Income Tax Appellate Tribunal - Pune
Chandraprabhu Gramin Bigar Sheti ... vs Income-Tax Officer, Ward - 2,, ... on 17 May, 2018
आयकर अपीलीय अिधकरण पुणे यायपीठ "SMC" पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
SMC BENCH, PUNE
ी डी.
डी क णाकरा राव,
राव लेखा सद य के सम
BEFORE SHRI D. KARUNAKARA RAO, AM
आयकर अपील सं. / ITA No.2648/PUN/2016
िनधा रण वष / Assessment Year : 2009-10
Jaykumar Balkrishna Shah,
Prop. Jaybee Electricals,
27, Rokadiya Hanuman Colony,
Opp. Sawji Hospital,
Aurangabad
PAN : AOJPM1650F .... अपीलाथ /Appellant
Vs.
ITO, Ward-2(2),
Aurangabad .... यथ / Respondent
अपीलाथ क ओर से / Appellant by : Smt. Deepa Khare
थ की ओर से / Respondent by : Shri Pankaj Garg
सुनवाई क तारीख / घोषणा क तारीख /
Date of Hearing : 16.05.2018 Date of Pronouncement: 17.05.2018
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-2, Aurangabad, dated 07-10-2016 for the Assessment Year 2009-10.
2. Grounds raised by the assessee read as under :
"1. On the facts and circumstances of the case, the re-assessment proceedings u/s.147 being initiated in absence of material showing escapement of income in the hands of the appellant is void and may kindly be cancelled. The material based for reopening is vague and has no live link with escapement of income in the hands of the appellant.
2. On the facts and in the circumstances of the case, the Ld. AO erred in law and on facts in completing the reassessment proceedings without dealing with the objections to notice u/s.148 filed by the appellant and passing an order thereon. The legal procedure laid down by Hon'ble Supreme Court in the case of GKN Driveshaft has not been followed and therefore the reassessment order u/s.147 is bad in law and may kindly be deleted.
3. The Ld.CIT(A) erred in law and on facts in confirming addition of Rs.13,60,939/- on account of inflated purchases alleged to be from bogus parties being 20% of Rs.68,04,695/- added by the Ld. AO.2 ITA No.2648/PUN/2016
Jaykumar Balkrishna Shah
4. The Ld.CIT(A) erred in law and on facts in confirming the addition inspite of holding that the Ld. AO has not brought on record any evidence to prove that the purchases were bogus and further ignoring the evidence produced in support of the purchases.
5. The appellant craves to add, alter, modify or substitute any ground of appeal at the time of hearing."
3. Briefly stated relevant facts are that assessee is an individual and is engaged in the business of Electrical Contractor. Assessee filed the return of income on 30-09-2009 declaring total income of Rs.7,40,830/- for the assessment year under consideration. On the basis of information received from the Investigation Wing of Sales Tax Department, AO issued notice u/s.148 of the Act to the assessee. AO found that assessee made purchases from 4 Hawala parties to the extent of Rs.68,04,695/-. AO noticed that assessee has not maintained the month-wise opening stock, purchases, sales and closing stock etc. At the end of the assessment proceedings u/s.143(3) r.w.s.147 of the Act, the AO made addition of 20% of hawala transactions made by the assessee which come to Rs.13,60,939/-. Assessee, being arrived with the order of AO, filed an appeal before the CIT(A).
4. Regarding the issue of reopening of the assessment, the CIT(A) held the reassessment made by the AO as valid and proper one and also sustainable under the law. While coming to the said conclusion, he discussed various case laws on the issue.
Regarding the merits of addition of 20% of purchases, the CIT(A), after elaborately discussion various case laws and distinguishing of various judgments on the issue, upheld the disallowance made by the AO.
5. Assessee filed the present appeal challenging the order of CIT(A) sustaining the disallowance to 20% of purchases made by the AO. 3 ITA No.2648/PUN/2016
Jaykumar Balkrishna Shah
6. Before me, at the outset, Ld. Counsel for the assessee referring to the letter dated 03-03-2015 addressed by the assessee to the ITO, Ward-2(3), Aurangabad requesting opportunity to cross examine the said dealer and additional information based on which the assessment is re-opened and submitted that in this case assessee asked for granting an opportunity of cross examination of the party and the same was denied. Further, he submitted that the addition made by AO in the re-assessment will not survive as the same is made at the back of the assessee. For this proposition, he relied on the following decisions of Pune Bench of the Tribunal by filing the copies of orders :
1. ACIT Vs. M/s. J.K. Petrochemical Industries - ITA Nos. 34 % 35/PUN/2012, dated 30-11-2016
2. ITO Vs. M/s. Metal United Alloys Fusion Products Ltd. and Vice versa - ITA No. 2286/PUN/2016 & C.O. No.39/PUN/2016, dated 21-04-2017
3. Anita Sanjay Agrawal & Ors Vs. ITO 52 CCH 0257 Pune-Tribunal
4. Shri Bechan Surajbali Kumbhar Vs. ITO - ITA No.2357/PUN/2015, dated 07-
03-2018
7. Ld. DR for the Revenue relied on the orders of AO/CIT(A) dutifully.
8. I have heard both the sides on the legal aspect of the issue relating to correctness of making additions at the back of the assessee by the Assessing Officer without granting benefit of cross examination to the assessee. I have also perused the decisions relied on by the Ld. Counsel for the assessee. On perusing the same, I find this issue is squarely covered in favour of assessee by virtue of decisions of Pune Bench of the Tribunal. I find in the case of ACIT Vs. M/s. J.K. Petrochemical Industries - ITA Nos. 34 & 35/PUN/2012, dated 30-11-2016 the Tribunal quashed the reassessment order made by the AO u/s.144 r.w.s.148 of the Act and dismissed the appeal of the Revenue. For the sake of completeness, I proceed to extract the said finding of the Tribunal (supra) as follows :
4ITA No.2648/PUN/2016
Jaykumar Balkrishna Shah "8. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to re-opening of assessment. It is an undisputed fact that the return of income for AY 2003-04 was filed by the assessee on 31.10.2003 which was initially processed u/s 143(1) of the Act. Later-on, a notice u/s 148 was issued on 29.03.2010 for re-
opening the assessment. We find that assessee vide letter dated 28/04/2010 inter-alia had submitted that the return of income filed by it on 31/10/2003 be treated as return of income in response to notice u/s 148 of the Act & had further sought reasons for reopening. We find that ld.CIT(A) after calling the remand report from the AO and the assessee's reply to the remand report and after considering the assessee's submission has given a finding that assessee had filed objection on 08.06.2010 to issuance of notice u/s 148 of the Act. The AO did not dispose of the objections and proceeded and passed the re- assessment order. At this moment, on procedure to be followed in the case of re-assessment proceedings it would be relevant to refer to the decision of Hon'ble Apex Court in the case of GKN Driveshafts (India) Ltd., Vs., ITO (supra) wherein the Hon'ble Apex Court has held as under:
"We clarify that when a notice u/s 148 of the Income-Tax Act is issued, the proper course of action for the notice is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order."
We further find that in case of KSS Petron Private Ltd (supra) where the facts were that the AO had passed the re-assessment order without disposing of assessee's objection for re-opening of assessment and when the matter was carried before the Tribunal, the Tribunal had set aside the orders and restored the assessment to the AO to pass fresh orders after disposing of the objections to re-opening, the Hon'ble High Court observed as under:
"8. We note that once the impugned order finds the assessment order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on re-opening notice, without jurisdiction (without compliance of the law in accordance with the procedure;, yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale / old matters."
9. Before us Revenue has not placed any contrary binding decision in its support. The decisions relied upon by the ld.DR are distinguishable on facts and are therefore not applicable to the facts of the present case. In the present case, since the AO has not disposed of the objections raised by the assessee on the re-opening of the assessment order u/s 147 of the Act, we relying on the aforesaid decision of Hon'ble Bombay High Court in the case of KSS Petron (supra), and following the same reasoning we quash the reassessment order passed u/s 144 r.w.s 148 of the Act. Since we have upheld the order of ld.CIT(A) in quashing the re-assessment order framed u/s 144 r.w.s 148 of the Act, we are of the view that the other grounds raised by the Revenue on merits, require no adjudication."
5ITA No.2648/PUN/2016
Jaykumar Balkrishna Shah
9. Further, I find the Pune Bench of the Tribunal in the case of M/s. Joto Abrasives Pvt. Ltd. Vs. DCIT in ITA No.2902/PUN/2016 dated 28-03-2018 (supra), held as under :
"7. We heard both the sides on the legal aspect of the issue relating to correctness of making additions at the back of the assessee by the Assessing Officer without granting benefit of cross examination of the assessee. In our view, this issue is covered in favour of assessee by virtue of decision of Pune Bench of the Tribunal in the case of Anita Sanjay Agrawal Vs. ITO and others in ITA Nos.2622 to 2624/PUN/2016. For the sake of completeness, relevant para is extracted herein below:
"25. The facts and issues arising before us are squarely covered by the facts and issues before the Hon'ble Supreme Court in M/s. Andaman Timber Industries Vs. Commissioner of Central Excise (supra) and applying the said principle / ratio to the facts of the present case, we hold that where the assessee had sought cross-examination of the witnesses at the earliest stage i.e. while objecting to the reasons recorded for reopening the assessment, which duly has been acknowledged by the Assessing Officer in his order disposing of objections raised by the assessee against reopening of assessment. But the Assessing Officer though asked the assessee to collect the statement but failed to allow cross-examination though he admitted that the same would be allowed in due course of time. On a later date, the Assessing Officer concludes that the letters sent under section 133(6) of the Act to the dealer were returned back. But the same cannot be reason for denying cross-examination. In the absence of allowing cross- examination of witnesses used against the assessee, where the addition was made in the hands of assessee on the basis of aforesaid statements recorded by the Sales Tax Department, we hold that no addition on account of bogus purchases can be made in the hands of assessee. The assessee had also established factum of trail of goods. Accordingly, we delete the addition made on account of bogus purchases. The grounds of appeal raised by the assessee are thus, allowed."
Considering the above, we are of the opinion that the facts are comparable and thus the decision of the Tribunal apply to the legal issue raised by the assessee in Ground No.3(c) of the appeal. On facts, it is evident that the benefit of cross examination was not granted to the assessee before making addition. Further, the order of the AO/CIT(A) do not indicate furnishing the copies of the statements of the suppliers to the assessee before making assessment. Nevertheless, the assessee furnished evidences by way of purchase bills, lab test reports showing the fact relating to manufacture of goods. Therefore, the addition made by AO without granting cross examination is unsustainable. Reliance is placed on the ratio of Hon'ble Apex Court in the case of M/s. Andaman Timber Industries Vs. CIT (supra) and the decision of the Tribunal in the case of Anita Sanjay Agrawal Vs. ITO (supra). Accordingly, the ground No.3(c) raised by the assessee is allowed.
Considering our decision above, the remaining grounds raised by the assessee on merits are dismissed as being academic." 6 ITA No.2648/PUN/2016
Jaykumar Balkrishna Shah It is undisputed fact that the assessee requested for grant of cross- examination benefit. AO did not allow the same. Considering the said Hon'ble Apex Court judgment in the case of M/s. Andaman Timber Industries Vs. CIT (supra), failure to allow the cross-examination makes the assessment order invalid. Considering the same, I am of the opinion that the facts are comparable and thus, the decisions of the Tribunal apply to the legal issue raised by the assessee in Ground Nos.1 & 2 of the appeal. I, therefore, quash the re-assessment order passed by the AO u/s.143(3) r.w.s. 147 of the Act.
Consequently, the grounds raised by the assessee on merit become academic and requires no adjudication. Therefore, the said grounds by the assessee are dismissed as such.
10. In the result, appeal of the assessee is partly allowed.
Order pronounced on this 17th day of May, 2018.
Sd/-
(D.KARUNAKARA RAO)
लेखा सद / ACCOUNTANT MEMBER
पुणे / Pune; दनांक Dated : 17th May, 2018.
Satish
आदेश क ितिलिप अ ेिषत/Copy of the Order is forwarded to :
1. अपीलाथ / The Appellant;
2.
यथ / The Respondent;
3. आयकर आयु (अपील) / The CIT(A)-2, Aurangabad
4. आयकर आयु / The CIT-2, Aurangabad
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, पुणे "SMC" / DR 'SMC', ITAT, Pune;
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER,स
स यािपत ित //True Copy//
//True Copy// Senior Private Secretary
आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune