LEXUS CERAMIC PVT LTD,MORBI vs. DCIT, CIRCLE-1(1), RAJKOT, RAJKOT

The Grounds of appeal raised by the assessee are as follows: 1. The grounds of appeal hereunder are without prejudice to one another.

Succinct facts are that assessee had filed its original return of income on 12.10.2010, declaring the total income at Rs.70,37,880/-. Scrutiny assessment order was passed u/s 143(3) of the Act on 23.03.2013. Thereafter, the assessment of the assessee was reopened u/s 147 of the Act after recording necessary reason u/s 148(2) of the Act. A notice u/s.148 of the Act was issued on 24/03/2017 and served upon the assessee. Subsequently, the case was assigned to assessing officer by the Jt. CIT, Morbi Range, Morbi vide order u/s. 120 of the Act dated 13.07.2017. Accordingly, change of incumbent notice u/s. 142(1) r.w.s. 129 of the Act dated 21.07.2017 was issued and served upon the assessee. The assessment proceedings were took place by issue of notices u/s. 142(1) from time to time. In response the assessee has e-filed a return of income on 04.09.2017 declaring the same income as per ITR filled u/s 139 of the IT Act. Thereafter notice u/s 143(2) of the IT Act was issued on 01.11.2017.The assessee is a company and engaged in manufacturing of Ceramic Tiles. The assessee submitted written submission and other details before the assessing officer.

However, assessing officer noticed that as per the information received from the Investigation Wing, the assessee had allegedly made non genuine transaction worth Rs. 33,20,000/- from M/s. Parth Chem Impex P.Ltd., Mumbai. Whereas according to the details submitted by the assessee, total purchase

Aggrieved by the order of assessing officer, the assessee carried the matter in appeal before Ld. CIT(A) who has confirmed the action of the assessing officer. The Ld. CIT(A) noticed that the assessee has knowingly introduced bogus bills from a tainted party to suppress taxable income. The "expenditure" claimed is, therefore, not genuine and falls squarely under the provisions of Section 69C as unexplained expenditure, hence, Ld. CIT(A) held that assessing officer rightly made the addition in the hands of assessee.

Shri Mehul Ranpura, Learned Counsel for the assessee, vehemently argued that the reopening of assessment in the assessee’s case is bad in law. As the reopening of assessment in the assessee’s case was without independent verification of the facts, as the survey was conducted on the other group and based on the survey statement of that group, reasons should not be recorded and the addition should not be made in the hands of the assessee. The Ld. Counsel further submitted that in the assessee’s case, the original assessment was framed u/s. 143(3) of the Act dated 23-03-2015 and there was no failure on the part of the assessee to disclose fully and truly all materials facts. Therefore, since all materials facts were disclosed fully and truly during the assessment proceedings u/s. 143(3) of the Act dated 23-03-2013, hence the reopening of assessment after four years is bad in law and therefore, may be quashed. The Ld. Counsel for the assessee, also submitted that the third party statement should not be relied on for recording the reasons of reopening and therefore, reopening of assessment may be quashed.

The Ld. Counsel for the assessee further submitted that statement recorded u/s 131 of the Act, on oath, during the survey proceedings is not a valid statement and therefore, addition made by the assessing officer based on the survey statement should be deleted for that learned Counsel relied on the judgment of the Hon’ble Supreme Court in the case of S. KHADER KHAN SON (2007) 75 CCH 0606 (Mad), where in it was held that section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition.

On the other hand, learned DR for the revenue, submitted that reassessment proceedings were initiated against the assessee by following the provisions of the Income tax Act, hence, reassessment proceedings are not bad in law.

Learned DR for the revenue, further submitted that just because the statement was recorded, on oath, during the survey proceedings, does not vitiate the assessment proceedings, as the addition was made by the assessing officer, based on the facts.

On merit, Learned DR for the revenue submitted that assessee has failed to prove the genuineness of the transaction, hence addition was made by the assessing officer, rightly by taking into account bogus purchases, made by the assessee, hence addition made by the assessing officer may be upheld.

I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. I note that the assessment year, in the assessee’s case, pertains to assessment year 2010-11 and in the assessee’s case the reassessment proceedings were initiated by issuing notice u/s 147/148 of the Act, on 24-03-2017, which is after expiry of 4 years. I note that assessee under consideration filed original return of income on 12.10.2010, declaring the total income at Rs.70,37,880/-. The scrutiny assessment order was passed u/s 143(3) of the Act on 23.03.2013, by the assessing officer. In the

In CIT vs. Kelvinator of India Ltd. 256 ITR 1 the Full Bench of the Delhi High Court was considering a case of reopening u/s 147 within 4 years from the end of the assessment year. The Court held that when a regular order of assessment is passed in terms of section 143 (3) of the Act, a presumption can be raised that such an order has been passed on application of mind. It was held that if it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. It was held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. On appeal by the department to the Supreme Court,(reported in 320 ITR 561(SC)) it was held that though the power to reopen under the amended s. 147 is much wider, one needs to give a schematic interpretation to the words “reason to believe” failing which section 147 would give arbitrary powers to the assessing officer (AO) to re-open assessments on the basis of “mere change of opinion”, which cannot be per se reason to re-open. One must also keep in mind the conceptual difference between power to review and power to re-assess. The AO has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by

In view of the reasons set out above, as also bearing in mind entirety of the case, I am of the considered view that the reasons recorded by the Assessing Officer, as set out earlier, were not sufficient reasons for reopening the assessment proceedings. I, therefore, quash the reassessment proceedings. As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.

In the result, appeal filed by the assessee, is allowed, in above terms.