The ITO, Ward-2(1)(2), RAJKOT-GUJARAT V. Smt. Parulben H. Desai, RAJKOT-GUJARAT

ITA 383/RJT/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9066 (ITAT-RAJKOT)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RD LALCHANDANI
• Keywords: Reopening of assessment; Business income; Depreciation; Audit objection; Reason to believe
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER . / I.T.A. NO.383/RJT/2016 & CO NO.28/AHD/2016(IN I.T.A. NO.383/RJT/2016) ( / ASSESSMENT YEAR : 2008-09) INCOME TAX OFFICER WARD 2(1)(2), ROOM NO.313, AAYAKAR BHAVAN, 3 RD FLOOR, RACE COURSE RING ROAD, RAJKOT. / VS. SMT. PARULBEN HITESHKUMAR DEASI, ILLA VILLA, ASHAPURA ROAD, RAJKOT. ./ ./ PAN/GIR NO. : ABIPD 9934 D ( / APPELLANTS ) .. ( / RESPONDENTS ) & CROSS OBJECTOR ASSESSEE BY : SHRI. R.D. LALCHANDANI, A.R. RE VENUE BY : SHRI PRAVIN VERMA, SR. D.R. ! ' # $ / DATE OF HEARING 01/02/2017 %& # $ / DATE OF PRONOUNCEMENT 10/04/2017 '( / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AND THE CROSS- OBJECTION THEREOF FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, RAJKOT, DATED 15/07/2016 FOR THE ASSESSMENT YEAR (AY) 2008-09. DEPARTMENT HA S TAKEN FOLLOWING GROUNDS OF APPEAL: ITA NO.383/RJT/2016 & CO NO.28/RJT/2016 (IN ITA NO. 383/RJT/2016) ITO VS. SMT. PARULBEN HITESHKUMAR DEASI ASST.YEARS 2008-09 - 2 - (I). THE LD. CIT(A)-II, RAJKOT HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE SETTING OFF OF BROUGHT FORWARD LOSSES TO THE EXTENT OF RS.42,05,935/- FORM EARLIER YEARS UNDER DIFFERENT H EADS. (II). THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-II, RAJKOT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. (III). IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNED CIT(A)-II, RAJKOT BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- IN THIS CASE, ORIGINAL ASSESSMENT WAS FINALIZED U/S . 143(3) ON 22/12/2010 DETERMINING TOTAL INCOME AT RS.3,40,91,993/-. ON TH E BASIS OF OBJECTION RAISED BY THE AUDIT PARTY THE CASE WAS REOPENED U/S .147 AND NOTICE U/S.148 WAS ISSUED AND SERVED UPON THE APPELLANT. O N VERIFICATION OF RECORDS IT WAS FOUND THAT THE APPELLANT HAS CLAIMED SET OFF OF BROUGHT FORWARD DEPRECIATION OF RS.49,064/-, BROUGHT FORWAR D BUSINESS LOSS OF RS.18,62,277/- AND BROUGHT FORWARD HOUSE PROPERTY L OSS OF RS.4,49,779/- AGAINST THE CURRENT YEAR INCOME AT RS.23,61,120/-, WHICH WAS ACCEPTED WHILE FINALISING THE ASSESSMENT U/S.143(3). THE INC OME OF SHORT-TERM CAPITAL GAIN AND INCOME FROM OTHER SOURCES TO THE E XTENT OF RS.51,484/- + RS. 6,15,959/- TOTALING TO RS. 6,67,143/- WAS ADDED TO THE TOTAL INCOME OF THE APPELLANT. 3. DURING THE COURSE OF APPELLATE PROCEEDINGS AR OF THE APPELLANT FILED A WRITTEN SUBMISSIONS AS UNDER: - 1. THE FIRST GROUND OF APPEAL IS AGAINST THE REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT. [A] THE APPELLANT HAD FILED RETURN OF INCOME ON 29/ 09/2009 AND ALL FACTS WERE CORRECTLY DISCLOSED. ITA NO.383/RJT/2016 & CO NO.28/RJT/2016 (IN ITA NO. 383/RJT/2016) ITO VS. SMT. PARULBEN HITESHKUMAR DEASI ASST.YEARS 2008-09 - 3 - [B] THE ASSESSMENT MADE WAS U/S. 143(3) AFTER DEEP SCRUTINY. A COPY OF THE ORDER IS ON PAGE 1 OF THE PAPER BOOK. ALL TH E FACTS IN CONNECTION WITH THE SET OFF OF CURRENT YEAR LOSSES AND THE BRO UGHT FORWARD LOSSES WERE TAKEN INTO CONSIDERATION BY THE ASSESSING OFFI CER AND FINALISE THE ASSESSMENT BY THE ORDER DATED 22/12/2010. [C] THE CASE HAS BEEN REOPENED BUY ISSUE OF NOTICE U/S. 148 DATED 11/06/2012. COPY OF ON PAGE 6. I OBJECTED TO THE RE OPENING OF MY CASE AND MY OBJECTIONS HAVE BEEN DEALT WITH BY A REPLY O N PAGE 14 OF THE PAPER BOOK. [D] IN INVITE REFERENCE TO THE SHOW CAUSE NOTICE DA TED 14/02/2014 WHICH IS ON PAGE 16 OF THE PAPER BOOK. IT HAS BEEN MENTIONED IN PARA 2 THAT THE REOPENING OF THE ASSESSMENT ON THE BASIS O F THE AUDIT OBJECTION. I SUBMIT THAT THE SAME IS NOT JUSTIFIED. [E] I INVITE REFERENCE TO THE DECISION OF HIGH COUR T OF GUJARAT JAGAT JAYANTILAL PARIKH VERSUS DEPUTY COMMI SSIONER OF INCOME-TAX SPECIAL CIVIL APPLICATION NO.16062 OF 20 12 DATE OF PRONOUNCEMENT 28/02/2013. THE HONBLE COURT HAS H ELD THAT THE CASE CANNOT BE REOPENED ON ACCOUNT OF AUDIT OBJECTION. [F] THE GUJARAT HIGH COURT HAS ALSO EXAMINED IDENTICAL ISSUE IN ANOTHER MATTER WHERE OTHER JUDGMENTS OF THE APEX CO URT ON THE ISSUE ARE ALSO TAKEN INTO ACCOUNT. IT WOULD BE RELEVANT T O REPRODUCE SOME OF THE RELEVANT PARAGRAPHS FROM THE CASE OF CADILA HEA LTHCARE LTD. VS. ASSTT. CIT [SPECIAL CIVIL APPLICATION NO.15566 OF 2011, DATED 14-12- 2011], AS UNDER: 'COUNSEL VEHEMENTLY CONTENDED THAT THE ENTIRE ISSUE HAS CROPPED UP ON THE INSISTENCE OF THE AUDIT PARTY. [G] I SUBMIT THAT MERE OPINION OF THE AUDIT PARTY C ANNOT FORM A BASIS FOR THE ASSESSING OFFICER TO BELIEVE THAT THE INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN THIS REGARD, I RELY ON THE F OLLOWING DECISIONS: (I) CIT VS. LUCAS T.V.S. LTD., 249 ITR 306 IN WHICH THE APEX COURT UPHELD THE THE DECISION OF THE HIGH COURT IN WHICH THE HIGH COURT HAD QUASHED THE REOPENING PROCEEDINGS WHEREIN APART FROM THE INFORMATION FURNISHED BY THE AUDIT PARTY, THE INCOME ITA NO.383/RJT/2016 & CO NO.28/RJT/2016 (IN ITA NO. 383/RJT/2016) ITO VS. SMT. PARULBEN HITESHKUMAR DEASI ASST.YEARS 2008-09 - 4 - TAX OFFICER HAD NO OTHER INFORMATION FOR REOPENING THE ASSESSMENT. (II) AGRICULTURAL PRODUCE MARKET COMMITTEE VS. ITO ,[201 1] 15 TAXMANN.COM. 170 (GUJARAT) WHEREIN DIVISION BENCH OF THIS COURT WAS PLEASED TO QUASH THE NOTICE FOR REOPENING WHERE THE ONLY BASIS WAS THE REVENUE AUDIT OBJECTION AS REGAR DS THE ELIGIBILITY OF THE ASSESSEE FOR EXEMPTION. (III) ADANI EXPORTS VS. DEPUTY CIT, 240 ITR 224 WHEREIN DIVISION BENCH OF THIS COURT HELD AS UNDER: 'IT IS TRUE THAT SATISFACTION OF THE ASSESSING OFFI CER FOR THE PURPOSE OF REOPENING IS SUBJECTIVE IN CHARACTER AND THE SCOPE OF JUDICIAL REVIEW IS LIMITED. WHEN THE REASONS RECORDED SHOW A NEXUS BET WEEN THE FORMATION OF BELIEF AND THE ESCAPEMENT OF INCOME, A FURTHER E NQUIRY ABOUT THE ADEQUACY OR SUFFICIENCY OF THE MATERIAL TO REACH SU CH BELIEF IS NOT OPEN TO BE SCRUTINISED. HOWEVER, IT IS ALWAYS OPEN TO QU ESTION EXISTENCE OF SUCH BELIEF ON THE GROUND THAT WHAT HAS BEEN STATED IS NOT CORRECT STATE OF AFFAIRS EXISTING ON RECORD. UNDOUBTEDLY, IN THE FACE OF RECORD, BURDEN LIES, AND HEAVILY LIES, ON THE PETITIONER WHO CHALL ENGES IT. IF THE PETITIONER IS ABLE TO DEMONSTRATE THAT IN FACT THE ASSESSING OFFICER DID NOT HAVE ANY REASON TO BELIEVE OR DID NOT HOLD SUCH BEL IEF IN GOOD FAITH OR THE BELIEF WHICH IS PROJECTED IN PAPERS IS NOT BELI EF HELD BY HIM IN FACT, THE EXERCISE OF AUTHORITY CONFERRED ON SUCH PERSON WOULD BE ULTRA VIRES THE PROVISIONS OF LAW AND WOULD BE ABUSE OF SUCH AU THORITY. AS THE AFORESAID DECISION OF THE SUPREME COURT INDICATES T HAT THOUGH AUDIT OBJECTION MAY SERVE AS INFORMATION, THE BASIS OF WH ICH THE ITO CAN ACT, ULTIMATE ACTION MUST DEPEND DIRECTLY AND SOLELY ON THE FORMATION OF BELIEF BY THE ITO ON HIS OWN WHERE SUCH INFORMATION PASSED ON TO HIM BY THE AUDIT THAT INCOME HAS ESCAPED ASSESSMENT. IN THE PRESENT CASE, BY SCRUPULOUSLY ANALYZING THE AUDIT OBJECTION IN GREAT DETAIL, THE ASSESSING OFFICER HAS DEMONSTRABLY SHOWN TO HAVE HELD THE BEL IEF PRIOR TO THE ISSUANCE OF NOTICE AS WELL AS AFTER THE ISSUANCE OF NOTICE THAT THE ORIGINAL ASSESSMENT WAS NOT ERRONEOUS AND SO FAR AS HE WAS CONCERNED, HE DID NOT BELIEVE AT ANY TIME THAT INCOME HAS ESCA PED ASSESSMENT ON ACCOUNT OF ERRONEOUS COMPUTATION OF BENEFIT U/S 80H HC. HE HAS BEEN CONSISTENT IN HIS SUBMISSION OF HIS REPORT TO THE S UPERIOR OFFICERS. THE MERE FACT THAT AS A SUBORDINATE OFFICER HE ADDED TH E SUGGESTION THAT IF HIS VIEW IS NOT ACCEPTED, REMEDIAL ACTIONS MAY BE T AKEN CANNOT BE SAID ITA NO.383/RJT/2016 & CO NO.28/RJT/2016 (IN ITA NO. 383/RJT/2016) ITO VS. SMT. PARULBEN HITESHKUMAR DEASI ASST.YEARS 2008-09 - 5 - TO BE BELIEF HELD BY HIM. HE HAS NO AUTHORITY TO SU RRENDER OR ABDICATE HIS FUNCTION TO HIS SUPERIORS, NOR THE SUPERIORS CA N ARROGATE TO THEMSELVES SUCH AUTHORITY. IT NEEDS HARDLY TO BE ST ATED THAT IN SUCH CIRCUMSTANCES CONCLUSION IS IRRESISTIBLE THAT THE B ELIEF THAT INCOME HAS ESCAPED ASSESSMENT WAS NOT HELD AT ALL BY THE OFFIC ER HAVING JURISDICTION TO ISSUE NOTICE AND RECORDING UNDER THE OFFICE NOTE ON 8.2.97 THAT HE HAS REASON TO BELIEVE IS A MERE PRETENCE TO GIVE VALIDI TY TO THE EXERCISE OF POWER. IN OTHER WORDS, IT WAS A COLOURABLE EXERCISE OF JURISDICTION BY THE ASSESSING OFFICER BY RECORDING REASONS FOR HOLD ING A BELIEF WHICH IN FACT DEMONSTRABLY HE DID NOT HELD THAT INCOME OF AS SESSEE HAS ESCAPED ASSESSMENT DUE TO ERRONEOUS COMPUTATION OF DEDUCTIO N U/S 80HHC, FOR THE REASONS STATED BY THE AUDIT. THE REASON IS NOT FAR TO SEEK.' [H] I THEREFORE SUBMIT THAT THE REOPENING OF THE AS SESSMENT IS NOT JUSTIFIED. [I] THE APPELLANT HAD FILED APPEAL AND ORDER OF ASS ESSMENT MERGED WITH APPELLANT ORDER OF CIT AND TRIBUNAL. [J] THE REOPENING U/S 147 IS NOT JUSTIFIED. 2. ON THE FACTS OF THE CASE I SUBMIT THAT [ A] THE APPELLANT HAD BROUGHT FORWARD LOSSES AND DEP RECIATION AS PER RETURN OF INCOME AS UNDER: B /F LOSSES, ADJUSTMENT AND C/F LOSSES ASSESSMENT YEAR DEP. BUSI. CG(LT) HOUSE PROP. PROP. 2000-2001 - - - 33358 2001-2002 - - - 79026 2002 - 2003 - 655566 - 63718 2003-2004 - - - 45491 2004-2005 - 1692162 108565 228186 2005 - 2006 - 2268086 - 264480 2006 - 2007 49064 1043124 - B/F 49064 5658938 108565 714259 ITA NO.383/RJT/2016 & CO NO.28/RJT/2016 (IN ITA NO. 383/RJT/2016) ITO VS. SMT. PARULBEN HITESHKUMAR DEASI ASST.YEARS 2008-09 - 6 - [B] AS PER RETURN OF INCOME APPELLANT HAD SHOWN IN COME AS UNDER: 1] PROPERTY LOSS RS. 247588/- 2] BUSINESS RS. 1892501/- 3] SHORT TERM CAPITAL GAIN RS. 100548/- 4] OTHER SOURCES RS. 615659/- [C] THE APPELLANT CLAIMED SET OFF LOSSES AS UNDER: 1] RS. 2475SS/- LOSS IS UNDER THE PROPERLY AGAINST INCOME FROM OTHER SOURCES. 2] BROUGHT FORWARD BUSINESS LOSSES OF RS. 1892501/ - AGAINST THE DECLARED PROFIT OF RS. 1892501/-. 3] DEPRECIATION BROUGHT FORWARD FROM EARLIER YEARS RS. 59064/- AGAINST THE INCOME FROM OTHER SOURCES. [D] THE ASSESSING OFFICER DETERMINED THE INCOME OF BUSINESS AT RS.4525585/- [E] THIS INCLUDES BUSINESS INCOME OF RS 5283440/- . I HAVE CARRY FORWARD LOSS OF MORE THAN THIS AMOUNT. HENCE THE SAME SHOUL D HAVE BEEN SET OFF AGAINST THIS INCOME AS DETERMINED. AS PER RETURN OF INCOME THE BUSINESS LOSS BROUGHT FORWARD WAS RS.5658932/-. THE SET OFF OF THE LOSS ONLY TO THE RELEVANT OF SAME OF RS.1892501/- IS NOT JUSTIFI ED. [F] THE REWORKING AS DONE THE ASSESSING OFFICER IS NOT JUSTIFIED. 3.1 APPELLANT HAS MADE A FURTHER SUBMISSION, W HICH READS AS UNDER:- '1. IN CONTINUATION TO OUR LETTER DATED 4.11.2015 W E FURTHER SUBMIT AS UNDER: [A] A COPY OF COMPUTATION OF INCOME AS SUBMITTED TO THE DEPARTMENT IS ENCLOSED. [B] IT MAY PLEASE BE OBSERVED THAT THERE IS A LOSS UNDER THE HEAD INCOME FROM HOUSE PROPERTY DURING THE CURRENT YEAR. WE CLAIM A SET OF OFF THE SAME AGAINST INCOME FROM OTHER SOURC ES. ITA NO.383/RJT/2016 & CO NO.28/RJT/2016 (IN ITA NO. 383/RJT/2016) ITO VS. SMT. PARULBEN HITESHKUMAR DEASI ASST.YEARS 2008-09 - 7 - [C] WE HAVE A BROUGHT FORWARD DEPRECIATION LOSS OF RS 49064. WE CLAIM THAT THIS AMOUNT HAS TO BE ADDED TO THE CURRE NT DEPRECIATION U/S 32[2] OF THE ACT. [D] WE HAVE A BROUGHT FORWARD LOSS OF 5658938 UNDE R THE HEAD BUSINESS. THE SAME SHOULD BE SET OFF AGAINST THE CU RRENT BUSINESS INCOME. 4. LEARNED CIT(A) HELD THAT SO FAR AS GROUND OF APP EAL AGAINST REOPENING OF ASSESSMENT U/S. 147 IS CONCERNED, HE HELD THAT T HE AO HAD SUFFICIENT REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. THEREFORE, THIS GROUND WAS DISMISSED BY THE CIT(A). 5. ALL THE GROUNDS OF APPEAL ARE RELATED TO SET OFF OF CARRIED FORWARD LOSSES UNDER DIFFERENT HEADS. THE PRINCIPLE TO GIVE SET OF F IS IN THE FOLLOWING ORDER:- (I) BUSINESS LOSS CARRIED FORWARD SHOULD BE SET OFF AGAINST BUSINESS INCOME. HERE IN THIS CASE THE BROUGHT FORWARD BUSIN ESS LOSS WAS MUCH MORE THAN ASSESSED BUSINESS INCOME DURING THE YEAR. (II) CURRENT YEAR LOSS IS ANY HEAD OF INCOME SHOULD BE S ET OFF AGAINST POSITIVE INCOME UNDER OTHER HEADS OF INCOME . (III) THE CARRIED FORWARD DEPRECIATION ALLOWANCE SHOULD B E SET OFF AGAINST BALANCE INCOME UNDER ANY OTHER HEAD OF INCO ME. 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER, SINCE DR COULD NOT POINT OUT ANY DEFECT IN THE ORDE R OF LEARNED CIT(A). THEREFORE, WE ARE NOT INCLINE TO INTERFERE IN THE O RDER PASSED BY THE LEARNED CIT(A). THEREFORE, APPEAL OF THE DEPARTMENT IS DISMISSED. ITA NO.383/RJT/2016 & CO NO.28/RJT/2016 (IN ITA NO. 383/RJT/2016) ITO VS. SMT. PARULBEN HITESHKUMAR DEASI ASST.YEARS 2008-09 - 8 - 7. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IS DISMISSED. 8. SO FAR AS CO IS CONCERNED, LD. A.R. DOES NOT WIS H TO PRESS CO. IN THE RESULT, CO IS ALSO DISMISSED AS NOT PRESSED. 9. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMI SSED AND CO FILED BY THE ASSESSEE IS ALSO DISMISSED AS NOT PRESSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 10/04/2017 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 10/04/2017 PRITI YADAV, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) $ *$ / CONCERNED CIT 4. *$ ( ) / THE CIT(A)-II, RAJKOT. 5. +!, - .$. , , / DR, ITAT, RAJKOT 6. - /0 1 ' / GUARD FILE. / BY ORDER, +$ .$ //TRUE COPY// / ! '#$ ( DY./ASSTT.REGISTRAR) ! $%! & , / ITAT, RAJKOT TRUE COPY