D.b. Income Tax Appeal v. The Income Tax Officer

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR D.B. Income Tax Appeal No.325/09Shri Hukum Chand Jain vs. The Income Tax Officer Date of order:: 14.3.2011. HON'BLE THE CHIEF JUSTICE MR. ARUN MISHRAHON'BLE MR. JUSTICE MOHAMMAD RAFIQ Mr. J.K. Ranka for assessee.Ms. Parinitoo Jain for revenue. *** (PER HON'BLE MOHAMMAD RAFIQ, J.) This income tax appeal has been filed bythe assessee against the order dated 30.9.2008passed by Income Tax Appellate Tribunal (forshort-`ITAT'), Jaipur whereby his appealchallenging the order of CIT(A) dated27.9.2007 was dismissed and the order ofassessment passed by the Assessing Officerdated 22.12.2006 in respect of assessment year1999-2000 was upheld. The aforesaid order ofassessment was framed on the basis of noticedated 28.3.2006 issued to the appellant u/s.148of the Income Tax Act, 1961 (for short-`theAct') for reopening of the assessment. Shri J.K. Ranka, learned counsel for theappellant has argued that a survey u/s.133A ofthe Act was conducted at the business premisesof the assessee by the income tax authorities on 16.1.2002. On account of coercive effect andthe pressure exerted by the income taxofficials, the appellant made a statementbefore the income tax authorities andsurrendered a sum of of Rs.6,00,000/- for theassessment year 2002-03. The assessee submitteda return on 17.10.2002 declaring net taxableincome of Rs.1,33,600/- along with past historybefore the Income Tax Officer wherein it wasclearly stated that he sold certain propertiesand the money was received by way of sales ofthe properties along with agricultural income,LIC claim etc. were invested by him in hisresidential house property. The originalassessment order u/s. 143(3) was passed on28.3.2005 which included Rs.6,00,000/- asunexplained investment in construction of houseproperty. This order was upheld by the CIT(A).When the further appeal was filed before theITAT, the ITAT allowed the appeal vide itsjudgement dated 27.2.2006 and deleted theaddition of Rs.6,00,000/- observing thatassessee may produce the evidence/materialregarding investment in property. Further,observations were made that Assessing Officeris free to verify these investments in the yearin which they are made and examine the investments as per law. Shri J.K. Ranka, learned counsel furtherargued that mere observation of the ITAT inthis manner could not be construed as evidenceof investment made by the assessee in respectof earlier years. Learned counsel submittedthat the property in question even as per thereport of the District Valuation Officer wasconstructed during the financial years 1997-98,1998-99 and 1999-2000, which has also verifiedthe fact that construction commenced in theyear ending 31.3.1999. Municipal authoritieshave also given certificate of completionaccordingly. Investment in property was thuscompleted prior to the financial year ending on31.3.2002. It is this argument which wasaccepted by the ITAT, therefore, the assessmentcould not have been reopened by recourse toSection 148. Petitioner demanded reasons forreopening and subjected his objections on suchreasons. Those observations were not properlyunderstood. There is no additional or freshmaterial with the Assessing Officer to justifyits finding regarding all these investments.Notice under Section 148 was even otherwisebarred by limitation. The Assessing Officer byhis order dated 22.12.2006 illegally made an addition of Rs.4,07,800/- holding that theinvestment in the residential house propertywas unexplained during the financial year 1998-99, whereas the evidence was to the effect thatconstruction was started, continued andcompleted during above referred to threeassessment years and not just one and thereforeaddition only to the extent of the investmentmade in the relevant assessment year could bemade. It was argued that Section 148 could beinvoked on the self same material on whichaddition, was set aside by the ITAT earlier. Learned counsel cited the judgement ofApex Court in the case of Pullongode RubberProduce vs. State of Kerala-91 ITR 18 to arguethat Supreme Court in that case held that eventhough admission or statement given by theassessee during survey proceedings may be animportant piece of defence, but it is notconclusive and it is always open to theassessee who has made such admission, to showthat it was incorrect. Per contra, Ms. Parinitoo Jain, learnedcounsel for the revenue argued that noticeu/s.148 for reopening of the assessment of year1999-2000 was issued because this issue wasleft open by the ITAT in its order dated 27.2.2006 while deleting the addition ofRs.6,00,000/- from the original assessmentorder dated 28.3.05. The ITAT in its orderdated 27.2.2006 clearly observed that AssessingOfficer is free to verify these investments inthe year in which they are made and examine theinvestments as per law. It cannot therefore besaid that the issuance of notification u/s.148was without justification. Learned counselsubmitted that though the Assessing Officerearlier included Rs.6,00,000/- in assessee'stotal income on the basis of notice issuedu/s.143(3) of the Act for assessment year 2002-03 as unexplained investment in house property,but the ITAT while allowing the appeal of theassessee observed that assessee may producebefore the Assessing Officer sufficientmaterial/evidence that the investment inproperty was made in the financial year endingon 31.3.2002. The period of constructionmentioned in the ITAT's order includesfinancial year 1998-99, which is relevant tothe assessment year 1999-2000 and also otherfinancial years. The ITAT thus rightly observedthat the Assessing Officer would be free toverify these investments in the year in whichthey are made and examine the investments as per law. The revised balance sheet which wasfiled by the assessee along with returnedincome for the financial year 2002-03 was notaccepted being afterthought. Accordingly,proceedings u/s.147 were initiated afterissuing notice u/s.148. Notice contains reasonsand also it was issued after obtaining validsanction from JCIT, Range-II, Kota. Even afterservice of notice u/s.148, the assessee did notfile his return. Notice u/s.142(3) was issuedand served upon the assessee on 30.9.06. Theassessee requested to supply reasons which weremade available to him. Objections raised whileinitiating proceedings u/s.148 were rejected bypassing an interlocutory order and assesseefailed to put forward his claim despiterepeated opportunities being given. Sincelimitation for making fresh assessment was toexpiry on 31.12.06, the Assessing Officer wasleft with no alternative except to makeassessment u/s.144 of the Income Tax Act on thebasis of material available on record. Totalvalue of construction was estimated by thevaluer at Rs.5,85,000/-, therefore, the averageinvestment for the assessment year 1998-99relevant to assessment year 1999-2000 wasworked out to Rs.4,07,800/- which remained unexplained and unrecorded. The same wastherefore rightly added to the income of theassessee as income from other sources. Successive appeals filed by the assesseewere dismissed by the CIT(A) as also by theITAT. It is therefore prayed that the appeal bedismissed. unexplained and unrecorded. The same wastherefore rightly added to the income of theassessee as income from other sources. Successive appeals filed by the assesseewere dismissed by the CIT(A) as also by theITAT. It is therefore prayed that the appeal bedismissed. On hearing learned counsel for the partiesand considering the material on record, we findthat notice u/s.148 for reopening of theassessment was issued to the assessee on thebasis of observations made by the ITAT in itsorder dated 27.2.2006 where ITAT left it opento the Assessing Officer to verify theseinvestments in the year in which they are madeand examine the investments as per law. Thisobservation was made accepting the argument ofthe assessee that the investments made in theconstruction of house property could not beadded to the income of the assessee for theassessment year 2002-03. The further argumentof the assessee was that the municipalauthorities and the District Valuation Officerin its report has mentioned that theconstruction commenced in the year ending31.3.1999 and period of construction wasfinancial years 1997-98, 1998-99 and 1999-2000. Accepting this plea of the assessee, the ITATin that order observed that the investment inthe property appears to have been completedprior to the year 31.3.2002. It was in thatcontext that the Assessing Officer was givenfreedom to verify these investments in the yearin which they are made and examine theinvestments as per law. We are therefore notpersuaded to countenance the argument that theAssessing Officer was precluded from thereopening of the assessment by invoking Section148. The reasons demanded by the assessee weresupplied to him by Assessing Officer and hisobjections were also considered. But then theassessee thereafter has adopted a total non-cooperative attitude with the sheer object offrustrating the assessment proceedings so as toensure that the limitation for making suchassessment is crossed. The Assessing Officer inhis order has given detailed reasons includingabout number of opportunities given to theassessee after reasons were supplied to him andultimately notice was given to show cause as towhy an ex-parte assessment u/s. 144 of the Actmay not be made in his case as he failed tocomply with notices issued to him from time totime and the date was fixed on 20.12.2006. In the notice, it was proposed to make an ex-parteassessment u/s. 144 so as to add total amountof Rs.4,07,800/- as unexplained investment inthe construction of house property made in thefinancial year 1998-99 relevant to assessmentyear 1999-2000. The assessee failed to disputethat and could not produce any other evidenceto the contrary to show that investments wereactually made in different years than this. TheAssessing Officer faced with this situationthat limitation was expiring on 31.12.2006,passed the assessment order on 22.12.2006. Allthe arguments which have been made merelypertain to the questions of fact and none ofthem raise any legal issue. It may be true thatthe ITAT in the earlier order dated 27.2.2006accepted the position of law settled by ApexCourt in Pullongode Rubber Produce, supra asregards the statement/admission of the assesseethat such admission despite being importantpiece of evidence, is not conclusive and it isopen to the assessee to show that it is notcorrect. But in this case, no such effort wasmade by the assessee because no such materialwas produced by him. In that view of thematter, admission made by the assessee couldnot be taken to have been dislodged by him. We therefore do not find any merit in thisappeal, which is accordingly dismissed. (MOHAMMAD RAFIQ), J. (ARUN MISHRA),CJ.RS/-