M/s. Patco Precision Components Pvt. Ltd., Nashik V. Assistant Commissioner of Income-tax,

ITA 697/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4218 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-08-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 13-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHEI
• Keywords: Reopening of assessment; Bogus purchase; Principle of natural justice; Additional evidence; Validity of assessment; Assessment record; Reassessment proceedings
• Section: 143(3); 147; 148; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO S. 696 & 697 /P U N/201 6 / ASSESSMENT YEAR S : 20 10 - 11 & 2011 - 12 M/S. PATCO PRECISION COMPONENTS PVT. LTD., A 25, MIDC, AMBAD, NASHIK 422010 PAN : AABCT3058K ....... / APPELLANT / V/S. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2, NASHIK / RESPONDENT ASSESSEE BY : SHRI SANKET JOSHI REVENUE BY : SHRI SANJEEV GHEI / DATE OF HEARING : 21 - 08 - 201 8 / DATE OF PRONOUNCEMENT : 31 - 10 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH ESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2, NASHIK FOR THE ASSESSMENT YEARS 20 10 - 11 AND 2011 - 12 , RESPECTIVELY. BOTH THE IMPUGNED ORDERS ARE DATED 28 - 01 - 2016. 2 ITA NO S.696 & 697/PUN/2016, A.YS. 2010 - 11 & 2011 - 12 SINCE, THE ISSUES INVOLVED IN BOTH T HE APPEALS ARE IDENTICAL AND ARE ARISING FROM SAME SET OF FACTS, BOTH THE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE BEING DISPOSED OF VIDE THIS COMMON ORDER. 2. SHRI SANKET JOSHI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE SUBMISSI ONS MADE BY THE ASSESSEE IN RESPECT OF ASSESSMENT YEAR 2010 - 11 WOULD EQUALLY APPLY TO THE ASSESSMENT YEAR 2011 - 12. THEREFORE, THE APPEAL OF ASSESSEE IN ITA NO. 696/PUN/2016 FOR ASSESSMENT YEAR 2010 - 11 BE TAKEN AS A LEAD CASE. 2.1 THE LD. AR SUBMITTED T HAT REASSESSMENT PROCEEDINGS WERE INITIATED IN ASSESSMENT YEAR 2010 - 11. THE ASSESSING OFFICER IN ORDER DATED 05 - 01 - 2015 PASSED U/S. 147 R.W.S. 143(3) HELD THAT THE ASSESSEE HAS INDULGED IN BOGUS PURCHASES TO THE TUNE OF RS.18,93,192/ - FROM THE HAWALA DEAL ER VITRAG TRADERS PRIVATE LIMITED. CONSEQUENTLY, THE ASSESSING OFFICER MADE ADDITION OF THE AFORESAID AMOUNT. AGGRIEVED AGAINST THE REOPENING OF ASSESSMENT AND THE ADDITION MADE ON ACCOUNT OF ALLEGED BOGUS PURCHASES , THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE FIRST APPELLATE AUTHORITY UPHELD THE REOPENING OF ASSESSMENT. HOWEVER, IN RESPECT OF ADDITION ON ACCOUNT OF BOGUS PURCHASES , THE ADDITION WAS RESTRICTED TO 10% OF THE ALLEGED H AWALA PURCHASES. THE LD. AR SUBMITT ED THAT NO ADDITION ON ACCOUNT OF H AWALA PURCHASE IS SUSTAINABLE AS THE REOPENING OF ASSESSMENT IS ITSELF BAD IN LAW. THE LD. AR CONTENDED THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTM ENT AND THE STATEMENT OF THIRD PARTIES. THE ASSESSEE WHILE FILING OBJECTIONS AGAINST THE REASONS RECORDED FOR REOPENING HA D ASKED FOR THE STATEMENT OF PARTIES ON THE BASIS OF WHICH ASSESSMENT HAS BEEN REOPENED. HOWEVER, NEITHER THE STATEMENT WAS 3 ITA NO S.696 & 697/PUN/2016, A.YS. 2010 - 11 & 2011 - 12 PROVIDED TO THE ASSESSEE NOR OPPORTUNITY TO CROSS - EXAMINE WAS ALLOWED. THE LD. AR FURNISHED A COPY OF LETTER DATED 08 - 01 - 2014 ADDRESS ED TO THE ASSESSING OFFICER FOR PROVING STATEMENT OF THE PARTIES. THE LD. AR SUBMITTED THAT IT IS A WELL SETTLED LAW THAT IN THE ABSENCE OF OPPORTUNITY TO CROSS - EXAMINE WHEN SPECIFICALLY REQUESTED THE ASSESSMENT ORDER IS NOT SUSTAINABLE. THE LD. AR RELIED ON THE DECISION OF TRIBUNAL IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. M/S. CHETAN ENTERPRISES IN ITA NO. 302/PUN/2 016 FOR ASSESSMENT YEAR 2009 - 10 DECIDED ON 05 - 05 - 2017 TO CONTEND THAT NO ADDITIONS ARE SUSTAINABLE WHERE COPIES OF STATEMENT OR ANY OTHER EVIDENCE IN RESPECT OF HAWALA PARTIES ARE NOT SUPPLIED TO THE ASSESSEE. 2.2 THE LD. AR FURTHER CONTENDED THAT THE A SSESSING OFFICER HAS NOT DISPOSED OF THE OBJECTIONS FILED BY THE ASSESSEE AGAINST THE REASONS RECORDED FOR REOPENING . THE ASSESSING OFFICER THUS, VIOLATED THE MANDATE OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. INCOME TAX OFFICER & ORS. REPORTED AS 259 ITR 19. 2.3 ON MERITS OF THE ADDITION THE LD. AR SUBMITTED THAT THE ASSESSEE HAD FURNISHED COMPLETE DETAILS OF PURCHASES, MODE OF PAYMENT AND THE CONFIRMATIONS. THE LD. AR POINTED THAT THE PAYMENTS AGAINST THE PURCHASE S WERE MADE BY ACCOUNT PAYEE CHEQUE TO THE SUPPLIERS . THE ASSESSEE HAS MAINTAINED STOCK REGISTER WITHIN INWARD AND OUTWARD RECORD. IT IS NOT THE CASE OF REVENUE THAT THE SAID AMOUNT HAS TRAVELLED BACK TO THE ASSESSEE NOR THE REVENUE HAS RAISED DOUBT OVER THE SALES MADE. UNDER SUCH CIRCUMSTANCES HOLDING PURCHASES AS DUBIOUS IS AGAINST THE FACTS ON RECORD. 4 ITA NO S.696 & 697/PUN/2016, A.YS. 2010 - 11 & 2011 - 12 3. ON THE OTHER HAND SHRI SANJEEV GHEI REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT SPECIFIC INFORMATION WAS RECEIVED FROM THE MAHARASHTRA SALES TAX DEPARTMENT ALONG WITH LIST OF SUSPICIOUS DEALERS ENGAGED IN PROVIDING BOOK ENTRY. THE LIST INCLUDED THE NAME OF SUSPICIOUS DEALER FROM WHEN THE ASSESSEE HAD ALLEGEDLY PURCHAS ED GOODS. THE ASSESSEE FAILED TO PRODUCE THE SUPPLIER BEFORE THE ASSESSING OFFICER. THE LD. DR SUBMITTED THAT SINCE THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM H AWALA OPERATOR THE ADDITION WAS MADE BY THE ASSESSING OFFICER. T HE COMMISSIONER OF INCOME TAX (APPEALS) WAS QUITE GENEROUS IN RESTRICTING THE ADDITION TO 10% OF THE PURCHASES MADE. 4. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . THE ASSESSEE IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THE GROUND S : I . CHALLENGING VALIDITY OF REOPENING OF ASSESSMENT U/S. 147; AND II . IN CONFIRMING THE ADDITION TO THE EXTENT OF 10% OF THE ALLEGED H AWALA PURCHASES I.E. RS.1,89,319/ - . A PERUSAL OF DOCUMENT S ON RECORD REVEAL THAT WHILE RAISING OBJECTIONS AGAINST THE REASONS RECORDED FOR REOPENING , THE ASSESSEE HAD SPECIFICALLY ASKED FOR PROVIDING STATEMENTS OF PARTIES ON THE BASIS OF WHICH BOGUS PURCHASES BY THE ASSESSEE ARE ALLEGED. THE ASSESSEE HAS PLACED ON RECORD COPY OF COMMUNICATION DATED 08 - 01 - 2014 DELIVERED IN THE OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX ON 21 - 01 - 2014. THE LD. AR HAS VEHEMENTLY ASSERTED THAT THE STATEMENTS WERE NEVER PROVIDED TO THE ASSESSEE. THE LD. DR HAS FAILED TO SHOW FROM THE ASSESSMENT RECORDS THAT THE STATEMENT WHICH FORMS THE BASIS FOR MAKING THE ADDITION WERE PROVIDED 5 ITA NO S.696 & 697/PUN/2016, A.YS. 2010 - 11 & 2011 - 12 TO THE ASSESSEE AT ANY STAGE. IT IS A WELL SETTLED LAW THAT PRINCIPLES OF NATURAL JU STICE HAVE TO BE ADHERED WHILE PASSING ANY ADVERSE ORDER AGAINST ANY SUBJECT. THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. CHETAN ENTERPRISES (SUPRA) HAS HELD THAT WHERE THE COPIES OF STATEMENTS WERE SOUGHT BY THE ASSESSEE AND THE SAME WERE NOT PROVIDED, NO ADDITION IS TO BE MADE IN THE HAN D S OF ASSESSEE IN RESPECT O F SUCH ALLEGED HAWALA PURCHASES. 5. THE ASSESSEE BY RAISING ADDITIONAL GROUND OF APPEAL HAS CHALLENGED THE VALIDITY OF ASSESSMENT PROCEEDIN GS ON THE GROUND THAT THE OBJECTIONS OF THE ASSESSEE AGAINST THE REASONS RECORDED FOR REOPENING WERE NEVER DISPOSE D OF BY THE ASSESSING OFFICER BEFORE PASSING THE ASSESSMENT ORDER. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS LEGAL IN NATURE AND NO FUR THER ADDITIONAL EVIDENCE IS REQUIRED TO BE ADDUCED, AS SUCH, THE SAME IS ADMITTED FOR ADJUDICATION. 6. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. INCOME TAX OFFICER & ORS. (SUPRA) HAS ENUMERATED THE STEPS TO BE FOLLOWED BEFORE PASSING THE ASSESSMENT ORDER IN CASE OF REOPENING OF ASSESSMENT . IT HAS BEEN HELD THAT WHEN A NOTICE U/S. 148 OF THE ACT IS ISSUED, THE PROPER COURSE OF ACTION FOR THE ASSESSEE IS TO FILE RETURN AND IF HE SO DES IRES SEEK REASONS FOR ISSUING NOTICE. THE ASSESSING OFFICER IS DUTY BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, THE ASSESSEE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. THE ASSESSING OFFICER IS UNDER OBLIGATION TO DISPOSE OF THE OBJECTIONS OF THE ASSESSEE BY PASSING A SPEAKING ORDER ON THE OBJECTIONS RAISED AGAINST REASONS RECORDED FOR REOPENING. 6 ITA NO S.696 & 697/PUN/2016, A.YS. 2010 - 11 & 2011 - 12 7. THE HONBLE BOMBAY HIGH COURT I N THE CASE OF KSS PETRON PRIVATE LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX IN INCOME TAX APPEAL NO. 224 OF 2014 DECIDED ON 03 - 10 - 2016 HAS HELD THAT WHERE OBJECTIONS OF THE ASSESSEE ARE NOT DISPOSED OF BY THE ASSESSING OFFICER BY PASSING A SPEAKING ORDE R, THE ASSESSMENT ORDER PASSED U/S. 147 R.W.S. 143(2) IS BAD IN LAW. IN THE PRESENT CASE, THE REVENUE HAS FAILED TO PLACE ON RECORD ANY EVIDENCE TO SHOW THAT THE OBJECTIONS OF THE ASSESSEE AGAINST REASONS RECORDED FOR REOPENING WERE DISPOSED OF BY THE ASS ESSING OFFICER . 8. WE ARE OF CONSIDERED VIEW THAT THE ASSESSING OFFICER HAS FAILED TO FOLLOW THE PRINCIPLES OF NATURAL JUSTICE AND THE LAW SETTLED BY THE HONBLE SUPREME COURT OF INDIA WHILE CONDUCTING REASSESSMENT PROCEEDINGS. THUS, WE HOLD THE ASSESS MENT PROCEEDINGS U/S. 147 TO BE BAD IN LAW. THE ASSESSMENT ORDER PASSED U/S. 147 R.W.S. 143(2) AND THE SUBSEQUENT PROCEEDINGS ARISING THERE FROM ARE HELD TO BE INVALID. ACCORDINGLY, THE GROUND NO. 4 AND THE ADDITIONAL GROUND OF APPEAL OF THE ASSESSEE ARE ALLOWED. 9. SINCE, WE HAVE HELD REASSESSMENT PROCEEDINGS TO BE BAD IN LAW , THE GROUND NO S. 1 TO 3 AND 5 OF THE APPEAL CHALLENGING THE ADDITIONS ON MERITS HAS BECOME ACADEMIC AND HENCE , ARE NOT DELIBERATED UPON. 10. THE GROUND NO. 6 OF THE APPEAL IS GENERAL IN NATURE, THUS, REQUIRES NO ADJUDICATION. 11. IN THE RESULT, THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF ASSESSEE IS ALLOWED. 7 ITA NO S.696 & 697/PUN/2016, A.YS. 2010 - 11 & 2011 - 12 ITA NO. 697/PUN/2016 (A.Y. 2011 - 12) 12. BOTH SIDES ARE UNANIMOUS IN STATING THAT THE ISSUE S RAISED IN THE APPEAL AND THE FACTS IN ASSESSMENT YEAR 201 1 - 12 ARE IDENTICAL TO ASSESSMENT YEAR 2010 - 11. SINCE, THE FACTS IN THE ASSESSMENT YEAR 201 1 - 12 ARE SIMILAR TO ASSESSMENT YEAR 20 10 - 11 , THE FINDINGS GIVEN BY US WHILE DECIDING THE APPEAL OF ASSESSE E IN ASSESSMENT YEAR 20 10 - 11 WOULD MUTATIS MUTANDIS APPLY TO ASSESSMENT YEAR 201 1 - 12. THE APPEAL OF ASSESSEE IS ALLOWED , ACCORDINGLY. 13. TO SUM UP, BOTH THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 31 ST DAY OF OCTOBER, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 31 ST OCTOBER, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 2, NASHIK 4. THE PR. C.I.T. - 2, NASHIK 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE