TaxTMI 
TaxTMI 
2021 (3) TMI 510
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....ed by limitation and as such the assessment made on the basis of it was illegal, ab initio void and without jurisdiction. 2. The learned CIT(A) was not justified to uphold the addition of Rs. 69,42,652/- (34.7% of Rs. 2,00,07,645/-) to the income of the appellant and income from undisclosed sources. The addition of Rs. 69,42,652/- is unfounded and uncalled for. 3. The learned CIT(A) failed to appreciate that: (a) e books of account. (b) The appellant was not confronted with any evidence by the learned Assesssing officer that it had made any sale outside the books of account. 4. The various reasons given by the learned CIT(A) to uphold the addition of Rs. 69,42,652/- to the income of the appellant are misconceived and incorrect. (c) The appellant has not made any sale, which is not recorded in the books of account. All the sales affected by the appellant to M/s Margra Industries, Gharoli are duly accounted for in the books of account. There is no sale made to this party which has not been recorded in the books of account. 5. The appellate order is contrary to the facts and law of the case. 6. The appell....
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....4,39,050/- to the income of the appellant is unfounded and uncalled for. 4. The learned CIT(A) was not justified to uphold the addition of Rs. 11,48,057/- by applying GP rate of 33.51% on 34,26,014/- to the income of the appellant as income from undisclosed source on account of short stock of marble profiles and marble mosaic found during the search made by the Customs & Central Excise Department. The addition of Rs. 11,48,057/- is arbitrary and uncalled for. 5. Without prejudice to the contention of the appellant that no sale outside the books of account was made by the appellant, the learned CIT(A) was not justified to allow deduction u/s 10B of the I.T. Act on such sales. 6. The learned CIT(A) failed to appreciate that: (a) No copies of documents/details relating to suppression of sales or removal of goods without payment of duty, cancelled invoices were supplied to the appellant firm. (b) No documents/details in respect of excess stock of Rs. 1,04,39,050/- stock short of Rs. 34,26,014/- and unaccounted sale of Rs. 2,44,73,246/- were supplied to the appellant firm. Infact, there was no difference in the stocks. (c) complete b....
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....ssee during the course of entire re-assessment proceedings as well as before the appellate proceedings. Even the reasons are vague and there was no tangent material available with the Assessing Officer while recording the reasons. While drawing an adverse inference against the assessee on merits also, there is no reference to the said invoice except for presumption that based on this information assessee must have made sales outside the books of account. 2. Since the information and material in the form of report submitted by ADIT (Investigation), Ghaziabad is very crucial and goes to the very route of the issue involved not for deciding the issue on merits but also on the validity of reasons recorded, therefore it was felt necessary that Department should produce not only the said report from the investigation wing but also the alleged invoices referred in the reasons as well as assessment order upon which presumption has been drawn that such cancelled invoices has led to undisclosed sale on which GP addition has been made. 3. Ld. CIT-DR, Mr. S.S. Rana requested that since it is very crucial document having a bearing on the case, therefore, some time sho....
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....s concerned, same was supplied to the assessee during the course of the assessment on 10.12.2009, and in response thereto, the assessee filed a letter on 14.12.2009, and submitted that all the sales made to M/s Margra Industries Ltd. during the assessment year 2002-03 are duly entered in the books of account of the assessee firm and the assessee has not removed any goods without payment of duty and therefore, requested to provide the copies of cancelled invoices. However, despite the request of the assessee, cancelled invoices were not supplied to the assessee. In respect of the communication dated 24.03.2009, addressed by the Addl. DIT( Inv.), Meerut to Addl. CIT, Range - 22, New Delhi, the assessee submitted that the Addl. DIT (Inv.) Meerut had recommended the cases of the assessee to be reopened, and the recommendation had been made without providing to the Assessing Officer any supporting material. It was submitted that since in the 'reasons recorded' the AO had not referred to either any communication dated 24.03.2009 by the Addl.DIT (Investigation) Meerut to Addl.CIT, Range - 22, New Delhi and to the order of Commissioner of Custom and Excise, Noida undated, the same canno....
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....to the Ld. counsel. However, assessee has filed these material on detail objection vide letter dated 21.05.2019 stating that firstly, these documents are not even complete and secondly, nowhere such documents as stated in the reason have been provided, specifically the allegation of removal of goods without payment of duty and invoices issued well later on cancelled by the assessee. Ld. CIT-DR today at the time of hearing requested that that further opportunity should be given in order to ascertain, whether any such material or information was there in some separate folder available with the assessing officer. Ld. Senior Counsel further pointed out that from the perusal of the reason recorded, it can be seen that the Assessing Officer in view of the allegation given in the information from the Additional Director of income tax (Investigation) is trying to examine the claim of exemption u/s.10B, which is impermissible in law. Ld. CIT-DR is directed to produce any record which is available with the assessing officer at the time of issuance of notice and also given her statement on the objection raised by the ld. Senior Counsel. It is made clear that no further adjou....
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....as challenged the assumption of jurisdiction u/s 147 of the Act by the AO on various grounds which can be summarised as under: a. That reasons recorded are not based on any tangible and relevant material; b. That reasons recorded are not based on any application of mind much less independent application of mind; c. That reasons have been recorded to conduct investigation and examination i.e. to make fishing and roving enquiries, which is not permissible; d. That in the absence of any sum of income having been specified which has allegedly escaped the precondition as envisaged u/s 149(1)(b) since remained unsatisfied, there was a lack of foundation for initiate the proceedings; e. Non furnishing of foundational material vitiates the proceeding for invoking section 147 of the Act has not been satisfied; f. That approval granted is a mechanical approval and hence initiation of proceedings u/s 147 of the Act; g. That once the basis or edifice on which proceedings have been initiated ceases to exist, the action is without jurisdiction. 12. For the AYs 2003-04 and 2004-05, since the assessment was originally made u/s 143(3....
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....edings initiated are without jurisdiction. It was also contended that the in the 'reasons to believe' for the AY 2003-03, it has been recorded by the learned AO that in view of the allegation made in the information received from Addl. DIT (Inv), Ghaziabad, the claim of exemption u/s 10B needs to be examined, and this fact shows that there was no material before the learned AO and proceedings have been initiated merely to examine the exemption claimed u/s 10B of the Act. It was submitted that initiation of the proceedings to examine the claim of exemption u/s 10B of the Act is outside the scope of section 147 of the Act as reassessment proceedings can be initiated only in the case of tangible material that the income of the assessee has escaped assessment, and recourse of section 147 of the Act cannot be take to make roving and fishing enquiry. It was submitted that in the 'reasons to believe' for the AY 2002- 03, it has not even been mentioned what is the amount of income which has been escaped assessment as such, in view of section 149(1) of the Act, initiation of the reassessment proceedings is illegal. 13.2 Lastly, it was submitted that approval granted u/s 151 of the Act wa....
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....ch reads as under: "Sanction for issue of notice. 151. (1) In a case where an assessment under subsection (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice: Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such no....
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....17 (Delhi) has held that the Legislature has provided certain safeguards to prevent arbitrary exercise of powers by an Assessing Officer, particularly after a lapse of substantial time from completion of assessment. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. In fact, in the case of CIT v. S. Goyanka Lime & Chemical Ltd. reported in 231 Taxman 73 (MP) it was held that sanction granted by merely recording "Yes, I am satisfied" is mechanical and same is unsustainable. In fact, SLP filed against the aforesaid judgment of Madhya Pradesh High Court is also dismissed and same is reported in 237 Taxman 378 (SC). In fact, in the case of Pr. CIT vs M/s N.C. Cables Ltd. reported in [2017] 391 ITR 11 (Delhi) jurisdictional High Court has held as under: "11. Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and fo....
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....ity of the assessee along with its claim of exemption u/s 10B needs to be examined. Therefore, there is a reason to believe that there is income which has escaped assessment in the case of the assessee for the said Assessment Year." 15.6 As discussed above, the Bench had directed the Revenue to produce the material which the AO had at the time of initiation of proceedings u/s 148 apart from the aforementioned letter. However, the Revenue had filed only four documents which are as under: i. "A copy of letter issued by Addl. Director of Income Tax (Inv.), Meerut dated 24.03.2009, to Addl. CIT, Range-22, New Delhi. ii. A copy of letter issued by Addl. Director of Income Tax (Inv.), Noida, dated 17.03.2009, to Addl. DIT(Inv.) Meerut. iii. A copy of an undated order passed by Sh. S.K. Goel, Commissioner, Central Excise, Noida. iv. A copy of letter dated 18.02.2019, addressed by Senior Investigating Officer of Customs, Central Excise & Service Tax Settlement Commission, Principal Bench, New Delhi to persons stated therein." 15.7 First of all, in the reasons there is no whisper regarding documents at Sl. No. (iii.) & (iv.) now filed by the departm....
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....he AO has to have tangible material with him and even if the information has come from Investigation wing, the AO must perused the material which has been referred in the said information and examine what is the income which has escaped assessment. Recommendation may come from any person or authority but it is the AO who has to entertain reason to believe based on material before him that income chargeable to tax has escaped assessment. The most crucial material here in this case is that assessee has removed goods without payment of duty and there were invoices which were later shown to be cancelled but nowhere there is any whisper about the invoices nor they have been produced. AO simply appears to have reopened to examine the claim of section 10B and what was the basis and premise before him as to how the claim on examine u/s 10B has incorrect is not coming fore. Mere intimation received from any authority cannot lead to immediate presumption but it needs to be verified by the AO and to apply his mind. Here in this case, even the documents pertaining to Custom & Central Excise Authorities was not available with the AO at the time of initiation of proceedings which fact has ....
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....ng Co. Ltd ITA 935/2009 dated 08.02.2018 DCIT No approval CIT 8 Dhadda Exports v. ITO [2015] 377 ITR 347 (Rajasthan) ITO JCIT CIT 9 Reliable Finhold Ltd. v. Union of India [2014] 369 ITR 419 (Allahabad) ITO - CIT 10 ITO v. Bhavesh Kumar [2011] 140 TTJ 257 (Agra) ACIT JCIT CCIT / CIT 16.2 It is seen that in the case of CIT vs. SPL's Siddhartha Ltd [2012] 345 ITR 223 (Delhi), wherein approval was taken by the AO from superior authority i.e. CIT, whereas the under the statutory provision, approval was to be taken from JCIT/Addl CIT, it was held that notice issued u/s 148 of the Act is invalid. The relevant finding of the Hon'ble High Court is as under: 7. Section 116 of the Act also defines the Income Tax Authorities as different and distinct Authorities. Such different and distinct authorities have to exercise their powers in accordance with law as per the powers given to them in specified circumstances. If powers conferred on a particular authority are arrogated by other authority without mandate of law, it will create chaos in the administration of law and hierarchy of administration will mean nothing. ....
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....nd even logical because the Commissioner or a Chief Commissioner is unarguably ranked higher in authority than a Joint Commissioner. Yet at the same time, this Court has to give effect to plain words of the statute which unambiguously states that the competent authority in such cases is the Joint Commissioner (and not the Chief Commissioner or the Principal Commissioner). The Revenue's submissions that all such cases, are covered under proviso to Section 147(1), the competent authority for prior approval would be four superior officers, renders Section 151(2) superfluous. If anything the Court is clear that it is not its job to render, in the process of interpretation, an entire provision academic or inoperative. This court is of the opinion that accepting the Revenue's position would result in that consequence. The Court also invokes the principle enunciated by the Privy Council in Nazir Ahmad v. Emperor AIR 1936 PC 253 : that if the statute mandates that something be done in a particular manner, should be in that manner or not at all. In this case, since the original assessment was completed "other than" the eventualities contemplated in Section 151(1), ....