M/s. Triloknath Corporation, Valsad V. The Income tax Officer, Ward-4, Valsad

ITA 3615/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5895 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 03-09-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Assessee Lawyers: RAJESH M UPADHYA
• Keywords: Unexplained investment
• Section: 148; 144; 2; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND T.K. SHARMA, JUDICIAL MEMBER) ITA.NO.3613, 3614 AND 3615/AHD/2007 ASSTT.YEAR : 2000-2001, 2002-2003 AND 2003-2004 M/S.TRILOKNATH CORPORATION C/O.GANESH HALL & DECORATORS NANI MAHETWAD, VALSAD. VS. ITO, WARD-4 VALSAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJESH M. UPADHYA REVENUE BY : SHRI A.K.KHANDELWAL O R D E R PER G.D. AGARWAL, VICE-PRESIDENT: THESE ARE THREE APPEALS BY THE SAME ASSESSEE AGAINST THE ORDERS OF THE CIT(A), VAL SAD OF EVEN DATED 19-6- 2007 FOR THE ABOVE ASSESSMENT YEARS ARISING OUT OF THE ORDERS OF THE ASSESSING OFFICER UNDER SECTION 144 R.W.S. 147 OF THE INCOME TAX ACT, 1961. 2. THE FIRST GROUND IN ALL THESE APPEALS IS AGAINST THE REOPENING OF THE ASSESSMENT UNDER SECTION 147. AT THE TIME OF HEARI NG BEFORE US, IT IS SUBMITTED BY THE LEARNED COUNSEL THAT THE FACTS IN ALL THESE YEARS ARE ALMOST SIMILAR AND THEREFORE THEY WOULD REFER TO THE CASE RELATING TO THE ASSESSMENT YEAR 2000- 2001 I.E. ITA NO.3613/AHD/2007. COPY OF THE REASON S RECORDED FOR REOPENING OF THE ASSESSMENT OF THE ASSESSEE IS PLACED AT PAGE NO.2 OF THE ASSESSEES PAPER- BOOK. FROM WHICH IT IS EVIDENT THAT THE ASSESSING OFFICER HAS MENTIONED THAT THE RETURN OF INCOME WAS NOT FILED BY THE ASSESSEE- FIRM. HE HAS ALSO RECORDED A FINDING THAT THERE IS AN ESCAPEMENT OF INCOME ON AC COUNT OF INVESTMENT IN THE UNSOLD SHOPS, FLATS AND OPEN LAND FOR ASSESSMENT YE AR 2001-2002. THE LEARNED COUNSEL HAS STATED THAT THE ASSESSEE HAD FILED THE RETURN OF INCOME ON 31-3- 2002. COPY OF ACKNOWLEDGEMENT IS PLACED PAGE NO.7 OF THE PAPER BOOK. THUS, FINDING OF THE ASSESSING OFFICER THAT NO RETU RN OF INCOME WAS FILED IS FACTUALLY INCORRECT. HE HAS ALSO SUBMITTED THAT T HE ASSESSING OFFICER HIMSELF ITA.NO.3613, 3614 AND 3615/AHD/2007 -2- HAS RECORDED THE FINDING OF ESCAPED ASSESSMENT ON A CCOUNT OF INVESTMENT FOR A.Y.2001-2002. WHEN THE FINDING OF THE ESCAPEMENT OF THE INCOME WAS FOR A.Y.2001-2002, THERE WAS NO JUSTIFICATION FOR REOPE NING OF OTHER YEARS. HE ALSO POINTED OUT THAT IN THE ASSESSMENT NO ADDITION IS MADE FOR UNEXPLAINED INVESTMENT. THIS ALSO PROVES THAT THERE WAS NO ESCA PEMENT OF INCOME AS RECORDED IN THE REASONS FOR REOPENING OF THE ASSESS MENT. 3. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE AUTHORITIES BELOW AND HE HAS STATED THAT AT THE TIM E OF REOPENING OF THE ASSESSMENT, IT IS ONLY PRIMA FACIE SATISFACTION OF THE ASSESSING OFFICER IS REQUIRED WITH REGARD TO ESCAPEMENT OF INCOME AND DE TAILED INVESTIGATION IS TO BE MADE ONLY WHEN THE ASSESSMENT IS REOPENED. THER EFORE, EVEN IF NO ADDITION IS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT, IT CA NNOT BE SAID THAT THE ASSESSING OFFICER WAS UNJUSTIFIED IN FORMING THE BE LIEF OF ESCAPEMENT OF INCOME AT THE TIME OF ISSUING NOTICES. 4. WE HAVE CAREFULLY CONSIDERED ARGUMENTS OF BOTH T HE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE COPY OF THE REA SONS RECORDED AS SUBMITTED BY THE ASSESSEE AT PAGE NO.2 OF THE PAPER BOOK IS A S UNDER: REASONS FOR ISSUE OF NOTICE U/S.148 OF THE I.T.ACT IN THE CASE OF M/S.TRILOLKNATH CORPORATION, MADANWAD, VALSAD. REG: M/S.TRILOKNATH CORPORATION, TRILOKNATH COMPLEX, MADANWAD, VALSAD A.Y.2000-01 THIS IS A PARTNERSHIP FIRM ENGAGED IN CONSTRUCTION BUSINESS. THERE ARE TWO PARTNERS VIZ. SHRI TARUN K.MODY AND SHRI SHIVPA L J.MISTRY HAVING 50% SHARE ACH AS PER THE PARTNERSHIP DEED. THEY HA VE CONSTRUCTED 18 FLATS AND 10 SHOPS IN TRILOKNATH COMPLEX IN A LAND PURCHASED AS PER THE PURCHASE DEED. RETURN OF INCOME WAS NOT FILED BY T HE FIRM ALTHOUGH THERE ARE NUMBER OF UNSOLD SHOPS AND OPEN LAND. SURVEY ACTION U/S.133A OF THE I.T.ACT WAS CARRIED O UT IN THE BUSINESS PREMISES OF ONE OF THE PARTNERS SHRI TARUN MODY AT GANESH HALL, HALAR, VALSAD ON 3.1.2006. DURING THE COURSE OF THE SURVE Y PROCEEDINGS STATEMENT U/S.133A/131 OF SHRI TARUN MODY WAS RECOR DED IN WHICH HE HAS STATED THAT HE IS A PARTNER IN THE FIRM OF TRIL OKNATH COMPLEX AND ITA.NO.3613, 3614 AND 3615/AHD/2007 -3- THERE ARE UNSOLD SHOPS AND LAND IN THE TRILOKNATH C OMPLEX, MADANWAD, VALSAD. I HAVE, THEREFORE, REASONS TO BELIEVE THAT THE INCO ME OF THE ABOVE FIRM CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT TO THE EXT ENT OF THE INVESTMENT VALUE OF UNSOLD SHOPS/FLATS AND OPEN LAND FOR THE A .Y.2001-2002. I, THEREFORE, PROPOSE TO ASSESS/RE-ASSESS THE INCOM E OF THE ASSESSEE WHICH HAS ESCAPED ASSESSMENT FOR THE A.Y.2000-01 BY ISSUING NOTICE U/S.148 OF THE I.T.ACT. SD/- MATHEW THOMAS K. ITO, WD.4, VALSAD DATE :06-02-2006. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OF FICER HAS RECORDED THE FINDING THAT THE RETURN OF INCOME WAS NOT FILED BY THE ASSESSEE-FIRM. THIS BASIC FINDING IS FACTUALLY INCORRECT BECAUSE AT PAGE NO.7 OF THE ASSESSEES PAPER BOOK, THE ASSESSEE HAS FURNISHED THE COPY OF THE ACKNOWLE DGEMENT FOR FILING OF THE RETURN OF INCOME FOR A.Y.2000-2001. MOREOVER, THE A SSESSING OFFICER HAS RECORDED THE FINDING OF THE ESCAPEMENT OF INCOME ON ACCOUNT OF UNEXPLAINED INVESTMENT FOR A.Y.2001-2002. BUT THE ASSESSMENT I S REOPENED FOR ASSESSMENT YEAR 2000-2001 AND NOT FOR ASSESSMENT YEAR 2001-200 2. NO SPECIFIC FINDING OF THE ESCAPEMENT OF INCOME FOR A.Y.2000-2001 IS RECOR DED. THE ONLY FINDING RELEVANT TO THE A.Y.2000-2001 IS THAT THE ASSESSEE DID NOT FILE THE RETURN OF INCOME WHICH IS ALSO FACTUALLY INCORRECT. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REOPENING TH E ASSESSMENT OF A.Y.2000- 2001 UNDER SECTION 147 OF THE INCOME TAX ACT. ACCO RDINGLY, THE NOTICE ISSUED FOR REOPENING OF THE ASSESSMENT UNDER SECTION 148 F OR A.Y.2000-2001 IS QUASHED AND CONSEQUENTIAL ASSESSMENT ORDER FOR A.Y. 2000-2001 PASSED IN PURSUANCE TO NOTICE U/S.148 IS ALSO QUASHED. 5. IN OTHER GROUNDS OF APPEAL, THE ASSESSEE HAS CHA LLENGED THE ADDITION OF RS.1,00,000/- MADE BY THE ASSESSING OFFICER. HOWEV ER, ONCE WE HAVE CANCELLED THE IMPUGNED ASSESSMENT ORDER, THIS GROUN D DOES NOT SURVIVE FOR ANY ADJUDICATION. ITA.NO.3613, 3614 AND 3615/AHD/2007 -4- 6. THE FACTS FOR THE ASSESSMENT YEAR 2002-2003 ARE IDENTICAL. FOR THIS YEAR ALSO, THE ASSESSEE HAD FILED RETURN OF INCOME ON 31 -3-2003, BUT THE ASSESSING OFFICER IN THE REASONS HAS RECORDED THE FINDING THA T NO RETURN OF INCOME WAS FILED BY THE ASSESSEE-FIRM. SIMILARLY, THE FINDING IS FOR ESCAPEMENT OF INCOME FOR ASSESSMENT YEAR 2001-2002 AND NOT FOR ASSESSMEN T YEAR 2002-2003. THEREFORE, FOR THE DETAILED DISCUSSION ABOVE, WE QU ASH THE NOTICE ISSUED UNDER SECTION 148 AND ALSO THE ASSESSMENT ORDER FOR THE A SSESSMENT YEAR 2002-2003. 7. FOR THE ASSESSMENT YEAR 2003-2004, THE FACTS ARE SLIGHTLY DIFFERENT TO THE EXTENT THAT THE ASSESSEE HAD NOT FURNISHED RETURN P RIOR TO THE ISSUE OF NOTICE UNDER SECTION 148. IN THIS CASE, THE NOTICE UNDER SECTION 148 WAS ISSUED ON 6- 2-2006 WHILE RETURN OF INCOME WAS FURNISHED ON 15-2 -2006. THUS ON THE DATE ON WHICH NOTICE WAS ISSUED UNDER SECTION 148 NO RET URN WAS FURNISHED BY THE ASSESSEE. THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE CONSTRUCTION BUSINESS. DUE DATE FOR FILING OF THE RETURN FOR A.Y.2003-2004 HAD ALREADY EXPIRED. MOREOVER, THE TIME LIMIT PERMITTE D FOR FILING OF THE BELATED RETURN UNDER SECTION 139 HAD ALSO EXPIRED. CLAUSE- (A) OF EXPLANATION 2 AFTER SECTION 147 READS AS UNDER: EXPLANATION 2.--FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY:-- (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED B Y THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF AN Y OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX; IN THE CASE OF THE ASSESSEE, THE ABOVE EXPLANATION WOULD BE SQUARELY APPLICABLE BECAUSE THE ASSESSEE DID NOT FURNISH THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION AND THE ASSESSEE IS CARRYING ON THE B USINESS OF DEVELOPMENT OF REAL ESTATE. THE ASSESSEE IS A PARTNERSHIP FIRM AN D IN THE CASE OF THE PARTNERSHIP FIRM, THE EXEMPTION LIMIT IS NIL. IN VIEW OF THE ABOVE, IN OUR OPINION, THE ITA.NO.3613, 3614 AND 3615/AHD/2007 -5- ISSUE OF NOTICE UNDER SECTION 148 FOR THE ASSESSMEN T YEAR 2003-2004 WAS FULLY JUSTIFIED, WE UPHOLD THE SAME AND REJECT THE GROUND NOS.1 AND 2 OF THE ASSESSEES APPEAL. 8. GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UN DER: LD.AO HAS ERRED IN LAW AND ON FACTS TO DISALLOW 20 % OF GENERAL EXPENSES, MAINTENANCE EXPS., SALARY EXPENSES AND TR AVELING EXPENSES AMOUNTING TO RS.29,619/- IGNORING THE FACT THAT THE SE EXPENSES ARE BEING INCIDENTAL TO THE NATURE F BUSINESS ACTIVITY, SHOUL D NOT BE DISALLOWED ON AD HOC BASIS. LD.CIT(A) VALSAD HAS ALSO ERRED IN SU STAINING THE SAID ADDITION. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SI DES AND THE FACTS OF THE CASE, IN OUR OPINION, THE DISALLOWANCE OF 20% OUT OF VARI OUS EXPENSES IS EXCESSIVE. WE DIRECT THAT THE SAME BE REDUCED TO 10%. 10. IN THE RESULT, ITA NO.3613 AND 3614/AHD/2007 AR E ALLOWED AND ITA NO.3615/AHD/2007 IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 18 TH JUNE, 2010. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 18-06-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER AR, ITAT, AHMEDABAD