SHRI GAURAV JOSHI, JALANDHAR V. INCOME TAX OFICER WARD-1(5), JALANDHAR

ITA 274/ASR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7134 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 11-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Keywords: Income from undisclosed sources; Principle of natural justice; Source of fund; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CAMP BENCH AT JALANDHAR BEFORE SH. N. K. SAINI, HONBLE VICE PRESIDENT AND SH. RAVISH SOOD, JUDICIAL MEMBER ITA NO.274/ASR./2018 : ASSTT. YEAR : 2010-11 SH. GAURAV JOSHI, C/O SH. ASHRAY SARNA, ADV., B- 18, VAKIL BUILDING, MODEL TOWN ROAD, JALANDHAR VS INCOME TAX OFFICER, WARD-1(5), JALANDHAR (APPELLANT) (RESPONDENT) PAN NO. AMJPJ3603P ASSESSEE BY : SH. ASHRAY SARNA, CA. REVENUE BY : SH. BHAWAN I SHANKAR, DR DATE OF HEARING : 10.01.2019 DATE OF PRONOUNCEMENT : 16.01.2019 ORDER PER N. K. SAINI, VICE PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 28.03.2018 OF LD. CIT(A)-1, JALANDHAR. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THAT THE ORDER PASSED BY THE WORTHY CIT(A)-I, J ALANDHAR IS AGAINST THE LAW AND FACTS OF THE CASE. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, THE WORTHY CIT(A), JALANDHAR IS ERRED IN LAW AND ON FACTS BY CONFIRMING THE ACTION OF LD. AO IN EXCEEDI NG HIS JURISDICTION AND FRAMING THE IMPUGNED ASSESSMENT OR DER U/S 143(3) R.W.S. 147/148 AND WITHOUT COMPLYING WITH TH E MANDATORY CONDITIONS U/S 147/143(2)/151/127 AS ENVI SAGED UNDER THE INCOME TAX ACT, 1961. ITA NO. 274/ASR./2018 GAURA JOSHI 2 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, THE WORTHY CIT(A), JALANDHAR IS ERRED IN LAW AND ON FACTS BY CONFIRMING THE ACTION OF LD. AO IN MAKING AN ADDITION OF RS.6,22,593/- U/S 69 OF THE ACT ON ACCO UNT OF NON DECLARATION OF CASH AND OTHER DEPOSITS IN BANK ACCO UNTS WITHOUT CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND WITHOUT OBSERVING THE PRINCIPLES OF NATURAL JUSTICE . 4. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODI FY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 3. THE MAIN GRIEVANCE OF THE ASSESSEE VIDE GROUND N O. 2 RELATES TO THE JURISDICTION OF THE AO IN REOPENING THE ASSE SSMENT U/S 147 R.W.S 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE E- FILED THE RETURN OF INCOME ON 08.08.2017 DECLARING AN INCOME OF RS.4 9,320/-. THE SAID RETURN WAS FILED IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT ISSUED BY THE AO ON 30.03.2017 ON THE BASIS OF INFO RMATION WITH THE DEPARTMENT AND BY RECODING THE REASONS AS UNDER: AS PER INFORMATION AVAILABLE ON RECORD THE ASSESSE E HAS DEPOSITED A CASH OF RS.1,39,28,640/- DURING THE F.Y . 2009-10 RELEVANT TO THE ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS NOT FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. LETTER WAS ISSUED TO THE ASSES SEE TO EXPLAIN THE SOURCES OF CASH DEPOSITED, BUT THERE IS NO COMPLIANCE. IT MEANS THE ASSESSEE HAS NO EXPLANATIO N TO OFFER REGARDING THE DEPOSIT OF CASH AND SAME WAS DEPOSITE D OUT OF UNDISCLOSED SOURCES OF INCOME. THEREFORE, IN MY VIEW, RS.1,39,28,640/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147/148 OF THE INCOME TAX ACT FOR THE PERIOD RELEVANT TO THE ASSES SMENT YEAR 2010-11. UNDER THE CIRCUMSTANCES, I HAVE REASO NS TO ITA NO. 274/ASR./2018 GAURA JOSHI 3 BELIEVE THAT INCOME OF THE ASSESSEE LIABLE TO TAX H AS ESCAPED ASSESSMENT. THEREFORE, IT IS A FIT CASE TO ISSUE OF NOTICE U/S 148 OF THE INCOME TAX ACT, 1961. SD/- (PARAMJIT KAUR) INCOME TAX OFFICER-1(5), LUDHIANA THE AO FRAMED THE ASSESSMENT AT AN INCOME OF RS.6,7 1,915/- BY MAKING THE ADDITION OF RS.4,42,148/-. 5. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND RAISED THE OBJECTION TO THE JURISDICTION OF THE AO BUT THE LD. CIT(A) DID NOT FIND MERIT IN THAT SUBMISSION OF THE ASSESSEE BY OBSERVI NG THAT THIS OBJECTION WAS NOT RAISED BY THE ASSESSEE BEFORE THE AO. ON THE MERIT OF THE CASE ALSO, THE LD. CIT(A) SUSTAINED THE ADDITION BY OBSERVING THAT THE AO HAD DULY EXAMINED AND CONSIDERED THE EXPLANATION FILED BY THE ASSESSEE RE GARDING DEPOSITS IN HIS BANK ACCOUNT. 6. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL F OR THE ASSESSEE SUBMITTED THAT IN THIS CASE THE PROCEEDINGS U/S 147 OF THE AC T WERE INITIATED BY THE ITO- 1(5), LUDHIANA WHILE THE ASSESSMENT HAS BEEN FRAMED BY THE ITO-1(5), JALANDHAR WHO HAD NOT ISSUED ANY NOTICE U/S 148 R.W .S. 147 OF THE ACT. THEREFORE, THE ASSESSMENT FRAMED WITHOUT ISSUING TH E NOTICE U/S 148 R.W.S. 147 OF THE ACT WAS BAD IN LAW. RELIANCE WAS PLACED ON T HE DECISION OF THE ITAT AGRA BENCH IN THE CASE OF JAWAHAR LAL AGARWAL VS IT O IN ITA NO. 336/AGRA/2014 REPORTED AT (2017) 51 CCH 0421 (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). IT WAS FURTHE R SUBMITTED THAT IN THE REASONS RECORDED, THE AO MENTIONED THE FIGURE OF RS .1,39,28,640/- BUT IN THE ASSESSMENT ORDER NO SUCH FIGURE WAS THERE AND THE A O HIMSELF ADMITTED THAT THE BANK DEPOSITS WERE ONLY OF RS.51,24,064/-. THEREFOR E, THE REASONS RECORDED ITA NO. 274/ASR./2018 GAURA JOSHI 4 WERE NOT EMERGING FROM THE RECORD AVAILABLE WITH TH E AO AND ON THE BASIS OF WRONG REASONS RECORDED, THE ASSESSMENT REOPENED WAS NOT JUSTIFIED. THE RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O CIT VS ATLAS CYCLE INDUSTRIES REPORTED A T 180 ITR 319 (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD) . 7. IN HIS RIVAL SUBMISSIONS, THE LD. DR STRONGLY SU PPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE, IT IS AN ADMITTED FACT THAT THE ITO-1(5), LUDHIANA ISSUED THE NOTICE U/S 148 R. W.S. 147 OF THE ACT, THEREAFTER, THE JURISDICTION WAS TRANSFERRED TO THE ITO-1(5), JALANDHAR WHO NEVER ISSUED THE NOTICE U/S 148 OF THE ACT BUT FRAMED THE ASSESSMENT U/S 143(3) OF THE ACT. ON A SIMILAR ISSUE, THE ITAT AGARA BENCH IN TH E CASE OF JAWAHAR LAL AGARWAL VS ITO (SUPRA) HELD AS UNDER: NOW, AS PER SECTION 147 OF THE ACT, THE AO MAY ASSESS OR REASSESS ANY INCOME ESCAPING ASSESSMENT, IF HE HAS REASONS TO BELIEVE SUCH ESCAPEMENT OF INCOME. THE SECTION STARTS WITH THE WORDS 'IF THE A SSESSING OFFICER HAS REASON TO BELIEVE. THE WORD 'ASSESSEE' IN THIS PHRASE WAS SUBSTITUTED FOR THE WORDS 'INCOME TAX OFFICER BY THE DIRECT TAX LAWS (AMENDMENT) ACT 1987, W.E.F. 1.04.1988. THE SAME ENACTMENT ALSO INTRODUCED SECTION 2(7A) IN THE ACT. AS PER THIS SECTION, 'ASSESSI NG OFFICER-MEANS AN OFFICER, AS NAMED THEREIN, WHO IS VESTED WITH THE RELEVANT JURISDICTION. THUS, IT WAS ONLY THE OFFICER HAVING JURISDICTION OVER THE MATTER W HO, U/S. 147, COULD HAVE FORMED ANY REASON TO BELIEVE ESCAPEMENT OF INCOME AND NONE OTHER. IT HAS NOT BEEN SHOWN OTHERWISE. TO REITERATE, IN THE PRESENT CASE, THE ACIT-1 AGRA, WHO RECORDED THE REASONS TO BELIEVE ESCAPEME NT OF INCOME AND ISSUED THE NOTICE U/S 148 OF THE ACT ADMITTEDLY DID NOT EXERCISE JURISDICTION OVER THE MATTER. IN FACT, EVIDENTLY, THIS W AS THE REASON WHY THE MATTER WAS TRANSFERRED FROM THE ACIT-1, AGRA TO T HE ITO 4(2) AGRA. THEREFORE, THE FORMATION OF THE REASONS TO BELIEVE ESCAPEME NT OF INCOME IS IN DIRECT VIOLATION OF THE PROVISIONS OF SECTION 147 OF THE ACT. ITA NO. 274/ASR./2018 GAURA JOSHI 5 THEN, SECTION 147 ALSO PROVIDES THAT THE ASSESSING OFFICER, IF HE HAS REASON TO BELIEVE ESCAPEMENT OF INCOME, HE MAY ASSESS OR REASSESS SUCH INCOME SUBJECT TO THE PROVISION OF SECTIONS 148 TO 153 OF THE ACT. SO, THE ASSESSMENT OR REASSESSMENT U/S 147 IS SUBJECT TO, INTER ALIA, THE ACT. IN VIEW OF THE ABOVE, TRIBUNAL HELD THAT SINCE THE REASONS TO BELIE VE ESCAPEMENT OF INCOME IN THIS CASE WERE RECORDED BY THE AO WHO DID NOT EXERCISE THE RELEVANT JURISDICTION, I.E., JURISDICTION OVER THE MAT TER, SUCH REASONS ARE NON-EST, BEING INFLAGRANT VIOLATION OF THE EXPRESS PROVISIONS OF SECTION 147 READ WITH THOSE OF SECTION 2(7A) OF THE ACT. THESE REAS ONS ARE, THUS, STRUCK DOWN AS VOID AB INITIO, NULL AND VOID. SINCE THE REASONS TO BELIEVE ESCAPEMENT OF INCOME THEMSELVES HAVE BEEN DECLARED NULL AND VOID, ALL PROCEEDINGS IN FURTHERANCE THEREOF, CULMINATING IN THE IMPUGNED ORDER ARE ALSO VOID AB INITIO AND ARE QUASHED AS SUCH. SO, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER, THE ASSESSMENT FRAMED BY THE AO WHO HAD NOT ISSUED NOTICE U/S 148 R.W.S. 147 OF THE ACT IS QUASHED. 9. IT IS ALSO RELEVANT TO POINT OUT THAT THE AO WHI LE ISSUING THE NOTICE U/S 148 OF THE ACT HAS MENTIONED THAT THE ASSESSEE HAD DEPOSITED A CASH OF RS.1,39,28,640/- DURING THE FINANCIAL YEAR 2009-10 IN THE BANK ACCOUNT WHICH HAD ESCAPED ASSESSMENT. ON THE CONTRARY, IN THE ASS ESSMENT ORDER, HE MENTIONED THAT THE CASH DEPOSITED IN THE BANK ACCOU NT OF THE ASSESSEE WAS RS.51,24,064/-, WHICH IS EVIDENT FROM PARA 8.3 OFF THE ASSESSMENT ORDER DATED 14.12.2017. THEREFORE, THE REASONS RECORDED BY THE AO WERE NOT EMERGING FROM THE RECORD AVAILABLE WITH HIM. 10. ON A SIMILAR ISSUE, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ATLAS CYCLE INDUSTRIES (SUPRA) HELD AS UNDER : 9. ADVERTING TO THE QUESTION REFERRED REGARDING THE REASSESSMENT PROCEEDINGS, WE ARE OF THE VIEW THAT THE TRIBUNAL WAS RIGHT IN CANCELLI NG THE REASSESSMENT AS BOTH THE GROUNDS ON WHICH REASSESSMENT NOTICE WAS ISSUED WERE NOT FOUND TO EXIST, AND THE MOMENT SUCH IS THE POSITION, THE ITO DOES NOT GET THE JURISDICTION TO MAKE A REASSESSMENT. THIS VIEW OF OURS FINDS SUPPORT FROM THE SUPREME COURT DECISIONS IN CIT VS. A. ITA NO. 274/ASR./2018 GAURA JOSHI 6 RAMAN & CO. (1968) 67 ITR 11 (SC) AND BANKIPUR CLUB LTD, VS. CIT 1972 CTR (SC) 245 : (1971) 82 ITR 831 (SC) . SIMILAR VIEW HAS BEEN TAKEN BY THE RAJASTHAN HIGH COURT IN ADDL. CIT VS. GANESHILAL LAL CHAND (1984) 43 CTR (RAI) 120 : (1985) 154 ITR 274 (RAJ). , ON BEHALF OF THE REVENUE, CIT VS. AHMEDABAD MANUFACTURING AND CALICO PRINTING CO. LTD. 1976 CTR (GUI) 214 : (1977) 106 ITR 159 (GUI), A DECISION OF THE GUJARAT HIGH COURT WAS CITED. ON A CONSIDERATION OF THE MATTER, W E ARE OF THE VIEW THAT IN VIEW OF THE AFORESAID SUPREME COURT DECISIONS , THE VIEW TAKEN BY THE RAJASTHAN HIGH COURT IS CORRECT AND THE VIEW TAKEN BY THE GUJARAT HIGH COURT IS NOT CORRECT. ACCORDINGLY, WE DISSENT FRO M THE VIEW TAKEN BY THE GUJARAT HIGH COURT AND IN VIEW OF THE DECISIONS OF T HE SUPREME COURT AND RAJASTHAN HIGH COURT, WE HOLD THAT THE ITO DID NOT HAVE THE JURISDICTION TO PROCEED WITH THE REASSESSMENT, THE MOMENT HE FOUND THE TWO GROUNDS MENTIONED IN THE REASSESSMENT NOTICE INCORRECT OR NON-EXISTENT. ACCORDINGLY, WE ANSWER THE REFERRED QUESTION IN FAVOUR OF THE ASSESSEE, IN THE AFFIRMATIVE, THAT THE TRIBUNAL WAS RIGHT IN CANCEL LING THE REASSESSMENT. 11. IN THE PRESENT CASE ALSO, THE AO RECORDED THE R EASONS WHICH WERE NOT FOUND TO EXISTS ON THE RECORD, THEREFORE, THE REASS ESSMENT FRAMED DESERVES TO BE QUASHED. IN VIEW OF THE AFORESAID DISCUSSION, WE AR E OF THE CONFIRMED VIEW THAT VIEWED FROM ANY ANGLE, THE REASSESSMENT FRAMED BY T HE AO WAS NOT JUSTIFIED, HENCE QUASHED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. (ORDER PRONOUNCED IN THE COURT ON 16/01/2019) SD/- SD/- (RAVISH SOOD) (N. K. SAINI) JUDICIAL MEMBER V ICE PRESIDENT DATED: 16/01/2019 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR