TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 1698
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....IT(A) (NFAC) has erred in law and on facts in confirming the actions of learned AO in making addition despite availability of referred documents in the reasons for reopening on assessment record and additions made without providing any documents as assured during VC and additions are made on whims and fancies of AO, thereby making the assessment as void and as such additions made in the order is to be deleted. (same as above) 4. That learned CIT(A) (NFAC) has erred in law and on facts in confirming the action of AO in estimating unrecorded business turnover of Rs. 2,74,58,591/- and applying a Net profit @12.5% on this estimation and also gross erred in confirming the additions of profit of Rs. 34,32,323/- u/s 69A of the Income Tax Act. (same as above) 5. That learned CIT(A) (NFAC) has erred in law and on facts in confirming the action of AO in estimating unrecorded business turnover of Rs. 2,74,58,591/- and applying a Net profit of Rs. 34,32,323/- @12.51 u/s 69A without rejecting the books of accounts of assessee. (same as above) 6 That learned CIT(A) (NFAC) has erred in law and on facts in confirming the action of AO of additio....
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.... that "material/information asked for cannot be provided at this stage being sensitive/confidential nature". 4.4 Again, vide letter/reply (APB-18) dated 22.03.2022, the assessee stated to the JAO that when a document is used against the assessee, it requires to be provided to the assessee. 4.5 The JAO, ignoring the request of the assessee, proceeded to pass the assessment order dated 30.03.2022, u/s 148A(d)/148. 5. The AO held in the assessment order that as per the information received during the course of search action on M/s Shiv Shankar Plywood, from Shri. Anil Tiwari, one of the key employees of M/s. Shiv Shankar plywood, some incriminating documents were found in the mobile handset of Shri Anil Tiwari which indicated unaccounted sales made by the assessee to M/s Shiv Shankar plywood. Based on the said material found during the said search action, unaccounted sales were worked out to the tune of Rs. 2,74,58,591/- and the same were added to the total income of the assessee under Section 69A of the Act. 6. The matter was carried by the assessee before the ld. CIT(A), raising Ground No. 2, which reads as follows : "2. That the ld. AO has erred on law and fact....
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.... 7.3 It is seen from the record that the JAO has followed the due process as prescribed U/s.148A of the Act, while completing the Order U/s.148A(d) of the Act. Subsequently, the reassessment U/s.144B r.w.s. 147 of the Act was completed by the FAO. The fact that the relevant material has not been provided to the assessee during the 148A proceedings is very much recorded by the Assessing Officer in the -Order u/s. 148A(d) of the Act dated.30.03.2022. However, the detailed reasons for the proposed reopening have been provided to the assessee in the show cause notice U/s.148A(b) of the Act. That apart, the relevant material which forms the basis of the reopening of Assessment and the subsequent addition to the total Income of the assessee has been provided to the assessee during the Re-Assessment proceedings U/s. 147 of the Act. Furthermore, the show cause notice issued by the Faceless Assessing Officer dated. 19.03.2023 during the Re-Assessment proceedings contains therein the modus operandi and the images of the relevant material which establish the said modus operandi. 7.4 It is not the case of the assessee that the relevant material has not been provided to him at al....
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....der: 1. The AO has detailed the facts and circumstances along with the modus operandi in elaborate detail which provide sufficient clarity to the issue at hand and the Assessment Order has already been reproduced earlier in this Order. The AO also records categorically in Para 6 of the Assessment Order that the relevant material/information has been provided to the assessee during the assessment proceedings. 2. The assessee being the proprietor of M/s. Neelkanth plywood is a supplier to M/s. Shiv Shankar plywood & Veneer, which was covered under search and seizure action on 04.01.2019. From the material gathered during the search proceedings such as the tally data, information found in the mobile handset of Shri. Anil Tiwari, a key employee of M/s. Shiv Shankar plywood and other documents etc., it was gathered that there have been unaccounted sales made by the assessee to M/s. Shiv Shankar plywood. 3. The comparison of entries in the above material gathered in search proceedings vis-a-vis the entries recorded in the books of accounts of the assessee, established that the assessee has followed a systematic method to indulge in unaccounted sales to M/s. Shi....
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....t and accordingly, are hereby dismissed. 7.11 Lastly, let us consider the ground no.3 which is regarding the addition of Rs. 2,74,58,591/- to the total income of the assessee U/s. 69A of the Act, holding the same to be the unaccounted sales turnover of the assessee during the year under consideration. 7.12 In this regard, while the AO has elaborated in detail as to the working of unaccounted sales, but he has failed to substantiate why he has treated the entire suppressed sales as unaccounted income of the assessee. It is observed, that while the AO has good grounds to work out the unaccounted business turnover based on the relevant material found during the search and seizure action but there is no basis to treat the whole of unaccounted sales as the income of the assessee. 7.13 Further, it is seen that based on the very same material and evidence, the AO had estimated the income at the rate of 12.5% of the unaccounted sales turnover detected, for the A.Y. 2017-18 in the assessee's own case. Even though, "Res Judicata" does not apply to the Income Tax proceedings in the strictest sense, the principle of legal consistency cannot be disregarded. In vie....
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....in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable." In the light M above* submissions, there is neither any justification in estimation of any suppressed sales as well as assessment of 100% Income of such suppressed sales. 7.15 In view of the above facts, there is merit in the assessee's claim that there is no basis to treat the entire unaccounted sales as the income of the assessee during the year under consideration, particularly when based on the very same material, the unaccounted income has been estimated for the immediately preceding year i.e., A.Y. 2017-18 at the rate of 12.5% of the unaccounted sales unearthed in assessee's own case. 7.16 Under the circumstances, the addition made by the AO is hereby restricted to 12.5% of the unaccounted sales detected at Rs. 2,74,58,591/-, which works out to 34,32,324/-. Accordingly, the ground no.3 raised by the assessee is partly allowed. 7.1 While deciding this issue against the assessee, the ld. CIT(A) has held as follows : "7.3 It is seen from the record that the JAO has followed the due process as prescribed ....
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....g addition despite availability on the assessment record, of documents referred in the reasons for re-opening and the additions made on estimation of unrecorded business turnover and application of net profit on such estimation without providing any documents to the assessee, as assured (Ground Nos. 3 and 4). 9. It has further been contended that the re-opening of the completed assessment is based on wrong facts. Attention has been drawn to APB-12 which is a copy of the notice dated 16.03.2022, issued u/s 148A(b) of the Act. It has been contended that therein, the AO has stated that from the impounded material in the form of Tally Data and other documents, it was concluded that there was a suppression of sales. It has been contended that it had been explained to the AO on behalf of the assessee that there was no difference in the impounded Tally Data of M/s Shiv Shankar Plywood and the books of the assessee. It has been contended that during the Virtual Conference (VC) held on 25.03.2022, the AO had verified that in fact there is no such difference. Attention, in this regard, has been drawn to APB-77, which is a copy of the VC transcript, time 22.04 to 24.22. It has been contend....
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....ce dated 19.03.2023, but also the assessment order dated 29.03.2023, which clearly shows that as such, no prejudice was caused to the assessee, in any manner, whatsoever, regarding the issue of providing the relevant material to him. 12. Heard. Apropos the grievance that the material relied on to make the addition in question, was never confronted to the assessee, as contended by the ld. Counsel for the assessee, the position as per record is as follows. 13. The following reasons for the re-opening of the assessment in the assessee's case were recorded ; Information available and was in possession of the Department As per information flagged by DIT (Systems) as CRIUA/RU high Risk Cases and available with this office, a search and survey action u/s 132 of the It Act, 1961 was conducted in the group of Shiv Shankar Plywood group, Indore on 04.01.2019. The issue involved was large scale suppression of sale of plywood, sun mica and other related items. 1. In the case of Sh. Rajesh Khanna C/o Neelkanth plywood, value of information is of Rs. 2,74,58,591/- and source of the same Tally data and impounded material during search and survey action on Shiv....
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....Shankar Plywood group, Indore on 04.01.2019. The issue involved was large scale suppression of sale of plywood, sun mica and other related items. 3. In the case of Sh. Rajesh Khanna C/o Neelkanth plywood, value of information is of Rs. 2,74,58,591/- and source of the same Tally data and impounded material during search and survey action on Shiv Shankar Plywood & Veneer. From the impounded material during search action, it was observed that M/s Neelkanth Plywood was also one of the suppliers to the Shiv Shankar Plywood and for operating the business, the group as well as suppliers were indulged in the practice of not recording actual transactions in its regular books of accounts. The supplier, namely Neelkanth Plywood used to issue suppress bills for the supplied goods and the difference amount between the actual cost and billed amount was being taken in cash. From the perusal of tally data and related material it was concluded that the supplier m/s Neelkanth Plywood used to record only 47.38% of the transaction amount in its regular books. Hence, unaccounted transactions have been made to the tune of 52.62% of the total transaction amount." 14. So, as per the reasons, t....
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....ce that details/material/ information asked for by you in your reply dated 17.03.2022 cannot be provided to you at this stage, being of sensitive and confidential nature. Further, the notice u/s 148A(b) dated 16.03.2022 was issued prior to initiation of proceedings u/s 148 of the IT Act, 1961. The purpose of the said notice was to provide an opportunity to the assessee of being heard so that the assessee may submit his/her response/ explanation regarding the information confronted to the assessee vide notice u/s 148A(b). In view of the above facts, it is said that your preliminary objections to the notice under Section 148A(b) dated 16.03.2022 are hereby rejected. Further, if you want to submit any documentary evidence/ explanation regarding information confronted to you vide notice u/s 148A(b) dated 16.03.2022, then you may submit the same to this office latest by 23.03.2022. 16.2 The assessee addressed another letter/reply dated 22.03.2022 (APB 18-20), stating as follows : To Income Tax Officer, Ward-3, Yamuna Nagar. Sub : Reply to show cause notice under Section 148A in the case of Rajesh Khanna, Neelkanth Plywood, Khazuri....
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....d by your office on the same allegation that assessee suppressed bills issued to Shiv Shankar Plywood and that same was on basis of impounded material during search on said party. More than one year has passed since that reopening and even till date, the AO in faceless assessment proceedings has not been able to trace out any such impounded material and neither provided any other material which supported the reasons recorded for reopening. In fact, assessee has filed an affidavit from Shiv Shankar Plywood in such proceedings where the party has confirmed that no information or material or Tally data showing suppression of sales was found during its search. A copy of the affidavit is attached for your reference. 4. Your Honor would appreciate that very purpose of amendment of sec 148 and insertion of sec 148A was to reduce litigation as noted in Memorandum to Finance Bill 2021: "In view of above, there is a need to completely reform the system of assessment or reassessment or re-computation of income escaping assessment and the assessment of search related cases. The Bill proposes a completely new procedure of assessment of such cases. It is expected that ....
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....recompute the loss or the depreciation allowance or any other, allowance or deduction for the Assessment Year 2018-19 and I, hereby, require you to furnish, within 30 days from service of this notice, a return in the prescribed form of the Assessment Year 2018-19. 3. This notice is being issued after obtaining the prior approval of the PCIT, Panchkula accorded on date 30/03/2022 vide Reference No. 100000029066846. 16.5 Vide letter (APB 32) dated 05.09.2022, the assessee again requested the AO to provide the following documents to the assessee ; a. Please provide the copy of tangible material related to information of Rs. 2,74,58,591/- being tally data and impounded material of Shiv Shankar Plywood group. b. Please inform as to how the transaction of Rs. 2,74,58,591/- is being assessed in the hands of M/s Shiv Shankar Plywood group. c. You are also requested to provide the copy of statement recorded during and post search of Shiv Shankar Plywood. d. You are also requested to allow us an opportunity to cross examine the persons whose statement / possession is intended to be used against assessee. 16.6 Yet, another request (APB 33) wa....
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....s passed by the Jurisdictional Assessing Officer. Therefore, notice u/s 148 of the I.T. Act, 1961 dated 30.03.2022 was issued with the prior approval of the competent authority. The notice u/s 148 of the I.T. Act, 1961, was issued on 30.03.2022 and served through e-filing portal. In response to notice issued u/s 148 of the Act, dated 28.04.2022 assessee filed his return of Income declaring total Income of Rs. 16,11,280/-. An intimation u/s 144B of the IT Act, 1961, dated 17-08-2022 for completion of assessment in accordance with procedure of section 144B of the IT Act, 1961, [For e-faceless assessment proceedings) was issued by National Faceless Assessment Centre Income Tax Department. 3.3. Synopsis of all submissions of the assessee relating to the issue and indicating the dates of submission. In response to notice issued u/s 142(1) of the Act dated 25.08.2022, Vide reply dated 05.09.2022, the assessee submitted that " .... return of Income in response to notice u/s 148 has already been filed and as such your honor is requested to provide the documents as requested above to proceed further in this case to explore the alternate remedy ... " 18.2 The as....
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....etails sought by point no. 2.3, 2.4 & 2.5 cannot be provided to you. However, relevant information gathered during the course of search and survey in the case of Shiv Shankar Plywood Group is being provided to you as per annexure A, in response to reply to point no. 2.2. 3.1. Your attention is invited to the fact that your honor has relied on some extract dated 25/12/2018 No. 0090 related to IN DOR. The extract is neither a document of Neelkanth Plywood nor has any idea about this extract. In respect to the Clarification/queries raised at 3.1, it is informed you that, Modus Operandi has been very well explained in the report received from the Investigation and the relevant part of the same has been provided you, as per annexure A. Further, your contention that the presuming sales of Rs. 1,14,65,244/- as suppressed sale is based on surmises and conjunctures is not acceptable as all the proposal are based on enquires made by the Appraisal unit and the Investigation Unit of Department. And which is duly corroborated by the facts which have been seized during the search and survey in the case of Shiv Shankar Plywood Group. You are requested to avail ....
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....ed sales of Rs. 6 lakh in my book. In the books of purchasers also the bills which I had sent him are recorded at the same value. Therefore, tally screenshot actually proves that whatever sales I have made in my books are correct because that is the same amount that is recorded in the books of the party also. Now the only document in this case is the picture found from his phone. Anil Tiwari is not the proprietor/partner of the firm. Sir, I don't know whether today you have received our submission or not I have attached an affidavit from partner of the firm also. He has stated that firstly they have not under reported sales or purchase and that no such document which proves any under reporting of purchase or sales was found from his premises during search. There is no statement of the partner or the accountant from whose mobile phone this picture is found, that there is a suppression of sales by Assessee by 52%. And most important point is neither any document is found from my possession nor from the searched customer. Even the picture found in the mobile of accountant do not contain my name and I can not be held accountable for image held in the mobile of accountant of my cust....
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....r cross examination of any person whose statement is likely to be relied. Both this were not given to me till today. I have been asking time and again to provide me the copy of such statement but it was neither given to me during 148A notice and nor during the present proceedings. That when I had received the notice I contacted the customer and enquired about the transaction and they informed that no document relating to Assessee was found and seized from them. They had given me an affidavit which I had produced before you in which they said there is no suppression of sales. 24.04 (AO)Tell me one thing that tally data that we have found from customer and given to you, is that recorded with you? 24.11 (AR) Yes sir, recorded in my books you can verify as the Invoice of Rs. 6.62 lakh is visible in the account copy as per my books of accounts. 24.18(AO) Tally Data which we had given to you whether it tallies with your books? 24.22(AR) Yes Sir Rs.6.62 lakh is recorded by me in my books and in tally data provided by your office. 24.24 (AO)OK 24.29 (AR) But you are saying that value in the picture found is Rs. 12,96,000/- and value in ....
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....ary interest and business expenses. We are trying to find the documents and we will definitely give you before passing assessment order. We will once again discuss your file and only after that we will finalise your case. We will not do any unnecessary addition. 30.11 (AR) On similar issue, assessment for last year was also reopened and completed. 30.17(AO) Whether search was conducted in that year also? 30.22(AR) No Sir, Paper was found for one year and not for all years. 30.27(AO) OK, 30.29(AR) The cases were reopened for all earlier years. 30.31 (AO) The paper is for FY 18-19 then how case is reopen for FY 17-18. 30.35 (AR) Sir that is the only paper and on this basis the reopening is done for FY 16-17, 17-18 and 18-19. 30.53 (AO) There must be some old data of tally found. 31.01 (AR) No sir, reopening of earlier was also on the basis of same image an other data. We have asked for statement or paper in that year also but they have not given any thing and completed assessment by making addition of 12.50%. 31.23(AO) File the copy of that order also. 31.25(AR) Sir I will attach. We have asked ....
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....justified. 34.22(AR) Sir if there is a fault of assessee then you are within your rights to use your power against assessee. Whereas in my case when there is nothing against is available as such no addition should be done. We have been telling the AO last time also but they started proceeding very late and at the end he did made some additions. 34.50(AO) Due to different time barring dates we could not see file upto December, then thereafter we send notices in December and January. (AR) I will make reply and send you and please provide the documents. (AO) You send I will read it tomorrow and available documents will be provided. (AR) Thanks sir. 35.37(AO) Dhanyawad 20. From the above documentary evidence, it is amply clear that the material relied on to reopen the assessee's case was never confronted to the assessee despite repeated requests made by the assessee to the AO in this regard. In fact, the assessee's requests were rejected in flagrant violation of the principles of natural justice and the assessment order was passed without confronting the assessee with the evidence relied on. The AO passed the order dated ....
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....lied on to reopen the case and to make any additions in the reopened assessment. 25. In "SABH Infrastructure Ltd. Vs Assistant Commissioner of Income Tax", 398 ITR 198 (Delhi), the Hon'ble Delhi High Court has laid down guidelines, inter-alia. that where the reasons to believe escapement of income make a reference to another document, whether as a letter or a report, such document and/or relevant portion of such report should be enclosed alongwith the reasons. Such document, referred to in the reasons to believe, is mandatorily to be provided to the assessee. 25.1 In "Tata Capital Financial Services Ltd. Vs Assistant Commissioner of Income Tax & Others", 443 ITR 127 (Bom.), the Hon'ble Bombay High Court has reiterated the position of law, as enunciated by the Hon'ble Delhi High Court in "SABH Infrastructure" (supra). The Hon'ble Bombay High Court directed the revenue to adhere to the guidelines laid down by the Hon'ble Delhi High Court, while re-opening the assessment proceedings. It was emphasized that the AO shall not merely state the reasons to believe in the letter addressed to the assessee, but if the reasons make reference to any other document or le....
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....appeal to the assessee's above appeal in ITA 62/CHD/2024. The following grounds have been taken : "1. Whether on facts and circumstances of the case, Ld. CIT(A)/NFAC was justified in restricting the addition made by the AO at Rs. 2,74,58,591/- to 12.5% thereof, not appreciating that the addition had been made by the AO u/s 69 A of the Act as the amount of Rs. 2,74,58,591/- had not been recorded in the books of account of the assessee? 2. Whether on facts and circumstances of the case, Ld. CIT(A)/NFAC was justified in treating Rs. 2,74,58,591/- as unaccounted sales though it was never the explanation of the assessee at any stage that he was making unaccounted sales to the extent of 52.6%and the assessee never disclosed these in his return of income filed for A.Y. 2018-19? 3. Whether Ld. CIT(A), NFAC was justified in holding that the explanation offered by the assessee was satisfactory as required u/s 69 A of the Act in the absence of any evidence and any admission by the assessee in this regard? 4. Whether on facts and circumstances of the case, Ld. CIT(A)/NFAC was justified in allowing relief to the assessee by restricting the addition to 12.....