TaxTMI 
TaxTMI 
2021 (10) TMI 1007
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.... law and facts of the case and confirmed the addition made by the Assessing Officer up to an extent of Rs. 71,12,000/- by treating the same as commission earned by the assessee, in spite of the fact that said receipts were duly accounted for in books of accounts and income was already assessee on said receipts. 2. That without prejudice to ground no.1 Ld. CIT(A) failed to consider addition already made in regular assessment on account of Net Profit at Rs. 37,25,962/- which ought to have been deducted/reduced to the income estimated on the transaction. Whereas the Revenue has raised following grounds of appeal in ITANo.439/Ind/2017: "i. Whether on facts and in the circumstances of the case Ld. CIT(A) has erred in law by restricting the addition of Rs. 7,12,00,000/- to Rs. 71,12,000/- made by the Assessing Officer on account of unexplained money ignoring the facts of the case that the assessee has channelized its unaccounted cash through accommodation entries. ii. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law by ignoring the facts of the case and restricting the addition of Rs. 7,12,00,000/- to Rs. 71,12,000/-....
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.... bad in law and same therefore deserves to be quashed." 4. Through the above addl. ground, the assessee has challenged the reassessment proceeding. In support of the admission of addl. ground, the learned Counsel for the assessee submitted that the addl. ground is legal in nature and the same was also raised before the ld. CIT(A). Further, reliance was placed on the judgment of Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. vs. CIT (1992) 229 ITR 383, judgment of Hon'ble jurisdictional High Court in the case of CIT vs. Eicher Motors Ltd. (2007) 293 ITR 464 as well as in the case of DCIT vs. Turquoise Investment & Finance Ltd. (2008) 299 ITR 143 (MP). On the other hand, the ld. CIT-DR opposed the request for admission of addl. ground but could not controvert the submission of the assessee by bringing any contrary material on record. 5. Considering the above facts and considering the decisions of Hon'ble Apex Court and Hon'ble Jurisdictional High Court (supra), we admit the addl. ground for hearing. Since addl. ground is legal in nature and goes to the root of the matter, we shall decide it at first. 6. Facts, in brief, are that the assessee is a P....
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....stion of authenticity. Learned Counsel for the assessee also submitted that in the reasons recorded by Ld. AO there were nowhere mentioned the words "Income chargeable to tax" which are of utmost importance so far as the Section 147 is concerned. Further, the learned Counsel for the assessee submitted that the Ld. AO has mentioned about section 40A(3) in the reasons of reopening, however, the AO deviated from his aforesaid stand which he basically took while reopening the case and later on while framing the assessment, he added the said amount u/s 69A. Thus, the Assessing Officer was not sure since beginning that the transaction involved is of what nature, which section is attracted here and what kind of violation is there. Ld. AO has absolutely changed his view which was formed initially and which was formed while concluding the assessment. Therefore, the statutory provisions per 'reasons' and contents in 'assessment order' are distinct which shows that the reasons were not on account of application of mind on the part of AO. Thus it is a clear case of lack of basic ingredient of section 147 i.e. "reason to believe", as AO himself was not able to decide about the legal provisions ....
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....x net, issued notice u/s 148 of I.T. Act, 1961. The notice u/s 148 is being issued after taking prior approval from competent authority u/s 151." 10. We find that the only basis of reopening was the copy of assessee's ledger account in the books of one M/s Ketti Construction Ltd. found during search at the latter's premises and the ld. AO observed that there were cash payments made by the assessee to Ketti Const. Ltd. during A.Y. 2009-10 amounting to Rs. 7,12,00,000/- in totality, thus, the Assessing Officer added the same u/s 69A. We find that the first proviso to section 147 of the Income Tax Act, 1961 reads as follows:- "Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material ....
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....147/148 and there was no failure by Petitioner to disclose fully and truly all material facts necessary for assessment and neither was such failure recorded in reasons-Held, there was full disclosure by Assessee of all material facts relating to exempt income-It could not be said that condition for reopening of assessment was satisfied on this count-Nature of business of Petitioner had always been known to Revenue year after year-Even in this reason there was not even whisper of failure by Petitioner to make full and true disclosure of all material facts necessary for assessment- Impugned notice did not satisfy rigors of sections 147/148 of the Act as there had been no non-disclosure of material facts by Petitioner-In fact, even reasons accompanying impugned notice did not even say that there was any failure by Petitioner to disclose fully and truly all material facts-Impugned notice quashed-Petition allowed. Conclusion : Where contents of the notice do not even say that there was any failure by the assessee to disclose fully and truly all the material facts, the notice did not satisfy the rigors of sections 147/148 and is liable to be quashed. 11. In case of H....
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....assessment. The failure to do so would not be a mere irregularity. It would render the reopening of the assessment after four years vulnerable to invalidation. Conclusion : Where there was no indication by AO in reasons for re-opening about failure, if any, by Assessee to make full and true disclosure of any material facts, reassessment order could not be sustained. 12. Further, we find that it is mandatory that the opinion should be that of assessing officer for forming belief whereas in the instant case, he has relied upon the information received from the DCIT-Central for which he himself was not sure on the question of authenticity as perceived from the word "it appears" noted in the reasons u/s 148(2) wherein in the first line, the AO wrote that "it appears that payments to the tune of Rs. 7,12,00,000/- was given to M/s Ferro Concrete Const. (I) Pvt. Ltd. to M/s Keti Constructions Ltd.". Thus, these words show that AO was not having "reason to believe", rather he has reopened the case on mere "suspicion". This view is supported by the decision of Hon'ble Supreme Court rendered in case of ITO vs. Lakhmani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437....
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.... that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid. This ratio has been laid down by the Hon'ble Supreme Court in the case of Ganga Saran & Sons (P) Ltd. vs. ITO & Ors. (1981) 22 CTR (SC) 112 : (1981) 130 ITR 1 (SC) : TC51R.639 reversing the decision of the Calcutta High Court in ITO vs. Ganga Saran & Sons (P) Ltd. (1981) 22 CTR (SC) 112 : (1981) 130 ITR 1 (SC) : TC51R.639]. The Hon'ble Supreme Court observed that "Having reason to believe" means that not only there is a reason for the belief but also that the belief is entertained or formed. Having reason to believe means that there is a reason coupled with the belief. Further, Hon'ble Delhi High Court in case of Sabharwal Properties Industries Pvt. Ltd. & Ors. Vs. Income Tax Officer& Ors., (2016) 95 CCH 046 (Del), observed that reasons recorded for reopening assessment should state that Assessee had failed to disclose fully and truly all material facts necessary for his assessment in returns as orig....
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....ed by the assessee is allowed. Consequently, since the reassessment proceedings itself is quashed, the appeal filed by the assessee for the assessment year 2009-10 stands allowed and that of Revenue for the assessment year 2009-10 stands dismissed. 16. So far as the merits of the matter are concerned, we are of the view that since the reassessment proceedings itself has been quashed as above, we are refraining ourselves to make detailed discussion on merits. On consideration of material available on record and rival submissions on merits of the case, we find that there is no case of assessing the income as there was no material evidencing movement of cash. Further, principal of natural justice was badly ignored by accepting version of third party without affording opportunity for cross examine. We also find that Section 40A(3) applies for payment otherwise than account payee cheque or bank draft against expenses and in the instant case, we find that no goods or service were provided by M/s Keti Construction Ltd. against which payment warranting action under section 40A(3) would be required. We find that the primary onus as regard to movement of cash, as alleged was on M/s Keti C....
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....so included. However, we observe that during the entire assessment proceedings, neither the copy of the statement was provided to the assessee nor the said person was allowed to be confronted by the assessee. Ld. AO was duty bound to provide an opportunity to assessee to confront Mr. Jakhetiya regarding the same. But AO did not follow the principle of natural justice. Thus in such a situation, the discussion made by AO about the statement of director of said company is invalid in view of the violation of principle of natural justice. This view is supported by the ratio laid down in the cases of PRINCIPAL COMMISSIONER OF INCOME TAX vs. PARADISE INLAND SHIPPING P. LTD (2017) 98 CCH 0438 MumHC : (2018) 400 ITR 0439 (Bom), ANDAMAN TIMBER INDUSTRIES vs. COMMISSIONER OF CENTRAL EXCISE (2015) 94 CCH 0187 ISCC : (2015) 281 CTR 0241 (SC) : (2015) 127 DTR 0241 (SC). Further, we find that the ld. CIT(A) noted that the assessee had received this amount of Rs. 7,12,00,000/- by cheque from M/s Keti Construction Ltd. under the garb of sub contract payments and it was paid back to M/s Keti Construction Ltd. by cash and the Ld. CIT(A) deleted the addition to the tune of Rs. 6,40,88,000/- on the gro....