Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, C/“SMC” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI
आदेश / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-1, Chennai dated 05.08.2016 pertaining to assessment year 2010-11.
The assessee raised the grounds in her appeal is with regard to reopening of assessment on the reason that the reopening was completed u/s.143(3) of the Act and there is no fresh tangible material so as to re-open the assessment u/s.147 of the Act.
The facts of the issue are that the assessee filed return of income for assessment year 2010-11 on 31.07.2010 admitting a total income of `4,12,938/-. The case was processed u/s.143(1) of the Act and the assessment was completed u/s.143(3) of the Act on 27.11.2012 without making any adjustment to the total income of assessee. During the year, assessee has received interest income from her savings bank account for a sum of `4,41,652/- while she had offered to tax only a sum of `70,638/-. The balance of `3,71,014/- had escaped assessment and hence, the case was reopened under section 147 and notice u/s.148 dated 22.08.2013 was issued to the assessee. The AO pointed out that the assessee had not disclosed the interest income, and as a result the same had not suffered tax and to that extent the particulars of income were concealed or inaccurately furnished. Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). On appeal, the Ld.CIT(A) confirmed the action of the ld. Assessing Officer.
Before us, the ld.A.R submitted that the assessee had challenged the reopening at the assessment stage stating that the assessment originally finalized on 27.11.2012 was finalized after scrutinizing all materials submitted by the assessee which included a copy of bank account along with explanations for all the credits in the Bank statement, including the interest credited by the Bank. Further, the ld.A.R submitted that at the time of the original assessment primary facts were already with the AO, so invoking the provisions of the section 147 is bad in law.
On the other hand, ld.D.R submitted that an assessment can be subject matter of reopening u/s.147 r.w.s.148 of the Act in the event that the AO having reason to believe that income chargeable to tax had escaped assessment. Further, ld.D.R submitted that the reopening would be mandated only if 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 u/s.139 /142(1)
/148 or, to disclose truly and fully all material facts necessary for the assessment . Further, he submitted that production beore the AO of books of account and other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure. Instances where no return was filed or where assessment has not been made on a return filed or assessment has been made but income was under-assessed or a low rate or with excessive relief given were instances where income would have escaped assessment . In such a situation, the assessment has been reopened within four years from the end of the relevant to assessment year and hence the proviso to s.147 would not apply. Further, in the original assessment also the AO had not expressed any opinion on the escaped income and hence there was no change of opinion. According to ld.D.R, the assessee cannot take a plea that the bank statements were produced before the AO and hence the assessment could not be reopened. Therefore, ld.D.R objected the argument of ld.A.R and pleaded that the reasons submitted above are valid grounds for reopening of assessment.
I have heard both the parties and perused the material on record. In this case, the original assessment passed u/s.143(3) of the Act by issuing notice u/s.143(2) of the Act vide assessment order dated 27.11.2012. Later, the notice u/s.148 was issued by AO on 22.08.2013 by recording reasons as follows:-
“During the year the assessee has received interest income from the Bank for a sum of `3,71,014/-. However, the assessee has not offered the same for taxation. Hence, the case was reopened u/s.147 and notice u/s.148 of the Act was issued to the assessee.
In the present case, there is a clear cut reason to believe that the income has escaped assessment. The assessment has interest income for a sum of 4,41,652/- from Bank. However, the assessee has offered only 70,634/- in the return of income. Therefore, there is no dispute on merits of the assessment proceedings that the assessee has not offered the income in the return filed and the income to that extent has escaped assessment. Further, the first proviso to sec.147 would not apply in this case, since the reopening of assessment is within the period of 4 years from the end of the assessment year.”
6.1 Perusal of the above reasons indicate that AO proceeds solely on the basis of the return of income and the enclosures that too, to initiate the proceedings for reopening of assessment . All the documents, which were considered for reopening of assessment already part of the assessment record and the basis on which the original assessment u/s.143(3) of the Act was framed and there is no fresh tangible material to form an opinion by the AO that income as escaped assessment so as to issue a notice u/s.148 of the Act. The Department cannot be permitted to avail all the extended time limit in the absence of any new or tangible material, when the original assessment was completed after due enquiry. Accordingly, I am of the opinion that issue of notice for reopening of assessment is bad in law. This view if fortified by the recent judgement of jurisdictional High Court in the case of TANMAC India Vs. DCIT in (2016) 97 CCH 0189(Chennai) wherein held that:-
“7. The sine qua non for the initiation of proceedings in terms of section 147 of the Act is ‘reason to believe’ on the part of the assessing officer that income chargeable to tax has escaped assessment. While the court cannot examine the sufficiency of reasons on the basis of which re-assessment is initiated, the existence or otherwise such ‘reason to believe’ is certainly open to verification and would be evident from the reasons recorded prior to issue of notice under section 148 as required in terms of section 148(2) of the Act. In order to examine this aspect of the matter, the records were called for and have been duly produced for our perusal by Mr. Narayanaswamy. The reasons recorded are as follows:
‘The debit claimed towards lump sum payment made as a compensation for future profits forgone by the retiring partner Rs.5,50,000/- is not allowable for the following reasons:
1. 1. The payment has not been authorised by partnership deed.
2. Serving of future profit is contingent one. Contingent expenditure cannot be allowed.
3. Future profits does not relate to the AY in question. And so, the expenditure cannot be allowed in this AY.’
A perusal of the Reasons would indicate that the assessing officer proceeds solely on the basis of the return of income and the enclosures thereto, being the financials and the deed of partnership, to initiate proceedings for re-assessment. The aforesaid documents however are part of record and the basis on which the intimation under section 143(1)(a) has been issued on 1.12.98. Let us bear in mind that the intimation dated 1.2.1998 has been manually issued, being prior to the electronic era which came into force on and with effect from 2003. The assessing officer has thus evidently applied his mind to the return and annexures even at that stage.
The scheme of assessment as set out in section 143 requires an assessing officer to process the return by issue of an intimation (which has been done in the present case) and thereafter issue a notice under sub-section (2) of section 143 to the assessee if the assessing officer considers it necessary or expedient to ensure that the assessee has not understated income, computed excessive loss or underpaid tax calling upon him to attend his office and require him on a date to be specified therein, to produce or cause to be produced any evidence on which the assessee may rely in support of such claim. Having done so, an assessment is to be completed in terms of section 153(1) of the Act
within a period of two years from the end of the assessment year in which the income was first assessable, in this case, on or before 31.3.2001.”
6.2 Accordingly, I am inclined to allow the appeal of assessee on legal issue.
In the result, the appeal of assessee is allowed. Order pronounced on 08th November, 2017.