Sh. Alok Sethi, Phagwara V. The Income-tax Officer, Phagwara

ITA 549/ASR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8714 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Amritsar
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKER
• Keywords: Tangible material; Reason to believe; Reassessment proceedings
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 69A; 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: (CIRCUIT BENCH AT JALANDHAR) BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.549/ASR/2016 (ASSESSMENT YEAR-2007-08) SH. ALOK SETHI, 39/40, INDUSTRIAL AREA, PHAGWARA PAN NO.BFAPS9482N (ASSESSEE) VS .. ITO-WARD-1, PHAGWARA (REVENUE) ASSESSEE BY SHRI .SANDEEP VIJH, CA. REVENUE BY SHRI. BHAWANI SHANKER, DR. ORDER PER, A. D. JAIN, JUDICIAL MEMBER: THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007- 08 AGAINST THE LD. CIT(A)S ORDER DATED 11.08.2016, TAKING THE FOLLOWI NG GROUNDS: 1. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HAS ERRED IN UPHOLDING_THE ASSUMPTION OF JURISDICTI ON FOR REASSESSMENT. THE SUBMISSIONS ON THE ISSUE HAVE NOT BEEN PROPERLY APPRECIATED. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ALSO INCORRECT IN STATING T HAT DATE OF HEARING 19.01.2017 DATE OF PRONOUNCEMENT 15.03.2017 I.T.A NO.549/ASR/2016 2 ADEQUATE OPPORTUNITY WAS GIVEN BEFORE INITIATING RE - ASSESSMENT PROCEEDINGS. (B) THE RE-ASSESSMENT PROCEEDINGS ARE ALSO BAD FOR THE REASON THAT THESE ARE BASED ON SUSPICION AND NOT 'R EASON TO BELIEVE'. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS), HAS ERRED IN CONFIRMING THE ADDITION OF RS. 173,637/- U /S 69A. NOT ONLY THE AMOUNT CREDITED IN THE BANK ACCOUNT CO ULD NOT HAVE BEEN ADDED U/S 69A, EVEN THE SUBMISSION MA DE CLEARLY ESTABLISH THAT THE AMOUNT RECEIVED WAS NOT UNEXPLAINED, AND NO ADDITION WAS CALLED FOR. 3. THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 91,800/- U/ S 69A IN RESPECT OF THE SALE PROCEEDS OF FOREIGN CURRENCY . FURTHER, THE SALE PROCEEDS OF THE FOREIGN CURRENCY WERE SUPPORTED BY THE PURCHASE OF FOREIGN CURRENCY MADE BY THE ASSESSEE. IN ANY CASE SALE PROCEEDS OF CURRENCY COULD NOT HAVE BEEN ADDED U/S 69A. 2. APROPOS GROUND NO. 1, THE AO RECORDED THE FOLLOW ING REASONS FOR REOPENING THE COMPLETED ASSESSMENT OF THE ASSESSEE: ''DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN TH E CASE OF M/S FINE SWITCHGEARS, 39-40, INDUSTRIAL AREA, PHAGW ARA FOR A.Y. 2007-08, IT WAS FOUND THAT THE AMOUNT OF UNSEC URED LOAN I.T.A NO.549/ASR/2016 3 IN THE CASE OF SH. ALOK SETLII OUTSTANDING AS ON 31 .03.2007 WAS RS.11,83,000/-. FURTHER, PERUSAL OF THE LEDGER ACCO UNT OF ALOK SETHI IN THE BOOKS OF M/S FINE SWITCHGEARS REVEALED THAT THE OPENING BALANCE AS ON 01.04.2006 WAS RS. 1,05,000/- AND AN AMOUNT OF RS.11,70,000/- WAS INTRODUCED DURING THE YEAR. THE CONFIRMATION OF UNSECURED LOAN OF SH. ALOK SETHI FI LED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF M/S FINE SWITCHGEARS DID NOT BEAR ANY PAN NO. OF ALOK SETHI. FURTHER ON VERIFICATION OF AND AS PER THE DATA AVAILABLE ON COMPUTER, IT HAS BEEN FOUND THAT NO RETURN HAD BEEN FILED BY THE ASSESSEE FOR A.Y. 2007-08. THEREFORE, UNDER THESE CIRCUMSTANCES AND IN VIEW OF THE ABOVE FACTS, I HAVE REASONS TO BELIEVE THAT THE ENTIRE AMOUNT OF RS.11,70,000/- HAS ESCAPED ASSESSMENT FOR THE F.Y. 2006-07 RELEVANT TO A.Y. 2007-08.' A PERUSAL OF THE SO CALLED REASONS SHOWS THAT THIS IS NOTHING MORE THAN SUSPICION AND THE INTENTION OF THE ASSESS ING OFFICER TO VERIFY THE SOURCE OF DEPOSIT GIVEN TO M/S FINE SWIT CHGEARS. MERELY BECAUSE DEPOSIT HAS BEEN GIVEN AND NO RETURN OF INCOME WAS FILED CANNOT BE THE BASIS OF HOLDING THAT THE D EPOSIT GIVEN REPRESENTS CONCEALED INCOME OF THE ASSESSEE. IT IS ALSO AN ACCEPTED LEGAL POSITION THAT REASSESSMENT PROCEEDIN GS ARE TO BE JUDGED ONLY ON THE BASIS OF THE REASONS RECORDED AN D THESE CANNOT BE SUPPLEMENTED. RELIANCE IS PLACED ON THE D ECISION IN THE CASE OF THE GUJARAT HIGH COURT IN THE CASE OF S ARADBHAI M. LAKHANI VS. ITO REPORTED AT 231 ITR 779 AND ALSO TH E DECISION I.T.A NO.549/ASR/2016 4 OF THE BOMBAY HIGH COURT IN THE CASE OF PRASHANT S. JOSHI VS. ITO REPORTED AT 324 ITR 154. 3. BEFORE THE LD. CIT(A) THE ASSESSEE CONTENDED (RE LEVANT PORTION) AS FOLLOWS: A PERUSAL OF THE SO CALLED REASONS SHOWS THAT THIS IS NOTHING MORE THAN SUSPICION AND THE INTENTION OF THE ASSESS ING OFFICER TO VERIFY THE SOURCE OF DEPOSIT GIVEN TO M/S FINE SWIT CHGEARS. MERELY BECAUSE DEPOSIT HAS BEEN GIVEN AND NO RETURN OF INCOME WAS FILED CANNOT BE THE BASIS OF HOLDING THAT THE D EPOSIT GIVEN REPRESENTS CONCEALED INCOME OF THE ASSESSEE. IT IS ALSO AN ACCEPTED LEGAL POSITION THAT REASSESSMENT PROCEEDIN GS ARE TO BE JUDGED ONLY ON THE BASIS OF THE REASONS RECORDED AN D THESE CANNOT BE SUPPLEMENTED. RELIANCE IS PLACED ON THE D ECISION IN THE CASE OF THE GUJARAT HIGH COURT IN THE CASE OF S ARADBHAI M. LUKHANI VS. ITO REPORTED AT 231 ITR 779 AND ALSO TH E DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF PRASHANT S. JOSHI VS. ITO REPORTED AT 324 ITR 154. 4. IN THE IMPUGNED ORDER, DISMISSING THE APPEAL, TH E LD. CIT(A) HAS HELD AS UNDER: 5.2 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS REMAND REPORT OF THE AO, SUBMISSIONS MADE INCLUDING JUDICI AL CITATIONS GIVEN THEREIN AND CROSS REPLY OF THE APPELLANT AND FIND THAT AO HAS ISSUED NOTICE TO THE APPELLANT BEFORE INITIATIN G RE- ASSESSMENT PROCEEDINGS. 1 FIND THAT AO HAD ISSUED T HE NOTICE U/S 148 BASED ON THE MATERIAL AVAILABLE ON RECORD. RE- I.T.A NO.549/ASR/2016 5 ASSESSMENT PROCEEDINGS WERE STARTED ALTER CONSIDERI NG THE OBJECTIONS RAISED BY THE APPELLANT AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. AO HAS GIVEN REASONABLE OPPORT UNITY OF BEING HEARD TO THE APPELLANT BEFORE INITIATING THE RE-ASSESSMENT PROCEEDINGS. HONBLE SUPREME COURT HAS LAID DOWN IN THE CASE OF KELVINATOR INDIA LTD. 320 ITK 561 THAT AO HAS PO WER TO RE- ASSESS, ONLY IF THERE IS A TANGIBLE MATERIAL AND TH E PROCEDURE LAID DOWN IN THE CASE OF G. K. N. DRIVESHAFT HAS BE EN FOLLOWED BY THE AO. THE AO HAS DISCHARGED THE DUTY WHICH LAY UPON HIM BEFORE INITIATING THE REASSESSMENT PROCEEDINGS. 5.3 HOWEVER, THE CASE LAWS RELIED UPON BY THE APPEL LANT DOES NOT HAVE APPLICABILITY TO THE PRESENT CASE ON ACCOU NT OF DIFFERENTIATION IN THE FACTUAL MATRIX. I HAVE ALSO GONE THROUGH A COPY OF THE ORDER PASSED BY THE HONOURABLE ITAT, AN D FIND THAT THE ISSUE BEFORE THE TRIBUNAL WAS IN THAT CASE AS T O WHETHER THE INFORMATION IN POSSESSION OF THE AO WAS SUFFICIENT FOR FORMATION OF THE BELIEF WITH REGARD TO THE ESCAPEMENT OF INCO ME OR NOT. IN THE PRESENT CASE, THERE WAS MATERIAL INFORMATION IN WAS IN THE POSSESSION OF THE AO, WHICH WAS SUFFICIENT FOR FORM ATION OF BELIEF REGARDING THE ESCAPEMENT OF INCOME. HONBLE SUPREME COURT HAS TIME AND OVER AGAIN HELD THAT THE FUNCTIO N OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN IN-BUILT IDEA OF FAIRN ESS TO TAXPAYER (ASST. CIT V. RAJESH JHAVERI STOCK BROKERS (P.) LTD. [2007] 291 1TR 500 (SC) IN DETERMINING WHETHER I.T.A NO.549/ASR/2016 6 COMMENCEMENT OF REASSESSMENT PROCEEDINGS IS VALID, THE COURT HAS ONLY TO SEE WHETHER THERE IS PRIMA FACIE SOME M ATERIAL ON THE BASIS OF WHICH THE DEPARTMENT OPENED THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THIS STAGE AS HELD BY THE SUPREME COU RT IN THE CASE OF RAYMOND WOOLLEN MILLS LTD. V. 1TO [1999] 23 6 ITR 34 (SC), GREAT ARTS (P.) LTD. V. ITO [2002] 257 ITR 63 9 (DELHI). THE ASSESSEE CANNOT CHALLENGE SUFFICIENCY OF BELIEF -ITO V. LAKHMANI MEWAL DAS [1976] 103 ITR 437 (SC). 5.4 IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT AO WAS JUSTIFIED IN INITIATING THE REASSESSMENT PROCEEDINGS IN THIS CASE. THE APPEAL FILED BY THE APPELLANT ON THIS GROUND IS ACC ORDINGLY DISMISSED. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED T HAT THE LD. CIT(A), WHILE WRONGLY DISMISSING THE APPEAL OF THE ASSESSEE, HAS ERRED IN HOLDING THAT IN THE PRESENT CASE, THERE WAS MATERIAL INFORMATION IN POS SESSION OF THE AO, WHICH WAS SUFFICIENT FOR FORMATION OF BELIEF REGARDING THE ES CAPEMENT OF INCOME AND THAT IN DETERMINING WHETHER THE COMMENCEMENT OF REASSESSMEN T PROCEEDINGS IS VALID, THE COURT HAS ONLY TO SEE WHETHER THERE IS PRIMA FACIE SOME MATERIAL, ON THE BASIS OF WHICH, THE DEPARTMENT OPENED THE CASE. IT HAS BEEN CONTENDED THAT A PERUSAL OF THE REASONS RECORDED BY THE AO FOR REOPENING THE COMPLE TED ASSESSMENT SHOWS THAT THEY ARE BASED ON NOTHING BUT SUSPICION, AND THAT T HEY WERE RECORDED ONLY WITH THE I.T.A NO.549/ASR/2016 7 INTENTION TO VERIFY THE SOURCE OF THE DEPOSITS GIVE N TO M/S FINE SWITCHGEARS, WHICH ACTION IS NOT SUSTAINABLE IN LAW. 6. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. IN THE REASONS RECORDED, AS REPRODUCED HEREINABOVE, THE AO HAS STATED THAT IN THE ASSESSMENT PROCEEDINGS FOR A.Y. 2007-08 IN THE CASE OF M/S FINE SWITCHGEARS, IT WAS FOUND THAT THE AMOUNT OF UNSECURED LOAN IN THE CASE OF THE ASSESSEE, OUTSTANDING AS ON 31.03.2007, WAS RS.11,83,000/-; THAT THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S FINE SWITCHGEARS, REVE ALED THAT THE OPENING BALANCE AS ON 01.04.2006 WAS OF RS.1,05,000/- AND AN AMOUNT OF RS.11,70,000/- HAD BEEN INTRODUCED DURING THE YEAR; THAT THE CONFIRMATION FILED BY THE ASSESSEE IN THE CASE OF M/S FINE SWITCHGEARS, DID NOT BARE ANY PAN; AND THAT THE ASSESSEE HAD NOT FILED ANY RETURN OF INCOME FOR THE YEAR. 8. FROM THE ABOVE, IT IS EVIDENT THAT AS RIGHTLY CO NTAINED, NO FRESH MATERIAL WAS IN THE POSSESSION OF THE AO TO ENABLE HIM TO RECORD THE REASONS FOR REOPENING THE COMPLETED ASSESSMENT OF THE ASSESSEE. IT WAS ONLY D UE TO THE FACT THAT DEPOSIT HAD BEEN GIVEN AND NO RETURN OF INCOME HAD BEEN FILED B Y THE ASSESSEE, THAT THE AO ARRIVED AT THE BASELESS CONCLUSION THAT THE DEPOSIT GIVEN REPRESENTED THE CONCEALED I.T.A NO.549/ASR/2016 8 INCOME OF THE ASSESSEE. IT IS WELL SETTLED THAT THE REASONS RECORDED NEED MUST HAVE SOME TANGIBLE MATERIAL AS THEIR BASIS, SO AS TO ACC ORD THEM ANY LEGAL VALIDITY. SARADBHAI M. LAKHANI VS. ITO, 231 ITR 779 (GUJ) A ND PRASHANT S. JOSHI VS. ITO, 324 ITR 154 (BOM) ARE ELOQUENT IN THIS REGARD . 9. MOREOVER, IN BIR BAHADUR SINGH SIJWALI VS. ITO , 43 CCH 153, IT HAS BEEN HELD THAT MERELY BECAUSE MONEY HAS BEEN DEPOSITED I N A BANK ACCOUNT AND NO INCOME TAX RETURN HAS BEEN FILED, THIS CANNOT BE TH E BASIS FOR INITIATING PROCEEDINGS U/S 148 OF THE I. T ACT, AS THE DEPOSITS IN THE BAN K ACCOUNT NEED NOT NECESSARILY BE OUT OF INCOME. SIMILAR ARE THE FACTS IN THE PRESENT CASE. 10. THUS, EVIDENTLY, THE REASONS RECORDED ONLY REPR ESENT SUSPICION AS THE BASIS FOR RECORDING THEM, WHICH IS NO BASIS IN THE EYE OF LAW. 11. THE LD. CIT(A), THEREFORE, HAS GONE WRONG IN NO T ADDRESSING THIS ISSUE AND DISMISSING THE APPEAL OF THE ASSESSEE MERELY BY HOL DING THAT THE AO WAS IN POSSESSION OF INFORMATION SUFFICIENT FOR FORMATION OF BELIEF REGARDING ESCAPEMENT OF INCOME, WHICH OBSERVATION, IN ITSELF, IS INCORRE CT, AND IT IS ONLY TO BE SEEN, FOR DETERMINING THE VALIDITY OF THE REASSESSMENT PROCEE DINGS, AS TO WHETHER THERE IS, PRIMA FACIE, SOME MATERIAL, ON THE BASIS OF WHICH, THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED. IN THE PRESENT CASE, AS DISCU SSED, THERE WAS NO MATERIAL FOR THE AO TO ENABLE INITIATION OF REASSESSMENT PROCEEDINGS . I.T.A NO.549/ASR/2016 9 12. IN JAY BHARAT MARUTI LTD. VS. CIT, 324 ITR 28 9 (DEL), IT HAS BEEN HELD, CONSIDERING ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500 (SC), THAT THE REASON TO BELIEVE MUST BE OF A REASONABLE PERSON AND IF IT IS NOT SO, IT WOULD VIRTUALLY AMOUNT TO GIVING POWER TO THE AO TO INITI ATE REASSESSMENT PROCEEDINGS AS PER HIS OWN WHIM AND FANCY. 13. IN VIEW OF THE ABOVE, THE REASONS RECORDED FOR REOPENING THE COMPLETED ASSESSMENT OF THE ASSESSEE ARE FOUND TO BE NOT SUST AINABLE IN THE EYE OF THE LAW. AND EVERYTHING CONSEQUENTIAL THERETO IS ACCORDINGLY , QUASHED. AS SUCH, NOTHING FURTHER SURVIVES FOR ADJUDICATION. 14. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/03/2017. SD/- SD/- (T. S. KAPOOR) (A.D. JAIN) ACCOUTANT MEMBER JUDICIAL MEMBER DATED: 15/03/2017 *AKV* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT BY ORDER AR/SR.P.S./P.S.