TaxTMI 
TaxTMI 
TaxTMI 
2005 (11) TMI 173
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....arned representatives of both the parties and gone through the observation of the authorities below and examined the rival submissions in the light of the material placed before us. The learned counsel for the assessee submitted that the assessees in ITA Nos. 378/95, 377/95, 380/95 and 389/95 have moved application for admission of the additional ground of appeal which reads as under:- "That the notice issued under section 148 in this case was invalid, barred by time and without recording any valid reasons for reopening of assessment and therefore the action of the Assessing Officer of reopening the assessment under section 147 is illegal and the said action has wrongly been upheld by the DCIT(A) Jalandhar." 4. The learned counsel for the assessee submitted that the legality and initiation of proceedings under section 147 of the IT Act have already been challenged in the case of the assessee Durga Parshad Goyal and a specific ground has been taken in the grounds of appeal. Learned counsel for the assessee submitted that the additional ground so raised is legal in nature which was taken before the authorities below. Learned counsel for the assessee further submitted that since th....
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.... the assessee on 31st March, 1989. In response thereto, the assessee filed letters on 1-5-1989 separately for assessment years 1982-83 and 1983-84 stating therein that he had already filed the income tax returns in respect of assessment years 1982-83 and 1983-84 which might be treated to have been filed in response to notice under section 148 of the Income-tax Act. The assessee objected to the legality of the initiation of reassessment proceedings on the plea that full facts of credits were before Income-tax Officer at the time of regular assessments, so the notices under section 148 could not be issued. The assessee also objected to the initiation of reassessment proceedings contending that the case was covered under clause (b) of section 147 and not under clause (a) of section 147 and that since the notice under clause (b) of section 147 had to be issued within a period of four years, therefore, the notices issued were beyond the time provided under the law. The legality of the initiation of reassessment proceedings were also objected to on the plea that subsequent information to the Assessing Officer that money lenders were not genuine did not justify the reassessment proceeding....
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.... in genuine. Even if some statement of Smt. Savitri Devi W/o Sh. Parshotam Dass was recorded, but there was no reference of loan transaction with any assessee and, as such, it was not open to the Department to initiate reassessment proceedings. He has pointed out that general statement made by a person disowning loan transaction with certain parties, not including the name of the assessee, could not empower the Assessing Officer to initiate reassessment proceedings. Learned counsel for the assessee further submitted that the similar questions were referred to the Special Bench by Hon'ble President of ITAT in the case of Assam Tea Co. v. ITO [2005] 92 ITD 85 (Asr.) in which the referred questions challenging the initiation of the proceedings under section 147 were decided by ITAT Special Bench Amritsar in favour of the assessee in Assam Tea Co. Learned counsel for the assessee submitted that the point in issue is squarely covered by earlier order of ITAT Amritsar Bench (Special Bench) in the case of Assam Tea Co. Learned counsel for the assessee also relied upon the decision of Hon'ble Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437. 9. On the othe....
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....ench of ITAT Amritsar Bench decided the identical referred questions in favour of the assessee and reassessment proceedings were quashed. The finding of ITAT Amritsar Special Bench in paragraphs 6 to 6.9 are reproduced as under:- "6. We have considered the rival submissions in extenso in the light of material placed before us and precedents relied upon. The primary question that falls for our consideration is to decide as to whether the reassessment proceedings initiated by the Assessing Officer and confirmed in the first appeal were valid or not. Before going to this question, it would be apposite to deal with the contention raised by Mr. Bansal to the effect that the Assessing Officer having accepted the transaction in original assessment proceedings could not have initiated the reassessment proceedings on the same facts. Section 147, prior to its substitution by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 had two clauses, namely (a) and (b). In the present appeals,, we are concerned with the unamended provisions. Relevant portion of clause (a) of section 147, empowers the Assessing Officer to assess or reassess any income, where he has reason to believe that by ....
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....ent stage. 6.1 Adverting to the facts of the cases under consideration, it is seen that the reassessment proceedings were initiated on the strength of some material gathered during the course of search at the residential and business premises of Sh. Parshotam Dass, on the basis of which the Assessing Officer came to the conclusion that the credits introduced by these assessees in their books of account in the name of M/s. RKPD were bogus as Sh. Parshotam Dass was only a name-lender. The stand of the aforesaid two cases is that the amounts were received through banking channels from M/s. RKPD which was a firm and the statement of Smt. Savitri Devi W/o Sh. Parshotam Dass, a stranger to the firm was inconsequential insofar as the transactions of the assessee with the said firm were concerned. 6.2 At this juncture, it would be relevant to get enlightened from certain judicial precedents on this point. In the case of Kashmiri Lal Kasturi Lal & Co. v. CIT [1989] 177 ITR 477 (Punj. & Har.), the Income-tax Officer found in the account books of -the assessee that firm 'G' had advanced a sum of Rs. 20,000 to the assessee by way of cash credit. At the time of original assessment, ....
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....n the balance sheet of the assessee made confessional statements to the effect that they were lending names and not money. The Assessing Officer re-opened the assessment of the assessee and added a sum of Rs. 1,60,000 to his income. The appeals before the AAC and the Tribunal were unsuccessful. When the matter travelled to the Hon'ble High Court, it was observed that even though breaking of a Hawala racket on all India basis could not have a rational connection with the loans of the assessee, yet confessional statements of the creditors might have a rational connection with the loans of the assessee. It was found that the material was not available in the order of the Tribunal as to whether the confessional statements related in any manner with the loans to the assessee or not. It was finally held that the Tribunal would be justified in upholding the re-opening of the assessment under section 147(a), if the confessional statements were in any manner related to the assessee; other not. 6.5 In the case of Phool Chand Bajrang Lal, the assessee had claimed that it had borrowed a sum of Rs. 50,000 from a Calcutta Company. Such loan was stated to have been raised and returned in ca....
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....ny capacity to advance the loans and he, ergo, acted only as a name-lender to these parties. It is an admitted position on behalf of the Deptt. that no statement of Sh. Parshotam Dass was recorded either at the time of search at his premises or during the course of assessment proceedings. The entire case of the Revenue is erected on the edifice of the small capacity of Sh. Parshotam Dass. It is true that Smt. Savitri Devi, W/o Sh. Parshotam Dass in her statement recorded on the occasion of search of her husband categorically stated that she had never advanced any loan to anybody during the last 8 years. She was asked if she knew Sh. Sushil Kumar, Sh. Ashok Kumar, Bhagwati Devi, in response to which she stated that neither she knew these persons nor any loan was advanced to them. It was further inquired whether she knew Parkash, Mahavir Pd. S/o Sh. Devi Dayal, Krishan Goel S/o Sh. Krishna Murari Goel and whether she had any transaction with them for the last 3 years, it was stated that she did not know these persons nor any transaction was made with them. On an examination of her preliminary and concluding statements, it becomes abundantly clear that no question was asked regarding ....
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....during the course of search on 31-3-1989. Under such circumstances, we are not persuaded to uphold the initiation of the reassessment proceedings, which are hereby quashed. We, therefore, answer first question in negative. In view of our answer to question No. 1, the second question becomes academic Only. 6.8 M/s. Ashoka Industries, the appellant in three years has also challenged the levy of interest under sections 139(8) and 215 in the reassessment proceedings. As the proceedings and the consequential assessment under section 148 are annulled, there cannot be any question of charging interest under these sections. 6.9 In the result, the appeal(s) of M/s. Assam Tea Co; and those of M/s. Ashoka Industries are hereby allowed." Learned representatives of both the parties have conceded before us that material facts are identical. It is admitted fact that in the present case also, statement of Shri Parshotam Dass is not recorded. The notice under section 148 was issued on 30th March, 1989 and was served upon the assessee on 31st March, 1989 i.e. prior to the amendment in section 147 of the Income-tax Act. Section 147 of the Income-tax Act prior to the substitution by Direct Tax ....
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....to tax has escaped assessment and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly material facts necessary for his assessment for that year or to make a return under section 139 for the assessment year to the Assessing Officer. Both the conditions should be cumulatively satisfied to confer jurisdiction to the Assessing Officer to initiate the proceedings. So long as the disclosure made by the assessee is full and true of all the material facts, the intention of the assessee cannot be questioned. If however, the subsequent events, after completion of the assessment, belie the claim of the assessee made at the assessment stage, it cannot be said that the disclosure earlier made was full and true. Hon'ble Supreme Court in the case of Lakhmani Mewal Das held:- "The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exi....
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....The decision of ITAT Amritsar Bench in the case of Gopi Chand Prem Kumar relied upon by the learned DR is not applicable in view of the order of the Special Bench of ITAT in the case of Assam Tea Co. In the case of Sachdeva & Sons, the initiation of reassessment proceedings was held to be justified by ITAT Amritsar Bench because specific material was available in the form of incriminating evidence recovered by the Enforcement Directorate. This case is, therefore, clearly distinguishable on facts. 13. In the present cases, the information collected by the Department after completion of the assessment is not specific, reliable and relevant. Any general information contained in the letter of the ACIT, Inv. Circle, in our opinion, is not relevant material to sustain the initiation of reassessment proceedings. Ld. DR referred to the letter of the assessee which was in nature of distinguishing the case of assessee. Ld. DR also placed copy of the reasons for issue of notice under section 148 in both the assessment years in the case of Durga Prashad Goyal in which the Assessing Officer has referred to the search conducted at the residence of Shri Purshotam Dass mentioned above and further....