Shri Bharat Ramjibhai Patel, Mehsana V. The Income Tax Officer, Ward-1, Mehsana

ITA 229/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8630 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SUTARIA
• Assessee Lawyers: GRISHMA SONI
• Keywords: Search and seizure; Accommodation entries; Competent authority; Reason to believe; Reassessment proceedings
• Section: 147

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.229/AHD/2015 ( / ASSESSMENT YEAR : 2005-06) BHARAT RAMJIBHAI PATEL 3, PRAKASH SOCIETY RADHANPUR CHAR RASTA HIGHWAY ROAD MEHSANA 384 002 / VS. THE ITO WARD WARD-1 MEHSANA # ./ ./ PAN/GIR NO. : ABIPP 6693 F ( #% / APPELLANT ) .. ( &#% / RESPONDENT ) #%' / APPELLANT BY : MS. GRISHMA SONI, AR &#%(' / RESPONDENT BY : SHRI DEEPAK SUTARIA, SR.DR )*(+ / DATE OF HEARING 23/08/2017 ,-./(+ / DATE OF PRONOUNCEMENT 04/09/2017 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-GA NDHINAGAR, [CIT(A) IN SHORT] DATED 01/10/2014 FOR THE ASSESSMENT YEAR (AY) 2005-06 ARISING AS A RESULT OF ASSESSMENT ORDER UND ER S.143(3) OF THE ITA NO. 229/AHD /2015 BHARAT RAMJIBHAI PATEL VS. ITO ASST.YEAR 2005-06 - 2 - INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') DATED 29/12/2011. 2. THE ASSESSEE HAS FILED GROUNDS OF APPEAL WHEREI N THE ASSESSEE HAS INTER-ALIA CHALLENGED THE ASSUMPTION OF JURISDICTION UNDER S. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') WITHOUT APPLYING WITH THE PROVISIONS OF SECTION 147 R.W.S.1 51 OF THE ACT. 3. THE LD.AR FOR THE ASSESSEE MS.GRISHMA SONI TO BE GIN WITH, HAS VEHEMENTLY CHALLENGED THE JURISDICTION ASSUMED BY T HE ASSESSING OFFICER (AO) UNDER S.147 OF THE ACT. THE LD.AR FOR THE A SSESSEE CONTENDED THAT IN THIS CASE THE ASSESSMENT WAS COMPLETED UNDE R S.143(1) OF THE ACT. THEREAFTER, THE CASE WAS REOPENED UNDER S.147 BY IS SUANCE OF NOTICE UNDER S.148 OF THE ACT DATED 20/03/2011. CONSEQUEN TLY, THE ASSESSMENT WAS COMPLETED UNDER S.143(3) R.W.S.147 OF THE ACT V IDE ORDER DATED 29/12/2011. AS PER THE AFORESAID ASSESSMENT, THE T OTAL INCOME DECLARED BY THE ASSESSEE AT RS.95,640/- WAS SUBSTITUTED BY A SSESSED INCOME OF RS.5,19,540/- BY MAKING AN ADDITION OF RS.4,23,900/ - ON ACCOUNT OF LONG TERM CAPITAL GAINS TREATED AS INCOME FROM OTHER SOU RCES. THE LD.AR ADVERTED OUR ATTENTION TO THE REASONS RECORDED UNDE R S.148(2) AND SUBMITTED THAT THE REASONS SO RECORDED SMACKS OF EM PTY FORMALITY AND WITHOUT APPLICATION OF MIND, APPARENTLY PRESUMING THAT AN ASSESSMENT UNDER S.143(3) OF THE ACT WAS CARRIED OUT EARLIER. THE LD.AR THEREAFTER REFERRED TO REASON RECORDED AND REASSESSMENT ORDER TO DEMONSTRATE FOR ITA NO. 229/AHD /2015 BHARAT RAMJIBHAI PATEL VS. ITO ASST.YEAR 2005-06 - 3 - APPROVAL FROM THE COMPETENT AUTHORITY OF HIS ACTION AND SUBMITTED THAT THE APPROVAL UNDER S.151 OF THE ACT, IN THE INSTANT CASE, HAS BEEN TAKEN FROM THE COMMISSIONER WHO IS NOT THE COMPETENT AUTH ORITY FOR GRANTING APPROVAL AS THE ASSESSMENT WAS NOT EARLIER CARRIED OUT UNDER S.143(3) OF THE ACT. ALTHOUGH THE NOTICE UNDER S.148 HAS BEEN ISSUED AFTER THE EXPIRY OF A PERIOD OF FOUR YEARS FROM THE END OF THE RELEV ANT AY 2005-06, THE COMPETENT AUTHORITY FOR OBTAINING SUCH APPROVAL IS JT.CIT/ADDL.CIT IN DISTINCTION TO THE COMMISSIONER EVEN WHILE HE CO MMANDS SUPERIOR AUTHORITY. THUS, IN VIEW OF THE WRONG APPROVAL, TH E NOTICE UNDER S.148 OF THE ACT IS VITIATED AND CONSEQUENTLY THE ENTIRE R E-ASSESSMENT ORDER IS NULL AND VOID. 4.1. THE LD.AR SUBMITTED THAT THE ACCORD OF WRONG A PPROVAL WILL VITIATE THE ASSUMPTION OF JURISDICTION UNDER S.147 OF THE ACT NOTWITHSTANDING THE FACT THAT AUTHORITIES SUPERIOR TO THE COMPETENT AUTHORITY DESIGNATED FOR SUCH APPROVAL HAS ACTUALLY ENDORSED THE ACTION OF THE AO. IT WAS STATED THAT THE IDENTICAL ISSUE HAS BEEN DEALT WITH IN FAVOUR OF ASSESSEE BY THE DECISION OF THE COORDINAT E BENCH RENDERED IN THE CASE OF ARVINDBHAI RAMJIBHAI PATEL (HUF) VS. IT O IN ITA NO.3448/AHD/2014 FOR AY 2005-06 DATED 12/06/2017. 5. THE LD.DR FOR THE REVENUE, MR.DEEPAK SUTARIA COU LD NOT CONTROVERT THE CLAIM OF THE ASSESSEE THAT APPROVAL HAS BEEN OBTAINED FROM ITA NO. 229/AHD /2015 BHARAT RAMJIBHAI PATEL VS. ITO ASST.YEAR 2005-06 - 4 - ADDL.COMMISSIONER AND NOT THE COMMISSIONER CONCERNE D. THE LD.DR HOWEVER RELIED UPON THE ORDER OF THE CIT(A). 6. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. THE OBJECTION ON THE ASSUMPTION OF THE JURISDICTION HAS BEEN DEALT WITH IN GREAT LENGTH BY THE COORDINATE BENCH IN ARVINDBHAI RAMJIBHAI PATEL (SUPRA) WHERE ONE OF US IS A PARTY TO THE DECISION. THE RELEVANT PARA OF THE ORDER OF THE ITAT IN THE AFORESAID CASE IS REPR ODUCED HEREUNDER:- 5. AS THE OBJECTION OF THE ASSESSEE GOES TO THE RO OT OF THE MATTER, WE CONSIDER IT APPROPRIATE TO EXAMINE THE PRELIMINARY ISSUE OF LAC K OF JURISDICTION UNDER S.147 OF THE ACT FIRST. THE REASONS RECORDED UNDER S.147/148 WO ULD BE PERTINENT TO ADJUDICATE THE ISSUE AND THEREFORE REPRODUCED HEREUNDER:- REASON RECORDED FOR REOPENING ASSESSMENT IN THE CA SE OF SHRI PATEL ARVINDBHAI RAMJIBHAI, HUF, PROP: AUTO ENTERPR ISE, PAN: AADHP 1984 M A.Y. 2005-06 IN THE CASE OF SHRI PATEL ARVINDBHAI RAMJIBHAI (HUF ), PROP: OF AUTO ENTERPRISE, IT IS FOUND THAT HE HAS FILED RETURN OF INCOME FILED ON 2 8 /10/2005 DECLARING TOTAL INCOME AT RS.1,88,970/-. THE ASSESSEE HAS ALSO SHOWN AGRIC ULTURAL. INCOME OF RS. 46,950/- WHICH IS CLAIMED TO BE EXEMPTED FROM INCOME-TAX. TH E RETURN OF INCOME FILED HAS BEEN PROCESSED U/S. 143(1) OF THE I.T. ACT ON 29.1 2.2005. AN INTIMATION DT. 16/03/2011 WAS RECEIVED FROM INVE STIGATION WING, AHMEDABAD ON 21/03/2011 GIVING DETAILS OF INFORMATION REGARDING BENEFICIARIES OF MAHASAGAR SECURITIES PVT. LTD. (NOW KNOWN AS ALANG SECURITIES PVT. LTD.) WHEREIN DETAILS OF GROUP SHARE SCAM WAS ELABORATED. FROM THE DETAILS R ECEIVED, IT IS OBSERVED THAT SEARCH AND SEIZURE ACTION 132 OF THE I.T. ACT WAS U NDERTAKEN IN THE CASE OF M/S.MAHASAGAR SECURITIES PVT.LTD. BY THE DDIT (INVE STIGATION), UNIT-L(4), MUMBAI ON 25/11/2009. THE SEARCH LED TO DETAILED INVESTIGA TION REGARDING TRANSACTIONS TAKEN IN THE BANK ACCOUNTS OF THE CONCERNED COMPANY AND I TS SISTER CONCERNS I.E. GOLD STAR FINVEST (PVT) LTD. ETC. THE DIRECTORS OF THESE COMP ANIES ARE SHRI MUKESH M.CHOKSHI ITA NO. 229/AHD /2015 BHARAT RAMJIBHAI PATEL VS. ITO ASST.YEAR 2005-06 - 5 - AND SHRI JAYESH K.SAMPAT. DURING THE COURSE OF SE ARCH, IT IS FOUND THAT THE GROUP COMPANIES ARE ENGAGED IN FRAUDULENT BILLING ACTIVIT IES AND INDULGE IN THE BUSINESS OF PROVIDING BOGUS SPECULATION PROFIT/ LOSS, SHORT TER M/ LONG TERM CAPITAL GAIN/LOSS, SHARE APPLICATION MONEY, COMMODITY PROFIT/ LOSS ON COMMODITY TRADING (THROUGH MCX) SINCE MANY YEARS. ON VERIFICATION OF THE LIST OF CLIENTS, WHO HAVE TAKEN ACCOMMODATION ENTRIES FROM THE ABOVE GROUP COMPANIE S, IT IS OBSERVED BY THE UNDERSIGNED THAT THE PRESENT ASSESSEE SHRI PATEL AR VINDBHAI RAMJIBHAI (HUF), PROP: OF AUTO ENTERPRISE, IS ONE OF THE BENEFICIARIES OF ACCOMMODATION ENTRIES. TOTAL OF ACCOMMODATION ENTRIES RECEIVED BY SHRI ARVINDBHAI R AMJIBHAI PATEL DURING F.Y.2004-05 PERTAINING TO A.Y.2005-06 IS TO THE TUN E OF RS. 4,23,095/-. IT IS SEEN FROM THE REGULAR RETURN OF INCOME FILED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION THAT SUCH TRANSACTION AND THE RELATAB LE INCOME HAS NOT BEEN REFLECTED THEREIN. THUS, INCOME TO THE EXTENT RELATABLE TO TH E REPORTED UNDISCLOSED TRANSACTIONS OF RS. 4,23,095/- HAS ESCAPED ASSESSMENT. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIEV E THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULL AND TRULY ALL MATERIA L FACTS NECESSARY FOR HIS ASSESSMENT AND ACCORDINGLY NO OPINION WAS FORMED IN THIS REGAR D IN THE ORIGINAL ASSESSMENT. ACCORDINGLY, I HAVE REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT TO THE EXTENT STATED ABOVE. PROPOSAL WAS SENT FOR REOPENIN G OF THE ASSESSMENT AND THE CIT, GANDHINAGAR VIDE LETTER NO.CIT/GNR/148/HBS/2010-11 DATED 30-3-2011 APPROVED ACTION U/S. 147 OF THE I T ACT. ACCORDINGLY ASSESSM ENT HAS REOPENED U/S. 147 OF THE I T ACT. 6. A BARE READING OF THE AFORESAID REASONS RECORDED GIVES AN UNMISTAKABLE IMPRESSION THAT THE AO HAS PROCEEDED ON A WRONGFUL BELIEF OF THE CASE COVERED BY FIRST PROVISO TO SECTION 147 OF THE ACT. IN THE ABSENCE OF ANY ASSESSMENT FRAMED UNDER S.143(3) OF THE ACT, THE ASSESSMENT IS NOT GO VERNED BY FIRST PROVISO TO S.147. THE AO ALSO RELIED UPON THE SATISFACTION FORMULAT ED BY THE CIT CONCERNED UNDER S.151 OF THE ACT FOR THE PURPOSES OF ISSUANCE OF NO TICE UNDER S.148 OF THE ACT. WE HAVE PERUSED THE FORM OF APPROVAL OBTAINED BY AO FR OM THE SUPERIOR AUTHORITY AND FIND THAT ALTHOUGH ADDL.CIT HAS NOTED THAT HE IS S ATISFIED WITH THE REASONS FOR REOPENING THE ASSESSMENT, THE SATISFACTION NOTE W AS FURTHER SENT TO THE COMMISSIONER FOR ITS ULTIMATE APPROVAL. CLEARLY TH E ENTIRE PROCEDURE OF OBTAINING APPROVAL CULMINATED WITH THE COMMISSIONER. SECTION 151 PROVIDES THAT WHERE THE NOTICE UNDER S.148 OF THE ACT IS ISSUED AFTER EXPIR Y OF A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THE ASSESSM ENT HAS NOT BEEN CARRIED UNDER S.143(3) OF THE ACT THE DESIGNATED SUPERIOR COMPETE NT AUTHORITY IS JT.CIT/ADDL.CIT AND NOT THE COMMISSIONER. THUS, WHILE THE PERMISSI ON OF THE SUPERIOR COMPETENT AUTHORITY IS INCUMBENT IN ALL CASES WHERE THE NOTIC E UNDER S.148 IS PROPOSED AFTER THE END OF FOUR YEARS FROM THE END OF RELEVANT ASSESSME NT YEAR, THE JURISDICTION FOR ITA NO. 229/AHD /2015 BHARAT RAMJIBHAI PATEL VS. ITO ASST.YEAR 2005-06 - 6 - APPROVAL OF SUPERIOR AUTHORITY IS STRUCTURED AND TH E APPROVAL OF THE COMMISSIONER ALTHOUGH HIGHER IN PEDESTAL TO THE ADDL.CIT CANNOT BE A SUBSTITUTE OF THE STATUTORY APPROVAL REQUIRED FROM THE JT.CIT/ADDL.CIT. THE AP PROVAL BY THE COMMISSIONER ALSO IMPLIES THAT THE SANCTION GIVEN BY THE CIT IS UNMI NDFUL OF THE FACTS AND THUS UNFOUNDED. LIKEWISE, THE SO-CALLED APPROVAL BY THE ADDL.CIT AS AN INTERMEDIATOR ALSO REFLECTS THAT BOTH THE SUPERIOR AUTHORITY HAVE ACTED MECHANICALLY OR PERFUNCTORILY. NEEDLESS TO SAY, THE REOPENING CASTS HEAVY BURDEN ON THE ASSESSEE. THE ASSESSEE HAS TO ASSIST THE AO AND HAVE TO DIG OUT T HE OLD RECORDS FOR THIS PURPOSE. THUS, THE SUPERIOR AUTHORITY CANNOT GRANT REQUISITE SANCTION IN A LIGHT HEARTED MANNER AND IS DUTY BOUND TO APPLY ITS MIND BEFORE A LLOWING THE AO TO PROCEED UNDER S.147/148 OF THE ACT. THE ACT OF SANCTION UNDER S. 151 WITHOUT APPLICATION OF MIND TO ISSUE NOTICE UNDER S.148 OF THE ACT IS BAD IN LAW. WHEN REASONS RECORDED AS WELL AS THE APPROVAL OBTAINED ARE READ IN COMBINED MANNER, THE CONCLUSION IS INESCAPABLE THAT THE ACTION OF THE AO IS BAD IN LAW. THUS, JUR ISDICTION USURPED BY THE AO UNDER S.147 IS UNSUSTAINABLE IN LAW. CONSEQUENTLY, THE R EASSESSMENT MADE PURSUANT THERETO IS DEVOID OF LEGAL SANCTION. ACCORDINGLY, WE FIND MERIT IN THE PRELIMINARY OBJECTION RAISED BY THE ASSESSEE TOWARDS REOPENING ASSESSMENT UNDER S.147. SINCE THE ACTION OF RE-OPENING IS FOUND TO BE UNSUSTAINABLE, WE DO NOT CONSIDER IT NECESSARY TO ADJUDICATE THE GROUND TAKEN BY THE ASSESSEE ON MERITS. 7. IN PARITY, WE FIND CONSIDERABLE MERIT IN THE OB JECTION RAISED BY THE ASSESSEE. IN THE ABSENCE OF APPROVAL OF THE COMPE TENT AUTHORITY DESIGNATED UNDER S.151 OF THE ACT, THE NOTICE ISSUE D UNDER S.148 OF THE ACT FOR ASSUMPTION OF JURISDICTION UNDER S.147 IS V ITIATED AND NON-EST . THE ENTIRE REASSESSMENT PROCEEDINGS IS ACCORDINGLY A NON-STARTER. CONSEQUENTLY, THE ORDERS OF THE AO & CIT(A) ARE REQ UIRED TO BE QUASHED. WE DO SO ACCORDINGLY. ITA NO. 229/AHD /2015 BHARAT RAMJIBHAI PATEL VS. ITO ASST.YEAR 2005-06 - 7 - 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 04 / 0 9 /201 7 SD/- SD/- () ( ) (RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 04/ 09 /2017 3..),.)../ T.C. NAIR, SR. PS !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &#% / THE RESPONDENT. 3. 456+ 7+ / CONCERNED CIT 4. 7+ ( ) / THE CIT(A)-GANDHINAGAR 5. 89:+)56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<* / GUARD FILE. ! / BY ORDER, &8++ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 30.8.17(DICTATION-PAD 7- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30.8.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.5.9.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 5.9.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER