Income Tax Appellate Tribunal - Jaipur
Shree Durga Marbles, Kishangarh vs Assessee on 16 August, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI BHAGCHAND, AM & SHRI LALIET KUMAR, JM
vk;dj vihy la-@ITA No. 277/JP/2015
fu/kZkj.k o"kZ@Assessment Year : 2008-09
Shree Durga Marbles, cuke Income Tax Officer,
E-242 A&B, IV Phase, RIICO Vs. Ward,
Industrial Area, Madanganj, Kishangarh.
Kishangarg.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABAFS 8815 Q
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Manish Agarwal &
Shri O.P. Agarwal (CA)
jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 05/08/2016
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 16/08/2016
vkns'k@ ORDER
PER: LALIET KUMAR, J.M. This is an appeal filed by the assessee against the order dated 13/01/2015 passed by the ld CIT(A), Ajmer for the A.Y. 2008-09. The grounds taken by the assessee in appeal are as under:-
"1 On the facts and circumstances Ld. CIT(A) has grossly erred in confirming the action of Ld. Assessing Officer of reopening the assessment u/s 148 of I.T. Act, 1961 2 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO by solely relying upon the Audit Objection without independent application of mind and without appreciating to the facts of the case, therefore, the order of the Ld. CIT(A) deserves to be hold bad in law and consequent additions deserves to be deleted.
1.1 That the Ld. CIT(A) has further erred in upholding the action of Ld. AO in initiating the proceedings u/s 148 of the Income Tax Act, 1961 without at all recording subjective satisfaction based on the appreciation of evidence in his possession and simply proceeded with the borrowed satisfaction based on the information provided by some other official without in any manner recording his own independent satisfaction, thus the consequent order passed deserves to be held bad in law.
1.2 That the Ld. CIT(A) has further erred in ignoring the fact that the information of audit party on the issue of law cannot be made a ground for re-opening the assessment, thus the order so passed deserves to be quashed.
2. On the facts and circumstances Ld. CIT(A) has grossly erred in upholding the disallowance of the interest of Rs. 8,66,831/- made by ld. AO which was paid to partners while the capital contribution was made by the partners in the firm and the partners have already been taxed on such interest in their return of income, thus disallowance so upheld tantamount to double taxation and therefore, deserves to be deleted."
2. The brief facts of the case are that the assessee is a partnership firm, engaged in the business of trading of marbles. For the year under consideration, the assessee filed return of income on 26/09/2008 3 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO declaring total income of Rs. 36,75,480/-. The assessment was completed vide order dated 25/11/2010 at a total income of Rs. 99,40,936/- by making addition of Rs. 62,65,456/- being unexplained cash deposit made by the assessee in the partner's account. The assessee has surrendered amount in the capital account and accordingly thereafter deposited the tax on the said amount. Finding of the ld Assessing Officer in this regard is as under:-
Thus in view of above tables it transpires that the assessee in the account of partner Smt. Durga Devi Somani has shown to have made cash credits of Rs. 46,35,000/- and withdrawal of Rs. 20,00,000/- . Similarly in the account of the other partner Smt. Sangeeta Somani cash deposits of Rs. 39,35,000/- and cash withdrawal of Rs.20,00,000/-. The assessee vide order sheet entry dated 18.11.2010 was asked to explain the source of cash deposits in the partners accounts as above. The assessee vides his apply filed on 24.11.2010 has stated as under:-
"With reference to last proceedings the required information are as under:-
1. Durga Devi Somani Copy of Capital Account of Smt. Durga Devi Somani, Partner of the firm enclosed herewith. She deposited Total Cash of Rs. 46,35,000/- during the year out of which Rs. 12,54,544/- was
4 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO from the cash payment shown to sundry creditors which surrender in the preceding year's assessment and Rs. 5,00,000/- deposited on 12.03.2010 which is out of cash withdrawn from capital a/c from 03/02/2008 to 29/02/2008. Remaining deposits of Rs. 28,80,456/- (Rs. 46,35,000 - 12,54,544 - 5,00,000 ) is hereby surrendered for taxation to purchase peace and no penalty should, be initiated.
2. Sangeeta Somani Copy of A/c of Smt. Sangeeta Devi Somani is enclosed herewith and she deposited total cash of Rs. 39,35,000/- out of which Rs. 50,000/- deposited on 06.02.2008 and Rs. 5,00,000/- deposited on 12.03.2008. Remaining deposits of Rs. 33,85,000/- (39,35,000 - 50,000 - 5,00,000 ) is hereby surrendered for taxation to purchase peace and no penalty should be initiated.
3. We are hereby declare that the total surrender in capital A/c Rs. 62,65,456/-(28,80,456 + 33,85,000 ) may be taxed in the hand of the firm.
After having due consideration on the facts of the case as well as the- reply filed by the assessee, the reply of the assessee is found to be acceptable to the extent of offering the income for taxation as the assessee in the account of Smt. Durga Devi Somani have deposited Rs. 46,35,000/- on various dates out of which 5 lacs were of rotated out of previous withdrawals therefore on this account the assessee his liable to get benefit of the same. The assessee has also claimed credit of Rs.
5 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO 12,54,544/- for the cash payments shown as sundry creditors in the preceding years of Smt. Durga Devi Somani in her individual capacity which have been offered-for taxation and accordingly taxed therefore written back in their books. In support thereof the assessee has filed copy of the assessment order of ITO, Kishangarh dated 21.12.2009 which confirms the facts. Therefore the assessee is allowed credit of Rs. 12,54,544/- thus on this account there will be a net addition of Rs. 28,80,456/-, (46,35,000/- - 5,00,000/- - 12,54,544/-) In the case of Sangeeta Somani the assessee has made cash deposits of Rs. 39,35,000/- out of which- 5,50,000/- were rotated out of the withdrawals made from the same account. Therefore the assessee is liable to get benefit of Rs. 5,50,000/-, thus the net amount to be added for taxation as unexplained cash deposits is Rs. 33,85,000/-(39,35,000- 5,50,000).
In view of above discussion the total addition on account of unexplained cash deposits made in partners accounts comes at Rs. 62,65,456/- ( 28,80.456 + 33,85,000).
The assessee has made a conditional surrender i.e. that no penalty should be initiated. It is to mention here that the assessee at its own had not surrendered the above income till 18.11.2010 while the proceeding were going since 11.08.2009 i.e. the date of notice u/s 143(2). It was only after 18.11.2010 when the assessee was pointed out / made a query about the 6 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO source of cash deposits and only on 24.11.2010 the assessee made a letter of surrender probably finding no way to escape therefore the assessee is liable to be initiated penalty U/s 271(1)(c)."
2.1 The ld Assessing Officer on the basis of the material available on the record has issued a notice U/s 148 of the Act on 14/3/2012. The ld Assessing Officer has mentioned the reasons recorded for reopening for the assessment year 2008-09 in the following manner:
The assessee firm has filed e-return of income on 26.09.2008 declaring total income at Rs. 36,75,480/- which was processed u/s 143(1) on 05/08/2009.The assessment in this case was completed u/s 143(3) on 25/11/2010 at total income of Rs. 99,40,940/-.
Subsequently it has been noticed that the A.O. disallowed the cash credits aggregating to Rs. 62,65,456/- found in the capital accounts of the partners which were added back to the income of the assessee firm as agreed and surrendered by it. The interest paid to partners on such unexplained credits was be disallowed at the time of assessment. The interest of Rs. 8,66,831/- was wrongly allowed to partners on the unexplained capital of Rs. 62,65,456/-.
Thus it is amply clear that the assessee claimed excess interest of Rs. 8,66,831/- and the income chargeable to tax to the tune of Rs. 8,66,831/- has escaped assessment within the 7 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO meaning of provisions of section 147 of the ITT. Act, 1961.
Notice u/s 148 read with section 147 of the I.T. Act, 1961 is being issued accordingly.
The notice u/s 148 read with section 147 of the I.T. Act, 1961 is issued after obtaining necessary approval from the Joint Commissioner of Income-tax, Range-1, Ajmer u/s 151(1) of I.T. Act, 1961 vide letter No. JCIT/R-1/AJM/2011-12/2355 dated 01/03/2012."
2.2 The assessee filed the reply to the said notice issued U/s 148 of the Act. In the reply, it was submitted that the capital of the partners were surrendered by the partners themselves and not by the firm and therefore, it was contended that the capital was brought by the partners in the firm and in the surrender letter, merely confirmed to deposit the tax on the surrendered amount. It was further submitted that the tax was paid by the firm but was borne by the partners. It was further submitted that both the partners shown the interest received by them in the return of income in the said assessment year. Thereafter, the assessee relied upon the various judgments and submitted that the proceedings U/s 148 of the Act be dropped. However, the ld Assessing Officer had not agreed with the contentions of the assessee and has therefore passed the assessment order thereby revising the assessment order and recomputed 8 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO the total income of the assessee firm. The order of the ld Assessing Officer passed in the assessment proceedings are as under:-
"It is worthwhile to mention here that during original assessment proceedings, the assessee itself requested vide letter dated 24.11.2010 to tax the undisclosed capital of Rs.62,65,456/- in the hand of the firm. The assessee itself agreed that the capital introduced is bogus capital, therefore the reply filed at this stage that the cash deposits (bogus capital) to be taxed in the hands of the partners have no relevance. Further the assessee submitted that the interest allowed was taxed in the hands of partners. Since the capital was treated as bogus in the hands of firm, therefore the interest wrongly allowed in original assessment is required to be disallowed in the hands of the firm. Considering the facts of the case, the interest paid to partners of Rs.8,66,831/- on bogus capital is disallowed and added to the total income of the assessee firm. The assessee has furnished inaccurate particulars of income, the penalty proceedings u/s 271 (1)(c)is separately issued."
3. Being aggrieved by the order of the ld Assessing Officer, the assessee carried the matter before the ld CIT(A). The grounds taken in the appeal primarily were that the ld Assessing Officer made reopening of the case by recording the reasons passed on the audit objections and it was submitted that the order passed by the ld Assessing Officer is change of opinion as the ld Assessing Officer has already made assessment U/s 143(3) of the Act and the reassessment on the pretext of change of 9 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO opinion is not permissible. However, the ld CIT(A) has discussed the legal issue and has held as under:-
"I have considered the contentions of the appellant as well as assessment order. It is seen that the AO has applied his mind to the case records and has reopened the assessment on the factual matter that though the addition of Rs. 62,65,456/- was made in the case of the assessee as bogus capital. However interest thereon of Rs. 8,66,831/- was wrongly allowed to the assessee in the original assessment. As such, it is a factual matter and it does not involve any interpretation of the legal provisions. As regarding the assessee's plea that assessee had disclosed all the material facts in the original assessment, so case was not liable to be reopened, it may be mentioned that the case was reopened on 14.03.2012 before the expiry of the four years from the end of the relevant assessment year. So the proviso to Sec. 147 does not place any embargo on reopening of the assessment by the AO. It is a case where the AO had reason to believe that income chargeable to tax has escaped assessment as the interest income of Rs. 8,66,831/- was not brought to tax in the case of the assessee. The cases cited by the assessee are on their own facts and are not applicable in the case of the assessee as they relate to the taxing of the income which was not at all mentioned in the reasons for reopening the assessment. In view of above discussion, this ground of appeal is dismissed."
10 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO
4. Now the assessee is in appeal before us. The ld AR of the assessee has submitted as under:-
Under these grounds of appeal the assessee has challenged the validity of initiation of reassessment proceedings u/s 148 of the Act as well as the completion of assessment u/s 147/143(3) of the Act.
In this regard it is submitted that during the course of original assessment proceedings, the fresh capital contributions made by the partners in their capital accounts was voluntarily surrendered and it was requested that the same may be taxed in the hands of the firm. After considering the surrender so made and further after duly examined the books of accounts and details filed of the interest paid by assessee to the partners on their capital the order was passed u/s 143(3) on 25.11.2010, copy enclosed, wherein the interest payment to the partners was not doubled and no disallowance was consciously made by the Ld. AO on this account. A bare perusal of the original assessment order would show that complete details with regard to the interest paid by assessee to the partners on their capital contributions was submitted by assessee and were examined by the Ld. AO, who even reproduced the capital accounts of both the partners in the assessment order.
However, subsequently solely on the basis of audit objection, the Ld. AO reopened the case of assessee to examine the details already available on record which were 11 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO submitted by assessee during the course of original assessment proceedings and stood examined. No new material has been brought on record to allege escapement of income and the same material (forming part of record of original assessment) is being reconsidered which is merely a change opinion. The reasons recorded by the Ld. AO would further show that there has been no allegation of any failure on part of assessee in disclosing the material facts and information and it is evident from the original assessment order as well as the reassessment order that there has been complete disclosure on part of the assessee.
The Ld. AO has reopened the assessment solely on the basis of audit objection which is without independent application of mind and as submitted above, no new material was brought on record and the same record already available with the Department is being reconsidered for alleging escapement of income.
Thus, in view of the above, it becomes clear that the Ld. AO has failed to record proper satisfaction regarding escapement of income and the reasons to believe framed by the Ld. AO are based on nothing but mere change of opinion which is totally impermissible in law and is violate to the provisions of section 148/147. It is well settled law that merely a change of opinion, no reassessment can be made u/s 147 and a subjective satisfaction on fresh material has to be recorded for alleging the escapement of income. Thus, in the present case, the action of 12 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO Ld. AO in completing the impugned reassessment is clearly bad in law and deserves to be quashed/set aside.
For that purposes, the ld AR has relied upon the following decisions.
(i) 34 DTR 49 CIT Vs. Kelvinator of India Ltd. (SC)
(ii) 51 DTR 117 CIT vs. Mansh Ajmera (Raj.)
(iii) 314 ITR 275 Cartini India Ltd. Vs. Addl. CIT (Bom.)
(iv) 115 TTJ 766 Sudhir Engg. Co. Vs. ACIT (Del.)
(v) 114 ITD 69 Asstt. CIT Vs. O.P. Chawala (Delhi)
(vi) 119 TTJ 379 ITO Vs. Smt. Indra Devi Gupta (JP)
(vii) 59 DTR 221 Virendra Kumar Agrawal vs. ITO (Mumbai 'F')
(viii) 122 DTR 131 Avtec Ltd. Vs. Dy. CIT (Dei.)
(ix) 157 ITD Issue 1 Weekly Browser Page 11 Adani Developers P. Ltd. Vs. ITO, Ward 1(1) [2016] 66 Taxmann.com 125 (Gujarat)
(x) CIT Vs. Indian Sugar & General Industry Export Import Corpn. Ltd. [2008] 170 Taxman 229 the Delhi High Court The sum and substance of the above said judgment that once the ld Assessing Officer has confirmed and has passed a reasoned order, the it is not permissible in law to disturb the final assessment made by the ld Assessing Officer on the basis of the same material available with the ld Assessing Officer. It was submitted that the presumption in law is that if the material is available on record, then the ld Assessing Officer should
13 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO have applied his mind and gone through the record. Merely by not making any comment in the assessment order the revenue cannot say that the ld Assessing Officer has not applied his mind and therefore, no opinion has been framed on that issue.
5. On the other hand, the ld DR has submitted that U/s 147 of the Act three issues are required to be appreciated:
(i) That complete information has been furnished by the assessee during the assessment proceedings on the basis of which the ld.
Assessing Officer has framed his belief for the purposes of assessment.
(ii) The assessee has not concealed the information.
(iii) The assessee has disclosed the complete information to the ld Assessing Officer.
On the basis of the above, the ld DR has submitted that the ld Assessing Officer has not applied his mind on the issue of payment of interest as is discernable from the assessment proceedings or record. It is submitted that no question was put by the ld Assessing Officer allowing or disallowing the interest on the cash credit introduced by the firm in the account of the partners, therefore, it was submitted that once the 14 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO question was not put, therefore, there is no occasion for the Assessing Officer to examine the issue and therefore, it was submitted that the present case is not of the change of opinion or of the oversight of the opinion rather it is a case of escape of the income required to be taxed in accordance with law.
6. We have heard the rival contentions of both the parties and perused the material available on the record. For the purposes of deciding this issue, it is necessary to reproduce the judgment of Full Bench of Hon'ble Delhi High Court in the case of CIT Vs. Usha International, (2012) 348 ITR 485 wherein the Hon'ble Court has held as under:
35. In A.L.A. Firm (supra), the Supreme Court specifically dealt with propositions (2) and (4) quoted in paragraph 34 above and thereafter elucidated and explained that there was no difference between observations of the Supreme Court in Kalyanji Mavji & Co. (supra) and Indian & Eastern Newspaper's case (supra), as far as proposition (4) is concerned. It was held that :-
"We have pointed out earlier that Kalyanji Mavji (supra) outlines four situations in which action under Section 34(1)(b) can be validly initiated. The Indian Eastern Newspaper Society's case has only indicated that proposition (2) outlined in this case and extracted earlier may have been somewhat widely stated; it has not cast any doubt on the other three propositions set out in Kalyanji Mavji's case. The facts of the present case squarely fall within the scope of propositions 2 and 4 enunciated in Kalyanji Mavji's case. Proposition (2) may be briefly summarised as permitting action even on a "mere change of opinion". This is what has been doubted 15 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO in the Indian Eastern Newspaper Society's case (supra) and we shall discuss its application to this case a little later. But, even leaving this out of consideration, there can be no doubt that the present case is squarely covered by proposition (4) set out in Kalyanji Mavji & Co. (supra). This proposition clearly envisages a formation of opinion by the Income-tax Officer on the basis of material already on record provided the formation of such opinion is consequent on "information" in the shape of some light thrown on aspects of facts or law which the I.T.O. had not earlier been conscious of. To give a couple of illustrations, suppose an I.T.O., in the original assessment, which is a voluminous one involving several contentions, accepts a plea of the assessee in regard to one of the items that the profits realised on the sale of a house is a capital realisation not chargeable to tax. Subsequently he finds, in the forest of papers filed in connection with the assessment, several instances of earlier sales of house property by the assessee. That would be a case where the I.T.O. derives information from the record on an investigation or enquiry into facts not originally undertaken. Again, suppose in I.T.O. accepts the plea of an assessee that a particular receipt is not income liable to tax. But, on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under Section 147(b) by virtue of proposition (4) of Kalyanji Mavji, The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later.
What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Mavji (supra). The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the I.T.O. initiates reassessment proceedings in the light of "information" obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for 16 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO e.g., as in the two Madras decisions referred to earlier. Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the I.T.O., having considered all the facts and law, arrives at a particular conclusion, but reinitiates proceedings because, on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier, he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax. In other words, as pointed out in Indian Eastern Newspaper Society's case, it also ropes in cases of a "bare or mere change of opinion" where the I.T.O. (very often a successor officer) attempts to reopen the assessment because the opinion formed earlier by himself (or, more often, by a predecessor I.T.O.) was, in his opinion, incorrect. Judicial decisions had consistently held that this could not be done and the Indian Eastern Newspaper Society's case (supra) has warned that this line of cases cannot be taken to have been overruled by Kalyanji Mavji (supra). The second paragraph from the judgment in the Indian Eastern Newspaper Society's case earlier extracted has also reference only to this situation and insists upon the necessity of some information which make the ITO realise that he has committed an error in the earlier assessment. This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas [1986] 21 S.T.C. 326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarised by the High Court in the following words represents, in our view, the correct position in law:
The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he
17 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO would be powerless to start the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently come by the material from the record itself, then such a case would fall within the scope of Section 147(b) of the Act." [Emphasis supplied]
36. The aforesaid observations are complete answer to the submission that if a particular subject matter, item, deduction or claim is not examined by the Assessing Officer, it will nevertheless be a case of change of opinion and the reassessment proceedings will be barred.
37. We are conscious of the fact that the aforesaid observations have been made in the context of Section 147(b) with reference to the term 'information' and conceptually there is difference in scope and ambit of reopening provisions incorporated w.e.f. 1st April, 1989. However, it was observed by the Supreme Court in Kelvinator of India Ltd. ( supra) that amended provisions are wider. What is important and relevant is that the principle of "change of opinion" was equally applicable under the unamended provisions. The Supreme Court was therefore conscious of the said principle, when the observations mentioned above in A.L.A. Firm (supra) were made.
38. -----------------------------
39. In view of the above observations we must add one caveat.
There may be cases where the Assessing Officer does not and may not raise any written query but still the Assessing Officer in the first round/ original proceedings may have examined the subject matter, claim etc, because the aspect or question may be too apparent and obvious. To hold that the assessing officer in the first round did not examine the question or subject matter and form an opinion, would be contrary and opposed to normal human conduct. Such cases have to be examined individually. Some matters may require examination of the assessment order or queries raised by the Assessing Officer and answers given by the assessee but in others cases, a deeper scrutiny or examination may be necessary. The stand of the Revenue and the assessee would be relevant.
18 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO Several aspects including papers filed and submitted with the return and during the original proceedings are relevant and material. Sometimes application of mind and formation of opinion can be ascertained and gathered even when no specific question or query in writing had been raised by the Assessing Officer. The aspects and questions examined during the course of assessment proceedings itself may indicate that the Assessing Officer must have applied his mind on the entry, claim or deduction etc. It may be apparent and obvious to hold that the Assessing Officer would not have gone into the said question or applied his mind. However, this would depend upon the facts and circumstances of each case.
The Hon'ble Delhi Court in the case of CONSOLIDATED PHOTO AND FINVEST LTD. Vs. ASSISTANT COMMISSIONER OF INCOME-TAX [2006] 281 ITR 394 (Del) has held as under:
"10. It is common ground that in the present case the Assessing Officer had not received any additional information from any outside source or quarter but the fact that there was no such information did not make any material difference. Action under section 147 was permissible even if the Assessing Officer gathered his reasons to believe from the very same record as had been the subject-matter of the completed assessment proceedings. What Mr. Vohra argued was that the Assessing Officer could not, on the basis of the very same material as was available to him at the time of assessment, initiate action under section 147, for doing so, would constitute action based entirely on a change in his opinion. The contention is that if the material was available to the Assessing Officer and if an assessment order based on that material is passed by him, a reassessment using the very same material or inferences available from that material should tantamount 19 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO to a mere change of opinion, which cannot, according to the petitioner, constitute a valid ground for reassessment.
11. We may, before going into the merits of the main contention urged before us, deal with the question of limitation feebly argued by Mr. Vohra. As noticed earlier, the proviso to section 147 envisages action in the ordinary course within a period of four years from the end of the relevant assessment year. That limitation does not, however, apply to cases where income chargeable to tax has escaped assessment on account, inter alia, of the failure of the assessee to disclose fully and truly all material facts. The argument that production of the account books and other documentary evidence relevant for assessment must imply a full and true disclosure of all material facts must be rejected out of hand in the light of the provisions of Explanation 1, according to which mere production of the books of account or other evidence from which the Assessing Officer could have, with due diligence, discovered the material evidence does not necessarily amount to a disclosure within the meaning of the proviso. The action initiated by the respondent does not in that view suffer from any error of jurisdiction to warrant interference from this court in exercise of its writ jurisdiction.
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19. In the light of the authoritative pronouncements of the Supreme Court referred to above, which are binding upon us and the observations made by the High Court of Gujarat with which we find ourselves in respectful agreement, the action initiated by the Assessing Officer for reopening the assessment cannot be said to be either incompetent or otherwise improper to call for interference by a writ court. The Assessing Officer has in the reasoned order passed by him indicated the basis on which income 20 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO exigible to tax had in his opinion escaped assessment. The argument that the proposed reopening of assessment was based only upon a change of opinion has not impressed us. The assessment order did not admittedly address itself to the question which the Assessing Officer proposes to examine in the course of reassessment proceedings. The submission of Mr. Vohra that even when the order of assessment did not record any explicit opinion on the aspects now sought to be examined, it must be presumed that those aspects were present to the mind of the Assessing Officer and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for the view which the authority is taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment, as is the position in the present case. It is in that view inconsequential whether or not the material 21 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO necessary for taking a decision was available to the Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee. What is important is whether the Assessing Officer had based on the material available to him taken a view. If he had not done so, the proposed reopening cannot be assailed on the ground that the same is based only on a change of opinion.
6.1 In the light of the above legal proposition stated hereinabove, if we examine the facts of the present case then the following situation emerges.
(i) The assessee namely Shree Durga Marbles has introduced capital in the accounts of its partners namely Smt. Durga Devi Somiani and Smt. Sangeeta Somani to the tune of Rs.
62,65,456/-.
(ii) The assessee company has agreed to deposit the tax on the said amount in the hands of the firm.
(iii) No notice or enquiry whatsoever was conducted by the ld Assessing Officer in respect of the deduction claimed by the assessee for sum of Rs. 8,66,831/-. The ld Assessing Officer has not put any question to the assessee with respect to 22 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO allowing or disallowing these expenses towards the interest paid to the partners of the firm.
(iv) No answer was given by the assessee in respect of these deductions claimed by it.
(v) The ld Assessing Officer has not discussed anything in the original assessment order dated 25/11/2010 thereby allowing the deduction of Rs. 8,66,831/-. There is no whisper or discussion in respect of the deduction arising out of the interest paid to the partners.
In the light of the above, once neither the question was asked from the assessee nor any enquiry was conducted by the Assessing Officer nor he applied his mind on the deductibility of the interest to the partners, therefore in our view, no opinion was formed by the Assessing Officer in the original assessment proceedings in this regard. Since we have held that no opinion was formed by the Assessing Officer in the original assessment proceedings, therefore, the reopening made by the Assessing Officer on the same facts cannot be said to be bad in law and is in accordance with 23 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO law mentioned hereinabove. By respectfully following the judgment of Full Bench of Hon'ble Delhi High Court in the case of Usha International (supra) we uphold the reopening proceedings for the reassessment. Moreover, in the light of the above judgment referred hereinabove, it does not matter even if the reopening/reassessment are sought to be initiated on the basis of the material already available on the record in the original assessment proceedings.
6.2 Having decided issue No. 1 against the assessee, now the other issues, which remained to be decided is whether the disallowance of interest of Rs. 8,66,831/- paid to the partners towards the capital contribution can be disallowed by the ld Assessing Officer or not. In this regard, in the original assessment proceedings, it is a case of the assessee and also in the reassessment proceedings, that the assessee had surrendered the amount of Rs. 62,65,456/- towards the cash credits in view of Section 68 of the Act being unexplained cash deposit. Since the assessee had admitted that the amount of Rs. 62,65,,456/- as unexplained cash deposits of the assessee, though, the said amount was applied by the assessee to the capital account of the partners. In our view, the assessee cannot claim the interest on its own amount. The 24 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO interest is only payable to the assessee if the amount is brought in by the partners as a capital or the capital is borrowed by the assessee from the third party. Since the assessee has admitted that the amount brought in was the bogus capital of the assessee, therefore, the assessee is not liable to the deduction in the payment of the interest to its partners. In our view, the income tax is required to be calculated in the right hands i.e assessee and the submissions of the assessee that the said amount has already been declared by the assessee's partners in the individual returns of income is of no consequences. For the default or wrong application of the interest by the partners in their returns of income will not be come in the way to tax the assessee for wrong deduction in the return of income of the assessee. The income tax is tax on the person who is in law duty bound to pay the interest. The plea of the double tax, in our view, is also not maintainable as the assessee is claiming the deduction of the interest paid in its account whereas the partners are paying the tax on the interest earned on the alleged capital introduced by the company in the capital account of the partners. As we have already held unexplained amount deposited in the accounts of the partners was the cash deposit of the assessee firm, therefore, merely deposit of the said amount in the accounts of the partners, do not make the assessee 25 ITA 277/JP/2015_ Shree Durga Marbles Vs ITO liable to pay the interest to its partners on its own money. In the light of the above, the income chargeable to tax as escaped assessment has the interest of Rs. 8,66,831/- was not brought to tax in the case of assessee and the assessee has wrongly claimed the deduction in the original assessment proceedings. In view of the above discussion, we also dismiss this ground No. 2 of the assessee's appeal.
7. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 16/08/2016.
Sd/- Sd/-
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(BHAGCHAND) (Laliet Kumar)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 16th August, 2016
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shree Durga Marbles, Kishangarh.
2. izR;FkhZ@ The Respondent- The ITO, Ward, Kishangarh.
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, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 277/JP/2015) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar