K. Thanikachalam, CHENNAI V. DCIT, CHENNAI

ITA 2119/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8005 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 14-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Tangible material; Reason to believe; Reassessment proceedings; FORM 26AS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 143(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B (SMC), CHENNAI , ! BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER ./ ITA NO.2119 /MDS/2016 $ % &'% / ASSESSMENT YEAR : 2007-08 K.THANIKACHALAM, NO.18-A, GIRIJA GARDEN, DEVADI ST. MYLAPORE, CHENNAI 600 004. [PAN: AAEPT 1404B ] ()*/ APPELLANT ) VS. DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, CHENNAI 600 034. (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SHRI T.VASUDEVAN, ADVOCATE +,)* - . /RESPONDENT BY : SHRI K.RAVI, JT. CIT / & - 0 /DATE OF HEARING : 18.01.2017 1' - 0 /DATE OF PRONOUNCEMENT : 23.01.2017 / O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE ORD ER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI (CIT(A) FOR SHORT) DATED 30.03.2016, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSE SSMENT U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) DAT ED 31.12.2014 FOR ASSESSMENT YEAR (AY) 2007-08. 2. THE FIRST ISSUE ARISING IN THIS APPEAL, RAISED P ER GROUNDS 2 TO 4, IS THE VALIDITY OF REOPENING OF THE ASSESSMENT. THE BASIS OF THE CH ALLENGE IS THAT THERE IS NO FRESH 2 ITA NO.2119 /MDS/2016 (AY 2007-08) K.THANIKACHALAM V. DY. CIT MATERIAL WITH THE ASSESSING AUTHORITY FOR ISSUING N OTICE U/S. 148, WHICH IS ON 14.03.2014, I.E., BEYOND A PERIOD OF FOUR YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR. RELIANCE IS PLACED ON CIT V. ORIENT CRAFT LTD. [2013] 354 ITR 536 (DEL), WHEREIN IT STANDS HELD THAT FRESH MATERI AL IS NECESSARY FOR REASSESSMENT EVEN IF THERE IS NO ASSESSMENT U/S. 143(3) EARLIER AND THE RETURNS STANDS PROCESSED U/S. 143(1). 3. THE PARTIES STAND HEARD AND THE MATERIAL ON R ECORD PERUSED. THE ASSESSEES CHALLENGE IS WHOLLY WITHOUT MERIT. THE ASSESSING OFFICER (AO) HAS RELIED ON FORM-26AS FOR THE CURRENT YEAR, THE D IFFERENCE BETWEEN THE SUMS REFLECTED WHEREIN - ON WHICH TAX STANDS DEDUCTED AT SOURCE, AND THAT RETURNED AS INCOME, FORMS THE BASIS OF HIS REASON/S TO BELIEVE ESCAPEMENT OF INCOME/S. FORM- 26AS IS EXTRINSIC TO THE RETURN OF INCOME, SO THAT THE ASSESSEES CLAIM IS FACTUALLY INCORRECT . AGAIN, THERE IS NO QUESTION OF ANY CHANGE OF OPIN ION IN-AS-MUCH AS THERE IS NO FORMATION OF OPINION EARLIER U/S. 143(1). NO DOUBT THE APEX COURT IN ASST. CIT V. RAJESH JHAVERI STOCK BROKERS (P.) LTD. [2007] 291 ITR 500 (SC) CLARIFIED THAT IT WOULD BE INCORRECT TO EQUATE OR CONSIDER TH E PROCESSING OF RETURN U/S. 143(1) AS AN ASSESSMENT, WHICH EXPRESSION STANDS USED IN THE STATUTE TO DENOTE A WIDE RANGE OF MEANINGS, I.E., DEPENDING ON THE CONTEXT. TRAVERSING THE PROVISION, NOTING THE CHANGES THEREIN SINCE 01.04.1989, IT EXPLAINED AS UNDER, SO THAT AN INTIMATION U/S. 143(1)(A) COULD NOT BE REGARDED AS AN ASSESSM ENT ORDER: (PG. 508) THUS, THE LEGISLATIVE INTENT IS VERY CLEAR FROM THE USE OF THE WORD INTIMATION AS SUBSTITUTED FOR ASSESSMENT THAT T WO DIFFERENT CONCEPTS EMERGED. WHILE MAKING AN ASSESSMENT, THE ASSESSING OFFICER IS FREE TO MAKE ANY ADDITION AFTER GRANT OF OPPORTUNITY TO THE ASSESSEE. BY MAKING ADJUSTMENTS UNDER THE FIRST PROVISO TO SECTION 143( 1)(A), NO ADDITION WHICH IS IMPERMISSIBLE BY THE INFORMATION GIVEN IN THE RE TURN COULD BE MADE BY THE ASSESSING OFFICER. THE REASON IS THAT UNDER SECTION 143(3)(A) NO OPPORTUNITY IS GRANTED TO THE ASSESSEE AND THE ASSESSING OFFICE R PROCEEDS ON HIS OPINION ON THE BASIS OF THE RETURN FILED BY THE ASSESSEE. THE VERY FACT THAT NO OPPORTUNITY OF BEING HEARD IS GIVEN UNDER SECTION 1 43(1)(A) INDICATES THAT THE ASSESSING OFFICER HAS TO PROCEED ACCEPTING THE RETURN AND MAKING THE PERMISSIBLE ADJUSTMENTS ONLY. AS A RESULT OF INSERT ION OF THE EXPLANATION 3 ITA NO.2119 /MDS/2016 (AY 2007-08) K.THANIKACHALAM V. DY. CIT IT WAS ACCORDINGLY HELD THAT TAXING INCOME ESCAPIN G ASSESSMENT IN THE CASE OF AN INTIMATION UNDER SECTION 143(1)(A) IS COVERED BY THE MAIN PROVISION OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL 1 , 1989, AND INITIATING REASSESSMENT PROCEEDINGS IN THE CASE OF INTIMATION WOULD BE COVERED BY THE MAIN PROVISION OF SECTION 147 AND NOT THE PROVISO THERETO. ONLY ONE CONDITION HAS TO BE SATISFIED. FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDI NGS WHEN INTIMATION UNDER SECTION 143(1) HAS BEEN ISSUED . NOTICE U/S. 148 WAS ACCORDINGLY UPHELD, STATING THAT ONLY ONE CONDITION , I.E., REASON TO BELIEVE, WAS REQUIRED TO BE SATIS FIED. IN FACT, POST 01.06.1999, EVEN A PRIMA FACIE ADJUSTMENT TO THE RETURN OF INCOME IS PRECLUDED BY LAW, AND THE ONLY EXAMINATION THEREO F U/S. 143(1) IS THE VERIFICATION OF THE CORRECTNESS OF THE TAX LIABILITY OR THAT REF UNDABLE AS PER THE RETURN OF INCOME. THE CASE LAW IN THE MATTER IS LEGION, BEGINNING WITH THE LAND MARK DECISION BY THE APEX COURT IN KALYANJI MAVJI & CO. V. CIT [1976] 102 ITR 287 (SC), RELIED UPON, AMONG OTHERS, INCLUDING BY THE HON'BLE DELHI HIGH COURT (VIZ. OPG METALS AND FINSEC LTD. VS. CIT [2013] 358 ITR 144 (DEL); CONSOLIDATED PHOTO AND FINVEST LTD. VS. ACIT [2006] 281 ITR 394 (DEL); HONDA SIEL POWER PRODUCTS LTD. VS. DY. CIT [2012] 340 ITR 53 (DEL), BY THE LD. CIT(A), TO NONE OF WHICH THE ASSESSEE WAS DURING HEARING ABLE TO REBUT. THE HONB LE APEX COURT HAS THEREIN CLARIFIED IN UNAMBIGUOUS TERMS THAT THE INFORMATIO N U/S. 34(1)(B) WOULD INCLUDE THAT OBTAINED EVEN FROM THE RECORD OF THE ORIGINAL ASSESSMENT FROM AN INVESTIGATION OF THE MATERIALS ON THE RECORD OR THE FACTS DISCLOSED THEREBY OR FROM OTHER ENQUIRY OR RESEARCH INTO FACTS OR LAW. WE DO NOT CONSIDER IT NECESSARY TO DWELL FURTHER IN THE MATTER IN VIEW OF THE ABSENCE OF FACTUAL BASIS TO THE ASSESSEES CLAIM. A LL THAT HAS TO BE SEEN IS THAT THE AO ENTERTAINS A HONEST REASON TO BELIEVE, WHICH HAS FURTHER A FIRM BASIS TO IT ( RAYMOND WOOLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC)), AND WHICH IS SO IN THE PRESENT CASE. THE PROCESSING OF RETURN EARLIER IS OF LITTLE CONSEQUENCE IN-AS- MUCH AS THE AO HAS NO POWER TO EXAMINE THE RETURN O R MAKE ANY INQUIRY IN THE MATTER, MUCH LESS CARRY OUT ANY ADJUSTMENT. IN FACT , WE FIND THAT AN ADJUSTMENT, 4 ITA NO.2119 /MDS/2016 (AY 2007-08) K.THANIKACHALAM V. DY. CIT I.E., ON THE BASIS OF THE RETURN, IS POSSIBLE U/S. 143(1) AS SUBSTITUTED BY FINANCE ACT, 2008 W.E.F 01.04.2008, I.E., AY 2008-09 ONWARD S. IT IS THEREFORE FROM AY 2008-09 THAT FORM 26AS, EVEN IF WERE TO BE A PART O F THE RETURN OF INCOME, COULD FORM A BASIS OF ADJUSTMENT U/S. 143(1) WHERE THE IN FORMATION THEREIN IS INCONSISTENT WITH THAT PER THE OTHER PART OF THE RE TURN. THE DECISION IN ORIENT CRAFT LTD. (SUPRA) WOULD NOT APPLY IN THE FACTS OF THE CASE AS WE HAVE FOUND THAT THERE IS TANGIBLE MATERIAL IN THE FORM OF FORM-26AS, ABSENCE OF ANY OF WHICH LED TO THE SAID DECISION, AND WHICH INFORMS THE REASON TO BELI EVE IN THE INSTANT CASE. IN FACT, WE OBSERVE, WITH RESPECT, THAT THE HONBLE COURT HA S NOT CONSIDERED THE ASPECT THAT, POST 01.06.1999, I.E., PRIOR TO AY 2008-09, N O ADJUSTMENT EVEN ON THE BASIS OF THE RETURN COULD BE MADE. IN FACT, EVEN HERE, I T IS DOUBTFUL IF SUCH AN ADJUSTMENT WOULD, IN VIEW OF THE POWER TO CALL THE ASSESSEE OR SEEK CLARIFICATION FROM HIM, WOULD QUALIFY TO BE AN ASSESSMENT. FORMAT ION OF OPINION, AFTER ALL, CONTEMPLATES AND CARRIES WITHIN ITS AMBIT THE ABILI TY/COMPETENCE TO SEEK ALL RELEVANT INFORMATION IN ARRIVING AT THE SAID OPINIO N. THE ASSESSEES CHALLENGE TO THE AO'S ASSESSMENT ACCORDINGLY FAILS. 4. ON MERITS, THOUGH THE APPEAL AGITATES EACH OF THE ADDITIONS SEPARATELY VIDE SEPARATE GROUNDS, THE SAME RAISE A COMMON ISSUE PER THE BALANCE GROUNDS (GROUNDS 5-9, WITH GD.10 BEING GENERAL IN NATURE, W ARRANTING NO ADJUDICATION). THE ASSESSEE DID NOT RETURN THE RENTAL INCOME OF A B UILDING LET TO A DLF HOME DEVELOPERS PVT. LTD., AS WELL AS MAINTENANCE CHARGES FOR THE SAME, FOR THE MONTH OF MARCH, 2007, WHICH WAS IN FACT FOUND TO BE THE R EASON FOR THE DIFFERENCE BETWEEN THE RETURNED INCOME/S AND THAT PER FORM-26A S. THE ASSESSEES CLAIM THAT THE SAME WERE OFFERED TO TAX AS THE INCOME FOR THE FOLLOWING YEAR, I.E., AY 2008- 09, WAS FOUND AS OF NO MOMENT AS THE ASSESSEES MET HOD OF ACCOUNTING WAS ADMITTEDLY MERCANTILE. 5. THE PARTIES STAND HEARD AND THE MATERIAL ON RECOR D PERUSED. THE ASSESSEES CLAIM THAT THOUGH FOLLOWING MERCANTILE METHOD OF AC COUNTING, EVEN AS STATED IN HIS 5 ITA NO.2119 /MDS/2016 (AY 2007-08) K.THANIKACHALAM V. DY. CIT AUDIT REPORT, HE YET FOLLOWS CASH BASIS (OF ACCOUNT ING) IN RESPECT OF RENTAL INCOME AND MAINTENANCE CHARGES, OFFERED AS BUSINESS INCOME , CANNOT BE COUNTENANCED. SEC. 145, POST 01.04.1997, MANDATES FOLLOWING EITHE R MERCANTILE OR CASH METHOD OF ACCOUNTING, SO THAT ADOPTING A HYBRID OR MIXED METH OD OF ACCOUNTING IS NOT PERMISSIBLE W.E.F. AY 1997-98 ONWARDS. AGAIN, EACH YEAR IS AN INDEPENDENT UNIT OF ASSESSMENT, SO THAT INCOME OF EACH YEAR IS TO BE BR OUGHT TO TAX FOR THAT YEAR ALONE, AND IT BEING ASSESSED FOR ANOTHER YEAR CANNOT BE A GROUND FOR IT BEING NOT ASSESSED FOR THE RIGHT YEAR ( CIT V. BRITISH PAINTS INDIA LTD. [1991] 188 ITR 44 (SC)). THIS IN FACT ALSO EMANATES FROM A CONJOINT READING OF SE CTIONS 4, 5, 28 & 145 OF THE ACT. TRUE, INCOME CANNOT BE SUBJECT TO TAX TWICE IN THE A SSESSEES HANDS. THE ASSESSEE IS AT LIBERTY TO MOVE THE AO TO CLAIM APPROPRIATE RELI EF IN RESPECT OF THE IMPUGNED INCOMES FOR AY 2008-09. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISM ISSED. ORDER PRONOUNCED ON JANUARY 23, 2017 AT CHENNAI . SD/- ( ) ( SANJAY ARORA ) !/ ACCOUNTANT MEMBER / CHENNAI, 2 / DATED, JANUARY 23, 2017 . EDN 3 - +$045 65'0 / COPY TO: 1. )* / APPELLANT 2. +,)* / RESPONDENT 3. / 70 () / CIT(A) 4. / 70 / CIT 5. 5&9: +$0$ / DR 6. :;% < / GF