2017 (6) TMI 587 - AT - Income Tax

Validity of proceedings initiated u/s. 147 - reasons to believe - Held that - At the time of recording of reasons the AO, since, had no tangible material before him to form a belief that income has escaped assessment, the reopening of assessment on mere suspicion, rumor and gossip is invalid. The AO in case of a particular assessee while initiating action u/s. 147 must form his own belief on the basis of materials/information in his possession and not at the behest of another officer. In the facts of the present case, we are convinced that at the time of recording of reasons there was no material before the AO to form a belief that income has escaped assessment. Though, the AO has referred to the information received from the AO at Madras, however, there is nothing available in the assessment record to throw light on the exact nature of information received from the AO, Madras and the mode of communication of such reasons. We are of the considered opinion that the formation of belief by the AO relating to escapement of income being not on the basis of any tangible material available before him at the time of recording of reasons, the initiation of proceedings u/s. 147 is invalid and without jurisdiction, hence, deserves to be annulled.- Decided in favour of assessee. Refund of excess appeal fees paid by the assessee at the time of filing of appeal before the CIT(A) - Held that - As per section 246A of the Act, any appeal filed by the assessee should be accompanied by appeal fees of Rs. .1000/-. Undisputedly, the assessee has paid appeal fees of Rs. .10,000/- while filing the appeals before the CIT(A) challenging the assessment orders. The CIT(A) has not disputed the aforesaid factual position. Therefore, when there is no dispute to the fact that the assessee has paid appeal fees in excess of what it was required to pay under the statutory provisions, such excess appeal fees has to be refunded to the assessee. We direct the AO to verify this aspect and refund the excess appeal fees paid by the assessee following due process of law.- Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of proceedings initiated under Section 147 of the Income Tax Act.
2. Refund of excess appeal fees paid by the assessee.

Issue-wise Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 147 of the Income Tax Act:

The first common issue raised in ground no.1 of all these appeals relates to the validity of proceedings initiated under Section 147 of the Act. The assessee, a company, filed its returns voluntarily for the assessment years 1998-99, 1999-2000, 2000-01, and 2001-02. For the assessment years 1998-99 and 2000-01, assessments were originally completed under Section 143(3) of the Act. For the assessment years 1999-2000 and 2001-02, returns were processed under Section 143(1) of the Act. The Assessing Officer (AO) reopened the assessments under Section 147, suspecting that income had escaped assessment due to bogus claims of commission payments to M/s. Narotam Agencies. Notices under Section 148 were issued, and the AO added back the service/commission charges paid to M/s. Narotam Agencies by treating them as bogus. The CIT(A) upheld the reassessment and the addition of commission/brokerage payments.

The learned AR argued that the AO had no tangible material to form a belief that income had escaped assessment and that the reopening was based on mere suspicion. The learned DR justified the reopening, citing specific information received from the AO of M/s. Narotam Agencies. The Tribunal examined the reasons recorded by the AO and found that the AO had not mentioned the nature of the information/material available at the time of forming the belief. The only material available was a letter dated 10.12.2010, which could not have been available at the time of recording reasons in March 2004. Therefore, the Tribunal concluded that the AO had no tangible material to form a belief that income had escaped assessment, rendering the reopening invalid. The Tribunal annulled the reassessment orders and quashed the assessments.

2. Refund of Excess Appeal Fees Paid by the Assessee:

The third issue common in all appeals relates to the refund of excess appeal fees paid by the assessee. The assessee, instead of depositing the actual appeal fee of Rs. 1000, paid Rs. 10,000 while filing appeals before the CIT(A) against the reassessment orders. The CIT(A) rejected the claim for a refund, stating that Section 246A does not provide for the refund of excess appeal fees and that the CIT(A) has no power to grant such refunds under Section 251(1).

The learned AR argued for the refund of excess appeal fees, citing the decision of the Hon'ble Bombay High Court in the case of Ranchodlal Maneklal vs. Maneklal Pranjivan Das AIR 1953 (Bom) 436. The Tribunal considered the submissions and found that the assessee had indeed paid appeal fees in excess of the statutory requirement. Therefore, the Tribunal directed the AO to verify the excess payment and refund the excess appeal fees to the assessee following due process of law.

Conclusion:

The Tribunal allowed the assessee's appeals, declaring the reassessment proceedings under Section 147 invalid due to the lack of tangible material at the time of recording reasons. Additionally, the Tribunal directed the refund of excess appeal fees paid by the assessee. The order was pronounced in the open court on the 9th day of May, 2017.