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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Shri P.M. Jagtap
Date of concluding the hearing : September 16, 2015 Date of pronouncing the order : September 18, 2015 O R D E R
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-6, Kolkata dated 26.02.2015 for the assessment year 2008-09.
The assessee in the present case is an individual, who is a Medical Practitioner by Profession. The return of income for the year under consideration was filed by her on 24.07.2008 declaring total income of Rs.3,05,290/-. The said return was initially processed by the Assessing Officer under section 143(1) of the Act. Subsequently, the assessment, however, was reopened by him and a notice under section 148 was issued to the assessee by him on 23.07.2010 after recording the reasons. In reply, a request was made by the assessee to treat the return originally ./2015 Assessment year: 2008-2009 Page 2 of 6 filed by her on 24.07.2008 as the return filed in response to the notice under section 148. Thereafter the assessment was completed by the Assessing Officer under section 143(3) read with section 147 vide order dated 21.12.2011 computing the total income of the assessee at Rs.10,87,100/- after making the following three additions:- (i) Advances received for providing Rs.6,50,000/- vaccination under section 68 (ii) Disallowance of promotional Rs. 90,282/- expenses (iii) Interest accrued on F.D. Rs. 41,528/-
Against the order passed by the Assessing Officer under section 143(3) read with section 147, an appeal was preferred by the assessee before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), there was, however, no compliance on the part of the assessee to various notices issued by the ld. CIT(Appeals) fixing the hearing from time to time. Keeping in view this non-compliance on the part of the assessee, the ld. CIT(Appeals) proceeded to dispose of the appeal of the assessee ex parte on merit vide his impugned order, wherein he confirmed all the three additions made by the Assessing Officer to the total income of the assessee. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
In the present appeal, the assessee has raised a preliminary issue challenging the validity of assessment made by the Assessing Officer under section 143(3) read with section 147 of the Act in Ground No. 1, while the issues raised in Grounds No. 2 to 4 relate to the three additions made by the Assessing Officer and confirmed by the ld. CIT(Appeals). As the preliminary issue raised in Ground No. 1 challenging the validity of assessment made by the Assessing Officer was not raised before the ld. CIT(Appeals) and the same thus is not arising from his impugned order, the assessee has moved an application seeking admission of the relevant Ground No. 1 wherein the preliminary issue relating to validity of ./2015 Assessment year: 2008-2009 Page 3 of 6 assessment is raised before the Tribunal for the first time. In the said application, the assessee has relied on the decision of the Hon’ble Supreme Court in the case of NTPC, wherein it was held by the Hon’ble Supreme Court that the legal issue can be raised by the assessee at any stage provided all the facts necessary to adjudicate upon the said issue are available on record. In the present case, the issue sought to be raised by the assessee in the additional ground is purely a legal issue and the relevant facts necessary to adjudicate upon the same being available on record as agreed even by the ld. D.R., I admit the additional ground raised by the assessee and now proceed to adjudicate upon the same first as the same involves preliminary issue relating to validity of the assessment made by the Assessing Officer.
I have heard the arguments of both the sides on the preliminary issue raised by the assessee challenging the validity of the assessment and also perused the material available on record. As submitted by the ld. counsel for the assessee by referring to the reasons recorded by the Assessing Officer for reopening the assessment, the assessment was reopened by the Assessing Officer to examine or verify the particulars furnished by the assessee in the return of income on the basis of suspicion and there was actually no reason for the Assessing Officer to have a belief that the income of the assessee chargeable to tax had escaped assessment. Relying on the decision of the Coordinate Bench of this Tribunal in the case of Deputy Director of income Tax (International Taxation)-21, Mumbai –vs.- Societe International De Telecommunication reported in 139 ITD 328 (Mumbai), he has contended that the initiation of reassessment proceedings itself therefore, was invalid and the assessment completed by the Assessing Officer in pursuance of such invalid initiation is liable to be cancelled.
In order to appreciate the stand of the ld. counsel for the assessee on this issue, it is pertinent to refer to the reasons recorded by the ./2015 Assessment year: 2008-2009 Page 4 of 6 Assessing Officer for reopening the assessment, which are extracted below:- “From the balance sheet as on 31.03.2007 and 31.03.2008 it was found that the capital balance were Rs.23,54,164.25 and Rs.29,76,667.52 and unsecured loan from others were Rs.9,50,656 and Rs.18,00,656 respectively, but no interest were debited for talking loans/advances. During FY 07-08, the assessee had shown long-term investment of Rs.37,91,377.93 and current assets, loans/advances of Rs.7,26,215.59. From the above analysis of balance sheet and profit & loss account, it may be possible that the assessee had introduced her unaccounted money in disguise of loans /advances”.
It is clearly evident from the reasons recorded by the Assessing Officer that there was actually no reason for him to have formed a belief about the escapement of any income of the assessee from the assessment, but the assessment was reopened by him to verify or examine certain particulars furnished by the assessee in the return of income, which according to the Assessing Officer, might have possibly involved introduction of her unaccounted money by the assessee. It is thus clear that the assessment was reopened by the Assessing Officer on the basis of suspicion and in order to make fishing and roaming enquiries, which, in my opinion, is not permissible. It is a settled position of law that the assessment can be reopened under section 147/148 on the basis of ‘reason to believe’ and not ‘reason to suspect’. As held by the Coordinate Bench of this Tribunal in the case of Deputy Director of income Tax (International Taxation)-21, Mumbai –vs.- Societe International De Telecommunication (supra) cited by the ld. counsel for the assessee, unless the reasons to believe about the escapement of income exist, no recourse can be taken to the provisions of section 147. It was held that where an Assessing Officer ventures to initiate reassessment proceedings with an object of finding some material about the escapement of income, such reassessment cannot legally stand and the law does not permit the Assessing Officer to conduct inquiries after the initiation of reassessment ./2015 Assessment year: 2008-2009 Page 5 of 6 proceedings, to find if there is an escapement of income. It was held that the scope of section 147 cannot encompass such an action under which certain examination is to be conducted for forming a reason to believe as to the escapement of income. If the facts of the present case including especially the reasons recorded by the Assessing Officer for reopening the assessment are considered in the light of the decision of the Coordinate Bench of this Tribunal in the case of Deputy Director of income Tax (International Taxation)-21, Mumbai –vs.- Societe International De Telecommunication (supra), I am of the view that the initiation of reassessment proceeding itself was bad in law and the assessment completed by the Assessing Officer under section 143(3) read with section 147 in pursuance of such invalid initiation is liable to be cancelled. I order accordingly.
Keeping in view the decision rendered above on the preliminary issue cancelling the assessment made by the Assessing Officer under section 143(3) read with section 147, the other issues raised by the assessee in this appeal disputing the additions made in the said assessment have become infructuous. I, therefore, do not consider it necessary or expedient to adjudicate upon the same.
In the result, the appeal of the assessee is treated as allowed. Order pronounced in the open Court on September 18, 2015.