DHARAM CHAND SOHAN LAL & COMPANY, Alwar V. ITO, Alwar

ITA 207/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2122 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 04-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L CHANDEL CIT DHK
• Keywords: Unexplained cash credit; Reason to believe; Reassessment proceedings
• Section: 40A(3); 143(3); 147; 68; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 207/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S DHARAM CHAND SOHAN LAL & COMPANY, A-13, NEW SABZI MANDI, ALWAR. CUKE VS. THE ITO, WARD-2(3), ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AAHFD6576D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 208/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 M/S DHARAM CHAND SOHAN LAL & COMPANY, A-13, NEW SABZI MANDI, ALWAR. CUKE VS. THE ITO, WARD-2(3), ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AAHFD6576D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRHDH VKSJ LS@ ASSESSEE BY : SHRI P.C.PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI S.L. CHANDEL (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22/08/2017 ?KKS'K .KK DH R KJH[K @ DATE OF PRONOUNCEMENT: 01/09/2017. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), ALWAR DATED 06.01.2015 FOR A.Y. 2008-09 AND DATED 06.01.2016 FOR A.Y. 2009-10 RESPECTIVELY WHEREIN THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF ADDITION U/S 68 OF THE ACT. ITA NO. 207&208/JP/16 M/S DHARAM CHAND SOHAN LAL & COMPANY V/S ITO 2 2. THE LD. AR SUBMITTED THAT IN BOTH THESE APPEALS ARISE OUT OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S 147 OF THE ACT AND THE ASSESSEE WISHES TO RAISE THE FOLLOWING ADDITIONAL GROUND OF APPEAL WHI CH IS PURELY A LEGAL GROUND AND WHICH WAS NOT TAKEN INADVERTENTLY EARLIER AT TH E TIME OF FILING OF THIS SUBJECT APPEAL: UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED U/S 147 IS ILLEGAL AND BAD IN LAW. 3. IT WAS SUBMITTED THAT IN VIEW OF THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF CIT VS. NTPC LTD REPORTED IN 229 ITR 383, THE ABOVE SAID ADDITIONAL GROUND BEING A PURELY LEGAL GROUND MAY B E ADMITTED FOR IMPARTING SUBSTANTIAL JUSTICE TO THE APPELLANT. 4. BOTH THE PARTIES WERE HEARD. AFTER TAKING INTO C ONSIDERATION THE FACT THAT THE ABOVE SAID ADDITIONAL GROUND IS PURELY A L EGAL GROUND, THE SAME WAS ADMITTED IN RESPECT OF BOTH THE APPEALS UNDER CONSI DERATION. 5. IN THIS REGARD, THE LD. AR HAS DRAWN OUR REFEREN CE TO THE REASONS RECORDED BY THE ASSESSING OFFICER BEFORE ISSUANCE O F NOTICE U/S 148 WHICH READS AS UNDER:- IN THIS CASE AS PER INFORMATION RECEIVED BY THIS O FFICE FROM THE ADIT(INV.)-II, JAIPURS LETTER NO. 1495 DATED 03.03.2011 WHICH REV EALS THAT THE ASSESSEE FIRM HAS MADE SUBSTANTIAL TRANSACTIONS INCLUDING CASH D EPOSITS & WITHDRAWALS DURING THE ASST. YEAR UNDER CONSIDERATION. APART F ROM THIS IT IS ALSO NOTICED THAT ASSESSEE HAS MADE FOLLOWING PAYMENTS IN CASH W HICH IS CONTRAVENTION TO SECTION 40A(3) OF THE I.T. ACT. PERIOD OF TRANSACTION AMOUNT OF TRANSACTION F.Y. 2007-08 RS. 53,26,090/- THUS, INCOME ON A/C OF DISALLOWANCE TO BE MADE U/S 40(A)(3) OF THE IT ACT HAS ESCAPED ASSESSMENT. I HAVE THEREFORE REASONS TH AT THE TRANSACTIONS MENTIONED BELOW ARE ESCAPED INCOME WITHIN THE MEANI NG OF THE SECTION 147 OF THE IT ACT. ITA NO. 207&208/JP/16 M/S DHARAM CHAND SOHAN LAL & COMPANY V/S ITO 3 PERIOD OF TRANSACTION AMOUNT OF TRANSACTION F.Y. 2007-08 RS. 53,58,101/- (CASH DEPOSIT IN THE ASSESSEES BANK A/C) TOTAL RS. 53,58,101/- HENCE, NOTICE U/S 148 IS BEING ISSUED. 6. IT WAS SUBMITTED BY THE LD AR THAT IN COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD CIT(A), THE ASSESSEE EXPLAINED THAT N OTICE U/S 147 IS ISSUED BY QUOTING THE REASONS WHICH ARE TOTALLY DIFFERENT THA N THE ADDITION MADE BY THE AO AND THEREFORE, THE REOPENING ITSELF IS NULL AND VOID. IT WAS FURTHER EXPLAINED THAT IN ORIGINAL PROCEEDINGS U/S 143(3), AO HAS VERIFIED ALL THE CREDITORS AND DEBTORS IN EVIDENCE TO WHICH COPY OF NOTICE ISSUED BY THE AO AND REPLY SUBMITTED BY THE ASSESSEE WAS FILED. THE LD. CIT(A) HOWEVER, HAS NOT GIVEN ANY FINDING ON THIS ISSUE. 7. IT WAS FURTHER SUBMITTED THAT THE AO INITIATED P ROCEEDINGS U/S 148 TO VERIFY CERTAIN CASH TRANSACTIONS AND ITS DISALLOWAB ILITY U/S 40A(3) BUT MADE THE ADDITION MADE U/S 68 BY TREATING THE CREDITORS AS UNEXPLAINED. IT IS A SETTLED LAW THAT IF THE INCOME, THE ESCAPEMENT OF WHICH WAS THE BASIS OF THE FORMATION OF THE REASON TO BELIEVE IS NOT ASSESSED OR REASSESSED, IT WOULD NOT BE OPEN TO THE AO TO INDEPENDENTLY ASSESS ONLY THAT INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEE DINGS UNDER THE SECTION AS HAVING ESCAPED ASSESSMENT. 8. IN SUPPORT, THE LD. AR PLACED RELIANCE ON THE F OLLOWING DECISIONS:- CIT VS. MOHMED JUNED DADANI (2014)355 ITR 172 (GUJ. ) HC) ORIENTAL BANK OF COMMERCE VS. ADDL. CIT (2014) 109 DTR 1(DEL.) (HC) ACIT VS. MAJOR DEEPAK MEHTA (2012) 344 ITR 641 ( CH HATTISGARD) (HC) CIT VS. JET AIRWAYS (I) LTD. (2011)331 ITR 236 (BOM .) (HC) CIT VS. ADHUNIK NIRYAT ISPAT LTD. (2011) 63 DTR 021 2 (DEL.) (HC) ITA NO. 207&208/JP/16 M/S DHARAM CHAND SOHAN LAL & COMPANY V/S ITO 4 RANBAXY LABORATORIES LTD. VS. CIT (2011) 336 ITR 01 36 (DEL.) (HC) 9. THE LD DR IS HEARD WHO HAS VEHEMENTLY ARGUED THE MATTER AND RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IS NO MORE RES INTEGRA. IN CASE OF CIT VS. JET AIRWAYS (I) LTD. (SUPRA), HONBLE JUSTICE DR. D.Y. CHANDRAC HUD, AFTER CONSIDERING THE AMENDMENT BROUGHT IN BY THE FINANCE (NO. 2) ACT OF 2009, WITH EFFECT FROM 1- 4-1989 AND TAKING INTO CONSIDERATION THE EARLIER DE CISION OF THE HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT V. SHRI RAM SIN GH [2008] 306 ITR 343 (RAJ.) HAS HELD AS UNDER: 11. THE RIVAL SUBMISSIONS WHICH HAVE BEEN URGED ON BEHALF OF THE REVENUE AND THE ASSESSEE CAN BE DEALT WITH, BOTH AS A MATTE R OF FIRST PRINCIPLE, INTERPRETING THE SECTION AS IT STANDS AND ON THE BA SIS OF PRECEDENTS ON THE SUBJECT. INTERPRETING THE PROVISION AS IT STANDS AN D WITHOUT ADDING OR DEDUCTING FROM THE WORDS USED BY PARLIAMENT, IT IS CLEAR THAT UPON THE FORMATION OF A REASON TO BELIEVE UNDER SECTION 147 AND FOLLOWING THE ISSUANCE OF A NOTICE UNDER SECTION 148, THE ASSESSING OFFICE R HAS THE POWER TO ASSESS OR REASSESS THE INCOME, WHICH HE HAS REASON TO BELI EVE HAD ESCAPED ASSESSMENT AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX. THE WORDS 'AND ALSO' CANNOT BE IGNORED. THE INTERPRETATION WHICH T HE COURT PLACES ON THE PROVISION SHOULD NOT RESULT IN DILUTING THE EFFECT OF THESE WORDS OR RENDERING ANY PART OF THE LANGUAGE USED BY PARLIAMENT OTIOSE. PARLIAMENT HAVING USED THE WORDS 'ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT', TH E WORDS 'AND ALSO' CANNOT BE READ AS BEING IN THE ALTERNATIVE. ON THE CONTRARY, THE CORRECT INTERPRETATION WOULD BE TO REGARD THOSE WORDS AS BE ING CONJUNCTIVE AND CUMULATIVE. IT IS OF SOME SIGNIFICANCE THAT PARLIAM ENT HAS NOT USED THE WORD ITA NO. 207&208/JP/16 M/S DHARAM CHAND SOHAN LAL & COMPANY V/S ITO 5 'OR'. THE LEGISLATURE DID NOT REST CONTENT BY MEREL Y USING THE WORD 'AND'. THE WORDS 'AND', AS WELL AS 'ALSO' HAVE BEEN USED TOGET HER AND IN CONJUNCTION. THE SHORTER OXFORD DICTIONARY DEFINES THE EXPRESSIO N 'ALSO' TO MEAN 'FURTHER, IN ADDITION, BESIDES, TOO'. THE WORD HAS BEEN TREAT ED AS BEING RELATIVE AND CONJUNCTIVE. EVIDENTLY, THEREFORE, WHAT PARLIAMENT INTENDS BY USE OF THE WORDS 'AND ALSO' IS THAT THE ASSESSING OFFICER, UPON THE FORMATION OF A REASON TO BELIEVE UNDER SECTION 147 AND THE ISSUANCE OF A NOT ICE UNDER SECTION 148(2) MUST ASSESS OR REASSESS: (I) 'SUCH INCOME'; AND ALS O (II) ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDING S UNDER THE SECTION. THE WORDS 'SUCH INCOME' REFER TO THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND IN RESPECT OF WHICH THE ASSESSING OF FICER HAS FORMED A REASON TO BELIEVE THAT IT HAS ESCAPED ASSESSMENT. HENCE, T HE LANGUAGE WHICH HAS BEEN USED BY PARLIAMENT IS INDICATIVE OF THE POSITI ON THAT THE ASSESSMENT OR REASSESSMENT MUST BE IN RESPECT OF THE INCOME IN RE SPECT OF WHICH HE HAS FORMED A REASON TO BELIEVE THAT IT HAS ESCAPED ASSE SSMENT AND ALSO IN RESPECT OF ANY OTHER INCOME WHICH COMES TO HIS NOTICE SUBSE QUENTLY DURING THE COURSE OF THE PROCEEDINGS AS HAVING ESCAPED ASSESSMENT. IF THE INCOME, THE ESCAPEMENT OF WHICH WAS THE BASIS OF THE FORMATION OF THE REASON TO BELIEVE IS NOT ASSESSED OR REASSESSED, IT WOULD NOT BE OPEN TO THE ASSESSING OFFICER TO INDEPENDENTLY ASSESS ONLY THAT INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF T HE PROCEEDINGS UNDER THE SECTION AS HAVING ESCAPED ASSESSMENT. IF UPON THE ISSUANCE OF A NOTICE UNDER SECTION 148(2), THE ASSE SSING OFFICER ACCEPTS THE OBJECTIONS OF THE ASSESSEE AND DOES NOT ASSESS OR REASSESS THE INCOME WHICH WAS THE BASIS OF THE NOTI CE, IT WOULD NOT BE OPEN TO HIM TO ASSESS INCOME UNDER SOME OTHER IS SUE INDEPENDENTLY. PARLIAMENT WHEN IT ENACTED THE PROVISIONS OF SECTIO N 147 WITH EFFECT FROM 1-4-1989 CLEARLY STIPULATED THAT T HE ASSESSING OFFICER HAS TO ITA NO. 207&208/JP/16 M/S DHARAM CHAND SOHAN LAL & COMPANY V/S ITO 6 ASSESS OR REASSESS THE INCOME WHICH HE HAD REASON T O BELIEVE HAD ESCAPED ASSESSMENT AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH CAME TO HIS NOTICE DURING THE PROCEEDINGS. IN THE ABSENCE OF TH E ASSESSMENT OR REASSESSMENT OF THE FORMER, HE CANNOT INDEPENDENTLY ASSESS THE LATTER. 14. THE SECOND LINE OF PRECEDENT IS REFLECTED IN A JUDGMENT OF THE RAJASTHAN HIGH COURT IN CIT V. SHRI RAM SINGH [2008] 306 ITR 343 . THE RAJASTHAN HIGH COURT CONSTRUED THE WORDS USED BY PARLIAMENT IN SEC TION 147 PARTICULARLY THE WORDS THAT THE ASSESSING OFFICER 'MAY ASSESS OR REA SSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS E SCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF THE PROCEEDINGS' UNDER SECTION 147. THE RAJASTHAN HIGH COURT HELD AS FOLLOWS : '. . . IF IS ONLY WHEN, IN PROCEEDINGS UNDER SECTION 147 T HE ASSESSING OFFICER, ASSESSES OR REASSESSES ANY INCOME CHARGEAB LE TO TAX, WHICH HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, WIT H RESPECT TO WHICH HE HAD 'REASON TO BELIEVE' TO BE SO, THEN, ON LY IN ADDITION, HE CAN ALSO PUT TO TAX, THE OTHER INCOME, CHARGEABLE T O TAX, WHICH HAS ESCAPED ASSESSMENT, AND WHICH HAS COME TO HIS NOTIC E SUBSEQUENTLY, IN THE COURSE OF PROCEEDINGS UNDER SE CTION 147. TO CLARIFY IT FURTHER, OR TO PUT IT IN OTHER WORDS, IN OUR OPINION, IF IN THE COURSE OF PROCEEDINGS UNDER SECTION 147, THE ASSESSING OFF ICER WERE TO COME TO THE CONCLUSION, THAT ANY INCOME CHARGEABLE TO TAX, WHIC H, ACCORDING TO HIS 'REASON TO BELIEVE', HAD ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, DID NOT ESCAPE ASSESSMENT, THEN, THE MERE FACT THAT THE ASS ESSING OFFICER ENTERTAINED A REASON TO BELIEVE, ALBEIT EVEN A GENUINE REASON T O BELIEVE, WOULD NOT CONTINUE TO VEST HIM WITH THE JURISDICTION, TO SUBJ ECT TO TAX, ANY OTHER INCOME, CHARGEABLE TO TAX, WHICH THE ASSESSING OFFICER MAY FIND TO HAVE ESCAPED ASSESSMENT, AND WHICH MAY COME TO HIS NOTICE SUBSEQ UENTLY, IN THE COURSE OF PROCEEDINGS UNDER SECTION 147.' (EMPHASIS SUPPLIED) ITA NO. 207&208/JP/16 M/S DHARAM CHAND SOHAN LAL & COMPANY V/S ITO 7 11. IN THE INSTANT CASE, THE BASIS FOR FORMATION O F BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT AND IN RESPECT OF WHICH THE NOTI CE UNDER SECTION 148 HAS BEEN ISSUED RELATES TO PAYMENTS IN CASH IN CONTRAVE NTION TO SECTION 40A(3) OF THE I.T. ACT WHICH HAS ESCAPED DISALLOWANCE AND THU S HAS ESCAPED ASSESSMENT IN THE ORIGINAL ASSESSMENT PROCEEDINGS C OMPLETED U/S 143(3) OF THE ACT. ON PERUSAL OF THE REASSESSMENT ORDER PASS ED UNDER 147 READ WITH SECTION 143(3) OF THE ACT, IT IS NOTED THAT IN AY 2 008-09, NO DISALLOWANCE HAS BEEN MADE U/S SECTION 40A(3) WHICH FORM THE BASIS F OR REOPENING OF THE ASSESSMENT. THE AO HAS HOWEVER, BROUGHT TO TAX UNE XPLAINED CASH CREDITORS AMOUNTING TO RS 10 LACS WHICH HAS APPARENTLY COME T O HIS NOTICE DURING THE COURSE OF REASSESSMENT PROCEEDINGS. IN AY 2009-10, AGAIN SIMILAR POSITION EXIST WHEREIN NO DISALLOWANCE HAS BEEN MADE U/S SEC TION 40A(3) WHICH FORM THE BASIS FOR REOPENING OF THE ASSESSMENT. THE AO HAS HOWEVER, BROUGHT TO TAX UNEXPLAINED CASH CREDITORS AMOUNTING TO RS 10 L ACS AND EXPENSES WORTH RS 1.05 LACS HAVE BEEN DISALLOWED TOWARDS VARIOUS E XPENSES WHICH APPARENTLY COME TO HIS NOTICE DURING THE COURSE OF REASSESSMEN T PROCEEDINGS. 12. IN THE LIGHT OF ABOVE DISCUSSIONS, THE VERY FO UNDATION OF THE PROCEEDINGS U/S 147 ARE VITIATED AND ACCORDINGLY, W E ARE SETTING ASIDE THE ORDER PASSED BY THE AO U/S 147 FOR BOTH THE YEARS U NDER CONSIDERATION. IN THE RESULT, THE ADDITIONAL GROUND OF APPEAL IS ALLO WED FOR BOTH THE YEARS. THE GROUNDS ON MERIT BECOME INFRUCTIOUS AND HENCE DISMI SSED. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE DISP OSED OFF WITH ABOVE DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2017. SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER ITA NO. 207&208/JP/16 M/S DHARAM CHAND SOHAN LAL & COMPANY V/S ITO 8 JAIPUR DATED:- 01/09/2017 SANTOSH VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT - M/S DHARAM CHAND SOHAN LAL & COMPANY, A-13, NEW SABZI MANDI, ALWAR. 2. IZR;FKHZ@ THE RESPONDENT - ITO, WARD-2(3), ALWAR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, 6. XKMZ QKBZY@ GUARD FILE (ITA NO.207 & 208/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT REGISTRAR.