RAMESH BHOJPRASAD GUPTA, VAPI V. ITO, WARD-7, VAPI

ITA 476/SRT/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2492 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-01-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 17-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPMA SINGLA
• Keywords: Reopening of assessment; Period of limitation; Corroborative evidences; Assessment record; Revised return; Reason to believe; Capital Gains
• Section: 147; 148; 144; 139; 143(3); 133(6); 143(2); 139(1); 2(A); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No.476/SRT/2019 (AY 2010-11) (Hearing in Virtual Court) Ramesh Bhojprasad Gupta, 604, Chandralok Housing Complex, Chandod, GIDC, Vapi – 396 195. PAN: AGSPG 8857 H Vs The Income Tax Officer, Ward-7, Vapi. Appellant/ assessee Respondent/ Revenue Assessee by Shri Rajesh Upadhyay – AR Revenue by Mrs.Anupma Singla – Sr.DR Date of hearing 11.01.2022 Date of pronouncement 07.02.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-Valsad [‘CIT(A)’ for short], dated 16.09.2019 for Assessment Year (AY) 2010-11. The Assessee raised the following grounds of appeal: “1. Ld. CIT[A] has erred in law and on fact to sustained reopening of assessment u/s 147 and issue of notice u/s 148 by the A.O. for A.Y. 2010-11. 2. Ld. CIT[A] has erred in law and on fact to sustained addition of Rs.9,14,448/- being 51.84% profit on undisclosed sales of Rs.18,98,771/- ignoring the fact that appellant’s books shows 11.45% N.P in A.Y. 2010-11. Further, Ld. CIT[A] has also erred in considering the fact that in A.Y. 2011-12, the A.O. has taken 10% N.P. under an assessment u/s 143[3] of the Act.” ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 2 2. Brief facts of the case are that Assessing Officer (AO) on the basis of AIR information noted that assessee made deposit of Rs.11,97,006/- in his bank account in Punjab National Bank. The AO issued notice to the assessee was issued a notice dated 24.01.20147 to explain the source. The AO recorded that in response to the notice dated 24.01.2017, no reply was furnished by the assessee. The AO, recorded the following reasons of reopening:- “... .... In this case as per the AIR information available on the record, it is seen that the during the year under consideration assessee has deposited cash amount to Rs.11,97,006/- in bank account maintained with the Punjab National Bank, Vapi. On verification of the details in ITD, it was seen that the assessee has not filed return of income for the A.Y 2010-11. In this regard a query letter issued to the assessee on 24.01.2017. As the assessee hasn’t complied with the verification letters issued by this office, the source of cash deposit still remains unexplained. From the above it is clear that the assessee has failed to disclose fully and truly all the material, facts for his assessment within the meaning of section 147 of the I.T. Act. In view of the above, the assessee’s case falls within the explanation 2(a) of the section 147 of the I.T. Act, i.e. “where no return of income has been furnished by the assessee. Although his total income or the total income of any other person in respect of which he is assessable under the Act during the previous year exceeded the maximum amount which is not chargeable to income tax,” I am therefore satisfied and have reason to believe that income ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 3 chargeable to income tax of rupees 11,97,006/- has escaped assessment with the meaning of section 147 of the I.T. “Act.....” 3. After recording the aforesaid reasons, the AO issued notice under section 28.03.2017, which was served on the assessee on 31.03.2017. The AO recorded that in response to the notice under section 148; the assessee neither filed return of income nor responded. The AO further recorded that again he issued detailed questionnaire to the assessee on 28.07.2017. The assessee ultimately filed return of income in response to notice under section 148 on 30.08.2017 declaring income of Rs.5,00,660/-.The assessee also claimed certain deductions under Chapter-VI-A of Rs.37,679/-. The AO recorded that despite repeated show cause notice, no details were furnished by assessee to substantiate the claim of deduction under Chapter-VI-A of Rs.37,679/-. The AO recorded that he finally issued notice as to why the assessment should not be finalized under section 144 r.w.s 147. The Assessing Officer ultimately by- passing the assessment order made addition of Rs.18,98,771/- on account of undisclosed cash deposits Punjab National Bank (‘PNB’ for short) as well as Bank of Baroda. The Assessing Officer also disallowed the disallowance under Chapter-VI-A by taking view that no such deduction claimed in the original return of income and no evidence to substantiate such deductions were filed. 4. Aggrieved by the order of reopening as well as addition in the assessment order, the assessee filed appeal before the Ld. CIT(A). Before Ld. CIT(A) the ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 4 assessee filed detailed written submission as recorded in para-3.2 of his order. On the validity of re-opening under section 147, the assessee submitted that during the assessment, assessee demanded for reasons recorded. The reasons recorded were supplied to assessee, vide letter dated 21.09.2017, which was received by assessee only on 23.09.2017. The assessee filed objection on 24.10.2017, against such reopening as per decision of Hon'ble Jurisdictional High Court in the case of Sahakari Khand Udyog Mandal Ltd. vs. ACIT (2014) (DT) 2465 (Guj). The AO before the expiry of limitation finalized the assessment order on 29.09.2017 and added total credit shown in the credit side in bank account with Punjab National Bank (PNB) instead of taxing profit on the basis of earlier year’s profit. The assessee filed objection on 24.10.2017 but the AO has not passed any speaking order on the objection filed by the assessee and not followed the direction of Hon'ble Jurisdictional High Court in the case of Sahakari Khand Udyog Mandal Ltd. (supra) and Hon'ble Supreme Court in the case of GKN Drivesafts (I) Ltd. vs. ITO And Ors. (2003) 259 ITR 19 (SC). Further no notice under section 143(2) was issued within period of limitation. The AO exceeded his jurisdiction while recording reason under section 147. The case of assessee was re-opened on the ground that no return of income was filed; in fact, the assessee filed return of income on 27.03.2011. Thus, the reason recorded were invalid as has been held by Hon'ble Jurisdictional High ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 5 Court in the case of Sunrise Education Trust vs. ITO (Exemption) (2018) 92 Taxman 74 (Guj). On the basis of aforesaid submission, the assessee claimed that assessment order be quashed. On the addition on account of credit in the bank accounts, the assessee stated that assessee is engaged in the business of scrap. In such business, the profit margin between 3 to 4%. The assessee has shown profit of Rs.1,44,493/- on sale of Rs.12,61,506/- which is to 11.45%. The transaction which is routed through PNB account. The assessee has shown such profit by return of income under section 148 and made payment of tax thereupon. The case of assessee for subsequent assessment year (AY) was scrutinized under section 143(3) and AO has added 10% of net profit on the turnover of Rs.31,90,000/- thereby making addition of Rs.3,19,000/-.The case for the year under consideration are exactly same. On the addition of disallowance of claim Chapter-VI-A of Rs.37,679/-, the ld. AR for assessee submits that AO made disallowance on two reasons (i) it was not claimed in the return filed under section 139 of the Act and (ii) supporting evidence were not furnished. The finding of Assessing Officer is incorrect in the return filed under section 139 of the Act. The assessee claimed similar deduction of Rs.37,697/- as appearing Column-2 of ITR IV. And on the second objection of AO, that no supporting evidence was filed, the assessee submitted that out of total deduction of Rs.37,679/-, an amount of Rs.27,679/- is claimed on account ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 6 of interest on housing loan. The Assessing Officer allowed deduction under section 24 of the Act in respect of housing loan interest is repaid in the form of equally monthly instalment (EMI) in which principal as well as interest is included, when interest is allowed, there is no justification to disallow principal amount of repayment. The Assessing Officer finalized re-assessment under section 144 within two days from supply of reasons recorded. Thus, the assessee has no opportunity to furnish the required details. 5. The Ld. CIT(A) after considering the submission of the assessee called the remand report / reply of Assessing Officer. The Assessing Officer furnished his reply on 28.07.2019. In the reply, the Assessing Officer stated that initially notice dated 24.01.2017 was issued and served upon the assessee on 30.01.2017 before re-opening the assessment no compliance was made by the assessee. Further, notice under section 148 was served upon the assessee on 31.03.2017 and the same was not complied nor by responded by assessee thereupon. The assessee in response to notice dated 28.07.2017 attended the proceedings only on 18.08.2017. On the request of assessee, copy of notice and reasons recorded was supplied. The Assessing Officer on considering the submission of assessee and replied filed by the Assessing Officer concluding that there was no compliance by assessee to the notice under section 148 of the Act within prescribed period of 30 days’ time. The Assessing Officer was ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 7 bound to proceed with assessment under section 144 of the Act. Thus, the objection on the validity of reopening and not following the guidelines of Decision in Sahakari Khand Mandali Ltd Vs ACIT (supra) is devoid of merit and accordingly dismissed the same. 6. On the addition of Rs.18,98,771/-, the Ld. CIT(A) held that total turnover of assessee is Rs.38,14,650/- while as per the bank accounts there was credits of Rs. 46,11,400/- thus, there was difference of Rs.7,96,750/- on which show cause notice was issued by AO to treat it as undisclosed income. No reply was filed by the assessee. The AO further noted that there was deposit of Rs. 12,46,506/- in PNB which were not disclosed while filing return of income. In the original return of income the assessee has shown income of Rs. 3,56,170/- and the return in response to notice under section 148 the assessee shown income of Rs. 5,00,660/- thereby shown additional income of Rs. 144,490/-. The assessee claimed that the profit margin in his business is 3 to 4% and that the transaction of his business is routed through his PNB account. The assessee claimed profit on sale of Rs. 1,44,493/- which is 11.45%, which is offered in return in response to notice under section 148. The Ld. CIT(A) observed that pattern of withdrawal support the contention of assessee is that deposit in the bank were pertaining to the business of its scrap. Accordingly, accepted the transaction in the PNB, which is similar to the cash deposit in Bank of Baroda. ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 8 The Ld. CIT(A) held that the turnover of Rs.7,96,750/- is pertaining to disclosed bank account and turnover pertaining to undisclosed bank account totalling to Rs.18,98,771/-. And the entire addition of Rs.18,98,771/- is not sustainable and only profit on such turnover can be taxed. The return of income filed in response to notice under section 148 of the Act dated 31.03.2017, was filed on 30.08.2017, which is no-nest return as the same was not filed within 30 days time limit. Accordingly, the additional in response, as income claimed in return filed in response to notice under section 148 pertaining to undisclosed bank account are not considered. The Ld. CIT(A) on the basis of pattern of deposit and withdrawal in PNB concluded that assessee shifted a part of his business turnover to undisclosed bank account. Thus, the other establishment expenses cannot be allowed from undisclosed turnover. In the original return, the ratio of purchase of sale is 51.84%. Accordingly, Ld. CIT(A) calculated the profit on account of undisclosed sales of Rs.18,98,771/-, credit in the bank account and accordingly worked out addition of Rs.9,14,448/- and directed the Assessing Officer that while computing the income of assessee, the original return of Rs.3,57,170/- should be taken as net profit worked out in the total turnover. Further, aggrieved the assessee has filed present appeal before this Tribunal. ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 9 7. We have heard the submission of ld. Authorised Representative (ld.AR) for the Assessee and ld. Sr. Departmental Representative (ld. Sr. DR) for the Revenue and perused the orders of lower authorities carefully. Ground No.1 relates of validity of re-opening under section 147 and notice under section 148 of the Act. The ld. AR of the assessee submits that reasons recorded by AO were not valid. The AO while recording the reasons recorded that no return of income is filed by assessee for AY 2010-11. In fact, the assessee filed return of income on 17.03.2011 under section 139(1) of the Act. The copy of acknowledgment of return of income is filed as per page 13 of the paper book, thus the reasons recorded are not correct and valid. The ld. AR of the assessee submits that once reasons recorded are not valid all subsequent actions of AO are void ab initio. 8. To support his submission, the Ld. AR of the assessee relied upon the decision of Jurisdictional High Court in Mumtaz Hazi Mohmad Memon Vs ITO [SCA No. 21030 of 2017 dated 21,03.2018] and decisions this Bench of Tribunal in the case of Ashish Natvarlal Vashi vs. ITO in ITA No.3522/AHD/2016 dated 19.04.2021 and in the case of Shri Hashmukhbhai B Patel in ITA No.193/SRT/2019 dated 24.07.2019. 9. In alternative submission, on the validity of order under section 147 of the Act, the ld. AR of the assessee submits that the reasons were supplied to the assessee only on 23.09.2017 and the assessment order was passed on ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 10 immediately thereafter i.e., on 29.09.2017. The objection of Assessing Officer that assessee has not responded to the notice under section 148 of the Act is not correct. In fact, notice under section 148 dated 28.03.2017 was not received to the assessee. The Ld. AR of the assessee submits that the reasons recorded as supplied to assessee while Assessing Officer letter dated 21.09.2017, received on 23.09.2017, copy of which is placed on record at page 9 of the paper book. The ld. AR of the assessee submits that Assessing Officer has not given even opportunity to file objection against such re-opening. The assessee filed his objection on 24.010.2017 vide objection dated 18.10.2017, however, the Assessing Officer before filing the objection completed the assessment. The Assessing Officer was having sufficient time to pass assessment order up to 31.12.2017. 10. On merit of the additions, the ld. AR of the assessee submits that assessee is engaged in business of scrap and the profit of such business is very low ranging from 3 to 4% only. The ld. AR of the assessee submits that in subsequent year in AY 2011-12, the Assessing Officer made addition on account of estimated income @ 10% of turnover in the assessment order dated 09.12.2013 passed under section 143(3). Thus, at the most the addition should not have exceeded more than 10% of the turnover of the assessee and the assessee in the return ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 11 filed in response to notice under section 148 offered additional income by showing income at 11.45%. 11. On the basis the aforesaid submission, the ld. AR of the assessee submits that re-assessment under section 147 is not valid, however, in any case, this Tribunal held legal issue against the assessee, the addition no addition against the assessee in warranted as the assessee has already officered more than the estimated rate of income as estimated by AO in subsequent AY 2011-12 on same business. 12. On the other hand, the ld. Sr. DR of the Revenue submits that before issuing notice under section 148 of the Act, the AO issued notice to the assessee on 24.01.2017 as recorded in assessment order. The said notice was not responded by assessee. Thereafter, the Assessing Officer after recording reasons of reopening served notice under section 148, which was duly served upon the assessee. The notice under section 148 was again not responded by the assessee. Since the assessee filed his original return of income to ITO, Ward-3 Vapi, however notice under section 148 was issued by ITO Ward-7, Vapi. The assessee had sufficient opportunity to inform the ITO Ward-7 Vapi that he has already field return of income before ITO Ward-3 Vapi. Thus, the assessee himself is guilty of non-compliance of various notices. The assessee has not complied with notice “within statutory period of 30 days”. Thus the assessee is ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 12 not entitled to claim that reasons recorded are not correct or re-opening was not made validly or notice under section 148 of the Act is wrong. The assessee could raise objection only on filing return of income in response to the notice under section 148. And without filing return of income within the time provided in the notice, the assessee has no right to object the jurisdiction of the AO. 13. On the addition on account of estimation @ 51.84% of undisclosed sale. Ld. Sr. DR of the Revenue submits that Ld. CIT(A) estimated the undisclosed sale on the credit shown in the undisclosed bank account. The Ld. CIT(A) has already given sufficient relief to the assessee. The Ld. Sr-DR of the Revenue prayed for dismissal of appeal. 14. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have also considered the various documents filed by assessee on record. We find that the Assessing Officer re- opened the assessment under section 148 of the Act by recording the reasons that on verification of details in ITD system it was seen that no return of income was filed by the assessee. The extracts of the reasons is already recorded in para-4 of this order. From the contents of assessment order, we find that after recording the reasons, the AO served notice under section 148 on the assessee. As per the contends of assessment order, the assessee not responded ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 13 the notice under section 148 and other/ various notices as recorded on page-5 and 6 of the assessment order. The Assessing Officer ultimately issued show cause notice as to why the assessment is not completed under section 144 of the Act. 15. We find that the Assessing Officer on page-3 of the assessment order recorded that assessee filed return of Rs.3,56,170/- in his return of income and the revised return of income, as “It was also noted by the undersigned that the assessee had returned income of Rs.3,56,170/- in his return of income and in the revised return of income, the assessee returned income of Rs.5,00,660/-“. Thus, during the re-assessment, the Assessing Officer was very well aware i.e., return was filed by assessee. We also find that assessee filed his return of income vide acknowledgement dated 17.03.2011 with ITO Ward-3 Vapi. Now again adverting to the contends of reasons recorded, in the reasons recorded, the AO recorded that on verification of the details in ITD, it was seen that assessee has not filed return and assessee has not complied with the verification letter. We have noted that in the reasons recorded, the Assessing Officer has not recorded as to how the said notice was served upon the assessee or not. Accordingly, the case of assessee was re-opened under section 147 and notice under section 148 dated. 28.03.2017 was issued upon assessee. Before us, the ld AR for the assessee claimed that notice under section 148 was not received ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 14 by him. We find that the assessee during the re-assessment proceedings and demanded reasons recorded. The reasons recorded was provided by AO vide letter dated 21.09.2017 which was received by assessee on 23.09.2017 and subsequently assessment order passed on 29.09.2017 by taking view that despite repeated notice and show cause assessee was not made proper compliance. We find that on similar ground of reasons of reopening wherein the Assessing Officer recorded that assessee has not filed return and in fact, return was filed by the assessee, the re-assessment were held as invalid by co- ordinate Bench of this Tribunal, in the case of Rinakumar A. Shah ( ITA No. 172/AHD/2017 dated 30.04.2019). The findings of the Coordinate Bench in that case are reproduced below: "10. We have heard the rival submissions and perused the relevant material on record. The learned counsel for the assessee has alleged that the AO in his reason record for reopening of assessment stated that the assessee has not filed any return of income for the assessment year under consideration whereas the assessee has duly filed return of income for the assessment year under consideration. Therefore, the AO has assumed wrong facts, hence, reassessment proceeding are liable to be quashed. In order to appreciate the facts in proper perspective, it would be relevant to reproduce the reason recorded by the AO which are appearing at Paper Book Page No. 72-73 as under:- "In this case AIR data has been generated from ITD application and it is noticed that during F.Y. 2006-07 relevant to A.Y. 2007-08, the assessee has deposited Rs. 37,10,7O/- in bank account. On verification of the record, it is found that the assessee has not filed his Return of Income. The failure on the part of the ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 15 assessee to make a return u/s. 139 of. I.T. Act, the income chargeable to tax to the extent of Rs. 37,10,700/- has escaped assessment within the meaning of sec. 147 of the Act. I have, therefore, reason to believe that income of Rs.37,10,700/- has escaped assessment within the meaning of section 147 of I. T. Act. It is therefore, necessary to initiate action u/s.147 of IT. Act, 1961 in the case of the assessee for A.Y. 2007-08. " 11. The perusal of above reasons would show that the AO has proceeded to reopen the assessment on the ground that the assessee has not filed his return of income and the assessee did not disclose cash deposits of Rs.37,10,700/- in bank account. However, we find that the assessee did file his return of income on 21.11.2007, i.e. before issue of notice under section 148 of the Act on 21.03.2014. Further, the addition was made on account of cash deposits in bank account was at Rs.80,77,6951- after obtaining copy of bank account from bank authorities under section 133(6) of the Act during the course of assessment proceedings. These facts would reveal that both the grounds of reopening of assessment are factually incorrect as it is undisputed fact that the assessee has did file return of income for the assessment year under consideration. Further, the cash deposits in bank account were at Rs.80,77,695/- and not at Rs.37,10,700/- as mentioned in reasons for reopening of assessment and show-cause notice issued for making addition meaning thereby that the AO was not gone through the bank account and notice under section 148 of the Act was issued far making roving enquiries without verification of record. Thus, the notice under section 148 of the Act was issued without verification of assessment record and return of income filed by the assessee. Therefore, relying on the decision of Hon'ble Gujarat High Court in the case of Mumta- Haji Mohmad Memon v. ITO Ward- 6(1) (1) Ahmedabad [SCA No. 21030 of 2017-dated 21.03.2018] (supra) the notice for reopening of assessment is liable to be quashed. The How'ble High Court observed as under:- "However, on verification from ITD system, it is seen that the assessee has not filed return of income for A.Y. 2010-11. Since, the assessee has not filed return of income, capital gain earned on the sale of immovable property has not been offered for taxation by the assessee. Therefore, the property sale ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 16 transactions made by her during the financial year 2009-10 are unexplained / undisclosed. In view of the above facts, the AO had reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the IT for A.Y. 2010-11 by an amount of Rs.39,65,000/-and it is a fit case for reopening the assessment for A.Y. 2010-11." The Honourable Court observed that "11. In this context, we have noted that the reasons proceeded on two fundamental grounds. One, that the property in question was sold for a sum of Rs.1,18,95,000/- and two; the assessee has not filed the return that therefore his one 3rd share out of the sale proceeds was not offered to tax. Both these factual grounds are totally incorrect as is now virtually admitted by the Revenue. It is undisputed that the assessee had actually filed the return of income for the said assessment year and income also offered his share of declared sale consideration to tax as capital gain. The Assessing Officer may have dispute with respect to the computation of such capital gain, he cannot simply dispute the fact that the assessee did not file the return. Importantly, even the second factual assertion of the Assessing Officer in the reasons recorded is totally incorrect. He has referred to said sum of Rs.l,18,95,000/-as a sale price of the property. The Assessee had produced before the Assessing Officer, the sale deed in which, the sale consideration disclosed was at Rs. 50 lakhs. " The Hon"ble High Court, in view of the foregoing, observed that reasons recorded, in fact, ignored that fact that the sale consideration as per the sale deed was Rs. 50 lakhs and that the assessee had by filing of the return offered his share of such proceeds by way of capital gains. Accordingly, the Hon'ble High Court has quashed the impugned notice for reopening of assessment. Similarly, in the case of the assessee, the assessee filed the return of income and comment figures of cash deposits were not before the AO. Hence, facts of said case are squarely applicable to the case of the assessee" 12. We also note that the AO had not examined the cash deposits in bank account on the basis of which reopening of assessment has been made as the said bank account were not in his possession at the time of issue of notice under section 148 of the Act. Hence, ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 17 the reasons recorded for reopening of assessment are not valid in the light of ratio laid down in the case of ITO & Ors v. Lakshmani Mewal Das [1976] 103 ITR 437 (SC) wherein it was held that the powers of ITO to reopen the assessment, though wide, are not plenary. The words of statute are "reason to believe" and not "reason to suspect" From the copy of acknowledgement of return of income placed at Paper Book Page No. 29-32, we are satisfied that the assesses has did file return of income for 'the assessment year under consideration whereas the AO has proceeded on the wrong premises that the assessee had never filed return of income for the relevant assessment year. Thus, respectfully following the ratio of judgement of Hon'ble Jurisdictional High Court in the case of Sunrise Education Trust v. Income Tax Officer [2018] 92 Taxman 74 (Gujarat) (supra) wherein it was held that when the AO in the reasons recorded proceeded on the erroneous footing that the assessee has not filed return of income at all and when it is not in dispute that the assessee did file the return of income for the assessment year under consideration, which was duly acknowledged by the department, then, it has to be held that the entire reasoning thus proceeded on the wrong premises that the assessee had never filed the return. This, itself would be sufficient to annual the notice of reopening the assessment. In view of the above and in the light of ratio laid down by the Hon'ble’ High Courts of Gujarat as quoted above and respectfully following the same, we hold that entire reasoning recorded by the AO for initiation of reassessment proceeding and issuance of notice under section 148 of the Act was on the wrong and incorrect facts that the assessee has never filed the return of income, and in fact, it was filed. This view is further supported by decision of Co-ordinate Bench of Surat Tribunal in the case of Vishal Dilip Rai v. ITO Valsad [I.T.A.No. 1863/Ahd/2016/SRT dated 26.09.2018] in which following the decision of Hon'ble High Court of Gujarat in the case of Sunrise Education Trust v. Income Tax Officer [2018] 92 Taxman 74 (Gujarat) quashed the reopening of assessment as the reasons mentioned that the assessee has no; filed return whereas the assessee did file the return of income. Therefore, are we are inclined to hold that the initiation of reassessment proceeding u/s.l47 of the Act and notice under section 148 of the Act of the Act and all subsequent proceedings and orders have been issued, conducted, passed without having valid jurisdiction, and therefore, the same are bad-in-law and hence, we quash the same. ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 18 Accordingly, legal ground no. 1 above of the assessee is allowed and notice under section 148 of the Act with impugned reassessment proceeding of the AO /CIT (A) are quashed." 16. On the basis of aforesaid decision wherein, this combination followed the decision of High Court in Mumtaz- Haji Mohmad Memon v. ITO (supra), which was further followed in the case of Ashish Natvarlal Vashi Vs ITO Ward-1,Navsari in ITA No.3522/AHD/2016 dated 19.04.2021, this combination also took the similar view. Considering the above factual and legal discussions, we are of the view that the reasons recorded was not correct, and the AO has not assumed jurisdiction validly, therefore, the action of the AO is void-ab initio and all subsequent action is liable to be set-aside. 17. Considering the facts that we have set-aside/ quashed the assessment order on the primary submissions of the assessee, therefore adjudication on the other submissions of the AR for the assessee have become academic. 18. Even on merit, we find that Ld. CIT(A) estimated the income @ 51.84% on account of undisclosed sales. The assessee claimed that he has shown book net book profit @ 11.45% and in subsequent year Assessing Officer has made addition @ 10% of net profit in the assessment order passed under section 143(3) of the Act. It is settled law that only profit element embedded in undisclosed sale or purchases is to be added not the substantial part of transaction. In our view when in subsequent assessment year in AY 2011-12, ITA No.476/SRT/2019 (AY 2010-11) Ramesh Bhojprasad Gupta 19 the AO himself made addition only @ 10% of net profit in the assessment order passed under section 143(3); the book profit shown by assessee @ 11.45% for the year under consideration was reasonable and justified. Therefore, the assessee also succeeded on merit. In the result, ground No. 2 is allowed. 19. In the result, appeal of the assessee is allowed. Order announced on 07 February, 2022 in open court and result was also placed on the notice board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 07/02/2022 DKP Outsourcing Sr. P.S. Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. Guard File By order // True Copy // Sr.Pvt. Secretary, ITAT, Surat