SHRI SHRI MOHD ARIF, BILASPUR(CG) V. THE INCOME TAX OFFICER -1(1), BILASPUR(CG)

ITA 167/BIL/2016

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3209 (ITAT-RAIPUR)
• Duration Of Justice: 6 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 03-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Peak credit; Bonafide belief; Question of law; Assessment record; Reason to believe; Reassessment proceedings
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 153

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA Nos.166 & 167/RPR/2016 Ǔनधा[रण वष[ / Assessment Years : 2005-06 & 2006-07 Mohd. Arif Prop. of M/s. Walraj Service Center Link Road, Bilaspur (C.G.) PAN : AFTPM7736B .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer-1(1), Bilaspur (C.G.) ......Ĥ×यथȸ / Respondent . Assessee by : Shri Sunil Kumar Agrawal, AR Revenue by : Shri G.N Singh, DR स ु नवाई कȧ तारȣख / Date of Hearing : 31.05.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 26.07.2022 2 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 आदेश / ORDER PER RAVISH SOOD, JM: The captioned appeals filed by the assessee are directed against the respective orders passed by the CIT(Appeals), Bilaspur (C.G.) dated 18.03.2016, which in turn arises from the orders passed by the A.O under Sec. 143(3)/147 of the Income-tax Act, 1961 (for short ‘the Act’) dated 24.11.2009 for the assessment years 2005-06 & 2006-07. As the issues involved in the captioned appeals are inextricably interlinked or in fact interwoven, therefore, the same are being taken up and disposed off together by way of a common order. We shall first take up the appeal filed by the assessee for the assessment year 2005-06 wherein the assessee has assailed the impugned order on the following grounds of appeal before us: “1. That the Ld. CIT(A) has erred in law as well as on facts, in not considering /dealing and appreciating the plea that the assessment u/s.147 was completed after the expiry of 9 months from the end of FY in which notice u/s.148(2) was served and thus, the re-assessment made u/s.147 is time barred and invalid and it deserved to be quashed. 2. That the Ld. CIT(A) has erred in law as well as on facts, in estimating the income at Rs.32% of the undisclosed bank transaction of Rs.1,57,84,050/- without giving any basis for such arbitrary estimation and ignoring the ‘comparable case’ ( i.e. the firm M/s. Walraj Service Center’ in which the assessee is one of the partners) given by the assessee. 3. That the assessee craves leave to add, urge, alter, modify and withdraw any ground/grounds before or at the time of hearing of the appeal.” Also, the assessee has raised an additional ground of appeal which reads as under: “1. On the facts and circumstances of the case and in law, protective assessment cannot be made in reassessment proceedings u/s.147/148; it would be impermissible on the ground that a contingency may arise in future resulting in escapement of income’ intimation u/s.148/147 is invalid as there is no reason to believe for the 3 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 alleged escaped income in the hands of the assessee, rather than in the hands of Walraj Service Centre, the condition precedent for a valid initiation u/s.147/148 is absent and thus, it is liable to be quashed.” 2. Succinctly stated, on the basis of information received by the A.O that an amount of Rs.1,03,14,576/- stood credited in an undisclosed bank account No.CD- 231 of M/s. Walraj Service Center, Link Road, Bilaspur, i.e. a bank account that was not reflected by the firm in its balance sheet and books of account, the A.O reopened the case of the aforementioned firm, viz. M/s. Walraj Service Center u/s.147 of the Act. Considering the fact that the assessee, viz. Mohd. Arif who was a partner in the aforementioned firm had signed the bank account opening form in his capacity as a proprietor and thereafter, had operated the account in his individual capacity, the A.O also reopened the case of the assessee and issued notice u/s.148 of the Act dated 26.02.2008. 3. During the course of the assessment proceedings in the case of the firm, viz. M/s. Walraj Service Center, it was observed by the A.O that there were unexplained credits amounting to Rs.1,03,14,576/- in the aforementioned bank account No. CD- 231. Observing, that the peak credit in the aforesaid bank account worked out at Rs.36,58,006/-, the A.O vide his order passed u/s.143(3)/147 of the Act, dated 30.12.2008 made a substantive addition of Rs.36,58,006/- in the hands of the aforementioned firm. Also, taking cognizance of the fact that the aforementioned bank account was opened by the assessee, viz. Mohd. Arif in his capacity as that of 4 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 a proprietor of M/s. Walraj Service Center, Link Road, Bilaspur, the AO in order to safeguard the interest of the revenue vide his order passed u/s.143(3)/147 of the Act dated 24.11.2009 made an addition of Rs.36,58,006/- u/s.69 of the Act on a protective basis in his hands. 4. Aggrieved, the assessee assailed the order passed by the A.O u/s.143(3)/147 of the Act dated 24.11.2009 before the CIT(Appeals), who vide his order dated 31.03.2011 being of the view that the addition in question was made by the A.O merely on a suspicion and not on the basis of any corroborative material, vacated the same. 5. Aggrieved, the Revenue assailed the order passed by the CIT(Appeals) before the Tribunal. The Tribunal vide its consolidated order passed while disposing off the appeals of the revenue in the assessee’s case, i.e, in ITA No.146 & 147/BLPR/2011 dated 31.12.2014 for the assessment years 2005-06 & 2006-07, taking cognizance of the fact that the CIT(Appeals) while disposing off the respective appeals had failed to consider the “remand report” that was filed by the A.O before him, thus, restored the matter to his file with a direction to re-adjudicate the appeal after affording a reasonable opportunity of being heard to the assessee. Also, a similar order was passed by the Tribunal while disposing off the appeal in the case of the firm, viz. M/s. Walraj Service Center in ITA Nos. 150 & 151/BLPR/2011 dated 31.12.2014, 5 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 wherein too on the aforesaid issue the matter was restored to the file of the CIT(Appeals) for fresh adjudication. 6. After having received the order of the Tribunal, the CIT(Appeals) vide his order passed in Appeal No. CIT(A)/BSP/A No.99/2009-10 dated 18.03.2016 re- adjudicated the issue. Observing that the amount of Rs.1,57,84,050/- was the undisclosed turnover of the assessee who was engaged in the business of trading in lubricants and petroleum products, the CIT(Appeals) substituted the addition that was made by the A.O by estimating the assessee’s net profit @ 32% of his undisclosed turnover of Rs.1,57,84,050/- and made a consequential addition of Rs.50,50,896/-, as against the originally assessed peak addition of Rs.36,58,006/- that was made by the A.O vide his order passed u/s.143(3)/147 of the Act dated 24.11.2009. 7. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. As observed by us hereinabove it is the second round of litigation before us. 8. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. AR in order to buttress his contentions. 6 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 9. As the assessee has raised an additional ground of appeal before us, therefore, we shall first advert to the same. On a perusal of the additional ground of appeal, we find that the assessee has assailed the validity of the jurisdiction that was assumed by the A.O for initiating the re-assessment proceedings u/s.147 of the Act, for the reason that the same could not have been done in a case of a protective assessment, on the ground that a contingency may arise in future that may result in escapement of income. As the assessee by raising in the aforesaid additional ground has raised a question of law which would not require looking any beyond the facts available on record hence, we have no hesitation in admitting the same. 10. Before us the Ld. Authorized Representative (for short ‘AR’) for the assessee has assailed the validity of the re-opening of the assessee’s case u/s.147 of the Act on the basis of his multifacet contentions. Apart from that, the Ld. AR has assailed on merits the validity of the addition that was sustained or in fact enhanced in the second round of litigation by the CIT(Appeals). Elaborating on the challenge thrown by him to the validity of the jurisdiction assumed by the A.O for re-opening the case of the assessee, the Ld. AR had come forth with three folds contentions, viz. (i) that as the assessment framed by the A.O vide his order passed u/ss.143(3)/147 of the Act, dated 24.11.2009 was beyond the stipulated time period contemplated in section 153(2) of the Act, therefore, the same was barred by limitation; (ii) that the reopening of the case of the assessee was based on dumb reasons which clearly 7 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 revealed non-application of mind by the A.O a/w absence of any nexus with the material available on record for formation of a bonafide belief on his part that the income of the assessee chargeable to tax had escaped assessment; and (iii) that the A.O had gravely erred in framing a protective assessment u/s.147 of the Act on the ground that a contingency may arise in future which may result to escapement of income. 11. We shall first deal with the claim of the assessee that the assessment order passed by the A.O u/ss.143(3)/147 of the Act, dated 24.11.2009 is barred by limitation. On a perusal of the records, we find that the case of the assessee for the year under consideration i.e. A.Y.2005-06 was reopened by the A.O vide notice issued u/s.148 of the Act dated 26.02.2008, Page 1 of APB. As stated by the Ld. AR, and rightly so, as per the “second proviso” to section 153(2) of the Act, as was available on the statute at the relevant point of time, no assessment order u/s.147 of the Act could be passed by the A.O after expiry of 9 months from the end of the financial year in which notice u/s.148 was served. For the sake of clarity, we herein cull out section 153(2) of the Act which at the relevant point of time read as under: “153 (2) No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served: Provided that where the notice under section 148 was served on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such assessment, reassessment or recomputation may be made at any time up to the 31st day of March, 2002: 8 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 Provided further that where the notice under section 148 was served on or after the 1st day of April, 2005 but before the 1st day of April, 2011, the provisions of this sub-section shall have effect as if for the words “one year”, the words “nine months” had been substituted Provided also that where the notice under section 148 was served on or after the 1st day of April, 2006 but before the 1st day of April, 2010 and during the course of the proceedings for the assessment or reassessment or recomputation of total income, a reference under sub-section (1) of section 92CA— (i) Was made before the 1st day of June, 2007 but an order under sub-section (3) of that section has not been made before such date; or (ii) Is made on or after the 1st day of June, 2007 The provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words “one year”, the words “twenty one months” had been substituted.” 12. In the backdrop of the aforesaid position of law, we shall herein deal with the claim of the assessee that the order passed by the A.O u/s.143(3)/147 dated 24.11.2009 is barred by limitation. As observed by us hereinabove, notice u/s.148 of the Act, dated 26.02.2008 was issued to the assessee and is stated to have been received by him on 06.03.2008. At this stage, we may herein cull out the copy of the notice u/s.148 dated 26.02.2008 as had been filed by the assessee before us, Page 1 of APB: 9 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 Before proceeding any further, we may herein observe that the A.O in his order passed u/s. 143(3)/147 dated 24.11.2009 had stated that the case of the assessee was reopened vide notice issued u/s. 148 of the Act, dated 26.02.2009. Considering the aforesaid serious contradiction emerging from the observation of the A.O, as against the claim of the assessee which is based on a copy of the notice u/s.148 of the Act, dated 26.02.2008 that had been filed before us, the Ld. Departmental Representative (for short ‘DR’) was directed to produce the assessment records. On a perusal of the assessment records for the year under consideration, i.e. A.Y.2005- 10 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 06 (duly numbered as Page 1-122), we find that the notice u/s.148 of the Act, dated 26.02.2008 is placed at Page 1 of the assessment record. Apart from that, we find that the CIT(Appeals) in his order dated 18.03.2016 had also categorically stated that the case of the assessee was reopened by the A.O vide a notice issued u/s.148 of the Act, dated 26.02.2008. On further verification of the records before us, we find that the assessee vide his letter addressed to the CIT(Appeals), Bilaspur dated 13.07.2015, Page 19 of APB had categorically stated before him that the A.O had erroneously in the body of the re-assessment order mentioned that notice u/s.148 was issued on 26.02.2009, Page 20-Para-1.1 of APB. For the sake of clarity, the aforesaid claim raised by the assessee before the CIT(Appeals), is reproduced as under: “1.1. After setting aside the assessment to your Honor’s file, in this respect, I want to bring your kind consideration to this fact that the notices u/s.148 for both the AY 05-06 & 06-07 were actually issued on 26.02.2008 and served in the month of March, 2008. For your kind verification, copy of notices dt.26-02-2008 for the AY05-06 is attached herewith ( Pg. No.11 & 12). But in the re-assessment orders passed by the A.O u/s.147 on 24.11.2009 in the case of the assessee-Indl for both the AYs, it was, by mistake, incorrectly mentioned that notices were issued on 26.02.2009 (instead of correct date of issuing notice is 26-02-2008) for both the AYs.” 13. On the basis of the aforesaid facts, we are of the considered view that the case of the assessee was reopened by the A.O vide notice issued u/s.148 of the Act, dated 26.02.2008. At this stage, we may herein observe that neither anything is discernible from the records which would prove otherwise, nor the ld. DR has placed any contention to rebut the aforesaid factual position. 11 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 14. As per section 153(2) of the Act as was then available on the statute, the assessment u/ss. 147/143(3) could have been framed by the A.O. latest by 31.12.2008, i.e., upto 9 months from the end of financial year in which notice u/s.148 of the Act was served. However, as in the case before us the assessment had been framed by the A.O vide his order passed u/s.143(3)/147, dated 24.11.2009, therefore, the same as claimed by the assessee, and rightly so, is much beyond the time limitation prescribed in sub-section (2) of Section 153 of the Act. We, thus, in terms of our aforesaid observations, quash the assessment framed by the A.O vide his order passed u/s.143(3)/147 dated 24.11.2009 as having been passed beyond the prescribed time limit. Thus, the Ground of appeal No.1 raised in appeal by the assessee is allowed in terms of our aforesaid observations. 15. As we have quashed the order passed by the A.O u/s.143(3)/147 of the Act dated 24.11.2009 by holding the same as barred by limitation, therefore, we refrain from adverting to and therein adjudicating the other contentions advanced by the Ld. AR as regards the validity of the jurisdiction assumed by the A.O for reopening the case of the assessee u/s.147 of the Act, as well as those advanced by him as regards the merits of the addition made in the hands of the assessee which, are left open. Thus, the Ground of appeal No.2 and additional ground of appeal raised by the assessee are disposed off in terms of our aforesaid observations. 12 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 16. Ground of appeal No.3 being general in nature is dismissed as not pressed. 17. In the result, appeal of the assessee in ITA No.166/RPR/2016 for the assessment year 2005-06 is allowed in terms of our aforesaid observations. ITA No.167/RPR/2016 A.Y.2006-07 18. As the facts and the issue involved in the present appeal remains the same as were there before us in the aforementioned appeal of the assessee in ITA No.166/RPR/2016 for assessment year 2005-06, i.e., the case of the assessee for the years under consideration i.e. A.Y.2006-07 was also reopened by the A.O vide his notice issued u/s.147 of the Act dated 26.02.2008 (Page 2 of APB) therefore, our order passed while disposing off the appeal for the preceding year i.e. A.Y.2005-06 shall apply mutatis-mutandis for disposing off the present appeal in ITA No.167/RPR/2016 for the assessment year 2006-07. Accordingly, on the basis of our aforesaid observations, in this case also we quash the assessment order passed by the A.O u/s.143(3)/147 dated 24.11.2009 as having been passed beyond the prescribed time limit. Thus, the Ground of appeal No.1 raised in the present appeal by the assessee is allowed in terms of our aforesaid observations. 19. Ground of appeal No.2 and additional ground of appeal raised by the assessee are disposed off with similar observations as were recorded by us while 13 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 disposing of the assessee’s appeal in ITA No.166/RPR/2016 for assessment year 2005-06. 20. Ground of appeal No.3 being general in nature is dismissed as not pressed. 21. In the result, appeal of the assessee in ITA No.167/RPR/2016 for the assessment year 2006-07 is allowed in terms of our aforesaid observations. 22. In the combined result, both the appeals of the assessee are allowed in terms of our aforesaid observations. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board. Sd/- Sd/- RATHOD KAMLESH JAYANTBHAI RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 26 th July, 2022 *SB आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals), Bilaspur (C.G) 4. The CIT, Bilaspur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. // True Copy // आदेशान ु सार / BY ORDER, Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 14 Mohd. Arif Vs. Income Tax Officer-1(1) ITA Nos. 166 & 167/RPR/2016 Date 1 Draft dictated on 20.06.2022 Sr.PS/PS 2 Draft placed before author 20.06.2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order