Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, Honble & DR.ARJUN LAL SAINI, Honble
आदेश / O R D E R Per Dr. A. L. Saini, AM: The captioned appeal filed by the assessee, pertaining to assessment year 2007-08,is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), which in turn arises out of an assessment order passed by Assessing Officer u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) dated 25.03.2015.
Grounds of appeal raised by the assessee are as follows: “1. On facts and circumstances of the case, the learned CIT(A) has gross erred in upholding the impugned reopening of assessment u/s. 148, by not appreciating the fact that in the case of the assessee, the regular assessment already stands concluded u/s. 143(3) of the Act, and hence the subject re-opening after the expiry of the statutory period of 4 years is illegal and bad-in-law requiring outright annulment. 2. Without prejudice to the aforesaid ground no. 1 regarding legality of the re- opening of the concluded assessment, even otherwise on the facts and circumstances of the case and in law, the learned CIT(A) has grossly erred in sustaining an addition of Rs.20,00,000/- u/s. 68 of the Act as made by the ITO, by
ITA No. 97/SRT/2018 A.Y. 07-08 Abhishek Agarwal treating the unsecured loan received by the assessee during the year under consideration as unexplained cash credit, which is absolutely erroneous and incorrect requiring outright annulment. 3. The assessee craves to add, amend, alter, substitute, modify any or all the above grounds of appeal, if necessary, on the basis of submissions to be made at the time of personal hearing.”
3.Briefly stated, the relevant material facts are as follows. The assessee filed return of income for the assessment year under consideration, declaring total income of Rs. 1,41,370/-, on 30.09.2009. The said return of income was processed u/s 143(1) of the Income Tax Act. Subsequently, the assessment was completed u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961, on 24.12.2010, determining total income at Rs.1,41,370/-. Thereafter, assessee`s case was reopened under section 147 of the Act.
The assessing officer observed that there was a search operation u/s 132 of the I.T.Act, 1961, conducted by the Income Tax Department in the case of Bhawarlal Jain Group in Mumbai on 03.10.2013. During the course of search operation, it was noticed that there were bogus entries of unsecured loans and advances made by Bhawarlal Jain Group. The assessee is one of the beneficiary who has taken following accommodation entries of bogus unsecured loans and advances from the said group:
Sr.No. Hawala Name Hawala PAN Amount (Rs). 1. AZ Jewels AAMFA7751J 20,00,000/- TOTAL 20,00,000/- In view of the above, assessing officer held that assessee has failed to disclose fully and truly all material facts necessary for his assessment for the assessment year 2007-08. Therefore, there is reason to believe that such income chargeable to tax and also any other income chargeable to tax exceeding Rs. 1 lakh for A.Y. 2007-08 has escaped assessment within the meaning of provision of section 147 of the Act and hence the case of the assessee is reopened u/s 147 of the I.T.Act, 1961, for assessment year 2007-08, after recording the reasons for the same. Accordingly, a notice under section 148 of the I.T. Act was issued to the assessee
ITA No. 97/SRT/2018 A.Y. 07-08 Abhishek Agarwal on 27.03.2014, which was duly served upon the assessee. Thereafter, a notice u/s 143(2) and 142(1) of the Act was issued to the assessee on 29.04.2014. The reasons for reopening were also provided to the assessee by assessing officer, vide letter dated 13.01.2015. The objections raised by the assessee against the reopening of the case was rejected by the assessing officer. Thereafter, the Assessing Officer taking into account the evidence furnished by the assessee, made the addition to the tune of Rs.20,00,000/-.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has dismissed the ground raised by the assessee challenging the validity of reassessment u/s 147 of the Act.
Shri Rasesh Shah, Learned Counsel for the assessee, begins by pointing out that assessee has challenged reopening of assessment on the grounds that the impugned reopening under section 148 of the regular assessment already concluded under section 143(3) of the Act, after the expiry of the statutory period of 4 years is illegal and bad-in-law. During the assessment proceedings, assessee had furnished books of accounts, evidences and documents as required by the assessing officer. There was no failure on the part of the assessee to disclose fully and truly all material facts during the original assessment proceedings, hence reassessment proceedings initiated against the assessee is not in accordance with the provisions of the Act, therefore, reassessment proceedings should be quashed.
Mrs. Anupama Singla, Sr. DR for the Revenue, pleads that there is no infirmity in the reasons recorded by the assessing officer. The assessing officer got the information from the Investigation Wing and then after applied his mind and issued the notice u/s 147/148 of the Act. There is a clear escapement of income. Therefore, reasons recorded by the Assessing Officer are valid and hence the reassessment proceeding initiated by the Assessing officer is valid in the eye of law. Hence, she prayed before the Bench that order passed by the assessing officer may be sustained.
ITA No. 97/SRT/2018 A.Y. 07-08 Abhishek Agarwal 8.We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that assessee is an individual and earning share of profit from partnership firm, rental income as also interest income during the year under consideration. The return of income for the subject assessment year in response to notice u/s 153A was filed on 30-09-2009 declaring total income of Rs.1,41,370/-.The assessment under section 143(3) r.w.s. 153A of the Act was completed on 24-12-2010, accepting the returned income. Thereafter, the case of the assessee was reopened vide notice under section 148 of the Act, dated 27-03-2014. In response to the said notice under section 148 of the Act, the assessee submitted that no income has escaped assessment and that the original return filed by it may be treated as return filed in response to the notice under section 148 of the Act. In the said letter, the assessee also requested for providing the copy of reasons of reopening.Accordingly, the learned assessing officer vide letter dated 13-01-2015, supplied the following reasons of reopening of the concluded assessment under section 143(3) of the Act:
“… In this case, the return of income for A.Y. 2007-08 was filed by the assessee on 30.09.2009 declaring total income at Rs.1,41,370/-. Subsequently, the assessment was completed u/s 143(3) r.w.s. 153A of the I.T. Act, 1961, on 24.12.2010 determining total income at Rs. 1,41,370/-. Information has been received from the O/o.DIT(Inv)-II, Mumbai vide letter No. DIT(Inv)-II/information/BL3/LDV/2013-14/811 dated10.03.2014 communicated vide letter No. O/o.DIT(Inv)-II has communicated the information bogus unsecured loans and advances entries by Bhawarlal Jain Group. Statement on oath and copies of documents has been examined. The assessee is one of the beneficiaries who have taken following accommodation entries of bogus unsecured loans and advances from the said group:- Sr. No. Hawala Name Hawala PAN Amount (Rs.). 1. AZ Jewels AAMFA7751J 20,00,000/- TOTAL 20,00,000/-
In view of the above, the assessee has failed to disclose fully and truly all material facts necessary for his assessment for the assessment year 2007-08, I have therefore, reason to believe that such income chargeable to tax and also any other income chargeable to tax exceeding Rs. 1 lakh for A.Y. 2007-08 has escaped assessment within the meaning of provision of section 147 and hence I propose to reopen the assessment u/s 147 of the I.T. Act, 1961, for A.Y. 2007-08.” 4
ITA No. 97/SRT/2018 A.Y. 07-08 Abhishek Agarwal
Learned Counsel submits that scrutiny assessment, in assessee`s case has been concluded for the assessment year 2007-08, vide assessment order u/s 143(3) r.w.s. 153A of the Act dated 24-12-2010, wherein the returned income has been accepted. During the original assessment proceedings, the assessee had submitted before the assessing officer, the books of accounts, bills, invoices, purchase details, sales details, bank statements and other evidences/ documents, as called by the assessing officer, hence there is no failure on the part of the assessee to disclose fully and truly all material facts.
We note that the main issue to reopen the concluded assessment was unsecured loan received from AZ Jewels. We note that loan received from AZ Jewels has been verified and accepted in the original assessment proceeding u/s143(3) by raising specific query in this regard. Thus, there is no question of there being any failure on the part of the assessee to disclose fully and truly all the material facts necessary to the impugned original assessment.
We note that during the original assessment proceedings, the assessing officer has issued notice u/s 142(1) of the Act and raised the specific query about AZ Jewels. In response to the notice u/s 142 (1) of the Act, the assessee submitted its reply before the assessing Officer which is reproduced below: “To The Assistant Commissioner of Income Tax, Central Circle-3, Aaykar Bhavan, Surat Respected Madam, Sub: Notice u/s. 142(1) dated 02/11/2010 PAN : ADXPA 8893P A.Y. 2003-04 to A.Y. 2009-10 I am in receipt of your subject notice stating that the proof of identity, genuineness of transaction and creditworthiness of the lenders in respect of unsecured loans availed from certain persons is pending, which is required to be submitted and in this regard, I enclose herewith in Statement-3, the confirmation 5
ITA No. 97/SRT/2018 A.Y. 07-08 Abhishek Agarwal of all the following lenders, their acknowledgement of return of income, Balance Sheet and bank statements as asked for by your honour. 1. Vibha Star 2. AZ Jewels 3. Fiberweb (I) Ltd. I hope that the submissions as made herein above, shall suffice with the requirements of your honour, however, should your honour require any further information or explanation in this regard, I shall be pleased to provide the same, at hearing from your end. For the kind act of your honour in accepting my submissions as made herein above I shall ever remain grateful. Thanking you, Abhishek Agarwal/A.R.”
Therefore, it is evidently clear that in original assessment u/s 143(3) r.w.s. 153A of the Act, for assessment year 2007-08, dated 24/12/2010, the assessing officer had examined the issue relating to M/s AZ Jewels. Hence, in the reassessment proceedings, there was no any new tangible material before the assessing officer to reopen the concluded proceedings. We note that in reassessment proceedings, the assessing officer targeted the transaction relating to M/sAZ Jewels, which had already been examined by the assessing officer in the original assessment proceedings. In CIT vs. Kelvinator of India Ltd. 256 ITR 1 the Full Bench of the Delhi High Court was considering a case of reopening u/s 147 within 4 years from the end of the assessment year. The Court held that when a regular order of assessment is passed in terms of section 143 (3) of the Act, a presumption can be raised that such an order has been passed on application of mind. It was held that if it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. It was held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. On appeal by the department to the Supreme Court, (reported in 320 ITR 561(SC)) it was held that though the power
ITA No. 97/SRT/2018 A.Y. 07-08 Abhishek Agarwal to reopen under the amended section 147 is much wider, one needs to give a schematic interpretation to the words “reason to believe” failing which section 147 would give arbitrary powers to the AO to re-open assessments on the basis of “mere change of opinion”, which cannot be per se reason to re-open. One must also keep in mind the conceptual difference between power to review and power to re-assess. The AO has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfilment of certain pre-condition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. Thus, based on these facts we note that reassessment proceedings initiated by the assessing officer are not in accordance with the provisions of section 147 of the Act.
At the cost of repetition, we also state that reassessment proceedings were initiated after the expiry of four years. We note that scrutiny assessment has been completed in the case of the assessee for the assessment year 2007-08, vide order u/s 143(3) r.w.s. 153A dated 24-12-2010 accepting the returned income and therefore, the impugned notice issued u/s 148 of the Act on 27-03-2014, is beyond the statutory period of 4 years, from the end of the relevant assessment year ending on 31-03-2012, which is ab-initio void; since there is no failure on the part of the assessee to disclose fully and truly all the material facts necessary to complete the original assessment. Thus, reassessment proceedings are bad in law and for that reliance can be placed on the judgment of the Hon'ble Delhi High Court in the case of BPTP Ltd. 113 taxmann.com 587 (Delhi) wherein it was held as follows: “24. It would also be profitable to refer to the decision of Central Warehousing Corpn. (supra) and CIT v. Kelvinator of India Ltd. [2002] 123 Taxman 433/256 ITR 1 (Delhi) and CIT v. Usha International Ltd. [2012] 25 taxmann.com 200/210 Taxman 188/348 ITR 485 (Delhi) and several other decisions wherein it has been repeatedly held that reopening initiated without any failure on the part of the Assessee in fully and truly disclosing all material facts without any fresh tangible material deserves to be quashed. In view of the aforesaid test laid down by this Court for re-opening of the assessment in cases where proviso to section 147 of the Act is attracted, we find that in the present case, the test is not met. It is well settled proposition under the Income Tax Act that merely a change of opinion would not give the AO the jurisdiction to reopen the assessment under section
ITA No. 97/SRT/2018 A.Y. 07-08 Abhishek Agarwal 147/148, as the same would amount to reviewing the earlier decision. There has to be some relevant tangible material for the AO to come to the conclusion that there is escapement of income from assessment, and there must be a live link with such material for the formation of the belief. The reasons should also disclose due application of mind as reopening of the assessment proceeding is not an empty formality. On a perusal of the recorded reasons, we are not able to discern as to how the AO has come to a conclusion that there is a failure on the part of the Assessee in fully and truly disclosing all material facts for the purpose of the assessment. Though, the recorded reasons allude to an ostensible failure on the part of the Assessee to disclose fully and truly all material facts, however, the recorded reasons except for using the expression "failure on the part of the Assessee to disclose fully and truly all material facts", do not specify as to what is the nature of default or failure on the part of the Assessee. The reasons also do not explain or specify as to what is the rationale connection between the reasons to believe and the material on record. The Supreme Court in ITO v. Techspan India (P.) Ltd. [2018] 6 SCC 685 has held that "The use of the words "reason to believe" in section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such re-assessment proceedings merely on his change of opinion on the basis of some facts and circumstances which has already been considered by him during the original assessment proceedings. Such could not be the intention of the legislature." The said judgment further held that "section 147 of the IT Act does not allow the reassessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the facts that were well within his knowledge even at the time of assessment. Doing so would have the effect of giving the assessing officer the power of review and section 147 confers the power to reassess and not the power to review."
Hence, we note that assessee’s issue under consideration is squarely covered by the judgment of the Hon'ble Delhi High Court in the case of BPTP Ltd. (supra). We note that in assessee`s case under consideration the assessment is sought to be reopened after a period of four years from the end of the relevant assessment year. Whereas, as noted by us in above para, that there is no failure on the part of the assessee to disclose fully and truly all the material facts necessary to complete the original assessment, hence reassessment proceedings needs to be quashed. 15. In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the reasons recorded by the Assessing Officer, as set out earlier, were not sufficient reasons for reopening the assessment proceedings. We, therefore, quash the reassessment proceedings. As the
ITA No. 97/SRT/2018 A.Y. 07-08 Abhishek Agarwal reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous. 16. In the result, the appeal of the assessee is allowed. Order pronounced on 06/01/2022 by placing the result on the Notice Board as per Rule 34(5) of Income tax (Appellate Tribunal) Rules1963.
Sd/- Sd/- PAWAN SINGH Dr. A. L. SAINI (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) सुरत/ Surat, िदनांक Dated: 06/01/2022 Rajesh Kumar, Sr.PS/SS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / Assistant Registrar, Surat