Indo Office Solutions (P) Ltd., New Delhi V. ACIT, New Delhi

ITA 3176/DEL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0571 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 19-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Reassessment proceedings
• Section: 133A; 251; 143(2); 147; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BEN CH, NEW DELHI BEFORE SHRI SUCHITRA KAMBLE, JUDICIAL MEMBER, AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.3176/DEL/2017 [ASSESSMENT YEAR: 2013-14] INDO OFFICE SOLUTIONS (P) LTD. 486, PATPARGANJ INDUSTRIAL ESTATE, NEW DELHI-110092 ACIT, CENTRAL CIRCLE-17, NEW DELHI PAN - AACCI0966J ASSESSEE REVENUE ASSESSEE BY SHRI VED JAIN, ADV. & SHRI HIMANSHU AGGARWAL, C.A. REVENUE BY SHRI AMIT KATOCH, SR. DR DATE OF HEARING 05/08/2019 DATE OF PRONOUNCEMENT 17/09/2019 ORDER PER SUCHITRA KAMBLE, JUDICIAL MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE LD. CIT(A)-25, NEW DELHI, DATED 27/02/2017, FOR ASSESSM ENT YEAR 2011-12, 2. GROUNDS OF APPEAL ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A )J IS BAD, BOTH IN THE EYES OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IS PASSING THE ORDE R WITHOUT GIVING ASSESSEE A PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD IN CLEAR VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN ENHANCING THE IN COME OF THE ASSESSEE WITHOUT GIVING ANY NOTICE FOR THE SAME. 2 4. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONF IRMING THE ORDER PASSED UNDER SECTION 147 READ WITH SECTION 148 OF T HE-ACT, DESPITE THE FACT THAT THE SAME WAS BAD IN THE EYES OF LAW, AS T HE CONDITIONS AND PROCEDURES PRESCRIBED UNDER THE STATUTE HAVE NOT BE EN SATISFIED AND COMPLIED WITH. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER PASSED BY AO AS THE R EASSESSMENT PROCEEDINGS INITIATED BY THE LEARNED AO ARE BAD IN THE EYES OF LAW, AS THE REASONS RECORDED FOR THE ISSUE OF NOTICE UNDER SECT ION 148 ARE BAD IN THE EYE OF LAW AND ARE CONTRARY TO THE FACTS. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN CONFIRMING THE O RDER OF THE AO DESPITE THE FACT THAT THE ORDER HAS BEEN PASSED WITHOUT DIS POSING OF THE OBJECTION AGAINST REOPENING RAISED BY THE ASSESSEE. 6. (I)ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN DISALLOWING AN AMOUNT BEING 12.32% OF THE TOTAL EXPENSES INCURRED BY THE ASSESS EE (II) THAT THE ABOVE DISALLOWANCE HAS BEEN MADE WITH OUT BRINGING ANY MATERIAL OR EVIDENCE IN THIS REGARD. (II) THAT THE DISALLOWANCE HAS BEEN MADE DESPITE TH E ASSESSEE BRINGING ON RECORD ALL MATERIAL & EVIDENCE TO PROVE THE GENUINENESS-OF EXPENSE. 3. THE COMMONWEALTH GAMES WERE HELD IN NEW DELHI FR OM THE 3 RD TO THE 14 TH OF OCTOBER 2010. THE ORGANIZATION AND THE CONDUCT OF THIS MEGA EVENT WAS CONTROLLED AND SUPERVISED BY THE CWG ORGA NIZING COMMITTEE (OC, CWG) SPECIFICALLY FORMED AND AUTHORIZED TO DEA L WITH THE VARIOUS ASPECTS RELATING TO THE ORGANIZATION OF THE EVENT. THE BUDGET OF THE OC, CWG WAS ESTIMATED AT ABOUT RS. 2300 CRORES. OUT OF THIS AMOUNT, A SUM OF RS. 600 CRORES WAS ESTIMATED TO BE SPENT ON THE EXECUTI ON OF THE OVERLAYS CONTRACTS. THESE CONTRACTS WERE AWARDED TO 04 DIFFE RENT PARTIES, WITH EACH PARTY EXECUTING THE WORK IN RESPECT OF ONE OR MORE OF THE SEVEN CLUSTERS INTO WHICH THE SPORTING AND TRAINING VENUES WERE DI VIDEND. M/S ESAJV D- ART INDO INDIA PVT LTD WAS ONE SUCH PARTY WHO GOT T HE OVERLAYS CONTRACTS. 3 THERE WERE ALLEGATIONS IN THE PUBLIC DOMAIN THAT TH E CONTRACTS FOR OVERLAYS WORK WERE AWARDED AT HIGH RATES RESULTING INTO HUGE MARGINS, WHICH WOULD NOT BE DISCLOSED TO THE INCOME TAX DEPARTMENT. A SE ARCH UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 WAS CARRIED OUT AT THE PREMISES OF M/S ESAJV D- ART INDO CONSORTIUM AND ITS ASSOCIATE ENTITIES ON 1 9/10/10 AT NEW DELHI. DURING THE COURSE OF THE SEARCH, VARIOUS DOCUMENTS WERE FOUND AND SEIZED. DURING THE COURSE OF POST SEARCH INQUIRIES, SURVEY ACTION U/S 133 A OF THE INCOME TAX ACT, 1961 WAS UNDERTAKEN ON 19/10/2010, IN THE CASE OF THE ASSESSEE COMPANY, AS IT WAS CLOSELY RELATED TO THE M/S ESAJV D-ART INDO INDIA PVT. LTD. THE ASSESSEE COULD NOT EXPLAIN ANY DIRECT OR INDIRECT EXPENSE IN RELATION TO SALE OR SERVICES PROVIDED TO M/S ESA JV D-ART INDO INDIA PVT. LTD. DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSI NG OFFICER OBSERVED THAT THE RATIO OF GROSS RECEIPTS FROM M/S ESAJV D-A RT INDO INDIA PVT. LTD. VERSUS TOTAL RECEIPTS WAS 12.32% (22832100/18529927 4*100). IT WAS HELD BY THE ASSESSING OFFICER THAT IT WAS ESTABLISHED TH AT NO SALE OR SERVICES WAS PROVIDED TO M/S ESAJV D-ART INDO INDIA PVT. LTD. BY THE ASSESSEE, AND DISALLOWANCE OF 12.32% OF THE EXPENSES CLAIMED WAS MADE. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 41,60,505/- ON 20.09.2011. SUBSEQUENTLY, NOTICE 4 U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE FOR A .Y. 2011-12 AND IN RESPONSE TO THE SAME THE ASSESSEE SUBMITTED THAT IT S RETURN OF INCOME DECLARING INCOME OF RS. 41,60,505/- FILED ON 20.09. 2011 MAY BE TREATED AS RETURN FILED U/S 148. THEREAFTER, ON REQUEST OF THE ASSESSEE, COPY OF THE REASONS RECORDED WAS SUPPLIED TO THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 03.03.2014. THE ASSESSEE HAS FILED ITS OBJECTIONS O N 09.04.2014 REGARDING REOPENING OF THE CASE AND THE SAME WERE DISPOSED OF WITHOUT PASSING THE SPEAKING ORDER. A SURVEY ACTION U/S 133A OF THE ACT WAS CARRIED OUT ON 19.10.2010 AT THE BUSINESS PREMISES OF ASSESSEE I.E . M/S INDO OFFICE SOLUTIONS PVT. LTD. THIS SURVEY WAS CONDUCTED CONSE QUENT UPON THE SEARCH CONDUCTED AT THE BUSINESS PREMISES OF M/S ESAJV D-A RT INDO INDIA CONSORTIUM AND ITS ASSOCIATES ON 19.10.2010 AT NEW DELHI. THE ASSESSEE COMPANY IS ONE OF THE SERVICE PROVIDER TO M/S ESAJV D-ART AND M/S ESAJV D-ART HAS CLAIMED AN EXPENDITURE OF RS.2,28,32,100/ - INCURRED FOR PROCURING FOLLOWING SERVICES FROM THE ASSESSEE: SR. NO. NATURE OF CONTRACT AMOUNT (RS.) 1 ARCHITECT SERVICE 22,06,000/- 2 INSTALLATION CHARGES 16,54,500/- 3 WAREHOUSING CHARGES 11,58,150/- 5 4 SUPERVISION CHARGES 27,57,500/- 5 FURNITURE ON RENT 1,50,55,950/- TOTAL 2,28,32,100/- THE ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NOT EXPLAIN ANY DIRECT OR INDIRECT EXPENSE IN RELATION TO SALE OR SERVICES PR OVIDED TO M/S ESAJV D-ART INDO INDIA PVT. LTD. THE RATIO OF GROSS RECEIPT FRO M M/S ESAJV D-ART INDO INDIA PVT. LTD. VS. TOTAL RECEIPTS IS 12.32% (2,28, 32,100/1,85,29,927 * 100). THEREAFTER, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 6,34,380/- IN TOTAL INCOME OF THE ASSESSEE COMPANY BY DISALLOWING 12.32 % OF THE TOTAL ADMINISTRATIVE EXPENSES AND SELLING OVERHEADS ON AD -HOC BASIS. ON APPEAL BEFORE THE CIT(A), THE CIT(A) DISREGARDED THE SUBMI SSIONS OF THE ASSESSEE REGARDING NON-APPLICATION OF MIND BY THE ASSESSING OFFICER IN REOPENING OF THE ASSESSMENT AND ON MERITS HAVE CONFIRMED AND EVE N ENHANCED THE ADDITIONS MADE BY THE ASSESSING OFFICER BY HOLDING THAT THE DISALLOWANCE SHOULD BE MADE AT 12.32% OF THE ENTIRE EXPENDITURE AND NOT ONLY THE ADMINISTRATIVE EXPENSE AND SELLING OVERHEADS AND TH US DISALLOWANCE IS SUSTAINED TO RS. 2,21,75,360/-. AS REGARDS TO GROUN D NO. 1, THE SAME IS GENERAL IN NATURE. AS REGARDS TO GROUND NO. 2, RELA TING TO NO NOTICE U/S 143(2) WAS ISSUED TO THE ASSESSEE, THE LD. AR SUBMI TTED THAT IN THE PRESENT 6 CASE, THE ASSESSING OFFICER FRAMED THE ASSESSMENT W ITHOUT ISSUING OF STATUTORY NOTICE U/S 143(2) OF THE ACT. THEREFORE, THE ASSESSMENT FRAMED IS BAD IN LAW. IN THIS REGARD, THE LD. AR RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF ACIT VS. HOTEL BLUE MOON ( 2010) 321 ITR 362. THE LD. AR FURTHER RELIED UPON THE FOLLOWING DECISI ONS: I) CIT VS. MOTOR GENERAL FINANCE LTD. 254 ITR 449 (DEL .) II) KUBER TOBACCO PRODUCTS VS. DCIT 117 ITD 273 (SB) III) CIT VS. JAI SHIV SHANKAR TRADERS 383 ITR 448 (DEL) IV) ALPINE ELECTRONICS VS. DGIT 341 ITR 247 V) ITO VS. GRAVITY SYSTEMS PVT. LTD. (ITA NO. 5626/DEL /2012) ORDER DATED 16.03.2017 THUS, THE LD. AR SUBMITTED THAT THE ASSESSMENT ORDE R FRAMED IS BAD IN LAW. 6. AS REGARDS TO GROUND NO. 3 RELATING TO ENHANCEME NT OF INCOME BY THE CIT(A) WITHOUT SHOW CAUSE NOTICE, THE LD. AR SUBMIT TED THAT THE CIT(A) HAS ENHANCED THE INCOME OF THE ASSESSEE WITHOUT GIVING THE NOTICE U/S 251(2) OF THE ACT. THE CIT(A) ON MERITS HAVE CONFIRMED AND EVEN ENHANCED THE ADDITIONS MADE BY THE ASSESSING OFFICER BY HOLDING THAT THE DISALLOWANCE SHOULD BE MADE AT 12.32% OF THE ENTIRE EXPENDITURE AND NOT ONLY THE 7 ADMINISTRATIVE EXPENSE AND SELLING OVERHEADS AS MAD E BY THE ASSESSING OFFICER. THE CIT(A) FURTHER HELD THAT THE ABOVE CAL CULATION WILL LEAD TO DISALLOWANCE OF A HIGHER AMOUNT, BUT SUCH CALCULATI ON DOES NOT AMOUNT TO ENHANCEMENT OF INCOME FOR WHICH SEPARATE NOTICE U/S 251(2) HAD TO BE GIVEN. THE LD. AR SUBMITTED THAT IT IS A SETTLED PR OPOSITION OF LAW THAT THE CIT(A) CANNOT MAKE ENHANCEMENT TO THE INCOME OF THE ASSESSEE WITHOUT ISSUING SHOW CAUSE NOTICE U/S 251(2) OF THE ACT. FU RTHER, THE CIT(A) CANNOT MAKE ENHANCEMENT ON THE ISSUE WHICH DOES NOT ARISE OUT OF THE ORDER OF ASSESSMENT. THE LD. AR RELIED UPON THE DECISION OF THE TRIBUNAL IN CASE OF RAMESH KUMAR PABBI VS. ACIT (ITA NO. 5594/DEL/2014) . THE LD. AR ALSO RELIED UPON THE DECISIONS OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. SARDARI LAL AND CO. 251 ITR 864 AS WELL AS THE DECI SION OF THE TRIBUNAL IN CASE OF BIKRAM SINGH VS. DCIT (2016) 48 ITR 689. TH US, IN LIGHT OF THE ABOVE, THE LD. AR SUBMITTED THAT THE ENHANCEMENT MA DE BY THE CIT (A) IS UNTENABLE IN LAW. 7. AS REGARDS TO GROUND NOS. 4 AND 5 RELATING TO NO N-DISPOSAL OF OBJECTION AGAINST RE-OPENING OF REASSESSMENT PROCEE DINGS RAISED BY THE ASSESSEE BY WAY OF SPEAKING ORDER AND NON-APPLICATI ON OF INDEPENDENT MIND BY THE ASSESSING OFFICER, THE LD. AR SUBMITTED THAT IN THE PRESENT CASE, NOTICE U/S 148 OF THE ACT DATED 17.03.2014 WA S ISSUED TO THE ASSESSEE FOR AY 2011-12 AND IN RESPONSE TO THE SAME ON 20.02 .2014 (WITHIN 8 SPECIFIED TIME) THE ASSESSEE SUBMITTED THAT THE RET URN OF INCOME DECLARING INCOME OF RS.41,60,505/- FILED ON 20.09.2011 MAY BE TREATED AS RETURN FILED U/S 148 OF THE ACT. THEREAFTER, ON REQUEST OF THE ASSESSEE COPY OF THE REASONS RECORDED WAS SUPPLIED TO THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 03.03.2014. THE ASSESSEE HAS FILED ITS OBJECT IONS ON 09.04.2014 WITHIN TIME REGARDING RE-OPENING OF THE CASE. THE A SSESSING OFFICER DID NOT PASS ANY SPEAKING ORDER FOR DISPOSING THE OBJECTION S FILED BY THE ASSESSEE AND STRAIGHTWAY PASSED THE ASSESSMENT ORDER ON 30.0 3.2015. THE FACT THAT NO ORDER DISPOSING OF THE OBJECTIONS RAISED BY THE ASSESSEE WAS PASSED BY THE ASSESSING OFFICER IS VERY MUCH EVIDENT FROM THE ASSESSMENT ORDER. IT IS A WELL SETTLED LAW THAT THE ASSESSING OFFICER IS DU TY BOUND TO DISPOSE OF THE OBJECTIONS TO REASONS SUBMITTED BY THE ASSESSEE BY PASSING A SPEAKING ORDER. IN THIS REGARD RELIANCE IS PLACED ON THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA ) LTD. VS. ITO 259 ITR 19 (SC) WHEREIN THE HONBLE APEX COURT HELD THAT TH E ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, THE NOTICEE IS ENTITLED TO FILE OBJECTIONS TO ISSUA NCE OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME B Y PASSING A SPEAKING ORDER. THIS ISSUE IS ALSO DEALT BY THE TRIBUNAL IN CASE OF NIMITAYA HOTEL & RESORTS LTD. VS. ITO ITA NO. 1830 TO 1832/DEL/2014 DATED 01.04.2019. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS AMPLE T IME AVAILABLE FOR 9 DISPOSAL OF OBJECTIONS AS THE ASSESSEE HAS FILED TH E OBJECTION ON 09.04.2014 WHEREAS THE ASSESSMENT ORDER WAS PASSED ON 30.03.20 15. THE LD. AR RELIED UPON THE FOLLOWING DECISIONS: I) SURENDRA KUMAR JAIN VS. PR. CIT W.P.(C) 593/2019 DATED 29.07.2019 (DEL HC) II) KSS PETRON PVT. LTD. VS. ACIT ITA NO. 224 OF 2014 ORDER DATED 03.10.2016 (BOM HC) III) AARTI INDUSTRIES LTD. VS. DCIT (ITA NO. 592 & 593/MUM/2018 ORDER DATED 29.05.2019) MUM. TRI. FURTHER, THE LD. AR SUBMITTED THAT THE ASSESSING OF FICER WHILE RECORDING THE REASONS FOR REOPENING OF THE ASSESSMENT HAS WEN T AHEAD IN HASTE AND HAS RECORDED THE REASONS WITHOUT APPLICATION OF MIN D. THE SAME CAN BE OBSERVED FROM THE PLAIN READING OF THE FOLLOWING PA RAGRAPHS: M/S INDO OFFICE SOLUTIONS PVT. LTD. HAS ALSO CLAIM ED TO HAVE PROVIDED SUPERVISION SERVICES TO THE ASSESSEE. HOWEVER, IT F AILED TO PROVIDE ANY SUPPORTING DOCUMENTS IN RESPECT OF SAME. AS PER THE CONTRACT FOR SUPPLY OF FURNITURE, 10% O F THE CONTRACT AMOUNT HAD TO BE PAID AS ADVANCE WHEREAS THE REMAINING 90% HAD TO BE PAID AFTER COMPLETION OF THE PROJECT. WHILE THE CLAIMED FURNIT URE WAS SUPPLIED ON 10 10.09.2010 AND 11.09.2010, A SINGLE INVOICE FOR THE ENTIRE CONTRACT VALUE WAS RAISED ON 01.09.2010 I.E. EVEN BEFORE THE CONTR ACT HAD BEEN EXECUTED. IN RESPECT OF THE WAREHOUSING CHARGES, IT WAS FOUN D THAT THE AMOUNT CHARGED BY M/S INDO OFFICE SOLUTIONS PVT. LTD. FROM THE ASSESSEE COMPANY WAS TEN TIMES THE AMOUNT THAT IT IS PRESENTLY CHARG ING FROM ITS TENANTS FRO THE SAME PREMISES. FIRSTLY, FROM THE PERUSAL OF THE REASONS RECORDED B Y THE ASSESSING OFFICER IT APPEARS THAT THE ASSESSING OFFICER HAS RECORDED THE REASONS AS THE ESAJV D-ART IS THE ASSESSEE COMPANY WHERE AS IN THE PRESE NT CASE INDO OFFICE SOLUTIONS PVT. LTD. IS THE ASSESSEE COMPANY. FURTHE R, REOPENING HAS BEEN MADE DESPITE THE FACT THAT THE ASSESSEE HAS DISCLOS ED ALL THE RECEIPTS FROM M/S ESAJV D-ART AND THERE WAS NO FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NEC ESSARY FOR ASSESSMENT. THUS, THE INITIATION IS BAD IN LAW. THE LD. AR RELI ED UPON THE DECISION IN CASE OF SABHARWAL PROPERTIES INDUSTRIES PVT. LTD. V S. ITO (2016) 382 ITR 547 WHEREIN THE HONBLE HIGH COURT HELD THAT IT IS WELL SETTLED LAW THAT THE REASONS RECORDED FOR REOPENING THE ASSESSMENT HAVE TO SPEAK FOR THEMSELVES. THEY HAVE TO SPELL OUT THAT (I) THERE W AS A FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERI AL FACTS NECESSARY FOR THE ASSESSMENT AND (II) THE REASONS MUST PROVIDE A LIVE LINK TO THE FORMATION OF THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THE LD. AR SUBMITTED IT IS A 11 TRITE LAW THAT THE RE-OPENING OF ASSESSMENT CANNOT BE DONE ON THE BASIS OF VAGUE REASONS RECORDED BY THE ASSESSING OFFICER WIT HOUT APPLICATION OF INDEPENDENT MIND. THE LD. AR RELIED UPON THE FOLLOW ING DECISIONS: (I) PR. CIT VS. RMG POLYVINYL (I) LTD. (2017) 396 ITR 5 (DEL HC) (II) PR. CIT VS. MEENAKSHI OVERSEAS (P) LTD. 395 ITR 677 (DEL HC) (III) SUNIL AGARWAL VS. ITO ITA NO. 988/DEL/2018 (DEL TRI .) THUS, THE LD. AR SUBMITTED THAT REOPENING OF ASSESS MENT IS UNTENABLE IN LAW. 8. AS REGARDS TO GROUND NO. 6 RELATING TO NO ADDITI ONS CAN BE MADE ON MERITS OF THE CASE, THE LD. AR SUBMITTED THAT THE A SSESSING OFFICER IN OBDURATE MANNER MADE AD-HOC DISALLOWANCE OF RS.6,34 ,380/- AT THE RATE OF 12.32% OF THE TOTAL ADMINISTRATIVE EXPENSES AND SEL LING OVERHEADS ON AD- HOC BASIS MERELY ON THE WHIMS AND FANCIES. THE CIT( A) ENHANCED THE ADDITIONS MADE BY THE ASSESSING OFFICER BY HOLDING THAT THE DISALLOWANCE SHOULD BE MADE AT 12.32% OF THE ENTIRE EXPENDITURE AND NOT ONLY THE ADMINISTRATIVE EXPENSE AND SELLING OVERHEADS WITHOU T GIVING ANY JUSTIFICATION FOR THE SAME. THE ASSESSING OFFICER P ERCEIVED THAT THE INCOME IS NOT GENUINE AND THEREFORE, THE EXPENSES ARE BOGU S. THE ASSESSEE HAS FILED THE COPY OF LEDGER ACCOUNT OF M/S ESAJV D-ART INDO INDIA PVT. LTD. 12 CLAIMING THAT AMOUNT RECEIVED FROM M/S ESAJV D-ART INDO INDIA PVT. LTD. IS DISCLOSED IN THE BOOKS, FORM 16A AND BANK STATEMENT S OF THE ASSESSEE COMPANY. DURING THE ASSESSMENT PROCEEDINGS, ASSESSE E HAS ALSO SUBMITTED THE COMPARATIVE CHART OF BUSINESS RECEIPTS AND NET PROFIT THE CRUX OF THE COMPARATIVE CHART IS AS UNDER:- FY TURNOVER (RS. LACS) NP% 2009-10 2194.55 0.71% 2010-11 1852.99 2.18% 2011-12 1179.62 1.13% THE LD. AR SUBMITTED THAT IN THE YEAR UNDER CONSIDE RATION THE NP RATE IS HIGHEST IN THREE YEARS. SINCE NP IS 2.18%, MAKING A DDITION AT 12.32% OF THE EXPENSES IS NOT TENABLE IN LAW. THE LD. AR FURTHER SUBMITTED THAT THERE IS NO ALLEGATION BY THE ASSESSING OFFICER THAT THE ASS ESSEE HAD NOT MADE PAYMENTS FOR SUCH EXPENDITURE. ALL THE EXPENSES ARE FULLY VOUCHED AND WERE VERIFIABLE. THE ASSESSEE HAS BEEN MAINTAINING REGULAR BOOKS OF ACCOUNTS DULY AUDITED UNDER SECTION 44AB OF THE ACT WHICH HAVE NOT BEEN DOUBTED OR REJECTED BY THE ASSESSING OFFICER. THE A DDITIONS ARE MERELY ON THE SUSPICIONS AND LACKS EVIDENCE. THE SAME ARE BAD IN LAW IN THE LIGHT OF 13 THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CA SE OF UMACHARAN SHAW & BROS VS. CIT 37 ITR 271 (SC) WHEREIN IT IS SETTLE D LAW THAT SUSPICION HOWEVER STRONG IT IS CANNOT TAKE PLACE OF THE EVIDE NCE. FURTHER THE LD. AR RELIED UPON THE DECISION OF THE HONBLE SUPREME COU RT IN CASE OF LALCHAND BHAGAT AMBICA RAM VS. CIT (1959) 37 ITR 288. 9. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS GROUND NO. 1 IS GEN ERAL IN NATURE, HENCE IT IS DISMISSED. AS REGARDS GROUND NO. 2, THE CONTENTI ONS OF THE LD. AR THAT THERE IS FAILURE ON PART OF ISSUANCE OF STATUTORY N OTICE U/S 143(2) OF THE ACT THAT DOES NOT SEEM TENABLE AS THE ASSESSING OFFICER HAS MENTIONED IN THE ASSESSMENT ORDER THAT NOTICE UNDER SECTION 143(2) H AS BEEN ISSUED TO THE ASSESSEE. THE ASSESSEE IN FACT PARTICIPATED IN THE ASSESSMENT PROCEEDINGS AND GOT THE FAIR OPPORTUNITY OF HEARING TO REPRESEN T THE CASE. THEREFORE, GROUND NO. 2 IS DISMISSED. AS REGARDS TO GROUND NO. 3, PRIOR TO ENHANCEMENT, NO REASONABLE OPPORTUNITY WAS GRANTED TO THE ASSESSEE AS PER THE REQUIREMENT OF SECTION 251(2) OF THE INCOME TAX ACT, 1961. THUS, THE CONTENTIONS OF THE LD. AR TO THAT EXTEND ARE SU STAINABLE AND GROUND NO. 3 IS ALLOWED. AS REGARDS TO GROUND NO. 4 AND 5, THE NON-DISPOSAL OF THE OBJECTIONS FILED BY THE ASSESSING OFFICER AGAINST R E-OPENING OF 14 REASSESSMENT PROCEEDINGS, THE CASE LAW CITED BY THE LD. AR THAT OF SURENDRA KUMAR JAIN VS. PR. CIT W.P. (C) 593/2019 & CM NO. 2670/2019 ORDER DATED 29.07.2019 PASSED BY THE HONBLE DELHI HIGH COURT IS PRECISELY APPLICABLE IN THE PRESENT CASE. THE HONBLE HIGH CO URT HELD AS UNDER: 5. IN THE PRESENT CASE, THE AO HAS NOT CHOSEN TO DI SPOSE OF THE OBJECTIONS, FILED BY THE PETITIONER AGAINST THE REOPENING OF TH E ASSESSMENT BUT HAS PROCEEDED TO THE STAGE OF PASSING THE REASSESSMENT ORDER ITSELF. 6. IN MOST AN IDENTICAL FACT SITUATION IN SMT. KAML ESH SHARMA V. B. L. MEENA, INCOME-TAX OFFICER (SUPRA), WHERE THE AO DID NOT PASS ANY SPEAKING ORDER BUT STRAIGHTAWAY PASSED AN ASSESSMEN T ORDER, AND SIMULTANEOUSLY REJECTED THE CONTENTION OF THE PETIT IONER, THIS COURT OBSERVED: 3. WE ARE OF THE OPINION THAT IN VIEW OF THE LANGU AGE OF THE SUPREME COURT IN GKN DRIVESHAFTS [2003] 259 ITR 19 THE ASSESSING OFFICER SHOULD HAVE REJECTED THE OBJECTIONS, IF HE THOUGHT IT APPROPRIATE TO DO SO, BEFORE PASSING THE FINAL ORDER AND NOT SI MULTANEOUSLY. 4. THIS POSITION WAS REITERATED BY THIS COURT IN SI TA WORLD TRAVELS (INDIA) LTD. V. CIT (@004) 140 TAXMAN 381 (DEL). 5. WE CANNOT APPRECIATE HOW, IN SPITE OF THE CLEAR LANGUAGE USED BY THE SUPREME COURT AS WELL AS THIS COURT, THE ASSESS ING OFFICER DID NOT COMPLY WITH THE REQUIREMENT OF LAW. 15 7. THIS COURT HAS, THEREFORE, NO HESITATION IN SETT ING ASIDE REASSESSMENT ORDER DATED 29 TH DECEMBER, 2018 FOR THE ASSESSMENT YEAR AY 2011-12. CONSEQUENTLY, A DIRECTION IS ISSUED TO THE AO TO ON CE AGAIN TAKE UP FOR CONSIDERATION, THE PETITIONERS OBJECTIONS TO THE R EOPENING OF THE ASSESSMENT FOR THE AFOREMENTIONED AY AND DISPOSE OF THOSE OBJECTIONS BY A REASONED ORDER NOT LATER THAN FOUR WEEKS FROM TODAY . THE SAID ORDER SHALL BE COMMUNICATED TO THE PETITIONER NOT LATER ONE WEE K THEREAFTER. 8. THEREAFTER, THE AO WILL PROCEED IN ACCORDANCE WI TH LAW AS FAR AS THE REASSESSMENT PROCEEDINGS ARE CONCERNED. 9. IT WILL BE OPEN TO THE PETITIONER TO SEEK APPROP RIATE REMEDIES IF HIS OBJECTIONS TO THE REOPENING OF THE ASSESSMENT ARE R EJECTED BY THE AO. IN THE PRESENT CASE AS WELL, THE ASSESSING OFFICER HAS NOT DISPOSED OFF THE OBJECTIONS OF THE ASSESSEE FILED AT THE INITIATION OF ASSESSMENT PROCEEDINGS. THUS, IN LIGHT OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF SURENDRA KUMAR JAIN (SUPRA) WE ARE ALSO OF THE OPIN ION THAT THE OBJECTIONS FILED BY THE ASSESSEE SHOULD HAVE BEEN DISPOSED OFF BY THE ASSESSING OFFICER AT THE INITIAL STAGE AND THEN SHOULD HAVE PROCEEDED WITH THE COMPLETION OF THE ASSESSMENT. THEREFORE, WE REMAND BACK THE ISSUE OF DISPOSING OFF THE OBJECTIONS TO THE FILE OF THE ASSESSING OFFICER TO FIRST DEAL WITH THE OBJECTIONS OF THE ASSESSEE, AND THEREAFTER PASSED A N APPROPRIATE ORDER 16 ITSELF. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPO RTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. THUS, GROU ND NO. 4 AND 5 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. WE ARE NOT COMMENT ING ON THE MERIT OF THE ISSUE RAISED BY THE ASSESSEE. THEREFORE, GROUND NO. 6 IS NOT DEALT HEREWITH. 11. IN RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 17/09/2019. SD/- SD/- [PRASHANT MAHARISHI] [SUCHITRA KAM BLE] ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI; DATED: 17/09/2019. F{X~{T? F{X~{T? F{X~{T? F{X~{T? FA FA FA FA P.S P.SP.S P.S COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI