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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI S.S. GODARA & SHRI PRADIP KUMAR KEDIA
आदेश / O R D E R PER PRADIP KUMAR KEDIA - AM: The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax(Appeals)-5, Ahmedabad [CIT(A) in short] dated 15/01/2015 arising in the
ITA No. 776/Ahd/2015 Mrs. Sejal J.Panchal vs. ITO Asst.Year – 2006-07 - 2 - assessment order for Assessment Year Assessment Year (AY) 2006-07 dated 14/02/2014 passed under s.143 r.w.s.147 of the Income Tax Act, 1961 (hereinafter referred to as "the Act").
The grounds of appeal raised by the assessee are two fold; (i) challenging the jurisdiction under section 147 and (ii) challenging the action of the Assessing Officer (AO) in making certain/disallowances in pursuance of the assumption of jurisdiction under s.147 of the Act.
When the matter was called for hearing, the Ld.AR for the assessee, at the outset, challenged the action of the AO in usurping jurisdiction under s.147 of the Act wrongfully. The Ld.AR claimed that the reasons recorded by the AO does not meet the pre-requisites for assumption of jurisdiction and therefore the notice issued pursuant to such recording of reasons is bad in law. It was thus submitted that the consequent reassessment order is without authority of law. The LdAR pointed out that the action under s.147 has been taken pursuant to notice dated 23/09/2013 which is after the expiry of four years from the end of the relevant assessment year. Consequently, the time limit for issuance of notice as provided under s.149(1)(b) of the Act has expired. The Ld.AR thereafter pointed out that a meager addition of Rs.16,320/- has been made which ostensibly means that income chargeable to tax which has escaped assessment as per the own version of the AO is less than Rs.1 lakh. Therefore, the notice under s.147 could not have been issued
ITA No. 776/Ahd/2015 Mrs. Sejal J.Panchal vs. ITO Asst.Year – 2006-07 - 3 - in terms of section 149 of the Act. The Ld.AR thereafter submitted that a bare reading of the reasons recorded would show that the AO based on certain information received pursuant to search in the case of Mahasagar Securities Ltd. has proposed to reopen the case for “detailed verification on various aspects”. The Ld.AR submitted that its ostensible that the AO did not form any firm reason to believe contemplated under s.147 of the Act towards escapement of income. The plain reading of the reasons provided would show that the AO merely wanted to make enquiry to find out the correctness of the information so received from other agencies. The Ld.AR accordingly submitted that a bonafide ‘belief’ towards escapement of income is clearly absent in the case. The Ld.AR accordingly submitted that the entire action of the AO is a complete non- starter and requires to be struck down.
The Ld.DR, on the other hand, submitted that the time limit prescribed under s.149 for issuance of notice under s.147 of the Act is not applicable since the likely escapement at the time of recording of reasons was more than Rs.1 lakh which whittled down at assessment stage. The Ld.AR relied on the order of the CIT(A) for upholding the action of the AO under s.147 of the Act.
We have carefully considered the rival submissions. We have also perused the reasons recorded for issuance of notice under s.147 of the
ITA No. 776/Ahd/2015 Mrs. Sejal J.Panchal vs. ITO Asst.Year – 2006-07 - 4 - Act which is under challenge. It will be apt to reproduce the reasons recorded hereunder:-
“The Search & Seizure action carried out by the Department on 25.11.2009 in the case of M/s. Mahasagar Securities Ltd., and also covered its group companies which were controlled by Shri Mukesh M. Choksi, at Mumbai. Shri Makesh M, Choksi himself admitted that my ail -group companies are providing entry for taking profit or toss by showing purchase or sale of the shares and securities to various parties across India on which I charged certain commission from the beneficiary parties. The same information received by this office from the Director of Income-tax (I & C.I.), New Delhi, vide letter dated 07.03.2013. On deep scrutinized of the data/details received in this office it is ascertain that you also involved in the taking entry from the group companies belongs to Shri Mukesh Choksi during the F.Y. 2005- 06 for taking fictitious entries by showing purchase and sale of share and securities. Thus in your case said transactions should be required for detailed verification from various aspects".
5.1. A bare glance of the reasons recorded gives unmistakable impression that the action under s.147 of the Act was taken for detailed verification of the various aspects of the reference made to the AO in consequence of search in case of a third party. Thus, it is evident that no definite formation of belief towards escapement of income was made at the time of issuance of notice. The AO has not even come to a prima- facie conclusion towards escapement of income. What the AO intended is to make objective enquiry into the correctness of the information received from other wing of the department and find out if there is any
ITA No. 776/Ahd/2015 Mrs. Sejal J.Panchal vs. ITO Asst.Year – 2006-07 - 5 - escapement of income. The AO merely seeks to conclude that there is a case for investigation towards truth of the alleged transactions. This is not the same thing as saying that there are ‘reasons to belief’ that some chargeable income has escaped assessment. Ostensibly, the AO at best has made out a case of ‘probable’ escapement in distinction to a definite conclusion of escapement of income. Thus, the requirement of section 147 is clearly not fulfilled.
5.2. Needless to say, provisions of section 147 which gives power to reopen a completed assessment can be invoked only when the conditions precedent for exercising the jurisdiction exists. Exercise of power under s.147 of the Act cannot be made on the basis of mere ipsi dixit of revenue. It is well settled by plethora of judicial precedents that reopening is not permissible merely seeking to investigate the facts collected without holding atleast prima-facie belief based on relevant material towards escapement of income. The conditions have not been met. Hence, the notice issued under s.147 of the Act is not backed by authority of law and consequently bad in law. The assessment as a sequel to such illegal notice is therefore null and void and requires to be quashed.
ITA No. 776/Ahd/2015 Mrs. Sejal J.Panchal vs. ITO Asst.Year – 2006-07 - 6 - 6. In the result, assessee succeeds on legal ground towards validity of jurisdiction under s.147 of the Act. Hence, we do not consider it necessary to dwell upon the merits of the case.
In the result, appeal of the assessee is allowed.
This Order pronounced in Open Court on 13 / 12 /2017
Sd/- Sd/- (एस.एस.गोदारा) (�द�प कुमार के�डया) �या�यक सद�य लेखा सद�य ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 13/ 12 /2017 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-5, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad