2018 (2) TMI 1880 - AT - Income Tax

Tribunal Invalidates Assessment Reopening, Stresses Independent Inquiry

The Tribunal ruled in favor of the assessee, finding the reopening of assessments invalid due to the lack of fresh information or material and the AO's ... Reopening of assessment - addition in the present proceedings were addressed on behalf of the Central Excise Authority before CESTAT - HELD THAT:- In the facts of the present case admittedly no effort was made by the assessing officer to call for any record from the Central excise authority or look into any material before the formation of his belief . It is seen that infact whether anything was done for the formation of his belief itself is not evident. It is seen that from the date of receipt of the information up to the date of issuance of notice more than sufficient time was available to the assessing officer . In the facts for 2006-07 Assessment year as has been argued on behalf the assessee and we have noticed that this fact is not disputed by the Ld. Sr. DR that the information was already available to the assessing officer before the passing of the original order under section 143 (3). We note that on account of this fact the said action has possibly not been defended as vehemently by the Revenue also. As gone before the Settlement Commission in the preceding assessment year and subsequent years cannot be the basis for a decision in the years under challenge. The said fact at best can be a reason for arousing suspicion that all may not be correct in the facts of a particular assessee however the presumption that necessarily it must be a case where reopening can be said to be justified would require drawing of presumptions conjectures and surmises . In the facts of the present case admittedly no effort was made by the assessing officer to call for any record from the Central excise authority or look into any material before the formation of his belief . It is seen that infact whether anything was done for the formation of his belief itself is not evident. It is seen that from the date of receipt of the information up to the date of issuance of notice more than sufficient time was available to the assessing officer. In the facts for 2006-07 Assessment year as has been argued on behalf the assessee and we have noticed that this fact is not disputed by the Sr. DR that the information was already available to the assessing officer before the passing of the original order under section 143 (3). We note that on account of this fact the said action has possibly not been defended as vehemently by the Revenue also. In these peculiar facts and circumstances of the case we find that the appeal of the assessee both on the assumption of jurisdiction as well as on merits has to be allowed. Instead of having reason to believe it was only one conclusion after another which position of fact is borne out from the record in the facts of the present case also. Accordingly we hold that the appeals of the assessee on both counts for the detailed reasons given hereinabove have to be allowed. - Decided in favour of assessee. Issues Involved:1. Validity of notice issued under sections 147/148 after four years of assessment completed under section 143(3).2. Reliance on information from the Central Excise Department for reopening assessments.3. Consideration of facts, explanations, evidences, and material on record by the CIT(A).4. Addition based on Gross Profit Rate applied to sales estimated by the Central Excise Authority.5. Estimation of turnover and Gross Profit based on orders of the Settlement Commission for other years.Detailed Analysis:1. Validity of Notice Issued under Sections 147/148:The assessee challenged the reopening of the assessment under sections 147/148, arguing that the notice was issued after the lapse of four years from the completion of the original assessment under section 143(3). The Tribunal found that the information from the Central Excise Department was already available to the Assessing Officer (AO) before the original assessment order was passed. Since there was no fresh information or material received after the original order, the reopening of the assessment was deemed invalid. The Tribunal noted that the AO did not independently apply his mind and relied solely on the information from the Central Excise Department, which was already on record.2. Reliance on Information from the Central Excise Department:The AO reopened the assessments based on information from the Central Excise Department, which alleged that the assessee was involved in duty evasion by undervaluing goods. The Tribunal observed that the Central Excise Department's allegations were based on the presumption that the assessee was manufacturing precipitated calcium carbonate, which carried a higher duty rate, instead of the declared products like quicklime, lime powder, and calcite powder. The Tribunal emphasized that the AO should have conducted an independent inquiry rather than blindly accepting the information from the Central Excise Department.3. Consideration of Facts, Explanations, Evidences, and Material on Record:The Tribunal found that the AO did not consider various facts, explanations, evidences, and material on record while upholding the assessment order. The AO failed to independently verify whether the information from the Central Excise Department was applicable to the assessee's case. The Tribunal highlighted that the Central Excise Department's case was based on suspicion and conjectures, which were not upheld by the CESTAT (Customs, Excise, and Service Tax Appellate Tribunal).4. Addition Based on Gross Profit Rate Applied to Sales Estimated by the Central Excise Authority:The AO made additions by applying the Gross Profit Rate on sales estimated by the Central Excise Authority, resulting in an impugned addition of Rs. 77,77,645/-. The Tribunal noted that the CESTAT had already ruled in favor of the assessee, demolishing the entire basis of the Central Excise Department's action. The Tribunal concluded that the AO's action of making additions based on the Central Excise Department's estimates was not sustainable.5. Estimation of Turnover and Gross Profit Based on Orders of the Settlement Commission for Other Years:The CIT(A) upheld the estimation of turnover and Gross Profit by relying on the orders of the Settlement Commission for other years. The Tribunal observed that the CIT(A) presumed that the assessee must necessarily be penalized in the years under consideration because the assessee had approached the Settlement Commission for other years. The Tribunal held that this presumption was contrary to facts and records and could not justify the reopening of assessments.Conclusion:The Tribunal allowed the appeals of the assessee, ruling that the reopening of assessments was invalid due to the lack of fresh information or material and the absence of independent inquiry by the AO. The Tribunal also found that the additions made by the AO based on the Central Excise Department's information and the orders of the Settlement Commission for other years were not sustainable. The Tribunal emphasized the need for independent application of mind by the AO and rejected the reliance on conjectures and surmises.