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Income Tax Appellate Tribunal, ‘G’ BENCH, MUMBAI
Before: SHRI B.R.BASKARAN, AM & SHRI RAVISH SOOD, JM
आदेश / O R D E R
PER RAVISH SOOD, JUDICIAL MEMBER:
The present appeal filed by the revenue is directed against the order passed by the CIT(A)-51, Mumbai, dated 11.09.2015, which in itself arises from the assessment order passed by the A.O under Sec. 143(3) r.w. Sec. 147 of the Income tax Act, 1961, (for short „Act‟).
P a g e | DCIT Vs. M/s Wind World (India) Limited The revenue assailing the order of the CIT(A) had raised before us the following grounds of appeal:- “1. on the facts and in the circumstances and in law, the Ld. CIT(Appeal) has erred in quashing the assessment made u/s.143(3) r.w.s. 147 by holding that Assessing Officer had no reason to believe that the income has escaped assessment and there was no failure on the part of the assessee to disclose fully and truly all material facts ignoring the fact that the Directors and the employees of the assessee company accepted the bogus expenditure and bogus purchase during the search and also the assessee company was unable to produce the books of account.
2. On the facts and in the circumstances and in law, the Ld. CIT(Appeal) has erred in not considering on merit and not upholding the addition made by the Assessing Officer for bogus expenditure and non-genuine purchase of Rs. 15,97,22,639/-. The appellant craves, leave to add, to amend and /or alter any of the grounds of appeal, if need be.
The appellant therefore, prays that on the grounds stated above, the order of the CIT(A)-51,Mumbai may be set aside and that of the Assessing Officer be restored.”
2. Briefly stated, the facts of the case are that the assessee is a closely held company established in collaboration with its German principal, viz. M/s Enercon BmbH and Indian promoters with the shareholding pattern of 56% and 44%, respectively. The assessee which was engaged in the business of manufacturing and selling wind turbine generators and providing wide range of services in the wind power industry had e-filed its return of income for Assessment year: 2006-07 on 28.11.2006, declaring total income at Rs. Nil and book profit under Sec. 115JB at Rs.137,69,75,328/-. The regular assessment in the case of the assessee was framed under Sec. 143(3) on 24.12.2009 determining its total income at Rs. Nil and book profit under Sec. 115JB at Rs.152,88,32,328/-. Aggrieved, the assessee filed an appeal before the CIT(A), which was partly allowed. That after
P a g e | DCIT Vs. M/s Wind World (India) Limited giving effect to the CIT(A) order dated 06.06.2011, the book profit under Sec. 115JB was reduced to Rs. 1,49,68,65,328/-.
Search and seizure proceedings under Sec. 132 of the Act were conducted in the case of the assessee on 14.03.2013. The managing director of the assessee company, viz. Sh. Yogesh Mehra in his statement recorded under Sec. 132(4) admitted that purchases aggregating to an amount of Rs.129,05,89,254/- made by the assessee from 32 parties during the period relevant to A.Ys 2010-11 to 2013-14 were not verifiable. Shri Yogesh Mehra further in his statement recorded under Sec. 132(4) on 18.02.2013 admitted an additional income of Rs.170 crores in the hands of the assessee company. The A.O in the backdrop of the aforesaid information reopened the case of the assessee for A.Y. 2006-07 by recording the following reasons to believe:-
“1. The return of income for A.Y. 2006-07 was e-filed by the assessee company on 28.11.2006, declaring total income at Nil after claiming deduction u/s 80IB amounting to Rs 38,94,30,485/- and declared book profit u/s 115JB of the I.T. Act at Rs. 137,69,75,328/-. The return of income was duly processed and subsequently scrutiny assessment u/s 143(3) was completed on 24.12.2009 assessing the to tal in co me at Rs. Nil and boo k prof it u /s 115J B a t Rs. 1,52,88,32,328/-. Further, after giving effect to the CIT(A) order dated 06.06.2011 book prof it u/s 115JB has been reduced to Rs.1,49,68,65,328/-.
2. Subsequently, an information has been received from DDIT (Inv.), Unit- IV (1), Mumbai vide his letter dated 25.03.2013 that a search u/s 132 of the I.T. Act was carried out on the assessee on 14.03.2013. This information reveals that the bogus purchase for the period pertaining to F Y 2009 -10 to 2011-12 formed an average 1.04% of turnover. So, considering, turnover of Rs. 1673,34,28,055/- for FY:2005-06 relevant to the A.Y. 2006-07, prima facie bogus purchase comes at around Rs. 17,40,27,652/- It is also submitted that the DDIT (Inv.), Unit IV(1), Mumbai that exact quantification of bogus purchases for the period of F.Y. 2005-06 relevant to the A. Y. 2006-07 may take some more time. Since the matter for F.Y. 2005-06 relevant to the A. Y. 2006-07 is going to be barred on 31.03.2013, the DDIT(Inv.), Unit IV(1), Mumbai has recommended to reopen the assessment for A.Y. 2006-07 on the basis of facts enumerated above. Thus, I have reasons to believe that the P a g e | DCIT Vs. M/s Wind World (India) Limited income of Rs.17,40,27,652/- in respect of bogus purchases made during the year under consideration has escaped assessment within the meaning of clause (c) below Explanation (2) to section 147 of the Act by reason of failure on the part of the assessee to disclose fully and truly all Material facts necessary for its assessment for A.Y. 2006-07.
3. In view of the above facts, I am satisfied that this is a fit case for issue of notice u.s 148 of the Income Tax Act, 1961.”
4. The assessee in compliance to the notice issued under Sec. 148 of the Act, submitted that its return of income filed on 28.11.2006 under Sec. 139(1) may be treated as a return filed in response to the aforesaid notice. The assessee thereafter raised objections as regards the validity of the reassessment proceedings initiated in its case, which however were rejected by the A.O by way of a speaking order, observing as under:
“Sub:- M/s Wind World India Limited (Formerly known as “Enercon (India) Limited”)-A.Y.2006-07 Order of Rejection of Objections to reopening proceedings-reg. – Please refer to the above. In your letter dated 29th January, 2014, you have raised objections with respect to reassessment proceedings in the assesse e‟s case for the A.Y.2006-07. The same have been perused and found to be not acceptable for the following reasons: 1. Ground (a) Assessee's claim that the notice did not contain reasons to indicate failure on part of the Assessee to disclose truly and fully all material facts necessary for assessment is erroneous, as the Assessing Officer has clearly indicated in the reasons recorded that the subsequent to search action u/s 132, the DDIT has written that during the course of search, instances have been found wherein the assesses has deviated from the standard operating procedure in respect of purchases. The assessee has admitted that it had booked such bogus purchases in order to meet its demand for meeting “speed money” payments. Assessee Company's director Shri Yogesh Mehra's categorically in his statement recorded on 15/03/2013,16/03/2013 and 17/03/2014 admitted that it was carrying out its business activity in all the previous years in the same fashion and manner with respect to bogus purchases for generation of speed money. On these failures of the assessee to truly and fully disclose details necessary for completing assessment which was brought to light subsequent to the search action, the assessing officer has reasons to believe that there has been an escapement of income. The practice of Assessee in indulging of booking of bogus purchases through P a g e | DCIT Vs. M/s Wind World (India) Limited interfering with the accounting software is clearly a fact of failure on part of the assessee to truly and fully disclose material facts required for assessment and thus the reopening based on this fact is truly in conformity with the provisions of Section 147 and thus valid in law, and not barred by limitation and well within jurisdiction. With respect to the case laws cited from the Jurisdictional High Court, it is a fact that all the referred case laws mandates that the reopening should be based on material facts that leads the assessing officer to believe that there has been an escapement of income due to failure on part of the Assessee to truly and fully disclose all details. This obligation has been fully conformed by the assessing officer. The reopening has been based on material facts received from DDIT(Inv.), Unit-IV(1) on the tax evasion practices of assessee by booking bogus purchases, unearthed during search. This fact clearly brings out that the assessee has not truly and fully disclosed material facts regarding its business and accounting practices. Thus, the failure of the assessee to fully and truly disclose, as per first proviso to section 147 of the Income Tax Act, is a fact which lead the assessing officer to believe that there has been an escapement of income owing to the failure of the assessee to truly and fully disclose all facts. The relevant portion of the reasons recorded by the Assessing Officer is as under. “Thus, I have reason to believe that the income of Rs. 17,40,27,652/- in respect of bogus purchases made during the year under consideration has escaped assessment within the meaning of clause (c) below explanation (2) to Section 147 of the Act by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for A. Y.2006-07”. Thus, assessee's claim that there is no mention of failure of assessee to disclose truly and fully all material facts necessary for assessment is erroneous as the same has been duly recorded in the reasons. Thus, this objection is rejected.
Ground (b) Assessee has claimed that the A.O has no reason to believe that any income chargeable to tax has escaped assessment for the assessment year 20O6-07 which is evident from the copy of reasons recorded by the A.O. Immediately in the next para assessee claims that 'the A.O. had only reason to suspect that income escaped assessment'. Assessee seems to agree that reasons were recorded by the A.O. and is only questioning that the reasons were only mere suspicion and does not constitute reasons to believe. This claim of the assessee is completely erroneous. It is reiterated that on receipt of information from DDIT, the AO has taken cognizance of the practices of the Assessee in booking bogus purchases for all the previous years including the A.Y. 2006-07 for generating speed money at the time of reopening. The fact is present i n t h e s t a t e m e n t o f S h r i Y o g e s h M e h r a d a t e d 15.03.2013, 16.03.2013 and 17.03.2013, as discussed above already. Reasons to believe is completely based on the practice of assessee in booking bogus purchases confirmed by statements P a g e | DCIT Vs. M/s Wind World (India) Limited recorded during search. The only remaining issue being quantification of such bogus purchases for relevant assessment year. The assessee was asked by the DDIT to produce the purchase bills for the assessment year 2006-07. The assessee did not possess the bills in its registered office, whereas stated that the same were present at its Daman Office. Thus, owing to failure of assessee to produce the required documents on time, the quantification became difficult and the same was decided on as per records available with the department. Evidences gathered during search have been given due cognizance and on the receipt of information of the same- the Assessing Officer had reasons to believe that there has been escapement of income resulting due to booking of bogus purchases. Non-disclosure of such practices and information by the assessee clearly is a failure on part of the assessee to truly and fully disclose details required for assessment. It is once again reiterated that reopening based on information on statements recorded during search and evidences gathered u/s 132, which were earlier not available before the assessing officer during assessment u/s 143(3), is valid, legal and complete in jurisdiction and in complete consonance with the provisions of the Income Tax Act. With respect to reliance placed on decision of the Hon'ble Supreme Court in the case of Sheo Nath Singh V/s Appellate Assistant Commissioner of Income Tax reported in 82 ITR 147(SC), the facts of the case in question is completely different, also in view of the change of the legal position from the time of the said order. The said case was reopened on the basis on „purported‟ secret profits, whereas in the current case, it is based on specific issue of bogus purchases unearthed during search. Thus, given the above discussion, your objection is hereby rejected.
3. Point-2- With respect to disallowance u/s 14A, queries are raised only to give effect to the appellate orders in question, as per ITAT's direction to A. 0. to decide afresh with respect to ground four being consequential in nature. Thus, it is clarified that the details are required only with respect to ground four. The same is a fall out of the order of ITAT and is being simultaneously considered with the pending proceedings. Assessee may give information to that extent alone. This is for information and clarification. In view of the above discussion and based on the facts available the objections raised against reasons for reopening are not acceptable and accordingly they are disposed of.”
The A.O while framing the assessment observed that during the course of the search & seizure proceedings conducted on the assessee under Sec. 132 of the Act, Shri Yogesh Mehra had in his statement recorded under oath admitted that the practise of payment of “Speed money” was also followed by the assessee in the earlier years, and P a g e | DCIT Vs. M/s Wind World (India) Limited source of generation of such money was by way of booking of bogus purchases. The A.O in order to verify the authenticity of the purchase transactions for the year under consideration called upon the assessee to produce its books of accounts maintained on the SAP system for the period prior to 18.10.2008. That despite specific directions the assessee failed to produce its books of accounts. Since the assessee was unable to produce its books of account maintained on the SAP system, therefore, the A.O in order to verify the purchase bills of the assessee for F.Y. 2005-06, made necessary verifications from the Daman office of M/s Enercon India Ltd. The purchase bills which were produced by the assessee revealed that bills of the following parties aggregating to an amount of Rs.5,97,22,639/- were not available:
Sr. No. DOC. NO. PARTY NAME AMOUNT (Rs.) 1. 52009976 GR/IR CLG. 1,22,87,833/- 2. 52009985 GR/IR CLG. 1,22,87,833/- 3. 52011353 INNOSOFT 80,98,865/- 4. 52011343 INNOSOFT 10,29,116/- 5. 52011344 INNOSOFT 10,29,116/- 6. 52013979 N I SHETTY 21,50,632/- 7. 52013965 G. SELVAM ENGINEERING 12,31,726/- 8. 52013831 SAV ENGINEERING 10,29,116/- 9. 52020794 GET ENGINEERING 45,99,820/- 10. 52015968 G. SELVAM ENGINEERING 33,20,967/- 11. 52020694 GET ENGINEERING 45,99,820/- 12. 52021648 V & V ASSOCIATES 38,92,930/- 13. 52024250- GAJAMBUJA CEMENT 4,19,499/- 52 14. 52027991 SAV engineering 20,58,232/- 15. 52027992- G SELVAM ENGINEERING 30,87,348/- 93 16. 52031503 M P MALAVIYA 24,75,592/- 17. 52031306 LANCO INFRATECH LTD. 11,24,194/- TOTAL AMOUNT 5,97,22,639/-
P a g e | DCIT Vs. M/s Wind World (India) Limited The A.O further observed that Shri Awadhesh Kumar Jha (Assisstant General Manager-Accounts of M/s Enercon India Ltd.) in his statement had categorically stated that he was neither in a position to provide the above mentioned bills, nor establish the actual receipt of goods/services or identify the site to which the goods pertained. The A.O on the basis of the aforesaid state of affairs directed the assessee to establish with documentary evidence the fact of actual receipt of goods/services in respect of the aforementioned bills/vouchers and the site to which those pertained. The A.O observed that as the assessee despite being afforded sufficient time and opportunity failed to produce the bills as well as establish the actual receipt of goods/services and the site to which the same pertained, therefore, called upon the assessee to show cause as to why the same may not be held to be non genuine purchases and added to its returned income. The assessee expressed its inability to produce the purchase bills/vouchers for the reason that the same had been lost or misplaced. The A.O being of the view that even if the aforesaid claim of the assessee was to be accepted, it was still beyond comprehension that all the other documents which would support the delivery of the goods had also gone missing. The A.O was also not persuaded to be in agreement with the claim of the assessee that as the abovementioned bills aggregating to Rs.5,97,22,630/- were not admitted by Shri Yogesh Mehra in the disclosure made by him during the course of the search proceedings, therefore, the same on the said count were to be taken as genuine. The A.O was also not impressed by the submissions of the assessee that as the Assistant Manager-Accounts of M/s Enercon India Ltd. had joined the company in the year 2010, therefore, there was every possibility that he may not be aware of the correct factual position for the period under consideration. The A.O further observed that as the GR/IR clearing account checked the P a g e | DCIT Vs. M/s Wind World (India) Limited quantity of goods received against the quantity of goods invoiced and then posts the balance accordingly, therefore, as long as there would be a difference in the invoices received and goods received, there would remain a balance in the GR/IR account. The A.O in the backdrop of his aforesaid observations concluded that as the GR/IR clearing account clearly revealed discrepancies in the purchases of the assessee, therefore, the contention of the assessee that no adverse inferences on the said count was liable to be drawn could not be accepted. The A.O further rejected the claim of the assessee that Shri Yogesh Mehra in his statement which was recorded under strain had inadvertently stated that the disclosure statement was with respect to non-genuine purchases for the year under consideration. The A.O observed that the assessee in its letter dated 03.06.2013 had stated that the disclosure of Rs.40 crore (approx.) pertaining to F.Ys. 2005-06 to 2008-09 relevant to A.Ys. 2006-07 to 2009-10 was made in order to cover up the discrepancies towards unverifiable purchase and certain other discrepancies that would crop up during the course of the assessment proceedings. Thus, in the backdrop of the aforesaid facts, the A.O observed that the assessee was engaged in inflation of its expenses by booking non-genuine purchases and expenses. It was further observed by the A.O that the fact as regards the booking of non-genuine purchase and expenses by the assessee could also safely be gathered from a perusal of the statement of Shri Awadhesh Kumar Jha (Assistant General Manager-Accounts of M/s Enercon India Ltd) recorded during the course of search & seizure proceedings, wherein he had categorically stated that he was unable to provide the bills as well as establish the actual receipt of goods/services or provide information as regards the site to which the goods pertained. The A.O observed that the fact of non-genuine purchases was also clearly admitted by Shri Biju Thomas, Manager-Finance and Shri Yogesh P a g e | DCIT Vs. M/s Wind World (India) Limited Mehra, Managing Director of the company in their respective statements recorded under Sec. 131 of the Act on 15.03.2013. The A.O further took support of the fact that Shri Yogesh Mehra (supra) had in his disclosure statement dated 03.06.2013 clearly accepted the fact of non-genuine purchases. The A.O further in order to support his conviction that the assessee had booked non-genuine expenses, observed that even after nearly one year of search & seizure action, the assessee could not provide confirmations with respect to the purchase transactions under consideration. The A.O in the backdrop of the aforesaid facts, observing that the assessee had failed to discharge the onus of proving the genuineness of the aforementioned purchases/expenses to the tune of Rs. 5,97,22,639/- and the fact that Sh. Yogesh Mehra had admitted non-genuine purchases of Rs. 10 crores, therefore, made an addition of Rs.15,97,22,639/- to the returned income of the assessee.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). The assessee assailed the validity of the re-assessment proceedings before the CIT(A), as well as challenged the additions made by the A.O on merits. The CIT(A) deliberated at length on the contentions raised by the assessee as regards the validity of the reassessment proceedings in the backdrop of the observations of the A.O and the material available on record. The CIT(A) after perusing the reasons to believe on the basis of which the reassessment proceedings were initiated in the hands of the assessee, observed that the A.O had reopened the concluded assessment of the assessee, not on the basis of any independent application of mind on his part, but rather, on the basis of the recommendations made by the DDIT(Inv.),Unit-IV(1), Mumbai. The CIT(A) in the backdrop of the aforesaid facts observed that as there was a clear absence of valid assumption of jurisdiction P a g e | DCIT Vs. M/s Wind World (India) Limited by the A.O to reopen the concluded assessment of the assessee, therefore, the assessment order passed by him under Sec. 143(3) r.w. Sec. 147 of the Act could not be sustained.
The CIT(A) observed that a perusal of the reasons to believe revealed that there was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for framing of its assessment for the year under consideration, therefore, the concluded assessment already framed in the hands of the assessee under Sec. 143(3) could not have been validly reopened after a lapse of a period of 4 years from the end of the relevant assessment year.
The CIT(A) further observed that the case of the assessee for the year under consideration, viz. A.Y. 2006-07 was reopened under Sec.147 on the basis of the information received by the A.O from the DDIT(Inv.), Unit-IV(1), Mumbai, that bogus purchases for the period pertaining to F.Ys 2009-10 to 2011-12, which formed an average 1.04% of the turnover had emerged during the search & seizure proceedings conducted under Sec.132 on the assessee on 14.03.2013. The CIT(A) observed that the A.O adopted the aforesaid bogus purchases/turnover ratio of 1.04% as a yardstick and worked out the bogus purchases for the year under consideration, viz. A.Y. 2006-07 at Rs. 17,40,27,652/- (i.e 1.04% of the turnover of the assessee of Rs.1673,34,28,055/- for A.Y. 2006-07). The CIT(A) observed that though the reasons to believe revealed that the case of the assessee was reopened on the ground that the bogus purchases of Rs.17,40,27,652/- of the assessee for the year under consideration had escaped assessment, but however, while framing the assessment no such addition was made in the hands of the assessee. Rather, the A.O instead of making addition of Rs. 17,40,27,652/- on account of the bogus purchases, on the basis of which the case of the assessee P a g e | DCIT Vs. M/s Wind World (India) Limited was reopened, had rather made an addition of Rs.5,92,54,319/- on account of unverifiable purchases that were admitted by Shri Awadhesh Kumar Jha, Assistant General Manager in his statement recorded under Sec. 132(4) on 22/23.04.2013 and a further addition of Rs.10,00,00,000/- on the basis of a letter filed by the assessee before the investigation wing on 06.03.2013. It was observed by the CIT(A) that both the statement of Shri Awadhesh Kumar Jha on 22/23.04.2013 and filing of the letter dated 03.06.2013 by the assessee were much after the recording of the reasons for reopening the assessment by the A.O. The CIT(A) observed that now when the A.O had not made the addition of Rs.17,40,27,652/- on the basis of which the case of the assessee was reopened, therefore, keeping in view the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Jet Airways Ltd. (2011) 331 ITR 236 (Bom), the reassessment framed in the hands of the assessee could not be sustained and was liable to be quashed.
The CIT(A) after perusing the facts available on record observed that the A.O received information from DDIT(Inv.), as per which the average bogus purchase of the assessee for the F.Y 2009-10 to 2011- 12 formed 1.04% of the turnover. The CIT(A) observed that on the basis of the aforesaid bogus purchase/turnover ratio pertaining to F.Ys 2009-10 to 2011-12, the A.O had reopened the case of the assessee for the year under consideration, viz. A.Y. 2006-07, for the reason that the income of Rs.17,40,27,652/- (which is 1.04% of the turnover of Rs.16,73,34,28,055/-) in respect of bogus purchases made by the assessee during the year had escaped assessment. The CIT(A) holding a strong conviction that the discrepancies found in purchases of the assessee for the F.Ys 2009-10 to 2011-12 could not have validly constituted a reason to believe that such discrepancies also existed P a g e | DCIT Vs. M/s Wind World (India) Limited during the year under consideration, viz. A.Y 2006-07, therefore, reopening of the assessment for the A.Y 2006-07 on the said basis by the A.O was not valid and could not be sustained. The CIT(A) in the backdrop of the aforesaid facts, taking support of the judgment of the Hon‟ble High Court of Delhi in the case of CIT Vs. Gupta Abhushan (P) Ltd. 16 DTR 76 (Del) concluded that as the A.O had reopened the case of the assessee for the year under consideration, viz. A.Y 2006-07 on the basis of bogus purchases for the subsequent years as had emerged during the course of search & seizure proceedings and not for the year under consideration, therefore, reopening of the case by the A.O under Sec.147 thus could not be sustained for the said reason too. It was observed by the CIT(A) that the A.O while reopening the case of the assessee must have reasons to believe that income chargeable to tax had escaped assessment. The CIT(A) after deliberating on the reasons on the basis of which the case of the assessee was reopened, was unable to persuade himself to be in agreement with the view taken by the A.O.
The revenue being aggrieved with certain observations of the CIT(A), had thus to the said extent carried the matter in appeal before us. The ld. Departmental Representative (for short „D.R‟) during the course of hearing of the appeal submitted that the CIT(A) had erred in quashing the assessment framed under Sec. 143(3) r.w. Sec. 147, by holding that there was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for framing of assessment for the year under consideration. It was submitted by the ld. D.R that the CIT(A) while observing as hereinabove, had failed to appreciate that the directors and employees of the assessee company had accepted the bogus expenditure and bogus purchases during the course of the search & seizure proceedings. It was submitted by the ld.
P a g e | DCIT Vs. M/s Wind World (India) Limited D.R that the CIT(A) had erred in vacating the addition of Rs.15,97,22,639/- made by the A.O in respect of non-genuine purchases and expenditure made by the assessee. The ld. D.R submitted that in the backdrop of the aforesaid facts, the order of the CIT(A) was liable to be set aside and that of the A.O be restored. Per contra, the ld. Authorized Representative (for short „A.R‟) relied on the order of the CIT(A). It was submitted by the ld. A.R that the CIT(A) had rightly concluded that as there was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment for the year under consideration, therefore, the concluded assessment which was earlier framed in its case under Sec.143(3) of the Act on 24.12.2009 could not have been disturbed after a lapse of a period of 4 years from the end of the relevant assessment year.
We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that the CIT(A) in the present case had quashed the reassessment proceedings for multiple reasons, viz. (i) the reopening of the concluded assessment of the assessee by the A.O on the basis of the recommendation and borrowed satisfaction of the DDIT(Inv.) Unit-IV (1), Mumbai, could not be sustained in the eyes of law; (ii) that in the absence of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment for the year under consideration, the concluded assessment of the assessee which was earlier framed under Sec. 143(3), dated 24.12.2009 could not have been reopened after the lapse of a period of 4 years from the end of the relevant assessment year; (iii) that though the case of the assessee was reopened on the ground that the bogus purchases of Rs.17,40,27,652/- made by the assessee P a g e | DCIT Vs. M/s Wind World (India) Limited during the year under consideration had escaped assessment, however, as no such addition was made by the A.O while passing the reassessment order, therefore, the reopening of the assessment could not be sustained; and (iv) that the reopening of the concluded assessment of the assessee on the ground that the information received by the A.O from the DDIT(Inv.) revealed bogus purchases for financial year 2009-10 to 2011-12, could not have constituted a reason to believe that a similar discrepancy existed in the case of the assessee for the year under consideration.
We find that the revenue in the present appeal had only assailed before us the observations of the CIT(A) that in the absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for framing of the assessment for the year under consideration, the concluded assessment of the assessee for the year under consideration, viz. A.Y 2006-07 could not have been reopened after a lapse of a period of 4 years from the end of the assessment year. We have perused the reasons to believe on the basis of which the A.O had assumed jurisdiction under Sec. 147 and had reopened the case of the assessee. We find that as observed by us hereinabove, the case of the assessee was reopened on the basis of the information received by the A.O from the DDIT(Inv.),Unit-IV(1), Mumbai, that search proceedings conducted on the assessee under Sec. 132 on 14.03.2013, revealed bogus purchase/turnover ratio of 1.04% for the F.Ys 2009-10 to 2011-12. We find a perusal of the reasons to believe reveals that the A.O had neither before him any such material pertaining to the year under consideration, viz. A.Y 2006-07 which could have persuaded him to have safely arrived at a belief that the income of the assessee chargeable to tax for the year under consideration had escaped assessment, much the less on P a g e | DCIT Vs. M/s Wind World (India) Limited account of failure on the part of the assessee to fully and truly disclose all the material facts which were necessary for framing of his assessment, nor is there any whisper of any such fact pertaining to the year under consideration on the basis of which any inference as regards escapement of income for the year under consideration could be gathered. We rather find that a perusal of the reasons to believe revealed that the reassessment proceedings had been initiated for the reason that by adopting the average of bogus purchase/turnover ratio of 1.04% for the period F.Ys: 2009-10 to 2011-12, as had so emerged during the course of the search proceedings conducted on the assessee, a similar discrepancy in respect of the purchases of the assessee could be inferred and the bogus purchases in the hands of the assessee by adopting the said basis worked out at Rs.17,40,27,652/-. We are of the considered view that as in the case of the assessee before us the regular assessment in its case was already concluded under Sec. 143(3) on 24.12.2009, therefore, in the absence of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment for the year under consideration, the said concluded assessment of the assessee could not have been reopened after the lapse of a period of 4 years from the end of the relevant assessment year. We are afraid that in the case before us, though the A.O while recording the reasons to believe had alleged that the income of the assessee in respect of bogus purchases of Rs.17,40,27,652/- made during the year under consideration had escaped assessment within the meaning of Clause (c) below Explanation 2 of Sec. 147, by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for A.Y 2006-07, but the fact as it so remains is that there is no reference to any such material fact which though was necessary for the assessment of the assessee, but had not been fully P a g e | DCIT Vs. M/s Wind World (India) Limited and truly disclosed by the assessee. We are of the considered view that mere drawing of inferences by the A.O for the year under consideration, viz. A.Y. 2006-07, on the basis of of facts pertaining to the subsequent years, viz. A.Y. 2010-11 to 2012-13 cannot form a basis for reopening assessment, all the more where it is a case of a concluded assessment which is sought by the A.O to be disturbed after the lapse of a period of more than 4 years from the end of the relevant assessment year. We may at this stage observe that for adjudicating the validity of the reopening we have to strictly restrict ourselves to the reasons to believe on the basis of which the A.O had assumed jurisdiction and reopened the case of the assessee. The reasons to believe recorded by the A.O had to be read as such, with no scope of improving upon the same by referring to the observations recorded by the A.O while framing the assessment. We hold a strong conviction that as nothing can be gathered from a perusal of the reasons to believe that the assessee had failed to fully and truly disclose all the material facts necessary for his assessment, therefore, the assumption of jurisdiction by the A.O after a lapse of a period of 4 years from the end of the relevant assessment year in order to disturb the concluded assessment of the assessee framed under Sec. 143(3) on 24.12.2009, cannot be sustained and is liable to be vacated. We thus finding ourselves to be in agreement with the well reasoned view taken by the CIT(A), therefore, uphold his order. Before parting, we may herein clarify that as the revenue had assailed before us the validity of the reassessment proceedings only on the basis of the aforesaid issue which had been deliberated upon by us hereinabove, therefore, our adjudication is restricted only as regards the said issue, and we refrain from adverting to the observations of the CIT(A) as regards the validity of the reassessment proceedings on other issues.