M/S BCL INDUSTRIES LTD.,BATHINDA vs. DCIT, CC-I, LUDHIANA

आदेश/ORDER

PER A.D.JAIN, VICE PRESIDENT

Both these appeals have been filed by different

assessees for assessment year 2011-12, against the separate

ITA 407 & 409/CHD/2023 A.Y. 2011-12 2

orders dated 01.05.2023 passed by the ld. Commissioner of

Income Tax (Appeals)-5, Ludhiana [ in short ‘the ld. CIT(A)’].

therefore, these were heard together and are being disposed

of by a common order, for the sake of convenience and

brevity.

ITA 407/CHD/2023

grounds of appeal :

“1. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in issuing the notice u/s 148 of the Income Tax Act with regard to reopening of the case. 2. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the validity of notice issued under section 148 of the Income Tax Act whereas as per facts and other material placed on record, notice issued under section 148 of the Income Tax Act is an illegal and invalid notice issued without any proper and valid reasons. 3. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred by holding that the sales of Rs. 42,68,400/-as deemed income u/s 68 of the Income Tax Act without appreciating that these sales are already declared as income in the return filed. Therefore, provisions of section 68 are not applicable. 4. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred by holding that modus of making bogus sales of Rs. 42,68,400/- is only to increase the turnover with the motive to avail better loan facilities from the banking authorities without appreciating that these sales are negligible i.e., 0.00013% of the total turnover of Rs 325626 lakh of the company. 5. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred by confirming addition of Rs.

ITA 407 & 409/CHD/2023 A.Y. 2011-12 3 42,68,400/-merely on the ground that the confirmation from the concerned party to whom sales made has not been furnished. 6. On the facts and the circumstances of the case and in law and material placed on record, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs. 42,68,400/-. 7. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred by enhancing the addition to Rs.42,68,400/- against Rs.10,40,000/- made by the Assessing Officer merely on the basis of information as provided by the assessee appellant on the basis of its books of account. 8. On the facts and circumstances of the case and in law, the ld. Commissioner of Income Tax (Appeals) has erred by making addition of Rs.85,368/- as unexplained expenditure u/s 69C of the Act merely on presumption without providing any opportunity to the assessee appellant especially when no such addition has been made by the Assessing Officer.” 4. Apropos Ground Nos. 1 & 2, the ld. Counsel for the

assessee has contended that the entire re-assessment

proceedings, culminating in the impugned order, require to

be quashed, since in the reasons recorded for re-opening the

completed assessment, it has been wrongly stated by the

Assessing Officer that the return of income for the year

under consideration was filed on 30.09.2010 by declaring

income of Rs.1,62,28,910/-, whereas, the fact is that the

return of income for the year under consideration was filed

on 28.09.2011, at ‘NIL’ income. Reliance in this regard has

sought to be placed on the following case laws :

i) Order of Chandigarh Bench in the case of Smt. Monika Rani W/o Shri Ashok Kumar In ITA No.l582/Chd/2019. ii) Judgment of Gujarat High Court in the case of Sagar Enterprises vs ACIT" as reported in 257 ITR 335 iii) Order of ITAT, Chandigarh "SMC" Bench in the case of Baba Karta Singh Dukki Educational Trust Vs ITO

ITA 407 & 409/CHD/2023 A.Y. 2011-12 4

iv) Order of ITAT Jaipur Bench in case of Shri Ram Mohan Rawat Vs. ITO 1014/JP/2018 dated 10.10.2019 v) Gaurav Joshi Vs Income Tax Officer [2019] 55 CCH 0083 (Amritsar Bench) vi) Sh. Jaspal Singh (Chandigarh Bench) 88 ITR (Trib) 407 vii) Smt Charanjitj Kaur, 88 ITR (Trib) 414 (Chandigarh Bench)

reliance on the impugned order. It has been contended that

in the reasons recorded, the date of the filing of return and

the income returned by the assessee were inadvertently

wrongly stated, due to typographical error, which does not

vitiate the reasons recorded by the AO to form his belief of

satisfaction of escapement of income.

the reasons for issue of notice u/s 148 of the Income Tax Act

in the case of the assessee for the year under consideration,

it has been stated as follows :

“The assessee is a Private Limited Company and engaged in business of manufacturing of Vanaspati Ghee and refined oils. The assessee has filed return of income through e-filing on 30.09.2010 for assessment year 2011-12 declaring income of Rs.1,62,28,910/-”.

6.1 The copy (APB-1) of Income Tax Return

acknowledgement for the year under consideration shows

that such return of income was filed on 28.09.2011 and not

ITA 407 & 409/CHD/2023 A.Y. 2011-12 5 on 30.09.2010, as stated in the reasons recorded. Further,

in the said return of income, the total income for the year is

‘NIL’ and not of Rs.1,62,28,910/-, as stated in the reasons

recorded, as above. For ready reference, the said Income

Tax Return acknowledgement for the year under

consideration (APB-1) is scanned and reproduced as under :

6.2 It is further seen that the date ‘30.09.2010’, as

mentioned in the reasons recorded, is the date of filing of

return of income for the earlier assessment year, i.e.,

assessment year 2010-11. This is evident from the copy

ITA 407 & 409/CHD/2023 A.Y. 2011-12 6 (APB-1) of Income Tax Return acknowledgement for

assessment year 2010-11.

6.3. Then, the figure of ‘Rs.1,62,28,910/-’, statedly

representing income declared by the assessee for the year

under consideration, as mentioned in the reasons recorded,

is the figure of total income returned for assessment year

2010-11, as shown in the copy (APB-83) of Income Tax

Return acknowledgement for assessment year 2010-11.

6.4 For ready reference, the Income Tax Return

acknowledgement of the assessee for assessment year 2010-

11 ( copy at APB-83) is scanned and reproduced as under :

ITA 407 & 409/CHD/2023 A.Y. 2011-12 7

6.5 In this regard, the Department has filed before us

letter dated 21.02.2024, wherein, it has been stated that the

office of the DR had asked the concerned AO, i.e., the DCIT,

Central Circle-I, Ludhiana, to give her comment on the

position that in the first paragraph of the original

assessment order dated 03.02.2014, it has been mentioned

that “Return declaring ‘NIL’ was e-filed by the assessee on

28.09.2011” , whereas in the first paragraph of the reasons

recorded by the AO to issue notice u/s 148 of the Act, the

AO had mentioned that “The assessee had filed return of

income through e-filing on 30.09.2010 for assessment year

2011-12 declaring income of Rs.1,62,28,910/-”; that from the

perusal of the reasons recorded by the AO, it was noticed

that the AO had inadvertently mentioned the date of filing of

the Income Tax Return as 30.09.2010, instead of 28.09.2011

and had also mentioned income of Rs.1,62,28,910/-, instead

of ‘NIL’; and that these are typographical mistakes

committed by the AO while recording the reasons. For ready

reference, the said letter is reproduced as under :

To

The Hon'ble Members, Income-Tax Appellate Tribunal, Bench 'A', Kendriya Sadan, Sector 9-A, Chandigarh. .

ITA 407 & 409/CHD/2023 A.Y. 2011-12 8

Sirs,

Sub: Appeal before Hon'ble ITAT, Bench 'A', Chandigarh in the case of M/s Kissan Fats Ltd. for the A.Y. 2011-12 in ITA No. 407/Chd/2023 - regarding. Kindly refer to above cited subject. The above mentioned case is fixed for hearing on 22.02.2024 before the Hon'ble ITAT, Bench-A, Chandigarh. 2. In this regard, it is submitted that this office had asked the concerned Assessing Officer i.e. DCIT, Central Circle-1, Ludhiana to give her comments on the following : (i) In the first paragraph of the original assessment order dated 03.02.2014, it is mentioned that "Return declaring nil was e-filed by the assessee on 28.09.2011'', while in the first paragraph of reasons recorded by the A.O. to issue the notice u/s 148 of the Act, the A.O. had mentioned that "the assessee had filed return of income through e-filing on 30.09.2010 for A.Y. 2011-12 declaring income of Rs. 1,62,28,910/-." 3. In this context, it is submitted that the reply of the concerned Assessing Officer i.e. DCIT, Central Circle-1, Ludhiana has been received in this office, giving her comments, which are reproduced as below :

The case of the assessee was re-opened u/s 147 of the Act and assessment was completed u/s 147/143(3) dated 19.12.2018 at a loss of Rs. 4,45,54,101/-. From the perusal of the reasons recorded by the A.O., it is noticed that the A.O. has inadvertently mentioned date of filing of ITR as 30.09.2010 instead 0^28^09^2011 and also mentioned income of Rs. 1,62,28,910/- instead of NIL.These are typographical mistake committed by the A.O. while recording reasons.

discrepancy in the reasons, as pointed out on behalf of the

assessee, is clear and admitted, that is to say, the reasons

recorded by the AO for issuance of notice of re-opening of

the completed assessment have been recorded on wrong

facts, in as much as firstly, the date of filing of the return of

ITA 407 & 409/CHD/2023 A.Y. 2011-12 9 income of the assessee for the year under consideration has

been wrongly mentioned. Then, the declared income has

wrongly been shown at Rs.1,62,28,910/- as against the

actually declared ‘Nil’ income.

the re-assessment proceedings are liable to be quashed as

void, as contended by the assessee.

8.1 In this regard, under similar circumstances, in ‘Smt.

Monika Rani Vs the ITO, Ward-2, Kurukshetra’, vide order

(copy at the assessee's case laws Paper Book, pages 308 to

318) dated 28.02.2020, passed for assessment year 2010-11,

in ITA No.582/CHD/2019, it was observed that from the

reasons recorded, it was clear that the AO had issued the

notice u/s 148 of the Act for the reason that the assessee

had not filed her return of income and that the assessee had

purchased a property for Rs.1,49,02,500/- during Financial

Year 2009-10; that further, the said reasons given by the AO

for re-opening the assessment were not correct, since the

assessee had filed the return of income on 30.03.2011,the

copy of which had been placed in the assessee's

compilation; that the assessee had also shown investment in

ITA 407 & 409/CHD/2023 A.Y. 2011-12 10

agricultural land amounting to Rs.52,20,000/- in her

balance sheet as on 31.03.2010, copy of which had been

placed in the assessee's compilation; that both the reasons

given by the AO were, thus, wrong; that the AO had, thus,

reopened the assessment on the basis of wrong facts and,

therefore, the re-opening was not valid and it was being

quashed.

8.2 The Tribunal followed the decisions cited as under :

i) Sagar Enterprises Vs ACIT, 257 ITR 335 (Guj)

ii) Baba Kartar Singh Dukki Educational Trust Vs ITO, rendered by the Chandigarh ‘SMC’ Bench of the Tribunal, (2016) 158 ITR 965 (CHD)(TRIB) iii) Shri Ram Mohan Rawat Vs ITO, order dated 10.10.2019 passed by the Jaipur Bench of the Tribunal in ITA No. 1014/JP/2018 iv) Van Oord Dredging & Marine Contractors BV Cs ADIT, order dated 28.02.2018, passed by the Mumbai Bench of the Tribunal in ITA Nos. 495&496/Mum/2016. 8.3 Similarly, in ‘Sagar Enterprises’ (supra), it has been

held as follows :

" that it was apparent that the fact of non-filing of the return for the assessment year 1991-92 had weighed with the respondent for arriving at the satisfaction about the failure on the part of the assessee and escapement of assessment of income. However, the material on record showed that the return had been filed. In such circumstances, it could not be said with certainty as to which fact would have weighed with the officer concerned and once it was shown that an irrelevant fact had been taken into consideration, to what extent the decision was vitiated would be difficult to say. Moreover the Income-tax Officer had stated that the payment which was stated to be undisclosed income relevant for the assessment year 1991-92 could have been made

ITA 407 & 409/CHD/2023 A.Y. 2011-12 11 during the financial year 1990-91 relevant to the assessment year 1991-92 and hence, "to cover up that probability, protective addition was made in the assessment year 1992-93." The first appellate authority decided the appeal for the assessment year 1992-93 on January, 1996, and the reason had been recorded thereafter on August 18, 1997. The notice of reassessment was not valid and was liable to be quashed."

8.4 Likewise, in ‘Baba Kartar Singh Dukki Educational

Trust’ (supra), it has been held as follows :

HEAD NOTE:

" Where Assessing Officer processed under section 143(1) returns of income filed by assessee for assessment years 2001-02 to 2003-04 and subsequently he reopened said assessments on sole basis that assessee had not filed returns for years preceding to assessment year 2004-05 and, therefore, its income having escaped assessment, reopening of assessment was on basis of suspicion and non-existent and incorrect facts and it was invalid"

8.5 Further, in ‘Ram Mohan Rawat’ (supra), it has been

held as follows :

“Thus the reasons recorded by the AO for formation of belief that income assessable to tax has escaped assessment are based on two counts. One, the assessee has made bogus purchases and the second, that the purchases are not verifiable as the assessee has not filed the return of income. Thus the formation of belief is based on these two factual aspects that the assessee has made bogus purchases which are not verifiable as assessee has not filed the return of income. The reason for non verifiableness of the purchases made by the assessee due to non filing of the return of income as stated by the AO is absolutely incorrect and wrong and contrary to the record when the assessee has filed the return of income electronically on 29.10.2007. This fact was also subsequently accepted by the AO that the assessee filed the return of income under section 139(1). The second aspect of the reasons that the assessee has made bogus purchases is also not based on any enquiry or verification of record by the AO but this is simply reproduction of information received from the Investigation Wing. The said information is also incomplete as regards the details of the purchases and the parties from whom such purchases were made by the assessee. Thus the reasons recorded by the AO manifest that there is no

ITA 407 & 409/CHD/2023 A.Y. 2011-12 12 application of mind and the averments as recorded in the reasons are very vague and general and rather inconsistent with the facts available on record so far as the filing of return of income by the assessee. The formation of belief on such incorrect and vague reasons would lead the reopening of the assessment as invalid."

8.6 Then, in ‘Van Oord Dredging and Marine Contractors

BV’ (supra), it has been held as under :

"In AY 2005-06, the A.O. has reopened the assessment on incorrect facts and further the assessing officer has failed to demonstrate that there was failure on the part of ht assessee to disclose fully and truly all material facts during the course of original assessment proceedings. Hence the reopening of assessment of AY 2005-06 is liable to be quashed on these two grounds also. Accordingly we set aside the order passed by Ld. CIT(A) on this issue and hold that the reopening of assessments of both the years are not in accordance with the law and accordingly quash the assessment orders passed for both the years under consideration."

cited before us, nor has any of the above decisions been

shown to have been reversed by higher authorities.

above discussed decisions, we hold that the re-opening of

the completed assessment in the present case was not valid.

The plea of the Department, that the recording of wrong

facts by the AO in the reasons was an inadvertent mistake,

is of no avail and it does not validate the reasons recorded

by the AO. It is trite that the reasons recorded are to be

read as they are, and the reasons recorded in the present

ITA 407 & 409/CHD/2023 A.Y. 2011-12 13

case, read as they are, are factually incorrect reasons which

could not have led the AO to arrive at a valid satisfaction

that income for the year under consideration had escaped

assessment. Accordingly, the initiation of the re-assessment

proceedings through the incorrect reasons recorded and the

entire re-assessment proceedings, culminating in the order

under appeal are quashed as void ab initio.

as above, nothing further survives for adjudication. Ordered

accordingly.

ITA 409/CHD/2023

grounds of appeal :

“1. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in issuing the notice u/s 148 of the Income Tax Act with regard to reopening of the case. 2. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the validity of notice issued under section 148 of the Income Tax Act whereas as per facts and other material placed on record, notice issued under section 148 of the Income Tax Act is an illegal and invalid notice issued without any proper and valid reasons. 3. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred by holding that the sales of

ITA 407 & 409/CHD/2023 A.Y. 2011-12 14 Rs. 26,62,821/- are deemed income u/s 68 of the Income Tax Act without appreciating that these sales are already declared as income in the return filed. Therefore, provisions of section 68 are not applicable. 4. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred by holding that modus of making bogus sales of Rs. 26,62,821/- is only to increase the turnover with the motive to avail better loan facilities from the banking authorities without appreciating that these sales are negligible even less than 0.0001% of the total turnover of Rs 47981 lakh of the company. 5. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred by confirming addition of Rs. 26,62,821/- merely on the ground that the confirmation from the concerned party to whom sales made has not been furnished. 6. On the facts and the circumstances of the case and in law and material placed on record, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs. 26,62,821/-. 7. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred by making addition of Rs.53,256/- as unexplained expenditure u/s 69C of the Act merely on presumption without providing any opportunity to the assessee appellant especially when no such addition has been made by the Assessing Officer.

i.e. ITA No.409/CHD/2023 are exactly similar to those of ITA

No.407/CHD/2023, therefore, our findings given in ITA

No.407/CHD/2023 would apply mutatis-mutandis to ITA

No.409/CHD/2023 also. However, for the sake of ready

reference, the relevant findings given in ITA 407/CHD/2023

are reproduced hereunder :

“10. Therefore, respectfully following the ratios of the above discussed decisions, we hold that the re-opening of the completed assessment in the present case was not valid. The plea of the Department, that the recording of wrong facts by the AO in the reasons was an inadvertent mistake, is of no avail

ITA 407 & 409/CHD/2023 A.Y. 2011-12 15 and it does not validate the reasons recorded by the AO. It is trite that the reasons recorded are to be read as they are, and the reasons recorded in the present case, read as they are, are factually incorrect reasons which could not have led the AO to arrive at a valid satisfaction that income for the year under consideration had escaped assessment. Accordingly, the initiation of the re-assessment proceedings through the incorrect reasons recorded and the entire re-assessment proceedings, culminating in the order under appeal are quashed as void ab initio.

allowed.

Order pronounced on 01.07.2024.

Sd/- Sd/-

(KRINWANT SAHAY) (A.D.JAIN ) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�/ CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar