ARUNKUMAR R, MEHTA,MUMBAI vs. DCIT CEN CIR 1, MUMBAI

The assessee has taken the following grounds of appeal:-

The assessee filed his return of income for the A.Y.205-06 on 31.08.2005 declaring total income of Rs.23,06,695/-. The case was reopened u/s.147 of the Income Tax Act, 1961( in short “the Act”) after duly recording the reasons for reopening. Notice u/s. 148 of the Act dated 27.03.2012 was issued and served upon the assessee on 27.03.2012. In response to the notice issued u/s.148 of the Act, the assessee filed return of income on 11.04.2012 declaring the income returned earlier u/s. 139 of the Act. The assessee requested for reasons for reopening which was supplied on 27.03.2012. The assessee also filed an objection vide letter dated 16.04.2012 and also attended the proceeding in response to the notice u/s. 143(2) and 143(1) of the Act. Infact the information was received from the CBDT that the assessee along with other family members was beneficiary of one Dryade Stiftung and Dianese Stiftung Trust, Vaduz having account in LGT Bank Liechtenstein. The bank statement was also received on 19.04.2002. The balance to the tune of US $ 4387146 including interest was standing with the same name. The said information was not mentioned in the return. Thereafter the notice u/s. 148 of the Act was given and the assessee’s share was assessed to the tune of Rs.5,35,23,181/- i.e. 25% of the said amount. Accordingly the assessment for the year 2003-04 was completed. On 30.12.2009 assessing the income to the tune of Rs.5,37,78,070/- for A.Y.2003-04. The assessee filed his return of income for A.Y.2005-06 declaring returned income to the tune of Rs.23,06,695/- on 31.08.2005. In the relevant A.Y.2005-06 the matter was taken up after issuance of notice u/s.148 of the Act on account of undisclosed income of interest of above said transaction which has been challenged before the Assessing Officer and the Assessing Officer declined the contention of the assessee and the learned CIT(A) confirmed the same. Therefore the assessee is before us.

We have heard the arguments advanced by the learned representative of the parties and have gone through the record carefully. It is not disputed that the provision u/s. 147 of the Act can be invoked when the income of the assessee is escaped income of assessment. However the procedure has also been mentioned in the section 147 of the Act. No doubt basically it is required to be seen whether the income of the assessee is the income escaped assessment or not. The present case is in connection with the assessment year of 2005-06. The case of the assessee was reopened for the year 2003-04 on receipt of the information from CBDT when the assessee and his family members were found beneficiary of one Dryade Stiftung and Dianese Stiftung Trust, Vaduz. Thereafter the shares of the assessee to the tune of Rs.5,35,23,181/- along with interest was added to the income. It also came into notice that subsequently the assessment of the assessee for the A.Y.2004-05 was reopened on the ground of that the interest of the said income / amount was not shown in the relevant return of income for the A.Y.2004-05. No doubt at that time there was no information with the Assessing Officer to which it can be assumed that the income of the assessee is the escaped income. Assessee challenged the same and the learned CIT(A) has held that the reopening of the assessment for the assessment year 2004-05 is bad in law by virtue of order dated 11.03.2013. It was stated that this order of learned CIT(A) was not challenged by the revenue. No doubt the present assessment is for the year 2005-06 which has also been challenged by the assessee on the same ground. Since the reopening was also on identical reason. On appraisal of the order in question no new ground has been raised or came into the notice of the Assessing Officer for reopening of the case. The only ground which has been taken by the Assessing Officer is that in the previous year the interest income was received by the assessee but the same has been shown in the assessment year of the A.Y.2005-06 in question. The interest has been added to the income of the assessee on the basis of presumption that the assessee have received certain interest on the amount lying in the bank in Germany. No doubt there is no reason on record to which it can be assumed that any specific interest of the assessee is the escaped income. Therefore in the said circumstances we are of the view that the learned CIT(A) has wrongly upheld the reopening u/s. 147/148 of the Act. Hence the order in question dated 05.05.2014 is hereby held bad in law therefore the same is hereby ordered to be set aside. Since the issue has been decided in favour of assessee and reopening has been ordered to be set aside therefore there is no need to decide the issue no.2 because thereon would be in academic in nature. Accordingly these issues are decided in favour of the assessee and against the revenue.

In result the appeal of the Assessee is hereby Allowed accordingly.