Income Tax Appellate Tribunal - Chandigarh
Fortune Metaliks Ltd., Ludhiana vs Dcit, Cc-I, Ludhiana on 12 January, 2021
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "ए" च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH "A" CHANDIGARH BEFORE: SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI R.L.NEGI, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 1090/CHD/2019 नधा रण वष / Assessment Year : 2011-12 Fortune Metaliks Limited, Versus The DCIT, Opp Circuit House, Central Circle-1, Ferozepur Road, Ludhiana.
Ludhiana.
थायी लेखा सं./PAN NO: AABCF3202D
अपीलाथ /Appellant यथ /Respondent
(Virtual Court)
नधा रती क ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राज व क ओर से/ Revenue by : Smt. Meenakshi Vohra, Addl.CIT सन ु वाई क तार$ख/Date of Hearing : 22.12.2020 उदघोषणा क तार$ख/Date of Pronouncement : 12.01.2021 आदे श/Order PER ANNAPURNA GUPTA, AC COUNTANT MEMBER:
Th e p r e s e nt a pp e a l ha s bee n p r e fe r re d b y t he a ss e ssee a ga i n st th e or de r d a te d 0 7 .0 6 .20 1 9 of th e C ommi ss io ne r of I n co me Ta x ( A p p e a ls )-5 , Lud h ia n a , (i n sh or t r e fe r re d to as C I T( A ), p a sse d u /s 25 0 ( 6) of th e I n co me Ta x Ac t, 19 6 1 ,( h e re i na f te r re fe r re d to as "A ct") pe rt a in i ng toa s se ssme nt ye ar ( A. Y) 20 1 1 -1 2.
2. Th e b r ie f fa c ts r e l a ti ng t o t he c ase a re th a t the a sse ssee co mpa n y i s e ng a ge d i n t he b usi n e ss of ma nu fa c tur i ng a nd ITA -1090/CHD/2019 A.Y. 2011-12 Page 2 of 9 tr a d i ng of TM T B a r s a n d o the r stee l i te ms . F or t he i mp ugn ed a ss e s sme n t ye a r, r e tur n of i n come w a s f il e d b y t he a sse ssee d e c la r i ng los s of Rs . 7 . 54 C r a s pe r nor ma l p r o vi si ons a nd i nc ome a mo un ti n g to Rs . 3 8. 4 3 la c s a s p e r Se c ti on 1 15 JB of th e Act . Th e a sse ssme nt u/s 1 4 3 (3 ) w a s c om pl e te d at the r e tu r ne d in co me . Th e r e a f te r , the ca s e of t he a sse ssee co mpa n y w a s r e ope ne d u/s 1 4 7 of th e Act a n d t he or i gi na l r e tu rned l oss of R s. 7. 5 4 C r w a s r e d u ce d to Rs. 5 .8 6 C r b y ad d in g b a ck a n i nco me of Rs . 1 . 6 7 C r . A ga i ns t th e or de r so pa s se d, the a ss e s see fi le d appeal to the ld . C I T( A) ch a l le ngi n g the a ss ump ti on of j ur i sd i cti on b y th e AO u/s 1 47 of th e A ct a nd a l so r a i si ng gr ou n d s on the me r i ts of th e ca s e . Th e l d . C I T( A ) d is mi sse d th e le ga l g r oun d r a i se d b y t he a s se s se e w h i le he p a r tl y a l l ow e d t he gr ou nd r a ise d on me r i ts.
3. Agg ri e ve d b y the sa me , t he a sse ssee h a s come in a pp e a l b e f ore u s r a i si ng b oth le ga l gr ou nd a n d a ls o on me r i ts. We sh a l l f i rs t b e de a l i ng w i th the l e ga l gr ou nd ra i se d b y the a ss e s see si nce it c ha l l e n ge s the v a li d it y of th e a s se s sme n t or d e r i tse lf . Th e s a id gr ou nd r e l a te s to g r oun d N o. 1 r a i se d b y th e a sse ssee a n d r e a d s a s un de r :
" 1 . T h at th e l d . C IT ( A ) h as e r r e d i n d i s m i s s i n g th e g r ou n d of p r o c e e d i n g s of r e - o p e n i n g th e c as e u / s 1 4 8 of th e In c o me T ax A c t, 1 9 6 1 .
ITA -1090/CHD/2019 A.Y. 2011-12 Page 3 of 9
4. Th e p r i ma r y a r g u me nt of the ass e s see ch a lle ngi n g the a ss ump ti on of j u r i sd ic ti on b y th e A O u /s 1 4 7 of the Act is on th e p re mi se t ha t t he re a son s r e cor d e d b y the AO f or a ssu mi ng j ur i sd i cti on to re ope n the ca se w e re b a d i n la w , be in g b a sed on i nc or re ct fa c ts w hi ch sh ow e d n o a p p l ic a ti on of min d b y th e AO on th e in for ma t ion i n h is p os se s si on a n d a l so tha t the sa t is fa c ti on for e sc a pe me n t of i nco me w a s n ot hi s ow n b ut b or r ow e d . O u r a tte n ti on w a s dr aw n to the re a son s r e c or de d, co py of wh i ch w as p l a ce d be fore us on Pa pe r B ook p age N o. 35 to 3 7 , a s un de r :
REASONS FOR ISSUE OF NOTICE U/S 148 OF THE ACT IN THE CASE OF M/S FORTUNE METALIKS LTP.FOR THE.A.Y.2011-12.
The assessee is a limited company and engaged in business of rolling mills. The assessee has filed return of income through e-filling 30.09.2011 for A.Y.2011-12 declaring income of Rs. Nil (Rs. 38,43,004/- u/s 115JB)/-. Further return of income assessed u/s 115JB at Rs. 38,43,004/- ort 20.03.2014.
2. This office is in the possession of the information received from ADIT(Inv.), Unit-I, Central Revenue Building, Civil Lines, Riapur (C.G) on 12.03.2018 in the case of M/s Fortune Metaliks Ltd.
3. In his report ADIT(Inv.), Unit-I, Riapur, has made followingobservations:-
The Commercial Tax Department, Chhattisgarh has detected and identified the concerns in whose name bogus sale bills have been isssued. Such bogus sale bills were detected with the help of specialized software of the Commercial Tax Department. After detection of such bogus bills, they were confirmed through enquiry and spot verification by the Commercial Tax Department. The findings on such bogus billing have been shared to the various intelligence and investigation agencies in the meeting of RE1C, Raipur on various dates. As per these findings, the beneficiaries have been taken bogus purchase bills from bogus dealers. Thus, the beneficiaries have suppressed their total income by way of debiting bogus purchases. Accordingly, action u/s 14? of the Income Tax Act, 1961 has to be taken in case of such beneficiaries for F.Y. 2010-11 which is going to be time barred by limitation on 31s' March, 201S. Details of such beneficiaries and corresponding bogus dealers, amount of bogus bills etc. pertaining to F.Y. 2010-11 are being forwarded for taking action ' u/s 147 of the I. T. Act 1961 as the PAN and jurisdiction lies with you.
ITA -1090/CHD/2019 A.Y. 2011-12 Page 4 of 9
4. This office has checked the entire details of the assessee on 360 degree profile on ITBA portal like Bank details, Address of assessee, ITR's details, Processing details, Tax details etc.
5. From the above information it was seen that assessee is involved in taking bogus purchase bill from bogus dealers namely as M/s Shital Trading Company for Rs. 1,31,78,094and from M/s Raj Dealers for Rs. 35,96,520/- in the A.Y 2011-12 and thus the assessee has suppressed its profit by way of debiting bogus purchases in the Trading and Profit & Loss account.
6. In view of above facts of the case, I have reason to believe that the income chargeable to tax, as discussed in para no. 05 above i.e. .Rs. 1,67,74,614/-, has escaped assessment (and also any other income chargeable to tax which has escaped assessment and which comes to notice subsequently in the course of the proceedings u/s 147 of Income Tax Act.
7. In this case a return of income was filed for the year under consideration and regular assessment u/s 143(3)/147 was made 20.03.2014. Since, 4 years from the end of the relevant year has expired in this case, the requirement to initiate proceeding u/s 147 of the act are reason to believe that income for the year under consideration has escaped assessment because of failure .on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration. It is pertinent to mention here that reasons to believe that income has escaped assessment for the year under consideration have been recorded above. I have carefully considered the assessment records containing the submission made by the assessee in response to various notices issued during the assessment /reassessment proceedings and have noted that the assessee has not fully and truly disclosed the following material facts necessary for his assessment for the year under consideration:
• Unexlpained expenditure.
It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening u/s 147 of the Act.
It is true that the assessee has filed a copy of annual report and audited P& L a/c and balance sheet alongwith return of income where various information/material were disclosed. However, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that even though the assessee has produced books of account, annual report, audited P& L a/c and balance' sheet or other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered with due diligence, accordingly attracting provisions of explanation 1 of section 147 of the Act.
It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the coure of regular assessment /reassessment. This fact is corroborated from the contents of notices issued by the AO u/s 143(2)/142(1) and order sheet recorded during the 143(3)/147 proceedings. It is important to highlighted here that material facts relevant for the assessment on the issue(s) under consideration were not filed during the course of assessment proceedings and the same may be embeded in annual report, audited P&L a/c, ITA -1090/CHD/2019 A.Y. 2011-12 Page 5 of 9 balance sheet and books of account in such a manner that it would require due diligence by the AO to extract these information. For aforesaid reasons, it is not a case of change of opinion by the AO.
In this case, more than four hears have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Principal Commissioner of Income Tax as per the provisions of Section 151 of the Act."
5. Re fe r r in g to the a b ove , l d. c oun se l f or the a sse ssee p oi nte d ou t tha t th e AO ha d r e c or de d sat is fa c ti on of e s ca pe me nt of i ncome on the b a sis of in for ma t ion wh i ch ha d co me t o h i s po ss e ssi on f r om the C o mme r ci a l Ta x De par t me nt, C h ha ti s ga r h, tha t bog us p u r cha s e b i ll s h a d be e n t a ke n b y the a ss e s see fr om tw o p a r ti e s . D r a w in g ou r a tte nti on to p a r a 5 of th e re a so ns re c or d e d , l d. coun se l f or t he a sse s see co nte nde d th a t wh i le n oti ng th e fi gu re s of b og us p ur ch a se s, t he AO ha d r e c or de d w r ong fi gu r e s. Th a t t he a ctu a l p ur ch ase s f r om one su ch a l le ge d p a r ty M /s Sh e e t a l Tr a d i ng C omp a ny , n ote d b y the AO a t Rs. 1 ,3 1 ,78 , 0 94 /- i n p a ra 5, w a s Rs 6 7 ,18 , 2 44 /- w h il e th a t of the a n oth e r M /s R a j D e a l er s, r e c or de d a t Rs 35 , 9 6, 5 20 /- w a s Rs 7 3, 6 2 ,9 4 6 /-.F ur th e r th e na me of one of t he pa r tie s ha d a l so b ee n n ote d w r ong ly a s M / s Ra j D e a l e r s i n pl a ce of i ts a ct ua l n a me Ra j Tr a d e r s. H e f ur the r c onte n de d th at th e A O had n ote d th a t the as se s se e ha d de b ite d the se a mou nt s to P r of it & Los s Ac cou nt w h ic h a ga i n w a s a n i nco rr e ct f a ct s in ce t he se b il l s r e l a te d to p ur c ha s e of f i xed a ss e ts a n d h a d n ot b ee n d e b i te d to the Pr of i t & Loss Acc oun t. The l d . c oun se l for the a ss e s see c on te nd e d , th a t the sa ti sf a ct ion b ei ng b as e d on ITA -1090/CHD/2019 A.Y. 2011-12 Page 6 of 9 i nc or re ct f a cts it cou ld not f or m the b a s is f or re-op e n in g the ca s e . I n thi s r e ga r d , he p la c e d re l i a nce on the fol l ow in g d e c is ion s of the I TA T h old i ng t ha t s a tis fa c ti on of the AO of e s ca pe me nt of in come b a se d on in cor r e c t fa c ts w oul d n ot e mp ow e r the AO t o r e o pe n the ca se :
Smt.Monika Rani vs I TO I TA No.582/C hd/2019 dt 28-02-2020 Sagar Enterprises V/s ACIT 257ITR335 GUJ-HC Baba Kartar Singh Dukki Educational Trust V/s ITO 158 ITD 0965 CHD-TRIB Van Oord Dredging and Marine Contractors BV V/s ADIT ITANO.495/MUM/2016 Shri Ram Mohan Rawat V/s Income Tax Officer ITANO.1014/JP/2018 Shri Allen De Noronha V/s ACIT ITA No. 338/LKW/2015 LKW-TRIB IOT Infrastructure & Energy Services Ltd V/s ACIT & ANR 329 ITR0547BOM-HC Th e l d . c oun se l for t he a sse ssee con te n de d th a t i t is e v id e nt th a t the A O h a d n ot ca r e d to a p p ly h i s min d a t a l l to th e i nf or ma ti on be for e hi m and t he sa ti sf a cti on of th e AO of e sc a pe me n t of i n come w a s w i tho ut a pp l ic a ti on of min d a nd w a s in f a ct b or r ow e d s a ti sf a cti on . He dre w our a tte nti on to the f oll ow i ng ca s e l a w s p u r por t e d ly ho ld i ng th a t n on- a p p l ic a ti on of mi nd by th e AO w hi l e re cor d in g r e a s ons w ou ld re n de r the re -
a ss e s sme n t pr ocee di n gs in va l i d .
1.Holy Faith International Pvt. Ltd. V/s DCIT ITA No.181/ASR/2017 CHD-TRIB ITA -1090/CHD/2019 A.Y. 2011-12 Page 7 of 9
2. Hari Steels and General Industries Limited V/s DCIT 104 taxmann.com 293 DEL-TRIB
3. MaganBehari Lai V/s Deputy Commissioner of Income Tax 75 ITR (Trib) 322 DEL-TRIB
6. Th e ld . D R o n t he othe r ha n d dr e w ou r a tte nt ion t o th e f in d in gs of the l d. C I T( A ) i n th is r e ga r d a t pa g e 6 0 of th e or d e r a s un d e r :
"..........The Assessing Officer, therefore, had a cause to show that income of the appellant had escaped assessment and the AO had a bonafide reason to believe, formed on the basis of tangible material/information on record that income of the appellant had escaped assessment within the meaning of Section 147. Credible information was received by me AO relating to the case and the AO was duty bound to act on the same. The AO could not have slept on the information without taking any action. The credible information received could not be kept in the file without taking cognizance and the AO was rather duty bound to act on the same. Considering the facts in this case, it is found to be a fit case where the AO has rightly initiated action under Section 147 on the basis of information received from Directorate of Income Tax (Investigation). The issue is covered by the decision of the Hon'ble ITAT, Mumbai (ITA No. 995/mum/2012) in the case of Ratnakar M. Pujari, Mumbai Vs. ITO Ward-25(3)(3), Mumbai, where, the Hon'ble ITAT has elaborately discussed the issues of re-opening u/s 147 and consequential addition. The Hon'ble ITAT has held that the reopening u/s 147 is justified, as the information received from the Investigation wing is fresh and tangible material which has live link and nexus with the formation of belief that the income of the assessee has escaped assessment. In view of these facts and in the circumstances of the case, the arguments of the AR are found devoid of merits and the issue of notice by the AO u/s 148, after recording reasons for re-opening u/s 147, based upon information received, is found to be as per law........."
7. We h a ve he a r d b oth th e p a rt ie s. W e fi n d me r i t i n the co nte nti on of th e ld . c oun se l f or t he a ss e ssee th a t t he r e - a ss e s sme n t p r ocee d i ng s u nde rt ak e n b y the AO in th e pre se nt ca s e we re in va l id si nc e the re a son s re cor d i ng his sa t is fa c ti on of e sca pe me nt of in come we re ba s e d on in cor re ct fa c ts a nd th e re w a s no a p pli ca t ion of min d a t a l l b y the A O . Th e fa l la c i e s in th e fa c ts p oin te d out by th e ld . c ounse l fo r the a ss e s see ,re g a r din g t he q ua n tum of b ogus p ur c ha s e s note d by ITA -1090/CHD/2019 A.Y. 2011-12 Page 8 of 9 th e AO i n hi s re a son s a s a l so n a me of o ne of the pa rt ie s, h a s n ot b ee n d i sp ute d or co ntr ove r te d by the Re ve nu e . Fu r the r , e ve n the f a ct r e co rd e d by th e A O in th e re a son s that th e b ogu s b il l s ha d b ee n de b ite d to the P r ofi t & Los s Ac cou nt was i nc or re ct w hi c h is e vi de n t f r om the f a ct th a t the ld . C I T(A ) i n h is or d e r p a sse d on me r it s h a s f oun d the se bi l ls to b e re la tin g to p ur ch a se of fi xe d a sse ts a nd ha s a cc or di n gl y, mad e th e d is a l low a n ce of on ly d e p re c ia ti on r e l a ti n g to th e sa me , w h ic h h a s no t be e n cha ll e n ge d b y the Re ve nue be f ore us . It is cl e a r l y e vi de n t th a t on r e c e ivi ng i nf or m a ti on f r om th e C om me rc ia l Ta x D e p a r tme n t, the l d . AO d i d not e ve n ca re to ve r if y the s a me fr om hi s r e cor d s f ro m w he re a ll the se fa c tu a l i na c cu ra c ie s w oul d ha v e be e n b r ou gh t out. Th e r e w a s cl e a r l y tot a l non a p p li ca t io n o f mi n d b y th e A O a nd the be l ie f of e s ca pe me nt of i ncome i s de f in ite ly not h is o wn bu t b or r owe d f ro m t ha t o f th e co m me r ci a l t a x off i ce r w ho ha d for wa r d e d the i nf or ma ti on.
Th e b a si c re q ui r e me n t o f l a w f or r e ope ni ng a n ass e ss me n t i s a p p li ca t ion of mi nd by th e A O to the ma te ri a l or i n for ma ti on i n h is p os se s si on to con cl ud e and a r r iv e at a sa t is fa c ti on th e re f r om tha t i n come has e s ca pe d a sse ss me nt .B ot h a p p li ca t ion of min d a nd s a ti sfa cti on/b e li e f of the AO a re l a ck i ng i n the pr e se n t c a se . Th e re a sse ss me n t th e re f ore we ITA -1090/CHD/2019 A.Y. 2011-12 Page 9 of 9 h old is i nv a l id . The c a se l a ws re lie d up on b y the L d . C oun se l for th e a s se sse e s up p or t t he ca se of t he a sse ssee , Th e or d e r p a s sed b y the A O i s, ther e fore , se t a s ide .
8. Th e gr ou nd of a p pe a l N o. 1 is , ther e f ore , a l l owe d .
9. Si nc e we h a ve se t a s id e the or de r p a ss e d b y the A O, w e d o n ot con si d e r i t ne ce s sa r y to a d ju d ic a te the gr oun d s r a is e d on me r i ts, si nc e i t woul d b e a me re aca d e mi c e xe r ci se .
10. I n the re s ul t, th e a p pe a l o f the a sse ssee i s a ll ow e d i n a b ove te r ms.
O r d e r p r on oun ce d on 1 2 . 01 . 20 2 1 .
Sd/- Sd/-
(R.L.NEGI) (ANNAPURNA GUPTA)
या यक सद य/ Judicial Member लेखा सद य/ Accountant Member
"Poonam"
आदे शक त*ल+पअ,े+षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकरआयु-त/ CIT
4. आयकरआयु-त (अपील)/ The CIT(A)
5. +वभागीय त न0ध, आयकरअपील$यआ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानुसार/ By order, सहायकपंजीकार/ Assistant Registrar