Income Tax Appellate Tribunal - Pune
Income Tax Officer vs Smt. Vijaya V. Kavekar L/H Of Late ... on 28 February, 2007
Equivalent citations: (2008)113TTJ(PUNE)602
ORDER
Ahmad Fareed, A.M
1. These two appeals by the Department directed against the order of CIT(A) dt. 29th March, 2001 for asst. yrs. 1988-89 and 1989-90 were heard together and, therefore, these are being disposed of by the common order for the sake of convenience.
ITA No. 886/Pn/2001 -Asst. yr. 1988-892. The grounds raised by the Department in this appeal are as under:
1, On the facts and in the circumstances of the case, the CIT(A) erred in annulling the assessment orders passed under Section 143(3) r/w Section 147 of the IT Act for asst. yrs. 1988-89 and 1989-90.
2. On the facts and in the circumstances of the case, the CIT(A) while annulling the assessment orders passed by the AO under Section 143(3) r/w Section 147 of the IT Act, erred in holding that the CIT has set aside the assessment under Section 263 as the additional income offered by the assessee in her petition dt. 22nd Jan., 1990 had not been taken into consideration in the assessment orders passed by the AO under Section 143(1) dt. 22nd Feb., 1990. As the additional income offered by the assessee for the relevant assessment years were of Rs. 5,000 only, no notice could validly be issued under Section 148 and the notice issued by the AO on 1st Feb., 1999 lacked valid jurisdiction.
3. On the facts and in the circumstances of the case, the CIT(A) erred in ignoring the fact that the notice issued by the AO dt. 1st Feb., 1999 was validly issued for asst. yrs. 1988-89 and 1989-90 as the income to the extent of Rs. 2,28,040 and Rs. 5,05,780 for asst. yrs. 1988-89 and 1989-90 has escaped assessment which was ascertained after verification of the seized records, as such, the assessments for asst. yrs. 1988-89 and 1989-90 were validly reopened by the AO by invoking the provisions oi Section 147 of the IT Act to tax the escapement of income on account of investment, with prior approval of the Jt. CIT, Range-3, Aurangabad, which was accorded on 15th Jan., 1999.
4. On the facts and in the circumstances of the case, the order of the CIT(A) may be vacated and that of the AO be restored.
5. On the facts and in the circumstances of the case, the appellant craves leave to add, amend or alter any of the grounds of appeal.
3. The assessee, late Shri Vijaykumar B. Kavekar, during his lifetime, was engaged in the business of purchase and sale of jewellery and money-lending. During a search conducted by the Police Department, at the business and residential premises of the assessee on 28th Feb., 1989, cash of Rs. 1,00,000 and some gold ornaments and silver utensils were seized. Subsequently, on the basis of information received from the Police Department, action was also taken under Section 132/132A of the IT Act, 1961 on 28th Feb., 1989. The CIT(A) has noted in para 2 of his order that the assessee committed suicide on the date of search.
4. The order under Section 132(5) of the Act was passed on 29th May, 1989 which was challenged by the assessee vide application dt. 24th June, 1989 addressed to the CIT under Section 132(11) of the Act. In this application and in a separate petition filed before the CIT, the assessee's widow offered income of Rs. 13,35,500 for tax as under:
S. No. A.Y. Income offered
(Rs)
1 1985-86 60,000
2 1986-87 1,95,000
3 1987-88 78,500
4 1988-89 4,02,000
5 1989-90 6,00,000
Total 13,35,500
5. The assessee addressed yet another letter dt. 22nd Jan., 1990 in which a further sum of Rs. 1,54,327 was offered for tax as under:
S. No. A.Y. Further Income offered
(Rs)
1 1984-85 2,000
2 1985-86 5,000
3 1986-87 16,500
4 1987-88 2,000
5 1988-89 5,000
6 1989-90 1,23,827
Total 1,54,327
6. The assessee filed returns in response to the notices under Section dt. 20th April, 1989 for asst. yrs. 1985-86, 1986-87, 1987-88, 1988-89 and 1989-90 as under:
S. No. A.Y. Total Income returned
(Rs)
1 1985-86 65,090
2 1986-87 2,10,630
3 1987-88 78,620
4 1988-89 4,35,830
5 1989-90 6,51,670
7. In the aforesaid returns the income aggregating to Rs. 1,54,327 offered vide letter dt. 22nd Jan., 1990 was not shown. These returns were accepted by the AO under Section 143(1) on 22nd Feb., 1990.
8. It appears that the aforesaid assessments were set aside by the CIT under Section 263 and the orders under Section 263 were subsequently set aside by the Tribunal vide its order dt. 24th Sept., 1998. The AO then initiated proceedings under Section 147 by issue of notice under Section 148 on 1st Feb., 1999. The assessee questioned the validity of this notice vide letter dt. 31st Jan., 2000. In the assessment order passed under Section 147 on 27th Dec, 2000, the total income was assessed at Rs. 6,62,870. In the first appeal, the CIT(A) annulled the assessment and his order has been challenged by the Department in the present appeal.
9. We have considered the rival submissions in the light of material on record and the precedent cited. The CIT(A) has, inter alia, noted in para 5 of his order that the notice under Section 148 dt. 1st Feb., 1999 for asst. yr 1988-89 was issued after more than four years, that the assessment could not be reopened unless some income chargeable to tax had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts for her assessment for the assessment year involved, that the alleged escaped income originated from the assessee's application dt. 22nd Jan., 1990 made to the CIT which was ignored by the AO when he finalized the assessment on 22nd Feb., 1990, that the failure under Section 263 was sought to be salvaged under Section 147, that the notice under Section 148 dt. 1st Feb., 1999 was without jurisdiction and, therefore, the assessment made on the basis of such a notice was ab initio void and was accordingly annulled.
10. In our opinion, the conclusions reached by the CIT(A), on the facts of the case, cannot be found fault with. The provisions of Sections. 147 to 151 were substituted/amended by the Direct Tax Laws (Amendment) Act, 1987 and 1989 w.e.f 1st April, 1989. The newly substituted (w.e.f 1st April, 1989) Section 147 not only merged the Clauses. (a) and (b) of Section 147 (operative upto 31st March, 1989), but also brought about a significant change in the preliminary requirement of certain mandatory conditions before the reassessment proceeding could be initiated under the pre-1989 Section 147. The power to reopen assessment under the post-1989 Section 147, is much wider and can be exercised even if an assessee had disclosed fully and truly all material facts, unless the case was covered by the proviso to the post-1989 Section 147.
11. Where the said period of four years has not expired, the conduct of the assessee regarding disclosure of material facts need not be the basis for initiating the proceedings and they can be commenced if the AO has reason to believe that the income has escaped assessment notwithstanding that there was full disclosure of material facts on record. The assessee in such cases cannot defend the initiation of action on the ground that the facts were already placed on record and that the AO must have or ought to have considered them. The power to make assessment or reassessment, where the initiation has been made within four years of the end of the relevant assessment year, would be attracted even in cases where there has been a complete disclosure of all relevant facts upon which a correct assessment might have been based in the first instance, and whether it is an error of fact or law that has been discovered or found out justifying the belief required to initiate the proceedings.
12. Where, however, the initiation of proceeding under Section 147 takes place after the expiry of four years from the end of the relevant assessment year, the proviso to the Section 147 is attracted and no action can be taken under Section 147 unless such income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts for his assessment for the assessment year.
13. The proviso to the post-1989 Section 147 reads as under:
Provided that where an assessment under Sub-section (3) of the Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section, after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
14. And, the Expln. 1 to the post-1989 Section 147(1) reads as under:
Production before the AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning ot the foregoing proviso.
15. It is seen that the proviso to Section 147(1) has in a way followed the criteria laid down in the pre-1989 Section 147(a) as it stood upto 31st March, 1989.
16. In order to be able to initiate the proceedings under the post-1989 Section 147, after the expiry of four years from the end of the relevant assessment year, the onus will be on the AO to establish that the assessee had failed to disclose fully and truly certain facts, material to the assessment of income which had escaped assessment (C&P 5131, 79/582, 41/597, 103/599, 104/524, 104/214, 107/79, 111/936, 111/934). In other words, the cases sought to be brought within the proviso to Section 147 should strictly fall within that provision and it is for the Department to show that the necessary conditions for the exercise of the jurisdiction are fully present. There cannot be an omission to disclose what the AO already knows.
17. The language employed in the proviso to Section 147 shows that the disclosure thereby contemplated is to be with regard to the material facts and, therefore, must necessarily be in respect of such facts which exist at all material times between the filing of the return and the order of assessment. A material fact which is not in existence right upto the time of assessment cannot possibly be disclosed.
18. Further, if such material facts are disclosed, the acceptance of a wrong contention raised by an assessee does not create jurisdiction for initiation of proceedings under Section 147. The inferences or conclusions that can reasonably be drawn from the primary facts are not to be stated by the assessee.
19. In the case of CIT v. Burlop Dealers Ltd. , the Supreme Court observed that if the assessee had disclosed primary facts relevant to the assessment, he was under no obligation to instruct the AO about the inference which the AO may draw from those facts. If on the evidence and the materials produced the AO could have reached a conclusion other than the one which he has reached, a proceeding under Section 147 will not lie merely on the ground that the AO has drawn an inference which he may later regard as erroneous.
20. A different conclusion or inference at a later time whether it is arrived at upon the facts disclosed or on fresh facts gathered as a result of further enquiry will not justify action under Section 147, if the fresh facts are not primary facts which existed at the time of assessment and which the assessee was under duty to disclose.
21. It is seen that in the present case, the AO had noted in para 10 of his impugned order as under:
10. In view of the directions contained in the order under Section 263, the assessment was reopened and after hearing the assessee and considering the information available on record/in the books, the assessment was finalized under Section 143(3) r/w Section 263 on 29th Dec., 1992, determining total income of Rs. 6,62,870.
The order of the CIT under Section 263 was appealed against before Tribunal, Pune. The Tribunal, Pune, vide ITA Nos. 746/Pn/1992 to 750/Pn/1992 for the asst. yrs. 1985-86 to 1989-90, respectively, dt. 24th Sept., 1998, set aside the order under Section 263 of the CIT, Nasik.
11. The matter is again considered afresh and after recording reasons and obtaining prior approval of the Jt. CIT, R-3, Aurangabad, a notice under Section. 148 was issued and served on 1st Feb., 1999....
22. The AO has not mentioned precisely, as to what material facts, which were necessary for assessment, the assessee had failed to disclose fully and truly. The proceeding under Section 147 was initiated, manifestly, because the order of the CIT under Section 263 was set aside by the Tribunal and such an action cannot be sustained. Therefore, considering the facts and circumstances of the case, and the legal position discussed in the above paras, we are of the opinion that the impugned proceeding under Section 147 for asst. yr. 1988-89 was not validly initiated. The assessment order passed under Section 147 dt. 27th Dec, 2000 is accordingly quashed.
23. In the result the appeal filed by the Department is dismissed.
ITA No. 887/Pn/2001Asst. yr. 1989-9024. The facts of the case in this appeal are identical and, therefore, for the reasons discussed in the above paras, the impugned assessment order for asst. yr. 1989-90 is quashed.
In the result the appeal filed by the Department for asst. yr. 1989-90 is dismissed.