DARSHAN PROPERTIES, MUMBAI V. DCIT CEN CIR 4(2) CEN RG 4, MUMBAI

ITA 6960/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6525 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 29-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E SRIDHAR
• Keywords: Reopening of assessment; Tangible material; Reason to believe; Reassessment proceedings
• Section: 143(3); 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI , JM ITA NO. 6960 / MUM/20 16 ( ASSESSMENT YEAR : 2008 - 09 ) M/S. DARSHAN PROPERTIES 16A/16B, 2 ND FLOOR RAGHUVANSHI MANSION ABOVE SQUARE FOOT, RAGHUVAN SHI MILLS, LOWER PAREL, MUMBAI 400 013 VS. THE DCIT, CENTRAL CIRCLE 4(2) CENTRAL RANGE 4, ROOM NO.1918, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI 400 021 PAN/GIR NO . AAFFD6257P ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI VIPUL JOSHI REVENUE BY SHRI E. SRIDHAR DATE OF HEARING 07/12 /201 8 DATE OF PRONOUNCEMENT 16 / 01 /201 9 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 52, MUMBAI DATED 29/09/2016 FOR A.Y.2008 - 09 IN TH E MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. IN THIS APPEAL ASSESSEE IS AGGRIEVED FOR REOPENING AS WELL AS MERIT OF THE ADDITION MADE ON ACCOUNT OF UNSECURED LOANS OF RS.50,00,000/ - U/S.68 OF THE IT ACT. 3. RIVAL CONTENTIONS HAVE BEEN H EARD AND RECORD PERUSED. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ITA NO. 6960/MUM/2016 M/S. DARSHAN PROPERTIES 2 CARRYING ON THE BUSINESS OF BUILDERS AND DEVELOPERS. THE ASSESSEE FILED IT S RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 02/09/2008 DISCLOSIN G INCOME OF RS. NIL. AFTER DUE CONSIDER ATION TO THE FACTS OF THE CASE INCLUDING THE LOANS TAKEN AND ADVANCES GIVEN THE SCRUTINY ASSESSMENT U/S. 1 43(3) OF THE IT ACT WAS COMPLETED ON 29/12/2010 ON INCOME OF RS.NIL. LATER A SEARCH AND SEIZER ACTION U/S 132(1) WAS CARRIED OUT ON ASSESSEE GROUP ON 22/09/2011. SUBSEQUENTLY ASSESSMENT U/S. 143(3) RWS 153(C) WAS COMPLETED ON 01/03/2013 ON NIL INCOM E. THEREAFTER THE AO RECEIVED INFORMATION FROM DGIT (INVESTIGATION) MUMBAI THAT THE ASSESSEE HAD TAKEN UNSECURED LOAN O F RS. 50, 00 ,000/ - FROM M/S. KRISHNA DIAM . ON THE BASIS OF THIS INFORMATION, THE AO ISSUED A NOTICE TO ASSESSEE U/S. 148 ON 31/03/2015. IN RESPONSE THE ASSESSEE UPLOADED A RETURN OF NIL INCOME AND REQUESTED FOR REASONS FOR ISSUE OF NOTICE U/S. 148. THE AO PROVIDED SUCH REASONS TO THE ASSESSEE AND THEREAFTER THE ASSESSEE FILED ITS OBJECTION VIDE LETTER DATED 31/07/2015. THE AO DISPOSED OFF, THE OBJECTIONS OF THE ASSESSEE VIDE HIS ORDER DATED 11/08/2015. THEREAFTER , THE RE - ASSESSMENT WAS COMPLETED IN WHICH A N AMOUNT OF RS, 50,00,000/ - WAS ADDED IN ASSESSEES INCOME U/S 68 OF THE ACT . THE AO ALSO DI SALLOWED INTEREST OF RS. 431,667 / - CLAIMED ON SUCH LOAN . THUS THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.54,31,670/ - VIDE ORDER DATED 24/02/2016 , PASSED U/S. 143(3) R.W.S.147 OF THE ACT. 4. ASSESSEE APPROACHED TO THE CIT(A). BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE REOPENING OF ASSESSMENT BY OBSERVING THAT AO DULY ITA NO. 6960/MUM/2016 M/S. DARSHAN PROPERTIES 3 PROVIDED REASONS FOR REOPENING AND THEREAFTER ASSESSEE ALSO FILED ITS OBJECTION AND THE AO HA S DISPOSED OFF THE SAME VIDE ORDER DATED 11/08/2015. THE CIT(A) OBSERVED THAT IN TERMS OF SEQUENCE OF EVENTS, IT IS QUITE CLEAR THAT AO HAS A REASON TO BELIEVE THAT INCOME TO THE TUNE OF RS.50,00,000/ - HAS ESCAPED ASSESSMENT. 5. ON MERIT, HE HAS CONFIRMED THE ADDITION ON ACCOUNT OF LOAN OF RS.50,00,000/ - U/S.68 . AGAINST THE ABOVE ORDER OF CIT(A) ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. IT WAS ARGUED BY LEARNED AR THAT NO REASSESSMENT PROCEEDINGS CAN BE INITIATED BEYOND FOUR YEARS UNLESS THERE IS OMISSIO N OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS TRULY AND FULLY. SANCTION UNDER SECTION 151 IS NECESSARY. REASSESSMENT IS BAD IN LAW WHEN BASED ON NO TANGIBLE MATERIAL. 7. LD. AR PLACED RELIANCE ON THE DECISION OF SUPREME COURT IN THE CASE OF CHHUGAMAL RAJPAL 79 ITR 603, LAKHMANI MEWAL DAS 103 ITR 437, NU POWER RENEWABLES (P) LTD., 94 TAXMANN.COM 29 (BOMBAY HIGH COURT), SHODIMAN INVESTMENTS (P) LTD., 93 TAXMANN.COM 153 (BOMBAY HIGH COURT). HE FURTHER ARGUED THAT THE VALIDITY OF AN AS SESSMENT MADE U/S.147 IS DEPENDENT UPON THE REASONS RECORDED BY THE AO AT THE TIME OF ISSUE OF NOTICE U/S.148. SUCH REASONS CANNOT BE MODIFIED OR SUPPLEMENTED SUBSEQUENTLY BY THE AO. FOR THIS PURPOSE, RELIANCE WAS PLACED ON THE DECISION OF BOMBAY HIGH COUR T IN THE CASE OF HINDUSTAN ITA NO. 6960/MUM/2016 M/S. DARSHAN PROPERTIES 4 LEVER LTD., 268 ITR 332, BALKRISHNA HIRALAL WANI 321 ITR 519 AND INDIVEST PTE LTD., 350 ITR 120. 8. LD. AR FURTHER DRAWN OUR ATTENTION TO THE FACT THAT THE NOTICE ISSUED U/S.148 WITHOUT OBTAINING APPROPRIATE SANCTION OF THE CONCE RNED AUTHORITY U/S.151 OF THE INCOME TAX ACT, 1961 IS INVALID. CONSEQUENTLY, IT MAKES THE ENTIRE RE - ASSESSMENT PROCEEDINGS U/S.147 BAD IN LAW. 9. WITH REGARD TO MERIT OF THE ADDITION, LD. AR CONTENDED THAT ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS OF PROVI NG THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF LOAN CREDITOR. 10. LD. AR SUBMITTED THAT LOAN CREDITOR KD IN RESPONSE TO SUMMON ISSUED BY U/S.133(6) SUBMITTED INCOME & EXPENDITURE A/C, SCHEDULE F & G OF BALANCE SHEET, BANK STATEMENT, REFLECTING LOAN T RANSACTION AND LEDGER ACCOUNT OF ASSESSEE IN ITS BOOK. HE FURTHER DRAWN OUR ATTENTION TO THE LETTER DATED 14/09/2015 SUBMITTED BEFORE THE AO ALONGWITH BANK STATEMENT FOR THREE YEARS, FURNISHED EXPLANATION ABOUT CREDITWORTHINESS OF KD. AGAIN REPEATED REQUES T TO ISSUE SUMMONS U/S.131 AND ENFORCE ATTENDANCE / COMPLIANCE. AGAIN REPEATED REQUEST FOR OPPORTUNITY OF CROSS - EXAMINATION. 11. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND CONTENDED THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF LOAN TRANSACTION AND CREDITWORTHINESS OF THE LOAN CREDITOR. 12. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO DELIBERATED ON THE ITA NO. 6960/MUM/2016 M/S. DARSHAN PROPERTIES 5 JUDICIAL PRONOUNCEMENTS RELATING TO THE LEG ALITY OF REOPENING IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE . 13. FROM THE RECORD, WE FOUND THAT ORIGINAL RETURN OF INCOME WAS FILED ON 02/09/2008. SCRUTINY ASSESSMENT WAS COMPLETED U/S.143(3) ON 29/12/2010. IN THE SCRUTINY ASSESSMENT, ORDER SO FRAMED B Y AO RECORDED HIS OBSERVATION WITH RESPECT TO VARIOUS UNSECURED LOANS TAKEN BY THE ASSESSEE INCLUDING LOAN FROM KRISHNA DIAM OF RS.50 LAKHS RECE IVED IN JULY 2007 AND WHICH WAS REPEATED IN AUGUST 2008. HOWEVER, THEREAFTER A SEARCH AT ASSESSEES PLACE PLACED ON 22/09/2011 AND SECOND ASSESSMENT U/S.153C R.W.S. 143(3) WAS AGAIN COMPLETED ON 14/02/2014. THEREAFTER, AO AGAIN REOPENED THE ASSESSMENT ON THE BASIS OF SEARCH AGAINST GAUTAM JAIN GROUP. AO ISSUED NOTICE U/S.148 DATED 21/03/2015. ASSESSEE REQUESTED FOR SUPPLY OF REASONS, REASONS SUPPLIED WITH RESPECT TO THE LOAN TAKEN FROM KD. ASSESSEE FILED EXHAUSTIVE OBJECTION DURING THE COURSE OF ASSESSMENT U/S.143(3) R.W.S. 147. ASSESSEE HAS FILED AN AFFIDAVIT OF GAUTAM JAIN, PARTNER OF KD, CONFIRMATION OF KD, COMPUT ATION OF INCOME AND ACKNOWLEDGEMENT OF KD, P & L ACCOUNT, BALANCE SHEET OF KD, BANK STATEMENT OF KD, REFLECTING LOANS TO ASSESSEE. 14. FROM THE RECORD, WE FOUND THAT DURING THE COURSE OF ASSESSMENT, ASSESSEE HAS FILED LEDGER ACCOUNTS OF KD & BANK STATEMEN TS, REFLECTING RECEIPT AND REPAYMENT OF LOAN AND PAYMENT INTEREST FOR F.Y.2007 - 08 AND 2008 - 09. ITA NO. 6960/MUM/2016 M/S. DARSHAN PROPERTIES 6 15. FROM THE RECORD, WE FOUND THAT ASSESSMENT WAS REOPENED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION. HOWEVER, IN THE NO TICE SO I SSUED FOR REOPENING, THERE IS NO WHISPER FOR ANY FAILURE ON THE PART OF THE ASSESSEE FOR FURNISH ING COMPLETE DETAILS OR DISCLOSURE FULLY AND TRULY ALL MATERIAL FACTS ALOGNWITH RETURN OF INCOME. THUS, THE CASE IS COVERED BY THE PROVISO TO SECTION 1 47 ACCORDING TO WHICH NO REASSESSMENT PROCEEDING CAN BE INITIATED BEYOND FOUR YEARS UNLESS THERE IS OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS TRULY AND FULLY. HONBLE BOMBAY HIGH COURT IN THE CASE OF IPCA LABORATORIES L TD. 251 ITR 416 (BOM) HELD AS UNDER: - THE REASONS ALSO DID NOT SPELL OUT FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IN THE CIRCUMSTANCES, THE DEEMING PROVISION IN EXPLANATION 2 TO SECTION 147 HAD NO APPLICATION TO THE FACTS OF THE INSTANT CASE. THUS, THE IMPUGNED NOTICE WAS SET ASIDE. 16. HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD., 268 ITR 339 HELD A S UNDER: - DISCLOSURE OF REASONS WOULD MAKE IT CLEAR THAT NO FAILURE ON THE PART OF THE PETITION ER TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THAT ASSESSMENT YEAR HAD BEEN ALLEGED AND AS SUCH THE NOTICE WAS HIT BY THE PROVISO TO SECTION 147 AND THE SAME BEING BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASS ESSMENT YEAR WAS UNSUSTAINABLE IN LAW, MUCH LESS, THE SAME WAS WITHOUT JURISDICTION. THEREFORE, THE NOTICE ISSUED U/S. 148 WAS QUASHED AND SET ASIDE. EVEN OTHERWISE, HAVING EXAMINED THE FACTS AND THE PROCEEDINGS, IT IS CLEAR THAT THE REVENUE COULD NOT EST ABLISH ANY LAPSE OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL NECESSARY FOR THE ASSESSMENT OF THE PETITIONER FOR THE ASSESSMENT YEAR IN QUESTION. ITA NO. 6960/MUM/2016 M/S. DARSHAN PROPERTIES 7 17. IN THE CASE OF GRINDWELL NORTON LTD., 267 ITR 673, HONBLE BOMBAY HIG H COURT OBSERVED AS UNDER: - NOWHERE IN THE REASONS RECORDED BY THE AO, IT WAS STATED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS IN THE RETURN FILED BY THE ASSESSEE. IN THE ABSENCE OF ANY FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, THE REOPENING OF THE ASSESSMENTS BEYOND THE PERIOD OF FOUR YEARS COULD NOT BE SUSTAINED. 18. SIMILAR VIEW HAS BEEN TAKEN BY BOMBAY HIGH COURT IN THE CASE OF GERMAN REMEDIES LTD., 287 ITR 494, AVENTIS PHA RMA LTD., 368 ITR 498. RESPECTFULLY FOLLOWING THE PROPOSITION OF LAW LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN ABOVE DECISIONS, WE DO NOT FIND ANY MERIT IN THE REOPENING OF ASSESSMENT IN SO FAR AS REOPENING WAS BEYOND A PERIOD OF FOUR YEARS FROM THE EN D OF THE RELEVANT ASSESSMENT YEAR AND THERE WAS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL THE MATERIAL FACTS TRULY AND FULLY. 19. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 / 01 /201 9 SD/ - ( RAM LAL NEGI ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 16 / 01 / 201 9 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2 . THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//