Income Tax Appellate Tribunal - Lucknow
Devi Saran Agarwal,, Kanpur vs Assessee on 6 June, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "A", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI. PRAMOD KUMAR, ACCOUNTANT MEMBER
ITA No.316/LKW/2011
Assessment Year:2002-03
Devi Singh Agarwal v. ITO 3(1)
54/1, Nayaganj Kanpur
Kanpur
PAN:ABNPA5170F
(Appellant) (Respondent)
Appellant by: Shri. Rakesh Garg, Advocate
Respondent by: Shri. Alok Mitra, D.R.
Date of hearing: 06.06.2013
Date of pronouncement: 07.08.2013
ORDER
PER SUNIL KUMAR YADAV:
This appeal is preferred by the assessee against the order of the ld. CIT(A), inter alia, on various grounds, which are as under:-
1. Because the reassessment framed u/s 147/143(3) of the Income-
tax Act, 1961 and upheld by the CIT(Appeals) is contrary to facts, bad in law, void ab initio, without jurisdiction and be quashed.
2. Because there being no escapement of income, nor there being any reasons justifying the initiation of re-assessment proceedings, the reassessment framed u/s 147/143(3) of the Act is contrary to facts, bad in law and be quashed.
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3. Because the CIT(Appeals) has failed to appreciate the fact that the original return was filed on 25.07.2002 which was in time and the subsequent return was filed on 9.04.2003 which was processed u/s 143(1), there was no occasion for the Assessing Officer to issue notice u/s 148 of the Act. The very notice issued is without jurisdiction, bad in law and be quashed.
4. Because the CIT(Appeals) has erred on facts and in law in upholding the validity of reassessment, which order is contrary to facts, bad in law, void ab initio, without jurisdiction and be quashed.
5. Because the CIT(Appeals) has erred on facts and in law in arbitrarily holding the sum of Rs.1,00,000/- received from Smt. Sushila Devi Manarika as unproved gift, which stands duly explained.
6. Because the CIT (Appeals) has erred on facts and in law in upholding the addition of Rs.5,000/- being alleged commission/expenditure incurred for procuring the gift from Smt. Sushila Devi Manarika.
7. Because the CIT(Appeals) has failed to appreciate the facts and circumstances of the case, and the explanation furnished by the assessee and has arbitrarily held that Rs.1,00,000/- is the undisclosed income of the assessee.
2. Through grounds No.1 to 4, the assessee has challenged the reopening of assessment under section 147 of the Income-tax Act, 1961 (hereinafter called in short "the Act") with the submission that processing of return under section 143(1)(a) of the Act cannot be considered as :-3-:
completion of assessment and the revised return even filed on 9.4.2003 after processing of return under section 143(1)(a) on 26.12.2002 was a valid return as per provisions of section 139(5) of the Act. The reopening is also challenged on the ground that notice under section 148 of the Act cannot be issued when there is time to issue notice under section 143(2) of the Act.
3. The contentions of the assessee were not accepted by the lower authorities. The ld. CIT(A) while approving the re-assessment has held that the Assessing Officer has received information from the Investigation Wing that the assessee has received bogus gift of `1 lakh which in fact was his own income and based on this information the Assessing Officer formed a belief that the appellant's income has escaped assessment. While upholding the validity of reopening of assessment, the ld. CIT(A) has observed that the Assessing Officer can issue notice under section 148 of the Act even there is time to issue notice under section 143(2) of the Act having placed reliance upon the judgments of the Hon'ble Punjab & Haryana High Court in the case of Punjab Tractors Ltd. vs. DCIT, 254 ITR 242 and the Hon'ble Madras High Court in the case of Sh. Krishna Mahal vs. ACIT, 250 ITR 333.
4. Aggrieved, the assessee preferred an appeal before the Tribunal with the submission that the return filed by the assessee was processed under section 143(1) of the Act on 26.12.2002. Subsequently assessee filed another return on 9.4.2003 declaring income of `2,46,280 which was processed under section 143(1) of the Act on 18.8.2003. The assessment was reopened by issuing notice under section 148 of the Act on 11.8.2004 although there was time available with the Assessing Officer to frame a regular assessment under section 143(3) of the Act by issuing notice under section 143(2) of the Act. Therefore, the reopening of assessment is illegal and deserves to be quashed.
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5. The ld. D.R., besides placing reliance upon the order of the ld. CIT(A), has contended that there is no provision under the Act which debars the Assessing Officer from reopening an assessment during the period where notice under section 143(2) of the Act can be issued for framing a regular assessment under section 143(3) of the Act. It is the choice of the Assessing Officer whether he invokes the provisions to frame assessment under section 143(3) of the Act or under section 147 of the Act. But merely for the reason that notice under section 148 of the Act was issued before expiry of the period for issuance of notice under section 143(2) of the Act, the assessment reopened by the Assessing Officer under section 147 of the Act cannot be held to be invalid or illegal. In support of his contention, the ld. D.R. invited our attention to the judgment of the jurisdictional High Court in the case of CIT and Another vs. Shri. Jora Singh, Prop. M/s Khaira Filling Station in Income Tax Appeal No.418 of 2010, in which the jurisdictional High Court has examined various judicial pronouncements of the Hon'ble Apex Court while holding that the power that can be exercised under section 143(2) of the Act to correct an assessment made under section 143(1) of the Act does not exclude the power of the Assessing Officer to reopen the assessment under section 147 of the Act if the ingredients of 147 of the Act are satisfied. Therefore, the assessment cannot be held to be illegal and invalid only for the reason that notice under section 148 of the Act was issued during the period for issuing notice under section 143(2) of the Act.
6. Having given a thoughtful consideration to the rival submissions and from a careful perusal of record, we find that the original return was filed by the assessee declaring income at `1,46,280 which was processed under section 143(1) of the Act on 26.12.2002. Subsequently The assessee filed revised return on 9.4.2003 declaring income at `2,46,280 (surrendering an income of `1 lakh) which was processed under section :-5-:
143(1) of the Act on 18.8.2003. The assessment was reopened by the Assessing Officer on receipt of information with regard to the bogus gift received by the assessee after forming a belief that income has escaped assessment and issued a notice under section 148 of the Act on 11.8.2004 which was duly served upon the assessee on 20.8.2004.
7. Now the moot question raised before us is whether the notice issued under section 148 of the Act, within the period for issuance of notice under section 143(2) of the Act, is valid and the reassessment framed consequent thereto is sustainable in the eyes of law? This issue was examined by the jurisdictional High Court in the case of CIT and Another vs. Shri. Jora Singh, Prop. M/s Khaira Filling Station (supra), in which their Lordships have held that the power that can be exercised under section 143(2) of the Act to correct the assessment made under section 143(1) of the Act does not exclude the power of the Assessing Officer to reopen the assessment under section 147 of the Act if the ingredients of section 147 of the Act are satisfied. It is open to the Assessing Officer to invoke the jurisdiction under section 147 of the Act notwithstanding the fact that there are other remedies open to him under the Act. It cannot, therefore, be accepted that the reassessment under section 147 of the Act is vitiated because the Assessing Officer failed to correct the assessment already completed under section 143(1) of the Act by issuing notice under section 143(2) of the Act. The relevant observations of the jurisdictional High Court are extracted hereunder:-
"In view of the above statutory provisions, the argument that no assessment order was framed, no re-assessment proceeding can be initiated is not valid provided the other conditions of clause (b) to Explanation-2 are specified. In any view of the matter, so far as the Allahabad High Court is concerned, the controversy stands :-6-:
concluded by the decision of this Court in the case of Pradeep Kumar Har Saran Lal (supra). The Allahabad High Court has followed the judgment of the Calcutta High Court and it extracted the relevant portion from the judgment of the Calcutta High Court in Jorawar Singh Baid versus CIT (Asst.) [1992] ITR 47 (Cal). The extracted portion is reproduced below :-
"Simply because the return of the assessee has been accepted without scrutiny and in good faith the Assessing Officer is not precluded from initiating a proceeding satisfying the conditions therefor where the income has escaped assessment. There is nothing either in Section 143 or in Section 147 that can support such a view. The provisions of a tax statute should be interpreted in a manner leading to the result that everybody pays his due tax. ... In our view, a return after its acceptance, whether in a summary manner or after scrutiny, may itself lead to reassessment proceedings provided the conditions for reassessment under Section 147 exist. It is not the summary acceptance of the return under Section 143(1) that can operate as a bar against reassessment. It is, rather, the further disclosure made by the assessee in the course of proceedings under section 143(3) whereby the assessee may take out his case from the mischief of Section 147. Therefore, the scope for initiating reassessment proceedings in an assessment made under section 143(1)(a) is far wider than in an assessment under Section 143(2) read with Section 143(3). In our view, the power that can be exercised under Section 143(2) to correct the assessment made under Section 143(1) does not exclude the power of the Assessing Officer to reopen the assessment under Section 147 if the ingredients of Section 147 are satisfied. It is open to the Assessing Officer to invoke the jurisdiction under Section 147, notwithstanding the fact that there are other remedies open to him under the Act. It :-7-:
cannot, therefore, be accepted that the reassessment under Section 147 is vitiated because the Assessing Officer failed to invoke his power to correct the assessment already completed under Section 143(1) by issuing a notice under Section 143(2) of the Act."
Thereafter, it has been held by this Court as follows:
"We agree with the above reasoning of the Calcutta High Court, in so far as it has been held that so long as the ingredients of Section 147 are fulfilled, the Assessing Officer is free to initiate reassessment proceedings and failure to take steps under Section 143(2) will not render the Assessing Officer powerless to initiate the reassessment proceedings." While preparing the judgment, we could lay our hands on a direct decision of the Apex Court in the case of Assistant Commissioner of Income-Tax versus Rajesh Jhaveri Stock Brokers P. Ltd., (2007) 291 ITR 500 (SC). In this case, the Apex Court has noticed the unamended Section 143 and as it was amended w.e.f. April, 1989. It considered the relevant provisions relating to re- assessment proceeding as it is existed prior to April, 1st 1989 and thereafter, it has been laid down that the scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. The relevant portions from the said judgment is extracted below:
"17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer :-8-:
must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso.
18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued."
The view taken by us, in the present appeal is in consonance of the judgment in the case of Assistant Commissioner of Income-Tax versus Rajesh Jhaveri Stock Brokers P. Ltd. (supra) holding that failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. Having regard to what has been said above, we are of the opinion that the order of the Tribunal holding that the notice under Section 147 of the Act dated 4th July, 2006 is invalid is legally not correct.
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On a query put by the Court, learned counsel for the assessee accepts if the recourse to Section 143(3) would have been barred by time, there would have been no restriction to initiate the re- assessment proceeding under Section 147 of the Act. We may add that there is nothing on the plain language of Section 143 of the Act which may suggest that the recourse to Section 147 can be had only when the period of limitation to complete assessment proceeding has expired or the Assessing Authority should wait for the expiry of the said period. The said argument is ridiculous and not acceptable. The ambit and scope of re-assessment proceeding is limited and restricted and if the Assessing Authority in its wisdom proceeds to assess the income with the help of limited power, it does not lie in the mouth of the assessee to say that the Assessing Authority should have exercised wider jurisdiction i.e. the regular assessment proceeding instead."
8. In the light of the aforesaid judgment of the jurisdictional High Court, we are of the view that only for the reason that notice under section
148 of the Act was issued before expiry of the period for issuance of notice under section 143(2) of the Act, reopening of assessment under section 148 of the Act cannot be held to be invalid. The Assessing Officer received information with regard to receipt of bogus gift by the assessee and the information was sufficient for him to form a belief that income chargeable to tax has escaped assessment. It is also evident from the record that the revised return was filed to surrender the additional income received through a gift. Therefore, the materials available with the Assessing Officer are sufficient to form a belief that income chargeable to tax has escaped assessment. In the light of these facts, we are of the view that the :-10-:
reopening of assessment under section 148 of the Act is valid. Accordingly we approve the view taken by the ld. CIT(A) in this regard.
9. Ground No.5 relates to the addition of `1 lakh received from Smt. Sushila Devi Manarika as unproved gift.
10. In this regard, it is noticed that the assessee received a gift of ` 1 lakh from Smt. Sushila Devi Manarika which was considered to be bogus gift by the Assessing Officer and he made addition of the same.
11. The assessee preferred an appeal before the ld. CIT(A) but did not find favour with him. The ld. CIT(A) has also confirmed the addition after having observed that the gift was made without any occasion and there was no relationship with the donor and donee. Besides, he has also observed that the donor is not assessed to tax. Thus, it cannot be safely presumed that the donor is creditworthy.
12. Now the assessee has preferred an appeal before the Tribunal with the submission that before the Assessing Officer donor has appeared and confirmed gift of `1 lakh to the assessee, but it was considered to be bogus gift only for the reason that the donor was not assessed to tax.
Since the donor is not assessed to tax, it cannot be presumed that the creditworthiness of the donor is not proved. Had it been a case of substantial amount of gift, one can understand that the donor must be assessed to tax to establish his/her creditworthiness. The amount of `1 lakh can be gifted out of the past savings of the donor, for which he/she is not required to be assessed to tax.
13. The ld. D.R., on the other hand, has placed reliance upon the order of the ld. CIT(A).
14. Having given a thoughtful consideration to the rival submissions and from a careful perusal of record, we find that before the Assessing Officer the assessee has produced the donor who has confirmed the gift :-11-:
given to the assessee. Nothing has been placed on record to show that a specific question was raised by the Assessing Officer with regard to the creditworthiness of the donor. Moreover, gift amount is only `1 lakh which can presumably be out of saving of the person. In order to dispute the genuineness of the gift, the Assessing Officer should have examined the donor with regard to his creditworthiness and the other aspects of the gift. With regard to the source of gift, it was stated to be out of repayment of loan from her husband, Shri. Ambika Prasad Murarka. Since the donor has acknowledged the gift given to the assessee and also explained the source of the fund, the gift should not be treated to be non-genuine. If the Assessing Officer has doubted the statement of the donor, the amount can be added in the hands of the donor. But for the reason that the donor is not assessed to tax, the gift should not be considered to be non-genuine. Accordingly we find no merit in the addition and we delete the same.
15. The next ground relates to the commission incurred for arranging the gift of `1 lakh from Smt. Sushila Devi Manarika.
16. Once we have accepted the gift to be genuine, the addition made on account of commission to arrange the alleged bogus gift cannot be sustained. We accordingly delete the same after setting aside the order of the ld. CIT(A) in this regard.
17. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 7.8.2013.
Sd/- Sd/-
[PRAMOD KUMAR] [SUNIL KUMAR YADAV]
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED:7.8.2013
JJ:0207
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Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar