Sri N K V Krishna, CHENNAI v. ACIT, CHENNAI

ITA 1381/CHNY/2011 | 2005-2006
Pronouncement Date: 04-11-2011 | Result: Allowed

Appeal Details

RSA Number 138121714 RSA 2011
Assessee PAN AGIPK3079R
Bench Chennai
Appeal Number ITA 1381/CHNY/2011
Duration Of Justice 3 month(s) 2 day(s)
Appellant Sri N K V Krishna, CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 04-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 04-11-2011
Date Of Final Hearing 01-11-2011
Next Hearing Date 01-11-2011
Assessment Year 2005-2006
Appeal Filed On 01-08-2011
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI B BENCH CHENNAI. BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI N.S. SAINI ACCOUNTANT MEMBER I.T.A. NOS. 1378 1379 1380 AND 1381/MDS/2011 ASSESSMENT YEARS: 2002-03 03-04 04-05 AND 05-06 SRI N K V KRISHNA NO. 27 CHELLAMMAL STREET SHENOY NAGAR CHENNAI 30. [PAN: AGIPK3079R] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE XIII CHENNAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G. NARAYANASWAMY C.A. REVENUE BY : SHRI R.B. NAIK CIT DR DATE OF HEARING : 0 1 . 1 1 .2011 DATE OF PRONOUNCEMENT : 04.11.2011 ORDER PER N.S. SAINI ACCOUNTANT MEMBER THESE FOUR APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT(A)XII CHENNAI DA TED 28.06.2011 FOR THE ASSESSMENT YEARS 2002-03 2003-04 2004-05 AND 2005 -06. 2. THE ASSESSEE IN ALL THE APPEALS HAS RAISED CO MMON GROUNDS OF THE APPEAL FOR DIFFERENT ASSESSMENT YEARS. THE SOLE ISS UE INVOLVED IN ALL THE GROUNDS OF BOTH THE APPEALS IS THAT (I) THE LD. CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITIONS OF ` .4 25 44 334/- FOR THE ASSESSMENT YEAR 2002-03 ` .10 66 69 257/- FOR THE ASSESSMENT YEAR 2003-04 ` .12 46 25 739/- FOR THE ASSESSMENT YEAR 2004-05 AND ` . 2 54 98 454/- FOR THE ASSESSMENT YEAR I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1378 TO 378 TO 378 TO 378 TO 1 11 1381 381381 381/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 2 2005-06 AS MADE BY THE ASSESSING OFFICER AND THE LD . CIT(A) HAS OVERLOOKED THAT THE ASSESSING OFFICER HAS ONLY PRES UMED THAT THE ASSESSED HAD EARNED THE ABOVE AMOUNTS AS INCOME FROM OUT OF HIS BUSINESS ACTIVITIES WITHOUT ANY BASIS (II) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE PROCEEDINGS UNDER SECTION 147 HAS BEEN LAWFULLY INITIATED. 3. THE LD. DR SUBMITTED THAT THE FACTS AND ISSUES INVOLVED IN ALL THE APPEALS ARE IDENTICAL. IN ALL THESE FOUR APPEALS E XCEPT CHANGE OF FIGURES PERTAINING TO SAME ASSESSEE ARE ARGUED TOGETHER BE FORE US. THEREFORE FOR THE SAKE OF CONVENIENCE ALL THESE FOUR APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE ASSESSEE HAS CHALLENGED THE VALIDITY OF ISSUANCE OF NOTICE UNDER SECTION 148 IN THE INSTANCE CASES FOR ALL THE YEARS UNDER APPEAL. 5. THE LD. CIT(A) HAS UPHELD THE VALIDITY OF ISSUA NCE OF REASSESSMENT NOTICES FOR ALL THE ASSESSMENT YEARS. THE LD. CIT(A ) HAS RECORDED THAT THE REASONS AS RECORDED BY THE ASSESSING OFFICER FOR IS SUANCE OF REASSESSMENT NOTICES WAS AS UNDER: .THE REASONS RECORDED BY THE ASSESSING OFFICER A S COULD BE SEEN FROM THE ASSESSMENT RECORDS OF A.Y. 2002-03 ARE REPRODUCED AS UNDER: 2002-03 SHRI N K V KRISHNA DOOR NO.27 CHELLAMMAL STREET SHENOY NAGAR CHENNAI-30. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1378 TO 378 TO 378 TO 378 TO 1 11 1381 381381 381/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 3 FOR THE A.Y.2002-03 THE ASSESSEE HAS FILED HIS RET URN OF INCOME ON 31.7.2002 ADMITTING TAXABLE INCOME OF ` .1 83 593/- AND AGRICULTURAL INCOME OF ` .1 24 000/-. THE ASSESSEE HAD CARRIED ON A CONSULTA NCY BUSINESS IN VASTUSASHTRA UNDER THE TRADE NAME OF 'S RISHTI VASTHU CONSULTANT' AND IN THE BALANCE SHEET FILED IN RESPE CT OF HIS BUSINESS HE CREDITED HIS CAPITAL ACCOUNT WITH A SUM OF ` .4 25 44 334/- BY WAY OF DEPOSITS. THERE IS NO EXPLANATION FOR THE SOURCES F OR THE DEPOSITS. NO ASSESSMENT SEEMS TO HAVE BEEN MADE U/S 143(3) OF TH E ACT. AT THE TIME OF SURVEY U/S 133A CONDUCTED ON 7.2.2007 IT WAS NOTED THAT THE ASSESSEE HAD RECEIVED THE AMOUNT FROM SEVE RAL PERSONS AND HE HAS NOT EXPLAINED THE PURPOSES FOR WHICH THESE AMOUNTS HAD BEEN DEPOSITED WITH HIM. IN THE ABSENCE OF PROPER AND SATISFACTORY EXPLANATI ON IT HAS TO BE PRESUMED THAT THE ASSESSEE HAD EARNED THE INCOME FR OM OUT OF HIS BUSINESS ACTIVITIES ONLY AND IT HAS TO BE CONSIDERED FOR ASS ESSMENT FOR THE YEAR 2002-03. I HAVE THEREFORE REASON TO BELIEVE THAT TAXABLE INC OME HAD ESCAPED ASSESSMENT OWING TO THE ASSESSEE'S FAILURE TO FURNI SH THE COMPLETE DETAILS OF HIS INCOME. I HAVE TO THEREFORE INVOKE THE PROVISIO NS OF SEC. 147 OF THE I T ACT. PLEASE ISSUE NOTICE U/S 147 OF THE I T ACT. SD/- 30.02.2007' (THE REASONS FOR THE OTHER THREE ASSESSMENT YEARS A RE ALSO SAME EXCEPT FOR THE AMOUNTS CLAIMED TO HAVE BEEN RECEIVED AND CREDI TED TO THE CAPITAL ACCOUNTS APART FROM THE DATE OF FILING THE RETURN A ND THE RETURNED INCOMES.) 6. IT IS AN ESTABLISHED POSITION OF LAW THAT THE V ALIDITY OF ISSUANCE OF NOTICE UNDER SECTION 148 IS TO BE TESTED ON THE BAS IS OF THE REASONS AS RECORDED BY THE ASSESSING OFFICER UNDER SECTION 148 (2) OF THE ACT AND NO OTHER MATERIAL WHICH WAS BROUGHT INTO RECORD BY TH E ASSESSING OFFICER WHILE RECORDING HIS REASONS FOR BELIEF CAN BE TAKEN INTO CONSIDERATION. 7. FURTHER IT IS ALSO AN ESTABLISHED POSITION OF THE LAW THAT THE REASONS TO BE BELIEF IS MUCH STRONGER THAN THE REASONS TO SUSP ECT. THE RECORDED REASONS MUST HAVE A LIVE LINK OR NEXUS WITH THE FOR MATION OF THE BELIEF OF I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1378 TO 378 TO 378 TO 378 TO 1 11 1381 381381 381/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 4 ESCAPEMENT OF INCOME FROM TAX. THE REASONS MUST BE BASED ON SOME DEFINITE MATERIAL AND SHOULD NOT BE VAGUE. FURTHER THE REOPENING OF ASSESSMENT CANNOT BE MADE MERELY FOR MAKING OF ROVI NG AND FISHING ENQUIRY OR TO FULFILL THE DESIRE FOR MAKING A DEEPER SCRUTI NY OF THE FACTS AVAILABLE ON RECORD. 8. IN THE INSTANCE CASE THE ORIGINAL RETURN OF IN COME FOR ALL THE YEARS UNDER APPEAL BECAME FINAL BECAUSE OF NON-ISSUANCE O F NOTICE UNDER SECTION 143(2) OF THE ACT. IN SUCH CIRCUMSTANCES THE NOTIC E ISSUED UNDER SECTION 148 OF THE ACT CANNOT BE HELD AS ISSUED ON CHANGE O F OPINION AS BECAUSE NO OPINION WAS FORMED WHILE ACCEPTING THE RETURN FILED BY THE ASSESSEE. 9. FURTHER THE OBJECT AND PURPOSE FOR ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT IS QUITE DISTINCT AND DIFFERENT FROM THE NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT. 10. NOTICE UNDER SECTION 148 CANNOT BE ISSUED FOR MERELY VERIFYING THE FACTS WHICH WERE DISCLOSED IN THE RETURN OR ON THE BELIEF THAT THE ASSESSEE MIGHT NOT BE ABLE TO SUBSTANTIATE THE FACTS ALREADY DISCLOSED IN THE RETURN OF INCOME. THERE SHOULD BE SOME MATERIAL BEFORE THE AS SESSING OFFICER ON THE BASIS OF WHICH A PERSON CAN ENTERTAIN A BONAFIDE BE LIEF THAT THE AMOUNT IN ISSUE WAS THE INCOME OF THE ASSESSEE ASSESSABLE TO TAX IN THE RELEVANT YEAR BUT THE SAME HAS ESCAPED FROM ASSESSMENT. 11. COMING TO THE FACTUAL MATRIX OF THE APPEAL UND ER CONSIDERATION WE FIND FROM THE RECORDED REASONS THAT THE ASSESSING O FFICER HAS BROUGHT NO I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1378 TO 378 TO 378 TO 378 TO 1 11 1381 381381 381/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 5 MATERIAL IN THE RECORDING MADE UNDER SECTION 148(2) OF THE ACT TO SHOW ANY MATERIAL WHICH WAS FOUND DURING THE COURSE OF THE SURVEY CONDUCTED ON 07.02.2007 IN THE PREMISES OF THE ASSESSEE AND ON T HE BASIS OF WHICH A REASONABLE PERSON CAN ENTERTAIN A BONAFIDE BELIEF T HAT THE AMOUNT DISCLOSED BY THE ASSESSEE AS CAPITAL RECEIPT IN THE NATURE OF THE GIFT IN THE RETURN OF INCOME WHICH HAVE BECAME FINAL WERE INCOME OF THE ASSESSEE ASSESSABLE TO TAX. THE RECORDED REASON MERELY SHOWS THAT AT TH E TIME OF SURVEY THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD REC EIVED THE AMOUNT FROM SEVERAL PERSONS AND HE HAS NOT EXPLAINED THE PURPOS ES FOR WHICH THESE AMOUNTS HAD BEEN DEPOSITED WITH HIM. 12. THUS IT SHOWS THAT MERELY TO VERIFY THE PURPO SE OF RECEIPT OF GIFT BY THE ASSESSEE NOT DISCLOSED AT THE TIME OF SURVEY AND TO VERIFY THAT THE REOPENING OF THE ASSESSMENT WAS MADE BY THE ASSESSING OFFICER . 13. IN OUR CONSIDERED OPINION SUCH ISSUANCE OF NO TICE UNDER SECTION 148 OF THE ACT CANNOT BE UPHELD. OUR ABOVE VIEW ALSO FI NDS SUPPORT FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT V. BATRA BHATTA COMPANY [2010] 321 ITR 526 (DELHI) WHEREIN IT WAS HELD AS UNDER: WE FEEL THAT THE OBSERVATIONS OF THE SUPREME COURT IN THE AFORESAID DECISION CLEARLY APPLY TO THE CASE AT HAND. MERELY BECAUSE THE ASSESSING OFFICER FELT THAT THE ISSUE REQUIRED 'MUCH DEEPER SCRUTINY' IS NOT GROUND ENOUGH FOR INVOKING SECTION 147. IT IS NOT BELIEF PER SE THAT IS A PRE-CONDITION FOR INVOKING SECTION 147 OF THE SAID ACT BUT A BELIEF FOUNDED ON REASONS. THE EXPRESSION USED IN SECTION 147 IS-'IF THE ASSESSING OFFICER HAS REA SON TO BELIEVE' AND NOT-'IF THE ASSESSING OFFICER BELIEVES'. THERE MUST BE SOME BAS IS UPON WHICH THE BELIEF CAN BE BUILT. IT DOES NOT MATTER WHETHER THE BELIEF IS ULTIMATELY PROVED RIGHT OR WRONG BUT THERE MUST BE SOME MATERIAL UPON WHICH S UCH A BELIEF CAN BE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1378 TO 378 TO 378 TO 378 TO 1 11 1381 381381 381/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 6 FOUNDED. IN THE PRESENT CASE THE COMMISSIONER INCO ME-TAX (APPEALS) AS WELL AS THE TRIBUNAL HAVE FOUND AS A FACT THAT THERE WAS NO MATERIAL UPON WHICH THE ASSESSING OFFICER COULD HAVE BASED HIS BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THE DECISIONS CITED BY MR. JOLLY WHO A PPEARED ON BEHALF OF THE REVENUE NAMELY ITO V. SELECTED DALURBAND COAL CO. P. LTD. (1996) 217 ITR 597 (SC) RAYMOND WOOLLEN MILLS LTD. V. ITO (1999) 236 ITR 34 (SC) AND ASST. CIT V. RAJESH J HAVERI STOCK BROKERS P. LTD. [2007] 291 ITR 500 (SC) DO NOT SAY ANYTHING DIFFERENT. IN DALURBAND COAL CO. [1996) 217 ITR 597 (SC) THE SUPREME COURT OBSERVED THAT AT THE STAGE OF ISSUANCE OF NOTICE UN DER SECTION 148 OF THE SAID ACT 'THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MA TERIAL AS STATED ABOVE ON WHICH A REASONABLE PERSON COULD HAVE FORMED THE REQ UISITE BELIEF'. AGAIN IN RAYMOND WOOLLEN MILLS LTD. [1999) 236 ITR 34 THE SUPREME COURT WHILE REFUSIN G TO INTERFERE WITH THE REASSESSMENT PROCEEDINGS OBS ERVED THAT (PAGE 35) : 'WE HAVE ONLY TO SEE WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE'. LASTLY IN RAJESH JHAVERI [2007] 291 ITR 500 (SC) THE ISSUE RAISED BEFORE THE SUPRE ME COURT WAS WHETHER FAILURE TO TAKE STEPS UNDER SECTION 143(3) OF THE S AID ACT WOULD RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMEN T PROCEEDINGS IN CASES WHERE INTIMATIONS UNDER SECTION 143(1) HAD BEEN ISSUED. T HE SUPREME COURT HELD THAT SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFI LLED THE ASSESSING OFFICER WOULD BE WITHIN HIS RIGHTS TO INITIATE 'REASSESSMEN T' PROCEEDINGS IRRESPECTIVE OF WHETHER STEPS FOR A REGULAR ASSESSMENT UNDER SECTIO N 143(3) HAD BEEN TAKEN OR NOT. WHILE SO DECIDING THE SUPREME COURT CONSIDERE D THE EXPRESSION 'REASON TO BELIEVE' AS APPEARING IN SECTION 147 IN THE FOLLOWI NG MANNER (PAGE 511 OF 291 ITR) : 'SECTION 147 AUTHORISES AND PERMITS THE ASSESSING O FFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUST IFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNO W OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT IT CAN BE SAID TO HA VE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT ... AT THAT S TAGE THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS AT THE INITIATION STAGE WHAT IS REQUIRED IS 'REASON TO BE LIEVE' BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE ST AGE OF ISSUE OF NOTICE THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MAT ERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BEL IEF.' (UNDERLINING L ADDED) 14. IN THE INSTANCE CASE AS DISCUSSED ABOVE WE F IND THAT NO MATERIAL FOUND DURING THE COURSE OF SURVEY WAS BROUGHT IN TH E RECORDED REASONS BY I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1378 TO 378 TO 378 TO 378 TO 1 11 1381 381381 381/ // /MDS/ MDS/ MDS/ MDS/11 1111 11 7 THE ASSESSING OFFICER ON THE BASIS OF WHICH A REASO NABLE PERSON COULD HAVE FORMED A BONAFIDE BELIEF THAT THE GIFTS IN QUESTION WERE INCOME OF THE ASSESSEE ASSESSABLE TO TAX AND THEREFORE IN OUR CO NSIDERED OPINION THE ISSUANCE OF THE NOTICE UNDER SECTION 148 OF THE ACT CANNOT BE UPHELD BY US IN THE YEARS UNDER APPEAL. 15. WE THEREFORE CANCEL THE REASSESSMENT ORDERS PASSED FOR THE YEARS UNDER APPEAL. 16. IN VIEW OF OUR ABOVE DECISION IN RESPECT OF VA LIDITY OF REOPENING OF THE ASSESSMENT THE OTHER GROUNDS OF APPEAL RAISED BY T HE ASSESSEE HAVE BECOME ACADEMIC IN NATURE AND REQUIRES NO ADJUDICAT ION IN VIEW OF THE DECISION OF THE NAGPUR SPECIAL BENCH OF THE TRIBUNA L IN THE CASE OF RAHUL KUMAR BAJAJ VS. ITO [2000] 241 ITR (AT) 1. 17. IN THE RESULT ALL THE FOUR APPEALS FILED BY T HE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.11.2011. SD/- SD/- (HARI OM MARATHA) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER CHENNAI DATED THE 04.11.2011 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.