2022 (5) TMI 1280 - AT - Income Tax

Reopening of assessment u/s 147 - Accommodation entries receipt - HELD THAT - We find sufficient basis for plea of the assessee that even the conditions of 1st proviso to Section 147 is not complied with. It is not shown as to how the assessee has failed to disclose material facts fully and truly in the original statement . The assessee is not expected to disclose something which he is not privy to. In the absence of any food grain bills received by the assessee from the suppliers named in the statement, we are unable to understand the basis for alleging any failure on the part of the assessee as perceived in the reasons recorded. In these peculiar facts, we are of the firm opinion that neither the strict condition of main provision of Section 147 is fulfilled nor the additional conditions embedded in 1s t proviso has been complied with. The twin conditions of format ion of belief towards escapement of income and such escapement attributable to failure on the part of the assessee are solely missing in the instant case. Without scrupulous compliance of jurisdictional parameters, the Assessing Officer was obviously not competent to invoke the provision of Section 147 of the Act which are drastic in nature. The assumption of jurisdiction under Section 147 is thus clearly without sanction of law and void ab initio. The consequent reassessment order is thus clearly bad in law. In this view of the matter, the reassessment order framed in consequence of invalid notice issued under Sect ion 148 is requires to be quashed. Having held the impugned re-assessment order framed without fulfilling prerequisites of Section 147 of the Act to be bad in law, we do not consider it expedient to deal with the challenges raised by the assessee on merits of additions

Summary

Issues Involved:
1. Validity of jurisdiction assumed under Section 148 of the Income Tax Act.
2. Merits of the additions/disallowances made in the re-assessment proceedings.

Issue-wise Detailed Analysis:

1. Validity of Jurisdiction Assumed Under Section 148 of the Income Tax Act

The assessee challenged the re-assessment orders on the grounds of wrongful assumption of jurisdiction by the Assessing Officer (AO). The AO issued notices under Section 148 based on information from the Investigation Wing, which included a statement from Shri Ram Prakash Bhatia confessing to providing accommodation entries through fictitious bills. The assessee argued that the AO did not apply independent mind and acted mechanically on the information received without proper inquiry.

The Tribunal noted that the reasons for reopening the assessment were based on generalized statements by Shri Ram Prakash Bhatia, who mentioned providing accommodation entries related to food grain bills. However, the assessee was engaged in the business of manufacturing and trading of yarn and garments and not in food grains. The Tribunal found that the statement did not directly implicate the assessee and that there was no tangible material to justify the reopening of the assessment. It was concluded that the AO failed to show how the assessee did not disclose material facts fully and truly during the original assessment. Consequently, the Tribunal held that the assumption of jurisdiction under Section 147 was without sanction of law and void ab initio, leading to the quashing of the reassessment orders.

2. Merits of the Additions/Disallowances Made in the Re-assessment Proceedings

The Tribunal did not delve into the merits of the additions/disallowances towards bogus purchases as it found the re-assessment orders to be invalid due to the wrongful assumption of jurisdiction. However, it noted the assessee's arguments regarding the genuineness of purchases supported by documentary evidence, such as purchase invoices, material receipt notes, VAT returns, and stock registers. The assessee contended that the AO did not provide an opportunity to cross-examine the witness, Shri Ram Prakash Bhatia, whose statements were used against the assessee.

Given the invalidity of the jurisdiction, the Tribunal did not consider it necessary to address the merits of the additions, rendering the exercise infructuous.

Separate Judgments Delivered:

The Tribunal delivered a common order for all the appeals, applying the same reasoning and findings across different assessment years (2010-11, 2011-12, and 2012-13). The appeals were allowed, and the re-assessment orders were quashed for all the years in question.

Conclusion:

The Tribunal quashed the re-assessment orders for all the assessment years under consideration, holding that the AO wrongfully assumed jurisdiction under Section 147 of the Income Tax Act. The appeals were allowed, and the Tribunal did not address the merits of the additions due to the invalidity of the jurisdiction.