Sunil Kanhaiyalal Gidwani, Sangli V. Assistant Commissioner of Income tax, Sangli

ITA 324/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9450 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-01-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 08-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUN KAILAS; S P WALIMBE ITA NO S
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 2(22)(e); 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY , J UDICIAL MEMBER . / ITA NO . 320 /PUN/201 7 / ASSESSMENT YEAR : 20 09 - 10 KAILASH KANYAIYALAL GIDWANI C.S.NO.34, LAXMI BUNGLOW, REVENUE COLONY, SOUTH SHIVAJINAGAR, SANGLI - 416416 PAN : A DGPG5025J ....... / APPELLANT / V/S. THE ASST . COMMISSIONER INCOME TAX , CIRCLE 1, SANGLI / RESPONDENT . / ITA NO.324/PUN/2017 / ASSESSMENT YEAR : 2008 - 09 SUNIL KANYAIYALAL GIDWANI C.S.NO.35, LAXMI BUNGLOW, REVENUE COLONY, SOUTH SHIVAJINAGAR, SANGLI - 416416 PAN : AFDPG9973Q ....... / APPELLANT / V/S. THE ASST. COMMISSIONER INCOME TAX, CIRCLE 1, SANGLI / RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : SHRI S.P. WALIMBE 2 ITA NO S . 320 & 324 /PUN/201 7 KAILASH K GIDWANI & ANR / DATE OF HEARING : 08 - 0 1 - 20 20 / DATE OF PRONOUNCEMENT : 08 - 01 - 2020 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : TH ESE APPEAL S PREFERRED BY RELATED ASSESSEE S EMANATES FROM THE RESPECTIVE SEPARATE ORDER S OF THE LD. CIT (A) - 1 , KOLHAPUR U/S 143(3) R.W.S. 147 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 07 . 12 .201 6 AND 06.12.2016 , FOR THE ASSESSMENT YEAR S 20 09 - 10 AND 2008 - 09 AS PER THE GROUNDS OF APPEAL ON RECORD. 2. THE CONCERNED ASSESSEES HAVE PREFERRED BOTH LEGAL GROUNDS AS WELL AS GROUNDS ON MERIT IN THE APPEAL MEMO. THE LEGAL GROUNDS PERTAIN TO THE VALIDITY OF RE - ASSESSMENT PROCEEDINGS U/S 147 / 148 OF THE ACT. AT THE OUTSET, THE LD. AR OF THE ASSESSEE SUBMITTED THAT BOTH THESE APPEALS ARE ABSOLUTELY SIMILAR IN FACTS AND CIRCUMSTANCES AND HAVING THE SAME LEGAL GROUNDS RAISED. HE FURTHER SUBMITTED THAT IF THE ASSESSEE SUCCEEDS IN HIS LEGAL GROUNDS, THEN ALL OTHER GROUN DS ON MERIT WOULD BECOME ACADEMIC IN NATURE. BOTH THE CASES WERE HEARD TOGETHER AS THE FACTS AND CIRCUMSTANCES ARE COMMON AND WE PROCEED TO DISPOSE THEM OF VIDE THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. IN ORDER TO ADJUDICATE THE ISSUES, WE WO ULD TAKE UP ITA NO .320 /PUN/201 7 FOR A.Y. 20 09 - 10 AS THE LEAD CASE. THEREAFTER, THE LD. AR OF THE ASSESSEE ADJUDICATING ON THE VALIDITY OF RE - ASSESSMENT PROCEEDINGS U/S 147 / 148 OF THE ACT, INVITED OU R ATTENTION AT PAGE 8 OF THE PAPER BOOK WHEREIN COPY OF REASONS HAVE BEEN 3 ITA NO S . 320 & 324 /PUN/201 7 KAILASH K GIDWANI & ANR PROVIDED BEFORE ISSUANCE OF NOTICE U/S 148 OF THE ACT IN THE CASE OF THE ASSESSEE. SIMULTANEOUSLY, THE LD. AR REFERRED TO PARA 11 OF THE ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT AND SUBMITTED THAT NONE OF THE ISSUES FOR WHICH THE REASONS FOR REOPENING THE ASSESSMENT WHICH WERE PROVIDED BY THE ASSESSING OFFICER , HE HAS NOT MADE ANY ADDITION ON THOSE ISSUES. ALL THE ADDITIONS WERE MADE IN RESPECT OF SOME OTHER ISSUES WHICH WER E NOT PART OF THE REASONS RECORDED FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT. THE LD. AR OF THE ASSESSEE CONTENDED THAT REOPENING OF ASSESSMENT CAN BE DONE IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME OF THE ASSESSEE HAS ESCAPED ASSESSME NT, BUT IN THIS CASE NO ADDITIONS ARE MADE ON THE ISSUES IN THE REASONS RECORDED FOR SUCH REOPENING. THEREFORE, IT CANNOT BE SAID THAT ANY INCOME HAD ESCAPED ASSESSMENT WITH RESPECT TO THOSE ISSUES WHICH ARE THERE IN THE SAID REASONS RECORDED. 3. THE LD . DR STATED THAT WITH REGARD TO APPLICABILITY OF SECTION 2, CLAUSE 22, SUB - CLAUSE (E) OF THE ACT, ADDITION WAS MADE BY THE ASSESSING OFFICER BUT ADMITTED THAT SO FAR AS THE REASONS FOR REOPENING ARE CONCERNED, THE APPLICABILITY OF SECTION 2(22)(E) OF THE A CT WAS IN RESPECT OF JAY MAHARASHTRA CONSUMERS PVT. LTD., WHEREAS THE ADDITION MADE BY THE ASSESSING OFFICER UNDER THE SAID PROVISION IS WITH REGARD TO APEKSHA IMPEX PVT. LTD. AS EVIDENT FROM PARA 7 OF THE ASSESSING OFFICERS ORDER. 4. THE LD. AR OF THE ASSESSEE FURTHER STATED THAT IN THE RELATED CONCERN OF THE ASSESSEE HEREIN IN ITA NO.769/PUN/2014 FOR A.Y. 2009 - 10, PUNE TRIBUNAL IN ABSOLUTELY SUBSTANTIAL SIMILAR FACTS, WHEREIN AT PARA 4 OF THE SAID ORDER OF THE TRIBUNAL, REASONS LEADING TO THE ISSUANCE OF NOTICE U/S 4 ITA NO S . 320 & 324 /PUN/201 7 KAILASH K GIDWANI & ANR 148 OF THE ACT ARE PROVIDED WHICH IS VERY MUCH SIMILAR TO THE REASONS IN THE CASE OF ASSESSEE BEFORE US. IN THAT CASE, PUNE TRIBUNAL HAS OBSERVED AND HELD AS FOLLOWS: 8 COULD HAVE MADE ASSESSMENT OR REASSESSMENT U/S 147 ONLY ON THE BASIS OF THE SOME REASONS TO BELIEVE ABOUT THE ESCAPEMENT OF INCOME. EXISTENCE OF REASONS FOR ESCAPEMENT OF INCOME ARE SINE QUA NON TO EMBARK UPON THE ASSESSMENT OR REASSESSMENT U/S 147 OF THE ACT. CHANGE OR NO CHANGE OF OPINION, AS ARGUED BY THE LD. DR, ARE THE FACTORS TO BE CONSIDERED AFTER FULFILLING THE JURISDICTIONAL CONDITION OF THERE BEING AN ESCAPEMENT OF INCOME, IN THE ABSENCE OF WHICH NO ASSESSMENT OR REASSESSMENT CAN BE MADE U/S 147. AS IT IS APPARENT FROM THE ABOVE DISCUSSION THAT NO VALID REASONS EXI ST ABOUT THE ESCAPEMENT OF THE ASSESSEES INCOME, WE HOLD THAT THE AO WAS NOT JUSTIFIED IN TAKING RECOURSE TO THE PROVISIONS OF SECTION 147 OF THE ACT. WE, THEREFORE, STRIKE DOWN THE INITIATION OF ASSESSMENT PROCEEDINGS AND THE CONSEQUENTIAL ASSESSMENT ORD ER PASSED U/S 147 OF THE ACT AND ALSO THE IMPUGNED ORDER. 9. IN THE RESULT, THE APPEAL IS ALLOWED. 5 . THE LD. AR OF THE ASSESSEE ALSO RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I.) LTD. (2011) 331 ITR 236 (BOM) , WHEREIN THE SCOPE OF RE - ASSESSMENT U/S 147 / 148 OF THE ACT HAS BEEN ANALYZED BY THE JURISDICTIONAL HIGH COURT AND IT HAS BEEN CATEGORICALLY HELD THAT THE EFFECT OF SECTION 147 OF THE ACT IS THAT (I) THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR; (II) U PON THE FORMATION OF THAT BELIEF AND BEFORE HE PROCEEDS TO MAKE AN ASSESSMENT, REASSESSMENT OR RE - COMPUTATION, THE ASSESSING OFFICER HAS TO SERVE ON THE ASSESSEE A NOT ICE UNDER SUB - S ECTION (1) OF S ECTION 148; (III) THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, WHICH HE HAS REASON TO BELIEVE, HAS ESCAPED ASSESSMENT AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION; AND (IV) T HOUGH THE NOTICE UNDER S ECTION 148(2) DOES NOT INCLUDE A PARTICULAR ISSUE 5 ITA NO S . 320 & 324 /PUN/201 7 KAILASH K GIDWANI & ANR WITH RESPECT TO WHICH INCOME HAS ESCAPED ASSESSMENT, HE MAY NONETHELESS, ASSESS OR REASSESS THE INC OME IN RESPECT OF ANY ISSUE WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. HOWEVER, IN THE PRESENT CASE OF THE ASSESSEE, NO ADDITION HAS BEEN MADE AS EVIDENT FROM THE RECORD ITSE LF ON THE ISSUES FOR WHICH THE REOPENING HAS BEEN DONE. THEREFORE, THOUGH ON CERTAIN ISSUES THE ASSESSING OFFICER INITIATED PROCEEDINGS U/S 147 / 148 OF THE ACT, HOWEVER, BEFORE COMPLETION OR AT THE TIME OF COMPLETION OF ASSESSMENT, HE PROBABLY WAS CONVINCED THAT ON THOSE ISSUES THERE HAS BEEN NO ESCAPE MENT OF ASSESSED INCOME. THAT FURTHER, IN THE CASE OF CIT VS. SMT. MANIBEN VALJI SHAH (2006) 283 ITR 453 (BOM) , IT WAS HELD THAT THE IMPORTANT WORDS IN SECTION 147 OF THE ACT ARE HAS REASON TO BELIEV E AND THESE WORDS ARE STRONGER THAN THE WORDS IS SATISFIED. THE BELIEF ENTERTAINED BY THE INCOME TAX OFFICER MUST NOT BE ARBITRARY OR IR R ATIONAL . IT MUST BE REASONABLE OR IN OTHER WORDS IT MUST BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL. THA T FURTHER IF THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF, SO THAT, ON SUCH REASONS, NO ONE PROPERLY INSTRUCTED ON THE FACTS AND LAW COULD REASONABLY ENTERTAIN THE BELIEF, THE CONCLUSION WOULD BE INESCAPABLE THAT THE INCOM E TAX OFFICER COULD NOT HAVE REASON TO BELIEVE THAT ANY PART OF THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. REVERTING TO THE FACTS OF THE PRESENT CASE THE LD. AR FURTHER POINTED OUT THAT THE ASSESSING OFFICER HAS RECORDED HIS REASONS FOR REOPENING OF THE ASSESSMENT BEFORE ISSUING NOTICE U/S 148 OF THE ACT. HOWEVER, AT THE TIME OF COMPLETION OF ASSESSMENT, HE HAS NOT MADE ANY ADDITION IN RESPECT OF THOSE ISSUES FOR 6 ITA NO S . 320 & 324 /PUN/201 7 KAILASH K GIDWANI & ANR WHICH HE HAS RECORDED REASONS. THEREFORE, THERE IS NO NEXUS BETWEEN THE REASONS RECO RDED AND THE BELIEF. 6. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE HAVE ALSO ANALYZED THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO PROVIDED CONSIDERABLE THOUGHT TO VARIOUS JUDICIAL PRONOUNCEMENTS BROUGHT ON RECORD. AFTER HEARING THE PARTIES, IT IS AN UNDISPUTED FACT THAT THE REASONS RECORDED BY THE ASSESSING OFFICER BEFORE ISSUANCE OF NOTICE U/S 148 OF THE ACT, ULTIMATELY NO ADDITION S WERE MADE ON THOSE ISSUES. EVEN THE LD. DR HAD POINTED OUT THAT THERE WAS AN ADDITION MA DE IN RESPECT OF SECTION 2(22)(E) OF THE ACT BUT IT WAS IN RESPECT OF SOME DIFFERENT ENTITY AND NOT IN RESPECT OF THAT ENTITY WHICH WAS GIVEN IN THE REASONS RECORDED BY THE ASSESSING OFFICER FOR INITIATION OF RE - ASSESSMENT PROCEEDINGS. THE BASIS OF RE - ASS ESSMENT PROCEEDINGS IS THAT THE ASSESSING OFFICER SHOULD HAVE THE REASON TO BELIEVE THAT SOME INCOME HAS ESCAPED ASSESSMENT, THAT BELIEF SHOULD LEAD HIM TO REACH A LOGICAL CONCLUSION I.E. IN THE FINAL ASSESSMENT HE SHOULD BRING THOSE INCOMES WHICH HAD EARL IER ESCAPED FROM TAX , NOW THEY SHOULD BE TAXED . IN THIS CASE, THE ASSESSING OFFICER FAILS TO DO SO. NONE OF THE ISSUES FOR WHICH REOPENING WAS INITIATED , NO ADDITION S ARE MADE IN RESPECT OF THEM. TAKING GUIDANCE FROM THE DECISIONS OF JURISDICTIONAL HIGH COURT IN CIT VS. SMT. MANIBEN VALJI SHAH (SUPRA) AND CIT VS. JET AIRWAYS (I) LTD. (SUPRA) , FIRSTLY THE BASIC CRITERIA OF SECTION 147/148 OF THE ACT IS NOT FULFILLED AS EVIDENT FROM THE ACTION OF THE ASSESSING OFFICER; SECONDLY, THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF. IN SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT THE ACTION OF ASSESSING OFFICER IN RESORTING TO 7 ITA NO S . 320 & 324 /PUN/201 7 KAILASH K GIDWANI & ANR REOPENING OF ASSESSMENT AND FRAMING THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT IS NOT VALID IN LAW AND WE ACCORDINGLY, QUASH THE RE - ASSESSMENT ORDER. BOTH THE PARTIES HAVE AGREED THAT THE FACTS AND CIRCUMSTANCES FOR ITA NO.320/PUN/2017 ARE ABSOLUTELY SAME TO ITA NO.324/PUN/2017. THEREFOR E, OUR DECISION IN ITA NO.320/PUN/2017 SHALL APPLY MUTATIS MUTANDIS IN RESPECT OF ITA NO.324/PUN/2017 AND SIMILARLY WE QUASH THE RE - ASSESSMENT ORDER. 7. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 8 TH DAY OF JANUARY , 20 20 . SD/ - SD/ - ANIL CHATURVEDI PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 8 TH JANUARY , 20 20 GCVSR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 1, KOLHAPUR 4. / THE PR. CIT - 1, KOLHAPUR 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. // // TRUE COPY// / BY ORDER, / SR. PRIVATE SECRETARY , / ITAT, PUNE