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Income Tax Appellate Tribunal, SMC BENCH, PUNE
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
There are 2 appeals filed by the Revenue under consideration. They are filed against the common order of CIT(A)-2, Nashik, dated 09-09-2016 for the Assessment Years 2009-10 and 2010-11.
Revenue raised similar grounds for both the assessment years. Therefore, we proceed to first deal with the appeal for A.Y. 2009-10.
ITA No.2729/PUN/2016 A.Y. 2009-10 2. Grounds raised by the Revenue read as under :
“1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A)- 2, Nashik was justified in deleting the addition of Rs.34,22,536/ - on account of alleged bogus purchases from Hawala dealers /parties?
Whether the Ld. CIT(A)-2, Nashik was justified in deleting the purchases treated as bogus, when the assessee has not been able to produce the certain parties from whom purchase were made when letters sent to the parties were returned back as undelivered or the parties did not respond?
Whether the Ld. CIT(A)-2, Nashik should have considered the fact that the onus was on the assessee to list out the bogus sales and get the purchases verified when required to do so, especially such purchases were very substantial. ?
Whether the Ld CIT(A)-2,Nasik erred in presuming that the purchases were only inflated when it was clear from the assessee, the parties found missing and results of the investigation of another Govt. Department (Sales tax), that the purchases could not be proved as genuine and therefore the disallowance by the AO was justified? 5. The appellant prays that the order of the Ld.CIT(A)-2, Nashik may please be cancelled and the order of Assessing Officer may please be restored.
The appellant prays to adduce such further evidence to substantiate his case. 7. The appellant prays leave to add, alter, clarify, amend and or without any grounds of appeal as and when the occasion demands.”
Briefly stated relevant facts of the case are that the assessee is an
individual and is engaged in the business of Electrical trading and job
work. Assessee filed the return of income on 19-09-2009 declaring total
income of Rs.6,62,760/-. During the course of assessment proceedings,
AO noticed that assessee made purchases worth Rs.38,02,818/- in this
year from 4 suppliers/entry providers. Assessee submitted various details
regarding the delivery challans, bank statements, PT & VAT payment
details, details of creditors/debtors, etc. However, AO wanted production of
parties before him to verify the purchases. Assessee expressed his inability
to produce the parties. However, assessee contested the proposal for
making entire purchases as addition ignoring the documentation relating to
the genuineness of the purchases and trail of goods. Eventually, the AO
disallowed the purchases and made addition of Rs.38,02,818/- in the
assessment completed u/s.143(3) r.w.s. 147 of the Act.
Similarly, addition for the A.Y. 2010-11 works out to Rs.33,31,064/-.
Otherwise, the relevant facts are similar to the ones of A.Y. 2009-10.
During the First Appellate proceedings, assessee made various
submissions both on merits as well as on legal issues. Assessee raised the
legal issue before the CIT(A) for quashing of the reassessment proceedings
for failure of the AO in furnishing the reasons for re-opening of the
assessment despite the written request from the assessee’s side. On merits
of addition, the CIT(A) estimated the profits at 10% of the said 4 purchases
amounting to Rs.38,02,818/- for the A.Y. 2009-10 and Rs.33,31,064/- for
A.Y. 2010-11 and restricted the addition accordingly. CIT(A) appreciated
the facts relating to trail of goods and the payments. However, CIT(A)
quashed reassessment proceedings as per his decision in Para 8.1 of his
order.
There are no appeals from the assessee against partly confirming of
the addition on the purchases to the extent of 10%. However, Revenue filed
the present appeals on merits with 7 grounds. On analysing the same, we
find the Ground Nos. 1 to 4 relates to the merits of addition. Ground No.5
relates to the conclusion of the CIT(A) with reference to the reassessment
order and its validity. Ground Nos. 6 and 7 are general in nature.
Before us, Ld. DR for the Revenue submitted that Ground No.5 can
be extended to include the relief granted to the assessee on the legal issue
relating to the validity of the reopening of the assessment. Ld. DR
submitted for restoring the order of the AO.
Per Contra, Ld. Counsel for the assessee submitted that it is settled
issue that in the cases reopened by the authorities after the judgment of
Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO
125 taxmann 963, there is requirement of quashing of the re-assessment
proceedings when there is obvious failure on part of the AO in furnishing
of the reasons against the written request of the assessee. This is a
relevant case where such judgment applies as the re-opening is done much
after the said judgment is pronounced.
We heard both the parties on this legal issue relating to quashing of
the re-assessment proceedings when the reasons recorded by the AO were
not furnished by the assessee despite the written request of the assessee.
We find there is no dispute on the fact that the reopening in this case is
done much after the Supreme court judgment GKN Driveshafts (India) Ltd.
(supra). Further, we have gone through the contents of para No.8.1 of the
order of CIT(A) which deals with this legal issue. For the sake of
completeness of this order, we extract the same as under :
“8.1 I have carefully considered the facts of the case, assessment order and the submission of the appellant. On perusal of the same it has been noticed that the appellant had filed letters dated 19-08-2014 on 21-08-2014 with the A.O. for the years under appeal, asking for reasons recorded for reopening the assessments for A.Yrs 2009-10 and 2010-11. The appellant has claimed that the said reasons were never supplied by the A.O. to the appellant inspite of the written request filed. In order to verify the above facts, the case record for the years under appeal was called for and perused. From the case record, it has been noticed that the A.O. had not supplied the reasons recorded for reopening the assessments to the appellant. In view of the above facts, the appellant has claimed that the reassessments made by the A.O. are invalid and void ab-initio. The above contention of the appellant is supported by various decisions relied on by the appellant.
It has been laid down in the following decisions as under : i) CIT Vs. Videsh Sanchar Nigam Ltd. (2012) 340 ITR 66 (Bom.) : In this case it has been laid down that since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of the assessment, the reassessment order cannot be upheld. ii) CIT Vs. Fomento Resorts and Hotels Ltd., ITA No. 71 of 2006, order dated 27-11-2006 (Bom-HC) “ In this case it has been laid down that since the reasons recorded for reopening of assessment were not furnished to the assessee till the completion of the assessment, the reassessment order cannot be upheld. Further the special leave petition filed by the Revenue against the decision of Hon’ble Bombay High Court has been dismissed by the apex court, vide order dated 16- 07-2007.
iii) Kothari Metals Vs. ITO (2015) 377 ITR 581 (Kar) : In this case it has been laid down that when reasons for reopening assessment had not been furnished to assessee, though request for the same had been made, proceedings for reassessment could not have been taken further.
In view of the above facts of the case and the ratio laid down by the above mentioned decisions and also decisions relied on by the appellant, I hold that proceedings for reassessment completed by the A.O. without furnishing reasons for reopening assessments even after written request is invalid and void ab-initio. Therefore, the reassessment for A.Yrs. 2009-10 and 2010-11 are quashed. Ground No.1 for both the years under appeal is allowed.”
Considering the above, we are of the opinion that the order of CIT(A)
on this legal issue is fair and reasonable and it does not call for any
interference.
Since the re-assessments themselves are quashed on the legal issue,
in our view, adjudication of grounds on merits becomes an academic
exercise. Therefore, they are dismissed as academic or general in nature,
as the case may be. Accordingly, the grounds raised by the Revenue are
dismissed.
ITA No.2730/PUN/2016 A.Y. 2010-11
The issues raised by the Revenue in the appeal, finding of CIT(A),
arguments and counter arguments are same as that of appeal in ITA
No.2729/PUN/2016 for A.Y. 2009-10. Therefore, our decision in upholding
the order of CIT(A) shall apply to this assessment year also. Thus, the
grounds raised by the Revenue are dismissed.
In the result, both the appeals of the Revenue are dismissed.
Order pronounced on this 23rd day of March, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 23rd March, 2018. Satish
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-2, Nashik 3. आयकर आयु� / The CIT-2, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “एक सद�य 5. एक सद�य” / एक सद�य एक सद�य DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
/ /True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune