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Sarika Jain, Vikram Jain and Sons (Huf) , Santosh Rani Jain Versus Income-Tax Officer

2016 (5) TMI 92 - ITAT CHANDIGARH

Reopening of assessment - receipt of gifts unexplained - Held that:- it is clear that information was received by the Assessing Officer from the Deputy Commissioner of Income-tax, CC-V, Ludhiana, dated March 5, 2007, which did not reveal any fact of escapement of any income. It refers only the decision of the hon'ble Punjab and Haryana High Court in the case of Lall Chand Kalra (1981 (1) TMI 275 - PUNJAB & HARYANA HIGH COURT ). This did not say that the assessee received any bogus gift. The reas .....

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f intimation. A valid reopening of assessment has to be based only on tangible material to justify the conclusion that there is escapement of income. The Assessing Officer recorded wrong facts in the reasons as mentioned above and, thus, has not applied his mind before forming belief of escapement of income. The information dated March 5, 2007, was not a pointer and did not indicate the escapement of income.

The Assessing Officer did not examine the information which was nothing and .....

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tant Member) For the Petitioner : Sudhir Sehgal For the Respondent : Manjit Singh ORDER Bhavnesh Saini (Judicial Member) 1. All the appeals by different assessees are directed against the different orders of the learned Commissioner of Income-tax (Appeals)-II, Ludhiana, dated January 11, 2012, for the assessment year 2005-06. In all the appeals, the assessee challenged the reopening of the assessment under section 148 of the Income-tax Act, 1961 and the additions of ₹ 21 lakhs, ₹ 46 .....

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Jain) 3. In this case, the Assessing Officer passed the order under section 143(3) read with section 148 of the Income-tax Act dated December 30, 2010. The facts of the case are that in this case, the original assessment for the assessment year 2005-06 had been reopened by issuing of notice under section 148 and after recording reasons, which are reproduced in the assessment order, the Assessing Officer issued a notice on March 30, 2010. The main purpose of issuance of the notice under section .....

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ift, therefore, the assessment was reopened to bring to tax a sum of ₹ 21 lakhs. 4. During the course of the assessment proceedings, the assessee had challenged the reopening of the assessment under section 148 of the Act and also stated that the proceedings are bad in law but the Assessing Officer stated that the gift was received for love and affection by the donee, is not tenable since it was received from the stranger and there was no such occasion and, accordingly, made addition on ac .....

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explained that there was valid reason for reopening of the assessment under section 148 of the Income-tax Act. 6. The learned Commissioner of Income-tax (Appeals), considering the merit, record, submissions of the assessee and remand report, noted that the information was received from the Assessing Officer, Central Circle, Ludhiana, about the gift received by the assessee from Shri Sunil Duggal and Shri Gaurav Duggal and after recording the reasons, assessment was reopened under section 148 of .....

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here should be reliable information and the belief of the Assessing Officer that income has escaped assessment and after considering the material on record, the learned Commissioner of Income-tax (Appeals) justified the action of the Assessing Officer in reopening of the assessment and this ground of appeal of the assessee was dismissed. The learned Commissioner of Income-tax (Appeals), with regard to the addition of merit also considered the material on record and noted that the donors have mad .....

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ions made before the authorities below and referred to the paper book page 19 which is reasons recorded under section 148 of the Income-tax Act dated March 29, 2010, and submitted that though the gift was received from Shri Sunil Duggal only donor, in the reasons the name of two donors, Shri Gaurav Duggal and Shri Sunil Duggal, have been wrongly mentioned. He has referred to paper book pages 1 and 2 which is acknowledgment of filing of the return and computation of income for the year under cons .....

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ing the receipt of the gift. He has, therefore, submitted that the Assessing Officer has not applied his mind while recording the reasons for reopening of the assessment and recorded incorrect facts therein. Paper book pages 3 to 8 are the affidavit of gift and affidavit of the donor with his details of Income-tax return filed along with the cash-flow statement and paper book page 9 is the assessment order dated November 15, 2007, in the case of the donor, Shri Sunil Duggal, in which no adverse .....

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sment from the Deputy Commissioner of Income-tax, Central Circle V, Ludhiana, dated March 5, 2007, in the group cases in which nothing is mentioned if there is any escapement of income for the purpose of reopening of the assessment. He has submitted that in this case, several other assessees have been mentioned but no actions have been taken against any of them by the Assessing Officer except the three assessees above. He has submitted that in this information, there is no mention of receipt of .....

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rm his belief that income chargeable to tax has escaped assessment. Similarly, there was no tangible material forwarded by the Deputy Commissioner of Income-tax, Central Circle, Ludhiana, which could be the basis of reopening of the assessment. Therefore, reopening of the assessment is wholly unjustified. He has filed several decisions of different High Courts and of the different Benches of the Tribunal in support of his contention and also relied upon the decision of the hon'ble Gujarat Hi .....

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horities below and submitted that prima facie details were available before the Assessing Officer to reopen the assessment. The reopening of the assessment is done on the basis of the report received from the Deputy Commissioner of Income-tax, Central Circle, Ludhiana, dated March 5, 2007, which is tangible material before the Assessing Officer for reopening of the assessment. Sufficiency of the material is not required to be seen at the time of reopening of the assessment. He submitted that the .....

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s Ltd. v. ITO [1999] 236 ITR 34 (SC), the decision of the Supreme Court in the case of ITO v. Puroshottam Das Bangur [1997] 224 ITR 362 (SC), the decision of the Delhi High Court in the case of Rajat Export Import India Pvt. Ltd. v. ITO [2012] 341 ITR 135 (Delhi), the decision of the Supreme Court in the case of A. L. A. Firm v. CIT [1991] 189 ITR 285 (SC) and the decision of the Supreme Court in the case of ITO v. Saradbhai M. Lakhani [2000] 243 ITR 1 (SC). The learned Departmental represent at .....

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8 of the Income-tax Act on March 29, 2010, copy of the same is filed at page 19 of the paper book. The same is reproduced as under : "Reasons for issuance of notice under section 148 Smt. Sarika Jain, 27A, Tagore Nagar, Ludhiana, assessment year 2005-06 PAN ABMPJ9153G The assessee has filed its return of income for the assessment year 2005-06 on May 19, 2005, declaring a total income of ₹ 75,533. Information in the case has been received from the office of the Deputy Commissioner of I .....

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l Duggal, have no blood relation with the donee nor was there any specific occasion for making such huge gift. The gift was made only for love and affec tion for the donee. The gift received is from totally a strange person. Hence, the case of the donee is clearly found to be hit by Lall Chand Kalra v. CIT reported at [1981] 22 CTR (P&H) 135. It is also clear that the assessee had introduced her own undisclosed money by way of alleged gift taken by her in books of account. In view of the fac .....

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nder section 148 of the Income-tax Act, 1961 for the assessment year 2005-06. Dated : 29.03.2010. Sd/ (Madan Lal) Income-tax Officer Ward VII(2), Ludhiana." 9. It may be noted here that in the reasons recorded above, the Assessing Officer has mentioned that the assessee filed the return of income for the assessment year under appeal on May 19, 2005, declaring a total income of ₹ 75,533. This fact is wholly incorrect because the assessee filed acknowledgment of filing of the return of .....

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e paper book. The Assessing Officer in paragraph 2.4 of the assessment order has mentioned this reason explaining therein that while recording the reasons under section 148, returned income and the date of filing of the return were inadvertently mentioned as ₹ 75,533 and May 19, 2005, instead of ₹ 1,46,513 and August 1, 2005, respectively. The observations of the Assessing Officer in the assessment order clearly prove that the Assessing Officer has mentioned wrong facts and wrong inf .....

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h the donee but according to the case of the Revenue, the assessee received the gift from only donor Shri Sunil Duggal and this fact is also mentioned in the letter of the Deputy Commissioner of Income-tax, Central Circle, dated March 5, 2007. Therefore, this is also wrong information/fact noted in the reasons recorded for reopening of the assessment. Further, it is noted in the reasons that the Assessing Officer has reason to believe that by reason of failure on the part of the assessee to disc .....

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that the Assessing Officer has not applied his independent mind before recording the reasons for reopening of the assessment. Thus, the Assessing Officer has not formed his independent belief to his subjective satisfaction that income has escaped assessment. The Assessing Officer admitted in reasons that gift was made only for love and affection for the donee. (ii) The copy of letter dated March 5, 2007, issued by the Deputy Commissioner of Income-tax, Circle V, Ludhiana, has been placed on reco .....

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which he has confirmed having already issued the confirmation in support of the aforesaid gifts received from the donor, Shri Duggal. In this information, it was stated that since there is no relationship of the donor and the donee and there was no specific occasion for making gift, therefore, the case is hit by the judgment of the hon'ble Punjab and Haryana High Court in the case of Lall Chand Kalra (supra). This letter was containing the confirmations of the donees. It would, therefore, cl .....

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ain have himself and for other assessees has confirmed the receipt of the gift and he has explained that Shri Sunil Duggal or Shri Gaurav Duggal are not related by blood but they are his personal friends and the donors deal in business of manufacturing of T-Shirts and export business. It was also explained that genuine gifts have been given and all the donees are known to the Duggal family because of their friendship. Therefore, from the statement of Shri Gautam Jain also, it is nowhere disclose .....

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case, there were no satisfactory evidences on record to prove that the donors owned land measuring 40 acre and 20 killas or that their annual net income was in fact ₹ 30,000 or ₹ 18,000 as alleged by them. Therefore, it was held that donors were not men of means. It was also found that the land belong to the donors, were barani and there was no evidence on record to show as to what was their income. Apart from this issue of the creditworthiness of the donor, the other issue was that .....

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before us that the gift deed, affidavit of the donor, his acknowledgment of filing of the return with computation of income with cash-flow statements were filed before the Assessing Officer of the donors on which no adverse inference have been drawn by the Assessing Officer. The statement of learned counsel for the assessee is corroborated by the assessment order in the case of the donor, Shri Sunil Duggal, copy of which is filed at page 9 of the paper book. In this case, assessment order under .....

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he donees, Shri Gautam Jain, no adverse inference was drawn against the transaction of the gifts. Therefore, there was no material available with the Assessing Officer of the donors to give any information to the Assessing Officer of the assessee to make out a case of escapement of income in the case of the assessee. This fact is supported by the notice given by the Assessing Officer of the donor to the assessee under section 131 of the Act (paper book page 12) and reply of the assessee and othe .....

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e other donees/assessees. 11. The hon'ble Gujarat High Court in the case of Inductotherm (India) P. Ltd. v. M. Gopalan, Deputy CIT [2013] 356 ITR 481 (Guj) held as under (headnote) : "The power to reopen an assessment is available either in a case where a return has been accepted under section 143(1) of the Income-tax Act, 1961, or a scrutiny assessment has been framed under section 143(3) of the Act. A common requirement in both cases is that the Assessing Officer should have reason to .....

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efore recording his own satis faction of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income chargeable to tax had escaped income. The Assessing Officer had to act on the basis of 'reasons to believe' and not on 'reasons to suspect'. The Tribunal rightly concluded that the Assessing Officer had failed to incorporate the material and his sati .....

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unting to ₹ 5 lakhs during the financial year 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which d .....

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t proceedings were not valid and were liable to be quashed. 14. The hon'ble Delhi High Court in the case of CIT v. Atul Kumar Swami [2014] 362 ITR 693 (Delhi) held as under (headnote) : "A valid reopening of assessment has to be based only on tangible material to justify the conclusion that there is escapement of income. Held accordingly, dismissing the appeal, that the note forming part of the return filed for the assessment year 1999-2000 clearly mentioned and described the nature of .....

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ote) : "Held, dismissing the appeal, that the reasons disclosed that the Assessing Officer reached the belief that there was escapement of income 'on going through the return of income' filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This was nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer. The reasons recorded by the Assessing Officer did confirm the apprehension about the har .....

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as Cycle Industries [1989] 180 ITR 319 (P&H) held as under (headnote) : "Held, (i) that the Tribunal was right in cancelling the reassess ment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make a reassessment." 17. Considering the facts of the case in the light of the above discussion, it is clear that information was received by the Assessing Officer from the Deputy Commis .....

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be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income in the case of the assessee. There is nothing in the reasons recorded to show any tangible material had come into possession of the Assessing Officer subsequent to the issue of intimation. A valid reopening of assessment has to be based only on tangible material to justify the conclusion that there is escapement of income. The Assessing Officer recorded wrong facts in .....

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