Madhav Soni, V. ITO,

ITA 36/LKW/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8165 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-08-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 24-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Keywords: Unexplained investment; Opportunity of being heard; Principle of natural justice; Tangible material; Non passing of speaking order; Reassessment proceedings
• Section: 142(1); 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A : LUCKNOW BEFORE SHRI S. K. YADAV, JUDICIAL MEMBER AND SHRI B. R. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 36 /LKW/ 11 ASSESSMENT YEAR: 200 3 - 200 4 SHRI MADHAV SONI, VS. INCOME TAX OFFICER, PROP. M/S SONI JEWELLERS, GONDA. (NEAR VINOD TALKIES), GONDA. PAN:AYZPS2459L (APPELLANT) (RESPONDENT) APPE LLANT BY : SHRI RAKESH GARG, ADVOCATE RESPONDENT BY : SHRI ALOK MITRA, SR. D.R. DATE OF HEARING : 07 /0 8 /2012 DATE OF PRONOUNCEMENT :22/08/2012 ORDER PER B. R. JAIN: THIS APPEAL BY ASSESSEE AGAINST THE ORDER DATED 26 / 1 0/201 0 OF LEARNED CIT(A) - I I , LUCKNOW RAISES THE FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN PASSING THE ORDER WHICH IS ILLEGAL, IMPROPER AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN PASSING THE ORDER WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD AND WITHOUT CONSIDERING TH E WRITTEN SUBMISSION SUBMITTED BEFORE HIM AND BEFORE THE LEARNED ASSESSING OFFICER. 2 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER REGARDING INITIATION OF PROCEED INGS U/S 147 WHICH IS WHOLLY ERRONEOUS AND BAD IN LAW AS THE LEARNED ASSESSING OFFICER HAD TAKEN NO INDEPENDENT DECISION BEFORE RECORDING REASONS AND INITIATED PROCEEDINGS U/S 147 ON GUESSWORK AND SURMISES FOR THE PURPOSE OF INVESTIGATION AND ENQUIRIES. 4 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ACTION OF THE LEARNED ASSESSING OFFICER AS ASSESSMENT U/S 144 IS ARBITRARY, UNJUSTIFIED AND UNLAWFUL AND THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS A NON SPEAKING ORDER AND HENCE LIABLE TO BE QUASHED. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN ESTIMATING THE INCOME BY APPLYING NET PROFIT RATE OF 20% OF SALES AND MAKING ENHANCEMENT OF ` 81,832/ - TO THE TOTAL INCOME, WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD AND WITHOUT CONSIDERING THE WRITTEN SUBMISSION SUBMITTED BEFORE HIM. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ALTER OR WITHDRAW ANY GROUND OF APPEAL OR RAISE ANY NEW GROUND OF APPEAL DURING THE PENDENCY OF APPEAL. 2. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE RETURNED INCOME OF ` 63,000/ - ON 03/02/2004. THEREAFTER, A NOTICE U/S 148 OF THE ACT STOOD ISSUED ON 06/02/2006 AFTER RECORDING REASONS AS UNDER: ( ) , . F.NO.ADDL.DIT(INV)/LKO/Z - 332/04 - 05/1439 DATED 22/12/2005 C/O 0 , 3/5/12 , , , 14 / 07 / 2002 35 ,000/ - 01 / 09 / 2002 3 77 ,000/ - 112 ,000/ - ( ) , 112 ,000/ - , (ESCAPE) 1961 147 2 ( ) 112 ,000/ - (ESCAPE) 148 2.1 THE NOTICE STOOD SERVED AND ASSESSEE PARTICIPATED IN THE PROCEEDINGS. HE, HOWEVER, DID NOT FILE THE RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THE ASSESSING OFFICER, THEREAFTER, ISSUED NOTICE U/S 142(1) OF THE ACT FOR LISTING THE HEARING ON 19/06/2007 AND STOOD ADJOURNED FROM TIME TO TIME FOR REQUIRING REQUISITE INFORMATION FROM THE ASSESSEE. THE ASSESSMENT STOOD COMPLETED EX - PARTE AT AN INCOME OF ` 1,75,000/ - BY MAKING THE ADDITION OF ` 1,12,000/ - BEING THE AMOUNT OF UNEXPLAINED INVESTMENT FOR WHICH PROCEEDINGS WERE INITIATED U/S 148 OF THE ACT. 3. THE LEARNED CIT(A), AFTER TAKING REMAND REPORT ON THE SUBMISSIONS MADE BY THE ASSESSEE, UPHELD THE PROCEEDING INITIATED AS VALID PROCEEDING S AS THERE WAS A REASONABLE BELIEF BEFORE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT. THE ACTION TAKEN BY THE ASSESSING OFFICER WAS TAKEN AS LEGALLY CORRECT. 4. IN APPEAL, THE ASSESSEES COUNSEL SHRI RAKESH GARG CONTENDS THAT THE ASSESSING OFFICER MAD E NO ENQUIRY BEFORE FORMATION OF BELIEF AND THE 4 ASSESSMENT HAS BEEN COMPLETED EX - PARTE . SINCE HE HAS FAILED TO EXAMINE THE INFORMATION THAT HE RECEIVED FROM THE INVESTIGATION WING, ACTION TAKEN U/S 147 IS UNWARRANTED AND REQUIRE S TO BE QUASHED. RELIANCE HAS BEEN PLACED ON THE JUDGMENT BY HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SMT. PARAMJIT KAUR [2009] 311 ITR 38 (P&H) . IT WAS CONTENDED THAT IN THAT CASE THE ASSESSING OFFICER HAD NOT EXAMINED THE INFORMATION REC EIVED FROM THE SURVEY CIRCLE BEFORE RECORDING HIS OWN SATISFACTION OF ESCAPED INCOME AND INITIATING REASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAD THUS ACTED ONLY ON THE BASIS OF SUSPICION AND IT COULD NOT BE SAID THAT IT WAS BASED ON BELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED INCOME. THE ASSESSING OFFICER HAD TO ACT ON THE BASIS OF 'REASONS TO BELIEVE' AND NOT ON 'REASONS TO SUSPECT'. THE TRIBUNAL RIGHTLY CONCLUDED THAT THE ASSESSING OFFICER HAD FAILED TO INCORPORATE THE MATERIAL AND HIS SAT ISFACTION FOR REOPENING THE ASSESSMENT AND THEREFORE THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT FOR REASSESSMENT PROCEEDINGS WAS NOT VALID. THE RELIANCE HAS ALSO BEEN PLACED ON THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF INDRA PR ASTHA CHEMICALS PVT. LTD. VS COMMISSIONER OF INCOME - TAX [2004] 271 ITR 113 (ALL) WHEREIN IN THE WRIT PROCEEDINGS THE HON'BLE JURISDICTIONAL HIGH COURT TOOK NOTE OF THE FACT THAT THE PROCEEDINGS U/S 147 OF THE ACT HAD BEEN INITIATED ON THE BASIS OF THE REP ORT OF THE INSPECTOR TAX INSPECTOR. FROM A READING OF THE REPORT, IT WAS CLEAR THAT THE INCOME TAX INSPECTOR HAD NOT RECORDED THAT THE INCOME HAD ESCAPED ASSESSMENT. HE HAD REPORTED THAT NO BUSINESS WAS DONE IN 5 ASSESSMENT YEAR 1993 - 94. THE REPORT SUBMIT TED BY THE INCOME TAX INSPECTOR DID NOT HAVE ANY RELEVANT MATERIAL TO POINT OUT THAT ANY INCOME HAD ESCAPED ASSESSMENT FOR THOSE YEARS. IT WAS THUS HELD THAT THE NOTICES ISSUED U/S 148 WERE ILLEGAL AND WITHOUT JURISDICTION AND LIABLE TO BE QUASHED. RELIA NCE HAS ALSO BEEN PLACED ON THE DECISION OF I.T.A.T. LUCKNOW B BENCH IN THE CASE OF RICH CAPITAL & FINANCIAL SERVICES LTD. VS. CIT, KANPUR IN I.T.A. NO.246/LKW/2009, ASSESSMENT YEAR 2000 - 2001, ORDER DATED 18/11/2009 WHEREIN THERE BEING NO REFERENCE TO AN Y RELIABLE MATERIAL FOR TAKING ACTION U/S 148 OF THE ACT, PROCEEDINGS STOOD QUASHED. 5. ON THE OTHER HAND, LEARNED D.R. CONTENDS THAT THE ACTION HAS BEEN INITIATED AFTER RECORDING THE REASONS WHICH REFER TO TANGIBLE MATERIAL. THE REASONS ARE BONAFIDE AND OF A REASONABLE PERSON. THE INFORMATION WAS RECEIVED FROM INVESTIGATION WING OF THE INCOME - TAX DEPARTMENT, WHICH WAS SENT TO THE ASSESSING OFFICER IN THE OFFICIAL CAPACITY AND ALL THE FUNCTIONS HAVE BEEN DISCHARGED IN PERFORMANCE OF THE GOVERNMENT DUTY. THE ASSESSEE HAS TENDERED NO EXPLANATION WITH RESPECT TO THE DEPOSITS OF ` 35,000/ - MADE ON 14/07/2002 AND ` 77,000/ - ON 01/09/2002 MADE BY HIM IN DEVI PATAN KSHETRIYA GRAMIN BANK, GONDA. THE ASSESSING OFFICER THUS FORMED AN HONEST BELIEF ON THE BASIS OF SUCH INFORMATION RECEIVED BY HIM THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND THUS, AFTER RECORDING SUCH REASON S, HE PROCEEDED TO INITIATE ACTION U/S 148 OF THE ACT. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF BRIJ 6 M OHAN AGARWAL VS ASSISTANT COMMISSIONER OF INCOME - TAX [2004] 268 ITR 400 (ALL) UPHELD THE ACTION TAKEN U/S 148 . IN THAT CASE ACTION WAS INITIATED U/S 148 OF THE ACT ON THE INFORMATION RECEIVED FROM INVESTIGATION WING OF THE INCOME - TAX DEPARTMENT ON THE BA SIS OF WHICH THE ASSESSING OFFICER FORMED THE BELIEF FOR TAKING ACTION U/S 148 OF THE ACT. SUCH A BELIEF WAS AN HONEST AND REASONABLE BELIEF ON THE MATERIAL, WHICH HE HAD RECEIVED FROM THE INVESTIGATION WING OF THE INCOME - TAX DEPARTMENT. THE NOTICE SO IS SUED U/S 148 OF THE ACT WAS THUS FOUND VALID. 6. WE HAVE HEARD THE PARTIE S AND HAVE PERUSED THE ENTIRE MATERIAL ON RECORD AS WELL AS THE CASE LAWS BROUGHT TO OUR NOTICE. ADMITTEDLY, THE ASSESSING OFFICER INITIATED PROCEEDINGS ON THE BASIS OF VALID INFORM ATION RECEIVED FROM INVESTIGATION WING OF THE INCOME - TAX DEPARTMENT. REASONS AS REQUIRED U/S 14 8 ( 2 ) OF THE ACT HAVE ALSO BEEN RECORDED AND STAND PERUSED. IT IS AMPLY CLEAR FROM THE REASONS THAT THE BELIEF OF THE ASSESSING OFFICER THAT INCOME HAS ESCAPE D ASSESSMENT WAS HONEST AND REASONABLE BELIEF WITH REFERENCE TO RELIABLE MATERIAL THAT HAS COME ON RECORD FROM THE INVESTIGATION WING OF THE INCOME - TAX DEPARTMENT . THE HON'BLE JURISDICTION HIGH COURT IN THE CASE OF BRIJ MOHAN AGARWAL VS ASSISTANT COMMIS SIONER OF INCOME - TAX [2004] 268 ITR 400 (ALL) HA S UPHELD THE ACTION TAKEN U/S 148 ON THE BASIS OF REPORT FROM INVESTIGATION WING OF INCOME - TAX DEPARTMENT. THE LAW OF PRECEDENCE IS THAT THE DECISION OF JURISDICTIONAL HIGH COURT IS BINDING ON SUBORDINATE COURTS AND AUTHORITIES UNDER 7 ITS SUPERINTENDENCE AS HAS BEEN HELD BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS THANA ELECTRICITY SUPPLY LTD. [1994] 206 ITR 727 (BOM) AND ALSO BY HON'BLE DELHI HIGH COURT IN THE CASE OF ALL INDIA LAKSHMI COMMERCIAL BANK OFFICERS' UNION VS UNION OF INDIA [1984] 150 ITR 1 (DEL) . THE JUDGMENT BY OTHER HIGH COURTS ONLY HAS A PERSUASIVE VALUE AS HAS BEE N STATED BY HON'BLE MADRAS HIGH COURT IN THE CASE OF VISVAS PROMOTERS (P) LTD. VS INCOME - TAX APPELLATE TRIBUNAL [2010] 323 ITR 114 (MAD) . EVEN OTHERWISE WHEN THERE IS CONFLICT OF DECISION OF HIGH COURT, DECISION OF SAME HIGH COURT HAS TO BE FOLLOWED. T HIS HAS BEEN SO STATED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS B.K. ROY PVT. LTD. [2001] 248 ITR 245 (CAL) . IN THIS VIEW OF THE MATTER, THE ACTION TAKEN BEING BONAFIDE, THE JUDGMENT RENDERED BY HON'BLE JURISDICTION HIGH COURT HAS TO BE FOLLOWED IN PR EFERENCE TO THE JUDGMENT RENDERED BY HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SMT. PARAMJIT KAUR [2009] 311 ITR 38 (P&H) . THE OTHER JUDGMENTS REFERRED BY THE ASSESSEE, HOWEVER, ARE RUNNING ON DIFFERENT FACTS WHERE THERE WAS NO REFERENCE TO RELIABLE MATERIAL FOR INITIATING ACTION U/S 148 OF THE ACT. ACCORDINGLY, WE UPHOLD THE ACTION AND REJECT THE GROUND NO. 3 RAISED IN APPEAL. 7. AS REGARDS GROUND NOS. 1,2,4 AND 5 IN APPEAL, SHORT CASE OF THE APPELLANT IS THAT THE ASSESSMENT ORDER HAS BEEN PASSED IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE IN AS MUCH AS THE ASSESSEE WAS NOT GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD AND THE WRITTEN SUBMISSIONS MADE BY HIM BEFORE THE LEARNED ASSESSING 8 AUTHORITY AS WELL AS BEFORE THE LEARNED CIT(A) LEADING TO ENHANCEMENT OF INCOME OF ` 81,832/ - WERE NOT CONSIDERED BY HIM. THE ASSESSEE ALSO SOUGHT TO RAISE A NEW PLEA WITH RESPECT OF ENHANCEMENT OF INCOME MADE BY DISCOVERY OF NEW SOURCE OF INCOME BY THE LEARNED CIT(A) AND A REFERENCE WAS MADE TO THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS UNION TYRES [1999] 240 ITR 556 (DEL) . THIS NEW PLEA WAS NOT ALLOWED TO BE ENTERTAINED AS IT WAS TOO LATE IN THE DAY TO TAKE SUCH PLEA BESIDES THE SAME WAS NOT BONAFIDE. 8. ON THE OTHER HAND, THE LEARNED D.R. CONTENDS THAT THIS WAS AN EX - PARTE ASSESSMENT FRAMED BY THE ASSESSING AUTHORITY AND THE ASSESSMENT ORDER REVEALS THAT THE ASSESSMENT HAS BEEN COMPLETED AFTER TAKI NG INTO ACCOUNT ALL RELEVANT MATERIAL AVAILABLE ON RECORD. THE LEARNED CIT(A) ALSO TOOK REMAND REPORT ON THE DOCUMENTS AND WRITTEN SUBMISSIONS FURNISHED BEFORE HIM BY THE ASSESSEE AND THUS IT SHALL NOT BE CORRECT TO SAY THAT THE WRITTEN SUBMISSIONS MADE OR MATERIAL LAID BEFORE THE AUTHORITIES BELOW HAS NOT BEEN CONSIDERED BY THEM BEFORE FRAMING THE ASSESSMENT ORDER OR MAKING ENHANCEMENT IN THE INCOME ON THE BASIS OF BALANCE SHEET AND OTHER RECORDS SUBMITTED FOR THE FIRST TIME BEFORE LEARNED CIT(A). THE A SSESSEE, IN ASSESSMENT PROCEEDINGS, HAS DENIED MAINTENANCE OF ANY BOOKS OF ACCOUNT B UT CHANGED ITS STAND BEFORE THE LEARNED CIT(A). IT THUS CAN BE SAID THAT IT IS NOT A CASE OF ENHANCEMENT OF INCOME BUT IS A CASE OF EXERCISE OF COTERMINOUS POWER BY THE LE ARNED CIT(A) AS 9 AFTER THE AMENDMENT BROUGHT U/S 251(1)(A) OF THE ACT W.E.F. 01/06/2001, THE LEARNED CIT(A) CANNOT SET ASIDE THE ORDER FOR MAKING IT AFRESH . THAT APART, THE TOTAL INCOME OF THE APPELLANT AFTER MAKING THE ADDITION BY LEARNED CIT(A) WORKED OU T TO ` 1,44,832/ - , WHICH IS MUCH BELOW THE TOTAL INCOME ASSESSED BY THE ASSESSING OFFICER A T ` 1,75,000/ - . IT THUS CANNOT BE A CASE OF ENHANCEMENT OF INCOME. 9. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD AND THE CASE LAWS BROUGHT TO OUR NO TICE. THE ASSESSING OFFICER HAS MADE AN ADDITION OF ` 1,12,000/ - ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE BANK ACCOUNT AND THUS COMPLETED THE ASSESSMENT AT AN INCOME OF ` 1,75,000/ - . THE LEARNED CIT(A), AFTER GIVING PROPER OPPORTUNITY AND AFTER EXAMINATION OF ALL FACTS AND MATERIAL ON RECORD, DELETED THE SAID ADDITION OF ` 1,12,000/ - BUT PROCEEDED TO MAKE AN ADDITION OF ` 81,832/ - BEING 20% OF THE SALES TAKEN AS NET PROFIT O N THE BASIS OF MATERIAL PRODUCED BEFORE HIM. THE ASSESSEE THUS GOT A N OVER ALL RELIEF OF ` 30,168/ - IN APPEAL FROM THE LEARNED CIT(A). IT, THEREFORE, CANNOT BE TERMED A CASE OF ENHANCEMENT MADE BY THE LEARNED CIT(A). THE HON'BLE MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS T. NAMBERUMAL CHETTY AND SONS [1933] 1 ITR 32 (MAD) HELD THAT THE ENHANCEMENT OF ASSESSMENT IS AN ENHANCEMENT AS A WHOLE AND NOT A MERE ENHANCEMENT OF A PARTICULAR ITEM OF INCOME IN THE ASSESSMENT, WHICH DOES NOT RESU LT IN THE ENHANCEMENT OF INCOME AS A WHOLE. IN THIS VIEW OF THE MATTER AND UNDER THE PECULIAR FACTS OF THE CASE, IT 10 IS NOT A CASE WHERE LEARNED CIT(A) CAN BE SAID TO HAVE ENHANCED THE ASSESSMENT OR EXCEEDED HIS JURISDICTION UNDER THE ACT. SINCE THE DECIS ION HAS BEEN TAKEN BY LEARNED CIT(A) BY CONSIDERING THE ENTIRE MATERIAL ON RECORD AND AFTER AFFORDING REASONABLE AND EFFECTIVE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, THE ADDITION OF ` 81,832/ - ON ESTIMATED BASIS IS FOUND JUSTIFIED. WE, THEREFORE, DO N OT FIND ANY MERIT IN THE GROUNDS RAISED IN APPEAL BY THE ASSESSEE. THE SAME, THEREFORE, STAND REJECTED. 10. IN THE RESULT, THE APPEAL BY THE ASSESSEE STANDS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 22/08/2012 ) SD/. SD/. ( S. K. YADAV ) ( B. R. JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22/08/2012 *SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR