M.V.Ramamurthy, Bangalore V. ITO, CHENNAI

ITA 1461/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8119 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 24-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AWIJIT RAKSHIT
• Assessee Lawyers: MRS SREE VIDYA
• Keywords: Recovery proceedings; Tangible material; Speculation loss; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 148; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' # . $ , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.1461/MDS/2016 ( / ASSESSMENT YEAR: 2008-09) MR. M.V.RAMAMURTHY, FLAT NO.302, SESNA 1D, ELAN HOMES OPP.TAL MALL SARJAPUR ROAD, BENGALALURU-560 035 VS THE INCOME TAX OFFICER, BUSINESS WARD-II(3), CHENNAI. PAN: AAMPM7191A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MRS. SREE VIDYA, ADVOCATE /RESPONDENT BY : MR. AWIJIT RAKSHIT, JCIT /DATE OF HEARING : 31 ST OCTOBER, 2016 /DATE OF PRONOUNCEMENT : 11 TH NOVEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 2, CHENNAI DATED 01.03.2016 IN ITA NO.149/CIT(A)-2 /2014- 15 PASSED UNDER SECTION 143(3) R.W.S. 147 & 250(6) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HIS A PPEAL, HOWEVER, THE CRUXES OF THE ISSUES ARE AS FOLLOWS:- 2 ITA NO.1461/MDS/2016 (I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT THE REASSESSMENT MADE BY THE LEARNED ASSESSING OFFICER UNDER SECTION 147 OF THE ACT IS VALID WHEN IT WAS ONLY DUE TO CHANGE OF OPINION. (II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE ORDER OF THE LEARNED ASSESSING OFFICER IN DENYING THE BENEFIT OF DEDUCTION UNDER SECTION 54 OF THE ACT AS THE INVESTMENTS WERE MADE BY THE ASSESSEE PRIOR TO THE SALE OF PROPERTY. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2008-09 ON 02.05.2008 ADMITTING TOTAL INCOME OF ` 80,778/-. INITIALLY, THE CASE WAS SELECTED FOR SCRUTINY AND N OTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE ON 14.09. 2009 AND THE ASSESSMENT WAS COMPLETED ON 21.10.2010 U/S. 143(3) OF THE ACT ACCEPTING THE RETURN FILED BY THE ASSESSEE. THEREAFTER THE LEARNED ASSESSING OFFICER REOPENED T HE ASSESSMENT ONCE AGAIN BY ISSUING NOTICE UNDER SECT ION 148 OF THE ACT TO THE ASSESSEE ON 24.08.2012 SINCE IT W AS REVEALED THAT THE ASSESSEE HAD SOLD A FLAT AT MUMBA I FOR ` 83.00 LAKHS AND HAD INVESTED ` 44,26,760/- IN PURCHASE OF 3 ITA NO.1461/MDS/2016 NEW PROPERTY AT BANGALORE AND CLAIMED DEDUCTION UND ER SECTION 54 OF THE ACT. 4. AT THE OUTSET, THE LEARNED AUTHORIZED REPRESENTA TIVE CHALLENGED THE ISSUE OF REOPENING BEFORE US. SHE SU BMITTED THAT IN THE CASE OF THE ASSESSEE ASSESSMENT WAS COM PLETED UNDER SECTION 143(3) OF THE ACT ON 21.10.2010 WHERE IN THE ISSUE WITH RESPECT TO DEDUCTION U/S.54 OF THE ACT W AS CONSIDERED BY THE LEARNED ASSESSING OFFICER. THEREA FTER THE ASSESSMENT WAS ONCE AGAIN REOPENED WITHOUT ANY FRES H MATERIALS BEING REVEALED. IT WAS THEREFORE PLEADED THAT THE REOPENING WAS BAD IN LAW AND HENCE THE ORDER OF THE LD.A.O MAY BE QUASHED. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NO T CONTROVERT TO THE SUBMISSIONS OF THE LEARNED AUTHOR IZED REPRESENTATIVE. HE ALSO COULD NOT EXPLAIN AS TO WHA T MADE THE LEARNED ASSESSING OFFICER TO REVISIT THE FILE O F THE ASSESSEE FOR THE SECOND TIME. HOWEVER HE ARGUED IN SUPPORT OF THE ORDER OF THE LD.CIT(A) WHO HAD DECIDED THE I SSUE OF 4 ITA NO.1461/MDS/2016 REOPENING AGAINST THE ASSESSEE RELYING IN THE DECIS ION OF THE HONBLE APEX COURT IN THE CASE KALYANJI MAVJI & CO . V/S. CIT REPORTED IN 102 ITR 287 WHEREIN IT WAS HELD THAT, T HERE IS NO CHANGE OF OPINION IF THE ASSESSMENT IS REOPENED ON NEW FACTS WHICH CAME TO NOTICE SUBSEQUENTLY, EVEN THOUG H THEY ARE ALREADY ON RECORD AND THE DECISION OF THE MUMBA I BENCH OF THE TRIBUNAL IN THE CASE ACIT V/S. KANGA & CO. ( 2010) TIOL 684 WHEREIN IT WAS HELD THAT TANGIBLE MATERIA L, FOR THE PURPOSE OF REOPENING U/S. 148, NEED NOT BE FROM OUT SIDE THE RETURN OF INCOME. 6. HOWEVER AFTER HEARING BOTH THE SIDES, WE FIND ME RIT IN THE SUBMISSION OF THE LEARNED AUTHORIZED REPRESENTA TIVE. IN THE CASE OF THE ASSESSEE THERE IS NO FRESH MATERIAL BEFORE THE LEARNED ASSESSING OFFICER FOR REOPENING THE ASSESSM ENT. THE ISSUE WITH RESPECT TO THE CLAIM OF DEDUCTION UN DER SECTION 54 OF THE ACT WAS ALREADY CONSIDERED BY THE LEARNED ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMEN T UNDER SECTION 143(3) OF THE ACT AND THE SAME IS NOT IN DI SPUTE. IN 5 ITA NO.1461/MDS/2016 THIS SITUATION WE ARE REMINDED OF THE FOLLOWING DEC ISIONS OF THE HONBLE APEX COURT:- (A) THE HONBLE SUPREME COURT IN THE CASE ACIT VS. RAJESH JHAVERI STOCK BROKERS P.LTD., REPORTED IN 29 1 ITR 500(SC) WITH REGARD TO REASSESSMENT / CONCEPT OF CH ANGE OF OPINION HAS HELD AS UNDER:- UNDER THE SCHEME OF SECTION 143(1) OF THE INCOME-TA X ACT, 1961, AS SUBSTITUTED WITH EFFECT FROM APRIL 1, 1989 , AND PRIOR TO ITS SUBSTITUTION WITH EFFECT FROM JUNE 1, 1999, WHAT WERE PERMISSIBLE TO BE ADJUSTED UNDER THE FIRST PROVISO TO SECTION 143(1)(A) WERE : (I) ONLY APPARENT ARITHMETICAL ERR ORS IN THE RETURN, ACCOUNTS OR DOCUMENTS ACCOMPANYING THE RETU RN, (II) LOSS CARRIED FORWARD, DEDUCTION, ALLOWANCE OR RELIE F, WHICH WAS PRIMA FACIE ADMISSIBLE ON THE BASIS OF INFORMAT ION AVAILABLE IN THE RETURN BUT NOT CLAIMED IN THE RETU RN, AND SIMILARLY (III) THOSE CLAIMS WHICH WERE, ON THE BAS IS OF THE INFORMATION AVAILABLE IN THE RETURN, PRIMA FACIE IN ADMISSIBLE, AND WERE TO BE RECTIFIED/ALLOWED/DIS-ALLOWED. WHAT WAS PERMISSIBLE WAS CORRECTION OF ERRORS APPARENT ON TH E BASIS OF THE DOCUMENTS ACCOMPANYING THE RETURN. THE ASSESSIN G OFFICER HAD NO AUTHORITY TO MAKE ADJUSTMENTS OR ADJ UDICATE UPON ANY DEBATABLE ISSUES. IN OTHER WORDS, THE ASSE SSING OFFICER HAD NO POWER TO GO BEHIND THE RETURN, ACCOU NTS AND DOCUMENTS, EITHER IN ALLOWING OR IN DISALLOWING DED UCTIONS, ALLOWANCE OR RELIEF. THOUGH TECHNICALLY THE INTIMAT ION ISSUED WAS DEEMED TO BE A DEMAND NOTICE UNDER SECTION 156, THAT DID NOT PRECLUDE THE RIGHT OF THE ASSESSING OFFICER TO PROCEED UNDER SECTION 143(2) : THAT RIGHT IS PRESERVED AND NOT TAKEN AWAY. WITH EFFECT FROM APRIL 1, 1998, THE SECOND PROVISO TO SECTION 143(1)(A) WAS SUBSTITUTED. DURING THE PERIOD BETWEE N APRIL 1, 1998, AND MAY 31, 1999, SENDING OF AN INTIMATION WAS MANDATORY. THE LEGISLATIVE INTENT IS VERY CLEAR FRO M THE USE OF THE WORD INTIMATION AS SUBSTITUTED FOR ASSESS MENT THAT TWO DIFFERENT CONCEPTS EMERGE. WHILE MAKING AN ASSE SSMENT, THE ASSESSING OFFICER IS FREE TO MAKE ANY ADDITION AFTER GRANT OF OPPORTUNITY TO THE ASSESSEE. BY MAKING ADJUSTMEN TS UNDER THE FIRST PROVISO TO SECTION 143(1)(A) NO ADDITION WHICH IS IMPERMISSIBLE BY THE INFORMATION GIVEN IN THE RETUR N COULD BE 6 ITA NO.1461/MDS/2016 MADE BY THE ASSESSING OFFICER. THE INTIMATION UNDER SECTION 143(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSES SMENT. UNDER THE FIRST PROVISO TO THE NEWLY SUBSTITUTED SEC TION 143(1), WITH EFFECT FROM JUNE 1, 1999, EXCEPT AS PR OVIDED IN THE PROVISION ITSELF, THE ACKNOWLEDGMENT OF THE RET URN SHALL BE DEEMED TO BE AN INTIMATION UNDER SECTION 143(1) WHERE (A) EITHER NO SUM IS PAYABLE BY THE ASSESSEE, OR (B ) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGMENT IS NOT DONE BY ANY ASSESSING OFFICER , BUT MOSTLY BY MINISTERIAL STAFF. IT CANNOT THEREFORE BE SAID THAT AN ASSESSMENT IS DONE BY THEM. THE INTIMATION UND ER SECTION 143(1)(A) WAS DEEMED TO BE A NOTICE OF DEMA ND UNDER SECTION 156 FOR THE APPARENT PURPOSE OF MAKIN G MACHINERY PROVISIONS RELATING TO RECOVERY OF TAX AP PLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDICATED TO BE P AYABLE IN THE INTIMATION BECAME PERMISSIBLE. NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISIONS. THEREFORE, TH ERE BEING NO ASSESSMENT UNDER SECTION 143(1) (A), THE QUESTIO N OF CHANGE OF OPINION DOES NOT ARISE. THE EXPRESSION REASON TO BELIEVE IN SECTION 147 W OULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFIC ER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCO ME HAD ESCAPED ASSESSMENT, HE CAN BE SAID TO HAVE REASON T O BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE EXP RESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER S HOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. WHAT IS REQUIRED IS REASON TO BELIEVE BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT TH E STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COUL D HAVE FORMED THE REQUISITE BELIEF. WHETHER MATERIAL WOULD CONCLUSIVELY PROVE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF THE BELIEF IS WITHIN THE REALM OF THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER. (B) FURTHER THE HONBLE SUPREME COURT IN T HE CASE CIT VS. KELVINATOR OF INDIA LTD. REPORTED IN 320 ITR 56 1(SC) WITH REGARD TO REASSESSMENT / CONCEPT OF CHANGE OF OPINI ON HAS ALSO HELD AS UNDER:- 7 ITA NO.1461/MDS/2016 THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME-TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989. AFTER THE AMENDMEN T, THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT THIS DOES NOT IM PLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHE CK THE ABUSE OF POWER. HENCE AFTER APRIL 1, 1989, THE ASSE SSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUS ION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMATION OF THE B ELIEF. ( C) THE HONBLE SUPREME COURT IN THE CASE A CIT VS. ICICI SECURITIES PRIMARY DEALERSHIP LTD. . REPORTED IN 348 ITR 299(SC) HAD HELD AS FOLLOWS:- WHERE THE ASSESSEE HAD DISCLOSED FULL DETAILS IN T HE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1999-2000 IN THE MATTER OF ITS DEALING IN STOCKS AND SHARES AND THE ASSESSMENT WAS REOPENED REJECTING THE ASSESSEES CONTENTION THAT THE LOSS INCURRED WAS A BUSINESS LO SS AND NOT A SPECULATIVE LOSS : HELD, AFFIRMING THE DECISION OF THE HIGH COURT, THA T REJECTION OF THE OBJECTIONS OF THE ASSESSEE TO THE REOPENING OF THE ASSESSMENT BY THE ASSESSING OFFICE R WAS CLEARLY A CHANGE OF OPINION AND THE ORDER REOPENING THE ASSESSMENT WAS NOT SUSTAINABLE. DECISION OF THE BO MBAY HIGH COURT AFFIRMED. 7. CONSIDERING THE FACTS OF THE CASE AND THE DECISI ONS OF THE HONBLE APEX COURT CITED ABOVE, WE ARE OF THE C ONSIDERED VIEW THAT REOPENING IN THE CASE OF THE ASSESSEE IS BAD IN LAW BECAUSE AT THE TIME OF ORIGINAL ASSESSMENT U/S.143( 3) OF THE 8 ITA NO.1461/MDS/2016 ACT, THE ISSUE WITH RESPECT TO DEDUCTION U/S. 54 OF THE ACT WAS BEFORE THE LD.A.O AND CONSIDERED HENCE REOPENIN G THE ASSESSMENT ONCE AGAIN BASED ON THE SAME ISSUE WOULD LEAD TO CHANGE OF OPINION. THE CASE RELIED UPON BY THE L D.CIT(A) WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE BECAUSE IN THOSE CASES THE ISSUE INVOLVED WERE OVERLOOKED BY T HE LD.A.O AND NOT CONSIDERED AT THE TIME OF THE ORIGI NAL ASSESSMENT THOUGH THE FACTS WERE ON RECORD. HENCE W E HEREBY QUASH THE ORDER OF THE LEARNED ASSESSING OFF ICER BY HOLDING THAT IN THE CASE OF THE ASSESSEE REOPENING IS BAD IN LAW. SINCE WE HAVE DECIDED THE ISSUE OF REOPENING AGAINST THE REVENUE, WE DO NOT FIND IT NECESSARY TO ADJUDIC ATE THE OTHER ISSUE ON MERITS. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH NOVEMBER , 2016 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 11 TH NOVEMBER, 2016 SOMU 9 ITA NO.1461/MDS/2016 *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF