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TMI Blog2016 (7) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... cessarily be the income of the assessee. That being so, in keeping with ‘Bir Bahadur Singh Sijwali’ (2015 (2) TMI 60 - ITAT DELHI) the reasons recorded to initiate assessment proceedings under section 147 of the Act and all proceedings pursuant thereto, culminating in the impugned order, are cancelled. - Decided in favour of assessee - ITA No.631(Asr)/2015 - - - Dated:- 27-5-2016 - SH. A.D. JAIN, JUDICIAL MEMBER For The Appellant : Sh.Sandeep Vijh, CA For The Respondent : Sh. A.N. Mishra, DR ORDER This is the assessee s appeal for the assessment year 2006-07, against the order dated 16.10.2015, passed by the ld. CIT(A), Jalandhar. The assessee has raised the following grounds of appeal: 1. That the ld. CIT(A), has erred in upholding an order which is bad in law. The issue of improper service of notice u/s 148 dated 30.04.2008 amounting to non service of notice has not been appreciated. 2. That the ld. CIT(A), has erred in upholding the assumption of jurisdiction for re-assessment. The re-assessment proceedings in this case were only based on presumption/suspicion and were thus not validly initiated. 3(a). That the ld. CIT(A), has erred in not allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat income of the assessee amounting to ₹ 1,98,000/- had escaped assessment. In view of these facts, the case of the assessee was sought to be assessed under section 147 of the Act by issue of notice under section 148 of the Act, dated 30.04.2008. However, neither was there any compliance to this notice, nor any return in response to the notice was filed. As there was no compliance to the notice under section 148 of the Act, the Assessing Officer issued a notice under section 142(1) of the Act dated 12.09.2009 for 26.06.2009, enclosing therewith the reasons recorded for the proposed assessment, under section 147, thereby asking the assessee again to file the return. This notice was served through the notice server of the Department on the grandfather of the assessee on 20.06.2009. However, again, there was no compliance on 26.09.2009. Subsequently, another notice under section 142(1) of the Act dated 23.10.2009 along with a detailed questionnaire was issued for compliance on 27.10.2009. Vide the questionnaire, the assessee was specifically asked to furnish the following evidence and documents: 1. Documentary evidence regarding source of the cash deposits in the bank accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. DR, Bir Bahadur Singh Sijwali (supra), is not applicable. 7. On a query from the Bench, as to under which provision the said letter dated 13.03.2008 was issued by the AO to the assessee, the ld. DR responded by stating that this was a general enquiry letter. However, the provision under which such a letter is sanctioned by the law could not be pointed out. 8. So, the first issue arisen for consideration is the legal force, sanctity and value of the enquiry letter dated 13.03.2008 and also the effect of the assessee s response/non response thereto. 9. The enquiry letter dated 13.03.2008 reads as follows: dated 13.03.2008 No.ITO-WI-CIB.Inf.2007-08 To Sh.Gurpal Singh S/o Sh. Surinder Singh, VPO Khajurla, Tehsil Phagwara. Sub: Verification of CIB Information Reg. In connection with verification of CIB information received in your case with regard to cash deposit in Bank accounts, you are requested to produce your Bank Passbook. Cash Book and Ledger for the period ending 31.03.2006 on 26.03.2008 at 11.00AM. In this regard, you are requested to bring documentary evidence for the source of deposit of cash on different dates (if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and its processing to be in line with its plans of computerization. Allotment of permanent account number is being done with the help of computers. Quoting of such numbers in high value transactions may be made to a statutory requirement. 41.2. At present the provisions of sub-section (6) of section 133 empower income-tax authorities to call for information which is useful for, or relevant to, any proceeding under the Act which means that these provisions can be invoked only in cases where the proceedings are pending and not otherwise. This acts as a limitation or restraint on the capability of the Department to tackle evasion effectively. It is, therefore, thought necessary to have the power to gather information which after proper enquiry, will result in initiation of proceedings under the Act. 41.3. With a view to having a clear legal sanction, the existing provisions to call for information have been empowered to requisition information which will be useful for or relevant to any enquiry or proceedings under the Income-tax Act in the case of any persons. The Assessing Officer, would, however, continue to have power to requisition information in specific cases in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicates that it was at the instance of the Director of Income-tax (Investigation) that the information was sought for . (emphasis supplied) 17. Thus, to reiterate, with effect from 01.07.1995, the condition that some proceeding must be pending is no longer applicable. Under the earlier provisions of section 133(6), the prescribed Authorities had the power to call for any information from any person which would be useful for, or relevant to, any proceeding under the Act. The amendment in subsection (6) empowers the prescribed Authorities to call for information for the purpose of any inquiry under the Act even in cases where no proceeding is pending. However, an Income Tax Authority below the rank of Director or Commissioner can exercise the said power in respect of an inquiry only with the prior approval of the Director or the Commissioner. 18. In the present case, the enquiry letter dated 13.03.2008 was issued by the Income Tax Officer, i.e., an Officer below the rank of the Income Tax Authorities referred to in the second proviso to section 133(6). Thus, in keeping with the said second proviso to section 133(6), prior approval was required to be obtained from the competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorities, the powers vested in a Court when trying a suit . Now, in juxtaposition to the trial of a suit by a Court, what would the equivalent before the Income Tax Authorities be? But obviously, proceedings under the Income Tax Act. Else, there would be no scope at all for the exercise of such power. 25. As a natural corollary, therefore, it follows that it is only during the pendency of some proceeding before it, that an Income Tax Authority can exercise the power vested on them under section 131(1), and not otherwise. 26. And this position stands judicially acknowledged in various judicial pronouncements, as follows. 27. In Jamnadas Madhavji Co. and Others vs. J.B. Panchal, ITO and Another , 162 ITR 331 (Bom.), for two years, the assessment orders were passed. For a third year, assessment proceedings became time barred. Subsequently, the assessee received from the ITO, summons under section 131(1) of the I.T. Act, calling upon the assessee to furnish information, documents and books of account on various points specified therein, in respect of the previous years relevant to all the aforesaid three years. In reply, reiterating the aforesaid position of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. and Another (supra), cannot be done sans pendency of some proceeding before the Income Tax Authority. At this juncture, it would be appropriate to reiterate that as finds mention in the impugned order, the assessee had not filed any return of income with the Department. As such, obviously, no proceeding whatsoever was pending before the Authority at the relevant time, i.e., at the time of issuance of the enquiry letter. 28. Also, as available from the concluding portion of the judgment in Jamnadas Madhavji Co. and Another (supra), their Lordships held that the ITO had, at that stage, i.e., when no proceedings were pending before him, no authority in law to invoke section 131(1) of the I.T. Act against the assessee. It was on holding so, that it was held that consequently, the ITO had no power to issue the impugned summons, having no sanction of law. Therefore, in Jamnadas Madhavji Co. and Another (supra), in the absence of pendency of any proceeding, the very invocation of the provisions of section 131(1) of the Act has been held to be without due authority of law. 29. Jamnadas Madhavji Co. and Another (supra), was followed by the Hon ble Calcutta High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority; that the powers of the Income Tax Authorities u/s 131(1) are powers of the Court of law; that while exercising these powers, the Income Tax Authorities have a quasijudicial capacity; that these powers must be exercised strictly for the purposes set out in sub-section (1) of section 131 of the Act, and not for any extraneous purposes; that the powers u/s 131 can be exercised only if proceedings are pending before the Authority concerned under the I.T. Act; and that the same is the position under the Wealth Tax Act and the Gift Tax Act. 32. In Rina Sen vs. CIT Others , 235 ITR 219 (Patna); the assessee constructed a house between 1967 and 1973. Return of income for the assessment year 1982-83 disclosed rental income, which was accepted by the ITO. In 1992, a notice was issued by the Assistant Valuation Officer, in terms of section 131(1)(d) of the Act, to produce documents regarding the house. It was held that since no Income tax proceedings were pending against the assessee in respect of the earlier years, the notice issued in terms of section 131(1)(d) of the Act, was not valid. It was observed that notice u/s 131(2) in respect of assessment year 1991- 92 could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1A). Under section 131(2) also, the Authority can exercise powers u/s 131(1) even in the absence of pendency of proceedings before them. Section 131(2) reads as follows: Section 131(2): For the purpose of making an inquiry or investigation in respect of any person or class of persons in relation to an agreement referred to in section 90 or section 90A, it shall be competent for any income-tax authority not below the rank of Assistant Commissioner of Income-tax, as may be notified by the Board in this behalf, to exercise the powers conferred under sub-section (1) on the income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before it or any other income-tax authority. 36. It is thus seen that whereas both sections 131(1A) and 131(2) deal with the situation where the powers u/s 131(1) can be exercised inspite of absence of pendency of proceedings and specific mention of such enablement is made by the legislature in both of these provisions, there is no such enablement contained in section 131(1). In other words, the legislative intent is clear from the words employed in sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Now, the AO recorded the following reasons for initiating assessment proceedings u/s 147 of the Act in the present case: Brief reasons to issue Notice u/s 148 of the Income Tax Act, 1961 As per information available with this office, the assessee is found to maintain saving bank account with State Bank of India, Khajurla, Tehsil Phagwara, in which the assessee, has inter-alia, made following cash deposits during the account period 01.04.2005 to 31.03.2006:. Dated 29/11/2005 Amount 1,98,000/- To verify the source of above cash deposit enquiry letter was issued to the assessee on 13.03.2008 which was received by Smt. Tejpal Kaur on behalf of the assessee. The assessee has failed to turn up on the date of hearing i.e. 26.03.2008. As per data base available with this office, neither the assessee is assessed to Income Tax nor the Return for the Asstt. Year under consideration has been filed by him. Therefore, under the circumstances, the above deposit remains unexplained and has to be treated as having been made out of undisclosed sources. In view of the above facts, I have reasons to believe that income of ₹ 1,98,000/- has escaped assessment for the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons recorded for reopening the assessment are to be examined on a standalone basis and nothing can be added to the reasons. It was also observed that the reasons must point out to an income escaping assessment and not merely need of an enquiry which may result in detection of an income escaping assessment. It was observed that it is necessary that there must be something which indicates, even if it does not establish, the escapement of income from assessment; that it is only on that basis that the AO can form a prima-facie belief that an income has escaped assessment; that merely because some further investigations have not been carried out, which, if made, could have led to detection of an income escaping assessment, this can not be reason enough to hold the view that the income has escaped assessment; and that there has to be some kind of cause and effect of relationship between the reasons recorded and the income escaping assessment. The observations of the Hon ble Supreme Court in the case of ITO vs. Lakhmani Mewal Das , 103 ITR 437 (SC), were reproduced, as under: the reasons for the formation of the belief must have rational connection with or relevant bearing on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escapement assessment. 48. The Tribunal concluded thus: but then in the case before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred to several other judicial precedents in support of the proposition that at the stage of initiation of reassessment proceedings, all that is to be seen is existence, rather than adequacy, of the material to come to the conclusion that income has escaped assessment. There cannot be any, and there is no, doubt on the correctness of this proposition but then, as we have elaborately explained earlier in this order, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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