TaxTMI 
TaxTMI 
2021 (11) TMI 528
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....d order. For the sake of convenience, the grounds as well as the facts narrated inITA No.223/SRT/2018 for AY 2008-09, have been taken into consideration for deciding the above appeals en masse. 3.The appealsfiled by the assessee for Assessment Years 2007-08 and 2008-09, are barred by limitation by 84 days. The assessee has moved a petition requesting the Bench to condone the delay.In this regard assessee has also field affidavit stating therein the reasons that order of Ld. CIT(A) was not received by assessee on time therefore the appeals could not be filed within the stipulated time before the Tribunal. We heard the party on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeals for hearing. 4. In these appeals the assessee has challenged the validity of reopening of assessment u/s 147 of the Act. We take the "lead case" in ITA No.223/SRT/2018 for AY 2008-09, wherein the grounds of appeal raised by the assessee are as follows: 1.0 (i) That on the facts and in the circumstances of the case and in Law, Ld. Commissioner of Income Tax (Appeals)-III, Surat [here-inafter referred to as Ld CIT(Appeals) was not....
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....d DR for the Revenue pleaded that assessee did not raise this issue during the appellate proceedings, before the ld CIT(A), therefore, at this stage the assessee cannot raise additional ground on legal issue. We note that assessee has raised the addition ground on the legal issue challenging the validity of reassessment proceedings under section 147/148 of the Act and it is purely a legal issue and all facts are already on record which goes to the root of the matter. We also note that no further inquiry is required for deciding the same as all facts are already on record. Therefore, in the light of ratio laid down by the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd., vs. CIT (1998) 229 ITR 382 (SC), we admit the additional ground raised by the assessee. 9. The facts of the case which can be stated quite shortly are as follows: Assessee is a firm and there was search proceedings u/s 132 of the Act in the case of Rajendra Jain andothers at Mumbai on 03.10.2013 and it was alleged that bogus sales was made by M/s Mayank Impex to the assessee-firm for Rs. 12.50 lakh. The assessee filed its original return of income declaring total income at Rs. 9,43,....
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....d the submissions of the AR and considered verbal arguments. It is seen from the records that the AO had received report from the Investigation Wing, Mumbai, which indicated that the assessee was beneficiary of accommodation entry operators. The said accommodation entry operator has admitted before the Investigation Wing that he had given bogus purchase bills to many persons including the assessee. Based on this report, the ld. assessing office had reason to believe that income has escaped the assessment. In the facts and circumstances, I am convinced that the reopening in this case is justified. Further, in his submissions and verbal arguments, the AR contested that the ld. AO has not provide details of specific transactions that he is proposing to added. The exact nature i.e. whether purchases or loan transaction is also not stated by ld. AO the assessee. The AR emphasized that without specific details the assessee still tried to explain and prove all the transaction. He also insisted that the reasons provided to assessee did not contain the exacts nature of the transactions with alleged parties. I have considered the issue in details, and I feel that is lapse of ld. AO is not fa....
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.... have perused case file as well as paper books furnished by assessee with the able assistance of Shri P.M. Jagasheth representing the assessee and Ms. Anupama Singla, Learned DR, representing the Revenue. We find that one key issue arises for our apt adjudication in these instant lis, which is, whether reasons recorded by the assessing officer falls into the kingdom of Section 147 of the Act or not? To ascertain this fact, let us, examine the reasons recorded by the assessing officer, to ascertain the fact whether reasons have been recorded as per the scheme of section 147 of the Act or not. The reasons recorded by the assessing officer under section 147 of the Act is reproduced below for ready reference: "Form for recording the reasons for initiating proceedings under section 147 and for obtaining the approval of the Addl.C.I.T., Rage-3(3), Surat. 1. Name and address of the assessee RAIYANI BROTHERS 2 Range/Circle/Ward Ward 3(3)4), Surat 3. PAN AADFR0702K 4. Status Individual 5.Assessment Year 2008-09 6. The Quantum of Income which has escaped assessment Rs. 1,67,78,359/- 7. Whether the Provisions of Sec 147 (a) or 147(b) are applica....
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.... the huge transaction. In view of the above, I have the reason to believe that the assessee has escaped assessment of Rs. 1,67,78,359/- on the above non-genuine transactions of Rs. 8,50,500/-, which is not shown in the RETURN OF INCOME filed for the A.Y. 2008-09. Thus the above income of Rs. 1,67,78,359/- has escaped assessment by the reason of failure on the part of the assessee to disclose fully and truly, all material facts necessary for his assessment for A.Y. 2008-09. Hence, notice u/s 148 of the I.T. Act is being issued to verify the genuineness of the above transactions made by the assessee during A.Y. 2008-09. 12. Whether the Addl./Jt. Commissioner of Income Tax is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of a Notice u/s. 148 of the I.T. Act. Yes, I am satisfied. 16.From the above reasons recorded, it is abundantly clear that assessing officer does not apply his mind while recording the reasons under section 147 of the Act. The assessing officer does not state any definite amount in the reasons so recorded by him. For instance, assessing officer has mentioned two sums of amount, that is Rs. 8,50,500/- and Rs. 1,....
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....confer jurisdiction to reassess; - There must be nexus between material and belief; and - Reasons recorded must show application of mind by the AO. 18. We note that none of the above conditions have been fulfilled by the assessing officer in assessee`s case under consideration therefore reasons recorded by the assessing officer are not in accordance with the scheme of the provisions of section 147 of the Act. 19. Reasons must have a live link with the formation of the belief. This is supported by Circular No.549 dated 31.10.1989 which clarified that the words "reason to believe" did not mean a change of opinion. The Hon'ble Supreme Court in ITO vs Lakhmani Mewal Das [1976] 103 ITR 437 has lucidly explained the power of assessing officer to bring to tax income escaping assessment u/s.147 of the Act. The Hon'ble Court first held that the section provides that there must exist "reasons to believe" and not "reasons to suspect". The following were the relevant observations: "The fact that the words "definite information" which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of....
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...., cannot be given another innings for no fault of the assessee and therefore in the facts and circumstances of the case, we are of the considered opinion that 'reason to believe' which is the jurisdictional precondition to reopen the assessment as required by the law has not met in the reasons recorded in the instant case and therefore the action of the Assessing Officer to reopen the assessment is null in the eyes of law and hence we are inclined to quash the initiation of reassessment proceedings being ab-initio void. 22 As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous. 23. In the result, appeal filed by the assessee for assessment year 2007-08 and 2008-09, (in ITA No.222/SRT/2018 & ITA No.223/SRT/2018) are allowed. 24.Coming to the assessee's appeal in ITA No.224/SRT/2018, for Assessment Year 2013-14. The grounds of appeal raised by assessee are as follows:- 1.0 That on the facts and in the circumstances of the case, Ld. Commissioner of Income Tax (Appeals)-III, Surat [here-in-after referred to as Ld. CIT(Appeals) was not justified and grossly erred ....
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.... to advance as interest free loan to these two persons. The Ld. Counsel drew our attention towards the audited Balance Sheet submitted by the assessee, wherein we noticed that own funds of the assessee is to the tune of Rs. 2,18,18,572/- whereas the assessee has advanced the interest free loan to the tune of Rs. 63,22,457/-. The own interest free funds are more than the interest free advance, hence no disallowance is attracted. On the other hand, Ld. Sr-DR for the Revenue relied on the order of lower authorities. 28.We find merit in the submission of ld Counsel. We note that own interest free funds of the assessee is to the tune of Rs. 2,18,18,572/- whereas the assessee has advanced the interest free loan to the tune of Rs. 63,22,457/-, which is less than the own free funds, therefore, based on this factual position, no disallowance on account of interest free advance should be made and hence we delete the addition of Rs. 1,25,400/-. 29.So far ground no. 2 is concerned, we note that it is an ad-hoc addition of Rs. 38,951/- on account of office expenses. Learned Counsel submits that these are the miscellaneous expenses like cold drink expenses, tea and coffee expenses. Conside....