2018 (5) TMI 1925 - AT - Income Tax

Reopening of assessment u/s 147 - passing the assessment order without considering the objections - HELD THAT - In the present case, we observe that the Assessing Officer has violated the directions of Hon ble Jurisdictional High Court in the case of Asian Paints Ltd. Vs. Deputy Commissioner of Income Tax Anr. 2007 (1) TMI 159 - BOMBAY HIGH COURT in not allowing four weeks time to the assessee before passing the assessment order after rejecting the objections. The time line set out by the Hon ble Bombay High Court in allowing four weeks time to the assessee is binding on the Assessing Officer. The violation of the directions of the Hon ble Jurisdictional High Court would make the assessment order bad in law. Also in the case of Aroni Commercials Ltd. Vs. Deputy Commissioner of Income Tax 2014 (2) TMI 659 - BOMBAY HIGH COURT in similar circumstances where the assessment order was passed in undue haste has condemned the action of Assessing Officer and has set aside the assessment order. In the present case objections against reopening were disposed of by the Assessing Officer on 05-03-2015. The Assessing Officer passed the assessment order on 16-03-2015 i.e. within 11 days of passing of the order rejecting objections. There was no time with the assessee to avail remedy against rejection of objections. Thus, there was clear violation of principles of natural justice and the law laid down by the Hon ble Jurisdictional High Court. Since, the Assessing Officer has violated the time line in passing the assessment order, the assessment order is liable to be set aside. We hold and direct accordingly. Thus, the appeal filed by the assessee is allowed on the issue of jurisdiction alone.

Summary

Issues:
1. Jurisdiction assumed by Assessing Officer under section 148 of the Income Tax Act, 1961.
2. Addition of bogus purchases made by the assessee.

Issue 1: Jurisdiction assumed by Assessing Officer under section 148 of the Income Tax Act, 1961:
The case involved reassessment proceedings initiated against the assessee based on information received from the State Sales Tax Department regarding suspicious dealings with Hawala Dealers. The Assessing Officer issued a notice under section 148 of the Act, which the assessee objected to, but objections were rejected. The Assessing Officer made an addition of a significant amount on account of bogus purchases. The assessee challenged the jurisdiction assumed by the Assessing Officer, arguing that the reassessment was initiated solely based on information from the Sales Tax Department without proper evidence. The assessee provided various documents during the proceedings to support genuine transactions, but the Assessing Officer allegedly did not apply an independent mind. The First Appellate Authority had reduced the addition, but the assessee contended that the reassessment itself was flawed. The Hon'ble Tribunal held that the Assessing Officer violated the mandatory four-week period directive after rejecting objections, as per relevant High Court judgments. Due to this violation, the assessment order was deemed bad in law, and the appeal by the assessee was allowed on the issue of jurisdiction alone.

Issue 2: Addition of bogus purchases made by the assessee:
The Revenue appealed against the reduction of the addition by the Commissioner of Income Tax (Appeals) regarding bogus purchases. The Revenue contended that the assessee did not cooperate during the assessment proceedings, failed to produce necessary documents, and transacted with declared Hawala dealers without physical goods receipt. The Revenue sought the addition of the entire amount as bogus purchases. The Tribunal noted conflicting submissions, with the assessee asserting cooperation and document provision, except for seized documents. The Tribunal found that since the assessee succeeded on the jurisdictional issue, the merit-based grounds became irrelevant, and the appeal by the Revenue was dismissed. The Tribunal upheld the relief granted by the Commissioner of Income Tax (Appeals) to the assessee on merits. Consequently, the appeal filed by the assessee was partly allowed, and the Revenue's appeal was dismissed.

In conclusion, the Tribunal's judgment primarily focused on the jurisdictional aspect of the case, highlighting the importance of adhering to legal procedures and timelines in reassessment proceedings. The decision emphasized the significance of following High Court directives and principles of natural justice in conducting assessments, ultimately impacting the validity of the assessment order.