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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the assessee against the order passed by the Ld. CIT(Appeals)-2, Rajkot in Appeal No. CIT(A)-2/Rjt/10214/2015-16 vide order dated 16.08.2018 passed for Assessment Year 2007-08.
The assessee has taken the following grounds of appeals:-
“1. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 54,676/-. The addition needs deletion. Praful Khetshibhai Solanki vs. ITO Asst.Year –2007-08 2. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 54,676/- without conducting proper and judicious inquiry. The addition needs deletion.
The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 54,676/- without cogent reason and without considering the factual position of the case. The addition needs deletion.
The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 54,676/- without considering legal as well as statutory position and against judicial decision of the case. The addition needs deletion.
5. Taking into consideration the legal, statutory, factual, and administrative aspects, no addition amounting to Rs. 54,676/- ought to have been confirmed. The addition needs deletion.
Without prejudice, the assessment made is bad in law and deserves annulment.
Without prejudice, no adequate, sufficient and reasonable opportunity has been provided at assessment stage. The assessment needs annulment.
Without prejudice, no adequate, sufficient and reasonable opportunity has been provided at appellate stage. The assessment needs annulment.
The appellant craves leave to add/alter/amend and/or substitute any or all ground of appeal
before the actual hearing takes place.” Praful Khetshibhai Solanki vs. ITO Asst.Year –2007-08
3. The brief facts of the case are that the Assessing Officer was in possession of information that assessee had purchased cheque / Demand Drafts of Rs. 1 lakh in lieu of cash from M/s. Shree Panchnath Enterprises. Accordingly, the Assessing Officer issued notice under Section 148 of the Act initiating re-assessment proceedings. During the re-assessment proceedings, the Assessing Officer added the sum of Rs. 1 lakh as unexplained income under Section 69A of the Act. Before CIT(Appeals) the assessee contended that he did not have any transaction with M/s. Shree Panchnath Enterprises. He further contended that addition was made by the Assessing Officer was without making any inquiry with M/s. Shree Panchnath Enterprises and without verifying the real nature of transactions. The CIT(Appeals) called for information from the Assessing Officer and on the basis of information received, CIT(Appeals) observed that assessee had received cheques of Rs. 54,676/- and of Rs. 45,324/- in favour of J. V. Commodity Pvt. Ltd. in lieu of cash. In view of this information, the Assessing Officer was required to make inquiry with J. V. Commodity Pvt. ltd. and establish the identity of Praful Solanki and Shri Kantibhai Solanki on whose behalf the said drafts /cheques had been issued to J. V. Commodity by M/s. Panchnath Enterprises. As per the report issued by the Assessing Officer, the CIT(Appeals) observed that only an amount of Rs. 54,676/- pertained to the assessee and the balance amount of Rs. 45,324/- pertained to Shri Kantibhai Solanki. Accordingly, the Ld. CIT(A) restricted the disallowance to Rs. 54,676/- in the name of the assessee and deleted the balance addition of Rs. 45,324/-. Before Ld. CIT(Appeals) the assessee submitted that proceedings under Section 148 is invalid as the amount income escaping assessment was less than Rs. 1 lakh. However, Ld. Praful Khetshibhai Solanki vs. ITO Asst.Year –2007-08 CIT(A) dismissed the contention of the assessee on the ground that the case was reopened on the basis of information that assessee had purchased cheques/drafts of Rs. 1 lakh from M/s. Panchnath Enterprise in lieu of cash and thus there was reason to believe that income to the extent of Rs. 1 lakh had escaped assessment. Subsequent finding after enquiry that actual amount escaping assessment was of lesser amount, cannot invalidate reopening of the assessment.
4. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). The Counsel for the assessee has challenged the re- opening of assessment on the ground that since the income escaping assessment is less than Rs. 1 lakh, then the initiation of proceedings under Section 147/148 of the Act are bad in law. Accordingly, the Counsel for the assessee submitted that the entire re-assessment proceedings are liable to be set-aside. Before deciding on the issue it would be useful to reproduce the relevant contention of Section 149 for ready reference:
“149. Time limit for notice.-(1) No notice under section 148 shall be issued for the relevant assessment year,-
(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c);
(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has excepted Praful Khetshibhai Solanki vs. ITO Asst.Year –2007-08 assessment amounts to or is likely to amount to one lakh rupees or more for that year;
(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.”
From a perusal of the statutory provisions, it is evident that notice under Section 148 shall be issued after four years but before six years from the end of the relevant assessment year if the income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 1 lakh or more for that year. Therefore, from the plain language of Section 149, re-assessment proceedings can be validly initiated, if in the opening of the Assessing Officer, the income chargeable to tax is “likely to amount to Rs. 1 lakh or more” for that year. In the instant facts, on the basis of information available with the Assessing Officer, he was of the considered view that income likely to escape assessment would be Rs. 1 lakh in the instant facts. The fact that in the final outcome if the income escaping assessment falls below 1 lakh, even then, in our considered view, it cannot be held that the notice issued under Section 148 of the Act is liable to be set-aside for want of jurisdiction. In our view, on a plain reading of Section 149 of the Act, even in the case where the income escaping assessment is “likely to amount to one lakh rupees or more” for that year, the Assessing Officer is empowered to issue notice under Section 147/148 of the Act and it is immaterial that in the final outcome the actual amount of income Praful Khetshibhai Solanki vs. ITO Asst.Year –2007-08 escaping assessment falls below the limit of Rs. 1 lakh. Accordingly, in our view the assessment proceedings have been validly initiated under Section 147/148 of the Act since the Assessing Officer had reasonable belief, on the basis of information available with him, that income escaping assessment is likely to exceed Rs. 1 lakh or more.