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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 :
These cross appeals by the assessee and the Revenue are directed against the order of Commissioner of Income Tax (Appeals)-4, Pune dated 01-12-2016 for the assessment year 2009-10.
The brief facts of the case as emanating from records are: The assessee is a dealer in iron and steel scrap, cement etc. The assessee filed his return of income for the assessment year 2009-10 on 30-10-2009 declaring total income of Rs.28,94,360/-. The information was received by the Income Tax Department from the State Sales Tax Department regarding assessee’s involvement in dealing with suspicious Hawala Dealers. The reassessment proceedings were initiated against the assessee. Notice u/s. 148 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was issued to the assessee on 05-03-2014. The assessee vide letter dated 25-03-2014 requested the Assessing Officer to consider the original return of income as return in response to notice u/s. 148 of the Act. The assessee filed objections against reasons for reopening the assessment. The objections raised by the assessee were disposed of /rejected by the Assessing Officer vide order dated 05-03-2014. Thereafter, the Assessing Officer passed assessment order making addition of Rs.31,35,79,329/- on account of bogus purchases made by the assessee from Hawala operators.
Aggrieved by the assessment order dated 16-03-2015 passed u/s. 143(3) r.w.s. 147 of the Act, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax
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(Appeals) restricted the addition to 10% of the total purchases i.e. Rs.3,13,57,932/-. Now, both the sides are in appeal against the findings of Commissioner of Income Tax (Appeals).
The assessee in appeal has assailed the addition confirmed by the Commissioner of Income Tax (Appeals) apart from challenging the jurisdiction assumed by Assessing Officer u/s. 148 of the Act.
The Revenue in appeal has assailed the order of Commissioner of Income Tax (Appeals) in deleting substantial addition (90%) in respect of bogus purchases.
Shri V.L. Jain appearing on behalf of the assessee submitted that the Assessing Officer has wrongly assumed jurisdiction u/s. 148 to reopen the assessment. The reassessment proceedings have been initiated merely on the basis of report received from Maharashtra Sales Tax Department. The list of Hawala dealers available on website of the Department is not sacrosanct. The Assessing Officer in the assessment order has mentioned that discrete enquiry were carried out by the Inspector before reopening the assessment, however, the enquiry report on the basis of which assessment has been reopened was never supplied to the assessee. In the reasons recorded, the Assessing Officer has concluded that no material was received by the assessee against invoice and only bogus purchases were made. These findings by the Assessing Officer are only based on surmises. The assessee during the proceedings before the Commissioner of Income Tax (Appeals) had furnished the copies of ledger extracts of the alleged Hawala dealers, the copies of invoices raised by the vendors, the copies of the weightment slips and transport invoices confirming delivery of
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goods, the copy of the bank statement highlighting the payments made to the vendors, the quantitative data showing quantity reconciliation and the copies of the Sales bills along with corresponding purchases. The Assessing Officer without applying his own independent mind has proceeded on to initiate reassessment proceedings merely on the basis of information gathered from Sales Tax Department.
5.1 The ld. AR further submitted that the assessment proceedings are also liable to be set aside on the ground that the mandatory period of four weeks time as directed by the Hon’ble Bombay High Court in the case of Asian Paints Ltd. Vs. Deputy Commissioner of Income Tax & Anr. reported as 296 ITR 90 was not granted by the Assessing Officer to the assessee after disposing of objections. The objections filed against reopening were rejected by the Assessing Officer on 05-03-2015. Within a short span of 10 days time the assessment order was passed by the Assessing Officer on 16- 03-2015. The ld. AR submitted that though First Appellate Authority has granted substantial relief to the assessee by reducing the addition from 100% of the bogus purchases to 10% of the alleged bogus purchases, however, the First Appellate Authority has failed to take into consideration that no addition could have been made as the reassessment proceedings is itself bad in law. The ld. AR in support of is submissions placed reliance on the following decisions : i. Krown Agro Foods Pvt. Ltd. Vs. Assistant Commissioner of Income Tax, 375 ITR 460 (Delhi); ii. Pr. Commissioner of Income Tax Vs. G & G Pharma India Ltd., 384 ITR 147 (Delhi); iii. Signature Hotels (P) Ltd. Vs. Income Tax Officer & Anr., 338 ITR 51 (Delhi).
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5.2 The ld. AR submitted that the Commissioner of Income Tax (Appeals) in impugned order has made certain observations which are contrary to the facts. The ld. AR pointed that in para 8.3 of the impugned order, the Commissioner of Income Tax (Appeals) has mentioned that the assessee has admitted that no real business was conducted by the alleged suppliers and no physical delivery of goods were ever made by the suppliers. The payments transferred through banking channel were received back in cash after deducting commission @ 1%. The above observations made by the Commissioner of Income Tax (Appeals) are wrong and against the documents on record.
On the other hand Smt. Nirupama Kotru representing the Department vehemently defended the assessment order and prayed for restoring the entire addition. The ld. DR submitted that during the assessment proceedings the assessee never cooperated with the Assessing Officer. No documents were furnished by the assessee during the assessment. The assessee failed to produce the suppliers, though discrete enquiry carried out by the Assessing Officer revealed that the alleged suppliers were merely entry providers and were not located at the given address. The assessee had entered into transactions with the declared Hawala dealers, no goods were received against the alleged purchases by the assessee, merely book entries were provided by the Hawala operators against marginal payment of commission. The ld. DR prayed for addition of entire amount as bogus purchases. To support her submissions the ld. DR placed reliance on the following decisions : i. Principal Commissioner of Income Tax Vs. paramount Communication (P.) Ltd., 392 ITR 444 (Delhi);
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ii. Thakorbhai Maganbhai Patel Vs. Income Tax Officer, 393 ITR 612 (Gujarat); iii. Pushpak Bullion (P.) Ltd. Vs. Deputy Commissioner of Income Tax, 85 taxmann.com 84 (Gujarat); iv. Raymond Woollen Mills Ltd. Vs. Income Tax Officer, 236 ITR 34 (SC).
6.1 The ld. DR further submitted that the Assessing Officer has followed the course of action as indicated in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer reported as 259 ITR 19 (SC). The assessee was provided opportunity to file objections against the reasons for reopening. The objections filed by the assessee were duly considered and were disposed of by passing a separate speaking order. Thus, there is no violation of any law as has been alleged by the assessee.
Controverting the submissions forwarded by the DR, the ld. AR submitted that the assessee cooperated with the Assessing Officer all the time. The assessee provided necessary documents as and when required. The assessee failed to furnish only those documents which were not in his possession as the same were seized by the Sales Tax authority at that point of time. The ld. AR asserted that it is not a case of best judgment assessment u/s. 144. This itself indicates that the assessee had cooperated and had furnished necessary information as sought by the Assessing Officer from time to time.
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. We have also considered the judgments on which the representatives of rival sides have placed reliance in support of their contentions. Before adverting to the
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merits of the additions it would be relevant to first to decide the legal issue i.e. Whether the reassessment proceedings were carried in lawful manner or not? To decide this issue it would be relevant to have a glance at the chronology of events : Sl. No. Events Date 1 Notice u/s. 148 05-03-2014 2 Letter by the assessee informing the Assessing 25-03-2014 Officer to treat the original return of income in response to notice u/s. 148 3 Notice u/s. 143(2) and 142(1) 02-09-2014 4 Second notice u/s. 143(2) on account of change in 14-01-2015 incumbent 5 Show cause notice u/s. 142(1) 22-01-2015 6 Reply to show cause notice and objections against 09-02-2015 reopening 7 Order rejecting objections filed by the Assessing 05-03-2015 Officer 8 Assessment order passed u/s. 143(3) r.w.s. 147 16-03-2015
A perusal of chronology of events show that after disposing the objections on 05-03-2015, the Assessing Officer has passed the assessment order within a short span of 11 days on 16-03-2015.
The Hon’ble Jurisdictional High Court in the case of Asian Paints Ltd. Vs. Deputy Commissioner of Income Tax & Anr. (supra) has held that the Assessing Officer should provide four weeks time to the assessee after rejection of objections before passing of the assessment order.
In the present case, we observe that the Assessing Officer has violated the directions of Hon’ble Jurisdictional High Court in the case of Asian Paints Ltd. Vs. Deputy Commissioner of Income Tax & Anr. (supra) in not allowing four weeks time to the assessee before passing the
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assessment order after rejecting the objections. The time line set out by the Hon’ble Bombay High Court in allowing four weeks time to the assessee is binding on the Assessing Officer. The violation of the directions of the Hon’ble Jurisdictional High Court would make the assessment order bad in law. The Hon’ble Bombay High Court in the case of Aroni Commercials Ltd. Vs. Deputy Commissioner of Income Tax reported as 44 taxmann.com 304 in similar circumstances where the assessment order was passed in undue haste has condemned the action of Assessing Officer and has set aside the assessment order. The observations of the Hon’ble High Court are as under : “6. It is axiomatic that the law declared by this Court is binding on all authorities functioning within the jurisdiction of this Court. It is not open to the Assessing Officer to feign ignorance of the law declared by this Court and pass orders in defiance of the law laid down by this Court. We do not accept this submission made on behalf of the revenue that the Assessing Officer was not aware of the decision of this Court in Asian Paints (supra). On the contrary, it appears that the order dated 19 December 2013 was passed only to make the entire proceeding pending before this Court redundant and to present the Court with a fait accompli. This is particularly so as the petitioner had on 18 December 2013 informed the Commissioner of Income Tax that a writ petition has been filed challenging the order dated 20 November 2013 in respect of A. Y. 2008-09 and is posted for admission on 23 December 2013. It is averred in the petition that the Assessing Officer was informed at the hearing held on 10 December 2013, that it is preparing a petition to challenge the re-opening for A. Y. 2008-09 on identical grounds as done in earlier Assessment Year namely A. Y. 2007-08 which is pending in this Court and ad interim relief has also been granted, restraining the revenue from proceeding with the assessment for A. Y. 2007-08. The passing of an order on 19 December 2013 by the Assessing Officer in undue haste and thereafter contending that in view of alternative remedy, the writ petition should not be entertained, does not appear bonafide. This undue haste in passing the impugned order dated 19 December 2013 is an attempt to overreach the Court and to thwart the petitioner's challenge to the impugned order dated 20 November 2013 pending before this Court. 7. In the above circumstances, we set aside the order dated 19 December 2013 passed by the Assessing Officer under Section 143(3) read with Section 147 of the Act for A. Y. 2008-09.”
In the present case objections against reopening were disposed of by the Assessing Officer on 05-03-2015. The Assessing Officer passed the assessment order on 16-03-2015 i.e. within 11 days of passing of the order rejecting objections. There was no time with the assessee to avail remedy
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against rejection of objections. Thus, there was clear violation of principles of natural justice and the law laid down by the Hon’ble Jurisdictional High Court. Since, the Assessing Officer has violated the time line in passing the assessment order, the assessment order is liable to be set aside. We hold and direct accordingly. Thus, the appeal filed by the assessee is allowed on the issue of jurisdiction alone.
As the assessee succeeds on legal ground, the grounds raised on merits have become infructuous and are dismissed as such. Consequently, the appeal of Revenue assailing the relief granted by Commissioner of Income Tax (Appeals) on merits to the assessee is also dismissed.
In the result, the appeal filed by the assessee is partly allowed and the appeal by the Revenue is dismissed.
Order pronounced on Wednesday, the 23rd day of May, 2018.
Sd/- Sd/- (अननऱ चतुवेदी / Anil Chaturvedi) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 23rd May, 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)-4, Pune 3. 4. The Pr. Commissioner of Income Tax-3, Pune 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