Abdul Rashid Sofi C/o Peer & Co. Vs ITO (ITAT Amritsar)
ITAT Amritsar held that reassessment proceedings initiated on recorded reasons on belief that the specific income has escaped assessment, however, addition on some other income not having any connection with the recorded reason is erred in law.
Facts-
The assessee’ s case is reopened u/s 148 of the Act on the ground that the assessee is one of the settlers of M/s Mars Educational Trust, (M.E.T.) situated at village Sangam Tehsil Bijbehara Distt. The assessee is jointly and separately owner of land and building with the trust and assessee took loan from bank after mortgaging the their land and building. The total value of the assets was Rs.9,46,05,848/- and also a capital fund Rs. 1,33,75,750/- was as source of the investment.
During assessment proceeding the ld. AO did not illuminate any point related to recorded reason which was formed on the basis of reasons to believe. But the entire addition was made on basis of income from petrol pump amount of Rs.6 lac and agricultural income Rs.1,75 ,000/-. The assessee filed a return related said assessment year U/s 139 bearing acknowledgement No.546 on dated 27.03.2009. The notice u/s 148 was issued and assessee made the reply of the said notice, but entire addition was made without considering a single point of the recorded reason. The assessee filed appeal before the ld. CIT(A) & relief was granted in appeal amount to Rs. 1,75,000/-. But other point related to addition Rs.6 lac was upheld. Also, the legal point was not adjudicated by the ld. CIT(A) in the impugned appeal order.
Being aggrieved, assessee filed an appeal before us.
Conclusion-
In the assessment proceeding there is no connection in between recorded reason and addition of the income. The entire reasons to believe are itself erroneous and not established on the true fact.
The fact which was ascertained / verified by the AO is itself erroneous. However, if after issuing a notice under section 148, he accepts contention of assessee and holds that income, for which he had initially formed a reason to believe that it had escaped assessment, has, as a matter of fact, not escaped assessment, it is not open to him to independently assess some other income.
If the ld. AO intends to do so, a fresh notice under section 148 would be necessary, legality of which would be tested in event of a challenge by assessee. The entire recorded reason is erroneous. The ld AO acted beyond jurisdiction.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
The instant appealsof the assessee are directed against the order of the ld. Commissioner of Income Tax (Appeals)-2, Amritsar, (Camp at Jammu)[in brevity the ld. CIT(A)] bearing appeal 157/2015-16 and 158/15-16, date of order 09.03.2018, the order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity the Act] for A.Ys. 2008-09 and 2009-10.The impugned orders were originated from the order of the Income Tax Officer, Anantnag, (in brevity the AO) order passed u/s 144/147 for A.Y. 2008-09 and u/s 143(3)/147 for A.Y. 2009-10.
2. The assessee filed the appeals with delay of 1014 days. The assessee had despatched the appeal to ITAT for filing on 17/05/2018 bearing Indian Speed Post Acknowledge no-ED773722105IN. But for technical glitches the appeals were A condensation application was filed by the assessee in view of the short payment of appeals fees which has already been rectified and balance fees has been paid.Reason of delay is well explained by the assessee. With the consent of ld. Sr. Dr, the delay of 1014 days is condoned.
3. The assessee filed prayer in form of ground before the bench which is reproduced as below:
“a. That the initiation of concealment proceedings are without any credible conclusive evidence which have been proved frivolous, wrong and erroneous itself in the order passed and therefore, all the proceedings initiated on such frivolous evidence are nullity abilities and does not stand test of law.
b. That the averments submitted by the appellant of no investment of any kind being made in the trust – M/s Mars Educational Trust during the impugned financial year under appeal have not been proved wrong by any corollary evidence, if any available with the Ld. A. O. and consequent finalization of assessment proceedings on other superfluous matters not covered by the reasons recorded to circumvent the deficiency in reasons is devoid of any credibility in the eyes of law.
c. That the final assessment arrived at by the Ld. A. O. does not prove directly or indirectly in any manner whatsoever any nexus with the reasons communicated at the outset which have been the basis of initiation of proceedings under the Act conclusively prove that the reassessment proceedings initiated are sham, baseless and ab-initio invalid.
d. That the Ld. A. O. has exceeded his jurisdiction in arbitrary enhancement of income in respect of business of the appellant without conclusively & credibly establishing that the reasons recorded for initiation of proceedings U/s 147/148 of the Act are correct and complete. In absence of such onus not discharged first he had no authority to make arbitrary reassessment of income and proceed to levy tax on any assumed income not covered under reasons recorded.
e. That the Ld. CIT(A) has erred in upholding the addition to the income of the appellant on presumptions & assumptions without discussing as to whether the Ld. A. O. was justified in apparently dismissing right/claim of the appellant that no books of accounts and records were needed to be produced before justifying the correctness of initiation of reassessment proceedings without deciding the case on merits of appeal filed.”
4. The assessee filed both the appeals on same issue and both reopened u/s 148 of the Act. For the sake of brevity the appeal in ITA no. 02/ASR/2021 is taken as lead case.
5. The brief fact of the case is that the assessee’ s case is reopened u/s 148 of the Act on the ground that the assessee is one of the settlers of M/s Mars Educational Trust, (M.E.T.) situated at village Sangam Tehsil Bijbehara Distt. The assessee is jointly and separately owner of land and building with the trust and assessee took loan from bank after mortgaging the their land and building. The total value of the assets was Rs.9,46,05,848/- and also a capital fund Rs. 1,33,75,750/- was as source of the investment. During assessment proceeding the ld. AO did not illuminate any point related to recorded reason which was formed on the basis of reasons to believe. But the entire addition was made on basis of income from petrol pump amount of Rs.6 lac and agricultural income Rs.1,75 ,000/-. The assessee filed a return related said assessment year U/s 139 bearing acknowledgement No.546 on dated 27.03.2009. The notice u/s 148 was issued and assessee made the reply of the said notice, but entire addition was made without considering a single point of the recorded reason. The assessee filed appeal before the ld. CIT(A) &relief was granted in appeal amount to Rs. 1,75,000/-. But other point related to addition Rs.6 lac was upheld. Also, the legal point was not adjudicated by the ld. CIT(A) in the impugned appeal order.
6. Being aggrieved, assessee filed an appeal before us.
7. During the hearing before the ITAT, none was present on behalf of the The matter was taken with a consent of the ld. Sr. DR. The counsel of the assessee filed Paper Book bearing page nos. 1 to 33 which is kept in the record. The assessee is a businessman operating petrol filing station at Anantnag, Kashmir as capacity of proprietor in number of years. Apart from the said business, the assessee is also a trustee in M/s Mars Educational Trust, Bijbehara, Kashmir which is a charitable trust engaged in imparting education to children. The appellant was served a notice u/s 148 with regard to special information received by the ld. AO regarding investment of appellant as founder in M/s Mars Educational Trust, for F.Y. 2007-08 relevant to A.Y. 2008-09. The reasons for the issuance of notice by communicating to the assessee vide letter dated 03.11.2014. The copy of the recorded reason is extracted as below:
“The assessee is one of the settlers of Mars Educational Trust (MET) situated at Village Sangam Tehsil B jibe ha ra Distt. Anantnag which is unregistered. The assessee is jointly and severally owner of land and buildings situated at Village Sangam Tehsil Bijbehara. The assessee has mortgaged the said land and buildings to J&K Bank B/U General Bus Adda Anantnag against raising of loan. The bank sanctioned loan in the name of M/s Delhi Public School Sangam, Anantnag (Managed by Mars Educational Trust) and as a surety/pledge/hypothecation the value of following properties/assets and monies has been disclosed by the assessee be fore the said Bank for raising loan:-
