M. SAYARCHAND MEHTA (HUF), MUMBAI V. ITO WD 18(3)(3), MUMBAI

ITA 1997/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3108 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 16-03-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 26-03-2012
• Court: TRIBUNAL
• Department Lawyers: SANTOSH MANKUSKAR
• Assessee Lawyers: S M BANDI
• Keywords: Unexplained cash credit; Deemed to accrue or arise in india; Tangible material; Difference of opinion; Revised return; Reason to believe; Change of opinion
• Section: 143(3); 147; 68; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI RAJENDRA , ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 1997 /MUM./ 2012 ( ASSESSMENT YEAR : 20 05 06 ) M/S. M. SAYARCHAND MEHTA (HUF) UNITED HEIGHTS, 3 RD FLOOR, MUGUL LANE M ATUNGA (WEST), MUMBAI 400 016 P AN AAAHM1059H .. APPELLANT V/S INCOME TAX OFFICER WARD 18(3)(3) PIRAMAL CHAMBERS LALBAUG, PAREL, MUMBAI 400 012 .... RESPONDENT ASSESSEE BY : SHRI S.M. BANDI REVENUE BY : SHR I SANTOSH MANKUSKAR DATE OF HEARING 22 .09.2015 DATE OF ORDER 30.09.2015 O R D E R PER SAKTIJIT DEY, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30 TH NOVEMBER 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 29, MUMBAI, FOR THE ASSESSMENT YEAR 2005 06. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF RE OPENING THE ASSESSMENT PROCEEDINGS M/S. M. SAYARCHAND MEHTA (HUF) 2 UNDER SECTION 148 OF THE ACT WHICH IS BAD IN LAW AND VOID AB INITIO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF THE ASSESSING OFFICER OF APPLYING THE PROVISION OF SECTION 68 OF THE ACT IN THE IMPUGNED CASE IN RESPECT OF ADDITION OF ` 19,33,288, AS UNEXPLAINED CASH CREDIT. 2. AS CAN BE SEEN IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT ' ). 3. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, THE ASSESSEE, A HINDU UNDIVIDED FAMILY (HUF), DERIVES INCOME FROM BANK INTEREST AND CAPITAL GAIN. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME ORIGINALLY ON 30 TH AUG UST 2005, DECLARING TOTAL INCOME OF ` 60,160. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, ON THE BASIS OF AIR INFORMATION, FOUND THAT THE ASSESSEE HAD DEPOSITED ` 73,03,000 IN CORPORATION BANK, SHIVAJI PARK BRANCH, MUMBAI, TILL 29 TH MAR CH 2005. HE, THEREFORE, CALLED UPON THE ASSESSEE TO EXPLAIN THE NATURE OF SUCH DEPOSITS. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER, THE ASSESSEE EXPLAINED THE SOURCES OF DEPOSITS IN THE BANK ACCOUNT VIDE LETTER DATED 17 TH DECEMBER 2007 . IT W AS STATED THEREIN THE SOURCE OF SUCH DEPOSIT IS FROM SALE OF SHARES. IN SUPPORT OF SUCH CLAIM, THE ASSESSEE ALSO FURNISHED CONTRACT NOTE OF BROKERS, CONFIRMATION LETTERS FROM BROKERS M/S. M. SAYARCHAND MEHTA (HUF) 3 AND COPY OF BANK STATEMENT. A CCORDINGLY, ASSESSEE ALSO FILED A REVISED RE TURN OF INCOME ACCOMPANIED WITH COMPUTATION OF INCOME, BALANCE SHEET, CAPITAL ACCOUNT DISCLOSING LONG TERM CAPITAL GAIN FROM SALE OF SHARES AT ` 51,89,636. THE ASSESSING OFFICER ULTIMATELY COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 26 TH DECEMBER 2007, ACCEPTING THE INCOME DECLARED IN THE REVISED RETURN OF INCOME. SUBSEQUENTLY, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT ON THE REASON THAT IN THE BALANCE SHEET FILED WITH THE ORIGINAL RETURN OF IN COME, THE ASSESSEE HAS SHOWN CASH AT HAND AT ` 18,375, WHEREAS, IN THE BALANCE SHEET FILED ALONG WITH THE REVISED RETURN OF INCOME, CASH AT HAND SHOWN BY THE ASSESSEE IS AT ` 19,33,288. THE ASSESSING OFFICER, THEREFORE, FORMED A BELIEF THAT THERE WAS UNDER ASSESSMENT OF INCOME TO THE EXTENT OF ` 19,14,913, WHICH NECESSITATED INITIATION OF ACTION UNDER SECTION 147 OF THE ACT. ACCORDINGLY, HE ISSUED A NOTICE UNDER SECTION 148 OF THE ACT TO THE ASSESSEE ON 28 TH MAY 2008, CALLING UPON THE ASSESSEE TO SUBMIT HIS RETURN OF INCOME. IN RESPONSE TO THE NOTICE UNDER SECTION 148, THE ASSESSEE FILED A RETURN OF INCOME ON 3 RD AUGUST 2009, DECLARING TOTAL INCOME OF ` 52,49,800 , AS WAS SHOWN IN THE REVISED RETURN . AS NOTED BY THE ASSESSING OFFICER , IN THE ORIGINAL RETURN O F INCOME FILED ON 30 TH AUGUST 2005 AND IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE UNDER SECTION 148, THE ASSESSEE HAS SHOWN CASH M/S. M. SAYARCHAND MEHTA (HUF) 4 BALANCE OF ` 18,375, WHEREAS IN THE REVISED RETURN OF INCOME FILED ON 19 TH DECEMBER 2007, THE CASH BALANCE SHOWN BY TH E ASSESSEE WAS OF ` 19,33,288=50. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER , THOUGH , IT WAS SUBMITTED BY THE ASSESSEE THAT A MISTAKE WAS COMMITTED WHILE PREPARING THE BALANCE SHEET AS A RESULT OF WHICH CASH BALANCE OF ` 19,33,288, WAS SHOWN INSTEAD OF ACTUAL CASH BALANCE OF ` 18,375, BUT THE ASSESSING OFFICER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. HE, THEREFORE, PROCEEDED TO COMPLETE THE ASSESSMENT UNDER SECTION 143(3) R/W SECTION 147 OF THE ACT BY TREATING THE DIFFERENCE IN CASH BALANCE AMOUNTING TO ` 19,33,288, AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 4. BEING AGGRIEVED OF SUCH ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY CHALLENGING NOT ONLY THE VALIDITY OF THE PROCEEDING S INITIATED UNDER SECTION 147 OF THE ACT BUT ALSO THE MERITS OF THE ADDITION MADE UNDER SECTION 68 OF THE ACT. AS FAR AS THE LEGAL ISSUE RELATING TO THE RE OPENING OF ASSESSMENT IS CONCERNED, LEARNED CIT(A) DISMISSED THE GROUND RAISED BY THE ASSESSEE BY OB SERVING THAT WHEN THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT THE ASSESSEES INCOME HAS ESCAPED ASSESSMENT BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT O F THAT M/S. M. SAYARCHAND MEHTA (HUF) 5 YEAR , THE CORRECTNESS OR SUFFICIENCY OF REASON CANNOT BE QUESTIONED. RELYING UPON SOME JUDICIAL PRECEDENT, THE LEARNED COMMISSIONER (APPEALS) UPHELD RE OPENING OF ASSESSMENT BY THE ASSESSING OFFICER. BEING AGGRIEVED ON THE AFORESAID DECISION OF THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, REFERRING TO THE REASONS RECORDED BY THE ASSESSING OFFICER FOR RE OPENING THE ASSESSMENT, SUBMITTED BEFORE US , THERE WAS NO FRESH TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER FOR RE OPENING THE ASSESSMENT. HE SUBMITTED, ON THE BASIS OF THE VERY SAME MATERIAL ON WHICH THE ASSESSMENT UNDER SECTION 14 3(3) OF THE ACT WAS COMPLETED ORIGINALLY, RE OPENING OF ASSESSMENT IS NOTHING BUT A CHANGE OF OPINION. FURTHER ELABORATING, HE SUBMITTED, WHEN THE ASSESSING OFFICER, WHILE COMPLETING THE ORIGINAL ASSESSMENT, HAS CONSIDERED THE ASSESSEES ORIGINAL AS WELL AS REVISED RETURN OF INCOME ALONG WITH THE BALANCE SHEET FILED IN THOSE RETURNS, THE SUBSEQUENT RE OPENI NG ON THE BASIS OF THE VERY SAME MATERIAL (BALANCE SHEET) IS NOTHING BUT MERE CHANGE OF OPINION. HENCE, THE RE OPENING IS INVALID IN LAW. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I) SEIMENS INFORMATION SYSTEM LTD. V/S ACIT & OR S., [2007] 295 ITR 333 (BOM.) ; M/S. M. SAYARCHAND MEHTA (HUF) 6 II) CIT V/S ORIENT CRAFT LTD., ITA NO.555/2012, ORDER DATED 12 TH DECEMBER 2012 (DELHI HIGH COURT); III) TELCO DADAJEE DHACKJEE LTD. V/S DCIT, ITA NO.4613/MUM. /2005, ORDER DATED 12 TH MAY 2010 ; AND IV) CIT V/S KELVINATOR OF INDIA LTD., [2010] 320 ITR 561 (SC) . 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE REASONING OF THE FIRST APPELLATE AUTHORITY. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET , IT NEEDS TO BE CLARIFIED, IN THE PRESENT CASE, RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT WAS MADE ON 28 TH MAY 2008, WHICH IS WITHIN FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR, THEREFORE, FIRST PROVISO TO SECTION 147 OF THE ACT, WILL NOT APPLY. HAVING SAID THAT, IT IS NECESSARY TO EXAMINE WHETHER AT THE TIME OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT, THE ASSESSING OFFICER HAD, IN HIS POSSESSION, SOME NEW TANGIBLE MATERIAL WHICH WERE NOT AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT SO THAT IT DOES NOT AMOUNT TO CHANGE OF OPINION . FOR THIS PURPOSE, IT IS ESSENTIAL TO LOOK AT THE REASONS RECORDED FOR RE OPENING THE ASSESSMENT WHICH READS AS UNDER: REASONS FOR REOPENING THE ASSESSMENT IN THIS CASE THE ASSESSEE HAS FILED O RIGINAL RETURN OF INCOME ON 30.08.2002 FOR A.Y. 2005 06 DECLARING TOTAL INCOME AT ` 60,160. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE I.T. ACT ON 30.01.2006. I HEREAFTER ASSESSEE FILED REVISED RETURN M/S. M. SAYARCHAND MEHTA (HUF) 7 OF INCOME ON 19.12.2007, DECLARING TOTAL INCO ME AT ` 52,49,796. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 26.12.2007, ASSESSING TOTAL INCOME AT ` 52,49,796. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 26.12.2007 ASSESSING TOTAL INCOME AT ` 52,49,796. ON PERUSAL OF BALANCE SHEET FILED ALONGWITH THE ORIGINAL RETURN IT IS SEEN THAT THE ASSESSEE HAS SHOWN CASH BALANCE AT HAND AT ` 18,375. HOWEVER, IT IS SEEN FROM THE BALANCE SHEET FILED ALONGWITH THE REVISED RETURN, THE ASSESSEE HAS SHOWN CASH BALANCE AT HAND AT ` 19,33,288. THEREF ORE, I HAVE REASON TO BELIEVE THAT THERE IS UNDER ASSESSMENT OF ` 19,14,913 WITHIN THE MEANING OF ITEM (I) CLAUSE (C) OF EXPLANATION 2 TO SECTION 147 OF THE I.T. ACT. THUS, THIS IS A CASE OF DEEMED INCOME ESCAPING ASSESSMENT. ON A PERUSAL OF THE REASONS RECORDED, IT IS VERY MUCH EVIDENT THAT THE ASSESSING OFFICER ONLY UPON REVISIT ING THE BALANCE SHEETS FILED WITH THE ORIGINAL RETURN OF INCOME AND REVISED RETURN OF INCOME, HAD FORMED THE BELIEF THAT THERE IS UNDER ASSESSMENT OF INCOME. IT IS PATENT AND OB VIOUS THAT NO NEW MATERIAL HAS COME TO THE POSSESSION OF THE ASSESSING OFFICER AFTER COMPLETION OF THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE BALANCE SHEET FILED ALONG WITH THE ORIGINAL RETURN OF INCOME AS WELL AS THE REVISED RETURN OF IN COME WERE PART OF THE RECORD WHEN THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT WAS ORIGINALLY PASSED BY THE ASSESSING OFFICER. THUS, THE ASSESSING OFFICER HAVING CONSIDERED THESE MATERIALS WHILE COMPLETING THE ORIGINAL ASSESSMENT , INITIATION OF PRO CEEDINGS UNDER SECTION 147 OF THE ACT ON THE BASIS OF THE VERY SAME MATERIAL AMOUNTS TO CHANGE OF M/S. M. SAYARCHAND MEHTA (HUF) 8 OPINION. AS HELD BY THE HON'BLE SUPREME COURT WHILE AFFIRMING THE VIEW EXPRESSED BY THE FULL BENCH OF THE HON'BLE DELHI HIGH COURT IN KELVINATOR OF INDIA LTD. (SUPRA), THERE SHOULD BE TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER FROM WHICH HE COULD ENTERTAIN THE BELIEF THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. IN THE PRESENT CASE, IT IS APPARENT FROM THE REASONS RECORDED THAT THERE IS NO SUCH MATERIAL AVAILABLE BEFORE THE ASSESSING OFFICER WHILE HE RECORDED HIS REASONS FOR RE OPENING THE ASSESSMENT. THAT BEING THE CASE, THE RE OPENING OF ASSESSMENT ON RE APPRECIATION / REVIEW OF S A ME SET OF FACTS AND MATERIAL WHICH WERE AVAILABLE AT THE TIME OF COMPLETING ASSESSMENT ORIGINALLY UNDER SECTION 143(3) OF THE ACT, T A NTAMOUNTS TO CHANGE OF OPINION, HENCE, NOT PERMISSIBLE IN LAW. IN VIEW OF THE AFORESAID, WE HOLD THAT RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT IN THE PRESENT CASE IS INVALID, HENCE, AS A NATURAL COROLLARY THE IMPUGNED ASSESSMENT ORDER PASSED IN PURSUANCE THERETO HAS TO BE QUASHED. WE ORDER ACCORDINGLY. GROUND NO.1, IS ALLOWED. 8. IN VIEW OF OUR AFORESAID DECISION IN GROUND NO.1, GROUND NO.2, RAISED BY THE ASSESSEE HA S BECOME REDUNDANT, HENCE, NOT REQUIRED TO BE ADJUDICATED UPON. M/S. M. SAYARCHAND MEHTA (HUF) 9 9. IN THE RESULT, THE ASSESSEES APPEAL IS CONSIDERED TO BE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT O N 30.09.2015 SD/ - RAJENDRA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI , DATED : 30.09.2015 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./A SSTT. REGISTRAR) ITAT, MUMBAI