Jolly David Pradhan, Darjeeling vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH: KOLKATA [Before Shri P. K. Bansal, AM & Shri Mahavir Singh, JM]

I.T.A No. 1727/Kol/2012 Assessment Year: 2005-06 Income-tax Officer, Wd-2, Darjeeling Vs. Shri Jolly David Pradhan (PAN: AFQPP3442N) (Appellant) (Respondent) & C.O. No. 02/Kol/2013 In I.T.A No. 1727/Kol/2012 Assessment Year: 2005-06 Shri Jolly David Pradhan Vs. Income-tax Officer, Wd-2, Darjeeling (Cross Objector) (Respondent) &

I.T.A No. 1728/Kol/2012 Assessment Year: 2006-07 Income-tax Officer, Wd-2, Darjeeling Vs. Shri Jolly David Pradhan (PAN: AFQPP3442N) (Appellant) (Respondent) &

C.O. No. 03/Kol/2013 In I.T.A No. 1728/Kol/2012 Assessment Year: 2006-07 Shri Jolly David Pradhan Vs. Income-tax Officer, Wd-2, Darjeeling (Cross Objector) (Respondent)

Date of hearing: 07.04.2015 Date of pronouncement: 30.04.2015

For the Revenue : Shri K. L. Kanak, Sr. DR For the Assessee/Cross Objector: Shri Subash Agarwal, Advocate

ORDER

Per Shri Mahavir Singh, JM:

Both the appeals and the Cross Objections filed by revenue and assessee respectively are arising out of separate orders of CIT(A), Siliguri in appeal Nos. 66 2 ITA Nos.1727 & 1728/K/2012 & C.O. Nos. 02 & 03/Kol/2013 Jolly David Pradhan AYs 2005-06 & 2006-07

& 69/CIT(A)/Slg/09-10 both dated 24.09.2012. Assessments were framed by ITO, Ward-2, Darjeeling u/s. 144/147 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Years 2005-06 and 2006-07 separately vide his order both dated 31.12.2009.

2. First we will adjudicate assessee's Cross Objections. In the said Cross Objections assessee has raised jurisdictional issue regarding the validity of initiation of reassessment proceedings u/s. 147 of the Act. For this, assessee has raised common grounds in his Cross Objections. We are reproducing following ground nos. 1 and 2 from CO No. 02/Kol/2013:

"1. For that the assessment order dated 31.12.2009 framed u/s. 147/144 is void and nullity in the eye of the law as there are no recorded reasons to belief that income chargeable to tax has escaped assessment.

2. Without prejudice to the ground no. 1 stated above, the recorded reasons are invalid and improper and as such, the assessment framed vide order dated 31.12.2009 is bad in the eye of law.

3. At the outset, Ld. Counsel for the assessee drew our attention to page 2 of assessee's paper book wherein certified true copy of order sheet entry for AY 2005- 06 i.e. typed copy is enclosed. The certified photo copy is at page 1 of assessee's paper book. The relevant order sheet entries were read out by assessee's counsel, which are as under:

"4/01/07 As the 'a' has not yet filed his return of income for the A. Yr 2005-06, issue notice u/s. 142(1), calling for the return.

3/6/08 No return of income has yet been filed by the assessee though from the records of the earlier assessment years it is evident that the total income of the assessee exceeds the maximum amount which is not chargeable to tax within the meaning of explanation 2(a) of section 147 of the IT Act 19611n the light of the above, notice u/s. 148 of the IT Act 1961 is issued to the assessee requiring him to furnish the return of Income.

12/11/09 Reminder letter issued to the assessee alongwith notice u/s. 142(1) of the Act requiring the assessee to submit/produce the particulars and documents entailed therein.

08/12/09 Reminder letter referring the case on 17/12/09 issued to the assessee.

31/12/09 As the assessee failed to file no return of income and as there was no compliance in any form to the notices issued, the case is disposed off U/S 144 read with section 3 ITA Nos.1727 & 1728/K/2012 & C.O. Nos. 02 & 03/Kol/2013 Jolly David Pradhan AYs 2005-06 & 2006-07

147 of the IT Act 1961. Penalty proceedings u/s. 271(1)(c), 271A, 271B, 271(1)(b) of the IT Act 1961 have been initiated separately. Copy of assessment order, demand notice and notice u/s. 274 issued to the assessee. "

Ld. Counsel for the assessee stated that there is no reason for issuance of notice u/s. 148 of the Act and the assessment framed by the AO, a survey operation was conducted by the revenue on the school premises i.e. Glen Hill Public School, Dow Hill Road, P.O. Kurseong, Darjeeling on 21.10.2005 of which assessee is Principal. Notice u/s. 148 of the Act for AY 2001-02 to 2004-05 were issued to the assessee and AO assessed the assessee in individual capacity. On the basis of the reassessment notice and also on the basis of impugned documents and materials seized during the survey on Glen Hill Public School treated the assessee as sole proprietor/sole beneficiary of the school. Ld. Counsel for the assessee drew our attention to the order of CIT(A) for AY 2001-02 to 2004-05 in appeal nos. 31, 32, 33 & 34/CIT(A)/Slg/09-10 dated 04.03.2011 wherein the CIT(A) on the basis of Tribunal's direction decided the issue of reopening exactly on similar facts and circumstances and quashed the reassessment proceedings by observing as under:

"I have carefully considered a submission of the Ld AR and also perused the assessment order, order of the IT AT and the documents filed by the AR. It is found

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1. The Glenhill Public School is a registered society registered under Registration NO.S/43859 of 1983-84 dated 04.01.1984.

2. Registration u/s.12A of the Income-tax Act, 1961 has been granted by the CIT- XIII, West Bengal on 28.09.1984.

3. The school has been affiliated under Council for Indian School Certificate Examinations.

4. The school maintained Bank A/c with SB1, Kurseong Branch.

5. As per the submission of the Ld AR, the survey u/s.133A was conducted in case of the school on 21.10.2005.

6. The ITO, Darjeeling - 2 issued notices uls.148 of the Act on 06.01.2006 for A Yrs 2001-02 to 2004-05 in the name of Glenhill Public School.

7. Subsequent to the issue of notices u/s.148, the AO issued notice u/s. 142(l) and 143(2) on 21.02.2006 in the name of the school for all those years.

8. On 09.10.2006 the AO wrote one letter to Sri Jolly David Pradhan (Director), M/s. Glen Republic School with reference to the notices issued u/s.148 of the Act. In the 4 ITA Nos.1727 & 1728/K/2012 & C.O. Nos. 02 & 03/Kol/2013 Jolly David Pradhan AYs 2005-06 & 2006-07

submission of the AR same was partially referred to.

However, while finalizing the assessment order, same was passed in the name of the assessee Sri Jolly David Pradhan mentioning his individual status. There is no evidence that proceedings u/s.147 were initiated in the name of the assessee. Apparently, the assessment orders were passed in the name of the assessee in respect of the proceedings initiated u/s.147 of the Act in respect of the school which is a separate entity for the purpose of Income-tax.

In view of the above facts and settled law, since no proceedings u/s.147 of the Act was initiated issuing notices u/s.148 of the Act in the name of the assessee, it is held that proceedings initiated in the name of the school cannot be transferred in case of the Principal of the school in his individual capacity. Thus, the assessment orders passed by the AO in respect of all four assessment years are bad in law.

However, the AO is directed to take action in case of the school to protect the interest of the revenue as per law.

Since these two grounds are decided in favour of the assessee, no decision is given in respect of other grounds taken on merit.

In the result, these four appeals are decided in favour of the assessee."

4. On this basis, Ld. Counsel for the assessee stated that there is no other reason for reopening except the material found from the school premises which belongs to the school and not to the assessee. Ld. Counsel for the assessee stated that he has clearly demonstrated before CIT(A) during appellate proceedings for AY 2001-02 to 2004-05 that this Glen Hill Public School is a registered society and separate entity. According to him, this has nothing to do with the assessee in question. In term of the above, he fairly stated that no further appeal has been preferred by revenue against this order.

5. On query from the Bench, Ld. Sr. DR Shri K. L. Kanak could not controvert the arguments made by Ld. Counsel for the assessee.

6. We have heard rival submissions and gone through facts and circumstances of the case. We find that revenue has made survey on the school Glen Hill Public School, which is a registered society as evident from the facts noted by CIT(A) in the appellate order for AY 2001-02 to 2004-05, which was not controverted by revenue. Even in future years the assessment was made in the hands of school i.e. the society in the name of Glen Hill Public School i.e. from AY 2006-07. In such 5 ITA Nos.1727 & 1728/K/2012 & C.O. Nos. 02 & 03/Kol/2013 Jolly David Pradhan AYs 2005-06 & 2006-07

circumstances, whether the reassessment proceedings u/s. 147 r.w.s. 148 of the Act can be resorted to. In our view because the entire material for which survey was conducted was found for and from registered society under the name of Glen Hill Public School and not the assessee. Once this is the position, the reassessment initiated is without any basis and hence quashed. Both the Cross Objections of assessee are allowed.

7. Since we quashed the reassessment proceedings the appeals filed by revenue has become infructuous and hence, the same are dismissed being infructuous.

8. In the result, both the appeals of revenue are dismissed and the Cross Objections of assessee are allowed.

9. Order is pronounced in the open court on 30.04.2015 Sd/- Sd/-

(P. K. Bansal) (Mahavir Singh) Accountant Member Judicial Member

Dated : 30th April, 2015

Jd.(Sr.P.S.)

Copy of the order forwarded to:

1. APPELLANT - ITO, Ward-2, Darjeeling.

2 Respondent - Shri Jolly David Pradhan, C/o Glen Hill Public School,

Dow Hill Road, P.O. Kurseong, Dist. Darjeeling-734203.

3. The CIT(A), Siliguri

4. CIT

5. DR, Kolkata Benches, Kolkata /True Copy, By order,

Asstt. Registrar.