M/S G.B. IMPEX ,JAIPUR vs. INCOME TAX OFFICER, WARD-5-3, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 624/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2009-10 cuke M/s G.B. Impex, Income Tax Officer Vs. B-172, Rajendra Marg, Bapu Ward-6(4), Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAGFG 3052 L vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 800/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2010-11 cuke M/s G.B. Impex, Income Tax Officer Vs. B-172, Rajendra Marg, Bapu Ward-5(3), Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAGFG 3052 L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Shri J.C. Kulhari (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 04/09/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 18/09/2018 vkns'k@ ORDER PER: VIJAY PAL RAO, J.M. These two appeals by the assessee are directed against the two separate orders dated 23/02/2018 and 27/03/2018 of ld. CIT(A)-2, Jaipur

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for the A.Y. 2009-10 and 2010-11 respectively. For the assessment year

2009-10, the assessee has raised following grounds of appeal:

“1. Under the facts and circumstances of the case, the notice issue U/s 148 and consequent order passed U/s 147 is illegal and bad in law.

proceedings U/s 147/148 of the Income Tax Act, 1961 (in short the Act)

and consequential reassessment order passed U/s 147 of the Act. The ld

AR of the assessee has submitted that the assessee filed its return of income of 30th September, 2009 declaring total income of Rs. 54,350/-.

The Assessing Officer completed the assessment U/s 143(3) of the Act on

22/12/2011 whereby the books of assessee were rejected U/s 145(3) of

the Act and a trading addition of Rs. 2,50,000/- was made by the

Assessing Officer. The ld AR has pointed out that the Assessing Officer in

the original assessment framed U/s 143(3) of the Act has verified all the

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purchases made by the assessee and made a trading addition after

rejection of books of account on specific grounds that certain purchases

were found unverifiable apart from non-maintenance of stock register.

Thus, the ld AR has submitted that the issue of purchase was considered

and examined by the Assessing Officer while passing the original

assessment then the subsequent reopening of the assessment on the

same issue and that too after expiry of four years is not sustainable in law

and liable to be quashed. The case was falls in the proviso to Section 147

wherein the assessment cannot be reopened after expiry of four years

from the end of the relevant assessment year unless any income

chargeable to tax has escaped assessment for the reason of failure on the

part of the assessee to disclose fully and truly all material facts necessary

for assessment. Once the Assessing Officer examined the issue including

the purchases made by the assessee and made a trading addition while

passing the original assessment U/s 143(3) of the Act then in absence of

failure on the part of the assessee to disclose all material facts necessary

for assessment, the reopening on the ground of bogus purchases is not

permitted. The ld AR has referred to the reasons recorded by the

Assessing Officer and submitted that even the Assessing Officer was not

sure about the income assessable to tax has escaped assessment whether

on account of bogus share application money or bogus unsecured loan or

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bogus sale and purchases. Thus, it is apparent from the reasons that the

Assessing Officer has not applied his mind while forming the believe that it

is a borrowed satisfaction based on the report of the DIT (Investigation)

for reopening of the assessment, which is not permissible under the law.

In support of his contention, he has relied upon the following decisions.

(i) M/s Dwarka Gems Ltd. Vs DCIT ITA No. 71/JP/2017 order dated 27/03/2018 (Jaipur)(Trib).

(ii) Nirmala Agarwal Vs ACIT ITA No. 995 & 996/JP/2016 order dated 11/04/2018 (2018) 58 Taxworld 280 (Jaipur)(Trib).

(iii) M/s Karwasra Developers Pvt. Ltd. ITA No. 393/JP/2016 order dated 11/06/2018 (Jaipur)(Trib).

(iv) Dynacraft Air Controls Vs. Sneha Joshi & ors. (2013) 355 ITR 102 (Bom)(HC).

(v) CIT Vs. Eco Media (P) Ltd. (2012) 81 CCH 85 (Mad.)(HC)

The ld AR has submitted that the Coordinate Benches of this Tribunal in

the cases cited (supra) have considered an identical issue and found that

the reopening was not valid when the original assessment was completed

U/s 143(3) of the Act and the assessment was reopened after expiry of

four years.

was reopened which is based on new facts and information came to the

knowledge of the Assessing Officer on the basis of the report of DIT(Inv.)

as well as statement recorded by the Investigation Wing of one Shri Vijay

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Narendra Kothari who has admitted to have provided accommodation

entries in respect of share application money, purchases and loan. The

assessee has claimed purchases from M/s Kothari Impex which was found

indulged in providing accommodation entries, therefore, the reopening is

based on tangible material in the shape of report of Investigation Wing as

well as statement of Shri Vijay Narendra Kothari recorded on 10/10/2013.

He has relied upon the orders of the authorities below.

material on record. There is no dispute that the original assessment was

completed U/s 143(3) of the Act on 22/12/2011 whereby the Assessing

Officer made a trading addition of Rs. 2,50,000/- after rejecting the books

of account of the assessee U/s 145(3) of the Act. The reasons for rejection

of books of account by the Assessing Officer in the original scrutiny

assessment was non-maintenance of stock register, unverifiable purchases

and valuation of stock. Thus, the Assessing Officer after conducting

enquiry in respect of purchases made by the assessee found that some of

the purchases were not verifiable. However, the Assessing Officer has not

commented on the genuineness of the purchases made from M/s Kothari

Impex. Subsequently, the Assessing Officer vide notice issued U/s 148

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dated 12/03/2016 has reopened the assessment while recording the

reasons as under:

“On the basis of information available on record it is gathered that during the year assessee has taken accommodation entry in the nature of bogus share application money/ bogus unsecured loan/ bogus sale and purchase. The assessee has obtained following accommodation entries:-

S. No. Name of concern/ Transaction Group Beneficiary entry provider Amount Name 1. Kothari Impex Rs.2,79,35,857/- Gautam Jain Group, Surat G.B.Impex Total Rs. 2,79,35,857/- The above concern is indulged in providing accommodation entries in lieu of cash obtained from the beneficiary and not doing any genuine business activities as divulged during the course of search and seizure proceeding in Dharmichand Jain Group, Surat. The assessee has failed to disclose fully and truly all material facts necessary for its assessment. Therefore, I have the reason to believe that, the income of Rs.2,79,35,857/- which is chargeable to tax, has escaped assessment within the meaning of section 147 of the IT Act 1961 ”

It is manifest from the reasons recorded by the Assessing Officer proposed

to reopen the assessment on account of income as escaped assessment of

Rs. 2,79,35,837/-, however, the Assessing Officer has not specified the

nature of transaction in the reasons recorded but has stated that on the

basis of the information it is gathered that during the year the

assessee has taken accommodation entries in the nature of

bogus share application money/bogus unsecured loan/

bogus sale and purchases. This statement of the Assessing

Officer in the reasons recorded clearly shows that the Assessing Officer

was not sure about the exact nature of transaction as

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accommodation entry availed by the assessee from M/s Kothari Impex.

Whereas as per the record, the assessee has made purchases of the said

amount from M/s Kothari Impex and no other transaction is either

recorded in the books or is found as per search and seizure proceedings. It

clearly reveals that the reasons recorded by the Assessing Officer are very

vague in nature without specifying the transaction whether it is share

application money or unsecured loan or sale or purchases. It is not the

case of transaction first time came into light only after the report of the

Investigation Wing, was received by the Assessing Officer but the original

assessment was completed U/s 143(3) of the Act and the Assessing Officer

has conducted an enquiry and taken a decision that some of the purchases

made by the assessee were unverifiable and accordingly a trading addition

of Rs. 2,50,000/- was made after rejection of books of account. Hence, the

transaction of purchases made from M/s Kothari Impex was duly disclosed

in the return of income and was also examined by the Assessing Officer

while completing the assessment U/s 143(3) of the Act. Hence, the

reopening based on the information of Investigation Wing is only to

conduct a further enquiry to ascertain the correct nature of transaction or

whether a transaction was in the nature of bogus share application money

or bogus unsecured loan or bogus sales and purchases. In our considered

view, the Assessing Officer cannot resort to the provisions of Section

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147/148 of the Act only to conduct a roving and fishing the enquiry and

then to decide whether any income assessable to tax has escaped

assessment or not. In this case, the Assessing Officer has finally concluded

that the transaction of purchases made by the assessee are in the

category of unverifiable purchases instead of holding the bogus transaction

and finally made an addition of 25% of such purchases. Therefore, the

Assessing Officer has estimated the income of the assessee in the

reassessment order passed U/s 143(3) read with Section 147 of the Act

which was further estimated by the ld. CIT(A) by applying G.P. rate of 9%.

It is pertinent to note that the original assessment was completed on the

income which is also estimated by the Assessing Officer after rejection of

books of account and a trading addition of Rs. 2,50,000/- was made,

therefore, reassessment was done by the Assessing Officer only to re-

estimate the income of the assessee. There is no dispute that the notice

issued U/s 148 of the Act on 12/3/2016 is after the expiry of four years

from the end of the assessment year under consideration, hence, the

reopening has to be tested with the compliance of the conditions set out in

the proviso to Section 147 of the Act. We note that the Coordinate

Benches of this Tribunal have considered an identical issue in the cases

relied upon by the assessee (supra) and in the case of M/s Dwarka Gems

Ltd. Vs DCIT (supra), the Tribunal has analysed the provisions of Section

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147 of the Act as well the facts which are identical to the facts in the case

in had and has held in para 4 as under:

“4. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the original assessment was completed under section 143(3) on 27th December, 2010 after an addition on account of unverifiable/bogus purchases was made by the AO. Thus it is manifest from the record that the AO while completing the original assessment under section 143(3) has conducted an enquiry in respect of the purchases made by the assessee and finally concluded that the purchases made by the assessee from the 12 parties were not verifiable and accordingly an addition of 25% of such purchases were made by the AO. Therefore, the issue of genuineness of purchases was duly examined by the AO while completing the scrutiny assessment under section 143(3). The AO, thereafter, issued a notice under section 148 on 21.11.2014 which is after four years from the end of the assessment year under consideration. The reasons recorded for reopening of the assessment are as under :- “As per information it had been established that bogus sales entries were made in favour of M/s Dwarka Gems on various dated during F.Y. 2007-08 i.e. A.Y. 2008-09 total amounting to Rs. 31,40,818/-. These entries were provided by M/s Meridian Gems & M/s Millenium Stars which are some of the bogus concerns of Bhanwar Lal Jain & Group.” Thus it is clear that the reopening of the assessment is based on the information received and to assess the income in respect of the purchases made by the assessee which was examined by the AO during the original scrutiny assessment under section 143(3). The AO after an enquiry and investigation during the original assessment proceedings held that the purchases made from 12 parties are not verifiable/genuine. Thus except the purchases made from those 12 parties, the AO has accepted the genuineness of the purchases including the two parties, namely M/s.

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Maridian Gems and M/s. Millennium Star. Even if the subsequent information received from the DIT Investigation Wing Mumbai renders the assessment order passed under section 143(3) defective and erroneous for want of proper verification and investigation, the same would not turn the case in the category that the assessee has failed to disclose fully and truly all the particulars necessary for assessment. It is not the case of the AO that the assessee has not furnished the requisite documents and details of purchase rather the AO conducted a detailed enquiry during the original assessment on the issue of genuineness of purchases. Thus the information received by the AO from Investigation Wing Mumbai would not amount to non disclosure of particulars by the assessee, rather it was the subject matter of enquiry by the AO in the original assessment. Therefore, if the AO failed to conduct proper enquiry regarding the genuineness of the purchases, the same would not give jurisdiction to the AO to review the order or remove the defect based on subsequent information. The statute has provided segregation of powers and jurisdiction between the hierarchy of the taxing authorities and, therefore, the power and jurisdiction vested with one authority cannot be assumed by the other authority. Section 263 is a provision of check and balances and, therefore, in case of failure on the part of the AO to conduct a proper enquiry as revealed by a subsequent material and information came to the knowledge of the Commissioner, the provisions of section 263 can be invoked by the revisionary authority. Therefore, the remedy for any defect or default in the order of the AO is provided under section 263 of the Act and not under section 147. The reopening after four years from the end of the assessment year completed under section 143(3) is not permissible without satisfying the condition precedent as provided under the provisions of section 147 of the Act. The subsequent information received by the AO cannot remove or relax the said condition provided under the provisions of section 147 that the assessee failed to

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disclose fully and truly all the material necessary for assessment. In the case in hand, when the AO has already conducted an enquiry on the issue and the assessee is not expected to furnish more than what was already furnished during the assessment proceedings, then the reopening based on the information from the Investigation Wing on the same issue is nothing but change of opinion and to review the order passed by the AO under section 143(3) which is not permissible under law. Accordingly, in the facts and circumstances of the case, we hold that the reopening is not valid and, therefore, the reassessment framed by the AO is without jurisdiction and consequently the reassessment order passed is quashed.”

Thus, the reopening in the said case was also based on the report of the

Investigation Wing, Mumbai and the Assessing Officer proposed to reopen

the assessment to assess the income on account of accommodation

entries received by the assessee. However, the Tribunal found that when

the assessee disclosed all the relevant facts and produced all the material,

which was required to be produced then even if the Assessing Officer

failed to conduct a proper enquiry regarding genuineness of the purchases

while passing the scrutiny assessment U/s 143(3) of the Act, the same

would not give the jurisdiction to the Assessing Officer to review the order

or remove the defect based on the subsequent information. In the case in

hand, the Assessing Officer has duly examined the purchases made by the

assessee and also observed that some of the purchases are not verifiable

and accordingly made the addition being trading addition of Rs. 2,50,000/-

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while passing the order U/s 143(3) of the Act and therefore, the reopening

after four years is not permitted just to review the earlier order passed by

the Assessing Officer U/s 143(3) of the Act based on the information

received from the Investigation Wing on the same issue, which was

subject matter of enquiry and investigation by the Assessing Officer while

passing the order U/s 143(3) of the Act. Even otherwise the reasons

recorded by the Assessing Officer are very vague which suggests that the

Assessing Officer has not applied his mind and just recorded the reasons

as borrowed from the report of the Investigation Wing without specifying

the nature of transaction whereas the assessee had only one transaction

of purchase from the said party namely M/s Kothari Impex. Hence, in view

of the facts and circumstances of the case as well as the decision of the

Coordinate Bench (supra) we hold that the reopening is not valid and the

same is liable to be quashed. Accordingly, the Assessing Officer has

framed reassessment without jurisdiction and therefore, the reassessment

order is not valid and the same is set aside.

the Assessing Officer, therefore, we do not propose to go into the ground

No. 2 of the appeal on the merits of the addition, which becomes

infructuous.

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grounds of appeal:

“1. Under the facts and circumstance of the case, the notice issued u/s 148 and consequent order passed u/s 147 is illegal and bad in law.

2.1 The Ld. CIT(A) has erred on facts and in law in making addition of Rs.70,45,465/- (1,74,32,920- 1,03,87,455) by applying g.p. rate of 9% on turnover of Rs.19,36,99,119/- as against addition of Rs.42,75,990/- made by AO by disallowing 25% of the purchases of Rs.1,71,03,970/- made from Kothari Impex, thereby enhancing the addition by Rs.27,69,475/-. She has further erred in making the addition by applying g.p. rate of 9% of the turnover. She has further erred in making the addition by application of g.p. rate ignoring that Hon’ble ITAT in ITA No.429/JP/15 dated 13.05.2016 in the assessee’s own case for the same AY has disapproved the application of g.p. rate applied by the AO and restricted the addition at 15% of the alleged unverifiable purchases.

proceedings U/s 147/148 of the Act and consequential reassessment order

passed U/s 147 of the Act. The assessee filed its return of income on

12/10/2010 declaring total income of Rs. 55,360/- on which scrutiny

assessment U/s 143(3) of the Act was passed on 25/3/2013. The

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Assessing Officer while passing the scrutiny assessment, rejected the

books of account and also observed that the purchases made by the

assessee from 12 parties were not verifiable and accordingly, the

Assessing Officer estimated the income of the assessee by applying G.P.

rate of 6.06% as against the G.P. rate declared by the assessee as 5.36%.

Consequently, the Assessing Officer made trading addition of Rs.

13,50,711/-. The said order of the Assessing Officer was subsequently

rectified by the Assessing Officer while passing the order U/s 154 of the

Act dated 06/09/2013 wherein the Assessing Officer applied G.P. rate @

8.32% and accordingly enhanced the addition to Rs. 57,83,670/-.

the ld. CIT(A) and vide order dated 06/2/2015, the ld. CIT(A) had

confirmed the disallowances by applying 15% of unverifiable purchases

and consequently the addition was restricted to Rs. 7,84,442/-.

before this Tribunal. However, the Tribunal vide order dated 13/5/2016

dismissed the appeal filed by the revenue in ITA No. 429/JP/2015 and

upheld the order passed by the ld. CIT(A). Thereafter the Assessing Officer

reopened the assessment by issuing the notice U/s 148 dated 25/3/2017

by recording the reasons as under:

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“The assessee firm has filed its return of income from the year under consideration on 12/10/2010 declaring total income of Rs. 55,360/-. Further on the basis of information available on record it is gathered that during the year assessee has taken accommodation entry in the nature of bogus purchase. The assessee has obtained accommodation entry from following concern as under:- S. No. Name of concern/ Transaction Group Beneficiary entry provider Amount Name 1. Kothari Impex Rs.1,71,03,970/- Gautam Jain & Ors. G.B. Impex Total Rs.1,71,03,970/- The above concerns of Gautam Jain & Others Group Surat is indulged in providing accommodation entries in lieu of cash obtained from the beneficiary and not doing any genuine business activities as divulged during the course of search and seizure proceeding in Gautam Jain & Others Group Surat. The assessee has failed to disclose fully and truly all material facts necessary for its assessment. Therefore, I have the reason to believe that, the income of Rs.1,71,03,970/- which is chargeable to tax, has escaped assessment within the meaning of section 147 of the IT Act 1961 ”

Thus, the Assessing Officer has recorded an identical reasons except the

fact that for this year the Assessing Officer has specified the transaction as

bogus purchases made from Kothari Impex. Further the information

received by the Assessing Officer includes the statement of a different

person namely Shri Gautam Jain instead of Shri Vijay Narendra Kothari.

Thus the Assessing Officer while recording the reasons for two years

considered two different statements in respect of transactions of

purchases made from the same party. All other facts are identical to the

facts for the A.Y. 2009-10. Undisputedly the original assessment was

completed U/s 143(3) of the Act and the reopening is after expiry of four

ITA 624 & 800/JP/2018_ 16 M/s GB Impex Vs ITO years from the end of the assessment year and therefore, the proviso to

Section 147 of the Act is attracted to the case of the case. Both the parties

have advanced their arguments identical to the arguments advanced in the

case for A.Y. 2009-10.

material on record, we find that the issue of validity of reopening for the

A.Y. 2010-11 is identical to the issue for the A.Y. 2009-10. All other

relevant facts and circumstances are also identical for both the years,

accordingly our findings in the case of A.Y. 2009-10 shall apply mutatis

mutandis in this year also. Hence we hold that the reopening is not valid

and is hereby quashed.

Order pronounced in the open court on 18/09/2018.

Sd/- Sd/- ¼foØe flag ;kno½ ¼fot; iky jko½ (VIKRAM SINGH YADAV) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 18th September, 2018 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- M/s G.B. Impex, Jaipur. 1. izR;FkhZ@ The Respondent- (i) The ITO, Ward-6(4), Jaipur 2. (ii) The ITO, Ward-5(3), Jaipur.

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