Dr. Bharat Ratilal Shah, Ahmedabad V. Income Tax Officer, Ahmedabad

ITA 786/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2413 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JIGNESH M SHAH
• Keywords: Reopening of assessment; Unexplained investment; Principle of natural justice; Borrowed satisfaction
• Section: 143(3)

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO. 786/AHD/2015 ( ASSESSMENT YEAR : 2006-07) DR. BHARAT RATILAL SHAH, 3-A, VIKRAMNAGAR SOCIETY, USMANPURA, AHMEDABAD / VS. INCOME TAX OFFICER, WARD 9(3)/ABD, AHMEDABAD ./ ./ PAN/GIR NO. : AINPS2488K ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI JIGNESH M. SHAH, A.R. / RESPONDENT BY : SHRI KAMLESH MAKWANA, SR. D.R. DATE OF HEARING 13/08/2018 !'# / DATE OF PRONOUNCEMENT 04/09/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-4, AHMEDAB AD (CIT(A) IN SHORT), DATED 09.02.2015 ARISING IN THE ASSESSMENT ORDER DATED 29.12.2011 PASSED BY THE ASSESSING OFFICER (AO) UND ER S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT) CO NCERNING ASSESSMENT YEAR 2006-07. ITA NO. 786/AHD/15 [DR. BHARAT R.SHAH VS. ITO] AY 2006-07 - 2 - 2. THE SOLITARY GROUND OF ASSESSEES APPEAL READS A S UNDER: (1) IN THE FACTS OF THE CASE AND IN LAW ADDITION O F RS.2421000/- U/S.69 OF IT ACT 1961 AS UNEXPLAINED INVESTMENT BY REOPENING THE ASSESSMENT U/S.147 IS BAD IN LAW AND BE CANCELL ED. (2) ADDITION OF RS.2421000/- MADE ON THE BASIS OF DOCUMENTS ALLEGED TO HAVE BEEN FOUND AT THE SEARCH OF THE THI RD PARTY WITHOUT GIVING ANY OPPORTUNITY TO DISPROVE THE SAME BE DELETED. IT AMOUNTS TO REOPENING OF ASSESSMENT MADE ON THE BASIS OF BORROWED SATISFACTION OF DCIT CENTRAL CIR. 1(1), AHMEDABAD LETTER DT.30.03.2009 REFERRED TO IN REASO NS RECORDED VIDE A.O.'S LETTER DT.17.11.2011 AND THERE FORE ASSESSMENT U/S.143(3)/147 BE CANCELLED. (3) THE A.O. HAS ERRED IN NOT FURNISHING THE EVIDEN CES AND INFORMATION REFERRED TO IN REASONS RECORDED AND USE D AGAINST THE APPELLANT TREADING THE SAME AS INFORMATION IN M AKING ADDITION OF RS.2421000/- BE DELETED. (4) THE ACTION OF THE A.O. IS IN TOTAL VIOLATION O F PRINCIPLES OF NATURAL JUSTICE. THE CIT(A) 4, AHMEDABAD ERRED IN U NILATERALLY CONSIDERING THE MATERIAL MENTIONED IN REASONS RECOR DED FURNISHED BY A.O. VIDE LETTER DT.17.11.2011 WITHOUT FURNISHING THE MATERIAL REQUESTED BY APPELLANT REPEATEDLY. (5) THE A.O. & CIT(A) HAVE NOT DISPROVED THE CONFIR MATION DT.01.12.2011 OF SAMUTKARSH CO. OP. HOUSING SOC. TH AT THE APPELLANT HAS PAID RS.1052210/- FOR PURCHASE OF PLO T OF LAND NO.18 ADMEASURING 958 SQ.YDS. SURVEY NO.273, 274/1 AND 271 AT MAKARBA, AHMEDABAD. THE ADDITION OF RS.2421000/- MADE ON PRESUMPTIVE MANNER BE DELETED. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LE ARNED AR FOR THE ASSESSEE SUBMITTED AT THE OUTSET THAT ACTION UNDER S.147 OF THE ACT HAS BEEN WRONGFULLY TAKEN WITHOUT AUTHORITY OF LAW. TH IS BEING JURISDICTIONAL DEFECT WHICH GOES TO THE ROOT OF THE MATTER REQUIRED TO BE GIVEN PRIMACY IN THE MATTER OF ADJUDICATION. TH E LEARNED AR REFERRED TO THE REASONS RECORDED AT PAGE NO.3 OF TH E PAPER BOOK AND SUBMITTED THAT THE REASONS RECORDED SHOWS LACK OF A PPLICATION OF MIND AND APPARENTLY THE ACTION UNDER S.147 OF THE ACT WA S TAKEN TO VERIFY THE FACTS CONCERNING ALLEGED ESCAPEMENT OF ACTION. IT WAS FURTHER CONTENDED THAT THE AO HAS MECHANICALLY ACTED UPON T HE INFORMATION ITA NO. 786/AHD/15 [DR. BHARAT R.SHAH VS. ITO] AY 2006-07 - 3 - RECEIVED FROM ANOTHER OFFICER OF THE DEPARTMENT WIT HOUT HAVING APPLIED HIS OWN INDEPENDENT MIND TO THE FACTS AVAIL ABLE, IF ANY. THUS, PURPORTED BELIEF OF THE AO IS ABSENT IN THE PRESENT CASE. THE LEARNED AR THEREAFTER ADVERTED TO A DETAILED DISCUSSION FIL ED BEFORE THE AO DATED 21.11.2011 RAISING VARIOUS POINTS AGITATING T HE ACTION INITIATED UNDER S.147/148 OF THE ACT. THE LEARNED AR STRENUO USLY SUBMITTED THAT THE OBJECTION RAISED BY THE ASSESSEE HAS NOT B EEN DISPOSED AND THEREFORE THE RE-ASSESSMENT COMPLETED UNDER S.147 O F THE ACT IS APPARENTLY BAD IN LAW. THE LEARNED AR ACCORDINGLY INSISTED THAT NEITHER THE REASONS RECORDED MEETS THE REQUIREMENTS OF LAW AS ENJOINED BY SECTION 147 OF THE ACT NOR DOES THE ACTION OF TH E AO IS IN CONFORMITY WITH THE STANDARD OPERATING PROCEDURE FO R DISPOSAL OF OBJECTION RAISED AS MANDATED BY THE SEVERAL JUDICIA L PRECEDENTS. THE LEARNED AR ACCORDINGLY SUBMITTED THAT THE AFORESAID JURISDICTIONAL DEFECTS ARE NOT CURABLE AND THEREFORE, THE RE-ASSES SMENT ORDER REQUIRES TO BE CANCELLED AND SET ASIDE. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE AO AND CIT(A) IN THIS REGARD. 5. SINCE, THE ISSUE RAISED ON BEHALF OF THE ASSESSE E TOWARDS JURISDICTIONAL DEFECT IS FUNDAMENTAL AND CARDINAL I N NATURE WHICH GOES TO THE VERY ROOT OF THE CONTROVERSY, WE CONSIDER IT EXPEDIENT TO DEAL WITH THE SAME IN THE FIRST INSTANCE. WE NOTICE FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT S (INDIA) LTD. VS. ITO 259 ITR 19 (SC) THAT ON RECEIPT OF REASONS FROM THE AO, THE ASSESSEE IS ENTITLED TO FILE OBJECTIONS TO THE ISSU ANCE OF THE NOTICE AND THE AO IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. THE AO HAS ADMITTEDLY FAILED TO DISPOSE OF THE OBJE CTIONS RAISED BY THE ASSESSEE. IN VIEW OF THE DECISION OF THE HONB LE SUPREME COURT, THE AO WAS UNDER A SACROSANCT OBLIGATION TO DISPOSE OF THE PRELIMINARY ITA NO. 786/AHD/15 [DR. BHARAT R.SHAH VS. ITO] AY 2006-07 - 4 - OBJECTION RAISED BY THE ASSESSEE AND COULD NOT HAVE FRAMED THE RE- ASSESSMENT ORDER WITHOUT DOING SO. SIMILAR ISSUE W AS CROPPED UP AGAIN BEFORE THE HONBLE GUJARAT HIGH COURT FOR ITS CONSIDERATION IN THE CASE OF ARVIND MILLS LTD. VS. ACWT 270 ITR 467 & ORS. (GUJ.) AND RECENTLY IN MGM EXPORTS VS. DCIT 323 ITR 331 (G UJ). APPLYING THE LEGAL POSITION AS LAID DOWN IN GKN DRIVESHAFTS (SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HELD THE ACTION O F THE AO IN FRAMING THE RE-ASSESSMENT ORDER WITHOUT FIRST DISPO SING OF THE PRELIMINARY OBJECTIONS RAISED BY THE ASSESSEE TO BE UNSUSTAINABLE IN LAW. ACCORDINGLY, THE HONBLE HIGH COURT QUASHED A ND SET ASIDE THE RE-ASSESSMENT ORDER. IT HOWEVER DIRECTED THE AO TO DISPOSE OF THE PRELIMINARY OBJECTIONS BY PASSING A SPEAKING ORDER AND ONLY THEREAFTER PROCEED WITH THE RE-ASSESSMENT PROCEEDINGS IN ACCOR DANCE WITH LAW. IN THE LIGHT OF THE DECISION OF THE HONBLE HIGH CO URT, THE MATTER REQUIRES TO BE REMITTED BACK TO THE FILE OF THE AO FOR PASSING A FRESH ORDER AFTER DISPOSING OF THE OBJECTIONS WITH REGARD TO ALLEGED JURISDICTIONAL DEFECT. 6. WE ALSO TAKE INTO ACCOUNT THE CONTENTION OF THE ASSESSEE THAT THE REASONS RECORDED ARE NOT SUSTAINABLE AS THE ACTION WAS TAKEN TO MERELY VERIFY THE CONCERNED FACTS. WHILE WE MAY AGREE ON PRINCIPLE ON THE AFORESAID PROPOSITION BUT IN THE SAME VAIN FIND THA T REASONS RECORDED UNDER S.148(2) OF THE ACT REFERS TO CERTAIN FACTS T OWARDS UNACCOUNTED PAYMENTS MADE BY THE ASSESSEE FOR THE PURPOSE OF RE SIDENTIAL HOUSE EMANATING FROM SEARCH ACTION CARRIED OUT IN THE CAS E OF THIRD PARTY NAMELY SAVVY INFRASTRUCTURE LTD. THEREFORE, WE ARE OF THE VIEW THAT THE ACTION OF THE AO CANNOT BE LABELED AS BALD AND ABSTRACT. THE STATEMENT OF FACTS AS NOTED IN THE REASON SO RECORD ED, IF FOUND TO BE TRUE, GIVES LEGALLY SOUND BASIS FOR FORMATION OF PRIMA FACIE BELIEF TOWARDS ESCAPEMENT OF CHARGEABLE INCOME FOR THE PUR POSES OF ACTION UNDER S.147 OF THE ACT. HOWEVER, IN THE ABSENCE OF COMPLETE ITA NO. 786/AHD/15 [DR. BHARAT R.SHAH VS. ITO] AY 2006-07 - 5 - DELINEATION ON FACTS, WE DO NOT SEEK TO DELVE FURTH ER. IT SHALL BE OPEN TO THE ASSESSEE TO TAKE ALL OBJECTIONS BEFORE THE A O CONCERNING LACK OF JURISDICTION, IF ANY. THE AO IS DIRECTED TO DEAL W ITH THE OBJECTIONS SO RAISED ON BEHALF OF THE ASSESSEE IN AN OBJECTIVE MA NNER AND PASS A SPEAKING ORDER THEREON BEFORE PROCEEDING FURTHER. THUS, ALL THE ISSUES ARE KEPT OPEN FOR FRESH ADJUDICATION WITH REGARD TO THE ALLEGED ILLEGALITY IN ASSUMPTION OF JURISDICTION. THE RE-A SSESSMENT ORDER PASSED UNDER S.147 OF THE ACT APPEALED AGAINST IS T HUS, SET ASIDE IN TERMS OF DIRECTIONS NOTED ABOVE AND THE MATTER IS R EMANDED BACK TO THE FILE OF THE AO FOR NECESSARY ACTION AS SPELT OUT. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 04/09/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 04/09/20 18