Mohd Irshad, Muzaffarnagar vs Assessee

(APPELLANT) (RESPONDENT) PAN No. AIBPM6434B Assessee by : Sh. Ram Avtar Bansal Adv., Smt Prem Lata Bansal Sr. Adv. Revenue by : Sh. P. Dam Kanunjha, Sr. DR Date of Hearing : 24.03.2015 Date of Pronouncement : 19 .06.2015

ORDER Per N. K. Saini, AM:

This is an appeal by the assessee against the order dated 30/12/2011 of ld. CIT(A)- Muzaffarnagar.

2. The registry has pointed out that there is delay in filing the appeal by 315 days. The assessee moved an application for condonation of delay by stating therein that the delay occurred in the present case is bona fide. It was further stated that assessee had made surrender of Rs. 50,00,000/- subject to no penal action but while framing the assessment, the AO initiated the penalty proceedings u/s 271(1) (c) of the Act and the CIT(A) vide order dated 30.12.2011 upheld the proceeding 2 ITA No. 882/Del/2013

initiated by the AO u/s 147 of the Act and confirmed the addition of Rs. 50,00,000/- accepting the surrender made by the assessee. However, the ld. CIT(A) deleted the addition of Rs. 7,13,535/- made by the AO on other grounds. It was submitted that since the conditional surrender had been accepted by the AO and the CIT(A), the assessee did not file appeal against the order passed by the CIT(A) and it was only when the AO imposed the penalty of Rs. 17,00,000/- vide order dated 30.07.2012, the assessee after receiving the said order sought an opinion from the legal experts who opined that the surrender was conditional, it was made by the assessee to buy peace and to avoid litigation as he being the illiterate person, not conversant with the law. It was further submitted that since despite the conditional surrender AO imposed the penalty of Rs. 17,00,000/- the assessee was constrained to file the present appeal challenging the proceeding u/s 148 of the Act. Since the initiation of proceeding goes to the vary route of the matter and touches the jurisdiction of the AO u/s 147 of the Act. therefore, the delay in filing the appeal we condoned in the interest of justice. The reliance was placed on the following cases :-

"a) Collector Land Acquisition vs. Mst. Katiji (1987) 167 ITR 471 (SC) 3 ITA No. 882/Del/2013

b) Surya General Traders vs. CTO (2003) 133 STC 388, 389 (AP) applying Collector, Land Acquisition vs. Mst Katiji (1987) 167 ITR 471(SC)

c) Remex Constructions/ Remex Electricals vs. ITO (1987) 166 ITR 18, 23(Bom).

d) State of West Bengal vs. Administrator, Howrah Municipality, AIR 1972 SC 749.

e) Dinabandhu Sahu vs. Jadumani Mangaraj (1955) 1 SCR 114= AIR 1954 SC 411, applied in Mohanlal Chedilal vs. CST (1986) 62 STC 264 (ALL).

f) Sandhya Rani Sarkar vs. Sudha Rani Debi, AIR 1978 SC 537"

3. During the course of hearing the ld. Counsel for the assessee reiterated the submissions made in the aforesaid application and prayed to condone the delay. In his rival submissions, the ld. Sr. DR submitted that there was no reasonable cause in filing the appeal be deleted, therefore the delay should not be condoned.

4. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the assessee made a conditional surrender of Rs. 50,00,000/- and paid the tax on the said surrender subject to no penalty u/s 271(1)(c) of the Act. The assessee also furnished copy of order sheet dated 21.12.2009 which is placed at page no. 2 of the assessee's compilation, in the said order sheet also it is mentioned "subject to no penal action." Therefore, the assessee under bona fide believe that no penalty will be levied, surrendered 4 ITA No. 882/Del/2013

Rs. 50 lacs and did not prefer an appeal. In our opinion, there was a reasonable cause in filing the appeal belated, therefore the delay is condoned and the appeal is admitted.

5. Following grounds have been raised in this appeal :-

" 1. That the Ld. CIT(A) has erred in holding that the Assessing Officer was justified in issuing notice u/s 148 of the Act, which is incorrect in law and on fact and therefore, order passed by the Assessing Officer in pursuance thereto is liable to be quashed.

2. That the Ld. CIT(A) has erred in holding the initiation of proceeding u/s 147 as valid ignoring the material fact that the same was issued merely on the basis of change of opinion and therefore, was liable to be quashed.

3. That the Ld. CIT(A) has erred in upholding the validity of reassessment proceeding despite the fact that the necessary conditions for initiation of such proceeding has not been satisfied and therefore, the order passed by the ITO was bad in law.

4. That the Ld. CIT(A) has erred in upholding the validity of reassessment proceeding ignoring the material fact that the formation of belief by the Assessing Officer was based on incorrect grounds / reasons and therefore, the order passed in pursuance to such proceeding is liable to be quashed.

5. That the Ld. CIT(A) has erred in upholding the validity of reassessment proceeding despite the fact that the same was conducted by the Assessing Officer contrary to the procedure laid down by the Supreme Court and that the Assessing Officer had framed the assessment u/s 147 / 143(3) of the Act without deciding the objections, first, raised by the appellant 5 ITA No. 882/Del/2013

before him; hence the order passed by the ITO was bad in law, liable to be quashed.

6. That the Ld. CIT(A) has erred in confirming the addition of Rs. 50 lac made by the Assessing Officer, without application of mind and therefore, the additions made by him was uncalled for and be deleted from the income of the appellant.

7. That the Ld. CIT(A) has erred in dismissing the grounds raised by the appellant in respect of addition of Rs. 50 lac on surmises and conjectures and therefore, order passed by him is not sustainable in law.

8. That the ld. CIT(A) did not appreciate the fact that the A.O. had wrongly rejected the books of accounts.

9. That the appellant seeks leave to add, amend, alter, abandon or substitute any of the above grounds during the hearing of the appeal."

6. Vide ground nos. 1 to 5, the grievance of the assessee

relates to the reopening u/s 147 read with section 148 of the IT

Act, 1961(hereinafter referred to as the Act) and ground nos. 6

to 8 relates to the confirmation of addition while ground no. 9

is general in nature. Facts of the case related to this issue in

brief are that the assessee filed the return of income on

13.2.2008 declaring an income of Rs. 2,76,890/- which was

processed on 14.3.2008 on the returned income. Later on the 6 ITA No. 882/Del/2013

case was selected for scrutiny and the assessment was framed

at an income of Rs. 2,83,890/-. Subsequently, it came to the

notice of the AO that the assessee has furnished fabricated

bank statement which resulted into escapement of income to

the tune of Rs. 57,95,000/-. The AO accordingly issued the

notice u/s 148 of the Act after taking necessary sanction /

approval. In response to the said notice, no return of income

was filed, thereafter the AO issued a notice u/s 143(2) of the

Act and the assessee filed the objection against the reopening

u/s 147 of the Act on 21.09.2010. However, vide letter dated

15.11.2010, the assessee withdrew his objections to the

reasons recorded for initiation of re-assessment proceedings

and surrendered income of Rs. 50,00,000/- for taxation,

subject to no penal action. It was also stated that this surrender

was being done with clean hands and the surrendered amount

represented past savings kept in the house for future

unforeseen events. The assessee stated the sources of alleged

amount as under :-

7 ITA No. 882/Del/2013 S. NO. Amount Sources of fund

1. Rs. 10,00,000/- Rs. 12,00,000/- received from father before 40 years during family arrangements.

2. Rs. 40,00,000/- Advance money received in April, 2006 for sale of two houses--Rs.

15,00,000/- for house at Charthawal and Rs. 25,00,000/- for house at Muzaffarnagar

7. The AO, however, did not find any merit in this submission of the assessee that the alleged amount was capital receipts and was duly entered in the books of accounts and credited in "Mohd. Irshad personal fund A/c". The AO also rejected the books of accounts by observing that during the course of survey conducted on 28.02.2010, no books were found and during the earlier assessment proceedings in the books of accounts produced, there was no such "Mohm. Irshad Personal A/c" it was appended later. The AO held that a fabricated bank statement was produced which was tallied with the copy of accounts of bank as appeared in the books of accounts. Accordingly the books were rejected u/s 145(3) of the Act and the addition of Rs. 50,00,000/- was made.

8 ITA No. 882/Del/2013 8. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and furnished the written submissions which are reproduced in Para 3 at page nos. 5 to 12 of the impugned order for the cost of repetition the same are not reproduced herein. The Ld. CIT(A) also asked the remand report from the AO who furnished the same which has been incorporated in para 3.1.1at page nos. 13 to 18 of the impugned order. The assessee also furnished rejoinder to the remand report which is incorporated in para 3.1.2 at page nos. 18 to 21 of the impugned order for the cost of re-petition, the same are not reproduced herein.

9. The ld. CIT(A) after considering the submissions of the assessee and remand report of the AO sustained the initiation of re-assessment proceedings u/s 147 of the Act by observing that the assessee' submission were silent on the aspect of production of forged copy of bank account before the AO and that the emphasis of the assessee that the information received from bank was considered by the AO at the time of original proceedings was patently wrong. He further observed that the AO due to lack of vigilance fell in the trap laid by the assessee and failed to consider the particular entries in the copy of bank account of the assessee supplied by the bank, thus to repair the damage already done, correctly initiated the proceedings u/s 9 ITA No. 882/Del/2013

147 of the Act. The reliance was placed on the following case laws :-

"(i) CIT vs. Shapoorji Mistry (1962) 44 ITR 891 (SC)

(ii) Dhala v. CIT (1944) 12 ITR 341 (Pat)

(iii) Dalal (Dr. Mr.) v. CIT (1963) 49 ITR (1963) 49 ITR 492 (Bom)

(iv) Malegaon Electricity Co. Pvt. Ltd. v. CIT (1970) 78 ITR 466 (SC)

(v) Sachdeva (SD) v. CIT (1972) 86 ITR 447 (P&H)

(vi) CIT vs. Kalyanji & Co. (1969) 74 ITR 107 (Cal)

(vii) Sohan Singh v. CIT (1986) 158 ITR 174(Del)

(viii) ITO v. Radheshyam Ladia (1987) 166 ITR 134(SC)

(ix) Consolidated Photo and Fin vest Ltd. v. ACIT (2006) 281 ITR 394 (Del)

(x) Palaniswami (P) v. CIT (1977) 106 ITR 811 (Mad)

(xi) Panchugurumurthy v. CIT (1995) 211 ITR 51(Mad)

(xi) Ganga Saran & Sons (P) Ltd. v. ITO (1981) 130 ITR 1,

(xii) ITO v. Nawab Mir Barkat Ali Khan Bahadar (1974) 97 ITR 239

(xiii) Raymond Woolen Mills Ltd. v. ITO (1999) 236 ITR 34"

The Ld. CIT(A) accordingly held that the AO was perfectly justified in issuing the notice u/s 148 of the act and CIT also sustained the addition of Rs. 50,00,000/- by observing that the assessee should have not preferred appeal against the surrender made of Rs. 50,00,000/- inasmuch as the surrender made was not an impugned issue which could have been appeal against.

Now the assessee is in appeal.

10. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further 10 ITA No. 882/Del/2013

submitted that the AO framed the original assessment u/s 143(3) of the Act at an income of Rs. 2,83,890/-. Later on the AO had called information from Trade Tax department and Canara Bank, but no entries in respect of sending the letters and receiving informations were made by the AO in the order sheet. It was further stated that the Assessee raised the objection before the AO against the re-assessment proceedings and those objections were not disposed off till the considerable time was lapsed. It was also submitted that the assessee was pressurized to make the surrender of the impugned amount of Rs. 50,00,000/- to avoid litigation and alternatively assessee was so much mentally perturbed that he thought it better to make the surrender. Therefore, the initiation of proceedings u/s 148 was bad in law since no information had come before the AO to form a belief based on reasons and the assessee being illiterate person surrendered amount of Rs. 50,00,000/- subject to no penal action to avoid any dispute of litigation and also to purchase peace of mind and withdrawing of objection against reopening was also as a matter of condition.

11. In his rival submissions, the ld. DR strongly supported the orders of the authorities below and further submitted that the assessee himself withdrew the objection 11 ITA No. 882/Del/2013

filed against the re-assessment proceedings u/s 147 of the Act and also agreed for surrender of Rs. 50,00,000/-. Therefore, the AO was justified in initiating the proceedings u/s 147 of the Act and making the addition of Rs. 50,00,000/-. It was further, submitted that the ld. CIT(A) rightly upheld the addition made by the AO.

12. We have considered the submissions both the parties and carefully gone through the material available on record. In the present case, it appears that the AO initiated the proceedings u/s 147 of the Act on the basis that there were certain entries in the bank account of assessee for which there was no proper explanation. The AO also noticed that the assessee produced fabricated copy of bank account along with books of accounts and as such formed the belief that the assessee's income had escaped assessment. In the present case, the assessee although filed the objection against the initiation of re-assessment proceedings u/s 147 of the Act, however, withdrew those objection and surrendered a sum of Rs. 50,00,000/- subject to no penal action. In the instant case, when the assessee himself withdrew the objection filed against the initiation of re-assessment proceedings u/s 147 of the Act, surrendered a sum of Rs. 50,00,000/- and paid the tax thereon, in our opinion, the ld. CIT was fully justified in 12 ITA No. 882/Del/2013

upholding the proceedings initiated by the AO u/s 147 of the Act and in confirming the addition of Rs. 50,00,000/-. We, therefore, don't see any merit in this appeal of the assessee.

13. In the result the appeal of the assessee is dismissed.

(Order Pronounced in the Court on 19/06/2015)

Sd/- Sd/- (G.C.Gupta) (N. K. Saini) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 19 /06/2015 *B. Rukhaiyar* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5.DR: ITAT ASSISTANT REGISTRAR 13 ITA No. 882/Del/2013

Date Initial 1. Draft dictated on 17/06/2015 2. Draft placed before author 18/06/2015 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member. 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. File sent to the Bench Clerk 8. Date on which file goes to the AR

9. Date on which file goes to the Head Clerk.

10. Date of dispatch of Order.