ASHOK KUMAR AGARWAL,HINDAUN CITY vs. ITO, DAUSA

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh fot; iky jko] U;kf;d lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 111/JP/2014 fu/kZkj.k o"kZ@Assessment Year : 2004-05 cuke Ashok Kumar Agrawal Income Tax Officer, Vs. Prop. M/s Gaurav enterprises, Dausa. Khedla, Dausa. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACMPA 2655 H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri G.C.Jain jktLo dh vksj ls@ Revenue by : Shri Ajay Malik (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 27/12/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 08/03/2018 vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 02.09.2013 of CIT(A), Alwar for the assessment year 2004-05. The assessee has raised the revised grounds of appeals as under:-

“1. That learned CIT(A) was not justified in facts & law, confirming the initiation of proceedings U/s 147, and completing the assessment which may be quashed also for the following reasons:- (i) No reasons were recorded before the issue of notice u/s 148.

2 ITA 111/JP/14_ Ashok Kumar Agrawal vs. ITO

(ii) No speaking order upon the objections of the appellant was passed, and if so it was not served upon the appellant. 2. That, without prejudice to the above, the learned CIT(A) was not justified in confirming the addition of Rs. 210158 u/s 69C of the Act, without considering the evidence of the appellant, which may kindly be deleted. 3. That, the learned CIT(A), was not jusitified on facts and evidence placed before him, in confirming the addition U/s 68 on a/c of cash- credits at Rs. 300000/-, which may kindly be deleted, 4. That learned CIT(A) grossly erred in arbitrary confirming the following additions made by learned A.O.:- (i) Rs. 50000/- in Trading A/c, merely on estimates. (ii) Rs. 22466/- out of Car exp. (including Dep.) (iii) Rs. 3637/- on Estimate out of Telephone exp. (iv) Rs. 10000/- on Estimate out of shop expenses, (v) Rs. 7176/- out of Dalali Expenses on estimate. 5. That, the learned CIT(A), was not justified in facts and circumstances of the case, and not considering the evidences filed, in confirming an addition of Rs. 20000/- on account of alleged low exp. Of Household expenses. 6. That the learned CIT(A), was not justified in not properly by not considering the pleas of the appellant, confirming the Intt. Charges U/s 234B & 234c of the I.T. Act, 1961.” 2. Ground no. 1 is regarding validity of reopening. The assessee filed

its return of income on 27.10.2004 declaring total income of Rs. 1,49,009/-

which was processed u/s 143(1) of the Act. Thereafter, the AO noted that

during the year under consideration the assessee entered into transactions

3 ITA 111/JP/14_ Ashok Kumar Agrawal vs. ITO

of purchases and payments thereof with M/s Ambica Traders, Ganesh

Nagar (Bhusawar). It was found that M/s Ambica Traders was engaged in

the business of bogus bill leding and had entered into such transactions

with the assessee also during the period under consideration. Accordingly

the AO proposed to reopen the assessment by issuing a notice u/s 148 of

the Act on 31.03.2006. In response to the notice the assessee stated that

the return of income filed on earlier may be treated as return filed in

response to the notice u/s 148 of the Act. The AO supplied the reasons

recorded for reopening of the assessment to the assessee. The assessee

raised the objections against the notice u/s 148 of the Act which were

disposed off by the AO vide separate order dated 29.11.2006 thereafter,

reassessment was completed vide order dated 29.12.2006. The assessee

challenged the action of the AO before the ld. CIT(A) but could not

succeed.

reasons recorded by the AO are not sufficient to believe the income has

escaped assessment within the meaning of section 148 of the Act. The ld.

AR has thus submitted that even it can be taken as reason to belief that

income has escaped assessment. The pre requisite condition of initiated

proceedings u/s 148 have not been complied with and as such the action

4 ITA 111/JP/14_ Ashok Kumar Agrawal vs. ITO

of the AO is absolutely illegal, void and bad in law and consequently the

assessment made by the AO is without jurisdiction being bad in law. In

support of his contention he has relied upon the decision of Hon’ble Gujart High Court in case of Varshaben Sanatbhai Patel vs. ITO 282 CTR 75. The ld. AR has thus submitted that the AO was not able to bring on

record any material from which it could be held that there has been

escapement of income on account of failure on the part of the assessee in

fully and truly disclosing the income in his return of income. He has relied upon the decision of Hon’ble Delhi High Court in case of ITO vs. Om Exim P. Ltd. 26ITR 697. Thus, the AO acted on such suspicion and

assumption that the income chargeable to tax has escaped assessment.

authorities below and submitted that on an identical issue the AO has

already held for A.Y. 2003-04 that the purchases made from M/s Ambica

Traders are bogus in nature.

on record. The undisputed fact on record is that the assessment for the

year 2003-04 was completed u/s 143(3) r.w.s. 147 of the Act on

31.03.2006 wherein the AO held that the purchases claimed from M/s

Ambica Traders are bogus transaction being accommodation bills provided

5 ITA 111/JP/14_ Ashok Kumar Agrawal vs. ITO

by the said parties. The Notice u/s 148 of the Act for the year under

consideration was issued on 31.03.2006 to assessee the income

chargeable to tax which has escaped assessment to the extent of

purchases claimed from M/s Ambica Traders. Therefore, the notice issued

u/s 148 of the Act in light of the assessment framed for the assessment

year 2003-04 after making the verification and investigation of facts by the

AO cannot be said without any basis or material to form the belief because

the AO during the scrutiny assessment for the A.Y. 2003-04 come to the

conclusion that the purchases made from M/s Ambica Traders are bogus

transaction and it would constitute a tangible material to form the belief

that the income assessable to tax in respect of the transaction of

purchase from the same parties has escaped assessment. It is also

pertinent to note that the reopening is within 4 years from the end of the

assessment year under consideration therefore, the proviso to section 147

is not attracted in this case. The decision of this Tribunal for the A.Y.

2003-04 would not help the case of the assessee as the said decision is

based on a technical objections of validity of notice u/s 148 when the time

to issue notice u/s 143(2) was still available with the AO. There is no such

issue of sufficiency of reason either raised or considered by the Tribunal

for the A.Y. 2003-04. The Hon’ble Bombay High Court in case of Multiscreen Media P. Ltd. vs. Union of India 324TTJ 48 as well as

6 ITA 111/JP/14_ Ashok Kumar Agrawal vs. ITO 324 ITR 54 has considered this issue of validity of reopening separately

based on the reopening assessments within and beyond 4 years. The

Hon’ble High Court has held the reopening for the assessment years which

was beyond 4 years from the end of the relevant assessment year was

invalid whereas the reopening in case of assessment year where it was

within the period of 4 years from the end of the assessment year was held

to be valid. The relevant finding of the Hon’ble High Court in case of

Multiscreen Media P. Ltd. vs. Union of India (supra) is in para 10 as

under:-

“10. In this background, the facts of the present case would have to be considered. During the course of proceedings for the assessment year 2004-05, a query was addressed by the Assessing Officer on September 7, 2006 inter alia requiring the assessee to make a disclosure of the nature of its business and details of the expenses towards market research. On November 15, 2006; the assessee was directed to furnish a justification and details of expenditure towards advertisements and sales promotion expenses. The assessee furnished the break-up of the expenses incurred towards advertisements and sales promotion and an order of assessment was passed under section 143(3). When the assessment proceedings for the assessment year 2005-06 were taken up, the Assessing Officer by his letter dated August 21, 2007 called up the assessee to furnish the ledger extracts of advertisements and sales promotion expenses/market research expenses. On November 26, 2008 a notice was issued to the assessee under section 142(1). The annexure to the notice drew the attention of the assessee to the fact that the assessee had debited advertisements and sales promotion expenses of Rs. 39.99 crores ; dealer's incentives of Rs. 50.89 crores and market research expenses of Rs. 2.73 crores. The Assessing

7 ITA 111/JP/14_ Ashok Kumar Agrawal vs. ITO

Officer noted that considering the fact that the programmes are aired by the channel, any "upside" in the revenues shall accrue to the channel company. The assessee was asked to explain why this amount should be allowed in the light of the absence of business expediency. The assessee was called upon to file a detailed explanation along with supporting documents. In the course of the assessment proceedings for the assessment year 2005-06, the assessee had filed a detailed explanation before the Assessing Officer on December 11, 2008. The assessee set out its case in regard to the allowability of its advertisements and sales promotion expenses and dealer's incentives expenses together with market research expenses under section 37(1). The case of the assessee was that the entire expenses were incurred wholly and exclusively for the purpose of its business and it was essential for the assessee to incur the expenses so as to increase its own income by way of sale of content, distribution income, advertisements as well as agency fees. The case of the assessee, therefore, was that the entire expenditure should be allowed as deduction under section 37(1) even though a third party, namely a channel company may have benefited from the same to a certain extent. The Assessing Officer while passing the order of assessment for the assessment year 2005-06 came to the conclusion after considering the submissions of the assessee that of the total expenses that were incurred, 18.75 per cent, would be allowed in the hands of the assessee while the balance shall be held as expenditure incurred on the behalf of the foreign principal of the assessee and was liable to be disallowed in the hands of the assessee. In the present case, we are not concerned with the merits of the claim of the assessee in regard to whether the expenditure that was incurred was wholly and exclusively for the purpose of the business of the assessee. What is material is that on the basis of a detailed inquiry which took place during the course of the assessment year 2005-06, the claim of the assessee of deduction of the entire expenses was not accepted and disallowance, was made to the extent of expenditure incurred over and above 18.75 per cent. The Assessing Officer did so on the basis of fresh material which came before him in view of the notice dated

8 ITA 111/JP/14_ Ashok Kumar Agrawal vs. ITO

November 26, 2008 in pursuance of which the assessee filed a detailed representation elucidating the relevant particulars of the business of the assessee and the reasons for the expenditure. Whether the Assessing Officer was justified in the decision which he took for the assessment year 2005-06 is again not a matter to be considered at this stage of the proceedings. The point is that on the basis of the additional material which was available on record, the Assessing Officer issued a notice for reopening the assessment for the assessment year 2004-05. In our considered view, the Assessing officer did have tangible material to reopen the assessment under section 147 of the Act and to form a reason to believe that income had escaped assessment. Clause (c)(iv ) of Explanation 2 to section 147 creates a deeming fiction where though the assessment has been made, income chargeable to tax is underassessed. In such a case, law deems that income chargeable to tax has escaped assessment. For these reasons, we are of the view that recourse to the provisions of section 147 cannot be faulted.” Thus, the Hon’ble High Court while passing a separate decision for the

assessment year where the reopening of the assessment within 4 years

held that reopening based on the assessment order of subsequent year is

valid. Accordingly, in view of the facts and circumstances of the case that

an identical issue was examined by the AO during the scrutiny assessment

for the A.Y. 2003-04 in reassessment proceeding and consequently the

initiation of proceeding for the reassessment for the year under

consideration was initiated by the AO and in view of the decision of the

Hon’ble Bombay High Court in case of Multiscreen Media P. Ltd. vs. Union

of India (supra) I do not find any error or illegality in the reopening of the

assessment under consideration. The decisions relied upon by the ld. AR

9 ITA 111/JP/14_ Ashok Kumar Agrawal vs. ITO

are not applicable in the facts of the present case because at the time of

issuing notice u/s 148 of the Act the AO had already conducted any

enquiry about the genuineness of the purchases made from M/s Ambica

Traders.

69C of the Act. The ld. AR of the assessee has submitted that the

additional evidence filed by the assessee in support of the claim of the

assessee was not considered by the authorities below. Therefore, the AO

may be directed to consider and verify the evidence filed by the assessee.

On the other had hand, ld. DR has relied upon the orders of the authorities

below.

material on record. Since, the assessee is seeking the directions to the AO

for proper examination of additional evidence therefore, in the facts and

circumstances of the case and in the interest of justice the matter on

merits is remanded to the record of the Assessing Officer for denovo

adjudication after consideration of evidence filed by the assessee.

estimated basis. Since, the matter on merits has been set aside to the

record of the Assessing Officer therefore, the entire issue has to be

10 ITA 111/JP/14_ Ashok Kumar Agrawal vs. ITO reconsidered by the Assessing Officer after giving an opportunity of

hearing to the assessee.

In the result, the appeal filed by the assessee is partly allowed for

statistical purposes.

Order pronounced in the open court on 08/03/2018.

Sd/- ¼ fot; iky jko ½ (VIJAY PAL RAO) U;kf;d lnL; @Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 08/03/2018 *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Ashok Kumar Agrawal, Dausa 1. izR;Fkh@ The Respondent- The ITO, Dausa. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 111/JP/14) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत