DEEPA SHOREWALA, MUMBAI V. ITO WD 15(1)(1), MUMBAI

ITA 1678/MUM/2009

• Counselvise Citation: 167819914 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 31-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 13-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: K SHIVARAM
• Keywords: Gross profit estimation; Gift; Search and seizure; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1678/MUM/2009 (ASSESSMENT YEAR: 2001-02) DEEPA SHOREWALA, (PROP. M/S. DEEPA TEXTILES) 201, 2ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI -400 021 ..... ASSESSEE VS INCOME TAX OFFICER WARD 15(1)(1), MUMBAI ........ REVENUE PAN: AADPS 9800 E ASSESSEE BY: SHRI K. SHIVARAM REVENUE BY: SHRI JITENDRA YADAV O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A) XV MUMBAI DATED 21.01.2009 FOR THE A.Y. 2001-02. THE ASSESSEE HAS TAKEN MULTIPLE GROUNDS. THE ASSES SEE HAS CHALLENGED THE VALIDITY OF THE REASSESSMENT PROCEEDINGS IN GRO UND NO.1, WHICH READS AS UNDER:- 1. THE HON. CIT (A) FAILED TO APPRECIATE THAT RE-O PENING DONE BY THE LD. A.O. IS BEYOND THE SCOPE OF LAW AND FOR RE- VERIFICATION JUST DUE TO CHANGE OF OPINION AS ALL RELEVANT PARTI CULARS WERE FILED DURING ASSESSMENT PROCEEDINGS U/S.143(3) EARL IER AND VERIFIED BY THE LD. A.O. THEREFORE THE IMPUGNED OR DER ITA 1678/MUM/2009 DEEPA SHOREWALA 2 U/S.143(3) R.W.S. 148 IS BAD IN LAW AND LIABLE TO B E QUASHED. 2. BRIEFLY STATED THE FACTS ARE AS UNDER. THE ASSE SSEE HAS FILED THE RETURN OF INCOME FOR THE A.Y. 2001-02 ON 29.10.2001 DECLARING THE TOTAL INCOME AT ` 3,01,380/-. THE REGULAR ASSESSMENT OF THE ASSESSE E WAS COMPLETED U/S.143(3) VIDE ASSESSMENT ORDER DATED 11 .10.2002 DETERMINING THE TOTAL INCOME AT ` 3,43,100/-. SUBSEQUENTLY, THE A.O. INITIATED THE ASSESSMENT PROCEEDINGS U/S.147 AND NO TICE U/S.148 WAS ISSUED ON 30.4.2001. AS REQUIRED IN THE NOTICE U/S .148, THE ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCO ME AT ` 3,43,200/-. THE A.O. COMPLETED THE ASSESSMENT U/S.143(3) R.W.S. 147 VIDE ORDER DATED 30.3.2005 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT ` 31,17,700/-. THE MAJOR ADDITION WAS U/S.68 IN RESP ECT OF THE GIFT CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE. THE ASSESSEE CHALLENGED THE SAID ASSESSMENT ORDER BEFORE THE LD. CIT (A) WH O DISMISSED THE ASSESSEES APPEAL AND THE ASSESSEE CARRIED MATTER B EFORE THE TRIBUNAL CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT (A) I N FIRST ROUND. THE ASSESSEE RAISED THE GRIEVANCE BEFORE THE TRIBUNAL T HAT THE REASONS FOR REOPENING WERE NOT FURNISHED TO THE ASSESSEE. THE TRIBUNAL VIDE ORDER IN ITA NO.6240/MUM/2002 DATED 24.8.2006 REMANDED BA CK THE ENTIRE MATTER TO THE FILE OF THE A.O. TO DISPOSE OFF THE O BJECTION OF THE ASSESSEE. THE A.O. COMPLIED WITH THE DIRECTIONS OF THE TRIBUN AL AND DISPOSED OFF THE OBJECTION OF THE ASSESSEE ON REOPENING. THE A. O. AGAIN PASSED THE ASSESSMENT ORDER U/S.143(3) R.W.S. 252 ON 14.12.200 7. THE ASSESSEE CHALLENGED THE SAID ORDER BEFORE THE LD. CIT (A) BU T WITHOUT SUCCESS. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL SUBMITS THAT THE REOPENING IS DO NE WITHIN THE PERIOD OF FOUR YEARS. HE FURTHER SUBMITS THAT WHIL E COMPLETING THE ORIGINAL ASSESSMENT THE A.O. HAS ALREADY CONSIDERED THE ISSUE OF THE GIFT AND SUBSEQUENT PROCEEDINGS U/S.147 IS MERELY ON THE CHANGE OF THE ITA 1678/MUM/2009 DEEPA SHOREWALA 3 OPINION. HE FURTHER SUBMITS THAT THE REOPENING IS DONE AT THE DIRECTIONS OF THE LD. CIT AND THERE WAS NO NEW MATE RIAL BEFORE THE A.O. FOR FORMATION OF THE BELIEF OTHER THAN THE MATERIAL AVAILABLE AT THE TIME OF COMPLETION OF THE ORIGINAL ASSESSMENT U/S.143(3) . THE LD. COUNSEL REFERRED TO PAGE NO.194 WHICH IS A COPY OF THE ORDE R-SHEET ENTRY WHICH IS DATED 20.8.2002 BY WHICH THE A.O. HAS SOUGHT THE APPROVAL OF THE ADDL. COMMISSIONER OF INOCME-TAX-15(1) MUMBAI FOR S ELECTING THE ASSESEES CASE FOR SCRUTINY. THE LD. COUNSEL ALSO REFERS TO PAGE NOS.195 TO 197 AND SUBMITS THAT ON 23.9.2002, AS PER THE OR DER-SHEET NOTING OF THE A.O. THE A.O. HAS SOUGHT THE DETAILS OF THE GIF T RECEIVED BY THE ASSESSEE. THE LD. COUNSEL ALSO REFERRED TO PAGE NO S. 4 & 5 AND SUBMITS THAT, AS REQUIRED BY THE A.O. THE ASSESSEE HAS FURN ISHED ALL INFORMATION IN RESPECT OF THE GIFT OF ` 27 LAKHS RECEIVED FROM SHRI CHHANULAL JHUNJHUNWALA, A NON-RESIDENT. HE FURTHER SUBMITS T HAT THAT IN RESPECT OF THE FLATSAND AND OTHER PROPRIETIES, THE A.O. HAS SOUGHT THE INFORMATION THAT WAS ALSO FURNISHED. THE LD. COUNS EL REFERRED TO THE PAGE NO.34 WHICH IS A COPY OF THE REASONS FURNISHED BY THE A.O. TO THE ASSESSEE AND SUBMIT THAT THE A.O. HAS TAKEN THE SHE LTER OF THE FOLLOWING REASONS FOR ISSUING NOTICE UNDER SEC.148 OF THE ACT :- I) ALV OF THE FLAT NO.6 OBEROI APARTMENTS, S AMARTH MARG, DELHI -7 WAS NOT BROUGHT TO TAX. II) THE INCOME FROM THE PROPERTY AT 9C AT 3RD FLOOR , THAKKAR IND. ESTATE, SITARAM MILL COMPOUND HAS ESCAPED THE ASSESSMENT. III) THE ASSESSEE HAS RECEIVED GIFT OF ` 27 LAKHS FROM ONE SHRI CHHANULAL JHUNJHUNWALA AND VERIFICATION OF SAID GIF T REMAINED TO BE DONE. IV) VALUATION OF CLOSING STOCK NOT SHOWN AND NO REASON WAS RECORDED FOR LOW GP AT THE TIME OF THE ASSESSMENT. ITA 1678/MUM/2009 DEEPA SHOREWALA 4 4. THE LD. COUNSEL REFERRED TO PAGE NO.9 OF THE COM PILATION. HE, THEREFORE, PLEADED THAT EACH AND EVERY ASPECT WAS E XAMINED BY THE A.O. AT THE TIME OF COMPLETING THE ORIGINAL ASSESSMENT U /S.143(3) AND SUBSEQUENT REOPENING IS NOT PERMISSIBLE AS IT IS ON LY ON THE CHANGE OF THE OPINION. THE LD. COUNSEL RELIED ON THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561 OTHER DECISIONS OF THE HONBLE JURISDICTIONAL H IGH COURT AS WELL AS OTHER HIGH COURTS. WE HAVE ALSO HEARD THE LD. D.R. WHO STRONGLY SUPPORTED THE REOPENING MADE BY THE A.O. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. WE HAVE ALSO CONSIDERED ALL THE PRECED ENTS RELIED ON BY THE PARTIES WE FIND FROM THE COPY OF THE ORIGINAL ASSE SSMENT ORDER PASSED U/S.143(3) DATED 11.10.2002 THAT THE A.O. HAS DISC USSED THE ISSUE OF GIFT OF ` 27 LAKHS. THE A.O. ALSO NOTED IN THE ASSESSMENT O RDER THAT THIS GIFT WAS RECEIVED BY THE ASSESSEE FROM SHRI CH HANULAL JHUNJHUNWALA (NRI) AND ALL THE PAPERS RELATED TO TH E GIFT, SUCH AS, PASSPORT, DETAILS OF THE DONOR, COPY OF THE DONORS NRI BANK PASSBOOK WITH THE INDIAN OVERSEAS BANK, GIFT DEED ETC. HAVE BEEN FILED . 6. WE FURTHER FIND THAT AS PER THE ORDER-SHEET NOTI NG OF THE A.O. DATED 23.09.2002, THE A.O. HAS SPECIFICALLY ASKED F OR THE DETAILS IN RESPECT OF GIFT DECLARED BY THE ASSESSEE. SO FAR A S THE NEXT REASON I.E. IN RESPECT OF THE ESCAPEMENT OF THE INCOME OF THE FLAT , WE FIND THAT THE A.O. HAS ASKED THE DETAILS, WHICH WERE ALSO FURNISHED BY THE ASSESSEE. WE FURTHER FIND THAT THE A.O. HAS ALSO MADE THE ENQUIR Y ON THE VALUATION OF THE STOCK AS WELL AS THE LOW GP. IT IS FURTHER SEEN THAT AS PER THE ADMINISTRATIVE INSTRUCTIONS OF THE DEPARTMENT, THE A.O. HAS SOUGHT APPROVAL OF THE ADDL. COMMISSIONER OF INCOME-TAX OF MUMBAI FOR SELECTING THE ASSESSEES CASE FOR SCRUTINY. THE RE ASONS GIVEN FOR SELECTING THE ASSESSEES CASE FOR SCRUTINY, PAGE NO .194 OF THE PAPER- BOOK AND THE REASONS FOR REOPENING ARE ALMOST IDENT ICAL. HENCE, BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT THE A.O. HAS NOT APPLIED HIS ITA 1678/MUM/2009 DEEPA SHOREWALA 5 MIND ON ALL THE ISSUES ON WHICH THE NOTICES U/S.148 IS ISSUED. IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) THE HONBL E SUPREME COURT HAS HELD AS UNDER:- 4. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MAD E TO S. 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987, REOPENING COULD BE DONE UNDE R ABOVE TWO CONDITIONS AND FULFILLMENT OF THE SAID CO NDITIONS ALONE CONFERRED JURISDICTION ON THE AO TO MAKE A BA CK ASSESSMENT, BUT IN S. 147 OF THE ACT (W.E.F. 1ST AP RIL, 1989), THEY ARE GIVEN A GO BY AND ONLY ONE CONDITION HAS R EMAINED, VIZ., THAT WHERE THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THEREFORE, POST 1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO BE LIEVE FAILING WHICH, WE ARE AFRAID, S. 147 WOULD GIVE ARB ITRARY POWERS TO THE AO TO REOPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE RE ASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL D IFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE A.O. HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSES S. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERT AIN PRE- CONDITION AND IF THE CONCEPT OF CHANGE OF OPINION , IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OP INION AS AN INBUILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE, AFTER 1ST APRIL, 1989, AO HAS POWER TO REOPEN, PROV IDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION TH AT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE TO LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO S.147 OF THE ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMEN DMENT) ITA 1678/MUM/2009 DEEPA SHOREWALA 6 ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS R EASON TO BELIEVE BUT ALSO INSERTED THE WORD OPINION IN S. 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM TH E COMPANIES AGAINST OMISSION OF THE WORDS REASON TO BELIEVE, PARLIAMENT RE-INTRODUCED THE SAID EXPRESSION AND DE LETED THE WORD OPINION ON THE GROUND THAT IT WOULD VEST ARB ITRARY POWERS IN THE AO. WE QUOTE HEREINABOVE THE RELEVAN T PORTION OF CIRCULAR NO.549, DT. 31ST OCT., 1989 [(1990) 82 CTR (ST) 1], WHICH READS AS FOLLOWS: 7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO RE-INTRODUCE THE EXPRESSION REASON TO BELIEVE IN S. 147 A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WARDS REASON TO BELIEV E FROM S. 147 AND THEIR SUBSTITUTION BY THE OPINION OF THE AO. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, REASON TO BELIEVE HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTLED AND ITS OMISSION FROM S. 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMENDING ACT, 1989, HAS AGAIN AMENDED S. 147 TO REINTRODUCE THE EXPRESSION HAS REASON TO BELIEVE IN PLACE OF THE WORDS FOR REASO NS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION. OTHER PROVISIONS OF THE NEW S. 147, HOWEVER, REMAIN THE SAME. 7. IN THE PRESENT CASE WE FIND THAT EACH AND EVERY ISSUE WHICH HAS BEEN MADE BASE FOR INITIATION OF THE PROCEEDINGS U/ S.147 HAS BEEN CONSIDERED BY THE A.O. WHILE COMPLETING THE ORIGINA L ASSESSMENT U/S.143(3). WE ARE, THEREFORE, OF THE OPINION THAT THE A.O. INITIATED THE REASSESSMENT PROCEEDINGS ON MERE CHANGE OF OPINION AND HENCE, THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT I N THE CASE OF ITA 1678/MUM/2009 DEEPA SHOREWALA 7 KELVINATOR OF INDIA LTD. (SUPRA) ARE SQUARELY APPLI CABLE TO THE ASSESSEES CASE AND THE PROCEEDINGS INITIATED U/S.147 ARE BAD IN LAW. 8. WE, ACCORDINGLY, QUASH THE REASSESSMENT PROCEEDI NGS INITIATED BY THE A.O. U/S.147 AND IN CONSEQUENCE CANCEL THE ASSE SSMENT ORDER PASSED BY THE A.O. ACCORDINGLY, GROUND NO.1 IS ALL OWED. 9. THE ASSESSEE HAS ALSO TAKEN GROUNDS ON MERIT BEI NG GROUND NO.2 AND 3. AS WE HAVE ALLOWED GROUND NO.1 OF THE ASSES SEE, HENCE WE DO NOT CONSIDER IT NECESSARY TO DEAL WITH THE GROUND 2 & 3 WHICH ARE ON MERIT OF THE ADDITIONS. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 9 TH APRIL 2011. SD/- SD/- ( B. RAMAKOTAIAH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 29 TH APRIL 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) XV, MUMBAI. 4) THE CIT CITY-15, MUMBAI. 5) THE D.R. D BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 9 TH APRIL 2011. SD/- SD/- ( RAJENDRA SINGH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 29 TH APRIL 2011 ITA 1678/MUM/2009 DEEPA SHOREWALA 8 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 26.04.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 27.04.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER