TaxTMI 
TaxTMI 
2007 (6) TMI 254
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....mation that has been referred to by the learned CIT (Appeals), in para 2 of the appellate order, was available with the Assessing Officer in the form of audited statement of account as well as Tax Audit report under section 44AB, at the time of processing the return and no discrepancy having been found in such information (at the time of initiation of action under section 147) the action under section 147 is bad in law. 3. Because in any case, non-issuance of notice under section 143(2), after the appellant had filed the return in compliance with the notice under section 148, was fatal to the very survival of the assessment order as was impugned before her and the learned CIT (Appeals) has erred in law and on facts in holding that sufficient opportunity of hearing having been given to the appellant otherwise, there was no requirement in law to issue notice under section 143(2). 4.1 Because the learned CIT (Appeals) had erred in law and on facts in upholding the addition of Rs. 63,100 as had been made in the assessment order, on the ground that the sources of corresponding credit remained unexplained. 4.2 Because the appellant had duly discharged his onus of proving the nat....
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....ds that: (a) the appellant had not given any detail to show as to how it is entitled to relief under section 80-IA. (b) such a claim had not been made at the original stage; and (c) in the proceedings under section 148, such a claim is not maintainable for the first time. 6.2 Because all the relevant details, were available on records, about the manufacturing activities being carried on by the appellant and the authorities below were under the statutory obligation to consider and allow the said claim, even if the same had not been made at the original stage. 6.3 Because wholly without prejudice to the contention raised in ground Nos. 6.1 and 6.2 above, the appellant's claim for relief under section 80-IA was legally maintainable, even if made for the first time in the re-assessment proceedings, as earlier assessment stood wiped off after initiation of proceedings under section 147. 7. Because the appellant disputes levy of interest under various heads. 8. Because the order appealed against is contrary to the facts, law and principles of natural justice." 2. The facts of the case are that the assessee is a proprietory concern of Shri Anil Kumar Gupta, and is ....
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....; 10,000 Tour and travel 5,000 Telephone expo for personal use 5,000 Staff-Welfare 2,000 Advertisement expenses 20,000 ------ Total  ....
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....nbsp; 2,400 ------ 63,100 ------------------------------------------------------------ 4. According to the Assessing Officer, neither the identity nor the capacity and creditworthiness has been established. The confirmations filed did not reveal complete details of income and savings of the creditors to advance loans. As the assessee did not discharge the onus of proving these loans and also did not produce the creditors, even though asked for by him, he added Rs. 63,100 as credits not proved. 5. Before the ld. CIT(A), the assess....
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....there must be material available with the Assessing Officer which could lead to the formation of reasons to believe that any income had escaped assessment. The Assessing Officer should have referred to such material in the reasons recorded. This is mandatory as per section 148(2). The material must have nexus with the formation of belief. If the material is irrelevant, then formation of belief would not be legally correct and hence re-opening will not be justified. In the present case, according to the ld. A.R. the reasons do not show that the Assessing Officer had any material with him. Whatever is mentioned has no relevance with the escapement of income. There is no nexus of any material with the escapement of income. According to the ld. A.R., the Assessing Officer had all the information on record. He mentioned in the reasons that he intends to do deeper scrutiny. According to him, some enquiries are called for, but this is not the requirement of law. The assessment cannot be re-opened without pointing escapement of income. The ld. A.R. relied on the decisions of Hon'ble Supreme Court in Chuggamal Rajmal v. S.P. Chaliha [1971] 79 ITR 603, Sheonath Singh v. AAC [1971] 82 ITR 147....
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....sment in a hurry. The ld. AR also submitted that section 68 is not mandatory and uses the word "May", which means that a discretion is available to the Assessing Officer whether to make addition under section 68 or not. Such discretion has to be used judiciously. The addition is not automatic if the creditors are not produced for some reason or the other. 10. Regarding the disallowances, the ld. AR submitted that assessee's accounts are audited. The auditors have verified the expenses. No defect/discrepancy have been pointed out in the books of account, which are evidence of correctness of entries. Without pointing out defect in the books, the Assessing Officer cannot resort to disallowances. The ld. CIT(A) has also confirmed part disallowances without considering the arguments of the assessee. 11. Regarding the claim under section 80-IA, the ld. AR submitted that the return filed under section 148 is at par with the return filed under section 139. The assessment once opened under section 148 is opened for all purposes, including the claims of deductions not originally made. Thus, deductions can be claimed in the return filed in response to notice under section 148. 12. In....
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....of issuance of notice under section 143(2) would not arise and the assessment could not be declared invalid. 14. On merits, the ld. D.R. submitted that the assessee has shown his inability to produce its creditors and therefore, no further time was allowed to the assessee. He relied on various authorities such as in the case of Nanak Chandra Laxman Das v. CIT [1983] 140 ITR 151 (All.), Bharati (P.) Ltd. v. CIT [1978] 111 ITR 951 (Cal.), CIT v. Transport Corpn. of India Ltd. [2002] 256 ITR 701 (AP), Goodyear (India) Ltd. v. CIT [2000] 246 ITR 116 (Delhi), CIT v. Chandra Vilas Hotel [1987] 164 ITR 102 (Guj.) and Rama Shanker Gupta v. CWT [2005] 275 ITR 628 (All.) to support his contention that the assessee has not been able to establish the identity of the creditor, their creditworthiness and genuineness of the transactions and the assessee has also not produced the creditors in spite of he being specifically asked by the Assessing Officer. 15. Regarding the claim of the assessee under section 80-IA, the ld. DR submitted that re-opening of the assessment under section 148(1) is for the benefit of revenue and only the income escaped as originally believe, or subsequently discove....
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....s confirmation of loan of Rs. 2,66,800 has been furnished with the return, hence the same is not treated as explained. Complete postal address and security received from stocks advances received from staff and postal addresses of sundry creditors have also not been furnished with the return. Turnover is of Rs. 1,40,23,431 plus G.P. appears very low. The expenses of sales promotion expenses of Rs. 1,94,555....... of Rs. 1,84,873 travelling and Rs. 2,82,792 appears to be excessive lowering down net profit/net income household expenditure is also low. This required deeper scrutiny. I have reasons to believe that taxable income of Rs. 4,06,000 has escaped assessment. Action under section 147 initiated. Issue notice under section 148." 19. These reasons, show that the Assessing Officer examined the original return filed by the assessee and found that in respect of creditor the assessee had not given complete addresses and confirmations of loans, therefore, they could not be treated as explained. The onus under section 68 lies on the assessee to establish identity of the creditors, their creditworthiness and also genuineness of transactions. The assessee has shown credits during the f....
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....re is a failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. This is on the basis of proviso to section 147 which requires such condition to be fulfilled before reopening of an assessment originally completed under section 143(3). For reference section 147 and its proviso read as under:- "147. Income escaping assessment.-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 recompute 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 ....
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....t there was no rational and intelligible nexus between the reasons recorded and belief it was held that: Held, (i) that since the assessment was done under section 143(1)(a) of the Act and not under section 143(3) of the Act, there was no occasion for the Department to express any opinion and, therefore, while issuing notice there was no change of opinion involved which called for assessment of reasons. 23. In Pradeep Kumar Har Saran Lal v. Assessing Officer [1998] 229 ITR 46 (All.) for the financial year ending 31-3-1989, relevant to the assessment year 1989-90, the petitioner obtained an excise licence in auction for purchasing and selling country liquor. He filed a return showing taxable income at Rs. 63,900. The Assessing Officer assessed the taxable income at Rs. 7,87,789 instead, making an addition of Rs. 7,23,889 after making adjustments under section 143(1)(a) of the Act. As per the adjustments explanatory sheet, appended to the intimation, the Assessing Officer recomputed the taxable income at the rate of 40 per cent of the purchase price applying the provisions of section 44AC, discarding the profits as worked out by the petitioner having recourse to sections 28 to ....
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....scharge and, therefore, prior to making a scrutiny assessment assessee is not required to prove the nature and source of the credits is legally not correct. Section 68 does not say that nature and source of credits have to be proved only in scrutiny assessment. If there are credits reflected in the balance sheet filed with the return and no explanation or satisfactory explanation as to the nature and source is filed along with the return indicting identity of the creditors and their creditworthiness, then the Assessing Officer will have basis to believe that those credits are deemed income of the assessee within the meaning of section 68. It would be a different matter if those credits are explained subsequently during scrutiny assessment. Thus in absence of documents showing an explanation or a satisfactory explanation filed with the return about the cash credits appearing in the balance sheet and the return having been accepted under section 143(1) the Assessing Officer will have reasons to believe that deemed income chargeable to tax under section 68 has escaped assessment. 26. Regarding second issue that notice under section 143(2) was not issued by the Assessing Officer and....
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....iii) that the Income-tax Officer had no material with him to entertain the necessary belief that the income of the petitioner chargeable to income-tax had escaped assessment: Held, that the extensions of time granted by the Income-tax Officer up to 30-4-1973, were given under the proviso to section 139(1) of the Act and could not be treated as notices issued under section 139(2) of the Act. Those two letters did not also contain a direction, as required by section 139(2), that the return should be furnished within thirty days of the service of the notice. The return finally filed by the assessee was under section 139(1). It was evident that no notice under section 139(2) was at all issued by the Income-tax Officer to the petitioner; and, therefore, the Income-tax Officer could not make a best judgment assessment under section 144 of the Act and the bar against assessment provided in section 153(1)(a)(iii) of the Act was not attracted. The return filed on 12-5-1975, having been filed beyond time, the Income-tax Officer was not unjustified in treating the same as non est. Therefore, the ground that the notice under section 147 could not be issued because the return already filed b....
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....5 held that "Even assuming for the sake of convenience that notice under section 143(2) of the Act was served has been received on behalf of the assessee on December 29, 2000, then there was no occasion that the assessee or his representative appeared before the Assessing Officer on 11-1-2001. In that case, issue was that if notice is not served on the assessee then whether assessment proceeding would be a nullity. Hon'ble Delhi High Court held against it. In our considered view, firstly, the Assessing Officer was not required to issue notice under section 143(2) as there was no valid return filed. by the assessee within the prescribed time given by the Assessing Officer in the notice under section 148(1) and secondly even otherwise, such non-issuance of notice under section 143(2) is mere irregularity and will not make the assessment void ab initio. Such an irregularity particularly in case of re-assessment proceeding is rectifiable and therefore, the matter cannot be sent back to the Assessing Officer. 31. We notice in the present case that the Assessing Officer, had issued notice under section 142(1) in response to which the assessee had produced the books of account and vouc....