Gampa Venkatesam, Karimnagar, Hyderabad V. ITO, Ward-2, Karimnagar, Karimnagar

ITA 448/HYD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3198 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 03-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 21-04-2015
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: S RAMA RAO
• Keywords: Reopening of assessment; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ES B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 448 /H YD /201 5 ASSESSMENT YEAR: 20 0 5 - 0 6 GAMPA VENKATESAM, KARIMNAGAR [PAN: A AQPG0 873K ] VS INCOME TAX OFFICER , WARD - 2, KARIMNAGAR RANGE, KARIMNAGAR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO , AR FOR REVENUE : SHRI B. KURMI NAIDU , DR DATE OF HEARING : 0 3 - 0 2 - 201 6 DATE OF PRONOUNCEMENT : 1 7 - 0 2 - 201 6 O R D E R PER B. RAMAKOTAIAH, A.M. : THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO REOPENING OF ASSESSMENT AFTER FOUR YEARS AFTER COMPLETION OF ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT [ACT]. ASSESSEE IS QUESTIONING THAT THERE IS NO RATIONALE IN REOPENING THE ASSESSMENT AFTER ASSESSING OFFICER (AO) DULY ENQUIRED THE ISSUE ON WHICH REOPENING WAS UNDERTAKEN. 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL AND HAS ADMITTED INCOME OF RS. 5,62,047/ - ORIGINALLY. THE AO IN THE COURSE OF SCRUTINY ASSESSM ENT, SPECIFICALLY ISSUED A SHOW CAUSE NOTICE TO I.T.A. NO. 448 / HYD / 20 15 GAMPA VENKATESAM : - 2 - : ASSESSEE ABOUT THE DEPOSITS MADE IN THE BANK ACCOUNT VIDE LETTER DT. 16 - 08 - 2007. ASSESSEE VIDE REPLY FILED ON 22 - 10 - 2007 DT. 05 - 10 - 2007 HAS REPLIED THAT HIS CLOSE FRIEND ONE MR. K. RAJEND E R RAO HAD OPENED THE ACCOUNT AS HIS BANK ACCOUNT HAS BECOME INOPERATIVE DUE TO DEFAULT TO THE BANK ON THE AGRICULTURAL TERM LOAN TAKEN FOR ESTABLISHING A POULTRY F A RM. SINCE PROCEEDINGS OF ONE TIME STATEMENT (OTS) WAS GOING ON, THE SA ID MR. K. RAJENDER RAO APPROACHED ASSESSEE TO OPEN ACCOUNT WITH THE SAID BANK AND THE TRANSACTIONS IN THE BANK ACCOUNT , EXCEPT AN AMOUNT OF RS. 1,50,330/ - RELATING TO FIRM M/S. VITAL AGENCIES, KARIMNAGAR, PERTAIN TO SAID MR. K. RAJENDER RAO. THIS LETTER W AS ACCOMPANIED BY AN AF FIDAVIT FROM SHRI . K. RAJENDER RAO DT. 04 - 10 - 2007 AND THE STATEMENT OF BANK ACCOUNT AND ACCOUNT COPY OF THE FIRM IN WHICH THE SAI D RS. 1,50,330/ - WAS ALSO REFLE CTED. AO AFTER D UE ENQUIRY AND HAVING SATISFIED PASSED AN ORDER U/S 143( 3) ON 16 - 06 - 2008. IT WAS CLEARLY STATED IN THE ORDER THAT THE ASSESSMENT WAS COMPLETED BASED ON THE INFORMATION FROM CIT - CIB, HYDERABAD AND AFTER VERIFICATION OF THE MATERIAL PRODUCED, THE INCOME RETURNED WAS ACCEPTED. THIS ASSESSMENT WAS COMPL E TED BY DY. CIT, CIRCLE - I, KARIMNAGAR. 2.1. THE AO , SUBSEQUENTLY BASED ON THE SAME INFORMATION , HAS REOPENED THE ASSESSMENT AND ISSUED NOTICE U/S. 148 DT 14 - 12 - 2011 . THIS REO PENING IS AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN T HE REASSESSMENT PROCEEDINGS , THE SUBMISSION DT. 22 - 10 - 2007 WAS RE PRODUCED IN PARA 3 OF THE ORDER. AO RECORDED A STATEMENT FROM MR. K. RAJENDER RAO ON 14 - 03 - 2013 AND CAME TO THE CONCLUSION THAT THE TRANSACTIONS PERTAIN ING TO MR. K. RAJENDER RAO C ANNOT BE A CCEPTED. EVEN THOUGH AO ACKNOWLEDGES THAT THE AMOUNT OF RS. 1,50,300/ - PERTAINS TO I.T.A. NO. 448 / HYD / 20 15 GAMPA VENKATESAM : - 3 - : M/S. VITAL AGENCIES AND THE NET AMOUNT STATED TO BE PERTAINING TO MR. K. RAJENDER RAO WAS RS. 14,27,000/ - , H E MAKES THE ADDITION OF ENTIRE AMOUNT OF RS. 15,77,3 00/ - IN THE RE - ASSESSMENT PROCEEDINGS COMPLETED ON 28 - 03 - 2013. ASSESSEE CHALLENGED THE ORDER OF THE REASSESSMENT QUESTIONING THAT THE REOPENING IS ON MERE PRESUMPTIONS AND WITHOUT HAVING ANY REASON TO BELIEVE AND MERE CHANGE OF OPINION. ASSESSEE ALSO QUE STIONED THE ADDITION OF AN AMOUNT OF RS. 15,77,300/ - AS INCOME FROM OTHER SOURCES. LD. CIT(A) IN HIS BRIEF ORDER , WITHOUT EXTRACTING ANY OF THE SUBMISSIONS MADE BY ASSESSEE, DISMISSED THE APPEAL STATING T HAT APPELLANT HAS TAKEN A HYPER - TECHNICAL VIEW IN THE SUBMISSIONS MADE. HE ALSO CONFIRMED THE ADDITION MADE STATING THAT IT IS SUITABLY DISALLOWED. HE ACCORDINGLY CONFIRMED DISALLOWANCE MADE BY THE AO. 3. LD. COUNSEL REFERRING TO THE PAPER BOOK PLACED ON RECORD SUBMITTED THAT THE ENTIRE ISSUE OF D EPOSITS IN THE BANK ACCOUNT WAS EXAMINED BY THE DY. CIT IN THE COURSE OF ASSESSMENT AND HAVING SATISFIED ABOUT THE GENUINENESS OF THE CLAIMS, ACCEPTED THE SAME WITHOUT MAKING ANY ADDITION. ON THE BASIS OF THE SAME SUBMISSIONS MADE BEFORE THE DY. CIT AND A FFIDAVIT PLACED ON RECORD, THE ASSESSMENT WAS REOPENED AFTER FOUR YEARS. IT IS SUBMITTED THAT THERE IS NO FAILURE ON THE PART OF ASSESSEE IN MAKING FULL AND TRUE DISCLOSURE AND THEREFORE REOPENING OF ASSESSMENT ON MERE CHANGE OF OPINION IS NOT PERMITTED. LD. COUNSEL RELIED ON VARIOUS CASE LAW. 4. LD. DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES. 5. WE HAVE PERUSED THE RIVAL CONTENTIONS AND EVIDENCE PLACE D ON RECORD. THERE IS NO DISPUTE WITH REFERENCE TO THE FACT THAT THE I.T.A. NO. 448 / HYD / 20 15 GAMPA VENKATESAM : - 4 - : THEN AO (DCIT, CIRCLE - 1, KARIMNAGAR) DID ENQUIRE ABOUT THE DEPOSITS IN THE BANK A/C AND ASSESSEE HAS JUSTIFIED NOT ONLY BY GIVING AN EXPLANATION BUT ALSO FURNISHING AN AFFIDAVIT FROM SHRI K. RAJENDER RAO ALONG WITH TH E COPIES OF THE BANK ACCOUNTS OF THE FIRM TO JUSTIFY THE TRAN SACTIONS IN THE BANK ACCOUNT. HAVING SATISFIED ABOUT THE SAME, THE AO COMPLETED THE ASSESSMENT WITHOUT MAKING ANY ADDITION OF THE SAME. SINCE THE ASSESSMENT WAS REOPENED AFTER THE END OF THE FOUR YEAR PERIOD, IT IS IMPERATIVE THAT AO SHOULD RECORD A SATI SFACTION THAT INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASONS OF THE FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR . THE ONLY ISSUE ON WHICH THE ASSESSMENT WAS ORIGINALLY SELECTED FOR SCRUTINY IS THE INFORMATION FROM CIB THAT THERE WERE CASH DEPOSITS IN THE BANK ACCOUNT. THERE IS EVIDENCE ON RECORD THAT THE THEN AO DID ENQUIRE AND WAS SATIS FIED ABOUT THE CLAIM OF ASSESSEE THAT THE TR ANSACTIONS PERTAIN TO ANOTHER PERSON. IN VIEW OF THE ABOVE, THE SUBSEQUENT REOPENING AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IS NOT PROPER AND IS NOT JUSTIFIED ACCORDING TO THE LA W ON THIS ISSUE. IT IS ALSO A CASE WITHIN THE PURVIEW OF CHAN GE OF OPINION . IN CIT VS. USHA INTERNATIONAL LTD., [348 ITR 485], THE FULL BENCH OF HON'BLE DELHI HIGH COURT LAID DOWN THE FOLLOWING PROPOSITION S OF LAW: (I) THE EXPRESSION 'CHANGE OF OPINION' POSTULATES FORMATION OF OPINION AND THEN A CHANGE THEREOF. IN THE CONTEXT OF SECTION 147 OF THE INCOME - TAX ACT, 1961, IT IMPLIES THAT THE ASSESSING OFFICER SHOULD HAVE FORMED AN OPINION AT THE FIRST INSTANCE, I.E., IN THE PROCEEDINGS UNDER SECTION 143(3) AND BY INITIATION OF THE REASSESSMENT PROCEEDINGS, THE ASSES SING OFFICER PROPOSES OR WANTS TO TAKE A DIFFERENT VIEW; (II) REASSESSMENT PROCEEDINGS WILL BE INVALID IN CASE THE ASSESSMENT ORDER ITSELF RECORDS THAT THE ISSUE WAS RAISED AND WAS DECIDED IN FAVOUR OF THE ASSESSEE. REASSESSMENT PROCEEDINGS IN THE SAID CAS ES WILL BE HIT BY THE I.T.A. NO. 448 / HYD / 20 15 GAMPA VENKATESAM : - 5 - : PRINCIPLE OF' CHANGE OF OPINION'; AND (III) REASSESSMENT PROCEEDINGS WILL BE INVALID IN CASE AN ISSUE OR QUERY IS RAISED AND ANSWERED BY THE ASSESSEE IN ORIGINAL ASSESSMENT PROCEEDINGS BUT THEREAFTER THE ASSESSING OFFICER DOES NOT MAK E ANY ADDITION IN THE ASSESSMENT ORDER. IN SUCH SITUATIONS, IT SHOULD BE ACCEPTED THAT THE ISSUE WAS EXAMINED BUT THE ASSESSING OFFICER DID NOT FIND ANY GROUND OR REASON TO MAKE ADDITION OR REJECT THE STAND OF THE ASSESSEE. HE FORMS AN OPINION. THE REASSES SMENT WILL BE INVALID BECAUSE THE ASSESSING OFFICER HAD FORMED AN OPINION IN THE ORIGINAL ASSESSMENT, WHETHER OR NOT HE HAD RECORDED HIS REASONS IN THE ASSESSMENT ORDER. 6. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF E - INFOC HIPS LTD., VS. DCIT [380 ITR 449] (G UJ ) HELD THAT ACCORDING TO THE FIRST PROVISO TO SECTION 147 OF THE I.T. ACT 1961, AN ASSESSMENT CAN BE REOPENED U/S. 147 AFTER THE EXPIRY OF FOUR YEARS ONLY IF I. THE A SSESSEE FAILED TO MAKE A RETURN U/S. 139 OR IN RESPONSE TO THE NOTICE U/S. 142(1) OR U/S. 148 AND HE FAILED TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. II. ONCE THE CASE OF ASSESSEE IS NOT COVERED BY THE FIRST PROVISO TO SECTION 147, RE - ASSESSMENT PRO CEEDINGS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WOULD BE WITHOUT JURISDICTION AND BAD IN LAW; 7. AS SEEN FROM THE ASSESSMENT RECORD, THE QUESTION EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS INDICATE THAT AO HAS APPLIED HIS MIND TO THE DEPOSITS IN THE BANK ACCOUNT AND DID ENQUIRE ABOUT THE GENUINENESS OF THE TRANSACTIONS. I T IS EVIDENT THAT THE AO HAS EXAMINED THE ISSUE ORIGINALLY AND WAS SATISFIED WITH THE EXPLANATION GIVEN BY ASSESSEE. T HEREFORE, ANY OPINION BY OTHER OFFICER IS A CHANGE OF OPINION. THE HON'BLE FULL BENCH OF I.T.A. NO. 448 / HYD / 20 15 GAMPA VENKATESAM : - 6 - : DELHI HIGH COURT IN THE CASE OF CIT VS . KELVINATOR OF INDIA LTD., [256 ITR 1] HAS HELD AS UNDER: 'WE ALSO CANNOT ACCEPT THE SUBMISSION OF MR. JOLLY TO THE EFFECT THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REASONS HAVE NOT BEEN REC ORDED AN ANALYSIS OF THE MATERIALS ON THE RECORD BY ITSELF MAY JUSTIFY THE ASSESSING OFFICER TO INITIATE A PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE SAID SUBMISSION IS FALLACIOUS. AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB - SECTION (1) OF SECTION 143 OR SUB - SECTION (3) OF SECTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SAID SUB - SECTION (3) OF SECTION 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE (E) OF SECTION 114 OF THE INDIAN EVIDENCE ACT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI - JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG.' THIS J UDGMENT OF THE HON'BLE DELHI HIGH COURT WAS APPROVED BY THE HON'BLE SUPREME COURT ALSO. 8. THEREFORE, IN OUR VIEW, WHAT THE AO IS NOW SEEKING TO TAX THE AMOUNT IS ON THE BASIS OF CHANGE OF OPINION AND IT IS NOT PERMISSIBLE , AS THE AO HAS ACCEPTED THE SAME AND COMPLETED THE ASSESSMENT IN TERMS OF SECTION 143(3). MOREOVER, AS ALREADY STATED EARLIER, THE REOPENING IS AFTER 4 YEARS AND THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO MAKE FULL DISCLOSURE. ON THE SAME MATERIAL FURNISHED BY ASSESSEE, THE REOPE NING WAS DONE, WHICH CANNOT BE SUSTAINED. 9. WE ARE SURPRISED BY THE WAY THE LD. CIT(A) DECIDED THE I SSUE. IN ORDER TO EXAMINE HOW HE HAS DEALT WITH SUBMISSIONS OF ASSESSEE , IT IS NECE SSARY TO EXTRACT PARA 5.1 : I.T.A. NO. 448 / HYD / 20 15 GAMPA VENKATESAM : - 7 - : 5.1 THE ORDER OF AO AND WRITTEN SUBMISS IONS OF THE APPELLANT WERE GONE THROUGH AND CONSIDERED. THE APPELLANT IN THE ASSESSMENT PROCEEDINGS FAILED TO SUBSTANTIATE HIS CLAIM AND IN THE COURSE OF APPEAL PROCEEDINGS ALSO, THE AR OF THE APPELLANT HAS TAKEN A HYPER TECHNICAL VIEW IN THE SUBMISSIONS M ADE. THE AO AFTER MAKING ENQUIRIES HAS SUITABLY DISALLOWED THE AMOUNT OF RS. 15,77,330/ - AS INCOME FROM OTHER SOURCE. SINCE, THE ORDER OF THE AO IS SELF - CONTAINED, I FIND NO REASON TO INTERFERE WITH THE ORDER OF THE AO. ACCORDINGLY, THE DISALLOWANCE MAD E BY THE AO IS UPHELD. 10. THERE IS NEITHER ANY DISCUSSION ABOUT THE SUBMISSIONS MADE BY ASSESSEE NOR ABOUT THE SATISFACTION RECORDED BY THE AO NOR ABOUT THE OBJECTIONS RAISED BY ASSESSEE IN THE RE - ASSESSMENT PROCEEDINGS ON JURISDICTION . IN FACT, LD. C IT(A) DID NOT EVEN COMMENT ABOUT THE VERACITY OF REOPENING OF THE ASSESSMENT. AS SEEN FROM THE LATER PART OF THE ORDER, HE DID NOT EVEN EXAMINE WHETHER THE AO MADE ADDITION OR DISALLOWED EXPENDITURE. AO BROUGHT AN AMOUNT OF RS. 15,77,330/ - TO TAX AS AN A DDITION UNDER THE HEAD INCOME FROM OTHER SOURCES , EVEN AFTER ACCEPTING THAT AN AMOUNT OF RS. 1,50,300/ - PERTAINS TO A FIRM. WITHOUT EVEN UNDERSTANDING WHETHER THE AMOUNT WAS AN ADDITION TO THE INCOME RETURNED OR DISALLOWANCE OF THE EXPENDITURE CLAIMED, TH E LD. CIT(A) CONFIRMS THE DISALLOWANCE MADE BY THE AO. THIS SHOWS NOT ONLY THE NON - APPLICATION OF MIND BY THE CIT(A) , BUT ALSO TOTAL IGNORANCE OF FACTS AND LAW ON THE MATTER UNDER CONSIDERATION. IN OUR OPINION IT IS THE CIT(A) WHO TOOK HYPER TECHNICAL VIEW AND NOT ASSESSEE. 1 1 . WITH THESE OBSERVATIONS, ASSESSEES GROUNDS ARE ALLOWED. THE RE - ASSESSMENT ORDER OF AO AND IMPUGNED ORDER OF CIT(A) ARE SET ASIDE. IN THE RESULT, APPEAL IS ALLOWED. I.T.A. NO. 448 / HYD / 20 15 GAMPA VENKATESAM : - 8 - : ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRU ARY , 201 6 SD/ - SD/ - (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 17 TH FEBRUARY, 2016 TNMM COPY TO : 1. GAMPA VENKATESAM, 2 - 10 - 119/B, JYOTHINAGAR, KARIMNAGAR . C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3 - 6 - 643, STREET NO. 9, HIMAYATNAGAR, HYDERABAD. 2 . INCOME TAX OFFICER , WARD - 2 , KARIMNAGAR RANGE, KARIMNAGAR. 3 . CIT (APPEALS) - 2 , HYDERABAD. 4. CIT - 2 , HYDERABAD. 5 . D.R. ITAT, HYDERABAD. 6 . GUARD FILE.