M/s. Jansons, Bangalore V. ACIT, Bangalore

ITA 1390/BANG/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9417 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-06-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 07-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS JAHANZEB AKHTER
• Keywords: Reopening of assessment; Unexplained investment; Difference of opinion; Change of opinion
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO.1390/BANG/2010 ASSESSMENT YEAR : 2001-02 M/S. JANSONS, # 75-76, COMMERCIAL STREET, BANGALORE 560 001. PAN: AABFM 2766Q VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI RAVI SHANKAR, ADVOCATE RESPONDENT BY : MRS. JAHANZEB AKHTER, CIT(DR) DATE OF HEARING : 29.06.2016 DATE OF PRONOUNCEMENT : 26.08.2016 O R D E R THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 07.11.2006 OF THE CIT(APPEALS)-I, BANGALORE FOR THE ASSESSMENT YEAR 2001-02 INTER ALIA ON THE FOLLOWING GROUNDS:- 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, W EIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ORDER OF RE-ASSESSMENT IS BAD IN LAW AND VO ID-AB-INITIO FOR WANT OF REQUISITE JURISDICTION ESPECIALLY, THE MANDATORY REQUIREMENTS TO ASSUME JURISDICTION U/S 148 OF THE ACT DID NOT EXIST AND HAVE NOT BEEN COMPLIED WITH AND CONSEQUEN TLY, THE RE-ASSESSMENT REQUIRES TO BE CANCELLED. ITA NO.1390/BANG/2010 PAGE 2 OF 8 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT [A] IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS.10,12,000 /- AS THE ALLEGED EXCESS STOCK DISCOVERED DURING THE COURSE O F SURVEY UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APP ELLANT'S CASE. 4. THE LEARNED CIT[A] FAILED TO APPRECIATE THAT TH E APPELLANT HAS CLEARLY SHOWN THE CLOSING STOCK CORRECTLY IN TH E PROFIT & LOSS ACCOUNT AND BALANCE SHEET FILED ALONG WITH THE RETU RN OF INCOME AND THEREFORE, THERE WAS NO JUSTIFICATION TO MAKE T HE IMPUGNED ADDITION. 5. WITHOUT PREJUDICE TO THE ABOVE, THE ADDITION MA DE ON ACCOUNT OF EXCESS STOCK IS HIGHLY EXCESSIVE AND UNR EASONABLE AND THE SAME DESERVES TO BE REDUCED SUBSTANTIALLY. 6. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER W ITH THE HON'BLE C.C.I.T/D.G. THE APPELLANT DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST U/S.234-B AND 234C OF THE ACT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT 'S CASE DESERVES TO BE CANCELLED. 7. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PAR T OF THE COSTS. 2. BESIDES ASSAILING THE ORDER OF CIT(APPEALS) ON MERITS, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING OF ASSESSM ENT ON THE GROUND THAT ALL INFORMATION WERE AVAILABLE BEFORE THE ASSESSING OFFICER WHILE COMPLETING THE ORIGINAL ASSESSMENT, THEREFORE REOPENING OF ASS ESSMENT IS SIMPLY ON ACCOUNT OF CHANGE OF OPINION AND THEREFORE NOT SUST AINABLE IN THE EYES OF LAW. 3. THIS ASPECT WAS EXAMINED BY THE CIT(APPEALS) IN HIS ORDER IN THE LIGHT OF THE FACT THAT SURVEY U/S. 133A(1) OF THE I NCOME-TAX ACT, 1961 ITA NO.1390/BANG/2010 PAGE 3 OF 8 [THE ACT] WAS CONDUCTED WHEREIN THE ASSESSEE ADMI TTED TO OFFER THE EXCESS STOCK OF RS.10,12,000 IN THE RETURN. THEREA FTER, A SEARCH WAS CONDUCTED ON 24.1.2001. A RETURN FOR AY 2001-02 WA S FILED ON 31.10.2001 DECLARING INCOME OF RS.79,090 AND ASSESSMENT WAS CO MPLETED ON 1.3.2004 AT RS.89,090 AGAINST THE RETURNED INCOME O F RS.79,090, AGAINST WHICH AN APPEAL WAS FILED, BUT THE SAME WAS DISMISS ED BY THE CIT(APPEALS) AND THEREAFTER NO FURTHER APPEAL WAS F ILED. 4. ON 16.2.2006, THE AO FORMED A VIEW TO REOPEN THE ASSESSMENT U/S. 148 OF THE ACT AND ACCORDINGLY REASONS WERE RECORDE D AND NOTICE U/S. 148 WAS ISSUED ON 17.2.2006 TO WHICH THE ASSESSEE HAS F ILED OBJECTIONS TO THE NOTICE U/S. 148 OF THE ACT. THEREAFTER, NOTICE U/S. 143(2) WAS ISSUED ON 13.7.2006 AND IN RESPONSE THERETO, THE ASSESSEE SOU GHT A COPY OF THE REASONS RECORDED VIDE LETTER DATED 31.7.2006. THRO UGH THIS LETTER, IT WAS ALSO STATED THAT THE RETURN FILED ON 31.10.2001 BE TREATED AS A RETURN FILED IN RESPONSE TO NOTICE U/S. 148. COPY OF THE REASONS R ECORDED WAS SERVED ON THE ASSESSEE ON 1.8.2006. THE ASSESSEE SOUGHT TIME TO FILE OBJECTIONS ON 14.8.2006, BUT NO OBJECTIONS WERE FILED BY THE ASSE SSEE. ACCORDINGLY ON SUBSEQUENT DATES FIXED FOR HEARING ON 10.7.06 AND 1 .8.06, NONE APPEARED ON BEHALF OF THE ASSESSEE. AGAIN ON 14.8.06 AND 10 .10.06, WHEN THE MATTER WAS LISTED FOR HEARING BEFORE THE AO, NONE A PPEARED ON BEHALF OF THE ASSESSEE. ACCORDINGLY ASSESSMENT WAS COMPLETED VIDE ORDER DATED 7.11.2006 U/S. 143(3) R.W.S. 147 OF THE ACT. THE A O HAS ALSO COMPLETED THE ASSESSMENT IN SEARCH PROCEEDINGS INCLUDING AN I NCOME OF ITA NO.1390/BANG/2010 PAGE 4 OF 8 RS.10,12,000 ADMITTED BY THE ASSESSEE DURING THE CO URSE OF SURVEY TOWARDS INVESTMENT IN EXCESS STOCK, BUT THE SAME WA S DELETED BY THE TRIBUNAL IN APPEAL, HAVING OBSERVED THAT IN BLOCK A SSESSMENTS ONLY THAT INCOME CAN BE ADDED WHICH HAS ACCRUED ON ACCOUNT OF SEIZED MATERIAL OR DOCUMENTS. THEREAFTER, THE AO HAS FORMED A VIEW TH AT DURING THE COURSE OF SURVEY CONDUCTED ON 8.1.2000, THE ASSESSEE HAS A DMITTED THE EXCESS STOCK AS REPRESENTING FROM UNDISCLOSED SOURCE OF IN COME TO THE EXTENT OF RS.10,12,000, BUT HE HAS NOT DECLARED THE SAID SUM OF RS.10,12,000 IN THE RETURN OF INCOME FILED FOR THE AY 2001-02. CONSEQ UENTLY, NOTICE U/S. 148 WAS ISSUED AND ASSESSMENT WAS COMPLETED U/S. 143(3) R.W.S. 147 OF THE ACT AT RS.11,01,090 BY MAKING AN ADDITION OF RS.10, 12,000 AS UNDISCLOSED INVESTMENT IN EXCESS STOCK. 5. THIS ORDER OF THE AO WAS CHALLENGED BEFORE THE C IT(APPEALS) ON THE LEGAL GROUND, BUT NO EXPLANATION WAS FURNISHED WITH REGARD TO SOURCE OF INVESTMENT IN EXCESS STOCK. THE CIT(APPEALS) HAS D EALT WITH THIS ISSUE IN DETAIL IN HIS ORDER IN THE LIGHT OF THE AFORESAID F ACTS AND WAS OF THE VIEW THAT SINCE ASSESSEE HAS NOT OFFERED THE AGREED UNDISCLOS ED INVESTMENT TOWARDS THE EXCESS TOCK IN THE RETURN OF INCOME FILED ON 31 .10.2001, THE AO HAS RIGHTLY MADE THE ADDITION. ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS DISMISSED BY THE CIT(APPEALS). 6. NOW THE ASSESSEE HAS PREFERRED THE APPEAL BEFORE THE TRIBUNAL AND REITERATED ITS CONTENTIONS. THE LD. COUNSEL FOR TH E ASSESSEE HAS CONTENDED ITA NO.1390/BANG/2010 PAGE 5 OF 8 THAT SINCE ALL INFORMATION WAS AVAILABLE BEFORE THE AO, THE AO SHOULD HAVE MADE THE ADDITION WHILE COMPLETING THE ORIGINAL ASS ESSMENT U/S. 143(3) OF THE ACT ON 1.3.2004, BUT HE DID NOT MAKE ANY ADDITI ON OF THE ALLEGED INVESTMENT IN EXCESS STOCK; MEANING THEREBY, DURING THE COURSE OF ASSESSMENT PROCEEDINGS HE WAS CONVINCED WITH THE EX PLANATION FURNISHED BY THE ASSESSEE WITH REGARD TO INVESTMENT IN EXCESS STOCK. THE AO, HOWEVER, MADE THE ADDITION OF THIS ALLEGED INVESTME NT IN EXCESS STOCK WHILE COMPLETING THE ASSESSMENT CONSEQUENT TO SEARC H ON 10.10.2006 AND THE ADDITION MADE THEREIN WAS RIGHTLY DELETED BY TH E TRIBUNAL AS THE ALLEGED INVESTMENT IN EXCESS STOCK WAS NOT FOUND DURING THE COURSE OF SEARCH. 7. NOW THE AO HAS RECORDED REASONS FOR REOPENING TH E ASSESSMENT ON 16.2.2006 STATING THEREIN THAT DESPITE HAVING ADMIT TED THE INVESTMENT IN EXCESS STOCK DURING THE COURSE OF SURVEY, ASSESSEE HAS NOT DECLARED THE SAID SUM OF RS.10,12,000 IN THE RETURN OF INCOME FI LED FOR AY 2001-02 AND ISSUED NOTICE U/S. 148 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT INFORMATION WITH REGARD TO THE INVES TMENT IN EXCESS STOCK FOUND DURING THE COURSE OF SURVEY, WAS AVAILABLE WI TH THE AO WHILE COMPLETING THE ASSESSMENT, BUT HE DID NOT MAKE ANY ADDITION IN THIS REGARD ONLY FOR THE SIMPLE REASON THAT HE WAS CONVINCED WI TH THE EXPLANATION OF THE ASSESSEE. THEREFORE, THE SAME EVIDENCE WHICH W AS AVAILABLE BEFORE THE AO WHILE COMPLETING THE ASSESSMENT CANNOT BE US ED FOR REOPENING THE ASSESSMENT, AS IT AMOUNTS TO CHANGE OF OPINION OF T HE AO ON A PARTICULAR ITA NO.1390/BANG/2010 PAGE 6 OF 8 ISSUE, WHICH IS NOT PERMISSIBLE IN LAW. THEREFORE, THE REOPENING IS BAD IN LAW AND ASSESSMENT FRAMED CONSEQUENT THERETO DESERV ES TO BE QUASHED. 8. THE LD. DR, BESIDES PLACING RELIANCE UPON THE OR DER OF CIT(APPEALS) HAS EMPHATICALLY ARGUED THAT DURING THE COURSE OF S URVEY, THE ASSESSEE HAS ADMITTED THE UNEXPLAINED INVESTMENT IN EXCESS S TOCK, BUT WHILE FILING THE RETURN OF INCOME, HE DID NOT INCLUDE THE INVEST MENT IN EXCESS STOCK. THEREFORE, THE AO HAS RIGHTLY REOPENED THE ASSESSME NT U/S. 147 OF THE ACT, HAVING RECORDED THE REASONS FOR DOING SO. 9. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, I FIND THAT UNDISPUTEDLY A SU RVEY WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE BEFORE A SEARCH W AS CONDUCTED AND ASSESSEE HAS OFFERED THE INVESTMENT IN THE EXCESS S TOCK. IT IS ALSO EVIDENT FROM THE RECORD THAT WHILE SUBMITTING THE RETURN, A SSESSEE DID NOT INCLUDE THE SAID UNEXPLAINED INVESTMENT IN EXCESS TOCK IN I TS RETURN OF INCOME, BUT THE SURRENDER STATEMENT OF THE ASSESSEE WITH REGARD TO UNEXPLAINED INVESTMENT IN EXCESS STOCK OF RS.10,12,000 WAS AVAI LABLE WITH THE AO AND IF THE ASSESSEE FAILED TO RETRACT HIS EARLIER STATE MENT AND ALSO FAILED TO EXPLAIN THE SOURCE OF INVESTMENT, THE AO COULD HAVE MADE AN ADDITION ON THE SAME WHILE COMPLETING THE ASSESSMENT U/S. 143(3 ) OF THE ACT, BUT HE DID NOT DO SO. THEREFORE IT IS A POSSIBILITY THAT AO MIGHT HAVE BEEN CONVINCED WITH THE EXPLANATION ON ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN EXCESS STOCK TO THE TUNE OF RS.10,12,000, ITA NO.1390/BANG/2010 PAGE 7 OF 8 BECAUSE NO ADDITION WAS MADE IN THIS REGARD WHILE C OMPLETING THE ASSESSMENT U/S. 143(3) OF THE ACT. 10. LATER ON, WHEN HE WAS COMPLETING THE ASSESSMENT PURSUANT TO THE SEARCH, HE INCLUDED THIS UNEXPLAINED INVESTMENT IN THE ASSESSED INCOME, BUT IT WAS SET ASIDE BY THE TRIBUNAL ON THE GROUND THAT THIS UNEXPLAINED INVESTMENT IN EXCESS TOCK WAS NOT FOUND DURING THE COURSE OF SEARCH. NOW THE AO WANTS TO ADD THAT UNEXPLAINED INVESTMENT IN EXCESS STOCK BY REOPENING THE ASSESSMENT WHICH WAS ORIGINALLY COMPL ETED ON 1.3.2004. 11. HAVING CAREFULLY EXAMINED THE FACTS OF THE CASE , I FIND THAT WHILE COMPLETING THE ORIGINAL ASSESSMENT, THE FACTS WITH REGARD TO SURRENDER STATEMENT OF THE ASSESSEE DURING THE COURSE OF SURV EY OF RS.10,12,000 AS UNEXPLAINED INVESTMENT IN EXCESS TOCK WAS AVAILABLE BEFORE THE AO, BUT HE DID NOT ACT ON IT FOR THE REASONS BEST KNOWN TO HIM . BUT ONCE HE HAS ALREADY APPLIED HIS MIND TO THESE FACTS AND HAS OPT ED NOT TO MAKE AN ADDITION IN THIS REGARD, HE CANNOT MAKE ADDITION OF THE SAME BY RESORTING TO THE PROCEDURE FOR REOPENING OF ASSESSMENT U/S. 147 OF THE ACT. IF IT IS ALLOWED TO BE DONE, IT WOULD AMOUNT TO REOPENING ON ACCOUNT OF CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN THE EYES OF LAW . IT HAS ALSO BEEN HELD BY THE VARIOUS HIGH COURTS THAT ONCE THE AO HAS APP LIED HIS MIND ON PARTICULAR FACTS, THE SAME FACTS CANNOT BE USED FOR REOPENING OF THE ASSESSMENT. THEREFORE, I FIND NO MERIT IN REOPENIN G OF THE ASSESSMENT. ACCORDINGLY I HOLD THAT SINCE THE REOPENING OF ASSE SSMENT IS ON ACCOUNT OF ITA NO.1390/BANG/2010 PAGE 8 OF 8 CHANGE OF OPINION, IT IS BAD IN LAW AND IS NOT SUST AINABLE IN THE EYES OF LAW. SINCE WE HAVE KNOCKED DOWN THE REOPENING OF ASSESSM ENT, THE ASSESSMENT FRAMED CONSEQUENT THERETO DESERVES TO BE QUASHED. I ACCORDINGLY SET ASIDE THE ORDER OF CIT(APPEALS) AND THAT OF THE ASSESSING OFFICER BY QUASHING THE ASSESSMENT. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF AUGUST, 2016. SD/- (SUNIL KUMAR YADAV ) JUDICIAL MEMBER BANGALORE, DATED, THE 26 TH AUGUST, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.