ITO 11(2)(3), MUMBAI V. DR. FIRUZA RAJESH PARIKH, MUMBAI

ITA 3814/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88659 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 27-08-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 30-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYESH VIRA
• Assessee Lawyers: SACHIDANAND DUBE
• Keywords: Reopening of assessment; Audit objection; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K. BILLAIY A, AM ./ I.T.A. NO.3132 & 3133 /MUM/2012 ( / ASSESSMENT YEAR : 2004-05 & 2005-06 DR. FIRUZA RAJESH PARIKH, 121-122, 12 TH FLOOR, JOLLY MAKER NO. 3, 119, CUFFE PARADE, MUMBAI -400 005. / VS. INCOME TAX OFFICER - RANGE 11(2)(3), AAYAKAR BHAVAN, MUMBAI 400 020. ./ PAN : AABPJ 9679D ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO.3814 /MUM/2012 ( / ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER - RANGE 11(2)(3), ROOM NO. 479, 4 TH FLOOR, AAYAKAR BHAVAN,MK ROAD, MUMBAI 400 020. / VS. D R. FIRUZA RAJESH PARIKH, 121-122, 12 TH FLOOR, JOLLY MAKER NO. 3, 119, CUFFE PARADE, MUMBAI -400 005. ./ PAN : AABPJ 9679D ( / APPELLANT ) .. ( / RESPONDENT ) A SSESSEE BY SHRI VIJAY MEHTA & SHRI PRIYESH VIRA RESPONDENT BY SHRI SACHIDANAND DUBE / DATE OF HEARING : 18-02-2015 / DATE OF PRONOUNCEMENT : 26-03-2015 [ !' / O R D E R PER VIJAY PAL RAO, J.M . : THESE TWO APPEALS BY THE ASSESSEE PERTAINING TO ASS ESSMENT YEARS 2004-05 AND 2005-06 AND ONE APPEAL BY THE REVENUE F OR A.Y. 2004-05 ARE ITA 3132 & 3133/M/12 & ITA 3814/M/12 2 DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE LD. C IT(A) -3, MUMBAI ALL DATED 15-03-2012. 2. THE ASSESSEE HAS RAISED A COMMON ISSUE IN BOTH T HE APPEALS I.E. IN GROUND NO. 1 WHICH READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED C.I.T. (APPEALS) ERRED IN CONFIRMING THE ST AND OF THE LEARNED ASSESSING OFFICER (A.O.) IN REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THE APPELLANT PRAYS THAT THE REOPENING OF ASSESSMENT UN DER SECTION 147 OF THE ACT MAY BE DECLARED AS BAD IN LAW AND REASSESSMENT ORDE R MAY PLEASE BE CANCELLED. 3. SINCE THE ISSUE RAISED IN GROUND NO. 1 IN BOTH T HE APPEALS OF THE ASSESSEE IS A LEGAL ISSUE REGARDING VALIDITY OF REO PENING AND GOES TO THE ROOT OF THE MATTER, THROUGH WE TAKE UP GROUND NO. 1 OF THE ASSESSEES APPEAL FOR ADJUDICATION. 4. THE ASSESSMENT FOR THESE ASSESSMENT YEARS WERE C OMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 26-2-05 AND 31-7-200 7. SUBSEQUENTLY THE ASSESSMENTS WERE REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON 20-1-2009 AND 30-3-2010 RESPECTIVELY. THE REASONS F OR REOPENING FOR BOTH THE ASSESSMENT YEARS ARE IDENTICAL. THE REASSESSMENTS W ERE COMPLETED BY THE A.O. BY DISALLOWING CERTAIN EXPENSES. THE ASSESSEE CHALLENGED THE ACTION OF THE A.O. INCLUDING THE VALIDITY OF REOPENING BEFORE THE LD. CIT(A). THE LD. CIT(A) REJECTED THE OBJECTION RAISED BY THE A.O. AN D CONFIRMED THE REOPENING OF ASSESSMENT. 5. BEFORE US, THE LD. A.R. HAS SUBMITTED THAT THE R EOPENING IS BASED ON AUDIT OBJECTION AND THE A.O. HAS NOT FORMED ANY OPI NION THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. HE HAS RE FERRED TO THE AUDIT OBJECTION AT PAGE 3-4 OF THE PAPER BOOK AS WELL AS REASONS RECORDED BY THE A.O. AT PAGE 2 OF THE PAPER BOOK AND SUBMITTED THAT THE REASONS RECORDED BY THE A.O. FOR REOPENING OF THE ASSESSMENT IS VERBATI M COPY OF THE AUDIT ITA 3132 & 3133/M/12 & ITA 3814/M/12 3 OBJECTION AND THERE IS NO APPLICATION OF MIND AND N O INDEPENDENT OPINION ON BEHALF OF THE A.O. TO BELIEVE THAT INCOME ASSESSED TO TAX HAS ESCAPED ASSESSMENT. HE HAS FURTHER CONTENDED THAT NO TANGIB LE MATERIAL CAME TO THE KNOWLEDGE OF THE A.O. TO FORM THE OPINION EXCEPT AD OPTING THE AUDIT OBJECTION. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE JU DGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ASIAN PAINTS LTD. VS. DCIT, 308 ITR 195 (BOM) AS WELL AS THE JUDGMENT OF HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF ICICI HOME FINANCE CO. LTD. VS. ACIT 210 TAXMANN 67 . 6. ON THE OTHER HAND, THE LD. D.R. HAS SUBMITTED TH AT THE A.O. WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT DID NOT EXAMINE THE EXPENSES ON MEDICINE DEBITED BY THE ASSESSEE. FURT HER THE ASSESSEE IS NOT MAINTAINING ANY STOCK REGISTER AS PER RULE 6 OF THE INCOME TAX RULES, 1962. THUS THE ASSESSEE HAS NOT DISCLOSED THE CORRECT AND ENTIRE FACTS IN THE RETURN OF INCOME AND AUDIT PARTY HAS POINTED OUT THE IN-CO RRECT CLAIM OF THE ASSESSEE IN THE AUDIT OBJECTION. THEREFORE, THE A.O. HAS RIG HTLY REOPENED THE ASSESSMENT BASED ON THE AUDIT OBJECTION. IN SUPPORT OF HIS CONTENTION HE RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF CIT VS. P.V.S. BEEDIES PVT. LTD. (1999) 237 ITR 13 AND SUBMITTED THAT THE REOPENING OF THE ASSESSMENT BASED ON THE FACTUAL ER ROR POINTED OUT BY THE INTERNAL AUDIT PARTY IS PERMISSIBLE UNDER LAW. HE HAS FURTHER SUBMITTED THAT THE REOPENING IS WITHIN FOUR YEARS, AND THEN THE CA SE OF THE ASSESSEE IS NOT HIT BY THE PROVISIO TO SECTION 147 OF THE ACT. HE HAS A LSO RELIED UPON THE ORDER OF THE LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. THERE IS NO DISPUTE THAT THE ORIGINAL ASSESSMENT FOR BOTH THE YEARS WAS COMPLETED U/S 143(3) OF THE ACT. SUBSEQUENTLY THE A.O. HAS REOPENED THE ASSESSMENT BY RECORDING THE REASON S AS UNDER:- ITA 3132 & 3133/M/12 & ITA 3814/M/12 4 1. THE ASSESSEE HAS PAID RENT OF RS. 1.43,029/~ TH OUGH SHE RUNS THE CLINIC AT HER RESIDENCE. 2. THE ASSESSEE OWNS TWO FLATS, BUT NO NOTIONAL INC OME IS OFFERED FROM THE FLAT OTHER THAN SOP. 3. ASSISTANT EXPENSES ARE SHOWN AS RS. 2,27,0001- I N THE EXP. STATEMENT BUT AS PER THE DETAILS SUBMITTED IT HAS B EEN SHOWN AS RS. 2,75,000/-. 4. ASSESSEE HAS OFFERED NO INCOME FROM THE CLINIC B UT EXPENSES OF RS. 63,93,655/- IS DEBITED. IT IS SEEN THAT ASSESSE E HAS INCURRED EXPENDITURE ON MEDICINE OF RS. 12,75,383/-. IT IS S TATED BY THE ASSESSEE THAT MEDICINE FOR INFERTILITY TREATMENT ARE OF UNUS UAL NATURE AND MEDICATION REQUIRED FOR THE PATIENT IS BEST KNOWN B Y THE TREATING DOCTOR AND IS SUPPLIED BY THE DOCTOR. IT CAN BE BELIEVED THAT THE DOCTOR HAS INCURRED COST OF MEDICINE FOR TREATMENT AND IS NOT REIMBURSED FROM THE PATIENT FURTHER, JASLOK DEDUCTION OF RS. 5,40,646/- PERTAINS TO USUAGE OF ROOM OPERATION THEATRE AND VARIOUS FACITIES PROV IDED BY THE HOSPITAL. THIS SHOWS THAT THE ASSESSEE TAKES PRIVATE TREATMENT FOR HER PATIENTS IN JASLOK HOSPITAL. 8 . THESE REASONS RECORDED BY THE A.O. ARE NOTHING BUT THE AUDIT OBSERVATION/OBJECTION BY THE INTERNAL AUDIT PARTY A ND RECORDED BY THE A.O. ARE VERBATIM OF OBJECTIONS RAISED BY AUDIT PARTY WO RD BY WORD WITHOUT CHANGING PARAGRAPH OR THE LANGUAGE OF THE OBJECTION RAISED BY THE AUDIT PARTY. WE FURTHER NOTE THAT AFTER RECORDING THE AUD IT OBJECTION, THE AUDIT PARTY HAS WRITTEN THAT THE ABOVE FACTS MAY BE EXAMINED AN D FURTHER THE FACTS MAY BE VERIFIED IN THE SUBSEQUENT YEARS ALSO. THUS FOR BOTH THE ASSESSMENT YEARS THE A.O. HAS RECORDED THE REASONS AS A MIRROR IMAGE /COPY OF AUDIT OBJECTION. WE FIND THAT THERE ARE TYPOGRAPHICAL MISTAKE IN THE AUDIT OBJECTION IN PARA 4 WHICH ARE ALSO REPEATED IN THE REASONS RECORDED BY THE A.O. AS HIGHLIGHTED BY US IN THE REASONS RECORDED AT TWO PLACES. THE FIRST MISTAKE OCCURRED IN THE ITA 3132 & 3133/M/12 & ITA 3814/M/12 5 SENTENCE IT CAN BE BELIEVED WHICH OUGHT TO HAVE BEEN IT CANNOT BE BELIEVED AND THE SECOND MISTAKE IN THE LAST SENTENCE IS ASSESSEE TAKES PRIVATE TREATMENT WHICH OUGHT TO HAVE BEEN ASSESSEE GIVES PRIVATE TREATMENT. THIS GOES TO PROVE THAT THE A.O. HAD NOT EVEN REA D OUT THE AUDIT OBJECTION PROPERLY BUT BLINDLY REPRODUCED THE AUDIT OBJECTION AS REASONS FOR REOPENING THE ASSESSMENT. THERE IS NO QUARREL ON TH E POINT THAT THE INTERNAL AUDIT PARTY IS ENTITLED TO POINT OUT FACTUAL ERROR IN THE ASSESSMENT AND REOPENING ON THE BASIS OF FACTUAL ERROR POINTED OUT BY INTERNAL AUDIT PARTY IS PERMISSIBLE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF P.V.S. BEEDIES LTD. (SUPRA). BUT IN THE CASE OF THE ASSES SEE, THE AUDIT PARTY HAS NOT POINTED OUT MERELY THE FACTUAL ERROR OR OMISSION BU T HAS GIVEN THE FINDING IN THE SHAPE OF OPINION THAT THE MEDICINE COST CANNOT BE BELIEVED TO HAVE BEEN INCURRED BY THE ASSESSEE AND THE SAME IS REIMBURSED FROM THE PATIENT AND IT WAS ALSO OPINED BY THE AUDIT PARTY THAT THE ASSESSE E GIVES PRIVATE TREATMENT TO THE PATIENT IN THE JASLOK HOSPITAL. THE A.O. ADO PTED THESE OBSERVATIONS OF THE AUDIT PARTY AS REASONS FOR REOPENING THE ASSESS MENTS IN QUESTION. THEREFORE, IT IS NOT A CASE OF THE A.O. THAT THE AU DIT PARTY POINTED OUT ONLY THE FACTUAL ERROR AND BASED ON THE FACTUAL ERROR AND ON EXAMINATION OF RECORD THE A.O. FORMED AN INDEPENDENT OPINION TO BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. RATHER THE A.O. HAS NOT RECORDED THAT HE HAS REASONS TO BELIEVE THAT INCOME ASSESSABLE TO TAX HA S ESCAPED ASSESSMENT. 9. IN THE CASE OF ASIAN PAINTS LTD. (SUPRA) THE HON BLE JURISDICTIONAL HIGH COURT HELD IN PARA 10 IS AS UNDER:- 10. IT IS FURTHER TO BE SEEN THAT THE LEGISLATURE HAS NOT CONFERRED POWER ON THE ASSESSING OFFICER TO REVIEW ITS OWN OR DER. THEREFORE, THE POWER UNDER SECTION 147 CANNOT BE USED TO REVIEW TH E ORDER. IN THE PRESENT CASE, THOUGH THE ASSESSING OFFICER HAS USED THE PHRASE REASON TO BELIEVE, ADMITTEDLY BETWEEN THE DATE OF THE ORD ER OF ASSESSMENT SOUGHT TO BE REOPENED AND THE DATE OF FORMATION OF OPINION BY THE ASSESSING OFFICER, NOTHING NEW HAS HAPPENED, THEREF ORE, NO NEW MATERIAL HAS' COME ON RECORD, NO NEW INFORMATION HAS BEEN RE CEIVED' IT IS MERELY A FRESH APPLICATION OF MIND, BY THE SAME ASSESSING 'O FFICER TO THE SAME SET ITA 3132 & 3133/M/12 & ITA 3814/M/12 6 OF FACTS AND THE REASON THAT HAS BEEN GIVEN IS THAT THE SOME MATERIAL WHICH WAS AVAILABLE ON RECORD WHILE ASSESSMENT ORDE R WAS' MADE WAS INADVERTENTLY EXCLUDED FROM CONSIDERATION. THIS WIL L, IN OUR OPINION, AMOUNT TO OPENING OF THE ASSESSMENT MERELY BECAUSE THERE IS CHANGE OF OPINION. THE FULL BENCH OF THE DELHI HIGH COURT IN ITS JUDGMENT IN THE CASE OF KELVINATOR [2002] 256 ITR 1 REFERRED TO ABO VE, HAS TAKEN A CLEAR VIEW THAT REOPENING OF ASSESSMENT UNDER SECTION 147 MERELY BECAUSE THERE IS A CHANGE OF OPINION CANNOT BE ALLOWED. IN OUR OPINION, THEREFORE, IN, THE PRESENT CASE ALSO, IT WAS NOT PERMISSIBLE F OR RESPONDENT NO. 1 TO ISSUE NOTICE UNDER SECTION 148. 10. THUS IT IS THE PRE-REQUISITE FOR THE A.O. TO FO RM OPINION BASED ON SOME NEW TANGIBLE MATERIAL OR INFORMATION AND NOT ON THE BASIS OF CHANGE OF OPINION BY RE-APPRECIATING THE EXISTING RECORD/MATE RIAL AVAILABLE ON RECORD. 11. IN THE CASE OF ICICI HOME FINANCE CO. LTD. (SUP RA), THE HONBLE JURISDICTIONAL HIGH COURT WHILE DEALING WITH THE IS SUE OF VALIDITY OF REOPENING BASED ON THE AUDIT OBJECTION HAS OBSERVED IN PARA 6 , 9 & 10 IS AS UNDER:- 6. THE POWER TO REOPEN A COMPLETED ASSESSMENT UNDER SE CTION 147 OF THE ACT HAS BEEN BESTOWED ON THE ASSESSING OFFICER, IF HE HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT FOR ANY ASSESSMENT YEAR. HOWEVER, THIS BELIEF THAT INCO ME HAS ESCAPED ASSESSMENT HAS TO BE THE REASONABLE BELIEF OF THE A SSESSING OFFICER HIMSELF AND CANNOT BE AN OPINION AND/OR BELIEF OF S OME OTHER AUTHORITY. IN FACT, THE SUPREME COURT IN THE MATTER OF INDIA E ASTERN NEWSPAPER SOCIETY V. COMMISSIONER OF INCOME TAX, NEW DELHI RE PORTED IN 119 ITR PAGE 996 HAS HELD THAT WHETHER AN ASSESSMENT HAS ES CAPED ASSESSMENT OR NOT MUST BE DETERMINED BY THE ASSESSI NG OFFICER HIMSELF. THE ASSESSING OFFICER CANNOT BLINDLY FOLLOW THE OPI NION OF AN AUDIT AUTHORITY FOR THE PURPOSE OF ARRIVING AT A BELIEF T HAT INCOME HAS ESCAPED ASSESSMENT. IN THE PRESENT FACTS, IT WOULD BE NOTIC ED THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006-2007 IS SOUGHT TO BE R EOPENED BY COMMUNICATION DATED 12.10.2011 ARE IDENTICAL TO THE OBJECTION OF THE AUDIT AUTHORITY DATED 29.12.2009. THE REASONS DO NO T RELY UPON ANY TANGIBLE MATERIAL IN THE AUDIT REPORT BUT MERELY UP ON AN OPINION AND THE EXISTING MATERIAL ALREADY ON RECORD. THIS ITSELF IN DICATES THAT THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER BEFORE HE ISSUED THE IMPUGNED NOTICE. ON THIS GROUND ALONE, THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER CAN BE FAULTE D. XXX..XX..X 9. THEREFORE, IN VIEW OF THE ABOVE, WE ARE OF THE V IEW THAT THE IMPUGNED NOTICE IS WITHOUT JURISDICTION AND THE IMP UGNED ORDER DEALING ITA 3132 & 3133/M/12 & ITA 3814/M/12 7 WITH THE OBJECTION OF THE PETITIONER IS NON SPEAKIN G ORDER IN AS MUCH AS IT DOES NOT DEAL WITH ANY OF THE OBJECTIONS RAISED BY THE PETITIONER IN ITS OBJECTIONS. 10. IN THE CIRCUMSTANCES, THE IMPUGNED NOTICE DATED 24-03-2011 ISSUED UNDER SECTION 148 OF THE ACT AS WELL AS THE IMPUGNED ORDER DATED 07-12-2011 REJECTING THE OBJECTION TO INITIATION OF REOPENING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006-2007 ARE QU ASHED AND SET ASIDE. 12. THE HONBLE JURISDICTIONAL HIGH COURT HAS OBSER VED THAT THE REASONS FOR WHICH THE ASSESSMENT IS SOUGHT TO BE REOPENED ARE I DENTICAL TO THE OBJECTIONS OF THE AUDIT PARTY AND THEREFORE THE REASONS DID NO T RELY UPON ANY TANGIBLE MATERIAL IN THE AUDIT REPORT BUT MERELY UPON AN OPI NION AND THE EXISTING MATERIAL ALREADY ON RECORD. THIS ITSELF INDICATES THAT THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE A.O. BEFORE ISSUING THE NOTICE U/S 148 OF THE ACT. THE FACTS IN THE CASE BEFORE US ARE IDENTICAL TO TH AT OF THE CASE OF ICICI HOME FINANCE LTD. (SUPRA), THEREFORE, FOLLOWING THE JUDG MENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ICICI HOME FINANCE LTD. (SUPRA) AS WELL AS IN THE CASE OF ASIAN PAINTS LTD. (SUPRA), W E HOLD THAT THE A.O. HAS REOPENED THE ASSESSMENT WITHOUT ANY APPLICATION OF MIND AND ACCORDINGLY THE REOPENING IS NOT SUSTAINABLE IN LAW. HENCE, WE QUA SH THE REASSESSMENT FOR BOTH THE ASSESSMENT YEARS. 13. SINCE THE REASSESSMENT ITSELF HAS BEEN HELD TO BE INVALID, THEREFORE, THE OTHER GROUNDS RAISED BY THE ASSESSEE AS WELL AS THE GROUNDS RAISED BY THE REVENUE BECOMES INFRUCTUOUS. ITA 3132 & 3133/M/12 & ITA 3814/M/12 8 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MARCH, 2015. !' # $% &! ' 26-03-2015 ( ) SD/- SD/- (N.K. BILLIAYA) (VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER $ 4 MUMBAI ; &! DATED 26-03-2015 [ .<../ R.K. , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. = () / THE CIT(A) CONCERNED , MUMBAI 4. = / CIT- -CONCERNED, MUMBAI 5. @A( <