Income Tax Appellate Tribunal - Jaipur
Dharam Chand Sohan Lal & Company, Alwar vs Ito, Alwar on 1 September, 2017
vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
Jh dqy Hkkjr] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k
BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 207/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2008-09
M/s Dharam Chand Sohan Lal & Company, cuke The ITO,
A-13, New Sabzi Mandi, Vs. Ward-2(3),
Alwar. Alwar.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AAHFD6576D
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 208/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2009-10
M/s Dharam Chand Sohan Lal & Company, cuke The ITO,
A-13, New Sabzi Mandi, Vs. Ward-2(3),
Alwar. Alwar.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AAHFD6576D
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrhdh vksj ls@Assessee by : Shri P.C.Parwal (C.A.)
jktLo dh vksj ls@Revenue by : Shri S.L. Chandel (Addl.CIT)
lquokbZ dh rkjh[k@Date of Hearing : 22/08/2017
?kks"k.kk dh r kjh[k@Date of Pronouncement: 01/09/2017.
vkns'k@ORDER
PER SHRI VIKRAM SINGH YADAV, A.M.
These are two appeals filed by the assessee against the order of Ld. CIT(A), Alwar dated 06.01.2015 for A.Y. 2008-09 and dated 06.01.2016 for A.Y. 2009-10 respectively wherein the assessee has challenged the confirmation of addition u/s 68 of the Act.
ITA No. 207&208/JP/16 M/s Dharam Chand Sohan Lal & Company V/s ITO
2. The ld. AR submitted that in both these appeals arise out of the order passed by the Assessing Officer u/s 147 of the Act and the assessee wishes to raise the following additional ground of appeal which is purely a legal ground and which was not taken inadvertently earlier at the time of filing of this subject appeal:
"Under the facts and circumstances of the case, the order passed u/s 147 is illegal and bad in law."
3. It was submitted that in view of the decision of Hon'ble Supreme Court in the case of CIT vs. NTPC Ltd reported in 229 ITR 383, the above said additional ground being a purely legal ground may be admitted for imparting substantial justice to the appellant.
4. Both the parties were heard. After taking into consideration the fact that the above said additional ground is purely a legal ground, the same was admitted in respect of both the appeals under consideration.
5. In this regard, the ld. AR has drawn our reference to the reasons recorded by the Assessing Officer before issuance of notice u/s 148 which reads as under:-
"In this case as per information received by this office from the ADIT(Inv.)-II, Jaipur's letter no. 1495 dated 03.03.2011 which reveals that the assessee firm has made substantial transactions including cash deposits & withdrawals during the asst. year under consideration. Apart from this it is also noticed that assessee has made following payments in cash which is contravention to section 40A(3) of the I.T. Act.
Period of Transaction Amount of Transaction F.Y. 2007-08 Rs. 53,26,090/-
Thus, income on a/c of disallowance to be made u/s 40(A)(3) of the IT Act has escaped assessment. I have therefore reasons that the transactions mentioned below are escaped income within the meaning of the section 147 of the IT Act.
2 ITA No. 207&208/JP/16 M/s Dharam Chand Sohan Lal & Company V/s ITO Period of Transaction Amount of Transaction F.Y. 2007-08 Rs. 53,58,101/- (Cash deposit in the assessee's bank a/c) Total Rs. 53,58,101/- Hence, notice u/s 148 is being issued."
6. It was submitted by the ld AR that in course of appellate proceedings before the ld CIT(A), the assessee explained that notice u/s 147 is issued by quoting the reasons which are totally different than the addition made by the AO and therefore, the reopening itself is null and void. It was further explained that in original proceedings u/s 143(3), AO has verified all the creditors and debtors in evidence to which copy of notice issued by the AO and reply submitted by the assessee was filed. The Ld. CIT(A) however, has not given any finding on this issue.
7. It was further submitted that the AO initiated proceedings u/s 148 to verify certain cash transactions and its disallowability u/s 40A(3) but made the addition made u/s 68 by treating the creditors as unexplained. It is a settled law that if the income, the escapement of which was the basis of the formation of the reason to believe is not assessed or reassessed, it would not be open to the AO to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment.
8. In support, the ld. AR placed reliance on the following decisions:-
• CIT vs. Mohmed Juned Dadani (2014)355 ITR 172 (Guj.) HC) • Oriental Bank of Commerce Vs. Addl. CIT (2014) 109 DTR 1(Del.) (HC) • ACIT vs. Major Deepak Mehta (2012) 344 ITR 641 ( CHHATTISGARD) (HC) • CIT vs. Jet Airways (I) Ltd. (2011)331 ITR 236 (Bom.) (HC) • CIT vs. Adhunik Niryat Ispat Ltd. (2011) 63 DTR 0212 (Del.) (HC) 3 ITA No. 207&208/JP/16 M/s Dharam Chand Sohan Lal & Company V/s ITO • Ranbaxy Laboratories Ltd. vs. CIT (2011) 336 ITR 0136 (Del.) (HC)
9. The ld DR is heard who has vehemently argued the matter and relied on the order of the lower authorities.
10. We have heard the rival submissions and purused the material available on record. The issue is no more res integra. In case of CIT vs. Jet Airways (I) Ltd. (Supra), Hon'ble Justice Dr. D.Y. Chandrachud, after considering the amendment brought in by the Finance (No. 2) Act of 2009, with effect from 1-
4-1989 and taking into consideration the earlier decision of the Hon'ble Rajasthan High Court in case of CIT v. Shri Ram Singh [2008] 306 ITR 343 (Raj.) has held as under:
11. The rival submissions which have been urged on behalf of the revenue and the assessee can be dealt with, both as a matter of first principle, interpreting the section as it stands and on the basis of precedents on the subject. Interpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under section 147 and following the issuance of a notice under section 148, the Assessing Officer has the power to assess or reassess the income, which he has reason to believe had escaped assessment and also any other income chargeable to tax. The words "and also" cannot be ignored. The interpretation which the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. Parliament having used the words "assess or reassess such income and also any other income chargeable to tax which has escaped assessment", the words "and also"
cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word 4 ITA No. 207&208/JP/16 M/s Dharam Chand Sohan Lal & Company V/s ITO "or". The Legislature did not rest content by merely using the word "and". The words "and", as well as "also" have been used together and in conjunction.
The Shorter Oxford Dictionary defines the expression "also" to mean 'further, in addition, besides, too'. The word has been treated as being relative and conjunctive. Evidently, therefore, what Parliament intends by use of the words "and also" is that the Assessing Officer, upon the formation of a reason to believe under section 147 and the issuance of a notice under section 148(2) must assess or reassess: (i) 'such income'; and also (ii) any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of the position that the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of section 147 with effect from 1-4-1989 clearly stipulated that the Assessing Officer has to 5 ITA No. 207&208/JP/16 M/s Dharam Chand Sohan Lal & Company V/s ITO assess or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceedings. In the absence of the assessment or reassessment of the former, he cannot independently assess the latter."
"14. The second line of precedent is reflected in a judgment of the Rajasthan High Court in CIT v. Shri Ram Singh [2008] 306 ITR 343 . The Rajasthan High Court construed the words used by Parliament in section 147 particularly the words that the Assessing Officer 'may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings' under section 147. The Rajasthan High Court held as follows :
". . . if is only when, in proceedings under section 147 the Assessing Officer, assesses or reassesses any income chargeable to tax, which has escaped assessment for any assessment year, with respect to which he had "reason to believe" to be so, then, only in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under section 147.
To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the Assessing Officer were to come to the conclusion, that any income chargeable to tax, which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the Assessing Officer entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the Assessing Officer may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147." (Emphasis supplied) 6 ITA No. 207&208/JP/16 M/s Dharam Chand Sohan Lal & Company V/s ITO
11. In the instant case, the basis for formation of belief that the income has escaped assessment and in respect of which the notice under section 148 has been issued relates to payments in cash in contravention to section 40A(3) of the I.T. Act which has escaped disallowance and thus has escaped assessment in the original assessment proceedings completed u/s 143(3) of the Act. On perusal of the reassessment order passed under 147 read with section 143(3) of the Act, it is noted that in AY 2008-09, no disallowance has been made u/s section 40A(3) which form the basis for reopening of the assessment. The AO has however, brought to tax unexplained cash creditors amounting to Rs 10 lacs which has apparently come to his notice during the course of reassessment proceedings. In AY 2009-10, again similar position exist wherein no disallowance has been made u/s section 40A(3) which form the basis for reopening of the assessment. The AO has however, brought to tax unexplained cash creditors amounting to Rs 10 lacs and expenses worth Rs 1.05 lacs have been disallowed towards various expenses which apparently come to his notice during the course of reassessment proceedings.
12. In the light of above discussions, the very foundation of the proceedings u/s 147 are vitiated and accordingly, we are setting aside the order passed by the AO u/s 147 for both the years under consideration. In the result, the additional ground of appeal is allowed for both the years. The grounds on merit become infructious and hence dismissed.
In the result, the appeals of the assessee are disposed off with above directions.
Order pronounced in the open Court on 01/09/2017.
Sd/- Sd/-
¼dqy Hkkjr ½ ¼foØe flag ;kno½
(Kul Bharat) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
7
ITA No. 207&208/JP/16
M/s Dharam Chand Sohan Lal & Company V/s ITO
Jaipur
Dated:- 01/09/2017
Santosh
vkns'k dh izfrfyfi vxzsf"kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Dharam Chand Sohan Lal & Company, A-13, New Sabzi Mandi, Alwar.
2. izR;FkhZ@ The Respondent- ITO, Ward-2(3), Alwar.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT,
6. xkMZ QkbZy@ Guard File (ITA No.207 & 208/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant Registrar.8