DILIP DAYABHAI DHORIYANI,MORBI vs. INCOME TAX OFFICER WARD 1, MORBI, MORBI

The assessing officer noticed that assessee had filed return of his income for the relevant assessment year on 16.03.2018, declaring therein total income at Rs.2,44,180/-. The assessee had made an investment of Rs.21,73,000/- by way of capital/unsecured loan in a partnership firm/LLP namely M/s Stenford Ceramic (PAN-ADAFS9166N), however, the said investment does not commensurate with the return profile of the assessee. All the above information suggest that that the income chargeable to tax has escaped assessment in assessee`s case by reason of failure to disclose fully and truly all the material (AY-17-18) Dilip D Dhoriyani facts. In view of the facts and considering the circumstances of the case, it was considered a fit case for issue of notice u/s 148 of the Income Tax Act, 1961 and order u/s 148A(d) of the Act was issued, after obtaining due approval, detailing the above facts on 10.07.2022. Therefore, the case of the assessee was reopened within the meaning of section 147 of the Act and notice u/s 148 of the Act, dated 10.07.2022 was issued to the assessee. The assessee did not comply with the above notice, therefore, assessing officer made addition of Rs.21,73,000/-.

The assessing officer also observed that as per information available on the ITS, the assessee has deposited cash of Rs.14,15,000/-, in bank account no. 03072020005410 with HDFC under the name M/s Siya Ram enterprises with the PAN of the assessee. The assessee has not explained the source of the above transactions and has not offered the same for taxation. The various notices were issued to the assessee but no response has been received from the assessee. Therefore, assessing officer made addition, under section 69A of the Act, at Rs.14,15,000/-.

Aggrieved by the order of Ld.CIT(A), the assessee is in appeal before us.

Shri Chetan Agarwal, Learned Counsel for the assessee, argued that issue raised by the assessee, before learned CIT(A), pertaining to section147/148 of the Act, challenging the assessment proceedings as bad in law, has not been 3 (AY-17-18) Dilip D Dhoriyani adjudicated by ld.CIT(A). The ld.CIT(A) has remitted the entire appeal back to the file of Assessing Officer, without adjudicating the technical ground regarding reopening u/s 147/148 of the Act, therefore, order passed by the learned CIT(A) should be quashed.

The Ld.Counsel for the assessee submitted that reopening of the assessment made by the Assessing Officer is time barred as the last date of issuing notice under section 148 of the Act under the new regime was up to 21.06.2022. However, notice under section 148 of the Act was issued on 12.07.2022, which is clearly time barred, hence reassessment proceedings may be quashed.

The Ld. Counsel for the assessee also on third technical issue submitted that amount escaped for assessment, as per assessing officer, is Rs.21,73,000/- which is mentioned in the reasons recorded by the assessing officer, and the said amount is also mentioned in the notice issued by the assessing officer, which is below Rs.50,00,000/-, threshold limit prescribed, as per provisions of Section 149(2) of the Act. That is, the assessment cannot be reopened after expiry of 4 (AY-17-18) Dilip D Dhoriyani three years, unless Rs.50,00,000/- or more, has escaped from assessment. However, in the order u/s 148A(d) of the Act, dated 10.07.2022, the amount is mentioned at Rs.21,73,000/-, which is below Rs.50,00,000/-. Hence, re- assessment proceedings cannot be initiated against the assessee, therefore, re- assessment order framed by the Assessing Officer u/s 147/148 of the Act, dated 15.05.2023 may be quashed.

On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.

We have heard the rival parties and have gone through the material placed on record. For the sake of clarity and also being pertinent, we reproduce, the provisions of section 151 of the Income Tax Act 1961: "151. Sanction for issue of notice. Specified authority for the purposes of section 148 and section 148A shall be, (1) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year, (ii) Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year: Provided that the period of three years for the purposes of clause (1) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of section 149."

We note that threshold limit to reopen the assessment beyond the period of three years is Rs.50,00,000/-, that is, Rs.50,00,000/-, or more should have escaped from assessment. However, in the assessee`s case under consideration, the assessing officer mentioned, in the notice under section 148 of the Act that an amount of Rs. 21,73,000/-, has escaped from assessment. The relevant para of the reasons recorded are reproduced below: “6. In view of the above facts, it can be derived that the source of impugned investment of Rs.21,73,000/- still remains unexplained within the meaning of relevant provision the Act. It is also very much clear from the material facts available on record that such transaction has never been offered for taxation under the relevant provision of the Act. 7. In view of the above facts & on the basis of material available on record, it is conclusively proves that income chargeable to tax to the extent of Rs.21,73,000/- has escaped assessment within the meaning of section 147 in the case of assessee for the AY 2017-18. In view of ethe above facts, I am satisfied that it I a fit case to issue a notice u/ 148 for the relevant yer i.e. AY 2017-18. This order has been passed with the prior approval of the Pr.CIT-`1, Rajkot vide approval letter No.PCIT-1/RJT/148A(d)/Approval/DDD/2022-23, dated 08.07.2022.”

It is abundantly clear from the above reasons recorded by the assessing officer that amount escaped from assessment is to the tune of Rs.21,73,000/-, which is below Rs.50,00,000/-. Therefore, as per provisions of Section 149(2) of the Act, assessment cannot be reopened after expiry of three years unless (AY-17-18) Dilip D Dhoriyani Rs.50,00,000/- or more has escaped from assessment. The relevant provisions of section 149 (2) is reproduced below for ready reference: “Time limit for notices under sections 148 and 148A. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years and three months have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years and three months, but not more than five years and three months, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence related to any asset or expenditure or transaction or entries which show that the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to fifty lakh rupees or more. (2) No notice to show cause under section 148A shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than five years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment, as per the information with the Assessing Officer, amounts to or is likely to amount to fifty lakh rupees or more.]”

However, we find that in the order u/s 148A(d) of the Act, dated 10.07.2022, the amount is mentioned at Rs. 21,73,000/- (in the reasons recorded), which is below Rs. 50,00,000/-. Hence, re-assessment proceedings, after the period of three years cannot be initiated in the assessee`s case under consideration, therefore re-assessment order framed by the Assessing Officer u/s 147 dated 15 .05.2023 should be quashed, and accordingly, we quash the same.

In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the reassessment proceedings initiated against the assessee, under section 147 of the Act, by the assessing officer, is not as per the provisions of the Act, as narrated above. We, therefore, quash (AY-17-18) Dilip D Dhoriyani the reassessment proceedings. As the reassessment itself is quashed, all other issues on merits of the additions/other technical issues, in the impugned assessment proceedings, are rendered academic and infructuous.