TaxTMI 
TaxTMI 
2021 (9) TMI 802
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....the assessment through notices issued u/s 143(2) & 142 of the Act, even there before, which was in a direct contravention of the binding directions of the Hon'ble Supreme Court given in the case of GKN Driveshafts (India) Ltd. vs. ITO & ORS 259 ITR 0019 (2002) and therefore, the impugned order so passed, deserves to be quested. 2. The impugned addition and disallowances made in the order dated 30.03.2016 u/s 143(3) of the Act are bad in law and on facts of the case, for want of jurisdiction and for various other reasons and hence the same may kindly be deleted. 3.1 Rs. 1,12,256/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the addition of Rs. 1,12,256/-made by the AO by applying estimated GP rate of 9.45% on the alleged suppressed sale of Rs. 5,77,150/-, merely based on a search conducted by the Central Excise Department (even though the said Department itself has taken back their allegation) and merely on suspicion, surmises & conjectures, without arriving at an independent opinion/ satisfaction over the impugned addition. The allegation of suppressed sale being completely contrary to the provisions of law and facts and the ....
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.... 29.08.2008, declaring total income at Rs. 50,27,790/- may be treated as ROI filed in response to notice u/s 148. Finally, the assessment order was passed determining total income of the assessee at Rs. 53,72,500/-. 4. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions of both the parties and material placed on record, upheld the action of the A.O. 5. Against the order passed by the ld. CIT(A), the assessee has preferred the present appeal before the ITAT on the grounds mentioned above. 6. Ground Nos. 1 and 2 of the appeal raised by the assessee relates to challenging the order of the ld. CIT(A) in confirming the reopening of the assessee U/s 147 of the Act. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before the Bench and the contents of the same are reproduced below: "1.1 Reassessment invalid-without deciding the objections within stipulated time: At the outset it is submitted that the AO failed to dispose off the objections raised by the asses....
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....within four weeks cannot be justified. If the notice is dated 27th March, 2014, then, the period till 27th March, 2015 was enough to conclude the steps and in accordance with law. The Respondents having delayed the proceedings at their own end, it would not be open for them to justify their conduct and have complete disregard to the orders and directions which were binding on them. In such circumstances, Court was not in agreement with the contention that the assessment order having now been passed, the Writ Petition should not be entertained and the Petitioner must be relegated to the statutory remedies. Having regard to the factual statements in para 12 of the Writ Petition and there being absolutely no reply thereto in the affidavit in reply, this contention of the Respondents cannot be accepted." 1.4 In Bharat Jayantilal Patel vs. Union of India (2015] 378 ITR 596 (Bom.) it was held that: "Where Assessing Officer passed assessment order within period of four weeks from date of rejection of assessee's objections to reopening of assessment, order so passed being invalid, deserved to be set aside" 1.5 In some other cases i.e. Jayanti Natarajan (Ms.) ....
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....quired by the provision of law. The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the Court Sheo Nath Singh v/s AAC (1971) 82 ITR 147 (SC). 2.4 On the facts it is proved that above judicial guideline has not been followed by the AO in this case, if the following facts, which were undisputedly available on record, on the date of recording of the reasons, are considered. 3. Complete non application of mind- Borrowed Satisfaction: 3.1 Because to assume a valid jurisdiction u/s 147 of the Act, the AO must form a reason to believe on his own and such a satisfaction or belief should not / cannot be borrowed from someone else. 3.2 A bare perusal of the impugned reasons (PB 54-57) clearly shows that the information relied upon being the SCN is based on a search conducted by the Central Excise Authorities and not by the Income Tax Department and that too at the premises of the Transporters and/or Dealers but not at the place of the assessee (which is a wrong fact stated in the reasons). Thus, the impugned reasons are based upon wrong facts and a third-party information th....
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....8-09 A.Y. 2009-10 A.Y. 2010-11 A.Y. 2011-12 Notice u/s 148 issued 19.03.2015 19.03.2015 19.03.2015 19.03.2015 ROI relied vide letter 06.04.2015 06.04.2015 06.04.2015 06.04.2015 Reason supplied on 10.04.2015 10.04.2015 10.04.2015 10.04.2015 Objection filed by the assessee 04.06.2015 04.06.2015 04.06.2015 04.06.2015 Again objection filed on 04.08.2015 05.08.2015 05.08.2015 05.08.2015 Request for early disposal 22.07.2015 22.07.2015 22.07.2015 22.07.2015 Objections disposed off 22.03.2016 22.03.2016 22.03.2016 22.03.2016 Written submission along with number of documents filed on 28.03.2016 (PB 1-51) 28.03.2016 (PB 1-173) 28.03.2016 (PB 1-198) 28.03.2016 (PB 1-155) Asst. Order Passed 30.03.2016 30.03.2016 30.03.2016 30.03.2016 A bare reading of the above chart and impugned order shall reveal that the AO passed the order to penalize the assessee in as much as Firstly, it is beyond imagination that the AO carefully read and considered more than 763 pages of paper books in one day and passed the impugned orders in five assessment years. S....
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....tedly stated. Kindly refer Para-C Pg-18 of the AO wherein replies to the contention of assesse have been summarized but rejected summarily?????? Thus, without examining the issue in hand, huge addition has been made. Needless to say that the CCE passed the order under the provision of Central Excise Act, 1944 in that peculiar context and requirement of that law. Such findings cannot be bodily lifted, relied and applied blindly in a different and legal factual context of Income Tax Law. This is against the settled principal of Jurisprudence. He relied on the decision in the case of Zirconia Cera Tech Glazes vs. DCIT in ITA No. 376 & 377/Ahd/2016 dated 30.11.2017 and CIT vs. Bharat Poetries Pvt. Ltd. in DBITA No. 493/2008 order dated 12.09.2017. Since, the impugned assessment order is seriously lacking due application of mind and satisfaction of the AO, the same suffers from illegality, vitiating the entire order which, results into as nullity and is not case of mere irregularity, hence deserves to be quashed. The ld. AR has further filed another written submission and the contents of the same are reproduced as under: "2. Reason to believe and not reason to suspe....
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....(Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position inlaw that re-opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction. [Para 13 & 14] " 4. Impugned additions u/s 147- without jurisdiction as escapement of income of Rs. 7.69 Cr recorded in the reasons, not made: It is submitted that in the present case, in the reasons recorded (PB 54), the reasons to believe refer to some information with regard to searches conducted on 20.07.2012. Such information although not detailed in the reasons to believe but is a SCN no. DZU/INV/G/CE/GRU/152/2012/ dated 02.01.2013 issued by the DGCEI, Department of Custom & Central Excise, Jaipur through the Commissioner Central Excise, Jaipur (CCE) being the Assessing authority (II PB 136-138). He also refers to the documents seized from the premises of transporters /dealers, which are bunched in separate annexures and marked as Annexure A to Annexure G. Based thereon it is alleged that the appellant was involved in clandestine clearance of....
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....register and statement of Moni Khan RUD-3 out of which 3/1 and 3/2 were recorded during the investigation proceeding of M/s. Raghuvir metals in which Shri Moin Khan was not impleaded as co-notice ever for the purpose of penalty U/r. 26 of the Rules. Further during the course of cross examination and relying upon Section 9D Shri Moin Khan has categorically stated that he had tendered the statement and they are not stated in a correct manner of clandestine removal I hold the demand cannot sustain merely on presumption and assumption as the same has to be supported by tangible evidences which are not available or perhaps have not been investigated upon appropriately, in the present matter, the truck driver who are named along mobile number should have been investigated, inspite of search and investigation no discrepancy in stock for the given period could be noticed in the factory of notice by DGCEI, further huge amount in crores alleged to be involved in purchase and sale of clandestine excisable goods has not been brought on record having a nexus with buyers/sellers of final goods and raw materials. Since the investigation has not alleged or issued show cause notice for short paymen....
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....tinent to note the Hon`ble CCE has completely quashed the demand based on the booking register RUD-24 and based on the statement of the third parties for the detailed reasons given in the said order. Thus, the vary basis and starting point on which your good-self had entertained a reason to believe doesn't exist anymore. It is therefore, requested to please drop the proceedings u/s 147/ 148 of the Act here itself." 4.3.1 Surprisingly however, the AO didn't whisper a single word on this aspect while disposing of the objections so filed before him in the rejection (disposal) order dated 22.03.2016 (PB 65-66) which is passed in a summary manner, on the face of it. Thus, the very purpose of giving the assessee an opportunity of filing objection as mandated by the directions of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 259 ITR 19 (SC), has lost its purpose and non-consideration of the objection as rather violated the said decision. Interestingly, even the legislature has also taken note of such SC directives and made amendment vide the Finance Act 2021 by inserting new S. 148A for mandatorily considering ob....
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....an also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings u/s 147 - Once the AO came to the conclusion, that the income, with respect to which he had entertained "reason to believe" to have escaped assessment, was found to have been explained, his jurisdiction came to a stop at that, and he did not continue to possess jurisdiction, to put to tax, any other income, which subsequently came to his notice, in the course of reassessment proceedings, which were found by him, to have escaped assessment." 5.2 In Hotel Regal International & Anr. Vs. ITO (2010) 320 ITR 573 (CAL), it was held: "Section 148 of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for - Assessment year 2006-07 - Where petitioners were called upon to file objection to notice under section 148 proposing to reopen assessment on ground that a sum of Rs. 73,219 had 'escaped assessment', revenue could not shift its stand and pass an order on ground of 'concealment of investment'; further where petitioner had disclosed its income fully and truly and return was acc....
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....roceedings. For better appreciation relevant part is reproduced here under: "22. We have approached the issue of interpretation that has arisen for decision in these appeals, both as a matter of first principle, based on the language used in s. 147(1) and on the basis of the precedent on the subject. We agree with the submissions which has been urged on behalf of the assessee that s. 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the AO may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Expln. 3 to S. 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh (supra). Parliament has not taken away the basis of....
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....Even the Explanation 3 to S.147 will not come in the way because what all the Explanation provide is that for the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and also such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under S.148(2). In this case in Pr 68 of the SCN dated 02.01.2013 issued by the DGCEI (II PB 136-138) the allegation of the clandestine sale for various items categorized under head A to G totaling to Rs. 53,21,78,463/- was given by way of a table (Also kindly refer internal Pg 73 of the adjudication order dated 24.07.2015). However, the AO in its wisdom, while recording the reasons to believe as to escaped income by way of suppress sale, chose the 1st entry at serial no. A only in the said table, which is related to the alleged clandestine sale for the period 01.12.2007 to 28.01.2010 for the quantity of 16043.50 MT valuing Rs. 49,39,94,028/-. The AO formed reason to believe as to the escapement of....
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.... off by the AO on 22.03.2016. Here at this stage, on these facts, the ld AR vehemently argued before us that the objections filed by the assessee to the notice U/s 148 of the Act were not disposed off within the reasonable time. Therefore, initiation of reassessment proceedings is bad in law. In order to appreciate the facts of the present case, we noticed that the chart filed by the assessee in its written submissions reiterated above and from the said chart, we noticed that initially notice U/s 148 of the Act for the year under consideration was issued on 19/03/2015 and the objections to the said reasons supplied to the assessee on 10/04/2015 wee filed on 04/6/2015. Since the objections of the assessee were not disposed off within the reasonable time, therefore, the assessee made a request to the A.O. to dispose off its objections but ultimately the objections of the assessee were disposed off after huge gap i.e. on 22/3/2016 and the orders U/s 147/148 of the Act was passed on 30/03/2016 immediately thereafter. The entire sequences and the dates mentioned by us above clearly shows that the objections filed by the assessee were not disposed off within the reasonable time and were ....
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.... Petition should not be entertained and the Petitioner must be relegated to the statutory remedies. Having regard to the factual statements in para 12 of the Writ Petition and there being absolutely no reply thereto in the affidavit in reply, this contention of the Respondents cannot be accepted." In the case of Bharat Jayantilal Patel vs. Union of India (2015] 378 ITR 596 (Bom.) it was held that: "Where Assessing Officer passed assessment order within period of four weeks from date of rejection of assessee's objections to reopening of assessment, order so passed being invalid, deserved to be set aside" We also draw strength from the decision in the case of Colonisers vs. ACIT 11992] 41 ITD 57 (Hyderabad) (SB)/[1993] 45 TTJ 114 (Hyderabad) (SB) has held that: In the preceding paragraphs it has been indicated why the assessee's version cannot be rejected as regards the credits appearing in his books. Perhaps the only justification, if at all it can be called a justification, for the ITO to reject the credits as not genuine is the failure of the assessee to produce the creditors when called upon to do so by the ITO. At this stage it is but necessary to....
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.... the Act is to be understood in a way that the word "belief" indicates that something concrete or reliable and not merely a suspicion. As in the present case, at the time of initiation of reopening proceedings and while the service of notice U/s 148 of the Act, the A.O. was having merely an information and the said information vaguely referred and relied in the reasons to believe of escaping income which was based on the allegation of clandestine sale by the assessee as per statement issued by the third party i.e. CCE (Commissioner of Custom Excise) and at that time even the CCE was not sure about correctness of fact or the allegation of the clandestine amount thereof. Whereas as per the provisions of Section 147 of the Act, it is the basic requirement that the A.O. has reasons to believe and not mere reasons to suspicion. As per the record, once the information relied upon by the A.O. itself was at an initial stage and which was yet to be tested after hearing the notice, that too by a third party i.e. the CCE then in that eventuality the A.O. could not have formed an honest believe even prima facie because the demand raised by the Custom and Excise department was ultimately found ....
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....re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position inlaw that reopening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction. [Para 13 & 14]" 10. From the record, we also noticed that the A.O. in the present case has not formed his own belief but has rather acted upon borrowed satisfaction. A bare perusal of the impugned reasons which are at page Nos. 54-57 of the paper book, clearly shows that the information relied upon being the SCN is based on a search conducted by the Central Excise Authorities and not by the Income Tax Department and that too at the premises of the Transporters and/or Dealers but not at the place of the assessee. Thus, the impugned reasons are clearly based upon wrong facts and are on the basis of third-party information which is unreliable. Apart from this, no material was found showing that the assessee was indulged in a clandestine clearance/ suppressed sale from its factory without paying excise duty and notices issued by the Excise Department is only on the basis of statement of third party or some information gathered from third party because no direct material ....
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....x (Investigation) to issue a notice under section 148 and the third sentence again comprised a direction given by the Additional Commissioner of Income-tax to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. The Assessing Officer referred to the information and the two directions as reasons on the basis of which he was proceeding to issue notice under section 148. These could not be the reasons for proceeding under section 147/148 of the Act. As the first part was only an information and the second and the third parts of the reasons were mere directions, it was not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. There was no substantial question of law for consideration" The Coordinate Bench of ITAT Jodhpur, has quashed the assessment made u/s 147 in the case of Surbhi Minchem P. Ltd vs. ITO in ITA No. 102 & 103/Jodh/2014 vide order dated 16.05.2014 by holding as under: "From the above provisions, it is clear that for taking action u/s 147 of the Act, the....
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....e had filed a detailed reply on dated 18.03.2016, however, further held that such factual explanation dealing with each and every case was not relevant inasmuch as the CCE has already examined the issue and recorded his findings. This fact clearly shows that the AO has summarily rejected the contention of the assessee without examining the issue in hand, huge additions were made. Merely relied upon the findings of the CCE, however, it is important to mention that the CCE had passed the order under the provision of Central Excise Act, 1944 in that peculiar context of the case. However, such findings cannot be lifted and relied upon by the A.O. in a different factual context of Income Tax Laws. In this respect, we draw strength from the decision in the case of Zirconia Cera Tech Glazes vs. DCIT in ITA No. 376 & 377/Ahd/2016 dated 30.11.2017 wherein the Coordinate Bench has held as under: "11. We find that the basis of addition is contents of show-cause notice issued by the Excise Department. An investigation was carried out by DGCEI at assessee premises on 25/08/2008, wherein it was alleged by the Excise Department that assessee has not declared actual assessable value of go....
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....ich 3/1 and 3/2 were recorded during the investigation proceeding of M/s. Raghuvir metals in which Shri Moin Khan was not impleaded as co-notice ever for the purpose of penalty U/r. 26 of the Rules. Further during the course of cross examination and relying upon Section 9D Shri Moin Khan has categorically stated that he had tendered the statement and they are not stated in a correct manner of clandestine removal I hold the demand cannot sustain merely on presumption and assumption as the same has to be supported by tangible evidences which are not available or perhaps have not been investigated upon appropriately, in the present matter, the truck driver who are named along mobile number should have been investigated, in spite of search and investigation no discrepancy in stock for the given period could be noticed in the factory of notice by DGCEI, further huge amount in crores alleged to be involved in purchase and sale of clandestine excisable goods has not been brought on record having a nexus with buyers/sellers of final goods and raw materials. Since the investigation has not alleged or issued show cause notice for short payment of service tax to Shri Moin Khan for his alleged....