MITESH ASHOKKUMAR PATEL,AHMEDABAD vs. THE ITO, WARD-3(3)(3), AHMEDABAD

The Ld.CIT(A) though, confirmed the addition, however, restricted the same to 5% to the aforesaid bogus purchases. However, the assessee still aggrieved, has come in further appeal before us.

We have heard the rival contentions of the parties and perused the material available on record.

At the outset, the Ld.Counsel for the assessee has invited our attention to paragraph No.2 of the assessment order to show that the AO had received the alleged information vide letter of the DGIT (Investigation) dated 14/03/2014, however, the original assessment u/s.143(3) of the Act in the case of the assessee was finalized on 21/03/2014. He, in this respect, has submitted that when the alleged letter was issued, the assessment proceedings of the assessee were already in progress and, therefore, the AO should have considered and utilized the said information during the original assessment proceedings itself, and that the subsequent re-opening of the assessment on the basis of alleged information which was available to the AO during the original assessment proceedings, was bad in law. At this stage, a specific query was raised by the Bench as to whether the said information/letter dated 14/03/2014 was received by the AO prior to the finalization of the original assessment in the case of the assessee or thereafter? However, even in the assessment records available with the Department, the said information is not available. Therefore, at this stage, it is difficult to point as to whether the AO had received information during the pendency of the original assessment proceedings or thereafter. Therefore, any adjudication regarding the 5 validity of reopening of assessment on this issue, at his stage, is not possible for want of exact and proper factual information. However, the fact on the record is that the alleged letter was sent by the office of the DGIT (Inv.), Mumbai on 14/03/2014 or a few days thereafter which might have been received the AO of the assessee in the month/months of March – April-2014. However, the AO of the assessee kept mum on the said information for four years. After passing of four years, the assessment was re-opened in the case of the assessee on 28/03/2018. Therefore, the aforesaid re-opening of the assessment is hit by the first proviso to section 147 of the Act, as applicable for the assessment year under consideration. As per the said proviso, if the original assessment has been completed u/s.143(3) of the Act, the assessment cannot be re- opened u/s.147 of the Act after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment.

Now, the question before us is as to whether the assessee, in this case, has failed to fully and truly disclose all material facts necessary for the assessment. The AO has enumerated the following facts, which according to him, the assessee was supposed to disclose, but had not disclosed during the original assessment proceedings:

It is pertinent to mention here that the AO, himself, has noted in the impugned assessment order that the assessee had filed the copy of Annual Financial Report and Audited P&L account and balance-sheet along with return of income, wherein various information/material were disclosed. At this stage, we had specifically put a query to the Ld.DR as to whether as per the legal requirement, the assessee was supposed to file along with return of income any other information/documents apart from that have been filed by the assessee along with return of income. He however, could not point out any such specific requirement, but, insisted that the aforesaid information as narrated in above points (a) to (d), was necessary for the just and correct assessment of income of the assessee. However, the Ld.Counsel for the assessee has submitted that the assessee had duly disclosed all the material information and particulars of income, which as per law, the assessee was required to disclose. The assessee as per the requirement of law, was not supposed to disclose in particular about any specific

We find force in the contention of the Ld.Counsel. Now coming to the four points (a) to (d) as reproduced above by the AO to suggest that the assessee was supposed to disclose these particulars during the original assessment proceedings, we note that the assessee had already furnished all the particulars of his purchases and sales before the AO which were duly included in the audited accounts of the assessee. As noted above, the assessee had made numerous transactions and purchases during the year. If the AO doubted any of the particular transaction, he should have called for further details relating to such transaction from the assessee. However, there was no requirement as per law for the assessee to furnish any further information as to the nature of transaction regarding each of the purchase transactions as alleged. The assessee had duly disclosed that the nature of transaction was purchases of the gold ornaments/bullion from the said parties. The copies of delivery challan/receipt/proof of transportation, the names of parties, to whom the further sales were made from all the 9 parties were furnished. The confirmations of purchasers, etc. were not required to furnished at the first instance along with a return filed u/s.139(1) of the Act. No doubt, during the assessment proceedings, the AO could have called for further information regarding any or each of the transaction. However, the AO proceeded to estimate the net profit by enhancing the same by Rs.1,00,000/-. The AO sat silently on the information received from Investigation Wing for four years and did not make any effort to verify the aforesaid information and re-open the assessment. After the lapse of four years, the case of the assessee is hit by proviso to section 147 of the Act, and the assessment cannot be reopened unless the conditions stipulated in the first proviso to section 147 of the Act are satisfied. However, such conditions have not been satisfied in this case. In view of this, re-opening of the assessment, in this case, is bad in law and subsequent assessment framed u/s.143(3)/147 of the Act is also bad in law and the same is hereby quashed.

Before parting, it is pertinent to mention here that the assessee has raised another legal ground that, in this case, re-opening has been made on the basis of various material/information collected during the course of search action in the case of Shri Rajendra Jain and under the circumstances, the only recourse available with the Department was to proceed against the assessee u/s.153C of the Act and that the re-opening of the assessment u/s.148 was not justified on this score also. However, we have already held that the re-opening of the assessment in this case

The assessee in this appeal has taken the additional legal ground that the assessment order is bad in law being hit by first proviso to section 147 of the Act. Since the additional ground taken by the assessee is legal and hit at the very jurisdiction of the AO to re-open the assessment and further no new facts have to be brought on record to examine this issue being relating to the dates, events, etc.as the same are very much available on record, therefore, this legal ground is admitted for adjudication.

In the result, both the appeals of the assessee stand allowed.