Shri Ritesh Niranjan Soni, Ahmedabad V. The Income Tax Officer, Ward-3(3), Now Ward- 1(3)(3), Ahmedabad

ITA 2979/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1345 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K
• Assessee Lawyers: R C SHAH
• Keywords: Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 142(1); 14A; 147; 10

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO.2979/AHD/2015 / ASSTT. YEAR: 2009-2010 RITESH NIRANJAN SONI 67, GREEN PARK BUNGALOW NR.HDFC BANK, AMBALI BOPAL ROAD AHMEDABAD. PAN : ALTPS 4852 Q VS ITO, WARD - 3(3)/1(3)(3) AMBAWADI, AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI R.C. SHAH REVENUE BY : SHRI B.P.K. PANDA, SR.DR / DATE OF HEARING : 01/06/2016 / DATE OF PRONOUNCEMENT: 02/06/2016 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF THE LD.CIT(A)-10, AHMEDABAD DATED 18.8.2015 PASSED IN T HE ASSTT.YEAR 2009-10. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPELLATE TRIBUN AL) RULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN UPHOLDING REOPENING OF THE ASSESSMENT AND CONFIRMING THE ADDI TION OF RS.96,739/- AS WELL AS RS.5,02,632/-. THESE ADDITIONS HAVE BEE N MADE BY THE AO ON THE GROUND THAT THE ASSESSEE HAD RECEIVED DIVIDE ND INCOME WHICH ITA NO.2979/AHD/2015 2 WAS EXEMPT FROM TAX. HE HAS INCURRED INTEREST EXPE NDITURE, AND THEREFORE, THE EXPENDITURE IS ATTRIBUTABLE TO THE E ARNING OF TAX FREE INCOME DESERVES TO BE DISALLOWED UNDER SECTION 14A OF THE INCOME TAX ACT R.W.R 8D OF THE INCOME TAX RULES, 1962. THE SECOND ADDITION HAS BEEN MADE ON THE GROUND TH AT THE ASSESSEE HAS FAILED TO DEDUCT TDS, THEREFORE, THE I NTEREST EXPENDITURE OF RS.5,02,632/- DESERVES TO BE DISALLOWED UNDER SE CTION 40(A)(IA) OF THE ACT. 3. WHILE IMPUGNING THE ORDER OF THE LD.CIT(A) FOR U PHOLDING REOPENING OF THE ASSESSMENT, THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 30.9.2009 DECLARING TOTAL INCOME AT RS.2,06,040/-. THE CASE OF THE ASS ESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT, AND THE ASSESSMENT ORDER W AS FRAMED UNDER SECTION 143(3) OF THE ACT ON 2.12.2011. THE LD.AO HAS DETERMINED THE TAXABLE INCOME OF THE ASSESSEE AT RS.2,28,472/-. T HE AO SOUGHT TO REOPEN THE ASSESSMENT BY RECORDING THE FOLLOWING RE ASONS: 11. REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. : ON VERIFICATION OF CASE RECORD IT IS NOTICED THAT D IVIDEND INCOME OF RS. 32,412/- WAS CLAIMED EXEMPTION U/S 10 FROM PAYM ENT OF TAX, FURTHER THE PAYMENT OF INTEREST OF RS. 10,91,356/- MADE ,AS PER PROVISION CONTAINED IN SECTION 14A OF RULE 8D, THE EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FROM PART OF THE TOTAL INCOME WAS REQUIRED TO BE DISALLOWED OF RS.L,00,848/-.THER EFORE CLAIMED PAYMENT INTEREST OF RS. 1,00,848/-REQUIRED TO BE DI SALLOWED. THEREFORE, IN VIEW OF THE INFORMATION AND THE MATER IAL AVAILABLE ON RECORD, I HAVE REASONS TO BELIEVE THAT INCOME OF RS . 1,00,848/- HAS ESCAPED ASSESSMENT IN THIS CASE FOR A.Y.2009-10 . SD/- (B.A. RATHOD) INCOME TAX OFFICER, WARD-3(3), AHMEDABAD. ITA NO.2979/AHD/2015 3 4. THE LD.COUNSEL FOR THE ASSESSEE HAS FURTHER CONT ENDED THAT DURING THE COURSE OF SCRUTINY ASSESSMENT, THE LD.AO HAD IS SUED A QUESTIONNAIRE UNDER SECTION 142(1) OF THE INCOME TAX ACT. THE AO HAS CALLED FOR ALL THE INFORMATION WITH REGARD TO THE INVESTMENT, DIVI DEND INCOME ETC. HE DREW OUR ATTENTION TOWARDS PAGE NO.4 TO 5 OF THE PA PER BOOK, WHEREIN COPY OF THE NOTICE ISSUED UNDER SECTION 142(1) OF T HE INCOME TAX ACT HAS BEEN PLACED ON RECORD. THE LD.COUNSEL FOR THE ASSESSEE TOOK US THROUGH SERIAL NO.(XIV) OF THE SHOW CAUSE NOTICE, W HERE THE LD.AO HAS CALLED FOR THE FOLLOWING DETAILS: (XIV) COPIES OF FOLLOWING ACCOUNT: FUTURE TRADING PROFIT, INTEREST ON SHARAFI A/C, INT EREST ON FD, DIVIDEND A/C., INTERNET EXP, LOAN PROCESSING CHARGE , SALARY, MUNICIPAL TAX, VEHICLE EXP, BANK CHARGES, INTEREST ON PL, INTEREST ON G E MONEY, INTEREST ON ABN AMRO, INTERE ST ON HDFC, INTEREST ON HSBC. 5. HE CONTENDED THAT THERE IS NO FRESH TANGIBLE MAT ERIAL POSSESSED BY THE AO, WHICH PERSUADED HIM TO BELIEVE THAT INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE LD.AO HAS BEEN POS SESSING THE SAME RECORD AND ANALYZED THE SAME MATERIAL. THEREFORE, REOPENING OF THE ASSESSMENT IS BAD IN LAW. IN SUPPORT OF HIS CONTEN TION, HE RELIED UPON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. LIVING MEDIA INDIA LTD., 359 ITR 106 (DELHI). 6. ON THE OTHER HAND, THE LD. DR RELIED UPON THE OR DERS OF THE REVENUE AUTHORITIES BELOW. 7. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. DURING THE COURSE OF HEARING, WE HAVE CONFRONTED THE LD.DR TO THE DECISION OF THE HONBLE DELHI HIGH COU RT RENDERED IN THE CASE OF INDU LATA RANGWALA VS. DCIT IN WRIT PETITIO N NO.1393 OF 2002 DECIDED ON 18.5.2016. THE HIGH COURT HAS MADE DETA ILED ANALYSIS OF ITA NO.2979/AHD/2015 4 THE POSITION OF LAW FOR REOPENING OF THE ASSESSMENT . IT IS PERTINENT TO TAKE NOTE THE FOLLOWING OBSERVATIONS: SUMMARY OF THE LEGAL POSITION 35.1 THE UPSHOT OF THE ABOVE DISCUSSION IS THAT WHE RE THE RETURN INITIALLY FILED IS PROCESSED UNDER SECTION 143 (1) OF THE ACT, AND AN INTIMATION IS SENT TO AN ASSESSEE, IT IS NOT AN 'AS SESSMENT' IN THE STRICT SENSE OF THE TERM FOR THE PURPOSES OF SECTIO N 147 OF THE ACT. IN OTHER WORDS, IN SUCH EVENT, THERE IS NO OCCASION FOR THE AO TO FORM AN OPINION AFTER EXAMINING THE DOCUMENTS ENCLO SED WITH THE RETURN WHETHER IN THE FORM OF BALANCE SHEET, AUDITE D ACCOUNTS, TAX AUDIT REPORT ETC. 35.2 THE FIRST PROVISO TO SECTION 147 OF THE ACT AP PLIES ONLY (I) WHERE THE INITIAL ASSESSMENT IS UNDER SECTION 143 ( 3) OF THE ACT AND (II) WHERE SUCH REOPENING IS SOUGHT TO BE DONE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR. IN OTHER WORDS, THE REQUIREMENT IN THE FIRST PROVISO TO SECTION 147 OF THERE HAVING TO BE A FAILURE ON THE PART OF THE ASSESSEE 'TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS' DOES NOT AT ALL APPLY WHERE THE INITIAL RETURN HAS BEEN PROCESS ED UNDER SECTION 143 (1) OF THE ACT. 35.3 AS EXPLAINED IN RAJESH JHAVERI STOCK BROKERS ( P) LTD. (SUPRA) 'AN INTIMATION ISSUED UNDER SECTION 143 (1) CAN BE SUBJECTED TO PROCEEDINGS FOR REOPENING', SO LONG AS THE INGREDI ENTS OF SECTION 147 ARE FULFILLED'. 35.4 EXPLANATION 2 (B) BELOW SECTION 147 STATES THA T FOR THE PURPOSES OF SECTION 147, WHERE A RETURN OF INCOME H AS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEE N MADE AND IT IS NOTICED BY THE AO THAT THE ASSESSEE HAS UNDER STATED THE INCOME AND CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOW ANCE AND RELIEF IN THE RETURN THEN THAT 'SHALL ALSO BE DEEME D TO BE A CASE WHERE THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSE SSMENT'. 35.5 AS EXPLAINED BY THE SUPREME COURT IN RAJESH JH AVERI STOCK BROKERS P. LTD. (SUPRA) AND REITERATED BY IT IN ZUA RI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA) AN INTI MATION UNDER SECTION 143 (1) (A) CANNOT BE TREATED TO BE AN ORDE R OF ASSESSMENT. THERE BEING NO ASSESSMENT UNDER SECTION 143 (1) (A), THE QUESTION OF CHANGE OF OPINION DOES NOT ARI SE. ITA NO.2979/AHD/2015 5 35.6 WHEREAS IN A CASE WHERE THE INITIAL ASSESSMENT ORDER IS UNDER SECTION 143 (3), AND IT IS SOUGHT TO BE REOPE NED WITHIN FOUR YEARS FROM THE EXPIRY OF THE RELEVANT ASSESSMENT YE AR, THE AO HAS TO BASE HIS 'REASONS TO BELIEVE' THAT INCOME HA S ESCAPED ASSESSMENT ON SOME FRESH TANGIBLE MATERIAL THAT PRO VIDES THE NEXUS OR LINK TO THE FORMATION OF SUCH BELIEF. IN A CASE WHERE THE INITIAL RETURN IS PROCESSED UNDER SECTION 143 (1) O F THE ACT AND AN INTIMATION IS SENT TO THE ASSESSEE, THE REOPENING O F SUCH ASSESSMENT NO DOUBT REQUIRES THE AO TO FORM REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT SUCH REASON S DO NOT REQUIRE ANY FRESH TANGIBLE MATERIAL. 35.7 IN OTHER WORDS, WHERE REOPENING IS SOUGHT OF A N ASSESSMENT IN A SITUATION WHERE THE INITIAL RETURN IS PROCESSE D UNDER SECTION 143 (1) OF THE ACT, THE AO CAN FORM REASONS TO BELI EVE THAT INCOME HAS ESCAPED ASSESSMENT BY EXAMINING THE VERY RETURN AND/OR THE DOCUMENTS ACCOMPANYING THE RETURN. IT IS NOT NECESSARY IN SUCH A CASE FOR THE AO TO COME ACROSS SOME FRESH TANGIBLE MATERIAL TO FORM 'REASONS TO BELIEVE' THAT INCOME HAS ESCAPED ASSESSMENT. 35.8 IN THE ASSESSMENT PROCEEDINGS PURSUANT TO SUCH REOPENING, IT WILL BE OPEN TO THE ASSESSEE TO CONTEST THE REOP ENING ON THE GROUND THAT THERE WAS EITHER NO REASON TO BELIEVE O R THAT THE ALLEGED REASON TO BELIEVE IS NOT RELEVANT FOR THE F ORMATION OF THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT. 35.9 THE DECISIONS OF THIS COURT AND OTHER COURTS T O THE EXTENT INCONSISTENT WITH THE ABOVE DECISIONS OF THE SUPREM E COURT CANNOT BE SAID TO REFLECT THE CORRECT LEGAL POSITIO N. 8. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE THE FAC TS OF THE PRESENT CASE, THEN, IT WOULD REVEAL THAT THE AO HAS CALLED FOR THE DETAILS WITH REGARD TO THE INTEREST ON FDS., DIVIDEND INCOME, IN TEREST EXPENDITURE ETC. HE HAS PASSED THE ASSESSMENT ORDER UNDER SECT ION 143(3). HE HAS NOT BROUGHT ANY NEW MATERIAL ON RECORD, WHICH HAS G OADED HIM TO FORM AN OPINION THAT INCOME HAS ESCAPED ASSESSMENT. A P ERUSAL OF THE RECORD WOULD SHOW THAT HE HAS ANALYZED SAME MATERIA L FOR HARBOURING A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IN VIEW OF THE ANALYSIS MADE BY THE HONBLE DELHI HIGH COURT, IT IS NOT PER MISSIBLE AT THE END OF ITA NO.2979/AHD/2015 6 THE AO TO REOPEN THE ASSESSMENT. THEREFORE WE ALLO W THE APPEAL OF THE ASSESSEE. AND QUASH REASSESSMENT ORDER. 9. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 2 ND JUNE, 2016 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER