M/S AMRIT TRADING CO vs. COMMISSIONER OF IT & ANR

This order will dispose of I.T.A. Nos.338 to 342 and 514 of 2005, as all the appeals filed by the assessees involve common questions relating to validity of reassessment proceedings.

I.T.A. No.338 of 2005 has been preferred by the assessee under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, Chandigarh in I.T.A. No.959/Chandi/96 for the assessment year 1991-92 raising following questions of law:- “i) Whether in the facts and circumstances of the present case the action of the authorities below in initiating the reassessment proceedings merely on the basis of communication dated 12.12.1992 without any reasonable ground having rational connection, is legally sustainable in the eyes of law? ii) Whether in the facts and circumstances of the present case, the action of the authorities below in holding the consignment sales to be the sales on account of trading without investigating the same appropriately and acting on its own presumption is legally sustainable in the eyes of law? iii) Whether in the facts and circumstances of the present case, the action of the authorities below in acting on its own presumption is legally sustainable in the eyes of law?”

The assessee is engaged in the business of timber sales and consignment sales. Its return for the assessment year in question was processed under Section 143(1)(a) of the Act, but thereafter, notice dated 15.2.1993 was issued under Section 148 of the Act, based on information received from Assistant Director of Income Tax, indicating that there was escapement of income from tax on account of assessee having treated certain sales to be consignment transactions. After due consideration, the assessment was made resulting in additions on account of undisclosed investment in trading activities. The CIT(A) set aside the reopening of the assessment following earlier order in some other cases wherein assessment was framed under Section 143 (3) of the Act and reassessment proceedings were initiated without obtaining necessary sanction under Section 151(1) of the Act. On appeal by the revenue, the Tribunal set aside the order of the CIT(A) and restored that of the Assessing Officer and held that sanction under Section 151(1) was not required where assessment was made under Section 143(1)(a) of the Act when initiation of reassessment was within the statutory period. The finding of the Tribunal is as under:- “19. In the case of M/s Bharat Trading Co. and M/s Assam Timber Store, the AO had received the information from the Assistant Director of Income-tax (Investigation) Hissar on 12.12. 92. The reasons for reopening of assessments had been recorded on 15.2.1993 i.e. after the receipt of information from the ADI, Hisar. The report is based on enquiry. A perusal of the sum and substance of the report, which has been reproduced elsewhere in this order, clearly indicates a sound basis for formation of the belief that income of the assessees had escaped assessments. We are, therefore, of the considered view that the proceedings for reassessments in the case of M/s Bharat Trading Co. for the assessment year 90-91 and 91-92 and in the case of M/s Assam Timber Store for the assessment year 90-91 and 91-92 had been validly initiated. The CIT(A) was, therefore, not justified in canceling the reassessments for the assessment years 90-91 & 91-92 in the case of M/s Bharat Trading Co. and in the case of M/s Assam Timber Store. The orders of the CIT(A) in the case of M/s Bharat Trading Co. in I.T.A. nos.1572 & 1573/Chandi/95 for the assessment years 90-91 and 91-92 and in the case of M/s Assam Timber Store in I.T.A. No.751 & 752/Chandi/96 for the assessment years 90-91 & 91-92 are set aside.

The CIT(A) has also deleted the trading addition made by the AO. It is observed from the assessment orders that assessee had given sufficient opportunity to establish that the goods had been received from Assam parties on consignment basis. Since assessee had failed to establish that the goods had been sold on commission basis and since on enquiry also the parties were not found to exist, the AO was justified in treating the commission sales as trading sales and assessing the profit accordingly. The AO has also been reasonable in determining the profits on the basis of the rate of profit disclosed by the assessee in respect of trading of timber other than sales on consignment. Since the determination of profit made by the AO is reasonable, we, in the case of M/s Bharat Trading Co. restore the additions of Rs.1,08,620 for the assessment year 90-91 and Rs.69,420 for the assessment year 91-92 and in the case of M/s Assam Timber Store restore the additions of Rs.8500/- for the assessment year 90-91 and Rs.19,250 for the assessment year 91-92. The assessment of Rs.57,800 and Rs.47,620 on account of unexplained investment is also justified. The orders of the CIT(A) are accordingly set aside and those of the AO restored.”

We have heard learned counsel for the parties.

It is not disputed that in the case of the appellants/assessees the earlier assessment was under Section 143(1)(a) of the Act, in which case the CIT(A) was not justified in invoking Section 151(1) of the Act, which is applicable only if initially assessment was regular assessment under Section 143 (3) or Section 147 of the Act. The view taken by the Tribunal, thus, does not require any interference. The questions of law claimed by the assessee have to be answered against it. Accordingly, the appeals are dismissed. A photocopy of this order be placed on the file of other connected case. (ADARSH KUMAR GOEL) JUDGE January 05, 2011 (AJAY KUMAR MITTAL) ashwani JUDGE 5