SH. VARINDER KUMAR SOUL,JALANDHAR vs. INCOME TAX OFFICER, WARD - 3(2), JALANDHAR

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 451(Asr)/2017 Assessment Year: 2012-13 PAN: CVIPS 5218R

Sh. Varinder Kumar Soul Vs. Income Tax Officer, 209-New Jawahar Nagar, Ward-3(2), Jalandhar. Jalandhar. (Appellant) (Respondent)

Appellant by : Sh. Ashray Sarna (C.A.) Respondent by: Sh. Ghulam Mustafa (D. R.) Date of Hearing: 18.12.2017 Date of Pronouncement: 16.01.2018

ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee agitating the Order by the Commissioner of Income Tax (Appeals)-2, Jalandhar ('CIT(A)' for short) dated 03.05.2017, dismissing the assessee’s appeal contesting his assessment u/s. 143(3) read with section 147 of the Income Tax ('the' Act hereinafter) for Assessment Year (A.Y.) 2012-13.

2 ITA No.451 (Asr)/2017(A.Y.2012-13) Varinder Kumar Soul v. ITO his absence but he filed copy of agreement to prove the sources of cash deposit. 3. That assessee request to add or amend any ground of appeal before the appeal is finally heard and disposed off.' Opening the arguments for and on behalf of the assessee, it was submitted by the ld. Authorized Representative (AR), his counsel, with reference to the reasons recorded u/s 148(2), adducing a copy thereof, that the assessee’s challenge is to the reopening of assessment on the ground of the validity of the reasons recorded, which read as under:

'Reasons for issue of notice u/s. 148 The assessee Sh. Varinder Kumar filed its return of income on 4.5.2012 for the assessment year 2012-13 declaring an income of Rs. 98000/- as rental income and Rs. 86850/- as income from interest. The bank statement of the assessee has been called for and it has been noticed that the assessee is receiving Rs. 34725 per month total 416700/- when he has shown Rs. 98000/-. Thus the rental income of Rs. 193690/- has escaped assessment. Further the assessee has cash deposits amounting to Rs. 3100000/- during the year, the same needs verification, source of cash deposits. I have therefore reasons to believe that by reasons of the failure on the part of the assessee to disclose fully and truly all the material facts required for his assessment has escaped assessment to the tune of Rs. 3293690/- for the assessment year 2012-13. Issue notice u/s. 148 of the I.T. Act 1961.'

Observing no specific ground in this respect, the Bench, after ascertaining if the ld. Departmental Representative (DR) had any valid or serious objection thereto, allowed the ld. AR to plead the said ground orally in pursuance of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963. In-as-much as the Assessing Officer (AO), the ld. AR would continue, only seeks to verify the source of the cash deposits in the assessee’s bank account (with Bank of India), it is plain that he

3 ITA No.451 (Asr)/2017(A.Y.2012-13) Varinder Kumar Soul v. ITO entertains no reason to believe escapement of income from assessment in respect of the said deposits. The ld. DR would object, stating that even ignoring the said reason, there is a valid assumption of jurisdiction u/s. 147 of the Act to reassess by the AO on the basis of first reason alone, i.e., the under-disclosure of rental income; the assessee admitting during the course of assessment proceedings a gross rental receipt of Rs. 3,85,830/- as against Rs. 98,000/- per the return filed u/s. 139 as well as that in response to notice u/s. 148, referring to page 2 of the assessment order. Once assessment is reopened for reassessment, it was open for the AO to examine any other aspect of assessment indicating under-assessment of any income that comes to his notice, adverting to s. 147 of the Act.

4 ITA No.451 (Asr)/2017(A.Y.2012-13) Varinder Kumar Soul v. ITO respect in fact stands raised before us. Rather, could not be inasmuch as the assessee, after failing to disclose any additional income per the return in pursuance to notice u/s. 148, offers additional rental income (at Rs.385,830 - which, as it appears, should be Rs. 416700/-) by filing a ‘revised’ computation of income during the reassessment proceedings. In other words, there is an admission as to escapement of income qua the first reason stated in the reasons to believe recorded by the AO. How could then, we wonder, the assessee question the validity of the reassessment proceedings? Why, how could, one may ask, a computation be furnished therein if the said proceedings were not valid proceedings? The assessee’s case in this regard, in view of the admitted under assessment in the first instance (u/s. 143(1)) and, thus, validity of the first reason of the believe escapement of income from assessment, only needs to be stated to be rejected.

5 ITA No.451 (Asr)/2017(A.Y.2012-13) Varinder Kumar Soul v. ITO possession of his residential house continuing to be with the assessee even to date (18.12.2017). In other words, the assessee wants us to believe that someone gave him Rs.31 lacs in cash and disappeared! Why should cash at all be paid (i.e., instead of through the banking channel, exhibiting a prima facie money trail) and, as it appears, in different amounts – the reason recorded as well as the assessment order speaking of cash deposits totaling to Rs. 31 lacs, rather than being paid in lump sum? It is this cash, received in India, which is deposited in the assessee's bank account in India. Was the assessee, a non-resident, in India on each of those dates to accept cash, or even on the date the agreement is stated to be executed? Why would the ‘payer’ not take possession of the subject property, or otherwise steps to complete the transaction despite lapse of several years? Has the amount been forfeited? There is further nothing on record to exhibit the identity of the payer, much less his capacity, or the genuineness of the transaction, establishing the nature and source of the cash deposits, as required u/s 69/69A. There is, at any rate, complete non-substantiation of his case by the assessee. As explained in CIT vs. P. Mohan Kala [2007] 291 ITR 278 (SC), an explanation means a reasonable and acceptable explanation. The Apex Court in that case was considering the applicability of section 68, and its said observations were in the context of the meaning of the expression 'the assessee offers no explanation’ (or one that is not satisfactory in the opinion of the Assessing Officer), which finds mention in section 69/69A as well. Further still, though there is no rebuttal by the assessee, and even as the same represents a part of well-settled law, we may yet, for the sake of completeness of our order, before parting, state that the Assessing Officer is fully empowered in law to make the impugned addition in reassessment. The provision of sec. 147, coupled with third proviso thereto, reading as under, clarifies the matter:

6 ITA No.451 (Asr)/2017(A.Y.2012-13) Varinder Kumar Soul v. ITO 'Income escaping assessment. 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 the proceedings 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 (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided ………. Provided further……… Provided also that the Assessing Officer may assess or reassess such income other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.' (emphasis, ours) In CIT v. Sun Engineering Works Pvt. Ltd. [1992] 198 ITR 297 (SC), the Hon'ble Apex Court clarified that the controversy in the reassessment proceedings is confined to matters which are relevant only in respect of income which had not been brought to tax during the course of the original assessment. The entire assessment is set at large and the total income is determined afresh once valid proceedings for reassessment are initiated, and jurisdiction for reassessment assumed. The only caveat is that concluded matters cannot be re-agitated, and the subject matter of the assessment is income that had escaped assessment earlier, and which is the only limitation to the words 'such income' occurring in sec.147. It is noteworthy that the assessment years involved in that case were AYs.1960-61 & 1961-62, for which the provision, since substituted by w.e.f. 1.4.1989, was, being differently worded, materially different, requiring the Hon'ble Court to examine and opine on the scope of the words 'such income'. The provision, as it presently stands, makes the foregoing abundantly clear per the main provision itself, with the

7 ITA No.451 (Asr)/2017(A.Y.2012-13) Varinder Kumar Soul v. ITO third proviso further setting out the limitation on the scope of the income/s that could be subject to assessment u/s.147. In the instant case, even if therefore the second 'reason' is discarded as not valid, the AO having assumed jurisdiction to reassess, the same would extend to all incomes that had escaped assessment, including the impugned income of Rs.31 lacs. Further still, Explanation 3 to sec.147, inserted by Finance Act, 2009, w.r..f 1.4.1989, so that the same underscores the manner in which the provision is to be read since its inception, reads as under: 'Explanation 3- For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.' As apparent, the same seeks to remove any iota of doubt in the matter that may have persisted or may be sought to be entertained, even as, to be fair, none was before us. Any issue qua an income that had escaped assessment could be examined even if the same does not find mention in the reasons recorded. There is no dilation on or even argument qua the assessee's residential status at any stage, except in the context of the stated difficulty in producing the ostensible buyer. Further, even if a non-resident, income accruing or arising or received in India is taxable in India. In view of the foregoing, we, therefore, uphold the impugned addition. We decide accordingly.

8 ITA No.451 (Asr)/2017(A.Y.2012-13) Varinder Kumar Soul v. ITO /GP/Sr. Ps. Copy of the order forwarded to: (1) The Assessee: Varinder Kumar Soul (2) The Respondent (3) The CIT(A)-2, Jalandhar (4) The Pr. CIT-2, Jalandhar (5) The SR DR, I.T.A.T., True copy By Order