Sunil Kanhaiyalal Gidwani (HUF), Mumbai V. Assistant Commissioner of Income-tax, Circle - 1, Sangli

ITA 1739/PUN/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6637 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-01-2020
• Assessment Year: 2006-2007
• Appeal Filed On: 13-11-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Reopening of assessment; Rule of consistency; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Set aside
• Section: 143(3); 143(1); 13; 68; 148

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.1739/PUN/2019 / ASSESSMENT YEAR : 2006-07 SUNIL KANHAIYALAL GIDWANI (HUF), CITY SURVEY NO.341, LAXMI BUNGALOW, REVENUE COLONY, SOUTH SHIVAJINAGAR, SANGLI-416416. PAN : AAHHS9603Q ....... / APPELLANT / V/S. ACIT, CIRCLE-1, SANGLI. / RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : SHRI S. P. WALIMBE / DATE OF HEARING : 28.01.2020 / DATE OF PRONOUNCEMENT : 31.01.2020 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-1, KOLHAPUR DATED 28.08.2019 FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED THE RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS A SALARIED EMPLOYEE AND IS FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.8,98,990/-. THE ASSESSEE ALSO DERIVED INCOME FROM TURMERIC TRADING ACTIVITY AMOUNTING TO RS.9,44,842/-. AT THE END OF THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT, THE ASSESSING OFFICER MADE THE ADDITIONS U/S 68 OF THE ACT ON ACCOUNT OF SUBSTANTIVE/PROTECTIVE BASIS. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE. ITA NO.1739/PUN/2019 - 2 - 3. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE FOLLOWING GROUNDS :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IN THE ABSENCE OF CONDITIONS PRECEDENT FOR ISSUANCE OF NOTICE U/S 148 OF THE I.T. ACT 1961, THE REASSESSMENT PROCEEDINGS INITIATED BY THE LEARNED ASSESSING OFFICER ARE BAD IN LAW, VOID AB INTIO AND WITHOUT JURISDICTION AND HENCE THE IMPUGNED REASSESSMENT FRAMED BY THE LEARNED ASSESSING OFFICER BE ANNULLED. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE INCOME OF RS.9,44,842.00 DISCLOSED BY THE APPELLANT FROM THE BUSINESS OF TURMERIC TRADING WAS UNDISCLOSED INCOME AND NO SUCH ACTIVITY WAS CARRIED ON BY THE APPELLANT. THE SAID FINDING BEING ARBITRARY, PERVERSE AND DEVOID OF MERITS BE VACATED. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.49,151.00 BEING LOAN GIVEN TO SUNIL GIDWANI AS LOAN FROM UNDISCLOSED SOURCES. THE SAID FINDING BEING ARBITRARY, PERVERSE AND DEVOID OF MERITS BE VACATED. 4. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.60,000.00 BEING LOAN GIVEN TO MRS. MEENAKSHI SUNIL GIDWANI AS LOAN FROM UNDISCLOSED SOURCES ON THE GROUND THAT THE APPELLANT DID NOT PRESS THIS ISSUE. IN FACT NO SUCH CONCESSION WAS EVER GIVEN BY THE APPELLANT. THE SAID FINDING BEING ARBITRARY, PERVERSE AND DEVOID OF MERITS BE VACATED AND THE IMPUGNED ADDITION BE DELETED. 5. THE APPELLANT CRAVES THE PERMISSION TO ADD, AMEND, MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE AND OR ALL GROUNDS OF APPEAL, IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 4. BEFORE ME, AT THE OUTSET, REFERRING TO THE GROUND NO.1, WHICH IS LEGAL IN NATURE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AN IDENTICAL ISSUE CAME BEFORE THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2005-06 TO 2007-08 VIDE ITA NOS.302 TO 304/PUN/2019 ORDER DATED 01.11.2019 AND THE TRIBUNAL DECIDED THE SAME IN FAVOUR OF THE ASSESSEE. FURTHER, LD. COUNSEL SUBMITTED THAT THE CONTENTS OF PARA 7 TO 13 OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) ARE RELEVANT IN THIS REGARD. 5. AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE SAID ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA), I FIND IDENTICAL ISSUE ALREADY ITA NO.1739/PUN/2019 - 3 - ADJUDICATED BY THE TRIBUNAL AND DECIDED THE SAME IN FAVOUR OF THE ASSESSEE. FURTHER, I FIND THE CONTENTS OF PARA 7 TO 13 OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) ARE RELEVANT AND FOR THE SAKE OF COMPLETENESS, THE SAID PARA 7 TO 13 ARE EXTRACTED HEREUNDER :- 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD ON THE PRELIMINARY ISSUE OF RE-OPENING THE ASSESSMENT. THE ASSESSEE IN THE PRESENT GROUND IS CHALLENGING THE VALIDITY OF THE REASSESSMENT PROCEEDINGS U/S 147/148 OF THE ACT. THE LAW ON RE-OPENING OF AN ASSESSMENT UNDER THE ACT, IS FAIRLY SETTLED. THE ASSESSING OFFICER CAN RE-OPEN AN ASSESSMENT ONLY IN ACCORDANCE WITH THE EXPRESS PROVISIONS PROVIDED IN SECTION 147/148 OF THE ACT. IT IS ONLY ON THE ASSESSING OFFICER STRICTLY SATISFYING THE PROVISIONS OF SECTION 147 OF THE ACT THAT HE ACQUIRES JURISDICTION TO RE-OPEN AN ASSESSMENT. SECTION 147 OF THE ACT, CLOTHES THE ASSESSING OFFICER WITH JURISDICTION TO REOPEN AN ASSESSMENT ON SATISFACTION OF THE FOLLOWING: (A) THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT (B) INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT AND (C) IN CASES WHERE THE ASSESSMENT SOUGHT TO BE REOPENED IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THEN AN ADDITIONAL CONDITION IS TO BE SATISFIED VIZ: THERE MUST BE FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE REQUIREMENT IN THE FIRST PROVISO TO SECTION 147 OF THERE HAVING TO BE A FAILURE ON THE PART OF THE ASSESSEE 'TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS' DOES NOT AT ALL APPLY WHERE THE INITIAL RETURN HAS BEEN PROCESSED UNDER SECTION 143(1) OF THE ACT. 8. IN THE PRESENT CASE IT IS REQUIRED TO BE NOTED THAT BY THE IMPUGNED NOTICE, THE ASSESSMENT FOR AY 2005-06 IS SOUGHT TO BE REOPENED IN EXERCISE OF POWER UNDER SECTION 147 OF THE I.T ACT. THE REASONS RECORDED TO REOPEN THE ASSESSMENT ARE AS UNDER : ACCORDING TO INFORMATION GATHERED FROM INFORMED SOURCES, LOCAL ENQUIRIES AND MEDIA REPORTS, IT HAS COME TO BE KNOWN THAT SHRI KARIHAIYALAL GIDWANI, OWNS THREE FLATS, ONE IN HIS NAME AND TWO IN THE NAMES OF HIS TWO SONS - KAILASH AND AMIT IN .THE ADARSHA HOUSING SOCIETY. AGAIN, ONE FLAT IS LEARNED TO BE BOOKED IN THE NAME OF SHRI GAJANAN S. KOLI, WHERE APPARENTLY IT IS BELIEVED THAT SHRI SUNIL K. GIDWANI, SON OF KANHIYALAL GIDWANI, HAS LENT FINANCE TO PURCHASE THE SAME. ALL PAYMENTS FOR THE SAME WERE APPARENTLY MADE THROUGH GIDWANI FAMILY'S VARIOUS BANK ACCOUNTS IN WHICH APPARENTLY CASH AMOUNTS WERE DEPOSITED AND THE SAME WERE TRANSFERRED INTO THE ACCOUNTS OF GIDWANI'S WIFE, SON AND DAUGHTER-IN-LAW IN HDFC BANK AT WORLI. THEREAFTER THE SAID AMOUNTS WERE APPARENTLY TRANSFERRED INTO THE ACCOUNT OF MS. JAY MAHARASHTRA CPL, HFDC BANK, WORLI, IN WHICH GIDWARIIS SONS ARE DIRECTORS FOR. MAKING PAYMENTS TOWARDS COST OF THE FLATS. ON VERIFICATION, IT IS SEEN THAT SHRI SUNIL GIDWANI, THE ASSESSEE, IS ASSESSED TO INCOME-TAX AND THAT HE HAS ADVANCED IN TEREST-FREE LOANS TO THE EXTENT OF RS 51.3 LAKHS TO SHRI GAJANAN KOLI FOR PURCHASE OF FLAT IN ADARSHA COOP. HOUSING SOCIETY, MUMBAI, PAYMENTS AS UNDER :- S.NO DATE AMT (RS.) 1 15.07.2004 50,000 2 15.09.2004 3,00,000 3 27.10.2005 9,75,000 ITA NO.1739/PUN/2019 - 4 - 4 06.07.2006 5,00,000 5 07.08.2007 5,00,000 6 25.10.2007 10,71,000 7 19.03.2008 5,70,000 8 12.02.2009 11,65,000 51,31,000 THE LOAN ADVANCED TO SHRI KOLI IS INTEREST-FREE LOAN AND THERE ARE NO BUSINESS CONNECTION I RELATION BETWEEN SHRI SUNIL GIDWANI AND SHRI GAJANAN KOLI. NO SECURITY OF ANY KIND AGAINST THE LOAN FROM SHRI GAJANAN KOLI IS OBTAINED. IN VIEW OF THE ABOVE AND ON VERIFICATION OF RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2005-06, ALONG WITH ITS ENCLOSURES, IT IS REVEALED THAT - (I) DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS GIVEN RS.3,50,000/- TO SHRI GAJANAN S. KOLI TOWARDS INVESTMENT IN ADARSHA CHS, THE GENUINENESS OF THE SOURCES OF THIS INVESTMENT IS NOT PROVED. THEREFORE IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX TO THE EXTENT OF RS 350,000 HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. THUS, AS PER THE REASONS NOTED HEREINABOVE THE REASONS RECORDED BY THE AO IS ON THE BASIS OF VERIFICATION OF THE RETURN OF INCOME FILED BY THE ASSESSEE ALONGWITH WITH THE ENCLOSURES. ACCORDING TO THE AO IT SHOWS THAT ASSESSEE HAS GIVEN LOAN TO SHRI GAJANAN KOLI FOR INVESTMENT IN ADASRSH CHS, THE GENUINENESS OF THE SOURCE OF INVESTMENTS IS NOT PROVED AND THUS HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO THE EXTENT OF LOAN GIVEN HAS ESCAPED ASSESSMENT. 9. SO FAR AS THE PROPOSITION OF THE LD DR TO THE EFFECT THAT WHEN A RETURN OF INCOME IS PROCESSED U/S 143(1) OF THE ACT, THE REVENUE HAS GREATED LATITUDE IN REOPENING AN ASSESSMENT IS CONCERNED, I FULLY AGREE ONLY TO THAT EXTENT WITH THE AFORESAID PROPOSITION BUT AT THE SAME TIME VARIOUS HIGH COURTS HAVE HELD THAT, EVEN IN SUCH CASES, WHERE RETURN OF INCOME IS PROCESSED U/S 143(1) OF THE ACT, THE REOPENING OF AN ASSESSMENT CAN ONLY BE DONE IF THERE IS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HERE IT WOULD BE RELEVANT TO REFER TO THE OBSERVATIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD REPORTED IN [2013] 29 TAXMANN.COM 392 (DELHI) WHEREIN THE HONBLE HIGH COURT HAS OBSERVED THAT THE EXPRESSION REASON TO BELIEVE CANNOT HAVE TWO DIFFERENT STANDARDS OR SETS OF MEANING, ONE APPLICABLE WHERE THE ASSESSMENT WAS EARLIER MADE U/S 143(3) OF THE ACT AND THE OTHER APPLICABLE WHERE AN INTIMATION WAS EARLIER ISSUED U/S 143(1) OF THE ACT. IT OBSERVED THAT IT IS OPEN TO THE ASSESSEE TO CONTEND THAT NOTWITHSTANDING THAT THE ARGUMENT OF CHANGE OF OPINION IS NOT AVAILABLE TO HIM, IT WOULD STILL BE OPEN TO HIM TO CONTEST THE RE-OPENING ON THE GROUND THAT THERE WAS EITHER NO REASON TO BELIEVE OR THAT THE ALLEGED REASON TO BELIEVE IS NOT RELEVANT FOR THE FORMATION OF THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT FURTHER OBSERVED THAT IN DOING SO, IT IS FURTHER OPEN TO THE ASSESSEE TO CHALLENGE THE REASONS RECORDED U/S 148(2) OF THE ACT ON THE GROUND THAT THEY DO NOT MEET THE STANDARDS SET IN VARIOUS JUDICIAL PRONOUNCEMENTS. 10. I ALSO FIND THAT VARIOUS HIGH COURTS HAVE HELD THAT FOR A MERE VERIFICATION OF THE CLAIM, THE POWER OF REOPENING OF ASSESSMENT COULD NOT BE EXERCISED. THE HIGH COURTS HAVE ALSO HELD THAT THE AO UNDER THE GUISE OF POWER TO REOPEN AN ASSESSMENT ITA NO.1739/PUN/2019 - 5 - CANNOT SEEK TO UNDERTAKE A FISHING OR ROVING INQUIRY AND SEEK TO VERIFY THE CLAIMS AS IF IT WERE A SCRUTINY ASSESSMENT. HERE THE REFERENCE COULD BE MADE TO THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF INDUCTOTHERM (INDIA) P LTD VS. M GOPALAN, DCIT REPORTED IN (2013) 356 ITR 481 (GUJ) WHEREIN IT HAS BEEN OBSERVED BY HONBLE HIGH COURT THAT FOR A MERE VERIFICATION OF THE CLAIM, THE POWER OF REOPENING OF ASSESSMENT COULD NOT BE EXERCISED. IT FURTHER OBSERVED THAT THE ASSESSING OFFICER UNDER THE GUISE OF POWER TO REOPEN AN ASSESSMENT, CANNOT SEEK TO UNDERTAKE A FISHING OR ROVING INQUIRY AND SEEK TO VERIFY THE CLAIMS, AS IF IT WERE A SCRUTINY ASSESSMENT. 11. WHEN THE FACTS OF THE PRESENT CASE IS SEEN IN THE LIGHT OF THE DECISIONS CITED HEREINABOVE, I AM OF THE VIEW THAT THE REOPENING IS SOUGHT BY THE AO ON THE BASIS OF THE RETURN OF INCOME FILED BY THE ASSESSEE AND IS FOR THE PURPOSE OF VERIFICATION OF THE ISSUE AND IS NOT BASED ON ANY TANGIBLE MATERIAL. 12. I FURTHER FIND THAT IDENTICAL REASONS WERE RECORDED BY THE AO FOR REOPENING THE ASSESSMENTS IN THE CASE OF SHRI KILASH KANIYALAL GIDWANI, SHRI SUNIL KANHAIYALAL GIDWANI AND SHRI SUNIL KANHIYALAL GIDWANI. WHEN THE REOPENING WAS CHALLENGED BEFORE THE CO-ORDINATE BENCH OF THE TRIBUNAL, IN THEIR CASES, THE TRIBUNAL VIDE ORDER DATED 11.09.2019 (ITA NO769/PUN/2014) HELD THAT THE AO WAS NOT JUSTIFIED IN TAKING RECOURSE TO THE PROVISIONS OF SEC. 147 OF THE ACT AND IT STUCK DOWN THE INITIATION OF ASSESSMENT PROCEEDINGS AND THE CONSEQUENTIAL ASSESSMENT ORDER PASSED U/S 147 OF THE ACT. 13. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS, I AM OF THE VIEW THAT AO IN THE PRESENT CASE WAS NOT JUSTIFIED IN TAKING RECOURSE TO THE PROVISIONS OF S. 147 OF THE ACT AND THEREFORE THE INITIATION OF REASSESSMENT PROCEEDINGS ARE NOT IN ACCORDANCE WITH LAW. I THEREFORE SET ASIDE THE INITIATION OF REASSESSMENT PROCEEDINGS AND THE CONSEQUENTIAL ASSESSMENT ORDER. THUS, THE GROUNDS OF THE ASSESSEE IN ITA NO.302/PUN/2019 FOR A.Y. 2005-06 IS ALLOWED. 6. THE REASONS RECORDED BY THE ASSESSING OFFICER IN THE INSTANT CASE ARE IDENTICAL. IN THE INSTANT CASE, THE REOPENING IS DONE FOR VERIFICATION OF THE INVESTMENTS MADE TO UNEARTH THE UNDISCLOSED INCOME (PAGE 1 OF THE PAPER BOOK). THE NOTICE U/S 148 OF THE ACT CANNOT BE ISSUED FOR VERIFICATION OR FOR CONSIDERING THE ROVING ENQUIRIES. IT IS A SETTLED LEGAL PROPOSITION. 7. CONSIDERING THE ABOVE DECISION OF THE TRIBUNAL (SUPRA) AND COMMON REASONS RECORDED, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TAKING RECOURSE TO THE PROVISIONS OF SECTION 147 OF THE ACT AND THEREFORE, THE INITIATION OF REASSESSMENT PROCEEDINGS ARE NOT IN ACCORDANCE WITH LAW. THEREFORE, FOLLOWING THE RULE OF CONSISTENCY, I SET-ASIDE THE INITIATION OF REASSESSMENT PROCEEDINGS AND THE CONSEQUENTIAL ASSESSMENT. ITA NO.1739/PUN/2019 - 6 - THUS, THE LEGAL GROUND RAISED BY THE ASSESSEE BY WAY OF GROUND NO.1 IS ALLOWED. 8. CONSIDERING THE RELIEF GRANTED TO THE ASSESSEE ON THE LEGAL ISSUE, THE ADJUDICATION OF THE OTHER MERITS RELATED GROUNDS BECOMES ACADEMIC EXERCISE ONLY. THUS, THE OTHER GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED AS ACADEMIC. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF JANUARY, 2020. SD/- (D. KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; DATED : 31 ST JANUARY, 2020. SUJEET / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-1, KOLHAPUR; 4. THE PR. CIT-1, KOLHAPUR; 5. , , - / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE