The ACIT 19(1), V. Shri. Amar Bajaj,

ITA 534/MUM/2004

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3969 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 11-07-2013
• Assessment Year: 1995-1996
• Appeal Filed On: 29-01-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gift; Reason to believe
• Section: 143(3); 147; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , !'# , $ % BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLA IYA, AM ./I.T.A. NO.611/MUM/2004 ( & & & & / ASSESSMENT YEAR : 1995-96 SHRI AMARLAL BAJAJ, BAJAJ NIWAS, 712, LINKING ROAD, KHAR (W), MUMBAI-400 052 THE ACIT, CIRCLE-19(1), PIRAMAL CHAMBER, LALBAUG, MUMBAI-400 012 ./I.T.A. NO.534/MUM/2004 ( & & & & / ASSESSMENT YEAR : 1995-96 THE ACIT, CIRCLE-19(1), PIRAMAL CHAMBER, LALBAUG, MUMBAI-400 012 SHRI AMARLAL BAJAJ, BAJAJ NIWAS, 712, LINKING ROAD, KHAR (W), MUMBAI-400 052 ' $ ./ () ./PAN/GIR NO. : AC CIR 19(1)/48-A ( '* /APPELLANT ) .. ( +,'* / RESPONDENT ) '* - / APPELLANT BY : ` SHRI HIRO RAI +,'* . - /RESPONDENT BY : SHRI RAJENDRA KUMAR . /0$ / DATE OF HEARING :11.07.2013 12& . /0$ / DATE OF PRONOUNCEMENT : 24.07.2013 3 / O R D E R PER N.K. BILLAIYA, AM: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED THE VERY SAME ORDER OF THE LD. CIT(A)-XX, MUMBAI DT .18.11.2003 ITA NOS.534 & 611/M/04 2 PERTAINING TO A.Y. 1995-96. THE ASSESSEE HAS RAISE D 5 SUBSTANTIVE GROUNDS OF APPEAL WHEREAS REVENUE HAS RAISED IN ITS APPEAL ONLY ONE GROUND. SINCE BOTH THESE APPEALS WERE HEARD TOGETH ER, THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E AND BREVITY. ITA NO. 611/MUM/2004 ASSESSEES APPEAL 2. WITH GROUND NO. 1, THE ASSESSEE HAS QUESTIONED T HE VALIDITY OF THE REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT. I T IS THE SAY OF THE ASSESSEE THAT THE REOPENING OF THE ASSESSMENT IS W ITHOUT JURISDICTION AND VOID AB INITIO. 3. FACTS OF THE CASE SHOW THAT THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 27.6.1996 DECLARING TOTAL INCOME AT RS. 21,20,060/-. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT. T HEREAFTER, THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S. 148 TO EXAMINE ISSUES REGARDING LOANS, EXPENSES AND THE BILLS. THE ORIGI NAL ASSESSMENT WAS COMPLETED ON 30.3.1998 AND THE NOTICES FOR REOPENIN G OF THE ASSESSMENT WERE SERVED UPON THE ASSESSEE ON 27.3.2002. AS THE IMPUGNED ASSESSMENT YEAR IS 1995-96, THE REOPENING HAS BEEN DONE AFTER 4 YEARS. THE ASSESSEE HAS QUESTIONED THE VALIDITY OF THIS NO TICE. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE REOP ENING IS IN CONTRAVENTION OF THE PROVISIONS OF SEC. 151 OF THE ACT. IT IS THE SAY OF THE LD. COUNSEL THAT IT IS MANDATORY FOR THE AO IF HE P ROPOSES TO REOPEN AN ASSESSMENT 4 YEARS TO TAKE A PRIOR SANCTION FROM TH E APPROPRIATE COMMISSIONER. TO SUBSTANTIATE, THE LD. COUNSEL REL IED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHHUG AMAL RAJPAL VS CHALIHA (S.P) 79 ITR 603. THE LD. COUNSEL FOR TH E ASSESSEE ARGUED THAT WHILE GIVING THE SANCTION, THE COMMISSIONER HAS MEC HANICALLY ACCORDED PERMISSION WITHOUT APPLYING HIS MIND AS IS EVIDENT FROM THE COPY OF THE ITA NOS.534 & 611/M/04 3 ORDER SHEET SUBMITTED BY THE LD. DEPARTMENTAL REPRE SENTATIVE WHICH IS ON OUR RECORD. THE LD. COUNSEL FURTHER RELIED UPON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF 93 ITR 103 AND IN THE CASE OF LAKHMANI MEWAL DAS V. INCOME-TAX OFFICER 99 ITR 296. THE LD. COUNSEL FURTHER ARGUED THAT THE FACTS OF THE CASE A RE IDENTICAL WITH THE FACTS OF THE DECISION OF THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF ARJUN SINGH VS CIT 246 ITR 363 AND THAT OF DELHI HIGH COURT IN THE CASE OF UNITED ELECTRICAL CO. P. LTD. V. COM MISSIONER OF INCOME- TAX. IT IS THE SAY OF THE LD. COUNSEL THAT THE ENT IRE REOPENING IS IN VIOLATION OF THE MANDATE PROVIDED U/S. 151 OF THE A CT R.W. PROVISO THEREFORE THE ASSESSMENT IS INVALID AND SHOULD BE H ELD AS SUCH. 4. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE SANCTION HAS BEEN GRANTED BY THE CIT BY DUE APPLIC ATION OF MIND. IT IS THE SAY OF THE LD. DR THAT THE APPROVAL GRANTED BY THE CIT IS NOT MECHANICAL ON THE CONTRARY THE CIT HAS FULLY CONSID ERED THE FACTS OF THE CASE AND AFTER DUE CONSIDERATION OF THE FACTS HAS G IVEN A DIRECTION FOR REOPENING OF THE CASE BY WRITING THE WORD APPROVED . THEREFORE, IT CANNOT BE SAID THAT THE SANCTION WAS GRANTED MECHAN ICALLY OR WITHOUT APPLICATION OF MIND. THE LD. DR CONTENDED THAT ALL CITATIONS BY THE LD. AR IN CONNECTION WITH THIS ISSUE ARE INFRUCTUOUS ON THIS ACCOUNT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND ALSO THE MA TERIAL EVIDENCES BROUGHT ON RECORD FROM BOTH SIDES. WE HAVE ALSO THE BENEFI T OF PERUSING THE ORDER SHEET ENTRIES BY WHICH THE LD. CIT HAS GRANTED SANC TION. LET US FIRST CONSIDER THE RELEVANT PART OF THE PROVISIONS OF SEC . 151 OF THE ACT. ITA NOS.534 & 611/M/04 4 151. (1) IN A CASE WHERE AN ASSESSMENT UNDER SUB-SECTI ON (3) OF SECTION 143 OR SECTION 147 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO NOTICE SHALL BE ISSUED UNDER SECTION 148 [BY AN ASSESSING OFFICER, WHO IS BELOW THE RANK OF ASSISTA NT COMMISSIONER [OR DEPUTY COMMISSIONER], UNLESS THE [JOINT] COMMIS SIONER IS SATISFIED ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE] : PROVIDED THAT, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NO SUCH NOTICE SHALL BE I SSUED UNLESS THE CHIEF COMMISSIONER OR COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY THE ASSESSING OFFICER AFORESAID, THAT I T IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. (2) IN A CASE OTHER THAN A CASE FALLING UNDER S UB-SECTION (1), NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSESSING OFFICER, WHO IS BELOW THE RANK OF [JOINT] COMMISSIONER, AFTER THE E XPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLES S THE [JOINT] COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER, THAT IT IS A FIT CASE FOR THE ISSUE OF SUC H NOTICE.] [EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT THE JOINT COMMISSIONER, THE COMMISSIONER OR TH E CHIEF COMMISSIONER, AS THE CASE MAY BE, BEING SATISFIED O N THE REASONS RECORDED BY THE ASSESSING OFFICER ABOUT FITNESS OF A CASE FOR THE ISSUE OF NOTICE UNDER SECTION 148 , NEED NOT ISSUE SUCH NOTICE HIMSELF.] 6. A SIMPLE READING OF THE PROVISIONS OF SEC. 151(1 ) WITH THE PROVISO CLEARLY SHOW THAT NO SUCH NOTICE SHALL BE ISSUED UN LESS THE COMMISSIONER IS SATISFIED ON THE REASONS RECORDED B Y THE AO THAT IT IS A FIT CASE FOR THE ISSUE OF NOTICE WHICH MEANS THAT T HE SATISFACTION OF THE COMMISSIONER IS PARAMOUNT FOR WHICH THE LEAST THAT IS EXPECTED FROM THE COMMISSIONER IS APPLICATION OF MIND AND DUE DILIGEN CE BEFORE ACCORDING SANCTION TO THE REASONS RECORDED BY THE AO. IN THE PRESENT CASE, THE ORDER SHEET WHICH IS PLACED ON RECORD SHOW THAT THE COMMI SSIONER HAS SIMPLY AFFIXED APPROVED AT THE BOTTOM OF THE NOTE SHEET PREPARED BY THE ITO TECHNICAL. NOWHERE THE CIT HAS RECORDED HIS SATISF ACTION. IN THE CASE ITA NOS.534 & 611/M/04 5 BEFORE THE HONBLE SUPREME COURT (SUPRA) THAT ON AO S REPORT THE COMMISSIONER AGAINST THE QUESTION WHETHER THE COMM ISSIONER IS SATISFIED THAT IT IS A FIT CASE FOR THE ISSUE OF NO TICE UNDER SECTION 148 MERELY NOTED ' YES ' AND AFFIXED HIS SIGNATURE THER E UNDER. ON THESE FACTS, THE HONBLE SUPREME COURT OBSERVED THAT THE IMPORTANT SAFEGUARDS PROVIDED IN SECTIONS 147 AND 151 WERE LIGHTLY TREAT ED BY THE OFFICER AND THE COMMISSIONER. THE HONBLE SUPREME COURT FURTHER OBSERVED THAT THE ITO COULD NOT HAVE HAD REASON TO BELIEVE THAT INCOM E HAD ESCAPED ASSESSMENT BY REASONS OF THE APPELLANT-FIRM'S FAILU RE TO DISCLOSE MATERIAL FACTS AND IF THE COMMISSIONER HAD READ THE REPORT C AREFULLY HE COULD NOT HAVE COME TO THE CONCLUSION THAT THIS WAS A FIT CAS E FOR ISSUING A NOTICE UNDER SECTION 148. THE NOTICE ISSUED UNDER SECTION 148 WAS THEREFORE, INVALID. IT WOULD BE PERTINENT HERE TO NOTE THE RE ASONS RECORDED BY THE AO. INTIMATION HAS BEEN RECEIVED FROM DCIT-24(2), MUMB AI VIDE HIS LETTERS DT. 22 ND FEBRUARY, 2002 THAT ONE SHRI NITIN J. RUGMANI ASSESSED IN HIS CHARGE HAD ARRANGED HAWALA ENTRIES IN ARRANGING LOANS, EXPENSES, GIFTS. DURING THE YEAR SHRI AMAR G. BAJAJ, PROP. OF MOHAN BROTHERS, 712, LINKING ROAD, KHAR (W), MUMBAI-52 WAS THE BENEFICIARY OF SUCH LOANS, EXPENS ES AND GIFTS. THE MODUS-OPERANDI WAS TO COLLECT CASH FROM THE PAR TIES TO WHOM LOANS WERE GIVEN AND CASH WAS DEPOSITED INTO ACCOUN T OF SHRI NITIN J. RUGANI AND CHEQUES WERE ISSUED TO THE BENEFICIA RY OF THE LOAN TRANSACTION. IN ORDER TO ENSURE THAT THE MONEY REA CHED BY CHEQUES TO THE BENEFICIARY SHRI NITIN J. RUGANI KEPT BLANK CHEQUES OF THE THIRD PARTIES. THE ASSESSEE SHRI AMAR G. BAJAJ HAD TAKEN BENEFIT OF SUCH ENTRIES OF LOANS, COMMISSION AND BILL DISCOUNT ING OF RS. 8,00,000/-, 11,21,243/- AND 9,64,739/- RESPECTIVELY . THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE I.T. AC T ON 31 ST MARCH, 1998 BY DCIT-SPL. RG. 40, MUMBAI. IT IS SEEN FROM RECORDS THAT THE AFORESAID POINTS HAVE NOT BEEN VERIFIED IN THE ASSESSMENT. I HAVE THEREFORE REASON TO BELIEVE THAT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, INCOME HAS ESCAPED AS SESSMENT WITHIN THE MEANING OF PROVISO TO SEC. 147 AND EXPLA NATION 2 (C)(I) OF THE INCOME-TAX ACT, 1961. ITA NOS.534 & 611/M/04 6 7. IN THE LIGHT OF THE ABOVE MENTIONED REASONS, IN OUR CONSIDERATE VIEW, SECTION 147 AND 148 ARE CHARTER TO THE REVENU E TO REOPEN EARLIER ASSESSMENTS AND ARE, THEREFORE PROTECTED BY SAFEGUA RDS AGAINST UNNECESSARY HARASSMENT OF THE ASSESSEE. THEY ARE S WORD FOR THE REVENUE AND SHIELD FOR THE ASSESSEE. SECTION 151 GUARDS TH AT THE SWORD OF SEC. 147 MAY NOT BE USED UNLESS A SUPERIOR OFFICER IS SATISF IED THAT THE AO HAS GOOD AND ADEQUATE REASONS TO INVOKE THE PROVISIONS OF SE C. 147. THE SUPERIOR AUTHORITY HAS TO EXAMINE THE REASONS, MATERIAL OR G ROUNDS AND TO JUDGE WHETHER THEY ARE SUFFICIENT AND ADEQUATE TO THE FOR MATION OF THE NECESSARY BELIEF ON THE PART OF THE ASSESSING OFFICER. IF, A FTER APPLYING HIS MIND AND ALSO RECORDING HIS REASONS, HOWSOEVER BRIEFLY, THE COMMISSIONER IS OF THE OPINION THAT THE AOS BELIEF IS WELL REASONED A ND BONAFIDE, HE IS TO ACCORD HIS SANCTION TO THE ISSUE OF NOTICE U/S. 148 OF THE ACT. IN THE INSTANT CASE, WE FIND FROM THE PERUSAL OF THE ORDER SHEET WHICH IS ON RECORD, THE COMMISSIONER HAS SIMPLY PUT APPROVED AND SIGNED THE REPORT THEREBY GIVING SANCTION TO THE AO. NOWHERE THE COMMISSIONER HAS RECORDED A SATISFACTION NOTE NOT EVEN IN BRIEF. THEREFORE, IT CANNOT BE SAID THAT THE COMMISSIONER HAS ACCORDED SANCTION AF TER APPLYING HIS MIND AND AFTER RECORDING HIS SATISFACTION. 8. HONBLE DELHI HIGH COURT IN THE CASE OF UNITED E LECTRICAL CO. PVT. LTD. VS CIT 258 ITR 317 HAS HELD THAT THE PROVISO TO SUB-SECTION (1) OF SECTION151OF THE ACT PROVIDES THAT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NOTICE UNDER S ECTION 148 SHALL NOT BE ISSUED UNLESS THE CHIEF COMMISSIONER OR THE COMMISS IONER, AS THE CASE MAY BE, IS SATISFIED, ON THE REASONS RECORDED BY TH E ASSESSING OFFICER CONCERNED, THAT IT IS A FIT CASE FOR THE ISSUE OF S UCH NOTICE. THESE ARE SOME IN-BUILTS SAFEGUARDS TO PREVENT ARBITRARY EXERCISE OF POWER BY AN ITA NOS.534 & 611/M/04 7 ASSESSING OFFICER TO FIDDLE WITH THE COMPLETED ASSE SSMENT. THE HONBLE HIGH COURT FURTHER OBSERVED THAT WHAT DISTURBS US MORE IS THAT EVEN THE ADDITIONAL COMMISSIONER HAS ACCORDED HIS APPROVAL F OR ACTION UNDER SECTION 147 MECHANICALLY. WE FEEL THAT IF THE ADDI TIONAL COMMISSIONER HAD CARED TO GO THROUGH THE STATEMENT OF THE SAID P ARTIES, PERHAPS HE WOULD NOT HAVE GRANTED HIS APPROVAL, WHICH WAS MAND ATORY IN TERMS OF THE PROVISO TO SUB-SECTION (1) OF SECTION 151 OF TH E ACT AS THE ACTION UNDER SECTION 147 WAS BEING INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE POWER VESTED IN THE COMMISSIONER TO GRANT OR NOT TO GRANT APPROVAL IS COUPLED WITH A DUTY. THE COMMISSIONER IS REQUIRED TO APPLY HIS MIND TO THE P ROPOSAL PUT UP TO HIM FOR APPROVAL IN THE LIGHT OF THE MATERIAL RELIED UP ON BY THE ASSESSING OFFICER. THE SAID POWER CANNOT BE EXERCISED CASUALL Y AND IN A ROUTINE MANNER. WE ARE CONSTRAINED TO OBSERVE THAT IN THE P RESENT CASE THERE HAS BEEN NO APPLICATION OF MIND BY THE ADDITIONAL COMMI SSIONER BEFORE GRANTING THE APPROVAL. 9. THE OBSERVATIONS OF THE HONBLE HIGH COURT ARE V ERY MUCH RELEVANT IN THE INSTANT CASE AS IN THE PRESENT CASE ALSO THE COMMISSIONER HAS SIMPLY MENTIONED APPROVED TO THE REPORT SUBMI TTED BY THE CONCERNED AO. IN THE LIGHT OF THE RATIOS/OBSERVATI ONS OF THE HONBLE HIGH COURT MENTIONED HEREINABOVE, WE HAVE NO HESITATION TO HOLD THAT THE REOPENING PROCEEDINGS VIS--VIS PROVISIONS OF SEC. 151 ARE BAD IN LAW AND THE ASSESSMENT HAS TO BE DECLARED AS VOID AB INITIO . GROUND NO. 1 OF ASSESSEES APPEAL IS ALLOWED. 10. AS WE HAVE HELD THAT THE REASSESSMENT IS BAD IN LAW, WE DO NOT FIND IT NECESSARY TO DECIDE OTHER ISSUES WHICH ARE ON ME RITS OF THE CASE. ITA NOS.534 & 611/M/04 8 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE CROSS APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.07.2013 . 3 . 2& $ 4 56 24.7.2013 2 . 7 SD/- SD/- (I.P. BANSAL ) (N. K. BILLAIYA ) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 5 DATED 24/072013 . . ./ RJ , SR. PS 3 3 3 3 . .. . +/ +/ +/ +/ 8 &/ 8 &/ 8 &/ 8 &/ / COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :7 +/ , , / DR, ITAT, MUMBAI +6. 7; < / GUARD FILE. 3 3 3 3 / BY ORDER, , / +/ //TRUE COPY// = == = / > > > > ( ( ( ( (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI