Shanteelal Chenaramji Joshi, Nashik V. Income-tax Officer, Nashik

ITA 949/PUN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3035 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Principle of natural justice
• Section: 148

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO. 949/PUN/2017 / ASSESSMENT YEAR : 2010-11 SHANTEELAL CHENARAMJI JOSHI, (PROP. M/S. JAYASHREE STEEL), 4, XLO POINT, NEAR JANKI WEIGH BRIDGE, AMBAD, NASHIK-422 010 PAN : ADCPJ2353A ....... / APPELLANT / V/S. THE INCOME TAX OFFICER, WARD- 1(3), NASHIK / RESPONDENT APPELLANT BY : SHRI SANKET JOSHI RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 17.05.2018 / DATE OF PRONOUNCEMENT : 25.05.2018 / ORDER PER D. KARUNAKARA RAO, AM THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A)-1, NASHIK DATED 21.02.2017 FOR THE A.Y. 2010-11. 2. ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND AS PER LAW, THE COMMISSIONER OF INCOME TAX (APPEALS)-1, NASHIK, IS N OT JUSTIFIED IN CONFIRMING VALIDITY OF NOTICE ISSUED U/S.148 PARTICULARLY WHEN AO HAS ISSUED THE SAID NOTICE ON THE BASIS OF INFORMATION RECEIVED FROM THIRD PARTY, WITHOUT APPLYING HIS MIND. 2 ITA NO.949/PUN/2017 SHANTEELAL C. JOSHI 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, N ASHIK, IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF PURCHASES OF RS. 26,58,213/-, PARTICULARLY WHEN THE AO HAS NOT ALLOWED THE APPELLANT THE CROSS- EXAMINATION OF THE WITNESS OF THE REVENUE I.E. PARTIES FROM WHOM THE PURCHASES WERE MADE AS WELL AS THE COMPETENT SALES TAX AUTHORITY ON THE BASIS OF WHOSE INFORMATION THE NOTICE U/S. 148 OF THE ACT WAS ISSUED BY THE AO. 3. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE DISALLOWANCE MADE BY THE COMMISSIONER OF IN COME TAX (APPEALS)-1, NASHIK OF THE PURCHASES MADE FROM SOME OF THE PARTIES OF RS.26,58,213/- BY TREATING THE SAME AS FICTITIOUS P ARTICULARLY WHEN THE APPELLANT HAS FURNISHED THE BASIC EVIDENCES IN SUPP ORT OF THE SAID PURCHASES. 4. THE APPELLANT CRAVES FOR ADDITION TO, DELETION, ALTERATION, MODIFICATION, CHANGE ANY OF THE GROUNDS. 3. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT THE ASSESSE E IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AN D TRADING STEEL. ASSESSEE FILED THE ORIGINAL RETURN OF INCOME ON 09.08.20 10 DECLARING TOTAL INCOME AT RS.4,50,580/-. ON THE BASIS OF INFO RMATION RECEIVED FROM SALES TAX DEPARTMENT, AO NOTICED THAT THE ASSESSEE INDULGED IN MAKING PURCHASES FROM COUPLE OF HAWALA DEALERS VIZ. (1) RAHUL STEELS; AND (2) ASIAN STEEL AGGREGATING TO RS.26,58,213/ -. AT THE END OF RE-ASSESSMENT PROCEEDINGS U/S.143(3) R.W.S. 147 OF T HE ACT, THE AO MADE ADDITION OF RS.26,58,213/- ON ACCOUNT OF THE SAID B OGUS PURCHASES. AGGRIEVED WITH THE ORDER OF AO, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) CHALLENGING THE VALIDITY OF NOTICE ISSUED U/S .148 OF THE ACT AS WELL AS THE ADDITION ON ACCOUNT OF BOGUS PURCHAS ES AMOUNTING TO RS.26,58,213/-. 4. DURING THE FIRST APPELLATE PROCEEDINGS, WITH REGARD TO THE FIRST ISSUE I.E. VALIDITY OF NOTICE ISSUING U/S.148 OF THE ACT, CIT(A) N OTED THAT AS THE ASSESSEE FAILED TO FURNISH FULL DETAILS IN RESPONSE TO THE NOTICE U/S.148 OF THE ACT, THE AO FORMED REASONS TO BELIEVE THAT THE INCOME 3 ITA NO.949/PUN/2017 SHANTEELAL C. JOSHI HAS ESCAPED ASSESSMENT AND ACCORDINGLY, ASSESSMENT WA S REOPENED BY ISSUING NOTICE U/S.148 OF THE ACT. THE CIT(A) ALSO WAS OF TH E VIEW THAT WHILE RECORDING THE REASONS FOR REOPENING, AO FOLLOWED DUE P ROCEDURE OF LAW AND ASCERTAINED THE FACT BY LEGAL EVIDENCE AND THEREFO RE, REASONS RECORDED WERE NOT VAGUE. THUS, RELYING ON THE JUDGMEN T OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STO CK BROKERS PVT. LTD., 291 ITR 500, JUDGMENT OF DELHI HIGH COURT IN THE CASE OF UNITED ELECTRICAL CO. PVT. LTD. VS. CIT 258 ITR 137 APART FR OM OTHERS, CIT(A) UPHELD THE VIEW OF AO REGARDING INITIATION OF PROCEEDING S U/S. 147 OF THE ACT. CONTENTS OF PARA 4 ALONG WITH ITS SUB-P ARAS OF THE CIT(A)S ORDER ARE RELEVANT IN THIS REGARD. 5. WITH REGARD TO MERITS OF THE ADDITION OF RS.26,58,213/-, CIT(A) CONFIRMED THE SAME. IN THE PROCESS, CIT(A) OBSERVED THAT NEITHER AT THE TIME OF ASSESSMENT PROCEEDINGS NOR AT THE TIME OF APPELLA TE PROCEEDINGS, NEITHER THE IMPUGNED SELLERS/PARTIES WERE PRO DUCED NOR FILED SUBMISSIONS EVIDENCING THE CLAIM. THE ASSESSEE ALSO NOT ENCLOSED THE QUANTITATIVE DETAILS, PURCHASE TO SALE RECONCILIATION WIT H THE HELP OF STOCK REGISTER. TRANSPORTATION OF GOODS WERE NOT EVIDENC ED. IN VIEW OF THE FACT THAT ASSESSEE FAILED TO PRODUCE ANY DOCUMENTAR Y EVIDENCE IN THE SHAPE OF TRANSPORT RECEIPT WAREHOUSE RECEIPTS, STOC K OF GOODS, MATCHING PURCHASES TO SALES TO SUPPORT HIS PURCHASES, C IT(A) CONFIRMED THE ADDITION. PARA 5.1 AND 5.2 OF THE APPELLATE ORD ER ARE RELEVANT IN THIS REGARD. 6. AGGRIEVED WITH THE ORDER OF CIT(A), ASSESSEE FILED APPEAL BEFORE ME RAISING THE AFOREMENTIONED GROUNDS EXTRACTED ABOVE. 4 ITA NO.949/PUN/2017 SHANTEELAL C. JOSHI 7. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT CIT(A) HAS ERRED IN CONFIRMING VALIDITY OF NOTICE ISSUED U/S. 148 PA RTICULARLY WHEN AO ISSUED THE SAID NOTICE MERELY ON THE BASIS OF IN FORMATION RECEIVED FROM THIRD PARTY AND WITHOUT APPLYING HIS MIND ON THE ISSUE OF CONCEALMENT OF INCOME. LD. COUNSEL FURTHER SUBMITTED THAT W HILE CONFIRMING THE DISALLOWANCE OF PURCHASES OF RS.26,58,213/-, TH E AO DID NOT ALLOW THE ASSESSEE THE CROSS EXAMINATION OF THE WITNE SS OF THE REVENUE I.E. PARTIES FROM WHOM PURCHASES WERE MADE AS WE LL AS THE COMPETENT SALES TAX AUTHORITY, THE SOURCE OF THE INFORMAT ION FOR THE ISSUANCE OF THE NOTICE U/S.148 OF THE ACT. REGARDING THE M ERITS OF ADDITION, LD. COUNSEL RELIED ON VARIOUS DECISIONS OF PUNE BENC H OF THE TRIBUNAL. 8. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RELIED HEAVILY ON THE ORDERS OF AO/ CIT(A). 9. ON HEARING BOTH THE SIDES AND ON PERUSAL OF ORDERS OF AUTHORITIES BELOW, I AM OF THE VIEW THAT AO AS WELL AS THE CIT(A) HAVE MADE THE AFORESAID ADDITION OF RS.26,58,213/- AT THE BACK OF THE ASSE SSEE WITHOUT PROVIDING COPIES OF STATEMENT/AFFIDAVITS OF THE PARTIE S AND WITHOUT PROVIDING THE BENEFIT OF CROSS EXAMINATION OF THE PA RTIES TO THE ASSESSEE. THE APPLICATION OF THE ASSESSEE ADDRESSED T O THE CIT(A)-I, DATED 16-12-2016, EVIDENCES THE FACT OF SEEKING CROSS EX AMINATION AND COPIES OF STATEMENTS/AFFIDAVITS OF THE PARTIES. FOR THE SAK E OF COMPLETENESS OF THIS ORDER I PROCEED TO EXTRACT THE SU BMISSIONS MADE BY THE ASSESSEE HERE AS UNDER (PARA 3) : 3. AS STATED ABOVE, IN OUR OPINION, THE PROCEEDING S U/S.148 OF THE ACT ARE INITIATED ON THE BASIS OF COPIES OF STATEME NTS AS WELL AS AFFIDAVITS OF THE ABOVE REFERRED PARTIES RECEIVED FROM SALES-T AX DEPARTMENT. THEREFORE, IN SUCH CIRCUMSTANCES, THE SAID PARTIES ARE IN FACT WITNESSES 5 ITA NO.949/PUN/2017 SHANTEELAL C. JOSHI OF THE REVENUE. THE APPELLANT DOES NOT HAVE THE CO PIES OF THE STATEMENTS/AFFIDAVITS OF THE HAWALA DEALERS WHICH T HE A.O. HAS RELIED UPON FOR MAKING THE ASSESSMENT OF THE YEAR UNDER AP PEAL. THEREFORE, WE KINDLY REQUEST YOUR HONOUR TO DIRECT THE AO TO G RANT US THE COPIES OF THE SAID STATEMENTS AND AFFIDAVITS. WS A LSO KINDLY REQUEST YOUR HONOUR TO DIRECT THE AO TO ALLOW US TH E CROSS EXAMINATION OF THE SAID SO CALLED SUSPICIOUS DEALER S AND ALSO COMPETENT SALES TAX AUTHORITY WHO HAS FURNISHED THE DETAILS OF SUSPICIOUS DEALERS TO THE INCOME TAX DEPARTMENT. IN THE SIMILAR CASE IT IS ACCEPTED THAT THE SUSPICIOUS DEALERS ON THE BASIS OF WHOSE STATEMENTS AND AFFIDAVITS THE IMPUGNED PROCEEDINGS ARE INITIATED, WERE ABSCONDING. THEREFORE, WE REQUEST YOUR HONOUR TO D IRECT AO TO PRODUCE THE IMPUGNED PARTIES. THE ABOVE SUBMISSIONS OF THE ASSESSEE POSTULATE THAT TH E REVENUE AUTHORITIES HAVE NOT FOLLOWED DUE PROCEDURE BEFORE MAKING RE- ASSESSMENT U/S.147 OF THE ACT AND THEREFORE, VIOLATED THE PRINCIPLES OF NATURAL JUSTICE. THEREFORE, ON THIS LEGAL ISSUE ALONE AND WIT HOUT CONSIDERING THE OTHER ARGUMENTS OF THE ASSESSEE, THE AS SESSMENT PROCEEDINGS U/S.148 OF THE ACT HAS TO BE HELD AS BAD IN LAW AND VOID AB-INITIO BY VIRTUE OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE - CIVIL APPEAL NO. 4228 /2016 DATED 02.09.2015. COMING TO THE MERITS ALSO, THE ASSESSEE HAS PRODUCED CO PIES OF BILLS, TRANSPORT RECEIPTS, DELIVERY CHALLANS, BANK STATEMENTS, ETC. ESTABLISHING THE TRAIL OF GOODS. FURTHER, THE BOOKS OF ACC OUNT HAVE ALSO NOT BEEN REJECTED U/S.145(3) OF THE ACT. THUS, THE ADJU DICATION OF THE MERIT RELATED GROUNDS BECOMES AN ACADEMIC EXERCISE AS I HAVE ALREADY GRANTED RELIEF ON LEGAL ISSUE. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW THAT T HE ASSESSMENT PROCEEDINGS INITIATED U/S.148 ARE HELD AS INVA LID AND UNSUSTAINABLE. THUS, THE LEGAL GROUNDS RAISED BY THE ASS ESSEE ARE ALLOWED, IN PRINCIPLE. CONSEQUENTLY, THE MERIT RELATED GROU NDS ARE DISMISSED AS ACADEMIC. 6 ITA NO.949/PUN/2017 SHANTEELAL C. JOSHI 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 25 TH DAY OF MAY, 2018. SD/- ( . /D. KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; / DATED : 25 TH MAY, 2018. SATISH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-1, NASHIK. 4. THE CIT-1, NASHIK 5. , , - , / DR, ITAT, SMC BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // /SR. PRIVATE SECRETARY , / ITAT, PUNE.