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Shri Devendra Kumar Prop. Devendra Kumar Sanjeev Kumar, Purani Anaj Mandi, Jahangirabad, Bulandshahar (Up) Vs. Income Tax Officer, Ward-1 Bulandshahar
September, 29th 2015
                                                               ITA NO. 5179/DEL/2014



                IN THE INCOME TAX APPELLATE TRIBUNAL
                   DELHI BENCH "SMC-2", NEW DELHI
               BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER


                I.T.A. NO. 5179/DEL/2014
                       A.Y. : 2007-08
SHRI DEVENDRA KUMAR                   INCOME TAX OFFICER,
PROP.    DEVENDRA      KUMAR VS. WARD-1
SANJEEV KUMAR,                        BULANDSHAHAR
PURANI ANAJ MANDI,
JAHANGIRABAD,
BULANDSHAHAR (UP)
(PAN: ADPPK0938H)
(APPELLANT)                                 (RESPONDENT)

            Assessee by               :    Shri Ved Jain, Advocate
           Department by              :    Sh. Sudhiranjan Senapati, Sr. DR


                      Date of Hearing : 06-08-2015
                      Date of Order       : 28-09-2015
                             ORDER
PER H.S. SIDHU : JM
     This Appeal filed by the Assessee emanate out of the Order
dated 06.8.2014 passed by the Ld. CIT(A), Meerut               relevant to
assessment year 2007-08.

2.   The following grounds have been raised in the Assessee's
Appeal:-

                 1.     On the facts and circumstances of the case,
                        the order passed by the learned Commissioner
                        of Income Tax (Appeals)[(CIT(A)] is bad both in
                        the eye of law and on facts.

                 2(i)   On the facts and circumstances of the case,
                        the learned CIT(A) has erred both on facts and
                        in law in confirming the order of the AO
                                      1
                                                    ITA NO. 5179/DEL/2014




        rejecting the contention of the assessee that
        reopening the assessment under section 147
        of     the   Act   without    complying        with        the
        statutory      conditions     and     the     procedure
        prescribed under the law is bad and liable to
        be quashed.

(ii)    On the facts and circumstances of the case,
        the learned CIT(A) has erred both on facts and
        in law in confirming the order of the AO
        rejecting the contention of the assessee that
        the reason recorded for reopening of the
        assessment are bad in law and as such the
        reopening of the assessment is illegal and
        liable to be quashed so.

(iii)   On the facts and circumstances of the case,
        the reopening is bad in law in the absence of
        live nexus in the reasons recorded and the
        facts of the case.

3(i)    On the facts and circumstances of the case,
        the learned CIT(A) has erred both on facts and
        in     law    in   confirming       the     addition         of
        Rs.3,50,OOOI- in respect of the loan received
        from Mr. Sunil Kumar Yadav.

        (ii)    That the above said addition has been
        confirmed by misinterpreting the facts and
        arbitrarily    rejecting     the    explanation           and
        evidences      submitted     by     the   appellant in
        support of its contention.



                       2
                                                                ITA NO. 5179/DEL/2014




                 4(i)   On the facts and circumstances of the case,
                        the learned CIT(A) has erred both on facts and
                        in law in confirming addition of Rs.2,OO,OOOI-
                        in respect of loan received from Mr. Virendra
                        Kumar Yadav.

                 (ii)   That   the    above   said   addition     has       been
                        confirmed by misinterpreting the facts and
                        arbitrarily   rejecting   the   explanation           and
                        evidences     submitted   by    the   appellant in
                        support of its contention.

                 5.     That the appellant craves leave to add, amend
                 or alter any of the grounds of appeal."




3.   The brief facts of the case are that Assessee filed return of
income on 27.12.2007 declaring Net Income of Rs. 1,03,794/-. The
notice u/s. 148 was issued to the Assessee on 10.8.2010 which was
duly served on the assessee through speed post. In compliance to
the notice issued u/s. 148, assessee vide his reply dated 25.8.2010
requested that return filed on 27.12.2007 may be treated return of
income filed in response to notice issued u/s. 148, dated 10.8.2010.
Thereinafter notice u/s. 142(1) alongwith questionnaire and notice
u/s. 143(2) was issued on 7.12.2010 fixing the date for compliance
therein on 20.12.2010. In compliance of these notices Sh. Mukesh
Gupta, Advocate, authorized representative of the assessee and Mr.
Sanjeev Kumar, Brother of the assessee attended the proceedings
from time to time and furnished the necessary details and
information called for. The case was       also discussed with them in
detail. Thereafter, the AO completed the assessment at income of
Rs. 7,53,794/- vide his order dated 20.9.2011 passed u/s 143(3) of
the I.T. Act, 1961.


                                      3
                                                          ITA NO. 5179/DEL/2014




4.   Against the above order dated 20.9.2011, assessee filed an
appeal before the Ld. CIT(A), who vide impugned order dated
6.8.2014 has partly allowed the appeal of the assessee.

5.   Ld. Counsel of the assessee has mainly challenged the
reopening the assessment made u/s. 147 of the I.T. Act and stated
that the same is without complying with the statutory conditions and
the procedure prescribed under the law and is bad and liable to be
quashed. He further stated that the reopening is bad in law in the
absence of live nexus in the reasons recorded and the facts of the
case. He further stated that the reason recorded for issuing notice
under section 148 clearly indicates that the reopening done without
even an allegation that the assessee has failed in its statutory
obligation to disclose fully and truly the material facts necessary for
the computation of income and as such cannot be held to be valid in
law and need to be cancelled on this primary ground only. There is
not even an allegation in the reasons that assessee has failed to
disclose fully   and truly all material facts for the compaution of its
income.    To support his contention, he placed reliance on the
judgment of the ITAT in the case of M/s Minda Industries Ltd. vs.
DCIT Circle6(1), New Delhi in ITA NO. 5509/Del/2012 dated
19.6.2015.

6.   On the other hand, Ld. DR contended that the reopening in
question is valid, hence, he relied upon the orders of the authorities
below.

7.    I have heard both the parties and perused the records. After

considering the position with regard to the issue of reopening, I find

that all the questions / reasons recorded by the AO. I further find

that in the instant case, the assessee had made full and true


                                   4
                                                           ITA NO. 5179/DEL/2014




disclosure during the original assessment proceedings with regard to

issues in dispute. Hence, I am of the view that the reopening had

been done merely on change of opinion in as much as that in the

original assessment    made u/s. 143(3) of the I.T. Act, the AO had

apparently applied his mind and had raised queries with regard to

the items which have been identified by the AO in this notice u/s.

147/148 of the Income Tax Act. I also find that AO has no fresh

material to form his opinion regarding escapement of assessment

and he has also not found any tangible material to record the

reasons for reopening of the assessment of the assessee.                It is

merely a change of opinion which is not permissible under the law

as well as according to the various decisions rendered by the

Hon'ble Supreme Court of India in the case of CIT vs. Kelvinator of

India Limited in Appeal Nos. 2009-2011 of 2003 reported in 320 ITR

561 and     Commissioner of Income Tax vs. Usha International Ltd.

[2012] 348 ITR 485 (Delhi) [Full Bench] the reassessment is invalid

on the part of the AO and also on confirming the same on the part

of the Ld. CIT(A).


7.1   I also find that the facts and circumstances of the present case

are similar and identical to that of the decision of the Tribunal in the

case of Minda Industries Ltd. vs. DCIT (Supra) vide order dated

19.6.2015. For the sake of convenience, the relevant para 14 to 15

at page no. 20 to 24 of the order are reproduced hereunder:-

                                   5
                                                    ITA NO. 5179/DEL/2014




"14. We have considered the submissions of both the parties
andcarefully gone through the material available on the
record. In thepresent case, it is an admitted fact that the
original assessment in assessee's case was completed u/s
143(3) of the Act on 30.03.2006 and the assessment was
framed at an income of Rs. 4,28,28,277/- after making certain
additions/disallowances. Thereafter, on the basis of information
received by the AO from Investigation Wing that the assessee
was engaged in receiving the bogus entries, the assessment
was reopened. The AO identified 3 parties and issued
summons u/s 131 of the Act which returned back with the
remarks of the Postal Authority `left without address'. The AO
made the addition of Rs. 25,00,000/- by observing that that the
loans received in the said amount by the assessee were on
account of bogus entries. In the present case, it is an admitted
fact that the reassessment proceedings were initiated by the
AO only on the basis of information received from the
Investigation Wing and no independent inquiry was made by
the AO. It is also noticed that during the course of original
assessment proceedings the AO, vide notice u/s 142(1) of the
Act dated 04.04.2005 asked the details and confirmation for
increase in unsecured loan as is evident from page no. 101 of
the assessee's paper book which is the copy of the said notice.
In response to the said notice, the assessee vide letter dated
09.12.2005 furnished the list of inter-corporate loan alongwith
copy of return of income and financial statement. Therefore, it
cannot be said that the AO did not make the inquiries relating
to the loans or the assessee did not furnish the requisite
details of the loans. In the present case, the AO after
examining the aforesaid details framed the assessment u/s
143(3) of the Act vide order dated 30.03.2006, therefore, the
                            6
                                                            ITA NO. 5179/DEL/2014




reopening on the basis of the same issue which was examined
in the course of original assessment was a change of opinion.
On a similar issue the Hon'ble Delhi High Court Full Bench in
the case of CIT Vs Kelvinator of India Ltd. 256 ITR 1 held as
under:

     "The scope and effect of section 147 as substituted with
effect from April 1, 1989, by the Direct Tax Laws (Amendment)
Act, 1987, and subsequently amended by the Direct Tax Laws
(Amendment) Act, 1989, with effect from April 1, 1989, as also
of sections 148 to 152 have been elaborated in Circular No.
549, dated October 31, 1989. A perusal of clause 7.2 of the
said circular makes it clear that the amendments had been
carried out only with a view to allay fears that the omission of
the expression "reason to believe" from section 147 would
give arbitrary powers to the Assessing Officer to reopen past
assessments on a mere change of opinion. It is, therefore,
evident that even according to the Central Board of Direct
Taxes a mere change of opinion cannot form the basis for
reopening a completed assessment. A statute conferring an
arbitrary power may be held to be ultra vires article 14 of the
Constitution of India. If two interpretations are possible, the
interpretation    which     upholds     constitutionality   should          be
favoured. In the event it is held that by reason of section 147
the Income-tax Officer may exercise his jurisdiction for
initiating a proceeding for reassessment only upon a mere
change   of      opinion,   the       same   may   be   held        to      be
unconstitutional.

     An order of assessment can be passed either in terms of
subsection (1) of section 143 or sub-section (3) of section 143.
When a regular order of assessment is passed in terms of the
                                  7
                                                     ITA NO. 5179/DEL/2014




sub-section (3) of section 143 a presumption can be raised that
such an order has been passed on application of mind. It is well
known that a presumption can also be raised to the effect that
in terms of clause (e) of section 114 of the Indian Evidence Act,
1872, judicial and official acts have been regularly performed.
If it be held that an order which has been passed purportedly
without application of mind would itself confer jurisdiction upon
the Assessing Officer to reopen the proceeding without
anything further, the same would amount to giving a premium
to an authority exercising quasi judicial function to take benefit
of its own wrong. Hence, it is clear that section 147 of the Act
does not postulate conferment of power upon the Assessing
Officer to initiate reassessment proceedings upon a mere
change of opinion."

     The aforesaid order has been affirmed by the Hon'ble
Supreme Court in the case of CIT Vs Kelvinator of India Ltd.
320 ITR 561.

15. In the present case, also the AO while framing the original

assessment, specifically, asked the assessee to furnish the

details of the unsecured loans and the assessee gave the

details by disclosing the name of the persons from whom loans

were received and also furnished their PAN nos. alongwith the

requisite details in the form of affidavit from the Directors of

the lending companies, balance sheet & profit & loss A/c of

those companies as well as copies of acknowledgment of

Income Tax Return etc. to demonstrate the creditworthiness,

bonafide and genuineness of the transactions. The assessee
                             8
                                                                 ITA NO. 5179/DEL/2014




      also disclosed the names, addresses, PAN, Ward Nos. etc. of all

      the persons from whom loans exceeding Rs. 20,000/- were

      obtained and repaid during the year, in the              Annexure `H'

      attached to the Tax Audit Report which was furnished to the

      AO who after making the proper inquiry and being satisfied did

      not make any addition in the original assessment. Therefore,

      the notice issued u/s 148 of the Act subsequently on the basis

      of information received from the Investigation Wing of the

      Department was on account of change of opinion and as such

      the reopening u/s 147 of the Act was not valid, therefore, the

      subsequent reassessment framed on that basis was invalid.

      Accordingly, we set aside the impugned order passed by the

      ld. CIT(A) and the original assessment framed by the AO is

      restored."




6.1   In   the     background   of       the    aforesaid   discussions        and

respectfully following the precedents as aforesaid, I am of the view

that in the present case both the authorities below have gone wrong

in deciding the reopening as valid. However, it is established that

that in the present case the issue reopening of assessment is

incorrect and invalid.    Therefore,           I quash the orders         of the

authorities below on this legal issue and decide the same in favor

of the assessee.



                                     9
                                                           ITA NO. 5179/DEL/2014




6.2    Since I had already decided the legal issue in favour of the

assessee and the reopening is held as invalid, therefore, no findings

is given on the other grounds which are on merit.


7.    In the result, the appeal filed by the Assessee stand allowed.

      Order pronounced in the Open Court on 28/9/2015.


                                                        Sd/-
                                                  [H.S. SIDHU]
                                               JUDICIAL MEMBER

Date 28/9/2015
"SRBHATNAGAR"
Copy forwarded to: -
1.    Appellant -

2.    Respondent -
3.    CIT
4.    CIT (A)
5.    DR, ITAT         TRUE COPY
                                                    By Order,



                                                 Assistant Registrar,
                                                 ITAT, Delhi Benches




                                   10

 
 
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