ACIT, VAPI CIRCLE, VAPI V. SHRI FATEHSINH MOHANSINH CHAUHAN, SILVASSA

ITA 198/SRT/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1931 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-06-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 13-08-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Corroborative evidences; Assessment record; Reason to believe; Change of opinion
• Section: 147; 68; 148; 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 198/SRT/2020 (AY 2010-11) (Hearing in Physical Court) Assistant Commissioner of Income-tax, Vapi Circle, Vapi Fortune Square-II, 7 th Floor, Room No. 704, Daman Road, Chala, CVapi-396191 Vs Shri Fatehsinh Mohansinh Chauhan, Haveli, Swaminarayan Marg, Silvassa-396230, Dadara & Nagar Haveli PAN : ABPPC 6997 C Appellant / Revenue Respondent / assessee Assessee by Shri Hardik Vora, Advocate Revenue by Shri SBG Mahapatra – Sr-DR Date of hearing 17.06.2022 Date of pronouncement 30.06.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income tax (Appeals)-Valsad dated 16.03.2020 for assessment year (AY) 2010-11, which in turn the assessment order under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 28.03.2013. The Revenue has raised the following grounds of appeal:- “1. The Ld. CIT(A) has erred in annulling the assessment passed u/s 147/143(3) of the Income-tax Act, 1961. 2. The Ld. CIT(A) has ignored the finding recorded by the A.O for reopening of assessment initiated u/s 147 of the IT Act and not properly appreciating the facts of the case. 3. The Ld. CIT(A) has erred in deleting the addition of Rs.2,26,82,000/- on account of unexplained advances received against land, without considering that the ae could not prove the identity and genuineness of the transactions as well as creditworthiness of the parties from whom those advances were received.” ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 2 2. Brief facts of the case are that assessee is an individual filed his return of income for assessment year 2010-11 on 30.09.2011 declaring total income of Rs.4.70 crores. In the computation of income, the assessee has shown income from ‘house property’, ‘business income’ from his proprietary firms namely (i) Haveli Enterprises (ii) Haveli Farm as well as income from ‘other sources’. The case of assessee was initially selected for scrutiny and assessment was completed under section 143(3) on 28.03.2013. In the assessment order, the Assessing Officer made certain additions and disallowances and thereby assessed total income. Subsequently, the case of assessee was re-opened by Assessing Officer by taking view that it came to his notice that in Column No. 8(a) of Audit Report in Form 3CB, the nature of business or profession was shown by assessee as “Land Dealing Business”. On perusal of balance-sheet, it was found that on 31.03.2010, a sum of Rs.5.55 crores has been shown as inventory of land. In the record of cost of land it was shown at Rs.7.41 crores, however, in profit and loss account, the cost of land was taken at Rs.7.71 crores. Thus, there was difference of ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 3 Rs.30 lakh appears to be of creditors. The Assessing Officer on further perusal of audit report found that in case of Mr. Arjun B Garuda, a sum of Rs.8.25 lakh introduced without providing PAN No. and further a sum of Rs.2.26 crores and Rs.3.72 crores were found credited in the books of account without supporting and no explanation as well as nature of source thereof. On the basis of aforesaid observation, the Assessing Officer was of the view that income of assessee has escaped assessment. Accordingly, notice under section 148 was issued on 02.05.2014. In response thereto, assessee filed letter dated 21.01.2016 and contended that original return of income filed on 17.12.2011 be treated as return of income in response to notice under section 148 of the Act. The Assessing Officer after serving notice under section 143(2) proceeded of re-assessment. 3. During the re-assessment, the assessee was asked to explain the nature and source of advances received against the land found credited in the boa amounting to Rs.2.26 crores. The Assessing Officer recorded that assessee furnished names and address of the parties who had given advances. The Assessing Officer in order to ascertain genuineness of such advances issued notice ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 4 under section 133(6) of the Act to such parties. The Assessing Officer recorded that no response from any parties was received. The Assessing Officer again given another opportunity to assessee to explain the genuineness of transactions. The Assessing Officer recorded that assessee furnished name of six persons, the amount and nature of transactions as recorded in para-4.1 of the assessment order in the following manner: Sr.No. Name of the parties Amount(Rs) Remarks 1 Shri Ishversinh Lalsinh Parmar 45,16,000 Old sale deed 2 Shri Kishorbhai V Gandhi 20,00,000 MoU on record 3 Others 8,15,000 Belong to Rishabhdev Technocable Ltd., MoU on record 4 Rainbow Plastic India Ltd. 51,000 5 Rishabhdev Technocable Ltd 1,41,00,000 Copy of MoU with party 6 Sipra Remedies Pvt Ltd 12,00,000 Copy of agreement for sale 4. On perusal of aforesaid details, the Assessing Officer was of the view that memorandum of understanding (MOU) was furnished in respect of two case, but there is no payment details in said MOU. No bank statement was furnished by the assessee to substantiate the transaction of payment of advance from the parties. The assessing officer held that in absence of complete details of advances, the genuineness of advance, credit worthy of ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 5 advances in the course of assessment under section 143(3) was not submitted nor in the re-assessment, hence he took his view that the assessee offered no explanation about the source was explained and accordingly made addition under section 68 of the Act. 5. On appeal before Ld. CIT(A), the assessee filed detailed written submission as recorded in para-3.2 of his order. The assessee submitted that Assessing Officer completed assessment under section 143(3) on 28.03.2013. Thereafter notice under section 148 was served upon the assessee. The Assessing Officer issued notice under section 148 on the basis of all material and information available on record. No new information has come to the notice of Assessing Officer to believe that income chargeable to tax has escaped assessment. In the original assessment, the assessee furnished all details called by the Assessing Officer and after verifying those information & documents and on being satisfied the Assessing Officer completed assessment. Thus, it is clear that the Assessing Officer re-assessment proceedings on the basis of information available on record at the time of original assessment. It was submitted that in absence of additional ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 6 materials or information from external source the Assessing Officer is not justified in initiating re-assessment proceedings based on same set of fact and same material which was available with him during the original assessment. The assessee also relied on certain case law and submitted that re-assessment proceedings initiated as a result of “change of opinion” is bad in law and liable to be quashed. 6. On merit of the case, the assessee submitted that assessee received advances from various parties for the purpose of business. The assessee also submits details of advances against the sale of land along with various documents like MoU, agreements, Sell Deed, copy of bank statement and ledger account. The Assessing Officer simply added the advances of Rs.2.26 crores as unexplained advance by holding that assessee failed to furnish the details of advances with supporting evidence. In alternative submission, the assessee explained that no addition against the amount which was received in earlier can be added in the year under consideration. The assessee further explained that during the year the assessee has received only Rs.1.18 crores from Rishabhdev Technocable Ltd. Against this ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 7 receipt, the assessee has considered of Rs.1.41 crores in AY 2-14- 15 while determining taxable income. Hence, the Assessing Officer is not justified in making addition under section 68 of Rs.2.26 crores. The assessee also furnished MoU dated 27.06.2008 with Rishabhdev Technocable Ltd. for a consideration of Rs.2.26 crores. 7. The Ld. CIT(A) after considering the submission of assessee deleted the addition of Rs.2.26 crores by taking view that Assessing Officer has mentioned about the information in Form 3CB and profit and loss account and concluded that there was discrepancies of 30 lakhs in the creditors account pertaining to purchase of land which was required to be ascertained. The Assessing Officer also noted that Rs.2.26 crores and Rs.3.72 crors found to be credited in the books of account of assessee but there was no supporting explanation with respect to the said sums. The Assessing Officer has also noted that assessee’s name was not found in the local land revenue records. Mere plain reading of the reasons recorded indicated that the Assessing Officer had reviewed and revisited the details and documents available on the original assessment records and proceed to re- ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 8 open the assessment. The Assessing Officer proceeded to re-open the assessment for certain details not available pertaining to creditors / land assets. The reopening in the current case also amounts to reopening on the basis of mere ‘change in opinion’. It is also seen from the assessment order at page-4 that the Assessing Officer had reproduced the above details pertaining to receipt of Rs.2.26 crores, however, Assessing Officer rejected the explanation of assessee in the re-assessment proceedings without bringing out any concrete opinion. On the other hand, assessee was able to prove the identity and genuineness of the said transactions as well as creditworthiness of the parties. 8. Thus, aggrieved by the order of Ld. CIT(A) the Revenue has filed present appeal before the Tribunal. 9. We have heard the submissions of Ld. Senior Departmental Representative (Ld. Sr. DR) for the Revenue and Ld. Authorized Representative (AR) for the assessee and have gone through the orders of authorities below. Ground No.1& 2 relate to validity of re-opening assessment under section 147 r.w.s 148 of the Act and ground No. 3 relates to addition under section 68 of Rs. 2.26 Crore. The Ld. Sr. DR for the Revenue submits that notice under ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 9 section 148 was issued within four years from the end of relevant assessment year. From record of the case the Assessing Officer found introduction of certain money, the identity of persons were not available on the record and there was no supporting explanation about the source and nature of such money. The assessee was duly served with the notice under section 148. The assessee has not filed objection against such re-opening proceedings. As no objection was raised by the assessee, thus the assessee cannot raised plea about the validity of the reopening. The Ld. Sr. DR for the Revenue further submits that at the time of reopening, the reason to believe is sufficient that income chargeable to tax has escaped assessment. The Assessing Officer is not required to make belief or final adjudication at the time of re-opening. The Ld. Sr. DR for the Revenue submits that Ld. CIT(A) failed to appreciate the fact and held that the reopening in not valid or it was mere change of opinion or no new material has come to the possessing of the assessing officer. On the merit of the addition the ld Sr DR for the revenue submits that during the re-assessment the assessee could not prove the identity and genuineness of transactions of credit. ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 10 10. On the other hand, Ld. AR for the assessee submits that initially case of assessee was selected for scrutiny and assessment was completed under section 143(3) on 28.03.2013, wherein certain additions were made by the assessing officer. The Ld. AR for the assessee submits that Assessing Officer made full- fledged investigation and raised a number of queries during assessment proceedings and made addition under four different counts. No new material or tangible material or information came to the notice of assessing officer. All the material required for assessment was available on the record. The assessing officer made reopening on the basis of information and the details available on record. The reasons recorded itself indicate and speak that the assessing officer has relied on the information available on record. Thus, the re-opening was based on mere “change of opinion”. 11. The Ld. AR for the assessee submits that Assessing Officer was not justified in initiating re-assessment proceedings and there was no new information with him but Assessing Officer re-opened the case on the basis of all the information available on record, for him seeking re-assessment, the prime condition is that there ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 11 has to be “reason to believe” that income chargeable to tax has been escaped and the fulfilment of this condition is not a mere formality. It is a mandatory that there was a failure on the part of assessee to disclose all the matter fully and truly at the time of filing return of income and failure to fulfil such condition would vitiate the entire assessment proceedings and the re-opening become illegal void ab initio. There is no reference in the assessment order that any new material or additional information has been came to possession of the Assessing Officer. On perusal of the contents of assessment order makes it clear that the Assessing Officer initiated assessment proceedings on the basis of record of such information details which was already available at the time of original assessment proceedings. The Ld. AR for the assessee submits that the re-opening was nothing but a result of “change of opinion” and re-assessment as a result of “change of opinion” is bad in law and liable to be quashed as such. To support his submission, Ld. AR for the assessee relied upon the judgments of Hon'ble jurisdictional High Court in the case of Pushpak Bullion (P). Ltd. vs. Deputy Commissioner of Income- tax, (2016) 71 taxmann.com 326 (Gujarat) and in the case of ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 12 Sunrise Education Trust vs. Income-tax Officer (Exemption) (2018) 92 taxmann.com 74 (Gujarat). 12. On merit of the addition, Ld. AR for the assessee submits that introduction of money was nothing but on business transactions. The assessee provided complete details of the said money receipt from various persons and paid during the year under consideration and the assessee provided complete bifurcation of the amount as on 31.03.2010. The assessee furnished copy of sale deed with Haveli Enterprises, ledger account and bank statement showing transaction. For Ishwar Singh Parmar, the assessee furnished sale deed, copy of ledger and bank statement, for transaction with Ranjit Singh Solanki the assessee furnished sale deed, copy of ledger and bank statement, for transaction with Rishabhdev Technobabble the assessee furnished sale deed, copy of ledger and bank statement, similarly with Sipra Remedies the assessee furnished sale deed, copy of ledger and bank statement, thus the assessee fully discharged his onus and prove the business transaction. The ld AR for the assessee submits that even of merit the assesse is liable to succeed. ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 13 13. We have considered the rival submission of parties and have gone through the orders of authorities below. There is no dispute that initially the assessment was completed under section 143(3) of the Act on 28.03.2013, wherein certain additions were made by the assessing officer. We find that the before issuing notice under section 148 the Assessing Officer recorded following reasons; “It has come to the notice that in col.8(a) of form 3CB states the nature of business or profession of the during the relevant previous year was “Land dealing Business”. A perusal of the balance sheet as on 31/03/2010 reveal that a sum of Rs.5,55,00,154/- has been shown as inventory of land. In the records the cost of land is shown at Rs.7,41,35,768/- but in P&L a/c the cost of land is taken at Rs.7,71,35,758/-. The difference of Rs.30,00,000/- appears to be of creditors. The creditors for the purchase of land is to be ascertained and also it has to be ascertained whether the assessee has sold such land during the year.it is observed that tax audit report reveals the assessee has accepted loans without bringing on record the identity of the respective payers. 1. In the case of Mr. Arjun B Garuda, a sum of Rs.8,25,000/- has been introduced without providing the PA number. 2. Also the sums of rs.2.26,82,000/- and Rs.3,72,14,013/- are found credited in the books of account of the assessee and there is no supporting explanation with respect to these sums pertaining to their sources as well as nature. The section 68 of the I.T. Act requires that where any sum is found credited in the books of ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 14 account of the assessee and the assessee offers no explanation about the nature and source thereof or the explanation satisfactory, the sum so credited may be charged to income tax as the income of the assessee. iv) The assessee name was not found recorded in the local land and revenue record and he was required to produce copies of 7/12 for verification. However, the assessee failed to produce the copy of 7/12 and thereby the genuineness of the agricultural income is to be ascertained. I have reason to believe that income to the tune of Rs.3,59,12,341/- has escaped assessment. Therefore, permission may kindly be accorded to issue notice u/s 148 of IT Act.” 14. On careful perusal of aforesaid reasons, we find that the Assessing Officer made the re-opening for verification of certain facts regarding land revenue record. It is a fact that before Assessing Officer assessee has not filed any objection against such re-opening assessment proceedings. However, we find that before Ld. CIT(A) assessee made detailed written submission including objecting against such validity of re-assessment order on the ground that the re-assessment was re-opened within four years from the end of relevant assessment year and found that no new material came to the notice of Assessing Officer. The Assessing Officer re-opened the assessment on the basis of ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 15 material available on record, which is evident from the reasons recorded. 15. We find that the Ld. CIT(A) on considering the submission of assessee held that re-opening of assessment is based on “change of opinion” and without any new tangible material available in the possession of Assessing Officer and the contents of reasons recorded coupled with the items of detailed questionnaire during original assessment leads to the conclusion that Assessing Officer proceeded to re-open the assessment for certain details not available pertaining to the creditors / land assets. The Ld. CIT(A) held that this is nothing but review of assessment the nature of re-opening of assessment. Further the Assessing Officer has not mentioned in the reasons that certain creditors were found to be bogus after conclusion of original assessment. The ld CIT(A) held that the re-opening is mere “change of opinion” and quashed the re-assessment order by taking view that re-opening is not sustainable in the eyes of law. 16. We find that Hon'ble jurisdictional High Court in the case of Sunrise Education Trust (supra) held that the reopening for mere verification of fact or for fishing inquiry is not permissible. ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 16 Similarly, in the case of Pushpak Bullion (P.) Ltd. (supra), the Hon'ble jurisdictional High Court held that though, it is the duty of assessee to explain nature of credits and genuineness and justification of share premium would arise when called upon during the assessment or validly re-opened assessment. Re- opening of assessment which was framed after scrutiny would not be permissible for a fishing inquiry. 17. We find that the Assessing Officer nowhere mentioned in the assessment record that any cogent or tangible material has come to his possession about the items of income which was allegedly escaped from assessment or that was not a part of original assessment. Thus, we affirm the order of Ld. CIT(A) that re- opening made by Assessing Officer was mere based on “change of opinion” . Even on merit, we find that Ld. CIT(A) after considering the submission of assessee held that assessee was able to prove the identity and genuineness of such transactions as well as creditworthiness of the parties pertaining to liability of Rs.2.26 crores. On perusal of various documentary evidence filed by the assessee, we find that the transaction was purely a business transactions reflecting in the books of assessee. Thus, the ITA No.198/SRT/2020 (A.Y.10-11) Sh. Fatehsinh M Chauhan 17 assessee also succeed on merit. We find that during the hearing the Ld. Ld. Sr.DR for the Revenue failed to controvert the finding of ld CIT(A) either on facts or on legal points. Therefore, we do not find any reason to devoid from the order of Ld. CIT(A) even on merit. Hence, all three grounds raised by Revenue are dismissed. 18. In the result, the appeal of the Revenue is dismissed. Order pronounced on 30/06/2022 and result was also placed on Notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 30/06/2022 Dkp. Out Sourcing P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)-Valsad 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Assistant Registrar/Sr.P.S, ITAT, Surat True copy/