Commissioner Of Income Tax, Jodhpur v. M/S Ravi Marble Industries D.b.income Tax Appeal

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR :ORDER: Commissioner of Income Tax, JodhpurVs.M/s Ravi Marble Industries D.B.INCOME TAX APPEAL NO.15/2010 Date of Order : 9[th] August 2010 PRESENT HON'BLE MR. JUSTICE DINESH MAHESHWARIHON'BLE MR.JUSTICE C.M.TOTLA Mr.M.R.Singhvi for the appellant. BY THE COURT: This appeal by the appellant (Revenue) under Section260-A of the Income Tax Act, 1961 ['the Act'] is directedagainst the judgment and order dated 19.08.2009 passed bythe Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur['the Tribunal'] in ITA No.151/JU/2005 whereby the Tribunaldismissed the appeal and maintained the order dated20.12.2004 passed by the Commissioner of Income Tax(Appeals)-II, Jodhpur ['the CIT (A)'] whereby the re-openedassessment order passed by the Assessing Officer ['the AO']was quashed and addition of Rs.26 lacs in the income of therespondent-assessee, a partnership firm, was deleted. Briefly put, the relevant facts and background aspects ofthe matter are that the respondent-assessee filed the return declaring 'nil' income on 05.04.2002. A notice under Section148 of the Act had been issued to the assessee on 07.03.2002on the directions issued by the Joint Commissioner of IncomeTax ['JCIT'] on 20.01.2000. The action under Section 148 ofthe Act was initiated essentially on the basis of the allegedinformation that the assessee had purchased a land and madeunexplained/unrecorded investment therein. After issuing therequisite notices, the assessment proceedings were taken up;and the AO held that partners of the assessee firm had madeinvestment of a sum of Rs.26,50,000/- in cash out ofundisclosed sources and proceeded to make an addition ofRs.26,00,000/- under Section 69 of the Act to the declaredincome of the firm. Aggrieved by the order so passed by the AO, theassessee preferred an appeal before the CIT (A). The learnedCIT (A) called for the comments from the AO and thereafterproceeded to allow the appeal on 20.12.2004. The learnedCIT (A) found the facts that in the first place, the AO reopenedthe proceedings under Section 147 as per the report of ADITin the cases of partners of the assessee firm for theassessment years 1994-95 to 1997-98 in respect of purchaseof the land in question but then, the addition so made by theAO on account of investment in purchase of land came to bedeleted in appeal. It was noticed that the AO issued notices inthe case of firm as per the directions of JCIT. However, it wasalso noticed that though such directions were issued as back as on 20.01.2000, the AO issued notices in relation to the firmonly on 07.03.2002 and that too, only after receiving theappellate order in the case of partners of the firm. The CIT (A)found the AO not justified in doing so without proper reasonsand found it proper to quash the assessment order passed bythe AO. Even on merits of the case, in relation to the additionof Rs.26,00,000/-, the CIT (A) found from the sale deeds thatthe land in question had been purchased by the partners of thefirm and the assessee firm was not at all in picture and hence,found such addition entirely unwarranted. The CIT (A) said,- as on 20.01.2000, the AO issued notices in relation to the firmonly on 07.03.2002 and that too, only after receiving theappellate order in the case of partners of the firm. The CIT (A)found the AO not justified in doing so without proper reasonsand found it proper to quash the assessment order passed bythe AO. Even on merits of the case, in relation to the additionof Rs.26,00,000/-, the CIT (A) found from the sale deeds thatthe land in question had been purchased by the partners of thefirm and the assessee firm was not at all in picture and hence,found such addition entirely unwarranted. The CIT (A) said,- “It is surprising to mention here that the AO hasreopened the assessments of partners of the firm inaccordance to the directions issued by the Jt.CITgiven vide letter dt. 20.1.2000 but he did not reopenthe assessment in the case of assessee firm at thattime. Had the Jt.CIT given direction for reopening theassessment in the case of firm he could havereopened the assessment simultaneously with thecase of the partners of the assessee firm. It seemsthat AO has reopened the assessment in the case ofassessee firm only after receiving the appellateorder in the case of partners of firm. In my view theAO was not justified in doing so. It is also worthwhileto mention here that assessment cannot be reopenedaccording to the direction given by superior authorityand as per the provisions of section 147 there shouldbe reason to believe on the part of AO that there isescapement of income but on going through the firstpara of the assessment order it seems that AO hasreopened the assessment according to the directionsof the Jt.CIT and he has mentioned nothing about theescapement of income by the assessee firm. Thecontention of the ld.AR that substantive addition cannot be made in two hands, has also sufficient forcebecause the AO has made substantive assessmentsin the hands of partners of the assessee firm and hehas reopened the assessment for making substantiveassessment in the case of assessee firm after lapseof more than 2 years, therefore the action of the AOfor reopening the assessment is illegal. So far as the ground No.2 about legality of theassessment order is concerned, it is seen that CIT (A)has deleted the additions made in the hands of thepartners of the assessee firm on a/c of investment inpurchase of the impugned land the Hon'ble ITAT hasalso approved the action of the CIT (A), thereforethere was no need for reopening the assessment inthe case of assessee firm and for making theassessment in the hands of the assessee firm.Therefore the assessment order passed by the AO inthe case of appellant's firm deserves to be quashedand accordingly hereby quashed. So far as the addition of Rs.26 Lacs isconcerned, it is seen from the Sale Deed that theland under reference has been purchased by thepartners of the firm and the assessee frim is not at allin picture, therefore the addition of Rs.26 Lacs in thehands of appellant firm was unwarranted, hence theaddition of Rs.26 Lacs on merits of the case alsodeserves to be deleted and accordingly the same ishereby deleted.” In its impugned judgment and order dated 19.08.2009,the Tribunal concurred with the CIT (A) particularly for thereason that only the partners of the assessee firm were thepurchaser of the land and not the assessee firm. The Tribunalsaid,- So far as the addition of Rs.26 Lacs isconcerned, it is seen from the Sale Deed that theland under reference has been purchased by thepartners of the firm and the assessee frim is not at allin picture, therefore the addition of Rs.26 Lacs in thehands of appellant firm was unwarranted, hence theaddition of Rs.26 Lacs on merits of the case alsodeserves to be deleted and accordingly the same ishereby deleted.” In its impugned judgment and order dated 19.08.2009,the Tribunal concurred with the CIT (A) particularly for thereason that only the partners of the assessee firm were thepurchaser of the land and not the assessee firm. The Tribunalsaid,- “However, the ld. CIT (A) has considered thesale deed covering the sale of the land in questionand found that the sale deeds are showing thepartners of the assessee only as purchasers of theland. Since the assessee is not the purchaser underthe sale deed, no addition in the hands of theassessee is sustainable for legal scrutiny. Thusobserving the ld. CIT (A) has deleted the addition ofRs.26 lakhs made by the Assessing Officer. In thelight of these undisputed facts and circumstances ofthe case, we are of the considered view that theaction of the ld. CIT (A) in directing deletion ofaddition in dispute is well reasoned one and therebynot suffering from any infirmity requiring interference.” Seeking to maintain this appeal, the appellant(Revenue) has suggested in the memo of appeal that the Tribunal has not examined the matter in its entirety and correctperspective; and that the corroborative statements of the twowitnesses were not considered and appreciated by theTribunal. After having heard the learned counsel for the appellantand having scanned through the orders placed on record, weare unable to find any question of law what to say of asubstantial one being involved in this case. The fact of the matter remains as per the findings offacts by the CIT (A) and the Tribunal that the sale deeds inquestion show only the partners of the assessee firm as thepurchasers of the land; and not the assessee firm itself. In thegiven fact situation, the assessment order as drawn in relationto the assessee firm seeking to make an addition ofRs.26,00,000/- with reference to such sale deeds could onlyhave been set aside; and the learned CIT (A) has rightly doneso. When the assessee firm is not shown having acquired anytitle or interest in the property under the sale deeds inquestion, by no stretch of reasonings, the amount ofconsideration in such sale deeds could have been added tothe income of the assessee firm. The grounds as suggested on behalf of the appellantregarding value and worth of statements of witnesses are noteven co-related with the real issue involved in the case asdealt with by the CIT (A) and the Tribunal and as reproducedhereinabove. It is also noticed that in fact, the CIT (A) has found thevery process of reopening wanting in the reasons and basisper Section 147 of the Act. In this case, it was precisely foundby the CIT (A) that the AO mentioned nothing about hisreasons to believe on escapement of income by the assesseefirm and, rather, proceeded to reopen only according to thedirections of the superior authority and such an action wasunjustified and unsustainable. Taking a comprehensive view of the matter, we aresatisfied that the CIT (A) and the Tribunal have dealt with thematter in accordance with law; and this appeal does notinvolve any substantial question of law worth consideration. The appeal fails and is, therefore, dismissed. (C.M.TOTLA),J. (DINESH MAHESHWARI),J.