VANITBHAI GANDABHAI PATEL, VALSAD V. ITO, WARD-4, VALSAD

ITA 524/SRT/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2370 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-02-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 14-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SITA RAM MEENA
• Keywords: Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 148; 143(3); 133(6); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM &DR. A.L.SAINI, AM आयकरअपीलसं./ITA No.524/SRT/2019 (िनधाŊरणवषŊ / Assessment Year: (2011-12) (Virtual Court Hearing) Shri Vanitbhai Gandabhai Patel Dadiya Falia, Kosamba Road, Bhagdawada,Valsad -396001 Vs. Income Tax Officer, Ward-4 Room No. 203, Palak Arcade, Shantinagar, Tithal Road-396001 ̾थायीलेखासं./जीआइआरसं./PAN/GIR No.: BOLPP 7421 L (Assessee ) (Respondent) Assessee by : Shri Rajesh M.Upadhyay, A.R Respondent by : Shri Sita Ram Meena, Sr-DR सुनवाईकीतारीख/ Date of Hearing : 14/02/2022 घोषणाकीतारीख/Date of Pronouncement : 25/03/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER Captioned appeal filed by the assessee, pertaining to assessment year 2011-12 is directed against the order passed by the Commissioner of Income Tax (Appeals)- Valsad [‘Ld. CIT(A)’ for short], which in turn arises out of an assessment order passed by the Assessing Officer (‘AO’ for short) under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), vide order dated 31.10.2018. 2. The appeal filed by the assessee for Assessment Year 2011-12, is barred by limitation by five days. The assessee has moved a petition requesting the Bench to condone the delay. We heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing. 3. Grounds of appeal raised by the assessee are as follows: “(1. Ld. CIT(A), Valsad has erred in law and on facts to confirm A.O’s reopening u/s 147 and issue of notice u/s 148 of the Act. Page | 2 ITA No.524/SRT/2019 A.Y.11-12 Sh. Vanitbhai G Patel 2. Ld. CIT(A), Valsad has erred in law and on facts to upheld addition of Rs.5,87,480/- being agriculture income treated as income from other sources ignoring the fact that the assessee is residing in village and source of his income is income earned out of agriculture activities.” 4. Brief facts of the issue in dispute are stated as under. The assessee before us is a farmer. The assessing officer, based on an information observed that during financial year 2010-11 relevant to assessment year under consideration i.e. 2011- 12, the assessee has deposited cash to the tune of Rs.5,00,000/- in bank of Baroda, Valsad. On verification of return of income and details on ITD system, it was observed by assessing officer that assessee had not filed his return of income for assessment year 2011-12. Therefore, query letters were issued to the assessee, on 26.02.2018 and 09.03.2018, to explain the source of cash deposit of Rs.5,00,000/- in Bank of Baroda. 5. In response thereto the assessee has not submitted any details regarding source of income relating to cash deposits. Therefore, assessing officer noted that source of cash deposits remained unexplained. Therefore, there was a reason to believe that the income has escaped assessment within the meaning of Section 147 of the Act. Hence the case was reopened u/s 147 of the Act, and notice u/s 148 of the Act was issued by AO to assessee on 25.03.2018. In response to notice u/s 148 of the Act, assessee has filed copy of acknowledgment of return of income filed by him on 09.05.2018, copy of balance-sheet, profit and loss account, and computation of income etc. The notice u/s 143(2) was issued on 28.06.2018. 6. Thereafter assessing officer issued notice 133(6) of the Act to the Bank of Baroda, Valsad and details of the bank account of the assessee was called for. On verification of bank statement of assessee’s a/c No.02330100016324 in Bank of Baroda, Valsad, it was noticed by AO that during the year under consideration assessee has deposited cash of Rs.5,00,000/-. The assessee stated before the AO that he is an agriculturist and shown his agricultural income of Rs.5,87,480/- in his return of income. However, the assessing officer rejected the contention of the assessee and treated Rs. 5,00,000/- as undisclosed income of the assessee. Page | 3 ITA No.524/SRT/2019 A.Y.11-12 Sh. Vanitbhai G Patel 7. During the year under consideration, the assessee has shown agricultural income in his return of income at Rs.5,87,480/-. The assessing officer observed that since assessee has not furnished any evidence of agricultural land and sale of agricultural produce therefore assessing officer treated said the agricultural income of Rs.5,87,480/- under the head income from other sources. 8. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before Ld. CIT(A), who has confirmed the action of assessing officer. Aggrieved by the order of Ld. CIT(A) the assessee is in further appeal before us. 9. Before us, Shri Rajesh M. Upadhyay, Ld. Authorized Representative (AR) for the assessee, pleads that during the assessment stage, the assessee has submitted the return of income in response to notice u/s 148 of the Act and requested the assessing officer to supply reasons for issuing notice u/s 147/ 148 of the Act. Since the assessee has specifically asked to provide him reasons for re-opening of assessment, however, assessing officer has failed to supply the reasons for reopening the assessment u/s 147 of the Act. Therefore, the re-assessment proceedings initiated by AO is itself bad in law and may be quashed. 10. On merits, Ld. AR submits that assessee is an agriculturist and does not have any other source of income except agricultural income. Therefore the amount of Rs.5,00,000/-deposited in his bank account is out of agricultural income. The Ld. AR submits that during the assessment stage and during the appellate proceedings, assessee has submitted the land holding records before the authorities and considering the sufficient land holding, the cash so deposited in his bank account should be treated as explained properly, as the assessee does not have any other income except agricultural income. 11. On the other hand, Ld. Sr-Departmental Representative for the Revenue, has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. Page | 4 ITA No.524/SRT/2019 A.Y.11-12 Sh. Vanitbhai G Patel 12. We have gone through the facts of the case, the reasons recorded for reopening u/s 147 of the Act, the submission and the various decisions of the Courts including those relied upon by the assessee. The assessee has challenged the reopening on basically on the following grounds. (i).Reasons for reopening are defective. (ii).Reasons for reopening has not been provided to the assessee. 13. We note that reasons for reopening the assessment are defective, as the assessing officer has observed in the reasons recorded that assessee has not filed his return of income for assessment year 2011-12. However, in fact, the assessee has filed his return of income for assessment year 2011-12, therefore, reasons so recorded by the assessing officer are based on “suspect”. Reasons must have a live link with the formation of the belief. This is supported by Circular No.549 dated 31.10.1989 which clarified that the words “reason to believe” did not mean a change of opinion. The Hon’ble Supreme Court in ITO vs. Lakhmani Mewal Das [1976 ]103 ITR 437 has lucidly explained the power of assessing officer to bring to tax income escaping assessment u/s.147 of the Act. The Hon’ble Court first held that the section provides that there must exist “reasons to believe“ and not “reasons to suspect”. The following were the relevant observations: “The fact that the words "definite information" which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. The powers of the Income-tax Officer to reopen assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed.” Page | 5 ITA No.524/SRT/2019 A.Y.11-12 Sh. Vanitbhai G Patel 14. Thus, it is abundantly clear that in assessee`s case under consideration, the reasons so recorded by the assessing officer is based on ‘suspect’, hence entire reassessment proceedings should be quashed. 15. We note that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the assessee`s case under consideration, the reasons were not furnished to the assessee therefore, the reassessment order cannot be upheld. For that we rely on the Judgment of the Hon`ble Supreme Court in the case of GKN Driveshafts (India) Ltd vs. ITO & Others, 259 ITR 19 (SC), wherein it was held as follows: “.....................when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order before proceeding with the assessment in respect of the five assessment years................” 16. The similar view has been upheld by the Hon`ble Bombay High Court in the case of CIT vs Videsh Sanchar Nigam Ltd,340 ITR 66 (Bombay HC): “It was held that failure to furnish the recorded reasons for issue of reopening notices to the assessee before completion of the assessment proceedings would make the reassessment order passed in pursuance of such a notice bad in law.” 17. We note that assessee, vide letter dated 10.05.2018, during the re-assessment stage, has requested the assessing officer to supply him, the reasons for re-opening the assessment. We note that assessing officer has not supplied the reasons recorded u/s 147 of the Act to the assessee, despite request by the assessee to the A.O for furnishing the same. Under these circumstances, as the ld. A.O has failed Page | 6 ITA No.524/SRT/2019 A.Y.11-12 Sh. Vanitbhai G Patel to furnish a copy of the reasons recorded for reopening to the assessee, therefore the re-assessment is to be held as bad in law. 18. We note that in the assessee’s case under consideration, similar, identical facts exist, therefore, respectfully following the judgment of the of the Hon`ble Supreme Court in the case of GKN Driveshafts (India) Ltd (supra), we allow the appeal of the assessee. Since, we have allowed the appeal of the assessee based on the technical reasons ( not furnishing the reasons recorded U/s 147 to assessee), therefore, other grounds raised by the assessee on merits, do not require adjudication. 19. In the result, appeal of the assessee is allowed. Order pronounced on 25/03/2022 by placing the result on the notice board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat/िदनांक/ Date: 25/03/2022 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat