PRABHU DAYAL AGRAWAL V. COMMISSIONER OF INCOME TAX And A

WPC/5402/2004

AI Insights

The case involves Prabhu Dayal Agrawal, the proprietor of Raj Trading Company, who challenged the revised assessment orders for the assessment years 1991-92 and 1992-93 issued by the Income Tax Officer and the subsequent appellate order by the Commissioner of Income Tax. The assessments were primarily based on the purchase of bank drafts by cash, which were alleged to be unexplained income. The petitioner argued that the reassessments were made without proper inquiry and in violation of the appellate authority's directions. The court found that the reassessments were indeed based on presumptions and surmises without adequate verification, leading to the quashing of the orders and a remand for a fresh assessment.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 748538 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 28-06-2016
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: DEEPAK ROSHAN
• Assessee Lawyers: SUMEET GADODIA; RANJEET KUSHWAHA; RITESH KUMAR GUPTA
• Keywords: Fresh assessment order; Income tax assessment; Bank Drafts; Presumption and Surmises; Appellate Authority Guidance
• Section: 264

Judgement Text

" IN THE HIGH COURT OF JHARKHAND AT RANCHI ­­­­­ W .P .(T)No.5402 of 2004 ­­­­ Prabhu Dayal Agrawal, S/o late Banshidhar Agrawal, proprietor Raj Trading Company, Parsudih,P .O. Parsudih, P .S.Sundarnagar, Jamshedpur, r/o Ram Tekri Road, Jugslai, P .O.P .S.Jugsalai, Jamshedpur, District­East Singhbhum. …Petitioner Versus 1. The Commissioner of Income Tax, Jamshedpur, 47 Circuit House Area, Jamshedpur, P .O.P .S. Jamshedpur, District­East Singhbhum. 2. Income Tax Officer, Ward­2(I), Bagmati Road, Road No.2, Bistupur, P .O. P .S. Bistupur, Jamshedpur, District­ Singhbhum East. …...Respondents ­­­­­­­­­ CORAM: HON'BLE MR. JUSTICE D.N.PATEL HON'BLE MR. JUSTICE AMITAV K. GUPTA ­­­­­­­­­ For the Petitioner : M/s. Sumeet Gadodia, Ranjeet Kushwaha,Ritesh Kumar Gupta, Advocates. For the Respondents : Mr. Deepak Roshan, Advocate. ­­­­­­­­­ 09/Dated: 28 th June, 2016 Per D.N. Patel, J.: 1. Following questions of law have been raised in this writ petition:­ (i ) Whether the revised assessment order for the assessment year 1992­93, vide Annexure­6, is wholly illegal and without any basis? (ii) Whether the order of assessment, vide Annexure­6, has been passed by the Income Tax Officer only on surmises/conjectures without making any inquiry as per the specific directions given by the appellate authority while remanding the case for assessment de novo? (iii) Whether the Income Tax Officer was bound to get the details of the alleged purchases of Bank Drafts from A.D.I.T(Inv.), Jamshedpur and he was also further bound to proceed in accordance with the directions given by the appellate authority? (iv) Whether the assessment order for the assessment year 1992­93(Annexure­6) as well as the order passed by the Commissioner of Income Tax, Jamshedpur under Section 264 of the Act(Annexure­7) are wholly illegal and contrary to the law settled by the Apex Court and/or own High Court? 2. (v) Whether the Income Tax Officer had any competence and/or jurisdiction to ignore and/or overlook the directions given by the appellate authority? (vi) Whether under the facts and circumstances of the case the impugned orders as contained in Annexures­6 and 7 are liable to be quashed by the Hon'ble High Court? 2. Having heard learned counsel for both sides and looking to the facts and circumstances of the case, it appears that for the assessment year 1991­92 , the Assessing Officer, while finalising the assessment vide order dated 30.03.1998, has, in fact, made an addition of about Rs.6,20,000/­, mainly on the basis that Bank Drafts approximately for Rs.77,00,000/­ were purchased in cash. Against this order the appeal was preferred before the Commissioner of Income Tax, who after quashing and setting aside the assessment order, remanded the matter for fresh assessment, with certain guidelines with regard to verification of bank entries etc. The appellate order is dated 05.01.1999 (Annexure­2 to the memo of this writ petition). Thereafter, fresh assessment was passed on 27.03.2001 and now there is an addition of only Rs.34,100/­ which has been accepted by the assessee. 3. So far as the assessment for the year 1992­93, which was made on 30.03.1998, is concerned, an amount of Rs.77,500/­ has been made in addition for concealing the income. Here also there was a reference of purchase of bank drafts by cash. For this assessment year also, appeal was preferred by this petitioner (assessee) before the Commissioner of Income Tax, which was allowed vide order dated 07.12.2000 (Annexure­5 to the memo of this writ petition) and the assessment order for the year 1992­93 was quashed and set aside. The guidance given in the appellate order dated 05.01.1999 for the assessment year 1991­92 was adopted by the Assessing Officer for the assessment year 1992­93 also. 4. It is submitted by the learned counsel for the petitioner that order for fresh assessment was passed on 27.03.2002 (Annexure­6 to the memo of this writ petition) for the assessment year 1992­93, without giving any opportunity of being 3. heard to the petitioner and even without verifying about the purchase of bank drafts etc. and hence, this order of re­assessment is in violation of the direction and guidance given by the appellate authority vide order dated 5.1.1999 (Annexure 2 to the memo of petition). It is submitted by the learned counsel for the petitioner that for the assessment year 1991­92 when the matter was remanded by the appellate authority and when re­assessment order was passed, the purchase of bank drafts by cash was not proved, but, for this assessment year 1992­93, the Assessing Officer has ignored the guidance given by the appellate authority and hence re­assessment order was again challenged before the Commissioner of Income Tax. However, the Commissioner of Income Tax rejected the appeal, preferred by this petitioner vide order dated 23.03.2004 (Annexure­7 to the memo of this writ petition), which is under challenge in this writ petition. 5. Counsel appearing for the petitioner has submitted that the whole assessment is based upon presumption, since the re­assessment order dated 27.03.2002 was made without giving any opportunity of being heard to the petitioner and even without following the guidance given by the appellate authority vide order dated 07.12.2000 (Annexure­5 to the memo of this writ petition). No verification was ever made from the Bank, as was done for the earlier year i.e. assessment year 1991­92, where after remand the purchase of the bank drafts was not proved and hence addition was omitted. However, for the assessment year 1992­93, similar exercise was not carried out and this aspect of the matter has not been appreciated by the Commissioner of Income Tax, while dismissing the appeal preferred by this petitioner, vide order dated 23.03.2004 (Annexure­7 to the memo of the petition) and hence this is a gross illegality in the assessment order, passed for the year 1992­93. The assessment is based only upon the presumption and surmises, as there is no proof of purchase of bank drafts for cash. On general information, no assessment can be made, but, the Income Tax Officer has ignored or over­looked the direction given by the appellate authority and, as such, the re­assessment order dated 27.03.2002 (Annexure­6 to the memo of petition) and the 4. order passed by the Commissioner of Income Tax dated 23.03.2004 (Annexure­7 to the memo of petition) be quashed and set aside and the matter may be remanded for fresh assessment for the assessment year 1992­93 by the Income Tax Officer. 6. Learned counsel appearing for the respondents has submitted that no error has been committed by the assessing officer while passing the order dated 27.03.2002. The details of purchase of the bank drafts for cash have been obtained from the Additional Director of Income Tax (Investigation), Jamshedpur and only on the basis of the said information, assessment order has been passed on 27.03.2002. It is further submitted that adequate opportunity of being heard was also given to this petitioner and these aspects of the matter have also been appreciated by the Commissioner of Income Tax, while rejecting the appeal preferred by this petitioner under Section 264 of the Income Tax Act vide order dated 23.03.2004 (Annexure­7 to the memo of petition). It is also submitted by the learned counsel for the respondents that for a huge amount, the bank drafts were purchased for cash, which was unexplained income, for which addition was made by the Assessing Officer. Hence, this writ petition may not be entertained by this Court. 7. Having heard learned counsels for both the sides and looking to the facts and circumstances of the case we hereby quash and set aside the order passed by the Income Tax Officer dated 27.03.2002 (Annexure­6 to the memo of petition) as well as the order passed by the Commissioner of Income Tax dated 23.03.2004 (Annexure­7 to the memo of petition), mainly for the following facts and reasons:­ (i) For the assessment year 1991­92, the Income Tax Officer has finalized the assessment vide order dated 30th March, 1998 and addition of Rs. 6,20,000/­ was made because of bank drafts purchased by this petitioner worth Rs. 77,00,000/­ approximately. This order for the assessment year 1991­92 was challenged before the Commissioner of Income Tax and the appellate authority while setting aside the assessment order for the year 1991­92, vide order dated 5. 5th January, 1999 (Annexure­2 to the memo of petition) made the following observations, paragraph no. 8 whereof, reads as under: “(8) In view of the above, the matter regarding assessment of business income at Rs.1,20,000/­ and addition under Section 60 of Rs.5 lakhs in the purchase of the concerned drafts, is restored to the file of the A.O., for re­ determination, under the following specific directions:­ (i) The A.O. shall first obtain the specific details from the ADIT(Inv.), Jamshedpur. (ii) The A.O. Shall then find out whether prima facie it appears that the bank drafts were purchased by the appellant; (iii) If yes, then the A.O. shall obtain from the concerned Bank the application for purchase of the bank drafts to ascertain the name and address of the persons who actually made the application to banks for purchase of the drafts; (iv) The A.O. shall also obtain the details of the banks in which the concerned drafts have been encashed. (v) After ascertaining the names and addresses of the persons in whose favour the bank drafts have been encashed, the A.O. shall require from the concerned parties to find out the details of persons and the details of goods purchased in consideration of the concerned bank drafts. (vi) After ascertaining the real person who actually purchase the concerned bank drafts, the matter regarding the issue of purchase of bank drafts and the resultant business income shall be decided by the A.O. under a speaking order after allowing full opportunity to the appellant of being heard.” (Emphasis supplied) (ii) In view of the aforesaid appellate order, fresh assessment order was passed by the Income T ax Officer & 6. vide order dated 27thMarch,2001 (Annexure-3 to the memo of this petition), a fresh assessment was made and the income of the assessee for the said assessment year i.e. 1991-92 was computed and thereby addition of only Rs.34,100/- was made. This has been accepted by the assessee as well as by the respondent-department, especially after the remand order was passed. Similarly, for the assessment year 1992-93, the Income T ax Officer has made assessment on 30th March, 1998 on the basis of purchase of the bank drafts. T wo types of additions were made for concealed income and determination was also made. This order was challenged in the appeal before the appellate authority and the appellate authority set aside the order of assessment for the assessment year 1992-93 also. (iii) Vide order dated 7th December, 2000 (Annexure-5 to the memo of this writ petition), while remanding the matter, the appellate authority has observed that the guidance given for the assessment year 1991-92 in the appellate order (Annexure-2 to the memo of petition), will be exercised by the Income T ax Officer for the assessment year 1992-93. Thus, verification from the concerned banks about the purchase of the bank drafts ought to have been done by the Income T ax Officer even for the assessment year 1992- 93. (iv) It appears that after remand (Assessment year 1992-93), the Income T ax Officer, without appreciating the guidance given by the appellate authority, made a fresh assessment vide order dated 27th March, 2002 (Annexure- 6 to the memo of this petition) and the addition which was made originally vide order dated 30th March, 1998 was enhanced, after the remand order. It appears from this order that no verification was made by the Income T ax Officer about the purchase of the bank drafts from the concerned banks. The whole assessment was made on the basis of presumption and surmises. The guidance 7. given by the appellate authority vide order dated 7th December, 2000(Annexure-5 to the memo of petition) to be read with order dated 5th January, 1999(Annexure-2 to the memo of this petition) passed by the appellate authority for the assessment year 1991-92 have not been followed by the Income T ax Officer, while passing the order dated 27th March, 2002. This aspect of the matter has also not been properly appreciated by the Commissioner of Income T ax, while rejecting the appeal preferred by this petitioner under section 264 of the Income T ax Act and as such, the order passed by the Commissioner of Income T ax dated 23.03.2004 (Annexure-7 to the memo of this petition) also deserves to be quashed and set aside. (v) Thus, it appears that both the authorities below namely, the Income T ax Officer and Commissioner of Income T ax while passing the orders dated 27th March, 2002 (Annexure 6 to the memo of petition) and the order dated 23rd March, 2004 (Annexure 7 to the memo of petition) respectively, have failed to appreciate that the guidance given by the appellate authority vide order dated 7th December, 2000 (Annexure-5 to the memo of this petition) have not been complied with and without any verification about the bank drafts from the concerned banks, only on the basis of presumptions and surmises, the assessment has been made for the assessment year 1992-93. It ought to have been kept in mind by the Assessing Officer that for the assessment year 1992-93 also, the same directions were given by the appellate authority, as was given vide order dated 5th January, 1999 for the assessment year 1991-92. Here, for the assessment year 1992-93, while fresh assessment was made after the remand order, it has been held by the Assessing Officer that the assessee is unable to explain the turnover, inclusive of cash purchase and bank drafts, even without verifying about the bank drafts from the concerned banks, for the assessment year 1992-93. 8. 8. As a cumulative effect of the aforesaid facts and reasons, we hereby quash and set aside the order passed by the Income T ax Officer dated 27th March, 2002 (Annexure-6 to the memo of petition) as well as the appellate order passed by the Commissioner of Income T ax dated 23rd March, 2004 (Annexure-7 to the memo of petition) and we hereby remand the matter to the Income T ax officer for fresh assessment, keeping in mind the following specific directions/guidelines:- “(i) The A.O. shall first obtain the specific details from the ADIT(Inv.), Jamshedpur. (ii) The A.O. Shall then find out whether prima facie it appears that the bank drafts were purchased by the appellant; (iii) If yes, then the A.O. shall obtain from the concerned Bank the application for purchase of the bank drafts to ascertain the name and address of the persons who actually made the application to banks for purchase of the drafts; (iv) The A.O. shall also obtain the details of the banks in which the concerned drafts have been encashed. (v) After ascertaining the names and addresses of the persons in whose favour the bank drafts have been encashed, the A.O. shall require from the concerned parties to find out the details of persons and the details of goods purchased in consideration of the concerned bank drafts. (vi) After ascertaining the real person who actually purchase the concerned bank drafts, the matter regarding the issue of purchase of bank drafts and the resultant business income shall be decided by the A.O. under a speaking order after allowing full opportunity to the appellant of being heard.” 9. With the aforesaid observations, this writ petition is hereby allowed and disposed of, as the assessment made by the Assessing Officer vide order 9. dated 27th March, 2002 (Annexure-6 to the memo of petition) as well as order passed by Commissioner of Income T ax, Jamshedpur under Section 264 of the Income T ax Act (Annexure-7 to the memo of petition) are not in accordance with the Income T ax Act and are based upon presumptions and surmises. (D.N. Patel, J.) (Amitav K. Gupta, J.) Biswas/Tarun "