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Income Tax Appellate Tribunal, “A”BENCH, MUMBAI
PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of order of CIT (A)-30, Mumbai passed in appeal No.CIT (A)-30/ACIT-19(1)/IT-55/09-10 date 31st January, 2012. Assessment was framed by the ACIT, Circle-19(1), Mumbai for assessment year 2000-01 vide his order dated 31-12-2007 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter as “the Act”).
The first issue in this appeal of the assessee is against the order of the CIT (A) confirming the reopening of assessment u/s 147 read with Section 148 of the Act. For this, the assessee has raised the following ground:- “1. Reopening per se invalid:- The ld. CIT(A) erred in upholding the re-opening of assessment made by ld. ACIT without having any material on record against the appellant to re-open his assessment, without independent application of mind and also without the ld. JCIT applying his mind before granting sanction”. During the course of hearing Ld. Counsel for the assessee also stated that the reopening cannot be held to be valid for the reason that the additions made in respect of items other than the item for which the assessment was reopened is unsustainable and is liable to be quashed.
Brief facts of the case are that the assessee filed his return of income for the relevant assessment year 2000-01 on 09-08-2000. This return was processed u/s 143(1) of the Act on 31-07-2001. Subsequently, the AO received information regarding capitation fee / donation for admission to D. Y. Dental College and Hospital, Nerul in the case of Ms. Reema Kashyap Shah (daughter of the assessee) from the office of DDIT(Inv.), Unit-III, Mumbai vide their letter No. DDIT (Inv)/U-VIII (3)/information/2006-07/9 dated 05-03-2007. The AO reopened the assessment by issuing notice u/s 148 of the Act on 26-03-2007. The AO recorded the following reasons:- “Reasons for belief that income has escaped assessment The assessee has filed the return of income for A. Y. 2000-01 on 09/08/2000 determining total income of Rs.12,96,560/-. The return is processed u/s 143(1) on 31/07/2001. An information has been received from DDI(Inv), Unit VIII(3), Mumbai vide letter No.DDIT(Inv.)/U-VIII(3)/Information/2006-07 dated 05-03/2007 that Miss Rima Kashyap Shah, 101, Mangal Milan, East Avenue, Sharad Chaterji Rs.8,86,830/- and Rs.19,500/- Road, Santacruz (W), Mumbai 400 054 has paid Capital fees/Donation of Rs.10,90,000/- on 10/06/1999 for admission to D. Y. Patil Dental College and Hospital, Nerul. Shri Kashyap Lalbhai Shah, father of Miss K. Shah is assesses to tax in this case under Permanent Account No. AABPS6722L. On going through the return filed by Shri Kashyap L. Shah it is found that he has not shown the amount of Rs.10,90,000/- paid for the Capitation Fees/Donation in the return of income. Being the father of Miss Rima K. Shah, he has paid the amount and as such the amount of Rs.10,90,000/- is not reflected in the return of income filed by Shri Kashyap L. Shah. I have reason to believe that the amount paid is out of his undisclosed income which is an escaped assessment. Sd/- (S. P. VORA) A. C.I.T. 19(1), MUMBAI”. Thereafter, the AO framed the assessment by making the following additions:- i) “Capitation Fees/Donation Rs. 10,90,000/- ii) Loan unproved Rs. 2,07,000/- iii) Unapproved NRI gifts Rs. 18,86,830/- iv) Unapproved gifts Rs. 19,500/- Total Rs. 38,02,171/-“
Aggrieved, the assessee preferred appeal before the CIT (A). The assessee before the CIT (A) challenged the reopening, who confirmed the reopening vide Para 3.2 of appellate order as under: 3.2 The appellant has submitted before me that the reopening is bad in law. He has stated that Rima and not the appellant is alleged to have paid capitation fees / donation and therefore, reopening of appellant’s case is without application of mind. In the instant case, information received was regarding payment of capitation fees/donation. It is common practice that the parents pay fees etc. for their children. Therefore, the AO was right in his belief that capitation fee/donation of Rs. 10,90,000/- was not shown by the appellant who is father of Rima. The AO is not required to make enquiries before reopening the assessment. He had enough evidence in his possession in the form of information from DDIT(Inv.), Mumbai to form a belief that it is a fit case for reopening. He had obtained prior approval of the JCIT Range 19(1) before issue of notice u/s.
The appellant has submitted before me that JCIT Range 19(1) has accorded permission without application of mind. I do not agree with the submission of the appellant. There was enough documentary evidence available on record for satisfaction of JCIT regarding reopening of assessment. It is a settled position of law that in a case, where the information is received from an agency regarding certain income or expenditure which has not been shown by the assessee in his / her return of income, then it is incumbent upon the A.O. to initiate reassessment proceedings. In this case, information was received from DDIT(Inv) Unit-III, Mumbai regarding the capitation fees of Rs. 10,90,000/- which the appellant has not shown in his return of income and therefore, reassessment proceedings were initiated. Thus, the A.O. is fully justified in reopening the case and initiating the reassessment proceedings. Further, the A.O. has duly followed the procedure by recording the reasons for reopening the case and taking prior approval of the JCIT concerned. Thus, in my considered view, the reopening of assessment has been validly initiated and the action of the A.O. in this regard is confirmed. There is no infirmity in reopening the assessment. This ground of appeal is dismissed.” Aggrieved, now the assessee is in second appeal before the Tribunal.
4. At the outset, the learned Counsel for the assessee drew our attention to CIT (A)’s order and stated that the addition qua reasons recorded regarding capitation fee / donation has been deleted by the CIT (A) after considering the remand report of the AO vide Para 4.2 of his appellate as under:-
“4.2 Since the AO has stated in his remand report that there is no documentary evidence for payment of capitation fees / donation, the addition of Rs.10,90,000/- is required to be deleted. Accordingly the AO is directed to delete the addition of Rs.10,90,000/-. These grounds of appeal are allowed”. The learned Counsel for the assessee stated that this is the only reason recorded for reopening of assessment and that does not survive now. In view of this, the learned Counsel for the assessee stated that this issue fully stands covered in favour of the assessee by the decision of the Hon’ble Bombay High Court in the case of Jet Airways India Ltd. [(2011) 331 ITR 236 (Bom)] and the decision of the Hon’ble Delhi High Court in the case of CIT Vs Living Media India Ltd. [(2013) 359 ITR 106 (Del)].
We have heard the rival contentions and have gone through the facts of the case. We find from the facts of the case are that the AO has recorded the reasons that Ms. Rima Kashyap Shah (D/o Assessee) has paid capitation fee for admission to D.Y. Patil Dental College and Hospital, Nerul amounting to Rs. 10.90 Lacs on 10/06/99 for admission in Dental College in Dental Course. It is also a fact that the CIT (A) has deleted this addition of Rs. 10.90 Lacs on the basis of which assessment was reopened. Now in respect to the payment of capitation fee being the only reason for which the assessment was reopened, the reopening proceedings cannot continue to exist. We are of the view that the Assessing Officer may assess or reassess such income under section 147 of the Act, which he has reason to believe has escaped assessment and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the assessment proceedings. But in case the AO does not include a particular income with respect to which the income has escaped and reasons recorded under section 147 r. w. s 148 of the Act, it is not open to him independently to assess any other income while framing reassessment. This view of ours is supported by the Hon’ble Bombay High Court in case of Jet Airways (I) Ltd. (supra) wherein it is held that,
“if the income, the escapement of which was the basis of the formation of the reason to believe is not assessed or reassessed, it would not be open to the Assessing officer to independently assessed only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment”. Similarly Hon’ble Delhi High Court in the case of Living Media India Ltd. (supra) has adjudicated the identical issue and held as under:-
“9. Having heard the counsel for the parties, the first point which needs to be examined is whether the proceedings under Section 147/148 were validly initiated or not. We have already noticed above that the purported reasons recorded on 19.01.2010 only contain the issue with regard to bad debts. It is only subsequently that, sometime in October 2010, additional reasons were recorded with regard to the issue pertaining to unabsorbed depreciation and the disallowance under Section 14A of the said Act. In our view, the additional reasons could not have been recorded. The notice under Section 148 would stand or fall depending upon the reasons prior to the issuance of the notice. In the present case, according to the learned counsel for the respondent/assessee, no notice under Section 148 of the said Act has been issued pertaining to the purported additional reasons which were allegedly recorded sometime in October 2010 and served upon the assessee on 29.10.2010. Therefore, the additional reasons cannot be looked into for the purposes of determining the validity of the proceedings initiated under the notice dated 19.01.2010 issued under Section 148 of the said Act.
That being the position, the only thing that has to be seen is whether the reasons recorded on 19.01.2010 could, at all, form the basis of reopening of an assessment under Section 148 of the said Act. One point is clear, in that so far as the issue of bad debts is concerned the present appeal is not concerned with it and therefore, the deletion of the addition made on account of bad debts has become final. Until and unless, there was an addition on the basis of the original reasons, no other additions could be made in view of the expression "and also" used in Explanation 3 to Section 147. This was the subject matter of the decision of the Bombay High Court in the case of CIT v. Jet Airways: 331 ITR 236 (Bom). This was followed by this Court in Ranbaxy Laboratories Limited v. CIT: 336 ITR 136 (Delhi) and also in CIT v. Software Consultants: 341 ITR 240 (Delhi). It was also subject matter of a recent decision of this court in the case of CIT v. Cheil Communications India Pvt. Ltd.: decided on 17.04.2013. Therefore, no additions in Assessing Officer.” In view of the above jurisdictional High Court decision and Hon’ble Delhi High Court, we are of the view that the reassessment framed is bad in law and hence quashed.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on 09/09/2016.