TaxTMI 
TaxTMI 
2025 (10) TMI 909
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.... the Act was passed on 29/07/2022 leading to issuance of notice u/s 148 of the Act dated 30/07/2022 under the amended regime. 2.1 The jurisdiction u/s 147 of the Act has been assumed on the alleged ground of income escaping assessment to the tune of Rs. 25,21,29,980/- purportedly arising from alleged evasion of VAT by consignee agents of the appellant. It was alleged that the evasion of VAT by consignee agents resulted in generation of unaccounted cash of which the appellant is beneficiary. The allegation was based on FIR which is a preliminary information. 2.2 The appellant objected to assumption of jurisdiction u/s 147 of the Act and submitted that the VAT evasion, if any, by consignee agents cannot be presumed to have any implications in the hands of the appellant company which was duly recorded the sales and offered the embedded profit to tax. However, the assessing officer completed the assessment vide passing of draft order dated 26/12/2023 after making addition of Rs. 25,21,29,980/- u/s 69A and other TP adjustments. 2.3 The appellant filed objections before DRP u/s 144C of the Act against the draft assessment order in respect of following issues: S. No. Issue ....
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....rity, the order u/s 148A(d) and notice u/s 148 are illegal and without jurisdiction. Re: Addition u/s 69A of the Income Tax Act 3.1 That the assessing officer erred on facts and in law in making addition of Rs. 25,21,29,980/- u/s 69A on the alleged ground of hypothetical receipt without any corroboration and merely on the basis of conjectures and surmises. 3.2 That the AO and DRP has fallen into error in confirming the variation without appreciating the submissions and documentary evidences placed on record. 3.3 That in the absence of any adverse evidence or material, the allegation of undisclosed income in the hands of the appellant arising from alleged VAT evasion by third party is wholly untenable and devoid of merits. 3.4 That the adverse inference being merely on the basis of FIR which is a preliminary' report and in the absence of any independent enquiry, the impugned addition is grossly mechanical, arbitrary and unsustainable. 4. That in the alternative, presumption of any income based on VAT evasion is tax neutral as claim of VAT is permissible deduction u/s 37 of the Income Tax Act, 1961 and as such the impugned add....
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....endors during the financial year 2012-13 to 2015-16 to evade the VAT liability in state of Gujrat- Due to this whole arrangement of fabrication of facts and documents the appellant company alongwith its vendors had managed to evade VAT amounting to Rs. 25,21,29,980/- during the financial year 2014-15 relevant to A.Y.2015-16, the appellant company was found the major beneficiary. The appellant company during the relevant A.Y. had done the suspected sale of Rs. 168,08,66,530/- which will be verified during the reassessment proceedings with the above mentioned dealers. After that remedial action had been taken by Commercial Tax Department, Gujrat. The aggregate amount of this evasion for all the concerned F.Y.s had been calculated at approx Rs. 125 Crores out of which approx. Rs. 100.00 crores liability had been borne by the Appellant company. As it had paid almost 80% of VAT liability so determined on it and its vendors. It is sufficient to prove that M/s DSL had taken a certain share of VAT evaded by this whole nexus and had generated unaccounted cash which has not been disclosed before the Department. As these transactions had been executed with help of certain ve....
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....taking necessary approval from the Chief Commissioner of Income Tax (Central)-2, Delhi." 5. The first contention of ld. Counsel is that Notice u/s 148 of the Act dated 30/07/2022 is barred by limitation in terms of first proviso to section 149(1) as six years from the end of AY 2015-16 expired on 31/03/2022. Ld. Counsel submitted that the notice u/s 148 of the Act dated 30/07/2022 issued under the amended regime is barred by limitation in terms of first proviso to section 149(1) as six years from the end of the assessment year i.e. AY 2015-16 had elapsed on 31/03/2022 and as such the notice u/s 148 dated 30/07/2022 has been issued after expiry of limitation period. It is submitted that the first proviso of section 149(1) of the Act specifically provides that no notice u/s 148 could be issued in relation to assessment years prior to 01/04/2021 wherein six years have elapsed. The relevant proviso is reproduced hereunder for ready reference: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been....
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....es issued to the respective assessee's which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessee's information and material relied upon by the Revenue, so that the assessee's can reply to the show-cause notices within two weeks thereafter; 6.1 However, in the present case, the assessing officer only provided the copy of reasons along with the notice u/s 148A(b) of the Act and the information supplied by the investigation was not provided. Moreover, other than a sheet of paper containing reasons, no material whatsoever was provided which formed the basis of such reasons and such there is clear cut violation of scheme and requirement of section 148A of the Act. In these circumstances, the failure on part of the assessing officer in supplying copy of information/material alongwith notice u/s 148A(b) of the Act vit....
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....tions had to yet pass through judicial scrutiny of criminal courts. Appellant has disputed the allegations in the FIR and has demonstrated to the VAT authorities that it has no role in alleged VAT evasion by Consignee agents, if any. Thus the order passed u/s 148A(d) of the Act appears to be without independent application of mind or tangible material, in the hands of AO. It has been alleged that appellant company has deposited 100 crores of VAT liability which proves its involvement in alleged VAT evasion. 9. In regard to these grounds ld. Counsel has also pointed out that even after the addition, the appellant is assessed at Book profit u/s 115JB where tax is higher that tax determined under normal provisions by the AO and there being no case of any adverse revenue implication, the assumption of jurisdiction u/s 147 is invalid. It comes up that even after the addition of Rs. 25,21,29,980/-, the final tax payable is determined u/s 115JB based on book profit and as such there is no case of adverse tax implication vis-à-vis alleged income escaping assessment of Rs. 25,21,29,980/- under normal provisions of the Income tax Act, 1961. In these circumstances, the very basis of....
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....ed by the judgment rendered in the case of Motto Tiles P. Ltd. v. ACIT [2016] 73 taxmann.com 176/386 ITR 280 (Gujarat) 7. The claim of the assessee that the tax liability on book profit is higher than the income assessable under normal provisions including escapement alleged qua normal provisions, has not been disputed by the revenue. 8. Governed by the view expressed in the decisions noted above, we find merit in the plea raised by the assessee towards lack of jurisdiction on first principles. 9. The re-assessment notice is accordingly quashed. The reassessment order is declared null and void. As the assessee succeeds on absence of jurisdiction usurped under s. 147 of the Act, which strikes to the root of the matter, the merits of additions and disallowances carried out merges in void at the threshold. Hence, we do not seek to delineate on the merit of additions and disallowances as challenged on behalf of the assessee and Revenue in their respective appeals. 10. As a consequence to aforesaid discussion these grounds deserved to be sustained. 11. Though we have held the reopening itself to be vitiated still as we had heard on merits as well for whi....