MARUDHAR POLYCOT (INDIA) PVT. LTD.,AHMEDABAD vs. THE DY. CIT. CIRCLE-2(1)(2),, AHMEDABAD

This appeal filed by the Assessee is directed against the order of the Ld. CIT(A)-2, Ahmedabad dated 19.01.2018 pertaining to A.Y. 2011-12 and following grounds have been taken:

He has erred in law and on facts in not appreciating properly the objections to reassessment proceedings made before A.O. by submission dated 21/10/2016 along with relevant evidence including affidavit of Praveenkumar Jain retracting the confession alleged to have been made by him whereby the order got legally vitiated.

The facts of the case are as emanates from the Assessment order: In this case, return of income for assessment year 2011-12 was filed on 28/09/2011 declaring income of Rs.58,48,228/-. The return was processed u/s.143(1) of the Income-tax Act on 31/03/2012. The assessment of the assessee was completed u/s. 143(3) on 07/02/2014 determining total income at Rs.62,47,250/-. Thereafter, it was learnt from the Investigation Wing of Mumbai that a search u/s. 132 was conducted in the cases of Praveen Kumar Jain Group were providing accommodation entries and that the assessee had 3 . A.Y. 2011-12 obtained accommodation entries to the tune of Rs.2,90,00,000/-from the bogus concern.

Against the said order, assessee preferred first statutory appeal before the ld. CIT(A) and before him, assessee took the plea that statement of Shri P.K. Jain has not been supplied to him despite of the fact that he made the request to the ld. A.O but to no avail and ld. CIT(A) confirmed the action of the A.O.

We have gone through the relevant record and impugned order. The lower authorities have made addition on the basis of investigation carried out in the case of Shri Praveen Kumar Jain where Shri P.K. Jain has admitted that he was indulged in providing entries to various companies and assessee has received accommodation entry in the form of share application money/share premium from various paper companies controlled and managed by Shri P.K. Jain. The assessee has specifically requested for the statement of Shri P.K. Jain to the A.O. but ld. A.O. did not supply the same.

In support of its contention, assessee cited a judgment of Delhi High Court in the matter of Principal CIT vs. Meenakshi Overseas Pvt. Ltd. wherein appeal of the revenue was dismissed by the Hon’ble Delhi High Court on the following observation: Reassessment—Income escaping assessment—Validity of Proceeding— AO passed assessment order against assessee—AO u/s. 148 issued notice 4 . A.Y. 2011-12 to assessee for reassessment holding that AO had reason to belief that income had escaped assessment—AO initiated reassessment proceedings u/s. 147/148—CIT(A) upheld order of AO—Tribunal held that requisite sanction had not been obtained by AO from Competent Authority under Section 151 and, therefore, invalidated re-opening , of assessment under Section 147/148— Revenue's appeal against said order of ITAT was allowed by Court—ITAT held that AO had not applied his mind at time of initiating proceedings of reassessment under Section 147—Tribunal quashed assessment proceedings under Section 147/148—Held, as rightly pointed out by ITAT, 'reasons to believe' were not in fact reasons but only conclusions, one after other—Expression 'accommodation entry' was used to describe information set out without explaining basis for arriving at such conclusion—Statement that said entry was given to Assessee on his paying "unaccounted cash" was another conclusion basis for which was not disclosed—Thus, crucial link between information made available to AO and formation of belief was absent—Court was not inclined to interfere in above circumstances in exercise of its writ jurisdiction to quash proceedings—Careful perusal of reasons revealed that AO did not merely reproduce information but takes effort of revealing what was contained in investigation report specific to Assessee—AO made no effort to set out portion of investigation report which contained information specific to Assessee, he did not also examine return already filed to ascertain if entry had been disclosed therein—AO was not merely reproducing information received from investigation but took effort of referring to deposition made during survey by Chartered Accountant that Assessee company was involved in giving and taking of bogus entries—AO thus indicated what tangible material was which enabled him to form reasons to believe that income had escaped assessment—It was in those circumstances that in case, Court came to conclusion that there was prima facie material for AO to come to conclusion that Assessee had not-made full and true disclosure of all material facts relevant for assessment—Reasons to believe contained not reasons but conclusions of AO one after other—There was no independent application of mind by AO to tangible material which formed basis of reasons to believe that income has escaped assessment— Reasons failed to demonstrate link between tangible material and formation of reason to believe that income had escaped assessment-Revenue's appeal dismissed.

Ld. A.R. also cited a judgment of Jurisdictional High Court in the matter of Varshaben Sanatbhai Patel vs. ITO wherein similar circumstances, plea of the assessee was accepted.

Ld. A.R. also cited an order of Co-ordinate Bench in the matter of Shantaben Parasmal Jain in wherein similar circumstances, relief was granted by the ITAT with following observation: 14.The entire assessment is based upon the statement of Shri Mukesh Choksi. It is an undisputed fact that neither a copy of the statement was supplied to the assessee. nor any opportunity of cross-examination was given by the Assessing Officer/CIT(A). The Hon'ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No. 4228 of 2006 was seized with the following action of the Tribunal:- "6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders." 15. The Hon'ble Apex Court held as under:-

Since statement of Shri P.K. Jain was not supplied to the assessee on the basis of addition was made and in the absence of said statement assessee could not cross examine to Shri P.K. Jain and same is amount to miscarriage of justice despite of the fact that assessee made a formal request to the lower authorities. In our considered opinion and after considering the aforesaid judgment, no addition can be made on the basis of which violate principle of natural justice.

Since we are inclined to grant relief to the assessee on technical ground, therefore, we do not adjudicate this appeal on factual material.

In the result, appeal filed by the Assessee is allowed.