Dr. Soumitra Dutta, Kolkata V. ITO, WD-55(1), KOLKATA, Kolkata

ITA 1236/KOL/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3140 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 28-09-2015
• Court: TRIBUNAL
• Department Lawyers: SUDIP GUHA
• Assessee Lawyers: K M ROY
• Keywords: Reopening of assessment; Depreciation; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI WASEEM AHMED , AM] I.T.A NO.1236/KOL/2015 ASSESSMENT YEAR: 2009-10 DR. SOUMITRA DUTTA VS. INCOME-TAX OFFICER, WD -55(1), KOLKATA (PAN: ADEPD6203F) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 20.01.2016 DATE OF PRONOUNCEMENT: 03.02.2016 FOR THE APPELLANT: SHRI K. M. ROY, FCA FOR THE RESPONDENT: SHRI SUDIP GUHA, JCIT ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-6, KOLKATA VIDE APPEAL NO. 124/CIT(A)-6/KOL/2011-12 DATED 14.08.2015. ASSESSME NT WAS FRAMED BY ITO, WARD-55(1), KOLKATA U/S. 143(3)/147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2009-10 VIDE HIS ORDER DATED 21.12. 2011. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS A GAINST ASSUMPTION OF JURISDICTION BY THE AO FOR REOPENING OF ASSESSMENT U/S. 147/148 OF THE ACT . 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE FILE D HIS RETURN OF INCOME FOR THE RELEVANT AY 2009-10 ON 23.09.2009 DECLARING TOTAL INCOME AT RS. 4,25,540/-. THIS RETURN WAS PROCESSED U/S. 143(1) OF THE ACT AND SUBSEQUENTLY, THE AO INITIATE D REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT BY ISSUING NOTICE U/S. 148 OF THE ACT DATED 08. 10.2010. FOR REOPENING THE ASSESSMENT, THE AO RECORDED THE FOLLOWING REASONS, WHICH WERE SUPPL IED TO ASSESSEE VIDE LETTER NO. ITO,W- 55(1)KOL/2010-11/1430 DATED 08.03.2011: FROM THE BALANCE SHEET AS ON 31.3.2009 IT IS REVE ALED THAT CAPITAL BALANCE WAS RS.48.77 LACS WHEREAS TOTAL INVESTMENT OF THE ASSESSEE IS RS.61.7 0 LACS. THE SUNDRY CREDITORS WAS SHOWN AS RS.27,59,856/-. THE ASSESSEE IS AN MEDICAL PROFESS ION. FROM THE P&L ACCOUNT AS ON 31.3.2009 IT WAS FOUND THAT GROSS RECEIPTS WAS SHOWN AS RS.13,12 ,760/- AND NET PROFIT WAS SHOWN AS RS.4,49,303.85 I.E. SUNDRY CREDITORS WAS MORE THAN 200% OF THE SAID RECEIPTS (GROSS RECEIPTS), WHICH IS VERY UNUSUAL W.R.T. TURN OVER AS WELL AS NATURE OF PROFESSIONAL INCOME. THE SOURCE OF SUNDRY CREDITORS IS NOT ASCERTAINED. IN VIEW OF ABOVE, I HAVE REASONS TO BELIEVE THAT I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. INITIATE PROCEEDINGS U/S. 147 OF THE I. T. ACT, 196 1 AND ISSUE NOTICE U/S. 148 OF THE I. T. ACT, 1961. 2 ITA NO.1236/KOL/2015 DR. SOUMITRA DUTTA, AY 2009-10 2 IN VIEW OF THE ABOVE REASONS, LD. COUNSEL FOR THE A SSESSEE STATED THAT THERE IS NO MATERIAL BEFORE THE AO ON THE BASIS OF WHICH HE HAS FORMED BELIEF T HAT THERE WAS ESCAPEMENT OF INCOME CHARGEABLE TO TAX WHICH IS A PRE-CONDITION FOR INIT IATION OF REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT. ACCORDING TO LD. COUNSEL FOR THE ASSESSEE , THE AO HAS RE APPRECIATED SAME FACTS AND ISSUED NOTICE U/S. 148 OF THE ACT. ACCORDING TO HI M, ON THE SAME SET OF FACTS, ON THE BASIS OF WHICH RETURN WAS PROCESSED U/S. 143(1) OF THE ACT, THE AO IS NOT PERMITTED TO REOPEN THE ASSESSMENT U/S. 147 READ WITH SECTION 148 OF THE AC T. LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF COORDINATE BENCH IN THE CASE OF FIVES S TEIN INDIA PROJECTS INDIA PVT. LTD. VS. DCIT IN ITA NO. 756/KOL/2013 DATED 15.01.2016, WHEREIN THE DECISION OF THIRD MEMBER OF THE HONBLE MUMBAI ITAT IN THE CASE OF TELCO DADAGEE DH ACKJEE LTD. VS. DCIT IN ITA NO. 4613/MUM/2005 DATED 12.05.2010 WAS FOLLOWED WHEREI N ITAT, MUMBAI BENCH HAS LAID DOWN THE FOLLOWING RATIO: AS IS CLEARLY EVIDENT FROM THE REASONS RECORDED B Y THE AO, THERE WAS NO NEW MATERIAL COMING TO THE POSSESSION OF THE AO ON THE BASIS OF WHICH THE ASSESSMENT COMPLETED U/S 143( 1) WAS REOPENED AND THIS POSITION HAS NOT BEEN DISPUTED EVEN BY THE LEARNED DR. RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK B ROKERS (P) LTD. (SUPRA), HE, HOWEVER, HAS CONTENDED THAT THE REOPENING OF ASSESSMENT COMPLETE D ORIGINALLY U/S 143( 1) IS PERMISSIBLE WITHOUT THERE BEING ANY NEW MATERIAL COMING TO THE POSSESSI ON OF THE AO IF THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT ARE OTHERWISE VALID. TH E LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS RELIED ON THIRD MEMBER DECISION OF THE TR IBUNAL IN THE CASE OF TELCO DADAJI DHACKJEE LTD. (SUPRA) STATING THAT A SIMILAR ISSUE INVOLVED IN THE SAID CASE HAS BEEN DECIDED BY THE THIRD MEMBER IN FAVOUR OF THE ASSESSEE AFTER TAKING INTO CONSIDERATION THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAJESLI JHAVERI STOCK BROKER ( P) LTD. (SUPRA) RELIED UPON BY THE LEARNED DR. IN THE SAID CASE, THE RETURN, FILED BY THE ASSESSEE WA S ORIGINALLY ACCEPTED U/S. 143(1). IN THE SAID RETURN THE ASSESSEE HAD CLAIMED DEDUCTION FOR PAYME NT OF NON-COMPETE FEES OF RS. 75 LAKHS WHICH INCLUDED PAYMENT OF RS.15 LAKH TOWARD DIRECTORS. TH E ASSESSEE HAD ALSO CLAIMED DEPRECIATION OF RS.1,41,858/- ON LEASE PREMISES. THE AO ISSUED NOTI CE U/S 148 ON THE GROUND THAT THESE WERE NOT ALLOWABLE EXPENSES AND INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. HE ACCORDINGLY DISALLOWED BOTH THE ITEM IN THE REASSESSMENT ORDER. WHEN THE MATTER REACHED TO THE TRIBUNAL, THE LEARNED JUDICIAL MEMBER TOOK THE VIEW THAT THERE WA S NO FRESH MATERIAL TO SUPPORT THE FORMATION OF THE BELIEF OF THE AO THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND IN THE ABSENCE OF ANY FRESH TANGIBLE MATERIAL, HE CAME TO THE CONCLUS ION THAT IT WAS NOT PERMISSIBLE FOR THE AO TO REOPEN THE ASSESSMENT. THE LEARNED ACCOUNTANT MEMBE R, HOWEVER, TOOK A DIFFERENT VIEW RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) AND THE MATTER, THEREFORE, WAS REFERRED TO A THIRD MEMBER FOR RESOLVING INTER ALIA, THE FOLLOWING POINT OF DIFFERENCE: 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE PROC EEDINGS INITIATED BY THE AO U/S 147 IS LIABLE TO BE CONFIRMED OR QUASHED WHEN THERE WAS NO FRESH MAT ERIAL AVAILABLE WITH THE AO AND THE ASSESSMENT HAD BEEN COMPLETED ORIGINALLY U/S 143(1) .' THE THIRD MEMBER AGREED WITH THE VIEW TAKEN BY THE LEARNED JUDICIAL MEMBER RELYING MAINLY ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F KELVINATOR INDIA LTD. (SUPRA) AND EICHER LTD. 320 ITR 561. IT WAS HELD BY THE THIRD MEMBER THAT S ECTION 147 APPLIES BOTH TO SECTION 143(1) AS WELL AS SECTION 143(3) AND, THEREFORE, EXCEPT TO TH E EXTENT THAT A REASSESSMENT NOTICE ISSUED U/S 148 IN A CASE WHERE THE ORIGINAL ASSESSMENT WAS MADE U/ S 143(1) CANNOT BE CHALLENGED ON THE GROUND 3 ITA NO.1236/KOL/2015 DR. SOUMITRA DUTTA, AY 2009-10 3 OF A MERE CHANGE OF OPINION, STILL IT IS OPEN TO AN ASSESSEE TO CHALLENGE THE NOTICE ON THE GROUND THAT THERE IS NO REASON TO BELIEVE THAT INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT. AS REGARDS THE DECISION OF HON'BLE SUPREME COURT IN TH E CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) CITED BY THE REVENUE AND RELIED UPON BY THE ACCOUNTANT MEMBER, THE THIRD MEMBER HELD THAT THE SAME WAS APPLICABLE IN CASES WHERE THE RET URN WAS PROCESSED U/S.143(1) BUT LATER ON NOTICE WAS ISSUED U/S 148 AND THE ASSESSEE CHALLENG ES THE NOTICE ON THE GROUND THAT IT IS PROMPTED BY A MERE CHANGE OF OPINION. THE THIRD MEMBER THEN REFERRED TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA (S UPRA) WHEREIN IT WAS HELD THAT THERE SHOULD BE 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT INCOME HAD ESCAPED ASSESSMENT. RELYING ON THE SAID DECISION, IT WAS HELD BY THE THIRD MEMBER THAT WHILE RESORTING TO SECTION 147 EVEN IN A CASE WHERE ONLY AN INTIMATION HAD BEEN ISSUED U/S 143(1) (A), IT IS ESSENTIAL THAT THE AO SHOULD HAVE BEFORE HIM TANGIBLE MATERIAL JUSTIFYING HIS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. SINCE THERE WAS NO SUCH TANGIBLE MATERIAL BEFORE TH E AO FROM WHICH HE COULD ENTERTAIN THE BELIEF THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAD E SCAPED ASSESSMENT, THE THIRD MEMBER HELD THAT REASSESSMENT PROCEEDINGS INITIATED BY THE AO WERE L IABLE TO BE QUASHED ON THE GROUND THAT THERE WAS NO TANGIBLE MATERIAL BEFORE THE AO EVEN THOUGH THE ASSESSMENT WAS COMPLETED ORIGINALLY U/S 143(1). IN OUR OPINION, THE THIRD MEMBER DECISION O F THE TRIBUNAL IN THE CASE OF TELCO DADAJI DHACKJEE LTD. (SUPRA) IS SQUARELY APPLICABLE IN THE PRESENT CASE AND RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE INITIATION OF REASSESSMENT P ROCEEDINGS BY THE AO ITSELF WAS BAD IN LAW AND THE REASSESSMENT COMPLETED IN PURSUANCE THEREOF IS LIABLE TO BE QUASHED BEING INVALID. WE ORDER ACCORDINGLY AND ALLOW GROUND NO. 1 OF THE ASSESSEE' S APPEAL.' 4. ON THE OTHER HAND, THE LD. SR. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND STATED THAT THE REASSESSMENT IS INITIATED WITHIN FOUR YEAR S AND THAT ALSO RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. ACCORDING TO HIM, THE CIRCUMSTANCES ME NTIONED IN THE REASONS RECORDED ITSELF JUSTIFY THE REOPENING OF ASSESSMENT U/S. 147 OF THE ACT. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE ARE OF THE VIEW THAT FOR INITIATING REASSESSMENT PROCEEDINGS, THE AO SHOULD ENTERTAIN BELIEF REGARDING ESCAPEMENT OF INCOME AND SUCH BELIEF SHOU LD HAVE BEEN BASED ON TANGIBLE MATERIAL, EVEN THOUGH THE RETURN IS PROCESSED U/S. 143(1) OF THE ACT. IN THE PRESENT CASE BEFORE US, NO NEW MATERIAL CAME TO THE POSSESSION OF THE AO ON THE BA SIS OF WHICH HE ENTERTAINED BELIEF THAT INCOME CHARGEABLE TO TAX IN THE HANDS OF THE ASSESS EE HAS ESCAPED ASSESSMENT. FROM THE VERY REASON RECORDED, IT IS CLEAR THAT THE AO HAS RELIED ON THE ACCOUNTS OF THE ASSESSEE AND THAT ALSO HIS BELIEF IS RECORDED AS, THE ASSESSEE IS A MEDICAL PROFESSIONAL. FROM THE P&L ACCOUNT AS ON 31.03.2009, IT WAS FOUND THAT GROSS RECEIPTS WAS SH OWN AT RS.13,12,760/- AND NET PROFIT WAS SHOWN AS RS.4,49,303.85 I.E. SUNDRY CREDITORS WAS M ORE THAN 200% OF THE SAID RECEIPT (GROSS RECEIPTS), WHICH IS VERY UNUSUAL WITH RESPECT TO TU RNOVER AS WELL AS PROFESSIONAL INCOME. WE FIND THAT THE VERY BASIS OF INITIATION OF REASSESSM ENT PROCEEDINGS BY THE AO IS JUST ON THE BASIS OF CONJECTURE AND SURMISES. HENCE, RESPECTFULLY FOLLO WING THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF TELCO DADAGEE DHACKJEE LTD. , SUPRA WE QUASH THE REASSESSMENT 4 ITA NO.1236/KOL/2015 DR. SOUMITRA DUTTA, AY 2009-10 4 PROCEEDINGS. AS WE HAVE QUASHED THE REASSESSMENT P ROCEEDINGS, OTHER GROUNDS ON MERITS NEED NOT TO BE ADJUDICATED. APPEAL OF ASSESSEE IS ALLOW ED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.02.2016. SD/- SD/- (WASEEM AHMED) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3RD FEBRUARY, 2016 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DR. SOUMITRA DUTTA, CK-123, SECTOR-II, SALT LAKE, KOLKATA-700091. 2. RESPONDENT ITO, WD-55(1), KOLKATA. 3. CIT(A) , KOLKATA 4. CIT , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .