,791/- pertains to AY 2001-02. Therefore, this amount is required to be added in AY 2001-02. The Ld. CIT(A) has confirmed Rs. 1,88,209/- in AY 2002-03. The Hon'ble ITAT

5 ITA 576/JP/2016_ Vasudev Gangwani Vs. ADIT (IT)

has also confirmed the finding o the Ld. CIT(A) vide order dated 31.12.2008. Since the Ld. CIT(A) has directed to add Rs. 10,11,791/- in AY 2001-02. Therefore, Rs. 10,11,791/- is escaped assessment for the year under consideration on account of undisclosed investment. Therefore, I have reason to believe that Rs. 10,11,791/- is escaped assessment within the meaning of Section 147 r.w.s. 150 of the Income Tax Act, 1961."

Assessing Officer has taken a shelter of the provisions of Section 150

of the Act for initiating the proceedings U/s 148 of the Act, which is

unjustified. When the Assessing Officer himself was of firm view that

the substantive addition of Rs. 10,11,791/- is to be made in the

assessment year 2001-02 then he must have initiated the proceedings

U/s 148 of the Act for the assessment year 2001-02 but he had not

done so. At the time of assessment proceedings for A.Y. 2002-03 he

was certain and gave firm findings regarding tax liability of Rs.

10,11,791/-. There was sufficient time to initiate proceedings U/s 148

within time as provided in Section 149 of the Act. The A.O.’s non-

initiation of proceedings U/s 148 within the period as provided in

Section 149 of the Act is suffering from laches. Therefore, the

Assessing Officer cannot take shelter of the provisions of Section 150

of the Act in invoking the action U/s 148 of the Act. Ld. AR submitted

6 ITA 576/JP/2016_ Vasudev Gangwani Vs. ADIT (IT)

that that the proceedings are barred by limitation. He pleaded to set

aside the order of authorities below. The ld AR also placed reliance on

the following case laws:

7 ITA 576/JP/2016_ Vasudev Gangwani Vs. ADIT (IT)

block assessment and that the same can be made in regular assessments. At the same, it observed that the addition, if at all permissible, can be considered in the hands of two companies and not in the hands of the assessee director.lt was held that in view of the above categorical finding recorded by the ITAT, the contention of the Revenue that the Tribunal has given a finding or direction to the effect that the amount of Rs. 90 lakhs are liable to be taxed in the regular assessments of the assessee cannot be accepted. Consequently, reopening of the assessments by invoking the provisions of section 150 of the Act cannot be sustained. Once it is held that section 150 of the Act is not applicable, then the reopening of the assessment beyond the period of 6 years from the end of the relevant assessment year would be time barred.

AO reopened assessment taking recourse to provision of sec. 150 on basis of order passed by Tribunal in year 2011 in assessee's case for AY 2002-03, wherein it was observed that since assessee received consideration in part and granted developer right to enter plot to carry out construction work of additional built up area on 09.02.2000 itself, by virtue of deeming provisions of sec. 45(1), capital gain was to be brought to tax for AY 2000- 01 and not in AY 2002-03. CIT(A) held that recourse by AO to provisions of sec. 150 read with sec. 148 for reopening the assessment was valid. Held sec. 150(1) is an exception which brings within its ambit only such cases where reopening of proceedings may be necessary to comply with an order of higher authority. Observation of Tribunal for purpose of deleting addition in respect of AY 2002-03 cannot be treated to be a 'finding' for reopening AY 2001-02 (sic AY 2000-01) as appeal for said assessment year has not been before Tribunal for adjudication. Observation of Tribunal that case of assessee is to be brought to tax for assessment year 2000-01 and not assessment year 2002-03 as done by AO was incidental for holding that addition made in AY 2002-03 was not justifiable and same cannot be basis for having recourse to sec. 150 by holding it as 'finding or direction'. Section 150 was not applicable to assessee’s case. Accordingly, reopening of assessment beyond the period of six years from end of the relevant assessment year would be time barred.

CIT(A) for AY 2005-06 found that sundry creditors, in respect of whom additions was made were old and relevant purchases were made in AYs 2000-01 to 2004-05. CIT(A) deleted addition. CIT(A) stated that AO would

8 ITA 576/JP/2016_ Vasudev Gangwani Vs. ADIT (IT)

be free to examine those purchases in respect of relevant AYs. Pursuant to above order, AO initiated reassessment proceedings for AY 2001-02 by issue of notice u/s 148 stating that income of assessee escaped assessment and CIT(A) had directed AO to reopen said AY. AO relied on section 150(1) and 150(2) for reopening. Thereafter, AO made addition section 150 of two creditors holding that these were not genuine. CIT(A) stated that assessment was reopened beyond period of six years and that there was no such direction given by CIT(A), thus reopening of assessment was not justified. It was held that observation made by CIT(A) while disposing appeal for AY 2005-06 was only option given to AO to take or not to take action in respect of creditors in relevant AYs in which purchases were made and that too strictly within four corners of law to ascertain genuineness of purchases. Since reassessment proceeding was initiated beyond period specified in section 149, it was viewed that action of AO to issue notice u/s 148 was barred by limitation and said notice was not saved under provision of section 150(1) or 150(2). Hence, order of CIT(A) that action of AO was not in accordance with law and assessment order passed by AO was liable to be quashed, was confirmed.

While disposing of the appeals for AYs 2003-04 and 2004-05, a casual observation was made by the Tribunal to deal with the issue before them as to whether the capital gains is assessable in AYs 2003-04 and 2004-05. Pursuant thereto, AO sought to invoke the provisions of sec. 148 r.w.s. 150 for the AY 2001-02 and accordingly issued a notice on 10.06.2011. It was held that there is no specific finding or direction in the order of the Tribunal that the impugned capital gain is assessable to tax in AY 2001-02. Even otherwise, the reopening of assessment for the AY 2001-02 is bad in law as the limitation for issuing notice u/s 148 had expired in the year 2008, well before the Tribunal passed the said order in the year 2010.

Officer has rightly initiated the proceedings on the basis of decision of

the Hon’ble ITAT, therefore, the issue is covered by the provisions of

Section 150 of the Act.

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Assessing Officer was well aware about the fact that the addition of

Rs. 10,11,791/- is to be made in the assessment year 2001-02

substantively at the time of finalization of assessment for the

assessment year 2002-03. He has made this addition only on

protective basis in the assessment year 2002-03. The relevant portion

of the Assessing Officer’s order is as under:-

"In my considered view the assessing officer has given correct finding that considering year of purchase of the building the relevant unaccounted investment of Rs. 10,11,791/- is to be assessed substantively in the Ay 2001-02 and remaining addition of Rs. 1,88,209/- is confirmed for the Ay under consideration. However, the protective addition made of aforesaid amount of Rs. 10,11,791/- in this year is hereby deleted which is to be included and assessed in the AY 2001-02 for which the AO himself has written in the body of assessment order. With this discussion, the relevant ground of appeal is hereby dismissed."

The reasons recorded by the Assessing Officer as reproduced above

shows that for the limitation, the Assessing Officer sought help of

Section 150 of the Act. The provisions of Section 150 of the Act read

as under: 150. (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.

10 ITA 576/JP/2016_ Vasudev Gangwani Vs. ADIT (IT)

(2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. The limitations as provided in Section 149 of the Act are not applicable

for making an assessment of reassessment or recomputation in

consequence of or to give effect to any finding or direction contained

in any order passed by any authority in any proceedings under this Act

by way of appeal, reference or revision. Thus the limitation as provided

in Section 149 for issuing notice U/s 148 of the Act is not to be

considered when the reassessment is in consequence of or to give

effect to any finding or direction contained in any appeal, reference or

revision. In this case, the Assessing Officer himself as reproduced

above recorded that the addition of Rs. 10,11,791/- is to be

substantively made in assessment year 2001-02 i.e. the year under

consideration. Thereafter he has waited for the ITAT appeal order to

initiate proceedings U/s 148 of the Act and then sought the help of the

provisions of Section 150 of the Act for coming out of the limitations as

provided in Section 149 of the Act, which is completely unjustified. The

A.O. was legally empowered to initiate proceedings on his own within

11 ITA 576/JP/2016_ Vasudev Gangwani Vs. ADIT (IT) the time as provided in Section 149 of the Act at the relevant time.

Therefore, I set aside the order of the Assessing Officer being barred

by limitation. This ground of appeal is allowed. Since the assessment

has been quashed being barred by limitation, therefore, the other

grounds of appeal are being academic, hence the same are being not

adjudicated.

Sd/- ¼Hkkxpan½ (BHAGCHAND) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 06th October, 2017 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Shri Vasudev Gangwani, Jaipur. 1. izR;FkhZ@ The Respondent- The ADIT (International Taxation) 2. Jaipur. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए 5. Jaipur xkMZ QkbZy@ Guard File (ITA No. 576/JP/2016) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत