Smt. K. Srilakshmi, CHENNAI V. ACIT, CHENNAI

ITA 2994/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5855 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN JCIT D R
• Assessee Lawyers: S SRIDHAR
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 147; 148

Judgement Text

, C/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL C/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.A.NO.2994 /MDS./2016 ( ASSESSMENT YEAR : 2010-11 ) SMT.K.SRILAKSHMI, NO.20B,CHARI AVENUE, ANNA MAIN ROAD, PALLAVAKKAM, CHENNAI 600 041. VS. THE ACIT, CORPORATE CIRCLE 1(2), CHENNAI. PAN AAHPS 9086 M ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : MR.S.SRIDHAR,ADVOCATE / RESPONDENT BY : MR.B.SAGADEVAN, JCIT, D.R ! ' / DATE OF HEARING : 08.11.2017 #$%& ! ' /DATE OF PRONOUNCEMENT : 08.11.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-1, CHENNA I DATED 05.08.2016 PERTAINING TO ASSESSMENT YEAR 2010-11. ITA NO.2994/MDS/2016 2 2. THE ASSESSEE RAISED THE GROUNDS IN HER APPEAL I S WITH REGARD TO REOPENING OF ASSESSMENT ON THE REASON THAT THE REOPENING WAS COMPLETED U/S.143(3) OF THE ACT AND THERE IS NO FRE SH TANGIBLE MATERIAL SO AS TO RE-OPEN THE ASSESSMENT U/S.147 OF THE ACT. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE F ILED RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 31.07.2010 AD MITTING A TOTAL INCOME OF ` 4,12,938/-. THE CASE WAS PROCESSED U/S.143(1) OF T HE ACT AND THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 27.11.2012 WITHOUT MAKING ANY ADJUSTMENT TO THE TOT AL INCOME OF ASSESSEE. DURING THE YEAR, ASSESSEE HAS RECEIVED IN TEREST INCOME FROM HER SAVINGS BANK ACCOUNT FOR A SUM OF ` 4,41,652/- WHILE SHE HAD OFFERED TO TAX ONLY A SUM OF ` 70,638/-. THE BALANCE OF ` 3,71,014/- HAD ESCAPED ASSESSMENT AND HENCE, THE C ASE WAS REOPENED UNDER SECTION 147 AND NOTICE U/S.148 DATED 22.08.2013 WAS ISSUED TO THE ASSESSEE. THE AO POINTED OUT THAT THE ASSESSEE HAD NOT DISCLOSED THE INTEREST INCOME, AND AS A RES ULT THE SAME HAD NOT SUFFERED TAX AND TO THAT EXTENT THE PARTICULARS OF INCOME WERE CONCEALED OR INACCURATELY FURNISHED. AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE ITA NO.2994/MDS/2016 3 LD.CIT(A). ON APPEAL, THE LD.CIT(A) CONFIRMED TH E ACTION OF THE LD. ASSESSING OFFICER. 4. BEFORE US, THE LD.A.R SUBMITTED THAT THE ASSES SEE HAD CHALLENGED THE REOPENING AT THE ASSESSMENT STAGE S TATING THAT THE ASSESSMENT ORIGINALLY FINALIZED ON 27.11.2012 WAS FINALIZED AFTER SCRUTINIZING ALL MATERIALS SUBMITTED BY THE ASSESSE E WHICH INCLUDED A COPY OF BANK ACCOUNT ALONG WITH EXPLANATIONS FOR AL L THE CREDITS IN THE BANK STATEMENT, INCLUDING THE INTEREST CREDITED BY THE BANK. FURTHER, THE LD.A.R SUBMITTED THAT AT THE TIME OF THE ORIGIN AL ASSESSMENT PRIMARY FACTS WERE ALREADY WITH THE AO, SO INVOKING THE PROVISIONS OF THE SECTION 147 IS BAD IN LAW. 5. ON THE OTHER HAND, LD.D.R SUBMITTED THAT AN ASS ESSMENT CAN BE SUBJECT MATTER OF REOPENING U/S.147 R.W.S.148 OF THE ACT IN THE EVENT THAT THE AO HAVING REASON TO BELIEVE THAT INC OME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. FURTHER, LD.D.R SUBMITT ED THAT THE REOPENING WOULD BE MANDATED ONLY IF INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REA SON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N U/S.139 /142(1) /148 OR, TO DISCLOSE TRULY AND FULLY ALL MATERIAL F ACTS NECESSARY FOR THE ITA NO.2994/MDS/2016 4 ASSESSMENT . FURTHER, HE SUBMITTED THAT PRODUCTION BEORE THE AO OF BOOKS OF ACCOUNT AND OTHER EVIDENCE FROM WHICH MATE RIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY T HE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE. INSTANCES WHERE N O RETURN WAS FILED OR WHERE ASSESSMENT HAS NOT BEEN MADE ON A RETURN FILED OR ASSESSMENT HAS BEEN MADE BUT INCOME WAS UNDER-ASSE SSED OR A LOW RATE OR WITH EXCESSIVE RELIEF GIVEN WERE INSTAN CES WHERE INCOME WOULD HAVE ESCAPED ASSESSMENT . IN SUCH A SITUATION , THE ASSESSMENT HAS BEEN REOPENED WITHIN FOUR YEARS FRO M THE END OF THE RELEVANT TO ASSESSMENT YEAR AND HENCE THE PROVISO T O S.147 WOULD NOT APPLY. FURTHER, IN THE ORIGINAL ASSESSMENT ALS O THE AO HAD NOT EXPRESSED ANY OPINION ON THE ESCAPED INCOME AND HEN CE THERE WAS NO CHANGE OF OPINION. ACCORDING TO LD.D.R, THE ASS ESSEE CANNOT TAKE A PLEA THAT THE BANK STATEMENTS WERE PRODUCED BEFOR E THE AO AND HENCE THE ASSESSMENT COULD NOT BE REOPENED. THEREF ORE, LD.D.R OBJECTED THE ARGUMENT OF LD.A.R AND PLEADED THAT TH E REASONS SUBMITTED ABOVE ARE VALID GROUNDS FOR REOPENING OF ASSESSMENT. 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THIS CASE, THE ORIGINAL ASSESSMENT PAS SED U/S.143(3) OF ITA NO.2994/MDS/2016 5 THE ACT BY ISSUING NOTICE U/S.143(2) OF THE ACT VI DE ASSESSMENT ORDER DATED 27.11.2012. LATER, THE NOTICE U/S.148 WAS ISS UED BY AO ON 22.08.2013 BY RECORDING REASONS AS FOLLOWS:- DURING THE YEAR THE ASSESSEE HAS RECEIVED INTEREST INCOME FROM THE BANK FOR A SUM OF ` 3,71,014/-. HOWEVER, THE ASSESSEE HAS NOT OFFERED THE SAME FOR TAXATION. HENCE, THE CASE WAS REOPENED U/S.147 AND NOTICE U/S.148 OF THE ACT WAS ISSUED TO THE ASS ESSEE. IN THE PRESENT CASE, THERE IS A CLEAR CUT REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. THE ASSESSMENT HAS INTEREST INCOME FOR A SUM OF 4,41,652/- FROM BANK. HOWEVER, THE ASSESSEE HAS OFFERED ONLY 70,634/- IN THE RETURN OF INCOME. THEREFORE, THERE IS NO DISPUTE ON MERITS OF THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS NOT OFFERED THE INCOME IN THE RETURN F ILED AND THE INCOME TO THAT EXTENT HAS ESCAPED ASSESSMENT. FURTH ER, THE FIRST PROVISO TO SEC.147 WOULD NOT APPLY IN THIS CASE, SI NCE THE REOPENING OF ASSESSMENT IS WITHIN THE PERIOD OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR. 6.1 PERUSAL OF THE ABOVE REASONS INDICATE THAT AO PROCEEDS SOLELY ON THE BASIS OF THE RETURN OF INCOME AND THE ENCLOS URES THAT TOO, TO INITIATE THE PROCEEDINGS FOR REOPENING OF ASSESSMEN T . ALL THE DOCUMENTS, WHICH WERE CONSIDERED FOR REOPENING OF A SSESSMENT ALREADY PART OF THE ASSESSMENT RECORD AND THE BAS IS ON WHICH THE ITA NO.2994/MDS/2016 6 ORIGINAL ASSESSMENT U/S.143(3) OF THE ACT WAS FRAM ED AND THERE IS NO FRESH TANGIBLE MATERIAL TO FORM AN OPINION BY THE AO THAT INCOME AS ESCAPED ASSESSMENT SO AS TO ISSUE A NOTICE U/S.148 OF THE ACT. THE DEPARTMENT CANNOT BE PERMITTED TO AVAIL ALL THE EXT ENDED TIME LIMIT IN THE ABSENCE OF ANY NEW OR TANGIBLE MATERIAL, WHEN T HE ORIGINAL ASSESSMENT WAS COMPLETED AFTER DUE ENQUIRY. ACCOR DINGLY, I AM OF THE OPINION THAT ISSUE OF NOTICE FOR REOPENING OF A SSESSMENT IS BAD IN LAW. THIS VIEW IF FORTIFIED BY THE RECENT JUDGEMEN T OF JURISDICTIONAL HIGH COURT IN THE CASE OF TANMAC INDIA VS. DCIT IN (2016) 97 CCH 0189(CHENNAI) WHEREIN HELD THAT:- 7. THE SINE QUA NON FOR THE INITIATION OF PROCEEDI NGS IN TERMS OF SECTION 147 OF THE ACT IS REASON TO BELIEVE ON THE PART O F THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. WHILE THE COURT CANNOT EXAMINE THE SUFFICIENCY OF REASONS ON THE BASIS OF WHICH RE-ASSESSMENT IS INITIATED, THE EXISTENCE OR OTHERW ISE SUCH REASON TO BELIEVE IS CERTAINLY OPEN TO VERIFICATION AND WOUL D BE EVIDENT FROM THE REASONS RECORDED PRIOR TO ISSUE OF NOTICE UNDER SEC TION 148 AS REQUIRED IN TERMS OF SECTION 148(2) OF THE ACT. IN ORDER TO EXAMINE THIS ASPECT OF THE MATTER, THE RECORDS WERE CALLED FOR AND HAVE BE EN DULY PRODUCED FOR OUR PERUSAL BY MR. NARAYANASWAMY. THE REASONS RECOR DED ARE AS FOLLOWS: ITA NO.2994/MDS/2016 7 THE DEBIT CLAIMED TOWARDS LUMP SUM PAYMENT MADE AS A COMPENSATION FOR FUTURE PROFITS FORGONE BY THE RETI RING PARTNER RS.5,50,000/- IS NOT ALLOWABLE FOR THE FOLLOWING RE ASONS: 1. THE PAYMENT HAS NOT BEEN AUTHORISED BY PARTNERSH IP DEED. 2. SERVING OF FUTURE PROFIT IS CONTINGENT ONE. CONT INGENT EXPENDITURE CANNOT BE ALLOWED. 3. FUTURE PROFITS DOES NOT RELATE TO THE AY IN QUES TION. AND SO, THE EXPENDITURE CANNOT BE ALLOWED IN THIS AY. 8. A PERUSAL OF THE REASONS WOULD INDICATE THAT THE ASSESSING OFFICER PROCEEDS SOLELY ON THE BASIS OF THE RETURN OF INCOM E AND THE ENCLOSURES THERETO, BEING THE FINANCIALS AND THE DEED OF PARTN ERSHIP, TO INITIATE PROCEEDINGS FOR RE-ASSESSMENT. THE AFORESAID DOCUME NTS HOWEVER ARE PART OF RECORD AND THE BASIS ON WHICH THE INTIMATIO N UNDER SECTION 143(1)(A) HAS BEEN ISSUED ON 1.12.98. LET US BEAR I N MIND THAT THE INTIMATION DATED 1.2.1998 HAS BEEN MANUALLY ISSUED, BEING PRIOR TO THE ELECTRONIC ERA WHICH CAME INTO FORCE ON AND WITH EF FECT FROM 2003. THE ASSESSING OFFICER HAS THUS EVIDENTLY APPLIED HIS MI ND TO THE RETURN AND ANNEXURES EVEN AT THAT STAGE. 9. THE SCHEME OF ASSESSMENT AS SET OUT IN SECTION 1 43 REQUIRES AN ASSESSING OFFICER TO PROCESS THE RETURN BY ISSUE OF AN INTIMATION (WHICH HAS BEEN DONE IN THE PRESENT CASE) AND THEREAFTER I SSUE A NOTICE UNDER SUB-SECTION (2) OF SECTION 143 TO THE ASSESSEE IF T HE ASSESSING OFFICER CONSIDERS IT NECESSARY OR EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED INCOME, COMPUTED EXCESSIVE LOSS OR UNDE RPAID TAX CALLING UPON HIM TO ATTEND HIS OFFICE AND REQUIRE HIM ON A DATE TO BE SPECIFIED THEREIN, TO PRODUCE OR CAUSE TO BE PRODUCED ANY EVI DENCE ON WHICH THE ASSESSEE MAY RELY IN SUPPORT OF SUCH CLAIM. HAVING DONE SO, AN ASSESSMENT IS TO BE COMPLETED IN TERMS OF SECTION 1 53(1) OF THE ACT ITA NO.2994/MDS/2016 8 WITHIN A PERIOD OF TWO YEARS FROM THE END OF THE AS SESSMENT YEAR IN WHICH THE INCOME WAS FIRST ASSESSABLE, IN THIS CASE , ON OR BEFORE 31.3.2001. 6.2 ACCORDINGLY, I AM INCLINED TO ALLOW THE APPEAL OF ASSESSEE ON LEGAL ISSUE. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON 08 TH NOVEMBER, 2017. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 08 TH NOVEMBER, 2017 . K S SUNDARAM. ' ( )!*+ ,+%! / COPY TO: 1 . / APPELLANT 3. ' ' -! () / CIT(A) 5. +0 1 )!)23 / DR 2. / RESPONDENT 4. ' ' -! / CIT 6. 1 45 6 / GF