Shri Laxmanbhai Rambhai Jalu (HUF), Surat V. The Income tax Officer,Ward-3(2), Surat

ITA 1211/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6126 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-02-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 30-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Reopening of assessment; Reassessment proceedings
• Section: 143(3)

Judgement Text

ITA NO. 1211 / AHD / 201 3 A SSESSMENT Y EAR: 20 0 4 - 05 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] ITA NO. 1211 /AHD/201 3 ASSESSMENT Y EAR : 20 0 4 - 05 LAXMANBHAI RAMBHAI JALU (HUF), ..... .......... .APPELLANT 71, KASTURBA CO - OPERATIVE HOUSING SOCIETY LIMI TED, NEAR NEW ERA SCHOOL, RANDER ROAD, SURAT 395 009. [PAN: A ADHJ 8643 P ] VS. INCOME TAX OFFICER , WARD 3 ( 2 ), SURAT. .. ......... RESPONDENT APPEARANCES BY: RAJESH M. UPADHYAY , FOR THE APPELLANT D INESH SINGH , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 1 4 . 0 2 . 201 7 DATE OF PRONOUNCING THE ORDER : 26 .04. 2017 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 29 TH MARCH 201 3 , PASSED BY THE LEARNED CIT( A) , IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 20 0 4 - 05 . 2. GRIEVANCES RAISED IN THIS APPEAL ARE AS FOLLOWS : - 1. LEARNED CIT(A) - IV, SURAT HAS ERRED IN LAW AND ON FACTS TO CONFIRM R EOPENING OF ASSESSMENT FOR A.Y. 2004 - 05 MADE BY THE ITO, WARD 3(2), SURAT. 2 . L EARNED CIT(A) - IV , SURAT HAS ERRED IN LAW AND ON FACTS TO SUSTAIN ADDITION OF RS.20,00,260/ - MADE BY THE ASSESSING OFFICER BY FOLLOWING DIRECTION OF DDIT (INV), SURAT IGNOR ING THE FACT THAT THE SAME IS BEING N PART OF OPENING CAPITAL FOR A.Y. 2005 - 06 FOR WHICH THE DEPARTMENT HAS ALREADY TAKEN TAX AND CHA R GED PENALTY U/S 271(1)(C) OF THE ACT. ITA NO. 1211 / AHD / 201 3 A SSESSMENT Y EAR: 20 0 4 - 05 PAGE 2 OF 5 3. WE WILL TAKE UP THE ISSUE OF VALIDITY OF REASSESSMENT PROCEEDINGS FIRST. IT I S A CASE OF REOPENED ASSESSMENT PROCEEDINGS. IN THE UNDATED REASONS RECORDED FOR REOPENING THE ASSESSMENT, WHICH ARE PLACED BEFORE US AT PAGES 4 TO 7 OF THE PAPER - BOOK, ALL THAT IS STATED IS THAT VERIFICATIONS OF SOME CLAIMS ARE REQUIRED. THESE REASONS STA TE, INTER ALIA, THAT THE CLAIM OF THE ASSESSEE THAT FUNDS OF HUF HAVE BEEN UTILIZED FOR PURCHASE OF PROPERTY AND CLAIM FOR AGRICULTURAL INCOME HAS TO BE VERIFIED BY THE AO FOR THE AY 2004 - 05 , THAT THE ASSESSEE HAS CLAIMED SAVINGS OUT OF PAST AGRICULTURA L INCOME OF RS 18,65,000.. (BUT) ..THE ASSESSEE HAS NOT FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004 - 05 , AND THE CLAIM OF THE ASSESSEE, THEREFORE, APPEARS TO BE NOT TENABLE , THAT THE AMOUNT OF RS 18,65,000 IS NOTHING BUT UNEXPLAINED INCOME OF TH E ASSESSEE FOR THE ASSESSMENT YEAR 2004 - 05 , THAT IN ORDER TO VERIFY THE SOURCE OF PURCHASE, IT IS NECESSARY TO REOPEN THE ASSESSMENT PROCEEDINGS.. AND FINALLY THAT FROM THE ABOVE FACTS, THE FOLLOWING COURSE OF ACTION ARISES SETTING OUT THE VERIFICATIO N WHICH, ACCORDING TO THE ASSESSING OFFICER, ARE DESIRABLE. HE THEN ADDS THAT IN VIEW OF THE ABOVE, IT IS CONCLUSIVELY PROVED THAT THE TRANSACTION HAS TAKEN PLACE AND I HAVE REASONS TO BELIEVE THAT THERE IS AN ESCAPEMENT OF INCOME WHICH IS ATTRIBUTABLE T O THE PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT FOR THE FINANCIAL YEAR 2003 - 04 RELEVANT TO THE ASSESSMENT YEAR 2004 - 05 . IT IS ON THE STRENGTH OF THESE REASONS THAT THE ASSESSMENT HAS BEEN REOPENED. THE ASSESSEE DID RAISE OBJECTIONS BEFORE THE ASSESS ING OFFICER AND APPEALED BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. NOT SATISFIED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. 4. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LI GHT OF THE APPLICABLE LEGAL POSITION. 5. I FIND THAT THE ONLY INCOME ESCAPING THE ASSESSMENT, AS POINTED OUT IN THESE REASONS, IS WITH RESPECT TO SAVINGS OUT OF AGRICULTURAL INCOME, AGGREGATING TO RS 18,65,000, BUT THE REASONS OF THE AO COMING TO THIS CON CLUSION ONLY IS THAT THE ASSESSEE ITA NO. 1211 / AHD / 201 3 A SSESSMENT Y EAR: 20 0 4 - 05 PAGE 3 OF 5 HAD NOT FILED ANY INCOME TAX RETURNS IN RESPECT OF THE SAME. THAT CAN HARDLY BE A REASON FOR HOLDING THIS BELIEF, PARTICULARLY WHEN THE AGRICULTURAL INCOME ITSELF IS EXEMPT FROM TAX. THERE IS NO OTHER REASON FOR HOLDING TH E BELIEF THAT ANY INCOME HAS ESCAPED ASSESSMENT. ALL THAT THE ASSESSING OFFICER STATES IS ABOUT THE NEED OF SOME VERIFICATIONS BUT IT IS ONLY ELEMENTARY THAT AN ASSESSMENT CANNOT BE REOPENED ONLY BECAUSE CERTAIN VERIFICATIONS ARE CONSIDERED DESIRABLE. WHIL E ON THIS ISSUE, AND DEALING WITH THE LEGAL POSITION WITH RESPECT TO REASONS RECORDED FOR REOPENING THE ASSESSMENT, I MAY USEFULLY REFER TO THE FOLLOWING OBSERVATIONS MADE BY A DIVISION BENCH OF THIS TRIBUNAL IN THE CASE OF BIR BAHADUR SINGH SIJWALI VS ITO [(2015) 68 SOT 197 (DEL)]: 7. IT IS WELL SETTLED IN LAW THAT REASONS, AS RECORDED FOR REOPENING THE REASSESSMENT, ARE TO BE EXAMINED ON A STANDALONE BASIS. NOTHING CAN BE ADDED TO THE REASONS SO RECORDED, NOR ANYTHING CAN BE DELETED FROM THE REASONS SO R ECORDED. HON'BLE BOMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER LTD. V. R.B. WADKAR [20 04] 268 ITR 332 , HAS, INTER ALIA, OBSERVED THAT ' .IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTI ON OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS OF REASONS NOT RECORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY HIM. HE HAS TO SPEAK THRO UGH THE REASONS.' THEIR LORDSHIPS ADDED THAT 'THE REASONS RECORDED SHOULD BE SELF - EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND THE EVIDENCE .'. THEREFORE, THE REASONS ARE TO BE EXAMINED ONLY ON THE BASIS OF THE REASONS AS RECORDED. THE NEXT IMPORTANT POINT IS THAT EVEN THOUGH REASONS, AS RECORDED, MAY NOT NECESSARILY PROVE ESCAPEMENT OF INCOME AT THE STAGE OF RECORDING THE REASONS, SUCH REASONS MUST POINT OUT TO AN INCOME ESCAPING ASSESSMENT AND NOT MERELY NEED OF AN INQUIRY WHICH MAY RESULT IN DETECTION OF AN INCOME ESCAPING ASSESSMENT. UNDOUBTEDLY, AT THE STAGE OF RECORDING THE REASONS FOR REOPENING THE ASSESSMENT, ALL THAT IS NECESSARY IS THE FORMATION OF PRIMA FACIE BELIEF THAT AN INCOME H AS ESCAPED THE ASSESSMENT AND IT IS NOT NECESSARY THAT THE FACT OF INCOME HAVING ESCAPED ASSESSMENT IS PROVED TO THE HILT. WHAT IS, HOWEVER, NECESSARY IS THAT THERE MUST BE SOMETHING WHICH INDICATES, EVEN IF NOT ESTABLISHES, THE ESCAPEMENT OF INCOME FROM A SSESSMENT. IT IS ONLY ON THIS BASIS THAT THE ASSESSING OFFICER CAN FORM THE BELIEF THAT AN INCOME HAS ESCAPED ASSESSMENT. MERELY BECAUSE SOME FURTHER INVESTIGATIONS HAVE NOT BEEN CARRIED OUT, WHICH, IF MADE, COULD HAVE LED TO DETECTION TO AN INCOME ESCAPIN G ASSESSMENT, CANNOT BE REASON ENOUGH TO HOLD THE VIEW THAT INCOME HAS ESCAPED ASSESSMENT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE SUBTLE BUT IMPORTANT DISTINCTION BETWEEN FACTORS WHICH INDICATE AN INCOME ESCAPING THE ASSESSMENTS AND THE FACTORS WHICH IND ICATE A LEGITIMATE SUSPICION ABOUT INCOME ESCAPING THE ASSESSMENT. THE FORMER CATEGORY CONSISTS OF THE FACTS WHICH, IF ESTABLISHED TO BE CORRECT, WILL HAVE A CAUSE AND EFFECT RELATIONSHIP WITH THE INCOME ESCAPING THE ITA NO. 1211 / AHD / 201 3 A SSESSMENT Y EAR: 20 0 4 - 05 PAGE 4 OF 5 ASSESSMENT. THE LATTER CATEGORY CONSIST S OF THE FACTS, WHICH, IF ESTABLISHED TO BE CORRECT, COULD LEGITIMATELY LEAD TO FURTHER INQUIRIES WHICH MAY LEAD TO DETECTION OF AN INCOME WHICH HAS ESCAPED ASSESSMENT. THERE HAS TO BE SOME KIND OF A CAUSE AND EFFECT RELATIONSHIP BETWEEN REASONS RECORDED A ND THE INCOME ESCAPING ASSESSMENT. WHILE DEALING WITH THIS ASPECT OF THE MATTER, IT IS USEFUL TO BEAR IN MIND THE FOLLOWING OBSERVATIONS MADE BY HON'BLE SUPREME COURT IN THE CASE OF ITO V. LAKHMANI MEWAL DAS [1976] 103 ITR 437, ' THE REASONS FOR THE FORMA TION OF THE BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE ITO AND THE FORMATION O F THIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE THAT THE COURT CANNOT GO INTO SUFFICIENCY OR ADEQUA CY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE ITO ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING ASSESSMENT. AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER VAGUE AND INDEFI NITE OR DISTANT, REMOTE AND FARFETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT.' 6. VIEWED THUS, THE REASONS RECORDED FOR REOPENING THE ASSESSMENT DO NOT MEET TE TESTS LAID DOW N IN LAW. THERE IS NOTHING MORE THAN SUSPICION AND THE NEED FOR VERIFICATION TO JUSTIFY THE REOPENING OF ASSESSMENT. IN THIS VIEW OF THE MATTER, AND IN THE LIGHT OF THE DISCUSSIONS EARLIER, I HOLD THAT THE REASSESSMENT ITSELF WAS UNSUSTAINABLE IN LAW. I, T HEREFORE, QUASH THE REASSESSMENT PROCEEDINGS. GIVEN THIS CONCLUSION, ALL OTHER ISSUES RAISED BY THE ASSESSEE ARE ACADEMIC AND CALL FOR NO ADJUDICATION AT THIS STAGE. 7. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE O PEN COURT TODAY ON THE 26 TH DAY OF APRIL, 2017. SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 26 TH DAY OF APRIL , 2017 . PBN/* ITA NO. 1211 / AHD / 201 3 A SSESSMENT Y EAR: 20 0 4 - 05 PAGE 5 OF 5 COPIES TO: (1) THE APPELLANT ( 2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD