M/s. Kuvawala Drill Equip, Pune V. Income-tax Officer, HQ-6(2), Pune

ITA 2534/PUN/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2339 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-10-2021
• Assessment Year: 2010-2011
• Appeal Filed On: 03-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D P SHROFF
• Keywords: Reason to believe; Reassessment proceedings
• Section: 69C; 143(3); 147; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, PUNE BEFORE SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, J UDICIAL M EMBER . / ITA NO S . 2534 & 2535 /PUN/20 17 / ASSESSMENT YEARS : 2010 - 11 & 2011 - 12 M/S. KUVAWALA DRILL EQUIP SUB PLOT NO.2, FINAL PLOT NO.68, RAMTEKDI, INDL ESTATE, HADAPSAR, PUNE - 411 013 PAN : AAIFK4139Q ....... / APPELLANT / V/S. THE INCOME TAX OFFICER, HQ - 6(2), PUNE. / RESPONDENT A SSESSEE BY : SHRI D.P SHROFF REVENUE BY : SHRI PIYUSH KUMAR SINGH YA DAV / DATE OF HEARING : 2 1 . 10 .2021 / DATE OF PRONOUNCEMENT : 26 .10 .2021 / ORDER PER BENCH : THESE TWO APPEALS PREFERRED BY THE ASSESSEE EMANATES FROM THE DIFFERENT ORDERS OF THE LD. CIT(APPEALS) - 7, PUNE DATED 03.07.2017 FOR THE ASSESSMENT YEARS 2010 - 11 & 2011 - 12 AS PER THE GROUNDS OF APPEAL ON RECORD. 2 ITA NO S . 2534 & 2535 /PUN/20 17 A.Y S . 2010 - 11 & 2011 - 12 2. PARTIES HEREIN AGREED THAT IN BOTH THESE APPEALS COMMON ISSUES ARE INVOLVED ON SIMILAR SET OF FACTS AND CIRCUMSTANCES. THEREFORE, BOTH THE APPEALS WERE HEARD TOGETHER AND DISPOSED OF VIDE THIS CONSOLIDATED ORDER. 3. AT THE VERY OUTSET, THE LD. AR SUBMITTED THAT THEY HAVE RAISED BOTH, LEGAL GROUND AS WELL AS GROUND ON MERITS IN TH E GROUNDS OF APPEAL IN THE APPEAL MEMO FILED BEFORE US. THAT SO FAR AS LEGAL GROUND IS CONCERNED, IN RESPECT OF BOTH THESE APPEALS, IT IS THE CONTENTION OF THE ASSESSEE THAT RE - OPENING OF ASSESSMENT PROCEEDINGS U/S.147/148 OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED TO AS THE ACT) BY THE ASSESSING OFFICER IS NOT VALID IN LAW HENCE, VOID AB - INITIO SINCE THERE HAS NOT BEEN ANY INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER TO FORM REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THAT THE ASSESSING OFFICER HAS SIMPLY RELIED ON THE INFORMATION S RECEIVED FROM THE SALES TAX DEPARTMENT AND HAD RESORTED TO REASSESSMENT PROCEEDINGS AND HENCE, WHETHER SUCH ACTION OF THE ASSESSING OFFICER WAS JUSTIFIED WITHIN THE LEGAL PARAMET ER S OF THE ACT. THIS LEGAL GROUND IS RAISED IN THE FORM OF ADDITIONAL GROUNDS BEFORE US. 4. FIRST WE TAKE UP THE LEGAL GROUND RAISED BEFORE US FOR ADJUDICATION IN RESPECT OF THESE APPEALS, TAKING ITA NO.2534/PUN/2017 FOR THE ASSESSMENT YEAR 2010 - 11 AS TH E LEAD CASE. ITA NO.2534/PUN/2017 A.Y.2010 - 11 5. THE BRIEF FACTS DEMONSTRATES THAT AT PARA 2 OF THE ASSESS MENT ORDER, THE REASON TO BELIEVE RECORDED BY THE ASSESSING OFFICER WAS AS FOLLOWS: THE ASSESSEE FILED HIS RETURN OF INCOME FOR AY 2010 - 11 DECLARING TOTAL INCOME OF RS.81,67,464/ - WAS FILED ON 07.10.2010, THE RETURN WAS PROCESSED U/S.143(1) OF THE IT ACT, 1961. 3 ITA NO S . 2534 & 2535 /PUN/20 17 A.Y S . 2010 - 11 & 2011 - 12 THE SALES TAX DEPARTMENT HAS SENT INFORMATION WHEREIN THE SALES TAX DEPARTMENT UNEARTHED RACKET OF HAWALA DEALERS WHO HAVE ISSUED FAKE PURCHASE BILLS TO THE VARIOUS TRADERS AND IN THE INSTANT CASE SHOWING HAWALA TRANSACTIONS AMOUNTING TO RS.8,87,389/ - FOR FY 2009 - 10 IN THE RELEVANT ASSESSMENT YEAR 2010 - 11, IN RESPECT OF KUVAWALA DRILL EQUIP AS UNDER: SR. NO . NAME OF THE PARTY SUPPLYING BOGUS BILLS AMOUNT 1 TISCON SALES AGENCY PVT. LTD. 8,87,389 TOTAL 8,87,389 THESE TRANSACTIONS RELATE TO BOGUS BILLS, FAKE PURCHASES BILLS AND FAKE PURCHASES. NON GENUINE BILLS UTILIZED BY THE SAID ASSESSEE TO INFLATE THE EXPENSES OR REDUCE ITS TOTAL INCOME. IN VIEW OF THE INFORMATION ABOVE, I HAVE THE REASON TO BELIEVE THAT AN INCOME TO THE EXTENT OF RS.8,87,389/ - FOR A.Y. 2010 - 11 HAS ESCAPED ASSESSMENT. 6. T HE ASSESSEE HAD APPEARED BEFORE THE ASSESSING OFFICER FROM TIME TO TIME AND SUBMITTED VARIOUS EVIDENCES/DETAILS WHICH WERE PRODUCED BEFORE THE ASSESSING OFFICER ACCORDINGLY. HOWEVER, THE FACT NOTED IS THAT IN THE ENTIRE ASSESSMENT ORDER, IT IS EVIDENT THAT THE ONLY REASON FOR WHICH THE ASSESSING OFFICER HAS FORMED REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.8,87,389/ - FOR THE ASSESSMENT YEAR 2010 - 11 HAS ESCAPED ASSESSMENT IS FROM THE INFORMATION OF THE SALES TAX DEPARTMENT AND NOTHING ELSE. THE ASSE SSING OF FICER NOWHERE IN HIS ORDER HAS SPECIFICALLY GIVEN REASONS WHETHER ON EXAMINATION OF MATERIALS ON RECORD OR BY WAY OF CONDUCTING ENQUIRY TO ARRIVE AT REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT THUS JUSTIFYING HIS ACTION S FOR RESORTING TO SECTIONS U/S.147/148 OF THE ACT. 7. WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PR. COMMISSIONER OF INCOME TAX VS. VAMAN INTERNATIONAL PVT. LTD., ITA NO.1940 OF 2017 WHEREIN THE QUESTION WAS WITH REGARD TO ADDITION U/S.69C 4 ITA NO S . 2534 & 2535 /PUN/20 17 A.Y S . 2010 - 11 & 2011 - 12 OF THE ACT AND IT WAS HELD BY THE HONBLE BOMBAY HIGH COURT THAT MERE RELIANCE BY THE ASSESSING OFFICER ON INFORMATION S OBTAINED FROM THE SALES TAX DEPARTMENT OR THE STATEMENTS OF TWO PERSONS MADE BEFORE THE SALES TAX DEPARTMENT WOULD NOT BE SUFFICIENT TO TREAT THE PURCHASES AS BOGUS AND THEREAFTER , TO MAKE ADDITION UNDER SECTION 69C OF THE ACT. THE HONBLE HIGH COURT FURTHER OBSERVED THAT TRIBUNAL IN THIS CASE HAD HELD THAT IF THE ASSESSING OFFICER HAD DOUBTED THE GENUINENESS OF THE PURCHASES, IT WAS INCUM BENT UPON THE ASSESSING OFFICER TO HAVE CAUSED FURTHER ENQUIRIES IN THE MATTER TO ASCERTAIN GENUINENESS OR OTHERWISE OF THE TRANSACTIONS. 8. REVERTING TO THE FACTS OF THE PRESENT CASE, THOUGH HEREIN THE ISSUE IS OF RE - OPENING OF THE ASSESSMENT U/S.147/14 8 OF THE ACT, THE GUIDING PRINCIPLES IS THAT IT IS MANDATORY FOR THE ASSESSING OFFICER TO CONDUCT INDEPENDENT ENQUIRY AND EXAMIN E THE FACTS ON RECORD TO ARRIVE AT A REASONING AND SATISFACTION SO TO JUSTIFY HIS REASON TO BELIEVE THAT INCOME HAS ESCAPED AS SESSMENT. IN THE PRESENT CASE, THE ONLY RELIANCE MADE BY THE ASSESSING OFFI CER FOR RE - OPENING PROCEEDING I S BASED ON THE SATISFACTION OF SALES TAX DEPARTMENT (I.E. THE INFORMATION RECEIVED FROM THEM) AND NOT HIS OWN INDEPENDENT SATISFACTION THROUGH PROPER APPLICATION OF MIND. 9. WE FIND SECTION 147 OF THE ACT IS CATEGORICALLY CLEAR THAT IF THE ASSESSING OFFICER HAS REASON TO BELIEVE.. M EANING THEREBY, THE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT HAS TO BE FORMED INDEPENDENTLY BY THE ASSESSING OFFICER AND HE CANNOT RELY ON THE SATISFACTION ARRIVE AT BY ANY OTHER AGENCIES WHATSOEVER FOR RESORTING TO PROVISION S OF SECTION 147 OF THE ACT. IT IS ALWAYS THE SATISFACTION OF THE ASSESSING OFFICER AND NO ONE ELSE IN THE CASE OF RE - ASSESSMENT PROCEEDINGS. FURTHER, THE FACTS ON RECORD DEMONSTRATES THAT THE ORIGINAL ASSESSMENT WAS COMPLETED 5 ITA NO S . 2534 & 2535 /PUN/20 17 A.Y S . 2010 - 11 & 2011 - 12 U/S.143(3) OF THE ACT AND IF AGAIN RE - ASSE SSMENT PROCEEDINGS ARE TO BE INITIATED THEN THE ASSESSING OFFICER MUST DEMONSTRATE WHAT ARE THE FRESH MATERIALS ON RECORD WHICH WERE EARLIER NOT THERE OR NOT CONSIDERED DURING THE TIME OF SCRUTINY ASSESSMENT U/S.143(3) OF THE ACT. THE ASSESSING OFFICER SHO ULD BRING OUT THAT THESE ARE THE FRESH EVIDENCES WHICH WERE EARLIER NOT CONSIDERED AND IF THE ASSESSING OFFICER CANNOT JUSTIFY HIS STAND BY GIVING HIS INDEPENDENT REASONING REGARDING DOCUMENTARY EVIDENCES AVAILABLE ON RECORD AND IF THE ASSESSING OFFICER HA S NOT CONDUCTED ANY INDEPENDENT ENQUIRY REGARDING THESE DOCUMENTARY EVIDENCES ON RECORD, IN SUCH SCENARIO, THE ACTION OF THE ASSESSING OFFICER CANNOT BE HELD TO BE JUSTIFIED. 10. WE TAKE GUIDANCE FROM THE JUDGMENTS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. FAIR FINVEST LTD., 357 ITR 146 (DELHI) AND CIT VS. KAMDHENU STEEL & ALLOYS LTD, 361 ITR 220 (DELHI) . IN SECTION 14 7 OF THE ACT , THE PRE - REQUISITE CONDITION WHICH CAN BE SAID TO BE SINE - QUA NONEST IS THAT THE ASSESSING OFFICER HAS REASON T O BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS HAS BEEN HELD BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHREE RAJASTHAN SYNTEX LTD, 313 ITR 231 THAT THE ASSESSING OFFICER COULD NOT RESORT TO RE - ASSESSMENT ON BORR OWED SATISFACTION AND IT HAS TO BE ALWAYS INDEPENDENT SATISFACTION OBTAINED FROM EXAMINATION O F FACTS ON RECORD. 11. IN THE PRESENT CASE BEFORE US, THERE IS NOTHING ON RECORD TO S HOW THAT THE ASSESSING OFFICER HAD INITIATED REASSESSMENT PROCEEDING IN PURSUANCE OF ANY NEW INFORMATION AVAILABLE IN HIS POSSESSION. THE LD.DR COULD NOT DEMONSTRATE BEFORE US BY PLACING ANY EVIDENCES ON RECORD THAT THE ASSESSING OFFICER HAS MADE AN INDEPENDENT APPLICATION OF MIND TO ARRIVE AT REASON TO BELIEVE THAT ANY INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE LD. 6 ITA NO S . 2534 & 2535 /PUN/20 17 A.Y S . 2010 - 11 & 2011 - 12 DR ALSO COULD NOT REFUTE THE FACTS CONTAINING IN THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER U/S.147/148 OF THE ACT THAT IT IS ONLY FROM THE INFORMATION RECEIVED BY SALES TAX DEPARTMENT THAT TH E ASSESSING OFFICER HAS FORMED REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IN RESPECT OF THE ASSESSEE. 12. WE ARE OF THE CONSIDERED VIEW THAT IN THIS CASE WHEN ORIGINAL ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED , THERE IS NO FRESH MATERIALS / DOCUMENTARY EVIDENCES BEFORE THE ASSESSING OFFICER WHICH WERE EARLIER NOT CONSIDERED DURING THE SCRUTINY ASSESSMENT AND THAT WHEN THE RE - ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED MERELY FROM INFORMATION RECEIVED FROM SALES TAX DEPARTMENT AND NOT BY COND UCTING ANY INDEPENDENT ENQUIRY OR VERIFICATION OF FACTS BY THE ASSESSING OFFICER TO ARRIVE AT REASON TO BELIEVE , WE ARE OF THE CONSIDERED VIEW THEREFORE, THE FUNDAMENTAL REQUISITE OF SECTION 147 OF THE ACT IS NOT SATISFIED IN THIS CASE AND WE HOLD THE RE - ASSESSMENT PROCEEDINGS UNDERT AKEN BY THE ASSESSING OFFICER BEING INVALID IN LAW , VOID AB - INITIO . ACCORDINGLY, THE ORDER OF ASSESSING OFFICER PASSED U/S. 143(3) R.W.S.147 OF THE ACT IS QUASHED . 13. SINCE THE ASSESSE GETS RELIEF ON THE LEGAL GROUND RAISED BEFORE US, IN SUCH SCENARIO, THE GROUNDS PERTAINING TO MERITS BECOMES INFRUCTUOUS. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.2534/PUN/2017 FOR THE ASSESSMENT YEAR 2010 - 11 IS ALLOWED. ITA NO.2535/PUN/2017 A.Y. 2011 - 12 15. BOTH THE PARTIES HEREIN UNANIMOUSLY AGREED THAT FACTS AND ISSUES INVOLVED IN ITA NO.2535/PUN/2017 FOR THE ASSESSMENT YEAR 2011 - 12 ARE ABSOLUTELY SIMILAR AND IDENTICAL TO ITA NO.2534/PUN/2017 FOR THE 7 ITA NO S . 2534 & 2535 /PUN/20 17 A.Y S . 2010 - 11 & 2011 - 12 ASSESSMENT YEAR 2010 - 11, THEREFORE, OUR DECISION RENDERED IN ITA NO.2534/PUN/2017 FOR THE ASSESSMENT YEAR 2010 - 11 SHALL MUTATIS - MUTANDIS APPLY TO ITA NO.2535/PUN/2017 FOR THE ASSESSMENT YEAR 2011 - 12. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.2535/PUN/2017 FOR THE ASSESSMENT YEAR 2011 - 12 IS ALLOWED. 17 . IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRO NOUNCED ON 26 TH DAY OF OCTOBER , 20 2 1 . S D/ - S D/ - INTURI RAMA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 26 TH OCTOBER , 202 1 SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT( APPEALS) - 7, PUNE. 4. THE CIT - 6, PUNE. 5. , , , / DR, ITAT, C BENCH, PUNE. 6 . / GUARD FILE. / BY ORDER, // T RUE C OPY // / PRIVATE SECRETARY , / ITAT, PUNE . 8 ITA NO S . 2534 & 2535 /PUN/20 17 A.Y S . 2010 - 11 & 2011 - 12 DATE 1 DRAFT DICTATED ON 2 1 .10 .202 1 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 2 6 .10 .202 1 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER