Income Tax Appellate Tribunal - Chandigarh
Ashok Goel , Ludhiana vs Assessee on 19 May, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
'SMC' BENCH, CHANDIGARH
BEFORE SHRI H.L.KARWA, HON'BLE VICE RESIDENT
ITA No.110/Chd/2016
(Assessment Year : 2005-06)
Ashok Goel, Vs. The Income Tax Officer III(2),
Old Grain Market, Ludhiana.
Mullanpur,
Distt. Ludhiana.
PAN: ABWPP1163A
Appellant by : Shri S.K. Maingi
Respondent by : Shri S.K. Mittal, DR
Date of hearing : 22.04.2016
Date of Pronouncement : 19.05.2016
O R D E R
This appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-I, Ludhiana dated 18.12.2015 relating to assessment year 2005-06.
2. In this appeal, the assessee has raised the following grounds :
"1. That the Ld. CIT(A) erred in confirming the addition of Rs.7,91,840/- on wrongly re-opening the case u/s.148 whereas on similar way of re- opening, in the case of Smt. Sarika Goel, assessee's daughter, proceedings u/s. 148 quashed being informative / irregular.2
2. That the proceedings u/s. 148 started without in possession of original Income Tax Return filed on 25/07/2005 vide Receipt no.511100211for which A.O. could not give inspection of the original documents and decided the case without opportunity of being heard.
3. Reasons recorded supplied for re-opening the case were on behest of D.D.I.(Invt.). It was re-opened on satisfaction of D.D.I. and not having reasons to believe of A.O. It is against the spirit of Hon'ble Punjab & Haryana High Court's case law of Paramjit Kaur 168 Taxman 39.
4. Recent decision of Hon'ble ITAT Chandigarh Bench in appeal no.282 & 389 of 2014 pronounced on 18/11/2015 and published under citation no. (2016) 65 Taxman.com 2016 in the case of Subash Chander Goel vs. ITO Ward 1(3), Chandigarh is very much a covered case for our case for quashing proceedings u/s. 148.
5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off."
3. The legal issue raised by the assessee in this appeal relates to validity of reopening of the assessment under section 147 of the Income Tax Act, 1961 (in short 'the Act'). For assessment year 2005-06, the assessee (individual) submitted his return of income on 25.7.2005 declaring total income at Rs,1,79,563/-. The return was processed under section 143(1) of the Act. Subsequently, the Assessing Officer issued notice under section 148 of the Act, dated 31.3.2010 after recording reasons that the 3 assessee had incurred expenditure on Roka and Engagement functions of her daughter solemnized on 29.8.2004, out of his unexplained income and income has escaped assessment for the period relevant to the assessment year 2005-06. Thereafter, the Assessing Officer issued statutory notices under sections 142(1) and 143(2) of the Act. On 15.11.2010, the assessee requested the Assessing Officer to supply the reasons recorded for reopening of the assessment. The Assessing Officer vide his letter dated 13.12.2010 asked the assessee as to why the expenses incurred amounting to Rs.7 lacs on Roka and Engagement functions should not be treated as 'income from undisclosed sources'. In response to the above query, the assessee submitted a detailed reply on 13.12.2010. The Assessing Officer did not find any merit in the above reply of the assessee and observed that the assessee failed to explain the source of expenditure made on Roka and Engagement functions of his daughter Ms.Sarika Jain solemnized on 29.8.2004. The Assessing Officer further observed that the assessee himself had accepted before the Assistant Director of Income Tax (Investigation) III, Ludhiana that he had incurred expenses on engagement ceremony as under :
(i) Payment to Hotel Rs.25,000/-
(ii) S h a g u n a t R i n g c e r e mo n y Rs.5,00,000/-
(iii) Other expenses on account
O f s we e t s , f r u i t s a n d g i f t s
I t e ms a s T V , A C , M o b i l e P h o n e
and clothes etc. Rs.1,75,000/-
4
(iv) Gold articles 1 6 4 G m.
4. The Assessing Officer took the view that the
assessee had spent Rs.7 lacs in cash and jewellery of Rs.91,840/-. Therefore, the Assessing Officer made an addition of Rs.7,91,840/- under section 69C of the Act.
5. On appeal, the learned CIT (Appeals) held that the reopening of the assessment by the Assessing Officer was valid and, therefore, the learned CIT (Appeals) dismissed the appeal of the assessee.
6. Being aggrieved by the said order of the learned CIT (Appeals), the assessee has come up in appeal before the Tribunal.
7. I have heard the learned representatives of both the parties at length and have also perused the materials available on record. In this case, the reasons recorded by the Assessing Officer for reopening under section 147 of the Act, are as under :
Reason for issue of notice u/s 148 of the Income Tax Act, 1961.
For the Asstt. Year 2005-06 the assessee had filed his return of income on 25.07.2005 declaring income of Rs 179563/-. The return was processed u/s 143(1) of the I.T. Act. Later on information was received from DD1T (Inv.)-III, Ludhiana that the assessee Sh Ashok Goel and his daughter Smt Sarita Goel, R/o Old Grain Market, Mullanpur, (Ldh) has spent approximately 37 lacs on his engagement and marriage ceremonies. As per copy 5 of complaint made by the assessee to Senior Supridentent of Police, Ludhiana, Roka and engagement function was solemnized on 29.08.2004 and expenditure of Rs 7 lacs was made on these function further, approximately Rs 30 lacs was spent on the marriage ceremony held on 16.05.2005. Investigation of DDIT (Inv.) shows the expenditure was made out of unexplained income which assessee could not explain before the investigation Wing.
2. I am satisfied that the assessee had incurred expenses of Rs 7 lacs on Roka and engagement ceremony function solemnized on 29.08.2004 out of his un-explained income and income has escaped assessment for the period relevant to the Asstt. Year 2005-06.
Issue notice under section 148 of the Income Tax Act, 1961 for the Asstt. Year 2005-06.
Yours faithfully Sd/-
( O.P.Saroha ) Dated: 31.03.2010 Income Tax Officer-111(2) Ludhiana
8. The Assessing Officer issued notice under section 148 of the Act after recording the above reasons for reopening of assessment. The brief background of the case is that the daughter of the assessee Ms.Sarika Jain married to Shri Piyush Jain on 16.5.2005. Later on, due to strained relations between Ms.Sarika Jain and Shri Piyush Jain, the daughter of the assessee lodged FIR No.69 dated 11.5.2009 with the Police Station, Dhaka, Distt. Ludhiana. The application for registration of 6 criminal case under sections 406, 498A, 34, 506, 120B of IPC was filed with police station by Ms.Sarika Jain against her husband Shri Piyush Jain, father-in-law Shri Rajnish Jain, mother-in-law Smt.Neelam Jain and brother- in-law Shri Vishesh Jain, all R/o 243F, Kitchlu Nagar, Ludhiana. In the said complaint, it was alleged by Ms.Sarika Jain that right from the beginning after the marriage, the accused persons mentioned above, have been taunted her that she has not brought sufficient amount of cash and jewellery according to their status and also complained that the dowry articles given by her parents were of inferior quality, so in this way, the attitude of the in-laws family towards her was very bad and she was consistently harassed for more dowry from time to time. It was also alleged by Ms.Sarika Jain that her husband's behavior was very negative towards her. She also alleged in the complaint that Roka and Engagement functions were solemnized on 29.8.2004 at Hotel Regency, Ludhiana. It was also alleged by her that approximately an amount of Rs.7 lacs was spent on these two functions, which included the charges of venue etc. and certain expensive articles were also given to her husband and in-laws. It is also apparent from record that the statement of Ms.Sarika Jain, daughter of the assessee was recorded by police authorities on 11.5.2009 under section 161 CrPC. In the said statement, Ms.Sarika Jain stated that her father had spent Rs.30 lacs on the marriage and Rs.7 lacs for Roka and Engagement 7 functions. Now, the Revenue has made this expenditure, the basis for reopening the case under section 148 of the Act.
9. The learned counsel for the assessee pointed out that this is a case where in arranged marriage, the dispute arose and boys' side made a complaint with the Police as well as Income Tax Department in support of marriage expenses. The learned counsel for the assessee submitted that FIR was lodged with the police on 11.5.2009 by Ms.Sarika Jain, daughter of the assessee, where some details of expenses of Roka ceremony was given at Rs.7 lacs in her own way just to fetch money from in-laws. According to the learned counsel for the assessee, this estimation made by the daughter of the assessee was used by the Assessing Officer in the hands of Shri Ashok Goel, father of Ms.Sarika Jain. According to the learned counsel for the assessee, the proceedings under section 147 r.w.s. 148 of the Act in the hands of the father i.e. Shri Ashok Goel on the basis of the allegations made by Ms.Sarika Jain against here husband, cannot be made the basis for making the addition. In the instant case, the ground on which the re-assessment notice was issued is not in existence. In the reasons recorded by the Assessing Officer, reproduced here-in- above, the Assessing Officer has categorically stated that as per the copy of complaint made by the assessee to SSP of Police, Ludhiana, Roka and Engagement functions were 8 solemnized on 29.8.2004 and expenditure of Rs.7 lacs was made on these functions. Further, approximately Rs.30 lacs were spent on the marriage ceremony held on 16.5.2005. Section 148(2) of the Act provides that before issuing any notice under section 148, the Assessing Officer has to record his reasons for reopening of the assessment. The reasons to be recorded by the Assessing Officer must relate to his belief under section 147 of the Act that any income chargeable to tax has escaped assessment for any assessment year. It is well settled legal position with regard to initiation of re-assessment proceedings that there must be material for belief. Furthermore, there must be nexus between material and belief. The reasons recorded by the Assessing Officer must show application of mind by him. In the instant case, the Assessing Officer has stated in the reasons recorded for reopening that the assessee had made the complaint to SSP, Ludhiana, which is factually incorrect and without any basis. In fact, the complaint to the police was made by the daughter of the assessee. Thus, it is clear that there was no nexus between material and belief. Secondly, the Assessing Officer has not applied his mind while recording the reasons for reopening. In para 2 of the reasons recorded by the Assessing Officer, it is stated that "I am satisfied that the assessee had incurred expenses of Rs.7 lacs on Roka and Engagement ceremony function solemnized on 29.8.2004 out of his unexplained income and income has escaped assessment for the period 9 relevant to assessment year 2005-06". It is observed that the expression appearing in section 147 is 'reason to believe', which refers to the belief. The same prompts the Assessing Officer to apply section 147 to a particular case. It is well settled that the expression in section 147 'has reason to believe' is stronger than the words 'is satisfied'. In the case of Emirates Shipping Line, FZE Vs. Assistant Director of Income Tax (2012) 349 ITR 493 (Del), the Hon'ble Delhi High Court at pages 509 and 510 held as under :
"23. We have quoted the "reasons to believe" recorded by the Assessing Officer. For invoking this power, it is not the requirement nor is the provision confined to cases of concealment of income. Reassessment provision empowers the Assessing Officer to assess income which has escaped assessment. The object of the section is to ensure that the taxable income is computed and calculated as per the Act and tax payable thereon is paid. At the same time, the power under this Section is not unbridled and there are several safeguards. One of the safeguards stipulated in the section itself is the requirement that the Assessing Officer must record 'reasons to believe'. This requirement mandates that the Assessing Officer must state in writing why and for what reason, i.e. cause or justification, he is invoking the said power. The said reasons must satisfy the stipulation that the Assessing Officer should have formed a prima facie belief that income has escaped assessment.
24. 'Reasons to believe' recorded by the Assessing Officer are a result of the subjective satisfaction of the assessing officer, but in a way has to satisfy the test of objectiveness. The belief must be honest and should be based upon some material or 10 basis but not on mere suspicion, gossip or rumour. 'Reasons to believe' do not mean 'reasons to suspect'. The Assessing Officer cannot institute or start a fishing investigation or rowing inquiry. There must be some information or material which is on the file which makes the assessing officer form a tentative or prima facie opinion that income has escaped assessment. This material or information cannot be wholly vague, indefinite or farfetched. It must have nexus or live link with the formation of belief. The test is whether a reasonable person would have formed the requisite belief on the basis of information or material as stated/recorded by the Assessing Officer that income has possibly escaped assessment. Mere ipse dixit or a hunch does not amount to reason to believe. Inspite of the wide power, the exercise of power must meet this requirement that there was relevant material and ground for the Assessing Officer to form a tentative or prima facie opinion that the income as escaped assessment which includes non assessment or under assessment. But, it is not the requirement that the Assessing Officer should have finally ascertained the fact of escapement of income by recording findings or conclusion. This final ascertainment takes place when the final assessment order is passed. The Assessing Officer has to show tentatively or prima facie that income has escaped assessment. There should be some material or basis for the said formation of belief (refer Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers, (2008) 14 SCC 208; ITO v. Selected Dalurband Coal Co. (P) Ltd. (1997) 10 SCC 68; Raymond Woollen Mills Ltd. v. ITO, (2008) 14 SCC
218)."
10. In the above case, the Hon'ble Delhi High Court has categorically stated that under section 147 of the Act, it is the requirement that the Assessing Officer must record 'reason to believe'. This requirement mandates that the Assessing Officer must state in writing why and for what reason, i.e. cause or justification, he is invoking 11 the power. The Hon'ble High Court further held that the reasons must satisfy the stipulation that the Assessing Officer should have formed a prima-facie belief that income has escaped assessment. In the instant case, the Assessing Officer proceeded on the premise that the assessee had made complaint to the SSP of Police, Ludhiana regarding Roka and Engagement functions solemnized on 29.8.2004 and expenditure of Rs.7 lacs was incurred on these functions. This observation is factually incorrect and it cannot be said that the Assessing Officer has formed a prima-facie belief that income has escaped assessment. At this juncture, I may refer to the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Atlas Cycle Industries (1989) 180 ITR 319 (P&H), wherein it has been held that the Assessing Officer did not have the jurisdiction to proceed with the re- assessment, the moment he found the two grounds mentioned in the re-assessment notice incorrect or non- existent. In the instant case also, notice was issued to the assessee on ground that he had made the complaint to the SSP of Police, which is factually incorrect. In fact, the assessee did not make any complaint to the SSP, Ludhiana. Secondly, the Assessing Officer has mentioned in the reasons recorded that information was received from DDIT (Investigation)-III, Ludhiana that the assessee and his daughter Ms.Sarika Jain had spent approximately 12 Rs.37 lacs on her engagement and marriage ceremony. It is brought to our notice that no addition has been made in the hands of Ms.Sarika Jain. On the contrary, Smt.Sarika Jain alleged in her complaint made with the Police that the assessee had spent an amount of Rs.7 lacs at the time of Roka and Engagement functions. It is also observed that in this case the information was provided by DDIT (Investigation)-III, Ludhiana on the basis of Police Report, wherein the daughter of the assessee alleged that a huge amount has been spent on marriage and Roka ceremony. The complaint was made by Ms.Sarika Jain against her husband and in-laws. Shri S.K. Maingi, learned counsel for the assessee submitted that the said complaint was made by Ms.Sarika Jain in order to fetch money from her husband and in-laws. This contention of the learned counsel for the assessee has some force, which can not be ignored. Recently, Division Bench of this Tribunal in the case of Shri Subhash Chander Goel Vs. ITO, Chandigarh in ITA No.282/Chd/2014 relating to assessment year 2006-07 held that statement recorded by the police officer under section 161 of CrPc, 1983 is neither given on oath, nor it is tested by cross examination and, therefore, such a statement cannot be treated as substantive evidence to reopen the assessment proceedings. In the instant case, the Assessing Officer had not examined and corroborated the information received from DDIT (Investigation)-III, Ludhiana before recording his satisfaction of the escaped income and 13 initiating the re-assessment proceedings. In my opinion, the Assessing Officer has thus acted on the basis of suspicion and he has also not applied his mind before recording the reasons for reopening of the assessment. Thus in my considered opinion, the statement made by Ms.Sarika Jain under section 161 of CrPc cannot be treated as relevant material for reopening proceedings under section 147 of the Act.
11. In view of the above discussion, I hold that reopening of the assessment was not valid under the law and, hence I quash the impugned orders of the authorities below.
12. Since I have quashed the re-assessment order, therefore, no comments are required to be given on the merits of the case.
13. In the result, the appeal of the assessee is allowed Order pronounced in the open court on this 19th day of May, 2016 Sd/-
(H.L.KARWA) VICE PRESIDENT Dated : 19 t h May, 2016 *Rati* Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh