Budhu, Ghaziabad V. ITO, Shamli

ITA 1941/DEL/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0476 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Question of law; Reason to believe
• Section: 143(3); 133(6); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: SMC-1, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.1941/DEL./2016 ASSESSMENT YEAR: 2009-10 SHRI BUDHU, C/O- AKHILESH KUMAR, ADVOCATE, CHAMBER NO. 206-207, ANSAL SATYAM, RDC RAJ NAGAR, GHAZIABAD VS. ITO, WARD-1, SHAMLI PAN :BYDPB3106Q (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER DATED 01/01/2016 PASSED BY THE LD. COMMISSIONER OF INCOME -TAX (APPEALS), MUZAFFARNAGAR [IN SHORT THE LD. CIT(A) ] FOR ASSESSMENT YEAR, 2009-10 RAISING FOLLOWING GROUNDS: 1. BECAUSE, NOTICE ISSUED U/S 148 OF ACT IS BEYOND JURISDICTION BEING WITHOUT ANY 'REASON TO BELIEVE' AND ' SATISFACTION' OF AO OR OF THE SUPERIOR AUTHORITY WHO ACCORDED APPROVAL IN A MECHA NICAL APPELLANT BY SHRI AKHILESH KUMAR, ADV. RESPONDENT BY SHRI PRAKASH DUBE, SR.DR DATE OF HEARING 10.12.2020 DATE OF PRONOUNCEMENT 23.12.2020 2 ITA NO. 1941/DEL./2016 MANNER, IN AS MUCH AS, THAT SAME IS MERELY ON THE B ASIS OF AIR INFORMATION TO CONDUCT ROVING ENQUIRIES AND HENCE S UBSEQUENT PROCEEDINGS ARE VOID-AB-INITIO AND CONSEQUENT ORDER ILLEGAL. 2. BECAUSE, WITHOUT PREJUDICE TO ABOVE AND AS AN A LTERNATIVE LEARNED COMMISSIONER OF INCOME TAX ERRED, IN SUSTAI NING THE ADDITION OF RS. 18.59 LAKHS MADE U/S 68 OF THE ACT, BEING THE AMOUNT DEPOSITED IN THE BANK IGNORING THE FACT THAT PROVISIONS OF S. 68 ARE NOT APPLICABLE TO ASSESSEE AND ADDITION I S AGAINST THE SAID PROVISION OF LAW. 3. BECAUSE, LEARNED COMMISSIONER OF INCOME TAX ALS O ERRED, IN SUSTAINING THE SAID ADDITION DESPITE ADMITTING THAT STATEMENT RELIED FOR THE SAME IS RECORDED BEHIND THE BACK OF ASSESSEE EVEN AFTER ADMITTING THAT THE SAID WITNESS NOT PRODUCED FOR CROSS- EXAMINATION AND HE FURTHER ERRED IN APPRECIATING TH E SEQUENCE OF EVENTS AND RULE OF PREPONDERANCE OF PROBABILITY, HE NCE ORDER IS PERVERSE. THEREFORE, ;N TERMS OF ABOVE GROUNDS, IT IS HEREBY PRAYED THAT THE NOTICE U/S 148 AND ASSESSMENT FRAMED MAY KINDLY BE QUASHED THOUGH ONLY AS AN A RELATIVE IT IS ALSO PRAYED THAT THE ADDITIONS OF RS. 18,59,000/- MAY KINDLY BE QUASHED. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESSEE , AN INDIVIDUAL, WAS ENGAGED IN AGRICULTURAL ACTIVITY DU RING THE RELEVANT YEAR. IN THE CASE OF THE ASSESSEE, AN INFO RMATION WAS RECEIVED THROUGH ANNUAL INFORMATION RETURN (AIR) TH AT THE ASSESSEE HAD DEPOSITED 23,59,000/- IN HIS SAVING BANK ACCOUNT MAINTAINED WITH THE PUNJAB NATIONAL BANK, SHAMLI (U TTAR PRADESH). ON BEING ASKED BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED EXPLANATION OF SOURCE OF DEPOSIT, HOWEVER , THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. IN VIEW OF THE INFORMATION, THE ASSESSING OFFICER ISSUED A NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT ) ON 18/01/2013. THE ASSESSEE FILED RETURN OF INCOME ON 20/11/2013, DECLARING AGRICULTURE INCOME OF 66,000 AND INTEREST INCOME OF 10,361/- ALONG WITH COPY OF RECEIPT OF ADVANCE OF 25 LAKH AND COPY AGREEMENT TO SALE OF LAND. AFTER FILING RETURN OF INCOME, THE 3 ITA NO. 1941/DEL./2016 ASSESSEE WAS PROVIDED REASONS RECORDED FOR ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THE OBJECTIONS FILED BY THE ASSESSEE AGAINST THE REASONS RECORDED WERE ALSO ADDRESSED BY THE ASSESSING OFFICER. THE ASSESSMENT UNDER SECTION 147 READ WITH SECTION 143(3) OF THE ACT WAS COMPLETED ON 31/03/20 14, AFTER MAKING ADDITION OF 20 LAKH. THE LD. CIT(A) VIDE IMPUGNED ORDER UPHELD THE ADDITION TO THE EXTENT OF 18.59 LAKHS. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING T HE GROUNDS AS REPRODUCED ABOVE. 3. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE SUB MITTED ORALLY THAT GROUND NO. 1 OF THE APPEAL MAY BE ADMIT TED AS ADDITIONAL GROUND RAISED BY THE ASSESSEE. ACCORDING TO HIM THIS GROUND BEING LEGAL IN NATURE AND NO INVESTIGATION O F THE FRESH FACTS IS REQUIRED, IT IS ADMISSIBLE IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERM AL POWER COMPANY LIMITED VERSUS CIT 229 ITR 383. 4. WE HAVE HEARD SUBMISSION OF THE PARTIES ON THE ISS UE OF ADMISSION OF THE ADDITIONAL GROUND. THE HONBLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF VMT SPINNING CO. L TD. VS. CIT & ANR., REPORTED IN 389 ITR 326 (P&H) HAS HELD THAT FOR RAISING THE GROUND, THE ASSESSEE CAN SEEK LEAVE OF THE TRIB UNAL ORALLY ALSO. THE RELEVANT FINDING OF THE HONBLE HIGH COUR T IS REPRODUCING AS UNDER: RULE 11 IN FACT CONFERS WIDE POWERS ON THE TRIBUNA L, ALTHOUGH IT REQUIRES A PARTY TO SEEK THE LEAVE OF THE TRIBUNAL. IT DOES NOT REQUIRE THE SAME TO BE IN WRITING. IT MERELY STATES THAT TH E APPELLANT SHALL NOT, EXCEPT BY LEAVE OF THE TRIBUNAL, URGE OR BE HE ARD IN SUPPORT OF ANY GROUND NOT SET FORTH IN THE MEMORANDUM OF APPEA L. IN A FIT CASE IT IS ALWAYS OPEN TO THE TRIBUNAL TO PERMIT AN APPE LLANT TO RAISE AN ADDITIONAL GROUND NOT SET FORTH IN THE MEMORANDUM O F APPEAL. THE SAFEGUARD IS IN THE PROVISO TO RULE 11 ITSELF. THE PROVISO STATES THAT 4 ITA NO. 1941/DEL./2016 THE TRIBUNAL SHALL NOT REST ITS DECISION ON ANY OTH ER GROUND UNLESS THE PARTY WHO MAY BE AFFECTED THEREBY HAS HAD A SUF FICIENT OPPORTUNITY OF BEING HEARD ON THAT GROUND. THUS EVE N IF IT IS A PURE QUESTION OF LAW, THE TRIBUNAL CANNOT CONSIDER AN AD DITIONAL GROUND WITHOUT AFFORDING THE OTHER SIDE AN OPPORTUNITY OF BEING HEARD. WE VENTURE TO STATE THAT EVEN IN THE ABSENCE OF THE PR OVISO IT WOULD BE INCUMBENT UPON THE TRIBUNAL TO AFFORD A PARTY AN OP PORTUNITY OF MEETING AN ADDITIONAL POINT RAISED BEFORE IT. MOREOVER, EVEN THOUGH RULE 11 REQUIRES AN APPELLANT TO SEEK THE LEAVE OF THE TRIBUNAL, IT DOES NOT CONFINE THE TRIB UNAL TO A CONSIDERATION OF THE GROUNDS SET FORTH IN THE MEMOR ANDUM OF APPEAL OR EVEN THE GROUNDS TAKEN BY THE LEAVE OF THE TRIBU NAL. IN OTHER WORDS THE TRIBUNAL CAN DECIDE THE APPEAL ON A GROUN D NEITHER TAKEN IN THE MEMORANDUM OF APPEAL NOR BY ITS LEAVE. THE O NLY REQUIREMENT IS THAT THE TRIBUNAL CANNOT REST ITS DECISION ON AN Y OTHER GROUND UNLESS THE PARTY WHO MAY BE AFFECTED HAS HAD SUFFIC IENT OPPORTUNITY OF BEING HEARD ON THAT GROUND. 5. THE LEARNED DR WAS GIVEN SUFFICIENT OPPORTUNITY OF BEING HERD ON THE ISSUE BEING AFFECTED PARTY. 6. THE GROUND RAISED BEING PURELY LEGAL IN NATURE AND ALL THE FACTS IN RELATION TO THE GROUND AVAILABLE ON RECORD AND NO INVESTIGATION OF THE FRESH FACTS IS REQUIRED. ACCOR DINGLY, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF NTPC LTD (SUPRA), THE ADDITIONAL GROUND RAISED BY THE AS SESSEE IS ADMITTED. 7. IN THE ADDITIONAL GROUND, THE ASSESSEE HAS CONTEST ED THAT NOTICE ISSUED UNDER SECTION 148 OF THE ACT IS BEYON D JURISDICTION BEING WITHOUT ANY REASON TO BELIEVE AND SATISFAC TION OF THE ASSESSING OFFICER. THE LEARNED COUNSEL OF THE ASSES SEE FILED A PAPER-BOOK CONTAINING PAGES 1 TO 74 AND REFERRED T O COPY OF REASONS RECORDED AVAILABLE ON PAGE 5 OF THE PAPER-B OOK. ACCORDING TO HIM IN THE REASONS RECORDED THE ASSESS ING OFFICER HAS MENTIONED THAT FURTHER INVESTIGATION WAS REQUIR ED TO FIND OUT THE ACTUAL SOURCE OF THE CASH DEPOSITS. THE LEARNED COUNSEL 5 ITA NO. 1941/DEL./2016 SUBMITTED THAT NO NOTICE UNDER SECTION 148 CAN BE I SSUED MERELY FOR INVESTIGATION/ROVING INQUIRIES. IN SUPPORT OF H IS CONTENTION, HE RELIED ON FOLLOWING DECISIONS: 1. PCIT VS. MANZIL DINESH KUMAR SHAH [2018] 95 TAXM ANN.COM 46 (GUJ.) 2. KRUPESH GHANSHYAMBHAI THAKKAR VS. DCIT (2017), 7 7 TAXMANN.COM 293(GUJ.) 3. PR. CIT VS. MEENAKSHI OVERSEAS (2017), 82 TAXMAN N.COM 300 (DELHI) 4. CIT VS. SMT. MANIBEIN VALJI SHAH (2006), 204 CTR (BOM.)249 8. FURTHER, HE SUBMITTED THAT MERE DEPOSIT IN BANK AC COUNT CANNOT LEAD TO A REASON TO BELIEVE THAT INCOME HAS ESCAPED TO TAX. HE ALSO REFERRED TO PAGE 2 OF THE PAPER-BOOK AND SU BMITTED THAT LETTER DATED 16/01/2012 ISSUED TO THE ASSESSEE ASKI NG TO EXPLAIN SOURCE OF DEPOSITS WAS WITHOUT ANY AUTHORITY OF LAW . 7. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSING OFFICER HAS VALIDLY INITIATED THE PROCEED ING UNDER SECTION 148 OF THE ACT. 8. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. IN THE CASE VALIDITY OF THE NOTICE ISSUED HAS BEEN CHALLEN GED ON THE GROUNDS OF REASONS TO BELIEVE NOT IN ACCORDANCE WIT H LAW. TO ADJUDICATE THE ISSUE, THE REASONS TO BELIEVE RECO RDED BY THE ASSESSING OFFICER ARE REPRODUCED AS UNDER: 3. THE REASONS FOR, ACTION U/S. 148 OF THE I.T. ACT IS GIVEN AS UNDER- IN THIS CASE, AS PER AIR INFORMATION AVAILABLE WIT H THE DEPARTMENT, YOU DEPOSITED IN CASH RS.23,59,000/- IN YOUR SAVING BANK ACCOUNT DURING F.Y. 2008-09 RELATING TO A.Y. 2009-10. NOTIC ES U/S. 133(6) OF THE I.T. ACT, 1961, DTD. 04.04.2012 AND 06.08.2012 WERE ISSUED. IN 6 ITA NO. 1941/DEL./2016 COMPLIANCE TO THE ABOVE REFERRED NOTICE, YOU FILED YOUR WRITTEN REPLY ALONGWITH DOCUMENTS AS REQUIRED, WHICH ARE PLACED O N RECORD. AS THE CONTENTION OF THE ASSESSEE CANNOT BE RELIED UPO N, FURTHER INVESTIGATION IS REQUIRED TO FIND OUT THE ACTUAL SO URCE OF CASH DEPOSIT MADE DURING THE RELEVANT PREVIOUS YEAR. I HAVE, THE REFORE, REASONS TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX TO THE EX TENT OF RS. 23,59,000/- HAS ESCAPED ASSESSMENT BY OMISSION ON Y OUR PART TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT. 9. WE NOTE THAT HONBLE GUJARAT HIGH COURT IN THE CAS E OF MANZIL DINESH KUMAR SHAH (SUPRA) HAS HELD THAT NO R OVING ENQUIRY COULD BE ALLOWED UNDER THE GUISE OF REOPENI NG OF THE ASSESSMENT. THE RELEVANT FINDING OF THE HONBLE HIG H COURT IS REPRODUCED AS UNDER: 7. IT IS EQUALLY WELL SETTLED THAT THE NOTICE OF R EOPENING CAN BE SUPPORTED ON THE BASIS OF REASONS RECORDED BY THE A SSESSING OFFICER. HE CANNOT SUPPLEMENT SUCH REASONS. THE THIRD PRINCI PLE OF LAW WHICH IS EQUALLY WELL SETTLED AND WHICH WOULD APPLY IN THE PRESENT CASE IS THAT REOPENING OF THE ASSESSMENT WOULD NOT BE PERMITTED FOR A FISHING OR A ROVING INQUIRY. THIS CAN AS WELL BE SEEN AS PART OF THE FIRST REQUIREMENT OF THE ASSESSING OFFICER HAVING R EASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. IN OTHER WORDS, NOTICE OF REOPENING WHICH IS ISSUED BARELY F OR MAKING FISHING INQUIRY, WOULD NOT SATISFY THIS REQUIREMENT. 8. WITH THIS BACKGROUND, WE MAY REVERT TO THE REASO NS RECORDED BY THE ASSESSING OFFICER. INFORMATION FROM THE VALUE A DDED TAX DEPARTMENT OF MUMBAI WAS PLACED FOR HIS CONSIDERATI ON. THIS INFORMATION CONTAINED LIST OF ALLEGEDLY BOGUS PURCH ASES MADE BY VARIOUS BENEFICIARIES FROM HAWALA DEALERS. ASSESSEE WAS ONE OF THEM. AS PER THIS INFORMATION, HE HAD MADE PURCHASE S WORTH RS.3.21 CRORES (ROUNDED OFF) FROM SUCH HAWALA DEALE RS DURING THE FINANCIAL YEAR 201011. ACCORDING TO THE ASSESSING O FFICER, THIS INFORMATION NEEDED DEEP VERIFICATION. 9. IF ON THE BASIS OF INFORMATION MADE AVAILABLE TO HIM AND UPON APPLYING HIS MIND TO SUCH INFORMATION, THE ASSESSIN G OFFICER HAD FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT, THE COURT WOULD HAVE READILY ALLOW HIM TO REASSESS THE INCOME. IN THE PRESENT CASE HOWEVER, HE RECORDED TH AT THE INFORMATION REQUIRED DEEP VERIFICATION. IN PLAIN TE RMS THEREFORE, THE NOTICE WAS BEING ISSUED FOR SUCH VERIFICATION. HIS LATER RECITATION OF 7 ITA NO. 1941/DEL./2016 THE MANDATORY WORDS THAT HE BELIEVED THAT INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT, WOULD NOT CURE THIS FUNDAME NTAL DEFECT. 10. LEARNED COUNSEL FOR THE REVENUE HOWEVER URGED U S TO READ THE REASONS AS A WHOLE AND COME TO THE CONCLUSION THAT THE ASSESSING OFFICER HAD INDEPENDENTLY FORMED A BELIEF ON THE BA SIS OF INFORMATION AVAILABLE ON RECORD THAT INCOME IN CASE OF THE ASSE SSEE HAD ESCAPED ASSESSMENT. ACCEPTING SUCH A REQUEST WOULD IN PLAIN TERMS REQUIRE US TO IGNORE AN IMPORTANT SENTENCE FROM THE REASONS RECORDED VIZ. IT NEEDS DEEP VERIFICATION. 11. BEFORE CLOSING, WE CAN ONLY LAMENT AT THE POSSI BLE REVENUE LOSS. THE LAW AND THE PRINCIPLES NOTED ABOVE ARE FA R TOO WELL SETTLED TO HAVE ESCAPED THE NOTICE OF THE ASSESSING OFFICER DESPITE WHICH IF THE REASONS RECORDED FAIL THE TEST OF VALIDITY ON A CCOUNT OF A SENTENCE CONTAINED, IT WOULD BE FOR THE REVENUE TO EXAMINE R EASONS BEHIND IT. 10. IT IS EVIDENT FROM THE REASONS RECORDED THAT AT TH E STAGE OF ISSUE NOTICE UNDER SECTION 148 OF THE ACT, THE ASSE SSING OFFICER WAS SUSPICIOUS ON THE SOURCE OF THE CASH DEPOSITS A ND, THEREFORE, HE WANTED TO INVESTIGATE FURTHER TO FIND OUT THE AC TUAL SOURCE OF THE CASH DEPOSITS. AT THE STAGE OF ISSUE OF NOTICE, THE ASSESSING OFFICER WAS NOT SURE WHETHER INCOME HAD ESCAPED TO TAX OR NOT. NO NOTICE UNDER SECTION 148 OF THE ACT CAN BE ISSUE D MERELY ON SUCH SUSPICION. THERE HAS TO BE A REASONABLE MATERI AL BEFORE THE ASSESSING OFFICER ON THE BASIS OF WHICH A REASONABL E PERSON CAN MAKE REQUISITE BELIEF. IN THE INSTANT CASE, THERE I S LACK OF REASONABLE MATERIAL TO FORM A REASONABLE BELIEF THA T INCOME HAS ESCAPED TAX. UNDER THE CIRCUMSTANCES, THE ACTION O F THE ASSESSING OFFICER OF REOPENING ASSESSMENT IN EXERCI SE OF THE POWER UNDER SECTION 148 OF THE ACT CANNOT BE SUSTAI NED. ACCORDINGLY, WE QUASH THE RE-ASSESSMENT PROCEEDING INITIATED IN THE CASE OF THE ASSESSEE. AS THE REASSESSMENT HAS A LREADY BEEN QUASHED, WE ARE NOT ADJUDICATING ON THE MERIT OF TH E ADDITION. 8 ITA NO. 1941/DEL./2016 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER, 2020. SD/- SD/- (BHAVNESH SAINI) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 RD DECEMBER, 2020. RK/- (D.T.D.S.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI