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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:-
I.T.A.No.1883/Mds/2014 & :- 2 -: C.O.No.93/Mds/2014
“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 I.T.A.No.1883/Mds/2014 & :- 3 -: C.O.No.93/Mds/2014 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 I.T.A.No.1883/Mds/2014 & :- 4 -: C.O.No.93/Mds/2014 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 I.T.A.No.1883/Mds/2014 & :- 6 -: C.O.No.93/Mds/2014 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.
I.T.A.No.1883/Mds/2014 & :- 7 -: C.O.No.93/Mds/2014
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 I.T.A.No.1883/Mds/2014 & :- 8 -: C.O.No.93/Mds/2014 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 I.T.A.No.1883/Mds/2014 & :- 9 -: C.O.No.93/Mds/2014 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 I.T.A.No.1883/Mds/2014 & :- 11 -: C.O.No.93/Mds/2014 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 I.T.A.No.1883/Mds/2014 & :- 12 -: C.O.No.93/Mds/2014 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.
I.T.A.No.1883/Mds/2014 & :- 13 -: C.O.No.93/Mds/2014
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 I.T.A.No.1883/Mds/2014 & :- 14 -: C.O.No.93/Mds/2014 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 I.T.A.No.1883/Mds/2014 & :- 15 -: C.O.No.93/Mds/2014 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 is dismissed.
Order pronounced on Friday, the 27th of March, 2015, at Chennai.