Sushil Kashmirilal Agarwal, Pune V. Assistant Commissioner of Income-tax,

ITA 921/PUN/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7629 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-05-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Assessee Lawyers: P S SHINGTE
• Keywords: Reopening of assessment; Rectification of order; Search and seizure; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Set aside; Capital Gains
• Section: 143(3); 148; 6

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.921/PUN/2014 / ASSESSMENT YEAR : 2006-07 SUSHIL KASHMIRILAL AGARWAL, BASERA 46/25, PCNTDA, NIGIDI, PUNE 411044. PAN : AARPA0355K. . / APPELLANT. V/S THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE. . / RESPONDENT ASSESSEE BY : SHRI P.S. SHINGTE. REVENUE BY : SHRI M.K. VERMA. / 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, NASHIK DATED 07.03.2014 FOR THE ASSESSMENT YEAR 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL STATED TO BE CARRYING ON BUSIN ESS OF WEIGHBRIDGE IN THE NAME AND STYLE OF GOYAL WEIGHBRIDGE. ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 2006-07 ON 31.03.2007 DEC LARING TOTAL INCOME OF RS.54,18,350/-. THE CASE WAS INITIALLY TAKEN UP FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED VIDE ORDER DATED 24.12.2008 U/S / DATE OF HEARING : 09.07.2019 / DATE OF PRONOUNCEMENT: 16.10.2019 2 143(3) OF THE ACT. THEREAFTER, NOTICE U/S 148 OF THE ACT DT.30.03.2011 WAS ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO NOTICE U/S 1 48 OF THE ACT, ASSESSEE VIDE REPLY DATED 12.04.2011 SUBMITTED THAT THE RETURN OF INCOME FILED BY HIM ON 31.03.2007 FOR A.Y. 2006-07 BE CONS IDERED AS RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148 OF THE AC T. THEREAFTER, THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT W AS FRAMED U/S 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DT.30.12.2011 AN D THE TOTAL INCOME WAS DETERMINED AT RS.1,05,42,450/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 07.03.2014 (IN APPEAL NSK/CIT(A)-2/754/13-14) DISMISSED THE APPEAL OF ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPE AL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN THE LAW THE LOWER AUTHORITIES ERRED IN INITIATING REASSESSMENT PROCEEDINGS U/S 147 OF THE INCOME TAX, 1961 IN SPITE OF THE FACT THAT ALL THE MATERIAL FACTS WERE AVAILABLE BEFORE ASSESSING OFFICER AT THE TIME OF P ASSING OF ORIGINAL ASSESSMENT ORDER THEREFORE, ENTIRE PROCEEDINGS ARE BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN THE LAW THE LOWER AUTHORITIES ERRED IN NOT PASSING SPEAKING ORD ER IN REFERENCE TO OBJECTION RAISED BY THE APPELLANT THEREFORE, THE EN TIRE PROCEEDINGS ARE BAD IN LAW 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN THE LAW THE LOWER AUTHORITIES ERRED IN MAKING THE ADDITION OF A SUM OF RS. 51, 24,097/- ON ACCOUNT OF CASH PAYMENTS MADE TO PARTIE S FOR CLAIMING ALLEGED FAKE CAPITAL GAIN. THE ADDITION IS ENTIRELY BASED ON PRESUMPTION OF ASSESSING OFFICER AND IS BY DISREGARDING APPELLANT SUBMISSION IN THIS REGARD AND THEREFORE NEEDS TO BE STRUCK DOWN. 3. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETH ER. 3.1. BEFORE US, LD.A.R. SUBMITTED THAT A SURVEY ACTION AT T HE BUSINESS PREMISES OF THE ASSESSEES WIFE TOOK PLACE ON 29.02.2008 W HEREIN DOCUMENTS PERTAINING TO THE ASSESSEE WERE FOUND IN A D IARY IN WHICH CERTAIN ENTRIES RELATABLE TO SHARE PURCHASE AND SHARE S ALE TRANSACTION OF THE ASSESSEE WERE RECORDED. ON THE BASIS OF THE AFORES AID DOCUMENTS, 3 THE REASONS WERE RECORDED FOR RE-OPENING AND IT WAS CO NCLUDED THAT THERE WAS AN ESCAPEMENT OF INCOME IN THE CASE OF ASSESS EE. HE SUBMITTED THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS FOR A.Y. 2006-07 THE AO HAD MADE A DETAILED ENQUIRY RELATING T O VARIOUS TRANSACTIONS OF THE ASSESSEE INCLUDING SHARE PURCHASE A ND SALE TRANSACTIONS TO WHICH THE ASSESSEE ALSO MADE DETAILED SU BMISSIONS FROM TIME TO TIME AND AFTER TAKING INTO CONSIDERATION OF ALL TH E SUBMISSIONS, ASSESSMENT ORDER WAS PASSED U/S 143(3) OF THE ACT ON 24.12.2008. IN SUPPORT OF HIS CONTENTIONS ABOUT THE INQUIRIES WITH RESPE CT TO SHARE PURCHASE / SALE TRANSACTIONS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ASSESSEES REPLY TO IT, HE POINTED TO T HE COPY OF THE QUESTIONNAIRE PLACED AT PAGES 160 AND 161 OF THE PAPER BOOK AND THE SUBMISSION MADE BY THE ASSESSEE AT PAGE 134 TO 159 OF THE PAPER BOOK. HE SUBMITTED THAT THE CASE OF ASSESSEE AND HIS WIFE ARE ASSESSED BY THE SAME ASSESSING OFFICER. HE FURTHER SUBMITTED THAT SURVEY ACTION ON THE BUSINESS PREMISES OF THE ASSESSEES WIFE WAS CONDUCTED O N 29.02.2008 AND THE ASSESSMENT PROCEEDINGS FOR A.Y. 2006-07 IN ASSES SEES CASE WERE COMPLETED ON 24.12.2008. HE SUBMITTED THAT IN BETWE EN ASSESSMENT PROCEEDINGS FOR A.Y. 2007-08 WERE ALSO INITIATE D ON 18.09.2008 AND IN THE ASSESSMENT ORDER PASSED U/S 143(3 ) OF THE ACT DATED 23.12.2009 FOR A.Y. 2007-08, THERE IS A REFERENCE AB OUT THE DOCUMENTS FOUND DURING THE SEARCH. HE FURTHER SUBMITTED THAT THE ADDITION MADE IN THE ORDER U/S 143(3) OF THE ACT FOR A.Y. 2 007-08 ON ACCOUNT OF CAPITAL GAINS WAS SUBSEQUENTLY DELETED BY THE AO BY SUO MOTO BY PASSING A RECTIFICATION ORDER AS ASSESSEE HAS OFFE RED THE SAME FOR TAXATION. HE THEREFORE SUBMITTED THAT THE NECESSARY ENQUIRIES WERE MADE REGARDING ENTIRE PURCHASE OF SALE OF SHARE TRANSAC TIONS AND AFTER APPLICATION OF MIND, THE AO HAD PASSED THE ASSESSMENT ORD ER AND THE 4 RE-OPENING IS ON THE BASIS OF CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE. HE THEREFORE SUBMITTED THAT THE PROCEEDINGS U/S 147 OF THE ACT BE TREATED AS VOID AND AB INITIO AND FOR WHICH HE PLA CED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF M/S. CIT VS. KELVINATOR OF INDIA LIMITED REPORTED IN (2010) 320 ITR 561 SC. LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. ASSESSEE IN THE PRESENT APPEAL IS CHALLENGING THE RE-OPENING OF THE ASSESSMENT U/S 147 / 148 OF THE ACT. IT IS AN UN DISPUTED FACT THAT ASSESSEE HAD FILED ORIGINAL RETURN OF INCOME FOR A.Y. 2006-07 ON 31.03.2007 AND THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143 (3) OF THE ACT VIDE ORDER DT.24.12.2008. THEREAFTER, NOTICE U/S 148 O F THE ACT WAS ISSUED ON 30.03.2011 I.E., WITHIN FOUR YEARS FROM THE END OF TH E ASSESSMENT YEAR A.Y. 2006-07. THE LAW ON RE-OPENING OF A N ASSESSMENT UNDER THE ACT, IS FAIRLY SETTLED. THE ASSESSING OFFICER CAN R E-OPEN AN ASSESSMENT ONLY IN ACCORDANCE WITH THE EXPRESS PROVISIO NS PROVIDED IN SECTION 147/148 OF THE ACT. IT IS ONLY ON THE ASSESSING OFFICER STRICTLY SATISFYING THE PROVISIONS OF SECTION 147 OF THE ACT THAT H E ACQUIRES JURISDICTION TO RE-OPEN AN ASSESSMENT. SECTION 147 OF THE ACT, CLOTHES THE ASSESSING OFFICER WITH JURISDICTION TO REOPEN AN ASSESS MENT ON SATISFACTION OF THE FOLLOWING: (A) THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT (B) INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT AND (C) IN CASES WHERE THE ASSESSMENT SOUGHT TO BE RE OPENED IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASS ESSMENT YEAR, THEN AN ADDITIONAL CONDITION IS TO BE SATISFIED VIZ: THERE MUS T BE FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. 5 5. IN THE PRESENT CASE, NOTICE UNDER SECTION 148 OF THE ACT HAS BEEN ISSUED ON 30.03.2011 IN RELATION TO ASSESSMENT YEAR 2006 -07. HENCE, THE REOPENING OF ASSESSMENT IS WITHIN A PERIOD OF FOUR YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN SUCH CASES, THE ASSESSING OFFICER WOULD BE CLOTHED WITH JURISDICTION TO ISSUE A NOTICE FO R REOPENING OF AN ASSESSMENT IF HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT. THE REQUIREMENT OF FAILUR E TO MAKE TRUE AND FULL DISCLOSURE AS PROVIDED IN THE PROVISO TO SECT ION 147 OF THE ACT IS NOT TO BE SATISFIED FOR ISSUING OF RE-OPENING NOTICE W ITHIN THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSM ENT YEAR. THUS, IN THE ABSENCE OF CUMULATIVE SATISFACTION OF REASON TO BELIEV E AND IN THE ABSENCE OF ANY INCOME CHARGEABLE TO TAX ESCAPING ASSESS MENT, THE ASSESSING OFFICER IS NOT EMPOWERED WITH JURISDICTION TO REOP EN AN ASSESSMENT. 6. IN THE PRESENT CASE IT IS ALSO A FACT THAT ORIGINAL ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS FRAMED UNDER SECTION 143 (3) OF THE ACT. IN SUCH A SITUATION, ANOTHER ASPECT THAT HAS TO BE KEP T IN MIND IS AS TO WHETHER THE REOPENING IS BASED UPON ANY TANGIBLE MATERIA L WHICH HAS COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER SUBSEQUEN T TO THE FRAMING OF THE EARLIER ASSESSMENT OR WHETHER THE SAME IS MERELY A CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER. 7. WHEN THE FACTS OF THE PRESENT CASE IS SEEN IN THE LIGHT OF THE AFORESAID LEGAL POSITION, IT IS AN UNDISPUTED FACT THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, AO HAD ISSUED QUESTIONN AIRE AND HAD SOUGHT INFORMATION OF THE TRANSACTIONS OF SALE/PURCHAS E OF SHARES AND THE ASSESSEE HAD ALSO MADE AVAILABLE THE INFORMATION AND DETAILS TO THE AO FROM TIME TO TIME. THEREAFTER THE ASSESSMENT WAS FRAMED U/S 6 143(3) AND THE SUBMISSIONS OF THE ASSESSEE IN RESPECT OF P URCHASE AND SALE OF SHARES WAS ACCEPTED BY THE AO AND NO ADDITION W AS MADE. IT IS ALSO A FACT THAT THE ASSESSEE AND HIS WIFE ARE ASSESSED BY THE SAME ASSESSING OFFICER. FURTHER, THE DOCUMENT FOUND AT THE PLACE OF BUSINESS OF ASSESSEES WIFE WAS FOUND DURING THE COURSE OF SURVEY CONDUCTED ON 29.2.2008 AND THE ASSESSMENT OF THE ASSESSEE U/S 143(3) FOR A.Y 2006- 07 WAS FINALIZED ON 24.12.2008 MEANING THEREBY THAT THE DO CUMENT FOUND DURING THE COURSE OF THE SURVEY AND WHICH IS THE B ASIS OF THE PRESENT REOPENING WAS ALREADY BEFORE THE AO WHILE CONDUC TING THE ASSESSMENT PROCEEDINGS. IN SUCH A SITUATION, THE CONCLUSIO N WOULD BE THAT THE DOCUMENT FOUND DURING SURVEY WAS CONSIDERED WHILE FRAMING THE ORIGINAL PROCEEDINGS AND THEREFORE WE FIND FORCE IN THE CONTENTION OF THE LD AR THAT THE IMPUGNED NOTICE HAVE BEEN OCCASION ED BY A CHANGE OF OPINION. IT IS TRITE LAW THAT A MERE CHANGE OF OPINION CAN NOT CONSTITUTE A REASON FOR RE-OPENING THE ASSESSMENT. ON THE ISSUE TH AT CHANGE OF OPINION CANNOT CONSTITUTE A REASON FOR REOPENING WE FIND T HAT HONBLE APEX COURT IN THE CASE OF CIT VS. KELVINATOR INDIA (2010) 320 ITR 561 (SC) HAS HELD SO. THE RELEVANT OBSERVATION OF THE HONBLE APEX COURT IS AS UNDER: '6. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MAD E TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, REOPENING COULD BE DONE UNDER THE ABOVE TWO CONDITI ONS AND FULFILLMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE A CT (WITH EFFECT FROM 1ST APRIL, 1989), THEY ARE GIVEN A GO-BY AND ONLY O NE CONDITION HAS REMAINED, VIZ., THAT WHERE THE ASSESSING OFFICER HA S REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDI CTION TO REOPEN THE ASSESSMENT. THEREFORE, POST-1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTER PRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, S ECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DI FFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSIN G OFFICER HAS NO POWER TO REVIEW ; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRECONDITIONS AN D IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEH ALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSE SSMENT, REVIEW WOULD 7 TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE O F OPINION' AS AN INBUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFIC ER. HENCE, AFTER 1ST APRIL, 1989, THE ASSESSING OFFICER HAS POWER TO REO PEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LI NK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF THE ACT, AS QUOTED HEREINABOVE. UNDE R THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPINION' IN SE CTION 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM THE COM PANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAME NT REINTRODUCED THE SAID EXPRESSION AND DELETED THE WORD 'OPINION' ON T HE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE ASSESSING OFFICE R.' 8. THE AFORESAID VIEW HAS BEEN REITERATED IN SEVERAL DECIS IONS THEREAFTER. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS AND IN VIEW OF THE DECISIONS CITED HEREINABOVE, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, THE NOTICE OF REOPENING THE ASSESSMENT U/S 148 OF THE ACT IS ON ACCOUNT OF CHANGE OF OPINION BY THE AO, WHICH IS NOT PERMIS SIBLE AS PER LAW. WE ARE THEREFORE OF THE VIEW THAT THE IMPUGNED NOTICE S CANNOT BE SUSTAINED AND THE SAME DESERVES TO BE QUASHED AND SE T ASIDE. WE THEREFORE QUASH THE IMPUGNED REASSESSMENT PROCEEDINGS FOR A.Y. 2006- 2007 ARE THUS SET ASIDE THE SAME. SINCE WE HAVE HEREINA BOVE SET ASIDE THE ASSESSMENT FRAMED U/S 143(3) R.W.S 147 OF THE ACT AN D HELD IT TO BE VOID THEREFORE THE ISSUE ON MERITS HAVE BEEN RENDERED ACADEMIC AND REQUIRES NO ADJUDICATION. THUS, THE GROUNDS OF ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 16 TH DAY OF OCTOBER, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 16 TH DAY OF OCTOBER, 2019. YAMINI 8 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-2, NASHIK. PR. CIT-2, NASHIK. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.