SMT. KIRAN AGRAWAL, CHAMPA (CG) V. THE ITO, WARD, 2(2), BILASPUR(CG)

ITA 32/BIL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0214 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 27-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: G S AGRAWAL
• Keywords: Reopening of assessment; Reason to believe; Reassessment proceedings
• Section: 147; 148

Judgement Text

ITA NO . 32 / BLPR /201 3 ASSESSMEN T Y EAR: 200 4 - 05 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, SMC , RAIPUR [CORAM : PRAMOD KUMAR AM ] ITA NO . 32 / BLPR /201 3 AS SESSMENT Y EAR : 200 4 - 05 KIRAN AGRAWAL .APPELLANT W/O. SHRI PREM CHAND AGRAWAL, HAT ARI CHOWK, P.O. SAKTI, DISTT. JANJGI R - CHAMPA (C.G.) [P AN: A DPPA 3301 C ] VS. INCOME TAX OFFICER, WARD 2(2), BILASPUR (C.G.) ...... . RESPONDENT APPEARANCES BY: G.S. AGRAWAL, FOR THE A PPELLANT D.K. JAIN , F OR THE RE SPONDENT DATE OF CONCLUDING THE HEA RING : 21.06.2016 DATE OF PRONOUNCING THE ORDER : 20 .09.2016 O R D E R 1. BY WAY OF TH IS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 31.01.2013 , PASSED BY THE LEARNED CIT (A) , BILASPUR (C.G.) FOR ASSESSMENT YEAR 200 4 - 0 5 . 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED CIT(A) S UPHOLDING THE ACTION OF REASSESSMENT PROCEEDINGS. GRIEVANCE OF THE ASSESSEE IS THAT LEARNED CIT(A) ERRED IN HOLDING THAT INITIATION OF P ROCEEDINGS UNDER SECTION 147/148 WAS ACCORDING TO LAW . ITA NO . 32 / BLPR /201 3 ASSESSMEN T Y EAR: 200 4 - 05 PAGE 2 OF 7 3. THE REASSESSMENT PROCEEDINGS WERE INITIATED BY THE ASSESSING OFFICER BY ISSUANCE OF NOTICE UNDER SECTION 148 ON 21 ST MARCH 2007. THE REASONS FOR THIS REOPENING OF ASSESSMENT, AS RECORDED BY THE A SSESSING OFFICER, WERE STATED TO BE AS FOLLOWS: SMT. KIRAN AGRAWAL PROP. M/S R.K. HANDLOOM, SAKTI FILED HER RETURN OF INCOME FOR AY 2005 - 06 ON 23 - 02 - 2006. THE CASE WAS SELECTED FOR SCRUTINY WITH THE PREVIOUS APPROVAL OF HON BLE CCIT, RAIPUR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2005 - 06 STATEMENT OF SHRI MANISH KEDIA, CONTRACTOR WAS RECORDED WHO CONSTRUCTED KIRAN APARTMENT , IN HIS STATEMENT DATED 08 - 12 - 2006 SHRI MANISH KEDIA, STATED THAT HE HAS ADVANCED LOAN OF RS.2,50,000/ - TO SMT. KIRAN AGRAWAL ON 06 - 06 - 2003. HE FURTHER STATED THAT CONSTRUCTION OF BUILDING KNOWN AS KIRAN APARTMENT WAS COMPLETED DURING FY 2003 - 04 RELEVANT TO AY 2004 - 05. SHRI MANISH KEDIA IN HIS DEPOSITION STATED THAT HE HAD CONSTRUCTED KIRAN APARTMENT ON CONTRACT BASIS. THE CONTRACT WAS GIVEN FOR CONSTRUCTION OF BUILDING FOR A SUM OF RS.10,35,000/ - . WHEN QUESTIONED ABOUT PURCHASE OF MATERIAL IT HAS BEEN STATED BY SHRI MANISH THAT BUILDING MATERIAL WAS PURCHASED LOCALLY ON CREDIT BASIS. WHEN QUESTIONED TO TELL NAME AND A DDRESSES OF TRADERS FROM WHOM MATERIAL WAS PURCHASED HE COULD NOT TELL ANY NAME. THE CONTRACTOR FURTHER STATED THAT MATERIAL WAS PURCHASED BY HIM ON CREDIT BASIS AND PAYMENT WAS MADE AFTER RECEIPT OF MONEY FROM SMT. KIRAN AGRAWAL BUT HE COULD NOT TELL THE NAME OF ANY TRADER TO WHOM PAYMENT WAS MADE. THIS ATTITUDE OF SHRI MANISH KEDIA CLEARLY INDICATES THAT CONSTRUCTION WAS ACTUALLY DONE BY THE ASSESSEE I.E. SMT. KIRAN AGRAWAL AND SHRI MANISH KEDIA HAS BEEN ENGAGED ONLY FOR NAME SAKE AND TO AVOID TO FURNISHI NG DETAILS OF EXPENDITURE FOR CONSTRUCTION OF BUILDING. THIS ALL INDICATES THAT THE INVESTMENT IN CONSTRUCTION OF BUILDING IS MUCH MORE THAN WHAT HAS BEEN STATED IN THE RETURN OF INCOME. FURTHER THE ASSESSEE HAS FURNISHED WRONG INFORMATION ABOUT RAISING OF LOAN FROM SHRI MANISH KEDIA. SHRI MANISH KEDIA IN HIS STATEMENT STATED THAT HE HAS ADVANCED LOAN TO SMT. KIRAN. THIS CLEARLY INDICATES THAT LOAN WAS TAKEN FROM SHRI MANISH KEDIA BUT HAS NOT BEEN SHOWN AS LOAN. DURING THE COURSE OF PROCEEDINGS FOR AY 2005 - 06 IN THE CASE OF SHRI SUMIT AGRAWAL, SAKTI, STATEMENT OF SHRI TAPAS SONI AND SHRI FULCHAND DEWANGAN WERE RECORDED. DURING THE COURSE OF STATEMENT THEY STATED THAT HAVE ADVANCED LOAN OF RS.2,00,000/ - EACH TO SMT. KIRAN AGRAWAL BUT COULD NOT PROVE THE SOURCE OF AVAILABILITY OF FUND TO ADVANCE LOAN. FROM THE STATEMENT IT IS EVIDENT THAT THEY ARE FINANCIALLY NOT SO SOUND TO ADVANCE LOAN TO SMT. KIRAN AGRAWAL. THE ASSESSEE HAS ONLY USED THEIR NAME TO ROUTE HER AMOUNT IN THE NAME OF THESE PERSONS. FROM T HE COPY OF BANK ACCOUNT IT IS CLEAR THAT ACCOUNT WAS OPENED ONLY FOR THE PURPOSE OF ROUTING THE MONEY THROUGH CHEQUES. NO TRANSACTION WAS CARRIED OUT AFTER ROUTING MONEY THROUGH THIS ACCOUNT. CONSIDERING THE ABOVE FACTS, I HAVE REASON TO BELIEVE THAT T HE ACTUAL COST OF THE BUILDING KNOWN AS KIRAN APARTMENT IS MUCH MORE THAN WHAT HAS BEEN SHOWN IN THE IT RETURN AND THE ASSESSEE HAS USED OWN FUNDS IN THE NAME OF SO CALLED CREDITORS. I HAVE THEREFORE, REASON TO BELIEVE THAT INCOME CHARGEABLE ITA NO . 32 / BLPR /201 3 ASSESSMEN T Y EAR: 200 4 - 05 PAGE 3 OF 7 TO TAX HAS E SCAPED THE ASSESSMENT WITHIN THE MEANING OF SEC. 147 OF IT ACT, 1961. ISSUE NOTICE U/S 148 OF IT ACT, 1961 FOR A.Y. 2004 - 05. 4. AGGRIEVED, INTER ALIA, BY REOPENING OF THE ASSESSMENT, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE CIT(A) HELD THAT INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT, EVEN ON THE BASIS OF INFORMATION OBTAINED IN ASSESSMENT PROCEEDINGS OF A SUBSEQUENT YEAR IS VALID . HE ALSO HELD THAT THE AO, ON THE BASIS OF THE STATEMENT OF SHRI MAN ISH KEDIA AND HAVING NO DETAILS OF INVESTMENT IN HOUSE PROPERTY MADE AVAILABLE BY THE APPELLANT MADE REFERENCE TO THE DVO IN THE ASSESSMENT PROCEEDINGS AND I FIND NO INFIRMITY IN SUCH ACTION OF THE AO WHICH COULD VITIATE THE PROCEEDINGS UNDER SECTION 147 O F THE ACT . THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE ME IN THIS APPEAL. 5. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. AS I DEAL WITH CORRECTNESS, OR OTHERWISE, OF LEARNED CIT(A) S UPHOLDING THE REASSESSMENT PROCEEDINGS, I MAY FIRST BRIEFLY TOUCH UPON THE LEGAL POSITION IN THIS REGARD. IT IS WELL SETTLED IN LAW THAT REASONS, AS RECORDED FOR REOPENING THE REASSESSMENT, ARE T O BE EXAMINED ON A STANDALONE BASIS. NOTHING CAN BE ADDED TO THE REASONS SO RECORDED, NOR ANYTHING CAN BE DELETED FROM THE REASONS SO RECORDED. HON BLE BOMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER LTD. VS. R.B. WADKAR [(2004) 268 ITR 332] , HAS, INTER ALIA, OBSERVED THAT ' .IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO ITA NO . 32 / BLPR /201 3 ASSESSMEN T Y EAR: 200 4 - 05 PAGE 4 OF 7 THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON T HE BASIS OF REASONS NOT RECORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH THE REASONS. ' THEIR LORDSHIPS ADDED THAT ' THE REASONS RECORDED SHOULD BE SELF - EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND THE EVIDENCE .'. THEREFORE, THE REASONS ARE TO BE EXAMINED ONLY ON THE BASIS OF THE REASONS AS RECORDED. THE NEXT IMPORTANT POINT IS THAT EVEN THOUGH REASONS, AS RECORDED, MAY NOT N ECESSARILY PROVE ESCAPEMENT OF INCOME AT THE STAGE OF RECORDING THE REASONS, SUCH REASONS MUST POINT OUT TO AN INCOME ESCAPING ASSESSMENT AND NOT MERELY NEED OF AN INQUIRY WHICH MAY RESULT IN DETECTION OF AN INCOME ESCAPING ASSESSMENT. UNDOUBTEDLY, AT THE STAGE OF RECORDING THE REASONS FOR REOPENING THE ASSESSMENT, ALL THAT IS NECESSARY IS THE FORMATION OF PRIMA FACIE BELIEF THAT AN INCOME HAS ESCAPED THE ASSESSMENT AND IT IS NOT NECESSARY THAT THE FACT OF INCOME HAVING ESCAPED ASSESSMENT IS PROVED TO THE H ILT. WHAT IS, HOWEVER, NECESSARY IS THAT THERE MUST BE SOMETHING WHICH INDICATES, EVEN IF NOT ESTABLISHES, THE ESCAPEMENT OF INCOME FROM ASSESSMENT. IT IS ONLY ON THIS BASIS THAT THE ASSESSING OFFICER CAN FORM THE BELIEF THAT AN INCOME HAS ESCAPED ASSESSME NT. MERELY BECAUSE SOME FURTHER INVESTIGATIONS HAVE NOT BEEN CARRIED OUT, WHICH, IF MADE, COULD HAVE LED TO DETECTION TO AN INCOME ESCAPING ASSESSMENT, CANNOT BE REASON ENOUGH TO HOLD THE VIEW THAT INCOME HAS ESCAPED ASSESSMENT. IT IS ALSO IMPORTANT TO BEA R IN MIND THE SUBTLE BUT IMPORTANT DISTINCTION BETWEEN FACTORS WHICH INDICATE AN INCOME ESCAPING THE ASSESSMENTS AND THE FACTORS WHICH INDICATE A LEGITIMATE SUSPICION ABOUT INCOME ESCAPING THE ASSESSMENT. THE FORMER CATEGORY CONSISTS OF THE FACTS WHICH, IF ESTABLISHED TO BE CORRECT, WILL HAVE A CAUSE AND EFFECT RELATIONSHIP WITH THE INCOME ESCAPING THE ASSESSMENT. THE LATTER CATEGORY CONSISTS ITA NO . 32 / BLPR /201 3 ASSESSMEN T Y EAR: 200 4 - 05 PAGE 5 OF 7 OF THE FACTS, WHICH, IF ESTABLISHED TO BE CORRECT, COULD LEGITIMATELY LEAD TO FURTHER INQUIRIES WHICH MAY LEAD TO DE TECTION OF AN INCOME WHICH HAS ESCAPED ASSESSMENT. THERE HAS TO BE SOME KIND OF A CAUSE AND EFFECT RELATIONSHIP BETWEEN REASONS RECORDED AND THE INCOME ESCAPING ASSESSMENT. WHILE DEALING WITH THIS ASPECT OF THE MATTER, IT IS USEFUL TO BEAR IN MIND THE FOLL OWING OBSERVATIONS MADE BY HON BLE SUPREME COURT IN THE CASE OF ITO VS LAKHMANI MEWAL DAS [(1976) 103 ITR 437] , THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CO NNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE ITO AND THE FORMATION OF THIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR BEC AUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE THAT THE COURT CANNOT GO INTO SUFFICIENCY OR ADEQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE ITO ON THE POINT AS TO WHETHER ACTION SHOULD BE INI TIATED FOR REOPENING ASSESSMENT. AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FARFETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT 7 . LET ME , IN THE LIGHT OF THIS LEGAL POSITION, REVERT TO THE FACTS OF THE CASE BEFORE ME . THE REASONS RECORDED FOR REOPENING THE ASSESSMENT STATE IS THAT WHEN QUESTIONED TO TELL NAME AND ADDRESSES OF TRADERS FROM WHOM MATERIAL WAS PURCHASED HE COULD NOT TELL ANY NAME. THE CONTRACTOR FURTHER STATED THAT MATERIAL WAS PURCHASED BY HIM ON CREDIT BASIS AND PAYMENT WAS MADE AFTER RECEIPT OF MONEY FROM SMT. KIRAN AGRAWAL BUT HE COULD NOT TELL THE NAME OF ANY TRADER TO WH OM PAYMENT WAS MADE. THIS ATTITUDE OF SHRI MANISH KEDIA CLEARLY INDICATES THAT CONSTRUCTION WAS ACTUALLY DONE BY THE ASSESSEE I.E. SMT. KIRAN AGRAWAL AND SHRI MANISH KEDIA HAS BEEN ENGAGED ONLY FOR NAME SAKE AND TO AVOID TO FURNISHING DETAILS OF EXPENDITUR E FOR CONSTRUCTION OF BUILDING ITA NO . 32 / BLPR /201 3 ASSESSMEN T Y EAR: 200 4 - 05 PAGE 6 OF 7 AND IMMEDIATELY THEREAFTER CONCLUDE THAT THIS ALL INDICATES THAT THE INVESTMENT IN CONSTRUCTION OF BUILDING IS MUCH MORE THAN WHAT HAS BEEN STATED IN THE RETURN OF INCOME . THE FACT THAT MANISH KEDIA HAS NOT BEEN ABLE TO GI VEN NAMES OF HIS CREDITORS CANNOT, TO ANY REASONABLE PERSON, LEAD TO THE CONCLUSION THAT INVESTMENT IN CONSTRUCTION OF BUILDING IS MUCH MORE THAN WHAT IS STATED IN THE RETURN . WHEN CONTRACTOR DOES NOT INDICATE NAME OF HIS CREDITORS, THE ADDITIONS ARE REQ UIRED TO BE MADE IN HIS HANDS FOR FICTITIOUS CREDITORS RATHER THAN COMING TO THE CONCLUSION THAT HE DID NOT INVEST AT ALL. THE APPROACH OF THE ASSESSING OFFICER SHOWS AN APPROACH DIVORCED FROM RATIONALE AND REALITY. THE MATERIAL TAKEN NOTE OF IN THE REASON S RECORDED FOR REOPENING THE ASSESSMENT CANNOT, TO ANY REASONABLE PERSON, LEAD TO THE CONCLUSION THAT INVESTMENT IN PROPERTY. THE REASONS TO HOLD BELIEF MUST BE TAKEN AS DISTINCT FROM REASONS TO SUSPECT, AND WHEN I APPLY THAT TEST, CASE OF THE REVENUE COMP LETELY FAILS. SIMILARLY, FINDINGS ABOUT LACK OF FUNDS, EVEN IF THAT BE SO, IN ONE YEAR IN THE CASE OF A LENDER CANNOT BE TAKEN AS APPLICABLE FOR THE OTHER ASSESSMENT YEAR AS WELL. IN ANY CASE, THE FACTS RECORDED IN THE REASONS AND CONCLUSIONS ARRIVED AT IN THE REASONS RECORDED DONOT HAVE CAUSE AND EFFECT RELATIONSHIP. THE DVO REFERENCE RELIED UPON BY THE CIT(A) DOES NOT FIND ANY MENTION IN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT. KEEPING IN VIEW ALL THESE FACTORS, THE VERY REOPENING OF ASSESSMENT WAS, IN MY CONSIDERED VIEW, UNSUSTAINABLE IN LAW. 8 . GRIEVANCE OF THE ASSESSEE, WITH RESPECT OF REOPENING THE ASSESSMENT, IS THUS UPHELD. 9 . AS THE REASSESSMENT ITSELF IS QUASHED, I SEE NO NEED TO DEAL WITH OTHER ISSUES RAISED IN THIS APPEAL. ALL THOSE ISSUES ARE NOW ACADEMIC. ITA NO . 32 / BLPR /201 3 ASSESSMEN T Y EAR: 200 4 - 05 PAGE 7 OF 7 1 0 . IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES 1963 TODAY ON 20 TH DAY OF SEPTEMBER, 2016 . SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 20 TH DAY OF SEPTEMBER , 2016 . PBN/* COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELL ATE TRIBUNAL RAIPUR BENCH, RAIPUR