Sh. Rakesh Bandhu, Muzaffarnagar V. ITO, Muzaffarnagar

ITA 2586/DEL/2014

• Counselvise Citation: 258620114 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 05-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GARIMA JAIN
• Keywords: Reopening of assessment; Business income; Reason to believe
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-2, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 2586/DEL/2014 AY: 2009- 10 SHRI RAKESH BANDHU, VS. ITO, WARD-1( 1), 212-B, SOUTH CIVIL LINES, MUZAFFARNAGAR MUZAFFARNGAR, (PAN: ACFPB7654J) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ANKIT GUPTA, ADV. RESPONDENT BY : MS. GARIMA JAIN, SR. DR ORDER THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R DATED 29.1.2014 PASSED BY THE LD.CIT(A), MUZAFFARNAGAR FO R ASSESSMENT YEAR 2009-10. 2. THE ONLY SOLITARY GROUND RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL IS THAT THE NOTICE ISSUED U/S. 148 AND REA SSESSMENT ORDER PASSED U/S. 147 R.W.S. 143(3) ARE ILLEGAL, BAD IN L AW AND WITHOUT JURISDICTION. 3. THE BRIEF FACTS OF THE CASE ARE THAT IN THIS CA SE IT WAS GATHERED BY THE AO THAT THE ASSESSEE HAD CLAIMED INTEREST OF RS. 1,48,307/- AS EXPENDITURE IN THE RETURN ORIGINALLY FILED ON 27.8. 2009. HOWEVER, THE SAME DID NOT RELATE TO BUSINESS ACTIVITIES AND AS S UCH EXPENDITURE CLAIMED AT RS. 1,48,307/- WAS NOT ALLOWABLE AS PER ACT. BASED ON SUCH ITA NO. 2586/DEL/2014 A.Y. 2009-10 2 INFERENCE, THE AO INITIATED ACTION U/S. 147 BY WAY OF NOTICE U/S. 148 OF THE ACT DATED 7.4.2011. IN RESPONSE TO NOTICE U/S. 148 OF THE ACT, IT WAS SUBMITTED BY THE ASSESSEE THAT THE RETURN FI LED ORIGINALLY ON 27.8.2009 BE TREATED AS RETURN FILED IN RESPONSE N OTICE U/S. 148 OF THE ACT. THEREAFTER, THE AO COMPLETED THE ASSESSMENT AT RS. 8,07,200/- VIDE HIS ORDER DATE 31.1.2013 PASSED U/S. 143(3)/14 7 OF THE I.T. ACT, 1961. 4. AGAINST THE AFORESAID ORDER OF THE AO, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 29. 1.2014 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. 6. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SE STATED THAT THE ASSESSEE HAS RAISED 16 GROUNDS OF APPEAL OUT OF WH ICH THE ASSESSEE HAS CHALLENGED THE GROUND CHALLENGING THE NOTICE U /S. 148 OF THE I.T. ACT AND THE REASSESSMENT ORDER PASSED U/S. 147 READ WITH SECTION 143(3) OF THE I.T. ACT AS WELL AS THE ADDITIONS MAD E BY THE AO AND CONFIRMED BY THE LD. CIT(A ON MERITS ALSO. HE FUR THER STATED THAT FIRSTLY HE WANTS TO ARGUE THE ISSUE OF NOTICE U/S. 148 WHICH IS ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. HE FURTHER STATED THAT THE AO HAS ISSUED NOTICE DATED 24.1.2011 TO THE ASSESSEE U /S. 147 OF THE I.T. ACT, 1961 FOR THE ASSESSMENT YEAR 2009-10 IN WHICH THE AO HAS STATED THAT THE RETURN FILED ON 27.8.2009 BY THE ASSESSEE IN WHICH THE ASSESSEE HAS CLAIMED DEDUCTION OF INTEREST AT RS. 1 ,48,307/-. THE AO ITA NO. 2586/DEL/2014 A.Y. 2009-10 3 HAS EXAMINED THE BALANCE SHEET ATTACHED WITH THE RE TURN OF INCOME WHICH SHOWS OUT OF BORROWED CAPITAL THE SUBSTANTIAL FUNDS ARE INVESTED IN NO BUSINESS ASSETS. THEREFORE, THE DE DUCTION U/S. 36(1)(III) OF THE ACT IS REQUIRED TO BE RESTRICTED TO THE BORROWED FUNDS INVESTED IN THE BUSINESS ASSETS. LD. COUNSEL FOR T HE ASSESSEE STATED THAT AO HAS RECORDED HIS REASONS DATED 7.4.2011 FOR ISSUING OF NOTICE U/S. 147 OF THE I.T. ACT ON THE SAME REASONS MENTIO NED IN THE NOTICE, BUT NO FRESH MATERIAL WAS AVAILABLE WITH THE AO, EX CEPT THE MATERIAL ALREADY FILED BY THE ASSESSEE WITH THE RETURN OF IN COME. THEREFORE, THE ISSUANCE OF NOTICE U/S. 148 OF THE I.T. ACT IS ILLEGALLY BAD IN LAW AND WITHOUT JURISDICTION, KEEPING IN VIEW OF THE VA RIOUS DECISIONS REFERRED BY THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. ORIENT CRAFT LTD. 354 ITR 536 (DELHI) AND CIT VS. ATUL KUM AR SWAMI 362 ITR 693 (DELHI). HE HAS ALSO FILED THE COPY OF THESE JUDGMENTS WITH THE PAPER BOOK FILED BY THE ASSESSE ALONGWITH THE RELEV ANT PAPERS WHICH THE ASSESSEE HAS FILED WITH THE PAPER BOOK CONTAINI NG PAGES 1 TO 59. 7. LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND REQUESTED THAT THE APPEAL OF THE ASSESSEE MAY BE DI SMISSED. 8. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE LEVANT RECORDS, ESPECIALLY THE ORDERS OF THE AUTHORITIES BELOW. NO DOUBT THAT THE ASSESSEE HAS RAISED 16 GROUND IN HIS APPEAL, BUT A T THE TIME OF HEARING BEFORE ME, HE MAINLY ARGUED THE GROUND NO. 1 IN WHICH HE HAS CHALLENGED THE NOTICE ISSUED U/S. 148 OF THE I.T. A CT AND REASSESSMENT ITA NO. 2586/DEL/2014 A.Y. 2009-10 4 PROCEEDINGS. AS ARGUED BY THE LD. COUNSEL FOR TH E ASSESSEE THAT IN THE NOTICE DATED 24.1.2011 AND IN THE REASONS RECOR DED BY THE AO ON 7.4.2011, THE AO HAS STATED THAT IN THE RETURN FILE D BY THE ASSESSEE, THE ASSESSEE HAS CLAIMED DEDUCTION OF INTEREST OF R S. 1,48,307/-. BUT AFTER PERUSING THE BALANCE SHEET ATTACHED WITH TH E RETURN SHOWS THAT OUT OF BORROWED CAPITAL THE SUBSTANTIAL FUNDS ARE INVESTED IN NO BUSINESS ASSETS. THEREFORE, THE DEDUCTION U/S. 3 6(1)(III) OF THE I.T. ACT, 1961 IS RESTRICTED TO THE BORROWED FUNDS INVES TED IN THE BUSINESS ASSETS. FOR THE SAKE OF CONVENIENCE, THE CONTENTS OF THE NOTICE DATED 24.1.2011 ISSUED BY THE AO U/S. 147 OF THE I.T. ACT , 1961 AS WELL AS THE REASONS RECORDED BY THE AO U/S. 147 OF THE I.T. ACT, 1961 DATED 7.4.2011 ARE REPRODUCED AS UNDER:- F.NO. ACFPB7654J/W-1(1)MZR/10-11 OFFICE OF THE INCOME TAX OFFICER WARD 1(1), MUZAFFARNAGAR DATED : 24.1.2011 TO SH. RAKESH BANDHU, 212, SOUTH CIVIL LINES, MUZZAFARNAGAR SUB:- NOTICE U/S. 147 OF THE I.T. ACT, 1961 FOR THE AY 2009-10 REG. IN THE RETURN FILED ON 27.8.2009 VIDE RR NO. 1568 YOU HAVE CLAIMED DEDUCTION OF INTEREST AT RS. 1,48,307/-. T HE BALANCE SHEET ITA NO. 2586/DEL/2014 A.Y. 2009-10 5 ATTACHED WITH THE RETURN SHOWS OUT OF BORROWED CA PITAL THE SUBSTANTIAL FUNDS ARE INVESTED IN NO BUSINESS ASSETS. THEREFO RE, DEDUCTION U/S. 36(1)(III) OF THE I.T. ACT, 1961 IS REQUIRED TO BE RESTRICTED TO THE BORROWED FUNDS INVESTED IN THE BUSINESS ASSETS. YOU ARE REQUIRED TO SHOW CAUSE ON 3.2.2011 AT 3.30 PM TO WHY NOTICE U/S. 148 OF THE I.T. ACT, 1961 MAY NOT BE IS SUED TO ASSESS THE ESCAPED INCOME. SD/- (V.K. NIGAM) INCOME TAX OFFICER WARD 1(1), MUZAFARNAGAR REASONS RECORDED OFFICE OF THE INCOME TAX OFFICER, WARD 1(1), MUZAFFARNAGAR 1. NAME & ADDRESS OF THE ASSESSEE SHRI RAKESH BANDHU 1-MANDI KOHNA, SARAFA BAZAR, MUZAFARNAGAR 2. PAN/GIR NO. ACFPB7654J 3. STATUS INDIVIDUAL 4. ASSESSMENT YEAR 2009-2010 REASONS UNDER SECTION 147 OF THE I.T. ACT, 1961 07.4.2011 THE ASSESSEE FILED RETURN ON 27-08-2009 VIDE R. R. NO.1568 DECLARING INCOME OF RS.164520/- THE ASSESSEE VIDE LETTER DA TED 24-01-2011 WAS ASKED TO SHOW CAUSE ON 03-02-2011 AT 3:00 P.M. AS TO WHY NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 MAY N OT BE ISSUED FOR THE FOLLOWING REASONS; . ITA NO. 2586/DEL/2014 A.Y. 2009-10 6 ' IN THE RETURN FILED ON 27-08-2009 VIDE R. R. NO.1 568 YOU NAVE CLAIMED DEDUCTION OF INTEREST AT RS.148307 /- THE BALANCE SHEET ATTACHED WITH THE RETURN SHOWS OU T OF BORROWED CAPITAL THE SUBSTANTIAL FUNDS ARE INVE STED IN NO BUSINESS ASSETS. THEREFORE DEDUCTION UNDER SECTION 36(1 )(III) OF THE INCOME TAX ACT, 1961 IS REQUIRED TO BE RESTRICTED TO THE BORROWED FUNDS INVESTED IN THE BUSINESS INCOME 2. THE ASSESSEE SOUGHT TIME ON 03-02-2011, 23-02-20 11, 04-03-2011 AND 22--03-2011. HOWEVER, TILL DATE NO REPLY HAS BE EN RECEIVED. MOREOVER AFTER ISSUE OF NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 THE ASSESSEE SHALL HAVE OPPORTUNITY TO EXPLAIN HIS CASE IN THE COURSE OF SETTLEMENT OF OBJECTIONS TO THE NOTICE UN DER SECTION 148. THEREFORE, ON THE BASIS OF FACTS MENTIONED IN THE S HOW CAUSE DATED 24-1-2011. I HAVE REASON TO BELIEVE THAT INCOME CHA RGEABLE TO TAX ESTIMATED AT RS.75000/- HAS ESCAPED ASSESSMENT. ISSUE NOTICE UNDER SECTION 148 OF THE INCOME TAX AC T, 1961. SD/- (V.K. NIGAM) INCOME TAX OFFICER WARD 1(1), MUZAFARNAGAR 8.1 AFTER GOING THROUGH THE ORDERS PASSED BY THE RE VENUE AUTHORITIES AND THE ARGUMENTS ADVANCED BY THE LD. C OUNSEL FOR THE ASSESSEE ALONGWITH THE JUDGMENTS CITED BY THE ASSES SEE IN THE CASE OF CIT VS. ORIENT CRAFT LTD. 354 ITR 536 (DELHI) AND C IT VS. ATUL KUMAR SWAMI 362 ITR 693 (DELHI), I FIND THAT THE IN ONE O F THE DECISIONS I.E. IN THE CASE OF CIT VS. ORIENT CRAFT LTD. (SUPRA), T HE HONBLE HAS HELD AS UNDER (HEAD NOTES):- HELD, DISMISSING THE APPEAL, THAT THE REASONS DISC LOSED THAT THE ASSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF ITA NO. 2586/DEL/2014 A.Y. 2009-10 7 INCOME ON GOING THROUGH THE RETURN OF INCOME FILE D BY THE ASSESSEE AFTER HE ACCEPTED THE RETURN UNDER SECTION 143(1) WITHOUT SCRUTINY, AND NOTHING MORE. THIS WAS NOTHI NG BUT A REVIEW OF THE EARLIER PROCEEDINGS AND AN ABUSE OF P OWER BY THE ASSESSING OFFICER. THE REASONS RECORDED BY THE AO DID CONFIRM THE APPREHENSION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS REASONS TO BELIEVE VIS--VIS AN INTIMAT ION ISSUED UNDER SECTION 143(1) COULD CAUSE TO THE TAX REGIME. THER E WAS NOTHING IN THE REASONS RECORDED TO SHOW THAT ANY TANGIBLE MATE RIAL HAD COME INTO THE POSSESSION OF THE AO SUBSEQUENT TO TH E ISSUE OF THE INTIMATION. THE NOTICE REFLECTED AN ARBITRARY EXER CISE OF THE POWER CONFERRED UNDER SECTION 147. 8.2 WHEN I EXAMINED THE FACTS OF THE ASSESSEES CAS E IN LIGHT OF THE RATIO LAID DOWN BY THE ABOVE DECISION OF THE HONBL E JURISDICTIONAL HIGH COURT, I FIND THAT THE ABOVE DECISION WOULD BE SQUARELY APPLICABLE. I FIND THAT NO FRESH MATERIAL IS BROUG HT BY THE REVENUE ON RECORD BUT THE ASSESSMENT HAS BEEN REOPENED ON THE BASIS OF THE RETURN OF INCOME AND THE DOCUMENTS SUBMITTED ALONGW ITH THE RETURN OF INCOME. THEREFORE, IN VIEW OF THE ABOVE DECISI ON OF THE HONBLE JURISDICTIONAL HIGH COURT, REOPENING OF ASSESSMENT IS NOT VALID. HENCE, THE SAME IS QUASHED AND ACCORDINGLY, THE ASS ESSMENT ORDER ITA NO. 2586/DEL/2014 A.Y. 2009-10 8 PASSED IN PURSUANCE OF THE NOTICE ISSUED UNDER SECT ION 148 IS ALSO QUASHED. 9. SINCE WHILE ADJUDICATING GROUND NO.1, I HAVE ALR EADY QUASHED THE ASSESSMENT ORDER, THE OTHER GROUNDS RAISED BY T HE ASSESSEE DO NOT REQUIRE ANY ADJUDICATION ON MERITS. 10 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/11/2015. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 17/11/2015 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES