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Income Tax Appellate Tribunal, DELHI BENCH: ‘H’: NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
PER O.P. KANT, A.M.: These two appeals filed by the Revenue are directed against two separate orders, both dated 23rd November, 2009 passed by the learned Commissioner of Income-tax( Appeals)-XXVI, New Delhi in respect of assessments made under section 147/144 of the Income-tax Act, 1961, for the assessment years 2004-05 and 2005-06 respectively. 2. The ground of appeal raised in both the appeals is identically worded, except change of assessment year. Therefore, both the appeals are heard together and disposed of by this consolidated order for convenience and brevity.
2 & 664/Del/2010 AYs: 2004-05 & 2005-06 ITA No. 663/Del/2010, for AY: 2004-05 3. First, we take up the appeal in ITA No. 663/Del/2010. The ground of appeal in ITA No. 663/Del/2010 for assessment year 2004-05, reads as under: “Ld. CIT(A) has erred in annulling the assessment for the AY 2004-05 without considering the fact that the AO has followed all the statutory procedures for reopening the case under section 147 of the IT Act and framing the assessment under section 144 of the IT Act.”
4. The facts in brief are that the assessee, an individual, derived its income from business. The assessee filed his return of income declaring income of Rs. 1,42,607/- on 15/07/2004 which was processed under section 143(1) of the Income-tax Act, 1961 (in short “the Act”). Subsequently, the Assessing Officer (in short “the AO”) issued notice under section 148 of the Act on 20/07/2007 for initiation of proceedings under section 147 of the Act after recording reasons to believe that the assessee had not disclosed an account having credit entries of Rs. 2,26,31,853/- with Punjab and Sindh bank, Naya Bazaar, Delhi. According to the AO, the notice was duly served on the assessee, however, there was no compliance from the assessee. Thereafter, the AO issued notice under section 142(1) and notice under section 143(2) of the Act. For non-compliances of the notices, the AO also initiated penalty proceedings under section 271(1)(b) of the Act, accordingly, the AO completed the assessment under section 144 of the Act. In the assessment, the AO held entire gross credits of Rs. 2,26,31,853/- appearing in bank accounts with Punjab and Sindh bank, Naya Bazaar, Delhi as undisclosed income and after giving deduction of the income of Rs. 1,42,607/- declared in the return of income, the balance undisclosed income of Rs.
3 & 664/Del/2010 AYs: 2004-05 & 2005-06 2,24,89,246/-, was added to the income declared by the assessee. On an appeal, the Ld. Commissioner of Income-tax(Appeals) after taking into consideration various evidences, deleted the addition after holding that proceedings initiated by the AO under section 147 of the Act were not valid. Aggrieved with the finding of the Ld. Commissioner of Income-tax( Appeals), the Revenue is in appeal before the Tribunal.
The Ld. Senior Departmental Representative (DR) relying on the order of the AO submitted that the assessee did not participate in the reassessment proceedings, which were initiated in accordance to law, and therefore, the Ld. Commissioner of Income-tax(Appeals), was not justified in questioning the reassessment proceedings.
On the other hand, the Authorized Representative of the assessee filed paper book containing pages 1 to 142 and submitted that the reassessment proceedings were not in accordance with law and beyond the jurisdiction as firstly, the notice under section 148 of the Act was never served upon the assessee, secondly, that the address mentioned on the notice was different from the address of the assessee, thirdly, both the copies of the notice under section 148 were found placed in the assessment folder and both were unsigned, fourthly the reasons recorded were not sufficient to form a belief that income has escaped assessment. In support of his claim, the Ld. AR relied on the order of the Ld. Commissioner of Income-tax(Appeals).
4 & 664/Del/2010 AYs: 2004-05 & 2005-06 7. We have heard the rival submissions and perused the material on record. In the case of the assessee, the AO received a request from ITO Ward 18(1) for verification of the fact of the payment of Rs. 5 lakhs towards share application money in ‘Unique Plus Agro & Expo private limited’ through a demand draft No. 452458 dated 19 /08/2003 from bank account with Punjab and Sindh bank, Naya Bazaar Delhi. The AO issued letter under section 133(6) of the Act to the aforesaid bank for confirming the fact of purchase of draft by the assessee and also sought copy of bank statement for the entire year. On receipt of the copy of bank statement, the AO observed credits of Rs. 2,26,32,424/-. In the reasons recorded, the AO mentioned that he needed enquiries in respect of those credits. He did not mention any reason how the income escaped the assessment. In the reasons recorded the AO has mentioned as income of Rs. 12 lakh had escaped assessment, but from where and how the figure of Rs. 12 lakh came was not mentioned. The Ld. Commissioner of Income-tax(Appeals) has dealt the objections of the assessee in respect of non-service of the notice as well as lack of credible information on the basis of which he could have a reason to believe that income escaped assessment. The relevant finding of the Commissioner of Income-tax( Appeals) are as under: “4.2 I also find that the AO was requested by the ITO, Ward 18(1) to confirm the factum of investment by the appellant of Rs. 5 Lacs towards share application money in Unique Plus Agro & Expo Pvt. Ltd. through a demand draft no. 452458 dated 19/8/2003 from bank account with Punjab & Sind Bank, Naya Bazar, New Delhi. I also notice that the AO had issued letter u/s. 133(6) to the aforesaid bank on 28/6/2007 for confirming the fact of purchase of draft by the appellant and also sought copy of his bank statement for the period 114/2002 to 31/3/2004. This inquiry was 5 & 664/Del/2010 AYs: 2004-05 & 2005-06 conducted by the AO not in pursuance of any ongoing lawful proceedings. Vide letter dated 7/7/2007, the bank had, in fact, confirmed the fact of payment of Rs. 5 Lacs by demand draft drawn by the appellant on the same bank account for towards the share application of Unique Plus Agro & Expo. A copy of the hank statement for the desired period was also provided by the bank manager to the AO. Since the limited purpose of inquiry u/s. 133(6) was to confirm to the information sent by ITO, Ward 18(1) vide letter dated 22/6/2007 about investigation by appellant in Mls. Unique Plus Agro & Expo Pvt. Ltd. of Rs.5 Lacs, essentially, the inquiry should have ended at that stage and the AO should have informed the ITO Ward 18(1) about this fact that the investment was duly made from the bank of the appellant. However, I observe that the learned AO did not inform the ITO, Ward 18(1) about this fact subsequently even though that was the only purpose of inquiry behind information sought U/3 133(6). Instead of doing the same and closing the matter, the AO went ahead to inquire the credit balances in the bank account of the appellant even when the prescribed time for issue of notice u/s. 143(2) is expired by issue of notice u/s 148. 4.3 The reasons as recorded by the learned AO clearly show that the learned AO wanted to inquire the credit balances in the bank statement of the appellant. The AO was clearly not in possession of any 'information' that could draw any adverse findings regarding escapement of income through credit entries in the bank account. The provision of section 147 empower the AO to start the re-assessment proceedings only when the AO has "reason to believe" that any income charging to tax has "escaped assessment". In the instant case the AO was not in a possession of any information that could be inferred in any possible manner as escapement of income in respect of credit entries, while in the admission of the AO, in the assessment order, the proceedings were initiated for the purpose of carrying out inquiry of credit entries. Since there was no credible 'information', whatsoever that could infer any escapement, obviously the AO could not have any 'reason to believe'. Provisions of section 147 cannot be used for making roving inquiries on the whims and fancies of the Assessing Officer in the absence of any information suggesting escapement of income. The AO ought to have used these provisions carefully in the most judicious manner, in the light of the various judicial decisions and not for the purpose of making roving inquiries. I also observe that the AO initiated proceedings u/s. 133(6) of the Income-tax Act even when no inquiry or proceedings were ongoing in the case of the appellant by the AO. It was moreso not justifiable to use the information gathered u/s. 133(6), -even though was not adverse, for recording the reasons for issue of notice u/s. 148 of the Income-tax Act, when the proceedings u/s. 133(6) themselves were not lawfully correct.
6 & 664/Del/2010 AYs: 2004-05 & 2005-06 4.4 The learned AR has produced the copy of notice u/s. 148 which was unsigned. It is not explainable as to how while on inspection the appellant was provided a copy of the notice which was unsigned but also showing receipt of notice by one "Nirmal" on '21/7/2007. On the other hand, the notice found in case record by me was signed by the ITO, albeit in ink (while it should have been a carbon copy only, like the rest of the hand-written. contents of the copy of the notice were). I also observe that the notice u/s. 143(2) dated 21110/2008 was issued at a different address at 5227/81, Raigar Pura, while final notice u/s. 148 was issued at 5228/81, Raigar Pura, which too was not the address of the appellant, as shown in the case record. In view of this since the notice was not issued for the right address, there is absolutely no likelihood that it would have ever been served upon the appellant. Moreover, AR on inspection found both copies of the notices 148, lying unsigned in the file, which clearly shows that the notice was void and not served. 4.5 In view of the above, I hold that the proceedings initiated by the learned AO by issue of notice u/s. 148 in' itself were invalid being not based on any information that could infer any kind of escapement of income. The reasons recorded by the AO clearly show that no satisfaction regarding escapement of income was noted and learned AO had initiated' proceedings for the purpose of carrying out the-" inquiries to investigate the credit entries of the bank account of the appellant without establishing any escapement of income with any belief of the AO. The bank statement, which was obtained by carrying out inquiries u/s.133(6) did not draw any adverse finding and hence treating them the basis for reopening the case was not justifiable, particularly when the said proceedings u/s. 133(6) themselves were not lawfully valid.”
We find from the facts of the assessee that not only the notice was containing wrong address but the reasons recorded clearly showed that no satisfaction of having income escaped assessment, was recorded by the AO and the proceedings were initiated only for carrying out enquiries in respect of credits in the bank accounts. We agree with the finding of the ld. Commissioner of Income-tax(Appeals) that the information which was received from another Income-Tax Officer was only to be verified at the end of the AO, and the bank statement obtained from bank could not be the basis of reopening of the 7 & 664/Del/2010 AYs: 2004-05 & 2005-06 assessment. It is not discernible from the reasons recorded whether any income escaped the assessment. The order of the Ld. Commissioner of Income- tax(Appeals) on the issue in dispute is well reasoned and no further interference is required from our side. Accordingly, we uphold the finding of the learned Commissioner of Income-tax(Appeals) in annulling the assessment passed by the AO being not in accordance to law. The ground of the appeal is, thus dismissed.
In the result, the appeal of the Revenue is dismissed. AY 2005-06 10. The facts and circumstances and the ground raised
in the appeal are identical to the facts and circumstances and grounds in ITA No. 663/Del/2010, thus, following our decision in said appeal in para no. 8, we dismiss the ground of the Revenue’s appeal.
11. In the result, both the appeals of the Revenue are dismissed The decision is pronounced in the open court on 30th March, 2016.