Case Law Details
ITO Vs Deepak Bajaj (ITAT Kolkata)
In this case the only information which was available to the Assessing Officer was that there were turnover of more than Rs.3 crores out of which there was withdrawal of cash was Rs.94.97 lacs in the bank account of the assessee. Except the aforesaid information, there was no information available to the Assessing Officer that the income of the assessee in any manner has escaped assessment.
Even the Assessing Officer did not correlate the aforesaid transaction in the bank account with the accounts of the assessee to form the belief regarding the escapement of income. Merely that there were huge turnover i.e. deposits and withdrawal in the bank account of the assessee without correlating the same with the accounts and with the nature of the business of the assessee, in our view, that was not enough to form a belief of escapement of income of the assessee for the assessment year under consideration.
Assessing Officer should have given opportunity to the assessee to contest the reopening and file objections against the reasons recorded
Even as pointed out by the ld. AR, the reopening was made at the last date of the 6th year from the end of the assessment year under consideration, which was the last day of limitation period for the Assessing Officer to reopen the assessment. As per the settled law, the Assessing Officer should have given opportunity to the assessee to contest the reopening and file objections against the reasons recorded. However, in this case, the reopening was done on the last date of limitation period, therefore, no opportunity to file objections has been granted to the assessee which violates the principles of natural justice.
If Assessing Officer fails to make any addition on the basis of reasons recorded, the Assessing Officer gets no jurisdiction to add any other item of income
The another point noted by the Ld. CIT(A) in the impugned order is that even the Assessing Officer failed to make any addition in respect of aforesaid high turnover. The ld. CIT(A) has, therefore, relied upon the decision of the Bombay High Court in the case of CIT Vs. Jet Airways Limited [(2010) 195 taxman 117 (Bom)] wherein it has been held that if the Assessing Officer fails to make any addition on the basis of reasons recorded, the Assessing Officer gets no jurisdiction to add any other item of income.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal has been preferred by the Revenue against the order dated 01.08.2021 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The Revenue in this appeal has taken the following grounds of appeal:
“1. On the facts and circumstances of the case, the CIT(A) erred in holding that the initiation of assessment u/s. 147 vide notice of u/s. 148 of the IT Act was bad-in-law, thereby failing to appreciate that the proceedings were duly initiated after recordings the reasons as per procedure of law.
2. On the facts and circumstances of the case, the CIT(A) erred in failing to appreciate that the reason are arbitrary and wrong whereas the case was reopened because there was huge difference in turnover between the information received and as per return of income of the assessee.
3. On the facts and circumstances of the case, the CIT(A) erred in failing to appreciate that once none of the grounds, recorded in the reason to initiate re-assessment u/s. 147, survives, the A.O. cannot make any other addition because the A.O. had already made the addition of Rs.78,11,140/- on account of undisclosed income which was the main criteria for reopening the case.
4. That the appellant craves the leave to add, alter, modify, include or delete any grounds of appeal.
2. A perusal of the above grounds of appeal reveals that the Revenue is aggrieved by the action of the ld. CIT(A) in holding that there were no sufficient reason available for the Assessing Officer to believe that the income of the assessee for the assessment year under consideration has escaped assessment. The ld. CIT(A) has further noted that even the Assessing Officer did not make any addition in respect of the aforesaid reasons recorded for reopening of the assessment but on some other issues.
The ld. DR has submitted that since there was a huge cash flow in deposits and withdrawal in the bank accounts of the assessee, therefore, the Assessing Officer had sufficient reason to form the belief that the income of the assessee has escaped assessment.
3. At the outset, the ld. Counsel for the assessee has submitted that the assessment year involved in this case is 2008-09, whereas, the reasons has been recorded for reopening of the assessment on 31.03.2015, which shows that the reasons for reopening of the assessment were on the last day of the 6th year from the date of end of the assessment year under consideration which was the last date of limitation period to reopen the assessment. He has submitted that the assessee was not given any opportunity to file objections against the reopening of the assessment. Since the assessee have been denied the opportunity to contest the reopening, therefore, the reopening of the assessment was bad in law. The ld. Counsel for the assessee has further submitted that, even otherwise, the reasons recorded did not constitute reliable information to form the belief by the Assessing Officer that income of the assessee for the year under consideration has escaped assessment. He, therefore, has relied upon the impugned order of the CIT(A).
4. We have heard the rival contentions of both the ld. representatives of the parties and gone through the records. A perusal of the reasons recorded, copy of which has been placed in page 1 of paper-book on the file, reveals that the only information which was available to the Assessing Officer was that there were turnover of more than Rs.3 crores out of which there was withdrawal of cash was Rs.94.97 lacs in the bank account of the assessee. Except the aforesaid information, there was no information available to the Assessing Officer that the income of the assessee in any manner has escaped assessment.
Even the Assessing Officer did not correlate the aforesaid transaction in the bank account with the accounts of the assessee to form the belief regarding the escapement of income. Merely that there were huge turnover i.e. deposits and withdrawal in the bank account of the assessee without correlating the same with the accounts and with the nature of the business of the assessee, in our view, that was not enough to form a belief of escapement of income of the assessee for the assessment year under consideration. Even as pointed out by the ld. AR, the reopening was made at the last date of the 6th year from the end of the assessment year under consideration, which was the last day of limitation period for the Assessing Officer to reopen the assessment. As per the settled law, the Assessing Officer should have given opportunity to the assessee to contest the reopening and file objections against the reasons recorded. However, in this case, the reopening was done on the last date of limitation period, therefore, no opportunity to file objections has been granted to the assessee which violates the principles of natural justice. The another point noted by the Ld. CIT(A) in the impugned order is that even the Assessing Officer failed to make any addition in respect of aforesaid high turnover. The ld. CIT(A) has, therefore, relied upon the decision of the Bombay High Court in the case of CIT Vs. Jet Airways Limited [(2010) 195 taxman 117 (Bom)] wherein it has been held that if the Assessing Officer fails to make any addition on the basis of reasons recorded, the Assessing Officer gets no jurisdiction to add any other item of income.
In view of the above discussion, we do not find any infirmity in the order of the CIT(A) and the same is upheld.
5. In the result, the appeal of the Revenue stands dismissed.
Kolkata, the 31ST March, 2022.
