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Income Tax Appellate Tribunal, B/“SMC” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI
आदेश / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
1. This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-15, Chennai dated 19.02.2016 pertaining to assessment year 2005-06.
2. The assessee raised the following grounds for adjudication.
1. The order of the learned Commissioner Of Income (Appeals)- 15, Chennai is wrong, illegal and is opposed to law and facts of the case.
2. The learned Commissioner of Income Tax (Appeals)-15 erred in law in upholding the validity of re-opening of the assessment. The learned CIT (A) ought to have seen that it is a settled proposition of law that the assessments cannot be re-opened merely based on change of opinion and that notice under Section 148 of the Act cannot be issued for the purpose of verification of the material already available with the authorities.
3. The learned CIT(A) ought to have seen that despite the fact that the appellant had raised specific objection regarding re-opening of assessment, the learned assessing officer proceeded with the re- assessment proceedings without passing a preliminary order disposing off the appellants objection.
4. The learned CIT(A) ought to have seen that the assessee has furnished full and true particulars of its income at the time of original assessment with reference to income alleged to have escaped assessment and that the assessment cannot be validly reopened under Section 147 of the Act, even within four year, merely on the basis of change of opinion.
The learned Commissioner of Income Tax (Appeals) ought to have seen that the entire material had been placed by the appellant before the Assessing Officer at the time of filing its original returns which was subjected to proceedings under section 143(1) of the Income Tax Act and that the re-opening of assessment is not on the basis of any fresh and additional material but only on change of opinion which is not valid in law.
Te learned Commissioner of Income Tax ought to have seen that there is no tangible material that the AO came across to justify forming ‘reasons to believe’ that income had escaped assessment. The only material referred to were the statement of accounts filed by the appellant, which in any way were available with the Assessing officer at the time of issuance of the order/ intimation under Section 143 (1) of the Act. The reasons recorded were therefore at best a change of opinion based on suspicion and surmises.
The learned Commissioner of Income Tax ought to have seen the ratio laid down in Trustees of H.E.H. The Nizam’s Supplemental Family Trust’s squarely applies to the instant case in favour of the assessee. The ratio of the said judgment is that in those situations where there is no assessment order passed, there cannot be a notice for re-assessment inasmuch as the question of re-assessment arises only when there is an assessment in the first instance. The aforesaid Judgment is further affirmed by the Hon’ble Apex Court in M/s.Standard Chartered Finance Vs CIT in SLP No.13512/2012.
8. The learned CIT (A) erred in law in disallowing the appellants claim of interest on housing loan under the pretext that the appellant has not produced the certificate.
The learned CIT (A) erred in law in disallowing a sum of Rs.1,40,000/- U/s.10(13A) of the Income Tax Act.
3. There was a delay of 45 days in filing this appeal by the assessee. The assessee has filed a condonation petition stating that:-
I am the Appellant/petitioner in the above appeal and I am fully acquainted with the facts of the case leading to and relating to the present petition.
I have filed the above appeal against the order of the Commissioner of Income (Appeals)-15, Chennai dated 19.2.2016. The said appellate order was received by me on 28.04.2016. In normal course the appeal should have been filed by 27.06.2016 but however the appeal was filed on 12.08.2016 with a delay of 46 days.
I submit that order of the learned Commissioner Of Income (Appeals)-15, Chennai was passed on 19.02.2016 and the same was received by me on 28.04.2016 but however the same was misplaced by me and could be traced subsequently only on 5.08.2016. Thereafter I contacted the Counsel immediately and got the appeal papers ready and filed the same before the Hon’ble Tribunal on 12.08.2016 with a delay of 46 days. I was unable to file the appeal papers in due time despite best of my efforts but however filed the same with a delay of 46day. The delay is neither willful nor wanton but due to the aforesaid circumstance.
4. It is therefore prayed that the Hon’ble Tribunal may be pleased to condone the delay of 46 days in filing the appeal before the Income Tax Appellate Tribunal and render justice.
I have gone through the reasons advanced by the assessee in the condonation petition. I find that there was sufficient cause for not filing the appeal within the stipulated time. Therefore, I condone the delay and admit the appeal for adjudication.
5. The facts of the case are that the assessee is an individual, filed his return on 01.08.2005 for assessment year 2005-06 declaring total income of `5,50,206/-. Subsequently, the ld. Assessing Officer initiated the re-assessment proceedings by issuing notice u/s.148 of the Act dated 29.03.2012 on the reason to believe that income has escaped assessment within the meaning of sec.147 of the Act. In response to the notice, the assessee filed his return of income on 30.04.2012. Notice u/s.143(2) was issued. Thereafter, the assessment was completed u/s.143(3) r.w.s.147 of the Act on 28.03.2013 assessing the total income of `8,57,338/-. Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). On appeal, Ld.CIT(A) observed that the ld. Assessing Officer has correctly reopened the assessment by recording his satisfaction that income has escaped assessment and the assessee also admitted that the reasons recorded were provided after a gap of eight months. According to Ld.CIT(A), the assessment order was passed after giving due opportunity to the assessee.
Therefore, Ld.CIT(A) confirmed the action of the ld. Assessing Officer regarding reopening of assessment . Against the order of Ld.CIT(A), now the Assessee is in appeal before us.
6. Now, coming to the issue relating to re-opening of assessment , ld.A.R submitted that there is no tangible fresh material to re-open the assessment . It was submitted that if the AO, after issuance of intimation u/s.143(1) of the Act, does not issue a notice u/s.143(2) of the Act to initiate the proceedings for scrutiny of return of income, the obvious conclusion is that he does not consider it necessary or expedient to do so, the inference is that the return of income filed is in order. It is this opinion that cannot be arbitrarily changed by the AO, to re-assess income on the basis of stale material, already on record. According to him, the fundamental requirement of invoking the sec.147 of the Act, it would be apparent that the exercise undertaken by the AO in this case is not one of re-assessment, but of review. The reasons make it abundantly clear that the re-assessment is sought to be initiated on the basis of the return of income and the enclosures which were available with the AO. At the time of processing u/s.143(1) of the Act, the same material ought to have prompted him to issue a notice u/s.143(2) of the Act so as to complete the scrutiny assessment u/s.143(3) of the Act. What is sought to be done by the re-assessment ought to have been achieved by scrutiny assessment proceedings. According to him, having missed the bus earlier, the ld. Assessing Officer cannot be permitted to avail of the extended time limit in the absence of anynew or tangible material, when the time of scrutiny assessment has elapsed before issue of notice u/s.148 of the Act. For this purpose he relied on the judgement of Jurisdictional High Court in the case of M/s.TANMAC India Vs. DCIT in Tax case (Appeal) No.1426 of 2007 vide order dated 19.12.2016 and he also relied on the judgement of Supreme Court in the case of M/s.Standard Chartered Finance Ltd., Vs. CIT in SLP(C) No.13512/2012 vide order dated 09.02.2016.
7. On the other hand, ld.D.R relied on the orders of the ld. Assessing Officer and Ld.CIT(A).
I have heard both the parties and perused the material on record. The main contention of ld.A.R is that in this case there was no assessment u/s.143(3) of the Act. The assessee has furnished all details to the AO at the time of filing of return of income and according to the A.R, there was no failure on the part of the assessee to disclose all material facts necessary for the purpose of assessment. He submitted that notice u/s.148 of the Act for re- opening was issued on 29.03.2012. He submitted that the AO going through the same documents, which were already on record, wanted to re-open the assessment, which is nothing but review of the earlier opinion, which is not possible u/s.147 of the Act. In this case, the assessment was reopened after recording the reasons that there was an escapement of income with reference to allowability of deduction u/s.80C of the Act.
8.1 Admittedly, there was no original assessment u/s.143(3) of the Act and the return was processed u/s.143(1) of the Act vide intimation dated 31.08.2006. Thereafter the ld. Assessing Officer recorded the reasons for re-opening of assessment by issuing of notice u/s.148 dated 15.03.2013 as below:-
“1. It is manifest from the records that you have occupied the house only in the month of December,2004. In that premise it is proposed to disallow the interest claim as well as claim u/s.80C. In view of the decision of Special Bench of ITAT,Chennai in the case of M.Ragunandam Vs. I.T.O (1985) 11 ITD 298 (Mad.Tri.) (SB). 2.It is seen from the record that have claimed an exemption of Rs.1,40,000/- u/s.10(13A) of the I.T.Act. However, you have not substantiated the claim u/s.10(13A) by furnishing any collaborative documentary evidence. In that premise, it is proposed to the disallow your claim of Rs.1,40,000/- u/s.10(13A) of the I.T.Act. You are required to explain as to why the claim u/s.10(13A) should not be disallowed.”
Admittedly, in the present case, the proceedings u/s.148 of the Act was initiated after the four years from the end of the relevant assessment year. It is not the case of the Department that the assessee has failed to file a return under Section 139 of the Act or failed to respond to the notice issued under Section 142 or Section 148 of the Act. The only other issue is whether there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for this assessment year. If the assessee furnishes all the details for the purpose of assessment, the AO would have issued notice u/s.143(2) of the Act for the purpose of completing the assessment u/s.143(3) of the Act originally. Further, there was no allegation from the AO that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The AO cannot proceeds further to reopen the assessment on the ground that the income escaping assessment without any fresh tangible material and only by relying on the decision of Special Bench of ITAT,Chennai in the case of M.Ragunandam Vs. I.T.O (1985) 11 ITD 298 (Mad.Tri.) (SB). For the purpose of assumption of jurisdiction u/s.147 of the Act, the AO must have reason based on the materials that there has been an income escaping assessment , which warranted assuming of jurisdiction u/s.147 of the Act. An perusal of the assessment order shows that the AO had not mentioned that there are materials for escapement of income. The AO also did not record any reason that there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that assessment year. The ld. Assessing Officer had failed to record anywhere his satisfaction or belief that income escaped chargeable to tax had escaped assessment on account of failure of assessee to disclose fully and truly material facts necessary for assessment and the issuance of notice u/s.147 of the Act beyond the period of four years from the end of the relevant assessment year was wholly without jurisdiction and cannot be sustained. More so, there was no tangible material to show the income escaped from the assessment. Being so, I am inclined to quash the assessment order itself. Since I have quashed the assessment order itself, I refrain from going into other grounds raised by the assessee on merit.
9. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 31st August, 2017.