ANIL KUMAR SARAF vs. THE PR. COMMISSIONER OF INCOME TAX,

Judgment 04/05/2017

These appeals are before us to examine correctness of the orders dated 23.11.2016, passed by the Income Tax Appellate Tribunal, Division Bench, Jodhpur in Income Tax Appeals No.118/2016 and 117/2016, respectively. The factual matrix, necessary to be noticed, is that after examining the annual return of income filed by the (2 of 6) [ITA-8/2017] assessees, the Assessing Officer initiated a process under Section 147 read with 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) and assessed the taxable income afresh. Subsequently the records of the assessment years under consideration were called for and examined by the Principal Commissioner of Income Tax, Bikaner. On examination of such records the Commissioner noticed that the orders under Section 147/143(3) of the Act of 1961 was erroneous and prejudicial to the interest of revenue, therefore, issued notices to show cause under Section 263 of the Act of 1961. The same were contested by the assessees by submitting detailed objections and those were considered and decided by the Commissioner of Income Tax under the orders dated 26.2.2016. The Commissioner of Income Tax, while arriving at the conclusion that the order of assessment caused prejudice to the interest of the revenue and the same was erroneous, held as under:- “3.4.2 An elaborate discussion made here-in-before clearly suggests that the assessing officer was aware of the fact that the detailed and deep investigation was conducted by the Investigation wing of the Department and as a result of such investigation, voluminous incriminating material has come to the possession of Department. It was gathered that certain entities belonging to the Mahasagar Group of cases were indulging in giving accommodation entries in order to enable the clients to declare speculation profit/loss, Short term capital gain, long term capital gain, profit/loss on account of commodity, introduce share money or introducing money in the form of gifts. The (3 of 6) [ITA-8/2017] details of the transactions pertaining to the assessee here-in have already been furnished here-in-before and are not being repeated again for the sake of brevity. Now, the question arises whether while examining the case, the Ld. Assessing Officer had taken into account the aforesaid incriminating material and if so, whether such incriminating material was confronted with the assessee. As discussed earlier, vide this office letter No.4461 dated 23.03.2015, the issue of existence of incriminating material in the present case was brought to the notice of the assessee. In response to the aforesaid, the assessee vide his letter dated Nil made request for providing the copy of incrimination material. He further admitted that the factum of existence of incriminating material pertaining to the assessee was not disclosed by the Ld. Officer during the course of re-assessment proceedings. Thus, there exists a situation where even the existence of incriminating material with the Assessing Officer does not find place in the entire re-assessment proceedings. It is also undisputed fact that neither the incriminating material provided by the Investigation wing was examined by the Assessing Officer himself nor the same was confronted with the assessee. Nor the same was utilized for the purposes of assessment. In light of the aforesaid, I have no hesitation, whatsoever, in my mind that the impugned order is erroneous because – (a) the principles of natural justice have not been observed, and (b) the AO has not applied his mind to the incriminating material which was in his possession or which could have come to his possession had he exercised due diligence during the assessment proceedings. It is undisputed that (4 of 6) [ITA-8/2017] the A.O. was aware of the investigation being conducted by the Investigation wing of the Department in the Mahasagar group of cases and he was also aware that in the course of such investigation incriminating material pertaining to the assessee has been collected. The record available in my office clearly establishes the fact that not only paper report but also 5 DVDs containing incriminating material were made available to the A.O. The aforesaid fact is further proved by the fact that the re-opening of the case for assessment year under consideration itself was based on this reason itself. Therefore, in light of the observations made by the Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd (supra), I hold that the impugned assessment order is erroneous. 3.4.3 Now, coming to the second condition which needs to b e satisfied, namely, whether the order is prejudicial to the interest of revenue. As stated in the show cause notice dated 23.03.2015, it has been elaborately brought out that the assessee had brought in huge amount of bogus purchases amounting to Rs.85,18,926/- in the name of certain entities which had been found to be indulging in providing bogus accommodation entries. It has also been stated in the notice that with the help of such accommodation entries and bogus purchase bills the assessee has inflated purchases and thereby suppressed the taxable profit. Therefore, the impugned order is also prejudicial to the interest of revenue. I also hold that in the given fact situation, no person properly instructed in law would have come to the conclusion that the purchases shown by the assessee are genuine.

(5 of 6) [ITA-8/2017] Therefore, I have no hesitation in holding that the view taken by the Assessing Officer was not permissible in law. Thus, the impugned assessment order is prejudicial to the interest of revenue.” Learned Commissioner, accordingly, ordered to do the assessment denovo after giving due opportunity to the assessee of not only being heard but also to offer his comments with regard to incriminating material available with the Assessing officer. To challenge the orders passed by the Commissioner, Income Tax, appeals were preferred before the Income Tax Appellate Tribunal, Division Bench, Jodhpur that also came to be dismissed under orders impugned dated 23.11.2016. The Tribunal, after taking into consideration the entire material available on record, arrived at the conclusion that a detailed deep investigation was conducted by the investigation wing and lot of incriminating material came to the possession of the department and the Assessing Officer should have properly inquired about that incriminating material, and as such there was no wrong in making order to proceed denovo in light of the orders passed by the Principal Commissioner of Income Tax. In appeals, it is submitted by learned counsel for the appellants that the Income Tax Appellate Tribunal failed to appreciate that the powers under Section 263 of the Act of 1961 are not open to be availed merely on the count of change in opinion or just for the reason that the Commissioner is not (6 of 6) [ITA-8/2017] satisfied with the finding arrived by the Assessing Officer, hence, the orders impugned are bad. We do not find any merit with the argument advanced. From perusal of the orders passed by the Principal Commissioner of Income Tax it is apparent that the Commissioner noticed the incriminating material which was not at all taken into consideration by the Assessing Officer while passing the orders of assessment. The Commissioner in quite detail considered all aspects to arrive at the conclusion that the order of assessment was erroneous and causing prejudice to the interest of revenue. The Income Tax Appellate Tribunal also looked into the matter thoroughly and upheld the conclusion arrived by the Principal Commissioner of Income Tax. The appeals as such do not involve any substantial question of law that may warrant adjudication by us. Accordingly, the appeals are dismissed. (VINIT KUMAR MATHUR)J. (GOVIND MATHUR)J. MathuriaKK/PS