SHANTEELAL CHENARAMJI JOSHI,NASHIK vs. INCOME-TAX OFFICER, NASHIK

आदेश / ORDER आदेश आदेश आदेश

PER D. KARUNAKARA RAO, AM

This appeal filed by the assessee is against the order of CIT(A)-1, Nashik dated 21.02.2017 for the A.Y. 2010-11.

“1. On the facts and in the circumstances of the case and as per law, the Commissioner of Income Tax (Appeals)-1, Nashik, is not justified in confirming validity of notice issued u/s.148 particularly when AO has issued the said notice on the basis of information received from third party, without applying his mind.

2 ITA No.949/PUN/2017 Shanteelal C. Joshi

individual and is engaged in the business of manufacturing and trading

steel. Assessee filed the original return of income on 09.08.2010

declaring total income at Rs.4,50,580/-. On the basis of information

received from Sales Tax Department, AO noticed that the assessee

indulged in making purchases from couple of hawala dealers viz. (1)

Rahul Steels; and (2) Asian Steel aggregating to Rs.26,58,213/-. At the

end of re-assessment proceedings u/s.143(3) r.w.s. 147 of the Act, the

AO made addition of Rs.26,58,213/- on account of the said bogus

purchases. Aggrieved with the order of AO, the assessee filed an appeal

before the CIT(A) challenging the validity of notice issued u/s.148 of the

Act as well as the addition on account of bogus purchases amounting

to Rs.26,58,213/-.

issue i.e. validity of notice issuing u/s.148 of the Act, CIT(A) noted that

as the assessee failed to furnish full details in response to the notice

u/s.148 of the Act, the AO formed reasons to believe that the income

3 ITA No.949/PUN/2017 Shanteelal C. Joshi

has escaped assessment and accordingly, assessment was reopened by

issuing notice u/s.148 of the Act. The CIT(A) also was of the view that

while recording the reasons for reopening, AO followed due procedure of

law and ascertained the fact by legal evidence and therefore, reasons

recorded were not vague. Thus, relying on the judgment of Hon’ble

Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers

Pvt. Ltd., 291 ITR 500, judgment of Delhi High Court in the case of

United Electrical Co. Pvt. Ltd. Vs. CIT 258 ITR 137 apart from others,

CIT(A) upheld the view of AO regarding initiation of proceedings u/s.

147 of the Act. Contents of Para 4 along with its sub-paras of the

CIT(A)’s order are relevant in this regard.

confirmed the same. In the process, CIT(A) observed that neither at the

time of assessment proceedings nor at the time of appellate

proceedings, neither the impugned sellers/parties were produced nor

filed submissions evidencing the claim. The assessee also not enclosed

the quantitative details, purchase to sale reconciliation with the help of

stock register. Transportation of goods were not evidenced. In view of

the fact that assessee failed to produce any documentary evidence in

the shape of transport receipt warehouse receipts, stock of goods,

matching purchases to sales to support his purchases, CIT(A)

confirmed the addition. Para 5.1 and 5.2 of the appellate order are

relevant in this regard.

raising the aforementioned grounds extracted above.

4 ITA No.949/PUN/2017 Shanteelal C. Joshi

has erred in confirming validity of notice issued u/s. 148 particularly

when AO issued the said notice merely on the basis of information

received from third party and without applying his mind on the issue of

concealment of income. Ld. Counsel further submitted that while

confirming the disallowance of purchases of Rs.26,58,213/-, the AO did

not allow the assessee the cross examination of the witness of the

revenue i.e. parties from whom purchases were made as well as the

competent Sales Tax Authority, the source of the information for the

issuance of the notice u/s.148 of the Act. Regarding the merits of

addition, Ld. Counsel relied on various decisions of Pune Bench of the

Tribunal.

the orders of AO/ CIT(A).

below, I am of the view that AO as well as the CIT(A) have made the

aforesaid addition of Rs.26,58,213/- at the back of the assessee

without providing copies of statement/affidavits of the parties and

without providing the benefit of cross examination of the parties to the

assessee. The application of the assessee addressed to the CIT(A)-I,

dated 16-12-2016, evidences the fact of seeking cross examination and

copies of statements/affidavits of the parties. For the sake of

completeness of this order I proceed to extract the submissions made

by the assessee here as under (Para 3) :

“3. As stated above, in our opinion, the proceedings u/s.148 of the Act are initiated on the basis of copies of statements as well as affidavits of the above referred parties received from sales-tax department. Therefore, in such circumstances, the said parties are in fact witnesses

5 ITA No.949/PUN/2017 Shanteelal C. Joshi

of the revenue. The appellant does not have the copies of the statements/affidavits of the hawala dealers which the A.O. has relied upon for making the assessment of the year under appeal. Therefore, we kindly request your honour to direct the AO to grant us the copies of the said statements and affidavits. Ws also kindly request your honour to direct the AO to allow us the cross examination of the said so called suspicious dealers and also competent Sales Tax Authority who has furnished the details of suspicious dealers to the Income Tax Department. In the similar case it is accepted that the suspicious dealers on the basis of whose statements and affidavits the impugned proceedings are initiated, were absconding. Therefore, we request your honour to direct AO to produce the impugned parties.”

The above submissions of the assessee postulate that the revenue

authorities have not followed due procedure before making re-

assessment u/s.147 of the Act and therefore, violated the principles of

natural justice. Therefore, on this legal issue alone and without

considering the other arguments of the assessee, the assessment

proceedings u/s.148 of the Act has to be held as bad in law and void

ab-initio by virtue of judgment of Honble’ Supreme Court in the case of

Andaman Timber Industries vs. CCE - Civil Appeal No. 4228/2016

dated 02.09.2015.

Coming to the merits also, the assessee has produced copies of

bills, transport receipts, delivery challans, bank statements, etc.

establishing the trail of goods. Further, the books of account have also

not been rejected u/s.145(3) of the Act. Thus, the adjudication of the

merit related grounds becomes an academic exercise as I have already

granted relief on legal issue.

In view of the above discussion, I am of the view that the

assessment proceedings initiated u/s.148 are held as invalid and

unsustainable. Thus, the legal grounds raised by the assessee are

allowed, in principle. Consequently, the merit related grounds are

dismissed as academic.

6 ITA No.949/PUN/2017 Shanteelal C. Joshi

Order pronounced on 25th day of May, 2018.

Sd/- (डी डी.क�णाकरा राव क�णाकरा राव/D. KARUNAKARA RAO) डी डी क�णाकरा राव क�णाकरा राव लेखा सद�य लेखा सद�य / ACCOUNTANT MEMBER लेखा सद�य लेखा सद�य

पुणे / Pune; �दनांक / Dated : 25th May, 2018. Satish

आदेश क� �ितिलिप आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप आदेश क� �ितिलिप अ�ेिषत अ�ेिषत / Copy of the Order forwarded to : अ�ेिषत

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A)-1, Nashik. 4. The CIT-1, Nashik 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “एक एक एक-सद�य एक सद�य सद�य” ब�च, सद�य पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

आदेशानुसार / BY ORDER, // True Copy //

िनजी सिचव /Sr. Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.