INCOME TAX OFFICER, YAMUNA NAGAR vs. RAJESH KHANNA, YAMUNA NAGAR

आदेश/ORDER

PER A.D.JAIN, VICE PRESIDENT

2. In its appeal in ITA 62/CHD/2024, the assessee has taken the following grounds of appeal :

1. That learned CIT(A) (NFAC) has erred in law and on facts in confirming the actions of learned AO in reopening of assessment u/s 148. (Tax effect=Rs. 26,77,211/-) 2. That learned CIT(A) (NFAC) has erred in law and on facts in confirming the actions of learned AO in. reopening of assessment u/s 148 by Jurisdictional Assessing officer which is contrary to CBDT Instruction of notice to be issued by Faceless Assessing officer. (same as above) 3. That learned CIT(A) (NFAC) has erred in law and on facts in confirming the actions of learned AO in making addition despite availability of referred documents in the reasons for reopening on assessment record and additions made without providing any documents as assured during VC and additions are made on whims and fancies of AO, thereby making the assessment as void and as such additions made in the order is to be deleted. (same as above) 4. That learned CIT(A) (NFAC) has erred in law and on facts in confirming the action of AO in estimating unrecorded business turnover of Rs.2,74,58,591 /- and applying a Net profit @12.5% on this estimation and also gross erred in confirming the additions of profit of Rs. 34,32,323/- u/s 69A of the Income Tax Act. (same as above)

5. That learned CIT(A) (NFAC) has erred in law and on facts in confirming the action of AO in estimating unrecorded business turnover of Rs.2,74,58,591 /- and ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 3 applying a Net profit of Rs. 34,32,323/- @12.51 u/s 69A without rejecting the books of accounts of assessee. (same as above)

6 That learned CIT(A) (NFAC) has erred in law and on facts in confirming the action of AO of additions u/s 69A amounting Rs. 34,32,323/- by violating the principles of natural justice i.e completing the assessment on basis of material found from third parties & without providing statements of such persons and without providing opportunity of their cross examination, without providing documents as assured during VC on 24/3/2023, thereby making the additions as void and additions should be deleted. (same as above)

7. That authorities below has grossly violated the principles of natural justice as all evidences and documents on records are completely ignored and assessment is completed on the diktat of Investigation Wing and appropriate cost be imposed on erring officers. (same as above)

3. At the outset, the ld. Counsel for the assessee has stated at the Bar that Ground No.2 is not pressed. Rejected as not pressed.

4. The facts are that the assessee is proprietor of M/s Neel Kanth Plywood and is in the business of manufacture of plywood at Yamuna Nagar. A search was conducted on 04.01.2019 at a customer of the assessee to whom, plywood is sold by the assessee, i.e., M/s Shiv Shankar Plywood and Veneer, Indore. It was on the basis of the information gathered by the Investigation Wing of the Department in the said search, that the case of the assessee was reopened u/s 148 of the Act, on 30.03.2022.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 4 4.1 During the search, an image (APB-106) was found. It was compared with Invoice (APB 101) No.0081 of the assessee, issued to M/s Shiv Shankar Plywood. The case of the Investigation Wing of the Department was that the image so found was the actual bill value and the bill issued was the suppressed sale value.

Suppressed sales were, therefore, estimated at Rs.2,74,58,591/-, by taking sales suppression at 52.62%. The JAO issued notice (APB-12) dated 16.03.2022, u/s 148A(b) of the Act, contending that from the impounded material in the form of Tally Data and other documents, it had been concluded that 47.38% of sales were recorded in the books and the balance 32.62% were suppressed sales.

4.2 In response to the notice, vide reply (APB-14) dated 17.03.2022, the assessee preliminarily sought copies of the Tally Data and other documents referred to in the re-opening notice.

4.3 The JAO, vide letter (APB-16) dated 22.03.2022, rejected the request of the assessee for supply of Tally Data and other documents relied on, by observing that “material/information asked for cannot be provided at this stage being sensitive/confidential nature”.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 5 4.4 Again, vide letter/reply (APB-18) dated 22.03.2022, the assessee stated to the JAO that when a document is used against the assessee, it requires to be provided to the assessee.

4.5 The JAO, ignoring the request of the assessee, proceeded to pass the assessment order dated 30.03.2022, u/s 148A(d)/148.

5. The AO held in the assessment order that as per the information received during the course of search action on M/s Shiv Shankar Plywood, from Shri. Anil Tiwari, one of the key employees of M/s. Shiv Shankar plywood, some incriminating documents were found in the mobile handset of Shri Anil Tiwari which indicated unaccounted sales made by the assessee to M/s Shiv Shankar plywood. Based on the said material found during the said search action, unaccounted sales were worked out to the tune of Rs.2,74,58,591/- and the same were added to the total income of the assessee under Section 69A of the Act.

6. The matter was carried by the assessee before the ld. CIT(A), raising Ground No.2, which reads as follows :

“2. That the ld. AO has erred on law and facts in completing the assessment without providing the surrendered documents in the reasons for re-opening of assessment, thereby making the assessment as void”.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 6 6.1 The assessee also raised additional ground as follows:

“2. That the ld. AO has erred on law and facts in re-opening the assessment u/s 148. The AO has erred in re-opening of assessment u/s 148 on the basis of material found during search on 04.01.2019 at 3rd party”. 7. In the impugned order, the ld. CIT(A) held as follows :

7.1 During the appellate proceedings, it was argued by the appellant that notice u/s. 148A(b) dated 16.03.2022 was issued by ITO Ward 3, Yamuna Nagar on the basis of a search conduced at the premises of M/s. Shiv Shankar Plywood Indore. It is an admitted position that the assessee as the proprietor of Neelkant Plywood is a supplier to M/s. Shivshankar Plywood. The Assessing Officer based on that tally data and other documents found during the above search action has completed the Order U/s. 148A(d) of the Act on 30.03.2022, after giving due opportunity to the assessee. Subsequently, notice u/s. 148 was issued to the assessee and after issue of due show cause notice the assessment U/s. 144B r.w.s. 147 was completed in this case on 29.03.2023. In the Assessment Order the AO relying upon the material found in the above search action, has concluded that there is a suppression of sales by 52.62% and accordingly, the unaccounted turnover of Rs.2,74,58,591/- was added to the total income of the assessee U/S.69A of the Act. The assessee is in appeal against the said Assessment Order dated.29.03.2023. 7.2 The ground No.1 & 2 are raised against reopening of Assessment without providing the relevant material/documents along with the reasons provided to the assessee for reopening of Assessment. Further, the appellant has raised additional grounds of appeal vide his submission dated 28.11.2023, which the assessee himself admits and rightly so that they are mere elaboration of the first ground of appeal in these additional grounds, the appellant claims that the AO has no jurisdiction over the case and secondly challenges the reopening of Assessment on the basis of material found during the search proceedings on a third party. As stated earlier in this order, these additional grounds of appeal are treated as points of elaboration of Ground of Appeal No.1. 7.3 It is seen from the record that the JAO has followed the due process as prescribed U/S.148A of the Act, while completing the Order U/s.148A(d) of the Act. Subsequently, the reassessment U/S.144B r.w.s. 147 of the Act was completed by the FAO. The fact that the relevant material has not been provided to the assessee during the 148A proceedings is very much recorded by the Assessing Officer in the -Order u/s. 148A(d) of the Act dated.30.03.2022. However, the detailed reasons for the proposed reopening have been provided to the assessee in the show cause notice U/s.148A(b) of the Act. That apart, the relevant material which forms the basis of the reopening of Assessment and the subsequent addition to the total Income of the assessee has been provided to the assessee during the Re-Assessment proceedings U/s. 147 of the Act. Furthermore, the show cause notice issued by the Faceless Assessing

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 7 Officer dated. 19.03.2023 during the Re-Assessment proceedings contains therein the modus operandi and the images of the relevant material which establish the said modus operandi. 7.4 It is not the case of the assessee that the relevant material has not been provided to him at all, since, the relevant material evidencing unaccounted sales forms part of both the show cause notice dated. 19.03.2023 and also the Assessment Order dated 29.03.2023. In view thereof the assessee is not prejudiced in any manner regarding the issue of providing the relevant material to him. 7.5 As regards, the jurisdiction issue, the AO cannot raise this ground at this stage, since the Act provides for limitation of time with respect to the challenge of jurisdiction and the same needs to be strictly adhered to (Abhishek Jain [2018] 94 taxmann 355(Delhi). Furthermore, it is seen that due procedure has been followed by the Assessing Officer during the entire Re-Assessment proceedings and the appellant has failed to substantiate the basis on which the jurisdiction for Re-Assessment is being challenged. It may be pointed out that the AO acquires the jurisdiction to Re- open Assessment U/s.147 on the basis of specific, reliable and relevant information coming into his possession (Phool Chand BajrangLal [1993] 203 ITR 456 (SC). 7.6 Section 147 of the Act provides for reopening of Assessment based on information received from, other authorities, wherein it has been found that the assessee had been a beneficiary of bogus transactions. It has held in various judgments that such reassessment is valid and justified (Peass Industrial Engineers (P) Ltd. [2016] 76 taxmann 106 (Gujarat) and Pushpak Bullion Pvt Ltd. [2017] 88 taxmann 603(Gujarat) 7.7 Under the circumstances it is clear that the AO has followed the due process of Law and adhered to the appropriate and prescribed procedure with respect to the reassessment U/s. 147 of the Act and the case laws referred to by the assessee are extraneous and have no immediate relevance to the case at hand. In view of the above facts, it is held that the first and second grounds of appeal do not bear merit and accordingly are dismissed. 7.8 In the grounds bearing number 4,5,6 and 7 the assessee has raised the issues of estimating unaccounted business turnover of Rs.2,74,58,591/-without rejecting books of accounts and by extrapolating the documents relating to A.Y. 2019-20 to the year under consideration and also without providing relevant documents and conducting independent enquiry etc. 7.9 Since, all the above grounds are correlated and interconnected, the same are dealt with as under:

1. The AO has detailed the facts and circumstances along with the modus operandi in elaborate detail which provide sufficient clarity to the issue at hand and the Assessment Order has already been reproduced earlier in this Order. The AO also records categorically in Para 6 of the Assessment Order that the relevant material/information has been provided to the assessee during the assessment proceedings.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 8 2. The assessee being the proprietor of M/s. Neelkanth plywood is a supplier to M/s. Shiv Shankar plywood & Veneer, which was covered under search and seizure action on 04.01.2019. From the material gathered during the search proceedings such as the tally data, information found in the mobile handset of Shri. Anil Tiwari, a key employee of M/s. Shiv Shankar plywood and other documents etc., it was gathered that there have been unaccounted sales made by the assessee to M/s. Shiv Shankar plywood.

3. The comparison of entries in the above material gathered in search proceedings vis-a-vis the entries recorded in the books of accounts of the assessee, established that the assessee has followed a systematic method to indulge in unaccounted sales to M/s. Shiv Shankar plywood. The AO worked out the suppression of sales to the extent of 52.62% and found that only the balance of 47.38% of the total sales were recorded in the books of accounts of the assessee namely, M/s. Neelkanth plywood. Thus the unaccounted sales were determined at Rs.2,74,58,591/- by the AO.

4. The claim of the assessee that he has submitted all the documents such as books of accounts, Audit report, bank statements etc., is merely self-serving in the present context of unaccounted sales, since the sales proceeds are received in cash and are deliberately kept beyond the scope of the regular books of accounts.

5. The AO has laid out in detail the relevant material available with the Department and also discussed the reasons for estimation of unaccounted sales both in the show cause notice and also in the Assessment Order. The assessee has failed to controvert the, same through coherent factual submissions and cogent reasoning. Thus the assessee has failed to counter the findings of the AO with respect to the suppression of sales both during the assessment as well as the appellate proceedings.

7.10 In view of the above observations, the grounds of appeal bearing number 4,5,6 & 7 do not bear merit and accordingly, are hereby dismissed.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 9 7.11 Lastly, let us consider the ground no.3 which is regarding the addition of Rs.2,74,58,591/- to the total income of the assessee U/s. 69A of the Act, holding the same to be the unaccounted sales turnover of the assessee during the year under consideration. 7.12 In this regard, while the AO has elaborated in detail as to the working of unaccounted sales, but he has failed to substantiate why he has treated the entire suppressed sales as unaccounted income of the assessee. It is observed, that while the AO has good grounds to work out the unaccounted business turnover based on the relevant material found during the search and seizure action but there is no basis to treat the whole of unaccounted sales as the income of the assessee. 7.13 Further, it is seen that based on the very same material and evidence, the AO had estimated the income at the rate of 12.5% of the unaccounted sales turnover detected, for the A.Y. 2017-18 in the assessee's own case. Even though, "Res Judicata" does not apply to the Income Tax proceedings in the strictest sense, the principle of legal consistency cannot be disregarded. In view thereof, it would not be appropriate, fair and judicious to treat the entire unaccounted sales as income during the year under consideration. 7.14 The appellant also pointed to this issue vide his submissions dated 19.06.2023 and the relevant extract thereof is reproduced here below: 3.33 That during the course of assessment proceedings it was informed to AO repeatedly that on the basis of same image of AY 2019-20, assessment for AY 2017-18 was completed by faceless assessment making an addition of 12.5% of the estimated suppressed sales (copy attached at page 61-85), that too without providing any document That without prejudice to our submissions that there is no justification of any addition but principles of consistency of own order of NFAC, there was no justification in making 100% addition in AY 2018-19. It is a settled law that on the same basis in AY 2017-18 NFAC has assessed the Income at 12.5% of suppressed sales then it is not open for AO to assessee 100% in AY 2018-19.

3.34 Your attention is further invited to the decision of Punjab & Haryana High Court in the case of Commissioner of Income Tax Panchkulla vs Haryana Tourism Corporation Ltd (ITA No. 567 of 2009) date of order 4.2.2010 (a copy of judgment enclosed at page ) wherein Hon'ble High Court has held that "The principle of consistency laid down by Hon'ble Supreme Court in the case of Berger Paints India Ltd. V CIT 266ITR 99, CIT vs. J.K.Charitable Trust (2009) ISCC 196 and C.K.Gangadharan vs. CIT (2008) SCC 739 would guide us that once similar position has been accepted by the revenue in respect of assessment year 1997-98, then it is not open to it to challenge a similar finding and deviate from its earlier stand. 3.35 Apex court in recent ruling in case of Marutl Suzuki case (reported at 416 ITR 613) that "There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which; has been taken by this Court in relation to the respondent for AY 2011-12 must, in our view, be ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 10 adopted, in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which mast attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable." In the light M above* submissions, there is neither any justification in estimation of any suppressed sales as well as assessment of 100% Income of such suppressed sales. 7.15 In view of the above facts, there is merit in the assessee's claim that there is no basis to treat the entire unaccounted sales as the income of the assessee during the year under consideration, particularly when based on the very same material, the unaccounted income has been estimated for the immediately preceding year i.e., A.Y. 2017-18 at the rate of 12.5% of the unaccounted sales unearthed in assessee's own case. 7.16 Under the circumstances, the addition made by the AO is hereby restricted to 12.5% of the unaccounted sales detected at Rs. 2,74,58,591/-, which works out to 34,32,324/-. Accordingly, the ground no.3 raised by the assessee is partly allowed.

7.1 While deciding this issue against the assessee, the ld. CIT(A) has held as follows :

“7.3 It is seen from the record that the JAO has followed the due process as prescribed u/s 148A of the Act while completing the order u/s 148A(d)of the Act. Subsequently, the re-assessment u/s 144B r.w.s. 147 of the Act was completed by the FAO. The fact that the relevant material has not been provided to the assessee during the 148A proceedings is very much recorded by the AO in the order u/s 148A(d) of the Act dated 30.03.2022. However, the detailed reasons for the proposed re-opening have been provided to the assessee in the Show Cause Notice u/s 148A(b) of the Act. That apart, the relevant material which forms the basis of the re-opening of the assessment and the subsequent addition to the total income of the assessee has been provided to the assessee during the re- assessment proceedings u/s 147 of the Act. Further more, the Show Cause Notice issued by the Faceless A.O. dated 19.03.2020 during the ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 11 re-assessment proceedings contains therein the modus operandi and the images of the relevant material which establish the said modus operandi. 7.4 It is not the case of the assessee that the relevant material has not been provided to him at all, since, the relevant material evidencing unaccounted sales forms part of both the Show Cause Notice dated 19.03.2023 and also the assessment order dated 29.03.2023. In view thereof, the assessee is not prejudiced in any manner regarding the issue of providing the relevant material to him. ……………………. 7.6 Section 147 of the Act provides for re-opening of the Assessment. Based on information received from other authorities wherein it has been found that the assessee had been a beneficiary of bogus transactions. It has been held in various judgements that such re-assessment is valid and justified. PEAS Industrial engineers (P) Ltd. [2016] 17 taxmann 106 (Guj) and Pushpak Bullion P. Ltd. [2017] 88 taxman 603 (Guj). 7.7 Under the circumstances it is clear that the AO has followed the due process of law and adhered to the appropriate and prescribed procedure with respect to the re-assessment u/s 147 of the Act and the case laws referred to by the assessee are extraneous and have no immediate relevance to the case at hand………..”

8. As per the ld. Counsel for the assessee, the primary grievance of the assessee before us is that the ld. CIT(A) has erred in law and on facts in confirming the action of the AO in re-opening of the assessment (Ground No.1) and making addition despite availability on the assessment record, of documents referred in the reasons for re-opening and the additions made on estimation of unrecorded business

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 12 turnover and application of net profit on such estimation without providing any documents to the assessee, as assured (Ground Nos. 3 and 4).

Attention has been drawn to APB-12 which is a copy of the notice dated 16.03.2022, issued u/s 148A(b) of the Act. It has been contended that therein, the AO has stated that from the impounded material in the form of Tally Data and other documents, it was concluded that there was a suppression of sales. It has been contended that it had been explained to the AO on behalf of the assessee that there was no difference in the impounded Tally Data of M/s Shiv Shankar Plywood and the books of the assessee. It has been contended that during the Virtual Conference (VC) held on 25.03.2022, the AO had verified that in fact there is no such difference. Attention, in this regard, has been drawn to APB- 77, which is a copy of the VC transcript, time 22.04 to 24.22. It has been contended that at APB page 79, time 30.53, the AO has observed that there must be some other Tally Data. It has been contended that the observation of the AO, is at APB-79, time 30.31 is also relevant; that the ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 13 paper is for Financial Year 2018-19. (It has been contended that if this be so, it is beyond comprehension as to how the case for Financial Year 2017-18, i.e., assessment year 2018- 19 was being subjected to re-opening.)

For the proposition that re-opening proceedings based on incorrect and non existent grounds is not a valid re-opening as per the provisions of Section 147 of the Act. The ld. Counsel for the assessee has sought to place reliance on the decision of the Hon'ble jurisdictional High Court in the case of ‘CIT Vs Atlas Cycle Industries’, 180 ITR 319 (P&H). It has further been contended that it is a matter of record that the initiation of re-opening proceedings in the present case is on the basis of documents seized in the search of M/s Shiv Shankar Plywood and Vineer House, conducted on 04.01.2019; that the said date is prior to the date of 01.04.2021 and so, the applicable provisions of Section 153C

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 14 of the Act were not invoked and instead, the re-opening has been initiated u/s 147 of the Act after 01.04.2021, which is specifically barred by the second proviso to Section 149 of the Act. In this regard, reliance has been sought to be placed on the order dated 19.03.2024, rendered by the Hon'ble Rajasthan High Court in the case of ‘Shyam Sunder Khandelwal Vs ACIT’, reported as 2024 (4) TMI 196 Rajasthan High Court (copy at APB 164 to 173).

1. In the case of Sh. Rajesh Khanna C/o Neelkanth plywood, value of information is of Rs.2,74,58,591/- and source of the same Tally data and impounded material during search and survey action on Shiv Shankar Plywood & Veneer.

2. From the impounded material during search action, it was observed that M/s Neelkanth Plywood was also one of the suppliers to the Shiv Shankar Plywood and for operating the business, the group as well as suppliers were indulged in the practice of not recoding actual transactions in its regular books of accounts. The supplier namely Neelkanth Plywood used to issue suppress bills for the supplied goods and the difference amount between the actual cost and billed amount v/as being taken in cash. From the perusal of tally data and related material it was concluded that the supplier m/s Neelkanth Plywood used to record only 47.38% of the transaction amount in its regular books. Hence, unaccounted transactions have been made to the tune of 52.62% of the total transaction amount. Details of transaction between M/s Neelkanth Plywood and Shiv Shankar Plywood and Veneer House are as under :

S No. F.Y. Transaction % of Actual Concealment amount as Billing Transaction (Rs.) per books

(RS) 1 2017-18 2,47,24,212 47.38 5,21,82,803 2,74,58,591

1. Ongoing through the return filed by the assessee, it has been noticed that the assessee i.e., Sh. Rajesh Khanna C/o Neelkanth plywood has declared his return income of Rs. 16,11,280/-comprising of Income from the Head

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 16 of Profits and gains from Business & Profession and Income from Other Sources and filed on 29.10.2018.The declared income is very less and suppressed vis-a- vis supplies made to the Shiv Shankar Plywood & Veneer for A. Y. 2018-19.

2. Therefore, reason to believe that income to the extent of Rs.2,74,58,591/- has escaped from assessment in the hands of the assessee for the AY. 2018-19 and has escaped assessment. Proceedings u/s 147 is reason to believe which has been recorded above (refer paragraph 3) and to which the provisions of clause (b) of Explanation 2 to Section 147 are applicable to facts of this case. It is evident from the above facts that the assessee had not truly and fully disclosed his return of income white filing Income Tax Return for the year under consideration thereby necessitating reopening u/s 147 of the Income Tax Act, 1961. As per information flagged by DIT (Systems) as CRIU/VRU high Risk Cases and available with this office, a search and survey action u/s 132 of the It Act, 1961 was conducted in the group of Shiv Shankar Plywood group, Indore on 04.01.2019. The issue involved was large scale suppression of sale of plywood, sun mica and other related items.

3. In the case of Sh. Rajesh Khanna C/o Neelkanth plywood, value of information is of Rs.2,74,58,591/- and source of the same Tally data and impounded material during search and survey action on Shiv Shankar Plywood & Veneer. From the impounded material during search action, it was observed that M/s Neelkanth Plywood was also one of the suppliers to the Shiv Shankar Plywood and for operating the business, the group as well as suppliers were indulged in the practice of not recording actual transactions in its regular books of accounts. The supplier, namely Neelkanth Plywood used to issue suppress bills for the supplied goods and the difference amount between the actual cost and billed amount was being taken in cash. From the perusal of tally data and related material it was concluded that the supplier m/s Neelkanth Plywood used to record only 47.38% of the transaction amount in its regular books. Hence, unaccounted transactions have been made to the tune of 52.62% of the total transaction amount.”

i) Tally Data ; and ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 17 ii) Related material impounded during the search action on Shiv Shankar Plywood & Veneer Group, Indore.

under Section 148(b) of the Act, it was stated (relevant portion) that ; “………..From the impounded material in the from of Tally data and other documents it was concluded that the supplier M/s Neelkanth plywood used to record only 47.38% of the transaction amount in regular books of account. Hence, the unaccounted transaction have been made to the tune of 52.62% of the total transaction amount. The value of total transaction between M/s Neelkanth Plywood and Shiv Shankar Plywood and Veneer house is Rs. 2,74,58,591/-for A.Y. 2018-19.

dated 17.03.2022, stating therein, inter-alia, as follows ;

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 18 16.1 The JAO, vide letter (APB 16-17) dated 22.03.2022, refused to provide to the assessee, the material relied on to reopen the assessee's case and rejected the assessee's objection. It was stated that ;

“In this regard, this is for your kind notice that details/material/ information asked for by you in your reply dated 17.03.2022 cannot be provided to you at this stage, being of sensitive and confidential nature. Further, the notice u/s 148A(b) dated 16.03.2022 was issued prior to initiation of proceedings u/s 148 of the IT Act, 1961. The purpose of the said notice was to provide an opportunity to the assessee of being heard so that the assessee may submit his/her response/ explanation regarding the information confronted to the assessee vide notice u/s 148A(b).

In view of the above facts, it is said that your preliminary objections to the notice under Section 148A(b) dated 16.03.2022 are hereby rejected. Further, if you want to submit any documentary evidence/ explanation regarding information confronted to you vide notice u/s 148A(b) dated 16.03.2022, then you may submit the same to this office latest by 23.03.2022. 16.2 The assessee addressed another letter/reply dated

22.03.2022 (APB 18-20), stating as follows :

To Income Tax Officer, Ward-3, Yamuna Nagar. Sub : Reply to show cause notice under Section 148A in the case of Rajesh Khanna, Neelkanth Plywood, Khazuri Road, Yamuna Nagar for A.Y. 2018-19 (PAN AGJPK1206H) Respected Madam, This is with reference to your letter dated 22.3.2022 wherein you have refused to provide copy of any material on basis of which assessment for AY 2018-19 is proposed to be reopened. In response, following is submitted: 1. Your Honor have mentioned that information required by assessee is of sensitive and confidential nature and therefore cannot be provided. However, when information is present with your office and proposed to be used against assessee, it cannot be called sensitive and assessee has right to confront any ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 19 such information as per principle of natural justice. It is therefore again requested to provide the following information: a. Copy of impounded material in form of Tally data and other documents seized from premises of Shiv Shankar Plywood and Veener House on basis of which it is concluded that assessee only recorded 47.38% sales in its books of accounts. b. Copy of documents and evidences on basis of which it is observed that assessee had issued suppressed sale bills and received the suppressed amount in cash. c. Complete statement recorded during search and post search enquiries in case of Shiv Shankar Plywood and Veener House. d. Opportunity to cross examine any person whose statement is sought to be relied against assessee. e. Information as to how the transactions of Rs. 2,74,58,591/-is being assessed in the hands of M/s Shiv Shankar Plywood and Veener House. f. Enquiries conducted u/s 148A(a) before issuance of show cause notice. g. Any other material available with your office and to be relied upon in this case. All of these are basic information which your goodself is using against assessee, therefore certainly it cannot be called confidential.

2. Further, you have mentioned that u/s 148A(b), AO is not required to provide all material to assessee and only provide opportunity of being heard. However, kindly note as per 148A(b) AO is required not only give hearing but also to provide results of enquiries conducted by your office u/s 148A(a). The above documents are results of enquiries conducted by your goodself and therefore refusal is not as per section 148A.

3. It is also relevant to mention that assessee's case for AY 2017-18 was also reopened by your office on the same allegation that assessee suppressed bills issued to Shiv Shankar Plywood and that same was on basis of impounded material during search on said party. More than one year has passed since that reopening and even till date, the AO in faceless assessment proceedings has not been able to trace out any such impounded material and neither provided any other material which supported the reasons recorded for reopening. In fact, assessee has filed an affidavit from Shiv Shankar Plywood in such proceedings where the party has confirmed that no information or material or Tally data showing suppression of sales was found during its search. A copy of the affidavit is attached for your reference.

Thanking You, Yours sincerely For Rajesh Khanna 16.3 The AO, ignoring the assessee's aforesaid letter, passed order (APB 21-30) dated 30.03.2022 under Section 148A(d)/148 of the Act, observing (relevant portion) as follows ;

“……..Therefore, in this case the material available on record is sufficient to believe that income to the extent of Rs.2,74,58,591/- has escaped assessment for the A.Y. 2018-19.” 16.4 In consequence of the aforesaid order dated

30.03.2022, notice (APB 31) was issued to the assessee on the very same date, i.e., 30.03.2022, stating as follows ; ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 21 * I have the following information in your case or in the case of the person in respect of which you are assessable under the Income tax Act, 1961 (here in after referred to as "the Act") for Assessment Year 2018-1. * Information flagged by the risk management strategy formulated in this regard suggesting that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. Order under sub-section (d) of section 148A of the Act has been passed in such case vide DIN ITBA/AST/F/148A/2021-22/1042149336(1) dated 30/03/2022 and annexed herewith for reference.

3. This notice is being issued after obtaining the prior approval of the PCIT, Panchkula accorded on date 30/03/2022 vide Reference No. 100000029066846.

16.5 Vide letter (APB 32) dated 05.09.2022, the assessee again requested the AO to provide the following documents to the assessee ; a. Please provide the copy of tangible material related to information of Rs. 2,74,58,591 /- being tally data and impounded material of Shiv Shankar Plywood group. b. Please inform as to how the transaction of Rs. 2,74,58,591 /- is being assessed in the hands of M/s Shiv Shankar Plywood group. c. You are also requested to provide the copy of statement recorded during and post search of Shiv Shankar Plywood. d. You are also requested to allow us an opportunity to cross examine the persons whose statement / possession is intended to be used against assessee.

16.6 Yet, another request (APB 33) was made to the AO in response to notice dated 03.10.2022 issued under Section 143(2) of the Act as follows ;

Sir Vide letter dated 5-9-22, assessee has requested your office to provide basic details about the information leading to reopening and reply. That ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 22 already more than 4 months have passed but no details/ documents are provided to assessee. You are once again requested to provide the requisite details as per letter. 16.7 Once again, a similar request (APB 34) was made in response to notice dated 18.01.2023 issued under Section 142(1) of the Act ;

Sir Vide letter dated 5-9-22, assessee has requested your office to provide basic details about the information leading to reopening and reply. That already more than 4 months have passed but no details/ documents are provided to assessee. You are once again requested to provide the requisite details as per letter. 17. The assessee, vide his application dated 25.01.2023, stated that the assessee had not received information leading to the re-opening of the case.

06.02.2023, stated as follows ;

Please refer to your submission on 25.01.2023 in compliance to the notice dated 18.01.2023 wherein you have stated that you have not received information leading to re-opening of the case . In this context, it is to mention here that order u/s 148A(d) of the Income Tax Act, 1961 has already been issued to you on 30.03.2022 vide DIN ITBA/AST/F/148A/2021 -22/1042149336(1) and supplied to you with complete reason of re-opening. However, a copy of the same is also being provided to you. 18.1 Thereafter, the AO issued Show Cause Notice

(APB 38-51) dated 19.03.2023, as to why the proposed variation should not be made. It was, inter-alia, stated that;

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 23 “On the basis of credible information available on the records, order u/s 148A(d) of the Income tax Act, 1961 was passed by the JAO on 30.03.2022 in this case for the A.Y. 2018-19. During the course of proceedings u/s 148A of the I.T. Act, 1961, to follow the principles of natural justice, sufficient opportunities of being heard were provided to the assessee, however the assessee has failed to avail these opportunities and has not furnished any cogent and corroboratory evidence in favor of his denial about suppressed sales and cash receipts, order u/s 148A(d) dated 30.03.2022 was passed by the Jurisdictional Assessing Officer. Therefore, notice u/s 148 of the I.T. Act, 1961 dated 30.03.2022 was issued with the prior approval of the competent authority. The notice u/s 148 of the I.T. Act, 1961, was issued on 30.03.2022 and served through e-filing portal. In response to notice issued u/s 148 of the Act, dated 28.04.2022 assessee filed his return of Income declaring total Income of Rs.16,11,280/-.

An intimation u/s 144B of the IT Act, 1961, dated 17-08-2022 for completion of assessment in accordance with procedure of section 144B of the IT Act, 1961, [For e-faceless assessment proceedings) was issued by National Faceless Assessment Centre Income Tax Department. 3.3. Synopsis of all submissions of the assessee relating to the issue and indicating the dates of submission. In response to notice issued u/s 142(1) of the Act dated 25.08.2022, Vide reply dated 05.09.2022, the assessee submitted that "….return of Income in response to notice u/s 148 has already been filed and as such your honor is requested to provide the documents as requested above to proceed further in this case to explore the alternate remedy..."

18.2 The assessee, in his reply (APB 52-59) dated 28.03.2023 to the aforesaid Show Cause Notice, stated (relevant portion) that;

Your honor is requested to provide the following documents/statements: 2.1 Please provide the complete Material related to Neelkanth Plywood found and impounded during search on 4-1-2019 and proposed to be relied by your office. …………………. …………………. In the light of above your honor is requested not to take any adverse inference on the basis some noting in the mobile of Mr. Anil Tiwari with ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 24 whom assessee has no connection and also without providing the desired documents. Hope, the same may be satisfactory. Your honor is requested to provide a Video Conferencing in this case to present the case in person.

recorded and the note of the Investigation Wing, which note was relied on, was rejected by the AO vide letter (APB 66-74) dated 24.03.2023, wherein, it was stated (relevant portion) that:

Sir/ Madam/ M/s,

Subject: Pending faceless e-assessment proceedings in your case for A.Y. 2018- 19. Please refer to your reply to show cause notice, which has been uploaded by you on 21.03.2023 whereby you have stated at point no. 2 "Please provide the complete Material related to Neelkanth Plywood found and impounded during search on 4-1-2019 and proposed to be relied by your office" In respect to the queries/replies in the aforesaid para, the comments/clarification/ information are as under:- 2.1 In respect to above issue, it is intimated that the relevant information which needs to be shared with you has already been provided to you by the Department on 16.03.2022 while issuing notice u/s 148(a)(b) of the Act. 1961. "The screen shots at page 8,10 and 11 are not readable as such please provide the legible copy of the same along with source of such document and copy of statement of the person in whose custody this document found along with mobile dump where the sheet is found if you want to place any reliance on the same" 2.2. Please find legible copy of screen shots of Tally with full details after verification and inquiries carried out by Investigation Unit during search and survey in the matter of Shiv Shankar Plywood Group, enclosed as Annexure -A. Details sought by point no. 2.3, 2.4 & 2.5 cannot be provided to you. However, relevant information gathered during the course of search and survey in the case of Shiv Shankar Plywood Group is being provided to you as per annexure A, in response to reply to point no. 2.2.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 25 3.1. Your attention is invited to the fact that your honor has relied on some extract dated 25/12/2018 No. 0090 related to IN DOR. The extract is neither a document of Neelkanth Plywood nor has any idea about this extract. In respect to the Clarification/queries raised at 3.1, it is informed you that, Modus Operandi has been very well explained in the report received from the Investigation and the relevant part of the same has been provided you, as per annexure A. Further, your contention that the presuming sales of Rs. 1,14,65,244/-as suppressed sale is based on surmises and conjunctures is not acceptable as all the proposal are based on enquires made by the Appraisal unit and the Investigation Unit of Department. And which is duly corroborated by the facts which have been seized during the search and survey in the case of Shiv Shankar Plywood Group. You are requested to avail the facility by attending the Video Conference, which is being allowed to you (on your request) on 25.03.2023 at 4.00 P.M.

19.1 The assessee has also produced on record, at APB 75-

80, the transcript of the video chat dated 05.06.2023 between the AO and the authorized representative of the assessee. For ready reference, the same is being reproduced hereunder ; VIDEO CHAT BETWEEN ASSESSING OFFICER AND AUTHORISED REPRENSENTATIVE (C.A.DHURV GOEL) DATED 05.06.2023 Assessee represented by CA Dhruv Goel and is mentioned as AR. Assessing Officer- AO 15.35 (AR) I am Dhruv Goel authorized representative of Assessee Rajesh Khanna who is the proprietor of Neelkanth Plywood. In Show cause notice an addition of Rs. 2,74,00,000/- is proposed, briefly if I will go back to case facts & see why this case has been reopened. That on 4.1.2019 a search was conducted at M/s Shiv Shankar Ply. During the course of search…….. Sir, please confirm whether it is search or survey.

16.14 (AO) Search

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 26 16.18 (AR) During the course of search a picture was found in one of their employee Anil Tiwari's mobile. The picture titled Indor shows details of some material amount &t GST and it was presumed to be the details of evidences of under billing & under reporting of sale by Assessee & purchase by search party. And on the basis of this single image It has been assumed that entire sales made by the assessee to the search party is under billed, and only 47.3% is billed amount and 52.7% is not billed. Thus entire sales have been assumed to be suppressed and extrapolated as suppressed sales of Rs. 2,74,00,000/- and proposed to be added to the Income.

You please understand the situation that a picture is found from customer's accountant mobile and on the basis of that picture a case was built on Assessee, Rajesh Khanna that he is doing suppression of sales.

Apart from this picture in Anil Tiwari's mobile no other document, No other statement and nothing was given.

17.51 (AO) Tally data was given to you and you can verify the difference there. 17.58 (AR) You had given screen shot of tally and mobile picture. The tally data provided by you is correct picture of sales purchase made to him by Assessee. It is not the case that in tally books of purchasers invoice is recorded at Rs.12 lakh and I have recorded sales of Rs. 6 lakh in my book. In the books of purchasers also the bills which I had sent him are recorded at the same value. Therefore, tally screenshot actually proves that whatever sales I have made in my books are correct because that is the same amount that is recorded in the books of the party also. Now the only document in this case is the picture found from his phone. Anil Tiwari is not the proprietor/partner of the firm. Sir, I don't know whether today you have received our submission or not I have attached an affidavit from partner of the firm also. He has stated that firstly they have not under reported sales or purchase and that no such document which proves any under reporting of purchase or sales was found from his premises during search. There is no statement of the partner or the accountant from whose mobile phone this picture is found, that there is a ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 27 suppression of sales by Assessee by 52%. And most important point is neither any document is found from my possession nor from the searched customer. Even the picture found in the mobile of accountant do not contain my name and I can not be held accountable for image held in the mobile of accountant of my customer which is not related to me.

Truth will be found only on cross examination of Anil Tiwari That is why in response to show cause notice. We requested 3 things :-

1. Statement of Anil Tiwari which was recorded after this document from his phone.

2. Statement of the partner or proprietor from Shiv Shankar Plywood where they have admitted or stated that we are suppressing our sales and therefore under billing them.

Underreporting means I am not maintaining proper books of account. But that is not true. My books have been audited and not doubted. My entire sales is on record. There is no evidence to show that I have done any suppressed sales. No unaccounted cash deposits in my account.

So simply on the basis of third party evidence in my hand 2,74,00,000/- sales is proposed to be added which is without understanding what is their statement and without their cross examination. That picture is not an evidence in my case. That is settled law that document found from third party can be admitted after cross examination. Thereafter, we can understand "What is the picture". But in your letter dated 24-3-23 you have stated that the same can not be provided to assessee.

We have been asking from the time of 148(A). It has been more than one year but we have never got these details.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 28

22.08 (AO)Goel sahib please listen 148 (A)(b) show cause was given march 2022. All these details were given in show was notice . All details you had asked for must be given with show cause notice. 22.17 (AR) No statement received no cross examination allowed, Till today I have never got any such document. If there is any search on any party, his statement must have been recorded

22.44 (AO)You are saying that show cause dated 16.3.2022 given to you u/s148A(b) but no documents were provided to you.

22.51 (AR) No Sir nothing is provided. I had asked for a copy of statement recorded during search & post search enquiry in case of Shiv Shankar plywood and also requested for cross examination of any person whose statement is likely to be relied. Both this were not given to me till today. I have been asking time and again to provide me the copy of such statement but it was neither given to me during 148A notice and nor during the present proceedings. That when I had received the notice I contacted the customer and enquired about the transaction and they informed that no document relating to Assessee was found and seized from them. They had given me an affidavit which I had produced before you in which they said there is no suppression of sales.

24.04 (AO)Tell me one thing that tally data that we have found from customer and given to you, is that recorded with you?

24.11 (AR) Yes sir, recorded in my books you can verify as the Invoice of Rs. 6.62 lakh is visible in the account copy as per my books of accounts.

24.18(AO) Tally Data which we had given to you whether it tallies with your books?

24.22(AR) Yes Sir, Rs.6.62 lakh is recorded by me in my books and in tally data provided by your office.

24.24 (AO)OK

24.29 (AR) But you are saying that value in the picture found is Rs. 12,96,000/- and value in the books is Rs. 6,62,261. You are saying that difference in these two figures are under reported amount. But sir, my contention is that 'the purchase which was ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 29 found in his tally is the same which has been recorded by me in my books of accounts and there is no difference.

24.58(AO) OK

24.59 (AR) It is not a case that department has found any parallel tally i.e. books of accounts and then your case could be difference in sale recorded one set of books at 12 lakh and in other Rs. 6.62 lakh but this is not the case here. If that be the case I would have agreed that there is some issue? However, in this case the same value of purchase recorded in the books of customer which I had made sales. It is the picture in mobile of employee for Rs.12,96,000/- and on this my name is not written. That in spite of this such a huge addition of Rs.2,74,00,000/- is proposed in my case over and above actual profit is Rs.8.37 lacs. 26.12 (AO) Yes

26.14 (AR) That apart from extrapolation of figure done by investigation wing on the basis of picture. There is no document or statement which shows that we have done under reporting sales. Sir, When there is no such proof & sales value made by me are recorded as purchases in the books of searched customer there is no justification in the allegation that I have under reported sales. In the absence of any such evidences of suppression of sales there is no cause for the proposed addition of more than 2 crore in my case.

27.09(AO) What is your gross sale & Purchases ? 27.17(AR) Gross sale is Rs.3.11 crore, Purchase Rs.1.60 crore Gross Profit 60 lakh and Net profit after partners salary is Rs.8,37,000/- 28.17(AO) Out of 60 lacs gross profit, 8 lacs profit shown & rest all expenses claimed. 28.23(AR) The depreciation alone is Rs 20 lacs because it is a manufacturing concern. 28.26 (AO)OK on machinery etc. 28.28(AR) Depreciation, partner salary. 28.35(AO) You are having Factory for manufacturing.

28.40(AR) Ji sir, partner salary apart from it my major expenses interest to 10 lacs.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 30 29.02 (AO) You do one thing and all facts are stating during VC and give a write up that tally data providing by my office is matching or not and also total sale / total purchase / gross profit in trading and net profit after deduction of salary interest and business expenses. We are trying to find the documents and we will definitely give you before passing assessment order. We will once again discuss your file and only after that we will finalise your case. We will not do any unnecessary addition. 30.11 (AR) On similar issue, assessment for last year was also reopened and completed. 30.17(AO) Whether search was conducted in that year also? 30.22(AR) No Sir, Paper was found for one year and not for all years. 30.27(AO) OK,

30.29(AR) The cases were reopened for all earlier years. 30.31 (AO) The paper is for FY 18-19 then how case is reopen for FY 17-18. 30.35 (AR) Sir that is the only paper and on this basis the reopening is done for FY 16-17, 17-18 and 18-19. 30.53 (AO)There must be some old data of tally found.

31.01 (AR) No sir, reopening of earlier was also on the basis of same image an other data. We have asked for statement or paper in that year also but they have not given any thing and completed assessment by making addition of 12.50%. 31.23(AO) File the copy of that order also. 31.25(AR) Sir I will attach. We have asked them also to provide paper but nothing has been provided. 31.33(AO) All this happen due to shortage of time.

31.35(AR) I do agree with you that's why I am requesting you. I will make a note of all this which I am trying to tell you in brief note. 31.48(AO) Yes 31.52(AR) I will give you previous year order also. Request please give relevant document to us. After this whatever best decision you think do it. My request to you to ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 31 Please not to make any addition without providing any document for suppression & evidence. This addition of Rs. 2 Crore will lead to shut down of business. 32.21 (AO) Appeal is still open 32.24(AR) Recovery of demand will lead to closure of business 32.28 (AO) OK 20% is to be deposited for appeal 32.31 (AR) Sir I will have to sell assets for depositing,20% otherwise my current account will be seized. 32.39(AO) Appeal ho jayegi 32.41 (AR) By the time current a/c will be seized how I will do business 32.44(AO) Yes 32.44(AR) Plywood industry is in bad stage 32.50(AO) Sunmica is doing good 32.53(AR) Yamuna Nagar area is in down fall for the last 3-4 years. Position is very down from earlier time. I will submit all the facts in brief as synopsis with relevant document. You please check it. I will give you earlier assessment order also. You please ensure at your end to provide us the paper. Please drop case if you thing no addition should be made.

33.27(AO) We will see all the documents then will make our mind for decision. We will check all file again. If document is find we will give.

33.37(AR) Sir when can I file this which you are saying. 33.41 (AO) We will give you documents in one or two days. 33.45(AR) Should I wait for the documents or file the synopsis?

33.48(AO) You file today by evening I will see it tomorrow. We are coming on Saturday and Sunday also. You had asked for VC and we had listened your grievance so that there should not be any problem from our side. We will not do any addition purposely. 34.00(AR) We are also coming. You are coming and we are sitting in front of you.

34.13(AO) You had asked for VC and we had listened your grievance so that there should be no problem from our side. We will not do any addition which is not justified.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 32

34.22(AR) Sir if there is a fault of assessee then you are within your rights to use your power against assessee. Whereas in my case when there is nothing against is available as such no addition should be done. We have been telling the AO last time also but they started proceeding very late and at the end he did made some additions.

34.50(AO) Due to different time barring dates we could not see file upto December, then thereafter we send notices in December and January.

(AR) I will make reply and send you and please provide the documents. (AO) You send I will read it tomorrow and available documents will be provided. (AR) Thanks sir. 35.37(AO) Dhanyawad

clear that the material relied on to reopen the assessee's case was never confronted to the assessee despite repeated requests made by the assessee to the AO in this regard. In fact, the assessee's requests were rejected in flagrant violation of the principles of natural justice and the assessment order was passed without confronting the assessee with the evidence relied on. The AO passed the order dated 30.03.2022 under Section 148A(d) of the Act, based on the Tally Data and other documents said to have been found during the search action on the Shiv Shankar

Plywood & Veneer Group, Indore, without confronting the evidence relied on to the assessee. The ld. CIT(A), in para

7.1 of the order under appeal, has observed that it was so ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 33 done “after providing due opportunity to the assessee”. As to how this is so in the absence of confronting the assessee with the evidence relied on, is beyond comprehension.

once due opportunity was not provided to the assessee, which is the basic tenet of the law of the land, has not been made out, nor the ld. DR has been able to support the same.

and the subsequent addition, was provided during the re- assessment proceedings and that the modus-operandi and the images of the relevant material establishing such modus-operandi were contained in the Show Cause Notice dated 19.03.2023 (APB 38-51) issued by the FAO during the re-assessment proceedings and that it is not the case of the assessee that the relevant material has not been provided to ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 34 him at all, since the relevant material evidencing unaccounted sales forms part of both the Show Cause Notice dated 19.03.2023 and the assessment order dated

29.03.2023. The ld. CIT(A) has tried to justify the AO’s blatant violation of the principles of natural justice in not providing of the material relied on for re-opening the case and making the additions under question. For this, the justification given by the ld. CIT(A) in para 7.4 of the order is that since the “relevant material” evidencing unaccounted sales forms part of the Show Cause Notice dated 19.03.2023 and the assessment order dated 29.03.2023, the assessee is “not prejudiced in any manner regarding the issue of providing the relevant material to him”.

assessment.

of Income Tax”, 398 ITR 198 (Delhi), the Hon'ble Delhi High

Court has laid down guidelines, inter-alia. that where the ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 35 reasons to believe escapement of income make a reference to another document, whether as a lettr or a report, such document and/or relevant portion of such report should be enclosed alongwith the reasons. Such document, referred to in the reasons to believe, is mandatorily to be provided to the assessee.

25.1 In “Tata Capital Financial Services Ltd. Vs Assistant

Commissioner of Income Tax & Others”, 443 ITR 127 (Bom.), the Hon'ble Bombay High Court has reiterated the position of law, as enunciated by the Hon'ble Delhi High Court in “SABH Infrastructure” (supra). The Hon'ble Bombay High

Court directed the revenue to adhere to the guidelines laid down by the Hon'ble Delhi High Court, while re-opening the assessment proceedings. It was emphasized that the AO shall not merely state the reasons to believe in the letter addressed to the assessee, but if the reasons make reference to any other document or letter or report, such document or letter or report should be enclosed with the reasons.

25.2 In “Micro Marbles Pvt. Ltd. Vs Office of the Income Tax Officer, Ward-1,Cittorgarh (Raj.)”, 457 ITR 569 (Raj.), “SABH Infrastructure” (supra) and “Tata Capital Financial

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 36 Services Ltd.” (supra) were followed to hold that in view of these decisions, the AO is to mandatorily supply the assessee with all relevant documents referred to in the reasons to believe, so that the assessee may file proper objections opposing the re-opening of the assessment. It was held that the non-supply of the material was sufficient to vitiate the proceedings.

25.3 In “Commissioner of Income Tax, Patiala-II Vs Sham

Lal”, 127 ITR 816 (P&H), the Hon'ble jurisdictional High

Court held that the finding of the Tribunal that the Revenue could not place reliance on the material which was brought on record at the back of the assessee, was un-exceptional; that the assessee is, in law, entitled to rebut the material placed before him if he so chooses and any material placed on the record without notice to the assessee, cannot be relied on by the Revenue. The finding of the Tribunal that the material placed on the record in violation of the principles of natural justice cannot be relied on, was upheld.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 37 contrary to these decisions has been cited before us on behalf of the Department.

relied on by the Department to reopen the assessee's case was never confronted to the assessee, the re-assessment proceedings stand vitiated for violation of the principles of natural justice. Ground Nos. 1,3 and 4 merit acceptance and thus, entire re-assessment proceedings, culminating the order under appeal, therefore, deserves to be quashed and they are ordered to be quashed, on accepting Ground Nos. 1 and 3. As a consequence thereof, the estimation of unrecorded business turnover, the application of net profit on such estimation, as well as the additions of profit are rendered unsustainable and they are cancelled, accepting

Ground No.4.

further survives for adjudication.

ITA 230/CHD/2024

above appeal in ITA 62/CHD/2024. The following grounds have been taken :

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 38 “1. Whether on facts and circumstances of the case, Ld. CIT(A)/NFAC was justified in restricting the addition made by the AO at Rs. 2,74,58,591/- to 12.5% thereof, not appreciating that the addition had been made by the AO u/s 69 A of the Act as the amount of Rs. 2,74,58,591/- had not been recorded in the books of account of the assessee?

2. Whether on facts and circumstances of the case, Ld. CIT(A)/NFAC was justified in treating Rs. 2,74,58,591/- as unaccounted sales though it was never the explanation of the assessee at any stage that he was making unaccounted sales to the extent of 52.6%and the assessee never disclosed these in his return of income filed for A.Y. 2018-19?

4. Whether Ld. CIT(A), NFAC was justified in holding that the explanation offered by the assessee was satisfactory as required u/s 69 A of the Act in the absence of any evidence and any admission by the assessee in this regard?

4. Whether on facts and circumstances of the case, Ld. CIT(A)/NFAC was justified in allowing relief to the assessee by restricting the addition to 12.5% while no addition on account of the purchase corresponding to these suppressed sales was made?

5. Whether Ld. CIT(A)/NFAC was justified in allowing relief when The assessment of the preceding assessment year cannot be a basis for allowing relief as "Res Judicata" does not apply to income tax proceedings in the strictest sense and the AO had made addition after due application of mind and after considering the seized material for the year under reference?

6. Whether Ld. CIT(A) NFAC has not erred in as well as and facts of the case in deleting the addition of Rs.2,74,58,591/- made by the AO relying upon the seized material which was duly confronted to the assessee.”

are rejected as infructuous.

ITA 62, 230/CHD/2024 & S.A.11/CHD/2024 A.Y.2018-19 39 31. Accordingly, the Department’s appeal is dismissed as infructuous.

62/CHD/2024 is allowed, Stay Application No.

11/CHD/2024 filed by the assessee is dismissed as infructuous and the Department’s appeal in ITA

230/CHD/2024 is also dismissed as infructuous.

Order pronounced on 19th August,2024.