Subhendu Chakraborty, Howrah V. ACIT, Circle - 48, Kolkata, Kolkata

ITA 61/KOL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5655 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 14-04-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 11-01-2010
• Court: TRIBUNAL
• Department Lawyers: SANJOY BORA
• Keywords: Unexplained investment; Reason to believe; Reassessment proceedings
• Section: 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA (BEFORE HONBLE SRI B.R.MITTAL, J. M. AND HONBLE SRI C.D.RAO, A.M) I.T.A. NO. 61/KOL/2010 ASSESSMENT YEAR 2004-05 SUBHENDU CHAKROBORTY -VS - ASSTT. COMMISSIONER OF IT, CIR. 48, KOLKATA (PAN ACTPC 2656 B) (APPELLANT) (RESPONDENT) APPELLANT BY : SR I SUBASH AGARWAL. RESPONDENT BY : SRI SANJOY BORA. O R D E R PER SHRI B.R.MITTAL, J.M. THE ASSESSEE HAS FILED THIS APPEAL FOR THE ASSES SMENT YEAR 2004-05 AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) D ATED 22.10.09. 2. IN GROUND NO. 1 OF THE APPEAL ,THE ASSESSEE HAS DISPUTED THE VALIDITY OF INITIATING REASSESSMENT PROCEEDINGS. SINCE THE ABOVE GROUND GOES TO THE ROOT OF THE ASSESSMENT ORDER, WE HEARD LEARNED REPRESENTATIVES OF BOTH THE PARTIES . 3. THE ASSESSEE FILED THE RETURN AND THE SAID RETU RN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. LATER ON, THE AO REOPENED THE ASSESSMENT U /S 147 OF THE ACT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THE AO HAS RECORDED THE R EASONS AS FOLLOWS : THE ASSESSEE HAS FILED RETURN OF INCOME FOR RS.1, 76,650/- CLAIMING REFUND OF RS.1365/- ON 01/11/04. IT APPEARS FROM BALANCE SHEET THE A SSESSEE INTRODUCED HUGE AMOUNT OF CAPITAL FOR WHICH NO EVIDENCE WAS FILED . THE A SSESSEE HAS MADE HUGE INVESTMENT IN LAND BUILDING. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CAS E I HAVE REASON TO BELIEVE THAT UNEXPLAINED INVESTMENT WAS MADE BY THE ASSESSEE. THE ASSESSEE HAS STATED THAT THE REASONS RECORDE D BY THE AO TO INITIATE REASSESSMENT PROCEEDINGS ARE NOT VALID AS NO MATERIAL HAS COME TO THE NOTICE OF THE AO THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE LEA RNED A.R. SUBMITTED THAT THE AO HAS REOPENED THE ASSESSMENT ONLY ON THE BASIS OF THE FACT AS STATED IN THE BALANCE SHEET FILED BY THE ASSESSEE TO MAKE AN INQUIRY IN RESPECT OF THE INV ESTMENT MADE BY THE ASSESSEE IN LAND. HE SUBMITTED THAT NOTHING HAS COME TO THE NOTICE O F THE AO THAT THERE IS ANY INVESTMENT OUTSIDE THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LEARNED A.R. SUBMITTED THAT THE ASSESSEE ALSO ARGUED BEFORE THE LEARNED C.I.T(A) THE VALIDITY OF THE ACTION OF THE AO , BUT THE LEARNED C.I.T.(A) HAS NOT ACCEPTED THE SAME ON THE GROUND THAT REOPENI NG IS WITHIN THE TIME LIMIT PRESCRIBED . THE 2 LEARNED A.R. SUBMITTED THAT THE LEARNED C.I.T(A) HAD NOT CONSIDERED AS TO WHETHER THE AO CAN RESORT TO RE-ASSESSMENT PROCEEDINGS MAINLY FOR TH E PURPOSE OF VERIFICATION. HE SUBMITTED THAT THE ASSESSMENT ORDER PASSED ON THE BASIS OF THE A BOVE REASONS IS TO BE CANCELLED AS THE INITIATION OF PROCEEDINGS ITSELF IS BAD IN LAW. 4. ON THE OTHER HAND, LEARNED D.R. RELIED ON THE OR DER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). 5. ON PERUSAL OF REASONS RECORDED BY THE AO, WE AGREE WITH THE LEARNED A.R. THAT THE AO HAS INITIATED REASSESSMENT PROCEEDINGS MERELY ON SU SPICION AND TO MAKE AN INQUIRY INTO THE SOURCE OF INVESTMENT IN LAND BUILDING, WHICH HE O BSERVED ON THE BASIS OF THE DETAILS APPEARING IN THE BALANCE SHEET FILED BY THE ASSESSEE ALONG W ITH THE RETURN. THERE IS NOTHING IN THE REASONS RECORDED THAT HE HAS COME INTO THE POSSESSION OF A NY MATERIAL THAT THE INVESTMENT MADE IN LAND BUILDING IS FROM UNDISCLOSED SOURCES OR THE SAID I NVESTMENT IS FROM OUTSIDE THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE HONBLE APEX COURT HAS HELD IN THE CASE OF S. NARAYANAPPA & OTHERS VS CIT 63 ITR 219 THAT THE EXPRESSION RE ASON TO BELIEVE DOES NOT MEAN A PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE ITO. I T IS OPEN TO THE COURT TO EXAMINE WHETHER THE REASONS OF BELIEF HAVE A RATIONAL CONNECTION OR A RELEVANT BEARING TO THE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR IRRELEVANT TO THE PURPO SE OF THE SECTION. THIRD MEMBER, ITAT HAS HELD IN THE CASE OF ACIT VS STAR FERRO ALLOYS PV T. LTD. 90 ITD 63 (TN) THAT FOR VERIFICATION OF ANY CLAIM , AO CANNOT RESORT TO INITIATION OF P ROCEEDINGS U /S 147 OF THE ACT. THE HONBLE CALCUTTA HIGH COURT HAS HELD IN THE CASE OF BERGER PAINTS INDIA LTD. VS ACIT 266 ITR 462 THAT THERE MUST NOT ONLY EXIST REASONS FOR FORMATION OF BELIEF THAT INCOME HAS ESCAPED ASSESSMENT, THERE MUST BE ALSO A RATIONAL CONNECTION OR RELE VANCE BEARING WITH THE MATERIAL FOR FORMATION OF BELIEF. AMRITSAR BENCH OF THE ITAT IN THE CASE OF PYRAMID SOFTWARE & TECHNOLOGIES VS DCIT , CIRCLE JAMMU 105 ITD 305 HAS HELD THAT THE MATER IAL WHICH COMES TO THE NOTICE OF THE AO, MUST BE SPECIFICALLY EVIDENT, DIRECT AND NOT UNSPEC IFIC OR VAGUE. IT IS HELD THAT BASIS FOR INITIATING REASSESSMENT PROCEEDINGS IS TO BE JUDGE D SOLELY ON THE BASIS OF REASONS RECORDED BY THE AO. THE AO CANNOT SUPPORT THE REOPENING OF THE ASS ESSMENT BY COLLECTING THE MATERIAL OR BY MAKING INQUIRY SUBSEQUENTLY AFTER THE DATE OF INI TIATION OF THE PROCEEDINGS. ITAT, PATNA BENCH, THIRD MEMBER IN THE CASE OF DCIT VS NAREN DRA MOHAN BAGROY (90 ITD 90) HAS HELD THAT THE BELIEF OF THE AO SHOULD NOT BE A PRODUCT OF IMAGINATION OR SPECULATION. THERE MUST BE REASON TO INDUCE BELIEF. 6. CONSIDERING THE ABOVE DECISIONS AND THE REASONS RECORDED BY THE AO , WE ARE OF THE CONSIDERED VIEW THAT THE INITIATION OF REASSESS MENT PROCEEDINGS BY THE AO IS NOT VALID IN LAW AS HE CANNOT RESORT TO THE PROVISIONS OF SECTION 147 READ WITH SECTION 148 MERELY FOR MAKING A ROVING INQUIRY IN THE ABSENCE OF ANY MATERIAL ON RECORD TO FORM AN OPINION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HENCE , WE HOLD THAT ACTION OF THE AO TO INITIATE REASSESSMENT PROCEEDINGS IN THE CASE BEFORE US IS NOT VALID. THEREFORE, WE QUASH THE ASSESSMENT MADE BY THE AO BY ALLOWING GROUND NO. 1 OF THE AP PEAL TAKEN BY THE ASSESSEE. 3 7. IN GROUND NOS. 2 & 3 OF THE APPEAL, THE ASSESSEE HAS DISPUTED THE ORDER OF LEARNED C.I.T(A) IN SUSTAINING THE ADDITIONS. SINCE WE HAV E QUASHED THE ASSESSMENT ORDER, WE DO NOT CONSIDER IT NECESSARY TO ADJUDICATE GROUND NOS. 2 & 3 OF THE APPEAL TAKEN BY THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 24.09.2010 SD/- SD/- (C.D.RAO) (B.R.MITTAL) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24.09.2010 COPY TO :- 1. ACIT, CIRCLE-48, KOLKATA. 2. SUBHENDU CHAKROBORTY, VILL & P.O. KHADINAN, P.S. B AGNAN, HOWRAH 3. C.I.T.(A), KOLKATA. 4. C.I.T., KOLKATA. 5. D.R., ITAT, KOLKATA. TRUE COPY BY ORDER BCD DY REGISTRAR, I.T.AT., KOLKA TA