IT : Where Assessing Officer had not made any addition in respect of escaped income for which he had recorded reasons, assessment order was liable to be cancelled
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[2013] 40 taxmann.com 149 (Jabalpur-Trib)
IN THE ITAT JABALPUR BENCH
Mihani Dal Mills
v.
Income-tax Officer*
Sunil Kumar Yadav, JUDICIAL MEMBER
AND P.K. Bansal, ACCOUNTANT MEMBER
AND P.K. Bansal, ACCOUNTANT MEMBER
IT Appeal No. 112 (Jab.) of 2009
[ASSESSMENT YEAR 1999-2000]
[ASSESSMENT YEAR 1999-2000]
FEBRUARY 2, 2013
Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Illustration [Reason to believe] - Assessment year 1999-2000 - Whether for a bona fide reason it is necessary that any assessment made in consequence of section 147, income as has escaped in opinion of Assessing Officer on basis of reasons recorded, additions must have been made - Held, yes - Whether further, if Assessing Officer did not make any addition in respect of income for escaped amount of which Assessing Officer recorded reasons to believe, and Assessing Officer made addition in respect of any other income, reasons so recorded could not be regarded to be a bona fide one - Held, yes - Whether, therefore, where Assessing Officer had not made any addition in respect of escaped income for which he had recorded reasons, assessment order was liable to be cancelled - Held, yes [Para 7] [In favour of assessee]
HELD
| ■ | In the reasons the Assessing Officer has not pointed out any of the assets acquired and expenditure incurred by the assessee which escaped the assessment. Section 147 requires the Assessing Officer to have the reasons to believe that any income chargeable to tax has escaped assessment. The reason must be bona fide. The words are not reason to suspect. There must be material relevant to the income escaped by the assessee on the basis of which the Assessing Officer must form prima facie belief. No doubt the Assessing Officer has not to prove at the time of recording of the reasons that the income has actually escaped the assessment but there must be material relevant to the assessee on the basis of which one may form prima facie opinion that the assessee has escaped income from assessment. The section further states that the Assessing Officer may assess or reassess such escaped income and also any other income chargeable to tax. The word used between such income and also any other income is 'and', therefore, for a bona fide reason it is necessary that any assessment made in consequence of section 147, the income as has escaped in the opinion of the Assessing Officer on the basis of the reasons recorded, the additions must have been made. If the Assessing Officer did not make any addition in respect of the income for the escaped amount of which the Assessing Officer recorded the reasons to believe, and the Assessing Officer makes the addition in respect of any other income, the reasons so recorded cannot be regarded to be a bona fide one. In this case the Assessing Officer has not made any addition in respect of the escaped income for which he has recorded the reasons. Therefore, that the reasons recorded are not bona fide. |
CASE REVIEW
CIT v. Jet Airways (I) Ltd. [2011] 331 ITR 236/[2010] 195 Taxman 117 (Bom.) and CIT v. Shri Ram Singh [2008] 306 ITR 343 (Raj.) (para 7) followed.
CASES REFERRED TO
CIT v. Jet Airways (I) Ltd. [2011] 331 ITR 236/[2010] 195 Taxman 117 (Bom.) (para 7), CIT v. Shri Ram Singh [2008] 306 ITR 343 (Raj.) (para 7).
Sanjay Mishra for the Appellant. Abhishek Shukla for the Respondent.
ORDER
P.K. Bansal, Accountant Member - This appeal has been filed by the assessee against the order dt. 20th Feb., 2009 of CIT(A)-I, Bhopal challenging the action of the AO taken under s. 147 of the Act as well as sustenance of the addition under s. 68 of the Act.
2. The brief facts relating to the action under s. 147 are that the AO initiated the proceedings under s. 147 by recording the following reasons :
"Reasons for the belief that income has escaped assessment.
Mihani Group Itarsi, District Hoshangabad comprises on amongst others the following members :
| 1. | Shri Shankar Mihani and his family members namely Smt. Usha Mihani, wife, Shri Sandeep Mihani, son and Ms. Renuka Mihani, daughter. | |
| 2. | Shri Balram Mihani and his family members namely Smt. Rukmini Mihani, wife, Shri Mukesh & Deepak Mihani, son and Ms. Kajal Mihani, daughter in-law. | |
| 3. | Shri Dilip Mihani and his family members namely Smt. Hemlata Mihani, wife, Shri Ravi Mihani, son and Ms. Puja Mihani, daughter. | |
| 4. | Shri Kanhaiya Mihani and his family members namely Smt. Varsha Mihani, wife, Shri Jaiky Mihani, son. | |
| 5. | Shri Mahesh Mihani and his family members namely Smt. Chandni Mihani, wife. | |
| 6. | Dharamdas Mihani and his family members namely Smt. Asha Mihani, wife, Shri Neeraj and Jitendra Mihani, sons. | |
| 7. | Dayaldas Mihani and his family members namely Smt. Nisha Mihani, wife. | |
| 8. | Shri Anil Mihani and his family members namely Smt. Savita Mihani, wife. | |
| 9. | Shri Sanjay Mihani and his family members namely Smt. Jyoti Mihani, wife. | |
| 10. | Smt. Lajwanti Mihani w/o Late Shri Vasudeo Mihani. | |
| 11. | Ms. Reshma Mihani. |
The group also owns and runs the following business concerns :
| 1. | Mihani Enterprises, Itarsi | |
| 2. | M/s Mihani Agencies, Itarsi | |
| 3. | Mihani Property Dealers, Itarsi | |
| 4. | M/s Mihani Departmental Stores, Itarsi | |
| 5. | Mihani Hardware, Itarsi | |
| 6. | M/s Mihani Kirana Stores, Itarsi | |
| 7. | Mihani Network, Itarsi | |
| 8. | M/s Mihani Dal Mill, Itarsi | |
| 9. | M/s Mihani Electronics, Itarsi | |
| 10. | M/s Mihani Sales Depot, Itarsi . |
Information has been received from the Police Department, Hoshangabad as per which during previous year relevant to asst. yrs. 1999-2000 to 2005-06, the various members of the Mihani Group have acquired assets and expenditure incurred for which is disproportionate to their known sources of income disclosed to the IT Department. A copy of the letter F. No. Tha/Eta/2734/2005 dt./2005 submitted by Shri C.P. Dwivedi, Town Inspector, Thana Sohagpur, Hoshangabad to the Hon'ble Court of JMFC, Itarsi, Hoshangabad has been received by the undersigned which is placed on record. The details of assets acquired and expenditure incurred under some heads are available in the various exhibits and enclosures of the abovesaid letter. On an examination of such material on record, I have reasons to believe that income chargeable to tax exceeding Rs. one lakh has escaped assessment in case of the assessee in asst. yr. 1999-2000 within the meaning of s. 147 of the IT Act, 1961."
3. Along with the reasons the AO has mentioned about the undeclared assets of the following persons :
| 1. | Balram Mihani | |
| 2. | Dileep Mihani | |
| 3. | Kanhaiya alias Bagga Mihani | |
| 4. | Mahesh Mihani | |
| 5. | Dharamdas Mihani | |
| 6. | Shankar Mihani | |
| 7. | Sanjay Mihani. |
Along with the reasons he has also enclosed the statement showing the various assets acquired by these persons during the period 1997 to 2005. The AO completed the assessment by making the addition under s. 69 of the Act amounting to Rs. 13,50,000 but no addition has been made in respect of undeclared assets.
4. The assessee went before the CIT(A) and the CIT(A) confirmed the order of the AO.
5. Before us, learned Authorised Representative on the basis of the reasons recorded, contended that the reasons are not bona fide. The reasons do not relate to the assessee. Even the name of the assessee is included in the Mihani Group at serial No. 8 but no description of any undeclared asset or expenditure is mentioned in the reasons. Even otherwise also on the basis of the reasons recorded no addition has been made in the case of the assessee that itself proves that the reasons are not bona fide. The order so passed is beyond jurisdiction and must be annulled.
6. On the other hand learned Departmental Representative relied on the order of the learned CIT(A).
7. We have heard the rival submissions, perused the material on record. We have also gone through the reasons recorded by the AO along with the Annexures forming part of the reasons recorded. We noted that in the reasons the AO has not pointed out any of the assets acquired and expenditure incurred by the assessee which escaped the assessment. Sec. 147 requires the AO to have the reasons to believe that any income chargeable to tax has escaped assessment. The reason must be bona fide. The words are not reason to suspect. There must be material relevant to the income escaped by the assessee on the basis of which the AO must form prima facie belief. No doubt the AO has not to prove at the time of recording of the reasons that the income has actually escaped the assessment but there must be material relevant to the assessee on the basis of which one may form prima facie opinion that the assessee has escaped income from assessment. The section further states that the AO may assess or reassess such escaped income and also any other income chargeable to tax. The word used between such income and also any other income is "and", therefore, for a bona fide reason it is necessary that any assessment made in consequence of s. 147, the income as has escaped in the opinion of the AO on the basis of the reasons recorded, the additions must have been made. If the AO did not make any addition in respect of the income for the escaped amount of which the AO recorded the reasons to believe, and the AO makes the addition in respect of any other income, the reasons so recorded cannot be regarded to be a bona fide one. In this case we find that the AO has not made any addition in respect of the escaped income for which he has recorded the reasons. The addition has been made only under s. 68 of the Act. We, therefore, are of the view that the reasons recorded are not bona fide. Our aforesaid view is duly supported by the decision of the Hon'ble Bombay High Court in the case of CIT v. Jet Airways (I) Ltd. [2011] 331 ITR 236/[2010] 195 Taxman 117 and that of Hon'ble Rajasthan High Court in the case of CIT v. Shri Ram Singh [2008] 306 ITR 343. We, therefore, set aside the order of the CIT(A) and cancel the assessment. Since we have cancelled the assessment the issue raised in appeal does not require any adjudication.
8. In the result, the appeal is allowed.
USP Regards
Prarthana Jalan
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