JAGDISH P. JAIN,MUMBAI vs. INCOME TAX OFFICER-19(2)(1), MUMBAI

1. Whether the Ld. CIT(A) was justified in sustaining the Assumption of Jurisdiction under section 147/148 by holding that it is based on definite information/ material as well as notice issued u/s 148.

Whether the Ld. CIT (A) was justified in sustaining the Assumption of Jurisdiction under section 147/148 as no copy of the reasons recorded by the Ld. A.O was provided to the assessee. Moreover, nothing about the service of copy of reasons recorded appears in the body of assessment order.

Brief facts of the case are that the assessee is engaged in the business/ trading of Ferrous and Non-ferrous metals, filed his return of income for Assessment Year 2011-12 on 23.09.2011 declaring income of Rs. 3,95,057/-. The return of income was processed under section 143(1). The assessment was re-opened under section 147 on the basis of information received from Sale Tax Department, Government of Maharashtra that 2 Mum 2019-Jagdish P. Jain certain hawala operators are indulging in providing accommodation bills without actual delivery of goods. The Sale Tax Department, Government of Maharashtra referred the list of such hawala dealers and the beneficiary to the DGIT (Investigation), Mumbai. The name of assessee appeared in the list of beneficiary. On the basis of information, the Assessing Officer made a belief that the income of the assessee escaped assessment, therefore, re- opened the assessment under section 147. The notice under section 148 dated 04.11.2014 was served upon the assessee. The Assessing Officer after serving notice under section 143(2) proceeded for re-assessment.

The Assessing Officer in order to verify the transaction of purchases, issued notice under section 133(6) to all the traders from whom the assessee has shown purchase. The notice sent through registered post was returned back with the remark “Left”. The assessee was asked to show-cause as to why the purchases shown from all the parties should not be treated as non- genuine. The assessee in order to substantiate the purchases stated that the goods were delivered by the said parties and are reflected in the books of account. The payments were made through cheques only. The assessee furnished the Books of account, purchases bills. The Assessing Officer after considering the reply of assessee, copies of bills and on the basis of report of Investigation Wing of Sale Tax Department disallowed 12.5% of aggregate of purchases shown from the said hawala parties in the assessment order passed under section 143(3) r.w.s 147 dated 15.03.2016.

We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. The ld. AR of the assessee submits that the ld. CIT(A) passed the order ex-parte without giving fair and proper opportunity of hearing to the assessee. The notices of hearing were sent via email. In response to the notice dated 26.09.2019 sent via e- mail for fixing hearing on 11.07.2019, the assessee requested for adjournment. The ld. CIT(A) neither adjourned the hearing nor issued further notice to the assessee. The order was passed ex-parte. No notice of enhancement under section 251(1)(a) of Income-tax Act, was issued to the assessee. Last notice which was responded by assessee was only for 11.07.2019 and no further notice was received by the assessee. The ld. CIT(A) enhance the addition to 100% of the alleged bogus purchases. The ld AR for the assessee submits that the ld CIT(A) passed the impugned order without providing fair and opportunity. 6. The assessee is dealing in Ferrous and Non-ferrous metals wherein profit margin is very low. The ld. AR of the assessee further submits that the assessee has good case on merit and liable to be succeeded in case the assessee is given opportunity of hearing on merit at the stage of First Appellate Authority (FAA). The ld. AR of the assessee prayed for restoring 5 ITA No. 5467 Mum 2019-Jagdish P. Jain the matter to the file of ld. CIT (A) for decision on all grounds of appeal

We have considered the rival submission of both the representatives of the parties and perused the order of lower authorities. In the re-assessment proceedings, the Assessing Officer identified the purchases shown from 14 parties, which were declared as hawala dealers by State Government. The Assessing Officer made the addition @ 12.5% of the alleged bogus purchases by following the decision of Hon’ble Gujarat High Court in Simith P. Seth (supra). On appeal before the ld. CIT(A), re-opening under section 147 was upheld and the addition of bogus purchases was enhanced to 100%.

We have noted that in para-4.1 of the impugned order, the ld. CIT(A) has recorded that first notice of hearing dated 22.01.2019 was issued through email for hearing on 05.02.2019. The assessee sought adjournment on that day. It is further recorded that another notice dated 26.06.2019 for fixing the date of hearing on 11.07.2019 was also sent via email. The assessee responded in response to the hearing fixed on 11.07.2019. The ld. CIT(A) 6 Mum 2019-Jagdish P. Jain recorded that assessee “again sought” adjournment via email on 11.07.2019. The adjournment was denied. No reason for denial of adjournment was recorded by ld. CIT(A). The ld CIT(A) has not recorded if the denial of adjournment was communicated to the assessee. The notice of enhancement under section 251(1)(a) was allegedly issued on 22.01.2019 for 05.02.2019. The date of enhancement notice is conflicting one (antedated). There is no reference in para 4.1 of the order that in a first notice of hearing dated 22.01.2019, the ld CIT(A) decided to made the enhancement.

The assessee filed its appeal on 30.06.2016. The hearing of appeal was taken up after two and half year from the date of filing the appeal. Even if the facts recorded by ld CIT(A) are appreciated, the notice of enhancement was allegedly issued on the first date itself 22.01.2019 for fixing hearing on 05.02.2019. In our view, no fair and proper opportunity of hearing was provided to the assessee. It is settled position under the law that opportunity of hearing not only be given but it should be reflected on the face of it.

In the result, appeal of the assessee is allowed for statistical purpose.