M/S. GERA DEVELOPMENTS PVT. LTD.,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

Both the appeals relating to the same assessee were heard together and are being disposed of by this consolidated order for the sake of convenience.

First, we shall take up the appeal of assessee in ITA No.1807/PUN/2016, relating to assessment year 2010-11, wherein the preliminary issue raised is against re-assessment proceedings initiated under section 147/148 of the Act. The assessee has by way of ground of appeal No.4 challenged the re-assessment proceedings being invalid as reasons recorded for reopening the assessment have not been furnished to the assessee. The assessee has also raised various other grounds of appeal by way of additional ground of appeal also, but during the course of hearing, the learned Authorized Representative for the assessee pointed out that in case jurisdictional issue raised vide ground of appeal No.4 is decided in favour of assessee, the other grounds of appeal would become academic. The ground of appeal No.4 raised by assessee reads as under:- “4. The ld CIT(A) grossly erred in not following the principles laid down by the Jurisdictional High Court that where the reasons recorded are not furnished to the assessee till the completion of the reassessment, the order or reassessment is liable to be quashed and set aside.”

Briefly, in the facts of the case, original assessment was completed under section 143(3) of the Act on 28.03.2013 and deduction under section 80IB of the Act was disallowed in the hands of assessee and income was computed at ₹ 1,42,39,620/-. The Assessing Officer received information from the office of Director General (Inv) Pune that the assessee was one of the beneficiaries and indulged in hawala transactions. The Assessing Officer thus, recorded reasons for reopening the assessment under section 147 of the Act and issued notice under section 148 of the Act on 22.03.2013. The Assessing Officer notes that reasons were recorded and were provided to the assessee and the same are reproduced at page 2 of assessment order. In response to the notice issued under section 148 of the Act, the assessee has participated in assessment proceedings and the assessment was completed after making addition of ₹ 9,69,481/-.

The CIT(A) has upheld the order of Assessing Officer, against which the assessee is in appeal.

The learned Authorized Representative for the assessee pointed out that certain factual aspects need to be considered for adjudicating the issue raised in the present appeal. The original assessment order under section 143(3) of the Act was passed on 28.03.2013. He further pointed out that when original assessment proceedings were pending, notice under section 148 of the Act was issued to the assessee on 22.03.2013, copy of which is placed at page 9 of Paper Book. The assessee in response furnished letter saying that return of income already filed may be treated as filed in response to notice issued under section 148 of the Act. Vide the said letter itself the assessee requested for copy of reasons recorded under section 148(2) of the Act. This letter is dated

The assessee reiterated that both the aforesaid statements were not only factually incorrect but also false. The assessee thus, pointed out that since it was filing appeal against aforesaid re-assessment order, it was requested that reasons recorded under section 148(2) of the Act were provided to the assessee, be supplied and also the evidence by way of relevant part of order sheet that Shri Soniminde had attended the office of the Assessing Officer in connection with the impugned re-assessment proceedings, be also provided for. A remainder was made to the Assessing Officer to provide the above information vide letter dated 10.10.2015. In reply, vide letter dated 11.02.2016, the Assessing Officer reported to the CIT(A) that on verification of record, it was seen that reasons for reopening the assessment were recorded and as per order sheet entry dated 07.05.2013, the same were given to Shri Soniminde and both the copies of reasons recorded and the copy of order sheet were enclosed for information. Before the CIT(A), the assessee filed written submissions pointing out the above said facts and circumstances and pointed out that the contents of re-assessment order that reasons recorded under section 148(2) of the Act were supplied to the assessee and Shri Soniminde attended the office in connection with re-assessment proceedings, were totally incorrect. In this regard, reliance was placed on series of decisions

The learned Departmental Representative for the Revenue has not controverted the submissions of learned Authorized Representative for the assessee except for relying on the orders of authorities below.

We have heard the rival contentions and perused the record. The first issue which needs to be addressed is whether re-assessment proceedings which were initiated by issue of notice under section 148 of the Act during pendency of original assessment proceedings are validly initiated. It is very

Now, coming to the next stand of assessee that it has not been provided reasons for reopening the assessment though the Assessing Officer in assessment order claims that it had handed over the same to the Accountant of assessee Shri Soniminde. The stand of authorities in this regard is not to be

The non-handing over of reasons recorded for reopening the assessment makes re-assessment proceedings fatal and invalid as held by the Hon’ble Bombay High Court in CIT Vs. Videsh Sanchar Nigam Ltd. (supra). The Hon’ble Bombay High Court held that since the reasons recorded for reopening the assessment were not furnished to the assessee till completion of assessment, re-assessment order cannot be upheld. The Hon’ble High Court also noted the fact that similar view was taken by the said Court in CIT Vs. Fomento Resorts & Hotels Ltd. in IT Appeal No.71 of 2006, dated 27.11.2006 and the Special Leave Petition filed by Revenue against the said decision had been dismissed by the Apex Court vide order dated 16.07.2007. It may also be appreciated that the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. Vs. ITO (2002) 125 Taxman 963 (SC) has held that after notice was issued under section 148 of the Act, proper course of action for noticee is to file return and if he so desires, to seek reasons for issuing notice and on receipt thereof to file objections to issuance of notice. The Hon'ble Supreme Court in the said case

In the present case, where the assessee has not been given reasons for reopening the assessment, then other procedure which is available to the assessee i.e. filing objections against reasons recorded for reopening, could not be complied with. In such circumstances, we hold the re-assessment proceedings initiated in the case are both invalid and bad in law and consequent re-assessment order passed cannot stand in the eyes of law. Thus, the preliminary issue raised vide ground of appeal No.4 is allowed and the issue raised on merits become academic.

Now, coming to the appeal in ITA No.1808/PUN/2016, relating to assessment year 2011-12, where the addition has been made in the hands of assessee on account of bogus purchases.

The learned Authorized Representative for the assessee in this regard has placed reliance on the decision of Pune Bench of Tribunal in bunch of appeals with lead order in M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT in ITA No.795/PUN/2014, relating to assessment year 2010-11, order dated

The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below.

We have heard the rival contentions and perused the record. The issue arising in the present appeal is against addition of ₹ 29,86,838/- made on account of alleged hawala purchases of construction material by the assessee. The assessee was engaged in construction business and had made said purchases from three different parties. The Assessing Officer had received certain information from the Sales Tax Authorities, under which it was alleged that purchases were made from hawala parties. The said information was collected by the Sales Tax Department and no efforts were made by Assessing Officer in this regard. However, the assessee on the other hand, has furnished trail of goods by furnishing purchase orders, bills, receiving report, delivery challans along with stamp of inward and even payments for purchases were made by cheque, then in such scenario, there is no merit in holding that the said purchases are not to be accepted in the hands of assessee. At best it could be case of making purchases from black market and as held by us in series of decisions, GP rate of 10% over and above declared by the assessee can be made in the hands of assessee. Such is the proposition laid down in series of decisions with lead order in M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT

In the result, appeal of assessee in assessment year 2010-11 is allowed and appeal of assessee in assessment year 2011-12 is partly allowed.