Dr. Arvindbhai Chhabildas Gandhi, v. The Income tax Officer, Ward-1,, Navsari

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AT SURAT CAMP AHMEDABAD BEFORE SHRI T.K. SHARMA JUDICIAL MEMBER AND SHRI D. C. AGRAWAL ACCOUNTANT MEMBER ITA NO.3076-3077/AHD/2007 ASSESSMENT YEARS :2002-03 & 2003-04 DATE OF HEARING:20.5.10 DRAFTED:21.5.10 DR. ARVINDBHAI CHHABILDAS GANDHI SONIWAD CHIKHLI DIST. NAVSARI PAN NO.ACHPG7205L DR. ARVINDBHAI CHHABILDAS GANDHI SONIWAD CHIKHLI DIST. NAVSARI PAN NO.ACHPG7205L V/S . V/S . INCOME TAX OFFICER WARD-1 NAVSARI ASSTT. COMMISIONER OF INCOME-TAX NAVASARI CIRCLE NAVSARI (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI S.B.VAIDYA AR REVENUE BY:- SMT. JYOTI LAXMI SR-DR O R D E R PER D.C.AGRAWAL ACCOUNTANT MEMBER:- THESE ARE TWO APPEALS FILED BY THE ASSESSEE FOR AS SESSMENT YEAR 2002-03 AND 2003-04 AGAINST THE ORDERS OF LD. CIT(APPEALS) DATED 05-03-2007. THE ASSESSEE HAS RAISED SEVERAL GROUNDS. ONE OF THE GR OUND IS THAT RE-OPENING OF ASSESSMENT U/S.147 WAS BAD IN LAW. ACCORDING TO LD . AR THIS ISSUE GOES TO THE ROOT OF THE MATTER AND IF IT IS DECIDED IN FAVOUR OF THE ASSESSEE THEN OTHER ISSUES ITA NO.3076-77/AHD/2007 A.YS. 02-03 & 03-04 DR. ARVINDBHAI C GANDHI V. ITO WD-1 & ACIT NVS PAGE 2 AND THE ADDITIONS CONTESTED WOULD BE INCONSEQUENTI AL. THE GROUND REGARDING REOPENING OF ASSESSMENT WHICH IS COMMON IN BOTH THE YEARS IS AS UNDER:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT THE LEARNED C.I.T.(A) VALSAD HAS ERRED IN UPHOLDING THE RE- OPENING OF ASSESSMENT US.147 WITHOUT APPRECIATING T HE FACT THAT NO INCOME HAD ESCAPED ANY ASSESSMENT AND THE REASON FO R REOPENING THE ASSESSMENT WAS NON EXISTENT AND THEREFORE THE ASSE SSMENT WAS BAD-IN- LAW AND VOID-AB-INITIO. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LEADING DOCTOR PRACTICING AT CHIKHLI WAS EXAMINED IN RESPECT OF A TAX EVASION CO MPLAINT BY THE ADIT (INV) VALSAD WHO SUMMONED HIM AND RECORDED HIS STATEMENT ON OATH. DURING THE COURSE OF STATEMENT ASSESSEE OFFERED A SUM OF RS.4 LAKH FOR ASSESSMENT YEAR 2002-03 AND RS.8 LAKH FOR ASSESSMENT YEAR 2003-04 A S HIS ADDITIONAL INCOME IN ADDITION TO HIS REGULAR PROFESSIONAL INCOME. THE AS SESSEE FILED RETURN OF INCOME FOR THESE TWO YEARS SHOWING TOTAL INCOME OF RS.4 07 044/- FOR ASSESSMENT YEAR 2002-03 AND AT RS.8 54 810/- FOR ASSESSMENT YEAR 20 03-04. THE ASSESSMENT YEAR 2002-03 WAS COMPLETED ON AN INCOME OF RS.10 02 290/ - WHEREIN ASSESSING OFFICER DISALLOWED A SUM OF RS.6 LAKH BY ESTIMATE O UT OF CLAIM OF EXPENSES. IN ASSESSMENT YEAR 2003-04 THE ASSESSING OFFICER DISA LLOWED A SUM OF RS.7.20 LAKH OUT OF CLAIM OF EXPENDITURE AND ASSESSED TOTAL INCOME AT RS.15 32 520/- INCLUDING THEREIN THE AMOUNT DECLARED BEFORE ADIT. 3. THE ASSESSEE CHALLENGED REOPENING OF ASSESSMENT BEFORE LD. CIT(APPEALS) WHO UPHELD THE REOPENING BY OBSERVING AS UNDER:- 4.4 I HAVE CONSIDERED THE CONTENTION OF THE AO AS WELL AS THE AR AND I AM OF THE VIEW THAT THE AO HAS VALIDLY REOPENED THE ASSESSMENT U/S. 147 WITH A VIEW TO EXAMINE ALL THE POINTS LEADING TO DE CLARATION OF INCOME MADE THROUGH THE STATEMENT BEFORE ADIT (INV.) VALS AD. IT WAS THE DUTY OF THE AO TO EXAMINE VARIOUS ASPECTS OF THE AFFAIRS OF THE APPELLANT AND THEREFORE THE CASE WAS RIGHTLY REOPENED BY THE AO U /S. 147 OF THE ACT. THEREFORE I DO NOT AGREE WITH THE CONTENTION OF TH E AR AND AS A RESULT THIS GROUND OF APPEAL IS DISMISSED. ITA NO.3076-77/AHD/2007 A.YS. 02-03 & 03-04 DR. ARVINDBHAI C GANDHI V. ITO WD-1 & ACIT NVS PAGE 3 4. BEFORE US LD. AR FOR THE ASSESSEE SUBMITTED THAT REOPENING IS BAD IN LAW BECAUSE AMOUNT OF RS.4 LAKH AND RS.8 LAKH WERE DECL ARED IN PROFIT & LOSS A/C. FILED ALONG WITH RETURN OF INCOME. THE ASSESSING OF FICER HAS RECORDED THE REASONS WHICH CONTAINED THE SUM OF RS.4 LAKH AND RS .8 LAKH ONLY AS ESCAPED INCOME WHICH WAS ALREADY DECLARED BY THE ASSESSEE I N THE PROFIT & LOSS A/C. AND COMPUTATION OF INCOME FILED ALONG WITH THE RETURN O F INCOME. ONCE THERE IS NO AMOUNT ESCAPING ASSESSMENT THE RE-OPENING WOULD BE UNJUSTIFIED. HE REFERRED TO THE FOLLOWING JUDGMENTS:- (A) HONBLE GUJARAT HIGH COURT :- 1. SARADBHAI M LAKHANI V. ITO 231 ITR 779 2. ADARSH CHEMICALS & FERTILIZERS LTD. V. INSPECTIN G ACIT 212 ITR 185 3. DESAI BROTHERS V. DCIT 240 ITR 121 (B) ITAT DECISIONS :- 1) ITO . VARUN STEEL INDUSTRIES 91 TTJ 382 (CHANDI GARH) 2) ITO V. SMT. K.P. SREE MATHY 17 ITD 159 (COCHIN) 3) CHEM CROWN EXPORTS LTD. V. ITO 93 TTJ 710 (CAL) 4) DCIT V. YAKUB ALI GOPAL SINGH & PARTY 98 TTJ 82 1 (JODHPUR) 5) BABULAL LATH V. ACIT 83 ITD 691 (MUM) 5. AGAINST THIS LD. SR-DR SUBMITTED THAT AS PER AS SESSMENT ORDER ASSESSMENT HAS BEEN REOPENED TO EXAMINE ALL THE FAC TS RELATING TO INVESTMENT AND CLAIM OF EXPENDITURE. HE FURTHER SUBMITTED THA T REOPENING IS JUSTIFIED IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF ACIT V. RAJESH JAVERI STOCK BROKERS PVT. LTD. (2007) 291 ITR 500 (SC) WHEREIN IT IS HELD THAT THE ASSESSMENT COMPLETED U/S.143(1) CAN BE REOPENED BY ISSUANCE OF NOTICE U/S.148(1). 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. FOR THE SAKE OF CONVENIENCE WE REPRODUCE T HE REASONS RECORDED BY THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2002-03:- ITA NO.3076-77/AHD/2007 A.YS. 02-03 & 03-04 DR. ARVINDBHAI C GANDHI V. ITO WD-1 & ACIT NVS PAGE 4 THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR A. Y. 2002-03 ON 12.03.2003 DECLARING TOTAL INCOME AT RS.4 07 044/-. THE SAME WAS PROCESSED U/S. 143(1) OF THE I.T. ACT ON 25.03.2003 . IN THIS CASE THE ADIT(INV.) VALSAD VIDE HIS LETTER NO.ADI(INV.)/VLS/ TEP/02.03 DT.5/03/20003 HAS FORWARDED HIS INQUIRY REPORT ON T EP AGAINST THE ASSESSEE. IT IS REPORTED THAT THE ASSESSEE HAS ADMI TTED AND VOLUNTARY DISCLOSED RS.4 00 000/- FOR F.Y. 2001-02 AS HIS UND ISCLOSED AND UNACCOUNTED INCOME AS PER HIS STATEMENT RECORDED U /S.131 OF THE I.T. ACT ON 26.2.2002. THEREFORE I HAVE REASON TO BELIE VE THAT INCOME AMOUNTING TO RS.4 00 000/- HAS ESCAPED THE ASSESSME NT IN THE CASE OF ASSESSEE. THEREFORE NOTICE U/S. 148 OF THE I.T. ACT IS REQUIRED TO BE ISSUED. FOR THE ASSESSMENT YEAR 2003-04 SIMILAR REASONS HA VE BEEN RECORDED EXCEPT CHANGE OF FIGURE NAMELY RS.8 LAKH IN PLACE OF RS.4 LAKH. 7. THUS ASSESSMENT HAS BEEN REOPENED ON THE GROUND THAT A SUM OF RS.4 LAKH HAS BEEN ESCAPED IN ASSESSMENT YEAR 2002-03 AND SUM OF RS. 8 LAKH HAS ESCAPED FROM ASSESSMENT FOR ASSESSMENT YEAR 2003-04. A PER USAL OF PAGE 6 OF ASSESSEES PAPER BOOK BEING PROFIT & LOSS A/C. FIL ED ALONG WITH THE RETURN OF INCOME SHOWED THE DECLARATION SUM OF RS.4 LAKH ON T HE INCOME SIDE AS UNDER:- PROFIT & LOSS STATEMENT FOR THE PERIOD [01/04/01] T O [31/03/02] ACCOUNTING YEAR: 2001-02 PAGE NO.1 INCOME EXPENSES 655.00 BANK INTEREST 6 500.00 MEDICINE STOCK (0) 4 20 795.00 PRACTICE INCOME 68 700.00 MEDICINE PURCHAE 8 120.00 MEDICINE STOCK 6 445.00 TELEPHONE EXPENSES 4 00 000.00 INCOME VOLANTARY DIS. 7 996.33 ELE. LIGHT EXPENSES LOSED A/C. 4 850.00 STATIONAERY EXPENSES 10 120.00 PETROL 7 R EARING 2 18 400.00 SALARY EXP ENSES 4 880.00 DISPE NSARY EXPENSES 76 564.00 DEPRE CIATION A/C 3 889.00 INSUR ASNCE PREMIUM 4 21 225.67 NET PR OFIT ============= =========== 8 29 570.00 8 29 570.00 IN THE ASSESSMENT YEAR 2003-04 ASSESSEE HAS DECLARE D PROFESSIONAL RECEIPTS OF RS.13 47 947/- AND IN THE NOTES TO THE ACCOUNT FOLL OWING DESCRIPTION HAS BEEN GIVEN:- ITA NO.3076-77/AHD/2007 A.YS. 02-03 & 03-04 DR. ARVINDBHAI C GANDHI V. ITO WD-1 & ACIT NVS PAGE 5 10. PROFESSIONAL RECEIPTS OF RS.13 47 947=00 INCLU DES RS.8 00 000=00 OF VOLUNTARY DISCLOSED INCOME BEFORE D.D.I.T.(INV.) VALSAD. ON ABOVE BASIS IT IS CLAIMED THAT BOTH THE SUM OF RS.4 LAKH AND RS.8 LAKH ARE DECLARED IN THE RETURN OF INCOME FOR ASSESSMENT YEA R 2002-03 WHICH WAS ORIGINALLY COMPLETED U/S.143(1) AND ASSESSMENT YEAR 2003-04 WAS COMPLETED AGAIN U/S.143(1) OF THE ACT ON THE INCOME DECLARED IN THE RETURNS. NOTICE U/S.148 WAS ISSUED SUBSEQUENTLY ON 20-01-2006. 8. ON THE ABOVE FACTS WE ARE OF THE VIEW THAT REOP ENING ASSESSMENT U/S.147 IS NOT VALID BECAUSE THERE IS NO INCOME WHICH HAS E SCAPED ASSESSMENT. BOTH INCOMES WERE DECLARED IN THE RETURN OF INCOME AND T HEREFORE REASONS SO FRAMED BY THE ASSESSING OFFICER CANNOT LEND TO A SATISFACT ION TO HIM THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE JUDGM ENT OF HONBLE SUPREME COURT IN THE CASE OF RAJESH JAVERI STOCK BROKERS PVT. LTD. (SUPRA) HAS LAID DOWN THAT THERE SHOULD BE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN OTHER WORDS IF AO HAS NO REASON TO SAY THAT ANY INCOME HAS ESCAPED ASSESSMENT ON THE GROUND THAT SUCH INCOME I S ALREADY DECLARED IN THE RETURN OF INCOME THEN REOPENING OF ASSESSMENT WILL NOT BE VALID. IN FACT THE DECISION OF HONBLE SUPREME COURT RAJESH JAVERI STOCK BROKERS PVT. LTD. (SUPRA) IS ON THE PROPOSITION THAT ASSESSMENT IS DO NE U/S.143(1) THEN SUCH ASSESSMENT CAN ALSO BE REOPENED BY ISSUING OF NOTIC E U/S.148(1) OF THE ACT. IT DOES NOT LAY DOWN A PROPOSITION THAT ASSESSMENT CAN BE REOPENED EVEN IF ALLEGED ESCAPED INCOME IS ALREADY DECLARED IN THE RETURN OF INCOME. HONBLE GUJARAT HIGH COURT IN THE CASE OF SARBHAI M LAKHANI V. ITO (1998) 231 ITR 779 (GUJ) HAS HELD THAT WHERE ENTIRE FACTS RELATING TO IMPUGN ED ESCAPED INCOME WAS DISCLOSED TO THE ASSESSING AUTHORITY THEN NOTICE IS SUED FOR REOPENING ASSESSMENT WOULD BE INVALID. IN ACIT V. LAXMI AGENTS LTD. (1975) 101 ITR 441(GUJ) HONBLE JURISDICTIONAL HIGH COURT HELD THAT WHERE A SSESSING OFFICER WAS IN ITA NO.3076-77/AHD/2007 A.YS. 02-03 & 03-04 DR. ARVINDBHAI C GANDHI V. ITO WD-1 & ACIT NVS PAGE 6 POSSESSION OF ALL THE INFORMATION AND THERE WAS NO ADDITIONAL INFORMATION AVAILABLE WITH HIM THEN INITIATION OF PROCEEDINGS U /S.147 WILL NOT BE VALID. IN THE CASE OF ITO V. SMT. K.P. SHREE MATHY (1986) 17 ITD 159 (KOCH) TRIBUNAL HELD THAT WHEREAS ASSESSEE HAS DISCLOSED THE PROPOSED RE CEIPT THE COST OF ACQUISITION OF LAND AND EXPENSES INCURRED AND NO NEW FACTS WERE DISCOVERED BY THE ASSESSING OFFICER THEN REOPENING WOULD NOT BE VALI D EITHER RENDER SEC.147(A) OR SEC.147(B). IN THE CASE OF DCIT V. YAKUB ALI GOPAL SINGH & PARTY [WINE CONTRACTOR] (2005) 98 TTJ 821 (JD) THE TRIBUNAL HELD THAT THE RE SHOULD BE CLEAR REFERENCE TO ESCAPEMENT OF INCOME IN ORDER TO ISSUE NOTICE U/S.148. 9. FOR ACQUIRING JURISDICTION U/S.148(1)/147 THE A SSESSING OFFICER HAS TO NECESSARILY MENTION FOLLOWING INGREDIENTS IN THE RE ASONS RECORDED BY HIM SO THAT IT CAN BE SAID THAT HE WAS PROPERLY AND JUDICIOUSLY SATISFIED BEFORE REOPENING OF ASSESSMENT. THESE INGREDIENTS ARE:- I) THE IDENTITY OF THE ASSESSEE IN WHOSE CASE ASSES SMENT IS SOUGHT TO BE REOPENED; II) CERTAINTY OF THE YEAR FOR WHICH ASSESSMENT IS S OUGHT TO BE REOPENED; III) AMOUNT OF INCOME WHICH HAS ESCAPED ASSESSMENT AND; IV) IN CASE WHERE ASSESSMENT IS SOUGHT TO BE REOPEN ED AFTER 4 YEARS THE SATISFACTION OF ASSESSING OFFICER THAT THERE WAS OM ISSION OR FAILURE ON THE PART OF ASSESSEE TO DISCLOSE MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT AND MENTION OF SUCH NON-DISCLOSURE OF MATERIAL FACT S IN THE REASONS RECORDED. UNLESS ALL THESE 4 INGREDIENTS ARE CLEARLY DISCERNI BLE FROM THE REASONS RECORDED THE REOPENING OF THE ASSESSMENT CANNOT BE UPHELD. E VEN IF ONE INGREDIENT IS MISSING REOPENING OF ASSESSMENT CANNOT BE HELD VAL ID. IT IS UNDISPUTED OF PROPOSITION OF LAW THAT RECORDING OF REASONS IS A C ONDITION PRECEDENT TO INVOKE JURISDICTION U/S.147/148 (CIT VS. RAJINDRA ROSIN & TURPENTINE INDUSTRIES. (2008) 305 ITR 161 (PUNJ. & HAR.). SIMILAR VIEW WA S TAKEN IN FOLLOWING CASES ALSO:- ITA NO.3076-77/AHD/2007 A.YS. 02-03 & 03-04 DR. ARVINDBHAI C GANDHI V. ITO WD-1 & ACIT NVS PAGE 7 TECHSPAN INDIA (P) LTD & ANR VS. ITO (2006) 283 IT R 212 (DEL) GERMAN REMEDIES LTD VS. DCIT & ORS. (2006) 285 ITR 26 (BOM) IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN TH E CASE OF CIT V. CORPORATION LTD. (2002) 254 ITR 781 (SC) THAT DISCLOSURE IN BALANCE- SHEET ALSO AMOUNT TO DISCLOSURE. WE ALSO HOLD THAT DISCLOSURE IN THE PROFIT & LOSS A /C. OR IN A NOTE APPENDED TO THE PROFIT & LOSS A/C. CLARIFYIN G THE COMPOSITION OF THE INCOME DISCLOSED WOULD ALSO AMOUNT TO DISCLOSURE. 10. IN VIEW OF THESE WE HOLD THAT ASSUMPTION OF JU RISDICTION FOR REOPENING OF ASSESSMENT WAS BAD IN LAW AND THEREFORE THE RE-ASSE SSMENT SO FAMED ARE QUASHED. THUS WHAT SURVIVES ARE THE ASSESSMENTS FR AMED ORIGINALLY U/S.143(1). AS A RESULT APPEALS FILED BY THE ASSESSEE ARE ALLO WED. 11. IN THE RESULT ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 28/05/2010 SD/- SD/- (T.K.SHARMA) (D.C.AGRAWAL) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD DATED : 28/05/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VLS 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD