Income Tax Appellate Tribunal - Agra
Rohit Bansal , Agra vs Department Of Income Tax on 27 July, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND
SHRI H.S. SIDHU, JUDICIAL MEMBER
ITA No. 430/Agr/2009
Asst. Year: 2001-02
Dy. Commissioner of Income Tax 4(1), Vs. Shri Rohit Bansal,
Agra. C/o. Sahitya Bhawan
Publication, Hospital Road,
Agra.
(PAN : AARPB 3049 H).
(Appellant) (Respondent)
Appellant by : Shri Vinod Kumar Jr. D.R.
Respondent by : Shri Prakash Narain, Advocate,
Shri S.N. Bansal, Advocate &
Shri S.K. Dass, Advocate
ORDER
PER H.S. SIDHU, J.M. :
The Revenue has filed the present appeal against the order dated 27.07.2009 passed by the ld. CIT(A)-II, Agra on the following grounds :-
"1. That the ld. CIT(A)-II, Agra has erred in law and on facts in deleting the addition of ` 47 lacs along with the interest amount of `2,03,093/- ignoring the fact that assessee has taken fictitious entries of loan by rotating his unexplained cash.
2. Whether ld. CIT(A) was correct in law and on fact in deleting the addition made u/s 68 of I.T. Act ignoring the fact that the alleged creditors have no capacity to pay the loans as revealed from the 2 transactions in their bank account that before issuance of cheque of loan to the assessee, equal amount had been deposited in the bank account.
3. The ld. CIT(A) has also erred in holding that the source of credit in respect of bank account of the creditors is beyond the scope of section 68 of the I.T. Act.
4. The order of the ld. CIT(A) deserves to be vacated and that of the Assessing Officer 's be restored.
5. That the appellant craves leave to add or delete or alter or modify any one of more ground(s) of appeal during the appeal proceedings."
2. At the time of hearing the ld. Counsel for the assessee raised a preliminary objection that the ld. First Appellate Authority in the impugned order dated 27.07.2009 has quashed the notice dated 31.03.2008 issued under section 148 of the Income Tax Act, 1961 ('the Act' hereinafter), on the basis of the same, the Assessing Officer has completed the assessment in dispute under section 143(3) read with section 147 of the Act on 28.11.2008. The Department has not raised any ground, challenging the quashing of notice dated 31.03.2008 by the ld. First Appellate Authority in the impugned order. He stated that the ld. First Appellate Authority has rightly quashed the impugned notice dated 31.03.2008 issued under section 148 of the Act declaring this notice as illegal and without authority of law 3 and the assessment order framed in pursuance of an illegal notice, he has also quashed the same.
3. The ld. D.R. relied upon the order passed by the Assessing Officer and was unable to reply the preliminary objection raised by the ld. Counsel for the assessee.
This Bench has also put a question to the ld. D.R. about the preliminary objection raised by the ld. Counsel for the assessee, but the ld. D.R. has not given any answer to the same and simply relied upon the order passed by the Assessing Officer.
4. We have heard both the parties and perused the relevant records available with us, especially the impugned order dated 27.07.2009 passed by the ld. First Appellate Authority. We found that the ld. First Appellate Authority has dealt the legal issue regarding validity, legality and jurisdiction of the Assessing Officer of the notice under section 148 of the Act issued by the Assessing Officer in paragraph nos.2.1 to 12 at page nos.4 to 9 of his order. The ld. First Appellate Authority finally quashed the notice dated 31.03.2008 by supporting his view with the various decisions rendered by the Hon'ble High Courts as well as the jurisdictional Tribunal. For the sake of convenience, the relevant portion of the impugned order from paragraph nos.2.1 to 12 at page nos.4 to 9 are reproduced as under :-
42.1 Grounds of appeal No. 1.1 to 1.9 are directed against the action of the Assessing Officer in issuing notice under section 148 of the Act. Appellant, while challenging the validity, legality and jurisdiction of the Assessing Officer, vide his written submission dated 06~04-2009 submitted:-
(a) As a matter of fact there is no valid material and evidence on record to assume jurisdiction u/ss 147 and 148. The reasons given for initiating reassessment proceedings are not proper, valid and justified. No requisite reasons for initiating reassessment proceedings have been recorded by the ld. A.O. The provisions of Sec. 147/148 are not applicable and the proceedings u/ss 147/148 are not valid. No income has escaped assessment and there is no evidence of any outside income. Nothing against the appellant can be made out from the search and seizure operations in case of Ganga Ram Group and there is no evidence, material and confession on record against the appellant. The Id. A.O. is wrong to assume that loans during the year from M/s Krishna Traders, M/s Naveen Kumar Agarwal & Co., M/s Nitin & Co., M/s Devi Sahai Vinod Kumar, M/s Shri Ram Agarwal & Co., M/s Devi Sahai Shree Ram, M/s Devi Sahai Brij Nath and M/s Amit Agarwal & Co. prima facie unexplained and that income chargeable to tax has escaped assessment which has not been fully and truly disclosed by the assessee before the department, so as to take action u/s 147. The creditors have nowhere and never admitted that the loans in question were not given to the appellant or given in lieu of cash. The observations made by the investigation wing are of general nature and not specific besides, being having no nexus with the appellant's case for the assessment year 2001-02. There is no objective material on record from which the ld. A.O. could form his subjective opinion. In the appellant's case there is no material which can be said to be specific, relevant and reliable. The appellant relied on the judgment of I.T.O. v. Lakhmani Mewal Das (1976) 103 ITR 437 (SC).5
(c) In similar case related to Ganga Ram Group of cases, the Hon'ble Income Tax Appellate Tribunal, Agra Bench, Agra in I.T.A. No. 134/Ag/06 for the assessment year 1997-98 in the case of M/s Agra Chemicals, Agra Vs. A.C.I.T-.2, Agra vide Order dated 30.9.2008 quashed the re-assessment proceedings.
(d) Reliance is also placed on Murlidhar Bhagwandas and Co. Vs CIT reported in 181 ITR 319 wherein it has been held that mere fact that credits in the assessee's books are in the names of bankers who are well-known for passing hawala entries would not be enough to justify such action.
3. Written submission of the appellant was forwarded to the Assessing Officer vide this office latter dated 06.04.09. Report of the Assessing Officer dated 05.05.09 was received in this office on 12.05.09. Copy of the same was provided to the appellant for filing rejoinder, if any. In the Remand Report the Assessing Officer submitted that there was definite information in possession and on the basis of true, correct and definite information the case was re-opened. The Assessing Officer further submitted that Investigation Wing should not be viewed as the outside agencies, on the contrary it is the part and parcel of the Income Tax Department and the information passed on by the Investigation Wing is sufficient for invoking section 148. For this view Assessing Officer referred to the following decisions:-
(a) Shri Brij Mohan Agarwal Vs. ACIT (2004) 268 ITR 400 (All.)
(b) Kapoor Brothers Vs. UOI (2001) 248 ITR 324 (Pat.)
(c) Shri Pal Jain Vs. ITO (2004) 267 ITR 540 (P&M)
(d) Jindal Photo Films Ltd. Vs. DCIT (1998) 234 ITR 170 (Del.)
(e) Renusagar Power Co. Ltd. Vs. ITO (1979) 117 ITR 719 (All.)
(f) Shri Krishna (P) Ltd. Vs. ITO (1996) 221 ITR 538 (Cal.)
(g) Phool Chand Bajrang Lal Vs. ITO (1993) 203 ITR 456 (S.C.) 6
4. In its rejoinder dated 19.05.09, A.R. of the appellant submitted that :-
The different judgments cited by the ld. A.0., are not applicable in the circumstances of the case on the point of legality and validity of action u/s 147/148 of the I.T. Act, 1961. On the other hand, the judgment of Hon'ble Supreme Court in the case of I.T.O. vs Lakhmani Mewal Das (1976) 103 ITR 437 (SC) fully applies to the facts of the appellant's case. This has been mentioned by the appellant at para 3(b) of page 2 of the written submissions dated 6.4.2009. Further the Hon. ITAT, Agra in Ganga Ram Group case of M/s Agra Chemicals, Agra Vs. A.C.I. T.-2, Agra by order dated 30.9.2008 has specifically held re-assessment proceedings null and void on the basis of above reasons. Both the above cases are in the Paper Book.
It is respectfully submitted that the facts of our case are identical to the facts of the above case of M/s Agra Chemicals, Agra.
5. I have considered the facts of the case, contents of the reasons recorded, submission made by the A.R., view of the Assessing Officer and the position of Law. Before adjudicating the ground I am of the opinion that the "reasons recorded" needs to be reproduced here. Reasons as supplied to the appellant, by the ACIT, 4(1), Agra reads as under:
"Information in possession received from Investigation Wing reveals that the following amount credited in the books of account of the assessee for Asstt. Year 2001-02 is prima-facie unexplained. The creditor belonging to associates of M/s Ganga Ram Group of cases of Agra:-
SI. Date Amount Entry provider
No.
1 27.01.2001 5,00,000/- Krishna Traders
2 24.01.2001 5,00,000/- Naveen Kumar Agarwal & Co.
3 29.01.2001 5,00,000/- Nitin & Co.
4 02.02.2001 5,00,000/- Devi Sahai Vinod Kumar
5 Op. Bal. 01.04.2001 11,00,000/- Shri Ram Agarwal & Co.
7
6 29.01.2001 5,00.000/- --------do-------
7 07.02.2001 6,00.000/- --------do-------
8 28.02.2001 ., 6,00,000/- Devi Sahai Shree Kumar
9 05.01.2001 5,00,000/- Devi Sahai Brij Nath
10 03.02.2001 5,00.000/- Amit Agarwal & Co.
58,00,000/-
I have gone through the information and have reasons to believe that the income amounting to ` 58,00,000/- chargeable to tax for Asstt. Year 2001-02 has escaped assessment which has not been fully and truly disclosed by the assessee before the department.
Issue notice under section 148 of the I.T. Act, 1961.
Asstt. Commissioner of Income-tax-4(1) Agra
6 I have given careful thought to the 'reasons recorded' in the light of submission made by the appellant, view of the Assessing Officer and judicial pronouncements discussed hereinabove. Assessing Officer has justified his action on the strength of "information" received from the Investigation Wing. In view of the challenge made by the appellant that there exist no material with the Assessing Officer to have issued notice under section 148 and the notice, as issued to him lacks jurisdiction, it becomes imperative for the Assessing Officer to have atleast referred to material part of the "information" either in the reason recorded or in the assessment order. Though, it is the sole satisfaction of the Assessing Officer to initiate re- assessment proceedings but that satisfaction of the Assessing Officer is open to judicial scrutiny. Hon'ble Madras High Court in the case of Asa John Devinathan 8r. Ors Vs. Addl. CIT (1980) 126 ITR 270 (Mad), where in the Hon'ble High Court observed that "the finding of the ITO on jurisdictional facts cannot be taken as sacrosanct. It was further observed by Hon'ble Court that the assumption of jurisdiction on the part of the ITO has to be established on the facts and if there are no relevant facts, the Revenue cannot seek to get away with the plea that the matter of jurisdiction is dependent on the 8 facts and the facts are beyond the jurisdiction of the Court. It was further observed by the Hon'ble High Court that though sufficiency of the grounds is beyond the scrutiny of the Courts, the rational connection between the materials and the reopening of the assessment is justifiable. There is no immunity from scrutiny by Courts or appellate authorities for the reasons recorded by the ITO for reopening the assessment. There is no disability on the part of the assessee from going into the question of the relevance of the material that was available to the ITO at the time when he sought to reopen the assessment. It is necessary to bear in mind the fact that in order to consider the validity of the jurisdiction on the ground of relevance of the materials available to the ITO at the time of initiation of the proceedings it is only those materials that were available to him that would have to be looked into, and not any further material that came to light in the course of reassessment proceedings themselves.
7. The term "reason to believe" stood judicially interpreted by various courts. The Hon'ble Courts have held that the expression "reasons to believe" predicates that one holds the belief induced by the exiting reasons. It contemplates existence of reasons on which belief is founded and not merely a belief in existence of reasons inducing the belief". Further, the formation of the required belief by the Assessing Officer is a condition precedent. Without such belief the Assessing Officer will have no jurisdiction to initiate proceedings under section
147. The fulfillment of this condition is not a mere formality but it is mandatory. Any failure to fulfill that condition would vitiate the entire proceedings as held by the Apex Court in the case of Johri Lal (HUF) vs. CIT(1973) 88 ITR 439 (SC) and Sheo Nath Singh vs. AAC (1971) 82 ITR 147 (SC). In the case of Ganga Saran & Sons (P) Ltd. vs. ITO (1981) 130 ITR 1 (S.C.), it was also held that "the important words under section 147 are 'has reason to believe' and these words are stronger than the words 'is satisfied'. The belief entertained by the authority must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. If there is no rational or intelligible nexus between the reasons and the belief, so that, on such 9 reasons, no one properly instructed in facts and law could reasonably entertain the belief, the conclusion would be inescapable that the officer could not have reason to believe that any part of income of the assessee has escaped assessment". In the case of ITO vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC) the Hon'ble Supreme Court observed that "There must be some direct nexus between the conclusions of fact arrived at by the authority concerned and primary facts upon which the conclusion is based. The use of extraneous or irrelevant material in arriving at the conclusion would vitiate the conclusion of facts because it is difficult to predicate as to what extent the extraneous or irrelevant material has influenced the authority in arriving at the conclusion of fact".
8. Coming back to the "recorded reasons" it can be concluded that the reasons as recorded by the Assessing Officer in the case in hand are virtually barren and bald in nature. The Assessing Officer instead of recording "reasons" for escapement of income has referred to the "information" received form the Investigation Wing. In the case of State Bank of Saurashtra vs. ITO (1988) 24 ITD 97 (Ahd.) it was held "that the ITO has to record the reasons and not merely state the word "information" in place of "reasons". The Bench held that it is necessarily because unless the reasons are recorded it cannot be found that there is nexus between the reasons and reasonable belief regarding escapement". Hon'ble ITAT, Calcutta Bench in the case of Dudhnath Prasad Gupta vs. ITO reported in (1977) 3 TTJ (Cal.) 309 has held that "it is not enough that the Income Tax Officer has some material in his possession for reopening the assessment. It is absolutely necessary that he must bring some of those materials into the report as a result of which the belief that the requirements of section 147(a) are satisfied can be sustained. If the reasons given by the Income Tax Officer are his conclusions themselves and are absolutely barren and bald in nature, one cannot say that any prima facie reasons can be spelt out for holding the belief that the condition in section 147(a) were satisfied.
9. In the facts of the present case the aforementioned decision are fully applicable. Apart from vaguely mentioning having 10 "information" the Assessing Officer has not been able to spell out either the "information" or the nature of enquiry undertaken leading to formation of requisite belief of escapement of income. In the reasons recorded Assessing Officer has mentioned that following amount credited in the books of the appellant for A.Y. 2001-02 is prima-facie unexplained. The creditors belonging to associates of M/s Ganga Ram Group of cases of Agra, it is not understood that on what basis the Assessing Officer has held so, there is no material referred in the reasons recorded for holding such a view. The reasons recorded thus are based on material available on record and are based on suspicion and surmises.
10. Appellant has referred and relied upon the case of Agra Chemicals Vs ACIT in ITA No. 134/Agr/06/ A.Y. 1997-98. I have gone through the referred order passed by the jurisdictional ITAT under similar set of facts and circumstances. The Bench through its detailed judgment held as under :
"A list of persons who dealt with GRG without any supporting material therein was received by the A.O. on which the above extracted reason is based. The A.O. has not applied his mind at all to the information so received. The creditors have duly accepted having made advance to this assessee. The allegation made by ADIT (Inv.) are also general in nature and are not specific. The observation of the ADIT is based on the material found in the year 2002 whereas the assessee's case is for A.Y. 1997-98. Thus there is no specific, relevant, reliable and definite material directly related to the assessee and also for particular assessment year. The satisfaction of the A.O. can be subjective but it has to be based on objective materials. The case being of earlier assessment year, the A.O. was required to apply his mind to the facts of that assessee as disclosed before him but he has not done so. The bank account from which loan was given has been duly accepted by the creditor. There was no material before him except to suspect on the basis of vague and 11 general information but no material to establish the transaction of taking of loan was bogus."
"In view of the our foregoing discussion, we are of the considered opinion that the reason recorded for taking action u/s 147 read with s. 148 are not valid and hence the entire re-assessment proceeding becomes invalid leading to quashing of the entire re-assessment. We ordered accordingly and quash the re-assessment order in this year by holding the notice issued u/s 148 on the basis of invalid reasons as null & void-ab-initio."
11. Hon'ble Allahabad High Court, being the Jurisdictional High Court, in the case of K.N. Agarwal Vs. CIT reported in 189 ITR 769, has observed :
"Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing Officer and since he acts in a quasi-judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore it merely on the ground that the Tribunal's order is the subject matter of revision in the High Court or that the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases. It would lead to a chaotic situation. True it is that the dilemma of the Revenue is also real and substantial in such cases, but such a situation cannot be provided for by judicial interpretation by courts, but only by an appropriate agency."
12. Guided by the principles of law as laid down by the Hon'ble Allahabad High Court and in view of the decision of Hon'ble ITAT, Agra Bench in the case of Agra Chemicals (supra) I hereby hold that notice dated 31-03-2008 issued under section 148 was illegal, without authority of law, assessment order framed in pursuance of an illegal notice therefore, cannot be sustained, is directed to be quashed."
125. Keeping in view of the impugned order, especially the aforesaid portion of the impugned order, we are of the considered opinion that the Department has not challenged the legal issue in the present appeal and only challenged the decision taken by the ld. First Appellate Authority on merit. It means, the Department has accepted the impugned order of the ld. First Appellate Authority on legal issue but filed the present appeal challenging the deletion of addition on merit which is not possible for us to deal with the same. In view of the facts and circumstances of the present case, we are of the considered opinion that the Department has filed the present appeal without thoroughly going through the impugned orders and has not challenged the legal issue decided against the Department quashing the notice dated 31.03.2008, on the basis of the same, the Assessing Officer has completed the Assessment Order dated 28.11.2008 passed u/s. 143(3) read with section 147 of the Act. We confirm the impugned order by dismissing the appeal filed by the Department.
6. In the result, appeal filed by the Revenue is dismissed.
(Order pronounced in the open Court on 31.03.2011).
Sd/- Sd/-
(P.K. BANSAL) (H.S. SIDHU)
Accountant Member Judicial Member
Place: Agra
Date: 31st March, 2011
PBN/*
13
Copy of the order forwarded to:
1. Appellant
2. Respondent By Order
3. CIT concerned
4. CIT (Appeals) concerned
5. DR, ITAT, Agra Bench, Agra
6. Guard File Assistant Registrar
Income-tax Appellate Tribunal, Agra
True Copy