Commissioner Of Income-Tax v. Smt. Varsha Goyal

Satish Kumar Mittal, J.:— The Revenue has filed this appeal under section 260A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) against the order dated July 21, 2006 passed by the Income-tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in I.T.A No. 91.Chandi/2004 for the assessment year 1995-96.

2. In this case, the assessee had challenged the reassessment order dated March 24, 2000, passed by the Assessing Officer under section 147/148 of the Act, wherein additions of Rs. 12,500 on account of unexplained investment in shares of M/s. Ganesh Benzoplast Ltd. and Rs. 6,93,823 on account of unexplained investment in jewellery, were made towards the income of the assessee being assessable to tax, which had escaped assessment. In this case, a search was conducted on January 17, 1995, at the office and residential premises of the assessee's family at New Delhi and Ludhiana.

3. Thereafter, the assessee filed her return for the assessment year 1995-96 on November 20, 1995. The said return was processed under section 143(1)(a) of the Act on March 4, 1998. Thereafter, a notice under section 148 of the Act was issued by the Assessing Officer on July 4, 1998, for reopening of the assessment while recording the following reasons:

“A search and seizure operation under section 132(1) of the Income-tax Act was carried out on January 17, 1995, at the business premises of M/s. Goyal Oil and General Mills group of cases as well as the residential premises of its partners and other family members. During the course of search a large number of books of account documents, share certificates, etc., were found and seized. Examination of the seized records reveals that the assessee has made huge investments in the purchase of shares as well as other movable/immovable assets. The entire transactions do not appear to have been recorded in the books of account. Therefore, I have reason to believe that the assessee's income assessable to tax has escaped assessment. Issue notice under section 148 of the Income-tax Act.” In pursuance of the said notice, the aforesaid reassessment order was passed by the Assessing Officer.

4. Feeling aggrieved against the aforesaid order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) on the plea that reopening of the assessment by the Assessing Officer under section 147 of the Act was not justified and the same deserves to be annulled. However, the Commissioner of Income-tax (Appeals), vide its order dated January 24, 2003, confirmed the action of the Assessing Officer for reopening of the assessment under section 147/148 of the Act.

5. Feeling aggrieved against the order of the Commissioner of Income-tax (Appeals), the assessee filed an appeal before the Tribunal, who, vide its order dated July 21, 2006, has allowed the appeal while observing as under:

“In the present case also, the assessee filed return of income for the assessment year 1995-96 on November 29, 1995, declaring a loss of Rs. 36,259 under the head ‘Capital Gains’ and an income of Rs. 22,060 under the head ‘Income from other sources’. A search was conducted on the business premises of Goyal Oil and General Mills ‘Group of cases’ as well as residential premises of its partners and other family members which also included the assessee. When the Assessing Officer issued intimation under section 143(1)(a) of the Income-tax Act, all the relevant informations were in his knowledge, i.e, the jewellery and the shares found during the course of search. The Assessing Officer, in the reasons recorded for reopening the case, nowhere stated that the assessee had undisclosed jewellery neither he specified the shares. Therefore, the Assessing Officer was not justified in calling upon the assessee to furnish information not connected with the reasons, on the basis of which reassessment notice had been served on the assessee. As per the ratio laid down by the hon'ble Supreme Court in the case of Commissioner Of Income Tax v. Sun Engineering Works (P) Ltd., [1992] 198 ITR 297 the proceedings under section 147 were opened only qua items of under assessment. The finality of assessment proceedings on other issue remained undisturbed. In the instant case, the Assessing Officer, nowhere stated that the investment in the jewellery was under assessed. Therefore, the proceedings under section 147 of the Income-tax Act initiated by the Assessing Officer were not justified when all the informations were already available with him while passing the intimation under section 143(1)(a) of the Income-tax Act. It is also noticed that the Assessing Officer had made an addition of Rs. 3,750 which is a part of the addition of Rs. 12,500 on account of investment in shares, on protective basis which clearly shows that the Assessing Officer was not sure himself about the investment made by the assessee in the share certificate. In view of the aforesaid discussion, we are of the opinion that in the facts and circumstances of the present case, reopening by the Assessing Officer under section 147 of the Income-tax Act was not justified and the same deserves to be annulled.”

6. Against the aforesaid order, the instant appeal has been filed by the Revenue in which the following substantial question of law has been raised:

“Whether, on the facts and the circumstances of the case, the hon'ble Income-tax Appellate Tribunal was right in law in holding that reopening by the Assessing Officer under section 147 of the Income-tax Act, 1961, was unjustified and thereby annulling the assessment framed?”

7. Learned counsel for the Revenue submitted that the learned Tribunal has wrongly set aside the orders of the Assessing Officer as well as the Commissioner.of Income-tax (Appeals) on the assumption that the Assessing Officer was not justified in reopening the assessment when all the information was already in his possession at the time of passing of the order/intimation under section 143(1)(a) of the Act as when the notice under section 148 of the Act was issued, the Assessing Officer was having all the relevant information with him, but instead of issuing the notice under section 143(2) of the Act and allowing those proceedings to become final, he exercised the power under section 147 of the Act without there being any justification. Learned counsel submitted that the only condition precedent for proceeding under section 147 of the Act is that the Assessing Officer should have reason to believe that the income had escaped assessment. Nothing more is required. Learned counsel further submitted that the Tribunal has further gone wrong while observing that the Assessing Officer in the reasons recorded for reopening of the assessment, nowhere stated that the assessee had undisclosed shares nor had he specified the investment in the undisclosed jewellery. Therefore, the Assessing Officer was not justified in initiating the proceedings under section 147 of the Act. Learned counsel submitted that in this regard the Tribunal has ignored the amendment made in section, 147 of the Act. According to the amended provisions, the Income-tax Officer may bring to charge items of income which had escaped assessment other than or in addition to the items which led to the issuance of a notice under section 148 of the Act. Learned counsel submitted that in the notice though the details of the share certificates and the jewellery items were not specifically mentioned, but while making the assessment under section 148 of the Act, the Assessing Officer had made addition with regard to the items or income which had escaped assessment. Therefore, the Tribunal was not justified in setting aside the order of the Assessing Officer on the ground that he was not having any reason to believe that a particular income had escaped assessment.

8. On the other hand, learned counsel for the assessee while justifying the order of the Tribunal submitted that in the instant case the Assessing Officer while recording the reasons for reopening the case nowhere stated that the assessee had undisclosed jewellery items and she had made investment in specified shares, which had escaped assessment. Learned counsel submitted that recording of the valid reasons for reopening of the assessment under section 147 of the Act is mandatory. While referring to the decision of the Supreme Court in ITO v. Lakhmani Mewal Das, [1976] 103 ITR 437, learned counsel submitted that the reasons for the formation of the belief contemplated by section 147(a) of the Act for reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief. She submitted that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. She submitted that in the reasons recorded by the Assessing Officer he has not mentioned which jewellery items and which particular shares had escaped assessment which came to the notice of the Assessing Officer. In the reasons recorded by the Assessing Officer, only it has been mentioned that the assessee had made huge investments in the purchase of shares as well as other movable and immovable assets, therefore, the Assessing Officer had reason to believe that the assessee's income assessable to tax had escaped assessment. Since there was no direct nexus between the material coming to the notice of the Assessing Officer and the formation of his belief, the Tribunal has rightly come to the conclusion that the Assessing Officer was not justified in reopening of the assessment under section 147 of the Act.

9. After hearing the learned counsel for the parties, we do not find any illegality in the order passed by the Tribunal and in our opinion no substantial question of law is arising from that order. In the present case, both the items with regard to which the addition has been made by the Assessing Officer, i.e, addition of Rs. 12,500 on account of undisclosed investment in shares and Rs. 6,93,823 on account of undisclosed investment in jewellery, were found during the course of search. All the documents and material was available with the Assessing Officer when the return of income was filed by the assessee on November 20, 1995, and was processed under section 143(1)(a) of the Act on March 4, 1998. In spite of that, the Assessing Officer while recording the reasons for issuing notice under section 148 of the Act has not specifically mentioned the items of jewellery and the particulars of shares which in his Opinion had escaped assessment. Merely recording the reason that examination of the seized records revealed that the assessee has made huge investments in the purchase of shares and other movable and immovable assets and those transactions have not been recorded in the books of account, therefore, the Assessing Officer has reason to believe that the assessee's income assessable to tax had escaped assessment, is not sufficient for reopening the assessment.

10. A bare perusal of the reasons recorded by the Assessing Officer for issuing notice under section 148 of the Act, which has been reproduced earlier, reveals that the Assessing Officer has not mentioned in his note that what items of jewellery and which share certificates were not recorded in the books of account which escaped from the assessee's income chargeable to tax. Thus, in our opinion, the Tribunal was fully justified while coming to the conclusion that the Assessing Officer was not justified in reopening the assessment of the assessee under section 147/148 of the Act in the facts and circumstances of the case.

11. In view of the aforesaid, we do not find any ground to quash the impugned order nor any substantial question of law arises in this appeal for consideration of this court.

12. Dismissed.