Sh. varinder kumar soul, Jalandhar V. Income tax officer, ward - 3(2), Jalandhar

ITA 451/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5764 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 04-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GHULAM MUSTAFA
• Keywords: Reopening of assessment; Depreciation; Residential status; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 451(ASR)/2017 AS SESSMENT YEAR: 2012-13 PAN: CVIPS 5218R SH. VARINDER KUMAR SOUL 209-NEW JAWAHAR NAGAR, JALANDHAR. VS. INCOME TAX OFFICER, WARD-3(2), JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHRAY SARNA (C.A.) RESPONDENT BY: SH. GHULAM MUSTAFA (D. R.) DATE OF HEARING: 18.12.2017 DATE OF PRONOUNCEMENT : 16.01.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE ORD ER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, JALANDHAR ('CIT(A)' FOR SHORT) DATED 03.05.2017, DISMISSING THE ASSESSEES APPEAL CONTESTING HIS ASS ESSMENT U/S. 143(3) READ WITH SECTION 147 OF THE INCOME TAX ('THE' ACT HEREINAFTE R) FOR ASSESSMENT YEAR (A.Y.) 2012-13. 2. VIDE THE INSTANT APPEAL THE ASSESSEE RAISES THE FOLLOWING GROUNDS: '1. THAT THE ORDER PASSED BY THE WORTHY CIT(A), JAL ANDHAR, DATED 03.05.2017 IS AGAINST THE LAW AND FACTS OF THE CASE. 2. THAT THE ORDER PASSED BY THE WORTHY CIT(A), JALA NDHAR IS ERRED IN LAW IN UPHELD THE ORDER PASSED BY THE ASSESSING OFFICER I GNORING THE FACTS THAT ASSESSEE IS NON-RESIDENT INDIAN AND HE WAS UNABLE T O PRODUCE THE PURCHASER IN ITA NO.451 (ASR)/2017(A.Y.2012-13) VAR INDER KUMAR SOUL V. ITO 2 HIS ABSENCE BUT HE FILED COPY OF AGREEMENT TO PROVE THE SOURCES OF CASH DEPOSIT. 3. THAT ASSESSEE REQUEST TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OFF.' OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE ASSE SSEE, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), HIS COUNSEL , WITH REFERENCE TO THE REASONS RECORDED U/S 148(2), ADDUCING A COPY THEREOF, THAT THE ASSESSEES CHALLENGE IS TO THE REOPENING OF ASSESSMENT ON THE GROUND OF THE VALIDI TY OF THE REASONS RECORDED, WHICH READ AS UNDER: 'REASONS FOR ISSUE OF NOTICE U/S. 148 THE ASSESSEE SH. VARINDER KUMAR FILED ITS RETURN OF INCOME ON 4.5.2012 FOR THE ASSESSMENT YEAR 2012-13 DECLARING AN INCOME OF RS. 98000/- AS RENTAL INCOME AND RS. 86850/- AS INCOME FROM INTEREST. THE BANK STATEMENT OF THE ASSESSEE HAS BEEN CALLED FOR AND IT HAS BEEN NOTICE D THAT THE ASSESSEE IS RECEIVING RS. 34725 PER MONTH TOTAL 416700/- WHEN H E HAS SHOWN RS. 98000/-. THUS THE RENTAL INCOME OF RS. 193690/- HAS ESCAPED ASSESSMENT. FURTHER THE ASSESSEE HAS CASH DEPOSITS AMOUNTING TO RS. 3100000/- DURING THE YEAR, THE SAME NEEDS VERIFICATION, SOURCE OF CA SH DEPOSITS. I HAVE THEREFORE REASONS TO BELIEVE THAT BY REASONS OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS REQUIRED FOR HIS ASSESSMENT HAS ESCAPED ASSESSMENT TO THE TUNE O F RS. 3293690/- FOR THE ASSESSMENT YEAR 2012-13. ISSUE NOTICE U/S. 148 OF THE I.T. ACT 1961.' OBSERVING NO SPECIFIC GROUND IN THIS RESPECT, THE BENCH, AFTER ASCERTAINING IF THE LD. DEPARTMENTAL REPRESENTATIVE (DR) HAD ANY VA LID OR SERIOUS OBJECTION THERETO, ALLOWED THE LD. AR TO PLEAD THE SAID GROUN D ORALLY IN PURSUANCE OF RULE 11 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963. IN-AS-MUCH AS THE ASSESSING OFFICER (AO), THE LD. AR WOULD CONTINUE, ONLY SEEKS TO VERIFY THE SOURCE OF THE CASH DEPOSITS IN THE ASSESSEES BANK ACCOUNT (WITH BANK OF INDIA), IT IS PLAIN THAT HE ITA NO.451 (ASR)/2017(A.Y.2012-13) VAR INDER KUMAR SOUL V. ITO 3 ENTERTAINS NO REASON TO BELIEVE ESCAPEMENT OF INCOM E FROM ASSESSMENT IN RESPECT OF THE SAID DEPOSITS. THE LD. DR WOULD OBJECT, STAT ING THAT EVEN IGNORING THE SAID REASON, THERE IS A VALID ASSUMPTION OF JURISDICTION U/S. 147 OF THE ACT TO REASSESS BY THE AO ON THE BASIS OF FIRST REASON ALONE, I.E., TH E UNDER-DISCLOSURE OF RENTAL INCOME; THE ASSESSEE ADMITTING DURING THE COURSE OF ASSESSMENT PROCEEDINGS A GROSS RENTAL RECEIPT OF RS. 3,85,830/- AS AGAINST RS. 98,000/- PER THE RETURN FILED U/S. 139 AS WELL AS THAT IN RESPONSE TO NOTICE U/S. 148, REFERRING TO PAGE 2 OF THE ASSESSMENT ORDER. ONCE ASSESSMENT IS REOPENED FOR R EASSESSMENT, IT WAS OPEN FOR THE AO TO EXAMINE ANY OTHER ASPECT OF ASSESSMENT IN DICATING UNDER-ASSESSMENT OF ANY INCOME THAT COMES TO HIS NOTICE, ADVERTING TO S . 147 OF THE ACT. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. TRUE, VERIFICATION OF THE NATURE AND SOURCE OF A RE CEIPT, AND ON THAT BASIS ASCERTAINING THE ASSESSABILITY, IF ANY, THEREOF AS INCOME UNDER THE ACT, COULD NOT CONSTITUTE A VALID REASON TO BELIEVE ESCAPEMENT OF INCOME FROM ASSESSMENT. THIS IS AS THERE IS THEREBY AN ADMISSION, EVEN IF TACIT, TH AT THERE IS NO BASIS WITH THE REVENUE TO BELIEVE THAT THE RECEIPT IS IN THE NATUR E OF INCOME, WHICH WOULD DEPEND ON THE RESULT OF THE VERIFICATION SOUGHT TO BE UNDE RTAKEN. THE CONDITION PRECEDENT FOR REASSESSMENT IS NOT 'REASON TO SUSPECT', BUT 'R EASON TO BELIEVE', WHICH IS A MORE STRINGENT CONDITION AND MANDATES THE FORMATION OF B ELIEF ON THE STRENGTH OF INFORMATION OR MATERIAL IN THE POSSESSION OF THE RE VENUE LEADING TO THE SAID REASON (REFER: CIT V. LAKHMANI MEWAL DAS [1976] 103ITR 437 (SC)). SECTION 143(2), PER WHICH THE LAW PROVIDES FOR THE SAID VERIFICATION, A ND SEC. 147, OPERATE IN DIFFERENT FIELDS, EVEN AS EXPLAINED IN VIPAN KHANNA V. CIT [2002] 255 ITR 220 (P&H). BE THAT AS IT MAY, THERE IS EQUALLY NO DOUBT THAT THE AO HAD A VALID REASON TO BELIEVE ESCAPEMENT FROM ASSESSMENT QUA RENTAL INCOME. THE SAME IS SUFFICIENT FOR HIM TO ASSUME JURISDICTION TO REOPEN THE ASSESSMENT U/S. 147. NO CONTENTION IN ITS ITA NO.451 (ASR)/2017(A.Y.2012-13) VAR INDER KUMAR SOUL V. ITO 4 RESPECT IN FACT STANDS RAISED BEFORE US. RATHER, CO ULD NOT BE INASMUCH AS THE ASSESSEE, AFTER FAILING TO DISCLOSE ANY ADDITIONAL INCOME PER THE RETURN IN PURSUANCE TO NOTICE U/S. 148, OFFERS ADDITIONAL RENTAL INCOME (AT RS.385,830 - WHICH, AS IT APPEARS, SHOULD BE RS. 416700/-) BY FILING A REVIS ED COMPUTATION OF INCOME DURING THE REASSESSMENT PROCEEDINGS. IN OTHER WORDS , THERE IS AN ADMISSION AS TO ESCAPEMENT OF INCOME QUA THE FIRST REASON STATED IN THE REASONS TO BELIEVE RECORDED BY THE AO. HOW COULD THEN, WE WONDER, THE ASSESSEE QUESTION THE VALIDITY OF THE REASSESSMENT PROCEEDINGS? WHY, HOW COULD, ONE MAY A SK, A COMPUTATION BE FURNISHED THEREIN IF THE SAID PROCEEDINGS WERE NOT VALID PROCEEDINGS? THE ASSESSEES CASE IN THIS REGARD, IN VIEW OF THE ADMI TTED UNDER ASSESSMENT IN THE FIRST INSTANCE (U/S. 143(1)) AND, THUS, VALIDITY OF THE F IRST REASON OF THE BELIEVE ESCAPEMENT OF INCOME FROM ASSESSMENT, ONLY NEEDS TO BE STATED TO BE REJECTED. 4. THE ONLY OTHER GROUND THAT SURVIVES; GD. 1 BEING GENERAL IN NATURE, WARRANTING NO ADJUDICATION, IS GROUND 2. THE ASSESSEE, IN EXPL ANATION OF THE NATURE AND SOURCE OF THE CASH DEPOSITS FOR RS.31 LACS, FILED (WITH TH E AO) A COPY OF THE AGREEMENT FOR SALE OF HIS RESIDENTIAL HOUSE, WITH ONE, SHRI MOHIN DER SINGH, CLARIFYING THAT THERE WAS THOUGH NO TRANSFER U/S. 2(47)(V) INASMUCH AS TH E POSSESSION CONTINUES TO BE RETAINED BY THE ASSESSEE. THE ASSESSEE HAS BEEN, WE OBSERVE, SUBSEQUENT TO THE ISSUE OF NOTICE U/S. 148 ON 11.02.2014, ALLOWED SEV ERAL OPPORTUNITIES TO PRODUCE THE SO-CALLED 'BUYER' OF THE PROPERTY (WHO IS STATE D TO HAVE PAID THE ASSESSEE RS. 31 LACS IN CASH AND, FURTHER, WITHOUT TAKING POSSESSIO N OF THE SUBJECT PROPERTY), INCLUDING FOUR TIMES BEFORE THE ASSESSING OFFICER, TO WHOM THE MATTER W AS REMANDED, PAYING HEED TO THE SEVERAL REQUESTS BY TH E ASSESSEE TO THE LD. CIT(A) FOR THE SAME, THRICE , TO NO AVAIL THOUGH (REFER PARAS 4.3 THRO' 4.10 O F THE IMPUGNED ORDER). WHAT IS THIS, IF NOT AN ABUSE OF THE PROCES S OF LAW? IN FACT, THE ASSESSEE CONFIRMED (THROUGH THE LD. AR DURING HEARING) STATUS QUO IN THE MATTER, I.E., OF THE ITA NO.451 (ASR)/2017(A.Y.2012-13) VAR INDER KUMAR SOUL V. ITO 5 POSSESSION OF HIS RESIDENTIAL HOUSE CONTINUING TO B E WITH THE ASSESSEE EVEN TO DATE (18.12.2017). IN OTHER WORDS, THE ASSESSEE WANTS US TO BELIEVE THAT SOMEONE GAVE HIM RS.31 LACS IN CASH AND DISAPPEARED! WHY SHOULD CASH AT ALL BE PAID (I.E., INSTEAD OF THROUGH THE BANKING CHANNEL, EXHIBITING A PRIMA FACIE MONEY TRAIL) AND, AS IT APPEARS, IN DIFFERENT AMOUNTS THE REASON RE CORDED AS WELL AS THE ASSESSMENT ORDER SPEAKING OF CASH DEPOSITS TOTALING TO RS. 31 LACS, RATHER THAN BEING PAID IN LUMP SUM? IT IS THIS CASH, RECEIVED IN INDIA, WHICH IS DEPOSITED IN THE ASSESSEE'S BANK ACCOUNT IN INDIA. WAS THE ASSESSEE, A NON-RES IDENT, IN INDIA ON EACH OF THOSE DATES TO ACCEPT CASH, OR EVEN ON THE DATE THE AGREE MENT IS STATED TO BE EXECUTED? WHY WOULD THE PAYER NOT TAKE POSSESSION OF THE SU BJECT PROPERTY, OR OTHERWISE STEPS TO COMPLETE THE TRANSACTION DESPITE LAPSE OF SEVERAL YEARS? HAS THE AMOUNT BEEN FORFEITED? THERE IS FURTHER NOTHING ON RECORD TO EXHIBIT THE IDENTITY OF THE PAYER, MUCH LESS HIS CAPACITY, OR THE GENUINENESS O F THE TRANSACTION, ESTABLISHING THE NATURE AND SOURCE OF THE CASH DEPOSITS, AS REQU IRED U/S 69/69A. THERE IS, AT ANY RATE, COMPLETE NON-SUBSTANTIATION OF HIS CASE BY TH E ASSESSEE. AS EXPLAINED IN CIT VS. P. MOHAN KALA [2007] 291 ITR 278 (SC), AN EXPLANATION MEANS A RE ASONABLE AND ACCEPTABLE EXPLANATION. THE APEX COURT IN THAT CASE WAS CONSIDERING THE APPLICABILITY OF SECTION 68, AND ITS SAID OBSERVATI ONS WERE IN THE CONTEXT OF THE MEANING OF THE EXPRESSION 'THE ASSESSEE OFFERS NO E XPLANATION (OR ONE THAT IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICE R), WHICH FINDS MENTION IN SECTION 69/69A AS WELL. FURTHER STILL, THOUGH THERE IS NO REBUTTAL BY THE A SSESSEE, AND EVEN AS THE SAME REPRESENTS A PART OF WELL-SETTLED LAW, WE MAY YET, FOR THE SAKE OF COMPLETENESS OF OUR ORDER, BEFORE PARTING, STATE THAT THE ASSESSING OFFICER IS FULLY EMPOWERED IN LAW TO MAKE THE IMPUGNED ADDITION IN REASSESSMENT. THE PROVISION OF SEC. 147, COUPLED WITH THIRD PROVISO THERETO, READING AS UNDER, CLARIFIES THE MATTER: ITA NO.451 (ASR)/2017(A.Y.2012-13) VAR INDER KUMAR SOUL V. ITO 6 'INCOME ESCAPING ASSESSMENT . 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, A SSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF THE PROCEEDINGS UNDER THIS SECTION , OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY B E, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SE CTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR): PROVIDED . PROVIDED FURTHER PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME OTHER THAN THE INCOME INVOLVING MATTERS WHICH ARE T HE SUBJECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT.' (EMPHASIS, OURS) IN CIT V. SUN ENGINEERING WORKS PVT. LTD . [1992] 198 ITR 297 (SC), THE HON'BLE APEX COURT CLARIFIED THAT THE CONTROVERSY IN THE RE ASSESSMENT PROCEEDINGS IS CONFINED TO MATTERS WHICH ARE RELEVANT ONLY IN RESP ECT OF INCOME WHICH HAD NOT BEEN BROUGHT TO TAX DURING THE COURSE OF THE ORIGIN AL ASSESSMENT. THE ENTIRE ASSESSMENT IS SET AT LARGE AND THE TOTAL INCOME IS DETERMINED AFRESH ONCE VALID PROCEEDINGS FOR REASSESSMENT ARE INITIATED, AND JUR ISDICTION FOR REASSESSMENT ASSUMED. THE ONLY CAVEAT IS THAT CONCLUDED MATTERS CANNOT BE RE-AGITATED, AND THE SUBJECT MATTER OF THE ASSESSMENT IS INCOME THAT HAD ESCAPED ASSESSMENT EARLIER, AND WHICH IS THE ONLY LIMITATION TO THE WORDS 'SUCH INC OME' OCCURRING IN SEC.147. IT IS NOTEWORTHY THAT THE ASSESSMENT YEARS INVOLVED IN TH AT CASE WERE AYS.1960-61 & 1961-62, FOR WHICH THE PROVISION, SINCE SUBSTITUTED BY W.E.F. 1.4.1989, WAS, BEING DIFFERENTLY WORDED, MATERIALLY DIFFERENT, REQUIRING THE HON'BLE COURT TO EXAMINE AND OPINE ON THE SCOPE OF THE WORDS 'SUCH INCOME'. THE PROVISION, AS IT PRESENTLY STANDS, MAKES THE FOREGOING ABUNDANTLY CLEAR PER TH E MAIN PROVISION ITSELF, WITH THE ITA NO.451 (ASR)/2017(A.Y.2012-13) VAR INDER KUMAR SOUL V. ITO 7 THIRD PROVISO FURTHER SETTING OUT THE LIMITATION ON THE SCOPE OF THE INCOME/S THAT COULD BE SUBJECT TO ASSESSMENT U/S.147. IN THE INST ANT CASE, EVEN IF THEREFORE THE SECOND 'REASON' IS DISCARDED AS NOT VALID, THE AO H AVING ASSUMED JURISDICTION TO REASSESS, THE SAME WOULD EXTEND TO ALL INCOMES THAT HAD ESCAPED ASSESSMENT, INCLUDING THE IMPUGNED INCOME OF RS.31 LACS. FURTHE R STILL, EXPLANATION 3 TO SEC.147, INSERTED BY FINANCE ACT, 2009, W.R..F 1.4. 1989, SO THAT THE SAME UNDERSCORES THE MANNER IN WHICH THE PROVISION IS TO BE READ SINCE ITS INCEPTION, READS AS UNDER: 'EXPLANATION 3 - FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDE R THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR REASSE SS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUC H ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDING S UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAV E NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB-SECTION (2) OF SECTI ON 148.' AS APPARENT, THE SAME SEEKS TO REMOVE ANY IOTA OF D OUBT IN THE MATTER THAT MAY HAVE PERSISTED OR MAY BE SOUGHT TO BE ENTERTAINED, EVEN AS, TO BE FAIR, NONE WAS BEFORE US. ANY ISSUE QUA AN INCOME THAT HAD ESCAPED ASSESSMENT COULD BE EXAMINED EVEN IF THE SAME DOES NOT FIND MENTION IN THE REASONS RECORDED. THERE IS NO DILATION ON OR EVEN ARGUMENT QUA THE ASSESSEE'S RESIDENTIAL STATUS AT ANY STAGE, EXCEPT IN THE CONTEXT OF THE STATED D IFFICULTY IN PRODUCING THE OSTENSIBLE BUYER. FURTHER, EVEN IF A NON-RESIDENT, INCOME ACCRUING OR ARISING OR RECEIVED IN INDIA IS TAXABLE IN INDIA. IN VIEW OF T HE FOREGOING, WE, THEREFORE, UPHOLD THE IMPUGNED ADDITION. WE DECIDE ACCORDINGLY. 6. IN VIEW OF THE ABOVE, THE APPEAL FILED BY ASSESS EE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.01.2018 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16.01.2018. ITA NO.451 (ASR)/2017(A.Y.2012-13) VAR INDER KUMAR SOUL V. ITO 8 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: VARINDER KUMAR SOUL (2) THE RESPONDENT (3) THE CIT(A)-2, JALANDHAR (4) THE PR. CIT-2, JALANDHAR (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER