TMI Blog2010 (3) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer under section 68 in respect of entire redemption value of SBI Resurgent India Bond of the face value of 5,000 US dollars received by the appellant as gift from an NRI friend, although the said SBI Resurgent India Bond happens to be a specified deposit under section 10( 15 )( i ) of the Act. 3. For that under the facts and circumstances of the case, the learned CIT(A) erred in confirming the disallowance made by Assessing Officer of various expenses claimed under the head Income from other sources ." Since facts are common, we are deciding these appeals by taking the facts of ITA No. 880/Kol./2008. 3. Brief facts of the case are that the assessee filed return showing total income of Rs. 1,53,282 which was processed under section 143(1) and a refund determined thereon was also issued to the assessee. Subsequently, proceeding under section 147 was initiated. In response to notice under section 148, the assessee requested the Assessing Officer to consider the return filed under section 139(1) as his return for the purpose of the reassessment proceedings and also asked to supply the reasons for initiating the reassessment proceedings. The assessee repeated this request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as return filed in response to notice under section 148. We further find that the assessee vide his letters dated 11-1-2007 and 24-8-2007, which are available at pp. 37, 38 and 39 of the paper book, requested the Assessing Officer to provide him the reasons for which reopening proceedings have been initiated under section 147. We also find from the copies of order sheet that the reasons for initiating reopening proceedings were noted by the Assessing Officer in the assessment folder but no evidence was produced before us to show that the assessee was provided the copy of such recording of reasons. On similar facts, the Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. ( supra ) has held as under : "When a notice under section 148 of the Income-tax Act, 1961, is issued, the proper course of action for the noticee is to file the return and, if he so desires, to seek reasons for issuing the notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order." In this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 147 was initiated on the following grounds : ( i )Expenses claimed against income from other sources were prima facie not incidental to earning of such income. ( ii )Receipt of gift of Rs. 3,34,813 from Smt. Savita Sharma who had no relationship with the assessee was considered as unaccounted money of the assessee camouflaged as gift. 3.1 The assessee debited Rs. 2,27,707 under various heads against Income from other sources , viz., interest on fixed deposit, SB account, NSC, ICICI Bonds and dividend totalling Rs. 2,99,818. The assessee claimed depreciation on motor car of Rs. 90,776, motor car expenses of Rs. 30,150, general charges of Rs. 5,280, salary to driver of Rs. 24,000 were incurred partly for earning business income and partly for earning income under the head Other sources . It was submitted that 50 per cent of such expenditure should be allocated to business and 50 per cent towards earning of income under the head Other sources . However, as the assessee had two proprietorship businesses in the name of M/s. Laxmi Saw Mills and M/s. M.P. Solar for which P L a/c and balance sheet were filed declaring net profit of Rs. 2,481 and Rs. 40,690 respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... motor car as the same was purchased during the financial year 2003-04. 6. As regards the receipt of gift, it was contended that there was no material before the Assessing Officer, other than the statement of the assessee recorded on 21-11-2006 in response to a notice under section 131 in the case of Sri Sadhan Paul. The assessee was forgetful and could not remember that he had received certain gifts for the financial year 2003-04. On the above fact, it was claimed that reopening of assessment was bad in law. Reliance was placed on the following case laws : ( a ) Techspan India (P.) Ltd. v. ITO [2006] 283 ITR 212 (Delhi); ( b ) Sheo Nath Singh v. AAC [1971] 82 ITR 147 (SC); ( c ) Vipan Khanna v. CIT [2002] 255 ITR 220 (Punj. Har.); ( d ) Vijaykumar M. Hirakhanwala (HUF) v. ITO [2006] 157 Taxman 100 (Bom); ( e ) J.P. Bajpai (HUF) v. CIT [2004] 140 Taxman 34 (All.). 7. The learned CIT(A) held that in the facts of the assessee s case the ratio laid down in the above cases were not applicable. The learned CIT(A) held that reopening of assessment was valid. He relied on the following case laws : ( a ) Bawa Abhai Singh v. Dy. CIT [2002] 253 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate. 10.Finally, the maturity value of Rs. 3,34,81,260 was received by the appellant from SBI under an advice (copy of advice enclosed, marked Annex. B-6). 11.When the donor, Smt. Savita Sharma subscribed to the said bond in 1998 as an NRI to SBI, the existence of Smt. Savita Sharma (being the donor of the gift) and her creditworthiness were automatically proved beyond doubt as the SBI accepted the subscription for Resurgent Bond after necessary verification of all documents and claims of the person subscribing to such bond. No question as to existence or creditworthiness can arise in this case of the donor. 12.The entire facts were made known to the learned Assessing Officer in course of reassessment proceedings and all the above-referred documents were furnished (copy of letter dated 20-7-2007 enclosed, marked Annex. B-7). 13.The learned Assessing Officer required the appellant to produce the donor before him which was impractical as the donor resides in Singapore. However, the appellant obtained a fresh confirmation from the donor Smt. Savita Sharma confirming the making of the aforesaid gift of SBI Resurgent India Bond vide letter dated 22-9-2007 addressed to the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove the genuineness of the transaction has not been discharged by the assessee. Therefore, he upheld the addition of Rs. 3,34,813 made under section 68 of the Act. 10. On the issue of disallowance of expenses the assessee submitted the following : "From the statement of computation of total income (copy filed under Annex. A-5) it may please be observed that the appellant was a partner in a partnership firm besides being two proprietorship businesses under the name of M/s. Laxmi Saw Mill and M/s. M.P. Solar. He also derived income by way of interest on fixed deposits with various banks and other investments and also dividend income. In course of earning income from 1 partnership business, proprietorship firms and from other sources, viz., interest, etc., he was required to incur various expenses in the nature of salary, car expenses, depreciation on motor car, interest on loan taken for the purpose of investments and various other incidental expenses. Proper disclosure of all the income earned and all the expenses incurred was made in the computation of income as well as in the various profitability statements furnished along with the return of income. It may be noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the learned CIT(A) on the issue of reopening of assessment under section 147 of the Act. It was submitted by him that the assessee was aware of the reason for reopening at least from the date when the assessment order was received by him as the reason for reopening has been mentioned by the Assessing Officer in the assessment order itself. 15. In the above circumstances, the learned JM has held that the ratio laid down by the Hon ble Apex Court in the case of GKN Driveshafts (India) Ltd. ( supra ) was applicable in the facts of the present case. Accordingly, he set aside the orders of the authorities below and remitted the matter back to the file of the Assessing Officer with the direction that the Assessing Officer should follow the procedure as laid down in the judgment of the Hon ble Apex Court in the case of GKN Driveshafts (India) Ltd. ( supra ) and thereafter proceed to make a fresh assessment. 15.1 In the circumstances discussed above, I am unable to agree with the view of the learned JM. In the case of GKN Driveshafts (India) Ltd. ( supra ), the assessment was pending. Notices issued under sections 148 and 143(2) were challenged in writ. As such the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in remanding the matter back to the file of Assessing Officer in view of decision of Hon ble Apex Court in the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC) or the learned AM was justified in holding that the case is required to be decided on merit by the Tribunal instead of remanding to Assessing Officer?" 2. At the time of hearing before me, it is stated by the learned counsel that the facts in the case of both the assessees, namely, Shri Bhabesh Chandra Panja and Kakali Panja are identical and, therefore, he will narrate the facts in the case of Shri Bhabesh Chandra Panja and the same would be equally applicable in the case of Kakali Panja. The facts in brief are that for the year under appeal, the Assessing Officer has issued notice under section 147, in response to which, the assessee informed vide letter dated 11-1-2007 that the return already filed may be treated as return in response to notice under section 148. He also requested for providing the reasons for reopening of the assessment. However, the reasons for reopening of assessment were not supplied to the assessee. During continuation of assessment proceedings again on 24-8-2007, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, i.e., GKN Driveshafts (India) Ltd. ( supra ). In fact, as per the Hon ble Apex Court, the assessee is entitled to the reasons recorded only after the filing of the return and not earlier. 3.1 The assessee did challenge before the CIT(A) the validity for reopening of assessment; such ground was wide enough to cover up the argument of non-supplying of the reasons recorded. 3.2 That the Hon ble Apex Court in the case of GKN Driveshafts (India) Ltd. ( supra ) has laid down the procedure which has to be followed by the Assessing Officer. Whenever the assessments are sought to be reopened by invoking the provisions of section 147, it is not necessary for each and every assessee to approach the Hon ble High Court or the Apex Court for issuing the writ to follow the above procedure. 3.3 The learned counsel for the assessee, therefore, submitted that the order of the learned JM may be upheld. 4. The learned Departmental Representative, on the other hand, supported the order of the learned AM and he stated that the assessee not only filed the return of income but also made due compliance with the assessment proceedings. He referred to the assessment order to poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for copy of the reasons recorded for issuance of such notice. Once the assessee requests for supply of reasons recorded, the Assessing Officer is bound to furnish the same within a reasonable time. On receipt of reasons recorded, the assessee is entitled to file the objection to the issuance of notice. When such objection is filed the Assessing Officer is to dispose of the same by passing a speaking order. 5.2 Now reverting back to the facts of the assessee s case, we find that the Assessing Officer has issued notice under section 148 on 11-12-2006. In response to which, the assessee vide letter dated 11-1-2007, stated that the return already filed by him should be treated as return filed in compliance to notice under section 148. In the same letter, the assessee also requested for providing the reasons for reopening of the assessment proceedings. In view of the above letter, the Assessing Officer has accepted the return which was already filed by the assessee as the return furnished in response to notice under section 148 and proceeded to make the assessment. The assessee made due compliance, during the course of assessment proceedings. However, copy of reasons recorded was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and unjustified in holding the gift amount of Rs. 3,34,813 received by the assessee from an NRI as assessee s unaccounted money and adding the same to the total income of the assessee wrongfully as unexplained cash credit under section 68 of the Act, the action of the assessee being totally whimsical, arbitrary against the facts and records and illegal. 3. For the learned Assessing Officer is wholly wrongful and unjustified in arbitrarily and whimsically disallowing 75 per cent of the expenses claimed under the head depreciation on motor car, salary to driver, motor car running expenses, telephone expenses and general charges and 50 per cent of conveyance expenses. 4. Under the facts and circumstances of the ease, the learned Assessing Officer is fully wrongful and unjustified in initiating penalty proceedings under section 271(1)( c ) of the Act. 5. Your assessee craves leave to add and elaborate the ground(s) of appeal taken above at the time of hearing of the appeal." 5.4 From the above, it is evident that by way of ground No. 1, the assessee has challenged the reopening of assessment under section 147. Once the assessee challenges the validity of reopening an assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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