SHRI K. ASHOKKUMAR,MUMBAI vs. ACIT., CIR.-23(2), MUMBAI

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, , , , मुंबई आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण मुंबई मुंबई “ए” खंडपीठ मुंबई खंडपीठ खंडपीठ खंडपीठ Income-tax Appellate Tribunal -“A”Bench Mumbai सव�ी जोिग�दर�सह �याियक सद�य एवं राजे��,लेखा सद�य Before S/Sh.JoginderSingh,Judicial Member and Rajendra,Accountant Member आयकर अपील सं./I.T.A./2323/Mum/2009,िनधा�रण वष� /Assessment Year: 2001-02 K.Ashokkumar ACIT Circle 23(2) C/o.Sanjay Sharma & Co. BKC,Bandra(E)Mumbai-51 17,Azad Shopping Center,2nd floor Vs. Grampanchayat Road,Goregaon(w) Mumbai-400062 PAN:AGQPK 0437 M आयकर अपील सं./I.T.A./3462/Mum/2011,िनधा�रण वष� /Assessment Year: 2001-02 K.Ashokkumar Vs. ACIT Circle 23(2) C/o.Sanjay Sharma & Co. BKC,Bandra(E)Mumbai-51 (अपीलाथ� /Appellant) ( !यथ� / Respondent) Revenue by:Sh.Rajesh Kumar Yadav Assessee by:Sh.G P Mehta सुनवाई क" तारीख / Date of Hearing: 20.04.2017 घोषणा क" तारीख / Date of Pronouncement: 20.04.2017 आयकर अिधिनयम अिधिनयम,1961 क� क� धारा धारा 254(1)केकेकेके अ�तग�त अ�तग�त आदेश आदेश आयकर आयकर आयकर अिधिनयम अिधिनयम क� क� धारा धारा अ�तग�त अ�तग�त आदेश आदेश Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य सद�य राजे�� राजे�� केकेकेके अनुसार अनुसार PER RAJENDRA, AM- लेखा लेखा लेखा सद�य सद�य राजे�� राजे�� अनुसार अनुसार Challenging the orders dated 10/07/2007 and 15/02/2011, of the CIT (A)- 33, Mumbai, the Assessee has filed the above two appeals. The first appeal is about quantum additions , whereas the second appeal deals with penalty levied under section 271(1)(c)of the Act.Assessee,an individual, derives income from salary, business and profession and other sources.He filed his return of income on 21/07/2001, declaring income of Rs. 27.94 lakhs. Initially, the return was processed under section 143 (1) on 11/12/2002. The Assessing Officer(AO)issued a notice under section 148 of the Act, on 17/07/2003, as he was of the opinion that the assessee had not disclosed his true and correct income and that income had escaped taxation. The AOcompleted the assessment,u/s. 143 (3) read with section 147 of the Act,on 31/10/2003, determining the income of the assessee at Rs. 62.27 lakhs.

2.The assessee,vide its application dated 08/05/2015, has filed additional ground of appeal.It his application,he has stated that issue raised by it is of legal nature, that the grounds raised by him would not require appreciation of any new evidence or material.During the course of hearing before us,the Authorised Representative (AR) reiterated the submissions that are part of the ITA/2323/M/2011K.Ashokkumar application filed for admission of additional ground. The Departmental Representative (DR) left the issue to the discretion of the bench. We find that the assessee has raised ground about the validity of the reassessment proceedings stating that the notice issued under section 148 was void.In our opinion,the ground raised by the assessee, under rule 11 of the Income Tax Appellate Tribunal, Rules, 1963, does not require the appreciation of the facts and it is purely legal ground. As the issue is about the basic jurisdiction and validity of the assessment order passed by the AO, so, in our opinion same is to be to be admitted as additional ground.

3.Before us, the AR argued that there was no tangible material with the AO to suggest that taxable income had escaped assessment, that the order passed by him was ab-initio void, that the basic conditions laid down in section 147 of the Act were not satisfied, that the notice issued under section 148 was invalid, that the order passed by the AO should be quashed. He referred to the reasons recorded by the AO and stated that the reasons clearly prove that the AO had reopened the assessment without any basis. He referred to the cases of Kelvinator of India Ltd. (320 ITR 561),Janak Texturisers Private Ltd. (ITA/4914/Mumbai/2009-AY.2003-04,dated 16/12/2015). The Departmental Representative(DR) supported the order of the AO and the First Appellate Authority(FAA).

4.We have heard the rival submissions and perused the material before us. In our opinion the jurisdiction issue has to be decided first because it goes roots of the matter. We’re reproducing the reasons recorded by the AO and same reads as under: “17/7/2003. The assessee has filed the return of income claiming refund of Rs. 9, 66, 815/-on 31.7. 2001. The same has been processed under section 143 (1) on 11/12/2002. The case has been received by this charge on 23/5/2003. On observation it is seen that the assessee had claimed some deduction to reduce his tax liability. While his sale is amounting to Rs. 85, 460/-, the assessee claimed expenses approximately 18 lakhs rupees. Therefore, it has been reported to the Addl.C.I.T. 27/5/2003. After his direction dt. 5. 6. 203 since there is reason to believe that the income has been escaped. A notice u/s. 148 dt. 17 .7. 2003 is issued.” If we analyse the reasons recorded by the AO, it becomes clear that he has taken a decision to issue the reassessment notice as per the direction of the Additional CIT,that he was not in possession of any material that could be considered to be lead to the belief that taxable income had escaped assessment.Re-opening of completed assessment is not a routine matter.Provisions of section 147 should be invoked in deserving cases.It is said that each re-opened case has to be decided on its own merits and reopening of assessment has to be viewed on the touchstone of the ITA/2323/M/2011K.Ashokkumar reason to believe as recorded while issuing the notice. The reasons recorded cannot be supplemented by affidavits and other material.In the case before us,the AO has stated that the assessee had claimed deduction to reduce his tax liability.Which were the deduction and how much was the tax effect is not mentioned in the reasons.Reasons recorded by the AO are of very general nature-rather they can be termed vague.Prvisions of section 147 cannot be invoked on such frivolous grounds.Non application of mind is evident from the sentence that notice was issued as per the direction of the Addl.CIT.Thus,the entire re-opening proceedings stand vitiated. We would like to refer to the case of Godrej Industries Ltd.(377 ITR1)of the Hon’ble Bombay High Court that deals with re-opening of cases as per the provisions of section 147 of the Act.It reads as under: “An assessment can be reopened under section 147 and section 148 of the Income-tax Act, 1961, only on the jurisdictional requirement for reopening of an assessment being strictly satisfied. This is for the reason that a reopening of an assessment would disturb a settled position by reopening a completed proceeding. Normally, the jurisdictional requirements to be satisfied for issuing of a reopening notice are (a) the Assessing Officer must record his reasons for issuing a reopening notice before issuing the notice ; (b) the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment and this must be recorded in his reasons ; (c) the Assessing Officer should not have considered the issue on which the reopening is sought during the regular assessment proceedings. In case the issue has been considered even if evidenced by asking questions then such an attempt to reconsider would not be permitted on ground of being a mere change of opinion ; (d) the reopening of an assessment must be on tangible material and the grounds for reopening must be recorded before issuing of notice for reopening of an assessment ; (e) these grounds recorded for reopening of an assessment must disclose a live link between the tangible material and the reason to believe that income chargeable to tax has escaped assessment ; (f) in the case of assessments sought to be reopened beyond a period of four years from the end of the relevant assessment year then there should have been a failure on the part of the assessee to truly and fully disclose all material facts necessary for assessment ; and (g) sanction of a superior officer to the reasons recorded, where required, in terms of section 151 should have been obtained before issuing of the notice. All the above jurisdictional requirements have to be satisfied cumulatively, wherever applicable. Therefore, even if one of the numerous jurisdictional requirements necessary for the issue of reopening notice is not satisfied, the reopening of an assessment fails. The sustainability of the reopening notice would be tested only on the basis of the reasons recorded at the time of issuing the notice. These reasons cannot be added to, deleted from or supplemented. Besides when a notice for reassessment is challenged, the burden is on the Revenue to establish that the jurisdictional requirement stands satisfied. So far as reason to believe on the part of the Assessing Officer is concerned, at the stage of issuing the notice only a prima facie and not a conclusive case of income escaping assessment should be established to turn down a challenge to the reopening notice.”

ITA/2323/M/2011K.Ashokkumar Considering the above,we hold that the re-assessment proceedings initiated by the AO were invalid.Hence,the order passed by him is an ab intio void order.We decide the jurisdictional issue in favour of the assessee.As the order of the AO has been held not to be a valid order,so,we are not deciding the other issues raised by the assessee. I.T.A./3462/Mum/2011: The AO had levied penalty u/s.271(1)(c)of the Act for concealing particulars of income and for furnishing inaccurate particulars.As we have already held that the order of the AO was not valid, so,the penalty for the year under appeal would not survive.