Devendra Kumar, Bulandshahr V. ITO, Bulandshahr

ITA 5179/DEL/2014

• Counselvise Citation: 517920114 RSA 2014
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 06-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHIRANJAN SENAPATI
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 147; 131; 148

Judgement Text

ITA NO. 5179 /DEL/201 4 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - 2 , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 5179 / D EL/201 4 A.Y. : 200 7 - 0 8 SHRI DEVENDRA KUMAR PROP. DEVENDRA KUMAR SANJEEV KUMAR, PURANI ANAJ MANDI, JAHANGIRABAD, BULANDSHAHAR (UP) (PAN: ADPPK0938H) VS. INCOME TAX OFFICER, WARD - 1 BULANDSHAHAR (APPELLANT) (RESPONDENT) ASSESSEE BY : S HRI VED JAIN, ADVOCATE DEPARTMENT BY : SH. S UDHIRANJAN SENAPATI, SR. DR DATE OF HEARING : 06 - 0 8 - 201 5 DATE OF ORDER : 2 8 - 0 9 - 201 5 ORDER PER H.S. SIDHU : J M TH IS APPEAL FILED BY THE ASSESSEE EMANATE OUT OF THE ORD ER DATED 06 . 8 .201 4 PASSED BY THE LD. CIT(A) , MEERUT RELEVANT TO ASSESSMENT YEAR 200 7 - 0 8 . 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THE ASSESSEE S APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)[(CIT(A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ORDER OF THE AO ITA NO. 5179 /DEL/201 4 2 REJECTING THE CONTENTION OF THE ASSESSEE THAT REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT WITHOUT COMPLYING WITH T HE STATUTORY CONDITIONS AND THE PROCEDURE PRESCRIBED UNDER THE LAW IS BAD AND LIABLE TO BE QUASHED. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ORDER OF THE AO REJECTING THE CONT ENTION OF THE ASSESSEE THAT THE REASON RECORDED FOR REOPENING OF THE ASSESSMENT ARE BAD IN LAW AND AS SUCH THE REOPENING OF THE ASSESSMENT IS ILLEGAL AND LIABLE TO BE QUASHED SO. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE REOPENING IS BAD IN LA W IN THE ABSENCE OF LIVE NEXUS IN THE REASONS RECORDED AND THE FACTS OF THE CASE. 3(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.3,50,OOOI - IN RESPECT OF THE LOAN REC EIVED FROM MR. SUNIL KUMAR YADAV. (II) THAT THE ABOVE SAID ADDITION HAS BEEN CONFIRMED BY MISINTERPRETING THE FACTS AND ARBITRARILY REJECTING THE EXPLANATION AND EVIDENCES SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS CONTENTION. ITA NO. 5179 /DEL/201 4 3 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING ADDITION OF RS.2,OO,OOOI - IN RESPECT OF LOAN RECEIVED FROM MR. VIRENDRA KUMAR YADAV. (II) THAT THE ABOVE SAID ADDITION HAS BEEN CONFIRMED BY MISINTERPRETING T HE FACTS AND ARBITRARILY REJECTING THE EXPLANATION AND EVIDENCES SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS CONTENTION. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED RETURN OF INCOME ON 27.12.2007 DECLARING NET INCOME OF RS. 1,03,794/ - . THE NOTICE U/S. 148 WAS ISSUED TO THE ASSESSEE ON 10.8.2010 WHICH WAS DULY SERVED ON THE ASSESSEE THROUGH SPEED POST. IN COMPLIANCE TO THE NOTICE ISSUED U/S. 148, ASSESS EE VIDE HIS REPLY DATED 25.8.2010 REQUESTED THAT RETURN FILED ON 27.12.2007 MAY BE TREATED RETURN OF INCOME FILED IN RESPONSE TO NOTICE ISSUED U/S. 148, DATED 10.8.2010. THEREINAFTER NOTICE U/S. 142(1) ALONGWITH QUESTIONNAIRE AND NOTICE U/S. 143(2) WAS IS SUED ON 7.12.2010 FIXING THE DATE FOR COMPLIANCE THEREIN ON 20.12.2010. IN COMPLIANCE OF THESE NOTICES SH. MUKESH GUPTA, ADVOCATE, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE AND MR. SANJEEV KUMAR, BROTHER OF THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FURNISHED THE NECESSARY DETAILS AND INFORMATION CALLED FOR. THE CASE WAS ALSO DISCUSSED WITH THEM IN DETAIL. THEREAFTER, THE AO COMPLETED THE ASSESSMENT AT INCOME OF RS. 7,53,794/ - VIDE HIS ORDER DATED 20.9.2011 PASSED U/S 143(3) OF THE I.T. ACT , 1961. ITA NO. 5179 /DEL/201 4 4 4. AGAINST THE ABOVE ORDER DATED 20.9.2011, ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 6.8.2014 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5 . LD. COUNSEL OF THE ASSESSEE HAS MAINLY CHALLENGED THE REOPEN ING THE ASSESSMENT MADE U/S. 1 4 7 OF THE I.T. ACT AND STATED THAT THE SAME IS WITHOUT COMPLYING WITH THE STATUTORY CONDITIONS AND THE PROCEDURE PRESCRIBED UNDER THE LAW AND IS BAD AND LIABLE TO BE QUASHED. HE FURTHER STATED THAT THE REOPENING IS BAD IN LA W IN THE ABSENCE OF LIVE NEXUS IN THE REASONS RECORDED AND THE FACTS OF THE CASE. HE FURTHER STATED THAT THE REASON RECORDED FOR ISSUING NOTICE UNDER SECTION 148 CLEARLY INDICATES THAT THE REOPENING DONE WITHOUT EVEN AN ALLEGATION THAT THE ASSESSEE HAS FAI LED IN ITS STATUTORY OBLIGATION TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS NECESSARY FOR THE COMPUTATION OF INCOME AND AS SUCH CANNOT BE HELD TO BE VALID IN LAW AND NEED TO BE CANCELLED ON THIS PRIMARY GROUND ONLY. THERE IS NOT EVEN AN ALLEGATION IN T HE REASONS THAT ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR THE COMPAUTION OF ITS INCOME. TO SUPPORT HIS CONTENTION, HE PLACED RELIANCE ON THE JUDGMENT OF THE ITAT IN THE CASE OF M/S MINDA INDUSTRIES LTD. VS. DCIT CIRCLE6(1 ), NEW DELHI IN ITA NO. 5509/DEL/2012 DATED 19.6.2015. 6 . ON THE OTHER HAND, LD. DR CONTENDED THAT THE REOPENING IN QUESTION IS VALID , HENCE, HE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7 . I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS . AFTER CONSIDERING THE POSITION WITH REGARD TO THE ISSUE OF REOPENING, I FIND THAT ALL THE QUESTIONS / REASONS RECORDED BY THE AO . I FURTHER FIND THAT IN THE INSTANT CASE, THE ASSESSEE HAD MADE FULL AND TRUE ITA NO. 5179 /DEL/201 4 5 DISCLOSURE DURING THE ORIGINAL ASSESSMENT PROC EEDINGS WITH REGARD TO ISSUES IN DISPUTE . HENCE, I AM OF THE VIEW THAT THE REOPENING HAD BEEN DONE MERELY ON CHANGE OF OPINION IN AS MUCH AS THAT IN THE ORIGINAL ASSESSMENT MADE U/S. 143(3) OF THE I.T. ACT, THE AO HAD APPARENTLY APPLIED HIS MIND AND HA D RAISED QUERIES WITH REGARD TO THE ITEMS WHICH HAVE BEEN IDENTIFIED BY THE AO IN THIS NOTICE U/S. 147/148 OF THE INCOME TAX ACT. I ALSO FIND THAT AO HAS NO FRESH MATERIAL TO FORM HIS OPINION REGARDING ESCAPEMENT OF ASSESSMENT AND HE HAS ALSO NOT FOUND ANY TANGIBLE MATERIAL TO RECORD THE REASONS FOR REOPENING OF THE ASSESSMENT OF THE ASSESSEE. IT IS MERELY A CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER THE LAW AS WELL AS ACCORDING TO THE VARIOUS DECISIONS RENDERED BY THE HON BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR OF INDIA LIMITED IN APPEAL NOS. 2009 - 2011 OF 2003 REPORTED IN 320 ITR 561 AND COMMISSIONER OF INCOME TAX VS. USHA INTERNATIONAL LTD. [2012] 348 ITR 485 (DELHI) [ F ULL BENCH ] THE REASSESSMENT IS INVALID ON THE PART OF THE AO AND ALSO ON CONFIRMING THE SAME ON THE PART OF THE LD. CIT(A). 7.1 I ALSO FIND THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE SIMILAR AND IDENTICAL TO THAT OF THE DECISION OF TH E TRIBUNAL IN THE CASE OF MINDA INDUSTRIES LTD. VS. DCIT (SUPRA) VIDE ORDER DATED 19.6.2015. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PARA 14 TO 15 AT PAGE NO. 20 TO 24 OF THE ORDER ARE REPRODUCED HEREUNDER: - ITA NO. 5179 /DEL/201 4 6 14. WE HAVE CONSIDERED THE SUBMISSIONS OF B OTH THE PARTIES ANDCAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THEPRESENT CASE, IT IS AN ADMITTED FACT THAT THE ORIGINAL ASSESSMENT IN ASSESSEE S CASE WAS COMPLETED U/S 143(3) OF THE ACT ON 30.03.2006 AND THE ASSESSMENT WAS FRAMED AT AN INCOME OF RS. 4,28,28,277/ - AFTER MAKING CERTAIN ADDITIONS/DISALLOWANCES. THEREAFTER, ON THE BASIS OF INFORMATION RECEIVED BY THE AO FROM INVESTIGATION WING THAT THE ASSESSEE WAS ENGAGED IN RECEIVING THE BOGUS ENTRIES, THE ASSESSMENT WAS REOPENED. THE AO IDENTIFIED 3 PARTIES AND ISSUED SUMMONS U/S 131 OF THE ACT WHICH RETURNED BACK WITH THE REMARKS OF THE POSTAL AUTHORITY LEFT WITHOUT ADDRESS . THE AO MADE THE ADDITION OF RS. 25,00,000/ - BY OBSERVING THAT THAT THE LOANS RECEIVED IN THE SAID AMOUNT BY THE ASSESSEE WERE ON ACCOUNT OF BOGUS ENTRIES. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED BY THE AO ONLY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING AND NO INDEPENDENT INQUIRY WAS MADE BY T HE AO. IT IS ALSO NOTICED THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS THE AO, VIDE NOTICE U/S 142(1) OF THE ACT DATED 04.04.2005 ASKED THE DETAILS AND CONFIRMATION FOR INCREASE IN UNSECURED LOAN AS IS EVIDENT FROM PAGE NO. 101 OF THE ASSESSEE S PAPER BOOK WHICH IS THE COPY OF THE SAID NOTICE. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE VIDE LETTER DATED 09.12.2005 FURNISHED THE LIST OF INTER - CORPORATE LOAN ALONGWITH COPY OF RETURN OF INCOME AND FINANCIAL STATEMENT. THEREFORE, IT CANNOT BE SAI D THAT THE AO DID NOT MAKE THE INQUIRIES RELATING TO THE LOANS OR THE ASSESSEE DID NOT FURNISH THE REQUISITE DETAILS OF THE LOANS. IN THE PRESENT CASE, THE AO AFTER EXAMINING THE AFORESAID DETAILS FRAMED THE ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DAT ED 30.03.2006, THEREFORE, THE ITA NO. 5179 /DEL/201 4 7 REOPENING ON THE BASIS OF THE SAME ISSUE WHICH WAS EXAMINED IN THE COURSE OF ORIGINAL ASSESSMENT WAS A CHANGE OF OPINION. ON A SIMILAR ISSUE THE HON BLE DELHI HIGH COURT FULL BENCH IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD . 256 ITR 1 HELD AS UNDER: THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL 1, 1989, BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, AND SUBSEQUENTLY AMENDED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1989, WITH EFFECT FROM APRIL 1, 1989, AS ALSO OF SECTIONS 148 TO 152 HAVE BEEN ELABORATED IN CIRCULAR NO. 549, DATED OCTOBER 31, 1989. A PERUSAL OF CLAUSE 7.2 OF THE SAID CIRCULAR MAKES IT CLEAR THAT THE AMENDMENTS HAD BEEN CARRIED OUT ONLY WITH A VIEW TO ALLAY FEARS THAT THE OMISSION OF THE EXPRESSION REASON TO BELIEVE FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON A MERE CHANGE OF OPINION. IT IS, THEREFORE, EVIDENT THAT EVEN ACCORDING TO THE CENTRAL BOARD OF DIRECT TAXES A MERE CHAN GE OF OPINION CANNOT FORM THE BASIS FOR REOPENING A COMPLETED ASSESSMENT. A STATUTE CONFERRING AN ARBITRARY POWER MAY BE HELD TO BE ULTRA VIRES ARTICLE 14 OF THE CONSTITUTION OF INDIA. IF TWO INTERPRETATIONS ARE POSSIBLE, THE INTERPRETATION WHICH UPHOLDS C ONSTITUTIONALITY SHOULD BE FAVOURED. IN THE EVENT IT IS HELD THAT BY REASON OF SECTION 147 THE INCOME - TAX OFFICER MAY EXERCISE HIS JURISDICTION FOR INITIATING A PROCEEDING FOR REASSESSMENT ONLY UPON A MERE CHANGE OF OPINION, THE SAME MAY BE HELD TO BE UNCO NSTITUTIONAL. AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUBSECTION (1) OF SECTION 143 OR SUB - SECTION (3) OF SECTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE ITA NO. 5179 /DEL/201 4 8 SUB - SECTION (3) OF SECTION 143 A PRESUMPTION CAN BE RAISED T HAT 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, 1872, JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFO RMED. 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 A UTHORITY EXERCISING QUASI JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. HENCE, IT IS CLEAR THAT SECTION 147 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REASSESSMENT PROCEEDINGS UPON A MERE CHANGE OF OPINIO N. THE AFORESAID ORDER HAS BEEN AFFIRMED BY THE HON BLE SUPREME COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD. 320 ITR 561. 15. IN THE PRESENT CASE, ALSO THE AO WHILE FRAMING THE ORIGINAL ASSESSMENT, SPECIFICALLY, ASKED THE ASSESSEE TO FURNISH THE DETAILS OF THE UNSECURED LOANS AND THE ASSESSEE GAVE THE DETAILS BY DISCLOSING THE NAME OF THE PERSONS FROM WHOM LOANS WERE RECEIVED AND ALSO FURNISHED THEIR PAN NOS. ALONGWITH THE REQUISITE DETAILS IN THE FORM OF AFFIDAVIT FROM THE DIRECTORS OF THE LENDIN G COMPANIES, BALANCE SHEET & PROFIT & LOSS A/C OF THOSE COMPANIES AS WELL AS COPIES OF ACKNOWLEDGMENT OF INCOME TAX RETURN ETC. TO DEMONSTRATE THE CREDITWORTHINESS, BONAFIDE AND GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE ITA NO. 5179 /DEL/201 4 9 ALSO DISCLOSED THE NAMES, ADDRES SES, PAN, WARD NOS. ETC. OF ALL THE PERSONS FROM WHOM LOANS EXCEEDING RS. 20,000/ - WERE OBTAINED AND REPAID DURING THE YEAR, IN THE A NNEXURE H ATTACHED TO THE TAX AUDIT REPORT WHICH WAS FURNISHED TO THE AO WHO AFTER MAKING THE PROPER INQUIRY AND BEING S ATISFIED DID NOT MAKE ANY ADDITION IN THE ORIGINAL ASSESSMENT. THEREFORE, THE NOTICE ISSUED U/S 148 OF THE ACT SUBSEQUENTLY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT WAS ON ACCOUNT OF CHANGE OF OPINION AND AS SUCH T HE REOPENING U/S 147 OF THE ACT WAS NOT VALID, THEREFORE, THE SUBSEQUENT REASSESSMENT FRAMED ON THAT BASIS WAS INVALID. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND THE ORIGINAL ASSESSMENT FRAMED BY THE AO IS RESTORED. 6.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENTS AS AFORESAID, I AM OF THE VIEW THAT IN THE PRESENT CASE BOTH THE AUTHORITIES BELOW HAVE GONE WRONG IN DECIDING THE REOPENING AS VALID. HOWEVER, IT IS ESTABLISHED THAT THAT IN THE PRESENT CASE THE ISSUE REOPENING OF ASSESSMENT IS INCORRECT AND INVALID. THEREFORE, I QUASH THE ORDERS OF THE AUTHORITIES BELOW ON THIS LEGAL ISSUE AND DECIDE THE SAME IN FAVOR OF THE ASSESSEE . ITA NO. 5179 /DEL/201 4 10 6 . 2 SINCE I HAD AL READY DECIDED THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE AND THE REOPENING IS HELD AS INVALID, THEREFORE, NO FINDINGS IS GIVEN ON THE OTHER GROUNDS WHICH ARE ON MERIT. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE O PEN C OURT ON 2 8 / 9 /20 1 5 . SD / - [ H.S. SIDHU ] JUDICIAL MEMBER DATE 2 8 / 9 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES