Ambica Ginning Pressing, V. The Income tax Officer,S.K.Ward-1, Himatnagar

ITA 4326/AHD/2007

• Counselvise Citation: 432620514 RSA 2007
• Duration Of Justice: 3 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 06-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Reopening of assessment; Unexplained cash credit; Unexplained investment; Principle of natural justice; Reason to believe
• Section: 143(3); 68; 148

Judgement Text

, , . .. . . .. . , , , , ! ! ! ! ' '' '# ## # $ $ $ $. .. .% %% % . .. .& & & &, , , , ' ' ' ' % ! % ! % ! % ! IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI G.D. AGRAWAL, V.P. & HONB LE SHRI T.K. SHARMA, J.M.) # ## #. ITA NO. 4326/AHD./2007 : ()- 2004-05 AMBICA GINNING PRESSING(P) LTD.SABARKANTHA -VS- I.T.O., S.K. WARD-1, HIMATNAGAR (,- /APPELLANT) (PAN : AACCA 8533B) ( ./,- /RESPONDENT ) # ## #. ITA NO. 3340/AHD./2009 : ()- 2004-05 I.T.O., S.K. WARD-1, HIMATNAGAR -VS-AMB ICA GINNING PRESSING(P) LTD.SABARKANTHA (,- /APPELLANT) ( ./,- /RESPONDENT ) 01 2 3 % / ASSESSEE BY : SHRI S.N.DIVATIA, A.R. ' 2 3 % / DEPARTMENT BY : SHRI SAMIR TEKRIWAL, A.R. 45 2 16 / DATE OF HEARING : 13/10/2011 78( 2 16 / DATE OF PRONOUNCEMENT : 25/10/2011 %& %& %& %& / ORDER PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THESE TWO APPEALS FILED BY THE ASSESSEE AND THE RE VENUE ARE AGAINST THE ORDERS DATED 24-10-2007 AND 30.09.2009 RESPECTIVELY OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-X, AHMEDABAD FOR THE ASSESSMENT YEAR 2004-2005. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A CO MPANY ENGAGED IN THE BUSINESS OF GINNING AND PRESSING OF RAW COTTON. FOR THE ASSESSM ENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME ON 29.10.2004 DECLARING INCOME AT RS.NIL. THIS RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) ON 05.11.2004 RESULT ING INTO NIL INCOME. SUBSEQUENTLY, THE AO ISSUED A NOTICE UNDER SECTION 148. THE REASONS RECORDED BEFORE ISSUING NOTICE UNDER SECTION 148 OF THE I.T. ACT AR E AS UNDER: REASON FOR ISSUE OF NOTICE U/S.148 ITA NOS. 4326-AHD-2007 & 3340-AHD-09 2 REG. AMBICA GINNING PRESSING PVT. LTD. A.Y. 2004-05 TAL. IDAR, DIST. SABARKATHA PAN. AACCA 8533B IN THIS CASE, THE ASSESSEE IS ENGAGED IN GINNING AN D PRESSING OF RAW COTTON. THE RETURN OF INCOME WAS FILED ON 29/10/200 4. WITH ACIT HIMATNAGAR DECLARING INCOME OF RS.NIL. THE RETURN OF INCOME WA S PROCESSED U/S 143(1) ON 05/11/04 RESULTING IN TO NIL. AS THE INCOME WAS BEL OW RS.5 LAKH THE CASE WAS TRANSFERRED TO THE UNDERSIGNED ON 14/09/2005. ON PERUSAL OF BALANCE SHEET AND 3CD AUDIT REPORT, I T IS NOTICED THAT DETAILS IN RESPECT OF COLUMN NO. 24(A) AND 24(B) HA S BEEN FURNISHED IN ANNEXURE 4 AND 5 OF THE 3CD REPORT. ON VERIFICATION OF THE SAID ANNEXURE, IT IS FOUND THAT THE ASSESSEE COMPANY HAS ACCEPTED LOAN A ND DEPOSIT OF RS. 1,00,000/- FROM J.B. PATEL & CO. OF IDAR FOR THE YE AR UNDER CONSIDERATION. AS PER ANNEXURE 5 OF THE 3CD REPORT J.B.PATEL & CO. WA S REPAID RS. 10,00,000/- AND THE ACCOUNT HAVE BEEN SHOWN AS SQUARED UP ACCOU NT. FURTHER, ON PERUSAL OF THE AUDIT REPORT OF THE A.Y.03-04 IT IS GATHERED THAT THE SAID ACCOUNT HAS BEEN SQUARED UP IN THE A.Y.03-04 ALSO, IT MEANS THA T THE ASSESSEE COMPANY HAS REPAID AN EXCESS AMOUNT OF RS.9,00,000/- TO J.B. PA TEL & COMPANY OF IDAR. ON PERUSAL OF THE BALANCE SHEET NO SUCH AMOUNT OF RS. 9,00,000/-HAS BEEN SHOWN IN THE GROUPING OF BALANCE SHEET UNDER THE HEAD LOA N AND ADVANCES BECAUSE THE SAID ACCOUNT HAS BEEN SHOWN AS SQUARED UP ACCOUNT I N THE ANNEXURE 4 OF THE 3CD AUDIT REPORT FOR THE YEAR UNDER CONSIDERATION, IT MEANS THAT ASSESSEE COMPANY HAS MADE AN UNACCOUNTED INVESTMENT TO THE T UNE OF RS. 9.00.000/-. IN VIEW OF THE SAID FACTS, I HAVE REASON TO BELIEVE THAT INCOME TO THE TUNE OF RS. 9,00,000/- HAS ESCAPED THE ASSESSMENT C HARGEABLE TO TAX FOR THE A.Y. 2004 -2005. NOTICE U/S. 148 ISSUED. 2.1 IN RESPONSE TO NOTICE UNDER SECTION 148, THE AS SESSEE HAD FILED A LETTER IN WHICH IT WAS REQUESTED TO TREAT THE ORIGINAL RETURN OF IN COME AS THAT FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE I.T. ACT, 1961. THEREAFTER , ON 22.12.2006, THE AO FRAMED THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 AT TOTAL INCOME OF RS.31,34,090/- AS UNDER: RETURNED INCOME RS.NIL ADD: UNEXPLAINED CASH CREDITS U/S.68 AS PER PARA- 16 RS.31,34,090/- TOTAL INCOME RS.31,34,090/- ASSESSED INCOME RS.31,34,090/- 3. AGAINST THE AFORESAID ORDER, THE ASSESSEE PREFER RED THE AFORESAID APPEAL, WHEREIN IT CHALLENGED THE REOPENING OF ASSESSMENT A S WELL AS ADDITION OF ITA NOS. 4326-AHD-2007 & 3340-AHD-09 3 RS.31,34,090/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT. IN THE IMPUGNED ORDER, THE LD. CIT(A) UPH ELD THE ACTION OF AO REGARDING REOPENING OF ASSESSMENT ON THE GROUND THAT INCOME T O THE TUNE OF RS.9 LAKHS HAS ESCAPED THE ASSESSMENT CHARGEABLE TO TAX FOR THE AS SESSMENT YEAR 2004-05. ON MERIT ALSO, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.3 1,34,090/- MADE BY THE AO UNDER SECTION 68 OF THE I.T. ACT, 1961 FOR THE DETAILED R EASONS GIVEN IN PARA 6, RELEVANT PORTION OF WHICH READS AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE ISSUE. I FIND T HAT THE REASONS RECORDED BY THE ASSESSING OFFICER WERE ON THE BASIS OF TAX AUDIT RE PORT FILED ALONG WITH THE RETURN OF INCOME FROM WHICH IT WAS APPARENT FROM ANNEXURE-4 TO THE AUDIT REPORT THAT LOAN AMOUNT DEPOSITED WAS SHOWN TO BE RS.1,00,000/- FROM J.B.PATEL AND COMPANY AND IT WAS ALSO STATED THAT THE ACCOUNT WAS SQUARED UP. HOWEVER, IN ANNEXURE-5 WHICH DEALS WITH REPAYMENT OF LOAN AMOUN T OF REPAYMENT WAS SHOWN AS RS.10,00,000/-. SINCE, IN ANNEXURE-4, THE AMOUNT OF LOAN ACCEPTED WAS MENTIONED AT RS,L,00,000/- ONLY, NATURALLY IT HAS T O BE ENQUIRED THAT HOW AND WHEN ANOTHER SUM OF RS.9,00,000/- WAS TAKEN FROM EITHER J.B.PATEL & COMPANY OR THROUGH SOME OTHER PERSON IN THE NAME OF J.B.PATEL & COMPANY BECAUSE REPAYMENT WAS SHOWN TO BE RS.10,00,000/- AND AMOUNT WAS SHOWN TO BE SQUARED UP. IT WAS THUS QUITE NORMAL FOR THE ASSESSING OFFI CER TO INFERN THAT A SUM OF RS.9,00,000/- WHICH APPEARS AS CREDIT REMAINS UNEXP LAINED AND THEREFORE THE REOPENING OF THE ASSESSMENT CAN NOT SAID TO BE BAD IN LAW, ESPECIALLY WHEN ORIGINAL ASSESSMENT WAS DONE U/S.143(1) OF THE ACT. IT HAS TO BE POINTED OUT THAT ONCE ASSESSMENT PROCEEDINGS ARE OPENED AND REASSESS MENT PROCEEDINGS ARE STARTED EVEN IF THE PARTICULAR ISSUE TOR WHICH THE ASSESSMENT WAS REOPENED, IS EXPLAINED, IT DOES NOT MEAN THAT PROCEEDINGS WILL H AVE TO BE DROPPED. ONCE AN ASSESSMENT IS REOPENED, ENTIRE RETURN IS OPEN TO VE RIFICATION AND AN ASSESSMENT ORDER HAS TO BE MADE BY THE ASSESSING OFFICER THERE FORE, I FIND NO MERIT IN THIS GROUND AND THE SAME STANDS DISMISSED. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS IN ITA NO. 4326/AHD./2007. 1.1 THE ORDER PASSED ON 24.10.2007 BY CIT(A)-X, AB AD CONFIRMING THE ORDER OF ASSESSMENT PASSED U/S.143(3) R.W.S. 147 ON .1 2.2006 BY ITO., S K WARD-1, HMT, IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PR INCIPLES OF NATURAL JUSTICE. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AN D OR ON FACTS IN HOLDING THAT THE PROCEEDINGS INITIATED U/S.147 BY AO WERE VALID AND LEGAL. 2.2 THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT WHEN THE PROCEEDINGS WERE INITIATED ON ACCOUNT OF DIFFERENCE IN AMOUNT SHOWN IN TAX AUDIT REPORT, WHICH WAS DULY CLARIFIED BY THE APPELLANT, THE PROCEEDING S OUGHT TO HAVE BEEN DROPPED RATHER THAN MAKING FISHING ENQUIRY ON OTHER ISSUES. ITA NOS. 4326-AHD-2007 & 3340-AHD-09 4 3.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE ADDITION OF RS. 31,34,090/- AS UNEXPLAINED INVESTMENT IN PURCHASES. 3.3 THE OBSERVATIONS MADE AND EVIDENCE RELIED UPO N BY THE CIT(A) FOR THE PURPOSE OF UPHOLDING THE IMPUGNED ADDITION IS UNJUS TIFIED AND UNCALLED FOR TO THE EXTENT THE SAME IS CONTRARY TO THE EVIDENCE ON RECORD AND PREJUDICIAL TO THE APPELLANT. HENCE, THE SAME ARE NOT ADMITTED BY THE APPELLANT TO THAT EXTENT. 4.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AN D OR ON FACTS IN DIRECTING THE AO TO EXAMINE ALL THOSE PERSONS WHOSE AFFIDAVIT WER E FILED BUT THEY WERE NOT EXAMINED BY AO DURING THE ASSESSMENT PROCEEDINGS. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER PASSED BY BOTH THE LOWER AUTHORITIES MAY PLEASE BE QUASHED. 5. AT THE TIME OF HEARING BEFORE US, SHRI S.N.DIVAT IA, APPEARED ON BEHALF OF THE ASSESSEE AND DREW OUR ATTENTION TO THE REASONS RECO RDED BY THE AO BEFORE ISSUING NOTICE UNDER SECTION 148 OF THE I.T. ACT (REPRODUCE D BY US HEREINABOVE). THE COUNSEL OF THE ASSESSEE POINTED OUT THAT IN THE ASSESSMENT ORDER, NO ADDITION OF RS.9 LAKHS (FOR WHICH ASSESSMENT WAS REOPENED BY ISSUING NOTICE UND ER SECTION 148) HAS BEEN MADE. THEREFORE, ON THIS GROUND ALONE, ASSESSMENT DESERVE S TO BE QUASHED. IN SUPPORT OF THIS, RELIANCE IS PLACED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD., (2010) 195 TAXMAN 117 (BOM.) WHEREIN THE HONBLE BOMBAY HIGH COURT AFTER CONSIDERING THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ATLAS CYCLE INDUSTRIES (1989) 180 ITR 319 AND THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CAS E OF CIT VS. SHRI RAM SINGH (2008) 306 ITR 343 (RAJ.) HELD AS UNDER: - 'IF UPON THE ISSUANCE OF A NOTICE UNDER SECTION 148 (2), THE ASSESSING OFFICER ACCEPTS THE OBJECTIONS OF THE ASSESSEE AND DOES NOT ASSESS OR REASSESS THE INCOME WHICH WAS THE BASIS OF THE NOTICE, IT WOULD NOT BE OPEN TO HIM TO ASSESS INCOME UNDER SOME OTHER ISSUE INDEPENDENTLY ' 5.1 FURTHER RELIANCE WAS PLACED ON THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD. VS- CIT R EPORTED IN (2011) 57 DTR (DEL) 281. THE COUNSEL OF THE ASSESSEE FURTHER EXPLAINED THAT THE HONBLE BOMBAY HIGH ITA NOS. 4326-AHD-2007 & 3340-AHD-09 5 COURT IN THE CASE OF JET AIRWAYS (I) LTD. ( SUPRA ) VIRTUALLY HELD THAT WHETHER A CASE WAS VALIDLY REOPENED ON THE BASIS OF BELIEF THAT INCOME X HAD ESCAPED ASSESSMENT. BUT IN THE REASSESSMENT ORDER PASSED UNDER SECTION 147, NO ADDITION WAS MADE BY THE AO IN RESPECT OF THIS X INCOME BUT AN ADDITION WAS MADE FOR Y INCOME, WHICH WAS NOTED TO HAVE ESCAPED ASSESSMENT. THE HONBLE BOMBAY HIGH COURT HELD THAT SUCH ADDITION OF Y INCOME CANNOT BE SUSTAINED, WHEN NO ADDITION WAS MADE FOR X INCOME. IN THAT JUDGEMENT, IT WAS NOTED THAT THE AO WAS HAVING POWER TO ASSESS ESCAPED INCOME OTHER THAN THOSE ON THE BASIS OF WHICH, THE NOTICE UNDER SECTION 148 WAS ISSUED. THIS POWER IS EXPLICIT IN THE LANGUAGE USED IN EXPLANATI ON 3 TO SECTION 147 BUT, THIS POWER IS CONDITIONED BY THE WORD AND ALSO IN THIS LAN GUAGE. ACCORDINGLY, THE HONBLE HIGH COURT HELD, THE WORD AND ALSO ARE USED IN CONJUNCTIVE AND CUMULATIVE SENSE INDICATING THAT OTHER ESCAPED INCOME CAN BE ASSESSE D ONLY IN CONJUNCTION WITH THE ESCAPED INCOME ON THE BASIS OF WHICH NOTICE UNDER S ECTION 148 HAD BEEN ISSUED. IF AT ALL, THE AO WISHES TO ASSESS THE ONLY OTHER ESCAPED INCOME INDEPENDENTLY, THEN HE MUST ISSUE ANOTHER FRESH NOTICE UNDER SECTION 148 O F THE IT ACT, 1961. THE COUNSEL OF THE ASSESSEE ACCORDINGLY CONTENDED THAT IN THE PRES ENT CASE, THE AO HAS NOT ASSESSED THE INCOME OF RS.9 LAKHS FOR WHICH NOTICE UNDER SEC TION 148 WAS ISSUED. THEREFORE, THE AO HAS NO POWER TO ASSESS OTHER ESCAPED INCOME TO THE TUNE OF RS.31,34,090/- UNDER SECTION 68 OF THE I.T. ACT, 1961. THEREFORE, IT MAY BE HELD THAT ASSESSMENT FRAMED IS WITHOUT JURISDICTION AND BAD IN LAW. HENC E, IT SHOULD BE QUASHED. 6. ON THE OTHER HAND, SHRI SAMIR TEKRIWAL, SR.D.R., APPEARING ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDERS OF THE DEP ARTMENTAL AUTHORITIES. THE LD. D.R. POINTED OUT THAT IN THIS CASE, NO ASSESSMENT W AS FRAMED UNDER SECTION 143(3). THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SIMP LY PROCESSED UNDER SECTION 143(1) ON 05.11.2004. THERE WAS ESCAPEMENT OF INCOME OF RS .9 LAKHS INASMUCH AS THE LOAN/DEPOSIT FROM J.B.PATEL & COMPANY WAS SHOWN IN TAX AUDIT REPORT AT RS.1 LAKH BUT THE REPAYMENT SHOWN AT RS.10 LAKHS. IT IS ONLY DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CLARIFIED THE MISTAKE. BU T THE ASSESSEE HAS NOT POINTED OUT ANY FALLACY IN THE REASONS RECORDED FOR REOPENING T HE ASSESSMENT UNDER SECTION 148. THEREFORE, VARIOUS DECISIONS RELIED ON BY THE ASSES SEE ARE NOT APPLICABLE. ITA NOS. 4326-AHD-2007 & 3340-AHD-09 6 7. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE ASSESSMENT ORDER, THE AO HAS NOT MADE THE ADDITION OF RS.9 LAKHS FOR WHICH A NOTICE WAS ISSUED UNDER SECTION 148(2), ON THE BASIS OF HIS BELIEF THAT THIS INCOME HAS ESC APED ASSESSMENT. AS A MATTER OF FACT, IN THE ASSESSMENT ORDER, THERE IS NO DISCUSSION ABO UT RS. 9 LAKHS. THEREFORE, IT IS CLEAR THAT INCOME, IN RESPECT OF WHICH REASSESSMENT NOTIC E WAS ISSUED BY THE AO, IS NOT FOUND BY HIM AS INCOME ESCAPED FROM ASSESSMENT. THE REFORE, KEEPING IN VIEW THE SETTLED POSITION OF LAW, AS POINTED OUT BY THE LD. COUNSEL OF THE ASSESSEE, THE ASSESSMENT FRAMED BY THE AO ON 22.12.2006 UNDER SEC TION 143(3) R.W.S. 147 IS WITHOUT JURISDICTION AND BAD IN LAW. WE ACCORDINGLY QUASH THE SAME AND ALLOW THE APPEAL OF THE ASSESSEE. 8. THE ONLY GROUND RAISED BY THE REVENUE IN ITS APP EAL IN ITA NO.3340/AHD/2009 IS AGAINST THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY OF RS.11,24,355/- LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE I.T. ACT. 9. IN VIEW OF OUR DECISION IN ASSESSEES QUANTUM AP PEAL IN I.T.A. NO.4326/AHD/2007, WE HAVE QUASHED THE ASSESSMENT FR AMED BY THE AO ON 22.12.2006 UNDER SECTION 143(3) R.W.S. 147. THE PEN ALTY PROCEEDINGS UNDER SECTION 271(1)(C) WERE INITIATED IN THAT ASSESSMENT ORDER. IN VIEW OF OUR DECISION IN QUANTUM APPEAL IN ITA NO.4326/AHD/2007, THIS APPEAL OF THE REVENUE BECOMES INFRUCTUOUS. THEREFORE, THE SAME IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED WHEREAS THE APPEAL FILED BY THE REVENUE IS DISMISSED. 9 %& 2 78( :#) 25/10 /2011 8 ; 2 <5 = THIS ORDER PRONOUNCED IN THE OPEN COURT ON 25/10/2011. SD/- SD/- (G.D.AGRAWAL) (T.K. SHARMA) VICE PRESIDENT JUDICIAL MEMBER DATED : 25/10/2011 ITA NOS. 4326-AHD-2007 & 3340-AHD-09 7 %& %& %& %& 2 22 2 .1> .1> .1> .1> %>(1) %>(1) %>(1) %>(1)- -- - 1. ,- 2. ./,- 3. ## 1 4B 4. 4B- - 5. >E< .1 , , = 6. < G9 %& %, / # , = TALUKDAR/ SR. P.S.