ORDER
Keshaw Prasad, A.M.
1. The cross-appeals, four by the assesses and four by the Revenue, have been directed against the combined order of the CIT(A) dt. 15th July, 1992, pertaining to asst. yrs. 1982-83 to 1985-86.
2. For the sake of convenience, we will first take up the appeal directed by the assessee. As the grounds of appeal are same in all the years, all the appeals are being disposed of by a consolidated order. In its grounds, the assessee has challenged the reopening of assessment under Section 148 of the Act.
3. Briefly the facts of the case are that the assessee is running a brick-Win in the name and style of Raya Int Udyog of which he is the proprietor. The return of income for all the years was accepted by the AO under Section 143(1) of the Act. However, subsequent to assessment order, information was received by the AO to the effect that there was difference in the sales turnover declared before the ST authorities as well as assessed by them vis-a-vis the sales turnover declared by the assessee before the AO. The relevant figures for all the years are as under:
Asst.
Yr.
Sales disclosed to IT Department
Sales before ST Department
Assessed
by ST Department
Â
Period
Amount
Period
Amount
Â
1982-83
1-10-80 to 30-9-81
2,94,249
1-4-82 to 31-3-83
2,43,403
4,66,550
1983-84
1-10-81 to 30-9-82
2,37,470
1-4-83 to 31-3-84
3,09,697
4,95,000
1984-86
l-10-82to 30-9-93
3,11,325
1-4-84 to 31 3-85
5,21.857
6,81,000
1986-86
1-10-83 to 30-9-94
4,78,357
1-4-85 to 31-3-86
4.75.074
7,25,651
4. As there was difference between the sales declared by the assessee both before the AO as well as ST authorities, the ST Department has assessed the sales at much higher figure, the AO issued notice under Section 148 of the Act reopening the assessment made by the AO earlier. While doing so, he has observed that he has reason to believe that the income of the assessee for all the four years has escaped assessment. In response to notice under Section 148, the assessee did not file any fresh return of income, ‘but stated that the return originally filed by him, may be treated as return filed in response to notice under Section 148 of the Act.
5. Thereafter, the AO started the assessment proceedings. After considering the submissions of the assessee, the AO brought to tax the following amounts under Section 143(3)/148 of the Act in different years :
Asst.
yr. 1982-83
Rs.
Sales assessed by ST AO
4,66,550
Less : Sales declared before
ST Department
-2,43,403
Undisclosed income brought
to tax
2,23,147
Asst.
yr. 1983-84
Â
Sales assessed by ST AO
4,95,000
Less : Sales declared to
S.T. Department
-3,09,697
Escaped income brought to
tax
1,85,303
Asst. yr. 19S4-85
Â
Sales declared by S.T. AO
6,81.000
Less : Sales declared before
S.T, Department
– 5,21,857
Escaped Income brought to
tax
– 1,59,143
Asst. yr. 1985-86
Â
Sales declared by ST AO
7,26,651
Less : Sales declared to ST
Department
– 4,78,357
Escaped/brought to
income-tax
2,47,294
The AO also made some other additions on account of excess consumption of coal.
6. Aggrieved by the order of the AO, the appeal was filed. It was claimed before the CIT(A) that the AO has wrongly assumed jurisdiction under Section 148 of the Act. It was stated that when the AO started fresh assessment proceedings, the assessee had challenged the reopening of the assessment by stating that holding understatement of income on the basis of the assessment order by the ST AO was not justified because the same had not become final. It was stated that as the ST AO had assessed the turnover of the assessee at a higher figure, the appeal was filed, which was also pending before the Sales-tax Appellate Tribunal. It was also explained that the accounting periods for the purposes of income-tax assessment was different than for the purposes of assessment under the ST Act. If the periods are reconciled, there will be no undisclosed sales turnover. It was also argued that there was no justification for making the addition of the entire suppressed sales. Utmost, only the profit of such suppressed sales could have been brought to tax by the AO.
7. The CIT(A) considered the submissions of the assessee. He noted in the asst. yrs. 1979-80 to 1981-82 there were some difference of figure between the sales turnover disclosed by the assessee and the sales turnover determined by the Sales-tax Appellate Tribunal. The CIT(A), therefore, felt that similar will be the position in respect of the sales turnover for the years under consideration. He, therefore, upheld the action of the AO in reopening the assessment under Section 148 of the Act for all the four years.
8. However, he felt that the addition of total undisclosed sales turnover, as income escaping the assessment was not justified- He held that the addition of only Rs. 10,627, Rs. 32,269, Rs. 29,886 and Rs. 21,925 for asst. yrs. 1982-83, 1983-84, 1984-85 and 1985-86 respectively was warranted. He accordingly allowed the relief of Rs. 2,46,359, Rs. 1,62,693, Rs. 1,45,966 and Rs. 2,72,031 which also included the addition on account of extra consumption of coal for asst. ys. 1982-83, 1983-84, 1984-85 and 1985-86 respectively.
9. The assessee is in appeal before us against the findings of the CIT(A) to the effect that the AO was justified in reopening the assessment of all the years by issue of notice under Section 148 of the Act.
10. The Revenue is also in appeal before us against the deletion of the addition made by AO as mentioned above.
11. It is argued by the learned counsel that the AO was incorrect in observing that there was difference in figures between the sales declared by the assessee and the sales assessed by the ST Department. He has stated that for the purposes of income-tax, sales for the previous year, which was from 1st October, to 30th September of the subsequent year, was declared. But for the purposes of turnover under the ST Act, the sales affected from 1st April to 31st March, must has been declared. For example, for asst. yr. 1982-83, under the IT Act, the sales for the previous year 1st Oct., 1980 to 30th Sept., 1981, has been declared. But for the purpose of ST Act, the sales turnover for asst. yr. 1982-83 will be the sales affected from 1st April, 1982 to 31st March, 1983. Similar is the position in respect of other assessment years. It was, therefore, pleaded that under the ST Act, there is no concept of the previous year. The sales effected during the financial year, will be the sales turnover of that particular assessment year. Thus, the figures of sales turnover under the IT Act and under the ST Act, would never be the same and could not be compared with each other. It appears that the AO has reason to believe that the income of the assessee has escaped assessment, was due to this confusion. It was further argued that the learned CIT(A) was not justified in stating that there was difference in sales declared by the assessee and assessed by the ST authorities. It was argued that the Sales-tax Tribunal vide its order dt. 30th April, 1993, in second appeal Nos. 133/90, 234/90, 479/91, 480/91 and 427/91 has accepted the sales turnover declared by the assessee for asst. yrs. 1982-83, 1984-85 and 1985-86. While doing so, the Hon’ble Sales-tax Tribunal has observed that the rejection of accounts and determination of total turnover were two different procedures. In such a case, the determination of turnover depends on certain relevant factors such as capacity of the Klin, firing period and average selling rates. It was stated that the decision of the Sales-tax Tribunal was not available with the assessee by the time the CIT(A) passed the order upholding the validity of reassessment proceedings. Regarding sales turnover for asst. yr. 1983-84, the learned counsel stated that the Sales-tax Tribunal has determined the turnover at Rs. 3,19,936 as against the sales turnover of Rs. 3,09,617 disclosed to the ST Department. It was stated that this minor difference in the sales turnover of about Rs. 10,000 also cannot be a basis for initiating the reassessment proceedings because of the two different accounting periods under the IT Act as well as the ST Act. The learned counsel, however, stated that if monthwise sales affected by the assessee are reconciled, there will be no difference in the sales turnover declared by it and the sales turnover as determined by the ST authorities. Hence, reopening of the assessment under Section 148 of the Act was invalid and the assessment framed in response to a notice under Section 148 deserves to be annulled.
12. On the other hand, the learned Departmental Representative supported the order of the CIT{A) by observing that by furnishing the different figures of sales turnover to the IT Department vis-a-vis the ST Department, the income of the assessee has escaped assessment and, therefore, the CIT{A) was justified in upholding the reopening of assessment by issue of notice under Section 148 of the Act.
13. We have considered the rival submissions. Sec. 148 provides, before making the assessment/reassessment or recomputation of income under Section 147, the AO shall serve on the assessee a notice. Sec. 147 provides that if the AO has reason to believe that any income chargeable to tax, has escaped assessment, he will assess or reassess such income. The provision of Section 147 of the Act has been amended w.e.f. 1st April, 1989. Prior to the amendment, Section 147 consisted of two clauses, namely (a) and (b). But w.e.f. 1st April 1989, these two clauses have been omitted. The Board vide its Circular No. 549, dt. 31st Oct., 1989 has clarified that if the reopening of an assessment takes place by issue of notice on 1st April, 1989 or afterwards though relatable to the earlier assessment years, the amended provisions will apply. Under the amendment provisions, if the AO has reason to believe that any income chargeable to tax, has escaped assessment, he will proceed to assess or reassess such income. The word “reason” in the phrase “reason to believe” would mean cause or justification to think or suppose that income has escaped assessment. The words “reason to believe” cannot mean that the AO should have finally asserted the facts by legal evidence. The formation of “belief” is not a judicial decision but an administrative decision. The expression ‘escaped assessment, clearly connotes a very basic postulates that the income for a particular assessment year when unnoticed by the AO, it escaped assessment. But mere fresh application of mind to the same set of facts are mere change of opinion. It has not conferred jurisdiction under the post-89 period. It appears that the AO resorted to the provisions of Section 147 merely on the basis of his belief that the sales-tax turnover declared by the assessee before him was not correct as compared to the sales-tax turnover declared before the ST authorities and also assessed by them. But while doing so, he omitted two very vital facts. Firstly, under the IT Act, there is a concept of previous year. The assessment year follows the previous year. But under the ST Act, the previous year as well as the assessment years are the same. For example, the sales turnover for asst. yr. 1982-83 will be the sales effected between 1st April, 1982 to 31st March, 1983. What the AO could have done was to reconcile the figures of sales declared before the ST authorities, which was affected during the period relatable to the income-tax proceedings. But without reconciling the same, the AO jumped on the conclusion that the sales turnover declared by the assessee, was understated by which the income has escaped assessment. The second important factor which was omitted by the AO was the final sales turnover determined under the ST Act. The AO noted that the ST Department have assessed the sales turnover of the assessee at a higher figure and on this basis, the AO arrived on the conclusion that the sales have been understated by the assessee. He did not realise that the sales turnover determined by the ST authorities/AO was subject to final adjudication by the appellate authorities. The assessee has furnished the sales turnover as determined by the Trade Tax Tribunal. Actually, in the asst. yrs, 1982-83, 1984-85 and 1985-86, the Trade Tax Tribunal has accepted the sales turnover declared by the assessee. There is a minor difference of sales turnover in the asst. yr. 1983-84. Such minor difference of about Rs. 10,000 was on account of different periods under the IT Act as well as the ST Act. Considering the facts as a whole, we hold that no escapement of income/understatement of sales have been noticed which warranted reopening of assessment under Section 147 of the Act. We, therefore, hold that the AO was not justified in reopening the assessment for all the four years and the CIT(A) was also not justified in upholding the reopening of the assessments done by the AO. We, therefore, quash the reassessment proceedings.
All the four appeals filed by the assessee are, therefore, allowed.
14. Now, we will take up the appeals directed by the Revenue.
15. The first ground of appeal related to the deletion of addition of Rs. 2,46,359, 1,62,295, 1,45,961 and Rs. 2,72,031 on account of undisclosed sales turnover/suppressed production for asst. yrs. 1982-83, 1983-84, 1984-85 and 1985-86 respectively.
16. As we have held that the reopening of the assessment under Section 148 of the Act was not justified, the ground of appeal raised by the Revenue, have become infructuous and the same is dismissed.
17. Ground Nos. 2, 3, 4 and 5 related to the reassessment made by AO and against the relief granted by the CIT(A). As we have already annulled the
reassessment made by the AO, the grounds of appeal raised by the Revenue against the relief granted by CIT(A) have become infructuous and the same are dismissed.
18. In the result, all the four appeals directed by the Revenue are dismissed.
