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Income Tax Appellate Tribunal, BANGALORE BENCH, BANGALORE
Before: SHRI. ABRAHAM P. GEORGE
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH, BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER SINGLE MEMBER CASE (Assessment Year : 2000-01) Smt. C. P. Prameelamma, W/o. Shri. C. Govindappa, Keremegala Doddi, Tippi Silk Farm, Channapatna – 571501 .. Appellant PAN : AOUPP5330C v. Income-tax Officer, Ward – 3, Mandya .. Respondent Assessee by : Shri. Suresh Muthukrishnan, CA Revenue by : Dr. P. K. Srihari, Addl. CIT Heard on : 08.10.2015 Pronounced on : 09 .10.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by assessee it has altogether raised seven grounds of which grounds 1, 5 and 7 are general needing no specific adjudication. Ground 6 is on levy of interest u/s.234C of the Income-tax Act, 1961 (‘the Act’ in short), which is consequential in nature which again needs no specific adjudication.
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Vide ground 2 assessee assails reopening resorted by the AO for the impugned assessment year. Appeal of the assessee had earlier travelled up to the Tribunal and this Tribunal considering the assessee’s request to admit additional ground assailing the jurisdiction assumed u/s.148 of the Act had remitted it back to the CIT (A) for considering it to be a fresh ground. CIT (A) had disposed of this ground in favour of the Revenue, which is now assailed before us by the assessee.
Facts apropos are that during the course of assessment proceedings of assessee’s husband Shri. Govindappa, it was found by the AO that the said Shri. Govindappa had shown a loan of Rs.10.77 lakhs as received from the assessee during the relevant previous year. Since assessee had not filed any return for the impugned assessment year, notice u/s.148 of the Act was served on the assessee with prior approval from JCIT, Range-2, Mysuru. Reasons for reopening was furnished to the assessee during the course of appellate proceedings before the CIT (A). Such reasons read as follows :
"23/03/2006 It is learnt that the above referred Smt. Prameelama has advanced a sum of Rs. 10.00 lakhs to Sri. Govindappa during the F. Y. 99- 00. The payment has stated to be made in cash & out of the own income of the said Smt. Prameelama. It is also gathered that the said Prameelama is not assessed to tax so far.
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In view of the above facts & circumstances and with a view to verify the sources of income for the above said payments I am of the view that the income for the said A. Y. has escaped taxes, within the meaning of this section 147 of the IT. Act & _____ the provisions of the section 147 of the IT. Act. As the case is a beyond 4 years old, the JCIT approval is obtained. The JCJT's order dtd. 23/3/06 is placed record.”
Assessee pursuant to the notice u/s.148 of the Act filed return of income on 02.08.2006 declaring agricultural income of Rs.2,75,000/- and total income of nil. In the documents appended to such return assessee claimed net aggregate agricultural receipts of Rs.19,70,000/- for financial years 1991-92 to 1999-00 from various crops like mango, horse-gram and coconut. AO was of the opinion that except for giving details of the area under cultivation for each crop, assessee could furnish no evidence regarding sale of the produce. AO resorted to his own estimation of the agricultural income for these years based on market rates of the agricultural commodities for the period 1991-92 to 2000-01, given by Agricultural Marketing Committee, Channapatna. He reworked the net agricultural income of the assessee at Rs.9,55213/- for F. Ys. 1991-92 to 1999- 00 and after deducting therefrom various expenditure and outflow due to loans advanced by the assessee during these years came to a conclusion that what could have been available with the assessee for giving a loan during the relevant previous year to her husband was only Rs.4,60,248/-. Thus out of the sum of Rs.10,77,000/- shown by assessee as loan given to her husband during ITA.369/Bang/2014 Page - 4 the relevant previous year, AO was of the opinion that assessee had explainable source for only Rs.4,60,248/- being savings from agricultural income. The balance of Rs.6,16,752/- was added as unexplained investment.
Before CIT (A), assessee had sought for the reasons for reopening which was furnished to it. As per the assessee, reopening was only on a suspicion and not based on a reason to believe that income had escaped assessment. However CIT (A) was not impressed by this contention. He was of the opinion that assessee had advanced sum of Rs.10,77,000/- to her husband and had failed to file a return of income at all. Thus as per the CIT (A), AO had sufficient reason to believe that income had escaped assessment. According to him the ratio of the decision of the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd v. ITO reported in 259 ITR 19, applied. He held the reopening valid. In the earlier round of proceedings, CIT (A) had confirmed the merits of the addition.
Now before us, Ld. AR strongly assailing the order of CIT (A) submitted that the reasons mentioned by the AO for the reopening was only for verification of source of income. There was nothing in it which would show that any income had escaped taxes. It was merely a suspicion which was unfounded. Relying on the judgment of Hon’ble jurisdictional High Court in the case of C. M. Mahadeva v. CIT [ITA No.795/2009, dt.24.08.2015], Ld. AR ITA.369/Bang/2014 Page - 5 submitted that a reopening for further investigation, to find source of an investment was not permissible in law. According to him assessee was only an agriculturist and her only source of income was agricultural income. Simply based on surmises the reopening was resorted to. Reliance was also placed on the Hon’ble Apex Court in the case of CIT v. P. K. Noorjahan [237 ITR 570].
Per contra, Ld. DR strongly supporting the order of CIT (A) submitted that judgment of jurisdictional High Court in the case of C. M. Mahadeva (supra) did not apply on facts here. According to him in the said case concerned assessee had filed a return u/s.143(1) of the Act and the reassessment proceedings were initiated after processing of such return. As against this, here the assessee had not filed a return of income at all. When no return of income was filed by the assessee, the tests to be applied for determining the relevancy of the reasons was much lighter. As per the Ld. DR when cash loans were found credited by assessee’s husband in his bank account for which, source was shown as given by assessee, AO was duty bound to verify the credit. By the time the verification of assessee’s husband’s accounts were done, the due date for filing the return in the normal course and even for filing a belated return was long over. According to him, the only available mode of investigation with the AO was through issue of a notice u/s.148 of the Act. Therefore as per the Ld. DR, the reopening was rightly done.
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We have perused the orders and heard the rival contentions. Before adjudicating the merits of the addition made by the AO, it is required to see whether the reopening was rightly resorted to in the circumstances of the case. There is no dispute that assessee was only an agriculturist and was having only agricultural income. There is also no dispute that assessee’s husband had shown in his return of income, a sum of Rs.10.77 lakhs as loan received from the assessee. To a question whether assessee’s husband had filed a confirmation from the assessee during the course of his assessment proceedings, Ld. AR submitted that it was furnished. This was not contradicted by the Ld. DR. In a case where confirmation of a creditor is filed by a party the AO is having ample powers to verify the correctness of the confirmation. In our opinion, the first course of action that should ordinarily be resorted to, is not issue of a notice u/s.148 of the Act to the concerned creditor. AO never issued summons u/s.131 of the Act to the concerned creditor and obtained a statement on oath. If from such statement he could gather sufficient material to come to a conclusion that there was escapement of income, or even in a case creditor failed to attend the summons, the AO could have resorted to a reopening. No doubt assessee here had not filed a return of income at all. Explanation 2 to Section 147 of the Act deals with a situation where there has been no return of income filed. Explanation 2 is reproduced hereunder :
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Explanation — 2. For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:-- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; It is clear from clause (a) of the above Explanation that there can be deemed or fictional presumption of income escaping tax in a case where no return of income was furnished, only if the total income of such party would have exceeded the maximum amount, not chargeable to tax. In other words where no return has been filed by an assessee and the AO wants to invoke jurisdiction vested upon him u/s.147 of the Act, the reasons mentioned by the AO for reopening should show a logical thought process which would show how he came to a conclusion that the total income of the such person exceeded the maximum amount which was not chargeable to tax. Now if we have a look at the reasons recorded by the AO in the case before us, what is mentioned is that he wanted to verify the source of income for the advance of Rs.10.77 lakhs given by the assessee to her husband. There is nothing here whatsoever mentioned regarding any lacunae in the confirmation filed by the assessee in the ITA.369/Bang/2014 Page - 8 course of her husband’s assessment proceedings or regarding any investigation done by the AO that could bring out something which would show an escapement of income. Argument of the Ld. DR is that in a case where assessee has not filed a return at all, the reasons that are to be given for reopening should not be seen with the same eyes as in the case of an assessee who had filed a return of income earlier. Even if we accept this contention, reasons given by the Ld. AO for issue of notice u/s.148 of the Act, does not give even a hint of any escapement of income or tax. As for the reliance placed by the CIT (A) on the Hon’ble Apex Court judgment in the case of GKN Driveshafts (supra), question there was whether reasons had to be furnished to an assessee and his reply disposed off, before concluding the assessment. In our opinion this case will not support the case of the Revenue here. In the circumstances of the case we are convinced that reopening was resorted only on suspicions and the test of relevancy is not satisfied. Ex-consequenti we hold the reassessment invalid.
Since ground 2 of the assessee is allowed, its grounds relating to merits of the addition are not adjudicated.
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In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 9th day of October, 2015.