TaxTMI 
TaxTMI 
2023 (10) TMI 1277
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the circumstances of the case, the Ld. CIT(A)/NFAC has erred in quashing the reopening of assessment order passed by the AO u/s 147 r.w.s 143(3) of the IT Act, 1961. 2. The order of the Id. CIT(A)/NFAC is erroneous both in law and on facts. 3. Any other ground that may be adduced at the time of hearing." Also, the assessee is before us as a cross-objector for the aforementioned year on the following grounds: "1. Ld. CIT(A) erred in not adjudicating Ground no. 1 of appeal raised by the respondent, relating to addition of Rs. 2,32,24,493/- on account of alleged unrecorded purchases. Ld. CIT(A) erred in holding that the ground raised by respondent is academic in nature. 2. Ld. CIT(A) erred in not adjudicating ground no. 3 of appeal raised by respondent, relating to the re-assessment order being illegal ab initio void and a nullity, having been passed without following mandatory provisions of law and without providing due & proper opportunity of hearing. 3. The cross objector reserves the right to add, amend, or alter any of the ground/s of cross objection." 2. At the threshold of hearing of the appeal, we find that the appeal filed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....easons leading to the delay in preferring the present appeal, and the same cannot be attributed to any deliberate conduct nor smack of a lackadaisical approach on the part of the revenue-appellant, therefore, in all fairness, we condone the delay of 53 days involved in the filing of the same. 5. Succinctly stated, the assessee, who is engaged in the wholesale trading business of cloth, saree & textiles, had e-filed his return of income for A.Y.2012-13 on 29.09.2012 declaring an income of Rs. 53,47,080/-. 6. On the basis of information received by the A.O. that the assessee, viz. Shri Akshay Lodha, Prop. Prakash Saree Kendra had purchased sarees of Rs. 2,32,24,493/-, against which unaccounted cash payments were made during the year under consideration; the A.O. reopened his case u/s. 147 of the Act. For the sake of clarity, the "reasons to believe" forming the very basis for initiating proceedings u/s. 147 of the Act in the case of the assessee are culled out as follows: 7. During the assessment proceedings, the A.O observed that as per the information shared by the DCIT, Central Circle, Raipur, a document viz. LPS- 3 that was seized from the premises of Kundanani Group in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had made any cash purchases from Shri Ramesh Kundanani (supra), made an exorbitant addition of Rs. 2,32,24,493/- in his hands. After deliberating at length on the contentions of the assessee, the CIT(Appeals) observed that a perusal of the "reasons to believe" did not indicate how the purchases of Rs. 2,32,24,493/- (supra) as therein stated pertained to the assessee. Also, he observed that the scanned list of purchases, as was culled out on Pages 3 to 10 of the assessment order, neither revealed the name of the assessee nor that of his proprietary concern, viz. M/s. Prakash Saree Kendra. Apart from that, the CIT(Appeals) observed that the A.O. in the assessment order had not stated what documentary evidence or specific statement of Shri Ramesh Kundanani (supra) indicated that the purchases under consideration pertained to the assessee. Backed by aforesaid observations, the CIT(Appeals) called for a remand report from the A.O and directed him to place on record a copy of the letter of DCIT, Central Circle, Raipur, who was stated to have shared with the A.O information a/w. documentary evidence linked or corroborated that the alleged cash purchases pertained to the assessee. However....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g on record any findings/substantial evidence that would say that the assessee had made cash purchases from Shri Ramesh Kundanani (supra), specifically when the assessee had declined of having made any payment to any agent towards purchases during the year under consideration. The CIT(Appeals), on the basis of his aforesaid deliberations, vacated the reopening of the assessee's case u/s. 147 of the Act. For the sake of clarity, the relevant observation of the CIT(Appeals) are culled out as follows: "After going through the submission of the appellant and findings of the AO in the assessment order, following facts emerge:- 1. The copy of reasons recorded furnished to the appellant vide letter dated 17.05.2016 stating "certain information in the possession of the department cash purchases to the tune of Rs. 23224493/- by the appellant not included in the books of the account of the appellant" does not indicate how these purchases were pertaining to the appellant when the search was conducted in the case of Shri Ramesh Kundnani and the list of purchase parties in the scanned copy of assessment order pages 3 to 10 do not indicate either appellant's name or the nam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n view of the above, factual findings and legal decisions quoted by the appellant, the reopening u/s 147 of the Act is found to be invalid as the AO did not indicate any tangible material to form the 'reasons to believe' and hence, could not have jurisdiction to reopen the case in accordance with provisions of the Act. It is also apparent from the assessment order that even in the assessment order the AO could not bring out any findings/ substantial evidences to show that the appellant had made cash purchases from Shri Ramesh Kundnani whereas the appellant had contended before the AO that he had not made any payment to agents for any of his purchases for current AY leave aside any cash purchases. Hence, the reopening of assessment is hereby quashed and held as invalid and illegal. Ground no.2 is allowed in favor of appellant. As the reopening of assessment is quashed on legal validity, the other grounds of appeal vide ground no.1 & 3 becomes only academic in nature and do not require adjudication. In the result, the appeal is hereby allowed." 12. The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry right to file an objection against the same which was in clear violation of the judgment of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO (2003) 259 ITR 19 (SC). 16. Adverting to the merits of the case, the Ld. AR relied on the order of the CIT(Appeals). The Ld. A.R submitted that as the A.O both in the course of the assessment proceedings as well as in the course of proceedings before the CIT(Appeals), had failed to place on record any material/evidence which would relate the impugned cash purchases as had been culled by him in the "chart" in the assessment order with the assessee; therefore, there was no justification for him to have made the addition of Rs. 2,32,24,493/- in the hands of the assessee. The Ld. AR submitted that the CIT(Appeals), in the totality of the facts, had, in the absence of any material/evidence supporting the addition made by the A.O., rightly vacated the same. 17. Apart from that, the Ld. AR referred to the cross-objection filed by the assessee and submitted that as the impugned assessment u/s. 147 r.w.s. 143(3) dated 28.10.2016 had been framed on the basis of notice u/s. 143(2) of the Act, dated 13.10.2016, i.e., ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reasons to believe," Page 42 of APB observed that as per information available with the department, the assessee, viz. Shri Akshay Lodha, proprietor of M/s. Prakash Saree Kendra had made unaccounted cash purchases of Rs. 2,32,24,493/- (supra), but there is neither anything discernible therefrom as to what type of information was available before him nor any reference of any other material/ evidence which would evidence that the assessee had made the impugned cash purchases. 20. Considering the aforesaid reason, on the basis of which the case of the assessee had been reopened u/s. 147 of the Act, we concur with the view taken by the CIT(Appeals) that the same clearly reveals non-application of mind on the part of the A.O who had initiated proceedings for making fishing and roving inquiries which cannot be justified to be drawn in the garb of proceedings u/s. 147 of the Act. 21. Apart from that, as the A.O had neither in the "reasons to believe" nor in the assessment order as well as in the course of proceedings before the CIT(Appeals) placed on record any material/evidence which would evidence that the assessee had made the impugned unaccounted cash purchases of Rs. 2,32,24,49....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sel, could not rebut the same. As the impugned assessment in the case of the assessee had been framed in the absence of any valid notice u/s. 143(2) of the Act, which is the foundation for passing a valid assessment order, we find substance in the claim of the Ld. AR that the impugned order passed by the A.O u/s. 147 r.w.s. 143(3) of the Act dated 28.10.2016 could not be sustained on the said count itself and was liable to be struck down. Our aforesaid view that the issuance of a valid notice u/s. 143(2) is a sine-qua-non for framing of a valid assessment u/s. 143(3) of the Act is fortified by the judgments of the Hon'ble Supreme Court in the case of ACIT & Anr. Vs. Hotel Blue Moon [2010] 321 ITR 362 (SC) and CIT v. Laxman Das Khandelwal (2019) 417 ITR 325(SC). 24. In the backdrop of our aforesaid deliberations, the appeal filed by the revenue in ITA No.160/RPR/2022 is dismissed, while for the cross-objection filed by the assessee in CO No.10/RPR/2022 for A.Y.2012-13 is allowed. Order pronounced in open court on 27th day of October, 2023. ============= Document 1 Government of India Ministry of Finance: Department of Revenue Office of the Assistant Commissioner of ....