M/s. Tulsi Lottery Agency, Ahmednagar V. Income-tax Officer, Ward - 2, Ahmednagar

ITA 716/PUN/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9234 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 1997-1998
• Appeal Filed On: 18-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tangible material; Difference of opinion; Reason to believe; Change of opinion; Set aside
• Section: 143(3); 133A; 148

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.716/PUN/2018 / ASSESSMENT YEAR : 1997-98 M/S. TULSI LOTTERY AGENCY, JAI BABA JEEVAN MUTTA SHOPPING CENTRE, MALIWADA ROAD, NEAR ASHA TALKIES, AHEMDNAGAR 414 001. PAN : AABFT7030Q. . / APPELLANT V/S THE INCOME TAX OFFICER, WARD-2, AHMEDNAGAR. . / RESPONDENT ASSESSEE BY : SHRI PRAYAG JHA. REVENUE BY : SHRI RAJESH GAWALI. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) - 2, PUNE DATED 21.12.20 17 FOR THE ASSESSMENT YEAR 1997-98. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF SALE OF LOTTERY TICKETS ON WHOLESALE BASIS. ASS ESSEE FILED ITS RETURN OF INCOME FOR A.Y. 1997-98 ON 27.10.1997 DECLARING TOTAL / DATE OF HEARING : 02.01.2019 / DATE OF PRONOUNCEMENT: 29.03.2019 2 ITA NO.716/PUN/2018 INCOME OF RS.3,19,540/-. THE ASSESSMENT WAS INITIALLY FRAMED U/S 143(3) OF THE ACT ON 15.02.2000 AND THE TOTAL INCOME WAS DETERMINED AT RS.5,23,530/-. SUBSEQUENTLY, A SURVEY WAS CARRIED OUT U/S 133A OF THE ACT AT THE BUSINESS PREMISES OF TH E ASSESSEE ON 25.03.2004. DUE TO SURVEY ACTION, NOTICE U/S 148 OF THE ACT WAS ISSUED ON 30.03.2004 AND SERVED ON THE ASSESSEE. THERE AFTER, ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE ACT VI DE ORDER DT.28.02.2005 AND THE TOTAL INCOME WAS DETERMINED AT RS.17,85,820/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.21.12.2017 (IN APP EAL NO.PN/CIT(A)-I/ITO WD-2/AN/109/2006-07) GRANTED PARTIA L RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSE SSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. TH E LEARN E D CIT(A) ERRED IN UPHOLDING THE ACTION OF THE LEARN ED ASSESSING OFFICER TO REOPEN THE ASSESSMENT C O MPLETED UNDER SECTION 143(3) AFTER EXPIRY OF FOUR YEARS WITHOUT POINTING OUT ANY FA I LUR E ON TH E PART OF THE ASSESS E E TO DISCLOSE F ULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASS E SS MENT W HICH HAD RENDERED THE R E ASSESSMENT PROCEEDINGS BAD IN LAW AND THE CONSEQUENTIAL ASS E SS MENT O RDER IS LIABLE TO BE QU AS HED. 2 . THE LEARNED CIT(A) ERRED IN N O T APPRECIATING THAT THE LEARNED ASSESSING OFFICER HAD MADE A DDITION ON AD HOC BASIS IN THE REASSESSMENT ORDER ON DIFFERENT GROUND FROM THE GRO UND ON WHICH THE ASSESS MENT WA S REOPENED AND REA S SESSMENT ORDER DESERVED TO BE QUASHED . 3 . THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT T HE LEARNED ASSESSING OFFICER HAD MADE A DDITI O N ON A D HOC BASIS IN THE REAS S E S SMENT ORDER ON DIFFERENT GROUND FROM THE GROUND ON WHICH THE AS S E S S MENT WA S REOPENED AND REA S SE S SMENT ORDER AND THE ADDITION DESERVED TO BE DELETED FULLY . 4 . T H E LEARN E D CIT(A) ERRED IN S U S TAINING PART OF THE ADDITION MADE AND DIRECTING THE LEARNED ASS ES S ING O FF ICER TO TREAT THIS ADDI T ION ON SUBSTANTIVE BASIS WITHOUT HAVING ANY MATERIAL TO DI SAGREE WITH THE LEARNED ASSESSING OFFICER WHO HAD MADE ADD ITION OF RS.12 , 62,287/- ON PROTECTIVE BASIS . 5 . T H E LEARN E D CIT(A) ERRED IN S U S T A INING ADDITION TO THE EXTENT OF RSA,98 , 928 / - AND ALSO DIRECTING TH E L E ARNED A SSESSING OFFICER T O TA X THIS AMOUNT ON SUBSTANTIVE BASIS WITHOUT APPRECIATI NG THAT A DDITI O NS 3 ITA NO.716/PUN/2018 M AD E ON SUBSTANTIVE B AS IS IN THE HANDS O F THE SEMI-WHOLESALE DEALERS AND RETAILERS WERE DEL E T E D IN A P PE AL. 3. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETHE R. 4. LD.A.R. SUBMITTED THAT IN THE PRESENT CASE FOR A.Y 1997- 98 THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 15.02.2000. THEREAFTER NOTICE U/S 148 OF THE ACT WAS ISSU ED ON 30.03.2004 I.E., BEYOND FOUR YEARS FROM THE END OF THE RELEV ANT ASSESSMENT YEAR AS THE PERIOD OF FOUR YEARS FROM THE EN D OF A.Y 1997-98 EXPIRED ON 31.03.2002. HE SUBMITTED THAT SEC.147 OF THE ACT CONTAINS A PROVISO WHICH STATES THAT NO ACTION UND ER SECTION 147 OF THE ACT WILL BE TAKEN AFTER A PERIOD OF EXPIRY OF FOUR YE ARS OF THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE ASSESSE E HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. HE SUBMITTED THA T IN THE NOTICE OR IN THE REASONS RECORDED, THERE IS NOT EVEN A WHISPER ABOUT THERE BEING ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE NECESSARY MATERIAL FACTS FOR THE ASSESS MENT WHICH IS A MANDATORY REQUIREMENT AS HELD BY HONBLE BOMBAY HIG H COURT IN THE CASE OF ZUARI FOODS AND FARMS P LTD VS ACIT REP ORTED IN (2018) 408 ITR 279 (BOM). HE ALSO RELIED ON THE DECISION IN THE CASE OF PANCHRATNA CO-OPERATIVE HOUSING SOCIETY LTD., VS ASSE SSING OFFICER & ORS (2015) 125 DTR (BOM) 62. HE ALSO PLACED ON RECOR D THE COPY OF THE AFORESAID DECISIONS. HE THEREFORE SUBMITTED THA T THE NOTICE U/S 148 OF THE ACT WAS VOID AB INTIO AND BAD-IN-LAW AND SAME DESERVES TO BE QUASHED. 4 ITA NO.716/PUN/2018 5. HE FURTHER SUBMITTED THAT THE REASSESSMENT PROCEED INGS WERE INITIATED ON THE BASIS OF THE APPELLATE ORDERS OF LD.CIT(A) IN THE CASES OF GANESH LOTTERY, LOKMAT LOTTERY AND NILKAMAL LOTTERY W HEREIN THE AFORESAID FIRMS HAD DENIED TO HAVE MADE ANY PURCHASES FR OM THE ASSESSEE WHEREUPON A SURVEY U/S 133A OF THE ACT WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE TO VERIFY THE FACTS. DURING THE COURSE OF SURVEY, CASH BOOK, PURCHASE REGISTER, SALES REGISTER WERE FOUND BUT NO SUPPORTING BILLS WERE FOUND. IN RESPECT OF THE SUPPORTIN G BILLS, HE SUBMITTED THAT THE PARTNER OF THE FIRM HAD STATED THAT THEY WERE NOT AVAILABLE AS THEY WERE DESTROYED BY WHITE ANTS. IN THE A BSENCE OF NON- AVAILABILITY OF EVIDENCE FOR SUPPORTING SALES, IN THE REAS ONS RECORDED FOR REOPENING THE ASSESSMENT IT WAS NOTED THA T THE AGGREGATE SALES PROCEEDS AMOUNTING TO RS.4.91 CRORES W ERE ASSESSEES OWN FUNDS THAT WERE INTRODUCED IN THE BUSINE SS BY THE ASSESSEE. HE SUBMITTED THAT IN THE RE-ASSESSMENT ORDER , AO HAS TREATED THE AFORESAID AMOUNT OF RS.4,91,61,108/- AS RET AIL SALES INSTEAD OF WHOLESALE AND ADOPTED GROSS PROFIT AT 5% THER EON AND THEREBY MADE ADDITION OF RS.12,62,287/- AND THAT TOO ON PROTECTIVE BASIS WHICH ITSELF DEMONSTRATES THAT THE REVENUE IS NOT S URE ABOUT THE ADDITION IS TO BE MADE IN WHOSE HANDS. 6. LD.A.R. FURTHER SUBMITTED THAT DURING THE COURSE OF ORIG INAL ASSESSMENT PROCEEDINGS, ASSESSEE HAD SUBMITTED THE DET AILS OF ALL OUTSTANDING DEBTS EACH EXCEEDING RS.1 LAKH AND THE SAM E WAS EXAMINED BY THE AO. HE SUBMITTED THAT IN THE ORIGINAL ASS ESSMENT ORDER, AO HIMSELF HAS ELABORATED STATED ABOUT THE MODUS OPERANDI OF THE LOTTERY BUSINESS AND THAT THE REOPENING WAS ON T HE BASIS OF 5 ITA NO.716/PUN/2018 MERE CHANGE OF OPINION AND IT IS A SETTLED POSITION OF LAW T HAT NO NOTICE U/S 148 OF THE ACT CAN BE ISSUED ON THE BASIS OF MERE CHANGE OF OPINION. 7. HE FURTHER POINTING TO THE LAST PARA OF THE REASONS RECORDED U/S 148 OF THE ACT POINTED OUT THAT THE NOTICE WAS ISSU ED ON THE BASIS OF THE ALLEGATION THAT THE ASSESSEE HAD USED ITS O WN FUNDS TO THE EXTENT OF RS. 4.91 CRORES (ROUNDED OFF). HE THEREFORE SUBMITTED THAT EVEN ON MERITS THE REOPENING IS NOT SUSTAINABLE AND THE SAME DESERVES TO BE SET ASIDE. LD.D.R. ON THE OTHER HAND SUPP ORTED THE ORDER OF LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUNDS OF APPEAL IS WITH RESPECT TO REOPENING OF THE ASSESSMENT AND THE ADDITIONS MADE THEREAFTER . 9. SECTION 147 OF THE ACT DEALS WITH THE INCOME ESCAPING ASSESSMENT AND STATES THAT IF THE ASSESSING OFFICER HAS R EASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT, HE IS EMPOWERED TO REOPEN THE ASSESSMENT TO REASSESS THE INCOM E AS PER THE CONDITIONS LAID DOWN. THE PROVISO TO SECTION 147, HOWEVER, MANDATES THAT THE REASSESSMENT SHALL NOT BE INITIATED A FTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESS MENT YEAR, UNLESS THERE IS A FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. THROUGH VARIOUS DECISIONS THE LEGAL POSITION IS SETTLED THAT THE CON DITIONS SPECIFIED IN SEC.147 OF THE ACT ARE JURISDICTIONAL REQUIREMENT S AND 6 ITA NO.716/PUN/2018 UNLESS THEY ARE FULFILLED, NO PROCEEDINGS UNDER THESE SECTIO NS CAN BE TAKEN. 10. WHEN THE FACTS OF THE PRESENT CASE ARE CONSIDERED IN THE LIGHT OF THE AFORESAID LEGAL POSITION WITH RESPECT TO THE REOPEN ING OF ASSESSMENT, IT IS AN UNDISPUTED FACT THAT IN THE PRESENT CASE THE ORIGINAL ASSESSMENT FOR A.Y 1997-98 WAS FRAMED U/S 143(3) OF THE ACT ON 15.02.2000. THEREAFTER THE NOTICE FOR REOPENING TH E ASSESSMENT U/S 148 OF THE ACT WAS ISSUED ON 30.03.2004 WHICH IS BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVAN T ASSESSMENT YEAR AND THUS THE REASSESSMENT PROCEEDING S ARE TAKEN UP BEYOND THE PERIOD OF FOUR YEARS. THE PROVISO TO SECTIO N 147 OF THE ACT LAYS DOWN THAT NO ACTION FOR REASSESSMENT UNDER IT SHALL BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ASSESSEE FAILS TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT ASSES SMENT YEAR. IN THE REASONS THAT ARE RECORDED FOR REOPENING THERE IS NOT A WHISPER THAT THE ASSESSEE FAILED TO MAKE FULL AND TRUE DISCLOSURE O F ANY RELEVANT FACTS OR THAT THE ASSESSEE HAS WITHHELD SUCH NECESSARY FACTS AND THEREFORE THE REOPENING IS NECESSARY. FURTHER THE R EADING OF THE REASONS WHICH IS PLACED IN THE PAPER BOOK ALSO DOES NOT INDICATE THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. 11. WE FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF ZUARI FOODS (SUPRA) HAS HELD THAT WHEN THE REASSESSMENT PROCE EDINGS ARE INITIATED AFTER A PERIOD OF FOUR YEARS, THE ASSESSING OFFICER MUST STATE 7 ITA NO.716/PUN/2018 SO IN THE REASONS AND THE ACTION MUST BE FOUNDED ON SU CH REASONS. WE FURTHER FIND THAT THE IN THE REASSESSMENT ORDER THE ADDITION OF RS.12,62,287/- HAS BEEN MADE ON PROTECTIVE BASIS. THE POW ERS UNDER SECTION 147 OF THE ACT CANNOT BE EXERCISED MEREL Y ON SUSPICION OR ON AN APPREHENSION THAT THE INCOME OF AN AS SESSEE HAS ESCAPED ASSESSMENT AND FOR THIS REFERENCE IS MADE TO TH E DECISION IN THE CASE OF ORIENTAL INSURANCE COMPANY VS. CIT (2015) 37 8 ITR 421 (DEL). IT IS NOW WELL ESTABLISHED THAT THE POWERS UNDER SEC TION 147 OF THE ACT BY THE AO CAN BE INVOKED ONLY IN CASES WHERE THE AO HAS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT HAS BEEN HELD IN SEVERAL DECISIONS THAT RE ASON TO BELIEVE MUST BE BASED ON TANGIBLE MATERIAL AND COGENT FACTS. 12. AS FAR AS PROTECTIVE ASSESSMENT IS CONCERNED, WHERE THERE IS DOUBT OR AMBIGUITY ABOUT THE REAL ENTITY IN WHOSE HANDS A PARTICULAR INCOME IS TO BE ASSESSED, THE ASSESSING AUTHORITY IS ENTIT LED TO HAVE RECOURSE TO MAKING A PROTECTIVE ASSESSMENT IN THE CASE OF ONE AND A REGULAR ASSESSMENT IN THE CASE OF OTHER. IN THE PRES ENT CASE AS NOTED THAT THE ADDITION HAS BEEN MADE BY THE AO ON PROTECTIVE BASIS WHIC H ITSELF SHOWS THAT THE AO WAS NOT ABLE TO MAKE UP HIS MIND AS TO ON WHOSE HANDS THE AMOUNT WAS TAXABLE. IN SUCH A SITUATION , WE ARE OF THE VIEW THAT IT IS NOT POSSIBLE TO SAY THAT THE AO HAD ENTERTAINED A REASONABLE BELIEF THAT SOME INCOME OF THE ASSESSEE HAD ES CAPED ASSESSMENT MORE SO WHEN AS PER THE PROVISIONS OF ACT, THE REASO N TO BELIEVE DOES NOT MEAN REASON TO SUSPECT THAT INCOME H AD ESCAPED ASSESSMENT. CONSIDERING THE TOTALITY OF THE AFORESAID FACT S, WE ARE OF THE VIEW THAT THE JURISDICTIONAL REQUIREMENT FOR REOPENING HAS NOT 8 ITA NO.716/PUN/2018 BEEN SATISFIED IN THE PRESENT CASE. WE THEREFORE SET ASIDE THE REASSESSMENT ORDER PASSED BY THE AO AND CONFIRMED BY CIT(A). THUS THE GROUNDS OF ASSESSEE ARE ALLOWED. 13. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 29 TH DAY OF MARCH, 2019. SD/- SD/ - ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 29 TH MARCH, 2019. YAMINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-2, PUNE. PR. CIT-1, PUNE. , , / DR, ITAT, SMC PUNE; / GUARD FILE. / BY ORDER // TRUE COPY // !' / SR. PRIVATE SECRETARY , / ITAT, PUNE.