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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Per Shri A.T.Varkey, JM
This is an appeal filed by the assessee against the order of Ld. CIT(A)-6, Kolkata dated 19.01.2017 for AY 2009-10. 2. The sole issue raised by the assessee is against the action of the CIT(A) in confirming the action of AO to reopen the assessment for the reason that the assessee did not reflect the capital gains received from the sale of property and that the assessee did not disclose the source for purchase of bonds/debentures or Rural Electrification Corporation to the tune of Rs.13,20,000/-. However, the AO did not make any addition on the reasons recorded for reopening the assessment but made an addition of Rs. 2 lacs which was found credited in the bank account of the assessee. According to the assessee, the reassessment, if any, must be in the first place should be in respect of income which has purportedly escaped assessment for which the reasons were recorded and only thereafter, in respect of some other items of escaped income, if any, assessment can be made which is not the case in the present appeal and, therefore, the order of reassessment is bad in law.
2 ITA No.339/Kol/2017 Mita Saha (Khan), AY 2009-10 3. The brief facts of the case are that the assessee who is a doctor working with the medical services of Govt. of West Bengal, had filed her return of income on 31.07.2009 computing net income of Rs.5,31,290/-. Thereafter, on 04.01.2013, the AO recorded the reasons for reopening u/s. 147/148 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) and issued notice to the assessee on 04.01.2013. The reasons recorded for reopening is as given below:
“In the instant case, assessee filed return of income on 31.07.2009 declaring total income of Rs. 5,31,293/-. The Return was processed u/s. 143(1) on 23.02.2011 as per return. But, as per ITS details on AIR information, the assessee had sold immovable property valued at Rs. 2,63,00,000/- on 19.08.2008. Further, the assessee had paid a sum of Rs.13,20,000/- on 31.07.2008 for acquiring bonds/debentures of Rural Electrification Corporation Limited during the relevant financial year. No reflection of above transactions is seen in the return of income submitted on 31.07.2009. Further, in the particulars submitted on 20.12.2012 in connection with this office letter dated 22.08.2012, the assessee had not made any mention of those transactions. Therefore, it is clear that the assessee had not taken into account the income on Capital Gain on sale of property. Further, the source of investment for Rs. 13,20,000/- was not accounted for. In view of the above, I am of the opinion that the income of the assessee had escaped assessment within the meaning of Section 147 of the I.T. Act, 1961. So, issue notice u/s. 148 for AY 2009-10.”
From a perusal of the above reasons recorded for reopening it is very clear that for two issues the AO thought it necessary to reopen the assessment. According to AO, assessee has sold her immovable property valued at Rs.2,63,00,000/- on 19.08.2008 which has not been duly reflected in the return of income and the assessee has paid a sum of Rs.13,20,000/- for acquiring bonds/debentures of Rural Electrification Corporation Ltd. on 31.07.2008 source of which has also not been reflected in the return of income. Therefore, according to AO, the capital gain on account of sale of property as well as source of investment for Rs.13,20,000/- was not accounted for and so he was of the opinion that income of the assessee has escaped assessment on these two issues. However, in the order passed on 25.3.2004 by the AO pursuant to the reopening the assessment as per reasons recorded (supra), it reveals that there is no mention or whisper about the capital gains or the source of purchase of the bonds/debentures for Rural Electrification Corporation and that the AO has not taken on any adverse view on these two issues. However, the AO has noted
3 ITA No.339/Kol/2017 Mita Saha (Khan), AY 2009-10 a new fact that an amount of Rs. 1 lac each was deposited in SBI and Axis Bank respectively which, according to AO, the assessee failed to explain whereas the assessee explained that these were advance payment for sale of pond owned by the assessee and since the sale transaction has not completed it was not shown in the return filed by her. However, the AO made the addition of Rs. 2 lacs. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to dismiss the appeal of the assessee and confirmed the action of the AO. The main grievance of the assessee is that the AO for the reasons recorded (supra) had reopened the assessment and he could not find during reassessment proceedings that there was any escapement of income on these two counts for which he had recorded reasons to enable him to reopen the assessment in respect of escapement of these two incomes. Hence, according to assessee, the AO cannot make any addition which was not mentioned in the reasons to reopen without first making any assessment on the reasons recorded to reopen, which is not the case in the present appeal. We note that the jurisdictional High Court in ITAT No. 60 of 2014 in GA No. 1736 of 2014 CIT Vs. M/s. Infinity Infotech Parks Ltd. has taken similar view after taking note of the Hon’ble Delhi High Court judgment in Ranbaxy Laboratories Vs. CIT 336 ITR 136 and Hon’ble Bombay High Court in CIT Vs. Jet Airways India Ltd. 331 ITR 236 approved the Tribunal’s view on the same which is reproduced as under:
“We further find that similar view was taken by the Hon’ble Bombay High Court in the case of CIT Vs. Jet Airways India Ltd. (supra) and the Hon’ble Delhi High Court in the case of Ranbaxy Laboratories India Ltd. (supra). The ratio laid down in these decisions is that reassessment must be in the first place, be in respect of income escaped assessment for which the reasons were recorded and only thereafter in respect of some other items of escaped income. If, however, the income, escapement of which was the foundation for recording of reasons to believe, is not assessed or reassessed in the order under section 147, then it is not mere open to the AO to independently assess any other income, which comes to his notice subsequently.”
Since we have taken note that there is no whisper about the sum of Rs. 2 lacs found in the bank account has been mentioned in the reasons for reopening dated 04.01.2013 no addition in respect of this can be made without making any addition in respect to the items shown to have been escaped assessment in the reasons recorded on 04.01.2013. During reassessment when the AO finds that the two items on the basis of which he reopened does not survive, then the reasons recorded to reopen loses its significance and the AO’s
4 ITA No.339/Kol/2017 Mita Saha (Khan), AY 2009-10 jurisdiction to reassess is fragile in the eyes of law and thereafter he should have dropped the reassessment proceeding there only. Therefore, his further fact finding in the absence of any item specified in the reasons recorded which is the foundation on which he reopens no longer subsists, the AO become ‘Quarum non-judice’ and, therefore, the impugned addition is non-est in the eyes of law and so it has to go. Therefore, we allow the appeal of the assessee and direct deletion of the addition of Rs.2 lacs.
In the result, appeal of assessee is allowed. Order is pronounced in the open court on 09.08.2017
Sd/- Sd/- (Dr. A. L. Saini) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 9th August, 2017 Jd.(Sr.P.S.) Copy of the order forwarded to: Appellant – Smt. Mita Saha (Khan), C/o, S. N. Ghosh & Associates, 1. Advocates, “Seven Brothers’Lodge”, PO Buroshibtala, PS. Chinsurah, Dist. Hooghly, Pin-712 105. Respondent – ITO, Ward-1(4), Hooghly. 2 The CIT(A), Kolkata 3. 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order, Sr. Pvt. Secretary