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03-09-2019, Suresh Chand Gupta, Section 147, 36(1)(iii), Tribunal Agra

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1 week 1 day ago #10716 by amit
Section - 147, 36(1)(iii), 148
Order Date - 03-09-2019
Favouring - Revenue
Court - Tribunal Agra
Appellant - Suresh Chand Gupta
Respondent - DCIT
Justice - LALIET KUMAR JM & DR. MITHA LAL MEENA AM
Citation - 919Taxpundit45
Appeal No. - I.T.A No.284/Agra/2017
Asstt. Year - 2010-11

Order

PER : Dr. M. L. Meena, A.M.

This appeal emanates from the order of the ld. Commissioner of Income Tax (Appeals)-2, Agra [(in short ‘the ld. CIT(A)], dated 28.02.2017, for A.Y. 2010-11, wherein assessee has raised the following grounds:

“1. The learned Commissioner of Income Tax (A)-2, Agra has erred in law and on facts in holding the re-opening of the case u/s 147 of Income Tax Act as valid without appreciating the facts of the case properly.

2. The learned Commissioner of Income Tax (A)-2, Agra has erred in law and on facts in confirming the addition of Rs.47,34,000/- being interest on FDRs ignoring that the appellant is a partnership firm and this interest income is duly disclosed in Audited Profit and loss A/c and Balance Sheet as also in the return of income filed in ITR-5 Part A-P & L A/c against Column (j) Rs. 47,34,000/- being other income under head (Business & Profession). Thus, there is double addition of Rs. 47,34,000/-.

3. That the learned Commissioner of Income Tax (A)-2, Agra has erred in law and on facts in not appreciating the facts of the case properly in as much as the Assessing Officer passing the original assessment order u/s 143(3) of Income tax Act, 1961 dated 26.12.2012 after lengthy discussion held “In this way, extra profit addition of Rs. 17,06,190/- (7.3% - 6.92%) on work done by self amounting to Rs. 44,74,30,030/- is made to the income returned by the assessee”. Hence computation of total income should have been (Income returned Rs. 2,73,46,630/- + Addition as discussed Rs. 17,06,190/- = Rs. 2,90,52,820/-).

4. That the appellant craves to alter, amend, add, and modify any grounds of appeal.

5. The appellate order being unjust, illegal, and arbitrary; hence deserves to be amended.”

2. Apropos Ground No. 1, the assessee has challenged validity of the re-opening of the assessment u/s 147 of Income Tax Act, on account of change of opinion.

3. The AO framed original assessment in the case of assessee u/s 143(3) by estimating profit rate after rejecting books of account. Subsequently the AO noticed that the assessee’s interest income from FDRs to the extent of Rs.47,34, has escaped assessment within the meaning of section 147 of the Act, (APB 52).Accordingly, the AO while taking due cognizance of fact that interest income from FDR of Rs.47,34,000/- had escaped assessment, he recorded his satisfaction on the escapement of the assessee’s income from other sources and reopened the assessee’s case u/s 147 of the Act by way of issue of notice u/s 148 of the Act dated 13.10.2014 to the assessee in the reassessment proceedings, and the AO has accordingly made an addition of Rs. 47,34,000/- under the head income from other sources against interest income from FDRs and thus assessed the total income of the assessee of Rs.3,37,86,820/- as against Rs.2,90,52,820/-.

4. Being aggrieved from the AO’s order, the assessee went in appeal before the ld. CIT(A), challenging the reopening of the case u/s 147 of the IT Act as in bad in law.

5. The ld. CIT(A) has rejected the legal ground of the assessee by observing the issue being covered in the case of the assessee of Hon’ble Apex Court in the case of ‘ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd.’ 2007 291 ITR 500 and ‘Raymond Woolen Mills Ltd. Vs. ITO’ (1999) 236 ITR 34 (SC) and Jurisdictional High Court in the case of ‘Anand Prakash Agrawal vs. CIT’ 121 DTR 227 and Hon’ble Karnataka High Court in the case of ‘CIT vs. United Racing & Blood Stock Breeders Pvt. Ltd. 131 DTR 344 where the Hon’ble High Court also held that sufficiency of correctness of the material is not a thing to be considered at the stage of reopening of proceedings u/s 147 relying on the decision of ‘ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd.’ (supra) accordingly, the ld CIT(A) has been set aside reasons recorded by the AO and held validity of the reopening of assessment by the AO by observing vide para 4.3 to 4.5 of the impugned order as follows:

“4.3 I have considered the facts of the facts of the case, written submissions filed by the Ld. AR for the appellant and perused the order of the AO. When the appellant itself has shown the interest on FDRs as his ‘other income’ in the profit & loss account, I find the AO had arrived to his reasonable satisfaction that the other income of assessee has escaped assessment in the original assessment, wherein the assessee’s only business income of assessee was determined on basis of gross contractual receipts of assessee, on which net profit rate was applied by the AO. As regards the assessee’s claim, that the AO’s action is based on change of opinion. It is observed that assessee’s objection is not based on the proper appreciation of the clear cut factual and legal position of the assessee’s case wherein the AO has adequately demonstrated that assessee’s income is liable to be assessed under a separate head which is provided in the scheme of the Income Tax Act, 1961. "Therefore the assessee’s claim is without any merit or credence into it. Thus in view of me forgoing it is well borne out that the AO has undertaken the re-assessment proceedings for bringing to tax the amount that has escaped assessment earlier. Therefore, the assessee’s contention that it was a change of opinion is misconceived and without any legal force.

4.4 As per the scheme of re assessment provisions u/s 147 of the Act, the word ‘reason’ in the phrase 'reason to believe' would mean cause or justification. If the assessing officer has a cause or justification to think or suppose that income had escaped assessment, the AO can be said to have a reason to believe that such income had escaped assessment. The words reason to believe' cannot mean that the AO should have finally ascertained the facts by legal evidence. It only means that the AO forms a belief from the examination he makes and information that he receives. If the AO discovers or finds or satisfies prima-facie himself/herself that the income has escaped assessment, it would amount to saying that AO has ‘reason to believe’ that such income had escapedassessment. The justification for his belief is not to be judged from the standards of proof required for coming to a final decision whether the income has escaped assessment or not. His formation of the belief is not a judicial decision, but an administrative decision. The decision to initiate the proceedings

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