Asst. Comm. of Income-tax, Dhule V. M/s. J.K. Petrochemical Industries, Nandurbar

ITA 35/PUN/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0392 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-06-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 09-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Business income; Principle of natural justice; Period of limitation; Additional evidence; Procedural lapse; Time period of passing order; Reason to believe
• Section: 142(1); 234B; 147; 148; 144

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , ! ' # , % & BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.34 & 35/PN/2012 ! ( ( / ASSESSMENT YEAR : 2003-04 & 2004-05 ASST. COMMISSIONER OF INCOME TAX, CIRCLE 3(1), AAYKAR BHAVAN, SAKRI ROAD, DHULE. . / APPELLANT V/S M/S J.K. PETROCHEM ICAL INDUSTRIES, MAIN ROAD, KHANDBARA TAL, NAVAPUR DIST., NANDURBAR. PAN NO.AACFJ4258K. . / RESPONDENT / APPELLANT BY : SHRI AJIT KORDE / RESPONDENT BY : SHRI SUNIL GANOO ) / ORDER PER ANIL CHATURVEDI, AM : THESE TWO APPEALS FILED BY THE REVENUE ARE EMANATING OUT OF THE ORDERS OF COMMISSIONER OF INCOME TAX (A) I , NASHIK DT.31.10.2011 FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 . / DATE OF HEARING :10.11.2016 / DATE OF PRONOUNCEMENT: 30 .11.2016 2 ITA NO.34/PN/2012 ITA NO.35/PN/2012 2. BEFORE US, AT THE OUTSET LD.AR SUBMITTED THAT THOUGH THE APPEALS OF REVENUE ARE OF THE SAME ASSESSEE BUT FOR DIFFERENT ASSESSMENT YEARS BUT THE FACTS AND ISSUES INVOLVED IN BO TH THE APPEALS ARE IDENTICAL EXCEPT FOR THE ASSESSMENT YEAR AND THE AMOUNTS INVOLVED AND THEREFORE THE SUBMISSIONS MADE BY H IM WHILE ARGUING ONE APPEAL WOULD BE EQUALLY APPLICABLE TO THE OTHER APPEAL ALSO AND THEREFORE, BOTH THE APPEALS CAN BE HEARD TOGETHER. THE AFORESAID SUBMISSION OF THE LD.AR HAS NOT BEEN OBJECTE D TO BY LD.DR. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEA LS BY A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, WE PROCEED WITH NARRATING THE FACTS FOR ASSESSMENT YEAR 2003-04. 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF SALE OF NAPHTHA AND SUPERIOR KEROSENE OIL (SKO). ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y 2003-04 ON 31.1 0.2003 DECLARING TOTAL LOSS OF RS.96,69,741/-. THE RETURN OF INCOME WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM JOINT COMMISSIONER OF SALES- TAX, ECONOMIC INTELLIGENCE UNIT, MUMBAI THROUGH DDIT(INV), NAGPUR, IT CAME TO THE KNOWLEDGE OF THE AO THAT ASSESS EE HAD INDULGED IN BUSINESS OF SALE OF NAPHTHA, SUPERIOR KEROSENE OIL ETC AND DURING INVESTIGATION BY THE SALES-TAX DEPARTMENT IT C AME TO ITS KNOWLEDGE THAT THE PARTIES TO WHOM THE ASSESSEE H AD SOLD GOODS DID NOT EXIST AND FURTHER THE SALE OF PETROL PRODU CTS THOUGH ACTUALLY SOLD IN MAHARASHTRA STATE BUT WERE SHOWN TO HAVE BEEN SOLD OUT OF MAHARASHTRA STATE AND THUS THERE WAS EVAS ION OF DIFFERENTIAL AMOUNT OF SALES-TAX AT 16% WHICH WAS EVADED B Y ASSESSEE AND THE AMOUNT OF RS.3,40,53,145/- (ON ACCOUNT O F DIFFERENTIAL AMOUNT OF SALES TAX) CONSTITUTED THE INCOME OF TH E 3 ITA NO.34/PN/2012 ITA NO.35/PN/2012 ASSESSEE. ACCORDINGLY, AO HAD REASON TO BELIEVE THAT INC OME HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC.147 OF THE ACT AND HE THEREAFTER ISSUED NOTICE U/S 148 ON 29.03.2010. AO HA S NOTED THAT THE NOTICE U/S 148 OF THE ACT COULD NOT BE SERVED IN USUAL COURSE AND THEREFORE, THE NOTICE WAS SERVED THROUGH A FFIXTURE ON 31.03.2010. AO THEREAFTER, HAS NOTED THAT NO RETURN OF IN COME WAS FILED BY THE ASSESSEE AND THE NOTICES SENT U/S 14 3(2) AND 142(1) WERE RETURNED UNDELIVERED BY THE POSTAL AUTHORITIES WITH REMARK THE PERSON HAS LEFT THE PREMISES. AO NOTED TH AT THEREAFTER NOTICE INFORMING THE ASSESSEE THAT IN CASE IT FAILS TO COMPLY WITH THE NOTICE ISSUED AN EX-PARTE ASSESSMENT U /S 144 SHALL BE FRAMED, ALSO REMAINED UN-RESPONDED. AO THEREAFTER , FRAMED ASSESSMENT U/S 144 R.W.S. 148 VIDE ORDER DT.24.12.2 010 AND DETERMINED THE TOTAL INCOME AT RS.5,55,64,360/-. 4. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT (A), WHO VIDE ORDER DT.31.10.2011 (IN APP EAL NO.NSK/CIT(A)-I/381/2010-11) GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 5.5 I HAVE C AREFULLY CONSIDERED THE FACTS OF THE CA SE , T HE ASSESSMENT ORDER, THE REMA N D REPORT OF THE AO AND THE RIVAL SUBMISSI O NS. IN THE FIRST TWO GROUNDS, THE APPELLANT HAS CHALLENGED THE V A LIDITY OF INITIATION OF PROCEEDING S U / S . 147 AND ISSUE OF NOTICE U/S.148 OF THE I T ACT AND ASSESSMENT OR D ER . I HAVE CAREFULLY EXAMINED THE REASONS RECORDED FOR ISSU E OF NOTICE U/S.148. THE ISSUE TO BE D E CIDED IS WHETHER THE AO WAS RIGHT IN LAW AND ON FACTS IN ISSUING A NOTICE U/S.148 OF THE IT ACT, ON THE BASIS OF REPORT AND FINDING OF T H E S ALES TAX . DEPARTMENT . 5.6 THE APP E LLANT HAS CHALLENGED THE VA L I DITY OF INITIATION OF PROCEEDINGS U / S.147 AND ISSUE OF NOTICE U/S.148 OF THE IT AC T, MAI N LY O N THE FOLL O WING GROUNDS . M ERE INFORMATION RECEIVED FROM THE DY. DIR E CTO R OF I T ( I NV ) A ND SALES TAX DEPARTM E NT - C A NNOT CON S TITUT E VALID REASONS FOR INITIA T ION O F 4 ITA NO.34/PN/2012 ITA NO.35/PN/2012 P ROCE EDINGS U/S.147/148 OF TH E IT A C T , IN A B SE N CE O F ANYTHING TO SHOW THAT TH E L E A R N ED A . O H A S INDEPENDENTLY APPLIED HIS MI ND TO ARRIV E AT A BELIEF THAT THE INCOM E HAS ESCA P E D A SSESSMENT. THE APPELLANT R E LI E D UPON TH E FOLLOWING DECISIONS: CIT V/S S F I L STOC K BRO KING LTD (20L0) 4 1 DTR ( D E L ) 98/ 2 33 C TR (D E L) 69 ; C IT VS. SHRI R A J A S T AN SYNT E X L T D. (2009) 212 TAX A TION 27 5 (R A J ); D CIT VS . RAINEE SINGH (2009) 125 T T J (D E L) 846; CIT VS . ATUL JAIN (2007) 164 TAX MAN 33 (D EL HI) & C IT VS. SMT . PARAMJIT K AUR (20 0 8 ) 1 68 TAX MAN 39 (PUNJ & . HAR), TH E APPE LL A N T H A S FIL E D THE OBJECTION ON 0 8 -0 6 - 20 10 TO ISS U E O F ISSUE NOTIC E U /S .148 . H O WEV E R, T HE L E ARN E D A.O DID NOT DISPOSE OFF THE OBJECTIONS AND PROCEEDED FURTHER AND COM P L E T E D TH E A SS E SSMENT. AS THE AS S E S SM ENT ORDER IS PA SS E D WITHOUT DISPOSING O FF T HE A PP E LL A NT'S OBJECTION, IT IS BAD IN L AW AND VO I D AB I NITIO AND LIABL E TO BE ANNULLED. THE LEARNED AO IS BOUND TO DISPOSE OF THE OBJECTIONS FILED BY THE APPELLANT BY SPEAKING ORDER . AS A.O. FAILED TO DO SO, THE ASSESSMENT ORDER PASSED IS, THEREFORE, BAD IN LAW. THE I MP U G N ED NOTI C E U/S . 148 WAS ISSUED A F T ER FOUR YE ARS FROM THE END OF THAT AS S E SSM E N T Y E AR, W I THOUT RECORDING REASON S T O B E LI E VE THA T INCOME HAS E SCAPED ASSE S S M E NT BY RE A SON OF THE FAILURE ON TH E P A R T O F TH E A S SES S E E TO DISCLO SE FU L LY AND TRU L Y A LL M A TE RI A L F ACTS NECESSARY FOR ASSES S M E NT . I T WAS ALSO A R G U E D TH A T THE SANCTION GIVEN B Y T HE AUTH O RI T Y F OR ISSUE OF NOTI C E UNDER SE CTION 148 I . E . SATISFACTION OF THE JCIT IS APP EA R I N G TO B E MECHANICALLY GIVEN WITHOUT A PPRE C IATING TH E CORRECT FACT OF T H E CASE . 5.7 I F IND FROM THE RECORD THAT TH E APP E LL A NT IS ENGAGED IN THE BUSINESS OF NAPHTHA AND SUPERIOR KEROSENE O I L AND DURIN G TH E F . Y . 2002-03, IT HAS MADE SALE TO THE TUNE OF RS. RS.16,25,37,206/-, AND NOTICE IS ISSUED MAINLY ON THE BASIS OF FINDING OF THE SALES TAX DEPARTMENT THAT THE DIFFERENTIAL AMOUNT OF SALES TAX @ 16% HAS BEEN EVADED BY THE ASSESSEE AND THE SAME CONSTITUTES THE UNDISCLOSED INCOME IN HIS HAND, WHICH WORKS OUT TO RS.2,60,05,593/- . THEREFORE, THE DIFFERENTIAL AMOUNT IN THE RATES OF NAPHTHA AND PETROL, IS CONSIDERED TO BE CONSTITUTES UNDISCLOSED INCOME OF THE ASSESSE FOR RELEVANT PERIOD. IN VIEW OF THE ABOVE, AS PER FINDING OF SALES TAX DEPARTMENT IS THAT SALES TAX TO THE EXTENT OF RS.2,60,05,953 /- WAS FOUND BY THE DEPARTM E NT TO H A VE BEEN EVADED BY TH E ASS ESS E E. THE SAME WORKS OUT @ 16 % ON THE SAL E S HO W N BY THE APPELLANT OF RS.16,25,37,206/ - . AFTER RE - OPENING THE ASSESSMENT, 5 ITA NO.34/PN/2012 ITA NO.35/PN/2012 R E ASS E SSMENT HAS BEEN MADE IN W HICH SAID SUM OF RS.2 , 60 , 05,953/-HAS BEEN , ASSESS E D A S 'U NDISCLOSED INCOME ON ACCOUNT OF EVASION ' OF SALES TAX. ADDITION HAS, THEREFORE, BEEN MADE SOLELY ON THE BASIS OF REPORT OF SALES TAX DEPARTMENT. THE LEARNED AO HAS NOT BROUGHT ANY FURTHER ADDITIONAL EVIDENCE IN SUPPORT OF HIS ADDITION. THE SALE T AX D E PARTMENT H A S NOT F OUND THAT APP E LL A NT HA D SUPPRES S ED ANY TUR NO VER , AS THEY H A V E NOT WORKS OUT ANY A D DITIONAL S AL E S T A X LIABILITY ON A N Y UNRECOR D E D SALES OU TSI D E O F THE BOOKS OF TH E A P PEL L ANT . T HUS , IT IS CLEAR TH A T T H E APPE LL A N T HAS NOT S U PPR E S SE D ANY SALES. TH E R E IS NO FI N DING ON T HE RECORD T H AT PURCHASES A ND S A LE S S HO WN BY THE APPELLANT HAS NOT F OU N D TO BE I NCORREC T . I T I S ADMITTED T H A T AMOU NTS R EP R E SENTING PURCHAS ES AND S A L E S EN T ERED IN THE BOOK S O F A C COUNTS ARE C ORR E CT BY T H E SA LES TAX AUTHORIT I E S AS WELL AS BY THE AO. FURTHER, I F IND FROM T H E R ECO RD THAT THE SAL E S TAX D E P A RT M EN T C ONSIDE RED THA T SALES TA X PAYAB L E ON ' SAL ES EN T E R E D IN BOOKS OF ACCOU NTS, IS M OR E AS P ER PROVI SIONS O F S ALES TA X ACT , THA N S A LES T AX AC T UA LLY PAID BY TH E AS SESSEE AND DIFF E R EN C E OF THE SAL ES T AX P A YABLE IS WOR K S O UT T O RS . 2 , 60,OS ,953/-. [ SAL E S R S . 1 6 ,25,3 7, 2 06 / - @ 1 6% = R S. 2 , 60,OS,953 ] . THI S DI F FERE NTIAL AMOUNT HA S B EEN CON S I DE R E D A S UNDISC LOSED I NCOME BY TH E A . O . BUT HE H AS N OT EXPLAINED AS TO H OW THIS IS U ND ISCLOSE D INCOME OF TH E APPELL A NT . IN R E M A ND RE P OR T A LSO THE AO HAS NO T ENLIGH TEN E D ANY THING IN THIS R E G A RD S AND NOT A DDUCED AN Y EV ID E NCE TO ESTABLISH E D AS T O H OW IT I S UN D IS CLOS ED INCOME OF THE APPELLANT. I FURTHE R N OTED THAT I T IS N OT A CASE OF SALES T AX D E PART MENT T HAT T HE ASS E SS E E HAD COLLECTED M OR E AMO UNT AS SA LES TAX FROM CUSTOM ERS TH AN SH OW N IN THE BOOKS . SO ALSO T HERE IS N O FINDIN G O F TH E A . O WITH ANY SUPPOR TING EVI D E N CE , T H A T THE APPELLAN T HA S COLLECTE D MORE SA L ES TAX T H A N SHOWN IN THE BOOK S. FURTHER, I FI ND FROM THE REC ORD THAT THE ONLY , QUE STION TH A T AR I S E S IS O F TH E R ATE OF CALC UL A T I O N O F SALES TA X P AY ABLE ON SALES REFLECT E D IN BOOK S OF ACC OUNT . E V EN IF TH E SAL E S TAX DEPARTMENT RAISED , SUCH ADDITIONAL DEMAND ON TH E SA L ES S HOWN IN THE BOOKS THE APPELLANT , THAT REPRESENTS LEGAL LIABILIT Y ON ENTR I ES IN THE BOOKS, TH E RE IS NOTHING ON RECORD THAT THE APPELLANT HAS NOT RECORD E D ANY SA L E S IN THE BOOKS OF ACCOUNTS. FURTHER, I FIND THA T THE REPORT OF SALES TAX D E PARTMENT THAT THERE WA S ADDITIONAL LIABILITY OF SALES T AX TO THE EXTENT OF RS . 2,6 0 , 05, 953 / -,ON THE S A LES SHOWN BY THE APPELLANT IN THE BOOKS, DOES NOT CONSTITUT E L EGA L EV ID E NCE IN INCOME-TA X A SS ES SMENT PROCEEDIN G S, TO B AS E A FINDING THAT 6 ITA NO.34/PN/2012 ITA NO.35/PN/2012 THER E WAS UNDISCLO SE D INCOME TO THE E X TENT OF THE ABOVE AMOUNT, PARTICULARLY WHEN THE S A LES TA X DEPARTMENT DID NOT DISPUTE CORRECTNESS OF FIGURES OF PURCHASE AND SALE IN THE BOOKS. I FIND FROM THE R E CORD THAT THE ADDITION M A DE BY THE A . O IS SOLELY ON THE ' BASIS OF R E POR T OF T H E SAL ES T A X DEP A RTMENT, WITHOU T 'PROPER S UPPORT OF ANY L EGA L E V ID E N C E WHATSOEV E R . E VID E N CE C OLLE C TED BY THE OTHER DEPARTMENT CAN FORM BA S IS F OR AD DITION IN INCOME - TA X PRO C EEDING . ONLY IF, THAT EVIDENCE IS BROUGHT ON R E CORD A ND THE ASSESSEE IS GIVEN OPPORTUNITY TO REBUT IT. THERE IS NOTHING ON RECORD THAT THE AO HAS BROUGHT ANY EV ID E NC E, IN SUPPORT OF HIS ADDITION. EVEN, IN REMAND PRO CEE DIN GS, THE A . O HAS NO T ADD U CE D A NY E VIDENCE . F URTH E R , A LL E G A T I ON O F S A L E S TAX DEPARTMENT, E V E N IF PR E SUME TO , BE TRU E, D O NOT GA VE A NY INF E R E N C E OF EX I ST E N CE OF UNDISCLOSED INCOME . THERE MUST B E EV ID E N C E ON REC ORD . IN THE C AS E O F T H E A PP E LLANT, THERE IS ONLY AN INTIMATION BY THE SALES T AX D E P AR TM E NT ON RECOR D . THERE IS N O OT H E R EVIDENCE ON R E CORD FROM WHICH UNDI S C LO SE D INCO M E C OULD B E I NFERRED . IN A BS E N C E OF SUCH EV IDEN CE NO ADDITION CAN B E M AD E. T H E A . O H A S NOT REP O RTED T O HAVE S U C H E V ID E NCE IN HIS PO SSESS ION IN REMAND R E P ORT A L SO . IN V I EW O F THE ABOVE, I A M OF TH E CONSIDER E D VIEW THAT FROM T H E RE ASO N S RECORDE D THER E CAN NOT BE FOR M E D A NY BELIEF THAT TH E ADDITIONAL DEMAND R A I S ED BY SALES TA X D E P A RT M ENT IS A ' E SCAPEME N T OF INCOM E CHARGEABLE TO TAX' WITHI N TH E MEA N ING O F PRO VI SI O N OF SECTION 14 7 O F THE IT A CT . THE PR O CEE D INGS U/S .147 WE RE INITIA T ED O N TH E BASI S OF THE REPO R T G I V EN BY THE SALES T AX D E P A R TMENT IN RES P ECT O F E VASION OF SAL E S TAX AND NOT THE EV A S IO N O F I N C O ME . IN A BS E N C E O F ANY ESCAP E D IN C O M E CHARG E ABLE TO T AX, NO PROCEEDIN GS U /S.147 CA N B E INITIATED. F URTHER , IT I S E V IDENT THA T T H E A . O H A S NOT CA RRIED OUT ANY IND E P E ND E N T E N Q U IRIES I N THIS RE GA R D S N OR BROUG HT A N Y EV IDENC E FOR TH E BELIEF OF ANY ESCAP E M E N T OF IN C O ME , FOR ISSU E O F TH E SAID N OTICE U/ S.14 8 OF TH E IT A C T, AS CONTEMPLATED I N EXP .2 TO SEC . 1 47 OF THE IT ACT , N E I THER AD DUC E D A N Y EVID E NC E DURING REMAND PROCEEDIN G S. T H E R E FO RE, IT I S EV ID E NT TH AT THE A . O M ERE L Y R E LI E D U P ON TH E R E PORT OF SALES TA X D EPARTMENT AN D INITI A TED P ROCEEDINGS U / S . 147 , TH E R EF OR E, I N ABSENCE OF ANYTHING TO S HO W T H AT TH E L E ARN E D A . O HAS I ND E P EN D E N TL Y A PPLI E D HIS MIND TO A RRIVE AT A B E LI EF TH A T IN C OM E H A S ES CAP ED 7 ITA NO.34/PN/2012 ITA NO.35/PN/2012 ASSESSMENT , T HE PR O CEE DING C ANNOT B E CONSIDERED AS VALIDLY IN IT I A T ED. THIS VIEW IS SUPPORTED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V/S SFIL STOCK BROKING LTD (2010) 41 DTR (DEL) 98/233 CTR (DEL) 69. IN THIS CASE, IT IS HELD THAT ' IT W AS C L E A R THAT THE ASSESSING OFFICER REFERRED TO THE INFORM A TION AND THE TWO DIR E CT S AS ' R E ASON' ON TH E BASIS OF WHICH HE WAS PROCEEDING TO ISSU E NOTIC E UND E R SECTION 148. TH E S E C OULD NOT BE THE REASONS FOR PROCEEDINGS UNDER S E CTION 147 / 148. FROM SO-CA LL E D REASO N S, I T WAS NOT AT A LL D ISCE RNIBL E A S TO WH E T HER T H E ASS E SS IN G O F FIC E R HAD AP PLI E D HIS MIND T O T H E IN FO R MA TION AND INDEP E NDENTL Y ARRIVE D AT A B ELIEF TH A T , ON TH E B ASIS OF T HE M A T E RI A L , W HI C H H E ' H A D B E FORE HIM , IN C OM E HAD ESC AP E D ASSESSMENT. THEREFORE THE REASSESSMENT WAS NOT VALID. FURTHER, THOUGH THE APP E LLANT HAS FIL ED THE OBJECTION ON 08 - 0 6 - 20 10 TO I S SUE OF ISSUE NOTIC E U / S.148, THE A . O HAS NOT DISPOSED OFF THE OBJECTION AND PROCEEDED FURTHER AND COMPL E TED THE ASSESSM E NT. A S THE AO HAS F A I LE D TO DO S O, THE ASSESSM E NT ORDER P A SS E D IS , TH E R E F ORE, BAD IN LAW . THIS V IE W I S S UPPORT E D B Y THE HON'BL E SUPREME COURT'S DECISION IN TH E C AS E OF GNK DRIVESHA F T S (INDIA) LTD VS ITO (2003) 259 ITR 19(5C) & ALLANA COLD STOR A GE VS ITO ( 2006) 2 8 7 ITR (BOM) 1 . THE IMPUGNED NOTICE U / S . 148 WA S I SS U E D A FTER FOUR YEARS FROM THE END OF' - T HAT ASSESSMENT YEAR. TH E A . O HAS NOT R EC ORD E D IN THE REASONS ' TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT B Y R E ASON O F T HE FAIL UR E ON THE PART OF THE A S S E SSEE TO DISCLO SE . FULLY AND TRULY ALL FACTS N E CESS A R Y FOR ASSES SM E NT . FURTH E R , TH E SA TISFACTION OF THE CIT IS M EC HANIC A LL Y GIV E N WI T HOUT APPRECIA T I N G T H E C ORR EC T FA CT O F T H E CASE AS CAN BE SEEN FROM THE REASONS RECO RDED B Y TH E AO. THE JCIT SHOULD H AVE APPRO V ED T HE PROPOSAL ONL Y A FTER, BEIN G S ATISFIED TH AT T HE ING R E DI E NT R E QUIR ES TO ISS UE TH E NOT IC E U /S .148 A R E F ULFILL E D . N O S U CH IN G R EDIE N TS/ REQUI REM E N T AR E FUL F IL LE D , A ND H E NC E, THE APPRO V A L I S G I VE N B Y THE JCIT IS C ER T A I NLY A PPEARS T O B E MECH A NI CA LL Y . IN V IEW O F TH E ABO VE FA C TU A L PO SIT IO N AND T H E POSI T I ON OF L AW , I A M O F T HE CONSID E R E D VIEWS TH AT TH E N OTI CE ' I SS U E D U / S . 148 O F TH E I T ACT B Y TH E A O IS NOT IN A C C ORD ANCE W I T H TH E PRO V ISION OF SECTION 1 47 OF TH E I T A CT . FROM TH E ABOVE DISCUSSION AND CONSIDERING T H E RATIO AND PR INCIPL ES L A ID D OW N IN THE DECISIONS RELIED UPO N BY T H E - ' APPELL ANT , PROCEEDIN G S INITIAT ED U /S . 1 4 7 OF TH E IT ACT A N D NOTI CE ISS UED U/S.148 ARE HEREBY QUASHED AND CONSEQUENTLY, THE ASSESSMENT ORDER PASSED BASED UPON THESE PROCEEDINGS AND NOTICE, IS HELD TO BE 8 ITA NO.34/PN/2012 ITA NO.35/PN/2012 VOID AB INITIO AND HENCE ANNULLED. SINCE THE PROCEEDING INITIATED U/S.147/148 ARE QUASHED AND THE IMPUGNED ASSESSMENT WAS ANNULELED, THE OTHER GROUNDS RAISED BY THE APPELLANT DO NOT REQUIRES ANY ADJUDICATION. HOWEVER, IN THE EVENT OF THE HIGHER APPELLATE AUTHORITY TAKING A DIFFERENT VIEW AND TO AVOID ANY EXERCISE OF SETTING ASIDE TO THE CIT(A), OTHER GROUNDS ARE CONSIDERED ON MERIT. 5. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN AP PEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS , I N LAW AND IN THE CIRCUMSTANCES OF THE CASE THE LD . CIT (A)- I , NASHIK HAS ERRED IN QUASHING THE PROCEEDINGS U/S. 147/148 OF THE I . T . ACT . AND HOLDING VOID AB INITIO AND ANNULLING IT . 2. ON THE FACTS , IN LAW AND IN THE CIRCUMSTANCES OF THE CASE , THE LD.CIT(A)-I , NASIK HAS ERRED IN HOLDING THAT A . O ' S ACT I ON IN RESPECT OF THE EX PARTE ASSESSMENT CANNOT BE UPHELD . 3. ON THE FACTS , I N L AW AND IN THE CIRCUMSTANCES OF THE CASE THE LD . C I T(A ) -I , NASHIK HAS ERRED IN DELETING THE ADDITION OF RS . 2 , 60 , 05 , 953/- ON ACCOUNT UNDISCLOSED INCOME OF EVASION OF SALE TAX. 4. ON THE FACTS , IN LAW AND IN THE CIRCUMSTANCES OF THE CASE THE LD . C I T(A)-I , NASH I K HAS ERRED IN DELETING THE ADDITION/DISALLOWANCE OF RS. 1 , 77,96,741 (RS . 81,26 , 860/ - PLUS RS.96 , 69 , 741/-) ON ACCOUNT OF BUSINESS INCOME ESTIMATED @ 5% ON TOTAL SALES . 5. ON THE FACTS , IN LAW AND IN THE CIRCUMSTANCES OF THE CASE THE LD . CIT(A)-I , NASH I K HAS ERRED IN DELETING THE ADD I TION OF RS . 2 , 13 , 19 , 380/- ON SALES OF GOODS IN THE MARKET WITH PROFIT MARGIN OF RS. 3/- PER LITER. 6. ON THE FACTS , IN LAW AND I N THE C I RCUMSTANCES OF THE CASE THE LD . CIT(A)-I , NASHIK HAS ERRED IN DELETING THE ADDIT I ON OF RS . 1 , 12 , 163/ - ON ACCOUNT I NCOME FROM OTHER SOURCES . 7. ON THE FACTS , IN LAW AND IN THE CIRCUMSTANCES OF THE CASE THE LD . CIT(A)-I, NASHIK HAS ERRED IN DELETING THE INTEREST U/S . 234A AND U/S . 234B OF THE I . T . ACT . 8. IT IS THEREFORE , PRAYED THAT THE ORDER OF THE LD . CIT(A)-I, NASHIK MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED . 9. THE APPELLANT CRAVES, LEAVE TO ADD/AMEND/ALTER THE GROUNDS OF APPEA L . 9 ITA NO.34/PN/2012 ITA NO.35/PN/2012 6. BEFORE US, AT THE OUTSET, LD. D.R. SUBMITTED THAT THE ISSUE WHICH REQUIRED ADJUDICATION IN THE PRESENT APPEAL IS WHETHER LD.CIT(A) WAS RIGHT IN QUASHING THE RE-ASSESSMENT ORDER P ASSED BY AO AND ALSO DELETING THE ADDITIONS MADE BY AO. BEFORE US, THE LD.DR TOOK US THROUGH THE ORDER OF AO AND SUBMITTED THA T THE ASSESSMENT WAS RIGHTLY RE-OPENED U/S 147 ON THE BA SIS OF INFORMATION RECEIVED FROM SALES-TAX DEPARTMENT IN RESPECT OF EVASION OF SALES-TAX WHICH LED TO THE BELIEF OF ESCAPEMENT OF INCOME. IT WAS FURTHER SUBMITTED THAT ASSESSEE DID NOT PRODUCE ANY BOOKS OF ACCOUNT OR MATERIAL FOR VERIFICATION AND ON A CCOUNT OF NON-COOPERATION BY THE ASSESSEE, AO WAS FULLY JUSTIFIED IN PASSING AN ORDER U/S 144 R.W.S. 148 OF THE ACT. WITH RESPECT TO LD CIT(A)S, FINDING THAT SINCE THE ASSESSMENT ORDER WAS PASSED WITH OUT DISPOSING OF ASSESSEES OBJECTIONS, IT WAS BAD-IN-LAW AND V OID AB INITIO, HE SUBMITTED THAT SINCE THE RE-ASSESSMENT PROCEEDINGS WER E VALIDLY INITIATED, THE MERE ACTION OF AO IN NOT DISPOSING O F ASSESSEES OBJECTIONS SHOULD NOT BE CONSIDERED AS FATAL SO AS TO ANNUL THE ASSESSMENT. HE SUBMITTED THAT THE NON-DISPOSIN G OF THE OBJECTIONS CAN ONLY BE CONSIDERED TO BE PROCEDURAL IRRE GULARITY AND WAS NOT A STATUTORY VIOLATION AND THE MATTER MAY BE R EMITTED BACK TO THE FILE OF AO FOR HIM TO DISPOSE OF THE OBJECTIONS FILED BY THE ASSESSEE AND WITH SUITABLE DIRECTIONS. HE FURTHER SUBMITTE D THAT THE VIOLATION OF NATURAL JUSTICE ON ACCOUNT OF NON-DISPOSAL OF OBJECTIONS OF THE ASSESSEE TO THE INITIATION OF RE-ASSESSM ENT PROCEEDINGS SHOULD BE CONSIDERED AS A MERE PROCEDURAL IRREGULARITY. HE SUBMITTED THAT VIOLATION OF ANY AND EVERY PROCEDURAL PROVISION CANNOT BE SAID TO AUTOMATICALLY VITIA TE THE ORDER PASSED BY AO. HE FURTHER RELYING ON THE DECISIO N OF THE HONBLE APEX COURT IN THE CASE OF STATE BANK OF PATIALA VS. S.K. 10 ITA NO.34/PN/2012 ITA NO.35/PN/2012 SHARMA (AIR 1996 SC 1669) SUBMITTED THAT IN CASE OF A VIOLATION OF PROCEDURAL PROVISION, WHICH IS NOT OF A MANDATORY CHARAC TER, THE COMPLAINT OF VIOLATION HAS TO BE EXAMINED FROM THE STAND POINT OF SUBSTANTIAL COMPLIANCE AND THAT THE ORDER PASSED IN VIOLAT ION OF THE PROCEDURAL PROVISION CAN BE SET ASIDE ONLY WHEN SUC H VIOLATION HAS CAUSED PREJUDICE TO THE ASSESSEE. HE FURTHER SUBM ITTED THAT HONBLE APEX COURT IN THE AFORESAID DECISION HAS HELD THAT WHILE APPLYING THE PRINCIPLES OF NATURAL JUSTICE, THE AUTHORITIES M UST ALWAYS BEAR IN MIND THAT THE ULTIMATE OBJECTIVE OF PRINCIP LES OF NATURAL JUSTICE IS TO ENSURE A FAIR HEARING AND TO ENSURE THAT THERE IS NO FAILURE OF JUSTICE. HE ALSO PLACED RELIANCE ON THE DECIS IONS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PRINCIPAL COMMIS SIONER OF INCOME-TAX-2, VADODARA VS. SAGAR DEVELOPERS (2016) 72 TAXMAN.COM 321 (GUJ), COMMISSIONER OF INCOME TAX VS. SUMANTBHAI C. MUNSHAW (1981) 128 ITR 142(GUJ), SUPERINTENDENT (TECH.1), CENTRAL EXCISE & OTHERS VS. PRAT AP RAI (1978) 114 ITR 231 (SC), GUDUTHUR BROS VS. ITO (1960) 40 ITR 298 (SC). HE THEREFORE AFTER RELYING ON THE AFORESAID DE CISIONS SUBMITTED THAT THE ORDER OF LD.CIT(A) HOLDING THAT THE ASS ESSMENT ORDER WITHOUT DISPOSING THE OBJECTIONS OF THE ASSESSEE TO BE BAD -IN- LAW AND VOID AB INITIO, BE SET ASIDE AND THAT THE MATTER BE REMITTED TO AO WITH NECESSARY DIRECTIONS. ON THE MERITS OF THE A DDITION THAT WERE MADE BY AO AND DELETED BY LD.CIT(A), HE SUBMIT TED THAT THE FACTS OF THE PRESENT CASE BEING SIMILAR TO THAT OF SHRIRAM PETROLEUM INDUSTRIES IN (ITA NOS.293 & 294/PN/2012 ORDER DT.16.01.2014 ) HE WOULD RELY ON THE AFORESAID DECISIONS OF THE CO- ORDINATE BENCH OF THE TRIBUNAL. HE ALSO PLACED A COPY O F THE AFORESAID DECISION ON RECORD. 11 ITA NO.34/PN/2012 ITA NO.35/PN/2012 7. LD.AR ON THE OTHER HAND SUPPORTED THE ORDER OF THE LD.CIT(A). LD.AR FURTHER SUBMITTED THAT IN RESPONSE TO TH E NOTICE ISSUED U/S 148, ASSESSEE VIDE LETTER DT.28.04.2010 HAD ST ATED THAT THE RETURN FILED BY THE ASSESSEE ON 31.12.2003 FOR AY 200 3-04 BE TREATED AS FILED IN RESPONSE TO NOTICE U/S 148 OF THE AC T. HE FURTHER SUBMITTED THAT ASSESSEE HAD RAISED OBJECTIONS T O THE RE- ASSESSMENT PROCEEDINGS INITIATED BY THE AO. HE FURTHER S UBMITTED THAT HONBLE APEX COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD., VS., ITO (2003) 259 ITR 19 SC HAS HELD THAT AO IS BOUND TO FURNISH REASONS FOR ISSUING NOTICE U/S 148 AND ON RECE IPT OF THE REASONS THE ASSESSEE IS ENTITLED TO FILE OBJECTIONS TO TH E ISSUANCE OF NOTICE AND THE AO IS BOUND TO DISPOSE OF THE SAME BY PA SSING A SPEAKING ORDER. HE SUBMITTED THAT THE AFORESAID DECISION OF HONBLE APEX COURT WOULD THEREFORE MEAN THAT THE PROCE DURE DIRECTED BY THE HONBLE APEX COURT HAS TO BE FOLLOWED IN LETTER AND SPIRIT, BUT THE SAME HAS NOT BEEN FOLLOWED BY AO AS HE H AS NOT DISPOSED OF THE OBJECTIONS RAISED BY ASSESSEE. HE THERE FORE SUBMITTED THAT WHEN AO DID NOT DISPOSE OF THE OBJECTIONS TO RE- ASSESSMENT, LD.CIT(A) HAS RIGHTLY HELD THAT THE ASSESSME NT ORDER PASSED WITHOUT DISPOSING OF THE ASSESSEES OBJECTIONS T O BE BAD-IN- LAW. HE ALSO OBJECTED TO THE LD.DRS PRAYER OF REMITTING BACK THE MATTER TO THE AO FOR DISPOSING OF THE OBJECTIONS AND SUB MITTED THAT IF THE MATTER IS SENT BACK TO THE AO TO DISPOSE OF THE O BJECTIONS, IT WOULD RESULT INTO GIVING A SECOND INNING TO THE AO TO PAS S ORDERS AND THAT WOULD LEAD TO UNNECESSARY HARASSMENT TO THE ASSESSEE. HE SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KSS PETRON PRIVATE LTD., VS. ACIT CIRCLE 10(2) (ITA N O.224 OF 2014 ORDER DT.03.10.2016) HAS HELD THAT WHEN THE ASSESSMENT ORDER IS PASSED WITHOUT JURISDICTION AND THE AO HAS NOT FOLLOWED 12 ITA NO.34/PN/2012 ITA NO.35/PN/2012 THE LAWS LAID DOWN BY THE APEX COURT IN CASE OF GKN DRIVESHAFTS (INDIA) LTD., (SUPRA), THERE IS NO REASON TO RESTORE THE ISSUE TO THE FILE OF THE AO TO PASS A FURTHER / FRESH ORDER AS IT WO ULD LEAD TO UNNECESSARY HARASSMENT OF THE ASSESSEE. WITH RESPECT TO THE LD.DRS RELIANCE PLACED ON THE DECISIONS IN THE CASE OF STAT E BANK OF PATIALA VS. S.K. SHARMA (SUPRA), HE SUBMITTED THAT IT WAS A CASE WITH RESPECT TO THE PROCEEDINGS UNDER LABOUR LAW AND TH EREFORE THE FACTS WERE DIFFERENT AND THEREFORE THE RATIO OF THAT DECISIO N WOULD NOT BE APPLICABLE TO THE PRESENT FACTS. HE FURTHER SUBM ITTED THAT THE RELIANCE PLACED BY THE LD.DR ON THE OTHER DECISIONS ALS O COULD NOT BE APPLIED TO THE PRESENT CASE BECAUSE THE FACTS O F THOSE CASES ARE DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. ON THE ISSUE OF LD.DRS RELIANCE PLACED ON THE DECISION IN THE CASE OF SHRIRAM PETROLEUM INDUSTRIES (SUPRA), FOR THE MERITS OF ADDITION, HE SUBMITTED THE FACTS OF THE CASE IN CASE OF SHRIRAM PET ROLEUM (SUPRA) ARE DISTINGUISHABLE AS IN THAT CASE IT WAS AN EX-P ARTE DECISION AND ASSESSEE HAD ACCEPTED TO GO BACK. HE THE REFORE SUBMITTED THAT THE DECISION IN THE CASE OF SHRIRAM PETRO LEUM INDUSTRIES (SUPRA) CANNOT BE APPLIED TO THE PRESENT FACT S. HE FURTHER SUBMITTED THAT THE LIMITATION PERIOD TO PASS THE R E- ASSESSMENT ORDER IN THE CASE OF ASSESSEE HAD EXPIRED ON 31.10.2010 AND THEREFORE RELYING ON THE DECISION IN THE CASE OF KSS PETRON PVT. LTD., (SUPRA) SUBMITTED THAT SECOND INNINGS A S SOUGHT BY LD.DR CANNOT BE GRANTED TO THE REVENUE. THE LD AR T HUS STRONGLY SUPPORTED THE ORDER OF LD.CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO RE-OPENING OF ASSESSMENT. IT IS AN UNDISPUTED FACT THAT THE RETURN 13 ITA NO.34/PN/2012 ITA NO.35/PN/2012 OF INCOME FOR AY 2003-04 WAS FILED BY THE ASSESSEE ON 31.1 0.2003 WHICH WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT. LATE R-ON, A NOTICE U/S 148 WAS ISSUED ON 29.03.2010 FOR RE-OPENING T HE ASSESSMENT. WE FIND THAT ASSESSEE VIDE LETTER DATED 28/ 04/2010 INTER-ALIA HAD SUBMITTED THAT THE RETURN OF INCOME FILE BY IT ON 31/10/2003 BE TREATED AS RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148 OF THE ACT & HAD FURTHER SOUGHT REASONS FOR RE OPENING. WE FIND THAT LD.CIT(A) AFTER CALLING THE REMAND REPORT FROM T HE AO AND THE ASSESSEES REPLY TO THE REMAND REPORT AND AFTER CONSID ERING THE ASSESSEES SUBMISSION HAS GIVEN A FINDING THAT ASSES SEE HAD FILED OBJECTION ON 08.06.2010 TO ISSUANCE OF NOTICE U/S 148 OF THE ACT. THE AO DID NOT DISPOSE OF THE OBJECTIONS AND PROC EEDED AND PASSED THE RE-ASSESSMENT ORDER. AT THIS MOMENT, ON PR OCEDURE TO BE FOLLOWED IN THE CASE OF RE-ASSESSMENT PROCEEDINGS IT W OULD BE RELEVANT TO REFER TO THE DECISION OF HONBLE APEX COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD., VS., ITO (SUPRA) WHEREIN THE HONBLE APEX COURT HAS HELD AS UNDER: WE CLARIFY THAT WHEN A NOTICE U/S 148 OF THE INCOM E-TAX ACT IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICE IS TO FILE A RETURN AND IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF RE ASONS, THE NOTICE IS ENTITLED TO FILE OBJECTIONS TO ISSUAN CE OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF TH E SAME BY PASSING A SPEAKING ORDER. WE FURTHER FIND THAT IN CASE OF KSS PETRON PRIVATE LTD (SUPRA) WHERE THE FACTS WERE THAT THE AO HAD PASSED THE RE- ASSESSMENT ORDER WITHOUT DISPOSING OF ASSESSEES OBJECTION FOR RE-OP ENING OF ASSESSMENT AND WHEN THE MATTER WAS CARRIED BEFORE THE TRIBUNAL, THE TRIBUNAL HAD SET ASIDE THE ORDERS AND RESTORED THE ASSESSMENT TO THE AO TO PASS FRESH ORDERS AFTER DISPOSING OF THE OBJECTIONS TO RE-OPENING, THE HONBLE HIGH COURT OBSERVED AS UNDER: 14 ITA NO.34/PN/2012 ITA NO.35/PN/2012 8. WE NOTE THAT ONCE THE IMPUGNED ORDER FINDS THE ASSESSMENT ORDER IS WITHOUT JURISDICTION AS THE LAW LAID DOWN BY THE APEX COURT IN GKN DRIVESHAFTS (SUPRA) HAS NOT BEEN FOLLOWED, THEN THERE IS NO REASON TO RESTORE THE ISSUE TO THE ASSESSING OFFICER TO PA SS A FURTHER/FRESH ORDER. IF THIS IS PERMITTED, IT WOULD GIV E A LICENCE TO THE ASSESSING OFFICER TO PASS ORDERS ON RE- OPENING NOTICE, WITHOUT JURISDICTION (WITHOUT COMPLIANCE OF THE LAW IN ACCORDANCE WITH THE PROCEDURE;, YET THE ONLY CONSEQUENCE, WOULD BE THAT IN APPEAL, IT WOULD BE RESTORED TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER FOLLOWING THE DUE PROCEDURE. THIS WOULD LEAD TO UNNECESSARY HARASSMENT OF THE ASSESSEE BY REVIVING STALE / OLD MATTERS. 9. BEFORE US REVENUE HAS NOT PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT. THE DECISIONS RELIED UPON BY THE LD.DR ARE DISTINGUISHABLE ON FACTS AND ARE THEREFORE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE PR ESENT CASE, SINCE THE AO HAS NOT DISPOSED OF THE OBJECTIONS RAISED B Y THE ASSESSEE ON THE RE-OPENING OF THE ASSESSMENT ORDER U/ S 147 OF THE ACT, WE RELYING ON THE AFORESAID DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF KSS PETRON (SUPRA), AND FOLLOWING TH E SAME REASONING WE QUASH THE REASSESSMENT ORDER PASSED U/S 144 R.W.S 148 OF THE ACT. SINCE WE HAVE UPHELD THE ORDER OF LD.C IT(A) IN QUASHING THE RE-ASSESSMENT ORDER FRAMED U/S 144 R.W.S 148 OF THE ACT, WE ARE OF THE VIEW THAT THE OTHER GROUNDS RAISED BY THE REVENUE ON MERITS, REQUIRE NO ADJUDICATION. 10. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. 11. AS FAR AS APPEAL FOR AY 2004-05 IS CONCERNED, SINCE BOTH THE PARTIES BEFORE US HAVE SUBMITTED THAT THE FACT S OF THE CASE FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 ARE IDENT ICAL, WE THEREFORE FOR THE REASONS STATED HEREIN WHILE DISPOSING OF THE 15 ITA NO.34/PN/2012 ITA NO.35/PN/2012 APPEAL FOR A.Y. 2003-04 AND FOR SIMILAR REASONS, DISMISS THE GROUNDS RAISED BY THE REVENUE IN AY 2004-05 ALSO. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 30 TH DAY OF NOVEMBER, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER % / ACCOUNTANT MEMBER PUNE; ! DATED : 30 TH NOVEMBER, 2016. YAMINI ) * +',- .-' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEAL) - 1 4. 5. 6. CIT - I, NASHIK #$% &&'(, * '(, B / DR, ITAT, B PUNE; %+, - / GUARD FILE //TRUE COPY// )! / BY ORDER ./0 &1 '2 / SR. PRIVATE SECRETARY * '( , / ITAT, PUNE