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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy & Sri S.S. Viswanethra Ravi]
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA [Before Sri J. Sudhakar Reddy, Accountant Member & Sri S.S. Viswanethra Ravi, Judicial Member] I.T.A. No. 116/Kol/2018 Assessment Year: 2008-09 M/s. Satyam Investment Advisory Pvt. Ltd……………....……………....…………………….....Appellant 51, Panchanna Gram Kolkata – 700 039 [PAN : AALCS 2500 H] Deputy Commissioner of Income Tax, Circle-3(3), Kolkata......……….....................Respondent
Appearances by: Shri S.M. Surana, Advocate, appeared on behalf of the assessee. Shri A.K. Singh, CIT, Sr. D/R, appearing on behalf of the Revenue.
Date of concluding the hearing : February 12th, 2019 Date of pronouncing the order : April 3rd , 2019 O R D E R Per J. Sudhakar Reddy :-
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) - 21, Kolkata, (hereinafter the ‘ld. CIT (A)’), passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 26/12/2017, for the Assessment Year 2008-09.
This case came up for hearing on various dates before this Bench. On 8th July, 2016, the Bench after hearing rival parties at length had passed an interim order dt. 6th August, 2018. At para 2 & 8 of this order, the Tribunal held as follows:- “2. The ld. Counsel for the assessee, challenged the legal validity of the re- opening of the assessment u/s 147 of the Act. He submitted that the original assessment in this case was completed u/s 143(3) r.w.s. 148 on 5th April, 2010 and that this is a second re-opening of assessment. He argued that this is the second re-opening of assessment and this second re-opening of assessment is bad in law because: a) Sanction u/s 151 of the Act had to be obtained from the Commissioner of Income Tax, for re-opening of assessment, whereas the sanction in this case, was granted by the Joint/Additional Commissioner of Income Tax.
2 I.T.A. No. 116/Kol/2018 Assessment Year: 2008-09 M/s. Satyam Investment Advisory Pvt. Ltd b) There is no whisper in the reasons recorded for re-opening of the assessment by the Assessing Officer that, there was failure on part of the assessee from truly and fully disclosing all material facts required for assessment. 8. After hearing rival contentions and perusing the documents produced before us, we are of the opinion that the assessee has discharged the initial burden of proof that lay on it, that an re-assessment order was passed on it for the impugned assessment year U/S 143(3) r.w.s 147 of the Act, on 05/04/2010. It is for the revenue to controvert these documents with evidence. As stated by the ld. Counsel for the assessee, the records of the department are in its exclusive possession and control. The assessee cannot be asked to explain the presence or absence of a record or an entry in the record. It is for the revenue to conduct a detailed enquiry on this issue to unearth the truth. It is surprising that no such enquiry has even been contemplated till date despite the graveness of the issue. It is not for the Tribunal to pass orders of enquiry. Not ordering an enquiry into the issue by the revenue administration leading to a conclusion that the contentions of the ld. Assessing Officer in the remand report given to the ld. CIT(A) is without evidence. This enquiry report is very much essential for the Tribunal to adjudicate the matter of validity of reopening of assessment u/s 147 of the Act. If no enquiry report is filed by the revenue on this issue before the next date of hearing, the ITAT would have no other alternative but to take adverse inference. The case would be disposed-off based on the original documents produced by the assessee.”
The pith and substance of this order is that the allegations made by the revenue that the copy of the assessment order passed u/s 143(3) r.w.s. 147 of the Act, dt. 05/04/2010 produced in original by the assessee before the Bench, along with the notice of demand issued u/s 156 of the Act dt. 05/04/2010, are forged documents, has to be proved by the revenue by conducting proper enquiry. The entire assessment records and other documents are in the exclusive possession and control of the Income-tax Department. The Bench was of the view, that enquiry/investigation should have been conducted by the department on this matter as it is a very grave allegation. Hence the Bench granted time to the ld. D/R to produce evidence in support of his contentions that the original assessment order dt. 05/04/2010 passed u/s 143(3) r.w.s. 147 of the Act and notice u/s 156 of the Act, filed by the assessee are no documents issued by the Income Tax Department. The matter came up before different Benches of the ITAT on 31/10/2018, 27/12/2018 & 16/01/2019. On each of these occasions, the revenue sought time to produce evidence and enquiry report and to support its contentions. The Bench granted time to the revenue for enabling it to produce these documents. Today when the case came up for hearing, the ld. D/R filed a report on the validity of the reopening of assessment u/s 147 of the Act. The
3 I.T.A. No. 116/Kol/2018 Assessment Year: 2008-09 M/s. Satyam Investment Advisory Pvt. Ltd then Assessing Officer Mr. Pradip Kr. Biswas, who is presently posted as Joint Commissioner of Income Tax, Range-2, Dhanbad, had given an affidavit stating that, the impugned assessment order in question was passed by him u/s 143(3) r.w.s. 147 of the Act, on 05/04/2010 and was in fact signed by him. Thus, the arguments of the ld. D/R that this assessment order is a forged document etc. is baseless. Hence we have to necessarily reject the same. 3.1. With this background, we have heard the arguments from both sides on the issue of validity of reopening of assessment. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 4. The facts of this case are that the assessee has originally filed its return of income u/s 139 of the Act, on 15/12/2008. Thereafter the assessment was re-opened u/s 147 of the Act by issual of notice u/s 148 of the Act on 06/01/2010, for the Assessment Year 2008-09. Thereafter the assessment order was passed u/s 147/143(3) of the Act on 05/04/2010, determining the total income of the assessee at Rs.20,440/-. During the course of this re-assessment proceedings, notices were issued by the Assessing Officer to M/s. Sanyam Vanijya Pvt. Ltd. and M/s. Swift Software Solutions Pvt. Ltd. dt. 25/01/2010 u/s 133(6) of the Act for furnishing information. Copies of the notices were filed by the assessee. After considering these notices, the Assessing Officer had completed the assessment. Thereafter notice u/s 148 of the Act was issued on 26/03/2015 reopening the assessment once again u/s 147 of the Act for the Assessment Year 2008-09. In response, the assessee stated that the return filed u/s 139 of the Act, may be treated as a return filed in response to notice dt. 26/03/2015.
A copy of the reasons for reopening is placed at page 15 of the paper book, which reads as follows:- “A piece of information received from DDIT(Inv)-2(1), Kolkata stating that a search & seizure action u/s 132 of the I.T. Act 1961 was carried out in the case of Cygnus group of companies on 23.12.2014. During the course of post search and Seizure investigation. It is noted that M/s Sat yam Investment Advisory Pvt Ltd, a group company of M/s. Cygnus Group has taken accommodation entries from various paper/jamakharchi companies (copy enclosed).
4 I.T.A. No. 116/Kol/2018 Assessment Year: 2008-09 M/s. Satyam Investment Advisory Pvt. Ltd
In course of further investigation summons were issued u/s 131 to all the Principal Officers of the allottee companies and most of them returned unserved and uncomplied. In view of the above information it appears that there are reasons to belief that the income chargeable to tax for the said A. Y. has escaped assessment within the meaning of section 147 of the income tax Act 1961.”
The issue before us is whether the reopening in question is in accordance with law. The assessee’s submission in this regard are as follows:- a) Reopening of assessment was beyond a period of four years and the original assessment was completed u/s 143(3)r.w.s. 147 of the Act and that in the reasons recorded there is no whisper that there was a failure on the part of the assessee to disclose truly and fully, all material facts necessary for The proviso to Section 147 of the Act is attracted and hence the assessment is barred by limitation. b) That sanction u/s 151 of the Act, has not been obtained from the Commissioner of Income Tax for the reopening of assessment and it was the Additional Commissioner of Income Tax, who granted sanction which is in violation of the law as the original assessment was completed u/s 143(3) of the Act.
Though a number of other legal and fictional arguments have been advanced before us by the ld. Counsel for the assessee, including arguments that the Assessing Officer had tampered/altered the original reasons recorded for re-opening, we confine ourselves to these two legal arguments.
Admittedly the approval u/s 151(2) of the Act in this case was granted by the Additional Commissioner of Income Tax, though the original assessment order was passed u/s 147 r.w.s. 143(3) of the Act on 05/04/2010 and the reopening is beyond a period of four years. This Bench of the of the Tribunal under identical circumstances in the case of M/S. Cygnus Investment & Finance Vs ACIT; I.T.A. No. 117/Kol/2018, Assessment Year: 2008-09, had held as follows:-
5 I.T.A. No. 116/Kol/2018 Assessment Year: 2008-09 M/s. Satyam Investment Advisory Pvt. Ltd “6. Section 151 of the Act, reads as follows:- “151. Sanction for issue of notice.—(1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice.” 6.1. Admittedly, the approval u/s 151(1) of the Act, in the case on hand has been granted by the Additional Commissioner of Income Tax Range – 7 vide order dated 31.03.2015 vide No. Addl. CIT/Range-7/Kol/148/2014-15/3916 and not by the Commissioner of Income Tax as mandated under the Act. Hence the reopening in question is bad in law as held by the Hon’ble Bombay High Court in the case of Ghanshyamdas Khabrani vs. ACIT 346 ITR 443, wherein it has been held as follows:- “The second ground upon which the reopening is sought to be challenged is that the mandatory requirement of section 151(2) has not been fulfilled. Section 151 requires a sanction to be taken for the issuance of a notice under section 148 in certain cases. In the instant case, an assessment had not been made under section 143(3) or section 147 for assessment year 2004-05. Hence, under sub-section (2) of section 151, no notice can be issued under section 148 by an Assessing Officer who is below the rank of Joint Commissioner after the expiry of 4 years from the end of the relevant assessment year unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. The expression 'Joint Commissioner' is defined in section 2(28C) to mean a person appointed to be a Joint Commissioner of Income-tax or an Additional Commissioner of Income-tax under section 117(1). In the instant case, the record before the Court indicates that the Assessing Officer submitted a proposal on 28-3-2011 to the Commissioner (Appeals) through the Additional Commissioner. On 28-3-2011, the Additional Commissioner forwarded the proposal to the Commissioner. On this, a communication was issued on 29-3-2011 from the office of the Commissioner (1) conveying approval to the proposal submitted by the Assessing Officer. There is merit in the contention raised on behalf of the assessee that the requirement of section 151(2) could have only been fulfilled by the satisfaction of the Joint Commissioner that this is a fit case for the issuance of a notice under section 148. Section 151(2) mandates that the satisfaction has to be of the Joint Commissioner. That expression has a distinct meaning by virtue of the definition in section 2(28C). The Commissioner is not a Joint Commissioner within the meaning of section 2(28C). In the instant case, the Additional Commissioner forwarded the proposal submitted by the Assessing Officer to the Commissioner. The approval which has been granted is not by the Additional Commissioner but by the Commissioner. There is no statutory provision under which a power to be exercised by an officer can be exercised by a superior officer. When the statute mandates the satisfaction of a particular functionary for the exercise of a power, the satisfaction must be of that authority. Where a statute requires something to be done in a particular manner, it has to be done in that manner. [Para 6]
6 I.T.A. No. 116/Kol/2018 Assessment Year: 2008-09 M/s. Satyam Investment Advisory Pvt. Ltd Once the Court has come to the conclusion that there was no compliance of the mandatory requirements of sections 147 and 151(2), the notice reopening the assessment cannot be sustained in law. [Para 7] Under similar circumstances, the Lucknow Bench of the ITAT in the case of Balbir Singh, being ITA No. 880/K/2014, dt. 13/03/2015, wherein the judgement of the Delhi High Court in the case of CIT vs. SPL’s Siddhartha Ltd. [2012] 345 ITR 223 (Delhi) wherein it has been held as follows:- It was apparent from records that the Assessing Officer had specifically sought the approval of the Commissioner only. Therefore, it could not be said that the Joint Commissioner/Additional Commissioner had granted the approval. Further, no doubt, the file was routed through Additional Commissioner. However, he also, in turn forwarded the same to the Commissioner. [Para 4] It is clear that the Additional CIT did not apply his mind or gave any sanction. Instead, he requested Commissioner to accord the approval. It, thus, cannot be said that it is an irregularity curable under section 292B. [Para 5] Section 116 also defines the Income-tax authorities as different and distinct Authorities. Such different and distinct authorities have to exercise their powers in accordance with law as per the powers given to them in the specified circumstances. If powers conferred on a particular authority are arrogated by other authority without mandate of law, it will create chaos in the administration of law and hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted by the satisfaction of the other authority. It is trite that when a statute requires, a thing to be done in a certain manner, it shall be done in that manner alone and the Court would not expect its being done in some other manner. [Para 7] Thus, if authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorised under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be "independent" and not "borrowed" or "dictated" satisfaction. Law in this regard is now well settled. [para 8] The Apex Court in the case of Anirudh Sinhji Karan Sinhji Jadeja v. State of Gujarat [1995] 5 SCC 302 has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether. [para 9] Therefore, the Tribunal has rightly decided the legal aspect, keeping in view well established principles of law laid down in catena of judgments including that of the Supreme Court. No question of law arises. This appeal is accordingly dismissed. [para 10]
7 I.T.A. No. 116/Kol/2018 Assessment Year: 2008-09 M/s. Satyam Investment Advisory Pvt. Ltd The Hon’ble Delhi High Court in the case of Pr. CIT vs N.C. Cables in ITA No. 335/2015 judgement dated 11.01.2017 held that approval under section 151 is to be made after application of mind. It is not so in this case as mechanical approval is given by an officer who is not authorised to do so in law. 6.2. Thus on this count also we hold that the reopening is bad in law.” 7.1. Even otherwise a plain reading of the reasons recorded demonstrates that there is no allegation that the assessee has failed to disclose truly and fully all material facts necessary for assessment for that Assessment Year. As the original assessment was made u/s 143(3) of the Act and four years have elapsed from the end of the relevant Assessment Year and the proviso to Section 147 of the Act applies. Under such circumstances, when there is no failure on the part of the assessee to disclose truly and fully all material evidence necessary for the assessment for that Assessment Year, no reopening is permissible under law.
The ‘A’ Bench of the ITAT, Kolkata in the case of Rajendra Kumar Agrawal vs. ITO; ITA No. 2437/Kol/2017 Assessment Year 2009-10, order dt. 3rd August, 2018, held as follows:- “4. A perusal of the above demonstrates, that there is no whisper or allegation that the assessee has failed to disclose fully and truly, all material facts necessary for the assessment as mandated by the proviso to Section 147 of the Act. 5. We find that the Kolkata 'A' Bench of the Tribunal in the case of M/s. Beekay Steel Industries Ltd. vs. DCIT CC-XXX, Kolkata, in I.T.A. No. 105/Kol/2015, order dt. 31/05/2017, held as follows: 4.4. The Hon'ble Bombay High Court in the case of Tao Publishing (P) Ltd. v. Dy.CIT reported in (2015) 370 ITR 135 (Bom.), has held as follows:- "10. As stated above, the reasons supplied to the Petitioner do not disclose that there was any failure on the part of the Petitioner to provide all the material facts. That being the position, this ground could not have been taken up against the Petitioner at the time of disposing of the objections. Once this was not the basis for issuance of notice for Reassessment, it cannot be held against the Petitioner that the Petitioner had failed to make a true and full disclosure. It will have to be held that the Petitioner did not fail to make full and true disclosure of all material facts. The jurisdictional requirement for carrying out the reassessment, after the expiry of period of four years, is not fulfilled in the present case." 4.5. The Hon'ble Bombay High Court in the case of Sound Casting (P) Ltd. v. Dy. CIT reported in 250 CTR 119 (Bom.) (HC), has held that there is no allegation in the reasons which have been disclosed to the assessee that there was any failure on his part to fully and
8 I.T.A. No. 116/Kol/2018 Assessment Year: 2008-09 M/s. Satyam Investment Advisory Pvt. Ltd truly disclose material facts necessary for assessment and therefore reopening beyond four years was not valid. (A.Y. 2005-06). 4.6. The Hon'ble Delhi High Court in the case of CIT vs. Orient Craft Ltd. reported in [2013] 354 ITR 356 (Del.)(HC) has held as follows: "The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of the words "reason to believe" vis-à-vis an intimation issued under section 143(1) can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147." 4.7. The Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. v. Commissioner of Income-Tax and Anor. reported in [2009] 308 ITR 38 (Delhi) has held as follows: "Viewed in this light, the proviso to section 147 of the said Act, carves out an exception from the main provisions of section 147. If a case were to fall within the proviso, whether or not it was covered under the main provisions of section 147 of the said Act would not be material. Once the exception carved ITA No. 2437/Kol/2017 Assessment Year: 2009-10 Rajendra Kumar Agrawal out by the proviso came into play, the case would fall outside the ambit of section 147. Examining the proviso [set out above], we find that no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year if the following conditions are satisfied: (a) an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year; and (b) unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee: (i) to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or (ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year. Condition (a) is admittedly satisfied inasmuch as the original assessment was completed under section 143(3) of the said Act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148. This is clearly not the case here because the petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material facts necessary for its assessment, then no action under section 147 could have been taken after the four year period indicated above. So, the key question is whether or not
9 I.T.A. No. 116/Kol/2018 Assessment Year: 2008-09 M/s. Satyam Investment Advisory Pvt. Ltd the petitioner had made a full and true disclosure of all material facts ? In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade Private Ltd (supra) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania (supra) that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated 29.03.2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 02.03.2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above. 4.8. Applying the propositions laid down in the above case law to the facts to this case, we have to necessarily hold that the re- opening of the assessment proceedings is not valid that there is not even a whisper in the reasons recorded for the reopening of the assessment that there is a failure on the part of the assessee to disclose fully and truly all the necessary material facts required for assessment in view of the 1st proviso to Section 147 of the Act. In this case no tangible materials have come to the possession of the Assessing Officer subsequent to the Assessment Order u/s 143(3). Re-opening is done based on the same material and record and hence it is bad in law. As far as the contention, that there is a change in opinion is concerned, we are unable to agree with the ld. Counsel for the assessee as there was neither a query on this issue by the Assessing Officer during the original assessment proceedings, nor there was a reply by the assessee. Hence there was no opinion formed. Thus, the question of change of opinion does not arise. 4.9. In any event, as we have held that the re-opening is bad in law as it does not fulfill the requirement of the Proviso to Section 147 of the Act, and as no tangible material has come to the possession of the Assessing Officer, we quash the assessment and allow the appeal of the assessee." (emphasis ours)
10 I.T.A. No. 116/Kol/2018 Assessment Year: 2008-09 M/s. Satyam Investment Advisory Pvt. Ltd 6. Applying the propositions of law laid down in above referred decision of the Tribunal, and the judgments of the Courts on this issue as discussed above to the facts of the case, we have to necessarily hold that the reopening is bad in law and hence the same is quashed.”
8.1. Applying the propositions of law laid down in this case law to the facts of this case we hold that the reopening is bad in law.
As we have held that the reopening is bad in law, on these two legal grounds, we do not adjudicate the other arguments raised by the ld. Counsel for the assessee and the ld. D/R on various other issues.
In the result appeal of the assessee is allowed.
Kolkata, the 3rd day of April, 2019. Sd/- Sd/- [S.S. Viswanethra Ravi] [J. Sudhakar Reddy] Judicial Member Accountant Member
Dated : 03.04.2019 {SC SPS} Copy of the order forwarded to: 1. M/s. Satyam Investment Advisory Pvt. Ltd 51, Panchanna Gram Kolkata – 700 039 2. Deputy Commissioner of Income Tax, Circle-3(3), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata.