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Facts
The assessee filed an appeal against the order of the CIT(A) for the assessment year 2018-19. The assessment was initially processed under section 143(3) accepting returned income. Later, a notice under section 148A(b) was issued for alleged escapement of income based on information regarding bogus bills and accommodation entries. The assessee provided a reply and supporting documents.
Held
The Tribunal held that the order passed under section 148A(d) was bad in law as the Assessing Officer did not consider the material on record, including the assessee's reply. The reopening was based on a change of opinion without concrete material. The statement of the key witness was not provided to the assessee for rebuttal.
Key Issues
Whether the reopening of assessment under Section 148A was validly initiated and based on proper evidence, and whether the principles of natural justice were followed by not providing the adverse statement for rebuttal.
Sections Cited
143(3), 142(1), 148A(b), 148A(d), 148, 147, 80C, 80TTA, 43B, 206C(1A), 206C(9)
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld CIT(A), NFAC, Delhi dated 04.09.2024 in DIN & Order No.ITBA/NFAC/S/250/2024-25/1068345718(1)), for the assessment year 2018-19.
2. Shri P.K.Mishra, Advocate appeared on behalf of the assessee. Shri Sanjay Kumar, ld CIT DR represented on behalf of the revenue.
The assessee is engaged in the transportation of coal and trading in coals. It was submitted by ld AR that the original return filed by the assessee came to be processed u/s.143(3) of the Act by the NFAC and the assessment came to be completed on 10.02.2021 accepting the returned income. Ld AR drew our attention to page 3 of the paper book, 2 which are the copies of notice issued u/s.142(1) of the Act and annexures thereto, which reads as follows:
3 ANNEXURE Your case has been selected for Complete Scrutiny with the reason "Low Income from TCS receipts-Mining and quarrying". As per ITR, you have shown TCS amounting to Rs. 2004682/- and gross receipt amounting to Rs. 194723948/- whereas the net profit reported is only Rs.2243540/- In connection with the assessment proceedings in your case for A.Y 2018-19, you are requested to furnish the below specified details/documents:-
1. 1. Details of Business/Profession activity carried by you during the relevant assessment year along with the computation of income for the year under consideration. Also Specify, in detail, the manner in which the liquor sold was utilized.
2. A detail note on various registers/records being maintained for recording the transactions and the accounting policies maintained 3. Copy of financials in the form of balance sheet, P&L account, tax audit report along with all annexures 4. Details of all bank accounts and bank statements maintained by you during the assessment year.
5. G.P and N.P rate for this year and earlier two assessment years and reason for fall, if any.
6. Details of Purchase/sale of immovable/movable assets/investments during the assessment year under consideration along with documentary evidence.
7. Please furnish details and proof of payments for statutory liabilities u/s 43B of IT Act.
8. Copy of ledger account and other evidences (bills/vouchers) in support of major expenses claimed in P&L account.
9. Have you taken any loan during the year under assessment? If yes, please furnish the lists along with supporting loan confirmations and PAN. Please provide the details of interest paid during the year in the following format- (a) S. NO (b) Name (c) PAN (d) Address (e) Amount of Interest paid (1) Rate of Interest (g) TDS deducted (h) Date of Payment of TDS 4 10. Please provide the list of sundry debtors and sundry creditors with name, address and PAN 11. Provide details of TDS deducted and deposited for relevant expenses debited to P&L account and also file copy of TDS returnalong with challans 12. Please furnish Month wise and party wise sales & purchases with complete postal address.
13. Please provide the details of opening & closing stock quantity & quality wise and basis of valuation of closing stock, supported with documentary evidence.
14. Please furnish copy of assessment order and appellate order of the last three assessment years, if any.
Party wise details of tax collected at source.
Details of parties who has filed declaration as per provisions of section 206C(1A) of the act along with amount of sale to respective party.
Details of buyers and amount of sale where a lower deduction certificate was issued by the AD as per provisions of 206C(9) of the Act.
Details of deductions/exemptions claimed during the year.
Please provide reconciliation of income from TCS receipts- Liquor (TCS) and Profit in Part-B-TI/Part A-PAL of ITR Also provide reasons for showing low income in comparison to TCS receipts.
Details of receipts on which tax was not collected at source.
As per ITR, You have claimed expenses on account of "Other expenses amounting to Rs. 1176170/-which includes "labour charges of Rs 765540/-,"travelling expense of Rs 179981/- With respect to expenses clamed by you, please provide following details (a) Supporting documentary evidence to substantiating your claim. evidences (b) Payments made to parties for the above expenses along with the documentary (c) Name, PAN, address of the parties (d) Copy of agreement if any with the above-mentioned parties.
5 (e) Mode of payment and supporting documentary evidence (1) TDS deduction details 22. You have made a huge cash withdrawal from your bank accounts maintained with Kotak Mahindra Bank Limited during the financial year 2017-18. Please provide reason and use for the same with relevant documentary evidence. Additional/Joint/Deputy/Assistant Commissioner of Income Tax/ Income-tax Officer, National e-Assessment Centre, Delhi 4. It was the submission that the question No.12 was a specific query with regard to the month-wise and party-wise sales and purchases. It was the submission that this notice u/s.142(1) is dated 5.2.2020. Ld AR further drew our attention to page 8 of PB, which was a reply furnished by the assessee dated 5.2.2021, which reads as follows: Date : 05.02.2021 To The Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income-tax Officer, Income Tax Department National e-Assessment Centre Delhi Sub: Revert to Notice under sub-section (1) of Section 1.42 of the Income Tax Act. 1961 Ref: DIN & Notice No: ITHA/AST/F/142(1)/2019-20/1024705442(1) Dated: 05/02/2020 Dear Sir, Please find below the point wise revert to the queries raised by your honor.
Details of all bank accounts and bank statements maintained by you during the assessment year Please find bank statement of Current account maintained with Allahabad Bank and Savings Account maintained with HDFC Bank and Kotak Mahindra Bank.
Copy of ledger account and other evidences (bills/vouchers) in support of major expenses claimed in P&L account.
6 Please find enclosed the list of major expenses a. Transporting Charges. Rs. 86,73,992.78 b. Labour Charges Paid Rs 7.65.540.00 Total Rs. 9,439,532.78 ============= 3. Have you taken any loan during the year under assessment? If yes, please furnish the lists along with supporting loan confirmations and PAN. Please provide the details of interest paid during the year. Please find attached.
Please provide the list of sundry debtors and sundry creditors with name, address and PAN. Please find attached list of sundry debtors and sundry creditors with name, address and PAN.
Provide details of TDS deducted and deposited for relevant expenses debited to P&L account and also file copy of TDS return along with challans. Please find attached TDS deducted and deposited for relevant expenses debited to P&L account and also find copy of TDS return along with challans.
6. Please furnish Month wise and party wise sales & purchases with complete postal address. Please find attached Month wise and party wise sales & purchases with complete postal address.
Party wise details of tax collected at source. Please find attached TCS deducted and deposited for relevant expenses debited to P&L account and also find copy of TCS return along with challans.
Details of deductions/exemptions claimed during the year Deduction u/s 80C has been claimed towards PPF of Rs. 5000/- and LIC of Rs. 37704/Deduction u/s 80TTA has been claimed towards interest on saving bank account. Copy enclosed.
Please provide reconciliation of income from TCS receipts-Liquor (TCS) and Profit in Part-HTL/ Part A-P&L of ITR This is to inform that there is no income from TCS receipts- Liquor and we are not engaged in selling the liquor.
As per ITR, You have claimed expenses on account of "Other expenses" amounting to Rs. 1176170/ which includes "labour charges of Rs 765540/-,"travelling expense of Rs 179981/-With 7 respect to expenses claimed by you, please provide following details: (a) Supporting documentary evidence to substantiating your claim. (b) Payments made to parties for the above expenses along with the documentary evidences. (c) Name, PAN, address of the parties. (d) Copy of agreement if any with the above-mentioned parties. (e) Mode of payment and supporting documentary evidence. (e) TDS deduction details. Please find attach the scan copy of voucher for labour payment paid to daily labours and scan copy of voucher alongwith invoices for travelling expenses. Please allow us the time as required for furnishing the reply. Thanking you. Yours Faithfully, Inderpal Singh Chhabra Essar Enterprises, Daily Market C/o Crazy Cool, Main Road Rourkela-769001 Odisha 5. Ld AR drew our attention to the reply in para 6, which are the details of month-wise and party-wise sales and purchase along with complete postal addresses. It was the submission that the assessment came to be completed on 10.2.2021 by the NFAC after completing e- verification and due assessment procedure. It was the further submission by ld AR that the assessee that subsequently on 15.3.2022 the assessee was served with notice u/s.148A(b) of the Act, wherein, the Assessing Officer has raised the issue of alleged bogus expenditure claimed on account of statement from Shri Neeraj Kumar Nathani. Ld AR drew our attention to pages 15 & 16 of paper book, which were the copy of the reasons served on the assessee along with notice u/s.148A(b) of the Act which reads as follows.
8 9 ANNEXURE Information flagged in the assessee's case for the A.Y. 2018-19 in accordance with the risk management strategy formulated by the Board reveals the following That an investigation was conducted in the case of Sin Niraj Kumar Nathani, son of Sri Gouri Shankar Nathani (PAN ABRPN5317P) in regards to information about a group led by Shri Niraj Nathani engaged in issuance of fake bills with the help of shell companies floated and maintained by the group to various parties in order to assist them claiming bogus GST input credit and deduction in Income-Tax computation. An enquiry was initiated and details of all the companies was obtained from MCA and ITBA systems. From the ITRs and other statutory reports filed by the companies it was observed that. most of the companies were incorporated during the F.Y. 2017-18, 83 companies were found non-filers and the companies were also having common directors. The bank alcs maintained by companies operated by Shri Niraj Kumar Nthani was obtained and analyzed. From the bank statements, most of the companies were reporting a considerable turnover were found receiving funds from group companies as well as some beneficiaries who have probably received take bills from these companies. Instances of internal fund transfers were also observed which were used merely for layering purpose. The statement of Shri Niraj Kümar Nathani was recorded an oath us. 131 wherein he has accepted the fact of his involvement in Bogus Billing and submitted list of beneficiary entities who have received bogus bills from shell companied operated by him and his group. The list of beneficiary entities who have received bogus bills from shell companies and have claimed deduction of these bogus expenses in their computation of income for relevant assessment years. Therefore, it is well established that Shri Niraj Kumar Nathani along with his associates is engaged in bogus billing and has issued bogus bills in the name of many of his clients form books of shell companies controlled by him and have made their clients claim bogus expenses and thereby evade Income-Tax From the list of beneficiaries, it is seen that Inderpal Singh Chhabra is one such beneficiary who has received accommodation entry from Mis, Rachel Realtors Pvt. Ltd. one of the many shell companies controlled by Shet. Niraj Kumar Nathani during the F.Y. 2017-18 as under 10 PAN OF NAME OF F.Y. PAN OF BILL NAME OF THE AMOUNT (in BILLER BILLDER RECEIVER BILL Rs.) COMPANY RECEIVER AAHCR9261N RACHEL 2017-18 AJLPC6337J INDERPAL 4,83,76,999.00 REALTORS SINGH PVT. LTD. CHHABRA On perusal of the above information received vis-à-vis records available with the department and after verification, it is seen that income chargeable to tax of Rs. 4.83,76,999/- has escaped assessment for The AY 2018-19 Therefore you are required to show-cause within 25.03.2022 as to why a notice uls, 148 should not be mound on the basis of the above information which suggest that income chargeable to tax of Rs. 4,83,76,999/- has escaped assessment for the A.Y. 2018-19. You are required to furnish your explanation along with documentary evidences to substantiate your case.
Non-compliance to this notice will be considered as "you have nothing to state and explain" in the matter and notice u/s.148 of the I.T Act, 1961 will be issued without providing any further opportunity.
Please note that no further extension of time will be entertained at this end.
MAGPEN BHUTIA ACIT, CIRCLE ROURKELA (In case the document is digitally signed please refer Digital Signature at the bottom of the page)
It was submission that the statement of so called Neerraj Kumar Nathani was also not provided to the assessee nor any details provided as to when such statement was recorded nor an opportunity of cross examination was granted to the assessee. However, the assessee complied with the said notice and replied to the same on 25.03.2022 the reply of the assessee is at page 17 & 18 of paper book which reads as follows:-
11 12 7. It was submission that the details of the purchases and sales from Rachel Realtors Pvt. Ltd. were also provided in its entirety. The ld AR drew our attention the GSTIN return in form 2A at page 97 of the paper book which showed that Rachel Realtors Pvt. Ltd. and their GST numbers, which read as follows:
13 8. It was the submission that subsequently the assessee was served with an order u/s. 148A(d) of the Act, wherein the AO in para 4 of his order has held that full reliance on the documents were furnished will be premature at this stage. The copy of the order u/s 148A (b) dated 30.03.2022 which reads as follows:-
14 15 9. It was submission that in the present case in the course of original assessment all the details were available to the AO and the assessment was completed in faceless manner and all details have been called for and the details have already been submitted. It was the submission that notice u/s. 148A(b) was itself defective, insofar as the adverse information 16 available to the AO was not provided to the assessee for his rebuttal but the assessee was asked to provide the information which was already available on record. It was the submission that the assessee provided such details and such details were not considered by the AO but was brushed aside by mentioning that verification of the information provided would be premature. It was the submission that the reasons recorded were clearly a change of opinion. It was the further submission that the information having already been provided to the AO and the same have already been examined at the time of assessment proceedings, in view of the decision of the Hon’ble Supreme Court in the case of CIT vs Odeon Builders, reported in [2019] 418 ITR 315(SC), the order itself is liable to be quashed.
10. The ld AR further relied on the decision of the Hon’ble Supreme Court in the case of Kelvinator India Ltd, reported in [2010] 320 ITR 561 (SC) to submit that the change of opinion cannot be used for the purpose of reopening the assessment.
In reply, ld CIT DR submitted that the AO in his notice u/s.148A(b) of the Act had brought to the attention of the assessee that a statement had been recorded from Nerraj Kumar Nathani and the assessee was well aware that the purchases form said Rachel Realtors Pvt. Ltd. were bogus. It was submission that the reopening is liable to be upheld.
We have considered the rival submission. A perusal of the present case would show that admittedly the statement recorded from Nerraj Kumar Nathani has not been provided to the assessee for his rebuttal.
17 Further a perusal notice issued u/s. 142(1) of the Act in the course of original assessment proceedings by the e-assessment proceedings would clearly show that the details of the purchases have been called for in its entirety. The assessee has also provided the same and admittedly the assessment order 143(3) has been done in the faceless manner which includes e-verification. Here, it would be worthwhile to extract the provisions of section 148A(d) which reads as under:- [Conducting inquiry, providing opportunity before issue of notice under section 148. 148A. The Assessing Officer shall, before issuing any notice under section 148,— (a) xxxxxx (b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
The AO provided an opportunity to assessee of being heard u/s.148A(b) of the Act. The assessee replied to the same. A perusal of the provisions of Section 148A(c) of the Act clearly shows that the AO is to consider the reply of the assessee which is furnished if any. Here, the assessee admittedly has provided a reply along with details. Once such reply has been furnished and the AO considers such reply, the order u/s.148A(d) of the Act would get passed. When passing an order u/s.148A(d) of the Act the AO is “to decide, on the basis of material 18 available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148......"
In the present case a perusal of the order 148A(d) of the Act, most specifically in para 4, shows that the information and the details provided by the assessee has not been considered at all. All that the AO has relied upon the statement of Neeraj Ku Nathani. If the statement of the Neeraj Ku Natahni is removed from the preview of the investigation, there is no other evidence available which could rise to suspicion that there is anything untoward in the accounts of the assessee. The statement of the Neeraj Ku. Nathani admittedly had also not been provided to the assessee. A perusal of the GSTIN return, which has been extracted hereinabove, also shows that in Form 2A filed under the GSTIN provision, the said company i.e. Rachel Realtors Pvt. Ltd. is clearly shown as a GSTIN supplier and has a registration number. A doubt, admittedly, could have been created but then the address of the said supplier is also at Chhattisgarh. The assessee's address admittedly as per the GSTIN details is in Chhattisgarh. So, this cannot be treated as one transaction which could draw a suspicion. Further a perusal of the order u/s. 148A(d) of the Act clearly shows that the AO has not considered nor decided on the basis of material available on record including the reply of the assessee, insofar as the AO specifically mentioned that "full reliance on the documents furnished will be premature at this stage considering the fact that for taking entries, the paper work in regards to the transactions for the purpose of which require to be authentic with proper entries in the 19 books and with proper routing of money through bank also. Therefore, the authenticity of the alleged transaction with Rachel Realtors Pvt. Ltd. cannot be relied on at this juncture." The purpose of section 148A and the issuance of notice u/s.148 is for a reopening of an assessment where there is income escaping assessment and not for the purpose of investigation of suspicion of income escaping assessment. When all data was available before the Assessing Officer, nothing stopped the Assessing Officer from examining such information to draw a conclusion as to whether the reopening is to be done or not as the Assessing Officer has not complied with the requirements of deciding the all the materials on the basis of record and the information as provided by the assessee has simply brushed aside without application of mind, it is held that the order passed u/s.148(A(d) of the Act by the Assessing Officer on 30.3.2022 is bad in law and consequential notice issued u/s.148 of the Act would also be bad in law. As we have held that’s the reopening is bad in law and also on the ground that the AO is admitted to reopen the files on the basis of change of opinion without any concrete material available with the AO, it is held that the reopening is bad in law and consequently the same is hereby quashed. Accordingly, we have quashed the reopening of the assessment in the present case, therefore, the consequential assessment order passed u/s.147/143(3) of the Act also stands quashed.