The Income Tax Officer v. M/S. Premier Art Silk Processors Private Limited....opponent(S

O/TAXAP/749/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 749 of 2007 With TAX APPEAL NO. 750 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER =========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ THE INCOME TAX OFFICER....Appellant(s)Versus M/S. PREMIER ART SILK PROCESSORS PRIVATE LIMITED....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1SERVED BY AFFIX.-(R) for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIandHONOURABLE MR.JUSTICE K.J.THAKER Date : 24/12/2014COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.Both these appeals arise from the common order of the Income Tax Appellate Tribunal, Ahmedabad, therefore, they are being heard and decided together by this common judgment. 2.By way of these appeals, the appellant-revenue has challenged the common order dated 31.10.2006 passed by the Income Tax Appellate Tribunal (for short “the Tribunal”) in ITA No.3433 and 3434/Ahd/2002, whereby the appeals preferred by the revenue were dismissed by the Tribunal. 3.The facts as well as the questions of law of both these appeals are similar, therefore, we discuss the facts of Tax Appeal No.749 of 2007 for our convenience. 4.The facts, in brief, are that the assessee is engaged in the business of dying and printing of cloths. The assesee filed its return of income for the Assessment Year 1989-90 on 4[th ]June,1992,declaredtotallossof Rs.49,64,980/-. After scrutiny, the Assessing Officer passed order dated 15[th] March, 2002 under Section 143(3) of the Income Tax Act and made addition of Rs.15,16,263. 5.Against the order of the Assessing Officer, the assesse filed an appeal before the Commissioner of Income Tax (Appeals). The CIT(A) vide order dated 7[th] August, 2002 allowed the said appeal. Being aggrieved and dissatisfied with the order of the CIT(A), the revenue filed an appeal before the Tribunal. The Tribunal vide impugned order dated 31.10.2006 dismissed the appeal of the revenue. Hence, these appeals are filed at the instances of the revenue. 6. While admitting these appeals on 07.12.2007, the Court had formulated the following substantial questions of law:- [i] Whether, on the facts and in the circumstances of the case, and in law, the Income Tax Appellate Tribunal is right in coming to the conclusion that reopening of assessment for Assessment Year 1989-90 under Section147 read with Section 148 of the Income Tax Act is illegal, as reopening is beyond four years and the assessee has fully disclosed true and complete facts, necessary for assessment? [ii] Whether, on the facts and in the O/TAXAP/749/2007 JUDGMENT 6. While admitting these appeals on 07.12.2007, the Court had formulated the following substantial questions of law:- [i] Whether, on the facts and in the circumstances of the case, and in law, the Income Tax Appellate Tribunal is right in coming to the conclusion that reopening of assessment for Assessment Year 1989-90 under Section147 read with Section 148 of the Income Tax Act is illegal, as reopening is beyond four years and the assessee has fully disclosed true and complete facts, necessary for assessment? [ii] Whether, on the facts and in the O/TAXAP/749/2007 JUDGMENT circumstances of the case, and in law, the Income Tax Appellate Tribunal is right in coming to the conclusion that the Appellate Commissioner has not committed any error in allowing the assessee to produce new material in violation of Rule 46A of the Income Tax Rules, without giving any opportunity to the Revenue? 7.Learned advocate for the appellant-revenue has submitted that the Tribunal has committed error in dismissing the appeals of the revenue and in confirming the order of the CIT(A). He further submitted that both the authorities namely the CIT(A) and the Tribunal have committed error in coming to the conclusion that reopening of assessment is bad in law. 7.1.It is the contention of the learned advocate for the appellant-revenue that the issue regarding payment in cash exceeding Rs.10,000/- was not discussed at all by the Assessing Officer when the original assessment order was passed. He, therefore, urged that this Court may allow these appeals and answer the questions raised in these appeals in favour of the revenue and against the assessee. 8.We have heard learned advocate for the O/TAXAP/749/2007 JUDGMENT appellant-revenue and perused the material on record. While deciding the appeals, the Tribunal in paragraph Nos. 6.1 and 6.2 has observed as under:- 6.1 We have heard party before us and perused material on record. Section 139(9) of the Act provides the documents and, thereby, the information that the assessee is required to furnish along with its return of income, failing which it would be treated as defective, so that it could, where not removed, as per the procedure laid down thereunder, be treatedasinvalid.Thesaid informational requirement, is only to enable the assessing authority to vet theassessee'sreturnasbeing inconformity with the provisions of the Act, as well as verify it for arithmetical accuracy. Audit report underSection44ABstandsalso prescribed thereunder and vide which the impugned payments stood disclosed to the prescribed thereunder and vide which the impugned payments stood disclosed to the Revenue. The same requires reporting in respect of all such payments, in excess of the prescribed limit of Rs.10,000/-, as do not stand excluded by the clauses (a) to (I) of Rule 6DD of the rules, notified thereunder. The very fact of same being reported, therefor, implies that the assessee and tax auditor considered the same as covered by clause (j), the residuary clause of the rule 6DD. We are unable to fathom as to what other information the assessee was required to furnish in support of its claim along with its return of income; there being no charge of furnishing of inaccurate and misleading particulars in respect of these payments. There is also O/TAXAP/749/2007 JUDGMENT as do not stand excluded by the clauses (a) to (I) of Rule 6DD of the rules, notified thereunder. The very fact of same being reported, therefor, implies that the assessee and tax auditor considered the same as covered by clause (j), the residuary clause of the rule 6DD. We are unable to fathom as to what other information the assessee was required to furnish in support of its claim along with its return of income; there being no charge of furnishing of inaccurate and misleading particulars in respect of these payments. There is also O/TAXAP/749/2007 JUDGMENT no material to suggest of the assess as having pressed a wrong claim(s), i.e. of the impugned payments as being actually not covered U/s. 6DD (j), leading to the formation of belief of the escapement of income by the AO and thus, assumption of jurisdictionforre-assessment proceedings. The Hon'ble Gujarat High Court has clarified that the obligation of the assessee is only to furnish the primary facts, fully and truly, and it is for the Assessing authority to seek further information/explanations,whereso considered fit, or draw inferences or conclusions on facts & law(Sheth Brothers v. JCIT 251 ITR 270). In the present case too, the non-verification of the assessee's claim(s in this respectinoriginalassessment proceedings cannot operate to its prejudice, without showing an infirmity in the disclosure(s) as made, so that the reopening (of assessment) could only be made within four years from the relevant assessment year(s). 6.2. Further, the learned DR was specifically questioned by the Bench as to what material stands considered by the learned CIT(A) in accepting the assessee's appeal in view of the fact that Revenue has raised a specific ground(#2) of the violation of Rule 46A of th rules, by him, and to which, he was unable to answer. Rather, affirmed of there being no such material or evidence furnished by the assessee before him. The learned CIT(A) has allowed the assessee's appeal, as afore-stated, on the simple ground of the reassessment being time-barred under proviso to s. 147 in view of the absence O/TAXAP/749/2007 JUDGMENT of any failure of the assessee in meeting the disclosure requirements being brought forth by the Revenue. We are in full agreement with the said finding and observation of learned CIT(A), for the reasons aforestated, and, therefore, decline to interfere with his order. We decide accordingly. 9.In view of the aforesaid discussions, we are in complete agreement with the view taken by the Tribunal. The Tribunal has given cogent and convincing reasons in arriving at the conclusion. We do not find any reason to interfere with the order of the Tribunal. Hence, the present appeals are dismissed. The questions raised in these appeals are answered in affirmative i.e. in favour of the assessee and against the revenue. Accordingly, we hold that the Tribunal was right in law in coming to the conclusion that reopening of assessment for Assessment Year 1989-90 under Section 147 read with Section 148 of the Income Tax Act is illegal. The Tribunal was also right in coming to the conclusion that the Appellate Commissioner has not committed any error in allowing the assessee to produce new material on record. (K.S.JHAVERI, J.) pawan O/TAXAP/749/2007 JUDGMENT (K.J.THAKER, J)