ACIT, CHENNAI v. Shri K.Bhagyaraj, CHENNAI

ITA 679/CHNY/2007 | 1997-1998
Pronouncement Date: 05-10-2010 | Result: Dismissed

Appeal Details

RSA Number 67921714 RSA 2007
Bench Chennai
Appeal Number ITA 679/CHNY/2007
Duration Of Justice 3 year(s) 6 month(s) 26 day(s)
Appellant ACIT, CHENNAI
Respondent Shri K.Bhagyaraj, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 05-10-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 05-10-2010
Date Of Final Hearing 05-10-2010
Next Hearing Date 05-10-2010
Assessment Year 1997-1998
Appeal Filed On 09-03-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH B : CHENNAI [BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE ACCOUNTANT MEMBER] I.T.A.NO.679/MDS/07 ASSESSMENT YEAR : 1997-98 THE ACIT MEDIA CIRCLE I CHENNAI VS SHRI K. BHAGYARAJ NO.8 5 TH CROSS STREET LAKE AREA NUNGAMBAKKAM CHENNAI 34 (APPELLANT) (RESPONDENT) C.O.NO.72/MDS/2007 ASSESSMENT YEAR : 1997-98 SHRI K. BHAGYARAJ CHENNAI 34 VS THE ACIT MEDIA CIRCLE I CHENNAI (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI P.B SEKARAN ASSESSEE BY : SHRI V.D. GOPAL O R D E R PER HARI OM MARATHA JM: THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE FOR ASSESSMENT YEAR 1997-98 ARISE OUT OF THE ORDER OF THE LD. CIT(A) CHENNAI DATED 29.11.2006. ITA 679/07 & CO 72/07 :- 2 -: 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A FILM DIRECTOR AND ACTOR. HE FILED RETURN FOR THE Y EAR UNDER CONSIDERATION BY DECLARING LOSS OF ` 1 15 030/- BELATEDLY ON 5.1.2000 WHICH WAS REGULARIZED BY THE ASSESSING OFFICER BY I SSUANCE OF NOTICE U/S 148. THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S 147 ON 28.3.2002 AT A TOTAL INCOME OF ` 1 14 280/- EXCLUDING AGRICULTURAL INCOME OF ` 33 820/-. IT WAS FOUND SUBSEQUENTLY THAT THE ASSE SSEE HAS PRODUCED A FILM BY THE NAME GNANAPAZHAM IN WH ICH EXPENDITURE OF ` 46.29 LAKHS WAS INCURRED. THIS FILM WAS RELEASED ON 15.11.1996 AND THE DETAILS OF EXPENDITURE INCURRED ARE AS UNDE R: ALL COSTS PAID TO M/S BHAGAWATHI CREATIONS ` 15 97 643 PAID TO M/S GEMINI COLOUR LAB ` 20 31 001 AMOUNT TO M/S AKKINIYYE AMMAN MOVIES ` 10 00 000 ` 46 28 644/- 3. THE ASSESSEE HAS SHOWN REALIZATION FROM THIS FILM O NLY AT ` 18 LAKHS BUT THE ASSESSING OFFICER BY PRESSING THE RUL E 9A OF THE I.T. RULES INTO SERVICE WHICH ACCORDING TO HIM IS APP LICABLE TO THE FACTS OF THIS CASE HAS ESTIMATED THE COST OF PRODUCTION O F THE FILM AT ` 18 LAKHS ONLY. HE HAS THUS DISALLOWED THE REMAINING AMOUNT OF COST I.E ` 28 28 644/- AND HAS CARRIED FORWARD THE SAME TO SU BSEQUENT YEARS. IT WAS FOUND THAT THE ASSESSEE HAD LENT A SUM OF ` 91 92 405/- TO HIS RELATIVE AND OTHER KNOWN PERSONS ON WHICH NO INTERE ST WAS CHARGED. ITA 679/07 & CO 72/07 :- 3 -: FROM THESE FACTS THE ASSESSING OFFICER GATHERED T HAT INCOME CHARGEABLE TO TAX FOR THE RELEVANT ASSESSMENT YEAR HAS ESCAPED ASSESSMENT . AS A RESULT HE ISSUED NOTICE U/S 148 ON 30.3.2004 AS PER LAW. IN COMPLIANCE TO THE NOTICE THE ASSESSEE REQUESTED THAT RETURN FILED BY HIM ON 5.1.2001 MAY BE TREATED AS T HE RETURN FILED IN PURSUANCE OF THE NOTICE U/S 148. BUT RE-ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF ` 34 37 110/- INCLUSIVE OF AGRICULTURAL INCOME OF ` 33 820/-. AS A RESULT A NET DEMAND OF ` 36 61 119/- WAS RAISED WHICH ALSO INCLUDED INTEREST UNDER SECTIONS 234A AND 234B . AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) BY CHAL LENGING THE MERITS OF ADDITIONS AND ALSO THE LEGALITY OF NOTICE ISSUED F OR RE-ASSESSMENT U/S 148. THE LD. CIT(A) WAS NOT AGREEABLE WITH THE ASS ESSEE THAT THE ASSESSING OFFICER DID NOT ASSUME A VALID JURISDICTI ON SIMPLY BY ACTING ON THE AUDIT OBJECTION RAISED BY THE REVENUE AUTHOR ITIES WHICH WAS SUBSEQUENTLY EVEN REJECTED. BUT ON MERITS HE HELD THAT PROVISIONS OF RULE 9A WERE NOT APPLICABLE AND HENCE HE DELETED T HE ADDITIONS MADE ON THAT COUNT. HE THUS HAS DELETED THE ENTIRE AD DITION MADE BY THE ASSESSING OFFICER. NOW THE REVENUE IS AGGRIEVED A GAINST THE DELETION OF THE ADDITION OF ` 20 31 001/- AND INTEREST AMOUNT OF ` 4 26 541/-. THE ASSESSEE IS STILL PURSUING THE LEGAL GROUND OF WRONG ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. ITA 679/07 & CO 72/07 :- 4 -: 4. THE ASSESSEE HAS FILED CROSS OBJECTION RAISING FOLL OWING GROUNDS: I. THE DECISION OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TO THE EXTENT IT IS AGAINST THE CROSS OBJECTOR IS CONTRARY TO LAW FACTS OF THE CAS E AND THE MATERIALS AVAILABLE ON RECORD. II. (A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SHOULD HAVE BEEN PLEASED TO HOLD THAT THE REOPENING OF THE ASSESSMENT IS UNTENABLE BOTH IN LAW AND ON FACTS. (B) IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SHOULD HAVE BEEN PLEASED TO HOLD THAT THE APPELLANT OFFICER DID NOT ENTERTAIN ANY BONAFIDE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT IN VIEW OF THE ADMITTED POSITION THAT THE ASSESSING OFFICER RESISTED THE AUDIT OBJECTION AND CONTESTED THE AUDIT OBJECTION BY SAYING THAT THE ORIGINAL ASSESSMENT ORDER IS IN ACCORDANCE WITH LAW THAT THERE WAS NO ESCAPEMENT OF INCOME AND THAT IT DOES NOT REQUIRE ANY MODIFICATIONS OR RE-ASSESSMENT. (C) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE CASE LAW SUBMITTED BY THE CROSS OBJECTOR CHARTERED ACCOUNTANT VIDE 284 ITR 593 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE BEEN PLEASED TO HOLD THAT THE REOPENING IS BAD IN LAW AND CONSEQUENTLY SHOULD HAVE ALLOWED THE APPEAL IN TOTO. (D) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN NOT APPRECIATING THAT THE ORIGINAL ASSESSMENT WAS PASSED ON 28.3.2002 U/S 143(3) AND CONSEQUENTLY THE REOPENING AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR BY NOTICE DATED 30.3.2004 IS BARRED BY TIME IN VIEW OF THE PROVISO TO SECTION 147 PARTICULARLY IN THE ADMITTED POSITION THAT THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ORIGINAL ASSESSMENT ITA 679/07 & CO 72/07 :- 5 -: ORDER WAS CORRECT IN ALL RESPECTS AND THAT THERE WAS NO OMISSION OR ERROR ON THE PART OF THE CROSS OBJECTOR TO DISCLOSE ALONG WITH THE RETURN ALL THE MATERIAL FACTS TRULY AND FULLY TO ENABLE THE OFFICE R TO CORRECTLY COMPUTE THE PROPER TOTAL INCOME EVEN AS PER THE ASSESSING OFFICERS LETTER TO THE DEPUTY ACCOUNTANT GENERAL(AUDIT) II DATED 4.10.2002. (E) EVEN OTHERWISE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SHOULD HAVE BEEN PLEASED TO APPRECIATE THAT THE SECTION 148 NOTICE DATED 30.3.2004 WAS NOT EFFECTIVELY ISSUED ON OR BEFORE 31.3.2004. III. FOR THE ABOVE MENTIONED GROUNDS AND SUCH OTHER GROUNDS AS MAY BE SUBMITTED BEFORE OR AT THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE GROUNDS OF THE CROSS OBJECTION MAY BE ALLOWED AND THE APPEAL FILED BY THE DEPARTMENT MAY BE DISMISSED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE C AREFULLY PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. T HE LEGAL ISSUE GOES TO THE VERY ROOT OF THE CASE AND IT IS FOUND THAT T HE ORIGINAL ASSESSMENT WAS PASSED ON 28.3.2002 U/S 143(3) AND THE REOPENIN G WAS DONE BEYOND FOUR YEARS FROM THE END OF THE ASSESSMENT YE AR BY ISSUANCE OF NOTICE DATED 30.3.2004 WHICH IS BARRED BY LIMITATIO N IN VIEW OF PROVISO TO SECTION 147. IT IS ALSO A FACT THAT THE AUDIT P ARTY RAISED AN OBJECTION AND THE ASSESSING OFFICER WROTE A LETTER DATED 4.10 .2002 TO THE DY. ACCOUNTANT GENERAL (AUDIT) II THAT THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS TRULY AND FULLY AND THE ASSESSING OF FICER HAS CORRECTLY MADE THE ASSESSMENT ORDER. WE HAVE FOUND THAT THE NOTICE FOR ITA 679/07 & CO 72/07 :- 6 -: REOPENING THE ASSESSMENT WAS ISSUED AFTER THE LAPS E OF FOUR YEARS AND ON THE BASIS OF THE AUDIT REPORT WHICH WAS CERT IFIED BY THE ASSESSING OFFICER HIMSELF TO BE NOT CORRECT OBJECTI ONS WHILE REPLYING TO THE AUDIT OBJECTION. THE ABOVE FACTS REMAINED UNDIS PUTED. THESE FACTS SHOW THAT THE ASSESSING OFFICER DID NOT ENTERTAIN A NY BONAFIDE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT IN VIEW OF THE ADMITTED POSITION THAT THE ASSESSING OFFICER EVEN RESISTED THE AUDIT OBJECTION AND CONTESTED IT BY STATING THAT THE ORIGINAL ASSESSMEN T ORDER IS IN ACCORDANCE WITH THE LAW AND THERE WAS NO ESCAPEMENT OF INCOME SO NO MODIFICATION OR RE-ASSESSMENT IS REQUIRED. REL IANCE HAS BEEN PLACED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD VS ACIT 291 IT R 593 WHICH IS A CORRECT LAW APPLICABLE TO THE FACTS OF T HE CASE AND ON WHICH BOTH PARTIES HAVE RELIED. IN THIS DECISION IT HA S BEEN HELD THAT FOR RE- ASSESSMENT A CONDITION PRECEDENT IS THAT THERE SHOU LD BE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT . IT HA S BEEN HELD THUS: HELD THAT THE RESPONDENT HAD SUSTAINED HIS OBJECT ION TO THE PROPOSAL MADE BY THE AUDIT DEPARTMENT AND THE OBJECTION RAISED BY THE RESPONDENT HAD BEEN ENDORSE D BY THE ADDITIONAL COMMISSIONER. THEREFORE IT WAS ABS OLUTELY CLEAR THAT THE RESPONDENT DID NOT HOLD THE BELIEF A T ANY POINT OF TIME EITHER BEFORE OR AFTER RECORDING REASONS THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT ON ACCOUNT OF ERRONEOUS COMPUTATION OF LOSS AND THE EX ERCISE OF RECORDING REASONS ON THE FILE WAS A MERE PRETENC E TO ITA 679/07 & CO 72/07 :- 7 -: GIVE VALIDITY OF THE EXERCISE OF POWER FOR ASSUMING JURISDICTION. IN OTHER WORDS IT WAS A COLOURABLE EXERCISE OF JURISDICTION AND COULD NOT BE SUSTAINED IN LAW. 6. THIS CASE HAS TRAVELED UPTO THE HON'BLE SUPREME CO URT AND THE COURT WHILE DECIDING IT (291 ITR 500) HAS MORE OR LESS CONFIRMED THE SAME VIEW ALTHOUGH IT HAS FURTHER ELABORATED THE JU RISDICTION ASPECT. BUT THE MAIN THING THAT THE ASSESSING OFFICER SHOUL D BE OF THE OPINION THAT INCOME HAS ESCAPED ASSESSMENT IS STILL THE CO NDITION PRECEDENT TO CARRY OUT RE-ASSESSMENT. IT HAS BEEN HELD THUS: THE EXPRESSION REASON TO BELIEVE IN SECTION 147 WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFI CER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCO ME HAD ESCAPED ASSESSMENT HE CAN BE SAID TO HAVE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT . THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSIN G OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. WHAT IS REQUIRED IS REASO N TO BELIEVE BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REAS ONABLE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. WHE THER MATERIAL WOULD CONCLUSIVELY PROVE ESCAPEMENT OF INC OME IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF THE BELIEF IS WITHIN THE REALM OF THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER. 7. THEREFORE BY FOLLOWING THE ABOVE DECISIONS AND IN VIEW OF THE PROVISIONS OF SECTION 147 R.W.S 148 OF THE ACT WE HOLD THAT REOPENING IN THE GIVEN FACTS AND THE CIRCUMSTANCES OF THIS CA SE IS BAD IN LAW AND ITA 679/07 & CO 72/07 :- 8 -: CANNOT BE SUSTAINED IN THE EYES OF LAW. WE THEREF ORE DECLARE THE RE- ASSESSMENT AS NULL AND VOID AB INITIO. HAVING HELD SO THERE IS NO NEED TO DECIDE THE ISSUES ON MERITS. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISS ED AND THE CROSS OBJECTION OF THE ASSESSEE STANDS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 5.10.2010. SD/- SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 5 TH OCTOBER 10 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR