Kamala Bhandari, CHENNAI V. ACIT NCR 11, CHENNAI

ITA 2274/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0146 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 02-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M SRINIVASA RAO
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Reopening of assessment; Principle of natural justice; Assessment record; Revised return; Reason to believe; Reassessment proceedings
• Section: 143(3); 143(1); 131; 148

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A. NO. 2274/CHNY/2018 / ASSESSMENT YEAR: 2013-14 SMT. KAMALA BHANDARI, 3, DAVIDSON ST., CHENNAI 600 001. [PAN:AADPB4715A] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE 11, CHENNAI. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI K. BALASUBRAMANIAN, ADVOCATE / RESPONDENT BY : SHRI M. SRINIVASA RAO, CIT / DATE OF HEARING : 19.06.2019 /DATE OF PRONOUNCEMENT : 24.06.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 13, CHENNAI, DATED 08.06.2018 RELEVANT TO THE ASSESSMENT YEAR 2013-14. BESIDES RAISING VARIOUS GROUNDS ON MERITS, BY REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. V DCIT (2003) 259 ITR 19, THE ASSESSEE HAS MAINLY CHALLENGED THE ORDER OF REASSESSMENT PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 [ACT IN SHORT] BY I.T.A. NO. 2274/CHNY/18 2 STATING THAT NO REASONS FOR REOPENING OF ASSESSMENT WAS SUPPLIED INSPITE OF SPECIFIC REQUEST FROM THE ASSESSEE ON 27.09.2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL FILED HERE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 ON 30.07.2013 DECLARING TOTAL INCOME AT .36,50,380/- AND THE SAME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 147 OF THE ACT, AS THERE WAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX EXCEEDING ABOVE .1 LAKH HAS ESCAPED ASSESSMENT. ACCORDINGLY, NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 29.07.2016 AND DULY SERVED ON THE ASSESSEE. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED THE RETURN ON 23.09.2017 AND OTHER PARTICULARS AGAINST STATUTORY NOTICES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AR OF THE ASSESSEE WAS ASKED TO PRODUCE COMPLETE SHARE TRANSACTIONS DETAILS INCLUDING PURCHASE BILLS AND SALES BILLS, COPIES OF BANK STATEMENTS, COPIES OF CONTRACT NOTE AND COPY OF AGREEMENT FOR PURCHASE OF SHARES AND PAYMENTS, ETC. THE AR FURNISHED PURCHASE BILL OF SHARES, BANK ACCOUNT STATEMENTS, DP STATEMENTS AND SOME BROKER NOTES TO STRENGTHEN HIS CLAIM ON LONG TERM CAPITAL GAINS. THE ASSESSING OFFICER BELIEVED THAT SOME IMPORTANT CIRCUMSTANTIAL AS WELL AS DIRECT EVIDENCES TO SHOW THAT THE LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE IS NOT NATURAL BUT IS ARRANGED ONE, A SUMMON UNDER SECTION 131 OF THE ACT WAS ISSUED ON 17.11.2017 AND SWORN STATEMENTS WERE ALSO RECORDED FROM THE ASSESSEE ON I.T.A. NO. 2274/CHNY/18 3 22.11.2017. AFTER CONSIDERING THE SUBMISSIONS OF THE AR OF THE ASSESSEE, THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT WAS COMPLETED BY MAKING DISALLOWANCE OF SALE CONSIDERATION OF SHARES AS WELL AS ADDITION OF COMMISSION FOR PROVIDING ARRANGED CAPITAL GAINS TO THE ASSESSEE, THE ASSESSING OFFICER DETERMINED TOTAL TAXABLE INCOME OF THE ASSESSEE AT .54,18,428/-. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). WITH REGARD TO THE SERVICE OF REASONS FOR REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT, THE LD. CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAS GIVEN CLEAR-CUT REASONS FOR REOPENING STATING THAT THE ASSESSEE HAS INDULGED INTO SALE OF SHARES OF PENNY STOCK COMPANY BY UNSCRUPULOUS METHOD AND CLAIM LONG TERM CAPITAL GAIN WHICH WAS NOT GENUINE AND HAS MATERIAL IN HIS POSSESSION THAT INCOME HAS ESCAPED ASSESSMENT AND HELD THAT THE GROUND RAISED BY THE ASSESSEE THAT THE ASSESSING OFFICER HAS NOT SUPPLIED THE REASONS FOR REOPENING IS NOT SUSTAINABLE AND REJECTED THE SAME. THEREAFTER, THE LD. CIT(A) ADJUDICATED THE ISSUE ON MERITS AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BY FILING COPIES OF THE LETTER DATED 26.09.2017 AS WELL AS LETTER DATED 01.12.2017, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE I.T.A. NO. 2274/CHNY/18 4 ASSESSEE HAS SPECIFICALLY REQUESTED THE ASSESSING OFFICER TO FURNISH THE REASONS FOR REOPENING OF ASSESSMENT. HOWEVER, THE ASSESSING OFFICER HAS NOT FURNISHED THE SAME AND THUS, THE REASSESSMENT IS, THEREFORE, AB INITIO VOID IN VIEW OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. V DCIT (SUPRA). THUS, THE LD. COUNSEL PRAYED FOR QUASHING THE REASSESSMENT ORDER. 5. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. HAVING RECEIVED THE LETTER DATED 26.09.2017 REQUESTING TO FURNISH REASONS FOR REOPENING OF ASSESSMENT, THE DEPARTMENT HAS DULY ACKNOWLEDGED THE SAME. HOWEVER, ON PERUSAL OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, NOWHERE IN THE ORDER, THE ASSESSING OFFICER HAS MADE A MENTION ABOUT REQUEST OF THE ASSESSEE FOR REASONS TO REOPENING OF ASSESSMENT AS WELL AS THE ASSESSING OFFICER HAS ADMITTED TO HAVE SUPPLIED THE REASONS FOR REOPENING OF ASSESSMENT. EXCEPT RELYING UPON THE APPELLATE ORDER, THE DEPARTMENT COULD NOT PRODUCE ANY EVIDENCE OF HAVING SUPPLIED THE REASONS FOR REOPENING OF ASSESSMENT TO THE ASSESSEE. I.T.A. NO. 2274/CHNY/18 5 6.1 IT IS NOT CLEAR AS TO WHETHER THE REASSESSMENT NOTICE WAS SERVED JUST TO MAKE AN ENQUIRY OR VERIFICATION OR THE ASSESSING OFFICER HAS ACTUALLY RECORDED THE REASONS AND SERVED THE SAME TO THE ASSESSEE FOR FILING OBJECTION. IF IT IS SO, THEN, DOES IT MEAN THAT THE ASSESSING OFFICER IS BOUND TO PROVIDE THE REASON FOR REOPENING TO THE ASSESSEE? ANSWER IS AFFIRMATIVE. THE ASSESSING OFFICER IS DUTY BOUND TO PROVIDE THE COPY OF REASON RECORDED WITHIN REASONABLE TIME AS PER GUIDELINES OF HONBLE SUPREME COURT IN CASE OF GKN DRIVESHAFTS (INDIA) LTD. V DCIT (SUPRA), WHEREIN, THE HONBLE SUPREME COURT HAS HELD AS UNDER: WHEN A NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961, IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICE IS TO FILE THE RETURN AND, IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING THE NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, THE NOTICE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. FURTHER, IN THE CASE OF MITHLESH KUMAR TRIPATHI V. CIT 280 ITR 16, THE HON'BLE ALLAHABAD HIGH COURT HAS DEALT THE ISSUE IN DETAIL AND THE RELEVANT PORTION OF THE JUDGMENT READS AS UNDER: THE STATUTE CONFERS JURISDICTION AND EMPOWERS THE ASSESSING OFFICER UNDER SECTION 148(2)OF THE ACT TO REOPEN ASSESSMENT PROCEEDINGS. SECTION 148(2) EXPRESSLY REQUIRES 'RECORDING OF REASONS' WHICH HAS A DEFINITE PURPOSE (AND IS NOT A MERE FORMALITY ON PAPER), I.E., TO AVOID ARBITRARINESS OR BIASED OR MALA FIDE ACTION BY THE TAXING AUTHORITIES. SECTION 148(2) IS SILENT REGARDING COMMUNICATION OF REASONS. THE PROVISION HAS TO BE INTERPRETED IN A MANNER WHICH MAKES IT MEANINGFUL AND PURPOSIVE. KEEPING THE OBJECT OF THE LEGISLATURE IN MIND, THE COURTS, INCLUDING THE SUPREME COURT, HAVE INTERPRETED THE SECTION BY LAYING DOWN THAT REASONS HAVE TO BE COMMUNICATED, AS I.T.A. NO. 2274/CHNY/18 6 OTHERWISE THE SAME WILL REMAIN A MERE FORMALITY WITH NO ULTIMATE PURPOSE OR OBJECT TO BE SERVED(EMPHASIS BY US).THERE IS ALSO NOTHING IN SECTION 148(2) OF THE ACT INDICATING EXPRESSLY OR OTHERWISE, THAT AN ASSESSEE CAN ASK FOR REASONS TO BE COMMUNICATED ONLY AFTER HE HAS FILED A 'REVISED RETURN' IN RESPONSE TO THE NOTICE UNDER THAT SECTION. THE RECORDING OF REASONS AND 'OBTAINING APPROVAL' TO GIVE NOTICE MAY BE 'ADMINISTRATIVE ACTION' BUT THE VERY ACT OF GIVING NOTICE BACKED BY GOOD AND VALID REASONS UNDER SECTION 148(2) OF THE ACT IS A QUASI-JUDICIAL FUNCTION. IF REASONS ARE SUPPLIED ALONG WITH THE NOTICE UNDER SECTION 148(2), IT WILL OBVIATE UNNECESSARY HARASSMENT TO THE ASSESSEE AS WELL AS TO THE REVENUE BY AVOIDING UNNECESSARY LITIGATION WHICH WILL SAVE COURTS ALSO FROM BEING INVOLVED IN UNPRODUCTIVE LITIGATIONS. ABOVE ALL IT WILL BE IN CONSONANCE WITH THE PRINCIPLES OF NATURAL JUSTICE.(EMPHASIS SUPPLIED) IN THE MATTER OF KLM ROYAL DUTCH AIRLINES(292 ITR 49),THE HON'BLE DELHI HIGH COURT HAS HELD THAT 'REASON TO BELIEVE' FOR ISSUING A REASSESSMENT-NOTICE CONSTITUTES THE 'SPRINGBOARD' FOR THE SECTION 147/148 ACTION AND 'SIMULTANEOUSLY' OR 'IMMEDIATELY AFTER THE ASSESSEE' FILES A RETURN, IN COMPLIANCE OF THE NOTICE, IT WOULD BE 'ENTITLED' TO BE APPRISED OF THE REASON. 6.2 FROM THE ABOVE JUDICIAL PRECEDENTS, IT IS CLEAR THAT THE REASONS RECORDED FOR REOPENING OF ASSESSMENT SHOULD HAVE BEEN SERVED ON THE ASSESSEE. ONCE THE ASSESSING OFFICER IS ISSUING NOTICE UNDER SECTION 148 OF THE ACT, HE IS DUTY BOUND TO SERVICE THE REASONS RECORDED FOR REOPENING OF ASSESSMENT TO FACILITATE THE ASSESSEE TO FILE THE OBJECTION BEFORE THE ASSESSING OFFICER FOR ADJUDICATION AND THE ASSESSING OFFICER SHOULD HAVE SPECIFICALLY MENTIONED IN THE ASSESSMENT ORDER AS TO HOW THE OBJECTION OF THE ASSESSEE IS REJECTED. IN THE ASSESSMENT, THERE IS NO MENTION ABOUT SERVICE OF REASONS RECORDED BEFORE INITIATING PROCEEDINGS UNDER SECTION 148 OF THE ACT OR THE ADJUDICATION OF THE OBJECTIONS RAISED BY THE ASSESSEE. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE DIRECT THE LD. CIT(A) TO CALL FOR I.T.A. NO. 2274/CHNY/18 7 THE ASSESSMENT RECORDS AND VERIFY AS TO WHETHER THE ASSESSEE WAS SERVED WITH THE REASONS RECORDED BEFORE INITIATING REASSESSMENT PROCEEDINGS SINCE THE LD. CIT(A) HAS MENTIONED IN HIS APPELLATE ORDER AT PAGE 15 THAT THE ASSESSING OFFICER HAS GIVEN CLEAR-CUT REASONS FOR REOPENING STATING THAT THE ASSESSEE HAS INDULGED INTO SALE OF SHARES OF PENNY STOCK COMPANY BY UNSCRUPULOUS METHOD AND CLAIM LONG TERM CAPITAL GAIN WHICH WAS NOT GENUINE AND HAS MATERIAL IN HIS POSSESSION THAT INCOME HAS ESCAPED ASSESSMENT. IN CASE, THE ASSESSING OFFICER HAS NOT RECORDED THE REASONS FOR REOPENING OF ASSESSMENT AND SERVED ON THE ASSESSEE, OR A NOTICE UNDER SECTION 148 OF THE ACT WAS SIMPLY ISSUED TO MAKE ENQUIRY OR VERIFICATION, THEN, THE LD. CIT(A) IS DIRECTED TO QUASH THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. SECTION 147 OF THE ACT. THE LD. CIT(A) SHOULD KEEP IN MIND THAT THE ASSESSEE HAS VERY WELL FILED EVIDENCE FOR REQUESTING REASONS RECORDED FOR REOPENING OF ASSESSMENT DURING THE COURSE OF APPELLATE PROCEEDINGS AS WELL AS TRIBUNAL, WHEREAS, NOWHERE IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MADE A MENTION ABOUT ADJUDICATION OF THE OBJECTIONS OF THE ASSESSEE THAT MIGHT HAVE FILED AGAINST THE SERVICE OF REASONS FOR REOPENING OF ASSESSMENT. SINCE THE LEGAL ISSUE OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT IS REMITTED BACK TO THE FILE OF THE LD. CIT(A), ADJUDICATING THE ISSUE ON MERITS, AT THIS JUNCTURE, IS NOT REQUIRED. I.T.A. NO. 2274/CHNY/18 8 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 24 TH JUNE, 2019 IN CHENNAI. SD/- SD/- (INTURI RAMA RAO) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 24.06.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.