Madan Mohan Tiwari Vs ITO (ITAT Delhi)
Once information received by AO were shown in objections as incorrect, entire jurisdiction on such reasons cease to exist and thus reopening should be dropped. Such non application of mind therefore at recording reasons as well as disposal of objections invalidate entire reopening.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal has been preferred by the assessee against the order dated 08.10.2018 of the Ld. Commissioner of Income Tax (Appeals)-31, New Delhi, (hereinafter referred to ‘CIT(A)’) for the Assessment Year 2008-09. The assessee has raised following grounds of appeal:-
“1. Challenge to assessment u/s. 147 of I.T. Act 1961 — Tax Effect- Rs,37,08,964/-
1.1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order was void, invalid, non est as AO had formed belief of income escapement without application of mind.
1.2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order was void, invalid, non est as AO had no evidence of not finding ITR in his computer system.
1.3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order was void, invalid, non est as Delhi HC order in Sonia Gandhi vs ACIT DATED 10.09.2018 was not applicable in present case as Assessing Officer had no germane material to the issue and hence he was required to do further investigation upon receipt of survey report.
2. Challenge to non dispatch of s.143(2) notice. Tax Effect –Rs.6579,313/-.
2.1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order was void, invalid, non est as the s.143(2) notice was never dispatched by Assessing Officer.
2.2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that relevant mater was whether speed post receipt dated 25.07.2013 was forged or not and not forensic examination.
3. Challenge to disposal of objection to issuance of s.148 notice by non speaking order.-Tax Effect-Rs/65,79,313/-
3.1. On the facts and in the circumstances of the case, the
Ld. CIT(A) erred in law and on facts in not appreciating that since factual error of non filing of ITR dated 12.10.2010 was not addressed in Assessing Officer letter dated 30.12.2013 rejecting assessee objection to issuance of s.148 notice dated 05.02.2013 Merely comprehensiveness of Assessing Officer disposal letter does not make it speaking order.
4. Challenge to assessment being only change of opinion-Tax Effect Rs.65,79,313/-
4.1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order was void, invalid, non est as assessment was merely change of opinion.
5. Challenge to assessment being made during pendency of earlier assessment proceedings. -Tax Effect-Rs.65,79,313/-
5.1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order was void, invalid, non est as Assessing Officer could not have done assessment proceedings when assessment proceedings were already pending in an earlier proceeding challenged.
6. Challenge to violation of natural justice.-Tax Effect Rs.65,79,313/-
6.1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order was invalid due to violation of natural justice caused by Assessing Officer by not giving copy of survey report even when demanded by assessee during course of assessment proceedings, not giving copy of bank statements collected by him through s.131 notices and not giving show cause notice for proposed additions.
6.2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order was invalid due to violation of continuing with assessment before disposal of objection to issuance of s.148 notice.
6.3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that Assessing Officer could not have decided that income was from profession and not business income without providing opportunity to appellant to prove that appellant was not carrying on business but was carrying on profession of engineering.
6.4. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that Assessing Officer could not have proceeded with assessment without waiting for 30 days after passing order of rejection to objections made by assessee for s.148 issuance.
7. Challenge to assessment order framed on reasons other than those on which belief for escapement of income was formed. -Tax Effect- Rs. 65,79,313/-
7.1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order has not been framed on reasons forming belief of income escapement.
8. Challenge to no addition made on reasons on which belief for escapement of income was formed. -Tax Effect-Rs. 65,79,313/-
8.1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that no addition has been made on reasons forming belief of income escapement.
9. Challenge to year of taxation.-Tax Effect-Rs.65,79,313/-.
9.1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that once assessee is entitled to file return under presumptive taxation i.e. s.44AD books of account are not required to be maintained or provided to Assessing Officer for claiming income on mercantile basis, on percentage contract completion method.
9.2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that bifurcation of receipts cannot be said to be prima facie arbitrary without appreciating the fact that bifurcation had been done as per mercantile accounting system of accounting.
9.3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that Assessing Officer could not have made addition without seeking reasons for difference in receipts as per Form No.s26AS (at Rs.1,76,11,272/-) and as shown by the appellant at Rs.37,80,885/-.
10. Challenge to making assessment order not as per provisions of s.143(3)-Tax Effect-Rs.65,79,313/-.
10.1 On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that AO had claimed in his order that s.148 notice was issued on 30.03.2013 while factually it was 05.02.2013 made assessment order invalid.
10.2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that use of forged speed post receipt dated 25.07.2013 made assessment order invalid.”
2. A perusal of the above grounds of appeal would show that the assessee apart from contesting the addition made by the lower authorities on merits has also taken legal ground relating to the validity of the reopening of the assessment u/s 147 r.w.s. 148 of the Act stating that the Assessing Officer did not have a valid reason to assume jurisdiction to reassess the income of the assessee u/s 147 of the Act.
3. The assessee at the outset has brought our attention to the reasons recorded by the Assessing Officer for reopening of the assessment dated 05.02.2013. A copy of which has reproduced by the Ld. CIT(A) in page 92 of the impugned order and for the sake of ready reference reproduced under:-
“The reasons recorded by the Assessing Officer dated 05.02.2013 are as follows
M.M. Tiwary,
1451, Kalkaji,
New Delhi
A survey was conducted in this case on 23/04/2012 by Investigation Wing, Delhi wherein it is stated that Shri M. M. Tiwary Prop. Of M/s M.M. Engineering Services has received Rs.1.00 Crore in F.Y.2007-08
On going through the AST System it is found that assessee has not filed return for A.Y. 2008-09 and on examining 26AS, it is found that assessee has total receipt of Rs.1,76,11,272/- during the year. Further, it is stated in the survey report that during the survey proceedings u/s 133A, it was found that Shri Madan Mohan Tiwary and his family members are maintaining 61 bank account in various banks and were having 39 debit cards.
Therefore on the basis of the facts narrated above, I have reasons to believe that the income of the assessee amounting to Rs.1,76,11,272/- has escaped assessment in the hands of the assessee for which the assessment of the assessee needs to be reopened Under Section 147/148 of the I.T. Act, 1961.
Sd/-
(M.L. Gupta)
Income Tax Officer,
Ward 22(1),New Delhi
4. A perusal of the above reasons recorded would show that the Assessing Officer had got information through Investigation Wing that the assessee has received Rs.1.60 crore from M/s M. M. Engineering Services. Further, the Assessing Officer after going through the AST System noted that the assessee had not filed return of the income for the Assessment Year under consideration i.e. AY 2008-09. Further, from the examining of the Form No.26AS , the Assessing Officer noticed that the total receipts of the assessee during the year was of Rs.1,76,11,272/-. On this basis of these reasons, the Assessing Officer formed belief that the income amounting to Rs.1,76,11,272/- of the assessee had escaped assessment. He, therefore, issued notice u/s 148 of the Income Tax Act, 1961 (hereinafter referred to ‘the Act’) to the assessee. On receipt of the notice, the assessee filed his objection against the aforesaid reasons recorded by the Assessing Officer for reopening of the assessment. The contents of the said objections 30.12.2013, the sake of ready reference are reproduced under:-
Date: 25/07/2013
“The Income Tax Officer
Ward 22(1)
New Delhi
Sub Objections to the issue of Notice u/s 147/148 of the Income-Tax Act, 1961 in the case of Shri Madan Mohan Tiwari for Assessment Year 2308-09
Sir
In connection with the above it is submitted as follows –
(1) The original return in the above case for Assessment Year 2008-09 was filed declaring therein an income ojf Rs. 2,80,070/- in response to notice u/s 142 of the Income Tax Act, 1961 vide reply dated 12.10.2010.
(2) Subsequently, notice u/s 148 of the Income Tax Act, 1961 was issued to the Assessee.
(3) In response to the above notice, reply/letter was filed on behalf of the Assessee in Your Honour’s office on 12-03-2013 stating there in that the return filed by the Assessee in response to notice u/s 142 of the Income Tax 1961 vide reply dated 12 10.2010 may kindly be treated as a return filed in response to the notice u/s 148 of the Income-tax Act. 1961 Simultaneously, a request was, also made for furnishing the Assessee with a copy of the reasons recorded for recourse to the reassessment provisions u/s148 of the Income-tax Act. 1961.
(4) The Assessee have been supplied with the copy of the reasons recorded for resorting to the provisions u/s 148 of the Income-tax Act, 1961 which read as follows –
“A survey was conducted in this case on 23/04/2012 by Investigation Wing, Delhi wherein it is stated that Shri M. M. Tiwary Prop, of M/s. M.M, Engineering Services has received Rs. 1.60 crore in F.Y. 2007-08.
On going through the AST System it is found that assessee has not filed return for A.Y, 2008-09 and on examining 26AS it is found that assessee has total receipt of Rs. 1,76,11,272/- during the year. Further it is stated in the survey report that during the survey proceedings u/s 133A it was found that Shri Madan Mohan Tiwary and his family members are maintaining 61 bank accounts in various banks and were having 39 debit cards.
Therefore, on the basis of the facts narrated above, I have reason to believe that the income of the assessee amounting to Rs. 1,76,11,272/- has escaped assessment in the hands of the assessee for which the assessment of the assessee needs to be reopened under section 147/148 of the I.T. Act, 1961.”
(5) In this connection, the Assessee hereby records its preliminary objections to the issue of notice u/s 148 and resort to the reassessment provisions incorporated u/s 147/148 of the Income-tax Act,. 1961 as follows;-
(i) Before proceeding further it would be pertinent to reproduce the provisions relating to reassessment of escaped income as incorporated in S 147 of the Income-tax Act, 1961 the relevant parts of which read as follows.- :
Income escaping assessment
147. If the Assessing’ Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year);
Provided that where an assessment under sub-section (3) of ‘ Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.”
(ii) The above provisions make it clear that an Assessing Officer if he has “reason to believe” that any income chargeable to tax has escaped assessment for any assessment year, may,’ subject to the provisions of sections 148 to 153, –
> Assess or reassess
> Such income; and
> Also any other income chargeable to tax
> Which has escaped assessment; and
> Which comes to his notice subsequently in the course of the proceedings under section 147; or
> Re compute
