PRAKASHMAL G. ARNAIYA, MUMBAI V. ITO 19(2)(5), MUMBAI

ITA 55/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0005 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 04-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries
• Section: 143(3); 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NOS.55 & 56/M/2017 ASSESSMENT YEARS: 2007-08 & 2009-10 PRAKASHMAL G ARNAIYA, 32/34, 2 ND FLOOR, KESHAV BHAVAN, 1 ST CARPENTER STREET, MUMBAI 400 004 PAN: AADPJ 0419M VS. ITO - 19(2)(5), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI DEVENDRA JAIN, A.R. REVENUE BY : SHRI B.S. BIST, D.R. DATE OF HEARING : 13.06.2017 DATE OF PRONOUNCEMENT : 30.06.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E ASSESSEE AGAINST THE COMMON ORDER DATED 24.11.2016 OF THE COMMISSIONER O F INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEARS 2007-08 & 2009-10. SINCE THE FACTS AND ISSUES INVO LVED IN BOTH THE APPEALS ARE IDENTICAL IN NATURE, HENCE THE SAME ARE TAKEN T OGETHER FOR DISPOSAL BY THIS COMMON ORDER. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN BUSINESS OF TRADING OF FERROUS AND NON-FERROUS METAL AND STEEL UNDER THE PROPRIETA RY CONCERN BY NAME M/S. JAYDEEP STEEL CENTRE. THE RETURN OF INCOME WAS FILED ON 29.10.07 DECLARIN G TOTAL INCOME OF RS.2,63,274/-. ON THE BASIS OF INF ORMATION RECEIVED FROM DGIT(INV.), MUMBAI, IT WAS FOUND THAT ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES FROM CERTAIN PARTIES TO INFLATE ITS PURCHAS ES. A SURVEY ACTION UNDER SECTION 133A WAS CONDUCTED ON 27.11.12 AT THE OFFIC E PREMISES OF THE ASSESSEE ITA NOS.55 & 56/M/2017 PRAKASHMAL G ARNAIYA 2 AND IT IS CONFIRMED THAT THE ASSESSEE HAS OBTAINED BILLS FROM EIGHTEEN PARTIES WHOSE NAMES ARE APPEARING IN THE LIST OF THE CASES PUBLISHED IN THE WEBSITE OF SALES TAX DEPARTMENT WHO WERE INVOLVED IN ISSUING B OGUS BILLS WITHOUT ACTUAL DELIVERY OF THE GOODS. THE ASSESSMENT WAS REOPENED BY ISSUING NOTICE UNDER SECTION 148 ON 21.02.14 AND ASSESSMENT WAS COMPLETE D UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT ON 26.03.15 DETERM INING THE TOTAL INCOME AT RS.19,61,120/- THEREBY RAISING THE DEMAND OF RS.11, 35,610/-. 3. MATTER CARRIED TO LD. CIT(A) AND THE LD. CIT(A) HAS DISMISSED BOTH THE APPEALS. 4. DURING THE COURSE OF HEARING, THE LD. A.R. HAS B ROUGHT MY ATTENTION TO PAGE 1 OF THE COPY OF THE NOTICE UNDER SECTION 148 WHICH IS DATED 21.02.2014 AND STATED THAT THE AO HAD ISSUED THE NOTICE UNDER SECTION 148 FOR ASSESSMENT YEAR 2007-08 AND THE ASSESSEE HAD REQUESTED THE AO STATING THAT PLEASE GIVE ME THE REASONS RECORDED BY YOU PRIOR TO THE ISSUE O F NOTICE SO THAT I CAN FILE MY OBJECTION TO THE SAME. THE ASSESSEE HAS ALSO GIVE N REMINDER ON 12.08.14 STATING THAT YOU SHOULD GIVE ME THE REASONS RECORDE D BY YOU PRIOR TO THE ISSUE OF NOTICE UNDER SECTION 148 BUT AO DID NOT GIVE REP LY AND SIMILAR REMINDER WAS MADE ON 19.01.15 AND 30.05.17. THE COPY WAS PROVIDED TO TH E ASSESSEE. THE ASSESSMENT WAS COMPLETED ON 26.03.15. THEREFOR E, THE AO HAS NOT PROVIDED THE COPY OF THE REASONS WITHIN TIME. THER EFORE, THE ASSESSMENT IS BAD IN LAW. LD. A.R. RELIED UPON THE DECISION OF HONB LE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. 175 TAXMA N 262 (DEL) WHEREIN IT IS HELD THAT UNDER SECTION 148 WITHOUT THE COMMUNICATI ON OF THE REASONS THEREOF IS MEANINGLESS INASMUCH AS THE AO IS BOUND TO FURNI SH THE REASONS WITHIN A REASONABLE TIME. IN THAT CASE, AS PER SECTION 149( 1)(B) STIPULATES THE OUTER LIMIT OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMEN T YEAR WHERE THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOU NTS TO OR IS LIKELY TO AMOUNT TO RUPEES ONE LAKH OR MORE FOR THAT YEAR. A S PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GNK DRIVESHAFT S (INDIA) LTD. THE ITA NOS.55 & 56/M/2017 PRAKASHMAL G ARNAIYA 3 REASONABLE TIME LIMIT CANNOT BE STRETCHED TO AN EXT ENT THAT EVEN BEYOND SIX YEARS WHICH IS STIPULATED IN SECTION 149. MOREOVER , THE LD. A.R. HAS RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAHKARI KHAND UDYOG MANDAL LTD. (2014) 46 TAXMANN.COM 69 (GUJARAT ) WHEREIN IT IS HELD THAT AO IS BOUND TO FURNISH THE REASONS WITHIN 30 D AYS AFTER THE ASSESSEE FILES THE RETURN IN RESPONSE TO THE NOTICE UNDER SECTION 148. IN THIS CASE, THE AO HAS SUPPLIED THE REASONS ON 09.01.2015 AND AFTER THAT THE ASSESSMENT ORDER WAS PASSED ON 26.03.2015. THEREFORE, THE COPY OF THE R EASONS FOR REOPENING THE ASSESSMENT WAS NOT GIVEN WITHIN THE TIME PRESCRIBED AS PER THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAHKARI K HAND UDYOG MANDAL LTD. (SUPRA). I FIND THAT THIS DIRECTION IS GIVEN IN WR IT PETITION BUT AFTER VERIFYING THE RECORD I AM OF THE VIEW THAT THE AO FAILED TO SUPPL Y THE COPY OF THE REASONS FOR REOPENING THE ASSESSMENT ORDER. THEREFORE, ASSESSE E SUCCEEDS ON THIS GROUND. 5. I FIND THAT ASSESSEE HAS ASKED FOR THE S ATISFACTION NOTE IN TERMS OF SECTION 151 OF THE ACT. THE ASSESSEE HAS GIVEN APPLICATION ON 30.05.17 BUT NO COPY OF SANCTIONED LETTER WAS GIVEN WHICH WAS ISSUED UNDER SECTION 151 OF THE ACT. ASSESSEE HAS ALSO ASKED FOR OPPORTUNITY TO CROSS EX AMINE THE HAWALA PARTIES TO FIND OUT THE GENUINENESS OF TRANSACTION BUT NO OPPO RTUNITY WAS PROVIDED TO THE ASSESSEE. THEREFORE, LOOKING INTO THE FACTS AND CI RCUMSTANCES OF THE CASE, I FIND THAT WITHOUT FOLLOWING THE PROPER PROCEDURE, T HE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. THEREFORE, IN MY OPINI ON, THE ASSESSMENT ORDER IS BAD IN LAW. IN THIS CASE THE ASSESSMENT FOR A.Y. 2 005-06 WAS COMPLETED UNDER SECTION 143(3) WHERE THE GP RATE OF 5.36% HAS BEEN ACCEPTED BY THE DEPARTMENT. I ALSO FIND THAT IN ITA NO.1129/M/2015 THE TRIBUNAL HAS MADE THE ADDITION TO RESTRICT THE ADDITION TO THE EXTENT OF 2.5% OF ALLEGED PURCHASES. 6. ON THE OTHER HAND, THE LD. D.R. RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ). 7. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LOOKING INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT IN THE INSTANT CASE THE AO HAS ITA NOS.55 & 56/M/2017 PRAKASHMAL G ARNAIYA 4 COMPLETED THE ASSESSMENT ON 29.10.07 WHICH RETURN W AS ACCEPTED. THEREAFTER, THE ASSESSMENT WAS REOPENED UNDER SECTION 148 ISSUE D ON 21.02.2014 AND ASSESSMENT WAS COMPLETED UNDER SECTION 143 READ WIT H 147 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDING THE AO HAS ASKE D FOR THE COPY OF THE REASONS RECORDED BUT THE COPY OF THE REASONS RECORD ED WAS GIVEN NEARLY AFTER 9 MONTHS LEFT AT THE FAG END OF THE ASSESSMENT YEAR. THEREFORE, FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT WHEREIN THE HONBLE GUJARAT HIGH COURT HAS GIVEN IN ONE OF THE WRITTEN PETITIONS FIL ED BY SAHKARI KHAND UDYOG MANDAL REPORTED IN 40 TAXMAN.COM 69 (GUJ.) WHEREIN IT IS HELD AS UNDER: (1)ONCE THE ASSESSING OFFICER SERVES TO AN ASSESSE E A NOTICE OF C/SCA/3955/2014 ORDER REOPENING OF ASSESSMENT UNDER SECTION 148 OF THE INCOME TAX ACT, 1961, AND WITHIN THE TIME PERMITTED IN SUCH NOTICE, THE A SSESSEE FILES HIS RETURN OF INCOME IN RESPONSE TO SUCH NOTICE, THE ASSESSING OFFICER S HALL SUPPLY THE REASONS RECORDED BY HIM FOR ISSUING SUCH NOTICE WITHIN 30 DAYS OF TH E FILING OF THE RETURN BY THE ASSESSEE WITHOUT WAITING FOR THE ASSESSEE TO DEMAND SUCH REASONS. (2)ONCE THE ASSESSEE RECEIVES SUCH REASONS, HE WOUL D BE EXPECTED TO RAISE HIS OBJECTIONS, IF HE SO DESIRES, WITHIN 60 DAYS OF REC EIPT OF SUCH REASONS. (3)IF OBJECTIONS ARE RECEIVED BY THE ASSESSING OFFI CER FROM THE ASSESSEE WITHIN THE TIME PERMITTED HEREINABOVE, THE ASSESSING OFFICER W OULD DISPOSE OF THE OBJECTIONS, AS FAR AS POSSIBLE, WITHIN FOUR MONTHS OF DATE OF R ECEIPT OF THE OBJECTIONS FILED BY THE ASSESSEE. (4)THIS IS BEING DONE IN ORDER TO ENSURE THAT SUFFI CIENT TIME IS AVAILABLE WITH THE ASSESSING OFFICER TO FRAME THE ASSESSMENT AFTER CAR RYING OUT PROPER SCRUTINY. THE REQUIREMENT AND THE TIME-FRAME FOR SUPPLYING THE RE ASONS WITHOUT BEING DEMANDED BY THE ASSESSEE WOULD BE APPLICABLE ONLY I F THE ASSESSEE FILES HIS RETURN OF INCOME WITHIN THE PERIOD PERMITTED IN THE NOTICE FOR REOPENING. LIKEWISE THE TIME FRAME FOR THE ASSESSING OFFICER TO DISPOSE OF THE OBJECTIONS WOULD APPLY ONLY IF THE ASSESSEE RAISES OBJECTIONS WITHIN THE TIME PROV IDEDC/SCA/3955/2014 ORDER HEREINABOVE. THIS, HOWEVER, WOULD NOT MEAN THAT IF IN EITHER CASE, THE ASSESSEE MISSES THE TIME LIMIT, THE PROCEDURE PROVIDED BY TH E SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD (SUPRA) WOULD NOT APPLY . IT ONLY MEANS THAT THE TIME FRAME PROVIDED HEREINABOVE WOULD NOT APPLY IN SUCH CASES. (5)IN THE COMMUNICATION SUPPLYING THE REASONS RECOR DED BY THE ASSESSING OFFICER, HE SHALL INTIMATE TO THE ASSESSEE THAT HE IS EXPECT ED TO RAISE THE OBJECTIONS WITHIN 60 DAYS OF RECEIPT OF THE REASONS AND SHALL REPRODU CE THE DIRECTIONS CONTAINED IN SUB-PARA 1 TO 4 HEREINABOVE GIVING REFERENCE TO THI S JUDGMENT OF THE HIGH COURT. ITA NOS.55 & 56/M/2017 PRAKASHMAL G ARNAIYA 5 (6)THE CHIEF COMMISSIONER OF INCOME TAX AND CADRE C ONTROLLING AUTHORITY OF THE GUJARAT STATE, SHALL ISSUE A CIRCULAR TO ALL THE AS SESSING OFFICERS FOR SCRUPULOUSLY CARRYING OUT THE DIRECTIONS CONTAINED IN THIS JUDGM ENT. 8. I FIND THAT THE SIMILAR JUDGMENT WAS DELIVERED B Y HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. (SUPRA) WHEREIN HONBLE DELHI HIGH COURT HAS HELD THAT THE REASONS OF REOPENING MUST BE GIVEN AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS ITO 125 TAXMAN 963 (SC) HAS TO BE G IVEN WITHIN REASONABLE TIME. WE FIND THAT THE ASSESSMENT ORDER IS IN GROS S VIOLATION OF PRINCIPLES LAID DOWN IN HONBLE SUPREME COURT IN THE CASE OF GKN DR IVESHAFTS (INDIA) LTD. (SUPRA) AS ACCEPTED IN HONBLE GUJARAT HIGH COURT I N THE CASE OF SAHKARI KHAND UDYOG MANDAL 46 TAXMAN 694. THEREFORE IT IS O NE OF THE REASONS FOR ACCEPTING THE ASSESSMENT ORDER. SECONDLY, I FIND TH AT THE AO DID NOT PROVIDE THE COPY OF SATISFACTION AS PER SECTION 151. I ALS O FIND THAT THE AO HAS RELIED ON SOME STATEMENT RECORDED BY SALES TAX AUTHORITY. NEITHER THE COPY OF SUCH STATEMENT WAS GIVEN TO THE ASSESSEE NOR PROPER CROS S EXAMINATION WAS PROVIDED. I FIND THAT THE ASSESSEE WAS NOT GIVEN TH E COPY OF THE STATEMENT RECORDED BY SALES TAX AUTHORITY. MOREOVER, IN ASSE SSEES CASE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) WHERE THE GP @ 5.36% HAS BEEN ACCEPTED BY THE DEPARTMENT. LOOKING TO THE ABOVE FACTS, WE DIR ECT THE AO TO RESTRICT THE ADDITION @ 2.5% OF THE TOTAL BOGUS PURCHASES. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.06.2017. SD/- (D.T. GARASIA) JUDICIAL MEMBER MUMBAI, DATED: 30.06.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI ITA NOS.55 & 56/M/2017 PRAKASHMAL G ARNAIYA 6 THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.