Commissioner of Income Tax vs Manish Ajmera

Mohammad Rafiq, J.—The appeals are barred by limitation having been filed with delay of 1138 days. The reason that is given in application seeking condonation of delay is that the Tribunal, Chandigarh decided the appeal on 14th March, 2005 [reported as Manish Ajmera v. Asstt. CIT (2005) 96 TTJ (Chd) 896-- Ed.], but no intimation was given by the Departmental Representative to Jaipur office of Tribunal, Jaipur or concerned CIT, Chandigarh. As per the ITAT Rules, copy of the order is required to be sent to Departmental Representative, Tribunal and concerned CIT. No such copy was dispatched to either of them at Jaipur. But it appears to have been sent to their counterparts at Chandigarh, whereas the matter was transferred to Chandigarh Bench for certain other reasons, though it actually did not have any jurisdiction over the dispute. We are satisfied that Appellant was prevented by sufficient cause in not filing appeal within limitation.

Delay in filing the appeals is condoned. The application u/s 5 of the Limitation Act is allowed. The appeals are heard on merits.

These two Income Tax appeals have been filed u/s 260A of the IT Act, 1961 (for short ''the Act'') against the common judgment passed by the learned Tribunal dt. 14th March, 2005. Though these appeals pertain to two (sic--three) different assessment years i.e., 1995-96, 1996-97 and 1997-98, by this common judgment, three appeals filed by the Assessee and two appeals filed by Revenue before the Tribunal have been decided together; while the appeals of the Assessees were allowed, the appeals filed by the Revenue were dismissed. It was held that the reopening of the assessment for the asst. yrs. 1995-96 and 1997-98 was not valid. Both the matters are therefore heard together and are being decided by this common judgment. For the purpose of deciding both the matters, we have taken the facts of the Appeal No. 522 of 2008 as basis.

The Assessee is engaged in lottery business through its proprietary concern M/s Manish Lottery Agencies, Jaipur. He filed return declaring income of Rs. 2,44,85,735, which was revised at Rs. 2,44,65,460. Initially income of the Assessee was assessed by AO u/s 143(3) at Rs. 2,46,12,260 on 23rd March, 1998. However, subsequently notice u/s 148 was issued on 22nd March, 2002 stating that (i) prize winning ticket amount reflected in the balance sheet on the current asset side not taken to the P&L a/c by the Assessee, (ii) valuation of closing stock at the end of the year was not claimed in the books of accounts, (iii) advance purchases and advance sales have not been taken to the P&L a/c. The order under Sections 143(3) and 148 was passed on 31st March, 2003 at Rs. 15,12,97,910.

The AO rejected the books of accounts u/s 145(3) of the IT Act and applied the net profit rate of 3 per cent on the turnover of Jaipur Branch and Delhi Branch. Appeal preferred by Assessee thereagainst before the CIT(A) was dismissed on 27th Oct., 2003, which upheld the reopening of assessment with some reliefs on merits. The Assessee and Revenue both filed appeals before the Tribunal and ultimately the matter came to be transferred to Tribunal, Chandigarh, which decided the appeals by the common order which is impugned in the present appeals.

Mr. R.B. Mathur, learned Counsel for the Appellant has argued that the AO categorically mentioned prize winning tickets that the Assessee had shown on 31st March, 1994 at Rs. 19,01,533 and as on 31st March, 1995 at Rs. 15,32,276 in the balance sheet of "Manish Lottery Agency" under ''Current assets'' head, therefore, the Assessee received Rs. 3,69,257 against the prize winning ticket which was not disclosed by him. This income has escaped assessment. The learned Tribunal has also committed illegality in not relying on the binding judgment of Supreme Court in Raymond Woollen Mills Ltd. Vs. Income Tax Officer and Others, . It failed to appreciate that there was no disclosure of this fact to the AO. It was a clear case of evasion. The assessment was therefore rightly reopened by recourse to Section 143(3) r/w Section 148 of the Act.

We have analysed the arguments so made in the light of the findings recorded by the Tribunal.

The Tribunal in para 17 of its order has held that the assessment in the present case was reopened essentially not because of escapement of income, but because of change of opinion, which was not permissible even in the amended provisions u/s 147. Moreover, when the assessment was reopened after the expiry of four years from the end of the assessment year, escapement of income has got to be by reason of failure of the Assessee to file return or failure of the Assessee to disclose fully and truly all material facts for assessment. In this case, even the AO has not alleged that there was any non-disclosure of material facts by the Assessee at the time of original assessment. The sole basis on which the assessment has been reopened is that while framing the original assessment order, the AO has accepted the system of accounting adopted by the Assessee as valid, whereas in the reassessment made u/s 147, the system of accounting adopted by the Assessee has not been considered to be appropriate. It is therefore change of opinion on the basis of which reassessment is made. The learned Tribunal has relied on the law laid down by the Supreme Court in Commissioner of Income Tax and Another Vs. Foramer France (through constituted attorneys), to hold that reopening of assessment on mere change of opinion especially when there is no non-disclosure of material fact by Assessee, is not permissible.

In our view, the order passed by the Tribunal does not suffer from any legal infirmity and therefore the appeals do not raise any question of law.

Both the appeals are therefore dismissed.