Saubhagya Mangari Mohanty, Bhubaneswar V. DCIT, Bhubaneswar

ITA 316/CTK/2012

• Counselvise Citation: 31622114 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-04-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 09-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: S K AGRAWALLA
• Keywords: Depreciation; Reason to believe
• Section: 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . . , . . , BEFORE SHRI P.K.BANSAL , AM & SHRI D.T.GARASIA , JM ./ ITA NO. 316 / C TK /20 1 2 ( / ASSESSMENT YEAR : 200 6 - 07 ) SAUBHAGYA MANJARI MOHANTY, PLOT NO.210/1320, SARALA N AGAR, BHUBANESWAR - 751 006 , ODISHA VS. DCIT, SPECIAL RANGE, BHUBANESWAR ./ ./ PAN/GIR NO. : ACXPM 8935 F ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI S.K.AGRAWALLA /REVENUE BY : SHRI S.C.MOHANTY / DATE OF HEARING : 2 2 ND APRIL , 201 4 / DATE OF PRONOUNCEMENT : 22 ND APRIL , 2014 / O R D E R PER BENCH : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 28 - 2 - 2012 , CHALLENGING THE ORDER ON MERIT AS WELL AS ON LEGALITY. 2 . THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN WAS FILED BY THE AS SESSEE ON 26 - 9 - 2006 SHOWING AN INCOME OF RS. 60,161/ - . IN THE MEANTIME, A SURVEY WAS CONDUCTED ON 18 - 3 - 2008 IN THE CASE OF PADMA HOSPITAL IN WHICH THE ASSESSEE IS THE PROPRIETRESS. NOTICE U/S.148 DATED 2 - 6 - 2008 WAS ISSUED. IN RESPONSE THERETO, THE RETURN WA S FILED ON 2 ITA NO. 316 /201 2 5 - 8 - 2008 SHOWING TOTAL INCOME OF R S. 60,161/ - . THEREAFTER PROCEEDING U/S.147 WAS INITIATED BY RECORDING THE FOLLOWING REASONS : - 02.06.2008 ASSESSEE DERIVES INCOME FROM RUNNING A NURSING HOME STYLED AS PADMA HOSPITAL & RESEARCH CENTRE, SARALA NAGAR, BHUBANESWAR. A SURVEY OPERATION U/S.133A OF THE I.T. ACT WAS CONDUCTED ON 18/3/2008 IN THE PREMISES OF M/S PADMA HOSPITAL, LOCATED AT SARALA NAGAR, BHUBANESWAR OWNED BY THE ASSESSEE. IN COURSE OF THE SAID SURVEY, A NUMBER OF LOOSE SHEETS AND DOCUME NTS WERE FOUND AND IMPOUNDED. FROM THE SAID DOCUMENTS THE FOLLOWING POSITION EMERGES: FROM THE RISK BOND KHATA FOUND AND IMPOUNDED, IT TRANSPIRES THAT DURING THE F/Y 2007 - 08, A TOTAL OF 589 SURGERIES HAVE TAKEN PLACE IN THE ABOVE NAMED NURSING HOME. IN H ER STATEMENT RECORDED IN COURSE OF THE SURVEY, THE ASSESSEE HAD STATED THAT ON AN AVERAGE THE SURGERY CHARGE VERY FROM RS. 2,000/ - TO RS. 8,000/ - PER SURGERY. EVEN IF THE AVERAGE CHARGE IS TAKEN AT RS. 5,000/ - , THE GROSS SURGERY CHARGES ITSELF WOULD WORKOUT TO 29,45,000/ - AS AGAINST WHICH, THE ASSESSEE HAS DISCLOSED RS.9,67,675/ - WHICH IS INCLUSIVE OF NURSING HOME CHARGES ALSO. FROM THE DEPRECIATION SCHEDULE ANNEXED WITH THE RETURN OF INCOME, IT IS ALSO SEEN THAT SHE HAS CLAIMED DEPRECIATION SCHEDULE ANNEXED WI TH THE RETURN OF INCOME, IT IS ALSO SEEN THAT SHE HAS CLAIMED DEPRECIATION AT RATES HIGHER THAN THAT THE ADMISSIBLE. THE EXCESS CLAIM HAS TO BE DISALLOWED. (EXCESS CLAIM RS. 55,760/ - ) . FROM THE DETAILED DISCUSSION MADE ABOVE, IT IS AMPLY CLEAR THAT THE ASSE SSEE HAS GROSSLY UNDERSTATED HER INCOME IN THE RETURN OF INCOME FILED BY HIM FOR THE A.Y.2006 - 07. I THEREFORE, HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING TO SECTION 147 OF THE I.T.ACT, 1961. ISSUE NOTICE U/S.148 OF THE I.T.ACT FOR THE A.Y.2006 - 07. THE ASSESSMENT WAS COMPLETED ON AN INCOME OF RS. 9,55,150/ - . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 3 . LEARNED AR , BEFORE US, VEHEMENTLY CONTENDED THAT AS IT IS APPARENT FROM THE REASONS RECORDED BY THE AO, THE ASSESSMENT HAS 3 ITA NO. 316 /201 2 BEEN REOPENED DUE TO THE UNDERASSESSMENT OF THE PROFESSIONAL INCOME, WHILE THE AO HAS NOT MADE ANY ADDITION ON THAT ACCOUNT, HOWEVER, ADDITION HAS BEEN MADE BY THE AO ONLY IN RE SPECT OF INSPECTION UP FRONT FEES & INTEREST ON TERM LOAN, DEPRECIATION, BANK INTEREST ON UNEXPLAINED CASH DEPOSITED IN THE BANK. IT WAS CONTENDED THAT UNTIL AND UNLESS THE INCOME IN RESPECT OF WHICH THE REASONS HAS BEEN RECORDED IS ADDED, THE OTHER INCOM E CANNOT BE ADDED AND THE ASSESSMENT FRAMED IS ILLEGAL AND BAD IN LAW. IN THIS REGARD, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS : I) CIT VS. JET AIRWAYS (I) LTD., (2011) 331 ITR 236 AND II) RANBAXY LABORATORIES LTD. VS. CIT, (2011) 336 ITR 136 4 . LE ARNED DR, ON THE OTHER HAND, CONTENDED THAT AFTER 198 9 , SECTION 147 HAS BEEN AMENDED AND IT IS NOT NECESSARY THAT THE INCOME IN RESPECT OF THE REASONS HAS BEEN RECORDED MUST BE ADDED AND T HE A O CAN ADD THE OTHER INCOME. RELIANCE WAS PLACED IN THIS REGARD ON EXPLANATION 3 TO SE CTION 147, WHICH WAS INSERTED BY THE FINANCE ACT, 2009 RETROSPECTIVELY. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MAJINDER SINGH KANG VS. CIT, (2012) 344 ITR 358 (P&H) . 5 . WE HEARD R IVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME . FROM THE FACTS ON RECORD, IT IS APPARENT THAT IN THE CASE OF THE ASSESSEE THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION IN THE INCOME FOR THE ESCAPEMENT OF WHICH THE REASONS WERE RECORDED. THE ASSESSI NG 4 ITA NO. 316 /201 2 OFFICER MADE THE ADDITION OF OTHER INCOME. WE NOTED THAT EXPLANATION 3 TO SECTION 147 WAS INSERTED BY THE FINANCE ACT, 2009 RETROSPECTIVELY. THIS EXPLANATION STAT E S AS UNDER : - EXPLANATION 3. - FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR S UCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB - SECTION (2) OF SECTION 148. 5.1 WE NOTED THAT THIS EXPLANATION HAS BEEN CONSIDERED BY THE HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS LTD. (SUPRA) , IN WHICH THE HONBLE H IGH COURT IN PARA 21 & 22 HELD AS UNDER : - 21. EXPLANATION 3 LIFTS THE EMBARGO, WHICH WAS INSERTED BY JUDICIAL INTERPRETATION, ON THE MAKING OF AN ASSESSMENT OR REASSESSMENT ON GROUNDS OTHER THAN THOSE ON THE BASIS OF WHICH A NOTICE WAS ISSUED UNDER S. 148 SET TING OUT THE REASONS FOR THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. 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 AO COULD NOT MAKE AN ASSES SMENT OR REASSESSMENT ON ANOTHER ISSUE WHICH CAME TO HIS NOTICE DURING THE PROCEEDINGS. THIS INTERPRETATION WILL NO LONGER HOLD THE FIELD AFTER THE INSERTION OF EXPLN. 3 BY THE FINANCE ACT (NO. 2) OF 2009. HOWEVER, EXPLN. 3 DOES NOT AND CANNOT OVERRIDE THE NECESSITY OF FULFILLING THE CONDITIONS SET OUT IN THE SUBSTANTIVE PART OF S. 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. SEC. 147 HAS TH IS EFFECT THAT THE AO HAS TO ASSESS OR REASSESS THE INCOME ('SUCH INCOME') WHICH ESCAPED ASSESSMENT AND WHICH WAS THE BASIS OF THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH , COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS. HOWEVER, IF AFTER ISSUING A NOTICE UNDER S. 148, HE ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPED 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 S. 148 WOULD BE NECESSARY, THE LEGALITY OF WHICH WOULD BE TESTED IN THE EVENT OF A CHALLENGE BY THE AS SESSEE. 22. WE HAVE APPROACHED THE ISSUE OF INTERPRETATION THAT HAS ARISEN FOR DECISION IN THESE APPEALS, BOTH AS A MATTER OF FIRST PRINCIPLE, BASED ON THE LANGUAGE USED IN S. 147(1) AND ON THE 5 ITA NO. 316 /201 2 BASIS OF THE PRECEDENT ON THE SUBJECT. WE AGREE WITH THE SUBMISSIO NS WHICH HAS BEEN URGED ON BEHALF OF THE ASSESSEE THAT S. 147(1) AS IT STANDS POSTULATES THAT UPON THE FORMATION OF A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, THE AO MAY ASSESS OR REASSESS SUCH INCOME 'AND ALSO' ANY OTHER INCOME CHARGEABLE TO TAX WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURING THE PROCEEDINGS AS HAVING ESCAPED ASSESSMENT. THE WORDS 'AND ALSO' ARE USED IN A CUMULATIVE AND CONJUNCTIVE SENSE. TO READ THESE WORDS AS BEING IN THE ALTERNATIVE W OULD BE TO REWRITE THE LANGUAGE USED BY PARLIAMENT. OUR VIEW HAS BEEN SUPPORTED BY THE BACKGROUND WHICH LED TO THE INSERTION OF EXPLN. 3 TO S. 147. PARLIAMENT MUST BE REGARDED AS BEING AWARE OF THE INTERPRETATION THAT WAS PLACED ON THE WORDS 'AND ALSO' BY THE RAJASTHAN HIGH COURT IN SHRI RAM SINGH (SUPRA). PARLIAMENT HAS NOT TAKEN AWAY THE BASIS OF THAT DECISION. WHILE IT IS OPEN TO PARLIAMENT, HAVING REGARD TO THE PLENITUDE OF ITS LEGISLATIVE POWERS TO DO SO, THE PROVISIONS OF S. 147(1) AS THEY STOOD AFTER THE AMENDMENT OF 1ST APRIL, 1989 CONTINUE TO HOLD THE FIELD. 5.2 WE HAVE ALSO GONE THROUGH THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF R ANBAXY LABORATORIES LTD. (SUPRA) . IN THIS CASE THE HONBLE HIGH C OURT WHILE DISCUSSING EXPLANATION 3 T O SECTION 147, AGREED WITH THE ORDER OF THE MUMBAI HIGH COURT AND TOOK THE VIEW THAT FOR EVERY NEW ISSUE COMING BEFORE THE AO DURING THE COURSE OF PROCEEDINGS OF ASSESSMENT OR REASSESSMENT OF ESCAPED INCOME, AND WHICH HE INTENDS TO TAKE INTO ACCOUNT, HE WO ULD BE REQUIRED TO ISSUE A FRESH NOTICE UNDER S.148, IF NO ADDITION IS MADE ON THE BASIS OF REASONS RECORDED. THE DECISION OF THE HONBLE BOMBAY HIGH COURT WAS RENDERED ON 12 TH APRIL, 2010 WHILE THE DECISION OF THE HON BLE DELHI HIGH COURT WAS DELIVERED ON 3 - 6 - 2011. WE HAVE ALSO GONE THROUGH THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MAJINDER SINGH KANG VS. CIT (SUPRA ). THIS DECISION WAS DELIVERED ON 13 - 9 - 2010. WE NOTED THAT IN THIS DECISION, THE HONBLE HIGH COURT HAS NOT REFERRED TO TH E DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD. (SUPRA) . IN THIS DECISION, WE NOTED THAT 6 ITA NO. 316 /201 2 THE HONBLE PUNJAB & HARYANA HIGH COURT WHILE TAKING CONTRARY VIEW BY HOLDING THAT THE PROVISIONS NOWHERE POSTULATES OR CONTEMP LATES THAT IT IS ONLY WHEN THERE IS SOME ADDITION ON THE GROUND ON WHICH REASSESSMENT HAS BEEN INITIATED THAT THE AO CAN MAKE ADDITION ON ANY OTHER GROUND ON THE BASIS OF WHICH INCOME MAY HAVE ESCAPED ASSESSMENT. 5. 3 THIS IS THE SETTLED LAW THAT WHENEVER THERE ARE DIFFERENT VIEWS OF THE DIFFERENT HONBLE HIGH COURTS OTHER THAN THE JURISDICTIONAL HIGH COURT, THE VIEW WHICH IS IN FAVOUR OF THE SUBJECT , HAS TO BE FOLLOWED. WE, THEREFORE, ARE BOUND TO FOLLOW THE DECISION OF HONBLE MUMBAI HIGH COURT AS WELL A S HONBLE DELHI HIGH COURT AND R ESPECTFULLY FOLLOWING THE SAME , WE QUASH THE REASSESSMENT. SINCE WE HAVE ALREADY QUASHED THE ASSESSMENT, THEREFORE, OTHER GROUNDS FILED BY THE ASSESSEE DO NOT REQUIRE ANY ADJUDICATION. 6 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND APRIL, 201 4 . 22 ND APRIL,2014 SD/ - SD/ - ( . . ) ( D.T.GARASIA ) ( . . ) ( P.K.BANSAL ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 22 /04/2014 . . /PKM , . / PS 7 ITA NO. 316 /201 2 / COPY OF THE ORDER FO RWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) , BHUBANESWAR 4. / CIT , BHUBANESWAR 5. , , / DR, ITAT, CUTTACK 6. / GUARD FI LE. //TRUE COPY//