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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI CHALLA NAGENDRA PRASAD
आदेश / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER
The appeal by Revenue and Cross—objection by assessee are directed against the order of Commissioner of Income Tax (Appeals)- II, Chennai dated 28.03.2014. The Revenue has raised the following grounds:-
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“On the facts and the circumstances of the case, the ld. CIT(A) erred in holding that the re-assessment order is not valid and thereby has wrongly deleted the addition made in the said order. 2.a On the facts and the circumstances of the case, the ld.CIT(A) erred in holding that the Assessing Officer has completely considered the impugned seized material in the original assessment order and thus, wrongly held that the Assessing Officer has completely considered the impugned seized material in the original assessment order and thus, wrongly held that the re-opening of assessment amounts to change of opinion. b. On a combined reading of the seized material (NSK/B&D/S-136) with the explanation of the assessee filed before the Assessing Officer on 23.12.2009, it is evident that the said seized material points to a consideration of ₹1,81,27,940/- while the explanation dated 23.12.2009 is offered only for ₹1,56,65,000/- leaving the balance of ₹24,62,840/- c. By virtue of the above position, the assessee’s balance of amount of ₹24,62,840/- has gone unexplained and thus unassessed in the original assessment. Hence, the order of the CIT(A) is contrary to the facts and legal position. 3. On the facts and the circumstances of the case, the ld. CIT(A) has failed to appreciate that the contents of the seized material were not fully explained by the assessee in their reply at the time of original assessment and therefore the then Assessing Officer has not fully examined the seized material in the original assessment order. 4. The CIT(A) erred in holding that the period available for re-opening the assessment was only 4 years while the sec. 147 r.w.s. 149(1)(b) provides a time limit of 6 years from the end of the assessment year as is the case in the re-opening.’’
Since the issue raised in the Cross-objection is against the root
of the matter which is being legal issue, first we take up Cross-
objection for adjudication.
The brief facts of the case are that there was a search in the
case of the assessee and assessment u/s. 153A r.w.s.143(3) of the
Income-tax Act, 1961 was completed on 31.12.2009 determining
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income of �34,16,452/-. Subsequently, notice was issued u/s. 148 of
the Income-tax Act on 29.03.2012. In response to this notice a return
of income was filed vide letter dated 21.11.2012. The assessee stated
before the Assessing Officer that return originally filed on 20.11.2006
may be treated as return in response to notice u/s. 148 of the Income-
tax Act. In view of the above, return filed originally on 20.11.2006 was
treated as return filed in response to notice u/s.148 of the Income-tax
Act and accordingly, notice u/s. 143(2) and notice u/s. 142(1) of the
Income-tax Act were issued on 04.12.2012. Consequently, re-
assessment order was passed, wherein it was observed by the
Assessing Officer that sale value of the property as per seizure
document No.136 in annexure NSK/B&D/S dated 20.02.2008, it would
works out to �1,81,27,940/- as against the sale of value of property
admitted by assessee at �1,56,65,000/-. Accordingly, the Assessing
Officer added an amount of �24,62,840/- in the assessment.
Aggrieved by this action of the Assessing Officer, the assessee
preferred an appeal before the Commissioner of Income Tax
(Appeals).
Before the Commissioner of Income Tax (Appeals), the assessee
challenged the reopening of assessment on the reason that it was
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change of opinion. The Commissioner of Income Tax (Appeals) upheld
the argument of the assessee counsel by observing as under:-
I have considered the submissions of the appellant and have also gone through the original assessment order dated 31.12.2009. I find the submissions of the appellant to be correct that the Assessing Officer while passing the original assessment under section 153A read with section 143(3) the Assessing Officer has considered the seized material and after considering the same & appellant’s submissions only he has passed the assessment order on the issue under consideration. Therefore, the reopening of assessment on the basis of same seized material, that had been considered by the Assessing Officer while framing the original assessment, is against the settled position of law and thus cannot be approved. Without going into the argument of the appellant that the assessments framed under section 153A could not have been reopening under section 148 in view of the non obstante clause within which sub-section (1) of section 153A opens, it is held that even otherwise the reopening by the Assessing Officer is not valid as the reopening has been done after four years from the end of the assessment year under consideration and there being no failure on the part of the appellant to disclose fully and truly all material facts necessary for the assessment for that assessment year. The reopening and the addition made to the income of the appellant in the reassessment made by the Assessing Officer is based on the same seized material that was considered by him in the original assessment made under section 153A read with section 143(3) which amounts to change of opinion. In view of the facts of the case, as discussed above, the reopening of the assessment based on the same material that had already been considered by the Assessing Officer in the original assessment made under section 153A read with section 143(3) is held to be not valid and thus the addition made during the course of the same is also directed to be deleted.
Since, I have decided the issue on the legal ground raised by the appellant, therefore, I do not consider it necessary to discuss the other grounds raised by the appellant on the merits of the additions made. In the result, the appeal is allowed’’.
I.T.A.No.1883/Mds/2014 & :- 5 -: C.O.No.93/Mds/2014
Against this findings of the CIT(A), the Revenue is in appeal
before us. In Cross-objection the assessee challenged the issue of
notice u/s.148 of the Income Tax Act in respect of assessment
completed u/s. 153A of the Income-tax Act.
The ld. counsel for the assessee supported the order of the
Commissioner of Income Tax (Appeals) cancelling its re-assessment
order as its merely passed on change of opinion and thereby deleting
the addition of �.24,62,840/- Regarding issue of notice u/s.148 to the
assessee, though original assessment in this case was completed u/s.
153A r.w.s. 143(3) of the Income-tax Act, he submitted that there is
non obstante clause in sub-section (1) of Sec 153A asserted that
Assessing Officer has no jurisdiction to issue notice u/s. 148 of the
Income Tax Act in respect of those six assessment years which falls
within the exclusive jurisdiction of Section 153A and 143(3) r.w.s. 147
of the Income Tax Act. For this purpose, he relied on the order of the
Tribunal in the case of State Bank of India vs. Deputy Commissioner of
Income Tax 22 ITR (Tri) 609 (Mumbai).
Further, the ld. counsel submitted that the Assessing Officer has
no jurisdiction to issue notice u/s. 148 of the Act in respect of those six
assessment years which falls within the exclusive jurisdiction of section
153A of the Act. He also relied on the judgment of Madhya Pradesh
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High Court in the case of Ramaballabh Gupta vs. ACIT & Others (288
ITR 347) (MP).
On the other hand, the Departmental Representative submitted
that there is no bar in reopening of assessment u/s. 147 in respect of
the assessment which was completed u/s. 153A r.w.s. 143(3) of the
Act. He submitted that where there was escaped income in
assessment completed u/s. 153A r.w.s. 143(3), the Assessing Officer
could reopened the assessment so as to bring the escaped income for
taxation. He submitted that provisions of sections 147 and 148 would
apply to the assessment for the block period made under Chapter XIV-
B and relied on the judgment of CIT vs. Peerchand Ratanlal Baid (HUF)
322 ITR 544 (Gauhati) wherein it was held that the addition of
�.13,66,715/- to the undisclosed income of the assessee for the block
period could have been made only by giving a notice under section
148 of the Act and no such notice having been given the provisions of
Section 153 of the Act would operate as a legal bar for any such notice
to the assessee. The provisions of Section 147/148 of the Act would
apply to an assessment for a block period made under Chapter XIV-B
of the Act.
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We have heard both sides and perused the material on record.
In this case original assessment was completed vide assessment order
dated 31.12.2009 u/s. 153A r.w.s. 143(3) of the Act, determining the
income at �.58,79,492/-. The Assessing Officer noticed that as per
seized document No.136 in annexure NSK/B&D/S, dated 20.02.2008,
the value of property situated at survey No.176/02, Nolambur is
worked out at �.1,18,73,840/- and other property as per seized
document No.136 annexure NSK/B&D/S, dated 20.02.2008, situated
at New survey No.72, at Nolambur vide sale deed No.2653 dated
23.05.2005 valued at �.62,54,100/-. Thus total value worked out at
�.1,81,27,940/-. However, the assessee disclosed the value of the
property at �.1,56,65,000/-. Hence, the Assessing Officer issued
noticed u/s.148 so as to reopen the assessment to bring the balance
amount of �.24,62,840/- to tax and thereafter he completed
assessment u/s. 153A r.w.s 143(3) r.w.s. 147 of the Act.
The contention of the Authorised Representative is that when
the assessment was completed u/s. 153A r.w.s 143(3,) it cannot be
subjected to reopen assessment u/s. 147 of the Income-tax Act so as
to issue 148 notice of the Act. In our opinion there is no merit in the
argument of the assessee’s counsel Section 147 of the Act permits
reassessment of income that has escaped assessment income in any
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assessment year subject to provisions of sections 149 and 153 of the
Income tax Act. Reassessment of escaped income under section 147
of the Act is made where income chargeable to tax has escaped
assessment either due to the failure of the assessee to file return or
failure to disclose fully and truly all material facts for the purposes of
assessment or where material already on record had not been
processed. In case of assessment u/s. 153A of the Income Tax Act, it
cannot be envisaged as all the materials recovered in the course of the
search are examined by the Assessing Officer or there can be case of
non-disclosure of material facts by the assessee.
The whole requirement is that to reopen the assessment, the
following conditions laid down u/s. 147 are to be fulfilled:
The Assessing Officer to assess or reassess income chargeable
to tax if he has reason to believe that income for any assessment year
has escaped assessment. The word 'reason' in the phrase 'reason to
believe' would mean cause or justification. If the Assessing Officer has
cause or justification to know or suppose that income had escaped
assessment, it can be said to have reason to believe that an income
had escaped assessment. The expression cannot be read to mean that
the Assessing Officer should have finally ascertained the fact by legal
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evidence or conclusion. The function of the Assessing Officer is to
administer the statute with solicitude for the public exchequer with an
inbuilt idea of fairness to taxpayer. As observed by the Delhi High
Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191
ITR662(SC), for initiation of action under Section 147(a) (as the
provision stood at the relevant time) fulfillment of the two requisite
conditions in that regard is essential. At that stage, the final outcome
of the proceeding is not relevant. In other words, at the initiation
stage, what is required is 'reason to believe', but not the established
fact of escapement of income. At the stage of issue of notice, the only
question is whether there was relevant material on which a reasonable
person could have formed a requisite belief. Whether the materials
would conclusively prove the escapement is not the concern at that
stage. This is so because the formation of belief by the Assessing
Officer is within the realm of subjective satisfaction.
The scope and effect of Section 147 as substituted with effect
from April 1, 1989, as also Sections 148 to 152 are substantially
different from the provisions as they stood prior to such substitution.
Under the old provisions of Section 147, separate Clauses (a) and (b)
laid down the circumstances under which income escaping assessment
I.T.A.No.1883/Mds/2014 & :- 10 -: C.O.No.93/Mds/2014
for the past assessment years could be assessed or reassessed. To
confer jurisdiction under Section 147(a) two conditions were required
to be satisfied firstly the Assessing Officer must have reason to believe
that income profits or gains chargeable to income tax have escaped
assessment, and secondly he must also have reason to believe that
such escapement has occurred by reason of either (i) omission or
failure on the part of the assessee to disclose fully or truly all material
facts necessary for his assessment of that year. Both these conditions
were conditions precedent to be satisfied before the Assessing Officer
could have jurisdiction to issue notice under Section 148 read with
Section 147(a). But under the substituted Section 147 existence of
only the first condition suffices. In other words if the Assessing Officer
for whatever reason has reason to believe that income has escaped
assessment it confers jurisdiction to reopen the assessment. It is
however to be noted that both the conditions must be fulfilled if the
case falls within the ambit of the proviso to Section 147. So long as the
ingredients of Section 147 are fulfilled, the Assessing Officer is free to
initiate proceeding under Section 147.
In the present case, in our opinion, we cannot say that there is
no reason to reopen the assessment. Being so, we cannot uphold the
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argument of the assessee’s counsel that issue of notice u/s. 148 is
bad in law. The assessee’s counsel relied on the judgment of the
Madhya Pradesh High Court in the case of Ramballabh Gupta wherein
it was held that notice u/s. 148 of the Act can be issued to six
assessment years which fall section 153A/153C of the Act. In this
case the Assessing Officer issued notice under section 153A of the Income Tax Act on 8th October, 2003 for the assessment year 1998- 1999 to 2003-2004. On 24th March, 2004, a notice under section 148
was issued to the assessee for the assessment year 1997-98. The
High Court held that notice u/s. 148 for the assessment year 1997-98
was bad being beyond the six year period prescribed under section
153A of the Act and that in the case of reassessment as a result of
raid, section 148 has no application by virtue of the overriding effect
contained in section 153A of the Act. Thus, it does not mean that
assessment completed under section 153A r.w.s.143(3) cannot be
subject to re-assessment.
While the ld. counsel for the assessee relied on the order of the
Tribunal in the case of State Bank of India (Mumbai) cited supra in
that case held that:
That the original assessments for the assessment years in question were completed u/s.143(3) on February 13, 2004 and December 30, 2004, respectively. Thereafter, a search and seizure action was
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initiated in the assessee’s case by the Department on July 2, 2005 on which date the assessments for the two assessment years were not pending. Therefore, in view of the non obstante clause with which Section 153A(1) opens, the Assessing Officer had no jurisdiction to issue notice u/s. 148 of the Act in respect of those six assessment years which fell within the exclusive jurisdiction of section 153A of the Act and accordingly the Assessing Officer was not justified in issuing notices u/s. 148 and in completing the assessments u/s.143(3) read with section 147 of the Act on October 31, 2006. The Assessing Officer instead of complying with the requirement of section 153A proceeded with the provisions of sections 147 and 148 which were not applicable in the assessment under section 153A of the Act. Therefore, the assessments completed u/s.143(3) read with section 147 of the Act were wholly without jurisdiction and liable to be quashed.
Thus, we are completely in agreement with the findings of the
Tribunal cited supra that after search and seizure under section 132,
the Assessing Officer shall proceed under section 153A of the Act and
he cannot proceed u/s.148 of the Act. There is no bar on reopening all
the assessments which was completed u/s. 153 A r.w.s. 143(3) of the
Income-tax Act, if there is reason to believe that income escaped from
the assessment.
Accordingly, we are inclined to dismiss this ground raised by the
assessee.
The second issue in Cross-objection is with regard to fact that 17.
assessment is only change of opinion.
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The ld. counsel for the assessee submitted that in the case of
assessment order u/s.153A r.w.s. 143(3) dated 31.12.2009 passed by
the Assessing Officer for analyzing the material seized during the
search, he has considered all the material for the purpose of
assessment and there was no escapement of income. According, to
the ld. counsel only for the purpose of making re-enquiry, he has
issued notice for reopening assessment which cannot be done. For
this purpose, he relied on the judgment of Rajasthan High Court in
the case of Mukesh Modi vs. DCIT and Another 366 ITR 418 (Raj).
On the other hand, the Departmental Representative relied on
the order of the Assessing Officer u/s. 153(A) of the Act. The
Assessing Officer has a jurisdiction for assessment or re-assessment
proceedings for all the six years to compute the total income of the
assessee including undisclosed income where action have been taken
against the assessee u/s.132(1) of the Act. Proceeding initiated u/s.
153A for all six years shall become a subject matter to assessment
u/s.153(A) of the Act and the Assessing officer shall have freehand,
on assessment, only on the proceeding that are pending to frame the
assessment afresh. But in the case where the proceedings have
reached finality, the assessment u/s.153A r.w.s.143(3) and where
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certain material document have been found indicating undisclosed
income, the addition shall have to be restricted to those documents or
incrementing documents, clubbed only to assessment framed
originally. As law does not permit the Assessing Officer to disturb
already concluded assessment, whether on the date of intimation of
search u/s.132 or requisition of books, no proceedings is pending in
the search, materials found indicating incrementing materials, the
Assessing Officer engrosses a jurisdiction where he has clubbed two
sets of income, return income and unearthed income, had arrived at
the total income. Thereafter, if he had a reason to believe the said
assessment can be re-assessed u/s.148 of the Income Tax Act as
discussed in the earlier paras so as to reopen the assessment, there
should be sufficient materials.
There is no arbitrary power to the Assessing Officer to reopen 20.
on the basis of change of opinion. In the present case we have gone
through the reasons for reopening of assessment. It cannot be proper
reason to reopening. The Assessing Officer has no power to review his
own order. The re-assessment has to be made on fulfillment of certain
free condition and if the concept stating ‘’change of opinion’’ is
removed in the graph of re-assessment or/of assessment, redo take
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place. Once again treat the concept of change of opinion inbuilt test
to check to abusive power by Assessing Officer. Hence, the Assessing
Officer has power to reopen, provided there is ‘tangible material’’ to
come to the conclusion that there is escapement of income from
assessment. The reason must have live link with the foundation of
belief. In the present case, the Assessing Officer considered seized
material No.136 in annexue NSK/B & D/S dated 20.02.2008 and also
seized material document NSK/B & D/S dated 20.02.2008 while
framing original assessment and arrived the value of property at
�.1,56,65,000/-. Thereafter, the Assessing Officer considered the
same seized material to arrive the value of sale property at
�.1,81,27,940/- which is not possible. Hence, in our opinion, the re-
assessment is only on change of opinion which cannot be permitted.
Accordingly, in our opinion, the Commissioner of Income Tax
(Appeals) has taken correct view in annulling of the re-opened
assessment order. Accordingly, we uphold the same.
This ground of the assessee in Cross-objection is allowed and
confirmed the order of the Commissioner of Income Tax (Appeals) on
this issue. Thus, cross-objection filed by the assessee is partly
allowed.
I.T.A.No.1883/Mds/2014 & :- 16 -: C.O.No.93/Mds/2014
Since we have partly allowed the cross-objection filed by the assessee, the appeal by the Revenue has become infructuous and the
same is dismissed.
In the result, Cross-objection of the assessee No.93/Mds/2014
is partly allowed and the appeal by the Revenue in ITA No.1863/Mds/2014 is dismissed.
Order pronounced on Friday, the 27th of March, 2015, at Chennai.
Sd/- Sd/- (च�ला नागे�� �साद ) (चं� पूजार� ) (CHALLA NAGENDRA PRASAD) (CHANDRA POOJARI) �या�यक सद�य/ JUDICIAL MEMBER लेखा सद�य/ ACCOUNTANT MEMBER चे�नई/Chennai. �दनांक/Dated:27.03.2015. KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2.��यथ�/ Respondent 3. आयकर आयु�त (अपील)/CIT(A) 4. आयकर आयु�त/CIT 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.