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2024 (12) TMI 692 - AT - Income TaxReopening of assessment by non jurisdictional officer - Legality of notice issued by Jurisdictional Assessing Officer - notice is challenged by the assessee stating that JAO could not have issued the notice u/s. 148 but by the Faceless Assessing Officer who conducted the assessment proceedings - addition u/s 68 - HELD THAT - As relying on Hexaware Technologies Ltd. 2024 (5) TMI 302 - BOMBAY HIGH COURT notice could not have been issued by the Jurisdictional Assessing Officer, the notice issued by the learned JAO cannot be upheld. Accordingly, notice u/s. 148 of the Act issued on 27.03.2022 by the Jurisdictional Assessing Officer is bad and invalid. The reassessment proceedings carried out on the basis of invalid notice cannot be sustained. Therefore, we quash the assessment order passed by the learned Assessing Officer. Sales transactions with M/s Sonu Monu Telecom Centre Pvt. Ltd. - Coming to the issue of reopening, we find that information received was that assessee has purchases goods from M/s. Sonu Monu Telecom Pvt. Ltd. of Rs. 76,47,675/-. Thus, the information was that M/s. Sonu Monu Telecom Pvt. Ltd. has executed sales of Rs. 76,47,675/- to M/s Vinayak Traders. However, the correct facts were found that assessee has sold goods worth Rs. 85,69,197/- to M/s. Sonu Monu Telecom Pvt. Ltd. Thus, the reopening is based on incorrect information. Reasons for reopening also shown the same reason that the assessee has purchased goods from M/s. Sonu Monu Telecom Pvt. Ltd., which is incorrect. Therefore, as the information received it is not correct, reopening made on that basis is invalid. Bogus purchases - when the assessee is found to have sold goods to M/s. Sonu Monu Telecom Pvt. Ltd., the directions suggested by the CBIC clearly shows that entities from whom purchases have been made by the M/s. Sonu Monu Telecom Pvt. Ltd., addition to the extent of 2% of such purchases can be made. However, the learned Assessing Officer has made addition of 100% sales already recorded in the Profit Loss Account as income of the assessee, added the same amount to the total income of the assessee. This addition was made u/s. 68 of the Act. Addition u/s. 68 of the Act could be made only when the assessee fails to show that the nature and source of credit in the books of account. Here in this case, the nature of credit in the books of account is sale of goods, such sale of goods is supported by sale bill, stock register, and availability of goods from the principal, receipt of consideration by cheque. Therefore, the nature of credit in the books of account is sales. When all these details are placed before the learned Assessing Officer, he did not make any enquiry but rejected the evidences produced by the assessee. When the assessee discharges its onus by producing overwhelming evidences of the sales already recorded in the books of account, the rejection of the arguments and submission of the assessee without making any enquiry and then making an addition is not correct. It is case of the assessee that assessee has recorded this sales in the P L account and resulted profit thereon have already been offered for taxation. Details of s carriage cost and godown etc was disputed in the case of assessee for sale of 85 lakhs where the assessee has sold goods worth Rs 35 Crores. Thus, this reason does not support the case of revenue. Therefore, addition of the above sum once again by the Assessing Officer, which is confirmed by the learned CIT(A), is not sustainable. Assessee appeal allowed.
Issues Involved:
1. Legality and validity of the reassessment order. 2. Legality and validity of the notice issued under Section 148 of the Income Tax Act. 3. Legitimacy of sales transactions with M/s Sonu Monu Telecom Centre Pvt. Ltd. 4. Sustaining of addition under Section 68 of the Income Tax Act. 5. Evaluation of evidence and legal position by the CIT(A). 6. Validity of the report by the Investigation wing. 7. Compliance with binding decisions of higher courts and tribunals. Comprehensive Issue-wise Analysis: 1. Legality and Validity of the Reassessment Order: The reassessment order was challenged by the assessee on the grounds that it was based on incorrect information. The original information received suggested that the assessee had purchased goods from M/s Sonu Monu Telecom Centre Pvt. Ltd., which was incorrect as the assessee had actually sold goods to this entity. The Tribunal found that the reopening of the assessment was based on this incorrect information, rendering the reassessment invalid. 2. Legality and Validity of the Notice Issued Under Section 148: The notice under Section 148 was issued by the Jurisdictional Assessing Officer (JAO) instead of the Faceless Assessment Officer (FAO), as required by the faceless assessment scheme. The Tribunal, following the decision of the Hon'ble Bombay High Court, held that the notice issued by the JAO was invalid and bad in law. Consequently, the reassessment proceedings based on this invalid notice were quashed. 3. Legitimacy of Sales Transactions with M/s Sonu Monu Telecom Centre Pvt. Ltd.: The assessee contended that the sales to M/s Sonu Monu Telecom Centre Pvt. Ltd. were genuine, supported by sale bills, stock register entries, and receipt of payment through banking channels. The Tribunal noted that the assessee had provided overwhelming evidence of the sales, including the payment of applicable taxes. The Tribunal found that the Assessing Officer failed to conduct any specific enquiry to dispute these transactions, thus supporting the assessee's claim of genuine sales. 4. Sustaining of Addition Under Section 68 of the Income Tax Act: The addition of Rs. 85,69,197/- under Section 68 was challenged on the basis that the nature and source of the credit were established as sales of goods. The Tribunal held that the addition under Section 68 was inappropriate as the assessee had sufficiently demonstrated the nature of the credit through documentation and evidence. The Tribunal concluded that the addition was not sustainable as the assessee had already accounted for the sales in its Profit & Loss Account and offered the resultant profit for taxation. 5. Evaluation of Evidence and Legal Position by the CIT(A): The Tribunal found that the CIT(A) failed to appreciate the submissions and evidence provided by the assessee in a judicious manner. The CIT(A) upheld the addition without considering the overwhelming evidence presented by the assessee, which demonstrated the legitimacy of the sales transactions. 6. Validity of the Report by the Investigation Wing: The Tribunal noted that the CIT(A) erred in upholding the report by the Investigation wing without any corroborative material or evidence supporting the report's conclusions. The Tribunal found that the report's findings were not substantiated by any concrete evidence against the assessee. 7. Compliance with Binding Decisions of Higher Courts and Tribunals: The Tribunal observed that the CIT(A) did not adhere to the binding decisions of higher courts and tribunals, which required a more thorough evaluation of the evidence and legal position. The Tribunal emphasized the importance of following judicial precedents and ensuring decisions are based on substantiated evidence. Conclusion: The Tribunal allowed the appeal of the assessee, quashing the reassessment order and the notice issued under Section 148, and set aside the additions made under Section 68. The Tribunal's decision was based on the invalidity of the notice, incorrect information leading to reopening, and the failure of the revenue authorities to conduct specific enquiries or consider the evidence provided by the assessee.
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