Marudhar Polycot (India) Pvt. Ltd., Ahmedabad V. The Dy. CIT. Circle-2(1)(2), Ahmedabad

ITA 301/AHD/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8857 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 07-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: PF JAIN
• Keywords: Reopening of assessment; Bogus purchase; Principle of natural justice; Tangible material; Difference of opinion; Accommodation entries; Competent authority; Reason to believe; Change of opinion; Reassessment proceedings; Borrowed satisfaction; Set aside
• Section: 143(3); 143(1); 68; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 301/AHD/2018 (ASSESSMENT YEAR: 2005-06) MARUDHAR POLYCOT (INDIA) PVT. LTD. 406, DWARKESH COMPLEX, 4 TH FLOOR, OPP. PATEL VAS, MITHAKHALI GAM, MITHAKHALI AHMEDABAD-380006 V/S DCIT, CIRCLE-2(1)(2), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AADCM8266G APPELLANT BY : SHRI P. F. JAIN, AR RESPONDENT BY : SHRI LALIT P. JAIN, SR. D.R. ( )/ ORDER DATE OF HEARING : 10 -06-201 9 DATE OF PRONOUNCEMENT : 26 -06-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-2, AHMEDABAD DATED 19.01.2018 PERTAINING TO A.Y. 2011-12 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 301/ AHD/2018 . A.Y. 2011-1 2 2 1. THE LD. C.IT.(APPEALS) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER PASSED U/S. 143(3) R.W.S. 147 SUBMITTED TO BE BAD-I N-LAW AND ON FACT INASMUCH AS REQUISITE CONDITIONS FOR RE-OPENING WERE NOT SATISF IED. 2. THE ID.C.IT.(APPEALS) HAS ERRED IN LAW AND ON FACTS IN NOT QUASHING AND HOLDING THE REASSESSMENT ORDER AS INVALID INASMUCH AS THE REASSESSMENT ORDER PASSED WAS WITHOUT ASSUMING PROPER JURISDICTION AND BEING BASED ON CHANGE OF OPINION AND BORROWED SATISFACTION. 3. HE HAS ERRED IN LAW AND ON FACTS IN NOT APP RECIATING PROPERLY THE OBJECTIONS TO REASSESSMENT PROCEEDINGS MADE BEFORE A.O. BY SUB MISSION DATED 21/10/2016 ALONG WITH RELEVANT EVIDENCE INCLUDING AFFIDAVIT OF PRAVEENKUMAR JAIN RETRACTING THE CONFESSION ALLEGED TO HAVE BEEN MADE BY HIM WHE REBY THE ORDER GOT LEGALLY VITIATED. 4. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDI NG ADDITION OF RS.2.90 CRORE BEING CAPITAL INVESTMENT MADE BY SIX COMPANIES MENTIONED IN PARA 5 OF ASSESSMENT ORDER U/S. 68 TREATING THE SAME AS BOGUS SHARE APPL ICATION MONEY AND ACCOMMODATION ENTRIES WITHOUT PROPERLY CONSIDERING AND APPRECIATING THE SUBMISSION DATED 07/11/2016 BEFORE A.O. ALONG WITH RELEVANT EVIDENCES PROVING THE INVESTMENT MADE BY THE SAID COMPANIES. 5. ON THE FACTS ADDITION U/S.68 OF RS.2.90 CRORE BE ING FACTUALLY AND LEGALLY ERRONEOUS DESERVES TO BE DELETED. 6. HE HAS ERRED IN LAW AND FACTS IN UPHOLDING T HE ADDITION WITHOUT APPRECIATING THE FACT THAT THE ONUS U/S.68 FOR PROVING INVESTMEN T HAVING BEEN DISCHARGED BY THE ASSESSEE NO ADDITION U/S.68 OUGHT HAVE BEEN MAD E. 7. ON THE FACTS OF THE ASSESSEE, NO INTEREST U/S.2 44A & U/S.234B OUGHT HAVE BEEN LEVIED. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER AND OR MODIFY ANY GROUND OF APPEAL. 2. THE FACTS OF THE CASE ARE AS EMANATES FROM THE ASSE SSMENT ORDER: IN THIS CASE, RETURN OF INCOME FOR ASSESSMENT YEAR 2011-12 WAS FILED ON 28/09/2011 DECLARING INCOME OF RS.58,48,228/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME-TAX ACT ON 31/03/2012. THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED U/S. 143(3) ON 07/02/2014 DE TERMINING TOTAL INCOME AT RS.62,47,250/-. THEREAFTER, IT WAS LEARNT FROM THE INVESTIGATION WING OF MUMBAI THAT A SEARCH U/S. 132 WAS CONDUCTED IN THE CASES OF PRAVEEN KUMAR JAIN GROUP WERE PROVIDING ACCOMMODATION ENTRIES AND THAT THE ASSESSEE HAD ITA NO. 301/ AHD/2018 . A.Y. 2011-1 2 3 OBTAINED ACCOMMODATION ENTRIES TO THE TUNE OF RS.2, 90,00,000/-FROM THE BOGUS CONCERN. 3. ON THE OTHER HAND ASSESSEES CONTENTION THAT THE AS SESSEE HAS STATED THAT NEITHER STATEMENT OF SHRI P.K. JAIN WAS SUPPLIED NO R ANY CHANCE TO CROSS EXAMINATION WAS GRANTED BY THE A.O. BUT LD. A.R. WA S NOT AGREED WITH THE CONTENTION OF THE ASSESSEE AND MADE ADDITION OF RS. 2.90 CRORE. 4. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) AND BEFORE HIM, ASSESSEE TOOK THE PLEA THAT STATEMENT OF SHRI P.K. JAIN HAS NOT BEEN SUPPLIED TO HIM DESPITE OF THE FACT TH AT HE MADE THE REQUEST TO THE LD. A.O BUT TO NO AVAIL AND LD. CIT(A) CONFIRMED TH E ACTION OF THE A.O. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. THE LOWER AUTHORITIES HAVE MADE ADDITION ON THE BASIS OF INVE STIGATION CARRIED OUT IN THE CASE OF SHRI PRAVEEN KUMAR JAIN WHERE SHRI P.K. JAI N HAS ADMITTED THAT HE WAS INDULGED IN PROVIDING ENTRIES TO VARIOUS COMPANIES AND ASSESSEE HAS RECEIVED ACCOMMODATION ENTRY IN THE FORM OF SHARE APPLICATIO N MONEY/SHARE PREMIUM FROM VARIOUS PAPER COMPANIES CONTROLLED AND MANAGED BY SHRI P.K. JAIN. THE ASSESSEE HAS SPECIFICALLY REQUESTED FOR THE STATEME NT OF SHRI P.K. JAIN TO THE A.O. BUT LD. A.O. DID NOT SUPPLY THE SAME. 6. IN SUPPORT OF ITS CONTENTION, ASSESSEE CITED A JUDG MENT OF DELHI HIGH COURT IN THE MATTER OF PRINCIPAL CIT VS. MEENAKSHI OVERSEAS PVT. LTD. WHEREIN APPEAL OF THE REVENUE WAS DISMISSED BY THE HONBLE DELHI H IGH COURT ON THE FOLLOWING OBSERVATION: REASSESSMENTINCOME ESCAPING ASSESSMENTVALIDITY OF PROCEEDING AO PASSED ASSESSMENT ORDER AGAINST ASSESSEEAO U/S. 148 ISSUED NOTICE ITA NO. 301/ AHD/2018 . A.Y. 2011-1 2 4 TO ASSESSEE FOR REASSESSMENT HOLDING THAT AO HAD RE ASON TO BELIEF THAT INCOME HAD ESCAPED ASSESSMENTAO INITIATED REASSESS MENT PROCEEDINGS U/S. 147/148CIT(A) UPHELD ORDER OF AOTRIBUNAL HEL D THAT REQUISITE SANCTION HAD NOT BEEN OBTAINED BY AO FROM COMPETENT AUTHORITY UNDER SECTION 151 AND, THEREFORE, INVALIDATED RE-OPENING , OF ASSESSMENT UNDER SECTION 147/148 REVENUE'S APPEAL AGAINST SAID ORDE R OF ITAT WAS ALLOWED BY COURTITAT HELD THAT AO HAD NOT APPLIED HIS MIND AT TIME OF INITIATING PROCEEDINGS OF REASSESSMENT UNDER SECTION 147TRIBU NAL QUASHED ASSESSMENT PROCEEDINGS UNDER SECTION 147/148HELD, AS RIGHTLY POINTED OUT BY ITAT, 'REASONS TO BELIEVE' WERE NOT IN FACT REASONS BUT ONLY CONCLUSIONS, ONE AFTER OTHEREXPRESSION 'ACCOMMODAT ION ENTRY' WAS USED TO DESCRIBE INFORMATION SET OUT WITHOUT EXPLAINING BASIS FOR ARRIVING AT SUCH CONCLUSIONSTATEMENT THAT SAID ENTRY WAS GIVEN TO A SSESSEE ON HIS PAYING 'UNACCOUNTED CASH' WAS ANOTHER CONCLUSION BA SIS FOR WHICH WAS NOT DISCLOSEDTHUS, CRUCIAL LINK BETWEEN INFORMATIO N MADE AVAILABLE TO AO AND FORMATION OF BELIEF WAS ABSENTCOURT WAS NOT INCLINED TO INTERFERE IN ABOVE CIRCUMSTANCES IN EXERCISE OF ITS WRIT JURI SDICTION TO QUASH PROCEEDINGSCAREFUL PERUSAL OF REASONS REVEALED THA T AO DID NOT MERELY REPRODUCE INFORMATION BUT TAKES EFFORT OF REVEALING WHAT WAS CONTAINED IN INVESTIGATION REPORT SPECIFIC TO ASSESSEEAO MADE N O EFFORT TO SET OUT PORTION OF INVESTIGATION REPORT WHICH CONTAINED INF ORMATION SPECIFIC TO ASSESSEE, HE DID NOT ALSO EXAMINE RETURN ALREADY FI LED TO ASCERTAIN IF ENTRY HAD BEEN DISCLOSED THEREINAO WAS NOT MERELY REPROD UCING INFORMATION RECEIVED FROM INVESTIGATION BUT TOOK EFFORT OF REFE RRING TO DEPOSITION MADE DURING SURVEY BY CHARTERED ACCOUNTANT THAT ASSESSEE COMPANY WAS INVOLVED IN GIVING AND TAKING OF BOGUS ENTRIESAO T HUS INDICATED WHAT TANGIBLE MATERIAL WAS WHICH ENABLED HIM TO FORM REA SONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENTIT WAS IN THOSE CIRCU MSTANCES THAT IN CASE, COURT CAME TO CONCLUSION THAT THERE WAS PRIMA FACIE MATERIAL FOR AO TO COME TO CONCLUSION THAT ASSESSEE HAD NOT-MADE FU LL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS RELEVANT FOR ASSESSMENTREASO NS TO BELIEVE CONTAINED NOT REASONS BUT CONCLUSIONS OF AO ONE AFTER OTHERT HERE WAS NO INDEPENDENT APPLICATION OF MIND BY AO TO TANGIBLE MATERIAL WHICH FORMED BASIS OF REASONS TO BELIEVE THAT INCOME HAS ES CAPED ASSESSMENT REASONS FAILED TO DEMONSTRATE LINK BETWEEN TANGIBLE MATERIAL AND FORMATION OF REASON TO BELIEVE THAT INCO ME HAD ESCAPED ASSESSMENT-REVENUE'S APPEAL DISMISSED. 7. LD. A.R. ALSO CITED A JUDGMENT OF JURISDICTIONAL HI GH COURT IN THE MATTER OF VARSHABEN SANATBHAI PATEL VS. ITO WHEREIN SIMILAR C IRCUMSTANCES, PLEA OF THE ASSESSEE WAS ACCEPTED. ITA NO. 301/ AHD/2018 . A.Y. 2011-1 2 5 SECTION 147 OF THE INCOME-TAX ACT, 1961 - INCOME ES CAPING ASSESSMENT - NON-DISCLOSURE OF PRIMARY FACTS (INFORMATION FROM E XTERNAL SOURCE) - ASSESSMENT YEARS 2009-10 TO 2011-12 - FOR RELEVANT ASSESSMENT YEARS, ASSESSEE FILED ITS RETURNS DECLARING CERTAIN TAXABL E INCOME -RETURNS WERE PROCESSED UNDER SECTION 143(1) - SUBSEQUENTLY, ON B ASIS OF INFORMATION RECEIVED FROM DGIT (INV.) THAT ASSESSEE MADE BOGUS PURCHASES AND TO SAID EXTENT INCOME HAD ESCAPED ASSESSMENT FROM TAX, ASSE SSING OFFICER ISSUED NOTICE UNDER SECTION 148 SEEKING TO REOPEN, ASSESSM ENT - ASSESSEE'S OBJECTIONS TO REOPENING OF ASSESSMENT WERE SET ASID E - WHETHER., SINCE FORMATION OF BELIEF OF ASSESSING OFFICER WAS NOT BA SED UPON DETAILS AVAILABLE ON RECORD, RATHER ON BASIS OF INFORMATION SUPPLIED BY DGIT (INV.) I.E. AN EXTERNAL SOURCE, IT COULD NOT BE CONCLUDED THAT REQUIREMENTS OF SECTION 147 WERE SATISFIED - HELD, YES - WHETHER, T HEREFORE, IMPUGNED REASSESSMENT PROCEEDINGS DESERVED TO BE SET ASIDE - HELD, YES [PARA 13] [IN FAVOUR OF ASSESSEE] 8. LD. A.R. ALSO CITED AN ORDER OF CO-ORDINATE BENCH I N THE MATTER OF SHANTABEN PARASMAL JAIN IN ITA NO. 726/AHD/2017 WHEREIN SIMIL AR CIRCUMSTANCES, RELIEF WAS GRANTED BY THE ITAT WITH FOLLOWING OBSERVATION: 14.THE ENTIRE ASSESSMENT IS BASED UPON THE STATEMEN T OF SHRI MUKESH CHOKSI. IT IS AN UNDISPUTED FACT THAT NEITHER A COPY OF THE STATE MENT WAS SUPPLIED TO THE ASSESSEE. NOR ANY OPPORTUNITY OF CROSS-EXAMINATION WAS GIVEN BY THE ASSESSING OFFICER/CIT(A). THE HON'BLE SUPREME COURT IN THE CA SE OF ANDAMAN TIMBER INDUSTRIES IN CIVIL APPEAL NO. 4228 OF 2006 WAS SEI ZED WITH THE FOLLOWING ACTION OF THE TRIBUNAL:- '6. THE PLEA OF NO CROSS EXAMINATION GRANTED TO THE VARIOUS DEALERS WOULD NOT HELP THE APPELLANT CASE SINCE THE EXAMINATION OF TH E DEALERS WOULD NOT BRING OUT ANY MATERIAL WHICH WOULD NOT BE IN THE POSSESSION O F THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX FACTORY PRICES REMAIN ST ATIC. SINCE WE ARE NOT UPHOLDING AND APPLYING THE EX FACTORY PRICES, AS WE FIND THEM CONTRAVENED AND NOT NORMAL PRICE AS ENVISAGED UNDER SECTION 4(1), WE FIND NO R EASON TO DISTURB THE COMMISSIONERS ORDERS.' 15. THE HON'BLE APEX COURT HELD AS UNDER:- ITA NO. 301/ AHD/2018 . A.Y. 2011-1 2 6 'ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROS S-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THO SE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF TIRE COMMISSIONER WAS BASED UPON THE STATE MENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DIS PUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED ITA NO.726/AHD/2017 SHANTABEN PARASMAL JAIN VS. DCIT 2010-11 TO CROSS-EXAMINE, THE ADJUDICATING AUTHORIT Y DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS S PECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOW EVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEAL T WITH BY THE ADJUDICATING AUTHORITY, AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED T HAT CROSS-EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIA L WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN A S TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL T O HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOS E DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DIS CREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS- EXAMINATION. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPO N THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID D EALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD B E THE SUBJECT MATTER OF CROSS- EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICA TING AUTHORITY TO PRESUPPOSE ITA NO. 301/ AHD/2018 . A.Y. 2011-1 2 7 AS TO WHAT COULD BE THE SUBJECT MAILER OF THE CROSS -EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. WE MAY ALSO POINT OUT T HAT ON AN EARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APP EAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING IT S REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF TH E TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WIT H THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEM ENT OF THE AFORESAID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CA USE WE, THUS, SET ASIDE THE IMPUGNED ORDER AS PASSED IN THE TRIBUNAL AND ALLOW THIS APPEAL.' 9. SINCE STATEMENT OF SHRI P.K. JAIN WAS NOT SUPPLIED TO THE ASSESSEE ON THE BASIS OF ADDITION WAS MADE AND IN THE ABSENCE OF SAID STA TEMENT ASSESSEE COULD NOT CROSS EXAMINE TO SHRI P.K. JAIN AND SAME IS AMOUNT TO MISCARRIAGE OF JUSTICE DESPITE OF THE FACT THAT ASSESSEE MADE A FORMAL REQ UEST TO THE LOWER AUTHORITIES. IN OUR CONSIDERED OPINION AND AFTER CONSIDERING THE AFORESAID JUDGMENT, NO ADDITION CAN BE MADE ON THE BASIS OF WHICH VIOLATE PRINCIPLE OF NATURAL JUSTICE. 10. SINCE WE ARE INCLINED TO GRANT RELIEF TO THE ASSESS EE ON TECHNICAL GROUND, THEREFORE, WE DO NOT ADJUDICATE THIS APPEAL ON FACT UAL MATERIAL. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 26- 06- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 26/06/2019