TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 214
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....oup of appeals involve identical question of law and arise in substantially similar factual background. For the purpose of all appeals, we adopt following substantial question of law: "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in setting aside the re-assessment orders on the ground that the reopening of assessment under section 147 of the Income Tax Act, 1961 was bad in law?" 2. Facts may be noted from Tax Appeal No. 542 of 2015. The appeal is filed by the Revenue challenging the judgement of the Income Tax Appellate Tribunal dated 27.02.2015. The respondent-assessee is engaged in the business of manufacturing ceramic tiles. For the assessment year 2004-05, the assessee had filed the return of income. The regular assessment of such return was completed at the relevant time. Later on, the Director General of Central Excise Intelligence ['DGCEI' for short], Ahmedabad, searched the assessee's premises on 17.01.2008. During such search, several incriminating documents were recovered. The investigation led to a prima facie revelation that the assessee was engaged in large scale financial irregularities whic....
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.... recorded, that the AO has firstly recorded the nature of the business of the assessee and the background under which the AO recorded that Director General of Central Excise Intelligence, Ahmedabad (DGCEI) in the case of the assessee found that there was a suppression of sale for the purpose of levy of excise duty and accordingly issued show cause notice, a copy of which was received by him from CIT, Central-2, Ahmedabad. Thereafter, the AO recorded the background under which the DGCEI made investigation and search in the case of the assessee and the background under which show cause notice came to be issued in the case of the assessee by the DGCEI. 17. According to the AO, the report contained in the show cause notice of Excise Department is foolproof, and there is substantial material evidence of suppression of sales and the said show cause notice also quantified the extent of suppressed sale. According to the AO for the above reasons, he believed that the assessee's income tot the extent of the sale found by the Excise Department to have been suppressed for levy of excise duty has escaped assessment under the Income Tax Act, and such escapement was for omission and failur....
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....hout verifying the relevant particulars declared in the income tax return, it cannot be reason to believe about the escapement of taxable income under the Income Tax Act. 22. In view of this, in our considered view, the reopening of the assessment based on the above recorded reasons, is bad in law and cnnot be sustained. We, therefore, hold accordingly, and consequently, cancel the impugned reassessment orders for all the years." 5. It is this judgement of the Tribunal which the Revenue has challenged before us. Since the Tribunal has decided only one question viz. that of the validity of the re-opening of assessment, we would confine our scrutiny to this legal question alone. In this context, learned counsel Mr. P.G.Desai for the Revenue, drawing our attention to the reasons recorded by the Assessing Officer for issuing the notice for re-opening, submitted that: (i) The Assessing Officer had recorded proper reasons for issuing the notice for reopening. He had tangible material in his possession to form a belief that income chargeable to tax had escaped assessment. (ii) The Tribunal committed a serious error in declaring the re-opening of assessment as invalid relying on the....
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....le with the sole purpose of assessing the income of the assessee, in light of the various financial irregularities noted and unearthed by the Directorate General of Central Excise, Intelligence, Ahmedabad Zonal Unit. As per their finding, there is suppression of sale of Rs. 5,90,63,965/- and such irregularities have been highlighted in the show cause notice of the excise department. A copy of the show cause letter issued by the Evasion Wing of the Central Excise department was forwarded to this office on 22.12.2009 from the offfice of the CIT Central II Ahmedabad through the Addl. CIT, Central Range, Baroda, which is placed on record. 2. The facts of the case is that, the Directorate General of Central Excise Intelligence, Ahmedabad Zonal Unit [herein after referred to as DGCEI for the sake of brevity] collected an intelligence, indicating that the manufacturers of Ceramic glazed and Vitrified tiles of Morbi and other parts of the State of Gujarat, are engaged in large scale evasion of Central Excise duty by adopting modus operandi like removing finished goods from their registered factory premises by not delcaring the actual MRP of their products in the Central Excise Invoice, ....
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....ale. 3. I have therefore reasons to believe that the assessee's income to the above extent has escaped assessment within the meaning of section 147 of the I T Act and that, such escapement was by reason of the omission and failure of the assessee to disclose fully and truly all material facts. Hence, the assessment is required to be reopened." 8. Substantially similar reasons have been recorded by the Assessing Officer in all the cases as well. We, therefore, adopt these reasons as a test case to judge the validity of the rival contentions. If one peruses the reasons minutely, it is recorded by the Assessing Officer that in case of the assessee which is engaged in the business of manufacturing ceramic tiles, the DGCEI had unearthed various financial irregularities which led to issuance of show-cause notice by the Excise Department for suppression of sale of Rs. 5.90 crores worth of stock. The showcause notice was forwarded by the Excise Department to the Income Tax Department. It was noticed that the ceramic tiles manufactures of Morbi and other parts of the State of Gujarat were engaged in large scale evasion of excise duty by removing finished goods from their registered....
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....Ore Co. Ltd. vs. Income Tax Officer, Nagpur (supra) the Supreme Court noted that in case of the assessee which had an office in London, this Customs authority had come to know that the assessee had declared very low price in respect of the consignment of Manganese exported by them out of India. After due inquiries and investigations, the Customs authorities found that the assessee was systematically under-voicing the value of Manganese as compared with the prevailing market price. The Income Tax Officer on coming to know about the proceedings before the Customs Collector in this respect issued notice for reopening of the assessment. In the reasons that the Assessing Officer relied on the facts as found by the Customs Authorities that the assessee had under-voiced goods during export. Under such circumstances, upholding the validity of the notice for reopening, the Supreme Court held and observed as under: "So far as the first condition is concerned, the Income Tax Officer, in his recorded reasons, has relied upon the fact as found by the Customs Authorities that the appellant had under invoiced the goods it exported. It is not doubt correct that the said finding may not be bindin....
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....session information on the basis of which he could have reasons to believe that income of the assessee chargeable to tax had escaped assessment for the relevant assessment years. For the reasons aforementioned, we are unable to uphold the impugned judgment of the High Court. The appeal is, therefore, allowed, the impugned judgment of the High Court is set aside and the Writ Petitions filed by the respondents are dismissed. No order as to costs." 12. In case of Income Tax Officer vs Selected Dalurband Coal Co. Pvt. Ltd.(supra), the assessment was reopened on the basis of the information contained in letter from Chief Mining Officer that the colliery of the assessee had been inspected and there had been under reporting of coal raised. Upholding the validity of re-opening of assessment, the Supreme Court held and observed as under: "After hearing the learned counsel for the parties at length, we are of the opinion that we cannot say that the letter aforesaid does not constitute relevant material or that on that basis, the Income Tax Officer could not have reasonably formed the requisite belief. The letter shows that a joint inspection was conducted in the colliery of the responden....
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.... involving Rs. 27 lakhs mentioned in the table in Annexure P-2 constitute fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income. The assessing officer has referred to the subsequent information and adverted to the concept of true and full disclosure of facts. It is also noticeable that there was specific information received from the office of the DIT (INV-V) as regards the transactions entered into by the assessee company with number of concerns which had made accommodation entries and they were not genuine transactions. As we perceive, it is neither a change of opinion nor does it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and sought to be done in a different manner in the proceeding under Section 147 of the Act. The reason to believe has been appropriately understood by the assessing officer and there is material on the basis of which the notice was issued. As has been held in Phool Chand Bajrang Lal (supra), Bombay Pharma Products (supra) and Anant Kumar Saharia (supra), the Court, in exercise of jurisdictio....
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....under: "9. From the above, it can be seen that the assessment which was previously concluded was re-opened on the premise that during the Excise raid, it was revealed that the petitioner had clandestinely removed goods without payment of excise duty. The Sales Tax Department, therefore, formed a belief that the value of goods plus excise duty evaded should form part of the turnover of the assessee for the purpose of tax under the Value Added Tax Act. 10. It may be that the raid carried out by the Excise duty and the material collected during such proceedings culminating into issuance of a show cause notice for recovery of unpaid excise duty and penalty in a given case sufficient to re-open previously closed assessment. In this case, however, we are not called upon to judge this issue and would therefore not give any definite opinion. The question, however, is whether on a mere show cause issued by the Excise Department, the Sales tax Department can make additions for the purpose of collecting tax under the Gujarat Value Added Tax Act without any further inquiry. If the Assistant Commissioner of Commercial Tax has utilized the material collected by the Excise Department; includ....