Damayantiben Chunilal Viramgam, Ahmedabad V. The ITO, Ward-7(2)(1), Ahmedabad

ITA 1339/AHD/2019

AI Insights

The case involves an appeal by Damayantiben Chunilal Viramgam against the order of the CIT(Appeals)-7, Ahmedabad, which upheld the addition of Rs. 10,00,000 as unexplained investment in the assessee's income for the Assessment Year 2011-12. The addition was based on the assessee's payment of a single premium of Rs. 10,00,000 for an LIC Pension Policy, which was not reported in her income tax return. The Assessing Officer reopened the assessment under Section 147 of the Income Tax Act, 1961, following which the CIT(A) dismissed the assessee's appeal. The Tribunal, however, found the reopening and subsequent assessment invalid, citing insufficient evidence of income escapement and reliance on vague reasons for reopening the assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299999 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-03-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 15-08-2019
• Other Referred Cases: Bakulbhai Ramanlal Patel vs. Income Tax Officer, Novo Nordisk India (P) Ltd vs. Deputy Commissioner of Income tax, Circle 12(2), Bengaluru, Shri Sumer S Sanghvi Ahmedabad vs The Asstt. Commissioner of Income
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained investment; Income from undisclosed sources; Set aside
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I. T .A . N o .1 33 9 / Ah d/2 0 1 9 ( A s se ss m e nt Y e a r : 20 11- 1 2 ) Da ma ya n ti be n C h u nil a l V ir a mg a m A- 4 , Ka r ma - Sh a k ti Pa r k , N ea r Sw a m i Na r a ya n T e mp le, B a p a Sit ar a m C ho wk , N e a r N a ro da , Ah me da bad - 3 82 34 6 V s . I T O War d - 7 ( 2) ( 1 ) , A h me da ba d [ P AN N o. A E FP V 0 4 39 R ] (Appellant) .. (Respondent) Appellant by : Shri M. S. Chhajed, A.R. Respondent by: Shri N. J. Vyas, Sr. D.R. D a t e of H ea r i ng 06.03.2023 D a t e of P r o no u n ce me nt 10.03.2023 O R D E R The appeal filed by the assessee is against the order passed by the Ld. CIT(Appeals)-7, Ahmedabad on 24.06.2019 for A.Y. 2011-12. 2. The grounds of appeal raised by the assessee are as under: “1. The order passed by the Ld. CIT(A) is against law, equity & justice. 2. The Ld. A.O. has erred in law and on facts in upholding validity of reopening of assessment. 3. The Ld. CIT(A) has erred in law and on facts in upholding addition of Rs. 10,00,000/-. 4. The appellant craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal.” 3. In this case the information was received that the assessee has paid single premium of Rs. 10,00,000/- of L.I.C Pension Policy but not filed his return of income nor offered said amount for taxation as per the observations of the Assessing Officer. Hence, the amount of Rs. 10,00,000/- was chargeable to tax for A.Y. 2011-12. The case was reopened under Section 147 of the Income Tax Act, 1961 with previous ITA No. 1339/Ahd/2019 Damayantiben Chunilal Viramgam vs. ITO Asst.Year–2011-12 - 2 - approval of higher authorities and after recording the reasons notice under Section 148 of the Act was issued on 30.03.2018 for filing the return of income. Show-cause notice was issued on 11.10.2018 and thereafter after taking submissions of the assessee the Assessing Officer made addition of Rs. 10,00,000/- as unexplained investment. 4. Being aggrieved by the assessment order the assessee filed before the CIT(A). The CIT(A) dismiss the appeal of the assessee. 5. At the time of hearing the Ld. A.R. submitted that in case of assessee’s husband the similar reopening and the addition has been decided by the Tribunal i.e. ITA No. 1338/Ahd/2019 order dated 03.03.2023 for A.Y. 2011-12 (Late Chunilal Bhavanjubhai Viramgama Through his legal heir Damyantiben Chunilal). The Ld. A.R. also submitted the synopsis of argument which as under: “Issue No.1: The Ld. A.O. has erred in law and on facts in upholding validity of reopening of assessment (A) Re-opening of assessment is bad and illegal as the Ld AO has as the reasons does not reflect that the income having escaped assessment is more than rupees one lakh or likely to be more than rupees one lakh as laid down under the provisions of s. 149(1)(b) of Act as reopening is made beyond four years. In the light of the provisions of section 149(1)(b), while reopening the assessment beyond a period of four years from the end of the relevant assessment year, since there Is a statutory bar against reopening the assessment in case where the amount of income escaping assessment does not amount to rupees one lakh or more, the AO is also required to record a finding to that effect. Copy of reasons recorded for re- opening of assessment is annexed at Pg No. 6 of Paperbook. However while going through the reasons recorded for reopening of assessment, we noticed that Ld AO have not mentioned that income exceeding Rs. 1,00,000/- escaped assessment. In absence of recording that income escaped assessment exceeding Rs. 1,00,000/- while recording reasons, reopening of assessment is void, illegal and not tenable in the eyes of law. ITA No. 1339/Ahd/2019 Damayantiben Chunilal Viramgam vs. ITO Asst.Year–2011-12 - 3 - Assessee relies on following judicial pronouncements: (1) Hon'ble Gujarat High court in the case of Bakulbhai Ramanlal Patel vs. Income Tax Officer 56 DTR 0212 (Guj) (2) Hon'ble High Court of Karnataka in the case of Novo Nordisk India (P) Ltd V/s Deputy Commissioner of Income tax, Circle 12(2), Bengaluru-[2018] 95 taxmann.com 225 (Karnataka) (3) Hon'ble ITAT Ahmedabad in the case of Shri Sumer S Sanghvi Ahmedabad vs The Asstt. Commissioner of Income ITA.No 1424/Ahd/2016 dated 06.02.2020 Considering the facts of the case and above cited judicial pronouncements your honour is requested to quash the assessment order. (B) Re-opening of assessment is bad and illegal as the reasons are vague and non- specific The reasons recorded for reopening of assessment are vague as Ld AO has mentioned that “the assessee had paid single premium of Rs. 10,00,000/ which is substantially high with reference to his return of income Since the amount invested does not commensurate with the return of income” Assessee fails to understand that how the premium paid depends on the return of income and how does that reflect that income has escaped assessment. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons are a manifestation of the mind of the Assessing Officer and must be self explanatory and should not keep the assessee guessing it cannot be justified on the basis of inferences or interpretation. 1. Hon'ble Bombay High Court in the case of Hindustan lever Ltd. Vs. R.B. Wadkar (2004) 268 ITR 332 (Bombay) 2. Hon'ble ITAT Ahmedabad in the case of Shri Sumer S Sanghvi, Ahmedabad vs The Asstt. Commissioner of Income ITA No 1424/Ahd/2016 dated 06.02.2020 Considering the facts of the case and above cited judicial pronouncements your honour is requested to quash the assessment order. Issue No. II: The CIT(A) has erred in law and on facts in upholding addition of Rs. 10,00,000/- Assessee has paid LIC premium of Rs 10,00,000/ out of opening bank balance and agricultural Income Copy of Cash flow statement is annexed at Pg No.22 of Paperbook. ITA No. 1339/Ahd/2019 Damayantiben Chunilal Viramgam vs. ITO Asst.Year–2011-12 - 4 - Summary of funds for payment of premium is as under: Particulars Amount Opening Bank Balance 47,132 Add: Net Cash Deposit 7,54,731 Add: Saving Bank Interest 137 Add: Receipt through cheque 2,00,000 Premium Paid 10,02,000 Assessee has deposited cash out of agricultural income. Considering the facts of the case your honour is requested to delete the addition made by Ld AO.” 6. The Ld. D.R. relied upon the assessment order and the order of the CIT(A). 7. Heard both the parties and perused all the relevant material available on record. The assessee has challenged the validity of the assessment under Section 147 thereby stating that there was no nexus between the information received by the Assessing Officer and the escapement of income. From the perusal of the order passed by the Tribunal in assessee’s husband case the reasons for reopening are identical which are reproduced in Para 4 of the CIT-A’s order at Page 4. In fact, the amount of surrender of the policy are also identical. No distinguishing facts of this year has been pointed out by the Ld. A.R. Thus, about the challenged to the validity of the assessment under Section 147 the Assessing Officer has solely depending on the information regarding premature surrender of L.I.C Policy but has not taken into cognizance there was no escapement of income. Thus, the assessment itself is bad in law. The Tribunal in assessee’s husband’s case held as under: “6. We are in agreement with the ld.counsel for the assessee that the information with the AO was insufficient for forming a belief of escapement of income. In other ITA No. 1339/Ahd/2019 Damayantiben Chunilal Viramgam vs. ITO Asst.Year–2011-12 - 5 - words on the basis of information in the possession of the AO, there possibly could not have been formed any belief of income escaping assessment. 7. The income of the assessee during the year alone is not sufficient to draw any conclusion regarding source of investments made during the year. Investments can be made from past earnings /savings also. Therefore merely because income returned for the year was not sufficient to justify investment in LIC premium, it cannot be inferred that the investment was made from undisclosed sources. The AO it appears has proceeded to form his belief of escapement of income in the present case on an implausible premise. His premise that the investments during the year are sourced from the incomes earned during year suffers from a basic fallacy. In fact, this information could not have even lead to suspicion about the income having escaped assessment. The AO needed to conduct some more inquiry, determine the quantum of income which the assessee had been returning in the past years, and whether considering his life style and other factors he could have reasonably accumulated the amount to the extent of Rs.10 lakhs for making investment in LIC premium. He ought to have sought explanation from the assessee of the source of investment, and if his inquiries and investigation would have not satisfied him only in such circumstances, the AO could have formed belief of escapement of income on account of source investment in LIC premium remaining unexplained. I am therefore in complete agreement with the contention of the ld.counsel for the assessee that the information in the possession of the AO could not have lead to belief of escapement of income so as to assume valid jurisdiction to reopening the case of the assessee under section 147 of the Act. 8. The ld.CIT(A), I have noted, has not dealt with this contention of the assessee in the right perspective. His finding at para 6.2 of his order is as under: “6.2 The appellant has also objected reassessment notice and reasons recorded by AO on the ground that such reasons are very vague. It was stated by appellant that AO has issued such notice only for investment made by him and not for income. The Appellant stated that AO is duty bound to disclose income element out of such payment. This contention of appellant is not acceptable for the reasons that AO has verified returned income and amount of investment and came to conclusion that appellant has no sufficient sources of make such investment. If appellant has no sources for making such investment or there is insufficiency of funds, it mean that appellant has made investment out of unaccounted income/funds. The amount of investment which is not explained by appellant for disclosed sources always represent undisclosed income and income element in such payment definitely exist. There is no vague reasons as claimed by the appellant because AO has verified details of investment, when such investment is sold, computation of total income and he found that appellant has no sufficient sources to make such investment, hence this is prima facie good case for issuing notice u/s 148 of the Act. ITA No. 1339/Ahd/2019 Damayantiben Chunilal Viramgam vs. ITO Asst.Year–2011-12 - 6 - 9. As is evident from the above, the ld.CIT(A) has proceeded on the exactly wrong premise as that on which the AO had proceeded that the source of investments is to be co-related or explained through income earned during the year, that is why, theld.CIT(A) has noted that the AO had verified the returned income and the amount of investment and had rightly come to the conclusion that the assessee had no sufficient source of making such investment. In view of the above, since I have held the jurisdiction assumed under section 147 to be invalid, the assessment order passed, as a consequence is not sustainable in the eyes of law and without jurisdiction. Therefore, the same is directed to be set aside. 10. Since I have set aside the order of the AO itself, as being invalid, the adjudication of the issue on merits is a mere academic exercise and is therefore not being dealt with by us. 11. In the result, the appeal of the assessee is allowed in the above terms.” The facts are identical and therefore, in assessee’s case also the addition does not sustain. 8. In result, appeal of the assessee is allowed. This Order pronounced in Open Court on 10/03/2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad; Dated 10/03/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad