IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR

BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND

SHRI N.K. SAINI, ACCOUNTANT MEMBER.

I.T.A.No. 471/Jodh/2014)

(A.Y. 2008-09)

Smt. Shalu Sachdeva,

340, Vinoba Basti,

Sriganganagar.

Vs. ACIT, Circle,

Sriganganagar.

PAN No. AMPPS 5445 J

(Appellant)

(Respondent)

Assessee by : Shri Suresh Ojha.

Department By : Shri Mahesh Kumar - D.R.

Date of hearing : 16/09/2014.

Date of pronouncement : 18/09/2014.

O R D E R

PER N.K. SAINI, A.M

This is an appeal by the assessee against the order dated

22/07/2014 of Ld. CIT(A), Bikaner. The following grounds have been

raised in this appeal:-

“1. That the order passed by the Assessing Officer and sustained by the Ld. CIT(A) is illegal and against the law.

2. That the action taken u/s. 147/148 of the I.T. Act by the Assessing Officer and sustained by the Ld. CIT(A) is illegal and against the law.

3. That the action taken on the basis of audit objection, by the Assessing Officer and sustained by the Ld. CIT(A) is illegal and against the law.

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4. That the addition amounting to Rs. 6,00,000/- made and confirm by the Ld. CIT(A) is illegal and against the law.”

2 Facts relating to this case, in brief, are that the assessment in this

was completed u/s. 143(3) of the I.T. Act, 1961 (hereinafter referred to

as ‘the Act’ in short) at an income of Rs. 7,62,140/-. Later on, the

Assessing Officer initiated the proceedings u/s. 147 of the Act by issuing

notice u/s. 148 of the Act. In response, the assessee submitted that the

return filed u/s. 139(1) of the Act may be treated as having filed in

response to the notice u/s. 148 of the Act. The assessee also requested

for supply of reasons recorded for issuance of notice u/s. 148 of the Act.

The Assessing Officer supplied the reasons recorded for reopening the

assessment. The assessee challenged the reopening and submitted before

the Assessing Officer as under:-

“That the proceeding initiated u/s 147 is bad in law and the validity of the notice u/s 148 and ions recorded by the AO prior to the issuance of the notice are challenged on the following grounds.

a. That during the course of regular assessment proceedings complete detail of the gift made by Smt. Sudha Sachdeva to the assessee for Rs. 600000/- was filed vide letter dated 22.09.2010.

b. That the copy of gift deed was also filed during the assessment proceedings.

c. That the Ld. AO while framing the assessment order duly examined the issue of gift made to her by Smt. Sudha Sachdeva and after having applied his mind on the issue did not made any addition for the same in the hands of the assessee. The examination of the transaction by the Ld. AO is

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apparent from the order sheet. Mere non recording of any finding in the assessment order cannot be considered that the AO did not applied his mind while passing the assessment order u/s 143(3). d. That when the assessee has furnished all the necessary details related to the gift made to her by Smt. Sudha Sachdeva and which were examined by the assessing officer, reopening is abuse of said power. Further once all the details furnished by the assessee during the course of original assessment proceeding, then it is for the Assessing Officer to complete the assessment after looking into and examining all the material placed before him. It has to be presumed that he has examined all facts. It would be farfetched and wrong to state that the Assessing Officer did not examine the question of taxability of gift received by her.

e. That Hon'ble Delhi Hight Court in the case of CIT vs. Eicher Ltd. (2007) 294 ITR 310 (Del.) has observed that if the entire material has been placed by the assessee before the Assessing Officer during the original assessment and the Assessing Officer had applied his mind, then merely because this is not expressly stated in the assessment order, is not a ground to conclude or hold that there was no application of mind. Such cases also fall under "change of opinion". It has been held that merely because the Assessing Officer has not specifically referred to the material on record in the assessment order but has examined the material and recorded in the order sheet, does not indicate or give a ground to hold that the Assessing Officer did not apply his mind.

f. That the power to reopen an assessment was conferred by the legislature not with the intention to enable the assessing officer to reopen the final decision made against the Revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not the legal position it would result in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods. Since the assessment has been framed u/s 143(3) there is no new material / information came before the assessing officer, neither there is any change in law. Having such situation the jurisdiction cannot be invoked u/s 148 to reconsider the issue which was examined during the course of original assessment proceeding.

g. That reassessment jurisdiction is meant for covering escaped income

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but where an issue was subject matter of consideration on the part of the Assessing Officer in the original assessment; reassessment is not permissible even within the four year time limit, because even in such a case, reassessment is based upon a change of opinion, which is not permissible. As otherwise, it would tantamount to review of assessment, which is not permissible by way of reassessment. The legal position affirmed in the following judicial decisions including decision of jurisdiction Tribunal and the decision of Hon'ble Supreme Court:

i. CITv/s Krishna Textile 315 ITR 271 (All)

ii. CIT vs. Kelvinator Of India Ltd. 256 ITR 1 (Del) stood confirmed by the supreme court in 320 ITR 561 (SC)

iii Raj Kumar Agarwal Vs. LTO. Ward -2, Makrana. Jodhpur ITAT in ITA No. 884/JU/2007 dated 17.04.2009 following the decision in the case of CIT vs. Kelvinator Of India Ltd. 256 ITR 1 (Del) (Copy of decision of Hon'ble ITAT is enclosed herewith).

h That further it is also equally 'well settled that if a notice under section 148 has been issued without the jurisdictional foundation under s. 147 being available to the AO, the notice and the subsequent proceedings will be without jurisdiction and has no legs to stand.

i. That the Hon'ble High Court of Rajasthan in the case of Gehna vs. Union of India & Anr 267 ITR 782 (Raj.) following the law laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO reported in 259 ITR at page 19 held that:

"When a notice under s. 148 is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the AO is bound to dispose off the same by passing a speaking order".

In light of the above submission and in the light of the binding legal pronouncement your honor is requested to consider the objection raised by me and the assessment proceedings may be kept in abeyance till the disposal of the objections. It is further requested to

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your honor to drop the proceedings initiated in contravention of the statutory provisions and legal pronouncement and as such without jurisdiction."

3. The Assessing Officer did not find merit in the submissions of the

assessee and held that the proceedings u/s. 147/148 of the Act had

rightly been initiated and all the objections raised by the assessee were

duly met. The Assessing Officer made the addition of Rs. 6,00,000/- and

assessed the income at Rs. 13,62,840/-. Against the assessment order

passed by the Assessing Officer, the assessee went in appeal before the

Ld. CIT(A) and challenged the validity of reassessment proceedings by

stating that the action was taken by the Assessing Officer on the basis of

audit objection. The assessee also furnished copy of the audit objection

and stated that the action taken was illegal. Reliance was placed on the

following case laws:-

1) Indian and Eastern Newspaper Society Vs. CIT, New Delhi [119

ITR 996].

2) CIT Vs. Kalvinator of India 256 ITR 1 (Del.)

It was further stated that the action taken by the Assessing Officer

was merely a change of opinion because his predecessor accepted the gift

as genuine gift and accepted that it was not includable in the income,

hence, it was not income of the assessee. Therefore, the reassessment

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completed was liable to be quashed. Reliance was placed on the decision

of the ITAT Jodhpur Bench in the case of Raj Kumar Agarwal, Makrana Vs.

ITO, Ward-2, Makrana in I.T.A.No. 884/JU/2007.

4. The learned CIT(A), after considering the submissions of the

assessee was of the view that the plea taken by the assessee in respect of

the audit objection was not acceptable and that the jurisdiction to

initiate the proceedings u/s. 147 of the Act for reassessment was

correctly and rightly exercised by the Assessing Officer. Reliance was

placed on the judgment of Hon'ble Gujarat High Court in the case of

Vasant Chunnilal Patel Vs. ACIT reported at 236 ITR 832. The Ld. CIT(A)

also confirmed the addition made by the Assessing Officer. Now the

assessee is in appeal.

5 Learned counsel for the assessee reiterated the submissions made

before the authorities below and also drew our attention towards page 19

of the assessee’s paper book which is the copy of the audit objection and

submitted that the action was taken by the Assessing Officer only on the

basis of audit objection. Therefore, the reopening was not valid when

the Assessing Officer himself applied his mind while framing the original

assessment and all the documents were furnished by the assessee which

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were considered at the time of framing the original assessment. Reliance

was placed on the decision of this Bench of the Tribunal dated

17/04/2009 in I.T.A.No. 884/JU/2007 for the A.Y. 2003-04 in the case of

Raj Kumar Agarwal, Makrana Vs. ITO, Ward-2, Makrana copy of which is

placed at page Nos. 9 to 14 of the assessee’s paper book.

6 In his rival submissions, learned D.R. reiterated the observations

made by the Assessing Officer and the Ld. CIT(A) and strongly supported

the impugned order passed by the Ld. CIT(A).

7 We have considered the submissions of both the parties and

carefully gone through the material available on record. In the present

case, it is an admitted fact that the audit party raised the objection

relating to gift of Rs. 6,00,000/- and asked the Assessing Officer to take

action which is clear from page 19 of the assessee’s paper book.

8 On a similar issue, the Hon'ble Supreme Court in the case of Indian

and Eastern Newspaper Society Vs. CIT, New Delhi reported in 119 ITR

996, has held as under:-

“The opinion of an internal audit party of the income-tax department on a point of law cannot be regarded as ‘information’ within the meaning of s. 147(b) of the I.T. Act, 1961 for the purpose of reopening

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an assessment. But although an audit party does not possess the power to pronounce on the law, it nevertheless may draw the attention of the ITO to it. Law is one thing, and its communication another. If the distinction between the source of the law and the communication of the law is carefully maintained, the confusion which often results in applying section 147(b) may be avoided. While the law may be enacted or laid down only by a person or body with authority in that behalf, the knowledge or awareness of the law may be communicated by anyone. No authority is required for the purpose. That part alone of the note of an audit party which mentions the law which escaped the notice of the ITO constitutes ‘information’ within the meaning of s. 147(b) ; the part which embodies the opinion of the audit party in regard to the application or interpretation of the law cannot be taken into account by the ITO. In every case, the ITO must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether inconsequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. The true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO.

It has further been held as under:-

“The opinion of the audit party on a point of law could not be regarded as ‘information’ enabling the ITO to initiate reassessment proceedings under s. 147(b). The ITO had, when he made the original assessment, considered the provisions of ss. 9 and 10 of the Indian I.T. Act, 1922. Any different view taken by him afterwards on the application of those provisions of would amount to a change of opinion on material already considered by him.”

9 Similarly, the Hon'ble Delhi High Court in the case of CIT Vs. Eicher

Ltd. reported in (2007) 294 ITR 310 has held as under:-

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“That the assessee had placed all the material before the Assessing Officer and where there was a doubt, even that was clarified by the assessee in its letter dated November 8, 1995. Since the facts were before the Assessing Officer at the time of framing the original assessment, and later a different view was taken by him or his successor on the same facts it clearly amounted to a change of opinion. This could not form the basis for permitting the Assessing Officer or his successor to reopen the assessment of the assessee. If the Assessing Officer, while passing the original assessment order, chose not to give any finding in this regard, that could not give him or his successor in office a reason to reopen the assessment of the assessee or to contend that because the facts were not considered in the assessment order, a full and true disclosure was not made.

If the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessee needed to be reopened.

An assessee has no control over the way an assessment order is drafted. Generally, issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee’s explanations are rejected and additions/disallowances are made.”

10. In the present case also when the original assessment was framed

u/s. 143(3) of the Act all the material was available on the record and

the Assessing Officer applied his mind by making a deep scrutiny while

framing the assessment u/s. 143(3) of the Act. The reassessment

proceedings were initiated on the basis of the audit objection which

cannot form the basis for the Assessing Officer to reopen the closed

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assessment. This view is also supported by the ratio laid down by the

Hon'ble Gujarat High Court in the case of Cadila Healthcare Ltd. Vs. ACIT

(OSD) & another reported in (2013) 355 ITR 393 wherein it has been held

as under:-

“It is only the Assessing Officer whose opinion with respect to the income escaping assessment would be relevant for the purpose of reopening of a closed assessment. The mere opinion of the audit party cannot form the basis for the Assessing Officer to reopen the closed assessment that too beyond four yours from the end of the relevant assessment year.”

In view of the above said judicial pronouncements, we are of the

view that the notice issued by the Assessing Officer on the basis of the

audit party was not valid and accordingly, reassessment framed u/s. 147

read with sec. 143(3), on the basis of the aforesaid notice issued u/s. 148

of the Act is quashed.

11. In the result, appeal of the assessee is allowed.

(Order Pronounced in the Court on 18th September, 2014).

Sd/- sd/-

(HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 18th September, 2014.

vr/-

Copy to:

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1. The Appellant 2. The Respondent 3. The ld.CIT 4. The CIT(A) 5. The D.R

Sr. Private Secretary, ITAT, Jodhpur.