Designer Exim Pvt. Ltd., Mumbai V. Income Tax Officer, 1(1)(2), Surat

ITA 14/SRT/2022

AI Insights

The case involves M/s Designer Exim Pvt. Ltd., which appealed against the order of the National Faceless Appeal Centre/Commissioner of Income Tax (Appeals) confirming the addition of Rs. 907,039 as income from alleged non-genuine purchases from M/s Sonali Enterprises. The reassessment was initiated based on information from the Investigation Wing about suspicious transactions linked to M/s Sonali Enterprises. The Tribunal focused on the procedural validity of the reassessment, particularly the lack of a notice under Section 143(2) of the Income Tax Act, 1961, which led to the quashing of the reassessment order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301520 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-03-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 19-01-2022
• Other Referred Cases: CIT Vs Laxman Das Khandelwal, ACIT Vs Hotel Blue Moon, Tiwari Kanahaiya Lal Vs CIT, V.R. Sreekumar Vs ITO, ITO Vs Smt. Kuldip Kaur, ITO Vs R.K. Gupta, CIT Vs Sukhini P Modi
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: WAY OF SPECIFIC OBJECTION; RAISED THIS
• Keywords: Tangible material; Reason to believe
• Section: 147; 148; 144; 139; 143(2); 113; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 14/Srt/2022 (Assessment Year 2012-13) (Physical hearing) M/s Designer Exim Pvt. Ltd., D-1203, Panchsheel Heights, Opp.- Pizza Hut, Mahavir Nagar, Kandivali West, Mumbai, Maharashtra-400067 PAN No. AABCD 4298 H Vs. I.T.O., Ward 1(1)(2), Surat. Appellant/ assessee Respondent/ revenue Assessee represented by Shri P.M. Jaggasheth, CA Department represented by Shri Vinod Kumar, Sr. DR Date of hearing 22/03/2023 Date of pronouncement 22 /03/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned National Faceless Appeal Centre, Delhi (NFAC)/Commissioner of Income Tax (Appeals), (in short, the ld. CIT(A)) dated 24/11/2021 for the Assessment year (AY) 2012-13 wherein the assessee has raised following grounds of appeal: “1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal) erred in confirming addition of Rs. 907039/- made by the Assessing Officer on account of payment made for alleged non-genuine purchases made from M/s Sonali Enterprises. Provisions of the Act ought to have been properly construed and regard being had to facts of the case no such addition should have been made. 2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming conclusion so arrived at by the Assessing Officer that purchases made by the appellant to the tune of Rs. 907039/- from M/s Sonali Enterprises is bogus and non- ITA No. 14/Srt/2022 M/s Designer Exim P Ld. Vs ITO 2 genuine. Reasons assigned by him are wrong and insufficient to support such conclusion. 3. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) failed to appreciate that (a) Proceeding initiated under section 147 /148 of the Act is on the basis of reason to suspect and not on reason to believe. (b) There is no new tangible material in possession of the Assessing Officer which justify issuance of notice u/s 148 of the Act. (c) The learned Assessing Officer failed to obtain sanction of the prescribed authority before issuing notice under section 148 of the Act. (d) The initiation of proceeding under section 147 of the Act and issuance of notice under section 148 is without jurisdiction, bad in law and contrary to the provisions of the Act and liable to be cancelled / annulled. 4. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming order made under section 144 r.w.s 147 of the Act by the learned Assessing Officer which is illegal, bad-in-law, ultra vires, without issuing notice under section 143(2) of the Act, without allowing reasonable opportunity of the hearing, without appreciating facts, submission and evidences in their proper perspective, without providing copies of material relied upon and without providing cross examination of persons whose statements are relied upon and is liable to be annulled. 5. The learned assessing officer erred in charging interest under section 234A, 234B, 234C and 234D of the Act. 6. The appellant crave leave to add, amend, alter and / or vary any of the grounds of appeal before or at the time of hearing.” 2. Brief facts of the case are that the assessee is a company, engaged in export of fabric and dress material, filed its return of income on 29/09/2012 declaring income of Rs. 1,86,240/- for A.Y. 2012-13. Subsequently, the case of assessee was reopened on the basis of information received from Investigation Wing on 22/03/2019 wherein it was revealed that a bank account in Axis bank in the name of Shrikant Deven Patel, proprietor of Sonali Enterprises wherein there was high ITA No. 14/Srt/2022 M/s Designer Exim P Ld. Vs ITO 3 value transaction and RTGS credits. The bank account was opened on 16/02/2011 and was closed on 12/12/2021. From the bank account of Sonali Enterprises, it was found that the assessee company has made a credit of Rs. 9,07,039/-. In order to verify such suspicious transaction, the case of assessee was reopened after recording reasons. Notice under Section 148 of the Income Tax Act, 1961 (in short, the Act) dated 31/03/2019 was served upon the assessee. The assessee in response to notice under Section 148 of the Act filed its letter dated 07/10/2019 requesting the assessing officer to consider the original return filed on 29/09/2012 as written in response to notice under Section 148 of the Act. The Assessing Officer noted that filing of return of income is mandatory in response to notice under Section 148 of the Act. The Assessing Officer proceeded for assessment and after recording that no response was made by assessee, the assessment was completed under Section 144 r.w.s. 147 of the Act on 12/12/2019 by making addition of Rs. 9,07,039/- as bogus and treated the same as income of assessee. 3. On appeal before the ld. CIT(A), the assesse filed written submission. The submission of assessee is recorded in para 5 of order of ld. CIT(A). The assessee besides challenging the additions and validity of initiation of proceedings under Section 147 and notice under Section 148, also raised a legal issue in its submissions that notice under Section 143(2) of the Act was not issue and in absence of such notice, the assessment ITA No. 14/Srt/2022 M/s Designer Exim P Ld. Vs ITO 4 order is liable to be annulled. The ld. CIT(A) instead of giving any finding on legal issues or jurisdictional issues, confirmed the addition by holding that the bank account was opened by Sonali Enterprises on 16/02/2021 and closed on 12/12/2021 and there was huge debit and credit of Rs. 94.89 crores. Further aggrieved, the assessee has filed the present appeal before this Tribunal. 4. I have heard the submissions of the learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue and have gone through the orders of the lower authorities carefully. The ld. AR of the assessee submits that besides other jurisdictional issue, the assessee strongly pressed ground No. 4 of the appeal, wherein he has raised issue that the assessment order, is passed without issuing notice under Section 143(2) of the Act, which is bad in law, ultra vires and liable to be quashed. The ld. AR of the assessee by referring the contents of assessment order, submits that the Assessing Officer nowhere either recorded that any notice under Section 143(2) was issued nor in fact issued such notice. The assessee by way of specific objection, raised this issue before the ld. CIT(A), however, no finding on such fact was given by ld. CIT(A). In absence of notice under Section 143(2) of the Act, the assessment order is void ab initio and liable to be quashed. To support ITA No. 14/Srt/2022 M/s Designer Exim P Ld. Vs ITO 5 his submission, the ld. AR of the assessee has relied on the following decisions: (i) CIT Vs Laxman Das Khandelwal (2019) 108 taxmann.com 183 (SC) (ii) ACIT Vs Hotel Blue Moon (2010) 188 taxmann.com 113 (SC) (iii) Tiwari Kanahaiya Lal Vs CIT (1985) 154 ITR 109 (Raj) (iv) V.R. Sreekumar Vs ITO (2012) 21 taxmann.com 545 (Coch). (v) ITO Vs Smt. Kuldip Kaur (2012) 20 taxmann.com 99 (Chandigarh) (vi) ITO Vs R.K. Gupta (2008) 115 ITD 384 (Delhi) 5. On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. 6. I have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. I have also deliberated on case laws relied upon by the ld. AR of the assessee. Perusal of assessment order reveals that the notice under Section 148 was issued to the assessee on 31/03/2019. In response to notice under Section 148, the assessee filed its reply/letter on 07/10/2019 and requested assessing officer to consider original return of income filed on 29/09/2012 in response to notice under Section 148 of the Act. Such contention of assessee was not accepted by the Assessing Officer. The Assessing Officer straightway proceeded for reassessment and after serving show cause notice dated 26/10/2019 made addition of Rs. ITA No. 14/Srt/2022 M/s Designer Exim P Ld. Vs ITO 6 9,07,039/-. I find that before the ld. CIT(A), the assessee raised specific plea that no notice under Section 143(2) was served. The ld. NFAC/CIT(A) has not given any finding on such fact. It is settled position under the law that in case, in case the assessee feels that it is not necessary for him to file fresh return and that the return filed by him under Section 139 should be treated as return for the purpose of reassessment, he may inform the Assessing Officer of his decision. In such event, earlier return is treated as fresh return submitted in response to notice under Section 148 of the Act. Such view is find support from the decision of Hon’ble Rajasthan High Court in Tiwari Kanhaiya Lal Vs CIT (supra). 7. I find that neither the assessing officer recorded in the assessment order that notice under section 143(2) was issued, nor the contention of the assessee was controverted by ld Sr DR by showing any evidence that the plea raised by assessee is not correct. Since no notice under Section 143(2) of the Act had been issued by the Assessing Officer, thus the reassessment order passed by the Assessing Officer vide order dated 12/12/2019 is invalid and liable to be quashed as has been held in series of decisions including the decision of Hon’ble Jurisdictional High Court in CIT Vs Sukhini P Modi (2014) 52 taxmann.com 159 (Gujarat). Hence, I allow ground No. 4 of the appeal. Considering the fact that I have ITA No. 14/Srt/2022 M/s Designer Exim P Ld. Vs ITO 7 allowed ground No. 4 of the appeal which is purely legal in nature, therefore, adjudication of other grounds of appeal become academic. 8. In the result, this appeal of the assessee is allowed. Order pronounced in the open court on 22 nd March, 2023. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 22/03/2023 *Ranjan Copy to: 1. Assessee – 2. Revenue -- 3. CIT 4. DR 5. Guard File By order // TRUE COPY // Sr. Private Secretary, ITAT, Surat