Income Tax Appellate Tribunal - Jodhpur
Kajodimal Virdi Chand vs Income Tax Officer on 11 October, 2002
Equivalent citations: (2003)78TTJ(JODH)934
ORDER
S.R. Chauhan, J.M.
1. The appeal by assessee for asst. yr. 1994-95 is directed against the order of CIT(A), Ajmer. dt. 18th Oct., 2000.
2. I have heard the arguments of both the sides and also perused the records.
3. Ground Nos. 1 and 2 constitute single issue disputing the validity of action under Sections 147, 148, the initiation of proceedings for reassessment under Section 147 and the reassessment order under Section 143(3)7147 of the Act. The learned authorised representative of assessee has contended that the reasons recorded by AO for reopening assessment already made under Section 143(1)(a) on 16th March, 1995, as placed on p. 7 of P.B., simply mention of certain transactions entered into by assessee with M/s Kimatram Dayaldas (for short K.D.), Ahmedabad, being not verifiable from return and hence escapement of income. He has contended that what is required for reopening of assessment and initiation of proceeding under Sections 147, 148 is the existence of "reason to believe", and not mere "reasons to suspect". He has relied on ITO v. Lakhmani Mewal Das (1976) 103 ITR 437 (SC) and Indian Oil Corporation v. ITO (1986) 159 ITR 956 (SC). It has been contended that though sufficiency of reasons may not be looked into by the Court, but the very existence thereof can be examined. It has also been contended that the action of Department suggest that the Department is treating the transactions as of taking of loans by assessee inasmuch as the AO has imposed penalty under Section 271D r/w Section 269SS on the allegation that the assessee took loan of Rs. 2,40,000, which included the sum of Rs. 1 lac, assessed by AO under Section 68, but later on treated by CIT(A) as a discount. It has been contended that in the above situation how the said sum of Rs. 1 lac can be termed as "income" under Section 147. It has been contended that Section 147 speaks of escapement of income and not of any receipt or expenditure. It has been contended that the AO, thus, while recording reasons on 26th Feb., 1998, merely proceeded on suspicion. It has also been contended that the formation of belief has to be by AO only and by none else. It has been contended that the learned CIT(A) justified the AO's action under Section 147 by observing that the letter of DDIT constituted sufficient material, but the AO has not taken that material into his consideration, while recording reasons, as the AO has not referred to the same therein. It has also been contended that the words "AO to have reasons to believe" should be read with reference to other provisions of the Act under which the income is chargeable to tax. In this regard CIT v. Srinivas & Co. (1996) 219 ITR 636 (Mad) has been referred to. It has been contended that it is in this regard that the authority should satisfy itself as to whether such income is chargeable to tax before holding that the AO had reason to believe that any income of assessee chargeable to tax had escaped assessment. It has been contended that in the instant case, no such situation of income chargeable to, tax having escaped exists; and the advances are not at all income chargeable to tax. It has also been contended that on change of opinion, reassessment or action under Section 147, for reopening assessment is not permissible. As against this, the learned Departmental Representative of Revenue has relied on the orders of AO,
4. I have considered the rival contentions, the relevant material on record as also the cited decisions. The reasons for behalf of escapement of taxable income, recorded by AO are as under
djnkrk us esa dherjke n;kyjke ds dj fu/kkZj.k o 1994&95 esa dfri; Mhfyax dh gS tks fd fjVuZ ls osfjQkbZ ugha gksrh gSA vk;
,Ldsi dh gS vr% uksfVl vUMj lsD'ku 148 tkjh fd;k tkosA The letter of DDIT, Ahmedabad dt. 8th Nov., 1993, to Dy. CIT, Ajmer, as placed on p. 32 of paper book, mentions that certain IOUs (stamped receipts signifying acceptance of loan) were found and seized, which contain details of amount received from Kimatram, by the party signing the IOU, as also the date of transaction. The said letter also mentions that the names and addresses of the parties who have accepted cash loan from Kimatram are also contained in IOU and these pertain to the jurisdiction of Dy. CIT, Ajmer. Thus, from the perusal of record, it is clear that the reasons recorded by AO (p. 7 of paper book) neither contain the nature of transactions entered into by assessee with Kimatram of Ahmedabad, nor any details/quantum of amount involved therein, nor the factum of any receipts therefrom by assessee to be constituting assessee's taxable income. Obvious as it is, the said recorded reasons are quite vague and general, containing no specific details/particulars and as such these reasons may cause a suspicion, mere as such, but in noway provide any reasonable basis to entertain even prima facie a belief as to the escapement of assessee's taxable income from assessment. The legal position, as it emanates from the above referred judicial decisions, is that the reasons, so as to enable the AO to form/entertain the requisite belief, must have a rational connection with the belief formed thereby which implies the existence of direct nexus between the material coming to the notice of AO and the formation of his belief as to the escapement of assessee's taxable income from assessment; but such is not the fact-situation in the instant case. The material, being the letter of DDIT, Ahmedabad to Dy. GIT, Ajmer (though that too has not been referred to by AO in his recorded reasons) too is not only vague and indefinite but it may, at the most, reflect a far-fetched and remote indication, and that too of some loan or advance, but not of any income or taxable income of assessee. In that view of the matter, considering all the facts and circumstances of the case, I find that the reasons recorded by AO, being vague and general and non-specific, do not reflect any rational connection with the requisite belief regarding escapement of assessee's any taxable income from assessment; nor do I find any direct nexus between the stated material and the requisite belief of escapement. Accordingly the initiation of proceedings for reopening of assessment under Section 147 and issuance of notice under Section 148, and in turn the consequent impugned reassessment framed under Section 143(3)7147 are found to be legally not valid and so not tenable in law. I, therefore, quash the said reassessment.
5. In view of my above conclusion/decision on ground Nos. 1 and 2, the remaining grounds being on factual merits of assessment, need not be considered and decided on merits.
6. In the result, this appeal of assessee is allowed as indicated above.