Sewak Ram v. The Income Tax Officer

ITA No. 690 of 2009 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Sewak Ram Versus The Income Tax Officer ITA No. 690 of 2009 Date of Decision: 7.10.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. K.L. Goyal, Senior Advocate with Mr. Sandeep Goyal, Advocate for the appellant. Ms. Savita Saxena, Advocate for the respondent. ADARSH KUMAR GOEL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 26.6.2009 passed by the Income Tax AppellateTribunal, Amritsar Bench, Amritsar, in ITA No. 27(ASR)/2007 in respectof assessment year 2000-01, proposing following substantial questionsof law:- “(i)Whether on the facts and circumstances of thecase, the Ld. Tribunal was justified in holdingthat the Assessing Officer had any reason toinitiate proceedings u/s 147 of the Income TaxAct, 1961? (ii)Whether on the facts and cicumstances of thecase, the finding of the Ld. Tribunal is perversein nature to the extent that the assessee did not file the Balance Sheet, Trading and Profit &Loss Account and Capital Account with theoriginal returns filed for assessment year 2000-01?”Loss Account and Capital Account with theoriginal returns filed for assessment year 2000-01?” 2.The income tax return of the assessee was processedunder Section 143(1) and thereafter process of re-assessment wasinitiated, inter alia, on the following grounds:- i)In the capital account of the assessee, five gifts werereceived without giving details or filing documents insupport thereof. The said amount representedundisclosed income of the assessee.received without giving details or filing documents insupport thereof. The said amount representedundisclosed income of the assessee. ii)The assessee sold one bigha land but no capital gainwas shown.was shown. iii)The assessee made huge investment in shareaccount.account. iv)The assessee was a director in a company and hasshown the liability to the company without showingany income. shown the liability to the company without showingany income. 3.After issuing a questionnaire and considering the view pointof the assessee, order of reassessment was passed making additionsof Rs.95,83,013/- to the declared income. On appeal, the CIT (A) setaside the reassessment order only on the ground that jurisdiction toreassess was not validly invoked. On further appeal, the Tribunal setaside the view taken by the CIT (A) and remanded the matter for freshdecision on merits. The finding recorded by the Tribunal is as under:- “Keeping in view the facts and circumstances in thepresent case and after hearing both the parties, wepresent case and after hearing both the parties, we iv)The assessee was a director in a company and hasshown the liability to the company without showingany income. shown the liability to the company without showingany income. 3.After issuing a questionnaire and considering the view pointof the assessee, order of reassessment was passed making additionsof Rs.95,83,013/- to the declared income. On appeal, the CIT (A) setaside the reassessment order only on the ground that jurisdiction toreassess was not validly invoked. On further appeal, the Tribunal setaside the view taken by the CIT (A) and remanded the matter for freshdecision on merits. The finding recorded by the Tribunal is as under:- “Keeping in view the facts and circumstances in thepresent case and after hearing both the parties, wepresent case and after hearing both the parties, we are of the considered opinion that the case law citedby the Ld. DR in the case of ACIT Vs. Rajesh JaveriStock Brokers Pvt. Ltd. reported in 291 ITR 500 (SC)is applicable to the facts of the present case. Asregards to the fresh material on which, thereassessment proceedings were initiated by the AO,we find that the A.O. has reopened the assessmenton the sufficient reason which is mentioned at page 2and para 2 of this order. As per paper book filed bythe Ld. counsel for the assessee, he drew ourattention towards copy of Trading, Profit & Loss,Capital Account and Balance Sheet relating to A.Y.2000-01, which he placed at page 3 & 4 of the paperbook. After considering the same, we are of the viewthat these documents, assessee has not filed withoriginal returns. Assessee has filed these documentsonly at the time of reopening of the present case. Asper sale deed for Rs.4,95,000/-, which the assesseehad sold as alleged by the A.O., the A.O. has notmade any addition in the re-assessment on thisaccount. As regards to the reasons for re-openingthe case of the assessee on the ground that theDirector of the Company M/s Bhupindra Flour MillsPvt. Ltd., the assessee has neither shown anyincome from the company nor shown any investmentin it. As per record, the assessee has made huge investment in the shares of Rs.40,87,040/- and thatincome has been shown from these investments anddividend income from shares was exempted. In viewof the judgment of Jurisdictional High Court in thecase of Commissioner of Income Tax Vs. SureshKumar, reported in 275 ITR 253 and variousjudgments rendered by the ITAT, in which they havediscussed the validity of reassessment and held thateven though the original assessment was madeunder section 143(1) and not under section 143(3) ofthe I.T. Act, assessee having made full disclosure ofits income and AO was not justified in re-opening theassessment in the absence of any new material.They held that section 147 does not postulateconferment of power upon the AO to initiatereassessment proceedings upon a mere change ofopinion. The Hon'ble Court also held that if the AOfeels that issue requires much deeper scrutiny is notenough ground for invoking the provisions of section147 of the Act, but in the present case, A.O. hassufficient reason to believe for re-opening of presentcase. We have already discussed that the ApexCourt in the case of ACIT Vs. Rajesh Jhaveri StockBrokers Pvt. Ltd. 291 ITR 500 (supra) has held thatno opinion expressed by the AO that an assessmentis framed under Section 143(1)(a) of the Act and as such, there is no change of opinion or invocation ofsection 147 of the Act. The AO has jurisdiction toissue notice u/s 148, if there was cause orjustification to know or suppose that income hasescaped assessment, it can be said to have reasonto believe that income had escaped assessment.The reason to believe is mandatory pre-condition forassuming of jurisdiction u/s 147 of the Act. It hasbeen further held that such 'reason to believe' mustnecessary to be based on relevant material and thatrelevant material must be such that a reasonableperson on information of such material would haveformed a requisite belief that income of the assesseehas escaped assessment. In other words,reasonable must be based upon reasons, whichshould be on the basis of new material on record tojustify the reason for reopening the case. Afterconsidering the facts and circumstances of thepresent case with the support of argumentsadvanced by both the parties, we are of theconsidered opinion that the AO was justified forreopening in the case of the assessee u/s 148 of theAct. Therefore, we are not agreed with the reasonsmentioned by the Ld. first appellate authority forcancelling the reassessment proceedings made bythe A.O. Accordingly, we cancel the same by allowing the appeal filed by the Department.” 4. We have heard learned counsel for the parties and perused the record. 5.Learned counsel for the assessee submits that the reasonsfor reassessment were not based on a new material but on the basis ofthe particulars in the return and reassessment amounted to change ofopinion and initiating a roving enquiry was not permissible. Reliancehas been placed on the following judgments:- of Section 147 w.e.f. 1.4.1989, reassessment can be initiated even if ITA No. 690 of 2009 there is disclosure in the return if without considering the particulars ofthe return, processing is done under Section 143(1) or assessment ismade under Section 143(3). No doubt, mere change of opinion by itselfis not a ground for reassessment as held in the judgments relied uponon behalf of the assessee but if there are reasons to believe that taxhas escaped, reassessment is permissible. Reasons can be even onthe basis of particulars of the return without any new material. Even ifproceedings under Section 143(2) are not taken, reassessmentproceedings can be taken. 7.In the present case, the CIT (A) set aside the proceedingsby wrongly holding that reassessment could not be initiated on the basisof material already disclosed in the return without going into thecorrectness of the reasons. 8.We find, prima facie, thatthe reasons for reassessment arenot irrelevant. In any case, the same could have been gone into by theCIT (A) before reassessment was set aside as rightly held by theTribunal. The judgments relied upon by learned counsel for theassessee, thus, have no applicability in the present case. In thesecircumstances, the view taken by the Tribunal cannot be held to beerroneous. No substantial question of law arises. 9.The appeal is accordingly dismissed. (ADARSH KUMAR GOEL) JUDGE October 7, 2010(AJAY KUMAR MITTAL) gbs JUDGE