O.S. Rajamani (HUF), Puducherry V. ITO, Puducherry

ITA 2824/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4895 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 11-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 29-09-2016
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL JT
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Reason to believe; Reassessment proceedings
• Section: 143(3); 133A; 147; 148

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A/SMC, CHENNAI , ! BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER ./ITA NO.2824/MDS/2016 ' # $%# / ASSESSMENT YEAR : 2007-08 O.S.RAJAMANI (HUF), NO.12, VOC STREET, KAMARAJ NAGAR, PUDUCHERRY 607 003. [PAN: AAAHO 8186P] VS. INCOME TAX OFFICER, WARD-(2), PUDUCHERRY. ( /APPELLANT ) ( / RESPONDENT ) &' ( ) / APPELLANT BY : SHRI K.BALASUBRAMANIAN, ADVOCATE *+&' ( ) / RESPONDENT BY : DR. B.NISCHAL, JT. CIT , $ ( - / DATE OF HEARING : 11.04.2017 .% ( - / DATE OF PRONOUNCEMENT : 20.04.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), PUDUCHERRY ( CIT(A) FOR SHORT) DATED 31.05.2016, PARTLY ALLOWING THE ASSESSEES APPEAL C ONTESTING ITS ASSESSMENT U/S. 143(3) R/W. S. 147 OF THE INCOME TAX ACT, 1961 (TH E ACT HEREINAFTER) DATED 30.12.2010 FOR ASSESSMENT YEAR (AY) 2007-08. 2. AT THE OUTSET, IT WAS OBSERVED THAT THE APPEAL I S TIME BARRED BY 61 DAYS. THE CONDONATION PETITION ON RECORD STATES THE ASSES SEES ADVANCED AGE, BEING 84 YEARS OF AGE, AND AILMENTS, PARTICULARLY ASTHAMA, W HICH IS SUPPORTED BY A 2 ITA NO.2824/MDS/2016 (AY 2007-08) O.S.RAJAMANI (HUF) V. ITO MEDICAL CERTIFICATE DATED 25.07.2016, AS THE REASON FOR THE DELAY. NO SERIOUS OBJECTION IS RAISED BY THE LD. DR, DISPUTING THE FA CTS. THE AVERMENTS IN THE SWORN AFFIDAVIT DATED 28.12.2016 ARE THEREFORE TAKE N AS CORRECT AND, ACCORDINGLY, FOUND ACCEPTABLE, FURNISHING A SUFFICIENT CAUSE FOR THE DELAY. THE SAME IS ACCORDINGLY CONDONED. 3. THE ONLY ISSUE IN APPEAL IS THE MAINTAINABILITY OR OTHERWISE IN LAW OF THE INITIATION OF REASSESSMENT PROCEEDINGS (BY THE ISSU E OF NOTICE U/S. 148 ON 11.03.2010), AGITATED PER THE FOLLOWING GROUNDS: 1 . THE LEARNED COMM I SSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THAT THE ASSESSMENT MADE U/ S 143(3) R.W.SEC.147. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO CONSIDER THE DECISION RELIVED ON BY TH E APPELLANT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO DISTINGUISH THE DECISION RELIVED ON BY HIM. THE ASSESSEES CASE IN THIS REGARD, MADE WITH REFE RENCE TO THE REASONS RECORDED, IS THAT THE ASSESSMENT HAS BEEN REOPENED FOR VERIFICATION PURPOSE ONLY, WHICH IS NOT IN ACCORDANCE WITH LAW AS THERE IS A P ROCEDURE THEREIN FOR VERIFICATION OF THE ASSESSEES RETURN OF INCOME AND THE CLAIMS MADE THEREBY. THE ASSESSEE, A PARTNER IN A FIRM BY THE NAME, SRI KANA GATHARA JEWELLERS, WAS EXAMINED DURING SURVEY PROCEEDINGS U/S. 133A OF THE ACT (ON 01.02.2007) IN THE CASE OF THE SAID FIRM, WHICH IS IN JEWELLERY BA SIS, WHEREAT HE WAS QUESTIONED IN RESPECT OF HIS INVESTMENT IN THE SAID FIRM. THE RELEVANT PART OF THE SAID STATEMENT, RECORDED ON 21/2/2007, IS REPRODUCED AS UNDER: (APB PG. 1) Q.4 IN Q . NO.2, REFERRED TO ABOVE, YOU HAVE STATED THAT YOU A RE PARTNER IN THE FOLLOWING INSTITUTIONS. PLEASE EXPLAIN THIS IN DETAIL A , B, C , D, E) KANAKADHARA JEWELLERY, NO . 72, KOSAKADAI ST., PONDICHERRY . THE ABOVE KANAKADHA R A JEWELLERY IS A NEWLY STARTED ONE . I AM A PARTNER IN THAT . TOWARDS MY CAPITAL, IN TWO INSTALMENTS, I HAVE DEPO SITED ABOUT 1,500 GMS OF GOLD JEWELLERY AND 400 GMS OF GO LD JEWELLERY . 3 ITA NO.2824/MDS/2016 (AY 2007-08) O.S.RAJAMANI (HUF) V. ITO I HAVE GIVEN 8 KGS OF SILVER. CASH I NVESTED RS . 1,00,000. DETA I LS FOR THE INVESTMENT ARE AS FOLLOWS : - THE ABOVE ARE OUT OF PARTITION OF ANCESTRAL JEWELS BETWEEN MYSELF AND MY WIFE ON 25 - 12 - 1976. OUT OF MY AGL. I NCOME RS . 1 L AKH CASH WAS GIVEN . THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE Y EAR (COPY ON RECORD) ONLY ON 26.12.2007, ADMITTING A TOTAL INCOME OF . 1,12,860/-, WHICH IS FROM HOUSE PROPERTY AND BUSINESS, APART FROM AGRICULTURAL INCO ME AT . 35,000/-, BESIDES CLAIMING LONG-TERM LOSS ON THE ASSETS TRANSFERRED T O THE PARTNERSHIP FIRM (AT . 1,61,668/-). NOT ONLY, THEREFORE, IS THE SOURCE DIS CLOSED (PER THE STATEMENT), IT STANDS CORROBORATED BY THE RETURN OF INCOME AS WELL . THERE MUST SOME BASIS FOR THE ASSESSING OFFICER (AO) TO ARRIVE AT A REASON TO BELIEVE AN ESCAPEMENT OF INCOME TO ANY EXTENT. THE ASSESSMENT HAS BEEN, AND WHICH CANNOT BE, REOPENED ONLY TO VERIFY THE ASSESSEES CLAIMS, I.E., FOR VER IFICATION PURPOSES. THIS SUMS UP THE ASSESSEES CASE. THE REVENUES CASE, ON THE OTH ER HAND, IS THAT FAILURE TO ISSUE A NOTICE U/S. 143(2) WOULD NOT BAR REASSESSME NT PROCEEDINGS. DISCLOSURE OF THE SOURCE (OF THE CAPITAL INVESTED IN THE FIRM) PE R THE STATEMENT SUPRA, IS IN VAGUE TERMS, AND WOULD NOT THEREFORE QUALIFY FOR BE ING CONSIDERED AS SUCH. 4. I HAVE HEARD THE PARTIES AND PERUSED THE MATERIA L ON RECORD. THE PRINCIPLE OF LAW RELIED UPON BY BOTH THE PARTI ES IS UNEXCEPTIONAL AND UNDISPUTED. FIRSTLY, A FAILURE ON THE PART OF THE A O TO SUBJECT A RETURN TO THE VERIFICATION PROCEDURE UNDER THE ACT, I.E., BY ISSU E OF A NOTICE U/S. 143(2), WOULD NOT TAKE AWAY HIS RIGHT TO ASSESSEE INCOME WHICH HE BELIEVES TO HAVE ESCAPED ASSESSMENT; THE TWO PROVISIONS, I.E., QUA VERIFICATION AND REASSESSMENT, OPERATING IN DIFFERENT FIELDS . AS LONG AS THEREFORE REOPENING IS SUPPORTED BY COGENT AND VALID REASON/S TO BELIEVE ESCAPEMENT OF INCOME, THE SAME SHALL BE VALID IN LAW. REFERENCE IN THIS CONTEXT MAY BE MADE , INTER-ALIA , TO DECISIONS IN KALYANJI MAVJI & CO. V. CIT [1976] 102 ITR 287 (SC) AND ASST. CIT V . RAJESH JHAVERI STOCK BROKERS (P.) LTD. [2007] 291 ITR 500 (SC), WHEREBY THE POSITION 4 ITA NO.2824/MDS/2016 (AY 2007-08) O.S.RAJAMANI (HUF) V. ITO OF LAW IN THIS REGARD IS MADE ABUNDANTLY CLEAR. AGA IN, THE JURISDICTION TO RE- ASSESS COULD BE ASSUMED ONLY ON THE BASIS OF A REAS ON/S TO BELIEVE, AND CANNOT BE FOR UNDERTAKING VERIFICATION, WHICH ITSELF INDIC ATES THAT THE AO HAS NO MATERIAL TO FORM A REASON TO BELIEVE AN ESCAPEMENT OF INCOME, BUT ONLY ENTERTAINS A REASONABLE DOUBT/S AS TO IT, AND TOWAR D WHICH HE THEREFORE WISHES TO VERIFY IF WHAT STANDS STATED OR DISCLOSED BY THE AS SESSEE IS TRUE AND CORRECT, AND FOR WHICH THERE IS A SEPARATE PROCEDURE UNDER THE A CT. WHY, THE VERIFICATION PROCEDURE, BY THE ISSUE OF A NOTICE U/S. 143(2), WO ULD STAND TO BE FOLLOWED EVEN IN REASSESSMENT PROCEEDINGS! REFERENCE IN THIS CON TEXT MAY BE MADE TO THE DECISIONS IN THE CASE OF INDUCTOTHERM (INDIA) LTD. V. DY. CIT [2013] 356 ITR 481 (GUJ); VIPAN KHANNA V. CIT [2002] 255 ITR 220 (P&H), AMONG OTHERS. THE MATTER THUS WOULD TURN ON THE FACTS OF THE CAS E, I.E., WHETHER THE AO, UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE , HAD A REASON/S TO BELIEVE ESCAPEMENT OF INCOME, AND FOR WHICH ONE SHALL HAVE TO ADVERT TO THE REASON/S RECORDED U/S. 148(2). THE SAME, AS COMMUNICATED TO THE ASSESSEE VIDE HIS LETTER DATED 7.7.2011 (COPY ON RECORD), ARE AS UNDER: A SURVEY U/S.133A WAS CONDUCTED AT THE BUSINESS PRE MISES OF THE KANAGATHARA JEWELLERY ON 01.02.2007, IN WHICH THE A SSESSEE IS A PARTNER. IN THE SWORN STATEMENT RECORDED DURING THE COURSE OF S URVEY PROCEEDINGS, THE ASSESSEE HAS DECLARED THAT HE HAD INVESTED 189 GMS OF GOLD AND 8225 GMS OF SILVER IN THE PARTNERSHIP AND A SUM OF RS.1,00,000/ - AS HIS SHARE OF CAPITAL. THE SOURCE FOR INVESTMENT OF THE ABOVE JEWELLERY AN D CASH IN THE FIRM WAS NOT DISCLOSED. HENCE, TO ASSESS THE INCOME ESCAPED ASSESSMENT, NOTICE U/S. 148 WAS ISSUED . THE KARTA OF THE ASSESSEE-HUF, VIDE HIS SWORN STAT EMENT EXTRACTED ABOVE (IN ITS RELEVANT PART), HAS CLEARLY STATED THE SOUR CE OF THE GOLD AND SILVER AS WELL AS CASH. THE SAME IS BORNE OUT BY THE RETURN OF INC OME, WHICH ALSO RECORDS AGRICULTURAL INCOME. THAT THE SAME IS BELOW . 1 LAC IS NOT RELEVANT. THE CASH IN THE FIRM BEING INTRODUCED ON 14.06.2006, I.E., BARE LY 2 MONTHS INTO THE RELEVANT YEAR, EVEN A HIGHER DISCLOSURE FOR THE CUR RENT YEAR MAY BE OF LITTLE CONSEQUENCE. IT IS THE AGRICULTURAL INCOME, ASSUMIN G SO, FOR THE PRECEDING 5 ITA NO.2824/MDS/2016 (AY 2007-08) O.S.RAJAMANI (HUF) V. ITO YEAR/S, WHICH COULD EXPLAIN THE CASH ON THE BASIS O F ITS ACCUMULATION. THERE IS NO REFERENCE IN THE REASONS RECORDED TO THE RETURNS FOR THE EARLIER YEARS, AS (SAY) FOR AY 2006-07 (FILED ON 29.3.2007) AND AY 2005-06, EVEN AS THE LD. AR WOULD DURING HEARING STATE THAT THE AGRICULTURAL IN COME RETURNED FOR AY 2005- 06 IS AT . 38,000/-. THE REASON MAY BE VALID AS IT MAY WELL BE THAT THE RETURN FOR AY 2006-07 DOES NOT DECLARE ANY AGRICULTURAL IN COME, OR ONLY AT LIKE AMOUNT, SO THAT IT IS ONLY THE AGRICULTURAL INCOME, ASSUMING IT IS AS SO, FOR AY 2005-06 AND EARLIER YEARS, THAT CAN BE SAID TO BE S AVED AND ACCUMULATED IN THE SUM OF . 1 LAC. IN FACT, THE CASH AVAILABLE (FROM AGRICUL TURE) WOULD HAVE TO BE MORE IN-AS-MUCH AS SOME CASH WOULD BE REQUIRED FOR THE AGRICULTURAL OPERATIONS, EVEN AS THE INCOME THERE-FROM WOULD ARI SE ONLY ON THE SALE OF THE HARVEST AND, BESIDES, REQUIRED ALSO FOR HOUSEHOLD P URPOSES. THERE IS NOTHING ON RECORD TO SHOW THAT THE AGRICULTURAL INCOME WAS BEI NG DISCLOSED IN THE EARLIER YEARS, WHICH, AGAIN, TO ADD UP TO . 1 LAC, WOULD REQUIRE ACCUMULATION OVER A LONG PERIOD OF TIME, EVEN IF TAKEN AS SAVED IN THE FULL, WHICH IS ITSELF DOUBTFUL. HOWEVER, THERE IS NO REFERENCE TO THE ASSESSEES RE TURNS FOR THE CURRENT YEAR OR THE EARLIER YEARS IN THE MATTER, I.E., IN THE REASO NS RECORDED. ALL THAT THE AO STATES IS THAT THE SOURCE IS NOT DISCLOSED, AND WHI CH CANNOT BE SAID TO BE SO ON THE BASIS OF THE MATERIAL ON RECORD, I.E., THE ASSE SSEES STATEMENT AND THE RETURN OF INCOME FOR THE CURRENT YEAR, TO WHICH AGAIN, THE RE IS IN FACT NO REFERENCE, AS WELL AS FOR THE EARLIER YEARS. WHY, IT MAY WELL BE THAT THE RETURN FOR AY 2006- 07 DISCLOSES AGRICULTURAL INCOME AT A HIGHER SUM? T HE ISSUE IN HAND IS QUA JURISDICTION, AND NOT THE ASSESSMENT ON MERITS, WHI CH WOULD OF COURSE DEPEND UPON THE EVIDENCES LED FOR AND AGAINST. THERE COULD , FOR THAT MATTER, BE A NUMBER OF ISSUES THAT REQUIRE VERIFICATION ON WHICH THE AO MAY, AND REASONABLY SO, ENTERTAIN REASONABLE DOUBT WITH REGA RD TO THE CORRECTNESS OF THE ASSESSEES CLAIMS. THAT BY ITSELF WOULD NOT GIVEN R ISE TO THE FORMATION OF A REASON TO BELIEVE ESCAPEMENT OF INCOME, WHICH IS HA VE DIRECT AND A CLEAR NEXUS 6 ITA NO.2824/MDS/2016 (AY 2007-08) O.S.RAJAMANI (HUF) V. ITO WITH MATERIAL IN THE POSSESSION OF THE REVENUE AND/ OR THE INFERENCE/S ARISING THERE-FROM (REFER, INTER ALIA, ITO V. LAKHMANI MEWAL DAS [1970] 103 ITR 437 (SC); SHEO NATH SINGH V. AAC [1971] 82 ITR 147 (SC)). 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLO WED. ORDER PRONOUNCED ON APRIL 20, 2017 AT CHENNAI . SD/- ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, / /DATED, APRIL 20, 2017 EDN 0 ( *'-12 32%- /COPY TO: 1. &' /APPELLANT 2. *+&' /RESPONDENT 3. , 4- ( )/CIT(A) 4. , 4- /CIT 5. 2$56 *'-' /DR 6. 67# 8 /GF