ACIT 25(2), MUMBAI V. RAJESH D. NANDU (HUF), MUMBAI

ITA 3819/MUM/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92418 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 05-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA P YADAV
• Assessee Lawyers: NEELKANTH KANDELWAL
• Keywords: Gift; Reason to believe
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 2665/MUM/2009 ASSESSMENT YEAR: 2004-05 RAJESH D. NANDU HUF A-103, ADITYA TOWER, CHANDVARKAR ROAD, BORIVALI (W), MUMBAI 400 102 PAN:AAAHR 1531 H VS. A DDL.C IT - 25(2) MUMBAI (APPELLANT) (RESPONDENT) ITA NO. 3819/MUM/2009 ASSESSMENT YEAR: 2004-05 A DDL.C IT - 25(2) MUMBAI VS. RAJESH D. NANDU HUF A-103, ADITYA TOWER, CHANDVARKAR ROAD, BORIVALI (W), MUMBAI 400 102 PAN:AAAHR 1531 H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV KHANDELWAL & SHRI NEELKANTH KANDELWAL REVENUE BY : SHRI AKHILENDRA P. YADAV DATE OF HEARING : 25.03.2015 DATE OF PRONOUNCEMENT : 17 .04.2015 ITA NO. 2665& 3819/MUM/2009 ASSESSMENT YEAR: 2004-05 2 O R D E R PER AMIT SHUKLA, JM: THE AFORESAID CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AS WELL AS REVENUE AGAINST ORDER DATED 26.03.2009, PAS SED BY THE LD.CIT(A)-XXV, MUMBAI FOR THE QUANTUM OF ASSESSMENT U/S 143(3) OF THE ACT, R.W.S. 147 FOR THE A.Y. 2004-05. 2. IN THE APPEAL OF THE ASSESSEE, VALIDITY OF REOPE N U/S 147 HAS BEEN CHALLENGED VIDE GROUND NO. 4 WHICH READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE REOPENING ASSE SSMENT U/S 147 OF THE INCOME TAX ACT, 1961, AS WELL AS ASSESSM ENT MADE U/S 143(3) R.W.S. 147 ARE VALID. LOOKING T THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELLANT SUBMITS THAT LD. CIT(A) OUGHT TO HAVE HELD THAT THE REOPENING ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961 AS WELL AS ASSESSMENT MADE U/S 143(3) R.W.S. 147 AR E INVALID AND OUGHT TO HAVE QUASHED THE REOPENING OF THE ASSESSME NT AS WELL AS ASSESSMENT MADE U/S 143(3) R.W.S. 147. BESIDES THIS ASSESSEE HAS ALSO RAISED GROUNDS RELAT ING TO MERITS OF THE ADDITION VIZ I) LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATIN G THE SHORT TERM /LONG TERM CAPITAL GAINS OF RS.6,19,51,865/- AS BUS INESS INCOME. II) LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE DISALLOWANCE U/S 14A. III) LD. CIT(A) HAS ERRED IN LAW AND ON FACTS CONFIRMING THE ADDITION OF RS.22,73,713/- U/S 68. ITA NO. 2665& 3819/MUM/2009 ASSESSMENT YEAR: 2004-05 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS HUF PROPRIETOR OF M/S. NANDU FINANCIAL SERVICES AND HAS SHOWN BROK ERAGE INCOME. THE RETURN OF INCOME WAS FILED ON 05.10.2004 AT AN INCO ME OF RS.1,34,255/- THE SAID RETURN OF INCOME WAS ACCEPTED THOUGH WITHO UT SCRUTINY ASSESSMENT U/S 143(3). THEREAFTER THE ASSESSEES CA SE WAS REOPENED VIDE NOTICE DATED 25.03.2008 U/S 148 ON FOLLOWING R EASONS:- RETURN OF INCOME WAS FILED ON 05.10.2004 WITH A TO TAL INCOME OF RS.1,34,255/-. RETURN WAS PROCESSED ONLY UNDER SECT ION 143(1). THE BALANCE SHEET FILED ALONG WITH THE RETURN OF IN COME SHOWS THAT A GIFT OF RS.22,73,313/- WAS RECEIVED BY THE A SSESSEE FROM ONE MR. KUNAL ARVIND BHANSALI OF HONG KONG, CHINA. THIS DONOR IS NOT RELATED TO THE ASSESSEE. DURING ASSESSMENT PROC EEDINGS FOR A.L. 2005-06, ASSESSEE PRODUCED ONLY COPY OF PASSPO RT AND BANK ACCOUNT OF THE DONOR. THE GENUINENESS OF THE GIFT I S NOT PROVED. THEREFORE, ;I HAVE REASONS TO BELIEVE THAT INCOME T O THE TUNE OF RS.22,73,313/- HAS ESCAPED ASSESSMENT U/S 148 FOR A .Y. 2004- 05. THEREAFTER, ASSESSMENT WAS COMPLETED VIDE ORDER DAT ED 23.12.2008 AT AN INCOME OF RS.6,43,60,180/-. THE LD. CIT(A) HAS R EJECTED THE ASSESSEES OBJECTION ON THE VALIDITY OF REOPENING A FTER OBSERVING AND HOLDING AS UNDER:- AO ISSUED NOTICE U/S 148 R.W.S 147 OF THE I.T. ACT 1961 WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. BEF ORE ISSUING AFORESAID NOTICE, NO ASSESSMENT U/S 143(3) WAS PASS ED. THE REASONS WERE RECORDED U/S 147 AND WERE PROVIDED TO THE APPELLANT. REASONS SO RECORDED PROVE THAT THE TAXAB LE INCOME HAS ESCAPED FROM ASSESSMENT. THE CASE OF APPELLANT IS COVERED BY SECTION 147 OF THE I.T. ACT. HENCE, REOPENING IS JUSTIFIED. IN VIEW OF ABOVE, GROUND NO. 6 STANDS DISMISSED. ITA NO. 2665& 3819/MUM/2009 ASSESSMENT YEAR: 2004-05 4 4. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT TH E REASON FOR REOPENING THE CASE WAS THAT IN THE BALANCE SHEET FI LED ALONG WITH RETURN OF INCOME, IT HAS BEEN SHOWN THAT THE ASSESSEE HAS RECEIVED A GIFT OF RS.22,73,713/- FROM MR. KUNAL ARVIND BHANSALI WHO I S AN NRI RESIDES IN HONG KONG, CHINA. IT HAS BEEN FURTHER OBSERVED THAT DURING THE ASSESSMENT PROCEEDINGS FOR A.Y. 2005-06 THE ASSESSE E HAS ONLY PRODUCE COPY OF PASSPORT AND BANK ACCOUNT OF THE DONOR AND GENUINENESS OF THE GIFT IS NOT PROVE. SUCH AN ALLEGATION OF THE AO IN THE REASONS RECORDED IS COMPLETELY BASELESS FIRSTLY, NO ISSUE RELATING TO G IFT ON REASON DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2005-06 A ND THERE IS NO WHISPER ABOUT GIFT IN THE ASSESSMENT ORDER FOR A.Y. 2005-06 AND SECONDLY, WHAT IS THE BASIS OF INFLUENCE OF THE AO THAT GENUINENESS OF THE GIFT IS NOT PROVE WITHOUT PASSPORT AND BANK ACC OUNT OF THE DONOR WILL BE PLACED. THERE IS NO FURTHER INQUIRY OR MATERIAL GATHERED BY THE AO SO AS TO ENTERTAINMENT REASONED BELIEF THAT GIFT IS NO T GENUINE THEREFORE REOPENING OF THE CASE BASED ON SUCH REASONS CANNOT CLOTHE THE AO WITH THE JURISDICTION OF REOPEN THE CASE U/S 147. 5. ON THE OTHER HAND LD. DR SUBMITTED THAT THE EARL IER ASSESSMENT OF THE ASSESSEE WAS COMPLETED U/S 143(1) AND THEREFORE , THERE WAS NO ACTION TO VERITY THE GENUINENESS OF THE GIFT. IN TH E ASSESSMENT PROCEEDINGS FOR A.Y. 2005-06, WHEN THE AO NOTICED A BOUT THE GIFT AND ASSESSEE HAD PRODUCED DOCUMENT RELATING TO GIFT, TH E AO HAD REASONED BELIEF THAT GIFT IS NOT GENUINE. FOR ENTERTAINMENT REASONED BELIEF THERE HAS TO BE MERELY PRIMA FACIE BELIEF OF THE AO AND S UCH A BELIEF CANNOT BE QUESTIONED. THUS HE STRONGLY SUPPORT THE ORDER O F THE LD. CIT(A) ON THIS ISSUE. ITA NO. 2665& 3819/MUM/2009 ASSESSMENT YEAR: 2004-05 5 6. WE HAVE HEARD RIVAL CONTENTIONS AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. IT IS AN UNDISPUTED FACT THAT RETURN OF INCOME FILED ON 05.10.2004 WAS ACCEPTED U/S 143(1). SUCH A N ASSESSMENT HAD ATTAINED FINALITY AS NO NOTICE U/S 143(2) WAS ISSUE D. SUCH AN ASSESSMENT HAS BEEN SOUGHT TO BE REOPENED ON THE REASONS AS IN CORPORATED ABOVE. FROM THE BARE PERUSAL OF THE REASONS RECORDED IT IS NOTICED THAT AO HAS ENTERTAINED REASONS TO BELIEF REOPEN THE CASE ON FO LLOWING GROUNDS:- I) THE BALANCE SHEET FILED ALONG WITH RETURN OF INC OME REFLECTED GIFT OF RS.22,73,713/- RECEIVED FROM MR. KUNAL ARVIND BHANS ALI RESIDES IN HONGKONG, CHINA AND HE IS NOT RELATED TO ASSESSEE. II) DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS PRODUCED ONLY COPY OF PASS PORT AND BANK ACCOUNT OF THE DONOR. FROM THESE FACTS, THE AO DEDUCED THAT THE GENUINENE SS OF THE GIFT IS NOT PROVE. WE ARE UNABLE TO APPRECIATE HOW THE AO HAS E NTERTAIN REASON TO BELIEVE THAT GENUINENESS OF THE GIFT IS NOT PROVED WHEN AS PER HIS OWN ADMISSION THE ASSESSEE HAD PRODUCED PASS PORT AND B ANK ACCOUNT OF THE DONOR. THERE IS NO WHISPER ABOUT ANY MATERIAL OR IN FORMATION ABOUT UNAUTHENTICITY FOR SUCH DOCUMENT. MERELY BECAUSE TH E GIFT HAS BEEN REFLECTED IN THE BALANCE SHEET, IT CAN LEAD TO INFE RENCE THAT GIFT IS NOT GENUINE. THE REASSESSMENT PROCEEDING CAN BE INITIAT ED U/S 147 ONLY IF THE ASSESSING OFFICER HAS REASON TO BELIEF THAT A NY INCOME CHARGEABLE TO TAX AS ESCAPE ASSESSMENT. THE REASON TO BELIEF SHOULD BE DISCERNABLE AND BORNE OUT FROM THE REASONS RECORDED . BECAUSE FROM SUCH REASONS ONLY THE ASSESSING OFFICER ACQUIRES TH E JURISDICTION TO REOPEN THE ASSESSMENT U/S 147. THOUGH SUFFICIENCY O F THE REASONS FOR ITA NO. 2665& 3819/MUM/2009 ASSESSMENT YEAR: 2004-05 6 THE BELIEF CANNOT INVESTIGATED HOWEVER, THE APPELLA TE AUTHORITIES CAN ALWAYS EXAMINE WHETHER SUCH REASONS BELIEVE BASED O N RELEVANT MATERIAL ON RECORD. IT IS TRITE LAW THAT THE BELIEF ENTERTAINED BY THE ASSESSING OFFICER MUST NOT BE ARBITRARY OR IRRATION AL. ALIBIET MUST BE REASONABLE AND HELD IN GOOD FAITH IT CANNOT BE MERE LY APPETENCE FOR ROVING AND FISHING ENQUIRY. THE REASONS FOR THE BEL IEF MUST HAVE RATIONAL CONNECTION AND RELEVANT BEARING FROM THE MATERIAL C OMING ON RECORD. THE RATIONAL CONNECTION POSTULATES THAT THERE MUST BE DIRECT NEXUS OR LIVE LINK BETWEEN MATERIAL COMING TO THE NOTICE OF THE AO AND THE FORMATION OF THE BELIEF THAT THERE HAS AN ESCAPEMEN T OF INCOME. HERE FROM THE REASONS RECORDED IT IS NOT DISCERNABLE AS TO WHAT IS THE MATERIAL COMING INTO POSSESSION OF THE AO THAT GIFT SHOWS IN THE BALANCE SHEET IS NOT GENUINE. FROM THE PERUSAL OF THE ASSESSMENT ORD ER FOR A.Y. 2005-06 NOWHERE THERE IS ANY MENTION ABOUT T HE GIFT RECEIV ED BY THE ASSESSEE. EVEN IF THE SAKE OF ARGUMENT IT IS ACCEPTED THAT AO DEED REQUIRE THE ASSESSEE TO FURNISH THE DETAILS REGARDING GIFT WHIC H WAS RECEIVED BY THE ASSESSEE IN THIS YEAR [THAT IS A.Y.2004-05] THE DET AILS MENTIONED IN THE REASONS ARE COPY OF PASS PORT AND BANK ACCOUNT OF T HE DONOR. PASS PORT PRIMA FACIE PROVES THE IDENTITY OF THE DONOR AND TH E BANK ACCOUNT PROVES THE SOURCE OF THE GIFT. THIS PRIMA FACIE ITS ELF GOES TO PROVE THAT ALL T HE RELEVANT DOCUMENTS RELATING TO NATURE AND SOURCE OF GIFT WAS FILED BY THE ASSESSEE. NOW WITHOUT CARING OF ANY FU RTHER ENQUIRY OR ANY MATERIAL COMING INTO POSSESSION OF THE AO HOW AO FO RM HIS OPINION AND BELIEF THAT GENUINENESS OF THE GIFT HAS NOT PROVED BY THE ASSESSEE. IT APPEARS THAT REOPENING THE MERELY APPETENCE FOR ENQ UIRING ABOUT THE GIFT SANS ANY MATERIAL ON RECORD. THE REASONS AS RE CORDED BY THE AO DO NOT LEAD TO ANY PRIMA FACIE INFERENCE THAT THE AO H AD REASONED TO ITA NO. 2665& 3819/MUM/2009 ASSESSMENT YEAR: 2004-05 7 BELIEVE FOR REOPENING THE CASE WHICH IS A CONDITION PRECEDENCE FOR ACQUIRING THE JURISDICTION TO INITIATE THE PROCEEDI NGS U/S 147. THUS WE ARE OF THE OPINION THAT REASONS RECORDED BY THE ASS ESSING OFFICER FOR REOPENING THE CASE IS VAGUE AND FARFETCHED AND THER E IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELI EF. AND THEREFORE, THE PROCEEDINGS INITIATED FOR REOPENING THE ASSESSMENT U/S 147 VIDE NOTICE DATED 25.03.2008 U/S 148 IS BAD IN LAW AND WITHOUT JURISDICTION AND HENCE IMPUGNED ASSESSMENT ORDER PASSED IN PURSUANC E OF SUCH NOTICE IS QUASHED. ACCORDINGLY THE GROUND NO. 4 AS RAISED BY THE ASSESSEE IS ALLOWED AND OTHER GROUND RAISED BY THE ASSESSEE HAV E BECOME INFRUCTUOUS. SINCE WE HAVE ALREADY QUASHED IMPUGNED ASSESSMENT ORDER, GROUND RAISED BY THE DEPARTMENT IN REVENUES APPEAL HAS ALREADY BECOME INFRUCTUOUS AND ACCORDINGLY, THE SAME IS DIS MISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, AND THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF APRIL, 2015. SD/- SD/- (B.R. BASKARAN) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 17 .04.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR D BENCH // TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. ITA NO. 2665& 3819/MUM/2009 ASSESSMENT YEAR: 2004-05 8