M/s. Devansh Exports, Kolkata V. ACIT, Circle - 32, Kolkata, Kolkata

ITA 2177/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1832 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 11-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PAUL
• Assessee Lawyers: KETAN K VED
• Keywords: Depreciation; Transfer pricing; International transaction; Assessment record; Reason to believe
• Section: 143(3); 92B; 92F; 92A; 92E; 147; 148; 154; 139; 92

Judgement Text

1 ITA NO. 2177/KOL/2017 DEVANSH EXPORTS, AY 2009-10 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) BEFORE . . , /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A. NO. 2177/KOL/2017 ASSESSMENT YEAR: 2009-10 M/S. DEVANSH EXPORTS (PAN: AACFD1870B) VS. ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-32, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 02.08.2018 DATE OF PRONOUNCEMENT 05.09.2018 FOR THE APPELLANT SHRI KETAN K. VED, AR FOR THE RESPONDENT SHRI SANJAY PAUL, ADDL. CIT, SR . DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE DRP-2, NEW DELHI, DATED 07.08.2017 FOR AY 2009-10. 2. THOUGH THE ASSESSEE HAS RAISED GROUNDS BOTH ON T HE LEGAL ISSUE OF REOPENING OF THE ASSESSMENT AS WELL AS ON MERITS OF THE ADDITION ON ACCOUNT OF INTERNATIONAL TRANSACTION AND TRANSFER PRICING. HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE SHRI KETAN K. VED AT THE FIRST INSTANCE ADVANCED ARGUMENTS ON THE ISSUE OF REOPENI NG OF THE ASSESSMENT, SINCE IF FOUND TO BE VALID THEN IT GOES TO ROOT OF THE VERY REOPENING OF THE ASSESSMENT ITSELF. HENCE, WE WOULD LIKE TO DEAL WITH IT FIRST I E, THE ISSUE OF THE VA LIDITY OF THE REOPENING OF THE ASSESSMENT. 3. BRIEF FACTS ARE THAT THE ASSESSEE FILED ITS RETU RN DECLARING TOTAL INCOME OF RS.8,11,360/- ON 04.09.2009. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT ORDER WAS PASSED U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT) ON 16.05.2011 BY ACCEPTING THE RETURNED INCOME. SUBSE QUENTLY INFORMATION WAS RECEIVED FROM DIT (INV.), KOLKATA VIDE LETTER NO. 8/OE/2014-15/20 23-25 DATED 02.09.2014 IN WHICH IT HAS 2 ITA NO. 2177/KOL/2017 DEVANSH EXPORTS, AY 2009-10 BEEN MENTIONED THAT THE ASSESSEE M/S. DEVANSH EXPOR TS HAD EXPORTED IRON ORE TO ITS ASSOCIATED ENTERPRISES (AE), M/S. SK RESOURCES LTD. , SITUATED AT HONG KONG [M/S. SKR (HK)]. THE ASSESSEE AS WELL AS THE BUYER M/S SKR(H K) IS AE WITHIN THE MEANING CONTAINED IN SEC. 92A OF THE ACT. IT HAS ALSO BEEN MENTIONED IN THE SAID LETTER OF DIT(INV.), THAT ASSESSEE HAS EXPORTED THE IRON ORE TO VARIOUS END USERS LOCATED AT CHINA AND THESE WERE ROUTED THROUGH ITS SISTER CONCERN M/S. SKR (HK) DUR ING THE YEAR. THE PRICE AT WHICH THE ASSESSEE CHARGED FROM ASSOCIATED ENTERPRISES M/S. S KR (HK) WAS MUCH LESS THAN THE PREVAILING MARKET PRICE AT CHINA BUT THE SAID M/S. SKR (HK) WOULD SELL THE GOODS TO THE END USERS AT THE PREVAILING MARKET PRICE. SO, ACCO RDING TO INFORMATION, THE ENTIRE ARRANGEMENT THUS RESULTED IN PROFIT BEING SHIFTED F ROM INDIA TO HONG KONG. BASED ON THIS INFORMATION, THE AO PROPOSED TO REOPEN THE ORIGINAL ASSESSMENT FRAMED ON 16.05.2011 U/S. 143(3) OF THE ACT. 4. ASSAILING THE ACTION OF AO TO REOPEN THE ORIGINA L ASSESSMENT AFTER 4 YEARS, THE LD. AR OF THE ASSESSEE CONTENDED THAT THE ASSESSMENT OF THE ASSESSEE COMPANY IN RESPECT OF AY 2009-10 WAS COMPLETED U/S. 143(3) OF THE ACT AFTE R THOROUGH EXAMINATION OF THE COMPANYS BOOKS OF ACCOUNT AND OTHER PARTICULARS AN D DETAILS AND EVIDENCES WITH REGARD TO PURCHASE AND SALE EFFECTED DURING THE YEAR. THE LD. AR DREW OUR ATTENTION TO THE FACT THAT DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS THE ASSESSEE PRODUCED BEFORE THE AO THE AUDITED ACCOUNTS, TAX AUDIT REPORT U/S. 44AB AN D AUDIT REPORT IN FORM 3CEB DT. 22.09.2009 PREPARED BY ITS CHARTERED ACCOUNTANT M/S . DELOITTE HASKINS & SELLS IN VIEW OF THE SECTION 92E RELATING TO INTERNATIONAL TRANSACTI ON WERE FILED AND THE FACTS RELATING TO SALE TO ASSOCIATED ENTERPRISES WAS DULY REFLECTED IN THE AUDITED ACCOUNTS AND TAX AUDIT REPORT U/S. 44AB OF THE ACT. ACCORDING TO LD. AR, THE ENTI RE SALE OF IRON ORE TO M/S. S.K RESOURCES LTD WAS AT THE PREVAILING MARKET PRICE AN D THERE WAS PROPER COMPLIANCE RELATING TO INTERNATIONAL TRANSACTION WITHIN THE MEANING OF SECTION 92B OF THE ACT, AND THE SCRUTINY ASSESSMENT WAS COMPLETED ACCORDINGLY U/S. 143(3) OF THE ACT AFTER PROPER APPRECIATION OF THE FACTS OF THE CASE. 3 ITA NO. 2177/KOL/2017 DEVANSH EXPORTS, AY 2009-10 5. THE LD. AR URGED BEFORE US THAT IN THE PRESENT C ASE THE REGULAR ASSESSMENT FOR AY 2009-10 WAS COMPLETED ON 16.05.2011 U/S. 143(3) OF THE ACT AND THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR EXPIRED ON 31.03.2014 AND, THEREFORE, THE PROVISO U/S. 147 IS ATTRACTED IN THIS CASE. AND SO, THE AO HAD TO SATISFY THE CONDITION PRECEDENT PROVIDED FOR IN THE PROVISO TO SEC. 147 BEFORE VENT URING TO REOPEN THE ORIGINAL ASSESSMENT. ACCORDING TO LD. AR, SINCE IN THE COURSE OF REGULAR ASSESSMENT THE ASSESSEE HAD FURNISHED ALL THE RELEVANT INFORMATION INCLUDING AUDIT REPORT U/S. 92F IN FORM 3CEB, THE SCRUTINIZED ASSESSMENT COMPLETED U/S. 143(3) OF THE ACT CANNOT BE TINKERED WITH, UNLESS THE CONDITION PRECEDENT AS PROVIDED FOR IN PROVISO TO SECTION 147 OF THE ACT IS SATISFIED THAT IS THE AO HAVE TO POINT OUT IN THE REASONS RECORDED TO REOPEN THE FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT OF THE ORIGINAL ASSESSMENT, THEN ONLY THE AO CAN VENTURE TO REOPEN REGULAR ASSESSMEN T COMPLETED U/S. 143(3) OF THE ACT. THE LD. AR BROUGHT TO OUR NOTICE THAT IN THE RECORD ED REASON THERE IS NOT EVEN A WHISPER OR SUGGESTION THAT ASSESSEES INCOME FOR AY 2009-10 HA D ESCAPED ASSESSMENT AS A RESULT OF ANY OMISSION ON ITS PART TO DISCLOSE TRULY AND FULLY AL L MATERIAL FACTS NECESSARY FOR ASSESSMENT. IN ABSENCE OF ANY SUCH FAILURE ON THE PART OF THE A SSESSEE DURING ORIGINAL ASSESSMENT, ACCORDING TO LD. AR, REOPENING AND THEREAFTER REASS ESSMENT PROCEEDINGS ARE NOT LEGALLY PERMISSIBLE IN VIEW OF THE FIRST PROVISO TO SEC. 14 7 OF THE ACT. 6. THE LD. AR CONTENDED THAT THE REASONS RECORDED B Y THE AO ARE BASED ONLY ON HEARSAY AND BALD ALLEGATIONS WHICH HAVE NOT BEEN SU BSTANTIATED BY ANY COGENT MATERIAL OR EVIDENCE. ACCORDING TO HIM, THE REASONS RECORDED BY AO U/S 148(2) BEAR NO LOGICAL CORRELATION WITH THE FACTS OF THE COMPANY'S CASE. I T WAS STRESSED BY THE LD. AR THAT THERE HAS BEEN NO INDEPENDENT APPLICATION OF MIND BY THE AO T O THE RELEVANT FACTS BEFORE RECORDING REASONS TO BELIEVE THAT COMPANY'S INCOME CHARGEABLE TO TAX FOR THE AY 2009-10 ESCAPED ASSESSMENT. ACCORDING TO LD. AR, THE AO AFTER MAKIN G A REFERENCE TO THE INFORMATION RECEIVED FROM DIT(INV) KOLKATA BLINDLY WITHOUT EVEN VERIFYING IN ANY MANNER THE PREVAILING MARKET PRICE OF IRON ORE IN CHINA DURING THE SAID PERIOD AND WITHOUT INDEPENDENT APPLICATION OF MIND HAVE RECORDED A SATISFACTION TH AT THE IRON ORE WERE EXPORTED TO M/S. S.K RESOURCES LTD AT A PRICE LESSER THAN THE PREVAILING MARKET PRICE IN CHINA AND THE SAID M/S. 4 ITA NO. 2177/KOL/2017 DEVANSH EXPORTS, AY 2009-10 S.K RESOURCES LTD SOLD THE GOODS TO THE END USERS A T CHINA AT THE PREVAILING MARKET PRICE WHICH RESULTED INTO PROFIT BEING SHIFTED FROM INDIA TO HONG-KONG WHICH ACTION OF AO, ACCORDING TO LD. AR VITIATES THE VERY INITIATION OF REOPENING OF THE ORIGINAL ASSESSMENT. SO, IT WAS CONTENDED BY LD. AR THAT MERELY ON THE BASIS OF SOME THEORETICAL CALCULATIONS OR GENERALIZED ALLEGATIONS THE AO WITHOUT INDEPENDENT APPLICATION OF MIND TO THE FACTS OF THE ASSESSEE'S CASE OUGHT NOT TO HAVE RECORDED HIS SATI SFACTION ABOUT ESCAPEMENT OF INCOME. ON THE OTHER HAND THE LD SR. DR DEFENDED THE ACTION OF AO & CIT(A) AND DOES NOT WANT US TO INTERFERE WITH THE ACTION OF AUTHORITIES BELOW. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ORIGINAL ASSESSMENT WAS FRA MED U/S. 143(3) OF THE ACT ON 16.05.2011 AND THE PERIOD OF FOUR YEARS FROM THE END OF THE RE LEVANT ASSESSMENT YEAR EXPIRED ON 31.03.2014. AND THE NOTICE CONVEYING THE INTENTION OF AO TO REOPEN U/S. 148 OF THE ACT WAS ISSUED ON 08.09.2014, SO THE REOPENING OF ORIGI NAL ASSESSMENT FRAMED U/S. 143(3) ON 16.05.2011 WAS AFTER 4 YEARS AND SO THE PROVISO TO SEC. 147 OF THE ACT COMES INTO PLAY AND THE PROCEDURAL SAFEGUARD PROVIDED TO BY THE PARLIAM ENT HAS TO BE SATISFIED BEFORE THE AO VENTURES TO REOPEN SUCH AN ASSESSMENT. SO, FIRST L ET US LOOK AT SEC. 147 OF THE ACT WHICH IS AS UNDER: INCOME ESCAPING ASSESSMENT . IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSE SS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION , OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY B E, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 1 53 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTI ON SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLE SS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESS MENT YEAR :(EMPHASIS GIVEN BY US) 5 ITA NO. 2177/KOL/2017 DEVANSH EXPORTS, AY 2009-10 8. READING OF THE PROVISO TO SECTION 147 MAKES IT C LEAR THAT IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE C OURSE OF THE PROCEEDINGS UNDER SECTION 147, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLO WANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE CONCERNED ASSESSMENT YEAR. HOW EVER, WHERE AN ASSESSMENT UNDER SUB- SECTION (3) OF SECTION 143 HAS BEEN MADE FOR THE RE LEVANT ASSESSMENT YEAR, NO ACTION CAN BE TAKEN UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YE ARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSM ENT YEAR. 9. SO WHEN THE ORIGINAL ASSESSMENT WAS FRAMED U/S. 143(3) AND FOUR YEARS HAVE EXPIRED AS IN THE PRESENT CASE BEFORE US, THE JURISDICTIONAL FACT FOR USURPATION OF JURISDICTION U/S. 147 READ WITH SEC. 148 OF THE ACT IS THAT THE AO HA S TO RECORD IN THE REASON FOR REOPENING AS TO WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THE ORIGINAL ASSESSMENT FRAMED U/S. 1 43(3) OF THE ACT AND A PERUSAL OF THE REASONS RECORDED TO REOPEN THE COMPLETED ASSESSMENT U/S. 143(3),(SUPRA) WE NEED TO EXAMINE FROM THE REASONS RECORDED BY THE AO AS TO W HETHER THERE IS ANY WHISPER/AVERMENT TO THE EFFECT WHICH FACT/MATERIAL THAT ASSESSEE HAS NOT TRULY AND FULLY DISCLOSED ANY FACTS OR MATERIAL TO ASSESS THE INCOME OF THE ASSESSEE IN TH E ORIGINAL ASSESSMENT. IN A SIMILAR CASE THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUS TAN LEVER LTD. VS. ACIT 268 ITR 332 (BOM) HAS LAID THE LAW ON THE ISSUE AS UNDER: THE REASONS RECORDED BY THE ASSESSING OFFICER NOWH ERE STATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THAT ASSESSMENT YEAR. IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE ASSESSING OFFICER. NO SUB STITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENC E CAN BE ALLOWED TO BE DRAWN BASED ON REASONS NOT RECORDED. IT IS FOR THE ASSESSING OFFIC ER TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH HI S REASONS. IT IS FOR THE ASSESSING OFFICER TO REACH THE CONCLUSION AS TO WHETHER THERE WAS FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR. IT IS FOR THE ASSESSING OFFICER TO FORM HIS O PINION; IT IS FOR HIM TO PUT HIS OPINION ON 6 ITA NO. 2177/KOL/2017 DEVANSH EXPORTS, AY 2009-10 RECORD IN BLACK AND WHITE. THE REASONS RECORDED SHO ULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENESS. THE REASONS RECORDED MUST DISCLOSE HIS MIND. THE REASONS ARE THE MANIFESTATION OF THE MIND OF THE ASSESSING OFFI CER. THE REASONS RECORDED SHOULD BE SELF- EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSI NG FOR THE REASONS. REASONS PROVIDE THE LINK BETWEEN CONCLUSION AND EVIDENCE . THE REASONS RECORDED MUST BE BASED ON EVIDENCE. T HE ASSESSING OFFICER, IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISC LOSE IN THE REASONS AS TO WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AN D TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR , SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE RE ASONS AND EVIDENCE. THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING OFFICER CANNOT BE SUPPLEM ENTED BY FILING AN AFFIDAVIT OR MAKING AN ORAL SUBMISSION, OTHERWISE , THE REASONS WHICH WERE LACKING IN THE MATERIAL PA RTICULARS WOULD GET SUPPLEMENTED, BY THE TIME THE MATTER REACHES TH E COURT, ON THE STRENGTH OF THE AFFIDAVIT OR ORAL SUBMISSIONS ADVANCED.(EMPHASIS GIVEN BY US) 10. KEEPING IN MIND THE AFORESAID RATIO OF THE DECI SION WE HAVE TO EXAMINE AS TO WHETHER THE JURISDICTIONAL FACT FOR USURPATION OF JURISDICTION U/S. 147 READ WITH SEC. 148 OF THE ACT IS FOUND IN THE REASONS RECORDED BY THE AO AND FOR THAT LET US NOW LOOK AT THE REASONS RECORDED BY THE AO TO REOPEN THE ASSESSMENT 'AN INFORMATION HAS BEEN RECEIVED FROM D.I.T (INV.) , KOLKATA BY HIS LETTER NO.8/0E/2014- 15/2023-25 DATED 2/9/2014 IN WHICH IT HAS BEEN MENT IONED THAT THE ASSESSEE-M/S. DEVANSH EXPORTS HAD EXPORTED IRON ORE TO M/S. S.K. RESOURC ES LTD, HONG KONG. THE ASSESSEE AS WELL AS THE BUYER I.E. M/S. S.K. RESOURCES LTD. ARE ASSOCIA TED ENTERPRISES WITHIN THE MEANING CONTAINED IN SEC. 92A OF THE ACT. IT HAS ALSO BEEN MENTIONED IN THE SAID LETTER OF D.I. T. (INV.) THAT ASSESSEE HAS EXPORTED THE IRON ORE TO VARIOUS END USERS LOCA TED IN CHINA AND THAT THESE WERE ROUTED THROUGH ITS SISTER CONCERN M/S. S.K. RESOURCES LTD. THE PRICE AT WHICH THE IRON ORE WERE EXPORTED TO M/S. S.K. RESOURCES DURING THE YEAR WAS MUCH LESS THAN THE PREVAILING MARKET PRICE OF CHINA BUT THE SAID M/S. S.K. RESOURCES LTD. WOUL D SELL THE GOODS TO THE END USERS AT THE PREVAILING MARKET PRICE. THIS ENTIRE ARRANGEMENT TH US RESULTED IN PROFIT BEING SHIFTED FROM INDIA TO HONG KONG. IT IS SEEN FROM THE AUDITED ACCOUNTS AND OTHER DETA ILS AVAILABLE IN ASSESSMENT RECORD OF THE ASSESSEE THAT DURING THE FINANCIAL YEAR 2008-09, IT EXPORTED 1,15,937 MT OF IRON ORE TO0 M/S. S.K. RESOURCES LTD. AT A TOTAL CONSIDERATION OF RS. 31,13,81,312/-. AS PER D.L. T. (INV.) 'S ABOVE LETTER, THE F.O.B RATE OF SUCH SALE WERE @ VARYING/ RAM $32 TO $90 PER MT DEPENDING ON THE DATE OF SHIPMENT. HOWEVER, THE MARKET PRICE OF THE SAME GOODS PREVAILING IN CHINA DURING THAT PERIOD VARIED FROM $55.50 TO $142.50 PER MT. IT IS THEREFORE CLEAR THAT THE TRANSACTION BETWEEN THE ASSESSEE AND M/S. S. K. RESOURCES LTD. IS IN T HE NATURE OF INTERNATIONAL TRANSACTION WITHIN THE MEANING CONTAINED IN SEC. 92B OF THE ACT AND TH E RATE OF TRANSACTION AS DISCLOSED BY ASSESSEE TO ITS ASSOCIATE ENTERPRISE IS MUCH LESS T HAN THE PREVAILING MARKET PRICE OR BELOW THE ARMS LENGTH PRICE AS DEFINED IN SEC. 92 OF THE ACT . THE ASSESSEE, THEREFORE, VIOLATED THE PROVISIONS OF SEC. 92 OF THE ACT AND I, THEREFORE, HAVE SUFFICIENT REASON TO BELIEVE THAT THE ASSESSMENT OF ASSESSEES CASE FOR THE RELEVANT YEAR ESCAPED ASSESSMENT. 7 ITA NO. 2177/KOL/2017 DEVANSH EXPORTS, AY 2009-10 11. THUS, AS DISCUSSED ABOVE, WHILE RECORDING REASONS , IT IS INCUMBENT UPON THE AO TO FIRSTLY MAKE AN ALLEGATION IN THE REASONS RECORDE D AND THEN ALSO TO MAKE OUT A CASE THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE IMPUGNED ASSES SMENT YEAR. PERUSAL OF THE REASONS RECORDED BY THE AO REVEALS THAT NO SUCH ALLEGATION HAS BEEN MADE IN THE REASONS. THUS, THE CONDITION PRECEDENT TO ENABLE THE AO TO REOPEN THE ORIGINAL ASSESSMENT COMPLETED ORDER DATED 16-05-2011 PASSED U/S 143(3), IS FOUND TO BE CLEARLY MISSING HERE. SO MUCH SO, EVEN IN THE RE-ASSESSMENT PROCEEDINGS, THE AO HAS NOWHER E BEEN ABLE TO SHOW ANYTHING FROM WHICH IT COULD BE INFERRED THAT THERE WAS ANY FAILU RE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E ASSESSMENT OF THE ASSESSEE. THE LD. DRP DID NOT ADJUDICATE THE CHALLENGE TO THE REOPENING O F ASSESSMENT ON THE GROUND THAT IT HAS NO POWER TO ANNUL THE PROCEEDING AND IN CASE THE ASSE SSEE WANTED SUCH A RELIEF IT SHOULD HAVE PREFERRED APPEAL BEFORE LD. CIT(A) AND DID NOT TOU CH THE ISSUE. THE LD. DR URGED BEFORE US THAT THE DRP HAS MENTIONED IN THE ORDER THAT ASS ESSEE HAS NOT PRESSED THIS GROUND. HOWEVER, THE LD. AR BROUGHT TO OUR NOTICE THAT LD. DRP INCORRECTLY RECORDED SUCH A PLEA AND THE ASSESSEE HAS NOT MADE ANY SUCH CONCESSION B EFORE THE LD. DRP. IN ORDER TO BOLSTER HIS ARGUMENT, THE LD. AR DREW OUR ATTENTION TO PAGE 268 OF PAPER BOOK WHICH IS A LETTER DATED 29.08.2017 FILED BEFORE THE LD. DRP U/S. 154 OF THE ACT (RECTIFICATION APPLICATION) WHEREIN PAGE 271 THE ASSESSEE HAS PLEADED AS UNDER: WE WOULD LIKE TO SPECIFICALLY DRAW YOUR ATTENTION TO THE ABOVE IN LIGHT OF THE STATEMENT FORMING PART OF THE DRP DIRECTIONS, WHEREIN YOUR HO NOURS HAVE MISTAKENLY STATED THAT THE ASSESSEE DID NOT INSIST ON THE REPORT TO BE RECEIVE D FROM THE AO AND SUBSEQUENTLY DISPOSED OFF THE PRIMARY GROUND OF THE ASSESSEE WITHOUT PROV IDING ANY BASIS FOR THE SAME. FURTHER, YOUR HONOURS HAVE ALSO INADVERTENTLY DIRECTED THE A O TO DISPOSE OFF THE SAID GROUND BEFORE PASSING THE FINAL ASSESSMENT ORDER WITHOUT PROVIDIN G DUE CONSIDERATION TO THE SAME AS STATED VIDE PARA 2 (REFER PAGE 2) THE AFORESAID DIRECTIONS FOR BOTH THE AYS UNDER CONSIDEATION THAT . THE ASSESSEE DID NOT PRESS THIS GROUND OF OBJEC TION. THIS GROUND OF OBJECTIONS IS THEREFORE REJECTED AS NOT PRESSED. WE WOULD LIKE TO REITERATE THAT THE GROUND HAS BEEN PRESSED BY THE ASSESSEE IN THE COURSE OF ALL SUBMIS SIONS FILED IN THE COURSE OF TP ASSESSMENT PROCEEDINGS AS WELL AS THE HEARINGS AND SUBMISSIONS BEFORE YOUR HONOURS, AND HENCE THE SAME BE CONSIDERED AS A GROUND DULY PRESSED BY THE ASSESSEE. 12. THE LD. AR BROUGHT TO OUR ATTENTION THAT THE LD . DRP DISPOSED OFF THE SEC. 154 PETITION OF ASSESSEE ON 10.11.2017 WHICH IS PLACED AT PAGES 277 TO 281 OF PAPER BOOK, HOWEVER, WE NOTE THAT THE LD. DRP HAS NOT TOUCHED U PON THE AFORESAID PLEA OF THE ASSESSEE 8 ITA NO. 2177/KOL/2017 DEVANSH EXPORTS, AY 2009-10 WHICH GOES ON TO SHOW THAT ASSESSEE HAD NOT MADE AN Y CONCESSION BEFORE THE LD. DRP ON THE LEGAL CHALLENGE AGAINST REOPENING. MOREOVER, T HERE IS NO ESTOPPEL AGAINST LAW AND ANY LEGAL ISSUE CAN BE RAISED EVEN FOR THE FIRST TIME B EFORE THE TRIBUNAL AND SINCE THE LEGAL ISSUE RAISED BEFORE US IS IN RESPECT TO THE JURISDICTION OF AO TO REOPEN THE ASSESSMENT ITSELF, THERE IS NO RESTRICTION TO ADJUDICATE THIS LEGAL ISSUE BE FORE US. 13. WE NOTE THAT IN THE CASE OF HINDUSTAN LEVER LT D VS R.B. WADEKAR (SUPRA) IT HAS BEEN EMPHASIZED BY THE HONBLE BOMBAY HIGH COURT THAT RE ASONS RECORDED BY THE AO MUST CONTAIN THE FINDING WITH REGARD TO THE ALLEGED FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT HAS ALSO BEE N OBSERVED BY THE HONBLE HIGH COURT THAT THE REASONS RECORDED BY THE AO HAVE TO BE READ AS IT IS. THE AO HAS TO SPEAK THROUGH HIS REASONS AND SHOULD DISCLOSE AN OPEN MIND THROUGH REASONS RECORDED BY HIM. THUS, IT IS FOR THE AO TO REACH TO THE CONCLUSION IN HIS REASO NS AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR. 14. AT THE COST OF REPETITION IN THE FACTS OF THE CASE BEFORE US AND IN THE LIGHT OF LAW AS EXPLAINED IN AFORESAID JUDGMENTS, IT IS NOTED THAT NOTHING HAS BEEN RECORDED BY THE AO IN THE REASONS ABOUT ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE FRAMING OF ORIGINA L ASSESSMENT. IT HAS NOWHERE BEEN MENTIONED BY THE AO WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE. THUS, VITAL LINK BETWEEN REASONS AND HIS FINDINGS HAS NOT BEE N ESTABLISHED BY HIM. THIS VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CO NCLUDED ASSESSMENT. THE REASONS RECORDED CANNOT BE SUPPLEMENTED BY WAY OF FURTHER O BSERVATIONS IN THE ASSESSMENT ORDER OR IN ANY OTHER MANNER. THE VALIDITY OF THE REOPENING CAN BE EXAMINED ON THE BASIS OF REASONS ALONE AND NOT IN SUPPLEMENTARY MATERIAL. THUS, TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE REO PENING HAS BEEN DONE WITHOUT COMPLYING WITH THE MANDATORY JURISDICTIONAL CONDITION PRECEDE NT AS STIPULATED IN FIRST PROVISO TO SECTION 147. THUS, REOPENING IS INVALID ON THIS GROUND AND THE ASSESSEE SUCCEEDS ON THE LEGAL ISSUE CHALLENGED BEFORE US. THEREFORE, WE HOLD THAT THE AO WITHOUT SATISFYING THE JURISDICTIONAL PRE-CONDITION AS STIPULATED IN THE FIRST PROVISO TO SEC. 147 OF THE ACT LACKS JURISDICTION TO 9 ITA NO. 2177/KOL/2017 DEVANSH EXPORTS, AY 2009-10 REOPEN THE ORIGINAL ASSESSMENT COMPLETED U/S. 143(3 ) OF THE ACT ON 16.05.2011 AFTER FOUR YEARS. THEREFORE, ALL PROCEEDING SUBSEQUENTLY MADE IS NULL IN THE EYES OF LAW AND SO, WE QUASH THE NOTICE OF REOPENING U/S. 148 AND SUBSEQUE NT AO AND DRPS ORDER IS NULL IN THE EYES OF LAW. 15. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 05/09/201 8 SD/- SD/- (M. BALAGANESH) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5 TH SEPTEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT M/S. DEVANSH EXPORTS, 1, SAROJINI NAIDU SARANI, SHUBHAM, 5 TH FLOOR, KOLKATA-700 017. 2 RESPONDENT ACIT, CIR-32, KOLKATA. 3 4 5 CIT(A)-, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY