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TMI Blog2009 (5) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... tent to issue notice u/s. 148. Further, we are of the view that the whole situation regarding the reopening of the assessment has to be seen from the facts obtained on the date of recording of the reasons. It may happen that on that day, AO may be prima facie convinced that there were reasons to believe that the income had escaped assessment. However, it may further happen that on detailed enquiry in the reassessment proceedings, he may come to the conclusion that no addition was called for. Such a conclusion will not render the reopening of the assessment as null and void or illegal. The ld counsel also argued that no other addition could have been made except with reference to the matter covered in the satisfaction note. This issue does not infringe on the jurisdiction of the AO to record reasons and issue notice u/s. 148. However, AO will not be competent to make fishing enquiries to make additions which are otherwise made in assessment u/s. 143(3) on the basis of notice issued u/s. 143(2) or s. 142(1). Therefore, these grounds are dismissed. Income from Cash credit - Addition u/s 68 - Bogus transactions - Transactions of purchase and sale - No documentary evidence was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for short), on 29-12-2006 under the provisions of Sections 143(3) and 148 of the Income Tax Act, 1961. The assessee has taken up four grounds in the appeal. Ground Nos. 1 and 2 are against reopening of the assessment under Section 148. The sum and substance of these grounds is that the notice issued under Section 148 was illegal, bad in law and without jurisdiction and consequently the order of reassessment was also illegal and bad in law. It is mentioned that as per recorded reasons, there was no basis for reopening the assessment and, therefore, the assessing officer did not have jurisdiction to frame the order of reassessment. Thus, such an order was bad in law. Ground Nos. 3 and 4 are against addition of Rs. 5 lakhs made by the assessing officer and sustained by the learned Commissioner (Appeals) under Section 69C of the Act. It is mentioned that on the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in directing the assessing officer to make the addition of Rs. 5 lakhs under Section 69C. It is also mentioned that the making of such an addition amounts to enhancement of income by the Commissioner (Appeals), for which no notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and submissions made before him. It was found by him that the reasons were recorded on the basis of the TEP, in which it was mentioned that the assessee indulged in transactions of sale through agent, which were bogus in nature. It was further mentioned that Shri Rajiv Goyal was paid commission of Rs. 5 lakhs. It was also mentioned that Ms. Sneh Sengar received a sum of Rs. 4 lakhs from the assessee company. It also mentioned that cash payments exceeding Rs. 20,000 were made, which were caught within the mischief of Section 40A(3). After examining the allegations, the assessing officer recorded reasons on 25-5-2005. He had reason to believe that income escaped assessment, which could be inferred on the basis of the TEP and the enquiries made therein. Therefore, the reopening of the assessment was upheld by him. 3. Before us, the learned Counsel for the assessee submitted that the return of income was filed on 2-12-2003. Therefore, notice under Section 143(2) could have been issued on the basis of the TEP, which was received by the CIT on 24-11-2004. Section 143(2) contains a provision that where a return of income has been furnished and the assessing officer considers it necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome which had escaped assessment and in addition thereto, he can also bring to tax any other income chargeable to tax, which had escaped assessment and which came to his notice subsequently. Reliance was also placed on the decision of the same court in the case of CIT v. Ram Singh, which was followed in the case of Dr. Devendra Gupta (supra). Reliance was also placed on the decision of Hon'ble Kerala High Court in the case of Travancore Cements Ltd. v. Asstt. CIT and Anr. (2008) 305 ITR 170 (Ker), in which it was held that the assessing officer does not have jurisdiction to proceed with the items in the reassessment proceedings, which stood covered in the notices issued under Sections 143(2) and 142(1). In this connection, reliance was also placed on the decision of Hon'ble Punjab Haryana High Court in the case of Vipan Khanna v. CIT (2002) 255 ITR 220 (P H); and Amrinder Singh Dhiman v. ITO (2004) 269 ITR 378 (P H), in which the decision in the case of Vipan Khanna (supra) was followed. 3.2 In reply, the learned departmental Representative submitted that the assessing officer had received the TEP on 24-11-2004. The content of the TEP required verification before tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of Section 147 of the Act. Therefore, a notice under Section 148 was issued on 26-5-2005. The assessing officer was not aware of the escapement of income on 24-11-2004, when the return was processed. He was not convinced about such escapement by 31st Dec, 2004 as the enquiries into the TEP were not completed by that time. In the case of Manohor Lal Gupta (supra), the assessing officer was aware of all the facts at the time of processing of the return, but he inadvertently forgot to issue notice under Section 143(2). Subsequently, a notice was issued under Section 148. The Hon'ble Rajasthan High Court held that this could not be done. However, as mentioned earlier, the facts of the instant case are completely distinguishable from the facts of the aforesaid case, inasmuch as the assessing officer was not aware about the escapement of income at the time of processing the return and not satisfied about such concealment till 31st Dec, 2004. Therefore, we are of the view that on the date when notice under Section 148 was issued, there was no jurisdiction with him to issue notice under Section 143(2) and accordingly he was competent to issue notice under Section 148. The other gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 69C. Before us, the learned Counsel merely mentioned that the addition was made by the assessing officer under Section 69 and confirmed by the learned Commissioner (Appeals) under Section 69C of the Act. Therefore, this action of the Commissioner (Appeals) amounted to enhancement of income. However, the case was not argued on merits as the assessee had surrendered the amount in the course of hearing before the learned Commissioner (Appeals). In reply, the learned departmental Representative merely relied on the findings of the lower authorities. 4.1 We have considered the facts of the case and rival submissions. We are not in agreement with the learned Counsel that mere change of Section amounts to enhancement of income by the learned Commissioner (Appeals) for the reason that the amount of addition remained the same and it is made in respect of the payment made to Shri Rajiv Goyal in cash. It was admitted that the assessee does not want to argue the case on merit as the amount had been surrendered before the learned Commissioner (Appeals). Therefore, these grounds are also dismissed. ITA No. 3424/Del/2007 - Appeal of the revenue 5. In regard to ground No. 1, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have taken place unless the goods were purchased. After analyzing the details furnished by the assessee, the learned Commissioner (Appeals) mentioned that the assessing officer had accepted the trading results of the assessee. In view thereof, addition in respect of purchases and sales could not have been made under Section 68 of the Act. His findings are contained in para 5 of his order, which are reproduced below: 5. I have considered the submissions made by the learned Authorised Representative. As stated above, there is no doubt that the assessing officer made the addition of Rs. 6,10,95,391 on account of sale and purchase relating to M/s Allure Creations, M/s Shashi Sales Marketing (P) Ltd., M/s M.V. Marketing (P) Ltd. and M/s Ganesh Textile for the reason that the appellant has failed to furnish the documentary proof regarding the genuineness of the transaction entered into with these parties. The Authorised Representative also referred to the fact that sale and purchase were duly reflected in the sales-tax returns filed by the appellant and which has been duly accepted by the STO. On merits, I have tried to analyze and co-relate the purchases and sales effected by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit/credit entries in the books of the appellant for which Section 68of Income Tax Act, 1961 can be invoked. In the case of Sona Electric Co. v. CIT (1984) 43 CTR (Del) 287 the jurisdictional Delhi High Court held that s. 68 of the Income Tax Act, 1961 makes it clear that a cash credit entry in the assessees books of account can be rejected by the Income Tax Officer on cogent grounds. When such grounds are themselves based on no evidence, the question of raising a presumption against the assessee does not arise. In the case of Annamaria Travels Tours (P) Ltd. v. Dy. CIT (2005) 95 TTJ (Del) 71, the Hon'ble jurisdictional Tribunal held that the assessee has not received any moneys from the airline companies. The credited presents amount due to them for purchase of tickets, Section 68 comes into play only where any sum is found credited in the account of the third person and the assessee unable to give satisfactory explanation in respect of the nature and source of the sum. The Section cannot apply where goods or services are acquired by the assessee on credit and an entry is made crediting the liability on the account of the person from whom the goods and services are acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue requires further examination to work out the exact profit earned by the assessee from the transactions. He relied on the decision of Hon'ble Delhi High Court in the case of CIT v. La Medica (supra), in which by reversing the findings of the Tribunal, the addition made in respect of bogus purchases was upheld. The relevant portion of the decision from pp. 579 and 580 is reproduced below: We have heard learned Counsel for the revenue. There is no appearance on behalf of the assessee in spite of notice. Though essentially the conclusions of the Tribunal have the colour of factual findings still we find that the Tribunal has not taken into consideration relevant materials and has also acted on irrelevant materials. The fact that the alleged sellers have been found to be persons with no means to effect purchases or to carry on business is a factor which does not appear to have been considered by the Tribunal in its proper perspective. The materials on record clearly establish that Chedi Lal was a petty employee of a concern of which Satya Pal Jain was a partner. In fact Satya Pal Jain was a partner of Medipac, one of the sister concerns of the assessee firm. On enq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of law if the finding is not founded on any evidence or material, or if it is contrary to evidence. Similar is the position if it is perverse or there is no direct nexus or link between the conclusion of fact and the primary fact upon which that conclusion is based. Where the Tribunal acts on partly relevant and partly irrelevant materials, and it is not possible to say to what extent the latter has influenced its mind, the finding is vitiated because of use of irrelevant material. That gives rise to a question of law. This position has been succinctly stated by the apex court in Dhirajlal Girdharilal v. CIT (1954) 26 ITR 736 (SC); CIT v. Daulatram Rawatmull (1973) 87 ITR 349 (SC). Where the Tribunal misdirects itself in law in basing its conclusions on some evidence ignoring other essential matters on record, a question of law arises see CIT v. Radha Kishan Nandlal (1975) 99 ITR 143 (SC). The answer to the question, therefore, is in the negative, in favour of the revenue and against the assessee. 5.3 In reply, the learned Counsel submitted that all transactions of purchase and sale were on credit basis and, thus, no investment was made in purchase of goods, which could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to ground No. 2, it is mentioned in the assessment order that the copy of the receipt showed payment of Rs. 4 lakhs to Ms. Sneh Sengar. The case of the assessee was that only Rs. 4,000 was paid to her. The assessing officer relied on the copy of the receipt and added a sum of Rs. 4 lakhs to the total income of the assessee. Before the learned Commissioner (Appeals), it was submitted that the assessee paid only a sum of Rs. 4,000 for which a voucher was filed before the assessing officer. The assessee had also made other payments to Ms. Sneh Sengar, which were not doubted by the assessing officer. Therefore , it was argued that in absence of any enquiry into the genuineness of the copy of the receipt, the assessing officer misdirected himself to make, addition of Rs. 4 lakhs. The learned Commissioner (Appeals) considered the facts of the case and submissions made before him. It was concluded that the assessee paid only a sum of Rs. 4,000 to Ms. Sneh Sengar. She was paid on other occasions also but none of the payments exceeded Rs. 20,000. Therefore, the addition made by the assessing officer was deleted. His findings are contained in para 6.2, which are reproduced below: 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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