RAMESH HARIDAS ASHAR, MUMBAI V. ITO WD 21(2)(2), MUMBAI

ITA 5974/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8902 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-06-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 10-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K MEHTA
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Unexplained cash credit; Bonafide belief; Retraction; Reason to believe; Reassessment proceedings
• Section: 80HHC; 147; 68; 148

Judgement Text

PAGE 1 OF 13 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI G. E. VEERABHADRAPPA, PRESIDENT & SHRI VIVEK VARMA, JUDICIAL MEMBER ITAS NO. 5974 & 5975/MUM/2009 ASSESSMENT YEARS : 1999-2000 & 2001-02 SHRI RAMESH HARIDAS ASHAR 67, GOKUL BUILDING, T. V. CHIDAMBARAM MARG, SION (E), MUMBAI-400 022 PAN NO: ACDPA 9014 B VS. ITO, WD 21(2)(2), ROOM NO.507, CIT(A)-10, BANDRA, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARI S. RAHEJA RESPONDENT BY : SHRI N. K. MEHTA DATE OF HEARING: 07.08.2012 DATE OF PRONOUNCEMENT: O R D E R PER VIVEK VARMA, J.M. : THE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE, CH ALLENGING THE COMMON ORDER OF CIT(A) XXI, MUMBAI DATED 14.08.2009. 2. THE ASSESSEE HAD FILED THE APPEAL ALONG WITH GRO UNDS OF APPEAL. THESE GROUNDS HAVE BEEN REVISED, THEREFORE, WE ARE ADJUDI CATING ON THE REVISED GROUNDS. SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 2 OF 13 3. GROUNDS NO. 1 & 2 IN BOTH THE IMPUGNED ASSESSMEN T YEARS ARE IDENTICAL, I.E. AGAINST THE INITIATION OF REASSESSMENT PROCEED INGS. 4. THE FACTS EMANATING FROM THE ORDER OF THE AO ARE THAT THE ASSESSEE HAD FILED HIS RETURN OF INCOME FOR THE AYS 1999-2000 AN D 2000-01 WITH ACIT-17(4), FROM WHERE THE JURISDICTION OF THE CASE GOT TRANSFE RRED TO WARD 13(2)(3), MUMBAI AND THEN THE JURISDICTION GOT TRANSFERRED TO WARD 21(2)(2), UNDER WHICH THE REASSESSMENT PROCEEDINGS HAD BEEN ADJUDICATED. IT WAS MENTIONED IN THE ORDER OF THE AO THAT REASSESSMENT PROCEEDINGS WERE INITIATED IN THE CASE OF THE ASSESSEE FOR THREE ASSESSMENT YEARS, I.E. ASSESSMEN T YEARS 1999-2000, 2000-01 AND 2001-02, OF WHICH REASSESSMENT PROCEEDINGS WERE DROPPED FOR ASSESSMENT YEAR 2000-01. THE INSTANT REASSESSMENT PROCEEDINGS WERE INITIATED VIDE NOTICE DATED 02.04.2004 , WHICH WERE SERVED THOUGH AFFIXTURE ON 07.04.2004 , BY THE INSPECTOR WARD 13(2)(3), MUMBAI AND THEN THE JURISD ICTION GOT TRANSFERRED TO WARD 21(2)(2), UNDER WHICH THE REASSESSMENT PROCEED INGS HAD BEEN ADJUDICATED. 5. THE REASONS FOR INITIATING THE REASSESSMENT PROC EEDINGS ARE AS UNDER : (IDENTICAL IN BOTH THE IMPUGNED ASSESSMENT YEARS) ANNEXURE COL. NO. 11 RAMESH H. ASHAR FOR A.Y. 1999-2000 THE ASSESSEE DURING THE PERIOD UNDER CONSIDERATION HAS CLAIMED DEDUCTION UNDER SECTION 80HHC OF THE I.T. ACT, 1961 AND AS PER THE INFORMATION RECEIVED FROM THE DDDIT(INV) UNIT-IV(2), MUMBAI AS PER HIS OFFICE LETTER NO. DDDIT(INV)/U-IV(2)/EXPORTS FRAUD/2003-04 DTD 15/3/2 004 (COPY AVAILABLE ON FILE), THE ASSESSEE IS ENGAGED IN THE PROCESS OF OV ER INVOLVING OF EXPORT SALES TO CLAIM MORE DUTY DRAWBACK AND DEPB AND ALSO DEDUCTIO N UNDER SECTION 80HHC OF THE I.T. ACT, 1961. THE INVESTIGATIONS MADE BY THE DRO APPEARS TO HAVE INDICATED THE INFLATION IN THE EXPORT SALES MADE BY THE ASSESSEE. DDIT (INV) HAS SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 3 OF 13 ALSO SUGGESTED THROUGH VERIFICATION INVESTIGATION W ITH REGARD TO THE PURCHASES AND SALES MADE BY THE ASSESSEE. IN VIEW OF ABOVE, I HAVE REASON TO BELIEVE THAT ASS ESSEES CLAIM UNDER SECTION 80HHC OF THE I.T. ACT, 1961 FOR THE A.Y. 19 99-00 HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. 6. ACCORDING TO THE AO, THE ASSESSEE WAS ONE OF THE BENEFICIARIES IN THE ALLEGED EXPORT INCENTIVE SCAM ON ACCOUNT OF FRAUDULENT EXPORTS TO RUSSIA BY OVER INVOICING THE EXPORT CONSIGNMENTS AND AVAILING OF DEPB/DUTY DRAWBACK, THEREBY, CAUSING HUGE LOSS TO THE EXCHEQUER, BESIDE S AVAILING DEDUCTION U/S 80 HHC OF THE INCOME TAX ACT, 1961. THE DRI HAD CONDUC TED THE INDEPTH ENQUIRY AND ACCORDING TO THE REPORT SENT TO THE INVESTIGATI ON WING, THE ASSESSEE PROPRIETOR OF MAHAVIR EXPORTS HAD COLLUDED WITH ONE M/S CLASSIC IMPORTS, OWNED BY ONE MR. MUKESH NAGINDAS VORA, HIS WIFE AND BROTH ER, WHO WERE KNOWN TO BE THE KINGPINS IN THE SCAM. THE AO, IN THE ORDER U/S 143(3)/148 HAS GIVEN THE COMPLETE MODUS OPERANDII OF THE SCAM. 7. CONSIDERING THE MODUS OPERANDII , THE AO PREFERRED TO INITIATE REASSESSMENT PROCEEDINGS. SINCE IT WAS FOUND THAT I N ASSESSMENT YEAR 2000-01, THERE WERE NO EXPORTS, THE AO, DROPPED THE REASSESS MENT PROCEEDINGS INITIATED FOR ASSESSMENT YEAR 2000-01. 8. ON THE REPORT AND INFORMATION RECEIVED FROM DRI AS TO THE QUANTUM OF INCOME GENERATED BY THE FRAUD PURPORTEDLY COMMITTED BY THE KINGPINS AND HIS COLLUDING PARTNERS, THE AO PROPORTIONATELY, REDUCED THE ALLOWANCES EARNED/RECEIVED ON ACCOUNT OF EXPORT INCENTIVES IN BOTH THE IMPUGNED YEARS. SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 4 OF 13 9. AGGRIEVED, THE ASSESSEE PREFERRED APPEALS BEFORE THE CIT(A), BEFORE WHOM THE ASSESSEE AGITATED BOTH ON LEGAL GROUNDS AN D MERITS INVOLVED IN THE REASSESSMENT PROCEEDINGS IN THE IMPUGNED ASSESSMENT YEARS. IN THE SOF FILED ALONG THE MEMORANDUM OF APPEAL, THE ASSESSEE CITED HIS GRIEVANCES AGAINST THE REASSESSMENT PROCEEDINGS, WHEREIN, THE ASSESSEE PLE ADED WITH THE CIT(A) THAT : 7. SIR THE SAID ASSESSMENT IS BAD IN LAW AND VOID AB INTIO, BASED ON THE ABOVE FACTS AND ALSO THE SAID ASSESSMENT IS MADE BA SED PURELY ON SURMISE AND SUSPICION, WITHOUT HAVING A SHRED OF EVIDENCE AGAIN ST YOUR APPELLANT. 8. SIR, NO STATEMENT, INFORMATION OR PARTIES WERE P RODUCED BEFORE YOUR APPELLANT TO REBUT THE ASSESSING OFFICERS BASELESS ALLEGATIONS. 9. ONGOING THROUGH THE SAID ASSESSMENT ORDER, IT IS NOTED THAT THE GENESIS OF REOPENING OF THE SAID ASSESSMENT WAS THERE WAS I NFORMATION WITH THE I.T.O. WARD 13(2)(3), REGARDING EXPORT TO RUSSIA BY OVER V ALUING THE SAID EXPORTS SO AS TO CLAIM HIGHER DUTY DRAWBACK. SIR YOUR APPELLAN T DRAWS YOUR ATTENTION TO FOLLOWING POINTS IN THE SAID ASSESSMENT ORDER : A) COPY OF REPORT FROM INVESTIGATION WING BY THE ASSES SING OFFICER AND COPY OF MEMORANDUM OF SHOWCAUSE WITH ANNEXURES ISSU ED BY THE ENFORCEMENT DIRECTORATE, WAS NOT PROVIDED TO YOUR A PPELLANT. B) REPORT OF THE ENFORCEMENT DIRECTORATE AS CLAIMED BY THE ASSESSING OFFICER, IN WHICH THE E.D. HAVE CONCLUDED THE SO CA LLED RUSSIAN EXPORT SCAM AND INVOLVEMENT OF YOUR APPELLANT. C) YOUR APPELLANT HAS NOT BEEN GIVEN ANY STATEMENT REC ORDED BY THE SAID E.D. AS ALLEGED BY THE ASSESSING OFFICER OF TH E SAID VORA BROTHERS. D) SIR, AS CLAIMED BY THE ASSESSING OFFICER, THE INFOR MATION WAS REGARDING OVER INVOICING OF EXPORTS TO RUSSIA ONLY. HOWEVER THE ASSESSING OFFICER WENT BEYOND REASONS AND ALSO DISA LLOWED YOUR APPELLANTS CLAIM OF EXPORTS TO DUBAI. E) SIR, YOUR APPELLANT REQUEST THE ASSESSING OFFICER T O PRODUCE ANY STATEMENT WHEREIN YOUR APPELLANT HAD AGREED HIM BEI NG PART OF ANY SUCH EXPORTS. THE ASSESSING OFFICER IS MAKING ASSES SMENT ON PRESUMPTIONS AND ASSUMPTIONS WITH ANY EVIDENCE AGAI NST YOUR APPELLANT. F) SIR, IT MAY BE NOTED THAT THE ASSESSING OFFICER DOE S ADMIT IN PARA 19 OF HER ASSESSMENT ORDER, THAT YOUR APPELLANTS CL AIM FOR EXPORTS TO COUNTRY OTHER THAN RUSSIA, WAS ELIGIBLE FOR OTHE R MATTER, A COPY OF WHICH WAS NOT PROVIDED TO YOUR APPELLANT FOR REB UTTAL THE SAID BENEFIT IS DENIED. G) SIR, ASSESSING OFFICERS CONTENTION THAT NO RECORDS WERE KEPT BY THE APPELLANT IS NOT ACCEPTABLE AS THE SAID BOOKS WERE DULY AUDITED BY A COMPETENT CHARTERED ACCOUNTANT AND REPORT IN PRES CRIBED FORM WAS ALSO ISSUED AFTER VERIFICATION OF ALL DOCUMENTS . 10. SIR, TREATING EXPORT INCENTIVE AS GRANTED U/S 2 8, AS INCOME FROM OTHER SOURCES AMOUNTING TO RS . 1,09,65,830/-, BASED ON ABOVE FACT IS UNJUST. SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 5 OF 13 IN THE WRITTEN SUBMISSIONS, AS REPRODUCED BY THE CI T(A) IN THE IMPUGNED ORDER, IT WAS CONTENDED BY THE ASSESSEE THAT EVEN SERVICE OF NOTICE WAS BAD IN LAW, AS THE SAME WAS SERVED THROUGH AFFIXTURE. 10. THE ASSESSEE, EVEN BEFORE THE CIT(A) PLEADED TH AT NONE OF THE EVIDENCE AS COLLECTED/RECEIVED BY THE AO HAD BEEN CONFRONTED TO THE ASSESSEE AND EVEN THE CIT(A), WHO COULD DO SO, HAVING CO-TERMINUS POW ERS, DID NOT PROVIDE ANY CHANCE/OPPORTUNITY TO THE ASSESSEE TO DEFEND HIMSEL F. THE CIT(A), THEREFORE, NOT ONLY SUSTAINED THE DISALLOWANCE BUT TREATED THE DISALLOWED PORTION, I.E. THE DISALLOWED PORTION OF EXPORT INCENTIVES, AS INCOME FROM OTHER SOURCES AND ENHANCED THE INCOME OF THE ASSESSEE TO THAT EXTENT, HOLDING, ACCORDINGLY, IT IS HELD THAT ALLEGED EXPORTS OTHER THAN RUSSIA AMOUNTI NG TO RS . 78,98,310/- FOR A.Y. 1999-2000 AND RS . 2,11,892/- FOR A.Y. 2001-02 ARE ENTIRELY APPELLANT S OWN INCOME BY WAY OF UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT. AS A RESULT THEREOF THE INCOME OF THE APPELLANT STANDS ENHANCED TO THIS EXTENT. 11. AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE ITAT. 12. BEFORE US, THE AR APPEARING ON BEHALF OF THE AS SESSEE SUBMITTED THAT AT THE OUTSET, THE REASSESSMENT PROCEEDINGS FOR ASSESS MENT YEAR 1999-2000 IS BAD IN LAW ON TWO COUNTS, I.E. FIRSTLY , THE NOTICE IS BEYOND FOUR YEARS, I.E. THE NOTICE SHOULD HAVE BEEN ISSUED AND SERVED ON THE AS SESSEE, ON OR BEFORE 31.03.2004, SINCE THE NOTICE UNDER SECTION 148 WAS ISSUED ONLY ON 02.04.2004, WHICH IS CLEARLY BEYOND FOUR ASSESSMENT YEARS AND SECONDLY , THE SERVICE BY WAY OF SUBSTITUTED SERVICE ON THE VERY FIRST INSTANCE, IS NOT IN ACCORDANCE WITH LAW SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 6 OF 13 AND TOTALLY AGAINST THE PROVISIONS OF ORDER 5 RULE 17 OF CPC , WHICH READS AS UNDER : 3. SERVICE BY AFFIXTURE ORDER 5, RULE 17, AS AMENDED BY ACT 104 OF 1976, OF THE CIVIL PROCEDURE COMES INTO OPERATION IN ANY OF THE FOLLOWING TWO SITUATIO NS VIZ: (I) WHERE THE DEFENDANT OR HIS AGENT OR MEMBER OF FAMILY, TO WHOM THE SUMMONS IS TENDERED, REFUSES TO SIGN THE ACKNOWLEDG EMENT; OR (II) WHERE THE SERVING OFFICER, AFTER USING ALL DU E AND REASONABLE DILIGENCE, CANNOT FIND THE DEFENDANT, WHO IS ABSENT FROM HIS R ESIDENCE AT THE TIME WHEN SERVICE IS SOUGHT TO BE EFFECTED ON HIM AT HIS RESI DENCE AND THERE IS NO LIKELIHOOD OF HIS BEING FOUND AT THE RESIDENCE WITH IN A REASONABLE TIME AND THERE IS NO AGENT EMPOWERED TO ACCEPT SERVICE OF THE SUMM ONS ON HIS BEHALF, ETC. IN ANY OF SUCH CIRCUMSTANCES, RULE 17 PRESCRIBES TH AT THE SERVING OFFICER 8 ALL AFFIX A COPY OF THE SUMMONS ON THE OUTER DOOR OR SO ME OTHER CONSPICUOUS PART OF THE HOUSE IN WHICH THE DEFENDANT ORDINARILY RESI DES OR CARRIES ON BUSINESS, AND SHALL THEN RETURN THE ORIGINAL TO THE COURT WIT H A REPORT ENDORSED THEREON OR ANNEXED THERETO STATING (A) THAT HE HAS SO AFFIXED THE COPY, (B) THE CIRCUMSTANCES UNDER WHICH HE DID SO, AND (C) THE NAME AND ADDRESS OF THE PERSON (IF ANY) BY WHOM THE HOUSE WAS IDENTIFIED AND IN WHOSE PRESENCE THE COPY WAS AFFIX ED. WHERE SERVICE BY AFFIXATION HAS BEEN MADE UNDER RUL E 17 AND THE RETURN OF SERVICE HAS NOT BEEN VERIFIED BY THE AFFIDAVIT OF T HE SERVING OFFICER, RULE 19 REQUIRES THE COURT TO EXAMINE THE SERVING OFFICER O N OATH, OR HAVE HIM SO EXAMINED BY ANOTHER COURT, TOUCHING HIS PROCEEDING. IF THAT IS NOT DONE, THE SERVICE WILL BE RENDERED INVALID [SEE CIT V. SATYA NARAIN PODDAR73) 89 ITR 136 (ALL). RULE 20 PROVIDES THAT THE COURT SHALL ORDER THE SUM MONS TO BE SERVED BY AFFIXING A COPY THEREOF IN SOME CONSPICUOUS PLACE I N THE COURT-HOUSE, AND ALSO UPON SOME CONSPICUOUS PART OF THE HOUSE (IF ANY) IN WHICH THE DEFENDANT IS KNOWN TO HAVE LAST RESIDED OR CARRIED CA BUSINESS O R PERSONALLY WORKED FOR GAIN, OR IN SUCH OTHER MANNER AS THE COURT THINKS FIT. TH E LAST CLAUSE OF RULE 20 OF ORDER 5 GIVES A WIDE DISCRETION TO THE COURT/ASSESS ING AUTHORITY IN THIS MATTER AND, COURT/ASSESSING AUTHORITY MAY DIRECT SERVICE T O BE EFFECTED BY AFFIXATION. 13. THE AR, THEREAFTER, INVITED OUR ATTENTION TO TH E ORDERS OF CEGAT IN THE CASE OF M/S MAHAVIR EXPORTS (I.E. THE ASSESSEE), WH EREIN THE HONBLE CEGAT, ZONAL BENCH AT MUMBAI IN THE CONCLUDING PARA HAS HE LD, WE FIND THE VARIATION IN THIS CASE IS REASONABLE. WE ALSO FIND THAT THE EXPORTER AT ALL TIMES REFUSED ANY SUGGESTION OF OVER INVOICI NG. WE HAVE TAKEN INTO ACCOUNT THE SUBMISSION THAT THE EXPORTER HAD ACCEPT ED TO CLAIM DUTY DRAWBACK ON THE FOB VALUATION BUT WE TAKE IT AS A SURRENDER OF A DESPERATE PERSON BUT SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 7 OF 13 NOT AN ADMISSION OF OVER INVOICING. WE DO NOT FIND THE EVIDENCE IN THE FORM OF MARKET ENQUIRIES TO BE SUFFICIENT TO NEGATE SUBMISS ION OF VALUATION MADE BY THE EXPORTER. IN THE RESULT THE APPEAL SUCCEEDS AND IS ALLOWED WITH CONSEQUENTIAL RELIEF. AND ALSO DETAILED ORDER OF SPECIAL DIRECTOR, DIREC TOR OF ENFORCEMENT DATED 26.05.2010, WHEREIN, THE SPECIAL DIRECTOR HAD ABSOL VED ALL THE PERSONS INVOLVED IN THE ALLEGED EXPORT SCAM, WHICH INCLUDED MR. MUKE SH H VORA AND HIS FAMILY MEMBERS. IN THIS ADJUDICATION ORDER, (AS EXTRACTED IN PART ONLY), THE SPECIAL DIRECTOR HAD HELD AS UNDER : IN THE OFFICE OF SPECIAL DIRECTOR OF ENFORCEMENT MINISTRY OF FINANCE, DEPARTMENT OF REVENUE JANMABHOOMI CHAMBERS, 1 ST FLOOR, WALCHAND HIRACHAND MARG, MUMBAI-1. ADJ. ORDER NO. ADJ/ 31/ B/SDE/RAJ/201 0 FILE NO. TRIBUNAL- 4/95- B/SDE/AKB/2002(SC N I) DATE : 26/05/201 0 PASSED BY.: RAJENDRA SPECIAL DIRECTOR ORDER (ORIGINAL) N.B.: I) THIS ORDER HAS BEEN PASSED IN ACCORDANCE WITH T HE PROVISIONS OF. THE FOREIGN EXCHANGE REGULATION ACT, 1973 (THE REPEALED ACT) READ WITH RELEVANT PROVISIONS OF FOREIGN EXCHANGE MANAGEMENT ACT, 1999. II) THE COPY IS GRANTED FREE OF CHARGE FOR THE USE OF THE PERSON TO WHOM IT IS ISSUED: III) AN APPEAL AGAINST THIS ORDER SHALL LIE WITH T HE APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE MINISTRY OF LAW, JUSTICE AND COMPA NY AFFAIRS, GOVT. OF INDIA, 4 FLOOR, B WING, JANPATH (INDIAN OIL) B HAVAN, JANPATH, NEW DELHI 110001, AFTER DEPOSITING THE AMOUNT OF PENALT Y IMPOSED, WITHIN 45 DAYS FROM THE DATE ON WHICH THIS ORDER IS SERVED . (REFER SECTION 19 READ WITH SECTION 49(5)(A) OF THE FOREIGN EXCHANGE MANAGEMENT ACT, 1999); IV) AN APPEAL PRESENTED TO THE APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE SHALL BE IN THE FORM OF A MEMORANDUM SIGNED BY THE APPELLANT AND THE MEMORANDUM SHOULD BE FILED IN TRIPLICATE AND MUST B E ACCOMPANIED BY THREE COPIES OF THIS ORDER. V) EVERY APPEAL SHALL BE ACCOMPANIED BY A FEE OF R S.10,000/-(RS. TEN THOUSAND ONLY) IN THE FORM OF CASH OR DEMAND DRAFT PAYABLE IN FAVOUR OF THE REGISTRAR, APPELLATE TRIBUNAL FOR FOREIGN EXCHA NGE, NEW DELHI. SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 8 OF 13 NAME AND ADDRESS OF THE PARTIES: 1. M/S. KOYNA GLASS WORKS PVT. LTD. 2. SHRI GOVIND N. NAGAR, DIRECTOR, 3. SMT. SHAKUNTALA NAGAR, DIRECTOR, 4. SHRI HARISH L. VED, PROPRIETOR, VARDAN EXPORTS 5. M/S. WORLD TRADE LINK EXPORTS. 6. SHRI ANANT B. TIMBADIA, PARTNER. 7. SHRI HARISH TIMBADIA, PARTNER. 8. SHRI HEMAND TRIVEDI, PROPRIETOR, NAMAN ENTERPRISES 9. SHRI MUKESH N. VORA 10. SHRI KIRAN N. VORA, 11. SHRI DIVYES D. GANDHI, PROPRIETOR, VIDI EXIM, 12. SHRI BRIJ MEHRA, MOSCOW 13. SHRI MANISH N. VORA, 14. SHRI H,P.JOSHI & CO. 15. SHRI KANTILAL H. JOSHI, PROPRIETOR 16. SHRI AMIT C. SHAH, 17. M/S. UNIMARINE SHIPPING AGENCIES (P) LTD., 18. SHRI SHAMSUDDIN A. SHROFF, DIRECTOR, 19. SHRI SULTAN ABDUL AZIZ SHROFF, DIRECTOR 20. SHRI NURUDIN RAYANI, DIRECTOR. 21. SMT. PARVEEN SHROFF, DIRECTOR 22. SHRI SHAIZAD S. SHROFF, DIRECTOR 23.THE STATE BANK OF INDIA, BACKBAY RECLAMATION BRANCH, MUMBAI-21 MEMORANDUM NO NO. AND DATER T-4195-B/SDE/AKB/2002 (SCN I) DATED 20.5.2002 SECTION CONTRAVENED SEC. 8(1), 9(1)(F)(I), 48, 49 AND 73(3) ALSO READ WITH SEC. 68 OF THE FOREIGN EXCHANGE REGULATION ACT, 1973 READ WITH SEC. 49(3) & 49(4) OF THE FOREIGN MANAGEMENT ACT, 1999. CONCLUSION 108. IF THE PRESENT SCN CAN BE COMPARED WITH A PYRA MID, IT CAN FORCEFULLY BE SAID THAT BASE AND TOP OF THE STR UCTURE ARE TOTALLY MISSING. NOT ONLY THE FOUNDATION STONE I.E. PROOF OF OVER- INVOICING-BUT ALSO THE UPPER LAYERS - I.E. PROOF OF OFF-LOADING OF GOODS AT DUBAI BY THE INDIAN EXPORTERS, OTHERWISE A CQUISITION OF FOREIGN EXCHANGE OUTSIDE INDIA AND TRANSFERRING THE SAME ARE MISSING. IN THE ABSENCE OF ANY INQUIRY OR ANY EVIDE NCE OF CONTRAVENTION OF SEC. 9 (1)(F)(I), THE STRUCTURE IS WITHOUT THE TOP LAYER. WHILE DECIDING THE MATTER, I HAVE ALSO CONS IDERED THE FOLLOWING FACTS : I) AFFIDAVIT FILED BY THE CHIEF COMMISSIONER OF CUS TOMS, MUMBAI. II) AFFIDAVIT FILED BY THE RESERVE BANK OF INDIA. III) NON-VOLUNTARINESS OF THE STATEMENTS OF THE NOT ICES AND THEIR CONSEQUENTIAL RETRACTION. IV) SHIPPING OF GOODS ON F.O.B. TERMS SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 9 OF 13 109. CONSIDERING THE TOTALITY OF THE FACTS AND CIRC UMSTANCES OF THE CASE UNDER CONSIDERATION, I HOLD THE SUBMISS IONS OF THE NOTICES ARE TO BE ACCEPTED AND CHARGES LEVEL ED AGAINST THEM HAVE TO BE DROPPED. SEALED AND SIGNED AT MUMBAI THIS 26 TH DAY OF MAY, 2010 SD/- (RAJENDRA) SPECIAL DIRECTOR 14. IT WAS ALSO POINTED OUT THAT VIDE ORDER DATED 1 7.06.2010, THE SPECIAL DIRECTOR HAD DROPPED ED PROCEEDINGS AGAINST THE ASS ESSEE AS WELL. 7. STATEMENTS OF THE FOLLOWING PERSONS WERE RECORD ED UNDER SECTION 40 OF THE FOREIGN EXCHANGE REGULATION ACT, 1973 READ WITH SECTIONS 49(3) AND 49(4) OF THE FOREIGN EXCHAN GE MANAGEMENT ACT, 1999. A) SHRI IQBAL MEHTA B) SHRI SEVANTILAL SHAH C) SHRI CHANDER OBHRAI D) SHRI GOVIND NAGAR E) SHRI KANTILAL H. JOSHI F) SHRI SAMSUDDIN SHROFF G) SHRI RAJESH M. SHAH H) SHRI RAMESH ASHAR I) SHRI KIRAN N. VORA J) SHRI PARESH VAKHARIA K) SHRI MUKESH LAKHANI L) SHRI CHANDRAKANT R. SHETH M) SHRI VIJAY C. KAMDAR N) SHRI VIJEN JHAVERI O) SHRI PANKAJ A. SHETH 8. SINCE THE STATEMENTS OF THE ABOVE SAID PERSONS A RE ALREADY DISCUSSED IN THE ADJUDICATION ORDER NO. ADJ/31- B/SDE/RAJ/2010/FERA DATED 26/5/2010 IN RESPECT OF S CN II NO.T-4/95-B/SDE/AKB/2002 (SCN-I) AND ADJUDICATION O RDER NO.ADJ/34-B/SDE/RAJ/2010/FERA DATED 10/06/2010 IN R ESPECT OF SCN NO. TRIBUNAL-4/95-B/SDE/AKB/2002 (SCN II) IS SUED BY THE UNDERSIGNED, THE SAME ARE NOT REPEATED HERE. 15. THE AR SUBMITTED THAT THE VARY BASIS OF INITIAT ION OF REASSESSMENT PROCEEDINGS HAD BEEN DEMOLISHED BY ITS SURROGATE, T HE SPECIAL DIRECTOR, AND HENCE, THE REASSESSMENT PROCEEDINGS, WHICH WERE SO INITIATED ARE BEING QUESTIONED ON ITS OWN LEGALITY. SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 10 OF 13 16. THE AR ALSO PLEADED ON THE ISSUE OF DELAYED ISSUE OF NOTICE U/S 143(2) AND OTHER LEGAL DEBACLES, COMMITTED BY THE REVENUE AUTHORITIES, AND CONCLUDED THAT THE REASSESSMENT PROCEEDINGS WERE BAD IN LAW A ND SHOULD BE HELD TO BE VOID. 17. THE DR, SUPPORTING THE ACTION OF THE REVENUE AU THORITY SUBMITTED THAT BONAFIDE BELIEF ON THE INFORMATION WAS NOT BAD IN L AW AND THE CIT(A) HAS RIGHTLY REJECTED THE ARGUMENTS OF THE ASSESSEE. 18. WE HAVE HEARD THE ARGUMENTS AND THE PAPERS BROU GHT ON RECORD. SO FAR AS ASSESSMENT YEAR 1999-2000, THE NOTICE IS CLEARLY BEYOND THE TIME BARRING LIMIT OF 31.03.2004, HAVING BEEN DATED 02.04.2004. AT NO POINT OF TIME, I.E. BY THE AO OR BY THE CIT(A) OR EVEN AT THE TIME OF HEAR ING, THE DR WAS ABLE TO SHOW EITHER TO THE ASSESSEE OR TO US, THE APPROVAL HAVING BEING TAKEN BY THE AO, BEING THE ITO, FROM JCIT, FOR INITIATION OF REA SSESSMENT PROCEEDINGS, AS PER THE PROVISIONS OF SECTION 151(2) AND EVEN WITH THE EXPLANATION THEREWITH. 19. IN THESE CIRCUMSTANCES, SO FAR AS ASSESSMENT YE AR 1999-2000 IS CONCERNED, THE NOTICE U/S 148 IS HELD TO BE VOID AND ALL PROCEEDINGS, UNDERTAKEN BY THE REVENUE AUTHORITIES, AS A CONSEQUENCE THEREO F, ARE, THEREFORE, ANNULLED . 20. SO FAR AS ASSESSMENT YEAR 2001-02 IS CONCERNED, THE ISSUE OF NOTICE CAN BE TAKEN TO BE IN TIME, BUT THE APPROVAL AND SERVICE OF NOTICE THROUGH SUBSTITUTED SERVICE HAS TO BE TAKEN INTO OUR SCAN, TO SEE AND TEST WHETHER THEY WERE LEGALLY VALID. IN OUR CONSIDERED OPINION, THE SERVICE OF NOTICE IS BAD IN LAW, BECAUSE AT NO POINT OF TIME, THE AO/CIT(A) OR EVEN THE DR, EVIDENCED THAT THE SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 11 OF 13 ASSESSEE HAD IGNORED THE ACCEPTANCE OF NOTICE OR TH AT THE ASSESSEE HAD AVOIDED THE SERVICE. ORDER 5 RULE 17 OF CIVIL PROCEDURE COD E IN CLAUSE (II) HAS USED THE WORDS, AFTER USING ALL DUE AND REASONABLE DILIGENCE , CANNOT FIND THE DEFENDANT, WHO IS ABSENT FROM HIS RESIDENCE AT THE TIME WHEN SERVICE IS SOUGHT TO BE EFFECTED ON HIM AT HIS RESIDENCE AND THERE IS NO LIKELIHOOD OF HIS BEING FOUND AT THE RESIDENCE WITHIN A REASONABLE TIME AND THERE IS NO AGENT EMPOWERED TO ACCEPT SERVICE OF THE SUMMONS ON HIS B EHALF, ETC.. 21. HERE WE FIND THAT THE AO USED THE SUBSTITUTED S ERVICE AT THE VERY FIRST INSTANCE, WITHOUT PROVING THAT THE ASSESSEE HAD IGN ORED THE SERVICE THROUGH PRIMARY MODES OF SERVICE . THE AR IN HIS SUBMISSION BEFORE THE CIT(A) HAD RE LIED ON THE FOLLOWING DECISIONS :- 1. ANIL KUMAR GOYAL VS. ITO 116 TTJ 239 (LUC) AND BANA RSI SILK PALACE VS. CIT 220 (ALL). 2. FATHECHAND AGARWAL VS. CWT 97 ITR 701 (ORI). 3. RAMESHWAR SIRKAR VS. ITO 88 ITR 374 (CAL). 4. KUNJ BIHARI VS. ITO 139 ITR 73 (P & H). 5. A. K. KOCHANDI & ORS. VS. AGRL. ITO 110 ITR 406 (KE RALA). 6. CIT VS. SATYANARAYAN PODDAR 89 ITR 136 (ALL). 7. KIRAN MACHINES VS. ITO 295 ITR 4 (MAD). 8. JAGANNATH PRASAD VS. CIT 110 ITR 27 (ALL), ARUNALAL VS. ASST CIT 126 TTJ (AGRA) (TM). 9. KIRAN MACHINES VS ITO 203 CTR 574 (MAD). 22. AFTER CONSIDERING THE ARGUMENTS ON LEGAL GROUND S AND ALSO TAKING INTO CONSIDERATION THE REASONS FOR REOPENING , WHICH IN OUR OPINION HAD BEEN DEMOLISHED BY THE VERY DEPARTMENT/AUTHORITY, WHO HA D INITIATED THE SCAM PROCEEDINGS AND BECAUSE OF WHICH THE SCAM, AS ALLEG ED, WAS MADE TO HAVE GOT DEVELOPED, THE REASONS FOR REOPENING THE ASSESSMENT IN THE IMPUGNED YEARS CANNOT SURVIVE AND MUST ALSO GET DEMOLISHED. BESIDE S THE REASONS, EVEN THE SHRI RAMESH HARIDAS ASHAR ITA NOS.5974 & 5975/MUM/2009 PAGE 12 OF 13 ISSUE OF SERVICE OF NOTICE BY WAY OF SUBSTITUTED SE RVICE ALSO IS ANOTHER REASON FOR THE ENTIRE REASSESSMENT PROCEEDINGS GETTING VITIATE D. 23. IN THE RESULT, WE HOLD THAT THE INITIATION OF R EASSESSMENT PROCEEDINGS IN BOTH THE IMPUGNED YEAR, I.E. ASSESSMENT YEARS 1999- 2000 & 2001-02 ARE HELD TO BE VOID AND ALL SUBSEQUENT PROCEEDINGS BY THE REVENUE AUTH ORITY ARE THUS ANNULLED . 24. THE APPEALS FILED BY THE ASSESSEE FOR ASSESSMEN T YEARS 1999-2000 AND 2001-02 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 05/09/2012. SD/- (G.E. VEERABHADRAPPA) PRESIDENT SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATE: 05/09/2012 ROSHANI COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY/ ASST.REGISTRAR,ITAT MUMBAI.