ALPESHSINH K JADEJA,BANASKANTHA vs. THE ITO, WARD-2, PALANPUR

PDF · subscribers
ITA 129/AHD/2021Status: DisposedITAT Ahmedabad01 December 2022AY 2011-127 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal condoned the delay in filing the appeal, noting the Supreme Court's extension of limitation periods due to the pandemic. It held that the AO lacked valid jurisdiction to reopen the assessment as the reasons recorded did not indicate escapement of income from the assessee's hands, but rather from M/s Laxmi Construction.

What were the facts?

The assessee filed an appeal before the ITAT after a delay of 377 days, citing COVID-19 lockdowns as the reason. The Assessing Officer (AO) had initiated reassessment proceedings under Section 147 based on information suggesting the assessee was a dummy entity used for bogus purchases by M/s Laxmi Construction.

What were the issues?

Whether the AO had valid reason to believe that income had escaped assessment in the hands of the assessee to assume jurisdiction under Section 147. Whether the reassessment proceedings were initiated without jurisdiction.

Which sections of the Income-tax Act were involved?

Section 147,Section 250(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SMT.ANNAPURNA GUPTA

Hearing: 05/09/2022

(Applicant) (Responent) : Shri Mehul Thkkar, AR Assessee by Revenue by : Shri Mukesh Thakwani, DR सुनवाई क� तार�ख/Date of Hearing : 05/09/2022 घोषणा क� तार�ख /Date of Pronouncement: /12/2022 आदेश/O R D E R The present appeal has been filed by the assessee against order passed by the Commissioner of Income Tax(Appeals)-4, Ahmedabad in short referred to as ld.CIT(A)) under section 250(6) of the Income Tax Act, 1961 ("the Act" for short), dated 17.2.2020 pertaining to Asst.Year 2011-12.

2.

At the time of hearing, it was noticed that the Registry has pointed out a delay of 377 days by the assessee in filing appeal before the Tribunal, and therefore, marked the appeal of the assessee as time barred. The ld.counsel for the assessee submitted that, in this period of filing of appeal there was surge of COVID and consequent lockdowns restricting mobility. Due to these reasons, which were beyond the control of the assessee, delay in filing of the 2 appeal before the Tribunal was caused, which deserves to be condoned, and the appeal may be adjudicated on merit.

3.

I have noted that the ld.counsel for the assessee has explained the reason for the delay in filing present appeal before the Tribunal. I further note that due to the pandemic of Covid-19, the limitation prescribed for filing appeals was extended till further order by the Hon’ble Supreme Court vide its order dated 23/03/2020 in Suo Moto Writ Petition (Civil) No.(s) 3/2020. And the same was ultimately extended upto 28th February 2022 in M.A No.21 of 2022 dated 10th January 2022. The present appeal having been filed on 27/05/2021 after a delay of 377 days, there is therefore no delay as such in the filing of the present appeal. Accordingly, delay is condoned, and the appeal of the assessee is taken up for adjudication on merit.

4.

The ground no.1 and 2 raised by the assessee are legal grounds challenging validity of the assessment framed under section 147 of the Act. The said grounds are as under: “1. The Ld. A.O. has erred in assuming jurisdiction u/s 147 of the IT Act, 1961 under the given set of facts of the case that during pre-search enquiries at SRA Group, it was revealed that payments made by the Laxmi Construction (SRA Group) to the subcontractors including appellant are found to be non-genuine and bogus in nature. 2. The Ld. A.O. has erred in assuming jurisdiction u/s. 147 of the Act despite the fact that no income has been escaped in the hands of appellant.

5.

The ld.counsel for the assessee’s contentions with respect to the above ground was that the reasons recorded by the AO for reopening of the cases of the assessee under section 147 of the Act did not reveal any belief regarding escapement of income of the assessee, and therefore, the jurisdiction assumed to reopen the case was not in accordance with law. He drew our attention to the copy of the reasons recorded in the present case placed before us at PB Page No.1 and 2 as under:

6.

Referring to the above, he pointed out that the information, on the basis of which the AO formed a belief of escapement of income of the assessee, all pointed out to bogus purchases entries being taken by a concern/firm, M/s Laxmi Construction, based in Ahmedabad. Drawing our attention to para 2 of the reasons, the ld.counsel for the assessee pointed out that during the search action conducted on the SRA group of Ahmedabad, it was revealed that the business of the group in the name of M/s Laxmi Construction had booked bogus purchases for material through bogus sub- contractors, who were dummy entities, and the assessee was found to be one of such dummy entities. The ld.counsel for the assessee contended that clearly the information revealed escapement of 5 income of M/s Laxmi Construction and not the assessee, which as per the information of the AO was only a dummy entity. Therefore, reopening in the present case was without jurisdiction in the absence of any belief of escapement of income of the assessee.

7.

The ld.DR however contended that the information with the AO revealed that the assessee had made bogus sales to Laxmi Construction and it was the income of the assessee in fact, which had escaped assessment, and the AO therefore rightly assumed jurisdiction to reopen the case of the assessee.

8.

I have heard rival contentions and have also carefully gone through the copy of the reasons recorded by the AO in the present case for reopening of the assessment under section 147 of the Act; For a valid assumption of jurisdiction to reopen cases under section 147, the statute requires the AO to have reason to believe that income of the assessee has escaped assessment. There is no dispute vis-à-vis this requirement of statute.

In the present case, the ld.counsel for the assessee has challenged the jurisdiction assumed by the AO to reopen the case of the assessee stating that the reasons recorded by the AO did not reveal any formation of belief of escapement of income of the assessee, but that on the contrary the reasons revealed information leading to formation of belief of escapement of income of some other entities i.e. M/s.Laxmi Construction in the present case. I have gone through the reasons recorded carefully and I find merit in the contention of the ld.counsel for the assessee. The information received by the AO which formed the basis for formation of belief of escapement of income of the assessee, as noted in para-2 of the reasons recorded above, reveals that it was gathered from search

6 action conducted at the SRA group of Ahmedabad which ran business in the name of M/s Laxmi Construction an Infrastructure firm. The information gathered through search revealed that this entity of the SRA group had booked bogus purchases/ expenses through bogus sub-contractor expenses shown in the name of dummy entities and the assessee was one of the entities reflected in the list of bogus sub-contractors. Even the analysis of the information by the AO in the reasons recorded is to the effect that the assessee is one of the dummy entities which was shown by M/s Laxmi Construction for booking bogus expenses. Therefore, what is derived from the above information and analysis of the information by the AO is that the AO had formed a belief that Laxmi construction was booking bogus expenses through dummy sub- contractors which included the assessee, which means that the AO was of the believe that it was Laxmi Construction which was taking accommodation entry of bogus purchases. The only belief this information can logically lead to is that it was the income of M/sLaxmi Construction which had escaped assessment. The assessee has been clearly mentioned as dummy entity created by M/s Laxmi Construction for booking entries of bogus purchases. Therefore, all the purchases made by M/sLaxmi Construction from the assessee are for the purpose of introducing its unaccounted money in its books. This information and analysis do not in any case reveal any income of the assessee being routed by way of issuing bogus sale bill to M/s Laxmi Construction, the assessee having been clearly mentioned as dummy entity.

Therefore, I agree with the ld.counsel for the assessee that information with the AO clearly could not have led to the formation of belief of escapement of income of the assessee, and therefore, reassessment proceedings initiated in the present case are without

7 valid jurisdiction. The assessment order passed as a consequence is set aside as invalid. The ground no.1 and 2 are allowed.

9.

Since I have set aside the assessment order under section 147 of the Act, other grounds are not being adjudicated by me as being mere academic exercise. The appeal of the assessee is accordingly allowed.

10.

In the result, the appeal of the assessee is allowed as indicated in above terms.

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →