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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
These two appeals have been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-2, Nashik for the assessment years 2010-11 and 2011-12, respectively. Both the impugned orders are dated 28-01-2016.
2 ITA Nos.696 & 697/PUN/2016, A.Ys. 2010-11 & 2011-12
Since, the issues involved in both the appeals are identical and are arising from same set of facts, both the appeals are taken up together for adjudication and are being disposed of vide this common order.
Shri Sanket Joshi appearing on behalf of the assessee submitted that the submissions made by the assessee in respect of assessment year 2010-11 would equally apply to the assessment year 2011-12. Therefore, the appeal of assessee in ITA No. 696/PUN/2016 for assessment year 2010-11 be taken as a lead case.
2.1 The ld. AR submitted that reassessment proceedings were initiated in assessment year 2010-11. The Assessing Officer in order dated 05-01- 2015 passed u/s. 147 r.w.s. 143(3) held that the assessee has indulged in bogus purchases to the tune of Rs.18,93,192/- from the hawala dealer Vitrag Traders Private Limited. Consequently, the Assessing Officer made addition of the aforesaid amount. Aggrieved against the reopening of assessment and the addition made on account of alleged bogus purchases, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The First Appellate Authority upheld the reopening of assessment. However, in respect of addition on account of bogus purchases, the addition was restricted to 10% of the alleged hawala purchases. The ld. AR submitted that no addition on account of hawala purchase is sustainable as the reopening of assessment is itself bad in law. The ld. AR contended that the addition has been made by the Assessing Officer on the basis of information received from Sales Tax Department and the statement of third parties. The assessee while filing objections against the reasons recorded for reopening had asked for the statement of parties on the basis of which assessment has been reopened. However, neither the statement was
3 ITA Nos.696 & 697/PUN/2016, A.Ys. 2010-11 & 2011-12
provided to the assessee nor opportunity to cross-examine was allowed. The ld. AR furnished a copy of letter dated 08-01-2014 addressed to the Assessing Officer for proving statement of the parties. The ld. AR submitted that it is a well settled law that in the absence of opportunity to cross-examine when specifically requested the assessment order is not sustainable. The ld. AR relied on the decision of Tribunal in the case of Assistant Commissioner of Income Tax Vs. M/s. Chetan Enterprises in ITA No. 302/PUN/2016 for assessment year 2009-10 decided on 05-05-2017 to contend that no additions are sustainable where copies of statement or any other evidence in respect of hawala parties are not supplied to the assessee.
2.2 The ld. AR further contended that the Assessing Officer has not disposed of the objections filed by the assessee against the reasons recorded for reopening. The Assessing Officer thus, violated the mandate of Hon’ble Supreme Court of India in the case of GKN Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors. reported as 259 ITR 19.
2.3 On merits of the addition the ld. AR submitted that the assessee had furnished complete details of purchases, mode of payment and the confirmations. The ld. AR pointed that the payments against the purchases were made by account payee cheque to the suppliers. The assessee has maintained stock register within inward and outward record. It is not the case of Revenue that the said amount has travelled back to the assessee nor the Revenue has raised doubt over the sales made. Under such circumstances holding purchases as dubious is against the facts on record.
4 ITA Nos.696 & 697/PUN/2016, A.Ys. 2010-11 & 2011-12
On the other hand Shri Sanjeev Ghei representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals). The ld. DR submitted that specific information was received from the Maharashtra Sales Tax Department along with list of suspicious dealers engaged in providing book entry. The list included the name of suspicious dealer from when the assessee had allegedly purchased goods. The assessee failed to produce the supplier before the Assessing Officer. The ld. DR submitted that since the assessee failed to prove the genuineness of the purchases made from hawala operator the addition was made by the Assessing Officer. The Commissioner of Income Tax (Appeals) was quite generous in restricting the addition to 10% of the purchases made.
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 findings of Commissioner of Income Tax (Appeals) on the grounds : i. Challenging validity of reopening of assessment u/s. 147; and ii. In confirming the addition to the extent of 10% of the alleged hawala purchases i.e. Rs.1,89,319/-.
A perusal of documents on record reveal that while raising objections against the reasons recorded for reopening, the assessee had specifically asked for providing statements of parties on the basis of which bogus purchases by the assessee are alleged. The assessee has placed on record copy of communication dated 08-01-2014 delivered in the office of the Assistant Commissioner of Income Tax on 21-01-2014. The ld. AR has vehemently asserted that the statements were never provided to the assessee. The ld. DR has failed to show from the assessment records that the statement which forms the basis for making the addition were provided
5 ITA Nos.696 & 697/PUN/2016, A.Ys. 2010-11 & 2011-12
to the assessee at any stage. It is a well settled law that principles of natural justice have to be adhered while passing any adverse order against any subject. The Co-ordinate Bench of the Tribunal in the case of Assistant Commissioner of Income Tax Vs. Chetan Enterprises (supra) has held that where the copies of statements were sought by the assessee and the same were not provided, no addition is to be made in the hands of assessee in respect of such alleged hawala purchases.
The assessee by raising additional ground of appeal has challenged the validity of assessment proceedings on the ground that the objections of the assessee against the reasons recorded for reopening were never disposed of by the Assessing Officer before passing the assessment order. The additional ground raised by the assessee is legal in nature and no further additional evidence is required to be adduced, as such, the same is admitted for adjudication.
The Hon’ble Supreme Court of India in the case of GKN Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors. (supra) has enumerated the steps to be followed before passing the assessment order in case of reopening of assessment. It has been held that when a notice u/s. 148 of the Act is issued, the proper course of action for the assessee is to file return and if he so desires seek reasons for issuing notice. The Assessing Officer is duty bound to furnish reasons within a reasonable time. On receipt of reasons, the assessee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. The Assessing Officer is under obligation to dispose of the objections of the assessee by passing a speaking order on the objections raised against reasons recorded for reopening.
6 ITA Nos.696 & 697/PUN/2016, A.Ys. 2010-11 & 2011-12
The Hon’ble Bombay High Court in the case of KSS Petron Private Ltd. Vs. Assistant Commissioner of Income Tax in Income Tax Appeal No. 224 of 2014 decided on 03-10-2016 has held that where objections of the assessee are not disposed of by the Assessing Officer by passing a speaking order, the assessment order passed u/s. 147 r.w.s. 143(2) is bad in law. In the present case, the Revenue has failed to place on record any evidence to show that the objections of the assessee against reasons recorded for reopening were disposed of by the Assessing Officer.
We are of considered view that the Assessing Officer has failed to follow the principles of natural justice and the law settled by the Hon’ble Supreme Court of India while conducting reassessment proceedings. Thus, we hold the assessment proceedings u/s. 147 to be bad in law. The assessment order passed u/s. 147 r.w.s. 143(2) and the subsequent proceedings arising there from are held to be invalid. Accordingly, the ground No. 4 and the additional ground of appeal of the assessee are allowed.
Since, we have held reassessment proceedings to be bad in law, the ground Nos. 1 to 3 and 5 of the appeal challenging the additions on merits has become academic and hence, are not deliberated upon.
The ground No. 6 of the appeal is general in nature, thus, requires no adjudication.
In the result, the impugned order is set aside and the appeal of assessee is allowed.
7 ITA Nos.696 & 697/PUN/2016, A.Ys. 2010-11 & 2011-12
ITA No. 697/PUN/2016 (A.Y. 2011-12)
Both sides are unanimous in stating that the issues raised in the appeal and the facts in assessment year 2011-12 are identical to assessment year 2010-11. Since, the facts in the assessment year 2011- 12 are similar to assessment year 2010-11, the findings given by us while deciding the appeal of assessee in assessment year 2010-11 would mutatis mutandis apply to assessment year 2011-12. The appeal of assessee is allowed, accordingly.
To sum up, both the appeals of assessee are allowed.
Order pronounced on Wednesday, the 31st day of October, 2018.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 31st October, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-2, Nashik 3. 4. The Pr. C.I.T. -2, Nashik ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “ए” बेंच, 5. ऩुणे / DR, ITAT, “A” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune