T.N.Sekar, Salem V. ITO, Salem

ITA 67/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8736 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-06-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 12-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: V SRIDHARA N
• Keywords: Reopening of assessment; Reason to believe
• Section: 147; 148

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL B SMC BENCH, CHENNAI ... , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER !./ ITA NOS.66 & 68/MDS/2015 # $%# / ASSESSMENT YEARS : 2002-03 & 2001-02 SHRI T.N. SEKAR, L/H LATE T.S. NARASIMHAN, 49, BUNGLOW STREET, SHEVAPET, SALEM. PAN : ADLPN 3256 F V. THE INCOME TAX OFFICER, WARD I(2), SALEM. ('(/ APPELLANT) ()*'(/ RESPONDENT) !./ ITA NO.67/MDS/2015 # $%# / ASSESSMENT YEAR : 2001-02 SHRI T.N. SEKAR, 49, BUNGLOW STREET, SHEVAPET, SALEM. PAN : ADLPN 3256 F V. THE INCOME TAX OFFICER, WARD I(2), SALEM. ('(/ APPELLANT) ()*'(/ RESPONDENT) '( + , / APPELLANTS BY : SHRI V. SRIDHARAN, CA )*'( + , / RESPONDENT BY : SH. P. RADHAKRISHNAN, JCIT - $ + ./ / DATE OF HEARING : 20.06.2016 01% + ./ / DATE OF PRONOUNCEMENT : 22.07.2016 / O R D E R THESE APPEALS OF TWO DIFFERENT ASSESSEES ARE DIRE CTED AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER O F INCOME TAX (APPEALS), SALEM, DATED 24.10.2014, FOR THE ASSESSM ENT YEARS 2002-03 AND 2001-02. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN ALL THESE APPEALS, I HEARD THESE A PPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2 I.T.A. NOS.66 TO 68/MDS/15 2. SHRI V. SRIDHARAN, THE LD. REPRESENTATIVE FOR TH E ASSESSEE, SUBMITTED THAT FOR BOTH THE ASSESSMENT YEARS, THE A SSESSING OFFICER REOPENED THE ASSESSMENT UNDER SECTION 147 OF THE IN COME-TAX ACT, 1961 (IN SHORT 'THE ACT'). HOWEVER, THE REASON FOR REOPENING OF ASSESSMENT WAS NOT PROVIDED TO THE ASSESSEE EVEN TH OUGH A SPECIFIC REQUEST WAS MADE. ACCORDING TO THE LD. RE PRESENTATIVE, THE ASSESSEE HAS ALSO FILED APPLICATION UNDER THE PROVI SIONS OF RIGHT TO INFORMATION ACT REQUESTING FOR COPY OF REASON FOR R EOPENING THE ASSESSMENT. INSPITE OF THE APPLICATION FILED BY TH E ASSESSEE UNDER RIGHT TO INFORMATION ACT, THE REASON FOR REOPENING THE ASSESSMENT WAS NOT FURNISHED TO THE ASSESSEE. SINCE THE ASSES SING OFFICER HAS NOT FURNISHED THE REASONS, THE REOPENING IS INVALID . PLACING RELIANCE ON THE JUDGMENT OF KARNATAKA HIGH COURT IN KOTHARI METALS V. ITO (2015) 377 ITR 581, THE LD. REPRESENTATIVE SUBMITTE D THAT NON- FURNISHING OF REASONS FOR REOPENING OF ASSESSMENT W OULD RENDER THE ENTIRE ASSESSMENT INVALID. THE LD. REPRESENTATIVE HAS ALSO PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THIS TR IBUNAL IN CIT V. TREND ELECTRONICS (2015) 61 TAXMANN.COM 308. PLACI NG RELIANCE ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN PVP V ENTURES LTD. V. ACIT (2016) 65 TAXMANN.COM 221, THE LD. REPRESENTAT IVE SUBMITTED THAT ONCE THE REOPENING OF ASSESSMENT CANNOT STAND ON THE STRENGTH 3 I.T.A. NOS.66 TO 68/MDS/15 OF THE REASON RECORDED UNDER SECTION 148 OF THE ACT , REASSESSMENT CANNOT BE JUSTIFIED BY FINDING SOME OTHER POINT OR POST FACTO AFTER REOPENING OF ASSESSMENT. ACCORDING TO THE LD. COUN SEL, THE REOPENING OF ASSESSMENT IN ALL THE THREE CASES IS N OT JUSTIFIED. THEREFORE, THE ENTIRE ASSESSMENT HAS TO BE SET ASID E. 3. ON THE CONTRARY, SH. P. RADHAKRISHNAN, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE FILED T HE RETURN OF INCOME IN ALL THE THREE CASES AND THE RETURN WAS LO DGED. THE ASSESSING OFFICER FOUND THAT SOME DEPOSITS WERE MAD E IN BANK BY THE ASSESSEE. THEREFORE, THE ASSESSMENT WAS REOPEN ED BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. ACCORDING TO THE LD. D.R., THE ASSESSEE HAS NO SOURCE FOR MAKING DEPOSIT IN THE BA NK ACCOUNT. THOUGH THE ASSESSEE CLAIMS THAT THEY HAVE AGRICULTU RAL INCOME, THE RECEIPT OF AGRICULTURAL INCOME WAS NOT DISCLOSED IN THE RETURN OF INCOME. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSIN G OFFICER. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHE R SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY ISSUING NOTICE U NDER SECTION 148 OF THE ACT ON THE GROUND THAT THERE ARE DEPOSIT S IN THE BANK 4 I.T.A. NOS.66 TO 68/MDS/15 ACCOUNT OF THE ASSESSEE. HOWEVER, NO ADDITION WAS MADE WITH REGARD TO DEPOSITS MADE IN THE BANK ACCOUNT. THE A DDITION WAS MADE WITH REGARD DIFFERENCE IN CAPITAL ACCOUNT. TH E QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSESSMENT WAS REOPEN ED FOR THE PURPOSE OF ASSESSING THE DEPOSITS MADE IN THE BANK ACCOUNT AND NO SUCH ADDITION WAS MADE IN THE REOPENED ASSESSMENT, CAN THE ASSESSING OFFICER MAKE ASSESSMENT BY INCLUDING OTHE R INCOME? THIS ISSUE WAS CONSIDERED BY THE BOMBAY HIGH COURT IN CIT V. JET AIRWAYS LTD. (2011) 331 ITR 236. THE BOMBAY HIGH COURT, AFTER CONSIDERING THE JUDGMENT PUNJAB & HARYANA HIGH COUR T IN VIPAN KHANNA (2002) 255 ITR 220, FOUND THAT EXPLANATION 3 TO SECTION 147 OF THE ACT LIFTS THE EMBARGO, WHICH WAS INSERTE D BY JUDICIAL INTERPRETATION, ON THE MAKING OF ASSESSMENT OR REAS SESSMENT ON THE GROUNDS OTHER THAN THOSE ON THE BASIS OF WHICH A NO TICE WAS ISSUED UNDER SECTION 148 OF THE ACT. REFERRING TO EXPLANA TION 3 TO SECTION 147 OF THE ACT, INSERTED BY FINANCE (NO.2) ACT OF 2 009, THE BOMBAY HIGH COURT FOUND THAT EXPLANATION 3 DOES NOT AND CA NNOT OVERRIDE THE NECESSITY OF FULFILLING THE CONDITIONS SET OUT IN THE SUBSTANTIVE PART OF SECTION 147 OF THE ACT. IT WAS FURTHER OBS ERVED THAT AN EXPLANATION TO A STATUTORY PROVISION IS INTENDED TO EXPLAIN ITS CONTENTS AND CANNOT BE CONSTRUED TO OVERRIDE OR REN DER THE 5 I.T.A. NOS.66 TO 68/MDS/15 SUBSTANCE AND CORE NUGATORY. THE BOMBAY HIGH COURT FURTHER FOUND THAT AFTER ISSUING NOTICE UNDER SECTION 148 O F THE ACT, IF THE ASSESSING OFFICER ACCEPTED THE CONTENTION OF THE AS SESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDE NTLY TO ASSESS SOME OTHER INCOME. THE BOMBAY HIGH COURT FURTHER F OUND THAT IT IS OPEN TO THE ASSESSING OFFICER TO ISSUE A FRESH NOTI CE UNDER SECTION 148 OF THE ACT AND THE LEGALITY OF WHICH WOULD BE T ESTED IN THE EVENT OF A CHALLENGE BY THE ASSESSEE. IN FACT, THE BOMBA Y HIGH COURT OBSERVED AS FOLLOWS:- EXPLANATION 3 LIFTS THE EMBARGO, WHICH WAS INSERTED B Y JUDICIAL INTERPRETATION, ON THE MAKING OF AN ASSESS MENT OF REASSESSMENT ON GROUNDS OTHER THAN THOSE ON THE BAS IS OF WHICH A NOTICE WAS ISSUED UNDER SECTION 148. SETTING OUT THE REASONS, FOR THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THOSE JUDICIAL DECISIONS HAD HELD THAT WHEN THE ASSESSMENT WAS SOUGHT TO BE REOPENED ON THE GRO UND THAT INCOME HAD ESCAPED ASSESSMENT ON A CERTAIN ISS UE, THE ASSESSING OFFICER COULD NOT MAKE AN ASSESSMENT OR REASSESSMENT ON ANOTHER ISSUE WHICH CAME TO HIS NOT ICE DURING THE PROCEEDINGS. THIS INTERPRETATION WILL NO LONGER HOLD THE FIELD AFTER THE INSERTION OF EXPLANATION 3 BY THE FINANCE (NO. 2) ACT OF 2009. HOWEVER, EXPLANATION 3 DOES NOT AND CANNOT OVERRIDE THE NECESSITY OF FULFILLING THE CONDITIONS SET OUT IN THE SUBSTANTIVE PART OF SECTI ON 147. AN EXPLANATION TO A STATUTORY PROVISION IS INTENDED TO EXPLAIN ITS CONTENTS AND CANNOT BE CONSTRUED TO OVER RIDE IT OR RENDER THE SUBSTANCE AND CORE NUGATORY. SECTI ON 147 HAS THIS EFFECT THAT THE ASSESSING OFFICER HAS TO A SSESS 6 I.T.A. NOS.66 TO 68/MDS/15 OR REASSESS THE INCOME ('SUCH INCOME') WHICH ESCAPE D ASSESSMENT AND WHICH WAS THE BASIS OF THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REA SSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS. HOWEVER, IF AFTER ISSUING A NOTICE UND ER SECTION 148, HE ACCEPTED THE CONTENTION OF THE ASSESS EE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FO RMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OP EN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME. IF H E INTENDS TO DO SO, A FRESH NOTICE UNDER SECTION 148 WO ULD BE NECESSARY, THE LEGALITY OF WHICH WOULD BE TESTED IN THE EVENT OF A CHALLENGE BY THE ASSESSEE. 5. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE ADDITION MADE BY THE ASSESSING OFF ICER CANNOT STAND IN THE EYE OF LAW. MOREOVER, THE ASSESSEE HA S SUFFICIENT AGRICULTURAL INCOME FROM COFFEE ESTATE. WHEN THERE WAS DIFFERENCE IN THE CAPITAL ACCOUNT WITH REGARD TO AGRICULTURAL INCOME, THE DIFFERENCE HAS TO BE NECESSARILY TREATED AS AGRICUL TURAL INCOME. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED I N TREATING THE SAME AS UNEXPLAINED CASH IN THE CAPITAL ACCOUNT OF THE A SSESSEE. 6. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDERS OF THE AUTHORITIES BELOW AND ACCORDINGLY, TH E SAME ARE SET ASIDE AND THE ADDITION MADE IN ALL THE THREE CASES ARE DELETED. 7. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE S ARE ALLOWED. 7 I.T.A. NOS.66 TO 68/MDS/15 ORDER PRONOUNCED ON 22 ND JULY, 2016 AT CHENNAI. SD/- ( ... ) (N.R.S. GANESAN) /JUDICIAL MEMBER /CHENNAI, 3! /DATED, THE 22 ND JULY, 2016. KRI. + ).45 65%. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 7. () /CIT(A), SALEM 4. - 7. /CIT, SALEM 5. 5$8 ). /DR 6. 9# : /GF.