Income Tax Appellate Tribunal - Mumbai
Dcit Cir. 4(3)(2), Mumbai vs Vipul Impex & Infrabuild Ltd., Mumbai on 16 May, 2018
आयकर अपील य अ धकरण, मुंबई यायपीठ, 'जी',मुंबई।
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "G", MUMBAI ी जो ग दर संह, या यक सद य एवं ी जी. मंजूनाथ, लेखा सद य, के सम Before Shri JOGINDER SINGH, Judicial Member, and Shri G. MANJUNATHA, Accountant Member ITA NOs.2313 to 2315/Mum/2016 Assessment Years: 2007-08, 2008-09 & 2010-11 DCIT-4(3)(2), M/s. Vipul Impex & Room No.649, बनाम/ Infrabuild Ltd., 140-K, Aayakar Bhavan, Cavel Cross Line No. 7, M. K. Road, Vs. Kalbadevi Road, Mumbai-400020 Mumbai 400002.
(राज व /Revenue) ( नधा!रती /Assessee)
P.A. No.AACJ1970D
ITA NOs.3004 TO 3006/Mum/2016
Assessment Years: 2007-08, 2008-09 & 2010-11 M/s. Vipul Impex & DCIT-4(3)(2), Infrabuild Ltd., 140-K, बनाम/ Room No.649, Cavel Cross Line No. 7, Aayakar Bhavan, Vs. M. K. Road, Kalbadevi Road, Mumbai 400002. Mumbai-400020 ( नधा!रती /Assessee) (राज व /Revenue) P.A. No.AACJ1970D 2 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
राज व क ओर से / Revenue by Shri Abhijit Patankar CIT-DR Ms. N. Hemlatha-DR नधा!रती क ओर से / Assessee by Shri Vimal Punmiya ु वाई क% तार&ख / Date of Hearing :
सन 03/05/2018
घोषणा क% तार&ख/Date of Pronouncement 16/05/2018
आदे श / O R D E R
Per Joginder Singh (Judicial Member)
This bunch of six appeals are by the Revenue as well as by the assessee against the impugned orders all dated 18/02/2016 of the Ld. First Appellate Authority, Mumbai. First, we shall take up the appeals of the assessee (ITA No.3004 to 3006/Mum/2016).
2. In ground numbers 1 and 2, the assessee has challenged the reopening of assessment u/s 147/148 of the Income Tax Act, 1961 (hereinafter the Act). The crux of argument on behalf of the assessee by Shri Vimal Punamiya is that the assessment was framed u/s 144 of the Act and no reassessment can be made just to make an enquiry or verification merely on information received from Investigation Wing and further reassessment proceedings cannot be initiated on suspicion. The assessee has also 3 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
filed written submissions, which are kept on record. The Ld. counsel reiterated its submissions, mentioned in the written submissions. Our attention was invited to various pages of the paper book/written submissions by claiming that the payment was made by account payee cheque. Our attention was also invited to section 40A(3) of the Act. On the other hand, the Ld. CIT-DR. Shri Abhijit Patankar, strongly defended the reopening of assessment by arguing that it was validly done. It was pleaded that certain information were received from the investigation wing. Our attention was invited to the reasons for reopening of case u/s 148, which has been reproduced in the assessment order. It was pleaded that in spite of issuance of statutory notice u/s 143(2) and 142(1), the assessee did not appear before the Ld. Assessing Officer, therefore, the assessment was framed u./s 144 of the Act and the Ld. Assessing Officer was forced to pass and ex-parte order due to non- compliance of the notices served upon the assessee. 2.1. We have considered the rival submissions and perused the material available on record. So far as, re- 4 ITA Nos.2313 to 2315 and 3004 to
3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
opening of assessment u/s 147/148 of the Act on the plea that the Ld. AO ignored the fact that there was no reason to believe that income has escaped assessment as there was no tangible material with the Assessing Officer and independent application of mind is concerned, we find that the assessee did not respond to the notice issued u/s 148 of the Act, which was issued after recording the reasons for reopening and the same was duly served upon the assessee, thereafter, notices u/s 143(2) and 142(1) were also served upon the assessee. There was information with the Assessing Officer that the assessee made payments by way of other than account payee cheque for purchase office and these amounts were more than Rs.20,000/-, therefore no deduction is allowed with respect to such expenditure. With this background, we shall analyze whether the Ld.AO was right in re-opening the assessment u/s.147 of the Act. 2.2 In the light of the foregoing discussions, it is our bounded duty to examine the validity of reopening u/s 147 r.w.s 148 of the Act. Before adverting further we are 5 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
reproducing hereunder the relevant provision of section 147 of the Act for ready reference and analysis:-
". If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:
Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.--Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.
Explanation 2.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :--
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person 6 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ;
(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;
(c) where an assessment has been made, but--
(i) income chargeable to tax has been underassessed ; or
(ii) such income has been assessed at too low a rate ; or
(iii) such income has been made the subject of excessive relief under this Act ; or
(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;
(d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.--For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.
Explanation 4.--For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012."
2.3. If the aforesaid provision of the Act is analyzed, we find that after insertion of Explanation -3 to section 147 of the Act by the Finance (No.2) Act of 2009 with effect from 01/04/1989 section 147 has an effect that Assessing officer has to assess or reassess income (such income) 7 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
which has escaped assessment and which was basis of formation of belief and, if he does so, he can also assess or reassess any other income which has escaped assessment and which came to the notice during the course of proceedings. Identical ratio was laid down by Hon'ble jurisdictional High Court in CIT vs Jet Airways India Pvt. Ltd. (2010) 195 taxman 117 (Mum.) and the full Bench decision from Hon'ble Kerala High Court in CIT vs Best Wood Industries and Saw Mills (2011) 11 taxman.com 278 (Kerala)(FB). A plain reading of explanation-3 to section 147 clearly depicts that the Assessing Officer has power to make addition, where he arrived to a conclusion that income has escaped assessment which came to his notice during the course of proceedings of reassessment u/s 148. Our view is fortified by the decision in Majinder Singh Kang vs CIT (2012) 25 taxman.com 124/344 ITR 358 (P & H) and Jay Bharat Maruti Ltd. Vs CIT (2010) Tax LR 476 (Del.) and V. Lakshmi Reddy vs ITO (2011) 196 taxman 78 (Mad.). The provision of the Act is very much clear as with effect from 01/04/1989, the Assessing Officer has wide powers to initiate proceedings of reopening. The Hon'ble Kerala High 8 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
Court in CIT vs Abdul Khadar Ahmad (2006) 156 taxman 206 (Kerala) even went to the extent so long as the AO has independently applied his mind to all the relevant aspect and has arrived to a belief the reopening cannot be said to be invalid.
2.4. We are aware that "mere change of opinion"
cannot form the basis of reopening when the necessary facts were fully and truly disclosed by the assessee in that situation, the ITO is not entitled to reopen the assessment merely on the basis of change of opinion. However, powers under amended provision are wide enough where there is a reasonable belief with the Assessing Officer, that income has escaped assessment, because the powers with effect from 01/04/1989 are contextually different and the cumulative conditions spelt out in clauses (a) and (b) of section 147, prior to its amendment are not present in the amended provision. The only condition for action is that the Assessing Officer "should have reason to believe" that income chargeable to tax has escaped assessment. Such belief can be reached in any manner and is not qualified by a pre-condition of faith and true disclosure of material facts 9 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
by an assessee as contemplated in pre-amended section
147. Viewed in that angle, power to reopen assessment is much wider under the amended provision. Our view is fortified by the decision from Hon'ble Delhi High Court in Bawa Abhai Singh vs DCIT (2001) 117 taxman 12 and Rakesh Agarwal vs ACIT (1996) 87 taxman 306 (Del.). The Hon'ble Apex Court in CIT vs Sun Engineering works Pvt. Ltd. 198 ITR 297 (SC) clearly held that proceedings u/s 147 are for the benefit for the Revenue, which are aimed at gathering the 'escaped income'. At the same time, We are aware that powers u/s 147 and 148 of the Act are not unbridled one as it is hedged with several safeguards conceived in the interest of eliminating room for abuse of this power by the AO. However, the material available on record, clearly indicates that income chargeable to tax had escaped assessment, therefore, the ld. Assessing Officer was within his jurisdiction to reopen the assessment. The Hon'ble Apex Court in Ess Ess Kay Engineering Co. Pvt. Ltd. (2001) 247 ITR 818 (SC) held that merely because the case of the assessee was correct in original assessment for the relevant assessment year, it does not preclude the ITO 10 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
to reopen the assessment of an earlier year on the basis of finding of his fact that fresh material came to his knowledge.
2.5. Under section 147, as substituted with effect from 01/04/1989, the scope of reassessment has been widened. After such substitution, the only restriction, put in that section is that "reason to believe". That reason has to be a reason of a prudent person which should be fair and not necessarily due to failure of the assessee to disclose fully and partially some material facts relevant for assessment (Dr. Amin's Pathology Laboratory vs JCIT (2001) 252 ITR 673, 682 (Bom.) Identical ratio was laid down by Hon'ble Delhi High court in United Electrical Company Pvt. Ltd. vs CIT (2002) 258 ITR 317, 322 (Del.) and Prafull Chunnilal Patel vs ACIT 236 ITR 832, 838 (Guj.). The essential requirement for initiating reassessment proceeding u/s 147 r.w.s 148 of the Act is that the ld. Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year. The Hon'ble Gujara High Court in Prafull Chunnilal Patel vs ACIT (supra) even went to the 11 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
extent that at the initiation stage formation of reasonable belief is needed and not a conclusive finding of facts. Identical ratio was laid down in Brijmohan Agrawal vs ACIT (2004) 268 ITR 400, 405 (All.) and Ratnachudamani S. Utnal vs ITO (2004) 269 ITR 272, 277 (Karnataka) applying Sowdagar Ahmed Khan vs ITO (1968) 70 ITR 79(SC).
2.6. So far as, the meaning of expression, "reason to believe" is concerned, it refers to belief which prompts the Assessing Officer to apply section 147 to a particular case. It depend upon the facts of each case. The belief must be of an honest and reasonable person based on reasonable grounds. The Assessing Officer is required to act, not on mere suspicion, but on direct or circumstantial evidence. Our view find support from the ratio laid down in following cases:-
i. Epica Laboratories Ltd. vs DCIT 251 ITR 420, 425-426 (Bom.), ii. Vishnu Borewell vs ITO (2002) 257 ITR 512 (Orissa), iii. Central India Electric Supply Company Ltd. vs ITO (2011) 333 ITR 237 (Del.), iv. V.J. Services Company Middle East ltd. vs DCIT (2011) 339 ITR 169 (Uttrakhand), 12 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
v. CIT vs Abhyudaya Builders (P. ) Ltd. (2012) 340 ITR 310 (All.), vi. CIT vs Dr. Devendra Gupta (2011) 336 ITR 59 (Raj.), vii. Emirates Shipping Line FZE vs Asst. DIT (2012) 349 ITR 493 (Del.).
viii. Reference may also made to following judicial decisions:-
ix. Safetag international India P. Ltd. (2011) 332 ITR 622 (Del.), x. CIT vs Orient Craft Ltd. (2013) 354 ITR 536 (Del.) xi. Acorus Unitech Wirelss Pvt. Ltd. vs ACIT (2014) 362 ITR 417 (Del.).
xii. Praful Chunilal Patel: Vasant Chunilal Patel vs Asst. CIT (1999) 832, 843-44, 844-45 (Guj.), xiii. Venus Industrial Corporation vs Asst. CIT (1999) 236 ITR 742, 746 (Punj.), xiv. Srichand Lalchand Talreja vs Asst. CIT (1998) 98 taxman 14, 19 (Bom.), xv. Usha Beltron Ltd. vs JCIT (1999) 240 ITR 728, 736-37, 739 (Pat.) xvi. Kapoor Brothers vs Union of India (2001) 247 ITR 324, 331, 332-33 xvii. Vippy Processors Pvt. Ltd. vs CIT (2001) 249 ITR 7, 8 (MP) 2.7. In Dilip S. Dahanukar vs Asst. CIT (2001) 248 ITR 147, 150-51 (Bom.). The Hon'ble jurisdictional High Court held as under:-
"Held, that there was material on record on the basis of survey and statement of person to show that the assessee had wrongfully claim deduction u/s 80IA. Therefore, the Assessing Officer had reason to believe that income had 13 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
escaped assessment for assessment year 1994-
95."
Identically in the case of Srichand Lalchand Talreja v. Asst. CIT, (1998) 98 Taxman 14, 19 (Bom), where the information regarding acquisition of the asset was not available with the Assessing Officer during the relevant assessment year 1992-93 and such information was disclosed in the return for the assessment year 1995- 96, the Hon'ble jurisdictional High Court held that the Assessing Officer can form a bona fide belief that there was escapement of income in relation to assessment year 1992-93.
2.8. The Hon'ble jurisdictional High Court in Export Credit Guarantee Corporation of India Ltd. v. Addl. CIT, (2013) 350 ITR 651 (Bom), where there had been no application of mind to the relevant facts during the course of the assessment proceedings by the Assessing Officer, the reopening of the assessment was held to be valid. 2.9. The Hon'ble jurisdictional High Court in Girilal & Co. v. S.L. Meena, ITO, (2008) 300 ITR 432 14 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
(Bom), held that in order to invoke the extraordinary jurisdiction of the court the petitioner must also make out a case that no part of the relevant material had been kept out from the Assessing Officer). The information was in the annexures and consequently Explanation 2(c)(iv) of section 147 would apply. The reassessment proceedings after four years were valid. 2.10. In the case of Deputy CIT v. Gopal Ramnarayan Kasat, (2010) 328 ITR 556 (Bom), it was not the case of the assessee that the notice issued was after the expiry of the time limit provided in section 153(2). The reassessment proceedings were held to be valid. In Indian Hume Pipe Co. Ltd. v. Asst. CIT, (2012) 348 ITR 439 (Bom), both in the computation of taxable long-term capital gains in the original return of income and in the computation that was submitted in response to the query of the Assessing Officer there was a complete silence in regard to the dates on which the amounts were invested, as such there being a failure to disclose fully and truly material facts necessary 15 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
for assessment. The reassessment proceedings were held to be valid. This view was also confirmed in following cases:-
a. Dalmia P. Ltd. v. CIT, (2012) 348 ITR 469 (Del); b. CIT v. K. Mohan & Co. (Exports), (2012) 349 ITR 653 (Bom);
c. Remfry & Sagar v. CIT, (2013) 351 ITR 75 (Del); d. OPG Metals & Finsec Ltd. v. CIT, (2013) 358 ITR 144 (Del).
2.11. In the case of Venus Industrial Corporation v. Asst. CIT, (1999) 236 ITR 742, 746 (P & H) [Where initiation was started within four years for re-examining the deduction under section 80HHC, was held to be wrongly allowed in the original assessment. Identically, in the case of Happy Forging Ltd. v. CIT, (2002) 253 ITR 413,416-17 (P & H), where excise duty paid in advance was shown as an asset in the balance sheet and was allowed as a deduction, reassessment notice on the ground that excise duty was shown as an asset in the balance sheet and was not routed through the profit and loss account. The reopening at this stage was held to be valid. In the case of Vipan Khanna v. CIT, (2002) 255 ITR 220, 230 (P & H), where from the facts it was clear that the assessee had claimed 16 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
depreciation in the return at the rate of 50 per cent and he had nowhere disputed the fact that the admissible rate of depreciation to him was 40 per cent., such fact alone was sufficient to initiate reassessment proceedings under section 147 and, therefore, such initiation was sustained. The Hon'ble Punjab & Haryana High Court in Mrs. Rama Sinha v. CIT, (2002) 256 ITR 481, 483, 486, where the reassessment notice has been issued on the basis of definite information from CBI regarding investments by the assessee which had not been disclosed during the original assessment proceedings, such initiation has been upheld. 2.12. In the case of Pal Jain v. ITO, (2004) 267 ITR 540, 544-45, 548, 549 (P & H), applying Phool Chand Bajrang Lal v. ITO, (1993) 203 ITR 456 (SC), although the transaction of sale of shares was disclosed and accepted in the original assessment, but the subsequent discovery by the DDI (Investigation) revealed that the transaction was not genuine, a reassessment notice after four years has been held to be valid because there was no true disclosure of the material facts. In this regard, the petitioner-assessee 17 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
cannot draw any support from the statement for challenging the validity of the notice for reassessment. It goes without saying that for the purpose of making the assessment, the Assessing Officer shall have to confront the petitioner with the entire material in his possession on the basis of which he proposes to make the additions. In Punjab Leasing Pvt. Ltd. v. Asst. CIT, (2004) 267 ITR 779, 781-82 (P & H), where depreciation was allowed to the assessee, who was engaged in the business of financing of vehicles and consumer durables on 'hire-purchase basis' as well as on 'lease/rent basis', a reassessment notice issued after four years has been held not to suffer from any illegality as the same was based on the bona fide action of the competent authority to determine whether or not the vehicles in respect of which the petitioner had been claiming depreciation, were actually owned by it. 2.13. In Jawand Sons v. CIT(A), (2010) 326 ITR 39 (P & H), in the initial assessment, the benefit of deduction of the duty drawback and DEPB under section 80-IB was wrongly granted to the assessee, for which it was not entitled. Therefore, reassessment proceedings to withdraw the 18 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
deduction were held to be valid. Likewise, in CIT v. Hindustan Tools & Forgings P. Ltd., (2008) 306 ITR 209 (P & H), where, the assessee in the regular assessment had been allowed deduction more than actually allowable under section 80HHC. Therefore, the action initiated by the AO for reassessment under section 147(b) could not be held to be invalid.
2.14. In the case of Markanda Vanaspati Mills Ltd. v. CIT, (2006) 280 ITR 503 (P & H), wherein, the information furnished by the assessee gave no clue to the payment of liability in regard of the sales tax collected in excess. The Assessing Officer was held to be validly initiated the reassessment proceedings under section 147 for both the years under consideration. In the case of Sat Narain v. CIT, (2010) 320 ITR 448 (P & H), the document did not form the sole basis for the Assessing Officer to initiate reassessment proceeding but he also took into consideration the letter written by the Assistant Commissioner as well as the fact that no return had been filed by the assessee for assessment year 1995-96. Thus, it was held that the Assessing Officer had rightly invoked the 19 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
jurisdiction to initiate the reassessment proceedings under section 147. In the case of CIT v. Hukam Singh, (2005) 276 ITR 347 (P & H), it was held that the respondents did not have the locus standi to question the orders of reassessment on the ground of lack of notice. Non-issuance of notice to some of the legal heirs of the late P was merely an irregularity and the same did not affect the validity of the reassessment orders. Likewise, in Tilak Raj Bedi v. Joint CIT, (2009) 319 ITR 385 (P & H), wherein, facts coming to light in a subsequent assessment year could validly form the basis for initiating reassessment proceedings, in view of Explanation 2 to section 147. The action of the income tax authorities in reopening the assessment of the assessee and restricting the deduction under section 80-IB was held to be valid. 2.15. In the case of Smt. Usha Rani v. CIT, (2008) 301 ITR 121 (P & H), there was nothing on record to show the relationship between the donor and the donee, capacity of the donor to make gifts and the occasion therefore. The assessee had failed to discharge the onus to prove the gifts. The reassessment proceedings were held to be valid. In the 20 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
case of Usha Beltron Ltd. v. Joint CIT, (1999) 240 ITR 728, 736-37, 739 (Pat), where the investigation report indicated that the Officer had reason to believe that on account of failure on the part of the petitioner-assessee to disclose true and full facts, income had been grossly under assessed, reassessment proceedings were held validly initiated.
2.16. In the case of Kapoor Brothers v. Union of India, (2001) 247 ITR 324, 331, 332-33 (Pat), where the material evidence for the purpose of reopening of the assessment already completed has been brought to the notice of the authority during the course of enquiry. The notice was held to be valid by the Hon'ble High Court. In the case of Vippy Processors Pvt. Ltd. v. CIT, (2001) 249 ITR 7, 8 (MP), where the need to issue notice arose due to noticing of vast difference in value of properties disclosed by the assessee and that of the report of the Valuation Officer and the reasons that led to the issue of the notice were duly recorded and the same were also adequate and based on relevant facts and material, initiation was upheld. In Triple 21 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
A Trading & Investment Pvt. Ltd. v. Asst. CIT, (2001) 249 ITR 109, 110-11 (MP), where the notice was issued after recording reasons in that regard, initiation was upheld. 2.17. Likewise, Hon'ble Gujarat High Court in Garden Finance Ltd. v. Add/. CIT, (2002) 257 ITR 481, 489, 494- 95, special leave petition dismissed by the Supreme Court:
(2002) 255 ITR (St.) 7-8 (SC), where the assessee was holding shares in an amalgamating company and he was allotted shares in the amalgamated company and such shares were sold by him and he has disclosed the market price of such shares as on the date of amalgamation as the cost of acquisition of such shares and has not disclosed the cost of acquisition of shares in the amalgamating company in accordance with section 49(2) read with section 47(vii), initiation of reassessment proceedings after four years has been sustained because there was failure on the part of the assessee to disclose material facts necessary for assessment. Likewise, in Suman Steels v. Union of India, (2004) 269 ITR 412,418-19 (Raj), where the return of the assessee for assessment year 1995-96 was processed under 22 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
section 143(1)(a) accepting the net profit rate declared by the assessee, who carried on con- tract business, initiation of reassessment proceedings by issuing a notice dated 15- 5-2001 proposing to reassess petitioner-assessee at higher rate in view of the presumptive rate prescribed under section 44AD has been sustained. In the case of Dr. Sahib Ram Giri v. ITO, (2008) 301 ITR 294 (Raj), the reassessment proceedings were initiated after recording reasons in writing by the AO. The non-availability of a few documents demanded by the assessee would not make the reassessment proceedings initiated for the reasons recorded in detail illegal.
2.18. In the case of Desh Raj Udyog : Chaman Udyog v. ITO, (2009) 318 ITR 6 (All), in the assessment years in question, the matter was still to be decided finally by the assessing authority whether the income should be treated under the head 'Business income' or 'property income'. The assessee would get opportunity to show sufficient cause to the assessing authority during the course of assessment. Thus, it could not be said that there was no relevant 23 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
material to initiate proceedings under section 147. In the case of Kartikeya International v. CIT, (2010) 329 ITR 539 (All), in view of the matter, the petitioner was not entitled for the deduction on the duty drawback amount under section 80-IB and since it had been allowed in the assessment order passed under section 143(1), it had escaped assessment. On these facts the initiation of the proceedings under section 147 read with section 148 for assessment years 2005-06 and 2006-07 was legal and in accordance with law.
2.19. Likewise, in the case of Sunil Kumar lain: Suresh Chandra lain v. ITO, (2006) 284 ITR 626 (All), notwithstanding the fact that the amount had been assessed to tax in the hands of P, he had taken a stand that the amount did not belong to him and instead belonged to S. Thus, it was not clear as to in whose hands the amount in question had to be assessed. The ITO was justified in taking proceedings under section 147 for assessing the amounts in the hands of the petitioners according to the claim made by the petitioners. Likewise, 24 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
Hon'ble Kerala High Court in CIT v. Dr. Sadique Ummer, (2010) 322 ITR 602 (Ker), where, the Assessing Officer collected further information to complete the reassessments which was also permissible under the Act. The finding of the first appellate authority as well as the Tribunal, that the Assessing Officer had no material to believe that the income had escaped assessment was wrong and contrary to facts. The assessee had not maintained any books of account. Therefore, the reopening of assessments was held to be valid and within time. In the case of CIT v. Uttam Chand Nahar, (2007) 295 ITR 403 (Raj), the notice requiring the assessee to file the return within 30 days was in accordance with section 148 as it must be deemed to be in force with effect from 1-4-1989, and in force as on the date notice was issued. There was no violation of section 148 in respect of the specified period within which the return is to be submitted. The reassessment proceedings were held to be valid.
2.20. In the case of CIT v. C. V. layachandran, (2010) 322 ITR 520 (Ker), where, the assessee did not concede the 25 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
income on capital gain either under the un-amended provision or un-der the amended provision, the recourse open to the Department was to bring to tax income escaping assessment under section 147 which was not time barred or otherwise invalid. Likewise, in Atul Traders v. ITO, (2006) 282 ITR 536 (All), the account books or record and other material were all common which were being considered by the CIT(A) in the proceedings relating to three appeals. The petitioner had notice and opportunity of being heard. The reassessment proceedings were held to be validly initiated. In the case of Inductotherm (India) P. Ltd. v. lames Kurian, Asst. CIT, (2007) 294 ITR 341 (Guj), the Assessing Officer had found that there were errors in the computation of allowances. The reassessment proceedings were held to be valid. In the case of Papaya Farms Pvt. Ltd. vs. DCIT, (2010) 323 ITR 60 (Mad), where the assessee had furnished incorrect particulars and therefore, the reopening of the assessment was held to be justified. 2.21 In the case of CIT v. Kerala State Cashew Development Corporation Ltd., (2006) 286 ITR 553 (Ker), 26 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
wherein, the assessee was following the mercantile system of accounting should not have claimed deduction of penal interest which had accrued not in the previous year relevant to the assessment year but in earlier years. This the assessee had not disclosed. The reassessment was held to be valid. Likewise, in Kusum Industries P. Ltd. v. CIT, (2008) 296 ITR 242 (All), as the award had become final it would be taken that the directors of the assessee had accepted the factum of earning of secret profit not reflected in the books of account, which was also binding on the company. The non-appearance of one of the arbitrators and one of the directors in respect of the summon issued under section 131 would not make the reassessment invalid. The Hon'ble Kerala High Court in CIT v. Indo Marine Agencies (Kerala) P. Ltd., (2005) 279 ITR 372 (Ker), held that the entry would amount to an order under section 144. The mere fact that it was not communicated to the assessee would not make such an assessment recorded in the order sheet illegal and that would not bar further proceedings under section 147. Thus, the assessment was held to be validly reopened under Explanation 2(c) to section 147. 27 ITA Nos.2313 to 2315 and 3004 to
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Likewise, in CIT v. N. Jayaprakash, (2006) 285 ITR 369 (Ker), where, the assessee could not, after having persuaded the assessing authority to withdraw the notice dated 1-10-1993, pointing out that it was not in conformity with law, be allowed to contend that the notice was valid due to the omission of the time-limit by the Finance (No.2) Act, 1996, with effect from 1-4-1989. In the absence of specific provision in the Finance (No. 2) Act, 1996, invalidating proceedings initiated by the Income-tax Officer, the action taken by him applying the then existing law could not be said to be invalid.
2.22 Likewise, in CIT v. S.R. Talwar, (2008) 305 ITR 286 (All), the factum of taking advances or loan from T and K, in which the assessee was one of the directors had not been disclosed nor a copy of the ledger account of the assessee maintained by the company filed. In view of the absence of these details, the Assessing Officer could not examine the taxability of advances or loan raised by the assessee. There was failure to disclose material facts necessary for assessment. The reassessment proceedings 28 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
were held to be valid. In another case, the Hon'ble Allahabad High Court in Chandra Prakash Agrawal v. Asst. CIT, (2006) 287 ITR 172 (All), wherein, the Income-tax Department had sent a requisition on 27-3-2002, under section 132A requisitioning the books of account and other documents seized by the Central Excise Department. The record of the proceeding dated 18-4-2002, showed that the requisition was not fully executed as all the books of account and other documents had not been delivered to the requisitioning authority. The proceedings initiated under section 147 was held to be valid.
2.23 In Ramilaben Ratilal Shah v. CIT, (2006) 282 ITR 176 (Guj), held that the noting in the diary constituted sufficient information for the escapement of income by either non-declaration of correct sale consideration or furnishing of inaccurate particulars as regards sale consideration. Thus, the Tribunal was justified in holding that the assessee had failed to disclose fully and truly all material facts necessary for 29 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
the assessment of the relevant assessment year. The reassessment proceedings had been validly initiated. 2.24 Likewise, in CIT v. Abdul Khader Ahamed, (2006) 285 ITR 57 (Ker), it was clear from the reasons recorded by the Deputy CIT that he prima facie had reason to believe that the assessee had omitted to disclose fully and truly the material facts and that as a consequence income had escaped assessment. The reassessment was held to be valid. In the case of U.P. State Brassware Corporation Ltd. v. CIT, (2005) 277 ITR 40 (All), the principles laid down by the Calcutta High Court in CIT v. New Central Jute Mills Co. Ltd. : (1979) 118 ITR 1005 (Cal) did constitute information on a point of law which should be taken into consideration by the ITO in forming his belief that the income to that extent had escaped assessment to tax and, the reassessment was held to be valid. In Sunder Carpet Industries v. ITO, (2010) 324 ITR 417 (All), held that the Departmental Valuer's Report constituted material for entertaining a belief of escaped income in the years under 30 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
consideration. The reassessment proceeding was held to be valid.
2.25 In Aurobindo Sanitary Stores v. CIT, (2005) 276 ITR 549 (Ori), there being a substantial difference between the figures of liabilities towards sundry creditors in the party ledgers of the assessee-firm and the figures of liabilities towards sundry creditors in the balance-sheet of the assessee-firm for the previous year relevant to the assessment year 1989-90. These materials had a direct link and nexus for formation of a belief by the Assessing Officer that income of the assessee-firm had escaped assessment because of failure of the assessee to disclose fully and truly all material facts necessary for the assessment. In the case of CIT v. Best Wood Industries & Saw Mills, (2011) 331 ITR 63 (Ker), the assessee challenged the validity of the reassessment on the ground that the AO had exceeded his jurisdiction under section 147 and both the first appellate authority as well as the Tribunal accepted the contention of the assessee holding that so far as the reassessments related to assessment of unexplained trade credits, they 31 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
were invalid. On appeal, it has been held that the reassessments were to be valid. In Honda Siel Power Products Ltd. v. Deputy CIT, (2012) 340 ITR 53 (Del), there being omission and failure on the part of the assessee to disclose fully and truly material facts Thus reassessment proceedings were held to be valid.
In Atma Ram Properties Private Ltd. v. Deputy CIT, (2012) 343 ITR 141 (Del), as the books of account and other material were not produced and no letter was filed, the order passed by the Commissioner (Appeals) in the assessment year 2001-02 would constitute 'information' or material from any external source and, as such, the reassessment proceedings for the assessment year 2000-01 were held to be valid. Likewise, in the case of CIT v. Smt. R. Sunanda Bai, (2012) 344 ITR 271 (Ker), the reassessment in question were held to be valid on the fact that the assessee claimed and was given relief under section 80HHA for the three preceding year which disentitled her for deduction under section 80HH for the assessment years 1992-93 and 1993-94.
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2.26 In the case of Aquagel Chemicals P. Ltd. v. Asst. CIT, (2013) 353 ITR 131 (Guj), since there being sufficient material on record for the Assessing Officer to form a belief as regards the escapement of income in relation to the claim of depreciation in respect of the building of coal fire boiler, the reassessment was held to be valid. In the case of Convergys Customer Management v. Asst. DIT, (2013) 357 ITR 177 (Del), where there being prima facie material in the possession of the Assessing Officer to form a tentative belief that section 9(1)(i) held attracted, said reason by itself constituted a relevant ground to reopen the assessment of the assessee.
Reference may also be made to i. Ajai Verma v. CIT [(2008) 304 ITR 30 (All)]; ii. Ashok Arora v. CIT [(2010) 321 ITR 171 (Del)]; iii. CIT v. Chandrasekhar BaLagopaL [(2010) 328 ITR 619 (Ker)];
iv. Jayaram Paper Mills Ltd. v. CIT [(2010) 321 ITR 56 (Mad)]; v. Kerala Financial Corporation v. Joint CIT [(2009) 308 ITR 434 (Ker)];
vi. Mavis Satcom Ltd. v. Deputy CIT [(2010) 325 ITR 428 (Mad)];
vii. CIT v. Madhya Bharat Energy Corporation Ltd. [(2011) 337 ITR 389 (Del)];
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viii. Kone Elevator India P. Ltd. v. ITO [(2012) 340 ITR 454 (Mad)];
ix. Vijay Kumar Saboo v. Asst. CIT [(2012) 340 ITR 382 (Karn)];
x. Siemens Information Systems Ltd. v. Asst. CIT [(2012) 343 ITR 188 (Bom)];
xi. I.P. Patel & Co. v. Deputy CIT [(2012) 346 ITR 207 (Guj)]; xii. Dishman Pharmaceuticals & Chemicals Ltd. v. Deputy CIT [(2012) 346 ITR 228 (Guj)];
xiii. Video Electronics Ltd. v. Joint CIT [(2013) 353 ITR 73 (Del)];
xiv. A G Group Corporation v. Harsh Prakash [(2013) 353 ITR 158 (Guj)];
xv. Inductotherm (India) P. Ltd. v. M. GopaLan, Deputy CIT [(2013) 356 ITR 481 (Guj)]; CIT v. Dhanalekshmi Bank Ltd. [(2013) 357 ITR 448 (Ker)];
xvi. Sitara Diamond Pvt. Ltd. v. ITO [(2013) 358 ITR 424 (Bom)];
xvii. Rayala Corporation P. Ltd. v. Asst. CIT [(2014) 363 ITR 630 (Mad)].
2.27 So far as, the decision in the case of CIT vs Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) is concerned, the Hon'ble Apex Court, while coming to a particular conclusion, only in a situation, when not a single piece of paper or document was recovered, therefore, the Hon'ble Court held that since there was no tangible material found and the addition was merely on the basis of 34 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
statement only then reopening of assessment u/s 147 of the Act was not permissible. Likewise, in the case of CIT vs S. Khader Khan Son (2012) 254 CTR 228 (SC), affirming the decision of Madras High Court in (2008) 300 ITR 157 (Mad.), the whole addition was made solely on the basis of statement u/s 133A and no other material was found, in that situation, it was held that the such statement has no evidentiary value.
2.28. It is noted that Hon'ble jurisdictional High Court in the case of Yuvraj vs UOI (2009) 315 ITR 84 (Bom.) held as under:-
"that from the perusal of the order one found no application of mind on the part of the Asstt. Commissioner to the facts of the case, the issue to be dealt with and the reasons for passing the order. The value of the land was not determined by the revenue. The issue relating to capital gain or casual income was also not addressed by the revenue. In the light of the same, in the facts of the case, the Assessing Officer was justified in issuing the notice under section 148. The Asstt. Commissioner did not apply his mind and failed to record good and proper reasons for passing the order. In the facts of the case, one did not find mere change of opinion in recording reasons for issuing notice under section 148 by the Assessing Officer.
Likewise, Hon'ble Apex Court in the case of Raymond Woollen Mills Ltd. vs Income Tax Officer (1999) 236 ITR 34 (Supreme Court) held that the Supreme Court had only to 35 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material was not a thing to be considered at this stage. The Supreme Court could not strike down the reopening of the case in the facts of the instant case. It would be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee might also prove that no new facts came to the knowledge of the ITO after completion of the assessment proceeding. The Supreme Court was not expressing any opinion on the merits of the case. The questions of fact and law were left open to be investigated and decided by the assessing authority. The assessee would be entitled to take all the points before the assessing authority. The appeals were dismissed. 2.29. If the material available on record and the judicial pronouncements discussed hereinabove are kept in juxtaposition with the facts of the present appeal, we find that the Ld. Assessing Officer was genuinely of the view that income chargeable to tax has escaped assessment as the assessee could not prove the genuineness of the 36 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
transactions for purchasing fish and even the assessee did not appear before the Ld. Assessing Officer and even respond to the notices served upon the assessee and were issued u/s 147, 143(2) and 142(1) of the Act. Therefore, the assessee certainly cannot challenge the reopening of assessment and the Ld. Assessing Officer was forced to frame assessment u/s 144 of the Act. Thus, the totality of facts available on record, clearly indicates that there was reasonable belief with the Assessing Officer that income chargeable to tax had escaped assessment. Consequently, so far as reopening is concerned, in the light of foregoing discussion, we do not find any infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), thus, this ground of the assessee is devoid of any merit, therefore, dismissed. This will also cover identical ground in the appeals of the assessee for remaining Assessment Years.
3. The next ground no. i.e. 3, raised by the assessee is that the Ld. Commissioner of Income Tax (Appeal) erred in confirming the assessment order passed u/s 144 of the Act, which is against the principle of natural justice. We have perused the record and find that notices 37 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
u/s 147, 143(2) and 143(1) were issued and served upon the assessee in spite of that the assessee choose not to appear, thus, we find no merit in the ground raised by the assessee, because, it was the duty of the assessee to make effective representation and to respond to the statutory notices issued to the assessee. Thus, there is no violation of principle of natural justice as has been claimed by the assessee. This ground is also dismissed. This will also cover identical grounds in remaining appeals of the assessee.
4. Ground no. 4 is with respect to confirming the disallowance of Rs.11,06,557/-(out of Rs.55,32,788/- made by the Assessing Officer) u/s 40A(3) of the Act. The contention of the Ld. counsel for the assessee is that the assessee is exporter of fresh and frozen sea food and the business of the assessee is seasonal and highly perishable in nature, therefore, the assessee is dependent upon koli, Aadiwasis and tribal fisherman, who are living near the sea shores from whom the fishes are purchased by making payment in cash as well as the bearer cheque. Some of the purchases are made through traders where the payments 38 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
are made through account payee cheque. Thus, the payment of Rs.55,32,788/- was made to such persons. Our attention was invited to circular no.10/2010 dated 15/12/2008 by claiming that the said exception is applicable to the assessee. Reliance was placed upon the decision in CIT vs Blue water Foods and Exports Pvt. Ltd. (2015) 55 taxman.com 511 (Karnataka).
4.1. On the other hand, the Ld. DR, strongly contested the claim of the assessee by inviting our attention to the remand report filed by the Ld. Assessing Officer by claiming that the claim of the assessee is not proved from the facts, therefore, it may be sent to the file of the Ld. Assessing Officer as the assessment was framed u/s 144 of the Act and even the Ld. Commissioner of Income Tax (Appeal) is also silent on this issue. 4.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee company is engaged in export of sea food. The assessee claimed to have made purchases of fish from fisherman and other traders from costal areas at 39 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
different places. It is noted that one of the reason for reopening the assessment u/s 147 of the Act was that the assessee made payment of Rs.55,32,788/- by way of other than account payee cheque/banking channel and thus section 40A(3) of the Act was invoked. Before adverting further, it is our bounded duty to analyze the provision of section 40A(3) of the Act, which is reproduced hereunder:-
(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, [or use of electronic clearing system through a bank account, exceeds ten thousand rupees,] no deduction shall be allowed in respect of such expenditure.
(3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, 19[or use of electronic clearing system through a bank account], the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds 20[ten] thousand rupees:
Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub- section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee 40 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
cheque drawn on a bank or account payee bank draft, 21[or use of electronic clearing system through a bank account, exceeds ten thousand rupees,] in such cases and under such circumstances as may be prescribed22, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors :
Provided further that in the case of payment made for plying, hiring or leasing goods carriages, the provisions of sub-sections (3) and (3A) shall have effect as if for the words "23[ten] thousand rupees", the words "thirty-five thousand rupees" had been substituted.
(4) Notwithstanding anything contained in any other law for the time being in force or in any contract, where any payment in respect of any expenditure has to be made by an account payee cheque drawn on a bank or account payee bank draft 24[or use of electronic clearing system through a bank account] in order that such expenditure may not be disallowed as a deduction under sub-section (3), then the payment may be made by such cheque or draft 23[or electronic clearing system]; and where the payment is so made or tendered, no person shall be allowed to raise, in any suit or other proceeding, a plea based on the ground that the payment was not made or tendered in cash or in any other manner.
4.3. A plain reading of section 40A(3), makes it clear that where the assessee makes a payment otherwise by an account payee cheque drawn on a bank or account payee draft, the payment so made shall be deemed to be the profit of business or profession and accordingly chargeable as per sub-section (3A) whereas, as per sub-section (3) substituted by the Finance Act, 2008 w.e.f. 01/04/2009 and prior to its substitution amended by Finance Act 1987, where the 41 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
payment or aggregate of payment to a person in a day, otherwise by an account payee cheque/draft, no deduction shall be allowed in respect of such expenditure. Without going into much deliberation, it is noted that the assessee knowingly willfully did not appear before the Assessing Officer and even did not respond to the notices issued and served upon u/s 147, 143(2) and 143(1) of the Act. The Ld. Assessing Officer was precluded from examining the factual matrix. Even the Ld. Commissioner of Income Tax (Appeal) while coming to a particular conclusion has not examined the facts in detail. Even otherwise, the mandate of Article- 265 of Constitution of India, only due taxes has to be levied/collected, therefore, to safeguard the interest of assessee as well as of the Revenue, we deem it appropriate to remand this issue to the file of the Ld. Assessing Officer to examine the factual matrix and decide in accordance with law. This ground is, therefore, allowed for statistical purposes. This will also cover identical ground for Assessment Year 2008-09 and 2010-11 (ITA No.3005 & 3006/Mum/2016) also.
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5. Ground no. 5 relates to confirming the addition made on account of unexplained cash credit amounting to Rs.36,68,160/- made u/s 68 of the Act. The crux of the argument on behalf of the assessee is that except two parties, all other parties replied to the notices. On the other hand, the Ld. CIT-DR defended the addition sustained by the Ld. Commissioner of Income Tax (Appeal). 5.1. We have perused the record and find that the Ld. Assessing Officer on comparison of profit & loss account of Assessment Year 2007-08 and 2006-07, observed that there is an increase by Rs.1,35,00,000/- in respect of Share Capital. The assessee was asked to produce documentary evidence with respect to unsecured loans. No compliance was made by the assessee. The Ld. Assessing Officer considering certain decisions like Power drugs Ltd. (2011) 13 taxman.com 56 (P & H), Hon'ble Apex Court in Sumati Dayal 80 taxman 89 (Supreme Court) and certain other decisions observed that the assessee failed to discharge the onus cast up on it and thus added Rs.1,35,00,000/- to the total income of the assessee. On appeal, before the Ld. Commissioner of Income Tax 43 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
(Appeal), it was noted that the assessee received share capital and share premium in the name of Kishan Gopal Agarwal and Kapil K. Agarwal. In order to explain the genuineness, the assessee was asked to provide basis for receiving the value of share, which include the face value along with premium. The assessee submitted a copy of board resolution passed in the meeting held on 06/03/2007 and valuation certificate dated 26/02/2007, issued by Chartered Accountant, showing the value of Rs.30/-. The Ld. Commissioner of Income Tax (Appeal) observed that in order to establish the identity, creditworthiness and genuineness of the transaction in totality merely filed valuation certificate. The whole difficulty arose due to non-appearance of the assessee before the Ld. Assessing Officer. Considering the totality of facts, we remand this issue to the file of the Ld. Assessing Officer to examine the claim of the assessee afresh. The assessee is directed to furnish necessary evidence with justification to substantiate its claim. The assessee be given opportunity. Thus, this ground is also allowed for statistical purposes. This will also cover identical ground i.e. No.5 for 44 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
Assessment Year 2008-09 and 2010-11 (ITA No.3005 & 3006/Mum/2016) also.
6. The last ground pertains to confirming the addition made on account of estimated ad-hoc gross profit at the rate of 5% on turnover merely on presumptive basis. Considering the arguments advanced from both sides, we deem it appropriate to remand this issue also to the file of the Ld. Assessing Officer. The assessee is directed to produce the necessary evidence and to make effective representation to substantiate its claim. This ground is also allowed for statistical purposes. This will cover ground number 6 for Assessment Years 2008-09 and 2010-11 (ITA No.3005 & 3006/Mum/2016).
7. Now, we shall take up the appeals of the Revenue in ITA No.2314/Mum/2016), deleting the addition of Rs.3,68,56,119/- made u/s 68 of the Act has been challenged. The crux of argument on behalf of the Revenue is that since the assessment was framed u/s 144 of the Act, the assessee has not established the genuineness of the sundry creditor in spite of the fact that the assessee 45 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
was given opportunities. On the other hand, the Ld. Counsel for the assessee, defended the impugned order by contending that the confirmation were received from Meridian Shipping Services.
7.1. We have perused the records and find that the assessee declared total income of Rs.1,31,82,030/-. Notice u/s 148 of the Act was issued on 29/03/2012 and due to non-compliance of notices, the assessment was framed u/s 144 of the Act determining the total income at Rs.15,27,51,730/-. The Ld. Assessing Officer issued notices u/s 133(6) of the Act to Merridian Shipping Services, Hermes Travel and Cargo Pvt. Ltd, FRIDA Sea Foods, Aqua Fish. The reply was received only from Merridian Shipping Services, confirming the transaction and there was no compliance from other parties rather the notices were returned back unserved. In the case of Hermes Travel and Cargo Pvt. Ltd. clear cut denial was made by the party having any transaction with the assessee. However, in para 6.3.8 of the impugned order, it has been observed that the assessee has filed confirmation in the case of (a) Frida Sea Foods (business) Herms Travel and Cargo Pvt. 46 ITA Nos.2313 to 2315 and 3004 to
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Ltd. before the Assessing Officer. It has been further observed that when the Assessing Officer made enquiries, no positive confirmations/reply were sent to the Assessing Officer by the respective parties and even these parties were not produced along with their relevant books of accounts to verify the genuineness. It is also noted that in spite of providing sufficient opportunities to the assessee, the assessee did not appear before the Ld. Assessing Officer and ultimately, the assessment was framed u/s 144 of the Act. Statutory notices u/s 148, 143(2) and 142(1) were issued and served upon the assessee asking to furnish the necessary details, meaning thereby, the Ld. Assessing Officer was denied opportunities to examine the parties, genuineness of the transactions, therefore, in the interest of justice and fair play, we deem it appropriate to remand this issue to the file of the Ld. Assessing Officer to examine the claim of the assessee. The assessee is directed to produce the concerned parties before the Assessing Officer so that the genuineness of the transaction, creditworthiness and identity can be examined. This ground is allowed for 47 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
statistical purposes. This will cover identical ground in the remaining appeals of the Revenue also.
8. The next ground raised by the Revenue pertains to deleting the addition of Rs.1,35,00,000/- made u/s 68 with respect to unexplained share capital and share premium. While adjudicating the identical ground in the appeal of the assessee, we have remanded this issue to the file of the Ld. Assessing Officer for fresh adjudication. Since, the assessee did not appear before the Ld. Assessing Officer, therefore, on the same reasoning, the assessee is expected to fulfill the conditions provided u/s 68 of the Act, therefore, this ground is also remanded back to the file of the Ld. Assessing Officer for fresh adjudication. The assessee be given opportunity of being heard and so that the onus cast upon the assessee can be discharged. This ground is also allowed for statistical purposes. This view of ours will cover identical ground in the remaining appeals of the Revenue.
9. The last ground pertains to deleting the addition made of Rs.2,62,77,610/- being 5% of net sales without properly considering the facts that the assessee failed to produce necessary details/documents, called for and thus the Ld. Assessing Officer was justified in estimating the income @ 10% of the net sales. Without going into much deliberation and on consideration of arguments from both sides, we are of the view that it may be 10% or 5% but 48 ITA Nos.2313 to 2315 and 3004 to 3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
there should be proper justification for the estimation. As mentioned earlier, since, the assessee did not appear before the Assessing Officer and the assessment was framed u/s 144 of the Act and mandate of Article 265 of constitution of India to the effect that only due taxes has to be levied/collected, therefore, to safeguard the interest of both the parties, we deem it appropriate to remand this issue also to the file of the Ld. Assessing Officer for fresh adjudication. The assessee be given opportunity. This ground is allowed for statistical purposes. Our view will also cover identical ground in the remaining appeals of the Revenue.
Finally, the appeals of the assessee are partly allowed for statistical purposes whereas the appeals of the Revenue are allowed for statistical purposes.
This Order was pronounced in the open court on 16/05/2018.
Sd/- Sd/-
(G. Manjunatha) (Joginder Singh)
लेखा सद#य / ACCOUNTANT MEMBER या$यक सद#य / JUDICIAL MEMBER
मब
ुं ई Mumbai; +दनांक Dated : 16/05/2018
f{x~{tÜ? P.S/. न.स.,
आदे श क %$त'ल(प अ)े(षत/Copy of the Order forwarded to :
1. अपीलाथ/ / The Appellant
2. 01यथ/ / The Respondent.
3. आयकर आय3 ु त,(अपील) / The CIT, Mumbai.49 ITA Nos.2313 to 2315 and 3004 to
3006/Mum/2016 M/s Vipul Impex & Infrabuild Ltd.
4. आयकर आय3 ु त / CIT(A)- , Mumbai
5. 5वभागीय 0 त न ध, आयकर अपील&य अ धकरण, मब ुं ई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मब ुं ई / ITAT, Mumbai