Mangi Lal Sethia, Uttar Dinajpur V. ITO, Wd-1, Raiganj, Uttar Dinajpur, Uttar Dinajpur

ITA 1475/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99908 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 12-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILOY BARAN SOM JCIT SRDR
• Keywords: Reopening of assessment; Depreciation; Search and seizure; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1475 / KOL / 2012 ASSESSMENT YEAR :2004-05 MANGI LAL SETHIA, C/O BASANTA STORES, MADHYA MOHANBATI, N.S. ROAD, RAIGANJ UTTAR DINAJPUR PIN 73 134 [ PAN NO. ACPPJ 8966 R ] V/S . INCOME TAX OFFICER, WARD-1, SBI BUILDING, KARNOJORA, RAIGANJ, UTTAR DINAJPUR, PIN 733 134 /APPELLANT .. / RESPONDENT /BY APPELLANT SUNIL SURANA, FCA /BY RESPONDENT SHRI NILOY BARAN SOM, JCIT-SR-DR /DATE OF HEARING 01-10-2015 /DATE OF PRONOUNCEMENT 15-10-2015 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS), JALPAIGURI IN APPEAL NO.165/RNJ/CIT(A)/JAL/08-09 DA TED 16.07.2012. ASSESSMENT WAS FRAMED BY ITO WARD-1, RAIGANJ U/S 147/143(3)OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 31.12.2008 FOR ASSESSMENT YEAR 2004-05. IN THIS APPEAL THE ASSESSEE HAS RAISED SEVERAL GROU NDS OF APPEAL BUT ARGUED ONLY ON THE GROUND BASED ON THE ISSUE OF REOPENING OF CASE UNDER SECTI ON 147 OF THE ACT. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL, RUNNING A PROPRIETORSHIP FIRM UNDER THE NAME & STYLE OF BASANTA STORES. THERE WAS SURVE Y UNDER SECTION 133 A OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE AND HIS FATHER. THE AO REC ORDED THE STATEMENT OF THE ASSESSEE AND FOUND THAT THE ASSESSEE HAS TAKEN UNSECURED LOAN OF RS. 5 ,90,800/- FROM HIS FATHER PROPRIETOR, OF M/S SATYAM ENTERPRISES, BUT THE SAME HAD NOT BEEN REFL ECTED IN THE BALANCE SHEET OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05. ON THIS BASIS THE AO F ORMED HIS OPINION THAT THE INCOME OF THE SAID AMOUNT HAS ESCAPED ASSESSMENT, HENCE ISSUED NOTICE UNDER SECTION 148 AND FRAMED ASSESSMENT UNDER SECTION 147 OF THE ACT ACCORDINGLY AFTER MAKI NG NECESSARY ADDITION AND DISALLOWANCE IN THE TOTAL INCOME OF THE ASSESSEE. ITA NO.1475/KOL/2012 A.Y. 2004-05 MANGILALSETHIA V. ITO WD-1 RNJ PAGE 2 3. AGGRIEVE ASSESSEE PREFERRED APPEAL TO CIT(A) ON CERTAIN GROUNDS OF APPEAL INTER ALIA CHALLENGING THE REOPENING OF ASSESSMENT UNDER SECTI ON 147 OF THE ACT. HOWEVER THE LD. CIT(A) HAS UPHELD THE ORDER OF THE AO BY OBSERVING THAT THE RE ASONS RECORDED BY THE AO TO INITIATE THE PROCEEDINGS UNDER SECTION 147 OF THE ACT ARE SUFFIC IENT ENOUGH FOR FRAMING THE INCOME ESCAPING ASSESSMENT. 4. AGGRIEVED ASSESSEE PREFERRED SECOND APPEAL BEFOR E US ON THE FOLLOWING GROUNDS OF APPEAL. 1. FOR THAT THE ORDER OF THE LD. CIT(A) IS ARBITRA RY, ILLEGAL AND BAD IN LAW. 2. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO TAKEN U/S. 147. 3. FOR THAT THE LD. AO ERRED IN CONFIRMING THE ASSE SSMENT ORDER WHEN IN GROUND NO. 1 WITH REFERENCE TO THE NON SIGNING OF THE DEMAND NOTICE A CCOMPANYING THE ASSESSMENT ORDER THE ASSESSEE DISPUTED THE VALIDITY OF THE ORDER AND THE LD. CIT(A) SHOULD HAVE HELD THAT THE ASSESSMENT WITHOUT RAISING ANY DEMAND WAS INVALID A ND AB INITIO VOID. 4. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE PROFIT ON SALE OF RS.5,76,416/- BY APPLYING SECTION 44AF WHEN THE ACCOUNTS WERE AUDITED AND THE PROFIT DECLARED WAS QUITE FAIR AND REASONABLE. 5. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) ERRED IN CONFIRMING THE AMOUNT OF RS.5,90,800/-. SHRI SUNIL SURANA, LD. AUTHORIZED REPRESENTATIVE AP PEARING ON BEHALF OF ASSESSEE AND SHRI NILOY BARAN SOM, LD. DEPARTMENTAL REPRESENTATIVE APPEARIN G ON BEHALF OF REVENUE. 5. BEFORE US THE LD AR SUBMITTED THE REASONS OF REO PENING OF THE CASE UNDER SECTION 147 OF THE ACT WHICH ARE EXTRACTED BELOW FOR THE SAKE OF MORE CLARITY AND UNDERSTANDING : REASON FOR REOPENING 5/2007 A SURVEY U/S. 133A WAS CONDUCTED IN THE BUSI NESS PREMISES OF SRI MANGILAL SETHIA AND SRI POONON CHAND SETHIA ON 13/11/2006.DURING TH E COURSE OF RECORDING THE STATEMENT OF SRI POONAM CHAND SETHIA, IT IS FOUND THAT THE TWO C HEQUE OF RS.40,000/- AND RS.5,50,800/- WERE DEPOSITED ON 09/09/2003 AND 29/9/2003 IN THE N AME OF M/S SATYAM ENTERPRISES, WHICH WERE RECEIVED FROM HIS FATHER SRI MAGILAL SETHIA AS UNSECURED LOAN, BUT THE SAME HAD NOT REFLECTED IN HIS I.T. RETURN FOR THE A.Y. 2004-05 AS DEBTOR. SO THE AMOUNT OF RS.5,90,800/- IS UNACCOUNTED IN THE A.Y. 2004-05. THEREFORE, I HAVE A REASON TO BELIEVE THAT THE INCO ME OF THE ASSESSEE FOR THE A/.Y. 2004-05 IS ESCAPED ASSESSMENT. HENCE, NOTICE U/S. 148 ISSUED T O THE ASSESSEE. THE LD AR HAS SUBMITTED THE BANK STATEMENT OF THE A SSESSEE, LEDGER ACCOUNT OF PARTY FROM WHOM THE LOAN WAS TAKEN AND THE CERTIFICATE OF THE BANK CERT IFYING THAT THE LOAN TAKEN HAS BEEN RETURNED. THE L D AR DEMONSTRATED THAT THE REASON FOR REOPENING THE C ASE IS NOT TENABLE AS IT IS NOT AS PER THE PROVISIONS OF THE INCOME TAX. THE LD. AR FURTHER SU BMITTED THAT MERELY ON THE BASIS OF BANK ENTRY FOUND AT THE TIME OF SURVEY DOES NOT GIVE THE RISE TO HAVE THE REASON TO BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT. THE LD AR ALSO SUBMITTED THAT T HE AO HAS FAILED TO APPRECIATE THAT THE SAME LOAN HAS BEEN REPAID WITHIN THE SAME FINANCIAL YEAR . SO THE QUESTION TO REFLECT THE SAME AMOUNT LOAN IN THE BALANCE SHEET AT THE YEAREND DOES NOT ARISE. THE LD. AR OF ASSESSEE HAS SUPPORTED VARIOUS CASE LAW IN SUPPORT OF HIS CLAIM IN THE OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER ITA NO.1475/KOL/2012 A.Y. 2004-05 MANGILALSETHIA V. ITO WD-1 RNJ PAGE 3 LTD. VS. R.B. WADKAR, ASSISTANT COMMISSIONER OF INC OME-TAX AND OTHERS (NO.1) 268 ITR 332 (BOM), WHERE HELD THAT:- THAT THE NOTICE WAS CLEARLY BEYOND THE PERIOD OF F OUR YEARS. THE REASONS RECORDED BY THE ASSESSING OFFICER NOWHERE STATED THAT THERE WAS FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT FOR THAT ASSESSMENT YEAR. HENCE, THE ASSESSING OFFICER HAD NO JURISDICTION TO REOPEN THE ASSESSMENT PROCEEDINGS. THE NOTICE WAS NOT VALID AND WAS LIABLE TO BE QUASHED. AND THE JUDGMENT OF HONBLE SUPREME COURT IN THE CA SE OF COMMISSIONER OF INCOME-TAX V. (1) KELVINATOR OF INDIA LTD. (2) EICHER LTD. 320 ITR 561 (SC) WHEREIN IT HAS BEEN HELD:- THEREFORE, POSTE-1 ST -APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVE R, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO BELIEVE FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OF FICER TO REOPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST A LSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REV IEW AND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS TH E POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRETENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THEE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONCE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN-BUILD TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. THE LEARNED COUNSEL ALSO CITED THE DECISION OF THIS COURT OF IN THE CASE OF CIT V. USHA INTERNATIONAL LTD. (2012) 348 ITR 485 (DEL.) AS ALSO THE DECISION OF T HE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD.: (2010) 320 ITR 561 (SC), IN SUPPORT OF HIS CONTENTION THAT REASSESSMENT PROCEEDINGS CANNOT BE INITIATED ON A MERE CHANGE OF OPINION. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE LOWER AUTHORITIES BELOW. 6. WE HAVE HEARD RIVAL PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. FROM THE AFORESAID DISCUSSION WE FIND THAT THE AO HAS FRAMED THE ASSESSMENT UNDER SECTION 147 OF THE ACT AS HE BELIEVED THAT THE LOAN TAKEN BY THE ASSESSEE HAS NOT BEEN SHOWN IN BALANCE SHEET. FROM THE RECORD AND DOCUMENTS SUBMITTED IT IS VERY MUCH CLEA R THAT THE CLAIM OF THE ASSESSEE THAT THE LOAN HAS BEEN REPAID DURING THE SAME FINANCIAL YEAR IS CORRE CT. BUT A CAREFUL ANALYSIS SHOWS THAT THE LOAN WAS NOT REPAID TO THE PARTY DIRECTLY BUT TO THE CREDITO RS OF THE PARTY. HOWEVER IT DOES NOT MAKE ANY DIFFERENCE IN THE ACCOUNTING BOOKS AND BALANCE SHEE T. ANY WAY IF WE SEE THE PROVISIONS OF THE LAW TO REOPEN THE CASE UNDER SECTION 147 OF THE ACT FOR TH E INCOME ESCAPING ASSESSMENT, THERE HAS TO BE LIVE LINK BETWEEN INCOME WHICH ESCAPED ASSESSMENT A ND THE REASONS TO BELIEVE THAT THE INCOME HAS REALLY ESCAPED ASSESSMENT. MERELY REOPENING THE CAS E UNDER SECTION 147 OF THE ACT ON SURMISE, PREMISE DOES NOT HOLD GOOD. FOR THE BETTER UNDERSTA NDING THE RELEVANT EXTRACT OF THE SECTION 147 IS REPRODUCED BELOW : 147, IF THE [ASSESSING] OFFICER [HAS REASON TO BEL IEVE] THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE TH E LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE AS SESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR): THE EXPRESSION REASONS TO BELIEVE REFERS TO THE BEL IEF WHICH PROMPTS THE ASSESSING OFFICER TO APPLY TO SEC.147 TO A PARTICULAR CASE. IT WILL DEPEND ON THE FACTS OF THE EACH CASE. THE BELIEF MUST BE OF AN ITA NO.1475/KOL/2012 A.Y. 2004-05 MANGILALSETHIA V. ITO WD-1 RNJ PAGE 4 HONEST AND REASONABLE PERSON BASED ON REASONABLE GR OUNDS. THE ASSESSING OFFICER IS REQUIRED TO ACT, NOT ON MERE SUSPICION, BUT ON DIRECT OR CIRCUM STANTIAL EVIDENCE. IN THIS PRESENT CASE, WE FIND NO LIVE LINK BETWEEN THE REASON TO BELIEVE AND REOPENING OF CASE U/S 147 OF THE ACT. IT WAS A LOAN ENTRY IN THE BOOKS OF THE ASSESSEE AND THE SAME WAS ALSO SETTLED WITHIN THE SAME YEAR. THEREFORE, THIS AMOUNT WILL NOT BE SHOWE D IN THE BALANCE SHEET OF THE ASSESSEE DURING THE YEAREND. IT IS A WELL ESTABLISHED PRACTICE THAT A C ASE CAN BE REOPENED U/S 147 OF THE ACT ONLY IF THER E IS REAL INTENTION OF THE ASSESSEE TO ESCAPE FROM TAX L IABILITY. IN THIS CASE THE AO IS TO FORM A BELIEF T HAT THERE IS A LIVE LINK BETWEEN THE REASON TO BELIEF A ND INCOME ESCAPED ASSESSMENT. IN THE PRESENT CASE, AO COLLECTED INFORMATION AT THE TIME OF SURVEY THAT LOAN IT WAS GIVEN HAS NOT BEEN SHOWN IN THE BOOK OF ACCOUNTS. THEREFORE, ISSUED A NOTICE U/S 148 OF THE ACT AND AO DID NOT CONSIDER THE FACT THAT IT IS NOT THE CASE, IN CASE THE LOAN HAS BEEN REPAID WILL NOT BE SHOWN IN ASSESSEES BOOK OF ACCOUNTS, WHERE SIMPLY TREATING THE LOAN ENTRY AS INCOME WHIC H HAS ESCAPED FROM ASSESMENT IS NOT APPROPRIATE. WE ARE ALSO RELYING ON THE JUDGMENT MENTIONED ABOVE BY LD. AR OF ASSESSEE IN THE CASE OF KELVINATOR OF INDIA LTD. (2) EICHER LTD. (SUPRA) . THEREFORE, WE ARE INCLINED TO QUASH THE PROCEEDIN GS U/S 147 OF THE ACT MADE BY AO ON THE BASIS OF GATHE RING INFORMATION AT THE TIME OF SEARCH AND THOSE INFORMATION WERE NEVER DULY VERIFIED BY AO. HENCE, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. SINCE THE MATTER GOT ADJUDICATED ON THE GROUND OF CHALLEN GING THE GROUND OF REOPENING U/S. 147 OF THE ACT, OTHER REMAINING GROUNDS IN THE APPEAL OF ASSESSEE D O NOT REQUIRE FURTHER ADJUDICATION. 8. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 15/1 0/2015 SD/- SD/- (MAHAVIR SINGH) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 15 /10/2015 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT-MANGILALSETHIA, C/O BASANTA STORES, MA DHYA MOHANBATI, N.S.ROAD, RAIGANJ, UTTAR DINAJPUR PIN 733 134 2. / RESPONDENT- ITO, WARD-1, SBI BUILDINGS, KARNOJOR A, RAIGANJ, U/DINAJPUR 3. * +, . / CONCERNED CITJALPAIGURI 4. .- / CIT (A)JALPAIGURI 5. 012 33+,, +, , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , /TRUE COPY/ / +, ,