Pramod Kumar, Accountant Member - By way of this appeal filed by the Assessing Officer and Cross Objection filed by the assessee, the Assessing Officer as also the assessee have challenged correctness of the order dated 30.03.2012 passed by the learned CIT(A) in the matter of assessment under section 143(3) read with section 147 of the Income Tax Act, 1961 ('the Act' for short), for the assessment year 2007-08.
2. When this appeal was called out for hearing, learned Counsel for the assessee invited our attention to the Cross Objection, which seeks to challenge correctness of the learned CIT(A)'s upholding the reassessment proceedings, and urged thus to take up the Cross Objection first, since it deals with a fundamental issue and, if allowed, will render Revenue's appeal infructuous. Learned Departmental Representative does not oppose this submission. In this background, we take up the Cross Objection first.
3. The grievance raised in this Cross Objection on which our adjudication sought is, in substance, that the learned CIT(A) erred in upholding initiation of reassessment proceedings on the facts of this case. With the consent of parties, the Cross Objection has been heard on this grievance.
4. Briefly stated the relevant material facts are like his. On 01.03.2011 the Assessing Officer recorded the following reasons for reopening the assessment:
"On verification, it is found that during the year under consideration the assessee has made the cash withdrawal of Rs.25,43,500/-. The assessee is engaged in the business of trading of waste papers. These withdrawals towards purchase of waste paper are very much in doubt. Further, provisions of section 40A(3) of the Act is also very applicable in the case of the assessee as the above withdrawals are said to be utilised for cash purchases. In view of this fact, I have reason to believe that income to the extent of more than one lakh has escaped assessment within the meaning of Section 147 of the I.T. Act."
5. The assessee did object to this reopening vide ground no.1 before the learned CIT(A). But the learned CIT(A) simply brushed aside the same even though he granted relief nevertheless on merits. The assessee is not satisfied and in further appeal before us.
6. We have heard the rival submissions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
7. We find that there is no dispute, as evident from a plain reading of the reasons dated 01.03.2011 recorded by the Assessing Officer that the only cause for reopening the assessment is "cash withdrawal of Rs.25,43,500/-" and the Assessing Officer's observation to the effect that "these withdrawals towards purchase of waste paper was very much in doubt". There is nothing to even remotely suggest that the Assessing Officer had any reasons to hold the belief that any income has escaped assessment. What he has noted in the reasons recorded in the reopening of the assessment is mere suspicion or apprehension which is seen from the fact that the assessee did make cash withdrawal from the Bank. That does not indicate escapement of income. When we put to the ld. Departmental Representative, he stated about certain other facts which are not borne out of the material on record and submitted that though it has not been stated by the Assessing Officer in so many words, the Assessing Officer had good and sufficient reason to hold the belief that income has indeed escaped assessment. For the reasons we will set out in a short while, it is not really necessary to note this contention of the ld. Departmental Representative in any further detail.
8. The important point is that even though reasons recorded may not necessarily prove escapement of income at the stage of recording reasons, such reason must point out to the income escaping assessment and not merely need any enquiry which may require detection of income escaping assessment. In the present case at best case of the Assessing Officer falls in the second category. As regards other factors which ld. Departmental Representative attempted to raise, we can only refer to the judgement of Hon'ble Bombay High Court, in the case of Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR 332/137 Taxman 479 (Bom.) wherein their Lordships have inter alia observed that "It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the Assessing Officer to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons." Their Lordships further added that "the reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence….".
Therefore, the reasons are to be examined only on the basis of the reasons as recorded. The efforts of the Ld. Departmental Representative are, therefore, of no use.
9. We have also noticed that in the present case the only reason is it's cash withdrawal from the bank account. Dealing with somewhat similar situation, Hon'ble jurisdictional High Court of Gujarat in the case of Vishal Exports Overseas Ltd. v. Dy. CIT [SLP Civil Application No. 3864 of 2015, dated 8-9-2015], inter alia, observed as follows :—
"10. Thus, from the reasons recorded it is manifest that according to the assessing officer, the petitioner has withdrawn Rs.2,54,00,000 from the bank accounts maintained by it in cash and has not explained the utilisation thereof. However, for the purpose of invoking section 147 of the Act, as noticed earlier, the primary requirement is that there should be escapement of income chargeable to tax for the relevant assessment year. Mere withdrawal of cash from the bank accounts maintained by the assessee, can, by no stretch of imagination be termed as escapement of income, as envisaged under section 147 of the Act. Thus, from the reasons recorded, there is nothing to indicate that any income chargeable to tax in the case of the assessee has escaped assessment. The sole basis for reopening the assessment is that the petitioner assessee has withdrawn an amount of Rs.2,54,00,000 in cash and has not explained the utilisation. Thus, cash withdrawals from bank accounts maintained by the assessee have been termed as escapement of income by the assessing officer. One fails to comprehend as to how the cash withdrawals from accounts maintained by the assessee can be said to amount to escapement of income within the meaning of section 147 of the Act, as stated by the assessing officer, when it is not the case of the assessing officer that the amount deposited by the assessee in its bank accounts is undisclosed income."
10. In view of these discussions and bearing in mind entirety of the case, we are of the considered view that reasons as recorded by the Assessing Officer for reopening the impugned assessment are clearly unsustainable in law. We, therefore, quash the reassessment proceedings.
11. The Cross Objection filed by the assessee is accordingly allowed.
12. As the Cross Objection filed by the assessee has been allowed and the very reassessment proceedings are quashed, the grievance raised by the Assessing Officer in appeal i.e. restricting the net profit to 2% is now wholly academic. We, therefore, decline to deal with the same and dismiss the appeal filed by the Assessing Officer as infructuous.
13. In the result, Assessing Officer's appeal is dismissed as infructuous while the Cross Objection of the assessee is allowed.