The order of the Bench was delivered by
Bhavnesh Saini (Judicial Member)- All the appeals by different assessees are directed against the different orders of the learned Commissioner of Income-tax (Appeals)-II, Ludhiana, dated January 11, 2012, for the assessment year 2005-06. In all the appeals, the assessee challenged the reopening of the assessment under section 148 of the Income-tax Act, 1961 and the additions of Rs. 21 lakhs, Rs. 46 lakhs and Rs. 12 lakhs received from the donors, Shri Sunil Duggal and Shri Gaurav Duggal and Parmod Duggal, respectively.
2. The learned representatives of both the parties mainly argued in the case of the assessee, Smt. Sarika Jain, in I. T. A. No. 316 of 2012 and submitted that the facts are the same in the remaining appeals. Therefore, for the purpose of disposal of all the appeals, we take up the appeal of the assessee, Smt. Sarika Jain, as under.
I. T. A. No. 316 of 2012 : (Smt. Sarika Jain)
3. In this case, the Assessing Officer passed the order under section 143(3) read with section 148 of the Income-tax Act dated December 30, 2010. The facts of the case are that in this case, the original assessment for the assessment year 2005-06 had been reopened by issuing of notice under section 148 and after recording reasons, which are reproduced in the assessment order, the Assessing Officer issued a notice on March 30, 2010. The main purpose of issuance of the notice under section 148 was that the assessee had received a gift of Rs. 21 lakhs from one Shri Sunil Duggal and Shri Gaurav Duggal and as per the reasons, it was observed by the Assessing Officer on the basis of the letter received from the Deputy Commissioner of Income-tax, Central Circle, Ludhiana, that the assessee had received a gift of Rs. 21 lakhs from Shri Sunil Duggal and Shri Gaurav Duggal and since they did not have the blood relation with the assessee and neither there was any occasion for the gift, therefore, the assessment was reopened to bring to tax a sum of Rs. 21 lakhs.
4. During the course of the assessment proceedings, the assessee had challenged the reopening of the assessment under section 148 of the Act and also stated that the proceedings are bad in law but the Assessing Officer stated that the gift was received for love and affection by the donee, is not tenable since it was received from the stranger and there was no such occasion and, accordingly, made addition on account of gift from undisclosed sources under section 69A of the Income-tax Act.
5. During the appellate proceedings, the assessee submitted that the Assessing Officer made the wrong addition and has not accepted the genuine gift which is confirmed by the donor. Copy of the affidavit was filed and the source of the same was also explained. The additional evidences were forwarded to the Assessing Officer for his comments in which the Assessing Officer objected to the admission of the same and also explained that there was valid reason for reopening of the assessment under section 148 of the Income-tax Act.
6. The learned Commissioner of Income-tax (Appeals), considering the merit, record, submissions of the assessee and remand report, noted that the information was received from the Assessing Officer, Central Circle, Ludhiana, about the gift received by the assessee from Shri Sunil Duggal and Shri Gaurav Duggal and after recording the reasons, assessment was reopened under section 148 of the Income-tax Act and addition was made in the assessment order. The learned Commissioner of Income-tax (Appeals) did not accept the contention of the assessee that there was no application of mind or that reasons were recorded in mechanical manner. The contention of the assessee that there were no incriminating materials available against the assessee, was also not accepted. The learned Commissioner of Income-tax (Appeals) held that for the purpose of reopening, the only requirement is that there should be reliable information and the belief of the Assessing Officer that income has escaped assessment and after considering the material on record, the learned Commissioner of Income-tax (Appeals) justified the action of the Assessing Officer in reopening of the assessment and this ground of appeal of the assessee was dismissed. The learned Commissioner of Income-tax (Appeals), with regard to the addition of merit also considered the material on record and noted that the donors have made a series of gifts, therefore, the same could not be said to be voluntary and, accordingly, confirmed the addition on the merits as well by following the decision of the hon'ble Punjab and Haryana High Court in the case of Lall Chand Kalra v. CIT [1981] 22 CTR (P&H) 135 and upheld the action of the Assessing Officer and, accordingly, dismissed the appeal of the assessee.
7. We have heard the learned representatives of both parties. Learned counsel for the assessee reiterated the submissions made before the authorities below and referred to the paper book page 19 which is reasons recorded under section 148 of the Income-tax Act dated March 29, 2010, and submitted that though the gift was received from Shri Sunil Duggal only donor, in the reasons the name of two donors, Shri Gaurav Duggal and Shri Sunil Duggal, have been wrongly mentioned. He has referred to paper book pages 1 and 2 which is acknowledgment of filing of the return and computation of income for the year under consideration and submitted that the return is filed on August 1, 2005, at Rs. 1,46,513 but in the reasons, the Assessing Officer has mentioned the date of filing of the return as May 19, 2005, declaring the income of Rs. 75,533. This fact is also incorrectly mentioned in the reasons. Further, in the reasons, it is stated that there was a failure on the part of the assessee to disclose truly and fully all material facts. He has submitted that there is no column in the return of income declaring the receipt of the gift. He has, therefore, submitted that the Assessing Officer has not applied his mind while recording the reasons for reopening of the assessment and recorded incorrect facts therein. Paper book pages 3 to 8 are the affidavit of gift and affidavit of the donor with his details of Income-tax return filed along with the cash-flow statement and paper book page 9 is the assessment order dated November 15, 2007, in the case of the donor, Shri Sunil Duggal, in which no adverse view have been taken either against the donor or the donee. Paper book page 12 is a letter of the Deputy Commissioner of Income-tax, Central Circle, Ludhiana, under section 131 for appearance of the assessee. Paper book page 13 is replies of the assessee authorising Shri Gautam Jain to appear before the Deputy Commissioner of Income-tax, Central Circle, Ludhiana, in the group case and others. He has submitted that the Assessing Officer received information in this case for reopening of the assessment from the Deputy Commissioner of Income-tax, Central Circle V, Ludhiana, dated March 5, 2007, in the group cases in which nothing is mentioned if there is any escapement of income for the purpose of reopening of the assessment. He has submitted that in thiscase, several other assessees have been mentioned but no actions have been taken against any of them by the Assessing Officer except the three assessees above. He has submitted that in this information, there is no mention of receipt of any bogus gift. There is no nexus of material with the reasons. In the case of Lall Chand Kalra (supra), the issue was of the creditworthiness of the donor and the present issue with regard to the reopening of the assessment was not there. No tangible material was found against the assessee for reopening of the assessment. No evidence was found against the donor about their creditworthiness and genuineness of the transaction in the matter. There was no material before the Assessing Officer to form his belief that income chargeable to tax has escaped assessment. Similarly, there was no tangible material forwarded by the Deputy Commissioner of Income-tax, Central Circle, Ludhiana, which could be the basis of reopening of the assessment. Therefore, reopening of the assessment is wholly unjustified. He has filed several decisions of different High Courts and of the different Benches of the Tribunal in support of his contention and also relied upon the decision of the hon'ble Gujarat High Court in thecase of Jagat Jayantilal Parikh v. Deputy CIT [2013] 355 ITR 400 (Guj) in which it was held that "no assessment could be reopened under section 148 unless the Assessing Officer formed his independent belief to his subjective satisfaction that income has escaped assessment". Learned counsel for the assessee also on the merits submitted that the addition is wholly unjustified.
(i) On the other hand, the learned Departmental representative relied upon the orders of the authorities below and submitted that prima facie details were available before the Assessing Officer to reopen the assessment. The reopening of the assessment is done on the basis of the report received from the Deputy Commissioner of Income-tax, Central Circle, Ludhiana, dated March 5, 2007, which is tangible material before the Assessing Officer for reopening of the assessment. Sufficiency of the material is not required to be seen at the time of reopening of the assessment. He submitted that the decision of the High Court would amount to information, therefore, reopening of the assessment is wholly justified in the matter. The learned Departmental representative relied upon the decision of the hon'ble Supreme Court in the case of Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 (SC), the decision of the hon'ble Supreme Court in the case of Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC), decision of the Supreme Court in thecase of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC), the decision of the Supreme Court in thecase of ITO v. Puroshottam Das Bangur [1997] 224 ITR 362 (SC), the decision of the Delhi High Court in thecase of Rajat Export Import India Pvt. Ltd. v. ITO [2012] 341 ITR 135 (Delhi), the decision of the Supreme Court in the case of A. L. A. Firm v. CIT [1991] 189 ITR 285 (SC) and the decision of the Supreme Court in the case of ITO v. Saradbhai M. Lakhani [2000] 243 ITR 1 (SC). The learned Departmental represent ative also submitted that the addition on the merits have been rightly made which is supported by several decisions of the hon'ble Punjab and Haryana High Court.
8. We have considered the rival submissions. The validity of the reassessment proceedings under section 148 of the Act shall have to be decided on the basis of the reasons recorded by the Assessing Officer under section 148 of the Act. In this case, the Assessing Officer recorded the reasons for initiating proceedings under section 148 of the Income-tax Act on March 29, 2010, copy of the same is filed at page 19 of the paper book. The same is reproduced as under :
"Reasons for issuance of notice under section 148
Smt. Sarika Jain, 27A, Tagore Nagar, Ludhiana, assessment year 2005-06 PAN ABMPJ9153G
The assessee has filed its return of income for the assessment year 2005-06 on May 19, 2005, declaring a total income of Rs. 75,533.
Information in the case has been received from the office of the Deputy Commissioner of Income-tax, Central Circle, Ludhiana, vide letter No. 998, dated March 5, 2007, that Sh. Sunil Duggal, 38G, Saraba Nagar had gifted an amount of Rs. 21,00,000 to Smt. Sarika Jain. During the course of the assessment proceedings of Duggal group of cases confirmation of donees were filed. From the perusal of confirmation of Sh. Gautam Jain before the Deputy Commissioner of Income-tax, Centre Circle-V, Ludhiana, dated February 28, 2007, it is found that the donor, Shri Gaurav Duggal and Sh. Sunil Duggal, have no blood relation with the donee nor was there any specific occasion for making such huge gift. The gift was made only for love and affec tion for the donee. The gift received is from totally a strange person. Hence, the case of the donee is clearly found to be hit by Lall Chand Kalra v. CIT reported at [1981] 22 CTR (P&H) 135. It is also clear that the assessee had introduced her own undisclosed money by way of alleged gift taken by her in books of account.
In view of the facts and circumstances of the case as detailed above it is clear that the entire amount of Rs. 21,00,000 is the assessee's own income. I have, therefore, reason to believe that by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, an amount of Rs. 21,00,000 has escaped income for the assessment year 2005-06. Hence, it is a fit case for issuance of notice under section 148 of the Income-tax Act, 1961.
Issue notice under section 148 of the Income-tax Act, 1961 for the assessment year 2005-06.
Dated : 29.03.2010.
Sd/
(Madan Lal)
Income-tax Officer
Ward VII(2), Ludhiana."
9. It may be noted here that in the reasons recorded above, the Assessing Officer has mentioned that the assessee filed the return of income for the assessment year under appeal on May 19, 2005, declaring a total income of Rs. 75,533. This fact is wholly incorrect because the assessee filed acknowledgment of filing of the return of income and computation of income in the paper book and, according to the same, return of income is filed by assessee on August 1, 2005, declaring total income of Rs. 1,46,513. The copy of the reasons filed in the paper book at page 19 as reproduced above, find mention the signature of the Assessing Officer thereon. However, the Assessing Officer, while reproducing the reasons in the assessment order, has noted the different reasons which did not match with the copy of the reasons filed in the paper book. The Assessing Officer in paragraph 2.4 of the assessment order has mentioned this reason explaining therein that while recording the reasons under section 148, returned income and the date of filing of the return were inadvertently mentioned as Rs. 75,533 and May 19, 2005, instead of Rs. 1,46,513 and August 1, 2005, respectively. The observations of the Assessing Officer in the assessment order clearly prove that the Assessing Officer has mentioned wrong facts and wrong information in the reasons recorded for reopening of the assessment. Thus, he has no authority to refer the incorrect reasons in the body of the assessment order. It may be noted when the assessee asked for details noted in reasons incorrectly, the Assessing Officer did not provide any details to the assessee.
(i) It may also be noted here that according to the reasons under section 148, the Assessing Officer found that the donor, Shri Gaurav Duggal and Shri Sunil Duggal, have no blood relation with the donee but according to the case of the Revenue, the assessee received the gift from only donor Shri Sunil Duggal and this fact is also mentioned in the letter of the Deputy Commissioner of Income-tax, Central Circle, dated March 5, 2007. Therefore, this is also wrong information/fact noted in the reasons recorded for reopening of the assessment. Further, it is noted in the reasons that the Assessing Officer has reason to believe that by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. However, it is not clarified as to how there is a failure on the part of the assessee to disclose fully and truly all material facts because there is no column in the return of income to disclose the receipt of the gifts. These facts clearly prove that the Assessing Officer recorded wrong facts and wrong information in the reasons recorded under section 148 of the Income-tax Act for reopening of the assessment and would prove that the Assessing Officer has not applied his independent mind before recording the reasons for reopening of the assessment. Thus, the Assessing Officer has not formed his independent belief to his subjective satisfaction that income has escaped assessment. The Assessing Officer admitted in reasons that gift was made only for love and affection for the donee.
(ii) The copy of letter dated March 5, 2007, issued by the Deputy Commissioner of Income-tax, Circle V, Ludhiana, has been placed on record providing information to the Additional Commissioner of Income- tax, Range VII, Ludhiana, from the regular assessment proceedings of the cases of the donors in which the name and address of the donee, their permanent account number and the amount of gift have been mentioned. It was stated that confirmation from the donees have been provided. The donees were summoned for examination and Shri Gautam Jain attended on behalf of others authorised by them and he was examined regarding the gifts in which he has confirmed having already issued the confirmation in support of the aforesaid gifts received from the donor, Shri Duggal. In this information, it was stated that since there is no relationship of the donor and the donee and there was no specific occasion for making gift, therefore, the case is hit by the judgment of the hon'ble Punjab and Haryana High Court in the case of Lall Chand Kalra (supra). This letter was containing the confirmations of the donees. It would, therefore, clearly reveal that in this information which is the sole basis of reopening of assessment, no information was provided by the Assessing Officer of the donors about any bogus gift given by the donors to the donee. No further information was provided to prima facie explain any escapement of income in the cases of the donor or the donees. The reference is made of the statement of Shri Gautam Jain recorded by the Assessing Officer of the donor, copy of which is placed on record in which Shri Gautam Jain have himself and for other assessees has confirmed the receipt of the gift and he has explained that Shri Sunil Duggal or Shri Gaurav Duggal are not related by blood but they are his personal friends and the donors deal in business of manufacturing of T-Shirts and export business. It was also explained that genuine gifts have been given and all the donees are known to the Duggal family because of their friendship. Therefore, from the statement of Shri Gautam Jain also, it is nowhere disclosed whether there was any escapement of income in the cases of the donees, i.e., the assessee and others. Mere reference has been made of the judgment in the case of Lall Chand Kalra (supra). In the case of Lall Chand Kalra (supra), the Tribunal decided the genuineness of the gift on the merits against the assessee. The reference to the hon'ble High Court was made under section 256(1) and the issue before the hon'ble High Court was with regard to the creditwor thiness of the donor. In this case, there were no satisfactory evidences on record to prove that the donors owned land measuring 40 acre and 20 killas or that their annual net income was in fact Rs. 30,000 or Rs. 18,000 as alleged by them. Therefore, it was held that donors were not men of means. It was also found that the land belong to the donors, were barani and there was no evidence on record to show as to what was their income. Apart from this issue of the creditworthiness of the donor, the other issue was that both the donors were strangers to the donees and there was no occasion to make a gift. Reference was answered against the assessee and in favour of the Revenue. Therefore, this case was decided on the merits of both these two issues and would not deal with the reopening of the assessment under section 148 of the Income-tax Act. In the case of the assessee in appeal, no information of the creditworthiness of the donor is available. The assessee was not totally stranger to donor.
10. It is argued before us that the gift deed, affidavit of the donor, his acknowledgment of filing of the return with computation of income with cash-flow statements were filed before the Assessing Officer of the donors on which no adverse inference have been drawn by the Assessing Officer. The statement of learned counsel for the assessee is corroborated by the assessment order in the case of the donor, Shri Sunil Duggal, copy of which is filed at page 9 of the paper book. In this case, assessment order under section 144 ex parte was passed on November 15, 2007, and the issue of gifts have been examined by the Assessing Officer of the donor and no adverse inference have been drawn of giving any bogus gift for consideration. The Assessing Officer of the donor accepted the declared income even in the ex parte assessment order. It would, therefore, clearly prove on record that despite making specific enquiry with regard to the genuineness of the gift even in the case of the donor and examining one of the donees, Shri Gautam Jain, no adverse inference was drawn against the transaction of the gifts. Therefore, there was no material available with the Assessing Officer of the donors to give any information to the Assessing Officer of the assessee to make out a case of escapement of income in the case of the assessee. This fact is supported by the notice given by the Assessing Officer of the donor to the assessee under section 131 of the Act (paper book page 12) and reply of the assessee and others (paper book page 13), etc. It may also be noted here that except the present three assessees, the names of other donees have been mentioned in the letter dated March 5, 2007, issued by the Deputy Commissioner of Income-tax, CC-V, Ludhiana, which is the basis of reopening of the assessment but no action have been taken against other assessees by the concerned Assessing Officer. No reasons have been explained as to why no action have been taken on the basis of identical facts in the cases of the other donees/assessees.
11. The hon'ble Gujarat High Court in the case of Inductotherm (India) P. Ltd. v. M. Gopalan, Deputy CIT [2013] 356 ITR 481 (Guj) held as under (headnote) :
"The power to reopen an assessment is available either in a case where a return has been accepted under section 143(1) of the Income-tax Act, 1961, or a scrutiny assessment has been framed under section 143(3) of the Act. A common requirement in both cases is that the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment. There should be tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief."
12. The hon'ble Punjab and Haryana High Court in the case of CIT v. Smt. Paramjit Kaur [2009] 311 ITR 38 (P&H) held as under (headnote) :
"Held, that the Assessing Officer had not examined the information received from the survey circle before recording his own satis faction of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income chargeable to tax had escaped income. The Assessing Officer had to act on the basis of 'reasons to believe' and not on 'reasons to suspect'. The Tribunal rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and, therefore, the issuance of notice under section 148 of the Act for reassessment proceedings was not valid."
13. The hon'ble Delhi High Court in the case of Signature Hotels P. Ltd. v. ITO [2011] 338 ITR 51 (Delhi) held as under (headnote) :
Held, allowing the petition, that the reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during the financial year 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to be quashed.
14. The hon'ble Delhi High Court in the case of CIT v. Atul Kumar Swami [2014] 362 ITR 693 (Delhi) held as under (headnote) :
"A valid reopening of assessment has to be based only on tangible material to justify the conclusion that there is escapement of income.
Held accordingly, dismissing the appeal, that the note forming part of the return filed for the assessment year 1999-2000 clearly mentioned and described the nature of the receipt under a non-compete agreement. The reasons for the notice under section 147 of the Income-tax Act, 1961, nowhere mentioned that the Revenue came up with any other fresh material warranting reopening of assessment. Therefore, mere conclusion of the proceedings under section 143(1) ipso facto did not permit invocation of powers for reopening the assessment."
15. The hon'ble Delhi High Court in the case of CIT v. Orient Craft Ltd. [2013] 354 ITR 536 (Delhi) held as under (headnote) :
"Held, dismissing the appeal, that the reasons disclosed that the Assessing Officer reached the belief that there was escapement of income 'on going through the return of income' filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This was nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer. The reasons recorded by the Assessing Officer did confirm the apprehension about the harm that a less strict interpretation of the words 'reason to believe' vis-a-vis an intimation issued under section 143(1) could cause to the tax regime. There was nothing in the reasons recorded to show that any tangible material had come into the possession of the Assessing Officer subsequent to the issue of the intimation. The notice reflected an arbitrary exercise of the power conferred under section 147."
16. The hon'ble Punjab and Haryana High Court in the case of CIT v. Atlas Cycle Industries [1989] 180 ITR 319 (P&H) held as under (headnote) :
"Held, (i) that the Tribunal was right in cancelling the reassess ment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make a reassessment."
17. Considering the facts of the case in the light of the above discussion, it is clear that information was received by the Assessing Officer from the Deputy Commissioner of Income-tax, CC-V, Ludhiana, dated March 5, 2007, which did not reveal any fact of escapement of any income. It refers only the decision of the hon'ble Punjab and Haryana High Court in the case of Lall Chand Kalra (supra). This did not say that the assessee received any bogus gift. The reasons did not satisfy the requirements of section 147 of the Income-tax Act. There is no reference to any document or statement except reference to the judgment of the High Court. The same could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income in the case of the assessee. There is nothing in the reasons recorded to show any tangible material had come into possession of the Assessing Officer subsequent to the issue of intimation. A valid reopening of assessment has to be based only on tangible material to justify the conclusion that there is escapement of income. The Assessing Officer recorded wrong facts in the reasons as mentioned above and, thus, has not applied his mind before forming belief of escapement of income. The information dated March 5, 2007, was not a pointer and did not indicate the escapement of income.
18. The Assessing Officer did not examine the information which was nothing and did not speak of escapement of income before recording his own satisfaction of escaped income initiating the reassessment proceedings. Thus, the Assessing Officer acted only on the basis of suspicion and the same could not be said that it was based on belief that income charged to tax has escaped assessment. The Assessing Officer did not have any reason to believe that income chargeable to tax has escaped income. The Assessing Officer, therefore, did not validly assumed the jurisdiction under section 147/148 of the Income-tax Act for reopening of the assessment in the matter. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment under section 147/148 of the Income-tax Act. Resultantly, all additions would stand deleted. In view of the above findings, there is no need to decide the issue of gift on the merits because the same is left with academic discussion only.
19. In the result, the appeal of the assessee is allowed.
I. T. A. No. 317 of 2012 and I. T. A. No. 318 of 2012
20. The learned representatives of both parties submitted that the issues are the same in these appeals as have been considered in Appeal No. 316 of 2012 in the case of Smt. Sarika Jain. By following the reasons for the decision in the case of Smt. Sarika Jain (supra) we set aside the orders of authorities below addition and quash the reopening of the assessment under section 147/148 of the Income-tax Act. Resultantly, all the additions on the merits would stand deleted. There is no need to decide the issues on the merits as the same is left with academic discussion only. Both appeals of the assessee are allowed.
21. In the result, all appeals of the assessees are allowed.