Income Tax Appellate Tribunal - Kolkata
Rabindra Nath Biswas, Hooghly vs Assessee on 26 September, 2008
आयकर अपीलीय अधीकरण, Ûयायपीठ - " SMC(A)" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "SMC(A)" BENCH: KOLKATA
(सम¢) ौी महावीर िसंह, Ûयायीक सदःय)
[Before Hon'ble Sri Mahavir Singh, JM]
आयकर अपील संÉया / I.T.A Nos. 1731 to 1734/Kol/2009
िनधॉरण वषॅ/Assessment Years : 2003-04 to 2006-07
Rabindra Nath Biswas Vs Income-tax Officer, Wd-3(2), Purulia
(PAN-AICPB 4896 K)
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
For the Appellant: Shri Somnath Ghosh
For the Respondent: Shri P. Kolhe
आदे श/ORDER
These appeals by assessee are arising out of the order of CIT(A), Asansol in Appeal No. 52, 53, 54, 55/CIT(A)/Asl/Ward-3(2)/Pur/2008-09 dated 26.09.2008. The assessments were framed by ITO, Wd-3(2), Purulia u/s. 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Years 2003-04 to 2006-07 vide his order dated 29.08.2008.
2. The first issue in these appeals of the assessee is as regards to the order of CIT(A) confirming reopening of assessments u/s. 147 r.w.s. 148 of the Act. For this, the assessee has raised the common ground in all the years and for the sake of clarity and brevity, we are reproducing ground no. 1 of ITA No.1731/Kol/2009 for Assessment Year 2003-04, which reads as under:
"For that the Ld. CIT(A), Asansol failed to appreciate that none of the conditions precedent existed nor were satisfied in the instant case for the Ld. Income Tax Officer, Ward-3(2), Purulia to assume jurisdiction u/s. 147 of the Income Tax Act, 1961 and the purported findings on that behalf are altogether arbitrary, unreasonable and perverse."
3. The brief facts leading to the above issue are that the Assessing Officer received information through CIT, Asansol in the case of the assessee and accordingly, he recorded reasons for reopening of the above four assessment years. Following are the common reasons in all the years:
"Rabindra Nath Biswas, Office of the Mining Officer-in-Charge of Purulia Zone, Mission Road Bhattandh, Purulia-723103, A.Ys. 2003-04, 2004-05, 2005-06, 2006-07.
28.01.2008. An enquiry was conducted through Departmental Inspector on the basis of information received from the Commissioner of Income Tax, Asansol, which are placed 2 ITA 1731-1734/K/2009 Rabindra Nath Biswas A.Y.03-04- 06-07 in the confidential folder of Rabindra Nath Biswas, Inspecting Officer and Mining Officer-in-Charge of Purulia Zone.
On the basis of Inspector's Report which is placed in record I have the reason to believe that income chargeable to tax has escaped assessment since the assessee has claimed excessive deduction, allowance or relief in the returns of income for the A.Yrs. 2003-04, 2004-05, 2005-06 and 2006-07 as per following details.
1. Deduction u/s. 80DD is claimed for dependent sister without furnishing any medical board certificate.
2. deduction u/s. 10(13A) is claimed in excess of actual amount of HRA received and without furnishing any sent payment receipt.
3. deduction is claimed for medical allowance receipt which is not a prescribed allowance for the purpose of section 10(14) of the I. T. Act, 1961 read with rule 2BB of the I. T. Rule 1962.
Issue notice u/s. 148 for the A.Years 2003-04, 2004-05, 2005-06 and 2006-07 for the purpose to reasons the income of the assessee on the basis reasons recorded above.
Sd/- ITO, Ward-3(2)"
CIT(A) simply after recording reasons confirmed this issue of the assessee's appeals by giving following finding:
"From the above referred reproduction of reasons recorded by the A.O. for issuing the notice u/s. 148, in my considered view, the A.O. had reason to believe that the income chargeable to tax has escaped assessment for assessment years 2003-04, 2004-05, 2005- 06 and 2006-07. Hence, this plea of the appellant is rejected that the A.O. was not justified in issuing notice u/s. 148. Ground No.1 is rejected."
Aggrieved against the action of the CIT(A), the assessee is in appeals before us.
4. Before me, the Ld. Counsel for the assessee Shri Somnath Ghosh, first of all, took me to the first para of assessment order that the Assessing Officer has based his reasons or formed reason to believe on the basis of Inspector's report. He drew our attention to the first para of the assessment order, which reads as under:
"The assessee Sri Rabindra Nath Biswas, an Inspecting Officer & Mining Officer-in- Charge of Purulia Zone was employed under Govt. of W.B. He was also DDO and Head of the Office. An enquiry was conducted by the departmental Inspector, against him, as per direction of the Ld. Commissioner of Income Tax, Asansol. On the basis of Inspector's report, it was believed that his income chargeable to tax has escaped assessment within the meaning of section 147 of I. T. Act, 1961. Accordingly, notice u/s. 148 of I. T. Act, 1961 was issued and duly served to the assessee. In response to the notice u/s. 148 of I. T. Act, 1961, the assessee submitted his revised return of income on 26.02.2008 showing total income of Rs.1,51,181/-. Subsequently, notices u/s. 143(2) and 142(1) of I. T. Act, 1961 along with requisitions were duly served."
3 ITA 1731-1734/K/2009 Rabindra Nath Biswas A.Y.03-04- 06-07 He further stated that assessments in these years are formed on the basis of Inspector's report and reasons were recorded only on the basis of Inspector's report. Ld. Counsel for the assessee referred to the Enquiry report in the case of the assessee by the Inspector of Income-tax, Purulia dated 24.1.2008 and stated that the entire enquiry report is on the basis of conjecture and surmises and on the basis of the same, the Assessing Officer has recorded reasons as noted above. He further stated that the Assessing Officer while forming reasons to believe has just based this information of Inspector's report which is placed on record and he has not formed his independent reasons to believe. For this, he referred to the case law of (1) Prashant S. Joshi (2) Dattaram Shridhar Bhosale Vs. ITO (2010) 324 ITR 154 (Bom), wherein Hon'ble Bombay High Court allowing the petitions noted that Revenue had sought to urge that the amount received by the petitioner was chargeable to tax under clauses (iv)/(v) of section 28. The question as to whether there was reason to believe, within the meaning of section 147 that income has escaped assessment, must be determined with reference to the reasons recorded by the Assessing Officer, further Hon'ble Court noted. The reasons which are recorded could not be supplemented by affidavits. In any case ex facie section 28(iv) does not apply to the benefits which are paid in cash or money. Hon'ble Bombay High Court further laid down that payment made to a partner in realization of his share in the net value of the assets upon his retirement from a firm, does not fall under clause (v) of section 28 and accordingly there was absolutely no basis for the Assessing Officer to form a belief that any income chargeable to tax had escaped assessment within the meaning of the substantive provisions of section 147. The notices were not valid and were quashed.
5. Ld. Counsel for the assessee further relied on the decision of Hon'ble M. P. High Court in the case of CIT Vs. D. N. Pachori (2010) 189 Taxman 420 (MP), wherein it has been held as under:
"7. As observed supra, we do not find any substantial question of law arising in this appeal. In our view both the authorities, namely CIT and ITAT rightly held that for want of any material, there was no justification for issuance of notice under section 148 ibid. In our view it was rightly held that the report of Inspector was not sufficient to warrant issuance of notice on the facts of this case and something more was required. That apart, even the alleged report did not contain any material evidence to enable the Assessing Officer to issue impugned notice under section 148 ibid for re- opening of assessment. This, in our opinion, is a pure question of fact."
He further relied on the decision of Hon'ble Delhi High Court in the case of CIT Vs. SFIL Stock Broking Ltd. (2010) 325 ITR 285 (Del.), where in it has been held as under:
"After having heard the counsel for the parties, we are inclined to agree with the submissions made by the respondent/assessee. We find that the Supreme Court in Rajesh Jhaveri [2007] 291 ITR 500 made it absolutely clear that before an Assessing Officer 4 ITA 1731-1734/K/2009 Rabindra Nath Biswas A.Y.03-04- 06-07 issues a notice under section 148, thereby reopening the assessment under section 147 of the said Act, he must have formed a belief that income had escaped assessment and that there must be some basis for forming such a belief. The Supreme Court made it clear that the basis of such belief could be discerned from the material on record which was available with the Assessing Officer. However, the Supreme Court in Rajesh Jhaveri [2007] 291 ITR 500 did not say that it was not necessary for the Assessing Officer to form a "belief" and that the mere fact that there was some material on record was sufficient.
In the present case, we find that the first sentence of the so-called reasons recorded by the Assessing Officer is mere information received from the Deputy Director of Income- tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income-tax (Investigation) to issue a notice under section 148 and the third sentence again comprises of a direction given by the Additional Commissioner of Income tax to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. These three sentences are followed by the following sentence, which is the concluding portion of the so-called reasons:
"Thus, I have sufficient information in my possession to issue notice under section 148 in the case of M/s. SFIL Stock Broking Ltd on the basis of reasons recorded as above."
From the above, it is clear that the Assessing Officer referred to the information and the two directions as "reasons" on the basis of which he was proceeding to issue notice under section 148. We are afraid that these cannot be the reasons for proceeding under section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on the facts. The law is well settled. There is no substantial question of law which arises for our consideration."
He further relied on the decision of Delhi High Court in the case of Batra Bhatta Co. (2008) 174 Taxman 444 (Del.) and the Hon'ble Court has held as under:
"9 In the present case, we find that the first sentence of the so-called reasons recorded by the Assessing Officer is mere information received from the Deputy Director of Income- tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income-tax (Investigation) to issue a notice under section 148 and the third sentence again comprises of a direction given by the Additional Commissioner of Income-tax to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. These three sentences are followed by the following sentence, which is the concluding portion of the so-called reasons:--
"Thus, I have sufficient information in my possession to issue notice under section 148 in the case of M/s. SFIL Stock Broking Ltd. on the basis of reasons recorded as above."
10. From the above, it is clear that the Assessing Officer referred to the information and the two directions as 'reasons' on the basis of which he was proceeding to issue notice under section 148. We are afraid that these cannot be the reasons for proceeding under section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the 5 ITA 1731-1734/K/2009 Rabindra Nath Biswas A.Y.03-04- 06-07 basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well-settled. There is no substantial question of law which arises for our consideration." [Emphasis supplied]"
6. He also relied on the decision of Hon'ble Delhi High Court in the case of Sarthak Securities Co. (P) Ltd. Vs. ITO (2010) 195 Taxman 262 (Del.), wherein it has been held as under:
"23. The obtaining factual matrix has to be tested on the anvil of the aforesaid pronouncement of law. In the case at hand, as is evincible, the Assessing Officer was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the Assessing Officer was made aware of the situation by the investigation wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not necessary to have the established fact of escapement of income, but what is necessary is that there is relevant material on which a reasonable person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence is riot disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports (P.) Ltd.'s case (supra) gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his objections had clearly stated that the companies had bank accounts and payments were made to the assessee company through banking channel. The identity of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted."
7. On the other hand, the Ld. DR heavily relied on the reasons recorded and also information received from Govt. of West Bengal, Directorate of Mines & Minerals dated 25th April, 2007, wherein it is reported as under:
"It has been brought to my knowledge that the abovementioned officer, Shri R. N. Biswas, who is also the DDO & Head off Office is claiming deduction from income on account of "specified expenditure on disable dependent" as also on account of "Expenses for medical treatment" in the annual Income Tax returns being filed by him since long. As per information available at this office Shri Biswas's mother was handicapped/disabled but she expired in 2002 & therefore, if Shri Biswas actually continues claiming aforementioned relief from income tax after 2002 that is not only unbecoming of a Govt. Officer apart from violation of provisions of Income Tax Act & Rules misusing his official position as DDO.
I, therefore request you to cause an enquiry in the matter including verification of the annual returns filed by Shri Biswas especially after 2002.
It will be highly appreciated if the result of the enquiry is made known to me at the earliest."
6 ITA 1731-1734/K/2009 Rabindra Nath Biswas A.Y.03-04- 06-07
8. We find from the above case laws as well as the facts of the case that the Assessing Officer has recorded reasons on the basis of merely Inspector's report. From the reasons it cannot be inferred that Assessing Officer has formed any opinion or he has any information on the basis of which he has reasons to believe that the income has escaped assessment. The A.O in the present case has no reasons to believe that a particular receipt is income under the Act and unless and until such reasons do not exists, reopening is not possible. It is the duty of the AO when it chooses to issue reassessment notice with regard to a particular receipt, to make the necessary allegations in that regard so as to establish that such receipt is 'income' taxable under the Act. Here, the AO has based his reasons to believe only on the Inspector's report and no independent recording of reasons, which remotely indicate independent application of mind. Hence, I am of the view that the reopening is bad in law and quashed accordingly.
9. As I have already decided the legal issue in favour of the assessee quashing the reassessment proceedings, the issues on merits need no adjudication.
10. In the result, all the appeals of the assessee are allowed.
11. Order is pronounced in the open court on 28.4.2011 Sd/-
महावीर िसंह, Ûयायीक सदःय (Mahavir Singh) Judicial Member तारȣख) तारȣख) Dated 28th April, 2011 (तारȣख वǐरƵ िनǔज सिचव Jd.(Sr.P.S.) आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ/APPELLANT - Shri Rabindra Nath Biswas, C/o, Shri Somnath Ghosh, Advocate, Seven Brothers Lodge, P.O. Buroshibtala, P.S. Chinsurah, Dist. Hooghly, Pin 712 105.
2 ू×यथȸ/ Respondent - ITO, Ward-3(2), Purulia
3. आयकर किमशनर (अपील)/ The CIT(A), Asansol
4. आयकर किमशनर/ CIT Asansol
5. ǒवभािगय ूितनीधी / DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, सहायक पंजीकार/Asstt. Registrar.