Smt. Premwati Suman Vs ITO (ITAT Agra)
Conclusion: Notice under section 148 could not be issued for verification of information, but here the jurisdictional satisfaction of the essential requirement had to be shown that there had to be reason to believe that there was income chargeable to tax which was not there in the assessment order passed. Thus, the reasons recorded by AO were no reasons in the eye of law for assuming jurisdiction and the assessment orders u/s 144 read with 147 was quashed.
Held: Assessee had purchased a property along with her son. Subsequently, notice under section 148 was issued after recording of reasons. In response to the notice, no return of income was filed and evidences filed to explain the sources of availability of funds did not favour with the view held by AO who framed assessment passed under section 144/147 determining total income. Assessee contended regarding validity of re-opening and also submitted that the addition on merits had wrongly been made. It was held the text of the reasons recorded proved that virtually there had been no application of mind by AO so as to form requisite satisfaction that any income had escaped assessment and that the reasons recorded in the case in hands were no reasons in the eye of law as being completely barren and bald in nature. The content of reasons did not reveal that AO had done some exercise by way of any enquiry having been conducted by him before arriving at the satisfaction for escapement of income. Notice under section 148 could not be issued for verification of information, but here the jurisdictional satisfaction of the essential requirement had to be shown that there had to be reason to believe that there was income chargeable to tax. The reasons recorded by AO should speak his mind and the basis for coming to conclusion that investment had been sourced from income, which should have been disclosed and had not been shown therefore, there was escapement of income. There must be direct nexus between the material and belief of escapement. The purported reasons did not show any such exercise by AO and hence AO had exceeded his authority in wrongly acquiring the jurisdiction in the matter. Thus, the reasons recorded by AO were no reasons in the eye of law for assuming jurisdiction and the assessment orders u/s 144 read with 147 was quashed.
FULL TEXT OF THE ITAT JUDGEMENT
Both these appeals, filed by the respective assessee, call into question correctness of order dated 27.03.2018 passed by the learned CIT(A)-I, Agra in the matter of assessments framed vide orders dated 31.03.2016 under section 147/144 of the Income Tax Act, 1961 for Assessment Year 2008-09 passed by the ITO 1(3), Agra.
2. Since, ITA No.393/Agra/2018 and ITA No. 394/Agra/2018 are for same A.Y: 2008-09 in the cases of mother (Smt. Premwati Suman) and son (Shri. Ranjeet Suman) and assessee’s therein had raised common grounds in appeal regarding the validity of reasons recorded, which too are recorded by the same Assessing officer in respect of same item of escapement of income in both the cases with the only variation in name and amount therefore, in order to have consistency in our decision both the appeals are heard together.
3. For brief facts we take ITA No. 393/Ag/2018 as a lead case in the case of Smt. Premwati Suman that an information was received that assessee had purchased a property for Rs.50,00,000/- along with her son Shri Ranjeet Suman on 27.12.2007 and also paid Rs.7,53,700/-. Subsequently, notice under section 148 was issued on 26.03.2015 after recording reasons. In response to the notice no return of income was filed and evidences filed to explain the sources of availability of funds did not favour with the view held by the learned Assessing officer who framed assessment vide order dated 31.03.2016 passed under section 144/147 of the Act determining total income at Rs. 22,13,439/-.
4. Before the learnedCIT(A) assessee has raised grounds regarding validity of re-opening and also submitted that the addition on merits has wrongly been made. However, the learnedCIT(A) rejected the appeal both on legal ground as well on merits and confirmed the assessment order as such.
5. The learned CIT(A) has sustained re-opening on the ground that before issuing notice under section 148 due enquiries were made from the assessee by the learned Additional CIT, Range-1 and by the ITO – 1(3) who issued notices to the assessee and replies furnished in response thereto were found unsatisfactory. Thus, after considering the replies by the assessee notice under section 148 was issued. He also rejected the contention of the assessee that investment in property cannot be compared with cash deposit and therefore, cases relied upon by the assessee were found to be not applicable. He thus, sustained re-opening confirmed the addition.
6. Being aggrieved, assessee has come in appeal raising the following grounds:
1. BECAUSE, upon due consideration of facts and in the overall circumstances of the case ‘appellant’ denies its liability to be assessed in terms of Notice dated 26.03.2015 said to be issued under section 148 of the ‘Act’.
2. BECAUSE, the purported ’Reasons’ are no ‘Reasons’ in the eyes of Law. The so called ‘Reasons’ do not show any ‘intelligible nexus’ to show that ‘Investment’ as made by the assessee represents her ‘Income’ which too is liable for Income Tax and had escaped Assessment warranting recourse to Notice under section 148 of the Act.
3. BEACUSE, alleged non-compliance, partial compliance or even unsatisfactory compliance to Letter dated 19.01.2015 as was issued by the Ld Addl. CIT, and 18.03.2015 as was issued by the ITO 1(3), Agra may be a ground only for ‘reasons to suspect’ for alleged escapement of income but does not give any valid foundation for reaching to ‘reasons to believe’ and thereafter arriving at the ‘satisfaction’ for escapement’ of Income warranting recourse to Notice under section 148 of the Act.
4. BECAUSE, while sustaining the validity of Notice Ld. CIT(A) legally erred in referring to the Letter dated 19.01.2015 and 18.03.2015, which Letters do not find mention in the ‘Reasons Recorded’ and therefore, cannot be referred or relied in order to improve the ‘Reasons Recorded’ which is lacking in material terms of showing application of mind on part of the AO recording the reasons.
5. BECAUSE, the sanction as was mandatorily required to be accorded by the Additional Commissioner of Income Tax under section 151 of the Act before issuing Notice under section 148 of the Act was though accorded by the Additional Commissioner of Income Tax but without application of mind in a mechanical manner, leading the Notice issued under section 148 of the Act to be held without jurisdiction and consequent assessment order passed in pursuance of such an invalid Notice to be held as void-ab-intio.
WITHOUT PREJUDICE TO THE ABOVE
6. BECAUSE, while confirming addition the authorities below failed to appreciate that the amount as was deposited in the Bank Account of the ‘appellant’ represented Cash available with the assessee raised from Loan and Sale Proceeds of Agriculture produce in preceding years therefore, even on merits no addition can be made.
7. BECAUSE, while making the addition of Rs. 23,09,381/- the ‘AO’ failed to consider that ‘appellant’ being an Agriculturist, having no source of Income liable for Tax and therefore, the authorities below was factually and legally wrong while making and sustaining addition towards alleged ‘Income from undisclosed sources’.
8. BECAUSE, in any case and in any view of the matter impugned additions/ disallowances and impugned assessment order is bad in law, illegal, unjustified, contrary to facts and law based upon incorrect assumption of facts and further without allowing adequate opportunity of hearing in violation of principals of natural justice and therefore, the additions made deserves to be quashed.
9. BECAUSE, the assessment order to the extent making addition is bad in law and against the facts of the case.
10. BECAUSE, assessee denies its liability against Interest charged under section 234A based on incorrect assumption of facts and Interest under section 234B and 234C is incorrectly charged.
11. The ‘appellant’ craves leave to add, alter or vary the grounds of appeal before or at the time of hearing.
7. The learned A.R of the assessee Shri Anurag Sinha, Advocate submitted that the purported reasons are no reasons in the eye of Law. No persons properly instructed on facts or in law, on the basis of reasons, as recorded in these cases could have arrived at ‘satisfaction’ for escapement of income. According to the learned Counsel the purported reasons are barren and bald and conclusion without any process of reasoning showing application of mind. The socalled reasons, thus, do not show any ‘intelligible nexus’ to show that ‘Investment’ as made by the assessee represents ‘Income’ which too is liable for Income Tax and had escaped Assessment warranting recourse to Notice under section 148 of the Act. He submitted that alleged non-compliance, partial compliance or even unsatisfactory compliance to notices dated 19.01.2015 as was issued by the learned Addl. CIT, and 18.03.2015 as was issued by the learned ITO 1(3), Agra may be a ground only for ‘reasons to suspect’ for alleged escapement of income but does not give any valid foundation for reaching to ‘reasons to believe’ and thereafter arriving at the ‘satisfaction’ for escapement’ of Income warranting recourse to notice under section 148 of the Act.
8. According to the submission of learned Counsel while sustaining the validity of notice learned CIT(A) legally erred in referring to the Letters dated 19.01.2015 and 18.03.2015, which Letters do not find mention in the reasons recorded and therefore, cannot be referred or relied in order to improve the reasons recorded which is lacking in material terms of showing application of mind on part of the learned Assessing officer recording the reasons. He invited attention to the reasons recorded as placed in paper book (APB-7) which is being reproduced as under:
“On the basis of information it is found that Smt. Premwati Suman and Shri Ranjeet Suman 1/1, HIG Flats, Sanjay Place, Agra had purchased an immovable property for Rs. 57,53,700/- [Purchase cost Rs. 50,00,000+ stamp duty of Rs. 7,53,700/-] n 27.12.20017 (during F.Y. 2007-08) relating to A.Y. 2008-09. As per records of this office they have not filed any return of income. The details are as under: –
