SH. ANIL KANT SOOD, AMRITSAR V. INCOME TAX OFFICER, WARD - 5(1), AMRITSAR

ITA 640/ASR/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1368 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 09-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL
• Keywords: Search and seizure; Principle of natural justice; Assessment record; Reason to believe; Reassessment proceedings; Set aside
• Section: 143(3); 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO. 640/ASR/2017 A SSESSMENT YEAR: 2009-10 ANIL KANT SOOD, 134 - STREET NO. 4, MODEL TOWN, AMRITSAR [PAN: ABQPS 7426P] VS. THE INCOME TAX OFFICER, WARD 5(1), AMRITSAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PADAM BAHL (C .A.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 13.03.2019 DATE OF PRONOUNCEMENT: 10.06.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AMRITSAR (' CIT(A)' FOR SHORT) DATED 31.7.2017, DISMISSING THE ASSESSEES APPEAL CONTEST ING HIS ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 14.12.2016 FOR THE ASSESSMENT YE AR (AY) 2009-10. 2. THE PRINCIPAL CHALLENGE IN THE INSTANT CASE IS T O THE VALIDITY OF THE REASSESSMENT PROCEEDINGS. THIS IS ON THE GROUND THA T THE REASONS RECORDED U/S. 148(2) ARE VAGUE AND DO NOT INDICATE INDEPENDENT AP PLICATION OF MIND BY THE ASSESSING OFFICER (AO). IN-AS-MUCH AS THE SPECIFIC DETAILS HAVE NOT BEEN SUPPLIED TO THE ASSESSEE, THERE IS NO MATERIAL WITH THE AO W HICH COULD THE SAID TO FORM THE ITA NO. 640/ASR/2017 (AY 2009-10) ANIL KANT SOOD V. THE ITO 2 BASIS OF HIS REASON/S TO BELIEVE AS TO THE INCOME C HARGEABLE TO TAX HAVING ESCAPED ASSESSMENT. THE OTHER OBJECTIONS RAISED BY THE ASSE SSEE ARE THAT THE REASONS RECORDED, WHICH ARE TO BE PRIOR TO THE NOTICE U/S. 148(1), ARE NOT DATED, AND TWO, THE NOTICE ITSELF INVALID AS IT STATES THE ASSESSEES, AN INDIVIDUAL, STATUS AS A COMPANY. 3. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. 3.1 THE PRIMARY OBJECTIONS ARE WITHOUT MERIT. THE L D. DEPARTMENTAL REPRESENTATIVE (DR), ON BEING CALLED UPON TO, PRODU CED THE SANCTION OF THE PROPOSAL FOR INITIATING THE PROCEEDINGS U/S. 147 AN D THE ISSUE OF NOTICE U/S. 148(1) DATED 24/3/2016 (PB PG. 1). THE SAME, OF WHICH THE REASON/S RECORDED U/S. 148(2) (AT PB PG. 2) IS A PART, IS DATED 22.3.2016. THE WR ONG MENTION OF THE ASSESSEE STATUS (IN THE CAPTION SECTION OF THE REASONS RECOR DED U/S. 148(2)) IS CLEARLY A MISTAKE, CURABLE U/S. 292BB AND, IN ANY CASE, OF NO MOMENT. THE NOTICE U/S. 148(1) DOES NOT MENTION THE ASSESSEES STATUS, BUT ONLY HI S NAME, AS SH. ANIL KANT SOOD, AS IN FACT DOES THE REASONS RECORDED AS WELL AS THE PROPOSAL (AS ALSO THE SANCTION). THE REASONS RECORDED; THE PROPOSAL; THE SANCTION, A ND THE NOTICE U/S. 148(1), ALL RECORD THE ASSESSEES PAN CORRECTLY. THE WORD COMP ANY IN THE STATUS COLUMN IN THE REASONS RECORDED IS, THUS, CLEARLY A TYPING MIS TAKE. THE NOTICE STANDS IN FACT DULY SERVED ON THE ASSESSEE ON 28.3.2016, AND RESPO NDED TO BY HIM. 3.2 THE REASONS RECORDED U/S. 148(2) READ AS UNDER: REASON FOR THE ISSUE OF NOTICE U/S. 148 AS PER THE INFORMATION AVAILABLE WITH THIS OFFICE, SH, ANIL KANT SOOD, 134, STREET NO.4, MODEL TOWN, AMRITSAR, HAS REDUCED HIS INCOME IN THE F.Y. 2008-09 RELEVANT TO THE A.Y. 2009-10 BY CCM (CLIENT CODE MODIFICATION) BY AN AMO UNT OF RS. 4,92,158/-. A SURVEY OPERATION U/S 133A OF THE INCOME TAX ACT, 1961 WAS CARRIED OUT BY THE AHMADABAD INVESTIGATION DIRECTORATE. THEREAFTER SURVEY REPORT WAS PREPARED ON THE BASIS OF DATA RECEIVED FROM NATIONAL STOCK EXCHANGE (NSE) AND IT WAS CONCL UDED THAT CCM HAS BEEN USED AS A TOOL FOR TAX EVASION. THE INFORMATION AVAILABLE ON RECOR D IN THE CASE OF ASSESSEE AS DISCUSSED ABOVE HAS BEEN CONSIDERED AND AFTER CAREFUL CONSIDE RATION, 1 AM OF THE CONSIDERED VIEW AND ITA NO. 640/ASR/2017 (AY 2009-10) ANIL KANT SOOD V. THE ITO 3 HAVE THEREFORE REASONS TO BELIEVE THAT THE ASSESSEE HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2009-10 WITHIN THE MEANING OF SECTION 147 OF T HE INCOME TAX ACT, 1961 BY REASON OF THE FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE A.Y. 2009-10 AND ALSO ANY OT HER INCOME CHARGEABLE TO TAX IN RESPECT OF WHICH ASSESSEE IS ASSESSABLE, WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. NECESSARY PERMISSION FOR ISSUE OF NOTICE U/S 148 IS BEING SOLICITED FROM THE PR. COMMISSIONER OF INCOME TAX-II, AMRITSAR. THE SAME CLEARLY STATE THAT THERE IS MATERIAL IN TH E POSSESSION OF THE AO INDICATING/ SUGGESTING THAT THERE HAS BEEN A CLIENT CODE MODIFI CATION IN THE INSTANT CASE RESULTING IN THE REDUCTION OF THE ASSESSEES INCOME FOR THE RELEVANT YEAR BY RS.4,92,158. THE MATERIAL, IT IS FURTHER STATED, IS THE SURVEY REPORT PREPARED BY THE AHEMDABAD INVESTIGATION DIRECTORATE UPON CARRYING O UT A SURVEY U/S. 133A OF THE ACT AND, FURTHER, ON THE BASIS OF THE DATA RECEIVED FROM THE NATIONAL STOCK EXCHANGE (NSE). HOW COULD THE SAME, ONE WONDERS, BE REGARDED AS VAGUE OR INDEFINITE? THE INFORMATION IS RELEVANT; FROM A REL IABLE SOURCE, AND SPECIFIC, QUALIFYING THUS THE REASONS RECORDED ON THAT BASIS AS VALID, AS EXPLAINED IN SEVERAL DECISIONS BY THE APEX COURT (VIZ. ITO V. LAKHMANI MEWAL DAS [1976] 103 ITR 437 (SC); PHOOL CHAND BAJRANG LAL V. ITO [1993] 203 ITR 456 (SC); RAYMOND WOOLLEN MILLS V. ITO [1999] 236 ITR 34 (SC), TO CITE SOME). CLIENT CODE MODIFICATION (CCM) IS USED AS A TOOL FOR TAX-EVASIO N, AS ALSO OBSERVED BY THE HONBLE JURISDICTIONAL HIGH COURT IN RAKESH GUPTA V. CIT [2018] 405 ITR 213 (P&H). FURTHER STILL, THE AO HAVING NOT SUPPLIED TH E RELEVANT DETAILS TO THE ASSESSEE, DESPITE BEING REQUESTED FOR AFTER COMPLYI NG WITH THE NOTICE U/S. 148(1) (REFER REPLY DATED 30.9.2016/PB PGS. 3-4), RESULTIN G IN THE ASSESSEE DURING HEARING ALLEGING THE AO TO HAVE NO MATERIAL, THE ASSESSMENT RECORD WAS CALLED FOR AND INSPECTED DURING HEARING. THE SAME, ALSO SHOWN TO T HE ASSESSEE, CLEARLY REVEALS THE REASONS RECORDED TO BE BASED ON DEFINITE INFORMATIO N. THAT THE INFORMATION RECEIVED FROM ANOTHER WING OF THE DEPARTMENT COULD BE ACTED UPON, STANDS AGAIN ITA NO. 640/ASR/2017 (AY 2009-10) ANIL KANT SOOD V. THE ITO 4 BEEN CLARIFIED IN SEVERAL DECISIONS BY THE HONBLE HIGH COURTS ( RAKESH GUPTA (SUPRA); RATTAN GUPTA V. UNION OF INDIA [1998] 234 ITR 220 (DEL); H.A.NANJI V. ITO [1979] 120 ITR 593 (CAL), TO CITE SOME, AS INDEED BY THE HONBLE APEX COURT, AS IN, ITO V . PURSHOTTAM DASS BANGUR [1997] 224 ITR 362 (SC). THE ASSESSEES CHALLENGE TO THE REASSESSMENT PROCEEDINGS ON THE GR OUND OF THE REASONS RECORDED BEING VAGUE AND INDEFINITE IS, THUS, NOT MAINTAINAB LE. 3.3 AT THE SAME TIME, HOWEVER, THE AO HAS IN THE PR ESENT CASE COMMITTED A SERIOUS MISTAKE, AND WHICH HAS, I AM AFRAID TO SAY, CONTINUED EVEN UP TO THE FIRST APPELLATE STAGE. THE ASSESSEE HAS NOT BEEN, AT ANY STAGE, COMMUNICATED THE SPECIFIC DETAILS. THE ESCAPEMENT OF INCOME, FOR WHICH THE AS SESSEE IS CHARGED, AND FOR WHICH THE REVENUE ENTERTAINS A REASON TO BELIEVE, I .E., RS. 4.92 LACS, COULD ONLY BE WHERE INCOME ARISING TO THE ASSESSEE ON SOME TRANSA CTION/S HAS BEEN TRANSFERRED BY, OR SOME LOSS ARISING TO ANOTHER TRANSFERRED TO, THE ASSESSEE, I.E., THROUGH CCM. THIS IS THE BASIC MATERIAL THAT THE REVENUE MUST SHARE W ITH THE ASSESSEE TO ENABLE HIM TO STATE HIS CASE IN THE MATTER . MERELY STATING THAT THERE HAS BEEN A CCM, WHICH WITHOUT DOUBT THERE MAY HAVE BEEN, IS NOT SUFFICIEN T. IN FACT, IT IS ONLY ON THE BASIS OF THESE DETAILS THAT THE FACT/INFERENCE OF A REDUC TION OF INCOME CHARGEABLE TO TAX, TO THE EXTENT OF RS.4.92 LACS, IN THE ASSESSEES CASE, IS ARRIVED AT OR, AS THE CASE MAY BE, DRAWN. IN FACT, THE ASSESSEE HAS SPECIFICALLY C LARIFIED (VIDE HIS LETTER DATED 30/9/2016) THAT IT IS NOT WITHIN HIS COMPETENCE AS A SUB-BROKER OF NSE TO EFFECT CCM, WHICH CAN ONLY BE BY THE BROKER OF NSE. IT WAS , THEREFORE, INCUMBENT ON THE AO TO HAVE, AFTER INITIATING REASSESSMENT PROCEEDIN GS AND, RATHER, ON HIS OWN, CONFRONTED THIS MATERIAL TO THE ASSESSEE, REQUIRING HIM TO SHOW CAUSE AS TO WHY, IN THE FACE OF THE SPECIFIC DETAILS, HIS INCOME BE NOT ASSESSED AT A HIGHER SUM (BY THE AMOUNT OF INCOME OSTENSIBLY ESCAPING ASSESSMENT), W HILE HERE WE FIND THAT THE AO DOES NOT DO SO DESPITE THE ASSESSEE SEEKING THE REL EVANT DETAILS! HOW IS THEN, ONE ITA NO. 640/ASR/2017 (AY 2009-10) ANIL KANT SOOD V. THE ITO 5 MAY ASK, IS THE ASSESSEE EXPECTED TO STATE HIS CASE . TAX PROCEEDINGS, IT NEEDS TO BE APPRECIATED, ARE NOT ADVERSARIAL IN NATURE, AND ENT IRE PROCESS OF ASSESSMENT IS TO DETERMINE THE CORRECT INCOME OF AN ASSESSEE CHARGEA BLE TO TAX FOR A PARTICULAR YEAR. IN FACT, IN THE CONTEXT OF REASSESSMENT PROCEEDINGS , THE APEX COURT HAS IN GKN DRIVESHAFTS (INDIA) LTD. V. ITO [2003] 259 ITR 19 (SC) LAID DOWN A PROCEDURE IN THIS REGARD. THE ASSESSEE CAN RAISE OBJECTION/S TO THE ASSESSMENT/ASSESSMENT PROCEEDINGS, WHICH WOULD REQUIRE BEING SPECIFICALLY MET BY THE AO PER A SPEAKING ORDER BEFORE PROCEEDING FURTHER IN THE MATTER. THE NON-FURNISHING OF THE SPECIFIC TRANSACTION DETAILS WHEREIN THERE HAS BEEN A CLIENT CODE MODIFICATION, DESPITE BEING SPECIFICALLY SOUGHT BY THE ASSESSEE, CONSTITUTES A BREACH OF THE PRINCIPLE OF NATURAL JUSTICE, AS WELL AS THE GUIDELINE PRESCRIBED IN GKN DRIVESHAFTS (INDIA) LTD. (SUPRA). THE LD. SR. DR, ON BEING QUESTIONED DURING HEARING, COULD OFFER NO SATISFACTORY EXPLANATION IN THIS REGARD. I REFRAIN FROM IMPOSING ANY COST ON THE AO FOR THIS SERIOUS BREACH, AS HE OUGHT TO BE HEARD BEFORE DOIN G SO. THE ASPECT IS NEVERTHELESS DILATED UPON TO ESCHEW AWARDING COST BY THE TRIBUNA L IN FUTURE. 4. THE MATTER, VACATING THE FINDINGS BY THE REVENU E AUTHORITIES, IS SET ASIDE TO FILE OF THE ASSESSING AUTHORITY, WHO SHALL ADJUDICA TE AFTER CONFRONTING THE ASSESSEE WITH THE RELEVANT DETAILS, AND PROVISION OF DUE OPP ORTUNITY TO STATE HIS CASE IN THE MATTER, PER A SPEAKING ORDER, ISSUING DEFINITE FIND INGS OF FACT THE MATTER AT HAND, AS DISCERNED BEING PRINCIPALLY FACTUAL. I DECIDE AC CORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN CO URT ON JUNE 10, 2019 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 10.06.2019 /GP/SR. PS. ITA NO. 640/ASR/2017 (AY 2009-10) ANIL KANT SOOD V. THE ITO 6 COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: ANIL KANT SOOD, 134 - STREET NO. 4, MODEL TOWN, AMRITSAR (2) THE RESPONDENT: THE INCOME TAX OFFICER, WAR D 5(1), AMRITSAR (3) THE CIT(APPEALS)-2, AMRITSAR (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER