Shri A.M.Vignesh, CHENNAI V. ITO, CHENNAI

ITA 936/CHNY/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96686 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 25-04-2012
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Tangible material; Condonation of delay; Reason to believe
• Section: 147; 148

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHENNAI , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER . /ITA NOS. 935 & 936/MDS/2012 / ASSESSMENT YEARS : 2004-05 & 2005-06 SHRI A.M.VIGNESH, NO.3, JAWAHARLAL NEHRU SALAI, EKKADUTHANGAL, CHENNAI 600 057. PAN ACAPV3592L ( /APPELLANT) V. THE INCOME-TAX OFFICER, MEDIA WARD-III, CHENNAI 34. RESPONDENT) / APPELLANT BY : SHRI A.S.SRIRAMAN, ADVOCATE / RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT ! / DATE OF HEARING : 06.11.2015 '# ! / DATE OF PRONOUNCEMENT : 31.12.2015 ! / O R D E R THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS PASSED BY THE COMMISSIONER OF INCO ME TAX (APPEALS), CHENNAI DATED 31.1.2012 FOR THE ASSESSME NT YEARS 2004-05 AND 2005-06. 2. THERE IS A DELAY OF 13 DAYS IN FILING THESE APPE ALS BEFORE THE TRIBUNAL. THE ASSESSE FILED A PETITION EXPLAINING THE REASONS FOR THE DELAY THAT THE APPEAL PAPERS WE RE HANDED 2 ITA 935 & 936/MDS/2012 OVER TO THE CHARTERED ACCOUNTANT, SHRI A.R.ANNAMALA I, WHO WAS SUDDENLY FELL ILL AND ON ACCOUNT OF THE ILLNESS OF LD. AR, THE APPEALS WERE FILED BELATEDLY. I HAVE GONE THRO UGH THE PETITION FOR CONDONATION OF DELAY AND AFFIDAVIT FIL ED BY THE ASSSESSEE. I AM OF THE OPINION THAT THERE IS GOOD AND SUFFICIENT REASON FOR FILING THESE APPEALS BELATEDL Y. ACCORDINGLY, THE DELAY IS CONDONED AND THE APPEALS ARE ADMITTED FOR ADJUDICATION. 3. THE PRIMARY GROUND IN THESE APPEALS IS WITH REGA RD TO FRAMING OF REASSESSMENT ORDER WITHOUT ASSIGNING PRO PER REASONS AND JUSTIFICATION. 4. THE FACTS OF THE CASE AS NARRATED IN THE ASSESS MENT YEAR ARE THAT THE ASSESSE DISPUTED ISSUE OF NOTICE U/S.148 OF THE ACT AS THE SAID NOTICE IN HIS OPINION WAS ISSUE D WITHOUT HAVING TANGIBLE MATERIAL BY THE ASSESSING OFFICER. HOWEVER, THE AO IN THE ASSESSMENT ORDER HAS BROUGHT ON RECOR D THAT IN SWORN STATEMENT, THE ASSESSE CONFIRMED THAT HE PROD UCED FILM ACHARYA AT THE COST OF ` 1.10 CRORES AND COULD NOT FURNISH EVIDENCE FOR LOANS TAKEN TO MEET THE COST O F PRODUCTION. THEREFORE, THE NOTICE ISSUED U/S.148 B Y THE AO, WHICH IS ACCORDING TO THE CIT(APPEALS) IS A VALID N OTICE SINCE 3 ITA 935 & 936/MDS/2012 THE AO HAD REASONS TO BELIEVE THAT INCOME HAD ESCAP ED ASSESSMENT. AGGRIEVED BY THIS, THE ASSESSE IS IN A PPEAL BEFORE THE TRIBUNAL. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. I HAVE GONE THROUGH THE REASONS RECOR DED FOR REOPENING THE ASSESSMENT AS PRODUCED BY THE LD. DR, WHICH READS AS UNDER: IT IS SEEN FROM THE FILE THAT THE A HAS NOT FILED R/I FROM THE A.Y. 2003-04 ONWARDS, THOUGH HE HAS EARNED INCOME DURING THE PERIOD RELEVANT TO THE A.Y . 2004-05. AS THERE IS AN ESCAPEMENT OF INCOME, NOTICE U/S.148 MAY BE ISSUED. PUT UP FOR ORDERS PL . AS SEEN FROM THE REASONS ON RECORD, THERE IS NO WHI SPER ON THE BASIS OF WHICH MATERIAL THE AO CAME TO THE CONC LUSION THAT THERE IS ESCAPEMENT OF INCOME IN THESE ASSESSM ENT YEARS. 6. SECTION 147 AUTHORISES AND PERMITS THE ASSESSIN G OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMEN T YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PH RASE 4 ITA 935 & 936/MDS/2012 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATI ON. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNO W OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPE D ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN T HAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED T HE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE A SSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUD E FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS T O TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINC ES MANGANESE ORE CO. LTD. V. ITO [1991] 191 ITR 662 , FOR INITIATION OF ACTION UNDER SECTION 147(A) (AS THE P ROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STA GE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON T O BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. A T THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHET HER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THE MATERIA LS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCER N AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF B Y THE 5 ITA 935 & 936/MDS/2012 ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION (SEE ITO V. SELECTED DALURBAND COAL CO. P. LTD. [19 96] 217 ITR 597 (SC) ; RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC). 7. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITU TED WITH EFFECT FROM APRIL 1, 1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISIONS OF S ECTION 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMST ANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. T O CONFER JURISDICTION UNDER SECTION 147(A) TWO CONDIT IONS WERE REQUIRED TO BE SATISFIED : FIRSTLY THE ASSESSING OF FICER MUST HAVE REASON TO BELIEVE THAT INCOME, PROFITS OR GAIN S CHARGEABLE TO INCOME TAX HAVE ESCAPED ASSESSMENT, A ND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT S UCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER OMISSIO N OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY OR TRULY ALL 6 ITA 935 & 936/MDS/2012 MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SA TISFIED BEFORE THE ASSESSING OFFICER COULD HAVE JURISDICTIO N TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE F IRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT IT CONFERS JURISDICTION TO REOPE N THE ASSESSMENT. IT IS, HOWEVER, TO BE NOTED THAT BOTH T HE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITH IN THE AMBIT OF THE PROVISO TO SECTION 147. THE CASE AT HAND IS COV ERED BY THE MAIN PROVISION AND NOT THE PROVISO. 8. IN THE PRESENT CASE, THERE IS NO TANGIBLE FRESH MATERIAL SO AS TO CONCLUDE THAT THERE IS ESCAPEMENT OF INCOM E AND THE CONCLUSION REACHED BY THE AO WHILE RECORDING THE RE ASONS ARE NOT BASED ON THE TANGIBLE MATERIAL. IN OUR OPI NION, THE REASSESSMENT ORDER IS BAD IN LAW AND WE QUASH THE REASSESSMENT ORDER. SINCE, WE HAVE QUASHED THE 7 ITA 935 & 936/MDS/2012 REASSESSMENT ORDER, WE REFRAIN FROM GOING TO THE GR OUNDS RAISED BY THE ASSESSEE WITH REGARD TO QUANTUM OF AD DITIONS. 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 31 ST OF DEC., 2015 AT CHENNAI. SD/- ( $ % & ' ) ()*+,-*.//0*-12 ! 34566/7+8*+89:;<:- $= /CHENNAI, >3 /DATED, THE 31 ST DEC., 2015. MPO* 3? @ABA /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. C2 /CIT(A) 4. C /CIT 5. ADE F /DR 6. EGH /GF.