AARTI JAGMOHAN MEHTA, MUMBAI V. ITO RG 20(1)-1, MUMBAI

ITA 4190/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100533 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 28-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 23-05-2011
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Assessee Lawyers: K R RASTOGI
• Keywords: Reopening of assessment; Deemed to accrue or arise in india; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI D. MANMOHAN, VP & SHRI R.C.SHARMA , A M ITA NO. 3806 &4190 / MUM/20 1 1 ( ASSESSMENT YEAR : 20 03 - 04 & 2004 - 05 ) AARTI JAGMOHAN MEHTA, 605 - A, BREEZE, 3 RD CROSS LANE, LOK HANDWALA COMPLEX, ANDHERI (WEST), MUMBAI VS. ITO, RANGE - 20(1)(1) , MUMBAI PAN NO. : A A NPM 8050 D ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI K.R.RASTOGI REVENUE BY : SHRI ASGHAR ZAIN VP DATE OF HEARING : 2 6 - 06 - 201 5 DATE OF PRONOUNCEMENT 04 - 08 - 2015 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE APPEA LS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), FOR THE ASSESSMENT YEAR S 2003 - 04 & 2004 - 05 , IN THE MATTER OF ORDER PASSED U/S.14 4 R.W.S. 148 OF THE ACT . 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. IN THE ASSESSMENT YEAR 2003 - 04, THE ASSES SMENT WAS FRAMED U/S.144 R.W.S.148 OF THE ACT, WHEREIN THE ADDITION WAS MADE ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS AMOUNTING TO RS. 3 LAKHS. THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO AND ALSO ENHANCED THE ASSESSMENT BY RS. 50,000/ - . IN THE ASSESSMEN T FRAMED U/S.14 4 R .W.S.147 THE AO OBSERVED THAT THE ASSESSEE HAS FILED AN AFFIDAVIT DATED 1 - 4 - 2004 BEFORE THE ELECTION COMMISSION OF INDIA DISCLOSING TOTAL ASSETS IN HER INDIVIDUAL CAPACITY AT RS.1.56 CRORES . ON THE BASIS OF AFFIDAVIT, THE AO HAS REOPENED THE ASSESSMENT. BEFORE THE AO ASSESSEE ADMITTED THE AFFIDAVIT RECORDING ITA NO S . 3806&4190 / 1 1 2 THEREIN THE ASSETS WORTH OF RS. 1,56,00,000/ - ON 1 - 4 - 2004. HOWEVER, WHILE FRAMING ASSESSMENT, THE AO DID NOT MAKE ANY ADDITION ON ACCOUNT OF REASONS STATED FOR REOPENING OF ASSESSMENT. THE ADDITIONS WERE MADE MERELY ON THE GROUND OF LOW WITHDRAWALS AT RS.3 LAKHS AND PRESUMPTIVE INTEREST @10% ON CASH AND BANK BALANCE AMOUNT ING TO RS. 2.70 LAKHS. THE CONTENTION OF THE LD. AR WAS THAT SINCE NO ADDITION WAS MADE ON THE GROUND O N WHICH THE AS SESSMENT WAS REOPENED, THEREFORE, THE AO WAS NOT JUSTIFIED IN MAKING ADDITION ON ACCOUNT OF WITHDRAWAL AND DEPOSITS. 3. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ADDITION OF RS. 3 LAKHS MADE ON ACCOUNT OF LOW WITHDRAWALS. THE ADDITION MADE ON ACCOUNT OF ESTIMATED INTEREST INCOME ON CASH AND BANK DEPOSIT S AMOUNTING TO RS.2.70 LACS WAS DELETED BY THE CIT(A), AGAINST WHICH THE REVENUE IS NOT IN APPEAL BEFORE THE TRIBUNAL. 4. AGAINST THE ABOVE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEF ORE US. THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUND OF APPEAL: - THAT THE A.O. HAS NOT MADE ANY ADDITION ON THE REASONS RELIED UPON BY HIM FOR REOPENING THE ASSESSMENT. ACCORDINGLY, THE OTHER ADDITION MADE IN THE ASSESSMENT IN THE ABSENCE OF THE ADDITION WITH RESPECT TO THE INCOME WHICH HAS INITIALLY FRAMED A REASON TO BELIEVE, HENCE THE REASSESSMENT IS BAD IN THE EYE OF LAW. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND FROM TH E RECORD THAT THE REOPENING WAS MADE BY THE A.O. ON THE BASIS OF AFFIDAVIT FILED BEFORE THE ELECTION COMMISSION WITH REGARD TO ASSETS OWNED BY HER. HOWEVER, NO ADDITION HAS BEEN MADE WHILE FRAMING ASSESSMENT U/S 147 R.W.S. 143(3) ITA NO S . 3806&4190 / 1 1 3 OF THE ACT. THE ONLY ADD ITION OF RS. 3 LACS WAS MADE ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWAL AND RS.2.70 LACS ON ACCOUNT OF INTEREST INCOME. ADDITION ON ACCOUNT OF INTEREST INCOME WAS DELETED BY CIT(A) WHEREAS ADDITION ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS WERE UPHELD BY THE CI T(A), AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. THE ADDITIONAL GROUND RAISED BEFORE US WITH REGARD TO LEGALITY OF REASSESSMENT U/S 147 GOES TO THE ROOT OF THE ISSUE INSOFAR AS NO ADDITION WAS MADE WITH REGARD TO THE REASONS RECORDED FOR REOPEN ING. THUS, THE GROUND RAISED REGARDING VALIDITY OF REOPENING IS PURELY LEGAL ISSUE AND IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NTPC LTD. 229 ITR 383, THE ADDITIONAL GROUND IS BEING ACCEPTED. 6. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DOUBLE DOT FINANCE LTD. [2013] 31 TAXMANN.COM 352 (BOMBAY) HELD THAT WHERE GROUND ON WHICH REASSESSMENT NOTICE U/S 148 WAS ISSUED WAS DROPPED WHILE PASSING REASSESSMENT ORDER, ASSESSING OFFICER C AN NOT REASSESS OR ASSESS ANY OTHER INCOME WHI CH HAS ESCAPED ASSESSMENT AND COMES TO HIS NOTICE IN REASSESSMENT PROCEEDINGS. FURTHERMORE, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD. [2011] 331 ITR 236 HELD THAT UNLESS THE A.O. ASSESSES THE INCOME WITH REFERENCE TO WHICH HE HAD FORMED A REASON TO BELIEVE WITHIN THE MEANING OF SECTION 147, IT WOULD NOT BE OPEN TO HIM TO REASSESS OR ASSESS ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT WHICH COMES TO HIS NOTICE IN REASSESSMENT PROCEEDINGS. IN THE INSTANT CA SE BEFORE US, ITA NO S . 3806&4190 / 1 1 4 ADMITTEDLY THE GROUND ON WHICH REASSESSMENT NOTICE U/S 148 WAS ISSUED WAS DROPPED WHILE PASSING THE REASSESSMENT ORDER U/S 143(3) R.W.S 147. HOWEVER, ADDITION WAS MADE ONLY ON THE GROUND OF LOW HOUSEHOLD WITHDRAWAL AND INTEREST INCOME WHICH W ERE NOT THE SUBJECT MATTER OF REASONS OF REOPENING. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE REASSESSMENT ORDER FRAMED BY THE A.O. U/S 147 R.W.S. 143(3) OF THE ACT. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 7. IT IS PERTINENT TO MENTION HERE T HAT EXPLANATION 3 TO SECTION 147 INSERTED BY THE FINANCE ACT, 2009 WITH EFFECT FROM 1.4.1989, LIFTS THE EMBARGO WHICH WAS INSERTED BY JUDICIAL INTERPRETATION ON THE MAKING OF AN ASSESSMENT OR REASSESSMENT ON GROUNDS OTHER THAN THOSE ON THE BASIS OF WHICH A NOTICE WAS ISSUED U/S 148 SETTING OUT THE REASONS FOR THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THOSE JUDICIAL DECISIONS HAD HELD THAT WHEN THE ASSESSMENT WAS SOUGHT TO BE REOPENED ON THE GROUND THAT INCOME HAD ESCAPED ASSESSMENT ON A CERTAIN ISSUE, THE A.O. COULD NOT MAKE AN ASSESSMENT OR REASSESSMENT ON ANOTHER ISSUE WHICH CAME TO HIS NOTICE DURING THE REASSESSMENT PROCEEDINGS. THIS INTERPRETATION WILL NO LONGER HOLD THE FIELD AFTER THE INSERTION OF EXPLANATION 3 BY THE FINANCE ACT (NO. 2) OF 2009. HOWEVER, EXPLANATION 3 DOES NOT AND CANNOT OVERRIDE THE NECESSITY OF FULFILLING THE CONDITIONS SET OUT IN THE SUBSTANTIVE PART OF S. 147. AN EXPLANATION TO A STATUTORY PROVISION IS INTENDED TO EXPLAIN ITS CONTENTS AND CANNOT BE CONSTRUED TO OVERRIDE IT OR RENDER THE SUBSTANCE AND CORE NUGATORY. AS PER THE PROVISIONS OF SECTION 147, THE A.O. HAS TO ITA NO S . 3806&4190 / 1 1 5 ASSESS OR REASSESS THE INCOME WHICH ESCAPED ASSESSMENT AND WHICH WAS THE BASIS OF THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH, COMES TO HIS NOTICE DURING THE COURSE OF REASSESSMENT PROCEEDINGS. HOWEVER, IF AFTER ISSUING A NOTICE U/S 148, HE ACCEPT S THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALL Y FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME. IF HE INTENDS TO DO SO, A FRESH NOTICE U/S 148 WOULD BE NECESSARY, THE LEGALITY OF WHICH WOU LD BE TESTED IN THE EVENT OF A CHALLENGE BY THE ASSESSEE. THUS AFTER INSERTION OF EXPLANATION 3, THE A.O. CAN ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURING THE REASSESSMENT PRO CEEDINGS AS HAVING ESCAPED ASSESSMENT. THE WORDS AND ALSO ARE USED IN A CUMULATIVE AND CONJUNCTIVE SENSE. TO READ THESE WORDS AS BEING IN THE ALTERNATIVE WOULD BE TO REWRITE THE LANGUAGE USED BY PARLIAMENT. 8. BEFORE PARTING WITH THE MATTER IT IS PERT INENT TO MENTION HERE THAT IN THE A.Y.2002 - 03, ADDITION OF RS.1,56,00,000/ - ON THE BASIS OF VERY SAME AFFIDAVIT FILED BEFORE ELECTION COMMISSION WAS MADE. ENTIRE ADDITION SO MADE BY AO WAS DELETED BY CIT(A) VIDE HIS CONSOLIDATED ORDER DATED 23.02.2011, AGA INST WHICH REVENUE IS NOT IN APPEAL BEFORE US. DURING THE ITA NO S . 3806&4190 / 1 1 6 COURSE OF HEARING LD. DR WAS SPECIFICALLY ASKED AND HE CONFIRMED THE FACT OF NOT FILING ANY APPEAL AGAINST THE ORDER OF CIT(A) BEFORE THE TRIBUNAL. ITA NO. 4190/MUM/2011 9 . IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ADDITION ON ACCOUNT OF CONSTRUCTION OF PLOT, PURCHASE OF CAR, FUND INVESTED IN PURCHASE OF MUTUAL FUND. THE ASSESSEE IS ALSO AGGRIEVED FOR CONFIRMING THE ADDITION S MADE BY AO AND FOR ENHANCING THE INCOME TO THE TUNE OF RS. 32 L AKHS WITH RESPECT TO CASH, JEWELLERY AND BANK DEPOSIT. 10 . DURING THE COURSE OF HEARING BEFORE US, THE ASSESSEE HAS TAKEN ADDITIONAL GROUND WHICH READS AS UNDER: - (1) THAT NO NOTICE U/S 143(2) OF I. T. ACT HAS BEEN ISSUED/SERVED BEFORE COMPLETION OF THE R EASSESSMENT HENCE THE PRESENT REASSESSMENT IS INVALID. (2) THAT A. O. HAS NOT MADE ANY ADDITION ON THE REASONS RELIED UPON BY HIM FOR REOPENING THE ASSESSMENT. ACCORDINGLY, THE OTHER ADDITION MADE IN THE ASSESSMENT IN THE ABSENCE OF THE ADDITION WITH RES PECT TO THE INCOME WHICH HAS INITIALLY FRAMED A REASON TO BELIEVE, HENCE THE RE - ASSESSMENT IS BAD IN THE EYE OF LAW. 1 1 . AS THE ADDITIONAL GROUND RAISED BEFORE US ARE PURELY A LEGAL GROUND, AND IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC LTD, WE ACCEPT THE ADDITIONAL GROUND AND NOW PROCEED TO DECIDE THE SAME. 1 2 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS, GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE A.O. ISSUED NOTICE U/S 148 ON THE BASIS OF INFORMATION RECEIVED FROM ADDL. DIT (INV.), ON THE BASIS OF AFFIDAVIT FILED BY THE ASSESSEE BEFORE THE RETURNING OFFICER, ELECTION COMMISSION OF INDIA, LOK SABHA ELECTIONS. THUS THE ASSESSMENT ITA NO S . 3806&4190 / 1 1 7 WAS REOPENED ON THE BASIS OF DETAILS SUBMITTED VIDE LETTER DATE D 1.4.2004 BEFORE THE ELECTION COMMISSION. AS PER THE INFORMATION RECEIVED BY THE A.O., THE ASSESSEE HAS FILED AN AFFIDAVIT DATED 1.4.2004 BEFORE THE ELECTION COMMISSION OF INDIA DISCLOSING THEREIN THE DETAILS OF TOTAL ASSETS OWNED BY THE ASSEASSEE IN HER INDIVIDUAL CAPACITY OF RS. 1.56 CRORES. THE DETAILS THEREOF ARE AS UNDER: - PARTICULARS AMOUNT CASH RS. 2,00,000/ - BANK DEPOSITS RS. 25,00,000/ - JEWELLERY RS. 5,00,000/ - AGRICULTURAL LAND RS. 4,00,000/ - NON - AGRICULTURAL LAND RS. 45,00,000/ - FLAT RS. 75,00,000/ - TOTAL RS. 1,56,00,000/ - 1 3 . HOWEVER, WHILE FRAMING THE ASSESSMENT, THE A.O. COMPUTED THE INCOME AS UNDER: - DEEMED INCOME, AS DISCUSSED ABOVE: U NEXPLAINED INVESTMENTS U/S 69 RS. 14,82,216 NOTIONAL INCOME, AS DISCUSSED RS 2,70,0 00 ON A/C OF LOW WITHDRAWALS RS. 2,46,000 TOTAL INCOME RS.19,98,216/ - =========== 1 4 . BY THE IMPUGNED ORDER, THE LD. CIT(A) ENHANCED THE INCOME WITH RESPECT TO CASH RS. 2 LACS, JEWELLERY RS. 5 LACS AND BANK DEPOSIT RS. 25 LACS. 15. AG AINST THE ABOVE ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA NO S . 3806&4190 / 1 1 8 16. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT RETURN OF INCOME WAS FILED BY THE ASSESSEE FOR THE R ELEVANT ASSESSMENT YEAR UNDER CONSIDERATION AT INCOME OF RS. 78,300/ - ON 27 - 6 - 2006. THEREAFTER ON THE BASIS OF AFFIDAVIT FILED BEFORE THE ELECTION COMMISSION, THE AO REOPENED THE ASSESSMENT BY ISSUE OF NOTICE U/S.148. THE AO FURTHER STATED THAT IN RESPONSE TO AOS NOTICE U/S.142(1), THE ASSESSEE VIDE LETTER DATED 3 - 12 - 2008 STATING THAT THE RETURN OF INCOME FILED ON 27 - 6 - 2008 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S. 148. HOWEVER, THERE IS NO MENTION OF ISSUE OF ANY 143(2) NOTICE IN THE ASSESS MENT SO FRAMED BY THE AO, NOR THERE IS ANY MENTION OF ISSUE OF SUCH NOTICE IN THE ORDER OF CIT(A). THE CONTENTION LD. A R BEFORE US WAS THAT NO NOTICE U/S.143(2) WAS ISSUED BEFORE COMPLETION OF ASSESSMENT. 17. IN THE ASSESSMENT SO FRAMED U/S.144 R.W.S148 T HE AO STATED THAT ON THE BASIS OF AFFIDAVIT THE ASSETS DECLARED THERE IN AMOUNTING TO RS.1.56 LAKHS WAS ADDED IN THE INCOME FOR THE ASSESSMENT YEAR 2002 - 03. THE AO HAS ALSO MADE ADDITION ON ACCOUNT OF CONSTRUCTION, PURCHASES OF MARUTI CAR, INVESTMENT IN M UTUAL FUND. FURTHERMORE, ADDITION WAS MADE FOR LOW HOUSEHOLD WITHDRAWALS AMOUNTING TO RS. 2,46,000/ - . THUS, AS AGAINST RETURN INCOME OF RS. 78,300/ - , THE ASSESSMENT WAS MADE AT TOTAL INCOME OF RS.19,98,216/ - U/S. 144 R.W.S.148. 18. BY THE IMPUGNED ORDER THE C IT(A) CONFIRMED ALL THESE ADDITIONS BY OBSERVING THAT NO PROPER EXPLANATION REGARDING SOURCE OF INVESTMENT WAS ITA NO S . 3806&4190 / 1 1 9 FILED BY THE ASSESSEE. THE CIT(A) FURTHER ENHANCED THE ASSESSMENT BY RS.32 LAKHS ON ACCOUNT OF JEWELLERY, BANK DEPOSIT AND CASH BALANCE BY OBSERV ING THAT NOBODY ATTENDED THE PROCEEDING ON THE PROPOSED DATE OF HEARING NOR ANY REQUEST SEEKING ADJOURNMENT FURNISHED BY THE ASSESSEE. AGAINST THIS ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEALS BEFORE US. 19. THE LEGAL GROUND TAKEN WITH REGARD TO NO N - ISSUE OF NOTICE U/S.143(2) BEFORE COMPLETION OF REASSESSMENT GOES TO THE ROOT OF THE ISSUE. AS PER THE PROVISIO TO SECTION 148, A NOTICE U/S. 143(2) IS REQUIRED TO BE SERVED BEFORE THE EXPIRY OF TIME LIMIT FOR COMPLETION OF RE - ASSESSMENT, OTHERWISE THE RE ASSESSMENT ORDER WILL BE INVALID. NEITHER IN THE ASSESSMENT ORDER NOR IN THE ORDER OF THE CIT(A) THERE IS ANY MENTION REGARDING ISSUE OF NOTICE U/S.143(2) OF THE ACT BEFORE COMPLETION OF ASSESSMENT. SINCE THE FACTUAL FINDING WITH REGARD TO ISSUE OF NOTICE U/S.143(2) IS NOT BEFORE US, IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE BACK TO THE FILE OF THE AO. THE AO IS DIRECTED TO VERIFY AND CONFIRM THE ISSUE OF NOTICE U/S. 143(2) WHILE DECIDING AFRESH THE LEGALITY OF REASSESSMENT ORDER . IF NO SUCH NOTICE IS FOUND TO BE ISSUED BEFORE COMPLETION OF ASSESSMENT, THE REASSESSMENT ORDER IS TO BE TREATED AS NULL AND VOID . I F THE AO FINDS THAT THE NOTICE U/S.143(2) WAS ISSUED BEFORE COMPLETION OF REASSESSMENT, THEN , WE DIRECT THE AO TO EXAMINE AFRESH THE MERITS O F ADDITION SO MADE AND ENHANCEMENT MADE BY THE CIT(A) AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE, INSOFAR AS ASSESSMENT ORDER WAS FRAMED U/S. 144 R.W.S.148. ITA NO S . 3806&4190 / 1 1 10 2 0 . IN THE RESULT, APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2003 - 04 (I.E.ITA NO. 3806/MUM/2011) IS ALLOWED, WHEREAS APPEAL FOR ASSESSMENT YEAR 2004 - 05 (I.E. ITA NO. 4190/MUM/2011) IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04/08 / 201 5 . SD/ - ( D.MANMOHAN ) SD / - ( R.C.SHARMA ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED 04/08 /2015 PKM , . / PS COPY OF THE ORDER FORWARDED TO : BY ORDER , (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//