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Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Before: Sri S. S. Godara]
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH KOLKATA [Before Sri S. S. Godara, Judicial Member] आयकर अपीलसं./I.T.A No.2404/Kol/2019 ("नधा"रण वष" / Assessment Year: 2010-11) Radix Tie-up Pvt. Ltd. Vs. ITO, Ward-11(2), Kolkata 184/A, Regent Colony, Tollygunge, Kolkata – 700001. "थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAECR1237M (Appellant) .. (Respondent) Appellant by : Shri S. M. Surana, Advocate Respondent by : Smt. Ranu Biswas, Addl. CIT- Sr. DR सुनवाई क" तार"ख/ Date of Hearing : 27/01/2020 घोषणा क" तार"ख/Date of Pronouncement : 14/02/2020 आदेश / O R D E R Per Shri S. S. Godara: This assessee’s appeal for assessment year 2010-11 arises against the Commissioner of Income Tax (A) - 4, Kolkata’s order dated 10.05.2019 passed in case No.791/CIT(A)-4/16-17 involving proceedings u/s 147 of the Income Tax Act, 1961 (in short ‘the Act’). Heard both the parties. Case file perused. 2. For the reasons stated in assessee’s condonation petition dated 27.01.20 explaining five days’ delay to be attributable to various procedural aspects and compilation of necessary records and on account of no objection from the Revenue side, I condone the impugned delay of five days in filing of the instant appeal and proceed to adjudicate the same on merits.
I.T.A No.2404/Kol/2019 Radix Tie-up Pvt. Ltd.
At the outset, the learned authorized representative invited my attention to the Assessing Officer’s reopening reasons recorded in facts of the instant case as under:
"Information received from DDIT(Inv) Unit-4(1) Kolkata that the unit had received credible information in respect of cash deposit in a number of dubious account and this accounts were operated by accommodation entry provider. It is found that the concern to whom these accounts belonged were paper concerns having no existent and real business. Most of the concerns are controlled and managed by Bikash Choudhary, Anil Kumar Khemka, Amit Dalmia etc for accommodation entry purpose of known accommodation entry operators of Kolkata. They have made statement on several times before the department. In their statement under oath they accepted that they are engaged in the business of providing accommodation entry in form of bogus share capital, share premium, unsecured loans, bogus commodity profit, pre-arranged bogus LTCG/STCL etc to various beneficiaries/parties through the concerns controlled by them in lieu of commission in cash Most of the cash deposit accounts and intermediary companies has been matched with the above entry operators.. On examination of bank statement of the above-mentioned concerns it is fund that the unaccounted cash has been frequently deposited in the bank account of the above concerned which was immediately transfer to the interlink accounts and then ultimately to the beneficiary's account. In this way M/s Radix Tie Up Pvt Ltd. having PAN AAECR1237M assessed under this jurisdiction is one of the beneficiary company and may have brought back its unaccounted income into the regular books of accounts in the guise of bogus share/share premium prearranged bogus LTCG/STCL unsecured loan etc. There was no other financial rationale behind such transactions. BENEFICIARY 1A 08/29/09 RADIX TIE UP 920100023311 400000/ PVT LTD. Considering the facts shared by the DDIT (Inv) Unit-4(1) Kolkata, I have therefore reason to believe that there is an escapement of income in assessment which chargeable to tax for the AY 2010-11 within the meaning of section 147 of the IT Act 1961" 4. Learned authorized representative’s case accordingly is that the Assessing Officer’s above extracted reasons nowhere indicate any corresponding taxable income having escaped assessment. The Revenue, on the other hand, strongly supported the above-noted reopening reasons that since the assessee had derived bogus LTCG/STCL and there was no financial rationale, the Assessing Officer had rightly reopened the impugned assessment.
I have given my thoughtful consideration to the rival contentions. The clinching fact that is evident from the Assessing Officer’s foregoing reasons I.T.A No.2404/Kol/2019 Radix Tie-up Pvt. Ltd.
recorded that the assessee’s taxable income having escaped assessment nowhere indicate as to what was the amount of such an income. I notice in this backdrop of facts that the case law Mukesh Kumar Gupta vs. CIT & Another [2014] 363 ITR 300(Allahabad) quashes an identical reopening involving the Assessing Officer’s failure in stating the amount of taxable income having escaped assessment as under:
“3. The dispute relates to the assessment year 2000-2001 in all these petitions. The petitioners filed returns which were accepted. The further allegation is that the sale consideration was invested in fixed deposit and UTI Bonds etc. with which we are presently not concerned. 4. The present writ petition arises out of the reassessment notice under section 148 of the Income Tax Act. The said notice is dated 23rd of March, 2007 for the assessment year 2000-2001. In response to the notice the petitioner has filed the return of income and also his/her objections challenging the very initiation of reassessment proceedings on various grounds. The objections having been dismissed by the order dated 29th of June, 2007, impugned in these petitions. 5. Heard Sri Nikhil Agrawal, learned counsel for the petitioners and Sri D. Awasthi, learned standing counsel for the respondents. 6. The only point urged before us is that the impugned notice under section 148 of the Income Tax Act is barred by time. Therefore, the proceedings for reassessment should be dropped. 7. The controversy Centres around the interpretation of section 149 (1) (b) of the Income Tax Act. For the sake of convenience, the relevant portion of section 149 is reproduced below:- Time limit for notice. 149. [(1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub-clause (b) or sub-clause (c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees one lakh or more for that year; Explanation. - In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.] (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year. I.T.A No.2404/Kol/2019 Radix Tie-up Pvt. Ltd.
Sri Nikhil Agrawal, learned counsel for the petitioner, submits that the notice under section 148 is dated 23rd of March, 2007 and it relates to the assessment year 2000- 2001. A period of four years from the end of the relevant assessment year is normal period within which assessing authority can issue a notice unless the case falls under the clause (b) (c). Clause-(b) gives extended period of six years from the end of the relevant assessment year unless the income chargeable to tax which has escaped the assessment amounts to or is likely to amount one Lakh of rupees or more for that year. The argument is that in the case on hand, there is no material before the department to show that the income which is said to have been escaped, amounts to or is likely to amount to Rs.1 lakhs or more. Attention of the Court was invited towards its earlier order dated 7th of August, 2007, which is reproduced below:- "The original record of the sanction by the Addl. Commissioner has been produced by learned counsel for the Income Tax Department. It does not show that while according sanction, mind had been applied by the Addl. Commissioner whether the income which was believed to have escaped assessment exceeded Rupees One Lakh. In fact there was no suggestion from the side of the proposing officer that the amount was above Rupees One Lakh. The limitation for issuing notice will be enhanced from four years to six years, only if income escaping assessment was in excess of Rupees One Lakh. The notice has admittedly been issued beyond four years and within six years. Counter affidavit may be filed within two weeks, rejoinder affidavit may be filed within two weeks thereafter. List thereafter. The original file has been returned to the learned standing counsel of the Income Tax Department." 9. A counter affidavit has been filed on behalf of the respondents. There it has been stated that an assessee has not disclosed the income under the head 'capital gains' in the return filed on 30th of August, 2000 and sale consideration was above Rs.10 Lakhs, the income escaped was more than Rs.1 Lakh, vide para 3 of the counter affidavit. It appears that the respondents have no idea about the sale consideration and that is the reason few paragraphs afterwards in para 5 it has been stated that the sale consideration was around Rs. 6 Lakhs. The whole basis of the counter affidavit is that the assessee did not act in accordance with law and it was obligatory upon him to pay the taxes on short term capital gain income which has escaped the assessment. In the counter affidavit, no material has been disclosed therein to show that at the time of seeking sanction for extension of period of limitation as provided for under section 149 the Assessing Authority or the sanctioning authority had any material in their possession that the income chargeable to tax which has escaped the assessment amounts to or is likely to amount to Rs.1 Lakh or more. 10. At this stage, we may consider the reasons recorded by the Income Tax Officer for reopening the assessment. The same is reproduced below:- "During the Assessment Year 2000-2001 the assessee Shri Mahesh Kumar Gupta sold the property (land) situated at 13-D Tashkant Marg, Allahabad after converting leasehold land into freehold and the capital gain/loss arrived at was offered for duration as long term capital gains. The assessee sold the property within three years after converting the land into freehold resulting into short term capital gains in view of the judgment of Hon'ble Karnataka High Court in the case of CIT v. Dr. V.V. Mody (218 ITR page 1). I.T.A No.2404/Kol/2019 Radix Tie-up Pvt. Ltd.
I have, therefore, reason to believe that the income chargeable to tax under the head Short Term Capital Gains has escaped assessment." 11. The reason assigned for reopening is that the petitioner after converting the leasehold land into freehold sold the property within three years after converting the land into freehold resulting into short term capital gain in view of the Karnataka High Court's decision referred to above. What income is said to have been escaped does not find mention therein. Even assuming for the sake of argument, the income was liable to be taxed as short term gain unless there is any material before the authority concerned that it exceeds the limit of Rs. 1 Lakh, extended period of limitation of six years will not be available to the department. The normal period of limitation is four years for giving the notice under section 148 and where the escaped income is likely to amount to Rs.1 Lakh or more, the extended period of limitation of six years would be attracted. This objection of the petitioner has been rejected by the impugned order on the ground that since the permission has been granted by the Joint/Additional Commissioner, Income Tax, statutory requirement stands fulfilled vide para-3 of the order which is reproduced below:- "You have also objected that it is not mentioned in the reasons of taking action U/S 148 that the escaped income is more then 1,00,000/-. In this connection this to inform that it is mentioned in notice U/S 148 itself that the notice is being issued after proper sanction of Joint/Addl. Commissioner of Income Tax. This fulfills the requirement of law, your have provided the reasons of initiating action U/S 148 not computation of income. The computation of income will be provided after proper hearing & giving proper opportunities to be heard." 12. The stand of the department as is evident from the above quoted paragraph has no legs to stand. The Joint/Additional Commissioner, Income Tax was not aware about the fact that the income chargeable to tax which has escaped the assessment is Rs.1 Lakh or more for the relevant Assessment Year. The proviso to section 151 (1) fortifies our view which says that after the expiry of four years from the end of the relevant Assessment Year no notice under section 148 shall be issued or unless the Chief Commissioner or Commissioner is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issue of such notice. On a true and proper constructions of the proviso it is imperative that the Assessing Officer in his reason should state that the escaped income is likely to be Rs. 1 Lakh or more so that the Chief Commissioner or the Commissioner may record his satisfaction. The sanctioning authority must be aware that it has exercised power of extended period of limitation under 149 (1) (b) of the Act. Exception has been carved out by clause (b) to section 149(1) in respect the income chargeable to tax which has escaped assessment, amounts to Rs. 1 Lakh or more. To fall within exception clause the relevant facts should have been recorded by the Assessing Authority in its order while recording the reason so that a sanctioning authority may apply its mind to the proposition while granting the sanction. 13. The learned counsel for the department after close of the argument has filed the following judgments for consideration of this Court:- 1. GKN Driveshafts (India) Ltd. v. ITO [2002] 259 ITR 19/125 Taxman 963 (SC) 2. Dr. H.S. Bawa v. CIT [2012] 25 taxmann.com 15/210 Taxman 57 (Punj. & Har.) 3. Vikram Kothari (HUF) v. State of U.P . [2011] taxmann.com 280/200 Taxman 152 (All.) 4. Export Credit Guarantee Corporation of India Ltd. v. Addl. CIT [2013] 30 taxmann.com 211 (Bom.) 5. Asstt. CIT v. Rajesh Jhaveri [2007] 291 ITR 500/161 Taxman 316 (SC) I.T.A No.2404/Kol/2019 Radix Tie-up Pvt. Ltd.
Chief Commissioner (Admn.) (U.P.) v. Kanhaiya Lal Kapoor [2005] 147 Taxman 12 (All.) 7. Pooran Mal v. Director of Inspection [1974] 93 ITR 505 (SC) 8. Deep Chand Daga v. ITO [1970] 77 ITR 661 (M.P.) and, 9. Fisher Xomox Sanmar Ltd. v. Asstt. CIT [2007]294 ITR 620/[2008] 168 Taxman 251 (Mad.) 14. None of the judgments referred to above have any connection to the point in issue even remotely. They relate either to the question of non-disclosure of income or failure on the part of the assessee to disclose the income fully or truly and what amounts to "reason to believe an information". None of these points were urged before us and we failed to understand the filing of the rulings by the counsel as referred to herein above. 15. The only point urged and pressed before us is whether in absence of anything in the reasons recorded to suggest that the income chargeable to tax which has escaped the assessment is Rs. one lakh or more having not been mentioned the reassessment notice given after four years of the close of the assessment order is valid or not. 16. For the reasons given above, we find sufficient force in the argument of the learned counsel for the petitioner that on the basis of the reasons recorded by the Assessing Officer, the initiation of the reassessment proceedings relevant to the Assessment Year 2000-2001 by means of the notice dated 23.3.2007 after more than four years is clearly barred by time.”
I adopt the foregoing detailed reasoning mutatis mutandis and hold that the Assessing Officer’s foregoing failure in not indicating the assessee’s taxable income to have escaped assessment turns out to be fatal to validity of the impugned reassessment and the same stands quashed. The assessee’s all remaining pleadings are rendered infructuous.
This assessee’s appeal is allowed.
Order is pronounced in the open court on 14.02.2020. (S. S. Godara) JUDICIAL MEMBER कोलकाता /Kolkata; "दनांक/ Date: 14/02/2020 RS I.T.A No.2404/Kol/2019 Radix Tie-up Pvt. Ltd.
आदेशक"""त"ल"पअ"े"षत/Copy of the Order forwarded to : 1. The Appellant –Radix Tie-up Pvt. Ltd. 2. The Respondent - ITO, Ward-11(2), Kolkata आयकरआयु"त(अपील) / The CIT(A), Kolkata [sent through email] 3. 4. आयकरआयु"त/ CIT "वभागीय""त"न"ध, आयकरअपील"यअ"धकरण, कोलकाता/ DR, ITAT, Kolkata [sent 5. through email] 6. गाड"फाईल / Guard file. स"या"पत""तBy Order