ITO, Balasore v. M/s Maa Laxmi Jewellery, Balasore

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK ( ) BEFORE . . HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER. /AND . . . S HRI K.S.S.PRASAD RAO JUDICIAL MEMBER / I.T.A.NO. 230/CTK/2010 / ASSESSMENT YEAR 2002 - 03 INCOME - TAX OFFICER WARD - 1 BALASORE. - - - VERSUS - M/S.MAALAXMI JEWELLERY VIVEKANANDA MARG BALASORE. PAN: AAJFM 29868 A ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI J.KHANRA DR / FOR THE RESPONDENT: / SHRI D.K.SETH/M.SETH AR / ORDER . . SHRI K.K.GUPTA ACCOUNTANT MEMBER. THIS APPEAL BY THE REVENUE AGITATES THE ACTION OF THE LEARNED CIT(A) IN HOLDING THAT THE REOPENING OF THE CASE U/S.147 WAS NOT VALID CONSEQUENT LY DELETING THE ADDITION OF 6 3 0 860 BY OBSERVING THAT THE REASON GIVEN BY THE ASSESSING OFFICER FOR REOPENING OF THE CASE WAS A MERE CHANGE OF OPINION THAT COULD NOT BE THE BASIS OF REOPENING U/S.147 AS THE SAME FACTS OF THE CASE POINT TO THE ESCAPEMENT OF INCOME HAD EARLIER WARRANTED REOPENING OF THE CASE UNDER THE PROVISIONS OF SECTION 147. 2. THE BRIEF FACTS A S HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSMENT WAS COMPLETED U/S.143(3)/147 FOR THE IMPUGNED ASSESSMENT YEAR ON 28.3.2005. IN THE SAID ORDER THE ASSESSING OFFICER HAD DETERMINED THE CAPITAL INVESTED BY TWO PARTNERS AT 60 000 AS AGAINST 6 90 862 SHOWN BY THE ASSESSEE. THE APPELLATE AUTHORITIES CONFIRMED THE INVESTMENT OF CAPITAL BY 60 000 BY TWO PARTNERS AT 30 000 EACH. ON RECASTING THE BALANCE SHEET THE LIABILITY TOTALED 6 60 560.490 AS AGAINST ASSETS OF 12 91 420.95 WHICH REQUIRED INITIATION OF PROCEEDINGS U/S.147/148. DURING THE I.T.A.NO. 230/CTK/2010 2 COURSE OF PROCEEDINGS IT WAS SUBMITTED BY THE ASSESSEE THAT THE TRIBUNAL HAD CATEGORICALLY MENTIONED THAT THE CAPITAL WAS LIMITED TO 30 000 EACH BUT THE INVESTMENT CONTINUED TO REMA IN THE SAME IN THE FORM OF ASSETS THEREFORE WAS ONLY A CHANGE OF 0 PINION WHEN THE ASSESSING OFFICER REFUSED TO BELIEVE THAT THE LOAN CREDITORS WHO CONTINUED TO REMAIN THE SAME WAS THE INVESTMENT MADE IN KIND BY THE PARTNERS THEREFORE WAS MERELY A CHANGE OF OPINION BY SHIFTING THE ONUS OF EXPLAINING A LIABILITY OF A CREDITOR UNDER THE PROVISIONS OF SECTION 68 VIS - - VIS NOW TO BE RECONSIDERED UNDER THE PROVISIONS OF SECTION 69C. HOWEVER TAKING THE CLUE FROM THE ORDER OF THE TRIBUNAL THE ASSESSING OFFICER P ROPOSED TO BRING TO TAX ASSETS WORTH 6 63 860 REPRESENTING STOCK FURNITURES SECURITY DEPOSITS ETC. ALLEGEDLY AS INTRODUCED BY THE PARTNERS TO BE TAXED WHICH WAS APPEALED AGAINST BEFORE THE FIRST APPELLATE AUTHORITY. THE LEARNED CIT(A) CONSIDERED THE CO NTENTION OF THE ASSESSING OFFICER AND THE ASSESSEE APPELLANT BEFORE HIM AND OBSERVED THAT THE ASSESSING OFFICER HAD EXAMINED THE SAME SET OF FACTS WHICH WERE PRESENT BEFORE THE PREDECESSOR ASSESSING OFFICER WHEREIN HE HAD HELD THAT THE AMOUNT OF 8 51 924 SHOWN IN THE BALANCE SHEET REPRESENTED UNEXPLAINED EXPENDITURE U/S.69C OF THE ACT WHEREAS THE PRESENT ASSESSING OFFICER HELD THAT THE ASSETS WERE IN FACT IN EXISTENCE AND THERE WAS A DIFFERENCE IN THE ASSETS AND LIABILITIES SO THE ADDITION MADE O N ACCOUNT OF UNEXPLAINED LIABILITY WAS NOT REFLECTED IN THE BALANCE SHEET. RELYING ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT V. FORAMER FRANCE (264 ITR 566) WHEREIN IT HAS BEEN HELD THAT ASSESSMENT CANNOT BE REOPENED ON THE BASIS OF CHANGE OF OPIN ION AND ALSO IN THE CASE OF CIT V. KELVINETOR OF INDIA LTD [256 ITR 1 (DEL)(FB)] HE HELD THAT THE ADDITION OF 6 30 860 WAS UNCALLED FOR AND ILLEGAL. HE HELD THE REOPENING OF ASSESSMENT IS INVALID AND ALLOWED THE ASSESSEE APPELLANT S CONTENTION. I.T.A.NO. 230/CTK/2010 3 3. THE LE ARNED DR INITIATING ARGUMENT S SUBMITTED THAT IT WAS NOT A CHANGE OF OPINION AS HAS BEEN CONSIDERED BY THE LEARNED CIT(A) IN THE CASE OF THE ASSESSEE O N THE FACTS AND CIRCUMSTANCES AS HAVE BEEN ENUMERATED ABOVE. THE ITAT IN THEIR DECISION HAD HELD THAT THE STOCK COULD NOT BE BROUGHT TO TAX UNDER THE PROVISIONS OF SECTION 69C THEREFORE WAS CONSIDERED BY THE LEARNED ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 69B. THE LEARNED CIT(A) ON THE OTHER HAND HAS CLEARLY MENTIONED THAT IT WAS ON THE SAME BUNCH OF FACTS THEREFORE WAS A MERE CHANGE OF OPINION WHETHER IT WAS INCOME IN THE SHAPE OF CAPITAL ACCOUNTS WHICH WAS TERMED AS UNACCOUNTED OR IN THE FORM OF ASSETS WHICH WERE VALUED AS PART AND PARCEL OF THE ASSESSEES BUSINESS WAS NOT TO BE CONSIDERED FOR IN CREASING THE CAPITAL AS INTRODUCED. HE THEREFORE POINTED OUT THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT IT WAS THE SAME BUNCH OF FACTS WHICH COULD NOT BE CONSIDERED AS A CHANGE OF OPINION MAY KINDLY BE CONSIDERED IN ACCORDANCE WITH THE NOTINGS IN THE ASSESSMENT ORDER. 4 . THE LEARNED COUNSEL FOR THE ASSESSEE INSISTED THAT ASSETS OF A CONCERN MATCHES LIABILITIES THEREFORE THE FACTS REMAINS THE SAME EVEN AFTER THE INTRODUCTION OF CAPITAL OR ON DEPLETION IN ASSETS TAKES PLACE ON THE BASIS OF FINDINGS OF THE APPELLATE AUTHORITIES. THE LEARNED CIT(A) THEREFORE TOOK COGNIZANCE TO THE FA C T THAT THE TRIBUNAL HAD BEEN APPRISED OF THE FA C T THAT THE INVESTMENT IN STOCK WAS NOT INTRODUCTION OF CAPITAL WAS THEREFORE NOT TO BE CONSIDERED FOR ADDITION BY RESTRICTING THE CAPITAL INTRODUCED BY THE PART NERS AT 30 000 EACH. IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSETS THAT HAD BEEN PUT TO USE IN THE IMPUGNED ASSESSMENT YEAR WERE UNACCOUNTED TO BE TAXED UNDER THE PROVISIONS OF SECTION 69C WHEN TH E LEARNED DR AS OF NOW INSISTS IS TO BE ASSESSED AS AMOUNT OF INVESTMENT NOT DISCLOSED IN THE BOOKS OF ACCOUNT U/S.69B. THERE WAS NO SPECIFIC FINDING BY I.T.A.NO. 230/CTK/2010 4 THE ASSESSING OFFICER THAT THE BUSINESS WAS NEW AND THEREFORE THE PURPORTED ASSETS WERE TO BE ACQUIRED ONLY THROU GH THE INTRODUCTION OF CAPITAL WAS CONSIDERED BY THE LEARNED CIT(A) AS A MATTER OF NO FRESH MATERIAL AVAILABLE TO THE ASSES SING OFFICER FOR CONSIDERATION TO INVOK E THE PROVISIONS OF SECTION 147/148. HAVING EXPLAINED THE INTRODUCTION OF CAPITAL BY THE PARTNERS AND ALSO THE FACT THAT THE FURNITURE AND OTHER ASSETS ALONG WITH STOCK STOOD EXPLAINED TO THE EXTENT WAS AVAILABLE IN THE BALANCE SHEET OF THE ASSESSEE. THE AS SESSING OFFICER MERELY CHANGED HIS OPINION BY BRINGING TO TAX THE DIFFERENCE BETWEEN ASSETS OVER LIABILITIES RATHER THAN THE INTRODUCTION OF CAPITAL AS WAS CONSIDERED BY THE TRIBUNAL AS HELD IN THE FORM OF ASSETS. THE ASSESSING OFFICER THEREFORE MERELY C HANGED HIS VERSION OF HOLDING ASSETS WITHOUT IDENTIFYING THE ASSETS WHETHER STOCK U/S.69C OR 69B THEREFORE FAILED TO RELATE THAT THE STOCK HAD ALREADY BEEN CONSIDERED AS EXPENDITURE BY THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THE ORDER OF THE LEARNED CIT(A) REQUIRES NO FURTHER INTERFERENCE IN VIEW OF THE FACTUAL POSITION CONSIDERED BY THE APPELLATE AUTHORITY INCLUDING THAT OF THE TRIBUNAL WHEN THE VERY FACT THAT T HE ADDITION BEING MADE U/S.69C OR 69B BY THE TRIBUNAL HAS BEEN STRUCK OFF. THEREFORE WE FIND THE CONTENTION OF THE LEARNED COUNSEL APPROPRIATE THAT IT WAS A MERE CHANGE OF OPINION BY THE ASSESSING OFFICER TO BRING TO TAX THE AMOUNTS ONCE NOT FOUND TAXABLE UNDER THE PROVISIONS OF SECTION 68 THEN U/S.69 WAS APPROPRIATELY CONSIDERED BY THE LEARNED CIT(A) . THE TRIBUNAL HAD GIVEN A FINDING THAT THE INTRODUCTION OF CAPITAL BE RESTRICTED TO 30 000 EACH WAS NOT TO BE BALANCED AGAINST ANY DIFFERENCE ARISING THEREA FTER. THE ASSESSING OFFICER HAS NOT BEEN ABLE TO IDENTIFY THE INCOME HAVING ESCAPED ASSESSMENT BUT ONLY CHANGE D HIS OPINION TO THE FIRST INITIATION I.T.A.NO. 230/CTK/2010 5 OF PROCEEDINGS U/S.147 ON THE BASIS OF CAPITAL INTRODUCTION AND ON THE BASIS FOR SUBSEQUENT REOPENING AS UNE XPLAINED EXPENDITURE. AS NO FRESH BELIEF WAS AVAILABLE WE ARE INCLINED TO HOLD THAT THE ASSESSING OFFICER REOPENING WAS APPROPRIATELY HELD AS INVALID BY THE LEARNED CIT(A). THE APPEAL FILED BY THE REVENUE THEREFORE IS BOUND TO BE DISMISSED. 6. IN THE RE SULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 18 TH FEBRUARY 2011 S D/ - S D/ - ( . . . ) ( K.S.S.PRASAD RAO) JUDICIAL MEMBER ( . . ) (K.K.GUPTA) ACCOUNTANT MEMBER. ( ) DATE: 18 TH FEBRUARY 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : INCOME - TAX OFFICER WARD - 1 BALASORE. 2 / THE RESPONDENT: M/S.MAALAXMI JEWELLERY VIVEKANANDA MARG BALASORE. 3 . / THE CIT 4 . ( )/ THE CIT(A) 5 . / DR CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY / BY ORDER [ ] SENIOR PRIVATE SECRETARY ( ) ( H.K.PADHEE ) SENIOR.PRIVATE SECRETARY.