M/s. Pawan Industries, Keshod V. The Income Tax Officer, Ward-1(1), JUNAGADH

ITA 242/RJT/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3339 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DM RINDANI
• Keywords: Reopening of assessment; Additional evidence; Difference of opinion; Corroborative evidences; Change of opinion
• Section: 147; 148; 40A(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 242/RJT/2014 (ASSESSMENT YEAR: 2005-06) M/S. PAWAN INDUSTRIES NEAR T.B. HOSPITAL, KESHOD. V/S INCOME-TAX OFFICER WARD- 1(1), JUNAGADH. (APPELLANT) (RESPONDENT) PAN: AADFP8051H APPELLANT BY : SHRI D.M. RINDANI RESPONDENT BY : SHRI PRAVEEN VERMA, SR. DR ( )/ ORDER DATE OF HEARING : 13 -02-201 8 DATE OF PRONOUNCEMENT : 18 -02-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-IV, RAJKOT DATED 28.02.2014 FOR A.Y. 2005-06 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 242/ RJT/2014 . A.Y. 2005-0 6 2 1. THE LD. CIT(A)-IV, RAJKOT ERRED IN CONFIRMING TH E REOPENING OF ASSESSMENT U/S. 148 OF THE I.T. ACT 1961. 2. THE LD. CIT(A)-IV, RAJKOT ERRED IN NOT ADMITTING ADDITIONAL EVIDENCE SUBMITTED BY THE APPELLANT DURING THE COURSE OF APP ELLATE PROCEEDING BY HOLDING THAT THE REASONS GIVEN BY THE APPELLANT DO NOT CONSTITUTE SUFFICIENT CAUSE FOR NOT PRODUCING THE EVIDENCES BE FORE THE ASSESSING OFFICER. 3. THE LD. CIT(A)-IV, RAJKOT FAILED TO APPRECIATE T HAT THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EV IDENCE BEFORE THE ASSESSING OFFICER. 4. ON MERITS, THE LD. CIT(A)-IV, RAJKOT ERRED IN CO NFIRMING THE DISALLOWANCE OF RS. 44,14,099/- MADE BUY THE ASSESSING OFFICER U /S. 40A(3) BY WAY OF GROUNDNUT PURCHASE FROM NON-AGRICULTURIST. 2. THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF VERIFICATION, IT WAS FOUND THAT DURING THE RELEVANT PERIOD, THE ASSESSEE HAS P URCHASED GROUNDNUTS SEED FROM VARIOUS PERSONS IN CASH THAT TOO ABOVE RS. 20, 000/- TO THE TUNE OF RS. 2,55,85,101/-. AS THERE WAS A VIOLATION OF PROVISIO N OF SECTION 40A(3) OF THE ACT, 20% OF EXPENSES OF RS. 51,17,020/- WAS REQUIRE D TO BE DISALLOWED VIDE NOTICE U/S. 142(1) DATED 12.09.2011, THE ASSESSEE W AS REQUESTED TO PROVIDE THE DETAILS OF PURCHASER AND THE REASONS FOR PAYMENT OF PURCHASE AMOUNT IN CASH. IT WAS EXPLAINED THAT THE PAYMENT MADE TO AGRICULTU RIST AGAINST PURCHASES OF GROUNDNUT AND COVERED UNDER EXEMPTION SPECIFIED UND ER RULE 6DD(I) OF THE I.T. RULES, 1961. THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTED AND REQUESTED TO FILE SUPPORTING EVIDENCES TO PROVE THAT THE PURC HASES WERE MADE FROM AGRICULTURIST AND COVERED UNDER RULE 6DD. WITH THIS SUBMISSION, THE ASSESSEE HAS FILED COPIES OF 7/12 UTARA TO PROVE THAT THE PE RSONS FROM WHOM PURCHASES WERE MADE WHERE AGRICULTURIST, THE ASSESSEE HAS FIL ED SUPPORTING EVIDENCES IN ITA NO. 242/ RJT/2014 . A.Y. 2005-0 6 3 RESPECT OF 26 AGRICULTURIST AND THE COST OF PURCHAS E FROM THESE AGRICULTURALIST COMES TO RS. 35,14,606/-. THEREFORE, IT IS CONCLUDE D THAT OUT OF PURCHASE OF RS. 2,55,85,101/-, PURCHASE OF RS. 35,14,606/- WERE MAD E FROM AGRICULTURIST. THUS, THE ASSESSEE HAS VIOLATED THE SECTION 40A(3) IN RES PECT OF RS. 2,20,70,495/- AND THEREFORE, 20% OF RS. 2,20,70,495/- WHICH COMES TO RS. 44,14,099/-. THEREFORE, AN AMOUNT OF RS. 44,14,099/- IS DISALLOW ED AND ADDED TO THE INCOME THE ASSESSEE. 3. THEREAFTER APPEAL WAS PREFERRED TO THE LD. CIT(A) W HO CONFIRMED THE ACTION THAT OF LD. A.O. 4. NOW ASSESSEE HAS COME BEFORE US. 5. LD. A.R. RAISED THE ISSUE THAT NOTICE ISSUED U/S. 1 47/188 ARE NOT FULFILLED AS PER THE SPIRIT OF THE INCOME TAX ACT AND STATED THAT LD . A.O. HAS NOT RECORDED HIS SATISFACTION AND REASONS. WE CALLED FOR THE RECORD AND WE FOUND THAT NO REASONS WERE RECORDED BY THE A.O. AND ON THE BASIS OF THE A UDIT OBJECTION LD. A.O. ISSUED NOTICE TO THE ASSESSEE. 6. AT THE OUTSET, LD. A.R. CITED AN ORDER OF CO-ORDINA TE BENCH IN ITA NO. 241/RJT/2014 WHEREIN IN SIMILAR CIRCUMSTANCES, MATT ER WAS DECIDED IN FAVOUR OF THE ASSESSEE AND RELEVANT PARA OF THE ITAT ORDER IS REPRODUCED: 8.4 IN THE BACKGROUND OF AFORESAID FACTS, WE NOW TA KE NOTICE OF THE REASONS RECORDED(SUPRA). A BARE PERUSAL OF THE REASONS RECO RDED SUGGESTS THAT THE AO HAS PROPELLED HIMSELF TO ACT ON THE FINDINGS OF THE INT ERNAL AUDIT PARTY. ALTHOUGH THE AO HAS REITERATED THE STATUTORY LANGUAGE EMPLOYED I N SECTION 147 OF THE ACT THAT HE HOLDS REASONS TO BELIEVE THAT CHARGEABLE INCOME TO THE EXTENT OF RS.23,78,800/- HAS ESCAPED ASSESSMENT, WE DO NOT FI ND ANY PROCESS OF REASONING FOR HOLDING SUCH BELIEF EXCEPT REFERENCE TO THE MEM O OF THE INTERNAL AUDIT PARTY. ITA NO. 242/ RJT/2014 . A.Y. 2005-0 6 4 IT IS NOT DISCERNIBLE FROM THE REASONS RECORDED AS TO HOW THE ENQUIRY MADE ON THE VERY ISSUE AT THE TIME OF THE ORIGINAL ASSESSMENT S UFFERED FROM ERROR AND WAS UNSUSTAINABLE ON FACTS AND LAW. IT IS WELL SETTLED THAT MARE REVIEW OF EXISTING FACTS BY THE SAME AUTHORITY LATER TO COME TO A DIFF ERENT CONCLUSION AND THEREBY RE-OPENING THE COMPLETED ASSESSMENT IS NOT PERMISSI BLE IN LAW. NOTABLY, SECTION 40A(3) IS NOT PLENARY IN NATURE BUT IS SUBJECT TO C ERTAIN EXCEPTIONS AS PROVIDED IN RULE 6DD OF THE IT RULES 1963. THEREFORE, WHILE RAI SING SPECIFIC QUESTION ON THE SUBJECT MATTER IN CONTROVERSY AND THEREAFTER ACCEPT ING THE CASH PURCHASES WOULD GIVE LOGICAL INFERENCE THAT AN OPINION ON THE ISSUE WAS FRAMED BY THE STATUTORY AUTHORITY WHEREBY DISALLOWANCE UNDER S.40A(3) WAS N OT FOUND ATTRACTED. BESIDES, ON REVIEW OF EXISTING FACTS ON RECORDS, THE INTERNA L AUDIT PARTY APPEARS TO HAVE COME TO A DIFFERENT CONCLUSION. THE AO SEEMS TO HAV E MERRILY ADOPTED THE OPINION OF THE INTERNAL AUDIT PARTY AS REASON TO BE LIEVE ON ESCAPEMENT OF INCOME WITHOUT ANY INDEPENDENT APPLICATION OF MIND. NEEDLE SS TO SAY, RE-OPENING IS NOT PERMISSIBLE ON A MERE CHANGE OF OPINION ON THE SAME ISSUE EXAMINED EARLIER. THEREFORE, IT IS DIFFICULT TO AGREE THAT THE AO HAS PASSED THE STRINGENT REQUIREMENT OF LAW FOR CONFERMENT OF POWER UNDER S. 147 OF THE ACT. SECTION 147 IS A SUBSTANTIVE PROVISION GRANTING JURISDICTION TO REOPEN COMPLETED ASSESSMENT AND THEREFORE CONDITIONS STIPULATED THEREIN ARE STR ICTLY REQUIRED TO BE ADHERED. SECTION 147 IS STRUCTURED WITH INBUILT SAFEGUARDS. THE AO IS NOT PERMITTED EXERCISE THE POWER UNDER S.147 ARBITRARILY OR MECHA NICALLY. 9. IN THE INSTANT CASE, WE FIND THAT THE ACTION UND ER S.147 WAS SOUGHT TO BE TAKEN IN RESPECT OF ASSESSMENT COMPLETED UNDER S.143(2) E ARLIER AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT ORDER ALL EGING ESCAPEMENT OF INCOME FROM TAXATION. THEREFORE, THE ACTION OF THE AO IS A LSO REQUIRED TO BE TESTED ON THE TOUCHSTONE OF EMBARGO PLACED BY THE FIRST PROVISO T O SECTION 147 OF THE ACT. THE FIRST PROVISO TO SECTION 147 OF THE ACT PLACES ADDI TIONAL RESTRICTIONS ON THE AO FOR USURPTION OF JURISDICTION. AS PER THE PROVISO, THE ESCAPEMENT OF CHARGEABLE INCOME SHOULD BE BY REASONS OF THE FAILURE ON THE P ART OF THE ASSESSEE TO INTER- ALIA DISCLOS FULLY AND TRULY ALL MATERIAL FACTS NEC ESSARY FOR ASSESSMENT OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR. WE DO NO T FIND ANYTHING IN THE REASONS RECORDED WHICH GOES TO DEMONSTRATE THAT THE ASSESSEE HAS FAILED TO DISCLOSE ANY MATERIAL FACT RELEVANT FOR ASSESSMENT. AT THE FIRST PLACE, THERE IS NO ALLEGATION OF THE AO ON THIS SCORE IN THE REASONS R ECORDED AS NOTED ABOVE. WE DO NOT FIND ANYTHING ON RECORD TO SHOW AS TO WHAT MATE RIAL FACTS REMAINED TO BE DISCLOSED BY THE ASSESSEE IN THE ORIGINAL ASSESSMEN T PROCEEDINGS. THE RE- ASSESSMENT ORDER PASSED UNDER S.147 ALSO DOES NOT P ORTRAY ANY CONCERN OF THE ITA NO. 242/ RJT/2014 . A.Y. 2005-0 6 5 AO ON THIS ASPECT. OSTENSIBLY, THE CONDITIONS STIPU LATED UNDER FIRST PROVISO UNDER S.147 IS NOT COMPLIED WITH. IN THIS EVENT, PROVISIO NS OF SECTION 147 OF THE ACT COULD NOT HAVE BEEN TRIGGERED. THE ENTIRE REASSESSMENT PR OCEEDINGS, THUS, IS WITHOUT JURISDICTION AND LIABLE TO ANNULLED. THE CONSEQUENT RE- ASSESSMENT ORDER IS ALSO THEREFORE LIABLE TO BE STRUCK DOWN AND CANCELLED. W E DO SO ACCORDINGLY. 10. IN VIEW OF OUR FINDING THAT THE ISSUANCE OF NOT ICE UNDER S.147/148 IS VOID AB INITIO AND ACCORDINGLY RE-ASSESSMENT ORDER IS WITHO UT JURISDICTION AND THEREFORE ILLEGAL, WE DO NOT CONSIDER IT EXPEDIENT TO DEAL WI TH THE MERITS OF THE FACTUAL ASPECTS OF THE CASE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 7. THEREFORE, HAVING PARITY WITH THE ORDER OF THE CO-O RDINATE BENCH AND SINCE MATTER HAS BEEN DECIDED BY THE BENCH IN FAVOUR OF A SSESSEE IN SIMILAR CIRCUMSTANCES; THEREFORE, WE ALLOW THIS GROUND OF A PPEAL OF THE ASSESSEE. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 18 - 02- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 18 /02/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD