Income Tax Appellate Tribunal - Mumbai
Dr. Firuza Rajesh Parikh, Mumbai vs Assessee on 26 March, 2015
आयकर अपील
य अ धकरण "F" यायपीठ मब
ंु ई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI
BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K. BILLAIYA, AM
आयकर अपील सं./I.T.A. No.3132 & 3133 /Mum/2012
( नधा रण वष / Assessment Year : 2004-05 & 2005-06
Dr. Firuza Rajesh Parikh, बनाम/ Income Tax Officer-
121-122, 12 t h Floor, Range 11(2)(3),
Vs.
Jolly Maker No. 3, Aayakar Bhavan,
119, Cuffe Parade, Mumbai - 400 020.
Mumbai -400 005.
थायी ले खा सं . /PAN : AABPJ 9679D
(अपीलाथ /Appellant) .. ( यथ / Respondent)
आयकर अपील सं./I.T.A. No.3814 /Mum/2012
( नधा रण वष / Assessment Year : 2004-05
Income Tax Officer- Range बनाम/ Dr. Firuza Rajesh
11(2)(3), Parikh,
Vs.
Room No. 479, 4 t h floor, 121-122, 12 t h Floor,
Aayakar Bhavan,MK Road, Jolly Maker No. 3,
Mumbai - 400 020. 119, Cuffe Parade,
Mumbai -400 005.
थायी ले खा सं . /PAN : AABPJ 9679D
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Assessee by Shri Vijay Mehta &
Shri Priyesh Vira
Respondent by Shri Sachidanand Dube
ु वाई क तार ख / Date of Hearing
सन : 18-02-2015
घोषणा क तार ख /Date of Pronouncement : 26-03-2015
[
आदे श / O R D E R
PER VIJAY PAL RAO, J.M. :
These two appeals by the assessee pertaining to assessment years 2004-05 and 2005-06 and one appeal by the Revenue for A.Y. 2004-05 are 2 ITA 3132 & 3133/M/12 & ITA 3814/M/12 directed against the respective orders of the ld. CIT(A) -3, Mumbai all dated 15-03-2012.
2. The assessee has raised a common issue in both the appeals i.e. in ground No. 1 which reads as under:-
"1. On the facts and in the circumstances of the case and in law the learned C.I.T. (Appeals) erred in confirming the stand of the learned Assessing Officer ('A.O.') in reopening the assessment under section 147 of the Act. The appellant prays that the reopening of assessment under section 147 of the Act may be declared as bad in law and reassessment order may please be cancelled."
3. Since the issue raised in ground No. 1 in both the appeals of the assessee is a legal issue regarding validity of reopening and goes to the root of the matter, through we take up ground No. 1 of the assessee's appeal for adjudication.
4. The assessment for these assessment years were completed u/s 143(3) of the Income Tax Act, 1961 on 26-2-05 and 31-7-2007. Subsequently the assessments were reopened by issuing notice u/s 148 of the Act on 20-1-2009 and 30-3-2010 respectively. The reasons for reopening for both the assessment years are identical. The reassessments were completed by the A.O. by disallowing certain expenses. The assessee challenged the action of the A.O. including the validity of reopening before the ld. CIT(A). The ld. CIT(A) rejected the objection raised by the A.O. and confirmed the reopening of assessment.
5. Before us, the ld. A.R. has submitted that the reopening is based on audit objection and the A.O. has not formed any opinion that the income assessable to tax has escaped assessment. He has referred to the audit objection at page 3-4 of the paper book as well as reasons recorded by the A.O. at page 2 of the paper book and submitted that the reasons recorded by the A.O. for reopening of the assessment is verbatim copy of the audit 3 ITA 3132 & 3133/M/12 & ITA 3814/M/12 objection and there is no application of mind and no independent opinion on behalf of the A.O. to believe that income assessed to tax has escaped assessment. He has further contended that no tangible material came to the knowledge of the A.O. to form the opinion except adopting the audit objection. In support of his contention, he relied upon the judgment of Hon'ble jurisdictional High Court in the case of Asian Paints Ltd. vs. DCIT, 308 ITR 195 (Bom) as well as the judgment of Hon'ble jurisdictional High Court in the case of ICICI Home Finance Co. Ltd. vs. ACIT 210 Taxmann 67.
6. On the other hand, the ld. D.R. has submitted that the A.O. while completing the assessment u/s 143(3) of the Act did not examine the expenses on medicine debited by the assessee. Further the assessee is not maintaining any stock register as per Rule 6 of the Income Tax Rules, 1962. Thus the assessee has not disclosed the correct and entire facts in the return of income and audit party has pointed out the in-correct claim of the assessee in the audit objection. Therefore, the A.O. has rightly reopened the assessment based on the audit objection. In support of his contention he relied upon the decision of Hon'ble Supreme Court in the case of CIT vs. P.V.S. Beedies Pvt. Ltd. (1999) 237 ITR 13 and submitted that the reopening of the assessment based on the factual error pointed out by the internal audit party is permissible under law. He has further submitted that the reopening is within four years, and then the case of the assessee is not hit by the provisio to section 147 of the Act. He has also relied upon the order of the ld. CIT(A).
7. We have considered the rival submissions and also perused the relevant material placed on record. There is no dispute that the original assessment for both the years was completed u/s 143(3) of the Act. Subsequently the A.O. has reopened the assessment by recording the reasons as under:-
4 ITA 3132 & 3133/M/12 & ITA 3814/M/12 "1. The assessee has paid rent of Rs. 1.43,029/~ though she runs the clinic at her residence.
2. The assessee owns two flats, but no notional income is offered from the flat other than SOP.
3. Assistant expenses are shown as Rs. 2,27,0001- In the exp.
Statement but as per the details submitted it has been shown as Rs. 2,75,000/-.
4. Assessee has offered no income from the clinic but expenses of Rs. 63,93,655/- is debited. It is seen that assessee has incurred expenditure on medicine of Rs. 12,75,383/-. It is stated by the assessee that medicine for infertility treatment are of unusual nature and medication required for the patient is best known by the treating doctor and is supplied by the doctor. It can be believed that the doctor has incurred cost of medicine for treatment and is not reimbursed from the patient Further, Jaslok deduction of Rs. 5,40,646/- pertains to usuage of room operation theatre and various facities provided by the hospital. This shows that the assessee takes private treatment for her patients in Jaslok Hospital. "
8. These reasons recorded by the A.O. are nothing but the audit observation/objection by the internal audit party and recorded by the A.O. are verbatim of objections raised by audit party word by word without changing paragraph or the language of the objection raised by the audit party. We further note that after recording the audit objection, the audit party has written that the above facts may be examined and further the facts may be verified in the subsequent years also. Thus for both the assessment years the A.O. has recorded the reasons as a mirror image/copy of audit objection. We find that there are typographical mistake in the audit objection in para 4 which are also repeated in the reasons recorded by the A.O. as highlighted by us in the reasons recorded at two places. The first mistake occurred in the
5 ITA 3132 & 3133/M/12 & ITA 3814/M/12 sentence "it can be believed" which ought to have been "it cannot be believed" and the second mistake in the last sentence is "assessee takes private treatment" which ought to have been "assessee gives private treatment". This goes to prove that the A.O. had not even read out the audit objection properly but blindly reproduced the audit objection as reasons for reopening the assessment. There is no quarrel on the point that the internal audit party is entitled to point out factual error in the assessment and reopening on the basis of factual error pointed out by internal audit party is permissible as held by the Hon'ble Supreme Court in the case of P.V.S. Beedies Ltd. (supra). But in the case of the assessee, the audit party has not pointed out merely the factual error or omission but has given the finding in the shape of opinion that the medicine cost cannot be believed to have been incurred by the assessee and the same is reimbursed from the patient and it was also opined by the audit party that the assessee gives private treatment to the patient in the Jaslok Hospital. The A.O. adopted these observations of the audit party as reasons for reopening the assessments in question. Therefore, it is not a case of the A.O. that the audit party pointed out only the factual error and based on the factual error and on examination of record the A.O. formed an independent opinion to believe that the income assessable to tax has escaped assessment. Rather the A.O. has not recorded that he has reasons to believe that income assessable to tax has escaped assessment.
9. In the case of Asian Paints Ltd. (supra) the Hon'ble jurisdictional High Court held in para 10 is as under:-
"10. It is further to be seen that the Legislature has not conferred power on the Assessing Officer to review its own order. Therefore, the power under section 147 cannot be used to review the order. In the present case, though the Assessing Officer has used the phrase "reason to believe", admittedly between the date of the order of assessment sought to be reopened and the date of formation of opinion by the Assessing Officer, nothing new has happened, therefore, no new material has' come on record, no new information has been received" it is merely a fresh application of mind, by the same Assessing 'Officer to the same set 6 ITA 3132 & 3133/M/12 & ITA 3814/M/12 of facts and the reason that has been given is that the some material which was available on record while assessment order was' made was inadvertently excluded from consideration. This will, in our opinion, amount to opening of the assessment merely because there is change of opinion. The Full Bench of the Delhi High Court in its judgment in the case of Kelvinator [2002] 256 ITR 1 referred to above, has taken a clear view that reopening of assessment under section 147 merely because there is a change of opinion cannot be allowed. In our opinion, therefore, in, the present case also, it was not permissible for respondent No. 1 to issue notice under section 148."
10. Thus it is the pre-requisite for the A.O. to form opinion based on some new tangible material or information and not on the basis of change of opinion by re-appreciating the existing record/material available on record.
11. In the case of ICICI Home Finance Co. Ltd. (supra), the Hon'ble jurisdictional High Court while dealing with the issue of validity of reopening based on the audit objection has observed in para 6, 9 & 10 is as under:-
"6. The power to reopen a completed assessment under section 147 of the Act has been bestowed on the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. However, this belief that income has escaped assessment has to be the reasonable belief of the Assessing Officer himself and cannot be an opinion and/or belief of some other authority. In fact, the Supreme Court in the matter of India Eastern Newspaper Society v. Commissioner of Income Tax, New Delhi reported in 119 ITR page 996 has held that whether an assessment has escaped assessment or not must be determined by the Assessing Officer himself. The Assessing Officer cannot blindly follow the opinion of an audit authority for the purpose of arriving at a belief that income has escaped assessment. In the present facts, it would be noticed that the assessment for the assessment year 2006-2007 is sought to be reopened by communication dated 12.10.2011 are identical to the objection of the audit authority dated 29.12.2009. The reasons do not rely upon any tangible material in the audit report but merely upon an opinion and the existing material already on record. This itself indicates that there was no independent application of mind by the Assessing Officer before he issued the impugned notice. On this ground alone, the assumption of jurisdiction by the Assessing Officer can be faulted.
x.........x.........x........x.........x........x
9. Therefore, in view of the above, we are of the view that the impugned notice is without jurisdiction and the impugned order dealing 7 ITA 3132 & 3133/M/12 & ITA 3814/M/12 with the objection of the Petitioner is non speaking order in as much as it does not deal with any of the objections raised by the Petitioner in its objections.
10. In the circumstances, the impugned notice dated 24-03-2011 issued under section 148 of the Act as well as the impugned order dated 07-12-2011 rejecting the objection to initiation of reopening the assessment for the assessment year 2006-2007 are quashed and set aside."
12. The Hon'ble jurisdictional High Court has observed that the reasons for which the assessment is sought to be reopened are identical to the objections of the audit party and therefore the reasons did not rely upon any tangible material in the audit report but merely upon an opinion and the existing material already on record. This itself indicates that there is no independent application of mind by the A.O. before issuing the notice u/s 148 of the Act. The facts in the case before us are identical to that of the case of ICICI Home Finance Ltd. (supra), therefore, following the judgment of Hon'ble jurisdictional High Court in the case of ICICI Home Finance Ltd. (supra) as well as in the case of Asian Paints Ltd. (supra), we hold that the A.O. has reopened the assessment without any application of mind and accordingly the reopening is not sustainable in law. Hence, we quash the reassessment for both the assessment years.
13. Since the reassessment itself has been held to be invalid, therefore, the other grounds raised by the assessee as well as the grounds raised by the Revenue becomes infructuous.
8 ITA 3132 & 3133/M/12 & ITA 3814/M/12
14. In the result, both the appeals of the assessee are allowed and appeal of the Revenue is dismissed.
Order pronounced in the open court on 26th March, 2015.
ु े #यायालय म% &दनांकः 26-03-2015 को क गई ।
आदे श क घोषणा खल
Sd/- sd/-
(N.K. BILLIAYA) (VIJAY PAL RAO)
ACCOUNTANT MEMBER JUDICIAL MEMBER
मंब
ु ई Mumbai; &दनांक Dated 26-03-2015
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व.<न.स./ R.K., Sr. PS
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आय= ु त(अपील) / The CIT(A) -Concerned , Mumbai
4. आयकर आयु=त / CIT- -Concerned, Mumbai
5. @वभागीय <त<नBध, आयकर अपील य अBधकरण, मुंबई / DR, ITAT, Mumbai F Bench
6. गाडF फाईल / Guard file.
ु ार/ BY ORDER, आदे शानस स या@पत <त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई / ITAT, Mumbai