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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy
Assessment Year: 2004-05 Subrata Saha….…………….........…..…….……………………..…………………………………..……….……..Appellant C/o. D.J. Shah & Co Kalyan Bhawan 2 Elgin Road Kolkata – 700 020 [PAN : AVQPS 9056 F] Income Tax Officer, Ward-41(2), Kolkata……………………………….…….…...…………….......Respondent Appearances by: Shri Miraj D. Shah, AR, appeared on behalf of the assessee. Shri Satyajit Mondal, Addl. CIT, D/R. appearing on behalf of the Revenue. Date of concluding the hearing : June 28th, 2018 Date of pronouncing the order : July 25th , 2018 ORDER Per J. Sudhakar Reddy, AM :-
This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)- 13, Kolkata, (hereinafter the ‘Ld. CIT(A)’), dt. 25/09/2017, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2004-05.
The assessee is an individual and is running a small business of trading items. He was also earning a small amount of interest income.
I have heard Sri Miraj D. Shah, the ld. Counsel for the assessee and Sri Satyajit Mondal, Addl. CIT, D/R, on behalf of the revenue. The reasons for reopening in this case are at page 4 of the order of the ld. CIT(A), which is extracted for ready reference:- “In the course of assessment proceedings for the asst. year 2005-06, the assessee could not explain the opening capital i.e. as on 01-04-2004 for the previous year 2004-05 and relevant asst year 2005-06. However, the assessee gave a break-up showing that his related to the earlier years capital carried forward and opposed the addition of the year. At this there is a wide gap of about Rs.15 lakhs approx as on 31-03-2004. The returned income of the asst year 2004-05 was summarily accepted u/s 143(1) and was not subjected to regular assessment.”
Assessment Year: 2004-05 Subrata Saha 3.1. The reasons for reopening, states that the assessee could not explain the opening capital as on 01/04/2004 relevant to the Assessment Year 2005-06 and hence the Assessing Officer has reason to believe that income had escaped assessment. While so, in the order passed u/s 144(1) r.w.s. 147 of the Act, the Assessing Officer made addition of Rs.15 Lakhs/- based on difference between the original balance sheet and the revised balance sheet both dt. 31/03/2004 but has not made any addition on account of unexplained opening balance. The assessee claimed that he was advised to invest in mutual funds for higher returns and for that purpose, he had borrowed money from friends and relatives amounting to Rs.15,21,680/-. As the transaction was not properly reflected by the accountant initially and hence the same was corrected and the corrected balance sheet was filed. It was submitted that due to lack of time, evidence could not be produced before the Assessing Officer and hence an application to admit additional evidence was moved before the ld. CIT(A). It was pleaded that the addition was wrongly made u/s. 68 of the Act and that the assessee should be given opportunity and this evidence should be considered. The ld. CIT(A) rejected the contentions of the assessee.
On the issue of reopening of assessment, I find that the reopening was made on the ground that the opening balance as on 01/04/2004, was not explained. While so, no addition was made on this count. The ‘SMC’ Delhi Bench of the Tribunal in the case of M/s. Pragati Finsec Ltd. vs. ITO, in relying on the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Chiel Communications Pvt. Ltd. (2013) 354 ITR 549 (Del) and the judgment of the Hon’ble Bombay High Court in the case of CIT vs. Jet Airways Ltd. (2011) 331 ITR 236 (Bom) held as follows:- “4. I have heard the rival submissions and perused the relevant material on record. It can be seen from the discussion made supra that the AO resorted to the re- assessment on account of one reason. The addition so consequently made stood deleted in the first appeal. No material has been brought on record to demonstrate that the Revenue has preferred any appeal against the impugned order deleting the addition of Rs.5,25,000/-. Section 147 provides that: 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. A bare perusal of the above provision manifests that the AO is fully empowered to bring to tax any other income which has escaped assessment and which comes to his notice subsequently in the course of proceedings u/s 147, apart from the income escaping assessment on which the AO formed reason to believe about the escapement of income and ITA NO. 634/Del/2018 issued notice Assessment Year: 2004-05 Subrata Saha u/s 148. The use of words and between the income escaping assessment forming reasons to believe for issuing notice u/s 148 and other income chargeable to tax which escaped assessment and comes to the notice of the AO in the course of the proceeding, amply shows that the existence of the former is a pre-condition for taxing the latter. To put it simply, if the grounds set out in the re-assessment notice are non- existent, i.e., either no addition is made on such grounds or the addition so made does not pass the scrutiny by the appellate forums, then, obviously, no further addition can be made for income which comes to the notice of the AO during the course of proceedings u/s 147. Without there being such a deterrent, the AO would acquire an unhindered power to initiate re- assessment at the drop of a hat without any legally sustainable reasons and then make other additions resulting in multiplicity of proceedings, which the legislature has sought to curb. Any lawful jurisdiction to make addition on account of other incomes coming to the notice of the AO during the course of proceedings u/s 147 can be acquired only on the foundation of a validly acquired jurisdiction on legally sustainable items of income escaping assessment forming reasons for issuing notice u/s 148. In other words, if the AO fails to acquire a valid jurisdiction to make re- assessment on the basis of his reasons, then, he is also debarred from making additions for other incomes chargeable to tax which escaped assessment and come to his notice subsequently in the course of proceedings u/s 147. The Honble jurisdictional High Court in CIT vs. Chiel Communications India Pvt. Ltd. (2013) 354 ITR 549 (Del) and CIT VS. Adhunik Niryat Ispat Ltd. (2011) 63 DTR 0212 (Del) has held to this extent. Similar view has been taken by the Honble Bombay High Court in CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom). When I test the facts of the instant case on the touchstone of the principle as discussed hereinabove, it turns out that the solitary reason taken note of by the AO before issuing notice u/s 148 is non-existent and, resultantly, there is no question of making any other addition. I, therefore, set aside the assessment order passed by the AO u/s 147 read with section 143(3) of the Act. As such, there is no need to discuss the merits of the other addition impugned in this appeal made by the AO which has been upheld in the first appeal. As the AO is not competent to make any other ITA NO. 634/Del/2018 addition in the instant case, the other addition of Rs.25,06,400/- so made is liable to be and hereby deleted.”
Applying the propositions of law laid down in the above mentioned case-law to the facts of the case on hand, I find that as no addition was made on the issues based on which the reopening of the assessment was done, the assessment in question has to be held as bad in law. Hence, I quash the same.
In the result, appeal of the assessee is allowed. Kolkata, the 25th day of July, 2018. Sd/- [J. Sudhakar Reddy] Accountant Member Dated : 25.07.2018 {SC SPS} Assessment Year: 2004-05 Subrata Saha Copy of the order forwarded to: 1Subrata Saha C/o. D.J. Shah & Co Kalyan Bhawan 2 Elgin Road Kolkata – 700 020 2. Income Tax Officer, Ward-41(2), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata.