ACIT, NEW DELHI vs. ANAND TIWARI,, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘A’, NEW DELHI BEFORE SH. C.M. GARG, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER Assessment Year: 2001-02 Vs. Sh. Anand Tiwari, C-67, Friends ACIT, Circle-3(1), New Delhi Colony (East), New Delhi PAN: AAGPT4274N (Appellant) (Respondent) Appellant by Sh. S.K. Jain, Sr. DR Respondent by None present Date of hearing 12.04.2017 Date of pronouncement 17.05.2017 ORDER Per O.P. KANT, A.M.:

This appeal by the Revenue is directed against order dated 31/03/2010 of the ld. Commissioner of Income-tax (Appeals)-IV, Delhi (for short “the CIT-A”) for assessment year 2001-02, raising following grounds: i. The Learned CIT(A) has erred on facts and in law in holding that reopening of the case u/s 147/148 was not justified and quashing the assessment particularly in view of the decision of the Hon’ble High Court of Delhi in the case of Shri Rakesh Aggarwal Vs. Asstt. Commissioner of Income Tax (225 ITR 496). ii. The learned CIT(A) has erred on facts and in law in deleting addition of Rs.70,77,000/-as unexplained investment treated as deemed income u/s 69B of the I.T. Act, 1961. iii. The Appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.

Income declared under the head ‘salary’ as per return Rs. 3,20,000/- Add: (i) Amount declared with assessee as agriculture Rs. 1,40,000/- income treated as income from other sources (ii) Amount declared with assessee is recovered Rs. 3,00,000/- from others treated as income from undisclosed sources Total Rs.17,60,000/- 3.1 Again, a notice under section 148 of the Act was issued on 19/03/2008 requiring the assessee to file return of income. The assessee responded that return already filed might be treated as return filed in response to notice dated 19/3/2008. A copy of reasons recorded for reopening of the assessment was also supplied to the assessee. In the impugned assessment order, the Assessing Officer has mentioned that during reassessment proceedings for assessment year 2002-03 the assessee filed a statement of affairs for assessment year 2001-02 also and according to which, the investment of assessee in equity shares stood at Rs. 10 lakh. The Assessing Officer further noted from the returns filed with the Registrar of Companies (ROC) in the case of Sh. P.K. Tiwari, who was also one of Directors in “Century Communication Ltd.”, along with assessee, investment in shares of M/s. Century Communication Ltd. was seen. Further, the Assessing Officer noted that vide letter dated 10/05/2005, during earlier reassessment proceedings for the year under consideration, the assessee declared investment in shares of M/s Century Communication Ltd. at Rs.92.48 Lacs. Contents of said letter has been reproduced by the Assessing Officer in the impugned order as under:

"Equity shares in companies (A) Third Eye Communications Pvt. Ltd Opening Balance as on 01.04.2000 55.00 Less: Sold during the year 10,00,000 shares at par @ Rs.10/- per share 20.00 35.00 (B) Century Communication Ltd. Opening Balance as on 01.04.2000 60.00 9,00,000 Equity Shares (including 3,00,000 Equity shares received as Bonus Shares) Add: (i)2,00,000 Shares of Rs. 10/- per share 20.00 of allotted by company (ii) 8,32,500 Shares purchased from others 12.48 92.48 3.2 In the second reassessment proceeding, the assessee submitted that it had purchased Rs.8,32,500 shares from the market through a stockbroker for Rs. 12.48 Lacs. The Assessing Officer asked the assessee details of purchase alongwith documentary evidence in respect of 8,32,500 shares purchased for Rs.12.48 Lacs, however, no details were supplied by the assessee. The Assessing Officer was of view that value of the shares should be at Rs. 10 per share and, therefore, the investment in the 8,32,500/- shares should have been worth Rs.83,25,000 and thus assessee has made an undisclosed investment to the extent of Rs. (83,25,000 - 12,48,000) = Rs.70,77,000/-, which he assessed as deemed income under section 69B of the Act. 3.3 Before the Ld. CIT-A, the assessee challenged the validity of the reassessment proceedings as well as merit of the addition. The Ld. CIT- A annulled the reassessment proceeding as well as deleted the addition on merit. Aggrieved, the Revenue is in appeal raising the grounds as reproduced above.

“FINDINGS: After going through the observations of the Assessing Officer, submissions of the AR of the appellant and the various judicial pronouncements on the issue these grounds of the appellant are being finalized on the basis of the following observations:- a) On going through the assessment order it is observed that the Assessing Officer has stated that for assessment year 2001-02 the total issued, paid up and subscribed capital of the company was declared only to the extent of Rs.75,00,000/-. The Assessing Officer however came to the conclusion that on the basis of this discrepancy, there was adequate reason to believe that income chargeable to tax had escaped assessment and accordingly action u/s 147/148 was justified. The Assessing Officer however has not specifically mentioned the discrepancies and has also ignored the fact that the assessment for assessment year 2001-02 had been completed u/s 148/143(3) of the Income Tax Act. It is also pertinent to note that during the course of the earlier assessment completed u/s 148/143(3), the then Assessing Officer had examined this issue relating to the shares held by the appellant and had also taken the statement of the broker to which these shares had been purchased, a copy of statement of Sh. Dalip Kumar Singhal was also produced before me wherein it has been mentioned that the books of accounts were produced for verification and the Assessing Officer by considering the matter in depth. Subsequent to this investigation on enquiring the Assessing Officer had accepted the contentions of the assessee and completed the assessment u/s 148/143(3). It is pertinent to note that on the same issue since a detailed enquiry had also been conducted by the Assessing Officer earlier and there was no additional information or fresh facts which could lead the Assessing Officer to believe that income chargeable to tax had escaped assessment, there does not appear to be valid reason for re-opening the assessment u/s 148 on a second occasion on similar grounds. b) The AR has also strongly argued on the basis of various judicial pronouncements that since the assessee had discloses fully and truly all material facts necessary for assessment and the Assessing Officer has not brought out any discrepancy for invoking the provisions u/s 148, this action of the Assessing Officer does not appear to be justified. The Authorized Representative has strongly argued that even the procedure followed for re- opening of the assessment has not been followed properly and on inspection it has been found that proper reasons had not been recorded and adequate mind has not been applied before re-opening of the assessment. The AR has relied upon the decision of United Electricals Co.(P) Ltd. (Del) (supra). c) The AR has further argued that the assessee had raised beyond the objections to the reasons recorded by the Assessing Officer, but these objections have not been disposed of by the Assessing Officer before proceedings with the action u/s 147/148 of the Income Tax Act. In this regard the AR has relied upon the decision of GKN Driveshafts (India) Ltd. 259 ITR (SC). Considering these strong arguments of the AR of the appellant it is clear that proper procedure has also not been followed by the Assessing Officer by recording the reasons for re- opening of the assessment and at the same time the objections filed by the appellant with regard to reasons for re-opening u/s 148 have not been disposed of. The Assessing Officer has not logically followed the provisions of Section 148 of the Income Tax Act and therefore this action of the Assessing Officer deserves to be quashed.

Keeping in view the above observations, in my opinion the action u/s 48/147 of the Income Tax Act taken by the Assessing Officer is not valid firstly because on the same issue, the earlier Assessing Officer had conducted specific enquiries and had come to a conclusion in favour of the appellant. The Assessing Officer was therefore not justified to take action u/s 148 without having “strong reasons to believe that income chargeable to tax had escaped assessment”. In the assessment order also the Assessing Officer has not brought out any facts which clearly indicate that the appellant had not disclosed full material facts on the earlier occasion. I am therefore inclined to agree with the submissions and arguments of the Authorized Representative of the appellant that the action taken by the Assessing Officer was not justified. After considering the various judicial pronouncements considering above I hold that the action of the Assessing Officer with regard to the re-opening of the case u/s 147/148 is not justified and the assessment therefore deserves to be annulled. These grounds of the appellant are therefore treated as allowed.

4.3 We observe that this second reassessment proceeding has been initiated on 19/03/2008, which is after four years from the end of the relevant assessment years and, therefore, proviso to section 147 of the Act is relevant . The said proviso reads as under:

“147. ……………………………………………………………………………………. Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason 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 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:

4.4 Thus, it is evident that wherever assessment/reassessment has been completed under section 143(3) of the Act or under section 147 of the Act and four years have already elapsed from the end of the relevant assessment year, subsequent notice under section 148 of the Act for reassessment cannot be issued unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. In the case of Rakesh Agarwal (supra), the notice under section 148, was issued within four years from the end of the relevant assessment year and therefore facts of the said case are distinguishable. 4.5 In the instant case, the Assessing Officer has not pointed out how the assessee failed to disclose fully and truly all material facts related to the assessment. In fact, the assessee only submitted details of investment in 8,32,500 shares in first round of reassessment proceedings. Before the Ld. CIT(A), the assessee contended that in first reassessment proceedings, the Assessing Officer had examined the issue relating to the shares held by the assessee and also recorded the statement of the broker through which shares in question were purchased. The Ld. CIT(A) has mentioned that a copy of statement of the broker Sh. Dalip Kumar Singhal, was produced before him, wherein it has been mentioned that books of accounts were produced for verification and the Assessing Officer considered the matter in-depth. According to the Ld. CIT(A), a detailed enquiry had already been conducted by the Assessing Officer earlier and there was no additional information or fresh facts and thus it was merely change of opinion on same set of facts and therefore there was no valid reason for reopening the assessment. The Ld. CIT-A has also observed that no proper reasons have been recorded. Further, the Ld. CIT-A also observed that the Assessing Officer has not disposed off the objection of the assessee to the reasons recorded in accordance to the decision of the Hon’ble Apex Court in GKN Driveshaft (India) Limited, 259 ITR 19(SC). The Revenue has not brought before us any material to contradict the factual findings of ld. CIT(A). 4.6 In our considered opinion, the finding of the Ld. CIT-A on the issue in dispute is comprehensive and well reasoned and, therefore, no interference on our part is required. Accordingly, we uphold the finding of the Ld. Commissioner of Income-tax (Appeals) in quashing the reassessment proceeding. Accordingly, ground No. 1 of the appeal is dismissed.

“FINDINGS: After going through the facts of the case as well as the submissions of the AR of the appellant, the remand report as well as the judicial pronouncements on the issue, this ground is being finalized after making the following observations:- (a) Keeping in view the facts of the case, it is an undisputed fact that his issue had been examined in detail by the Assessing Officer on an earlier occasion and the order had been finalized u/s 143(3)/147 of the Income Tax Act. It is observed that no new facts were available before the Assessing Officer and there was no material on the basis of which it could be concluded that a higher amount of investment made by the appellant for acquiring these shares. Also considering the various judicial pronouncements of CIT Vs. K.P. Verghese, 131 ITR (SC) & Ors., including the decision of ITAT Delhi Bench in the case of K.J. Arora Vs. DCIT, in & Ors., it has been held that different in the case of investment in property only on the basis of estimation, cannot be a valid ground for sustaining the addition. Grounds have also held that the burden of prove that there is unexplained investment lies on the revenue. b) In the present set of facts the Assessing Officer has made the addition of ignoring earlier findings of the Assessing Officer who had examined the books of accounts and made necessary enquiries before accepting the contentions of the appellant. The addition has been made by the Assessing Officer only on grounds that no written confirmation was provided from the purchasing party that the shares had only been sold for Rs. 12,48,000/- and not Rs.70,77,000/-. The Assessing Officer however has not controverted the earlier findings of the Assessing Officer based on the examination of the stock broker company and the statement of Sh. D.K. Singhal confirming the amount of investment in these shares. Further keeping in view the nature of share business, share transactions are not once based on the face value of the share and are liable to fluctuations depending on the financial strongly and various other factors of the company. In the present case there are no grounds to disbelieve the transaction reflected by the appellant. Even if the Assessing Officer did have an apprehension addition unaccounted money has changed needs, there has to be some material evidence on the basis of which any addition can be made u/s 69B of the Income Tax Act. Since in the present set of circumstances there is no material to indicate that any unexplained investment has been made by the appellant while purchasing the shares, there is no justification for making this addition merely on the basis of apprehension or services. The various judicial pronouncements have settled this issue in favour of the appellant and accordingly in my opinion this addition made by the Assessing Officer deserves to be deleted. Accordingly, this ground of the appellant is allowed.”

5.3 We note that in reassessment proceeding the Assessing Officer has mentioned that no information was provided by the assessee and therefore made the addition. However, in appellate proceeding before the Ld. CIT(A), a remand report was called from the Assessing Officer but in the said remand report also, no evidence as regard to the market value of the shares or any evidence of unaccounted money invested by the assessee was brought on record by the Assessing Officer. No material has been brought by the Revenue to rebut the above factual finding of the ld. CIT(A). In such circumstances, we are of considered opinion that in absence of any material to indicate that any unexplained investment has been made by the assessee in purchase of shares, no addition could have been made in the hands of the assessee. We are of the view that the finding of the Ld. CIT(A) on the issue in dispute is comprehensive and well reasoned and we are not inclined to interfere in the same. Accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute and ground of appeal of the Revenue is dismissed.

6. In the result, the appeal of the Revenue is dismissed.

The decision is pronounced in the open court on 17th May, 2017.