Shri Hartaj Sewa Singh, Kolkata V. ACIT(IT), Circle - 1(1), Kolkata, Kolkata

ITA 1524/KOL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5319 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 16-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: S M SURANA
• Keywords: Unexplained cash credit; Unexplained investment; Gift; Source of fund; Onus to prove; Reassessment proceedings
• Section: 143(3); 147; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI S.S. GODARA, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 1524/KOL/20 18 ASSESSMENT YEAR : 2010- 11 SHRI HARTAJ SEWA SINGH -VS- ACIT(I T), CIRCLE-1(1), KOLKATA. [PAN: ABHPS 9122 R] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S. M .S URANA, ADVOCATE FOR THE RESPONDENT : SHRI ROBIN CHOUDHUR Y, ADDL. CIT SR.DR DATE OF HEARING : 30.08.2018 DATE OF PRONOUNCEMENT : 12.10.2018 ORDER PER S.S. GODARA, JM 1. THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2010- 11 ARISES AGAINST THE CIT(A)-22, KOLKATAS ORDER DATED 10.05.2018 PASSED IN CASE NO. 106/CIT(A)-22/10-11/17-18/KOL, INVOLVING PROCEEDING U/S 143(3) / 147 OF THE INCOM E TAX ACT, 1961 (IN SHORT THE ACT). HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEE RAISED THE FOLLOWING SUBSTANTIVE GR OUND IN THE INSTANT APPEAL. 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN REOPENING THE AS SESSMENT BEYOND 4 YEARS FROM THE END OF THE ASSESSMENT YEAR ONLY FOR CHANGE OF O PINION WHEN TWO VIEWS WERE POSSIBLE WITH REGARD TO THE NATURE OF EXPENSES WHIC H REQUIRED THE INTERPRETATION 2 ITA NO.1524/KOL/2018 SHRI HARTEJ SEWA SINGH A.YR. 2010-11 2 OF LAW, WHETHER THE EXPENSES WERE CAPITAL OR REVENU E IN NATURE AND THERE CANNOT BE REASONABLE BELIEF THAT ANY INCOME HAS ESCAPED AS SESSMENT. 3. FOR THAT THE LD. CIT(A) SHOULD HAVE CANCELLED TH E ASSESSMENT MADE U/ S. 147 SINCE THE NO ADDITION WAS RETAINED ON THE GROUNDS F OR WHICH THE ASSESSMENT WAS REOPENED AND WHEN SUCH ADDITION WAS NOT MADE, THE P ROCEEDINGS WERE LIABLE TO BE DROPPED. 4. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN ADDING BACK GIFT OF RS. 75 LAKHS RECEIVED FROM THE UNCLE OF THE ASSESSEE AS UNEXPLAINED CASH CREDI T U/ S. 68 OF THE LT. ACT WHEN THE IDENTITY AND CREDITWORTHINESS OF THE DONOR WAS PROVED AND THE GENUINENESS OF THE TRANSACTION WAS ESTABLISHED AND THE ASSESSEE DU LY DISCHARGED HIS ONUS TO PROVE THE SAME. 5. FOR THAT EVEN OTHERWISE THE ADDITION OF RS. 75LA KHS WAS NOT MAINTAINABLE SINCE IN THE COURSE OF REASSESSMENT PROCEEDINGS THERE WAS NOTHING ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE AA NOTICED S OME OTHER ESCAPED INCOME. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. IT EMERGES AT THE OUTSET THAT THE ASSESSING OFFICER HAD FRAMED REASO NS TO BELIEVE REGARDING ESCAPEMENT OF THE TAX PAYERS INCOME FROM ASSESSMENT FOR THE SOLE REASON THAT HIS FINANCE CHARGES AMOUNTING TO RS. 10,00,001/- ARE NOT ALLOWABLE ON B OTH COUNTS I.E. BEING ADVANCES AS WELL AS CAPITAL IN NATURE. THIS FOLLOWED THE IMPUGN ED REASSESSMENT FRAMED ON 27.12.2017 DISALLOWING / ADDING THE ABOVE SUM ALONG WITH SECTION 68 ADDITION OF RS. 75 LACS PERTAINING TO GIFTS RECEIVED FROM ASSESSEES UNCLE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT RESPECTIVELY. THE ASSESSEE PREFERRED AP PEAL. THE CIT(A) HAS ADMITTEDLY DELETED THE FORMER DISALLOWANCE / ADDITION OF RS. 1 0,00,001/- (SUPRA) AND CONFIRMED THE LATTER ADDITION OF UNEXPLAINED CASH CREDITS. THIS I S WHAT GIVES RISE TO ASSESSEES INSTANT APPEAL CHALLENGING CORRECTNESS OF BOTH VALIDITY OF REOPENING AS WELL AS IMPUGNED ADDITION OF UNEXPLAINED CASH CREDITS OF MERITS. 4. THE ASSESSEES ONLY ARGUMENT DURING THE COURSE O F HEARING IS THAT HE HAS SUCCEEDED ON THE FORMER ISSUE OF FINANCE CHARGES FORMING THE SOLE REASON OF REOPENING AND 3 ITA NO.1524/KOL/2018 SHRI HARTEJ SEWA SINGH A.YR. 2010-11 3 THEREFORE, THE ENTIRE REASSESSMENT DESERVES TO BE Q UASHED. THE REVENUES STAND ON THE OTHER HAND VEHEMENTLY CONTENDS THAT THERE IS NO LEG AL BAR IN SUCH A CASE TO SUSTAIN ANY DISALLOWANCE / ADDITION ON REMAINING ISSUE(S) OTHE R THAN THE SUBJECT MATTER OF REOPENING. WE FIND REVENUES INSTANT ARGUMENT TO BE NOT SUSTAINABLE AS PER THIS TRIBUNALS CO-ORDINATE BENCHS DECISION IN SANJU JA LAN VS. ITO I.T.A. NO. 634/ KOL/2017 DATED 10.01.2018 ADJUDICATING THE VERY ISSUE IN A SSESSEES FAVOUR AS UNDER: 15. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNS EL FOR THE ASSESSEE AND THE LD. DR. THE LD. COUNSEL FOR THE ASSESEE POINTED OUT THAT TH E JEWELLERY IN QUESTION HAS BEEN PURCHASED BY THE ASSESEE WHICH WAS CONFIRMED BY NIC E DIAMONDS AND THE PAYMENT HAS BEEN MADE BY CHEQUES. MORE IMPORTANT IT WAS POINTED OUT THAT THE INVESTMENTS HAS BEEN SHOWN IN THE BOOKS OF ACCOUNTS AND THE SOURCE HAD B EEN DULY EXPLAINED AS FROM THE DISCLOSED BANK ACCOUNTS OF THE ASSESSEE. IT WAS SUB MITTED THAT IN THE CIRCUMSTANCES THE ADDITION MADE U/S 69 OF THE ACT CANNOT BE SUSTAINED . THE LD. DR RELIED ON THE ORDERS OF CIT(A). 16. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. IT IS AN UNDISPUTED POSITION THAT ADDITION IN CASE OF THE AS SESSE HAS BEEN MADE U/S 69 OF THE ACT. SECTION 69 OF THE ACT READS AS FOLLOWS :- UNEXPLAINED INVESTMENTS 69. WHERE IN THE FINANCIA L YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINE D BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOU T THE NATURE AND SOURCE OF THE INVESTMENTS OR THE EXPLANATION OFFERED BY HIM I S NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE VALUE OF THE I NVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. 17. IN THE PRESENT CASE INVESTMENTS OF JEWELLERY IS DULY REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSES. THEREFORE THERE IS NO SCO PE OF APPLYING THE PROVISION OF SECTION 69 OF THE ACT. APART FROM THE ABOVE SOURCE OF FUNDS IS EVIDENCED BY THE PAYMENTS FROM DISCLOSED BANK ACCOUNTS. THEREFORE TH E SOURCE OF INVESTMENTS IS ALSO PROPERLY AND SATISFACTORILY EXPLAINED BY THE ASSESS ES. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ADDITIONS MADE BY THE AO AND CONF IRMED BY CIT(A) CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE DELETED. G ROUND NO.5 RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 18. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON THE OTHER GROUNDS OF APPEAL VI., GR.NO.6 TO 8, IT IS THE PLEA OF THE ASSESSEE BEFORE US THAT WHEN AN ASSESSMENT IS REOPENED FOR ONE REASON BUT NO ADDITION IS MADE IN THE REASSESSMENT PROCEEDINGS IN RESPECT OF THAT REASON OR WHEN THE SAID ADDITION IS DELETED, THEN, NO FURTHER ADDITION CAN BE MADE IN THE REASSESSMENT PROCEEDINGS. IN THIS RE GARD LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS INDIA LTD., 331 ITR 326 (BOM), WHER EIN THE HONBLE BOMBAY HIGH 4 ITA NO.1524/KOL/2018 SHRI HARTEJ SEWA SINGH A.YR. 2010-11 4 COURT HELD THAT IF AO DOES NOT ASSESS INCOME FOR WH ICH REASONS WERE RECORDED U/S 147 OF THE ACT, HE CANNOT ASSESS OTHER INCOME U/S 147 O F THE ACT. THE HONBLE COURT OBSERVED THAT (I) S. 147 PROVIDES THAT THE AO MAY A SSESS THE INCOME WHICH HAS ESCAPED ASSESSMENT AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION. EXPLANATION 3 TO S. 147 INSERT ED BY F (NO. 2) ACT, 2009 W.R.E.F 1.4.1989 PROVIDES THAT THE AO MAY ASSESS OR REASSE SS THE INCOME IN RESPECT OF ANY ISSUE NOTWITHSTANDING THE REASONS FOR SUCH ISSUE H AVE NOT BEEN INCLUDED IN THE REASONS RECORDED (II) THE WORDS AND ALSO INDICATE THAT REASSESSMEN T MUST BE WITH RESPECT TO THE INCOME FOR WHICH THE AO HAS FORMED AN OPINION AND ALSO IN RESPECT OF ANY OTHER INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY. HOWEVER, IF THE A O ACCEPTS THE OBJECTION OF THE ASSESSEE AND DOES NOT ASSESS THE INCOME WHICH WAS T HE BASIS OF THE NOTICE, IT IS NOT OPEN TO HIM TO ASSESSEE INCOME UNDER SOME OTHER ISSUE IN DEPENDENTLY; (III) EXPLANATION 3 TO S. 147 WAS INSERTED TO SUPER SEDE THE JUDGMENTS IN VIPIN KHANNA 255 ITR 220 (P&H) & TRAVANCORE CEMENTS 305 ITR 170 (KER) WHERE IT WAS HELD THAT THE AO COULD NOT ASSESS INCOME IN RESPECT OF ISSUES UNCONNECTED WITH THE ISSUE FOR WHICH THE NOTICE WAS ISSUED. HOWEVER, EXPLANATION 3 DOES NOT AFFECT THE JUDGMENTS IN SHRI. RAM SINGH 306 ITR 343 (RAJ) & ATLAS CYCLE IND USTRIES 180 ITR 319 (P&H) WHERE IT WAS HELD THAT IF THE AO ACCEPTED THAT THE REASON S FOR WHICH THE NOTICE WAS ISSUED WERE NOT CORRECT, HE WOULD CEASE TO HAVE JURISDICTI ON TO PROCEED WITH THE REASSESSMENT; (IV) EXPLANATION 3 LIFTS THE EMBARGO INSERTED BY JU DICIAL INTERPRETATION ON THE MAKING OF A S. 147 ASSESSMENT IN RESPECT OF ITEMS NOT REFERRE D TO IN THE RECORDED REASONS. HOWEVER, IT DOES NOT AND CANNOT OVERRIDE THE SUBSTA NTIVE PART OF S. 147 THAT THE INCOME FOR WHICH THE NOTICE WAS ISSUED MUST BE ASSESSABLE. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 19. WE HAVE CONSIDERED THE SUBMISSION OF THE LEARNE D COUNSEL FOR THE ASSESSEE IN THE LIGHT OF THE JUDGMENT OF THE HONBLE BOMBAY IN THE CASE OF JET AIRWAYS (I) LTD. (SUPRA). WE ARE OF THE VIEW THAT ON THE FACTS AND IN THE CIR CUMSTANCES OF THE PRESENT CASE THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JET AIRWAYS INDIA LTD. (SUPRA)IS SQUARELY APPLICABLE. AS WE HAVE ALRE ADY SEEN THAT THE ASSESSMENT WAS REOPENED FOR THE REASON THAT THE JEWELLERY PURCHASE D BY THE ASSESSEE WAS FROM UNDISCLOSED SOURCES AND THE PURCHASES WERE BOGUS. T HAT ADDITION HAS NOT BEEN SUSTAINED NOW. THE ASSESSING OFFICER HOWEVER, PROCE EDED TO MAKE AN ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN (LTCG) ON SALE OF SHARES. THIS WAS CLEARLY BEYOND THE SCOPE OF THE PROCEEDINGS UNDER SECTION 148 OF T HE ACT. THE ASSESSING OFFICER, THEREFORE, COULD NOT HAVE PROCEEDED TO MAKE THE IMP UGNED ADDITION OF BOGUS LTCG. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE DELH I HIGH COURT IN THE CASE OF RANBAXY LABORATORIES VS. CIT, ITA 148 OF 2008 DATED 3/6/2011. THE HONBLE DELHI HIGH COURT FOLLOWED THE DECISION OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF JET AIRWAYS (SUPRA). IN THAT VIEW OF THE MATTER WE HOLD THAT THE ADDITION BY TREATING THE LTCG AS BOGUS CANNOT BE SUSTAINED AS IT WAS BEYOND THE SCOPE OF THE PROCEEDINGS 5 ITA NO.1524/KOL/2018 SHRI HARTEJ SEWA SINGH A.YR. 2010-11 5 UNDER SECTION 147 OF THE ACT. WE THEREFORE DELETE T HE SAID ADDITION ALSO AND ALLOW GROUND NO..6 TO 8. 20.. IN VIEW OF THE ABOVE CONCLUSIONS WE ARE OF THE VIEW THAT THE ISSUE WITH REGARD TO THE VALIDITY OF INITIATION OF RE-ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT DOES NOT REQUIRE ANY CONSIDERATION. WE ADOPT THE ABOVE DETAILED REASONING MUTATIS MUTAN DIS TO ANNUL REOPENING / REASSESSMENT IN ISSUE AS NOT VALID. THE SAME IS AC CORDINGLY QUASHED. ALL THIS RENDERS THE ASSESSEES REMAINING GROUNDS ON MERITS TO BE AC ADEMIC. 5. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 12.10.2018 SD/- SD/- [M. BALAGANESH] [ S.S.GODARA ] ACCOUNTANT MEMBER JUDICIAL MEM BER DATED : 12.10.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. SHRI HARTAJ SEWA SINGH, MEWS III, IC, TIVALI COU RT, BALLYGUNGE CIRCULAR ROAD, BECK BAGAN, KOLKATA-700019. 2. ACIT(IT), CIRCLE-1(1), KOLKATA, 110, SHANTIPALLY , NEAR RUBY HOSPITAL, E.M. BYE PASS, AAYAKAR BHAWAN POORVA, KOLKATA-700107. 3..C.I.T(A).- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S