ASST CIT 13(2), MUMBAI V. PRAKASH NAGARDAS BROS, MUMBAI

ITA 4352/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62639 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-07-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 30-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: B N RAO
• Keywords: Bogus purchase; Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VERMA, JUDICIAL MEMBER ITA NOS.3700 TO 3702/MUM/2011 (ASSESSMENT YEARS: 2003-04 TO 2005-06) PRAKASH NAGARDAS BROTHERS, 30/32, AHMEDABAD STREET, CARNAC BUNDER, IRON MARKET, MUMBAI -400 009 ...... APPELLANT VS ASST. COMMISSIONER OF INCOME-TAX, 13(2), AAYAKAR BHAVAN, MUMBAI ..... RESPONDENT ITA NOS.4351 TO 4353/MUM/2011 (ASSESSMENT YEARS: 2003-04 TO 2005-06) ASST. COMMISSIONER OF INCOME-TAX, 13(2), AAYAKAR BHAVAN, MUMBAI ...... APPELLANT VS PRAKASH NAGARDAS BROTHERS, 30/32, AHMEDABAD STREET, CARNAC BUNDER, IRON MARKET, MUMBAI -400 009 ..... RESPONDENT PAN: AAAFP 1036 F APPELLANT ASSESSEE BY: SHRI B.N. RAO RESPONDENT REVENUE BY: SHRI P.C. MAURYA DATE OF HEARING: 03.07.2012 DATE OF PRONOUNCEMENT: 11.07.2012 O R D E R PER BENCH: THESE SIX APPEALS, THREE FILED BY THE ASSESSEE AND THREE FILED BY THE REVENUE, ARE CROSS APPEALS WHICH ARE DIRECTED A GAINST THREE SEPARATE ORDERS PASSED BY THE LD. CIT (A)-24 MUMBAI DATED 15.03.2011 FOR A.Y. 2003-04, 2004-05 & 2005-06. AS THE ISSUES INVOLVED IN ALL THESE APPEALS ARE COMMON, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS SINGLE COMPOSITE ORDER. ITA 3700 TO 3702/M/2011 ITA 4351 TO 4353/M/2011 PRAKASH NAGARDAS BROTHERS 2 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN IRON AND STEE L ITEMS. THE RETURNS OF INCOME FOR THE YEARS UNDER CONSIDERATION WERE FILED BY THE ASSESSEE REGULARLY DECLARING TOTAL INCOME OF ` 73,400/-, ` 3,40,913/- AND ` 10,14,340/- FOR A.Y. 2003-04, 2004-05 & 2005-06 RE SPECTIVELY. THE RETURNS FILED BY THE ASSESSEE FOR A.Y. 2003-04 & 2004-05 WERE INITIALLY ACCEPTED BY THE A.O. U/S.143(1) WHILE THE ASSESSMENT FOR A.Y. 2005-06 WAS COMPLETED BY HIM U/S.143(3) VIDE AN ORD ER DATED 28.09.2007 ON TOTAL INCOME OF ` 12,00,743/-. THEREAFTER, THE A.O. WAS IN RECEIPT OF INFORMATION FROM THE OFFICE OF THE AD DITIONAL DIT (INV.)- UNIT III, MUMBAI THAT THE ASSESSEE HAD OBTAINED BOG US PURCHASE BILLS AMOUNTING TO ` 1,04,95,194/-, ` 2,83,32,110/- AND ` 2,11,88,258/- FROM DIFFERENT PARTIES DURING THE PREVIOUS YEARS RE LEVANT TO A.Y. 2003- 04, 2004-05 & 2005-06 RESPECTIVELY. ON THE BASIS O F THE SAID INFORMATION, ASSESSMENTS FOR THE YEAS UNDER CONSIDE RATION WERE REOPENED BY THE A.O. AFTER RECORDING THE REASONS. IN RESPONSE TO NOTICES ISSUED BY THE A.O. U/S.148, RETURNS OF INCO ME WERE FILED BY THE ASSESSEE DECLARING THE SAME INCOME AS WAS DECLA RED IN THE RETURNS ORIGINALLY FILED. IN THE ASSESSMENTS COMPL ETED U/S.143(3) R.W.S.147, THE TOTAL INCOME OF THE ASSESSEE WAS COM PUTED BY THE A.O. AT ` 1,05,68,592/-, ` 2,86,73,020/- AND ` 2,23,89,326/- FOR THE A.Y. 2003-04, 2004-05 & 2005-06 RESPECTIVELY AFTER MAKIN G ADDITION ON ACCOUNT OF BOGUS PURCHASE BILLS ALLEGEDLY PROCURED BY THE ASSESSEE. 3. AGAINST THE ORDERS PASSED BY THE A.O. U/S.143(3) R.W.S.147 FOR ALL THE THREE YEARS UNDER CONSIDERATION, APPEALS WE RE PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT (A) CHALLENGING THEREIN THE VALIDITY OF THE ASSESSMENTS MADE BY THE A.O. AS WELL AS DISPUTING T HE ADDITIONS MADE THEREIN ON MERIT. ONE OF THE GROUNDS RAISED B Y THE ASSESSEE FOR CHALLENGING THE VALIDITY OF THE ASSESSMENTS MADE BY THE A.O. WAS THAT THE SAID ASSESSMENTS WERE COMPLETED WITHOUT ISSUING NOTICES U/S.143(2). IN THE REMAND REPORT SUBMITTED TO THE LD. CIT (A), THE A.O. ACCEPTED THE FACT THAT NO NOTICES U/S.143(2) W ERE ISSUED WITHIN THE STIPULATED PERIOD DURING THE COURSE OF REASSESS MENT PROCEEDINGS BEFORE COMPLETING THE ASSESSMENT U/S.143(3) R.W.S. 147. HE, HOWEVER, ITA 3700 TO 3702/M/2011 ITA 4351 TO 4353/M/2011 PRAKASH NAGARDAS BROTHERS 3 RELIED ON THE PROVISIONS OF SEC.292BB INSERTED IN T HE STATUTE W.E.F. 01.02.2008 AND SUBMITTED IN HIS REMAND REPORT THAT THE RE- ASSESSMENTS IN THE CASE OF THE ASSESSEE HAVING BEEN COMPLETED FOR ALL THE THREE YEARS UNDER CONSIDERATION ONLY AFTER 01.0 4.2008, THE ASSESSEE WAS PRECLUDED FROM TAKING ANY PLEA AS TO N ON-SERVICE OF NOTICE U/S.143(2) AS PER THE PROVISIONS OF SEC.292B . THE LD. CIT (A) AGREED WITH THE SUBMISSION OF THE A.O. AND REJECTED THE CLAIM OF THE ASSESSEE THAT IN THE ABSENCE OF ISSUANCE OF NOTICES U/S.143(2), THE REASSESSMENTS MADE IN THE YEARS UNDER CONSIDERATION WERE INVALID. HE ALSO REJECTED ALL OTHER CONTENTIONS RAISED BY TH E ASSESSEE WHILE CHALLENGING THE VALIDITY OF THE SAID REASSESSMENTS MADE BY THE A.O. AND HELD THE SAID REASSESSMENTS TO BE VALID IN THE EYE OF LAW. 4. AS REGARDS THE ADDITIONS MADE BY THE A.O. ON ACC OUNT OF ALLEGED BOGUS PURCHASES, THE LD. CIT (A), HOWEVER, ACCEPTED ONE OF THE CONTENTIONS RAISED BY THE ASSESSEE THAT THE ENTIRE AMOUNT OF SUCH PURCHASES COULD NOT BE TREATED AS INCOME OF THE ASS ESSEE AND ONLY THE GROSS PROFIT ON SUCH PURCHASES AS WELL AS UNEXPLAIN ED INVESTMENT MADE BY THE ASSESSEE FOR MAKING SUCH PURCHASES COUL D BE ADDED AS INCOME IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, HE DIRECTED THE A.O. TO RESTRICT THE ADDITIONS MADE ON ACCOUNT OF B OGUS PURCHASES TAKING THE GROSS PROFIT AT 3% AND UNEXPLAINED IN VESTMENT AT 20% OF THE DISPUTED PURCHASES. AGGRIEVED BY THE ORDERS OF THE LD. CIT (A), THE ASSESSEE AND REVENUE BOTH HAVE PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D HAVE ALSO PERUSED THE RELEVANT MATERIALS ON RECORD. ONE OF T HE PRELIMINARY ISSUES RAISED BY THE ASSESSEE IN THESE APPEALS IS T HAT THE ASSESSMENTS MADE BY THE A.O. U/S.143(3) R.W.S.147 FOR ALL THE T HREE YEARS UNDER CONSIDERATION ARE INVALID AS THERE WERE NO NOTICES ISSUED U/S.143(2) DURING THE COURSE OF REASSESSMENT PROCEEDINGS BEFOR E COMPLETING SAID ASSESSMENTS. AS ALREADY NOTED BY US, THERE IS NO D ISPUTE REGARDING THE FACT THAT NOTICES HAVE NOT BEEN ISSUED BY THE A .O. WITHIN THE STIPULATED PERIOD DURING THE COURSE OF REASSESSMENT PROCEEDINGS ITA 3700 TO 3702/M/2011 ITA 4351 TO 4353/M/2011 PRAKASH NAGARDAS BROTHERS 4 BEFORE COMPLETING THE REASSESSMENTS WHICH CULMINATE D IN THE ASSESSMENTS MADE BY THE A.O. U/S.143(3) R.W.S. 147. IN THE REMAND REPORT SUBMITTED TO THE LD. CIT (A), EVEN THE A.O. ACCEPTED THIS FACTUAL POSITION. HE, HOWEVER, RELIED ON THE PROVISIONS OF SEC.292BB TO SUBMIT THAT AS PER THE SAID PROVISIONS INSERTED W.E .F. 01.04.2008, THE ASSESSEE WAS PRECLUDED FROM TAKING ANY OBJECTION RE GARDING NON- SERVICE OF NOTICE U/S.143(2) SINCE IT HAD APPEARED IN THE REASSESSMENT PROCEEDINGS. AS PER THE SAID PROVISIONS, WHERE THE ASSESSEE HAD APPEARED IN ANY PROCEEDINGS RELATING TO ASSESSMENT OR REASSESSMENT, IT SHALL BE DEEMED THAT ANY NOTICE UNDER ANY PROVIS ION OF THE ACT, WHICH IS REQUIRED TO BE SERVED UPON HIM, HAS BEEN D ULY SERVED UPON HIM IN TIME IN ACCORDANCE WITH THE PROVISIONS OF TH E ACT. ACCORDING TO THE A.O., SINCE THE ASSESSEE HAD APPEARED IN THE RE ASSESSMENT PROCEEDINGS AND THE REASSESSMENTS WERE COMPLETED FO R ALL THE THREE YEARS UNDER CONSIDERATION AFTER 01.04.2008, THE ASS ESSEE WAS PRECLUDED FROM TAKING ANY OBJECTION REGARDING NON-S ERVICE OF NOTICE U/S.143(2) AS PER THE PROVISIONS OF SEC.292BB INSER TED W.E.F. 01.04.2008. THE LD. CIT (A) ACCEPTED THIS SUBMISSI ON OF THE ASSESSEE AND UPHELD THE VALIDITY OF THE REASSESSMENTS MADE B Y THE A.O. 6. AT THE TIME OF HEARING BEFORE US, THE LD. D.R. R ELIED ON THE PROVISIONS OF SEC.292BB IN SUPPORT OF THE REVENUES CASE THAT THE ASSESSEE HAVING PARTICIPATED IN THE REASSESSMENT PR OCEEDINGS AND THE SAID REASSESSMENTS HAVING BEEN COMPLETED AFTER 01.0 4.2008, THE ASSESSEE IS PRECLUDED FROM CHALLENGING THE VALIDITY OF THE SAID REASSESSMENTS ON THE GROUND THAT NOTICES U/S.143(2) WERE NOT ISSUED AS REQUIRED. IN SUPPORT OF THIS CONTENTION, THE LD . D.R. HAS RELIED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RAM NARAYAN BANSAL 202 TAXMAN 213 WHEREIN I T WAS HELD THAT THE PROVISIONS OF SEC.292BB INSERTED BY THE FI NANCE ACT, 2008 W.E.F. 1ST APRIL, 2008 SHALL APPLY TO ALL THE PROCE EDINGS PENDING ON 01.04.2008. HE ALSO RELIED ON THE EXPLANATORY NOTE DATED 27.03.2009 ON FINANCE ACT (PARA NO.14.9) EXPLAINING THE APPLIC ABILITY OF THE PROVISIONS OF SECTION 292BB. HE ALSO SUBMITTED THA T NOTICES U/S.143(2) WERE ISSUED BY THE A.O. FOR ALL THE THRE E YEARS UNDER ITA 3700 TO 3702/M/2011 ITA 4351 TO 4353/M/2011 PRAKASH NAGARDAS BROTHERS 5 CONSIDERATION ON 21.10.2009 ALTHOUGH THERE IS NO PR OOF OF SERVICE OF THE SAID NOTICES AVAILABLE ON RECORD. 7. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, RELIED INTER ALIA ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN TH E CASE OF CIT VS. SALMAN KHAN RENDERED ON 6TH JUNE, 2011 IN IT AP PEAL NO.508 OF 2010. HE ALSO RELIED ON DECISION OF SPECIAL BENCH OF ITAT, MUMBAI IN THE CASE OF KUBER TOBACCO P. LTD. VS. DCIT REPORTED IN 117 ITD 273. 8. WE HAVE CAREFULLY GONE THROUGH THE RELEVANT PROV ISIONS OF SEC.292BB AS WELL AS THE JUDICIAL PRONOUNCEMENTS CI TED BY BOTH THE SIDES IN SUPPORT OF THEIR RESPECTIVE CONTENTIONS. ALTHOUGH THE LD. D.R. HAS SUBMITTED THAT NOTICES UNDER SEC.143(2) FOR ALL THE THREE YEARS UNDER CONSIDERATION WERE ISSUED BY THE A.O. IN THE STIPULATED PERIOD, IT IS OBSERVED THAT THE REQUIREMENT OF LAW IN THIS REGARD IS THAT THE SAME SHOULD BE SERVED UPON THE ASSESSEE DURING THE STIPULATED PERIOD. AS AGREED BY THE LD. D.R. HIMSELF, THERE I S HOWEVER NOTHING AVAILABLE ON RECORD TO PROVE THAT NOTICES U/S.143(2 ) CLAIMED TO HAVE BEEN ISSUED BY THE A.O. WERE ACTUALLY SERVED UPON T HE ASSESSEE WITHIN STIPULATED PERIOD. 9. IN THE CASE OF KUBER TOBACCO P. LTD. (SUPRA), DE LHI SPECIAL BENCH OF THIS TRIBUNAL HAS HELD THAT SEC.292BB INSE RTED BY THE FINANCE ACT, 2008 W.E.F. 1ST APRIL, 2008 HAS NO RET ROSPECTIVE OPERATION AND APPLIES TO ASSESSMENT YEAR 2008-09 AND ONWARDS ONLY. IN THE CASE OF CIT VS. SALMAN KHAN (SUPRA), A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE BOMBAY HIGH COURT WHILE UPHOLDING THE O RDER OF THE TRIBUNAL CANCELLING THE REASSESSMENT MADE U/S.143(3 ) R.W.S. 147 FOR NON-RECEIPT OF NOTICE U/S.143(2) HOLDING THAT THE R EASSESSMENT YEAR INVOLVED WAS RELATING TO THE PERIOD PRIOR TO INSERT ION TO SEC.292BB. ALTHOUGH IN THE CASE OF CIT VS. RAM NARAYAN BANSAL (SUPRA) CITED BY THE LD. D.R., A DIFFERENT VIEW HAS BEEN TAKEN BY TH E HONBLE PUNJAB & HARYANA HIGH COURT IN FAVOUR OF THE REVENUE HOLDING THAT THE PROVISIONS OF SEC.292BB INSERTED IN THE STATUTE W.E .F. 01.04.2008 ARE APPLICABLE TO ALL THE PROCEEDINGS PENDING ON 01.04. 2008, WE ARE ITA 3700 TO 3702/M/2011 ITA 4351 TO 4353/M/2011 PRAKASH NAGARDAS BROTHERS 6 BOUND TO FOLLOW THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF SALMAN KHAN (SUPRA) WHICH IS IN FAVOUR OF T HE ASSESSEE. RESPECTFULLY FOLLOWING THE SAID DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE HOLD THAT THE REASSESSMENTS MADE BY THE A .O. U/S.143(3) R.W.S. 147 FOR ALL THE YEARS UNDER CONSIDERATION VI Z. A.Y. 2003-04, 2004-05 & 2005-06 WITHOUT SERVING OF NOTICES U/S.14 3(2) UPON THE ASSESSEE IN THE STIPULATED PERIOD WERE BAD IN LAW A ND THE SAME ARE LIABLE TO BE QUASHED. WE ORDER ACCORDINGLY AND DEC IDE THIS PRELIMINARY ISSUE IN FAVOUR OF THE ASSESSEE. 10. KEEPING IN VIEW OUR DECISION RENDERED ON THE PR ELIMINARY ISSUE CANCELLING THE REASSESSMENTS MADE BY THE A.O. FOR A LL THE THREE YEARS UNDER CONSIDERATION, THE OTHER GROUNDS RAISED BY TH E ASSESSEE IN ITS APPEAL AS WELL AS ALL THE GROUNDS RAISED BY THE REV ENUE IN ITS CROSS APPEALS RELATING TO QUANTUM OF ADDITION MADE IN THE SAID REASSESSMENTS HAVE BECOME INFRUCTUOUS. WE, THEREFO RE, DO NOT DEEM IT NECESSARY OR EXPEDIENT TO ADJUDICATE UPON THE SA ME. 11. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED WHEREAS THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 11TH JULY, 2012. SD/- ( VIVEK VERMA ) JUDICIAL MEMBER SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER MUMBAI, DATE: 11TH JULY, 2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-24, MUMBAI. 4) THE CIT -13, MUMBAI. 5) THE D.R. C BENCH, MUMBAI. 6) COPY TO GUARD FILE BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN