Mrs.Sejal J Panchal, Ahmedabad V. ITO,Ward-10(4), Ahmedabad

ITA 776/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8010 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RICHA RASTOGI
• Keywords: Reason to believe
• Section: 147

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD .., , BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.776/AHD/2015 ( / ASSESSMENT YEAR : 2006-07) MRS. SEJAL J PANCHAL C/O.SURESH R.SHAH & ASSOCIATES GHANSHYAM CHEMBER OPP. MITHAKHALI RLY CROSSING MITHAKHALI ELLISBRIDGE AHMEDABAD / VS. THE ITO WARD-10(4) AHMEDABAD $ ./ ./ PAN/GIR NO. : AKEPP 9021G ( $' / APPELLANT ) .. ( ($' / RESPONDENT ) $') / APPELLANT BY : SHRI SUNIL TALATI, AR ($'*) / RESPONDENT BY : MS.RICHA RASTOGI, DR +,*- / DATE OF HEARING 10/11/2017 ./0*- / DATE OF PRONOUNCEMENT 13/ 12 /2017 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTAN CE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, AHMEDABAD [CIT(A) IN SHORT] DATED 15/01/2015 ARISING IN THE ITA NO. 776/AHD /2015 MRS. SEJAL J.PANCHAL VS. ITO ASST.YEAR 2006-07 - 2 - ASSESSMENT ORDER FOR ASSESSMENT YEAR ASSESSMENT YEA R (AY) 2006-07 DATED 14/02/2014 PASSED UNDER S.143 R.W.S.147 OF TH E INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AR E TWO FOLD; (I) CHALLENGING THE JURISDICTION UNDER SECTION 147 AND (II) CHALLENGING THE ACTION OF THE ASSESSING OFFICER (AO) IN MAKING CERT AIN/DISALLOWANCES IN PURSUANCE OF THE ASSUMPTION OF JURISDICTION UNDER S .147 OF THE ACT. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LD. AR FOR THE ASSESSEE, AT THE OUTSET, CHALLENGED THE ACTION OF T HE AO IN USURPING JURISDICTION UNDER S.147 OF THE ACT WRONGFULLY. TH E LD.AR CLAIMED THAT THE REASONS RECORDED BY THE AO DOES NOT MEET THE PR E-REQUISITES FOR ASSUMPTION OF JURISDICTION AND THEREFORE THE NOTICE ISSUED PURSUANT TO SUCH RECORDING OF REASONS IS BAD IN LAW. IT WAS TH US SUBMITTED THAT THE CONSEQUENT REASSESSMENT ORDER IS WITHOUT AUTHORITY OF LAW. THE LDAR POINTED OUT THAT THE ACTION UNDER S.147 HAS BEEN TA KEN PURSUANT TO NOTICE DATED 23/09/2013 WHICH IS AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. CONSEQUENTLY, THE TI ME LIMIT FOR ISSUANCE OF NOTICE AS PROVIDED UNDER S.149(1)(B) OF THE ACT HAS EXPIRED. THE LD.AR THEREAFTER POINTED OUT THAT A MEAGER ADDITION OF RS.16,320/- HAS BEEN MADE WHICH OSTENSIBLY MEANS THAT INCOME CHARGE ABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AS PER THE OWN VERSION OF TH E AO IS LESS THAN RS.1 LAKH. THEREFORE, THE NOTICE UNDER S.147 COULD NOT HAVE BEEN ISSUED ITA NO. 776/AHD /2015 MRS. SEJAL J.PANCHAL VS. ITO ASST.YEAR 2006-07 - 3 - IN TERMS OF SECTION 149 OF THE ACT. THE LD.AR THER EAFTER SUBMITTED THAT A BARE READING OF THE REASONS RECORDED WOULD SHOW THA T THE AO BASED ON CERTAIN INFORMATION RECEIVED PURSUANT TO SEARCH IN THE CASE OF MAHASAGAR SECURITIES LTD. HAS PROPOSED TO REOPEN THE CASE FO R DETAILED VERIFICATION ON VARIOUS ASPECTS. THE LD.AR SUBMITTED THAT ITS OSTENSIBLE THAT THE AO DID NOT FORM ANY FIRM REASON TO BELIEVE CONTEMPLATE D UNDER S.147 OF THE ACT TOWARDS ESCAPEMENT OF INCOME. THE PLAIN READIN G OF THE REASONS PROVIDED WOULD SHOW THAT THE AO MERELY WANTED TO MA KE ENQUIRY TO FIND OUT THE CORRECTNESS OF THE INFORMATION SO RECEIVED FROM OTHER AGENCIES. THE LD.AR ACCORDINGLY SUBMITTED THAT A BONAFIDE B ELIEF TOWARDS ESCAPEMENT OF INCOME IS CLEARLY ABSENT IN THE CASE. THE LD.AR ACCORDINGLY SUBMITTED THAT THE ENTIRE ACTION OF THE AO IS A COMPLETE NON- STARTER AND REQUIRES TO BE STRUCK DOWN. 4. THE LD.DR, ON THE OTHER HAND, SUBMITTED THAT THE TIME LIMIT PRESCRIBED UNDER S.149 FOR ISSUANCE OF NOTICE UNDER S.147 OF THE ACT IS NOT APPLICABLE SINCE THE LIKELY ESCAPEMENT AT THE TIME OF RECORDING OF REASONS WAS MORE THAN RS.1 LAKH WHICH WHITTLED DOWN AT ASSE SSMENT STAGE. THE LD.AR RELIED ON THE ORDER OF THE CIT(A) FOR UPHOLDI NG THE ACTION OF THE AO UNDER S.147 OF THE ACT. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SU BMISSIONS. WE HAVE ALSO PERUSED THE REASONS RECORDED FOR ISSUANCE OF NOTICE UNDER S.147 OF THE ITA NO. 776/AHD /2015 MRS. SEJAL J.PANCHAL VS. ITO ASST.YEAR 2006-07 - 4 - ACT WHICH IS UNDER CHALLENGE. IT WILL BE APT TO REP RODUCE THE REASONS RECORDED HEREUNDER:- THE SEARCH & SEIZURE ACTION CARRIED OUT BY THE DEP ARTMENT ON 25.11.2009 IN THE CASE OF M/S. MAHASAGAR SECURITIES LTD., AND ALSO COVERED ITS GROUP COMPANIES WHICH WERE CONTROLLED B Y SHRI MUKESH M. CHOKSI, AT MUMBAI. SHRI MAKESH M, CHOKSI HIMSELF AD MITTED THAT MY AIL -GROUP COMPANIES ARE PROVIDING ENTRY FOR TAKING PRO FIT OR TOSS BY SHOWING PURCHASE OR SALE OF THE SHARES AND SECURITI ES TO VARIOUS PARTIES ACROSS INDIA ON WHICH I CHARGED CERTAIN COMMISSION FROM THE BENEFICIARY PARTIES. THE SAME INFORMATION RECEIVED BY THIS OFFICE FROM THE DIRECTOR OF INCOME-TAX (I & C.I.), NEW DELHI, V IDE LETTER DATED 07.03.2013. ON DEEP SCRUTINIZED OF THE DATA/DETAILS RECEIVED IN THIS OFFICE IT IS ASCERTAIN THAT YOU ALSO INVOLVED IN TH E TAKING ENTRY FROM THE GROUP COMPANIES BELONGS TO SHRI MUKESH CHOKSI DURIN G THE F.Y. 2005- 06 FOR TAKING FICTITIOUS ENTRIES BY SHOWING PURCHAS E AND SALE OF SHARE AND SECURITIES. THUS IN YOUR CASE SAID TRANSACTIONS SHOULD BE REQUIRED FOR DETAILED VERIFICATION FROM VARIOUS ASPECTS'. 5.1. A BARE GLANCE OF THE REASONS RECORDED GIVES UN MISTAKABLE IMPRESSION THAT THE ACTION UNDER S.147 OF THE ACT W AS TAKEN FOR DETAILED VERIFICATION OF THE VARIOUS ASPECTS OF THE REFERENC E MADE TO THE AO IN CONSEQUENCE OF SEARCH IN CASE OF A THIRD PARTY. TH US, IT IS EVIDENT THAT NO DEFINITE FORMATION OF BELIEF TOWARDS ESCAPEMENT OF INCOME WAS MADE AT THE TIME OF ISSUANCE OF NOTICE. THE AO HAS NOT EVE N COME TO A PRIMA- FACIE CONCLUSION TOWARDS ESCAPEMENT OF INCOME. WHAT T HE AO INTENDED IS TO MAKE OBJECTIVE ENQUIRY INTO THE CORRECTNESS O F THE INFORMATION RECEIVED FROM OTHER WING OF THE DEPARTMENT AND FIND OUT IF THERE IS ANY ITA NO. 776/AHD /2015 MRS. SEJAL J.PANCHAL VS. ITO ASST.YEAR 2006-07 - 5 - ESCAPEMENT OF INCOME. THE AO MERELY SEEKS TO CONCL UDE THAT THERE IS A CASE FOR INVESTIGATION TOWARDS TRUTH OF THE ALLEGE D TRANSACTIONS. THIS IS NOT THE SAME THING AS SAYING THAT THERE ARE REASON S TO BELIEF THAT SOME CHARGEABLE INCOME HAS ESCAPED ASSESSMENT. OSTENSIB LY, THE AO AT BEST HAS MADE OUT A CASE OF PROBABLE ESCAPEMENT IN DIS TINCTION TO A DEFINITE CONCLUSION OF ESCAPEMENT OF INCOME. THUS, THE REQU IREMENT OF SECTION 147 IS CLEARLY NOT FULFILLED. 5.2. NEEDLESS TO SAY, PROVISIONS OF SECTION 147 W HICH GIVES POWER TO REOPEN A COMPLETED ASSESSMENT CAN BE INVOKED ONLY W HEN THE CONDITIONS PRECEDENT FOR EXERCISING THE JURISDICTION EXISTS. EXERCISE OF POWER UNDER S.147 OF THE ACT CANNOT BE MADE ON THE BASIS OF MER E IPSI DIXIT OF REVENUE. IT IS WELL SETTLED BY PLETHORA OF JUDICIA L PRECEDENTS THAT REOPENING IS NOT PERMISSIBLE MERELY SEEKING TO INVE STIGATE THE FACTS COLLECTED WITHOUT HOLDING ATLEAST PRIMA-FACIE BELIEF BASED ON RELEVANT MATERIAL TOWARDS ESCAPEMENT OF INCOME. THE CONDITI ONS HAVE NOT BEEN MET. HENCE, THE NOTICE ISSUED UNDER S.147 OF THE A CT IS NOT BACKED BY AUTHORITY OF LAW AND CONSEQUENTLY BAD IN LAW. THE ASSESSMENT AS A SEQUEL TO SUCH ILLEGAL NOTICE IS THEREFORE NULL AND VOID AND REQUIRES TO BE QUASHED. ITA NO. 776/AHD /2015 MRS. SEJAL J.PANCHAL VS. ITO ASST.YEAR 2006-07 - 6 - 6. IN THE RESULT, ASSESSEE SUCCEEDS ON LEGAL GROUND TOWARDS VALIDITY OF JURISDICTION UNDER S.147 OF THE ACT. HENCE, WE DO NOT CONSIDER IT NECESSARY TO DWELL UPON THE MERITS OF THE CASE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 13 / 12 /2017 SD/- SD/- (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13/ 12 /2017 4..+,.+../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 567- 8- / CONCERNED CIT 4. 8- ( ) / THE CIT(A)-5, AHMEDABAD 5. 9:-+67 , 670 , 5 / DR, ITAT, AHMEDABAD 6. <, / GUARD FILE. / BY ORDER, (9-- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD