Satprem Nanda, Bhubaneswar V. ITO, Bhubaneswar

ITA 3/CTK/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7844 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 28-06-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 04-01-2012
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: S K AGARWALLAC R DAS ARS
• Keywords: Unexplained cash credit; Invalid notice; Gift; Salary income; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 68; 148; 139

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 003/CTK/2012 (ASSESSMENT YEAR 2002 - 03 SATPREM NANDA, PLOT NO.CM - 1, V.S.S.NAGAR, BHUBANESWAR 751 007 VERSUS INCOME - TAX OFFIC ER, WARD 2(2), BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI S .K.AGARWALLA/C.R.DAS, ARS FOR THE RESPONDENT SHRI A.BHATTACHARJEE, DR DATE OF HEARING : 28.06.2012 DATE OF PRONOUNCEMENT : 29.06.2012 ORDER SHRI K.K.GUPTA, AM : THIS APPEAL BY THE ASSESSEE RAISES THE FOLLOWING GROUND. 1. THE LD. AUTHORITIES BELOW ARE WRONG IN TREATING THE UNSECURED LOAN OFF 7,00,000 OBTAINED FROM THE CLASSIC BUILDERS (P) LTD. AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT, 1961 WHICH IS LIABLE TO BE DELETED. 2. THAT, THE LD. AUTHORITIES BELOW ERRED IN FACTS IN CIRCUMSTANCES BY TREATING THE GIFT OF 1,50,000 RECEIVED FROM THE RELATIVES AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT, 1961 AND THE SAME IS LIABLE TO BE DELETED. 3. THAT, THE LD. AUTHORITIES BELOW FAILED TO APPRECIATE THE PROVISIONS OF SECTION 147 OF THE ACT IN PROPER PROSPECTIVE AND REOPENING OF THE CASE U/S 147 OF THE ACT IS ILLEGAL AND LIABLE TO BE QUASHED. 4. THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS WRONG IN DISMISSING THE GROUNDS OF APPEAL OF THE APPELLANT THAT THE ASSESSMENT ORDER IS BARRED BY LIMITATION WITH AN OBSERVATION, SINCE THE ITNS - 51 WAS NOT RECEIVED, THE EXACT DATE OF SERVICE IS NOT KNOWN. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THA T THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM SALARY AND BUSINESS OR PROFESSION. THE ASSESSEE FILED THE RETURN OF INCOME U/S 139 BY DECLARING AN INCOME OF 1,52,508 THE LD. ASSESSING OFFICER ISSUED THE NOTICE U/S 148 OF THE OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED AS THE ACT) ON 30.03.2009. IN RESPONSE TO THE SAID NOTICE THE ASSESSEE FILED A PETITION ON 29.04.2009 FOR SEEKING OF TIME FOR FILING OF RETURN OF INCOME. HOWEVER ON 22ND JUNE 2009, ITA NO.003/CTK/2012 2 THE ASSESSEE FILED THE RETURN OF INCOME U/S 148 BY DECLARING THE SAME INCOME AS DECLARED IN THE RETURN OF INCOME FILED U/S 139. THEREAFTER THE ASSESSEE IN HIS LETTER DATED 2ND JULY 2009, REQUESTED THE ASSESSING OFFICER TO PROVIDE THE CAUSES OF REOPENING U/S 147 OF THE ACT. IN RESPONSE TO THE SAID REQUES T LETTER OF THE ASSESSEE THE ASSESSING OFFICER WAS KIND ENOUGH TO PROVIDE THE CAUSES OF REOPENING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ALL THE PARTICULARS REQUISITIONED BY THE ASSESSING OFFICER WERE FURNISHED AND ALL THE REQUIRED EXPLANATIONS WERE PROVIDED BY THE ASSESSEE . HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE RETURNED INCOME AS CORRECT, COMPLETE AND TRUE AND ASSESSED THE TOTAL INCOME AT 10,02,510 BY MAKING OF ADDITIONS OF 1,50,000 & 7,00,000 U/S. 68 OF THE ACT. 3. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONFIRMED THE ASSESSING OFFICERS ORDER U/S.143(3)/147 DT.31.12.2009 BY OBSERVING - 7. GROUND NO .2 OF THE APPEAL IS DIRECTED AGAINST THE ORDER IN QUESTION HAS BEEN PASSED AS EVIDENT FROM THE ORDER AND THE DEMAND NOTICE ON 31.12.2009. THE LENGTHY SUBMISSION OF THE APPELLANT SUPPORTING THE PLEA THAT THE ORDER IS BARRED BY LIMITATION IS NOT CONVINCING. THE ASSESSING OFFICER HAS NOT RETURNED I.T.N.S - 51. THEREFORE, THE EXACT DATE OF SERVICE IS NOT KNOWN. IN ANY CASE SINCE THE ORDER WAS MADE ON 31.12.2009, NO MERIT IS FOUND IN THIS GROUND AND ACCORDINGLY, GROUND NO.2 OF THE APPEAL IS DISMISSED. HE ALSO C ONFIRMED THE DISALLOWANCE/ADDITIONS WHICH THE LEARNED COUNSEL FOR THE ASSESSEE WILL RELATE HEREIN AFTER. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT GIVEN A WHISPER OF THE PURPORTED INFORMATION BROUGHT ON RECORD BY HIM IN PURSUANCE TO NOTICE U/S.148 ON THE BODY OF THE ORDER AS MAY BE PERUSED. THE DATES ARE SIGNIFICANT TO CONSIDER WHETHER FOR THE ASSESSMENT YEAR 2002 - 03 REASSESSMENT PROCEEDINGS CAN BE TAKEN BY ISSUING OF NOTICE U/S.148 ON 30.3.2009 WHEN THE LAW PROVI DES THAT A PERIOD OF SIX YEARS WOULD ITA NO.003/CTK/2012 3 BE GIVEN ONLY WHEN THE PURPORTED ESCAPED INCOME WOULD LEAD TO NON - PAYMENT OF TAX OF 1 LAKH. HE POINTED OUT THAT THE MERIT ADDITIONS MADE BY THE ASSESSING OFFICER DO NOT HAVE ANY LINK TO THE PURPORTED ESCAPEMENT OF INCO ME FOR ISSUE OF NOTICE U/S.148 WAS THEREFORE PURPORTEDLY MADE WHEN THE FACTS AS WERE GIVEN IN THE ORIGINAL RETURN PROCESSED U/S.143(1) WERE ADEQUATE TO HOLD OTHERWISE. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT HAVING FOUND NO LINKING TO T HE PURPORTED INFORMATION THE ASSESSEE WAS SUBJECTED TO SECTION 148 BEYOND THE PERIOD OF FOUR YEARS WHEN THE PURPORTED NOTICE U/S.148 OUGHT TO HAVE BEEN ISSUED BY 31.3.2007. THE LEARNED CIT(A) HELD THE SAME AS NOT CONVINCING AS ENUMERATED AS THE DATE SPEAKS VOLUME OF ILLEGALITY IN ISSUING THE NOTICE. HE PERUSED SECTION 149(1)(B) INSCRIBING THE TIME LIMIT FOR NOTICE WHEN TH E LAW PROVIDES THAT NO NOTICE U/S.1 48 SHALL BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR IF FOUR YEARS BUT NOT MORE THAN SIX YEARS HAVE ELAP SED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO FETCH TAX THE AMOUNT OF 1 LAKH OR MORE. HE SUBMITTED THAT DISALLOWANCE OF CAPITAL BALANCE HAVING BEEN ACCEPTED OVER A PERIOD OF FOUR YEARS AND A LOAN ADVANCE OBTAINED BY THE ASSESSEE SIX YEARS AGO WAS NOT AN ESCAPEMENT OF INCOME WHICH WAS NOTED BY THE ASSESSING OFFICER IN HIS RE ASONS TO BELIEVE INCOME HAVING ESCAPED ASSESSMENT. HE SUBMITTED THAT THAT THE REASON THE ASSESSING OFFICER HAS NOT EVEN REPRODUCED THE REASONS WHICH WERE OBJECTED TO BY THE ASSESSEE AT THE TIME OF HEARING U/S.147/148. THE LEARNED CIT(A) THEREFORE RELYING O N THE DATE OF ORDER ALONE ERRED IN DISMISSING THE GROUNDS OF APPEAL THAT THE INITIATION OF PROCEEDINGS U/S.147 IS BAD IN LAW INSOFAR AS THEY ARE ARBITRARY, NOT CORRECT, CONTRADICTORY TO THE WEIGHT OF EVIDENCE ON RECORD . THE LEARNED CIT(A) OUGHT TO HAVE ADD RESSED THE SITUATION WHEN HE CONFIRMED THE ORDER WAS MADE ON 31.12.2009 ITA NO.003/CTK/2012 4 U/S.143(3)/147 WHEN HE ONLY HELD IT WAS NOT CONVINCING . THE DEADLINES OF LIMITATION ARE GLARING ON THE BASIS OF THE ORDER AND THE MERITS CONSIDERED BY THE LEARNED CIT(A) RATHER LEANS IN FAVOUR OF THE ASSESSEE TO THE EXTENT THAT THE GIFTS OBTAINED SUBSEQUENT TO THE MARRIAGE SOLEMNIZED IN 2000 WAS SUBMITTED TO THE ASSESSING OFFICER BY WAY OF CASH FLOW INDICATING THE HOLDING OF THE ASSETS IN THE HANDS OF THE ASSESSEE 1,50,000 AND EVIDENCE FOR HAVING RECEIVED THE ADVANCE OF 7 LAKHS FROM THE COMPANY IN WHICH THE ASSESSEE WAS THE DIRECTOR WAS NOT MERELY SELF - SUFFICIENT BECOMES PART OF THE RETURN OF INCOME FILED BY THE ASSESSEE ACCEPTED U/S.143 ( 1). THE NATURE OF ADDITION S MADE BY THE ASSESSING OFFICER IS NOT INCOME HAVING ESCAPED ASSESSMENT BUT MERELY A CHANGE OF OPINION AFTER THE ISSUE OF INVALID NOTICE U/S.148 AFTER A PERIOD OF FOUR YEARS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INFORMATION AVAILABLE WAS NOT LINKED TO THESE INFORMATION WHICH WERE ALREADY AVAILABLE TO THE ASSESSING OFFICER MORE THAN SIX YEARS AGO. THIS CLEARLY INDICATE THAT THE TIME LIMIT HAD BEEN EXCEEDED BY THE ASSESSING OFFICER AND ERRONEOUSLY CONFIRMED BY THE LEARNED CIT(A). HE SUBMITT ED THAT SINCE THIS LEGAL ISSUE OF JURISDICTION WAS TO BE ADDRESSED CONCLUSIVELY, THE ASSESSEE HAS A GOOD CASE ON MERIT ALSO WHICH, IF ALLOWED, MAY BE PROCEEDED WITH. 6. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE WAS CATEGORICALLY SAYI NG THAT THE INFORMATION LEADING TO THE ASSESSEE MISSING ENTRY OF A LOAN OBTAINED IN THE NAME OF THE PARTNERSHIP FIRM WAS TO BE CONSIDERED IN THE IMPUGNED ASSESSMENT YEAR WHEN THE LAW PROVIDES THAT THE LIMIT OF FOUR YEARS FOR ISSUING NOTICE MAY BE EXTENDED TO SIX YEARS IF THE TAX ON ESCAPED INCOME IS 1 LAKH OR MORE. HE SUBMITTED THAT ON MERITS THE ASSESSEE WAS TO EXPLAIN THE NATURE OF GIFTS RECEIVED , HELD BY HIM FOR OVER ONE YEAR WHEREIN SPECIFIC FINDING BY THE ASSESSING OFFICER WAS NOT SHOWN IN THE BALANC E SHEET AS ON 31.3.2001. THE LEARNED COUNSEL FOR THE ASSESSEE AS ITA NO.003/CTK/2012 5 OF NOW HAS EXPLAINED THE AMOUNT OF ADVANCE OF 7 LAKHS TO M/S. CLASSIC BUILDERS BY THE ASSESSEE WAS NOT EXPLAINED TO THE ASSESSING OFFICER BY WAY OF FURNISHING THE BALANCE SHEETS OF M/S.CLASS ICAL BUILDERS. HE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERING OF THE FACTS AND CIRCUMSTANCES OF TH E CASE, WE ARE INCLINED TO HOLD WITH RESPECT TO THE ISSUE OF ASSUMING JURISDICTION U/ S.148 BELATEDLY, IN OUR OPINION, , IF IN THE COURSE OF PROCEEDINGS UNDER SECTION 147, THE ASSESSING OFFICER WERE TO COME TO THE CONCLUSION, THAT ANY INCOME CHARGEABLE TO T AX, WHICH, ACCORDING TO HIS `REASON TO BELIEVE', HAD ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, DID NOT ESCAPE ASSESSMENT, THEN, THE MERE FACT THAT THE ASSESSING OFFICER ENTERTAINED A REASON TO BELIEVE, ALBEIT EVEN A GENUINE REASON TO BELIEVE, WOULD NOT C ONTINUE TO VEST HIM WITH THE JURISDICTION, TO SUBJECT TO TAX, ANY OTHER INCOME, CHARGEABLE TO TAX WHICH THE ASSESSING OFFICER MAY FIND TO HAVE ESCAPED ASSESSMENT, AND WHICH MAY COME TO HIS NOTICE SUBSEQUENTLY, IN THE COURSE OF PROCEEDINGS UNDER SECTION 147 . EXPLANATION 3 LIFTS THE EMBARGO, WHICH WAS INSERTED BY JUDICIAL INTER PRETATION, ON THE MAKING OF AN ASSESSMENT OF REASSESSMENT ON GROUNDS OTHER THAN THOSE ON THE BASIS OF WHICH A NOTICE WAS ISSUED UNDER SECTION 148. SETTING OUT THE REASONS, FOR THE BELIE F THAT INCOME HAD ESCAPED ASSESS MENT. THOSE JUDICIAL DECISIONS HAD HELD THAT WHEN THE ASSESSMENT WAS SOUGHT TO BE REOPENED ON THE GROUND THAT INCOME HAD ESCAPED ASSESSMENT ON A CERTAIN ISSUE, THE ASSESSING OFFICER COULD NOT MAKE AN ASSESSMENT OR REASSESSME NT ON ANOTHER ISSUE WHICH CA ME TO HIS NOTICE DURING THE PRO CEEDINGS. THIS INTERPRETATION WILL NO LONGER HOLD THE FIELD AFTER THE INSERTION OF EXPLANATION 3 BY THE FINANCE (NO. 2) ACT OF 2009. HOWEVER, EXPLANATION 3 DOES NOT AND CANNOT OVERRIDE THE NECESSIT Y OF FULFILLING THE ITA NO.003/CTK/2012 6 CONDITIONS SET OUT IN THE SUBSTANTIVE PART OF SECTION 147. AN EXPLANATION TO A STATUTORY PROVISION IS INTENDED TO EXPLAIN ITS CONTENTS AND CANNOT BE CONSTRUED TO OVERRIDE IT OR RENDER THE SUBSTANCE AND CORE NUGATORY. SECTION 147 HAS THI S EFFECT THAT THE ASSESSING OFFICER HAS TO ASSESS OR REASSESS THE INCOME ('SUCH INCOME') WHICH ESCAPED ASSESSMENT AND WHICH WAS THE BASIS OF THE FOR MATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESS MENT AND WHICH COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS. HOWEVER, IF AFTER ISSUING A NOTICE UNDER SECTION 148, HE ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPE D ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME. IF HE INTENDS TO DO SO, A FRESH NOTICE UNDER SECTION 148 WOULD BE NECESSARY, THE LEGALITY OF WHICH WOULD BE TESTED IN THE EVENT O F A CHALLENGE BY THE ASSESSEE. WE, ON THIS ISSUE, WOULD BASICALLY TO FIND THE MEANING OF THE INTENTION OF THE LEGISLATION IN PRESCRIBING A TIME LIMIT U/ S.149(1)(B). THE LEARNED CIT(A) HAS UPHELD THE ASSESSMENT HAVING BEEN PASSED ON 31.12.2009 WHICH OUGHT TO HAVE BEEN ON THE BASIS OF FACTS COULD ONLY BE PASSED UP TO 31.3.2007. IT IS ANOTHER MATTER THAT IF ON MERITS TH E ISSUE TO BE CONSIDERED U/S.1 48 WOULD LEAN IN FAVOUR OF THE ASSESSEE INSOFAR AS THE CASH FLOW ON THE BASIS OF GIFTS WERE EXPLAINED FOR BY THE ASSESSING OFFICER FOR THREE CASH GIFT S OF 25,000 EACH ONLY. HE OUGHT NOT TO HAVE DISALLOWE D THE WHOLE OF THE AMOUNT OF 1 ,50,000 FORMING PART OF THE CASH FLOW. OTHER AMOUNTS ARE LESS THAN BY 25,000 WHICH CONFIRM ATION WERE NOT CALLED FOR. SIMILARLY 7 LAKHS WAS ADVANCED TO THE MANAGING DIRECTOR CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED AMOUNT IN THE CASH FLOW. BOTH THESE ISSUES THEREFORE COULD NOT HAVE BEEN ISSUE FOR INCOME HAVING ESCAPED FOR ISSUE OF NOTICE U/S.148. AS NO OTHER ADDIT IO NS HAVE BEEN ITA NO.003/CTK/2012 7 MADE AND THERE IS NO WHISPER FOR THE PURPORTED INFORMATION AVAILABLE TO THE ASSESSING OFFICER WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE OF NOTICE U/S.148 IS INVALID AND THEREFORE, THE CONSEQUENT ASSESSMENT U/S.143(3)/147 MADE BY THE ASSESSING OFFICER ALSO BECOMES INVALID AND LIABLE TO BE QUASHED. IN VIEW OF THE ABOVE, WE QUASH THE IMPUGNED ASSESSMENT AND ALLOW THE APPEAL FILED BY TH E ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 29.06.2012 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE O RDER FORWARDED TO : 1. THE APPELLANT: SATPREM NANDA, PLOT NO.CM - 1, V.S.S.NAGAR, BHUBANESWAR 751 007 2. THE RESPONDENT: INCOME - TAX OFFICER, WARD 2(2), BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY. APPENDIX XVII SEAL TO BE AFF IXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 28.06.2012 .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 29.06.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 29.06.2012 . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..