In case of return of income processed under section 143(1), the only condition to be satisfied for reopening is that taxable income has escaped assessment and the assessee’s plea that no fresh material was there before the AO warranting re-opening, was not relevant.
Assessee’s assessment was reopened by AO by issuing notice under section 148 estimating profit @ 25% out of alleged Hawala purchases on the basis of information received from sales Tax Department. Against this, assessee made a plea that no fresh material was there before AO warranting re-opening.
Held: In case of return of income processed under section 143(1), the only condition to be satisfied for reopening is that taxable income has escaped assessment and the assessee’s plea that no fresh material was there before the AO warranting re-opening, was not relevant. Hence, re-opening made by the AO by issuing notice under section 148 was upheld.
Decision: Against the assessee.
IN THE ITAT, MUMBAI BENCH
C.N. PRASAD, J.M. & N.K. PRADHAN, A.M.
Ajay Narayan Bhoir v. Asstt. CIT
ITA No. 5052/MUM/2016
25 April, 2018
Assessee by: S.M. Makhija, Authorised Representative
Revenue by: V. Vidhyadhar, Departmental Representative
N.K. Pradhan, A.M.
This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner (Appeals)-2, Thane (in short ‘Commissioner (Appeals)’) and arises out of the assessment completed under section 143 (3) read with section 147 of the Income Tax Act 1961, (the ‘Act’).
2. Broadly stated, the assessee/appellant has raised two grounds of appeal. The 1st one is against the order of the learned Commissioner (Appeals) confirming the reopening made by the assessing officer (assessing officer) under section 147 of the Act. The 2nd ground is against the order of the Commissioner (Appeals) estimating profit @ 25% out of alleged hawala purchases of Rs. 25,74,568 which comes to Rs. 6,43,642.
3. We begin with the 1st ground of appeal. The facts of the case are that the assessee filed his return of income for the assessment year 2011-12 on 29-9-2011 disclosing a total income of Rs. 69,49,784. The same was processed by the assessing officer under section 143(1) of the Act. Subsequently, the assessing officer (assessing officer) received information from the Sales Tax Department, Government of Maharashtra that certain accommodation-entry providers had given entries and that no goods as mentioned in the purchase bills issued by them were in fact delivered to the beneficiaries. In the case of the assessee, the entry providers were as under:
Name of the Party
Amount (Rs. )
|Shree Amaaya Enterprises
| Meridian Trading Co.
|Sun Shine International
In view of the above facts, the assessing officer issued notice under section 148 dated 20-6-2013 which was duly served on the assessee.
3.1 In the present case, the return of income filed by the assessee was processed under section 143(1). In the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500 (SC), it has been held that intimation under section 143(1)(a) is not an assessment and a notice under section 148 issued was valid. In Kone Elevator India P. Ltd. v. ITO (Mad) 340 ITR 454, CIT v. Ideal Garden Complex P. Ltd. (Mad) 340 ITR 609 and ACIT v. Maersk Global Services Centre (India) (P) Ltd. (ITAT, Mum) 66 DTR 90, it has been held that in case of return of income processed under section 143(1), the only condition to be satisfied for reopening is taxable income has escaped assessment and the assessee’s plea that no fresh material was there before the assessing officer warranting re-opening, is not relevant.
In view of the above position of law, we uphold the re-opening made by the assessing officer by issuing notice under section 148 of the Act.
4. Now we turn to the 2nd ground of appeal. During the course of assessment proceedings, the assessing officer asked the assessee to file details in respect of purchases made from the abovementioned parties. The assessing officer, having gone through the details filed by the assessee noticed that the said transactions were not properly supported by relevant documents such as transportation bills, delivery challans, goods receiving note, octroi receipt etc.
Subsequently, the assessing officer issued notice under section 133(6) to the abovementioned parties asking them to produce the details of transactions they had with the assessee. But these notices were returned unserved by the postal authorities. Therefore, the assessing officer treated the purchases made from the above parties as unsubstantiated and made an addition of Rs. 25,74,768.
5. Aggrieved by the order of the assessing officer, the assessee filed an appeal before the learned Commissioner (Appeals). The learned Commissioner (Appeals) relying on the decision in Vijay Proteins Ltd. v. ACIT 58 ITD 428 (Ahd), Sanjay Oil Cakes Industries v. CIT (2008) 316 ITR 274 (Guj), restricted the disallowance to Rs. 6,43,642 (@ 25% of Rs. 25,74,568).
6. Before us, the learned counsel of the assessee vide the grounds of appeal submits that (i) the learned Commissioner (Appeals) erred in confirming the order of the assessing officer not providing documentary evidence and cross-examination of the so-called hawala dealer or bogus supplier of goods which had been sought by the appellant during the course of assessment proceedings, (ii) the learned Commissioner (Appeals) erred in rejecting the books of accounts under section 145(3) without issuing a show cause notice to the appellant nor providing an opportunity of hearing, (iii) the learned Commissioner (Appeals) erred in estimating the profit without furnishing to the appellant the material on which the rate of gross profit was arrived at or without giving an opportunity to the assessee to rebut it (iv) the learned Commissioner (Appeals) erred in not applying any scientific method or comparative net profit of similar type of business at the time of determining the net profit of the appellant after rejecting the books of account.
Further, the learned counsel files a Paper Book containing the decision in M/s. Andaman Timber Industries v. CIT of Central Excise Kolkata-II (SC) (Civil Appeal No. 4228 of 2006); H.R. Mehta v. The ACIT, Mumbai (Bom.) (ITA No. 58 of 2001); CIT-13 v. Ashish International (Bom.) (ITA No. 4299 of 2009); Income Tax Officer 25(3)(2), Mumbai v. Deepak Poptalal Gala (ITA Bench-D, Mumbai) ITA No. 592/Mum/2013 dated 27-3-2015; Hiralal Chunnilal Jain v. ITO (ITAT Mumbai ‘H’ Bench) ITA No. 457/Mum/2014, ITA No. 2545/Mum/2014 and ITA No. 1275/Mum/2014.
7. On the other hand, the learned Departmental Representative submits that the notices issued by the assessing officer under section 133(6) were returned back as unserved by the postal authorities. These notices carried the address provided by the assessee to the assessing officer. Also it is stated that the assessee failed to file before the assessing officer the relevant documents such as transportation bills, delivery challans, goods received note, octroi receipt etc. Thus, the learned Departmental Representative supports the order passed by the learned Commissioner (Appeals) estimating the profit @ 25% on the said purchases of Rs. 25,74,568.
8. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below.
In the case-laws referred to by the learned counsel of the assessee, the applicability of cross-examination has been emphasized. In the present appeal as mentioned hereinbefore the notices issued by the assessing officer to the parties under section 133(6) were returned back by the postal authorities as unserved. The assessing officer had sent these notices in the address furnished by the assessee. Thus the issue of cross-examination materially cannot step in.
We are of the considered view that the contentious issues in the instant case could be resolved by proper hearing by the assessing officer. A proper hearing must always include a fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view. Cross-examination is allowed by procedural rules and evidently also by the rules of natural justice. Any witness who has been sworn on behalf of any party is liable to be cross-examined on behalf of the other party to the proceedings.
The Hon’ble Supreme Court in State of Kerala v. K.T. Shaduli Grocery Dealer AIR 1977 SC 1627, recognised the importance of oral evidence by holding that the opportunity to prove the correctness or completeness of the return necessarily carry with it the right to examine witnesses and that includes equally the right to cross-examine witnesses.
In ITO v. M. Pirai Choodi (2011) 334 ITR 262 (SC), the Hon’ble Supreme Court has held that “Order of assessment passed without granting an opportunity to assessee to cross-examine, should not have been set aside by High Court; at most, High Court should have directed assessing officer to grant an opportunity to assessee to cross-examine concerned witness.”
In a similar case of a beneficiary of accommodation entries, their Lordships of the Hon’ble Bombay High Court in the case of Om Vinyls P. Ltd. v. ITO (Writ Petition (L) No. 3114 of 2014) have observed that it would be open to the assessee to raise all permissible defences and also to insist on cross-examination of the persons who have made a statement implicating the assessee in having participated in taking accommodation entries.
In view of the above factual scenario, we set aside the order of the learned Commissioner (Appeals) on the above issue and restore the matter to the file of the assessing officer to make a de novo order after examining the parties mentioned at para 3 hereinbefore and allowing cross-examination to the assessee. It is the duty of the assessee to file before the assessing officer the recent address of the above parties. We direct the assessee to file the relevant documents/evidence before the assessing officer. Needless to say, the assessing officer would give reasonable opportunity of being heard to the assessee before finalizing the fresh order.
As the matter has been restored to the file of the assessing officer for fresh adjudication, we are not adverting to the case-laws relied on by the learned counsel.
Thus the 2nd ground of appeal is allowed for statistical purposes.
9. In the result, the appeal is partly allowed.