Income Tax Appellate Tribunal - Jaipur
Smt. Meena Baldua, Jaipur vs Income Tax Officer, Ward-5(5), Jaipur on 8 March, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,"A" JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 872/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2008-09
Smt. Meena Baldua, cuke The ITO,
304, Upasna Residency, Vs. Ward -5(5),
C-25, Sawai Jaisingh Highway, Jaipur.
Collectrate Circle, Bani Park,
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABAPB 0137 G
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by : Shri Manish Tatiwala (C.A.)
jktLo dh vksj ls@ Revenue by : Shri A. K. Mehla (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 05/03/2019
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 08/03/2019
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 19.03.2018 of ld. CIT (A), Udaipur for the assessment year 2008-09. The assessee has raised the following grounds:-
"1. That the learned Commissioner of Income Tax (Appeals-2), Udaipur has erred in law and in facts in treating the assessment legally correct.ITA No. 872/JP/2018
Smt. Meena Baldua vs. ITO
2. That the learned Commissioner of Income Tax (Appeal-2) has erred in law as well as in facts in sustaining addition made for payment of credit card.
3. That the assessee has right to add, amend or alter any ground of appeal."
2. The assessee is an individual and did not file return of income U/s 139(1) of the Act for the year under consideration. The AO issued notice U/s 148 of the Act on 25.03.2015 after recording the reasons that the credit card expenditure to the tune of Rs 15,29,050/- and interest received in the saving bank account of Rs. 39,000/- has escaped assessment. The AO completed assessment U/s 148 r.w.w. 144 of the I.T. Act and made the addition on total amount of Rs. 15,68,050/-. The assessee challenged the action of the AO before the ld. CIT(A) and contended that the assessee even does not have any credit card therefore, the reasons recorded by the AO for payment of credit card bills are not valid reasons for reopening of the assessment of the assessee. The ld. CIT(A) called for a remand report and after considering the remand report of the AO rejected the ground challenging the validity of the opening.
2 ITA No. 872/JP/2018
Smt. Meena Baldua vs. ITO
3. Before us, the ld. AR of the assessee has submitted that the AO reopened the assessment by recording that as per AIR Information, the assessee has paid Rs. 15,29,050/- for payment of credit card bills and also received interest of Rs. 39,000/- but the assessee has not filed any return of income. The ld. AR has pointed out that the notice issued by the AO U/s 148 of the Act was not received by the assessee and further the assessee has clearly raised this objection before the ld. CIT(A) and pointed out that the assessee does not have any credit card and therefore the question of payment of credit card bills does not arise. In the remand report the AO has accepted that there was no credit card payment by the assessee however, the ld.CIT(A) has treated the same as clerical mistake and sustained the addition made by the AO by considering the same as deposit made in the bank account. The ld. AR of the assessee has relied upon the decision of Hon'ble Bombay High Court in case of Hindustan Lever Ltd. vs. R.B. Wadkar 268 ITR 332 and submitted that the reasons are required to be read as they were recorded by the AO and no substitution or deletion is permissible. Therefore, no amendment, alteration or change can be made to the reasons recorded for reopening of the assessment U/s 148 of the Act. Even it is not open to the AO to improve upon the reasons recorded at 3 ITA No. 872/JP/2018 Smt. Meena Baldua vs. ITO the time of issuing the notice either by adding or substituting the reasons. There is no tangible material having nexus with the reasons recorded by the AO to form the belief that income assessable to tax on account of payment of credit card bills has escaped assessee. The ld. AR has submitted that the reasons must provide a live link to the formation of the belief that income has escaped assessment. In support of his contention, he has relied upon the decision of Hon'ble Bombay High Court in case of Infotech Ltd. V/s ACIT 329 ITR 257. The AO in the reasons recorded has stated that the assessee has made payment of credit card bills but subsequently in the remand report he has submitted that it is a clerical mistake in the reasons recorded instead of recording cash deposit in the saving bank account of the assessee. Thus the ld. AR has submitted that the reopening of the assessment and consequently reassessment order is not sustainable and liable to be quashed.
4. On the other hand, ld. DR has submitted that the assessee has not appeared before the AO and reassessment was passed ex-parte. The ld. CIT(A) has recorded the fact that in the notice u/s 142(1) of the Act the AO has mentioned the cash deposit in the bank account and not 4 ITA No. 872/JP/2018 Smt. Meena Baldua vs. ITO the credit card payment. He has relied upon the impugned order of the ld. CIT(A).
5. We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee did not file any return of income for the year under consideration. The Assessing Officer has issued notice U/s 148 of the Act on 25.03.2015 by recording the reasons as under:-
"As per AIR information, the assessee has paid Rs. 15,29,050/- for payment of credit card bill & also received interest of Rs. 39,000/- but as per ITD systems no return of income filed. Thus the assessee did not disclosed fully & truly all material facts necessary for his assessment. Therefore, I have reasons to believe that income of Rs. 15,29,050/- has escaped assessment. In view of the above, it is requested that necessary approval as laid down under sub section (1) of section 151 of the I.T. Act, 1961 may kindly be accorded for issuance of notice u/s 148 of the Act."
It is clear that the AO has proposed to assess the income on account of payment of credit card bills of Rs. 15,29,050/- as well as interest of Rs. 39,000/- while recording the reasons for reopening. Since, nobody has appeared on behalf of the assessee in the assessment proceedings 5 ITA No. 872/JP/2018 Smt. Meena Baldua vs. ITO therefore, the AO has passed the ex-parte order. The Assessing Officer while passing the assessment order has made the addition as under:-
" With these remarks income of assessee assessed u/s 144 of the I.T. Act, 1961 as under:-
i) Unexplained payment of credit card bill u/s 69C of I.T. Act, 1961 Rs. 15,29,050/-
ii) undisclosed interest received in cash in SB A/c 69B Rs. 39,000/-
Total income Rs.15,68,050/-"
Thus, the reasons recorded as well as the additions finally made by the AO in the assessment order clearly spelt out the income on account of unexplained payment for credit card bills U/s 69C of the Act. Though during the appellate proceedings before the ld. CIT(A), the Assessing Officer in the remand report has accepted the fact that there was no payment by the assessee towards credit card bills but this amount represents the cash deposited in the bank account. Therefore, the reasons recorded and the income assessed by the AO on account of payment of credit card bills are not based on correct facts which the AO has stated in the remand report that this amount of Rs. 14,90,050/-
represents cash deposit in the bank account and further interest of Rs. 39,000/-. If the reasons recorded by the AO are considered in light of the correct facts of the case then it is clear that at the time of reopening of the assessment the AO has not applied his mind and even 6 ITA No. 872/JP/2018 Smt. Meena Baldua vs. ITO while passing the reassessment order the AO has again made the addition on account of credit card bills and not as cash deposited in the bank account. Subsequent rectification of mistake in the remand report will not substitute the reasons recorded by the AO for reopening of the assessment. The Hon'ble Bombay High Court in case of Hindustan Lever Ltd. vs. R.B. Wadkar (supra) has held in para 19 to 23 as under:-
"19. In the case in hand, it is not in dispute that the assessment year involved is 1996-97. The last date of the said assessment year was 31st March, 1997 and from that date if four years are counted, the period of four years expired on 1st March, 2001. The notice issued is dt. 5th Nov., 2002 and received by the assessee on 7th Nov., 2002. Under these circumstances, the notice is clearly beyond the period of four years.
20. The reasons recorded by the AO nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the AO to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the AO to reach to the conclusion as to whether there was failure on the part of the assessee to disclose 7 ITA No. 872/JP/2018 Smt. Meena Baldua vs. ITO fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the AO to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the AO. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The AO, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the AO cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.
21. Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the asst. yr. 1996-97 and does not comply with the requirements of proviso to s. 147 of the Act, the AO had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of 8 ITA No. 872/JP/2018 Smt. Meena Baldua vs. ITO assessment under s. 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside.
22. Since we are setting aside the impugned notice only on the first ground of challenge, in our opinion, it is not necessary to go to the other question and record our findings in that behalf.
23. In the result, the impugned notice is quashed and set aside. Rule is made absolute in terms of prayer cl. (a) with no order as to costs."
Therefore, for the purpose of considering the validity of reopening and reasons recorded by the AO to establish a live link between the reasons and evidence only reasons recorded are to be looked into and not the subsequent explanation of the AO regarding the mistake in the reasons. In the case in hand, the AO himself as admitted the mistake in the reasons recorded and we find that it is not only mistake in the reasons recorded but the AO has also made the addition while passing the impugned assessment order on account of credit card bills U/s 69C of the I.T. Act. Therefore, the subsequent explanation of the AO that this amount represents the cash deposit in the bank account will not remove the defects in the reasons recorded. The Assessing Officer in the reasons recorded for reopening of the assessment was proposed to assess the income on account of unexplained expenditure incurred by 9 ITA No. 872/JP/2018 Smt. Meena Baldua vs. ITO the assessee which was also assessed to tax at the time of passing the reassessment order. Subsequently, the AO has come out with the explanation in the remand report that the amount represents the income on account of cash deposited in the bank account therefore, it is re-categorization of transaction from unexplained expenditure to cash deposit in the bank account. Though, the ld. CIT(A) has stated that in the notice issued U/s 142(1) of the I.T. Act the AO has mentioned the cash deposit in the bank account however, the AO finally made the addition on account of payment of credit card bills then the notices issued U/s 142(1) itself was not considered by the AO while making the addition. Even otherwise the notice issued U/s 142(1) would not substitute the reasons recorded by the AO. Accordingly, in view of the undisputed facts that the amount which was proposed to assess the income by the AO in the reasons recorded is not actually represents the payment of credit card bills then, reopening based on the incorrect facts and non application of mind is not sustainable in law. Hence, we hold that the reasons recorded by the AO based on incorrect fact is not sustainable in law and liable to be quashed. Since, we quashed the reopening being invalid therefore, we do not propose to go into ground no. 2 of the assessee's appeal on the merits of the addition. 10 ITA No. 872/JP/2018
Smt. Meena Baldua vs. ITO In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 08/03/2019.
Sd/- Sd/-
¼foØe flag ;kno½ ¼fot; iky jko½
(Vikram Singh Yadav) (Vijay Pal Rao)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 08/03/2019.
*Santosh.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Smt. Meena Baldua, Jaipur.
2. izR;FkhZ@ The Respondent- ITO, Ward 5(5), Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No. 872/JP/2018} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 11