ACIT, Nagercoil V. Shri J. Raj Prabhu, Nagercoil

ITA 2652/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7501 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 12-09-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVASRINIVAS IRS
• Keywords: Reopening of assessment; Retrospective amendment; Reason to believe; Reassessment proceedings
• Section: 143(3); 54F; 148; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . , ' # BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 2652/MDS/2016 / ASSESSMENT YEAR : 2011-12 ASSISTANT COMM ISSIONER OF INCOME TAX, CIRCLE-1, NAGERCOIL. VS. SHRI J. RAJ PRABHU, 315, JOSHUVA STREET, WCC ROAD, NAGERCOIL, KANYAKUMARI. [PAN: AEOPR 1899G] ( / APPELLANT) ( / RESPONDENT) $% & / APPELLANT BY : SHRI S HIVA SRINIVAS, IRS JCIT )*$% & / RESPONDENT BY : NONE & + /DATE OF HEARING : 06.03.2017 & + /DATE OF PRONOUNCEMENT : 28.03.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE REVENUE FILED AN APPEAL AGAINST THE ORDER OF C OMMISSIONER OF INCOME TAX (APPEALS)-3, MADURAI, IN ITA NO. 0012/20 15-16 DATED 13.06.2016 PASSED U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT . :-2-: I.T.A. NO. 2652/MDS/2016 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2.1 THE CIT(A) HAS ERRED IN HOLDING THAT THE AO IS BARRED FROM INITIATING RE- ASSESSMENT PROCEEDINGS U/S. 147 OF THE INCOME TAX A CT, 1961 WHEN THE TIME LIMIT FOR ISSUANCE OF NOTICE U/S. 143(2) OF TH E INCOME TAX ACT 1961 HAD NOT EXPIRED. 2.2 THE CIT(A) OUGHT TO HAVE SEEN THAT THE INCOME T AX ACT, 1961 HAS NO PROVISION BARRING THE ASSESSING OFFICER FROM ISSUIN G NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961 WHEN TIME FOR ISSUE OF NOTICES U/S. 143(2) OF THE INCOME TAX ACT, 1961 HAS NOT EXPIRED AND HENCE OUGH T TO HAVE HELD THE RE-OPENING OF ASSESSMENT AS VALID. 2.3 THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT TH AT WHEN THE CAPITAL GAINS IS COMPUTED, THE RELEVANT CLAIMS OF DEDUCTIONS AND EXEMPTIONS ARE ALSO TO BE CONSIDERED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND IN THE BUSINESS OF ELECTRONIC WORK SERVICES AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 30.03.2013 WITH TOTAL IN COME OF RS. 12,94,190/-. THE RETURN OF INCOME WAS PROCESSED U/S. 143(1) ON 2 5.04.2013. THE LD. AO BASED ON AIR INFORMATION FOUND THAT THE ASSESSEE HA S TRANSFERRED THE PROPERTY IN THE FINANCIAL YEAR 2010-11 FOR RS. 2,13,62,400/- AN D WORKED OUT THE CAPITAL GAINS OF RS. 54,34,807/- FURTHER THE ASSESSEE HAS CLAIMED EXEMPTION U/S. 54F OF THE ACT TO THE EXTENT OF RS. 43,01,975/- WITHOUT ANY SU PPORTING PROOF AND THE LD. AO HAVING THE REASON TO BELIEVE THAT THE INCOME HAS ES CAPED ASSESSMENT AND :-3-: I.T.A. NO. 2652/MDS/2016 ISSUED NOTICE U/S. 148 OF THE ACT DATED 20.08.2013. THE ASSESSEE FILED LETTER DATED 22.05.2014 TO TREAT THE ORIGINAL RETURN OF IN COME FILED ON 30.03.2013 AS DUE COMPLIANCE OF NOTICE AND SUBSEQUENTLY, THE ASSE SSEE WAS SERVED WITH NOTICE U/S. 143(2) OF THE ACT THE LD. AR APPEARED FROM TI ME TO TIME AND FILED THE DETAILS. THE ASSESSING OFFICER CONSIDERED THE FINA NCIAL STATEMENTS AND FOUND THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM OF EX EMPTION U/S. 54F OF THE ACT NOR PRODUCED ANY EVIDENCE TO THE EXTENT OF RS. 4,09 ,239/- AND IN RESPECT OF SECOND CLAIM OF EXEMPTION OF RS. 66,95,823/-. THE ASSESSING OFFICER DEALT ON THE DISPUTED ISSUE AT PAGE 3 OF THE ORDER AND OBSER VED THAT THE ASSESSEE COULD NOT PRODUCE THE EVIDENCE OF CONSTRUCTION OR PURCHAS E OF RESIDENTIAL HOUSE AND BROUGHT TO TAX LONG TERM AND ASSESSED INCOME OF RS. 74,84,961/- AND PASSED ORDER U/S. 143(3) R.W.S. 147 ON 27.02.2015. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN AP PEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. AR OF THE ASSESS EE ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSIN G OFFICER AND ALSO RAISED GROUNDS ON THE VALIDITY OF RE-OPENING OF ASSESSMENT U/S. 147 OF THE ACT, WHERE LD. AO HAS ISSUED NOTICE U/S. 148 OF THE ACT IRRESP ECTIVE OF THE TIME PERIOD FOR ISSUE OF NOTICE U/S. 143(2) OF THE ACT NOTICE HAS N OT BEEN EXPIRED UNDER THE PROVISIONS OF SECTION 143(2) OF THE ACT NOTICE HAS TO BE ISSUED WITHIN A PERIOD OF 6 MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHIC H THE RETURN OF INCOME WAS FILED. WHEREAS, THE LD. AO HAS ISSUED NOTICE U/S. 148 ON 20.08.2013, IRRESPECTIVE OF THE FACT THAT THE RETURN OF INCOME WAS FILED BY THE ASSESSEE :-4-: I.T.A. NO. 2652/MDS/2016 BELATEDLY ON 30.03.2013. WITH THESE OBSERVATIONS, THE ASSESSING OFFICER HAS ERRED IN ISSUING NOTICE U/S. 148 OF THE ACT THOUGH THE TIME LIMIT OF SIX MONTHS WAS AVAILABLE FROM THE DATE OF END OF THE FINANCIAL YEAR IN WHICH RETURN OF INCOME WAS FILED. THE LD AR RELIED ON THE JURISDIC TIONAL OF THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS QATALYS SOFTW ARE TECHNOLOGIES LTD., 308 ITR 249 (MDS) HELD THAT THE TRIBUNAL WAS RIGHT IN C OMING TO THE CONCLUSION THAT THE ASSESSING OFFICER WAS BARRED FROM INITIATING RE -ASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT WHEN THE TIME LIMIT OF ISSUE OF NOTI CE U/S. 143(2) OF THE ACT HAD NOT EXPIRED. THE LD. CIT(A) OBSERVED THE FINDINGS AT PAGE 3 TO 7 OF THE ORDER AND CONCLUDED AT PARA 3.4 IN CANCELLING THE IMPUGNE D ORDER AND ALLOWED THE APPEAL WHICH IS READ AS UNDER: '3.4 HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENTAT IVE. IT IS SEEN FROM THE REASONS RECORDED THAT THE ASSESSME NT WAS REOPENED FOR THE PURPOSE OF TAXING THE ALLEGED DIFFERENCE IN THE SALE CONSIDERATION ADMITTED AND AS PER THE AIR INFORMATI ON. HOWEVER, DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S THE ASSESSING OFFICER WAS SATISFIED WITH THE REPLY OF THE APPELLA NT AND ACCEPTED THE FACT THAT THE SHARE OF APPELLANT WAS ONLY AS ADMITT ED IN THE RETURN OF INCOME AND THEREBY DID NOT MAKE ANY ADDITION. IN T HE LIGHT OF THE ABOVE FACTS, THE VALIDITY OF ADDITION MADE BY THE A SSESSING OFFICER ON OTHER ISSUES HAVE TO BE CONSIDERED. SEC. 147 PROVID ES THAT WHILE COMPLETING THE REASSESSMENT, THE ASSESSING OFFICER HAS TO ASSESS THE ESCAPED INCOME AND ANY OTHER INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY. THE IMPORTANT WORD HERE IS 'AND' IN SEC. 147. WHEN THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION IN RESPECT OF ISSUES FOR WHICH HE REOPENED THE ASSESSMENT, HE HAS NO POW ER TO MAKE ANY OTHER ADDITION WHICH COMES TO HIS NOTICE SUBSEQUENT LY. EVEN AFTER :-5-: I.T.A. NO. 2652/MDS/2016 INTRODUCTION OF EXPLANATION-3, THE POSITION IS THE SAME AS EXPLANATION -3 ONLY EXPLAINS THE SCOPE OF SEC.147 AND IT DOES N OT EXTEND THE SCOPE OF MAIN SECTION. EXPLANATION - 3 WAS INSERTED BECAUSE SOME JUDICIAL AUTHORITIES WERE TAKING THE VIEW THAT THE ASSESSING OFFICER COULD NOT MAKE ADDITION OTHER THAN THE ISSUES FOR W HICH THE ASSESSMENT WAS REOPENED EVEN THOUGH ADDITION WAS MA DE IN RESPECT .OF ISSUES MENTIONED IN THE REASONS RECORDED FOR RE OPENING. TO OVERCOME SUCH DECISIONS, EXPLANATION-3 WAS INSERTED PROVIDING THAT IF THE ASSESSING OFFICER MAKES ANY ADDITION IN RESPECT OF ISSUES FOR WHICH THE ASSESSMENT WAS REOPENED, HE CAN MAKE ADDI TION IN RESPECT OF OTHER ISSUES FOR WHICH THE REASONS HAVE NOT BEEN RECORDED AND THE CONDITION IS THAT HE HAS TO NECESSARILY MAKE ADDITI ON IN RESPECT OF ISSUES FOR WHICH THE ASSESSMENT WAS REOPENED. THIS IS CLEAR FROM THE EXPLANATORY NOTES FOR FINANCE ACT (NO.2) OF 2009 AS PER CIRCULAR NO.05/2010 DATED 03.06.2010 WHICH READS AS UNDER:- '47.1 THE EXISTING PROVISIONS OF SECTION 147 PROVI DES THAT IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT AN Y INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTION 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER I NCOME CHARGEABLE TO TAX, WHICH HAS ESCAPED ASSESSMENT. FU RTHER, ASSESSING OFFICER MAY ALSO ASSESS OR REASSESS SUCH OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDING S UNDER THIS SECTION. ASSESSING OFFICER IS REQUIRED TO RECO RD THE REASONS FOR REOPENING THE ASSESSMENT BEFORE ISSUING NOTICE UNDER SECTION 148 WITH A VIEW TO REASSESS THE INCOM E OF ASSESSEE. :-6-: I.T.A. NO. 2652/MDS/2016 47.2 SOME COURTS HAVE HELD THAT THE ASSESSING OFFI CER HAS TO RESTRICT THE REASSESSMENT PROCEEDINGS ONLY TO TH E REASONS RECORDED FOR REOPENING OF THE ASSESSMENT AND HE IS NOT EMPOWERED TO TOUCH UPON ANY OTHER ISSUE FOR WHICH N O REASONS HAVE BEEN RECORDED. THE ABOVE INTERPRETATIO N IS CONTRARY TO THE LEGISLATIVE INTENT. 47.3 THEREFORE, TO ARTICULATE THE LEGISLATIVE INTE NTION CLEARLY EXPLANATION 3 - HAVE BEEN INSERTED IN SECTION 147 T O PROVIDE THAT THE ASSESSING OFFICER MAY EXAMINE, ASSESS OR R EASSESS ANY ISSUE RELEVANT TO INCOME WHICH COMES TO IS NOTI CE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS UNDER THI S SECTION, NOTWITHSTANDING THAT THE REASON FOR SUCH ISSUE HAS NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB-SECTION (2) OF SECTION 148. 47.4 APPLICABILITY - THIS AMENDMENT HAS BEEN MADE APPLICABLE WITH RETROSPECTIVE EFFECT FROM 1ST APRIL , 1989 AND WILL APPLY ACCORDINGLY IN RELATION TO ASSESSMENT YE AR 1989-90 AND SUBSEQUENT YEARS.' IN THE CASE OF THE APPELLANT, THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION IN RESPECT OF REASONS RECORDED BY HIM AND, THEREFORE, NO OTHER ADDITION CAN BE MADE. IN VIEW OF THE ABOVE, I FIND THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RESTRICTING THE CLAIM OF DEDUCTION U/S.54F FOR WHICH HE HAD NOT RECORDED THE REASONS W HILE REOPENING THE ASSESSMENT. 3.5 IN VIEW OF THE ABOVE DISCUSSION, THE IMPUGNED ORDER IS CANCELLED. AS I HAVE CANCELLED THE IRNPUGNED ORDER, I DO NOT FIND IT NECESSARY TO DEAL WITH THE OTHER GROUNDS RAISED BY THE APPELLANT ON MERITS. 4. IN THE RESULT, THE APPEAL IS ALLOWED.' :-7-: I.T.A. NO. 2652/MDS/2016 5. AGGRIEVED BY THE CIT(A) ORDER, REVENUE HAS FILED AN APPEAL WITH THE TRIBUNAL. BEFORE US, THE LD. DR ARGUED THAT THE LD . CIT(A) HAS ERRED IN OBSERVING THAT THE AO IS BARRED FROM INITIATING RE- ASSESSMENT PROCEEDINGS WHEN THE TIME LIMIT FOR ISSUE OF NOTICE U/S. 143(2) HAS NOT EXPIRED. THE LD. CIT(A) SHOULD HAVE CONSIDERED THE MERITS OF THE CASE BEFOR E CANCELLING THE IMPUGNED ORDER U/S. 143(3) R.W.S. 147 OF THE ACT AND PRAYED FOR RESORTING THE ORDER OF THE ASSESSING OFFICER. CONTRA, THE LD. AR RELIED ON TH E ORDERS OF CIT(A) AND SUPPORTED WITH THE DECISION OF THE JURISDICTIONAL H IGH COURT. 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE SOLE SUBSTANTIVE DISPUTE A LLEGED BY THE LD. DR THAT THE LD. CIT(A) HAS QUASHED THE RE-ASSESSMENT PROCEEDING S AS THE LD. AO HAS ISSUED NOTICE U/S. 148 OF THE ACT WHEN THE TIME LIMIT HAS NOT EXPIRED FOR ISSUANCE OF NOTICE U/S. 143(2) OF THE ACT WAS AVAILABLE FOR THE SAID ASSESSMENT YEAR. WE FIND THE ISSUE IS SQUARELY COVERED BY THE JURISDICTIONAL HIGH COURT DECISION CIT VS QATALYS SOFTWARE TECHNOLOGIES, 308 ITR 249 (MDS) HE LD AS UNDER: ' 3. WE HAVE HEARD THE ARGUMENT OF THE LEARNED COUNSE L FOR THE REVENUE, WHO SUBMITTED THAT THE ISSUE HAS ALREA DY BEEN DECIDED AGAINST THE REVENUE BY THE ABOVE CITED JUDGEMENT OF THE DIVISION BENCH OF THIS COURT. 4. WE HAVE ALSO PERUSED THE ABOVE REFERRED JUDGMEN T OF THE DIVISION BENCH OF THIS COURT DATED 4.7.2007, WHEREI N IT IS HELD AS FOLLOWS:- 'APPLYING THE PRINCIPLES ENUNCIATED IN THE JUDGMENT S OF THE SUPREME COURT AS WELL AS THE DELHI HIGH COURT, CITE D SUPRA, THE TRIBUNAL IS RIGHT IN COMING TO A CONCLUSION THA T NO ACTION COULD BE INITIATED UNDER SECTION 147 OF THE ACT, WH EN THERE IS :-8-: I.T.A. NO. 2652/MDS/2016 A PENDENCY OF THE RETURN BEFORE THE ASSESSING OFFIC ER. THE REASONS GIVEN BY THE TRIBUNAL ARE BASED ON VALID MA TERIALS AND EVIDENCE AND WE DO NOT FIND ANY ERROR OR ILLEGA LITY IN THE ORDER OF THE TRIBUNAL SO AS TO WARRANT INTERFERENCE '. 5. FOLLOWING THE SAID DECISION, THESE APPEALS ARE DISMISSED. CONSEQUENTLY, CONNECTED MISCELLANEOUS PETITION IS A LSO DISMISSED. WE RESPECTFULLY FOLLOWING THE JURISDICTIONAL HIGH C OURT DECISION AND APPARENT FACTS, FOUND THE LD. CIT(A) HAS DEALT EXHAUSTIVELY ON THE PROVISIONS OF LAW AND FACTS VIS-A-VIS EXPLANATIONS OF THE ASSESSEE AND AL LOWED THE APPEAL. ACCORDINGLY, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT(A) AND UPHOLD THE DECISION AND DISMISS THE GROUNDS OF THE REVENUE. 7. IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 28 TH DAY OF MARCH, 2017 AT CHENNAI. SD/ - ( . ) ( A. MOHAN ALANKAMONY ) # / ACCOUNTANT MEMBER SD/ - ( . ) (G. PAVAN KUMAR) ) # /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 28 TH MARCH, 2017 JPV & )'+23 43-+ /COPY TO: 1. $%/ APPELLANT 2. )*$% /RESPONDENT 3. ! 5+ ( )/CIT(A) 4. ! 5+ /CIT 5. 367 )'+' /DR 6. 789 /GF