DHARMENDRA BHANDARI,NEW DELHI vs. DCIT, FARIDABAD

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ITA 2488/DEL/2017Status: DisposedITAT Delhi01 June 2018AY 2010-117 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal quashed the reassessment order, holding that the AO's reasons for reopening were based on a need for verification rather than a firm belief of income escapement. The Tribunal followed the Gujarat High Court's decision that reopening is not permissible for mere verification.

What were the facts?

The assessee's income was reassessed after a notice under section 148 was issued. The Assessing Officer (AO) believed that an investment of Rs. 6,50,000 in share application money was from undisclosed sources and had escaped tax. The assessee objected to the reassessment proceedings.

What were the issues?

Whether the reassessment proceedings initiated by the AO were valid when the reasons recorded indicated a need for verification rather than a belief of income escapement.

Which sections of the Income-tax Act were involved?

Section 148,Section 147,Section 143(3)

AI-generated summary — verify with the full judgment below

Before: Shri H.S. Sidhu

This appeal is filed by the assessee against the order dated 05.2.2016 passed by Ld. CIT(A), Muzaffarnagar for Assessment Year 2006-07.

2. The grounds raised in the appeal as under:-

1.

That the notice issued VIs 148 and reassessment order

passed u/s. 147 r.w.s. 143(3) are illegal, bad in law and without jurisdiction.

2.

That, in view of the facts and circumstances, no satisfaction

is recorded by the assessing officer. as required Vis

147/148 of the Act prior issuing the notice under section 147 of the Act.

3.

The addition! disallowances made by the assessing officer

are illegal, unjust, highly excessive and are not based on any material on record by the assessing officer. The total income of the appellant has been wrongly and illegally computed by the assessing officer at Rs.9,03,OOO.OO as against declared income of Rs.99,700.00.

4. That, the assessing officer has erred in making addition of Rs.6,50,OOO.OO on account of CASH available. The CIT (A) has also erred in upholding the same.

5. That the Assessing Officer, in view of the facts and circumstances of the case erred on facts and in law in making the ad-hoc addition/disallowance on estimated basis, which is unjust, arbitrary, unlawful, highly excessive, based on surmises and conjectures and cannot be justified by any material on record.

6. The CIT(A)/Assessing Officer has erred in not providing proper and adequate opportunity of hearing to the Appellant to place the evidence/details on record to substantiate its claim during the assessment proceedings.

7. The additions made and the observations made are unjust, unlawful and based on mere surmises and conjunctures. The additions made cannot be justified by any material on record and also excessive. The CIT(A) erred in upholding the same.

8. The CIT (A) has failed to appreciate, the explanation given in the evidence produced, material placed that has been made available on record has not been properly considered and judicially interpreted and the same do not justify the additions/ allowances made.

9.

The interest under Section 234A, 234B & 234C has been wrongly and illegally charged as the Appellant could not have foreseen the additions/ disallowances made and could

not have included the same in current income for payment of Advance tax. The interest charged under various sections is also wrongly worked out.

10.

The Appellant craves leave to add, amend, alter and or modify the grounds of appeal of the said appeal.

All of the above grounds of appeal are without prejudice and are mutually exclusive to each other.

3. The brief facts of the case are that after recording reasons, notice under section 148 of the Income Tax Act, 1961 was issued on 25.2.2013. Initially the assessee objected the initiation of proceedings, which has been decided as per order passed on 14.2.2014. In response thereto, the assessee filed copy of return filed initially on 19.7.2006 with written petition dated 30.10.2013. the assessee has also enclosed chart of taxable income and copy of state of affairs (capital account, balance sheet) as on 31.3.2006. Later, notices u/s. 143(2) and 142(1) of the Act were issued calling for specific evidences and clarifications which were discussed with the A.R. of the assessee. After accountability of facts and evidence, as filed, notice u/s. 142(1) of the Act was also issued on 26.2.2014, fixing date on 4.3.2014 and personal presence was also required to ascertain reality and on the date of hearing fixed, no compliance has been made. Even no application for adjournment has been filed. As such, taxable income was computed after accountability and totally of facts and queries raised for compliance vide notices dated 26.2.2014 and income of the assessee was assessed at Rs. 9,03,000/- u/s. 147/143(3) of the I.T. Act, 1961 vide order dated 14.3.2014. Against the assessment order, the Assessee appealed before the Ld. CIT(A), who vide his impugned order dated 29.8.2017 has partly allowed the appeal of the assessee.

4.

Being aggrieved by the same, the assessee is before the Tribunal.

5.

At the time of hearing, Ld. Counsel of the assessee has filed a Paper Book containing pages 1 to 22 in which he has attached the copy of reasons recorded u/s. 148 of the Act for the assessment year 2006-07; Written Explanation; copy of acknowledgement of ITR alongwith computation for the AY 2006-07; copy of reply in the 4 assessment proceeding before ITO, Ward 1(1), Muzaffarnagar dated 30.10.2013; copy of reply in the assessment proceeding before ITO, Ward 1(1), Muzaffarnagar dated 26.2.2014; copy of acknowledgment of ITR alongwith computation for the AY 2005-06; copy of acknowledgment of ITR alongwith computation for the AY 2005-06; copy of acknowledgement of ITR alongwith computation for the AY 2004-05; copy of acknowledgement of ITR alognwith computation for the AY 2003-04; copy of share application form; copy of order disposing objection by the AO and copy of objections. He further submitted that notice issued u/s. 148 of the Act and reassessment order passed u/s. 147 r.w.s. 143(3) of the Act are illegal, bad in law and without jurisdiction. He further submitted that no satisfaction is recorded by the AO as required u/s. 147/148 of the Act prior issuing the notice under section 147 of the Act. He draw my attention towards page no. A to B of the Paper Book which is a copy of reasons recorded under section 148 of the Act for the assessment year 2006- 07 and stated that the AO was totally failure to record, his own satisfaction before initiation of proceedings, that, there was a escapement of income. He further stated that in the reasons recorded the AO has observed that the “The amount so invested in share application money needs verification”. However, he stated that as per the Order dated 27.6.2016 of the Hon’ble Gujarat High Court at Ahemdabad in Special Civil Application No. 4646 of 2016 in the case of Sampatraj Dharmichand Jain vs. ITO “reopening may not be permitted for mere verification purpose.” In view of above, he requested to follow the aforesaid ratio and quash the reassessment.

6.

On the contrary, Ld. DR relied upon the orders of the authorities below and reiterated on the findings of the authorities below, but 5 could not produce any contrary decision.

7.

I have heard both the parties and perused the records, especially the impugned order as well as the Order dated 27.6.2016 of the Hon’ble Gujarat High Court at Ahemdabad in Special Civil Application No. 4646 of 2016 in the case of Sampatraj Dharmichand Jain vs. ITO. For the sake of clarity, I am reproducing the reasons recorded u/s. 148 of the Act in the case of the assessee (Paper Book Page-B) as under:-

“Reasons for initiating proceedings u/s. 148 of the I.T. Act, 1961 in the case of Smt. Neeta Agarwal W/o Rajeev Agarwal.

“The assessee has invested an amount of Rs. 6,50,000/- in share application during FY 2005-06 whereas income as per intimation under section 143(1) dated 13.9.2006 has been shown as Rs. 99,7000/-.

The amount so invested in share application money needs verification.

I have reason to believe that the investment of Rs. 6,50,000/- in share application money and extent of availability during the year 2006-06 is form undisclosed sources which is escaped to tax.”

7.1 After perusing the aforesaid reasons recorded by the AO, I find that AO himself was of the view that the amount so invested in share application money needs verification, despite that he has the reason to believe that the investment of Rs. 6,50,000/- in share application money and extent of availability during the year 2006-07 (wrongly mentioned in the reasons recorded as “2006-06”) is from (wrongly mentioned in the reasons recorded as “form”) undisclosed sources which is escaped to tax, which is not sustainable in the eyes of law as laid down by the Hon’ble Gujarat High Court at Ahemdabad in Special Civil Application No. 4646 of 2016 in the case of Sampatraj Dharmichand Jain vs. ITO vide order dated 27.6.2016, wherein it has been observed that “reopening may not be permitted for mere verification purpose.” Therefore, respectfully following the aforesaid precedent, I quash the reassessment order. Since the reassessment has been quashed, the other grounds on merits have become academic, hence, are not being adjudicated.

8.

In result, the Appeal of the assessee is allowed.

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