M/s Ram Chander Reva Nand, Shimla V. ITO, Shimla

ITA 337/CHANDI/2012

• Counselvise Citation: 33721514 RSA 2012
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-06-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 16-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER MEENA
• Assessee Lawyers: V K GULATI
• Keywords: Reopening of assessment; Unexplained investment; Deemed to accrue or arise in india; Difference of opinion; Change of opinion
• Section: 143(3); 147; 69; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 337/CHD/2012 ASSESSMENT YEAR: 2000-01 M/S RAM CHANDER REVA NAND, VS THE ITO, WARD-1. SHIMLA SHIMLA PAN NO. AAFGR8512C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.K. GULATI RESPONDENT BY : SHRI SURINDER MEENA DATE OF HEARING : 26.06.2012 DATE OF PRONOUNCEMENT : 27.06.2012 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), SHIMLA DATED 23.01.2012 RELATING TO ASSESS MENT YEAR 2000-01. 2. IN THIS APPEAL THE ASSESSEE HAS TAKEN THE FOLLOW ING GROUNDS:- 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THE INITIATION O F PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961 AS VALID AS NO NEW MATERIAL OR INFORMATION HAD COME TO POSSESSION OF ASSESSING OFFICER AFTER COMPLETION OF ORIGINAL ASSESSMENT FRAMED U/S 143(3). THE RE- ASSESSMENT PROCEEDINGS SO INITIATED ARE BAD IN LAW AND DESERVES TO BE CANCELLED. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS GROSSLY ERRED IN HOLDING THE ACTION OF T HE LD. 2 ASSESSING OFFICER OF CONSIDERING THE STOCK SURRENDE RED BEFORE THE SURVEY PARTY AS AN UNEXPLAINED INVESTMEN T / ASSET U/S 69 / 69-A OF THE ACT AND RESTRICTING THE REMUNERATION PAID TO PARTNERS AT RS. 50000/- AGAIN ST CLAIMED AND ALREADY ALLOWED AS PER ORIGINAL ASSESSM ENT FRAMED U/S 143(3) OF THE ACT AT RS. 243000/- , AS JUSTIFIED. THE ADDITION SO MADE ON ACCOUNT OF DISALLOWANCE OF SALARY TO PARTNERS MAY DIRECTED TO BE ALLOWED. 3. VIDE GROUND NO.1 OF THE APPEAL THE ASSESSEE HAS CHALLENGED THE VALIDITY OF INITIATION OF PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT ON 23.3.2001 AT AN IN COME OF RS. 2,74,630/- AGAINST RETURNED INCOME OF RS. 2,32,620/- AFTER DIS ALLOWING CERTAIN EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT. SUBSEQUENTLY, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD CLAIMED REM UNERATION TO THE PARTNERS AGAINST THE INCOME SURRENDERED BY THE ASSESSEE FIRM AT THE TIME OF SURVEY OPERATION U/S 133A(1) OF THE ACT. DURING THE SOURC ES OF SURVEY OPERATION, THE ASSESSEE WAS FOUND TO HAVE IN POSSESSION OF EXC ESS STOCK TO THE TUNE OF RS. 4,50,000/- AND EXCESS CASH IN HAND AT RS. 25,00 0/- FOR WHICH THE ASSESSEE COULD NOT GIVE ANY SATISFACTORY EXPLANATION AND CAM E FORWARD WITH SURRENDER OF RS. 4,50,000/- IN STOCK AND RS. 25,000/- IN CASH . THE ASSESSING OFFICER TOOK THE VIEW THAT THE AMOUNT SURRENDERED ON ACCOUN T OF EXCESS STOCK AND EXCESS CASH IS AN UNEXPLAINED INVESTMENT IN THE STO CK AND UNEXPLAINED MONEY AND IS DEEMED INCOME OF THE ASSESSEE U/S 69 AND 69A OF THE ACT. HE FURTHER OPINED THAT THE INVESTMENT MADE IN THE FORM OF EXCE SS STOCK IS AN INDEPENDENT INVESTMENT WITHIN THE MEANING OF SECTIO N 69A OF THE ACT AND 3 SIMILARLY THE EXCESS CASH FOUND IS UNEXPLAINED MONE Y WITHIN THE MEANING OF SECTION 69A OF THE ACT. HE ACCORDINGLY, HELD THAT THE REMUNERATION CLAIMED ON SURRENDERED AMOUNT IS OUTSIDE THE SCOPE OF CHAPT ER IVD OF THE ACT. ACCORDINGLY, PROCEEDINGS U/S 147 OF THE ACT WERE I NITIATED BY THE ASSESSING OFFICER AND THE CLAIM OF REMUNERATION WAS RESTRICTE D TO RS. 50,000/- ONLY AS AGAINST RS. 2,43,000/- CLAIMED AND ALREADY ALLOWED AS PER ORIGINAL ASSESSMENT FRAMED U/S 143(3) OF THE ACT. 5. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ASSESSEE V IDE GROUND NOS. 2 AND 3 OF THE APPEAL, FILED BEFORE THE CIT(A) HAS CHALLENG ED THE VALIDITY OF REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT. HO WEVER, THE CIT(A) DECIDED THE ISSUE AGAINST THE ASSESSEE STATING THAT IN THE INSTANT CASE, THE ASSESSEE HAS CREDITED THE SURRENDERED AMOUNT OF RS. 4,50,000/- IN THE TRADING ACCOUNT AND HAD DEBITED THE SALARY OF RS. 2,43,000/ - IN THE PROFIT AND LOSS ACCOUNT. THUS, THE ASSESSEE HAD NOT CORRECTLY REF LECTED THE SURRENDERED AMOUNT OF RS. 4,50,000/-. ACCORDING TO CIT(A), THE AFORESAID AMOUNT SHOULD HAVE BEEN STRAIGHT AWAY REFLECTED IN CLEAR TERMS ON THE PROFIT SIDE IN THE PROFIT AND LOSS ACCOUNT. BY BOOKING IT IN THE TRA DING ACCOUNT, THE ASSESSEE CAMOUFLAGED IT AS A PART OF HIS TRADING PROFIT AND THUS DID NOT TRULY DISCLOSE THE MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT, TH EREFORE, THE ISSUANCE OF NOTICE U/S 147 / 148 EVEN AFTER EXPIRY OF FOUR YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR IS FULLY JUSTIFIED IN THIS CASE. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L AGAINST THE ORDER OF CIT(A) DATED 23.1.2012. 4 7. SHRI V.K. GULATI, ADVOCATE, APPEARED FOR THE ASS ESSEE AND SHRI SURINDER MEENA APPEARED FOR THE REVENUE. SHRI V.K. GULATI, LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT IN VIEW OF PROV ISO TO SECTION 147, NO ACTION CAN BE TAKEN U/S 147 BEYOND THE PERIOD OF FO UR YEARS IF THE CASE DOES NOT FALL WITHIN THE EXCEPTION TO THE PROVISO MENTIO NED IN THE PROVISO ITSELF, NAMELY, IF THERE IS NO CASE OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS WHICH ARE NECESS ARY FOR ASSESSMENT FOR THE YEAR UNDER CONSIDERATION. SHRI V.K. GULATI, LD. CO UNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE INSTANT CASE, THE ASSESSEE HA S FULLY AND TRULY DISCLOSED THE MATERIAL FACTS NECESSARY AT THE TIME OF FILING OF RETURN AND ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. ACCORDING TO LD. COUNSEL FOR TH E ASSESSEE, RE-ASSESSMENT PROCEEDINGS CANNOT BE INITIATED MERELY BY FRESH APP LICATION OF MIND BY ASSESSING OFFICER ON SAME SET OF INFORMATION WHICH IS NOTHING BUT CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER THE LAW. SH RI V.K. GULATI, LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT IN THE INSTANT CASE, THE ASSESSEE HAD NOT FAILED TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY. THEREFORE, THE ASSESSING OFFICER HAS WRONGLY ASSUMED THAT THE COMP UTATION OF INCOME WAS ERRONEOUS. SHRI V.K. GULATI, LD. COUNSEL FOR THE A SSESSEE ALSO SUBMITTED THAT IN THE INSTANT CASE, COMPUTATION OF INCOME SUBMITTE D ALONGWITH ORIGINAL RETURN WAS BASED ON EVIDENCE AND NOT ON DOCTRINES A ND THEORIES, SO THAT WHERE THE MATERIALS ON RECORD DID NO OFFER SCOPE FOR INVO KING ACTION UNDER SECTION 147, SUCH ACTION WILL NOT BE VALID. SHRI V.K GULA TI, LD. COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT THE REOPENING OF ASSESSMENT IS INVALID SO MUCH SO THAT FIRSTLY THE ASSESSEE HAD ALREADY DISCL OSED ALL MATERIAL FACTS FULLY AND TRULY AT THE TIME OF FRAMING OF ORIGINAL ASSESS MENT WHICH IN THIS CASE WAS 5 FRAMED U/S 143(3) OF THE ACT ON 23.3.2001 AND SECON DLY THE ASSESSING OFFICER HAS ERRONEOUSLY ISSUED NOTICE UNDER SECTION 148 AFT ER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. AS REGA RDS THE OPINION DISCUSSED BY ASSESSING OFFICER IN THE BODY OF ASSESSMENT ORDE R AND INTERPRETING THE LAW AS WELL AS FACTS THAT THERE ARE UNEXPLAINED INVESTM ENTS / ASSETS AND REFERRING TO SECTIONS 69 & 69 A OF THE ACT, SHRI V.K. GULATI, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NOTHING HAS BEEN OBSERVED B Y THE LD. ASSESSING OFFICER EITHER AT THE TIME OF FRAMING THE ORIGINAL ASSESSMENT ON 23.3.2001 OR DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS COMP LETED ON 4.12.2007. SHRI V.K. GULATI ALSO SUBMITTED THAT NO ADDITION ON ACCO UNT OF STOCK HAS BEEN MADE BY THE ASSESSING OFFICER EITHER AT THE TIME OF FRAMING OF ORIGINAL ASSESSMENT OR AT THE TIME OF PRESENT ASSESSMENT. I N OTHER WORDS, NOTHING HAS BEEN FOUND OUTSIDE THE BOOKS OF ACCOUNT OR RETURN F ILED EITHER U/S 139 OR IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. 8. SHRI SURINDER MEENA, LD. DR HEAVILY RELIED ON TH E ORDERS OF THE AUTHORITIES BELOW. 9. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE VERY OUTSET, I MAY OBS ERVE HERE THAT IN THE INSTANT CASE, THE INITIATION OF RE-ASSESSMENT PROCEEDINGS WAS BASED ON CHANGE OF OPINION OF THE ASSESSING OFFICER WHICH IS NOT PERMI SSIBLE IN LAW. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS FULLY AND TRULY DISCLOSED ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AT THE TIME OF FILING OF R ETURN AND ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 23.3.2001. IT IS WELL SETTLED LAW THAT RE-ASSESSMENT 6 PROCEEDINGS CANNOT BE INITIATED MERELY BY FRESH APP LICATION OF MIND OF THE ASSESSING OFFICER TO SAME SET OF INFORMATION WHICH IS NOTHING BUT CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE UNDER THE LAW. D URING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS F URNISHED PROFIT AND LOSS ACCOUNT, THE BALANCE SHEET, COMPUTATION OF INCOME A LONG WITH RETURN OF INCOME. THEREAFTER, THE ASSESSING OFFICER FRAMED T HE ASSESSMENT U/S 143(3) OF THE ACT. THERE WAS NO MATERIAL OR INFORMATION WH ICH HAD COME TO POSSESSION OF ASSESSING OFFICER AFTER COMPLETION O F THE ORIGINAL ASSESSMENT TO JUSTIFY THE REOPENING. IN MY OPINION, REOPENING WAS BASED MERELY ON FRESH APPLICATION OF MIND BY ASSESSING OFFICER TO SAME SE T OF FACTS AND, THEREFORE, INITIATION OF RE-ASSESSMENT PROCEEDING IS BAD IN LA W AND ASSESSMENT COMPLETED BY ASSESSING OFFICER IS LIABLE TO BE CANC ELLED BEING INVALID. 10. THE NEXT CONTENTION OF SHRI V.K. GULATI, LD. CO UNSEL FOR THE ASSESSEE IS THAT THERE WAS NO FAILURE ON THE PART OF THE ASS ESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. I HAVE ALSO PERUSED THE REASONS RECORDED BY THE ASSESSING OFFICER FOR INITIATION OF PROCEEDINGS U/S 147 OF THE ACT DATED 28.3.2007 (COPY OF THE REASONS RECORDED BY ASSESSIN G OFFICER IS AVAILABLE AT PAGE 19 OF THE PAPER BOOK). IN THE REASONS RECORDE D BY ASSESSING OFFICER FOR INITIATION OF PROCEEDINGS U/S 147 OF THE ACT, IT IS NOWHERE STATED THAT THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS. IT IS WELL SETTLED LAW THAT IN CASE WHERE THE ASSESSMENT IS COMPLETED U/S 143(3) OF THE ACT, THE REOPENING OF THE ASSESSMENT U/S 147 / 148 OF THE AC T BEYOND THE PERIOD OF FOUR YEARS AT THE END OF THE RELEVANT ASSESSMENT YE AR CAN BE SUSTAINED ONLY IF IT IS ESTABLISHED THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IN THIS CASE, THERE IS NO FINDING THAT THERE IS 7 ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THAT ALL THE MATERIAL FACTS WERE AVAILABLE AT THE TIME OF MAKING ORIGINAL ASSES SMENT. ADMITTEDLY, IN THIS CASE RE-ASSESSMENT PROCEEDINGS WERE INITIATED BEYON D THE PERIOD OF FOUR YEARS FORM THE END OF RELEVANT ASSESSMENT YEAR. PROVISO TO SECTION 147 OF THE ACT PROVIDES THAT NO ACTION CAN BE TAKEN U/S 147 BEYOND THE PERIOD OF FOUR YEARS IF THE CASE DOES NOT FALL WITHIN THE EXPLANATION OF THE PROVISO MENTIONED IN THE PROVISO ITSELF, NAMELY IF THERE IS NO CASE OF F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS WHICH ARE NECESSARY FOR ASSESSMENT FOR THE YEAR OF ASSESSMENT. 11. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VI EW THAT THE ASSESSMENT DATED 4.12.2007 FRAMED U/S 143(3) READ WITH SECTION 147 OF THE ACT CANNOT BE SUSTAINED IN LAW. ACCORDINGLY, I QUASH THE IMPUGNE D ORDER AND RE-ASSESSMENT ORDER AND ALLOW GROUND NO.1 OF THE APPEAL. 12. SINCE, I HAVE QUASHED THE RE-ASSESSMENT PROCEED INGS AND THE IMPUGNED ORDER, THEREFORE, I DO NOT THINK IT NECESSARY TO D ECIDE THE GROUND NO.2 OF THE APPEAL. 13. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH JUNE, 2012. SD/- (H.L.KARWA) VICE PRESIDENT DATED :27 TH JUNE, 2012 RKK 8 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR