Income tax Officer, V. Jayprakash Prabhakaran Nair, Nashik

ITA 2729/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9168 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 02-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Bogus purchase; Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKAR A RAO, AM . / ITA NOS.2729 & 2730/PUN/2016 / ASSESSMENT YEARS : 2009-10 & 2010-11 ITO, WARD-2(3), NASHIK . /APPELLANT VS. SHRI JAYPRAKASH PRABHAKARAN NAIR, PROP. OF ELECTRO TECH ELECTRICALS, K-4, MIDC, AMBAD, NASHIK 10 PAN : ABJPN2630F . / RESPONDENT / APPELLANT BY : DR. VIVEK AGGARWAL / RESPONDENT BY : SHRI SANKET JOSHI / DATE OF HEARING : 21.03.2018 / DATE OF PRONOUNCEMENT:23.03.2018 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE 2 APPEALS FILED BY THE REVENUE UNDER CONSIDERA TION. THEY ARE FILED AGAINST THE COMMON ORDER OF CIT(A)-2, NASHIK, DAT ED 09-09-2016 FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11. REVENUE RAISED SIMILAR GROUNDS FOR BOTH THE ASSESSMENT Y EARS. THEREFORE, WE PROCEED TO FIRST DEAL WITH THE APPEAL FOR A.Y. 2009-10. ITA NO.2729/PUN/2016 A.Y. 2009-10 2. GROUNDS RAISED BY THE REVENUE READ AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A)- 2, NASHIK WAS JUSTIFIED IN DELETING THE ADDITION OF RS.34,22,536/ - ON ACCOUNT OF ALLEGED BOGUS PURCHASES FROM HAWALA DEALERS /PAR TIES? 2 2. WHETHER THE LD. CIT(A)-2, NASHIK WAS JUSTIFIED I N DELETING THE PURCHASES TREATED AS BOGUS, WHEN THE ASSESSEE HAS NOT BEEN AB LE TO PRODUCE THE CERTAIN PARTIES FROM WHOM PURCHASE WERE MADE WHEN LETTERS S ENT TO THE PARTIES WERE RETURNED BACK AS UNDELIVERED OR THE PARTIES DID NOT RESPOND? 3. WHETHER THE LD. CIT(A)-2, NASHIK SHOULD HAVE CON SIDERED THE FACT THAT THE ONUS WAS ON THE ASSESSEE TO LIST OUT THE BOGUS SALE S AND GET THE PURCHASES VERIFIED WHEN REQUIRED TO DO SO, ESPECIALLY SUCH PU RCHASES WERE VERY SUBSTANTIAL. ? 4. WHETHER THE LD CIT(A)-2,NASIK ERRED IN PRESUMING THAT THE PURCHASES WERE ONLY INFLATED WHEN IT WAS CLEAR FROM THE ASSESSEE, THE PARTIES FOUND MISSING AND RESULTS OF THE INVESTIGATION OF ANOTHER GOVT. D EPARTMENT (SALES TAX), THAT THE PURCHASES COULD NOT BE PROVED AS GENUINE AND TH EREFORE THE DISALLOWANCE BY THE AO WAS JUSTIFIED? 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT (A)-2, NASHIK MAY PLEASE BE CANCELLED AND THE ORDER OF ASSESSING OFFI CER MAY PLEASE BE RESTORED. 6. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDE NCE TO SUBSTANTIATE HIS CASE. 7. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIFY , AMEND AND OR WITHOUT ANY GROUNDS OF APPEAL AS AND WHEN THE OCCASION DEMA NDS. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF ELECTRICAL TRADING AND JOB WORK. ASSESSEE FILED THE RETURN OF INCOME ON 19-09-2009 DECLARING TOTAL INCOME OF RS.6,62,760/-. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, AO NOTICED THAT ASSESSEE MADE PURCHASES WORTH RS.38,02 ,818/- IN THIS YEAR FROM 4 SUPPLIERS/ENTRY PROVIDERS. ASSESSEE SUBMITTE D VARIOUS DETAILS REGARDING THE DELIVERY CHALLANS, BANK STATEMENTS, PT & VAT PAYMENT DETAILS, DETAILS OF CREDITORS/DEBTORS, ETC. HOWEVER, AO WANTE D PRODUCTION OF PARTIES BEFORE HIM TO VERIFY THE PURCHASES. ASSESSEE EX PRESSED HIS INABILITY TO PRODUCE THE PARTIES. HOWEVER, ASSESSEE CONTESTED T HE PROPOSAL FOR MAKING ENTIRE PURCHASES AS ADDITION IGNORING THE DOCUMENT ATION RELATING TO THE GENUINENESS OF THE PURCHASES AND TRAIL OF GOODS. EVE NTUALLY, THE AO DISALLOWED THE PURCHASES AND MADE ADDITION OF RS.38,02,818/- IN THE ASSESSMENT COMPLETED U/S.143(3) R.W.S. 147 OF THE ACT. SIMILARLY, ADDITION FOR THE A.Y. 2010-11 WORKS OUT TO RS.33, 31,064/-. OTHERWISE, THE RELEVANT FACTS ARE SIMILAR TO THE ONES OF A.Y. 2009-10. 3 4. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE MADE VARIOUS SUBMISSIONS BOTH ON MERITS AS WELL AS ON LEGAL ISSUES. ASSE SSEE RAISED THE LEGAL ISSUE BEFORE THE CIT(A) FOR QUASHING OF THE REASSESSME NT PROCEEDINGS FOR FAILURE OF THE AO IN FURNISHING THE REASONS FOR RE-OPENING OF THE ASSESSMENT DESPITE THE WRITTEN REQUEST FROM THE ASSESS EES SIDE. ON MERITS OF ADDITION, THE CIT(A) ESTIMATED THE PROFITS AT 10% OF THE SAID 4 PURCHASES AMOUNTING TO RS.38,02,818/- FOR THE A.Y. 2009-10 AND RS.33 ,31,064/- FOR A.Y. 2010-11 AND RESTRICTED THE ADDITION ACCORDINGLY. CIT (A) APPRECIATED THE FACTS RELATING TO TRAIL OF GOODS AND THE PAYMENTS. HO WEVER, CIT(A) QUASHED REASSESSMENT PROCEEDINGS AS PER HIS DECISION IN PARA 8.1 OF HIS ORDER. THERE ARE NO APPEALS FROM THE ASSESSEE AGAINST PARTLY CONFIRMING OF THE ADDITION ON THE PURCHASES TO THE EXTENT OF 10%. HOW EVER, REVENUE FILED THE PRESENT APPEALS ON MERITS WITH 7 GROUNDS. ON ANALY SING THE SAME, WE FIND THE GROUND NOS. 1 TO 4 RELATES TO THE MERITS OF ADDIT ION. GROUND NO.5 RELATES TO THE CONCLUSION OF THE CIT(A) WITH REFERENCE TO THE REASSESSMENT ORDER AND ITS VALIDITY. GROUND NOS. 6 AND 7 ARE GENERAL IN NATURE. 5. BEFORE US, LD. DR FOR THE REVENUE SUBMITTED THAT GRO UND NO.5 CAN BE EXTENDED TO INCLUDE THE RELIEF GRANTED TO THE ASSESSE E ON THE LEGAL ISSUE RELATING TO THE VALIDITY OF THE REOPENING OF THE ASSESSMENT . LD. DR SUBMITTED FOR RESTORING THE ORDER OF THE AO. 6. PER CONTRA, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T IT IS SETTLED ISSUE THAT IN THE CASES REOPENED BY THE AUTHORITIES AFTE R THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (IND IA) LTD. VS. ITO 125 TAXMANN 963, THERE IS REQUIREMENT OF QUASHING OF THE RE-ASSESSMENT PROCEEDINGS WHEN THERE IS OBVIOUS FAILURE ON PART OF THE AO IN FURNISHING OF THE REASONS AGAINST THE WRITTEN REQUEST OF THE ASS ESSEE. THIS IS A 4 RELEVANT CASE WHERE SUCH JUDGMENT APPLIES AS THE RE-O PENING IS DONE MUCH AFTER THE SAID JUDGMENT IS PRONOUNCED. 7. WE HEARD BOTH THE PARTIES ON THIS LEGAL ISSUE RELATING TO QUASHING OF THE RE-ASSESSMENT PROCEEDINGS WHEN THE REASONS RECOR DED BY THE AO WERE NOT FURNISHED BY THE ASSESSEE DESPITE THE WRITTEN REQUE ST OF THE ASSESSEE. WE FIND THERE IS NO DISPUTE ON THE FACT THAT THE REOPENIN G IN THIS CASE IS DONE MUCH AFTER THE SUPREME COURT JUDGMENT GKN DRIVES HAFTS (INDIA) LTD. (SUPRA). FURTHER, WE HAVE GONE THROUGH THE CONTENTS OF PARA NO.8.1 OF THE ORDER OF CIT(A) WHICH DEALS WITH THIS LEGAL ISSUE. FOR THE SAK E OF COMPLETENESS OF THIS ORDER, WE EXTRACT THE SAME AS UNDER : 8.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT THE APPELLANT HAD FILED LETTERS DATED 19-08-2014 ON 21-08-2014 WITH THE A.O. FOR THE YEARS UNDER APPEAL, ASKING FO R REASONS RECORDED FOR REOPENING THE ASSESSMENTS FOR A.YRS 2009-10 AND 201 0-11. THE APPELLANT HAS CLAIMED THAT THE SAID REASONS WERE NEVER SUPPLI ED BY THE A.O. TO THE APPELLANT INSPITE OF THE WRITTEN REQUEST FILED. IN ORDER TO VERIFY THE ABOVE FACTS, THE CASE RECORD FOR THE YEARS UNDER APPEAL W AS CALLED FOR AND PERUSED. FROM THE CASE RECORD, IT HAS BEEN NOTICED THAT THE A.O. HAD NOT SUPPLIED THE REASONS RECORDED FOR REOPENING THE ASSESSMENTS TO T HE APPELLANT. IN VIEW OF THE ABOVE FACTS, THE APPELLANT HAS CLAIMED THAT THE REASSESSMENTS MADE BY THE A.O. ARE INVALID AND VOID AB-INITIO. THE ABOVE CONTENTION OF THE APPELLANT IS SUPPORTED BY VARIOUS DECISIONS RELIED ON BY THE APPELLANT. IT HAS BEEN LAID DOWN IN THE FOLLOWING DECISIONS A S UNDER : I) CIT VS. VIDESH SANCHAR NIGAM LTD. (2012) 340 ITR 66 (BOM.) : IN THIS CASE IT HAS BEEN LAID DOWN THAT SINCE THE REASONS R ECORDED FOR REOPENING OF THE ASSESSMENT WERE NOT FURNISHED TO T HE ASSESSEE TILL THE COMPLETION OF THE ASSESSMENT, THE REASSESSMENT ORDE R CANNOT BE UPHELD. II) CIT VS. FOMENTO RESORTS AND HOTELS LTD., ITA NO. 71 OF 2006, ORDER DATED 27-11-2006 (BOM-HC) IN THIS CASE IT HAS BEE N LAID DOWN THAT SINCE THE REASONS RECORDED FOR REOPENING OF ASSESSM ENT WERE NOT FURNISHED TO THE ASSESSEE TILL THE COMPLETION OF TH E ASSESSMENT, THE REASSESSMENT ORDER CANNOT BE UPHELD. FURTHER THE S PECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST THE DECISION OF HONBLE BOMBAY HIGH COURT HAS BEEN DISMISSED BY THE APEX COURT, VI DE ORDER DATED 16- 07-2007. III) KOTHARI METALS VS. ITO (2015) 377 ITR 581 (KAR) : I N THIS CASE IT HAS BEEN LAID DOWN THAT WHEN REASONS FOR REOPENING ASSE SSMENT HAD NOT BEEN FURNISHED TO ASSESSEE, THOUGH REQUEST FOR THE SAME HAD BEEN MADE, PROCEEDINGS FOR REASSESSMENT COULD NOT HAVE B EEN TAKEN FURTHER. 5 IN VIEW OF THE ABOVE FACTS OF THE CASE AND THE RATI O LAID DOWN BY THE ABOVE MENTIONED DECISIONS AND ALSO DECISIONS RELIED ON BY THE APPELLANT, I HOLD THAT PROCEEDINGS FOR REASSESSMENT COMPLETED BY THE A.O. WITHOUT FURNISHING REASONS FOR REOPENING ASSESSMENTS EVEN AFTER WRITTE N REQUEST IS INVALID AND VOID AB-INITIO. THEREFORE, THE REASSESSMENT FOR A.YRS. 2009-10 AND 2010-11 ARE QUASHED. GROUND NO.1 FOR BOTH THE YEARS UNDER APPEAL IS ALLOWED. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE O RDER OF CIT(A) ON THIS LEGAL ISSUE IS FAIR AND REASONABLE AND IT DOES NOT C ALL FOR ANY INTERFERENCE. 8. SINCE THE RE-ASSESSMENTS THEMSELVES ARE QUASHED ON THE LEGAL ISSUE, IN OUR VIEW, ADJUDICATION OF GROUNDS ON MERITS BECOMES AN ACADEMIC EXERCISE. THEREFORE, THEY ARE DISMISSED AS ACADEMIC OR GE NERAL IN NATURE, AS THE CASE MAY BE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. ITA NO.2730/PUN/2016 A.Y. 2010-11 9. THE ISSUES RAISED BY THE REVENUE IN THE APPEAL, FINDING OF CIT(A), ARGUMENTS AND COUNTER ARGUMENTS ARE SAME AS THAT OF APPEAL IN ITA NO.2729/PUN/2016 FOR A.Y. 2009-10. THEREFORE, OUR DECISION IN UPHOLDING THE ORDER OF CIT(A) SHALL APPLY TO THIS ASSESSMENT YEAR A LSO. THUS, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 23 RD DAY OF MARCH, 2018. SD/- SD/- (SUSHMA CHOWLA) (D.KARUNAKAR A RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 23 RD MARCH, 2018. SATISH 6 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-2, NASHIK 4. / THE CIT-2, NASHIK 5. , , / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, / /TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE