Income Tax Appellate Tribunal - Jaipur
Manoj Kumar Gupta vs Income Tax Officer on 31 December, 2007
Equivalent citations: (2008)114TTJ(JP)253
ORDER
I.C. Sudhir, J.M. ITA No. 1013/Jp/2006:
1. The assessee has impugned first appellate order on the grounds that the learned CIT(A) has erred in:
1 & 2. upholding the action of the AO taken under Section 147 r/w Section 148 and consequently the impugned assessment framed under Section 143(3)/148 dt. 13th Dec. 2006;
3. confirming addition of Rs. 16,000 as against Rs. 32,685 made by the AO on account of disallowance of sales discount;
4. confirming addition of Rs. 10,000 as against Rs. 39.960 made by the AO on account of disallowance of travelling expenses;
5. confirming addition of Rs. 16,005 as against Rs. 25,609 made by AO on account of disallowance of transportation expenses;
6. confirming addition of Rs. 23,520 made by the AO on account of household withdrawals;
7. confirming the treatment given by AO as deeming the agricultural income from other sources and confirming the addition of Rs. 23,500 out of Rs. 28,000 made by AO;
8. confirming the addition of Rs. 61,000 on account of Smt. Mamta Gupta as undisclosed income;
9. confirming the disallowance of Rs. 2,000 out of Rs. 18,268 made by AO on account of interest on the deposit of Smt. Mamta Gupta;
10. not allowing the set off of addition on various counts; and
11. charging interest under Sections 234A, 234B and 234D of the Act.
2. Heard and considered the arguments advanced by the parties in view of orders of the lower authorities, material available on record and the decisions relied upon by them.
Ground Nos. 1 and 23. In support of these grounds, the learned Authorised Representative submitted that the assessee is a proprietor of M/s RCA Products and engaged in the business of trading of slats. Return of income was filed at Rs. 28,361 on 31st Dec. 1999 which was processed under Section 143(1) on 13th June, 2000. The AO taking note of the assessment proceedings for asst. yr. 2001-02 observed that there were two cash credits of Sh. Manoj Kumar Gupta of Rs. 1,00,000 received in cash on 26th March, 1999 and from Smt. Mamta Gupta wherein Rs. 61,000 were deposited in cash on 16th March, 1999. Since the assessee had paid and claimed interest payment to these creditors, the AO in the proceedings for asst. yr. 2001-02 alleges that a satisfactory reply was not given. The learned Authorised Representative referred page Nos. 2 and 3 of the paper book i.e., copy of the reasons recorded for issue of notice under Section 148 dt. 29th March, 2004. The assessee had questioned the validity of action of the AO in this regard before the learned CIT(A) but could not succeed. The learned Authorised Representative submitted further that the AO had not any material direct or circumstantial to base his belief on the date of recording of his reasons that income has escaped assessment in the present case. He submitted further that reasons recorded under Section 148 are related to two cash creditors i.e., of Sh. Manoj Kumar Gupta (HUF) and Smt. Mamta Gupta alleging that while examining details in asst. yr. 2001-02, the assessee had failed to prove the genuineness as these creditors were not produced. The learned Authorised Representative, submitted that the assessee has however furnished some details like their confirmations, affidavits, PAN, computation of total income etc. The learned Authorised Representative also referred order dt. 20th Oct., 2006 of the Tribunal in the case of assessee for asst. yr. 2001-02 in ITA No. 458/Jp/2004 wherein vide para No. 13 of the order the Tribunal has upheld the first appellate order questioned by the Revenue on the basis that the learned CIT(A) has deleted the addition made on account of payment of interest on the basis that when the loans themselves have not been treated as non-genuine in the year of receipt, the interest thereon cannot be disallowed in the subsequent year. The learned Authorised Representative submitted that the AO has proceeded for reopening of the assessment merely on suspicion without any adverse material coming to the notice of the AO indicating any escapement of income. In this regard he placed reliance on the decision in the case of Chhugamal Rajpal v. S.P. Chaliha . Even on the merits of the genuineness of cash credits taken from Manoj Kumar Agarwal (HUF) and Smt. Mamta Gupta the learned Authorised Representative submitted that so far as Manoj Kumar Agarwal (HUF) is concerned the assessee has filed confirmation, return i.e., computation of total income along with balance sheet showing the balances of credit and the assessee as a debtor, affidavit and the explanation that the amount was given by father-in-law, late Sh. Harish Chandra Mittal, by way of gift of Rs. 1,00,000 on 24th March, 1999 to Smt. Kamla Devi for Bandobast of the assessee. Because of his death wife Smt. Kamla Devi had confirmed the same. The capital account of Sh. Harish Chandra Mittal for asst. yr. 1999-2000 filed before the AO clearly shows that the amount was withdrawn for "gift to daughter's husbandRs. 1 lac". Notably Smt. Kamla wife of the donor filed an affidavit on 20th March, 2004. The AO, however, did not choose to summon her under Section 131 and therefore contents of affidavit of Smt. Kamla Devi remained uncontroverted. All these details were made available before the AO during the course of assessment proceedings for asst. yr. 2001-02 and the new thing which happened was the recording of statements of Sh. Yogendra Mittal s/o Late Shri Harishchand Mittal, the donor. The earlier facts are all duly recorded in the very reasons. There is no adverse note in the reasons that some contrary material came to the notice of AO. Regarding the cash creditor Smt. Mamta Gutpa, the learned Authorised Representative submitted that the assessee had filed copies of capital account, balance sheet, confirmation and return of income to prove the cash credit. The amount was received by account payee cheque. The AO did not make any adverse remark in the assessment order asst. yr. 2001-02 at page No. 6 at para No. 2, placed at page Nos. 75 to 80 of the paper book filed before the Tribunal. The learned Authorised Representative submitted that so far as validity of reasons are concerned, prima facie upto that stage, there was no adverse material indicating escapement coming to the notice of AO nor has he alleged so in the impugned reasons. It is settled that the validity of the assumption of jurisdiction has always to be judged with reference to the reasons recorded. He placed reliance on the following decisions:
(i) Jindal Photo Films Ltd. v. Dy. CIT ;
(ii) Andhra Bank Ltd. v. CIT ;
(iii) CAT v. Samhhar Salts Ltd. ;
(iv) Techspan India (P) Ltd. and Anr. v. ITO ;
(v) Consolidated Photo & Finvest Ltd. v. Asstt. CIT .
4. The learned Departmental Representative, on the other hand has tried to justify the first appellate order on the issue.
5. After considering the above submissions made by the parties, we find substance in the contentions of the learned Authorised Representative that validity of the assumption of jurisdiction in a case of reopening of assessment has always to be judged with reference to the reasons recorded. When in the present case the very reason for reopening of the assessment was about escapement of assessment of amount which the asscssce had claimed to have been paid as interest to the cash creditors Sh. Manoj Kumar Gupta (HUF) and Smt. Mamta Gupta as in the asst. yr. 2001-02 the AO had noticed that the assessee was not able to furnish satisfactory explanation and evidence regarding genuineness of each of the cash credits but the Tribunal vide order dt. 20th Oct., 2006 in ITA No. 458/Jp/2004 has deleted the disallowance of interest claimed to have been paid to these parties on the basis that in earlier years these loans have been treated as genuine and interests thereon have been allowed. In this regard the Tribunal has followed the decision of Ahmedabad Bench of the Tribunal in the case of Omkarmal Gaurtshanker v. ITO (1991) 39 TTJ (And) 223 wherein it was held that where deposits were not treated as non-genuine in the year of receipt and interest thereon was never disallowed in the past, no disallowance in respect of interest can be validly made. Even on the merit of the genuineness of the above two cash credits, we prima facie find that the assessee had furnished necessary informations about them to the AO and the AO has not bothered himself to verify the correctness of these informations. We however, do not want to comment on genuineness of these cash credits because it is beyond our jurisdiction and records of those years are not available with us. At the same time it is worth noting that when the Department itself in earlier years as it has been noted by the Tribunal in para No. 13 of the order dt. 20th Oct.. 2006 for asst. yr. 2001-02, has accepted the genuineness of these above cash credits and interest paid by the assessee thereon has been allowed, there was no reason with the AO to initiate the reopening proceedings on this belief that interests claimed to have been paid by the assessee to the above two cash creditors are not genuine and is escaped income from assessment. It is also an established position of law that reopening proceedings cannot be initiated to investigate the matter further. The word "believe" has to be understood in contradiction of suspicion or opinion. Belief indicates something concrete or reliable. The belief of the officer should be as to escapement of income and the belief should not be a product of imagination or speculation. There must be reason to induce the belief. The belief must be of an honest and reasonable person based upon reasonable grounds. The officer may act on direct or circumstantial evidence but his belief must not be based on mere suspicion, gossip or rumours. Under these circumstances, when there was no sufficient material before the AO to nurture his reasons to believe that income has escaped assessment by way of interest amount claimed to have been paid to the creditors, there was no occasion for him to initiate the reopening proceedings. The notice issued under Section 148 of the Act under these circumstances was not valid one and in consequence the assessment made in furtherance thereto. It does not matter that on earlier occasion return of income was processed under Section 143(1) of the Act and there was no occasion for the AO to form his opinion about genuineness of any claim made by the assessee therein especially when time-limit for scrutiny by way of issuance of notice under Section 143(2) has been expired and the processing of return has adopted the status of deemed assessment. We thus hold the notice issued under Section 148 in the present case as invalid one and in consequence the assessment order passed in furtherance to it is also held as invalid. The ground Nos. 1 and 2 are thus decided in favour of the assessee.
Ground Nos. 3 to 76. In support of these grounds the learned Authorised Representative submitted that the different additions made and upheld by the lower authorities which have been questioned in these grounds were never subject-matter of the reasons to believe for initiation of reopening proceedings in the present case, hence the AO has travelled beyond his jurisdiction under Section 147/148 of the Act. These additions are thus not tenable in view of the decisions in the cases of Vipan Khanna v. CAT , Gyarsi Lal Gupta & Sons v. ITO (2005) 95 TTJ (Jp) 386 and Asstt. CAT v. Sunil Kumar Jain (2007) 110 TTJ (Jp) 731. The learned Authorised Representative submitted further that even on merits the additions questioned in ground Nos. 3 to 5 are covered with the decision of Tribunal in the case of assessee for the asst. yr. 2001-02 wherein under the similar set of facts and circumstances of the case the Tribunal has upheld the first appellate order deleting the addition simply made on presumption and without any positive evidence of non-genuineness of the expenditure.
7. The learned Departmental Representative on the other hand tried to justify the first appellate order with this submission that under the amended provisions of Section 147 of the Act w.e.f. 1st April, 1989 the AO has got vide power to reopen an assessment if he has reasons to belief that chargeable income has escaped assessment. He submitted further that in the present case admittedly, return of income as processed under Section 143(1) of the Act and only during the course of reopening proceedings it came to the notice of the AO that several other incomes have escaped from assessment. He was thus justified in disallowing those claims about expenditure, etc. and making additions of those amounts in the income of the assessee to tax the same.
8. After considering the above submissions we concur with the submission of learned Departmental Representative to this extent that , after amendment in the provisions of Section 147 of the Act, the jurisdiction of the AO to initiate reopening proceedings has been widened but it does not mean that the AO has unrestricted power to reopen an assessment without sufficient reason. Reasons to believe are still to be recorded by the AO for initiation of reopening proceedings and while making reassessment he is also empowered to make other additions which are not subject-matter of the reasons to believe recorded for initiation of reopening proceedings, if he finds that those chargeable incomes have escaped assessment. The Hon'ble Punjab & Haryana High Court in their decision in the case of Vipan Khanna (supra) has also been pleased to hold this position of law but at the same time the Hon'ble Court has held that the AO cannot make additions of different income not part of the reasons to believe recorded for the reopening without proper and sufficient inquiry. The Jaipur Bench of the Tribunal has been following this decision of Hon'ble Punjab & Haryana High Court on the issue. Thus, it is clear now that the AO during the reassessment proceedings can make additions of different income beyond the reasons recorded if during the course of reassessment proceedings he has sufficient material to come to the conclusion that other chargeable income has escaped assessment and the AO examines the veracity of those beliefs after affording adequate opportunity to the assessee. In the present case there was nothing on record which came to the notice of the AO during the course of reassessment proceedings to form his belief that other chargeable incomes have also escaped assessment besides those for which reopening proceedings were initiated. All the materials were already on record and prescribed time-limit of issuance of notice under Section 143(2) was also expired in between to convert the processing of return under Section 143(1) into deemed assessment. The AO was thus not justified in reopening the other concluded matter without sufficient adverse material with him. The additions made on account of disallowance of sales discount, disallowance of travelling expenses, disallowance of transportation expenses, low household withdrawals and agricultural income are therefore directed to be deleted. Ground Nos. 3 to 7 are thus allowed.
Ground Nos. 8 and 99. In support of these grounds the learned Authorised Representative submitted that the AO noted that Smt. Mamta Gupta had deposited Rs. 61,000 on 16th March, 1999 with M/s R.C.I. Products, proprietor concern of the assessee by cheque. The AO disallowed this claim and made additions of Rs. 61,000 and interest paid by the assessee on the said deposit i.e., Rs. 18,268. The learned CIT(A) though has upheld the addition of Rs. 61,000 under Section 68 of the Act but has reduced the disallowance of interest to Rs. 2,000. He submitted that in her statements Smt. Mamta Gupta had stated to have given Rs. 61,000 and Rs. 65,000 to M/s R.C.I. Products. The source of Rs. 61,000 was stated in answer to question No. 7 to be out of a gift received from her father-in-law, Sh. Babulal Gupta by cheque. The AO however did not accept the same alleging that copy of bank pass book of the creditor, Smt. Mamta Gupta was not produced though she stated that the computer hard disk of the bank was damaged. The learned CIT(A) has held that the gift declaration by Sh. Babulal Gupta was not relevant as it was dt. 16th March, 1999 whereas declaration refers to the gift of Rs. 61,000 on 2nd Sept., 1999. The mistake was fairly accepted by the learned Authorised Representative and in the revised written submission dt. 29th Aug., 2006 it was submitted by the assessee that the said gift of Rs. 61,000 from Sh. Babulal Gupta in fact was relevant for asst. yr. 2000-01 has received therein whereas the present credit was out of a gift of Rs. 61,000 received by Smt. Mamta Gupta from her brother-in-law Sh. Amit Kumar. In this regard the assessee has enclosed copy of the gift deed of Sh. Amit Kumar Agarwal dt. 18th Sept., 2006 and copy of his account in the books of M/s R.C.I. Products showing withdrawal of Rs. 1,26,361. The learned CIT(A) has however confirmed the addition on the basis that neither copy of pass book of Smt. Mamta Gupta nor of Sh. Babulal Gupta was filed. The learned CIT(A) also rejected the subsequent explanation of the assessee on the basis that the gift declaration given by Sh. Amit Kumar was recent being dt. 18th Sept., 2006, whereas the gift was made 7 years back. The learned CIT(A) observed further that copy of bank statement of Sh. Amit Kumar was not furnished to prove that in fact he had given a cheque of Rs. 61,000 to Smt. Mamta Gupta and which was out of the receipts from M/s R.C.I. Product. The learned CIT(A) also observed that it is not clear whether Sh. Amit Kumar has shown the said gift in his accounts/papers accompanying return of income. The learned Authorised Representative submitted further that under Section 68 of the Act it is only initial onus, which lay upon the assessee to prove the identity and the capacity of the creditor as well as the genuineness of the transaction, and once this initial onus is discharged, it shifts to the AO to rebut/disprove the same for making a valid addition under Section 68 of the Act. The learned Authorised Representative submitted that confirmation of the creditor (page No. 51) was filed giving complete address; the creditor was also examined by the AO (page Nos. 48 to 57 of the paper book) and the assessee vide his letter dt. 17th Nov., 2004 submitted during the course of assessment proceedings that Smt. Mamta Gupta was assessed to income-tax with ITO Ward No. 3 Sawai Madhopur and her PAN was also furnished. In this regard he placed reliance on the decisions in the cases of Shankar Industries v. CIT , CIT v. Shree Barkha Synthetics Ltd. (2003) 182 CTR (Raj) 175, CIT v. First Point Flnance Ltd. . The learned Authorised Representative submitted that the learned CIT(A) has rejected the explanation of the assessee on the basis that he has changed his version. He submitted that there cannot be any admission over facts so as to work as an estoppel, provided the facts are available on record. If a bona Jide mistake has been committed, the assessee is entitled to retract from the same. In this regard he placed reliance on the decision in the case of Pullangode Rubber & Produce Co. Ltd. v. State of Kerela .
10. The learned Departmental Representative on the other hand tried to justify the first appellate order upholding the addition under Section 68 of the Act relating to the cash credit of the creditor Smt. Mamta Gupta in absence of evidence to support the claim of the assessee in this regard.
11. Considering the above submissions we find substance in the contention of the learned Authorised Representative that an assessee is always at liberty to retract from admissions made by him in his statements to the authority if there is bona fide mistake supported by evidence. In the present case the creditor, Smt. Mamta Gupta had confirmed about the credit of Rs. 61,000 and had stated about its source in her statements made before the AO. Subsequently she tried to correct her earlier statements that the gift which remained the source of deposit of Rs. 61,000 during the year was actually made by her brother-in-law Sh. Amit Kumar and furnished evidence in support. Smt. Mamta Gupta is also an income-tax assessee and her PAN was also furnished. The assessee has filed copy of gift declaration of the donor dt. 28th Sept., 2006, copy of his account in the books of M/s R.C.I. Products showing withdrawal of Rs. 1,26,361 on 6th March, 1999 (page No. 74) and copy of cash book dt. 16th March, 1999 (page No. 73) showing giving a cheque No. 577522 of Bank of Baroda of Rs. 1,26,361 and a certificate from Bank of Baroda (page No. 72)' supporting the above fact. Under these circumstances we are of the view that the lower authorities were not justified in brushing aside the explanation of the assessee about the source of the creditor to deposit the amount with the assessee without verifying the correctness of evidence furnished by the assessee. The additions of Rs. 61,000 and Rs. 2,000 sustained by the learned CIT(A) disbelieving the claim of the cash credit from Smt. Mamta Gupta and interest paid to her thereon are thus directed to be deleted. The ground Nos. 8 and 9 are thus decided in favour of the assessee.
Ground Nos. 10 and 1112. In view of above findings issues raised in these grounds do not survive. The charging of interest under Sections 234A, 234B and 234D is also consequential one. These grounds are accordingly dismissed. ,
13. In result appeal is partly allowed.
ITA No. 28/Jp/2007:14. The first appellate order has been impugned by the assessee on the grounds that the learned CIT(A) has erred in:
1 and 2. upholding the validity of action taken under Section 147 r/w Section 148 by the AO and the assessment framed under Section 143(3)/148 dt. 13th Dec, 2005;
3. partly confirming the addition of Rs. 19,000 as against Rs. 38,004 made by the AO on account of disallowance of sales discount;
4. partly confirming addition of Rs. 12,000 as against Rs. 40,960 made by the AO on account of disallowance of travelling expenses;
5. partly confirming addition of Rs. 31,528 as against Rs. 50,520 made by the AO on account of disallowance of transportation expenses;
6. partly confirming the addition of Rs. 29,700 as against Rs. 39,700 made by the AO on account of household withdrawals;
7. confirming the addition of Rs. 87,500 made by the AO treating the outstanding balance of M/s Keladevi Transport Co. as undisclosed income;
8. partly confirming disallowance of Rs. 10,980 as against Rs. 21,690 made by AO on account of disallowance of interest on the deposit of Smt. Mamta Gupta;
9. not allowing the set off of addition on various counts; and
10. charging interest under Sections 234A, 234B and 234D.
15. Heard and considered the arguments advanced by the parties in view of orders of the lower authorities, material available on record and the decisions relied upon by them.
Ground Nos. 1 and 216. Similar argument's have been adopted by the parties as advanced by them on the identical issues raised in ground Nos. 1 and 2 in the above appeal ITA No. 1013/Jp/2006. We thus following the decision taken therein of which we are not repeating here for the sake of brevity, decide these grounds in favour of the assessee holding the notice issued under Section 148 of the Act and assessment made in furtherance thereto as invalid.
Ground Nos. 3 to 817. Similar arguments have been adopted by the parties which they have advanced hereinabove against ground Nos. 3 to 9 of the above appeal ITA No. 1013/Jp/2006 on identical issues. Regarding the new issue raised in ground No. 7 on account of addition of Rs. 87,500 treating the outstanding balance of M/s Keladevi Transport Co. as undisclosed income, the learned Authorised Representative, submitted that details of transport charges as well as copy of account of M/s Keladevi Transport Co. was furnished before the AO and from the copy of account of M/s Keladevi Transport Co. it was evident that a sum of Rs. 1,67,700 was credited in his account on various dates, out of which Rs. 85,000 was paid and balance of Rs. 87,700 remained as credit as on 31st March, 2000. The AO had recorded the statements of Sh. Sanjay Sharma, the proprietor of the transport company and he had confirmed about booking the goods of the assessee. Me was booking the trucks on commission basis and as such the business was not on large scale. He had done the business for the assessee firm only. Considering these facts, the source of balance of Rs. 87,700 as credit of M/s Keladevi Transport Co. was fully explained. On the legality of this addition the learned Authorised Representative reiterated same argument and cited the same decision as in support of ground Nos. 3 to 7 hereinabove in ITA No. 1013/Jp/2006 that the additions questioned in ground Nos. 3 to 8 herein were not part of the reasons to believe recorded for the reopening proceedings in the present case hence the AO was not justified in making these additions during the course of reassessment proceedings without sufficient material in his possession. The learned Departmental Representative on the other hand has tried to justify the first appellate order.
18. Following the decision taken on identical issue hereinabove in grounds Nos. 3 to 7 of ITA No. 1013/Jp/2006, we find substance in the contentions of the learned Authorised Representative that there was no sufficient material before the AO to make the additions in question beyond the proposed escaped chargeable income for which reopening proceedings were initiated. The additions questioned in ground Nos. 3 to 7 are thus directed to be deleted. So far as addition by way of disallowance of Rs. 10,980 as against Rs. 21,690 made by the AO on account of disallowance of interest on the deposits of Smt. Mamta Gupta is concerned, we following the decision in ground Nos. 8 and 9 hereinabove in 1TA No. 1013/Jp/2006 on the identical issues direct the AO to delete the addition. The ground Nos. 3 to 8 are accordingly allowed.
Ground Nos. 9 and 1019. In view of above findings issues raised in these grounds do not survive. The charging of interest under Sections 234A, 23413 and 234D is also consequential one. These grounds are accordingly dismissed.
20. In result appeal is partly allowed.
In summary appeals are partly allowed.