Ram Pratap Singh, Hardoi V. Income Tax Officer-3(3), Hardoi

ITA 205/LKW/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4320 (ITAT-LUCKNOW)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 22-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148; 132

Judgement Text

I.T.A. NO.205/LKW/16 ASSESSMENT YEAR:2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI P. K. BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ITA NO.205/LKW/2016 ASSESSMENT YEAR:2007-08 SHRI RAM PRATAP SINGH, NEAR KHUSI RAM BAGIA, CIRCULAR ROAD, VIBHUTI NAGAR, HARDOI. PAN:BUFPS5308M VS. INCOME TAX OFFICER-3(3), HARDOI. (APPELLANT) (RESPONDENT) O R D E R PER P. K. BANSAL, A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), BAREILLY DATED 16/03/2016 RELATING TO ASSES SMENT YEAR 2007-08. 2. GROUND NO. 1 TO 4 TAKEN BY THE ASSESSEE RELATE T O THE VALIDITY OF THE ASSESSMENT FRAMED U/S 147 READ WITH SECTION 143(3) OF THE ACT. BEFORE US, LEARNED A. R. OF THE ASSESSEE VEHEMENTLY CONTEN DED THAT THE REASSESSMENT PROCEEDINGS INITIATED U/S 147 ARE INVA LID AND VOID AB INITIO. THE PROCEEDINGS HAS BEEN INITIATED JUST FOR THE PUR POSE OF VERIFICATION OF FACTS. OUR ATTENTION WAS DRAWN TOWARDS THE REASON TO BELIEVE. THERE WAS NO MATERIAL BEING BROUGHT ON RECORD WHICH SHOWS THAT THE ASSESSEE APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY SHRI AMIT NIGAM, D. R. DATE OF HEARING 23/05/2016 DATE OF PRONOUNCEMENT 27 / 07 /2016 I.T.A. NO.205/LKW/16 ASSESSMENT YEAR:2007-08 2 HAS ESCAPED THE INCOME. THEREFORE, IT WAS CONTENDE D THAT THE PROCEEDINGS HAS ILLEGALLY BEEN INITIATED AND THEREF ORE, THE ASSESSMENT MUST BE QUASHED. LEARNED D. R. ON THE OTHER HAND R ELIED ON THE ORDER OF CIT(A). 3. WE HAVE HEARD THE RIVAL SUBMISSIONS, CAREFULLY C ONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. IN THIS CASE WE NOTED THAT THE ASSESSING OFFICER HAS INITIATED THE PROCEE DINGS U/S 147 OF THE ACT BY RECORDING THE FOLLOWING REASONS TO BELIEVE: IN THIS CASE AN INFORMATION IN RESPECT OF DONATION / CAPITATION FEES PAID OVER AND ABOVE THE REGULAR FEES TO SANTOS H MEDICAL COLLEGE, GHAZIABAD, HAS BEEN RECEIVED FROM THE DY. DIRECTOR OF INCOME TAX (INV.), UNIT V(L) NEW DELHI VIDE LETTER F.NO.DDIT(INV)U-V(L)/2013-14/305 DATED 19.3.2014. T HIS INFORMATION WAS GATHERED DURING A SEARCH & SEIZURE ACTION U/S 132 OF THE I.T. ACT. 1961, CARRIED OUT ON 27.06.201 3 IN THE CASE OF M/S SANTOSH GROUP OF INSTITUTIONS & DR. P. MAHALINGHAM. DURING THE COURSE OF SEARCH, CERTAIN D OCUMENTS/ BOOKS OF ACCOUNTS WERE SEIZED FROM THE PREMISES H-L TO 6, SANTOSH NAGAR, PRATAP VIHAR, THE MAIN ADMINISTRATIV E BLOCK OF THE COLLEGE IN WHICH RECEIPTS OF THE DONATION/CAPIT ATION FEE, OVER & ABOVE THE REGULAR COURSE FEES, PAID IN CASH BY THE PARENTS OF STUDENTS TAKING ADMISSION. AS PER ABOVE INFORMATION SRI RAM PRATAP FATHER OF SRI AJAY PRATAP SINGH (CAN DIDATE) HAD PAID DONATION/CAPITATION FEE AMOUNTING TO RS.23,00, 000/- ON 14.7.2006 IN CASH. THE ABOVE FACTS HAS NOT BEEN VER IFIABLE FROM THE RECORDS OF THIS OFFICE. ACCORDINGLY, EXPEN DITURE MADE BY ASSESSEE TOWARDS PAYMENT OF CAPITATION FEES MEN TIONED ABOVE IS NOT VERIFIABLE, THEREFORE I HAVE REASON TO BELIEVE THAT INCOME TO THE TUNE OF RS.23.00.000/- HAS ESCAPED TO ASSESSMENT FOR THE A.Y. 2007-08. HENCE, IT IS A F IT CASE FOR ISSUE OF NOTICE U/S 148 OF THE I.T. ACT, 1961. 3.1 FROM THE REASONS TO BELIEVE, IT IS APPARENT THA T THE ASSESSING OFFICER HAS INITIATED THE PROCEEDINGS ON THE BASIS OF THE INFORMATION RECEIVED FROM DY. DIRECTOR OF INCOME TAX (INV.), WH ICH WAS GATHERED I.T.A. NO.205/LKW/16 ASSESSMENT YEAR:2007-08 3 DURING THE COURSE OF SEARCH CARRIED OUT IN THE CASE OF M/S SANTOSH GROUP OF INSTITUTIONS & DR. P. MAHALINGHAM. DURING THE C OURSE OF SURVEY, CERTAIN DOCUMENTS AND BOOKS WERE SEIZED FROM THE PR EMISES H1 TO H6, SANTOSH NAGAR, PRATAP VIHAR IN WHICH THERE WERE DET AILS FOR THE RECEIPT OF DONATION/CAPITATION FEES. THE NAME OF THE ASSESSEE WAS THERE AND IT SHOWS THAT THE ASSESSEE HAD PAID DONATION/CAPITATIO N FEES AMOUNTING TO RS.23 LAC ON 14/07/2006. THE ASSESSING OFFICER THE REFORE, RECORDED THE REASON THAT THE INCOME TO THE TUNE OF RS.23 LAC HAS ESCAPED THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR. AT TH E TIME OF INITIATION OF PROCEEDINGS THERE MUST BE MATERIAL TO SUPPORT TH E REASONS TO BELIEVE. THE REASONS MUST BE RELATED TO THE ASSESSEE. THE A SSESSING OFFICER MAY RECORD THE REASONS ON THE BASIS OF THE INFORMATION WHICH MAY HAVE BEEN RECEIVED EITHER FROM INTERNAL SOURCES OR FROM EXTER NAL SOURCES. EVEN THE INFORMATION AVAILABLE IN THE INCOME TAX RETURN CAN BE THE BASIS TO FORM THE REASONS TO BELIEVE. HON'BLE SUPREME COURT IN T HE CASE OF INCOME TAX OFFICER VS. PUROSHOTTAM DAS BANGUR AND ANOTHER [199 7] 224 ITR 362 (SC) HAS TAKEN THE VIEW THAT THE LETTER OF DDIT (INV.) G IVING THE INFORMATION IS AN INFORMATION FROM WHICH ASSESSING OFFICER COULD H AVE REASON TO BELIEVE THAT THE INCOME ESCAPED THE ASSESSMENT. WE NOTED THAT IN THIS CASE THE ASSESSING OFFICER HAS INITIATED THE PROCEEDINGS ON THE BASIS OF THE LETTER FROM DDIT(INV.). THE ASSESSMENT HAS NOT BEEN REOPE NED JUST FOR THE SAKE OF VERIFICATION OF THE PAYMENT OF CAPITATION F EES BUT THE ASSESSING OFFICER HAS STATED THAT HE HAS THE REASON TO BELIEV E THAT THE INCOME TO THE TUNE OF RS.23LAC HAS ESCAPED ASSESSMENT FOR THE ASS ESSMENT YEAR 2007- 08. IT HAS BEEN HELD BY HON'BLE SUPREME COURT IN T HE CASE OF INCOME TAX OFFICER VS. LAKHMANI MEWAL DAS [1976] 103 ITR 4 37 (SC) THAT THE COURT CANNOT LOOK INTO THE SUFFICIENCY OF THE REASO NS. THE REASONS FOR THE FORMATION OF THE BELIEF FOR REOPENING OF AN ASSESSM ENT MUST HAVE A I.T.A. NO.205/LKW/16 ASSESSMENT YEAR:2007-08 4 RATIONAL CONNECTION OR RELEVANT BEARING ON THE FORM ATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF T HE INCOME-TAX OFFICER AND THE FORMATION OF HIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTI CULAR ASSESSMENT YEAR. BONAFIDE OF THE REASONS CAN BE LOOKED INTO B Y THIS TRIBUNAL. IT IS A CASE WHERE, IN OUR OPINION, THE REASONS RECORDED AR E BONAFIDE. WE, THEREFORE, DISMISS GROUND NOS. 1 TO 4 TAKEN BY THE ASSESSEE. 4. GROUND NOS. 5 TO 8 OF THE APPEAL RELATE TO THE S USTENANCE OF ADDITION OF RS.23,00,500/- BY THE CIT(A). THE BRIE F FACTS RELATED TO THIS ISSUE ARE THAT THE ASSESSEES SON AJAY PRATAP SINGH APPEARED IN PRE MEDICAL EXAMINATION FOR M.B.B.S. COURSE PROVIDED BY SANTOSH MEDICAL COLLEGE, GHAZIABAD. THE ASSESSEE HAD PAID THE REQU ISITE FEES THROUGH DD ISSUED IN FAVOUR OF SANTOSH MEDICAL COLLEGE, GHAZIA BAD. THERE HAD BEEN SEARCH IN THE CASE OF SANTOSH GROUP OF INSTITUTIONS AND DR. P. MAHALINGHAM CARRIED OUT ON 27/06/2013 IN WHICH THE FEES PAID THROUGH DD WAS SHOWN. HOWEVER, IN ADDITION TO THIS, A CASH PAYMENT WAS ALSO MENTIONED. THE ASSESSEE, DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THROUGH AN AFFIDAVIT AND ALSO THROUGH STATEMENT ON OATH RECORDED BY THE ASSESSING OFFICER, SPECIFICALLY DENIED THAT HE HAS NOT PAID ANY CASH. HE DOES NOT KNOW HOW THE COLLEGE HAS MENTIONED HIS NAM E. THE SECURITY DEPOSIT FOR HOSTEL FEES WAS DULY REFUNDED TO AJAY P RATAP SINGH THROUGH CHEQUE. THE ASSESSEE ASKED THE ASSESSING OFFICER T O MAKE AVAILABLE THE PERSON WHO HAS MADE THE ENTRIES IN THE DOCUMENTS WH ICH WAS SEIZED TO CROSS EXAMINE HIM. THE ASSESSING OFFICER INSTEAD O F ALLOWING THE CROSS EXAMINATION ASKED THE ASSESSEE TO FURNISH A CERTIFI CATE FROM THE COLLEGE TO THE FACT THAT NO CASH PAYMENT OF RS.23,00,500/- WAS MADE AT THE TIME OF I.T.A. NO.205/LKW/16 ASSESSMENT YEAR:2007-08 5 ADMISSION OF HIS SON. SINCE THE ASSESSEE FAILED TO OBTAIN SUCH A CERTIFICATE FROM SANTOSH MEDICAL COLLEGE, GHAZIABAD, THE ASSESS ING OFFICER THEREFORE, TREATED THE SAID SUM AS THE INCOME OF THE ASSESSEE. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE AD DITION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, CAREFULLY C ONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. ALTHOUGH LEARNED A. R. OF THE ASSESSEE HAS TAKEN NUMBER OF PLEAS AND VEHEM ENTLY ARGUED THAT THE ADDITION CANNOT BE SUSTAINED. THE ASSESSEE HAS NEVER MADE PAYMENT TO SANTOSH MEDICAL COLLEGE, GHAZIABAD. THE ASSESSE E IS NOT CONNECTED WITH THE MANAGEMENT OF SANTOSH MEDICAL COLLEGE, GHA ZIABAD AND IS NOT AWARE OF HOW THEY HAVE ENTERED THE ASSESSEES NAME IN RESPECT OF THE CASH RECEIVED IN THIS REGARD. BUT THE MAIN THRUST OF ARGUMENT WAS THAT THE ADDITION HAS BEEN MADE ON THE BASIS OF THE RECO RD OF THE THIRD PARTY FOR WHICH NO OPPORTUNITY HAS BEEN GIVEN TO THE ASSE SSEE TO CROSS EXAMINE THE SAID PERSON. IN THIS REGARD, LEARNED A. R. OF THE ASSESSEE VEHEMENTLY RELIED BEFORE US ON THE LEGAL PROPOSITION AS LAID D OWN BY HON'BLE SUPREME COURT IN THE CASE OF ANDMAN TIMBER INDUSTRIES VS. C OMMISSIONER OF CENTRAL EXCISE IN CIVIL APPEAL NO. 4228 OF 2006 DAT ED 2 ND SEPTEMBER, 2015, THE COPY OF WHICH WAS PLACED BEFORE US AT PAG E NO. 42 TO 46 OF THE PAPER BOOK. WE HAVE GONE THROUGH THE SAID DECISION WHEREIN HON'BLE SUPREME COURT HAS HELD AS UNDER: WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COU NSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNA N, LEARNED SENIOR COUNSEL WHO APPEARED FOR THE REVENUE . ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROSS -EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS O F THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE OR DER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRI NCIPLES OF I.T.A. NO.205/LKW/16 ASSESSMENT YEAR:2007-08 6 NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS A DVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DIS PUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CRO SS- EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT T HIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AU THORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUN ITY WAS SOUGHT BY THE ASSESSEE. HOWEVER/ NO SUCH OPPORTUNIT Y WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WI TH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS C ONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENAB LE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS-EXAMINATION O F THE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHI CH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WA S NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESS ES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPO SE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATIO N. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPO N THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PR ICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS W ERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRI CE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUB JECT MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE AD JUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUB JECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARK S AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN E ARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DI RECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF TH E TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, TH ERE WAS NO I.T.A. NO.205/LKW/16 ASSESSMENT YEAR:2007-08 7 MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESA ID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CA USE NOTICE. WE, THUS, SET ASIDE THE IMPUGNED ORDER AS PASSED BY THE TRIBUNAL AND ALLOW THIS APPEAL. 5.1 THE SAID DECISION OF HON'BLE SUPREME COURT, IN OUR OPINION, IS CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE AS W E NOTED THAT IN THIS CASE THE ASSESSEE HAS ASKED THE ASSESSING OFFICER WHICH IS APPARENT FROM PARA 8.1 OF THE ASSESSMENT ORDER TO MAKE AVAILABLE THE P ERSON WHO HAS MADE THE ENTRIES IN THE DOCUMENTS, WHICH WERE SEIZED FRO M SANTOSH MEDICAL COLLEGE, GHAZIABAD I.E. THE THIRD PARTY AND TO PROD UCE THE SAME TO CROSS EXAMINE HIM. THE ASSESSING OFFICER, INSTEAD OF PRO VIDING THE SAID PARTY TO THE ASSESSEE FOR HIS CROSS EXAMINATION, ASKED TH E ASSESSEE TO BRING A CERTIFICATE FROM THE COLLEGE I.E. FROM THAT THIRD P ARTY THAT NO CASH PAYMENT OF RS.23,00,500/- WAS MADE BY THE ASSESSEE AT THE T IME OF ADMISSION OF HIS SON. THIS ACTION OF THE ASSESSING OFFICER CLEA RLY PROVES THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE EVIDENCE FOUND FROM THE THIRD PARTY AND AS HAS BEEN RECORDED BY THE THIRD PARTY. IT IS UNDISPUTED FACT THAT THE DOCUME NTS ON THE BASIS OF WHICH ADDITION HAS BEEN MADE IN THE CASE OF THE ASS ESSEE WERE NOT FOUND FROM THE ASSESSEE. THE ENTRIES ARE ALSO NOT IN THE HAND WRITING OF THE ASSESSEE IN THE DOCUMENTS FOUND DURING THE COURSE O F SEARCH AT THE THIRD PARTY. IT IS A CASE WHERE THE THIRD PARTY HAS MENT IONED THE NAME OF THE ASSESSEE. THEREFORE, THE THIRD PARTY ARE THE EVIDE NCE OF THE REVENUE FOR MAKING THE ADDITION IN THE HANDS OF THE ASSESSEE. THE REVENUE IS BOUND TO PRODUCE THESE WITNESSES WHEN THE ASSESSEE ASKED FOR HIS CROSS EXAMINATION AS IN OUR OPINION, THE STATEMENT AND TH E DOCUMENTS OF THE THIRD PARTY WAS THE WITNESS OF THE REVENUE. NO CON TRARY DECISION WAS I.T.A. NO.205/LKW/16 ASSESSMENT YEAR:2007-08 8 BROUGHT TO OUR KNOWLEDGE. THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ANDMAN TIMBER INDUSTRIES IS BINDING ON US. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DELETE THE ADDITION OF RS.23,00,500/-. IN OUR OPINION, THE ADDITION HAS BEEN MADE ON THE BASI S OF MATERIAL COLLECTED ON THE BACK OF THE ASSESSEE AND FOR WHICH NO OPPORT UNITY FOR CROSS EXAMINATION HAS BEEN GIVEN TO THE ASSESSEE. WE, TH EREFORE, SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION OF RS.23,25 ,500/-. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 27/07/2016) SD/. SD/. ( MAHAVIR PRASAD ) ( P. K. BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:27/07/2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR