ZISHAAN FASHION PVT LTD, MUMBAI V. ITO 5(3)(4), MUMBAI

ITA 4268/MUM/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0422 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 16-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABDUL HAKEEM
• Keywords: Reopening of assessment; Transfer pricing; Principle of natural justice; Period of limitation; Question of law; Tangible material; Procedural lapse; Revised return; Reassessment proceedings; Borrowed satisfaction; Set aside
• Section: 68; 148; 263; 11; 143(3); 133(6); 13; 153; 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “SMC” BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA.NOs. 4266, 4267, 4268, 4269 & 4270/MUM/2019 (A.Ys: 2009-10, 2010-11, 2013-14, 2014-15 & 2015-16) M/s. Zishaan Fashion Pvt. Ltd., Flat No. 44, 4 th Floor 1-B Wing, Bustan Apartments Belassis Road, Mumbai - 400008 PAN: AAACZ1319E v. Income Tax Officer – 5(3)(4) Room No. 565, 5 th Floor Aayakar Bhavan, M.K. Road Mumbai - 400020 (Appellant) (Respondent) Assessee by : Shri Rajeev Khandelwal Department by : Shri Abdul Hakeem Date of Hearing : 24.11.2021 Date of Pronouncement : 07.01.2022 O R D E R PER C.N. PRASAD (JM) 1. These appeals are filed by the assessee against the consolidated order of the Learned Commissioner of Income-tax (Appeals)-10, Mumbai [hereinafter in short “Ld. CIT(A)”] dated 20.03.2019 for the Assessment years 2009-10, 2010-11 and 2013-14 to 2015-16 arising out of the assessment orders passed under section 143(3) r.w.s 147 of the Act for 2 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., assessment year 2009-10 and 2010-11 and 143(3) of the Act for assessment years 2013-14 to 2015-16. 2. These appeals were heard together and are being disposed of together by this common order for the sake of convenience as the issues involved in all these appeals are based on identical facts. 3. Firstly, I take up the appeal filed by the assessee for A.Y 2009-10 in ITA No 4266/Mum/2019 for adjudication and briefly the facts are as under: - 4. The assessee is engaged in the business of trading in garments and also has agricultural income. For the year under reference the assessee filed its return of income on 31.12.2009 declaring its total income at ₹.5,82,995/- and agricultural income at ₹.14,67,200/-. Later the Assessing Officer issued notice u/s 148 of the Act dated 21.03.2016 and reopened the assessment of the assessee. The assessee in response to the said notice, by letter dated 20.10.2016 requested the Assessing Officer to consider the original return of income filed to be in pursuance to the notice u/s 148 of the Act. 3 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., 5. However, the Assessing Officer by his order dated 27.12.2016 completed the assessment u/s. 143(3) r.w.s 147 of the Act by making an addition of ₹.7,57,063/- u/s 68 of the Act, not accepting the agricultural income shown by the assessee and further made disallowance of expenses of ₹.7,10,137/- claimed by the assessee against its agricultural income, thereby making an addition of ₹.14,67,200/-. Assessing Officer further made an ad hoc disallowance of ₹.18,52,913/- being 10% of the total expenses of ₹.1,85,29,130/- debited to the profit and loss account. 6. The assessee carried the matter in appeal to the Ld.CIT(A) and challenged the reopening of assessment. The Ld.CIT(A) however, upheld the reopening of assessment and against this order the assessee is in appeal before the Tribunal. 7. At the outset, the Ld. Counsel for the assessee submitted that the assessee by letter dated 11.02.2021 for assessment years 2009-10 and 2010-11 has raised additional ground of appeal challenging the validity of notice issued under section 148 of the Act respectively and consequently Assessment Order as bad in law. Ld counsel submitted that the additional ground of appeal is purely a legal ground and hence should be admitted. He placed reliance on the decision of the Apex Court in the case of 4 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., National Thermal Power Co Ltd reported in (229 ITR 383) for the same. The Ld. DR objected to the admission of the additional ground of appeal raised by the assessee. 8. I have heard the rival submissions and I am of the considered view that the additional ground of appeal is purely a legal ground which does not require additional facts to be seen and relying on the decision of the Apex court in the case of National Thermal Power Co (supra) I admit the additional ground of appeal raised by the assessee. 9. Regarding the additional ground of appeal raised the Ld. counsel for the assessee pointed out that the assessee by its letter dated 01.02.2021 requested the Assessing Officer to provide the reasons recorded for reopening the assessment and the approval u/s 151 obtained from the appropriate authority together with the material sent for obtaining such approval which is at page No 5 of the paper book. Thereafter the Ld. counsel referred to page no 6 of the paper book to show that the assessee also made an application under RTI on 03.02.2021 for providing the reasons and the approval mentioned above and informed the Bench that till date the assessee has not received the reasons recorded by the 5 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., Assessing Officer for reopening the assessment by issue of notice u/s 148 for the year under reference. 10. The Ld. counsel for the assessee thus, stated that there are no reasons recorded by the Assessing Officer as the same are not available on the assessment records as the same have not been given to the assessee till the date of hearing before the Tribunal and as such, it can be said that no reasons were recorded by the Assessing Officer before issuing the impugned notice under section 148 of the Act. Accordingly, he contended that the impugned reassessment order passed under section 143(3) r.w.s 147 of the Act for assessment year 2009-10 is required to be quashed. Ld. Counsel for the assessee placed reliance on the following decisions. (i). Videsh Sanchar Nigam Ltd [340 ITR 66 (Bom)] (ii). Tata International Ltd [23 taxmann.com 18 (Mum)] 11. The Ld. DR could not controvert the above facts as brought out by the Ld. counsel for the assessee. Recording of the reasons is a pre-requisite for commencing reassessment proceedings as mandated by the provisions of section 148(2) of the Act and as the Assessing Officer has not been able to provide the reasons for reopening the assessment for this year either before completion of assessment or even at the stage 6 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., of appeal proceedings, it can safely be concluded that the same have not been recorded by him. Even assuming for a moment, the Assessing Officer had in fact recorded the reasons for reopening such reasons were never provided to the assessee for its rebuttal. The assessee had no occasion to file its objections as the reasons for reopening the assessment were never furnished to the assessee and this is completely in violation of the procedure laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd., [259 ITR 19]. 12. In the case of Fomento Resorts & Hotels Ltd., v. ACIT in Tax Appeal No. 63 of 2007 dated 30.08.2019 the Hon'ble Bombay High Court held as under: “13. In the present case, the Appellants did lodge their objections vide letter dated 14th April, 2003. By a further letter dated 25th March, 2004, the Appellants requested the Assessing Officer to dispose of such objections by passing a speaking order before proceeding with the reassessment in respect of the Assessment Year 1997-98. However, the Assessing Officer, without proceeding to dispose of the objections raised by the Appellants by passing a speaking order, straight away proceeded to make the assessment order dated 26th March, 2004, bringing to charge taxable expenditure on ₹10,22,73,987/-. The assessment order dated 26th March, 2004, no doubt, deals with the objections raised by the Appellant and purports to dispose of the same. Ms. Linhares contends that this is a sufficient compliance with the procedure set out in GKN Driveshafts (India) Ltd. (supra), assuming that the same is at all applicable to the proceedings under the said Act. Mr. Dada, however, submits that such disposal in the assessment order itself does not constitute the compliance with the mandatory conditions prescribed by the Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. (supra). In support, as noted earlier, Mr. Dada relies upon Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra). 14. The contention of Ms. Linhares that the decisions relied upon by Mr. Dada relate to the provisions of the Income Tax Act and, therefore, are not applicable to the proceedings under the Expenditure Tax Act, cannot 7 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., be accepted. In the first place, the provisions relating to reopening of assessment are almost pari materia. Secondly, in so far as Assessment Year 1995-96 is concerned, the Respondent applied the very same ruling in GKN Driveshafts (India) Ltd. (supra) to hold that the notice of reopening of assessment was ultra vires Section 11 of the said Act. This view, in the specific context of the said Act and incidentally in the specific context of this very Appellant, was upheld not only by this Court, but also by the Hon’ble Supreme Court. This was in ETA No.1 and 5/PANJ/01 decided by the Tribunal on 4.4.2006. 15. The aforesaid decision of the ITAT was appealed by the Respondent vide Tax Appeal No.71/2006. This appeal was dismissed by this Court vide order dated 27th November, 2006, which reads thus : “Heard the learned Counsel on behalf of the parties. This appeal is filed against the Order dated 4-4-2006 of the ITAT wherein in para 7 the learned ITAT has come to the conclusion that the Assessing Officer is required to give reasons, when asked for by the Assessee. Giving of reasons has got to be considered as implicit in Section 11 of the Expenditure Tax Act, 1987. It is now well settled that giving reasons in support of an order is part of complying with the principles of natural justice. In the light of that, no fault could be found with the order of the learned ITAT and as such no substantial question of law arises as well. Appeal dismissed.” 16. The Respondent, instituted a Special Leave to Appeal (Civil) No.5711/2007 which was, however, dismissed by the Hon’ble Apex Court vide order dated 16/7/2007, by observing that there were no merits. 17. Accordingly, for the aforesaid reasons, we are unable to accept Ms. Linhares’s contention based upon the any alleged variance between the provisions of the said Act and the provisions of the Income Tax Act, in so far as applicability of the principles in GKN Driveshafts (India) Ltd. (supra) is concerned. 18. The moot question is, therefore, the disposal of the objections by the Assessing Officer in his assessment order dated 26th March, 2004 constitutes sufficient compliance with the procedure prescribed by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) or, whether it was necessary for the Assessing Officer to have first disposed of the Appellant’s objections by passing a speaking order and only upon communication of the same to the Appellants, proceeded to reopen the assessment for the Assessment Year 1997-98. 19. Virtually, an identical issue arose in the cases of Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra) before the Division Benches of our High Court at Bombay. 20. In Bayer Material Science (P) Ltd. (supra), by a notice dated 6/2/2013, the Revenue sought to reopen the assessment in the year 2007- 08. The Assessee filed a revised return of income and sought for reasons recorded in support of the notice dated 6.2.2013. The reasons were 8 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., furnished only on 19.3.2015. The Assessee lodged objections to the reasons on 25th March, 2015. The Assessing Officer, without disposing of the Petitioner’s objections, made a draft assessment order dated 30th March, 2015, since this was a matter involving transfer pricing. In such circumstances, the Division Bench of this Court, set aside the assessment order by observing that the Court was unable to understand how the Assessing Officer could, at all, exercise the jurisdiction and enter upon an inquiry on the reopening notice before disposing of the objections on the reasons furnished to the Assessee. This Court held that the proceedings initiated by the Transfer Pricing Officer (TPO), on the basis of such a draft assessment order, were without jurisdiction and quashed the same. 21. Similarly, in the case of KSS Petron Private Ltd. (supra), this Court was concerned with the following substantial question of law : “Whether on the facts and circumstances of the case and in law, the Tribunal was justified in restoring the issue to the Assessing Officer after having quashed/set aside the order dated 14th December, 2009 passed by the Assessing Officer without having disposed of the objections filed by the appellant to the reasons recorded in support of the reopening Notice dated 28th March, 2008 ?” 22. In the aforesaid case, the Assessing Officer had purported to dispose of the objections to the reasons in the assessment order, consequent upon reopening of the assessment. This Court, however, held that the proceedings for reopening of assessment prior to disposing of the Asessee’s objections by passing a speaking order, was an exercise in excess of jurisdiction. 23. KSS Petron Private Ltd. (supra), this is what the Division Bench has observed at paragraphs 7 and 8 of the Judgment : “7. On further Appeal, the Tribunal passed the impugned order. By the impugned order it held that the Assessing Officer was not justified in finalizing the Assessment, without having first disposed of the objections of the appellant. This impugned order holds the Assessing Officer is obliged to do in terms of the Apex Court's decision in GKN Driveshafts (India) Ltd., v/s. ITO 259 ITR 19. In the aforesaid circumstances, the order of the CIT(A) and the Assessing Officer were quashed and set aside. However, after having set aside the orders, it restored the Assessment to the Assessing Officer to pass fresh order after disposing of the objections to reopening notice dated 28th March, 2008, in accordance with law. 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 pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in 9 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., 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.” 24. According to us, the rulings in Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra) afford a complete answer to the contentions raised by Ms. Linhares in defence of the impugned order. 25. Since, in the present case, the Assessing Officer has purported to assume the jurisdiction for reopening of the assessment, without having first disposed of the Assessee’s objections to the reasons by passing a speaking order, following the law laid down in GKN Driveshafts (India) Ltd. (supra), Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra), we are constrained to hold that such assumption of jurisdiction by the Assessing Officer was ultra vires Section 11 of the said Act. The first substantial question of law will, accordingly, have to be answered in favour of the Appellant and against the Respondent-Revenue.” 13. As could be seen from the above decision of the Hon'ble Bombay High Court even if Assessing Officer disposed off the objections raised by the assessee in the Assessment Order while completing the re-assessment that is not in compliance with the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd., [259 ITR 19] in other words the Assessing Officer shall pass a separate speaking order disposing off the preliminary objections raised by the assessee in reopening the assessment. 14. In the case of Maharashtra State Power Generation Co. Ltd., v. Addl. CIT in ITA.No. 2043/Mum/2011 dated 31.07.2019 the Tribunal considering the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd., v. ITO (supra) and the decision of the Hon'ble Jurisdictional High Court in the case of KSS Petron Pvt. Ltd., v. ACIT in 10 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., ITA.No. 224 of 2014 dated 03.10.2016 and also the decision of the Coordinate Bench in the case of DCIT v. Firstsource Solutions Ltd in ITA.No. 3985 & 3986/Mum/2016 dated 22.05.2019, quashed the reassessment order passed u/s. 143(3) r.w.s. 147 of the Act. While quashing the re-assessment order the Coordinate Bench observed as under: - “2.1 The Ld. Authorized Representative for Assessee [AR], at the outset, submitted that the objections raised by the assessee against reopening the assessment were never disposed-off by Ld. Assessing Officer as mandated by the decision of Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. V/s ITO [259 ITR 19] and therefore, the reassessment proceedings stood vitiated in the eyes of law. Reliance has been placed on the decision of Jurisdictional Hon’ble Bombay High Court rendered in KSS Petron Private Limited V/s ACIT [ITA No. 224 of 2014 dated 03/10/2016] to submit that the matter could also not be restored back to the file of Ld. AO to pass order on objections raised by the assessee. 2.2 On the other hand, Ld. CIT-DR relied on para 3.3(a) of the impugned order which would read as under: - 3.3(a) The appellant’s first objection is that the AO did not dispose-off objections raised by it in respect of re-opening of the assessment proceedings. On this issue the appellant has relied on various case-laws. I have considered the facts of the case and decisions relied on by the appellant. Though as per decisions of the Hon'ble Supreme Court and other decisions, it was obligatory on the part of the AO to first dispose-off, by passing a speaking order, appellant’s objections raised against reopening of the assessment. However, the Assessing Officer’s action of not disposing off appellant’s objections was a procedural irregularity only which did not affect the legality of the assessment order passed. In the above decisions relied upon by the appellant, the assessment order passed was not held to be invalid on account of not disposing off the assessee’s objections raised against re- opening of the assessment. In those cases the assessment order was set aside to the file of the AO for first disposing off the objections by passing a speaking order and then frame assessment order. Therefore, on account of this irregularity, the assessment order passed by the AO cannot be held to be invalid. As per existing provisions of the Act, the undersigned has no power to set aside the assessment order passed by the AO. Therefore, appellant’s objections/arguments on this issue are not acceptable. 11 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., In the above background, Ld. CIT-DR pleaded for restoration of matter back to the file of Ld. AO for disposal of assessee’s objection against reassessment proceedings. However, the fact that the assessee had raised objections against the reopening of the assessment and the same was not disposed-off by Ld. AO, remain uncontroverted. Nothing on record would establish that the assessee’s objections against reopening of assessment were ever considered and rejected by Ld. AO at any point of time, during reassessment proceedings. 3. After due consideration of factual matrix, we find that the binding judicial precedent in the shape of cited decision of Hon’ble Bombay High Court squarely applies to the fact of the case. The relevant observation of Hon’ble court, for ease of reference, could be extracted in the following manner: - 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 pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening 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. In fact, to ensure that reopening notices are disposed of, expeditiously the parliament itself has provided in Section 153(2) of the Act a period of limitation within which the Assessing Officer must pass an order on the notice of reopening i.e. within one year from the end of the financial year in which the notice was issued. In fact, Section 153 (2A) of the Act as in force at the relevant time itself provides that an order of fresh Assessment, consequent to the order of Tribunal under Section 254 of the Act, would have to be passed within one year from the end of the financial year in which the order under Section 254 of the Act, was passed by the Tribunal and received by the Commissioner of Income Tax. 10. The Director of the appellant has filed an affidavit dated 19th September, 2006. In the affidavit, it is stated that consequent to the impugned order of the Tribunal dated 14th August, 2013, the Assessing Officer has not passed any order of reassessment. Time was granted on the last occasion to enable the Respondent to respond to the affidavit dated 19 th September, 2006 of the Director of the Appellant Company. The Respondent is unable to dispute the facts stated in the affidavit dated 19th September, 2016 filed by the Director of the Appellant Company. The time to pass a order on the notice dated 28th March, 2008, even consequent to the impugned order of the Tribunal, has lapsed. 11. Therefore, on the above facts and law, the substantial question of law is answered in the negative i.e. in favour of the Appellant-Assessee and against the Respondent-Revenue. 12 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., This decision has subsequently been followed by the co-ordinate bench of the Tribunal in number of cases, few of which could be tabulated as follows: 1. DCIT M/s. National Bank for Agriculture and Rural Development [ITA No.4964/Mum/2014 (A.Y.2004-05) dated 28/10/2016] 2. Baldev Ramratan Sharma Vs. ACIT [ITA No.1909/Mum/2017 (A.Y.2009-10) dated 28/08/2018] 3. DCIT V/s Firstsource Solutions Ltd. [ITA Nos. 3985- 86/Mum/2016 dated 22/05/2019] 4. The co-ordinate bench of the Tribunal in DCIT V/s Firstsource Solutions Ltd. [supra], after considering the contrary case-laws as cited by the revenue, has concluded the matter in the following manner: - 7. We have considered rival submissions and perused the material on record. Undisputed factual position, as culled out from the material on record, clearly reveals that in the course of re– assessment proceedings, though, the assessee had raised objections challenging the validity of re–opening of assessments under section 147 of the Act, however, the Assessing Officer has not disposed of the objections independently by way of separate orders before completion of assessment proceedings under section 143(3) r/w 147 of the Act. The Hon'ble Supreme Court in GKN Driveshafts India Ltd. (supra) has held that before completion of the assessment, the Assessing Officer is duty bound to dispose of the objections of the assessee separately. Therefore, the Assessing Officer in the instant appeal has not followed the due judicial process while dealing with the objections of the assessee. For that reason, the impugned assessment orders are legally unsustainable. Now the issue which arises is, whether in such circumstances, the re–assessment orders passed have to be quashed as void ab initio or they are to be restored back to the Assessing Officer for enabling him to dispose of the objections of the assessee and pass fresh assessment orders. In our view, the issue is no more res integra in view of the decision of the Hon'ble Jurisdictional High Court in KSS Petron Pvt. Ltd. (supra), wherein, the Hon'ble Jurisdictional High Court has held that if the re–assessment order is passed without disposing of the objections raised by the assessee, they have to be quashed and no second opportunity can be given to the Assessing Officer to pass fresh assessment orders after disposing of the objections of the assessee. The same view has been expressed by the Co–ordinate Bench in the decisions cited by the learned Sr. Counsel for the assessee. Upon careful reading of the decision of the Hon'ble Supreme Court in Larsen Toubro Ltd. v/s State of Jharkhand & Ors., in Civil Appeal no.5390/2007, cited by learned Departmental Representative, we find it to be not applicable to the facts of the present case, as the said decision is not on the issue of validity of re– assessment order on account of non–disposal of objection raised by the assessee. It is relevant to observe, post conclusion of hearing of the appeal, the learned Departmental Representative has submitted a note citing certain decisions in support of the proposition that non– disposal of objection is a procedural irregularity, hence, the assessment 13 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., order should be set aside for enabling the Assessing Officer to dispose of the objections and pass a fresh assessment order. The first decision relied upon by the learned Departmental Representative is, Home Finders Housing Ltd. v/s ITO, [2018] 94 taxmann.com 84 (SC). This is a matter arising out of a judgment delivered by the Hon’ble Madras High Court holding that non– disposal of objection before completion of assessment is a procedural irregularity which can be cured by setting aside the assessment order to the Assessing Officer for disposing of assessee’s objection and thereafter completing the assessment. Against the aforesaid decision of the Hon’ble Madras High Court, the assessee filed a Special Leave Petition (SLP) before the Hon'ble Supreme Court. The Hon'ble Supreme Court in the decision cited supra, dismissed the SLP in limine without laying down any ratio. The order passed by the Hon’ble Supreme Court is as under:- “The Special Leave Petition is dismissed. Pending application stands disposed of.’’ 8. It is a fairly well settled legal position that dismissal of SLP in limine at the stage of admission without a speaking or reasoned order does not constitute a binding precedent under Article–141 of the Constitution of India. This principle has been well propounded in case of Kunhayammed Vs. State of Kerala 2001(129) ELT 11 (S.C.). Aforesaid view was again affirmed by the hon’ble Supreme Court in case of Khoday Distilleries Ltd. Vs. Shree Mahadeshwara Sahakara Sakkare Karkhane Ltd. while disposing of Civil Appeal no.2432 of 2019 in judgment dated. 01.03.2019. Therefore, it cannot be said that in the aforesaid decision, the Hon'ble Supreme Court has laid down the proposition that non–disposal of objections against the validity of proceedings initiated under section 147 of the Act is a procedural irregularity which can be cured if the Assessing Officer is given an opportunity to dispose of the objections of the assessee and thereafter complete the assessment. Moreover, the decision of the Hon'ble Supreme Court in GKN Driveshafts India Ltd. (supra) has not been overruled and still holds the field. The next decision cited by the learned Departmental Representative is of the Hon'ble Jurisdictional High Court in NTUC Income Insurance Co– operative Ltd. v/s DDIT, [2013] 33 taxmann.com 255 (Bom.). On a careful reading of the aforesaid decision, it is evident that the facts on the basis of which the Hon'ble Jurisdictional High Court restored back the issue to the Assessing Officer to re–frame assessment de novo is completely different from the present appeal. In the case before the Hon'ble Jurisdictional High Court, the Assessing Officer had not only communicated the reasons for reopening, but, by a separate communication had intimated the assessee that all conditions laid down in GKN Driveshafts India Ltd. has been met. Admittedly, the assessee did not challenge the aforesaid decision of Assessing Officer. Subsequently, the reassessment order was subjected to the proceedings under section 263 of the Act. In of revision proceeding the assessee contended that due to lack of opportunity various documents/evidences could not be produced before the 14 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., Assessing Officer. Considering the aforesaid submission of the assessee, the Commissioner set aside the assessment order with a direction to frame de novo assessment. During the fresh assessment proceeding assessee pleaded that the objection against reopening of assessment should be disposed of first. In the aforesaid factual context, the Hon'ble Jurisdictional High Court did not entertain assessee’s plea. However, the Hon'ble Jurisdictional High Court in KSS Petron Pvt. Ltd. (supra), in no uncertain terms, has held that if the Assessing Officer before completion of assessment has not disposed of the objection, the assessment order cannot be restored back to the Assessing Officer for framing assessment de novo after disposal of the objections of the assessee. Though, the Hon'ble Madras High Court in case of Home Finders Housing Ltd. referred to earlier as well as the Hon'ble Gujarat High Court in MGM Exports v/s DCIT, [2010] 323 ITR 33 (Guj.) and PCIT v/s Sagar Developers, [2016] 72 taxmann.com 321 (Guj.) have held contrary view, however, we are bound by the decision of the Hon'ble Jurisdictional High Court in KSS Petron Pvt. Ltd. (supra). 9. In view of the aforesaid, we do not find any infirmity in the orders passed by learned Commissioner (Appeals) in holding the assessment orders passed to be legally unsustainable. Accordingly, grounds raised in both the appeals are dismissed. Respectfully following the cited binding judicial precedents, the action of Ld. first appellate authority in upholding the reassessment proceedings, could not be said to be in accordance with law. Therefore, we quash the reassessment order dated 29/12/2009 passed by Ld. Assessing Officer. In view of the same, dealing into the merits of the case become merely academic in nature and therefore, we refrain from dealing the same. Ground No. 1 stands allowed which makes other grounds of appeal infructuous.” 15. In the case of CIT v. Videsh Sanchar Nigam Ltd., [340 ITR 66] the Hon'ble Jurisdictional High Court held that since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of assessment the re-assessment order cannot be upheld. While holding so the Hon'ble High Court observed as under: - “1 Whether the Tribunal was justified in cancelling the reopening of the assessment is the question raised in this appeal. 2 The finding of fact recorded by the Income-tax Appellate Tribunal is that in the present case the reasons recorded for 15 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., reopening of the assessment though repeatedly asked by the assessee were furnished only after completion of the assessment. The Tribunal following the judgment of this court in the case of CIT v. Fomento Resorts and Hotels Ltd., Income-ta Appeal No. 71 of 2006 decided on November 27, 2006, has held that though the reopening of the assessment is within three years from the end of the relevant assessment year, since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of assessment, the reassessment order cannot be upheld. Moreover, special leave petition filed by the Revenue against the decision of this court in the case of CIT v. Fomento Resorts and Hotels Ltd. has been dismissed by the apex court, vide order dated July 16, 2007. In this view of the matter, the present appeal is also dismissed with no order as to costs.” 16. The ratio of the above decision squarely applies to the facts of the assessee’s case. Thus in view of what is discussed above and in the case on hand before me since Assessing Officer failed to provide the reasons for reopening of assessment to the assessee, respectfully following the above decision of the Hon'ble Bombay High Court in the case of CIT v. Videsh Sanchar Nigam Ltd., (supra), I hold that reassessment is bad in law and accordingly the re-assessment order passed u/s. 143(3) r.w.s. 147 of the Act is quashed as bad in law. The additional ground raised by the assessee is allowed. 17. Now I take up the appeal for A.Y. 2010-11 in ITA.No. 4267/Mum/2019 for adjudication and the brief facts are as under. 16 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., 18. The Ld. Counsel for the assessee brought to the notice of the Bench that by letter dated 11.02.2021 the assessee has also raised additional ground of appeal challenging the validity of notice issued under section 148 of the Act and consequently Assessment Order as bad in law. The Ld. counsel submitted that the additional ground of appeal is purely legal ground and placed reliance on the decision of Apex Court in the case of National Thermal Power Co. Ltd [229 ITR 383]. Ld. DR objected to the admission of the additional ground of appeal. 19. I have heard the rival submissions and I am of considered view that the additional ground of appeal is purely a legal ground which does not require additional facts to be seen and relying on the decision of National Thermal Power Co (supra) I admit the additional ground of appeal raised by the assessee for A.Y. 2010-11 also. 19.1. The Ld. Counsel for the assessee referring to the reasons recorded by the Assessing Officer which are placed in the paper book at page no 11, at the outset submitted that the Assessing Officer has not supplied to the assessee the information received by him from ADIT, Inv, Unit-5(2), Mumbai by letter dated 03.03.2016 which is in violation of the principles of natural justice. 17 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., 19.2. It is further submitted that in the entire reasons recorded by Assessing Officer, he has brought nothing on record to prove that he has on his own carried out any independent inquiry to come to the prima facie belief that income has escaped assessment. However, he has merely relied on the information received from the Investigation wing before issuing notice under section 148 of the Act. It is submitted that the Courts have time and again held that re-opening of assessment is valid only if the reasons recorded are based on the satisfaction of the Assessing Officer and not based on borrowed satisfaction. However, it is the contention of the Ld. Counsel for the assessee that the reasons recorded clearly show that they are based on borrowed satisfaction. The Ld. counsel placed reliance on the following decisions in support of the above proposition. (i) Shodiman Investment P Ltd [422 ITR 337 (Bom)] (ii) Varshaben Sanatbhai Patel [64 taxmann.com 179 (Gujarat)] Thus, the Ld. counsel for the assessee contended that the entire reasons recorded are based on borrowed satisfaction and hence the impugned assessment order ought to be quashed. 19.3. The Ld. counsel further argued that the re-opening of assessment to be successful has to be tested on the touchstone of ‘reason to believe’ on the basis of tangible material that income has escaped 18 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., assessment. There should be a live link between the tangible material and the formation of belief on the basis of the reasons recorded that income has escaped assessment. He stated that the Assessing Officer has miserably failed in doing so inasmuch as he only relies on the information received from the ADIT (Inv), Unit-5(2), Mumbai that the assessee could not provide credible documentary evidences for cash deposit arising out of agricultural income. Thus, on the basis of the reasons recorded, there can be no belief that income has escaped assessment. It is trite law that the reasons should be exhaustive and should mention as to how income has escaped assessment that is, there should be a nexus between the material received from extraneous sources and the formation of belief on the basis of the reasons recorded that income has escaped assessment, which he submitted has not been done. Thus, it is submitted that the conclusion drawn by the Assessing Officer that there is evasion of tax is erroneous and baseless. 19.4. The Ld. counsel for the assessee further referring to page Nos. 9 and 10 of the Paper Book submitted that the approval given by the appropriate authority under section 151 of the Act is a mechanical approval not in accordance with the prescription of section 151 of the Act inasmuch as, the appropriate authority in the Form for recording the 19 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., reasons for initiating proceedings under section 148 and for obtaining the approval at serial no 12 of such Form has stated “The prosal of the AO/ Addl CIT for issuing notice u/s 148 is endorsed”. Accordingly, the satisfaction recorded by the appropriate authority is not a proper satisfaction. He placed reliance on the following decisions: (i) Amarlal Bajaj [37 Taxmann.com 7 (Mum-Trib)] (ii) Hirachand Kanuga [56 Taxmann.com 199 (Mum-Trib)] 19.5. Ld. Counsel for the assessee further buttressed his arguments by stating that it would not be out of place to mention that the Ld.CIT(A) on the basis of documentary evidences placed before him which were also available with the Assessing Officer who has still stated in the reasons recorded that the agricultural land has been purchased by the assessee on 02.02.2008 and 26.03.2008 on the findings of the Investigation wing that the agricultural land is transferred in the name of the assessee on 04.01.2016, is erroneous. Therefore, the Ld. counsel stated that the only basis left for reopening was cash deposit in the bank account for which there is no valid reasoning given by the Assessing Officer as to how this can be considered as undisclosed income and urged that there is no belief of the Assessing Officer that income of the assessee has escaped income. 20 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., 20. The Ld. DR on the other hand contended that the Ld.CIT(A) has dealt with this issue at length and reiterated the same arguments as stated by the Ld.CIT(A) in Para Nos 6.1 to 6.1.14 of his order. 21. I have heard the rival submissions and perused the orders of the Authorities below. On perusal of the reasons recorded for reopening, I notice that the Assessing Officer has merely relied on the information received from the Investigation Wing and has not made any independent inquiry on his own. Thus, the reasons recorded are based on borrowed satisfaction and not on any satisfaction of the Assessing Officer. This is clear from the fact that the Assessing Officer has in the reasons recorded stated that the agricultural land is transferred in the name of the assessee only on 04.01.2016 which on the basis of facts and documents available on record is not correct as is also held by the Ld.CIT(A) in para 8.3.2 at page 19 of his order. If this reason is not considered in the reasons recorded, then the only basis of the Assessing Officer that the cash deposit in the bank account is not out of agricultural income of the assessee is that, the assessee only produced some hand written cash receipts which do not inspire confidence. This also, the Ld counsel stated, is the conclusion of the ADIT (Inv) and not of the Assessing Officer. 21 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., 22. The decisions relied upon by the Ld. Counsel also fortify the view that reasons recorded should be based on the satisfaction of the Assessing Officer and not on borrowed satisfaction. I am of the considered view that the satisfaction recorded in the reasons recorded by the Assessing Officer are borrowed and not his own. Thus, the order made under section 143(3) r.w.s 147 for assessment year 2010-11 is quashed as bad in law. The additional ground raised by the assessee is allowed. 23. I shall now take up the appeals for the assessment years 2013-14 to 2015-16 in ITA Nos 4268 to 4270/Mum/2019, respectively which are against the orders of the Assessing Officer passed u/s 143(3) of the Act. 24. The Ld. Counsel for the assessee submitted that the facts of all these three years have to be seen in entirety and proceeded with his submissions as under. 24.1. The Assessee in its appeals challenged the order of the Ld. CIT(A) in estimating the agricultural income at 40% of the gross agricultural income shown by the assessee and further, upholding the disallowance of 10% of expenses debited to profit and loss account made by the Assessing Officer. 22 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., 24.2. The Assessing Officer considered the gross agricultural income shown by the assessee of Rs 22,24,561/- as under. Income from sale of goats ₹.18,74,661 Under section 68 – agricultural income ₹.3,49,900 The Assessing Officer thus, did not allow the claim of agricultural income of the assessee. 24.3. It is submitted that the Ld.CIT(A) however, estimated the net agricultural income at minus ₹.2,27,925/- (negative) for A.Y.2013-14, ₹.9,46,266/- for A.Y.2014-15 and ₹.4,14,600/- for A.Y. 2015-16 and accordingly, directed that the said sums of ₹.9,46,266/- for A.Y. 2014-15 and ₹.4,14,600/- for A.Y. 2015-16 be considered as agricultural income, beside holding that the sale of goats and goat mindvi is not considered as agricultural income 24.4. It is submitted that the Ld.CIT(A) determined the net profit from agricultural income at the rate of 40% of gross agricultural income without any basis and entirely on the basis of assumptions and presumptions. The Ld.CIT(A) has not brought any comparable figures on record to support his estimation. 23 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., 24.5. It is submitted that the observation of the Ld.CIT(A) that there is huge variation in salary and wages expenses and labour expenses for earlier and subsequent assessment years is erroneous, inasmuch as, if the said expenses are combined then there is no major variation: - Sr. No. Asst. Years Agricultu ral Income Labour Expenses Salary and wages Expenses Total Expenses Percentage of agricultural income (A) (B) (C) (D) = (B) + (C) (D) / (A) 1 2009-10 13,47,250 2,69,270 -- 2,69,270 19% 2 2010-11 14,32,240 13,250 2,76,770 2,90,020 20% 3 2013-14 & 27,15,565 1,83,510 1,71,500 3,55,010 13% 2014-15 4 2015-16 10,36,500 2,49,600 -- 2,49,600 24% * Agricultural income is excluding sale of goats and goats mindvi 24.6. Referring to page Nos 13 and 16 of the paper book it is submitted that the assessee in its return of income for assessment years 2011-12 and 2012-13 have declared net agricultural income of ₹.16,28,925/- and ₹.19,36,140/- respectively which has been accepted by the Department for the said assessment years. Thus, he submitted that the Assessing Officer cannot blow hot and cold in the same breath, where for few assessment years he accepts the agricultural income declared per 24 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., return of income and for other assessment years he does not. It is submitted that though, under the Income-tax Act, the principles of res judicata does not apply, however, the Courts have time and again held that, the principles of consistency shall still apply for each year. If the facts in different assessment years are the same and identical then different views cannot be permitted to be taken. 24.7. Regarding sale of goats and goats mindvi, the Ld. counsel for the assessee fairly submitted that a reasonable profit be estimated and suggested a rate of 5% of the sale of goat and goat mindvi, that may be added to the total income. 25. Ld. DR vehemently supported the orders of the Authorities below. 26. I have heard the rival submissions, perused the orders of the Authorities below, as regards the addition sustained by the Ld.CIT(A) estimating the agricultural income at 40%, I find that the Assessing Officer mainly relied on the findings of the Investigation wing that the agricultural land was transferred to the assessee only on 04.01.2016, and accordingly, taxed the entire agricultural income shown by the assessee under section 68 of the Act. However, the aforesaid finding of the 25 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., Investigation wing relied upon by the Assessing Officer was categorically denied and disproved by the Ld. CIT(A) in Para 8.3.2 of his order based on various documentary evidences furnished by the assessee during assessment as well as appeal proceedings in support of purchase of land viz., copy of “Krishi Bhoomi Vikray Patra”, 7/12 extract of land / Khatuani / Khasra with Malguajari & Mahasul, Sinchai paid in the name of the company etc. The Ld.CIT(A) further observed that on 04.01.2016 only the mutation of land in land records was carried out but the land was purchased prior to 04.01.2016 by the assessee. 27. However, the Ld.CIT(A) has estimated the net agricultural income at 40% of the gross which is without any basis and also are not supported by any materials on record. He has considered few expenses incurred to earn the agricultural income which also as shown by the assessee, have not correctly appreciated. The expenses on salary and wages and labour charges are of the same nature and if the said expenses are clubbed for each year then there is no major variation in the expenses. Similarly, the variation in transport charges if compared for each year though show some variation but as urged by the Ld counsel for the assessee, the said expenses are at times incurred by the buyer and hence, cannot strictly be compared for each year. I have also seen that the agricultural income of 26 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., ₹.16,28,925/- and ₹.19,36,140/- shown by the assessee for the A.Ys. 2011-12 and 2012-13 respectively have been accepted by the Revenue. I am thus, of the considered view that the estimation of the agricultural income by the Ld.CIT(A) is entirely on assumptions and presumptions. The facts being the same in all the years, and the Revenue accepting agricultural income for the A.Ys. 2011-12 and 2012-13 and the lower authorities not bringing any evidence on record to hold otherwise, taxing the agricultural income shown by the assessee, as cash credit u/s. 68 of the Act is not correct. Therefore, the Assessing Officer is directed to exclude the income from sale of goats and goat mindvi from the agricultural income shown by the assessee and treat only the balance as agricultural income and recompute the income accordingly. 28. As regards the sale of goats and goats mindvi, I hold that the same is not an agricultural income, however, as fairly submitted by the Ld.counsel for the assessee that a reasonable sum may be estimated as net income, suggesting to be estimated at 5%, I find that the same is on the lower side. Accordingly, in the interest of justice, the income from the sale of goat and goat mindvi should be estimated at the rate of 10% of the sale. This ground of appeal of the assessee gets part relief. 27 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., 29. I now take up the next ground of appeal that relates to an ad hoc disallowance of 10 per cent of total purchases and other expenses debited to the profit and loss account in each of these three years. 30. The Ld. counsel for the assessee submitted that the Ld.CIT(A) ought not to have sustained the impugned disallowance made by the Assessing Officer. He submits that the books of account of the assesse are audited and no adverse remarks have been made by the auditors regarding expenses claimed in the profit and loss account. Further, the Assessing Officer has not pointed out any specific defects regarding the claim of expenses and has not rejected the books of account, however, made the disallowance only for the reason that no reply was received from the parties to whom notice under section 133(6) were issued and field enquiries revealed that no such parties existed, which the courts have time and again held is not tenable. The Ld counsel placed reliance on the decision of Hon’ble Supreme Court in the case of R.G. Buildwell Engineers Ltd reported in 99 Taxmann.com 284. 31. The Ld counsel for the assessee submitted that the field report regarding non-existence of parties to whom notice under section 133(6) were issued was not made available to the assessee for rebuttal. The 28 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., Assessing Officer in making the impugned disallowance has relied on the proceedings carried on at the back of the assessee without informing them the result of such proceedings and as such, there is gross violation of principles of natural justice. He placed reliance on the decision of the Hon’ble Supreme Court in the case of Kishinchand Chellaram reported in 125 ITR 713. 32. Ld. DR stated that the Assessing Officer has issued notices u/s.133(6) and the parties have not responded to the same and hence, the addition made by the Assessing Officer is justified. 33. Heard rival contentions. On a perusal of the Assessment Order it is noticed that Assessing Officer in order to verify the genuineness of the purchases made by the assessee for its garment business appears to have issued u/s. 133(6) of the Act to the parties. However, the parties did not respond to the notices issued by the Assessing Officer. It is the observation of the Assessing Officer that field enquiries revealed that no such party existed at the given address. Assessee was asked to prove the genuineness of the purchases and in response to the same assessee furnished copies of the invoices. However, the Assessing Officer treated the purchases as not verifiable for the reason that the bills did not have 29 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., any stamp of the company and only initial signatures of the sellers appeared on the bills. The Ld. Counsel for the assessee submitted that all these purchases made from these parties have been sold and accounted for in the books of accounts and the profit was shown in the Profit and Loss Account. This fact is not disputed by the Assessing Officer. Considering the submissions of the assessee the Assessing Officer came to the conclusion that the assessee has made purchases in grey market without there being any transportation of goods. Therefore, he concluded that since purchases have been utilized towards sales it is only the profit element from such purchases to be brought to tax. Accordingly, the Assessing Officer estimated the profit element from purchases at 10% and the same was disallowed. Apart from this the Assessing Officer also disallowed 10% of the other expenses debited to Profit and Loss Account by the assessee. In other words, the Assessing Officer disallowed 10% of entire expenses debited to Profit and Loss Account in each of these years. It is the contention of the Ld. Counsel for the assessee that enquiries were made behind the back of the assessee and the Assessing Officer never put to use about non receipt of replies from the parties. Therefore, the Ld. Counsel for the assessee submits that there is violation of principles of natural justice. Ld. Counsel for the assessee also stated that the Assessing Officer has not rejected the books of account of the 30 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., assessee under section 145(3) and the Auditor also has not made any adverse remarks regarding purchases/expenses claimed. It is observed from the Assessment Order that the Assessing Officer has not given any basis for disallowing the other expenses other than the purchases made by the assessee. It appears that the reports of the field enquiries were also not confronted with the assessee for its rebuttal. Therefore, taking the totality of facts and circumstances into consideration, I hold that if the disallowance is restricted to 5% it would meet the ends of justice. I order accordingly. This ground is partly allowed. 34. In the result appeals of the assessee for the A.Y. 2009-10 and 2010-11 are allowed. Appeals for A.Y. 2013-14, 2014-15 and 2015-16 are partly allowed as indicated above. Order pronounced on 07.01.2022 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board Sd/- (C.N. PRASAD) JUDICIAL MEMBER Mumbai / Dated 07/01/2022 Giridhar, Sr.PS 31 ITA.NOs. 4266 to 4270/MUM/2019 M/s. Zishaan Fashion Pvt. Ltd., Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum