TMI Blog2018 (2) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... s for reopening. Further the reasons reproduced hereinabove are only the reasons forming part of the note sheet, whereas for the requirement of law, the reasons should be recorded separately and thereafter proceedings should be initiated by the AO.As the copy of reasons are required to be provided to the assessee and note sheet of the proceedings cannot acquire the status of reasons recorded Therefore the reassessment proceedings initiated by the Revenue against the BOI are without any jurisdiction - Decided in favour of assessee. - ITA Nos. 273 to 279/Bang/2010, 280/Bang/2010 To 286/Bang/2010, 287/Bang/2010 To 293/Bang/2010, ITA nos.294 to 300/Bang/2010, ITA Nos.301 to 07/Bang/2010, ITA Nos.308 to 314/Bang/2010, ITA Nos. 315 to 321/Bang/2010 And ITA Nos.322 to 328/Bang/2010 - - - Dated:- 6-12-2017 - MR. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL MEMBER ITA Nos.329 To 335/Bang/2010, ITA Nos.336 To 342/Bang/2010, 68/Bang/2003 To 71/Bang/2003, 72/Bang/2003 To 75/Bang/2003, 76/Bang/2003 To 79/Bang/2003, 80/Bang/2003, ITA Nos.81 to 87/Bang/2003, ITA Nos.88 to 91/Bang/2003, 92/Bang/2003 To 95/Bang/2003, 96/Bang/2003 To, 99/Bang/2003, 100/Bang/2003 T0 103 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.143(3) r.w.s 147 on 05.03.1998 making an addition in respect of the exemption income by the assessee. The AO has assessed the income of the assessee in respect of each assessment year as follows : Sl. No Appeal no. Name of the assessee A. Y Income assessed Rs. 1 ITA.273/B/2010 Disrupted BOI of D. Dasappa, D. Ramachandrappa D. Jairaj 1986-87 7,73,860 2 ITA.274/B/2010 -do- 1987-88 14,41,425 3 ITA.275/B/2010 -do- 1988-89 28,08,925 4 ITA.276/B/2010 -do- 1989-90 39,34,002 5 ITA.277/B/2010 -do- 1990-91 28,54,534 6 ITA.278/B/2010 -do- 1991-92 80,68,600 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Disrupted BOI consisting of Shri. D. Ramachandrappa, Shri. D. Ravikumar and Shri. D. Ravikumar PAN : ABJPR9683E 1986-87 8,43,861 23 ITA.295/B/2010 -do- 1987-88 14,23,925 24 ITA.296/B/2010 -do- 1988-89 27,58,925 25 ITA.297/B/2010 -do- 1989-90 37,03,002 26 ITA.298/B/2010 -do- 1990-91 27,43,484 27 ITA.299/B/2010 -do- 1991-92 71,59,545 28 ITA.300/B/2010 -do- 1992-93 21,38,971 29 ITA.301/B/2010 Disrupted BOI consisting of Shri. D. Jayaraj, Shri. D. Vijayakumar and Shri. 1986-87 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45 ITA.317/B/2010 -do- 1988-89 29,13,930 46 ITA.318/B/2010 -do- 1989-90 39,14,002 47 ITA.319/B/2010 -do- 1990-91 32,99,534 48 ITA.320/B/2010 -do- 1991-92 60,05,600 49 ITA.321/B/2010 -do- 1992-93 22,39,071 50 ITA.322/B/2010 Disrupted BOI 1986-87 8,50,912 consisting of Smt. R. Lakshmidevi, D. Ravikumar, Smt. D. Indrani PAN:AJPPS2187J 51 ITA.323/B/2010 -do- 1987-88 14,27,926 52 ITA.324 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -do- 1990-91 33,74,484 69 ITA.341/B/2010 -do- 1991-92 54,17,945 70 ITA.342/B/2010 -do- 1992-93 20,88,921 Assessee being aggrieved by the order passed by the AO filed an appeal before the CIT (A) 5. Before the CIT (A) assessee failed to get any relief. Consequentially, the assessee preferred appeal before the ITAT, challenging the validity of the assessment on the BOI of D. Dasappa, D. Ramachandrappa and D. Jayaraj. 6. The Tribunal, vide decision dated 02.03.2001 in ITA no 622 to 647 in para 22 and 23 held as under : 22. The ld. Representative Shri Venkatesan has also submitted that the issue of notices under 148 read with 147 was not correct. He has submitted that the assessee s were present before the AO and therefore, making assessments under sec.144 was also not correct. If the assessee s were disrupted, then the question of remaining present before the AO does not arise as they are not in existence. They could not also have been represented. The fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay High Court in the case of Ellis C. Reid v. CIT reported in 5 STC 100 for the proposition that in the absence of assessable person on the date of assessment, the assessment made on such person is bad in law. This decision of the Bombay High Court in the case of Ellis Reid (supra) has been referred by the Hon'ble High Court of Karnataka in the case of G.E. Narayana (193 ITR 41) wherein it was observed at page 47 as under: The forerunner to this principle is found in the decision of the Bombay High Court in Ellis C Reid V cit AIR 1931 Bom.333 (1930) 5 STC 100, wherein the Bombay High Court held that, when a person died after the commencement of the assessment year but before his income for the relevant accounting year was assessed, his executor was not liable to pay the tax. After this decision, section 24B was introduced in the earlier Income-tax Act, 1922 (similar to the present section 159). That the existence of the assessee at the time of the assessment order is an absolute necessity is a matter which has been recognised in all these decisions and if the assessee is not in existence, there should be a specific provision to assess the said income which was liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by an amendment of the law or by the decision of the High Court or Supreme Court. The earlier Bench considered these very decisions cited by the Id. AR and came to a certain conscious decision and therefore, the decision of the earlier Bench should be followed by this Bench for judicial consistency. Therefore, following the earlier order of the Tribunal, we uphold the validity of the assessments made on the disrupted BOIs. 13. The next issue is about the validity of the reopening. It is contended on behalf of the assessees that the reopening of the assessments is bad in law. Again, the validity of the re-opening was upheld by the Tribunal in the aforesaid order. It was contended by Shri Venkatesan that although the Tribunal upheld the validity of the reopening reasons that are mandatorily required to be recorded were not produced before the Tribunal during the course of hearing of the assessees Accordingly, we directed the learned Departmental Representative to produce the reasons recorded for the years under appeal . The learned Departmental Representative produced a photostat copy of the order sheet where the reasons recorded are as under: 'The assessees have izo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the individuals and firms as well as in the cases of the BOIs. In respect of some of the assessment years namely A. Ys 89-90, 90-91 and 1991-92 in the hands of the BOIs, notices u/s. 148 have already been issued. Some of these assessments are time barring by 31/03/96. Some of the remaining assessments are time-barring 31/03/97. We have not however, issued notices u/s. 148 in respect of the other years. From the facts gathered in the course of the assessment proceedings, it was considered that the amount brought into individual/firms hands through the media of BOIs are assessable as cash credits. The BOIs also could not establish that how they had earned substantial amount in the form of gifts and goodwill. However, the CIT(A) has decided otherwise. In the light of the above facts, I have reasons to believe that the income assessable for the assessment years 85-86 to 95-96 has escaped assessment in respect of the 10 BOIs referred to above, except the cases in respect of which proceedings u/s. 147 have already been initiated for the A. Ys. 1989-90, 1990-91, 1991-92 and the A. Y. 1992-93 in respect of which returns have already been filed and actions taken thereon. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer only wanted to make a protective. assessment. 17. For these reasons also, we hold that the reasons recorded are so vague and irrelevant that the assessment cannot be sustained from this angle also. Accordingly, we cancel the assessments so framed. 18. In so far as the assessment year 1992-93 is concerned, the assessments have been set aside by the CIT(A) and when the assessment is thus set aside and pending, the Assessing Officer has issued a notice u/s. 148 of the Act. Therefore, the present assessments made uls.148 of the Act are - also-bad in law. 19. Although, we have cancelled the assessment, we proceed to dispose of the other issues on merits in case the appeals are revived in further appeal. The learned Departmental Representative tried to contest that the finding of the Tribunal in the above order about the treatment of goodwill, gifts and presentations and additions towards agricultural income which are covered in favour of the assessee should be reviewed by the Tribunal in these appeals. We have perused the earlier order of the Tribunal in the case of the assessees and considered the argument of the learned Departmental Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO. Feeling aggrieved by the order passed by the CIT (A), the assessee filed an appeal before the Tribunal. 10. The Tribunal vide order dt.03.04.2007 in ITA No.68 to 103/2003 and 1359 to 1361/2002, has allowed the appeals of the assessee. In the said order, it was held by the Tribunal in Para 2.11 to 2.14 as under : 2.11 Af ter considering the submissions of both the part ies, i t is clear that on the basis of the decided law, one has to consider the justification for the reopening on the basis of reasons recorded, It has been held in the following case laws that validity of notice is to be judged on the basis of material existing prior to issue of notices:- 1. Chunnilal Surajmal v CIT (160 ITR 141) (Patna) 2. ITO v Textile Mills Agents P. Ltd. (130 ITR 733) (Cal.) Even the jurisdict ional High Court in the case of Vi jayalakshmi d Industries v ITO (155 ITR 748) has held that reopening is to be considered as valid on the basis of the reasons recorded and note, if any, available in the assessment record cannot help in holding that reopening is valid on the basis of such note. From the assessment order, i i is clear that the Assessing Officer has reopened t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stock Exchange Ltd. (262 ITR 146) (Guj.) 2.14 Once a f inding has been arrived by the Tribunal, the same finding cannot be reversed while hearing appeal of another assessee as it will tantamount to review of earlier order. Hence, also on this ground, it cannot be held that receipts in the nature of goodwill or gift and presentation belong to AOP. The reopening of assessment on such basis cannot be justified, as the Assessing Officer has no jurisdiction to review the order of the Tribunal. Hence, it is held that the reopening is not valid in the eyes of law. 11. Again at para.4 the Tribunal held as under : 4. On the other hand, the learned AR has relied on the decision of the Apex Court in the case of Ganga Saran Sons P. Ltd v. ITO (130 ITR 1). In this case, the Apex Court has held that the words has reason to believe are stronger than the words is satisfied . The Hon ble Apex Court held that the court cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the ITO in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no valid reasons assigned and it Is a mere change of opinion and the proceedings initiated against the assessees in the status of AOP would amount to review of the earlier order passed in the status of BOl . Be that as it may, we having heard the learned cousnel for both sides and on perusal of material on record. particularly, the order passed by the Tribunal and when in fact that the appeals with regard to the existence of BOl as on the date of Issuance of earlier notices under Section 148 is under consideration before the Tribunal, we deem It proper that these appeals would have to be heard along with those appeals filed by the assessees pursuant to the remand made by this court on 6.11.2007. 10. We say so for more than one reason. It is necessary to note that it is in respect of the very same assessees that the controversy regarding the existence of BOl as on the date of issuance of earlier notices under Section 148 is pending before the Tribunal and it is in respect of the very same individuals as to whether they had constituted themselves as AOP in various combinat ions has been the subject mat ter of the reopening by issuance of notices under Section 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts of income, the Tribunal straightaway held that the members had not joined together voluntarily and therefore, the income cannot be taxed in the hands of AOP. In our view there is no basis for arriving such a categorical conclusion. When the Assessing Officer has mentioned in the reasons recorded that the members of the family had come together to earn income by participating in excise auction or alternatively to earn income by collecting goodwill or royalty from other excise contractors for not bidding any excise auction and enabling other contractors to succeed in the auction, the Commissioner of Income Tax (Appeals ) had held that such an activity would amount to conscious activity of members coming together which according to the Commissioner of Income Tax (Appeals) justifies the group being assessed as -AOP rather than BOI . The Tribunal has also recorded that the Assessing Officer had not confronted to the assessees any material and therefore, the said material could not be used against the assessees. If that be so, then the Tribunal could not have straightaway concluded the matter on merits in favour of the assessees. Therefore, for the aforesaid reasons, we are o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time of original assessment in the year 1998 or before the CIT (A). Therefore the argument of the assessee is not acceptable. Feeling aggrieved by the order passed by the AO in the second round of litigation, the assessee filed appeal before the CIT (A). 14. The CIT (A) upheld the order passed by the AO and in paras 4.1, 4.2, 4.7 and 4.10 upheld the validity of notice u/s.148 in the following manner : 4. VALIDITY OF ACTION U/s 147/148 OF THE ACT [Gr.No.2 to 5.1] 4.1 At the t ime of the reassessment proceedings before the incumbent AC, the appellant again contested as bad in law the validity of the reopening of the assessment u/s 147 of the Act made by his predecessor through notices u/s 148 of the Act issued on 28/3/1996 for the assessment years under consideration on the same grounds that the appel lant had, by then, ceased to be in exi stence due to the disrupt ion of the Body of Individuals on 12/9/1993; that no income had escaped assessment; and that no assessment could be made on the disrupted BOI. The incumbent AC, quoting the provisions of section 2(31) of the Act and drawing attention to clause (v) thereof, explained in the reassessment order that the law ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned A.O ought to have appreciated that the objections of the appellant for reopening the assessment were valid and therefore, he ought to have dropped the proceedings initiated. The order of assessment therefore is invalid and requires to be cancelled. 4.2 At para 4 of the Statement of Fac t s ac companying the Appeal Memo, the appellant states that the returns of income for the said assessment years came to be f i led UNDER PROTEST in response to the illegal notice issued u/s 148 of the Act. It is also submi t ted at paras 9 and 10 therein that, when the appel lant 's representatives inspected the assessment records, it was found that the reasons for reopening the assessments were recorded only for the assessment years 1986-87 -and 1991-92 and not for the other assessment years under appeal; that, even in respect of the reasons found recorded for the assessment years 1986-87 and 1991-92, obj e c t ions we r e rai s ed be for e the AO for r eopening of the assessments but they were not taken cognisance of by the AO; that the incumbent AO's observat ion that the appellant should have raised such objections at the time of original assessments betrayed his ignora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons recorded in writing before issuance of notice u/s.148, based on which the assessee could raise the objection against the assumption of jurisdiction regarding the validity of original assessment proceedings. It was further submitted that in view of the Judgment of the Hon ble Supreme Court in GKN Drive Shaft vs CIT [259 ITR 19], the AO is duty-bound to furnish the reasons recorded within reasonable time and thereafter the AO is bound to pass a speaking order in respect of validity of assumption of jurisdiction by the AO on the objections raised by the assessee. The assessee has sought the reasons vide latest communication dt.09.12.2008. However, the AO despite the request has not provided the reasons for reopening. 18. The Ld. DR during the course of argument has submitted that the reasons for issuance of notice u/s.148, are as under : Beside these two note sheets no other reasons recorded were produced before us .Ld. DR relies upon the order passed by the AO and the CIT (A). 19. We have heard the rival contentions and perused the record. It is beyond the pale of controversy in terms of the judgment of the Hon ble Supreme Court in the matter of GKN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 003 ITA Nos.1359 to 1361/Bang/2002: 23. Now, we will deal with the other set of appeal filed by the assessee whereby the AO has treated the assessee as AOP pursuant. The assessee has raised grounds 2 and 3 in all the appeals pertaining to AOP in ITA Nos.68 to 103/Bang/2003 ITA.1359 to 1361/Bang/2002 : 2. The order of reassessment is had in law and void-abinitio for want of requi s i te jur i sdict ion espe cial ly, the mandatory requirements to assume jurisdiction u/s 148 of the Act did not exist and have not been complied with and consequently, the reassessment requires to be cancelled. 3. Wi thout prejudice to the abov e, the author i t ies below are not justified in completing the re--opened assessment protectively under the facts and in the circumstances of the appellant s case. They 'failed to appreciate that, provisions of Section 147 of the Act to re-open the assessment can be resorted to only where there is income escaping assessment and not merely on suspicion of income escaping assessment The act ion of the A.0. in assessing the income protectively clearly brings out the doubt and suspicion and consequently, the order of reassessment requires to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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