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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-1, Pune dated 22-07-2016 for the assessment year 2009-10.
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The brief facts of the case as emanating from records are : The assessee/appellant is engaged in manufacturing and trading of Vails, Ampoules and Pharmaceutical material. The assessee filed its return of income for the impugned assessment year on 25-09-2009 declaring total income of Rs.51,04,920/-. The return of income was processed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). On the basis of information received from Maharashtra Sales Tax Department the assessment for assessment year 2009-10 in the case of assessee was reopened. As per information received by the Department, the assessee has indulged in bogus purchases of material from Hawala Dealers. In reassessment proceedings the Assessing Officer observed that the assessee had made alleged bogus purchases to the tune of Rs.2,53,45,433/- excluding VAT. The Assessing Officer rejected the books of account of assessee and made addition of Rs.24,05,281/- i.e. 9.49% of the bogus purchase.
Aggrieved by the assessment order dated 28-02-2014 passed u/s. 143(3) r.w.s. 147 of the Act, the assessee filed appeal before the Commissioner of Income Tax (Appeals) challenging the addition on merits. The First Appellate Authority vide impugned order confirmed the addition made by Assessing Officer. Now, the assessee is in second appeal before the Tribunal. The assessee has raised following grounds of appeal assailing the order of Commissioner of Income Tax (Appeals) : “1. On the facts and in the circumstances of the case and in law, the Ld. C.I.T.[A] has erred in confirming the addition of Rs.24,05,281/- made by the Ld. Assessing Officer on the ground of alleged bogus purchase from hawala dealer of Rs.2,53,45,433/-, thereby calculating G.P. on the same excluding VAT @ 9.49% to cover up the discrepancies in the profit due to bogus purchases and bogus sales ignoring the facts that such purchases and sales were genuinely made by the appellant and was duly considered in the audited accounts and also that G.P. on such sales was already offered for taxation and hence there was no unaccounted purchases and sales in the case of the appellant.
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The aforesaid addition being arbitrary, perverse, devoid of merits and being legally unsustainable the same may please be deleted.
On the facts and m the circumstances of the case and in law, the Ld. C.I.T.[A] has erred in confirming the addition of Rs.24,05,281/- made by the Ld. Assessing Officer on the ground of alleged bogus purchase from hawala dealer of Rs.2,53,45,433/-, thereby calculating G.P. on the same excluding VAT @ 9.49% to cover up the discrepancies in the profit due to bogus purchases and bogus sales disregarding the facts that sales could not be effected unless purchases were made by the appellant and also that profit disclosed on the said sales was already offered for taxation and hence further addition on G.P. would tantamount to double addition.
On the facts and In the circumstances of the case and in law, the Ld. C.I.T.[A] has erred in dismissing the prayer of the appellant that levy of interest u/ss. 234A/B/C and D as made by the Ld. Assessing Officer was bad in law and not warranted, which may please be ordered for deletion. 4. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary a t the time of hearing of the appeal.”
The assessee has filed additional grounds of appeal on 04-09-2018 inter alia challenging the validity of reopening of assessment. The additional grounds raised by the assessee are as under : “1. On the facts and circumstances of the case and in law the Learned Assessing Officer erred in initiating the re-assessment proceedings u/s. 147 of the Income Tax Act, 1961 in the case of the appellant in spite of the fact that all material facts necessary for assessment were disclosed in the return of income originally filed on 25/09/2009.
On the facts and circumstances of the case and in law the Learned Assessing Officer erred in passing the assessment order u/s. 143(3) r.w.s. 147 of the I.T. Act, 1961 recording the reasons merely on the basis of the information received from the Sales Tax Department, Government of Maharashtra, received through the Investigation Wing of the Income Tax Department, even though no such materials were in the possession of the Department to prove that there was escapement of income in the case of the appellant within the provisions of section 147 of the I.T. Act, 1961. 3. On the facts and circumstances of the case and in law the Learned Assessing Officer erred in completing the re-assessment proceedings by passing order u/s 143(3) r.w.s. 147 I.T. Act, 1961 on the basis of a third party statement of the Director of the company Jurong Labs Pvt. Ltd. and such other persons considered as Hawala operator(s) of providing accommodation entries without affording an opportunity of
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cross examination to the appellant in utter disregard of the violation of principle of natural justice and the settled law in this regard propounded in various judicial decisions and therefore, the entire proceedings are void-ab-initio and is deserved to be quashed. 4. On the facts and circumstances of the case and in law the Learned Assessing Officer erred in completing the re-assessment u/s. 143(3) r.w.s. 147 of the I.T. Act, 1961 by relying on the statements made by the Directors of Jurong Labs Pvt. Ltd. and such other persons considered as Hawala operator(s), without providing the copies of such statement either during the assessment proceedings or subsequently so as to rebut the same by the appellant, though such statements were used against the appellant in violation of principle of nature justice and, therefore, the reassessment so made on the facts already disclosed in the original return of income filed fully and truly does not stand in law and therefore such reassessment order is deserved to be cancelled /quashed."
Thereafter the assessee filed another set of additional grounds on 05-09-2018 challenging the validity of notice issued u/s. 148 of the Act. The second set of additional grounds raised by the assessee reads as under: “1. On the facts and circumstances of the case and in law the Learned Assessing Officer erred in completing the re-assessment u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 without disposing off the objection raised against initiating proceedings u/s. 147 of the Act in the letter dated 24/02/2014 after receiving the notices u/s. 148 and 142(1) of the Act. 2. That the said ground could not be raised along with challenging the validity of initiation of proceedings u/s. 147 of the of the I.T Act, 1961 and also issue of notice u/s. 148 of the said Act before the Ld. CIT(A), although in the submission made before him during the appellate proceedings, the said issue was raised as quoted by him in page no.8 of the appellate order. The mistake of not raising the ground before the CIT(A) was a bona-fide mistake but as the facts have been originated from the assessment order and is a patent mistake in law, the appellant is raising this ground nO.1 for adjudication of the Hon'ble Bench, as without disposing off the objection raised by the appellant before the Ld. Assessing Officer, the reassessment order u/s. 143(3) r.w.s. 147 of the Act was passed in violation of the principle laid down in the case of GKN Driveshafts (India) Ltd. v. DCIT (2003) 2591TR 19 (SC) & Asian Paints Ltd. Vs. Dy. Commissioner of Income Tax [2008] 296 ITR 90 (Bom).”
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Shri B.C. Malakar appearing on behalf of the assessee submitted that the assessment order has been passed without deciding the objections of the assessee against reopening. The ld. AR submitted that reassessment proceedings have been initiated merely on the basis of information received from Maharashtra Sales Tax Department. The Assessing Officer has not applied his own independent mind while recording satisfaction for reopening the assessment. The ld. AR fairly admitted that validity of reopening was not challenged in an explicit manner in the appeal before the Commissioner of Income Tax (Appeals). However, in written submissions objection was raised against initiation of proceedings u/s. 147 of the Act. The ld. AR contended that the additional grounds raised before the Tribunal are purely legal in nature and goes to the root of addition made, hence, the same should be admitted by the Tribunal.
5.1 On merits of addition the ld. AR submitted that the authorities below have erred in making addition on the basis of information received from Maharashtra Sales Tax Department. During the assessment proceedings the assessee had furnished all necessary evidences in the form of invoices, inward stock register, purchase orders etc. The payments to the alleged Hawala Dealers were made through banking channel and the statement of the bank account was also produced before the Assessing Officer. However, the Assessing Officer without appreciating the facts and evidences furnished made addition. The Commissioner of Income Tax (Appeals) also confirmed the addition without considering the facts of the case.
On the other hand Shri M.K. Verma representing the Department vehemently opposed the additional grounds raised by the assessee. The ld.
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DR submitted that before Commissioner of Income Tax (Appeals), the assessee never took objection of invalid notice issued u/s. 148 and the validity of assessment proceedings on the ground of not granting any opportunity of cross-examination. The ld. DR vehemently submitted that there was no request by the assessee before the Assessing Officer for seeking cross-examination of the parties. The ld. DR submitted that the authorities below were quite fair in making the addition only to the extent of GP declared by the assessee. The ld. DR prayed for dismissing the appeal of assessee and confirming the findings of Commissioner of Income Tax (Appeals). The ld. DR to substantiate his submissions placed reliance on the following decisions : i. Gujarat Ambuja Exports Ltd. Vs. Deputy Commissioner of Income Tax, 250 Taxman 482 (Gujarat); ii. Acorus Unitech Wireless (P.) Ltd. Vs. Assistant Commissioner of Income Tax, 362 ITR 417 (Delhi).
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The assessee in appeal has assailed the order of Commissioner of Income Tax (Appeals) in confirming the addition on account of bogus purchases on merits as well as challenging the validity of reopening of assessment by raising additional grounds of appeal.
A perusal of impugned order shows that the assessee has not challenged the validity of reopening before the Commissioner of Income Tax (Appeals). Before the Tribunal the assessee has raised additional grounds of appeal challenging the reopening on following counts :
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i. Reopening is based merely on the basis of information received from Maharashtra Sales Tax Department, no such material was in possession of the Department to prove that there were escapement of income. ii. The assessee was not provide opportunity to cross-examine with the Director of Jurong Labs Pvt. Ltd. as his statement was made base for reopening the assessment. iii. The Assessing Officer passed assessment order u/s. 143(3) r.w.s. 147 without disposing of the objections raised by the assessee against reopening. The action of Assessing Officer is in violation of law laid down by the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd. Vs. DCIT reported as 259 ITR 19 and the decision of Hon’ble Bombay High Court in the case of Asian Paints Ltd. Vs. Dy. Commissioner of Income Tax reported as 296 ITR 90.
After examining the additional grounds of appeal raised by the assessee we are of considered view that the grounds are purely legal and goes to the root for ascertaining validity of reassessment proceedings. Therefore, in line with the law laid down by the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax reported as 229 ITR 383, the additional grounds raised by the assessee are admitted for adjudication.
Since, the assessee has raised additional grounds challenging the validity of assessment proceedings for the first time before the Tribunal, without commenting on the merits of addition made, we deem it appropriate to remit the file to Commissioner of Income Tax (Appeals) for adjudicating the legal issues raised as additional grounds before the
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Tribunal. The Commissioner of Income Tax (Appeals) while adjudicating the legal grounds challenging the validity of reopening shall grant reasonable opportunity of hearing to the assessee, in accordance with law. Accordingly, the appeal of assessee is allowed for statistical purpose.
In the result, the appeal of assessee is allowed for statistical purpose.
Order pronounced on Monday, the 03rd day of December, 2018.
Sd/- Sd/- (अननऱ चतुवेदी / Anil Chaturvedi) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 03rd December, 2018 RK आदेश की प्रनतलऱवऩ अग्रेवर्त / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-1, Pune 3. प्रधान आयकर आयुक्त / The Pr. CIT-I, Pune 4. ववभागीय प्रनतननधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रनत // True Copy// आदेशानुसार / BY ORDER,
ननजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune