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TMI Blog2012 (5) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe that income has escaped assessment - It has been held in a number of decisions that when there is no reason recorded or the reasons recorded are wrong/absurd or irrelevant the re-assessment proceedings based on such no reason or absurd or irrelevant reason is invalid - Appeal is allowed - ITA No. 2776/Mum/2009, ITA No. 2777/Mum/2009 - - - Dated:- 5-10-2011 - D. Manmohan, R.K. Panda, JJ. M.S. Mathuria for the Appellant Devi Singh for the Respondent ORDER R.K. Panda: The above two appeals filed by the assessee are directed against the separate orders dated 10.02.2009 of the ld. CIT(A)- VII, Mumbai relating to A.Yrs. 1999-2000 and 2000-01respectively. Since identical grounds have been taken by the assessee in both these appeals, therefore, these were heard together and are being disposed of by this common order. ITA No. 2776/Mum/2009 (By the assessee for A.Y. 1999-2000) 2. In grounds of appeal No. 1 and 2 the assessee has challenged the order of the ld. CIT(A) in upholding the reassessment proceedings initiated by the A.O. 2.1. Facts of the case, in brief, are that the assessee is a Private Limited Company engaged in the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that assessee had no genuine export transaction. 2.3 Before the ld. CIT(A), it was submitted that the re-opening of the assessment u/s 147 of the Act is bad in law, void ab initio and illegal. It was submitted that on the very same ground a block assessment was framed by the A.O. u/s 158BC, the ld. CIT(A) deleted the addition and the Tribunal also confirmed the decision of the ld. CIT(A). Now the A.O. has taken other route to make the same addition which was already made in the block assessment proceedings. It was submitted that the search was conducted in the year 2000 and the block assessment was completed in the year 2002. Since the law is very clear that the proceedings u/s 158BC as well as the proceedings u/s 147 have a common object and purpose i.e. to tax the undisclosed income, the A.O. cannot reopen the assessment u/s 147 if same issues were already considered in the block assessment. For this proposition, various decisions were cited before the ld. CIT(A). 2.4 However, the ld. CIT(A) was not convinced with the explanation given by the assessee. He noted that no clause in the provisions of section 147 as well as 148 of the Act prohibits the A.O. from re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 22 to 29 of the paper book, he drew the attention of the Bench to para 9 of the order of the ld. CIT(A) where the ld. CIT(A) has treated the exports as genuine by observing that the sales invoices and bills etc. are attested by the Customs Officials, there are Airways bills issued by the agents of the Airlines, the particulars of actual carriage of goods by Airlines are endorsed on these documents which conclusively prove the fact of export of goods outside India. The ld. CIT(A) in the said order has held that Customs Officials are part of the Revenue Department of the Government and their attestation could not be doubted unless otherwise proved beyond doubt. The export proceeds were realized through proper banking channel through convertible foreign exchange as certified by them in their certificates. Thus, the ld. CIT(A) has allowed the claim of deduction u/s 80HHC both in law and on facts. 3.2 Referring to page 30 to 32 of the paper book, the ld. counsel for the assessee submitted that the Revenue has filed an appeal before the Tribunal against the order of the ld. CIT(A). Referring to page 33 to 73 of the paper book the ld. counsel for the assessee drew the attention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erring to the decision of the co-ordinate Bench of the Tribunal in the case of Western India Bakers (P.) Ltd. vs. DCIT reported in [2003] 87 ITD 607 (Mum), he drew the attention of the Bench to the following observation of the Tribunal:- "Chapter XIV-B enacts a special procedure to deal with the search cases. The assessment pursuant to search cases cannot be equated with the ordinary assessment. The purpose of section 147 is to bring to tax the escaped income. Section 147 is a device to detect the escaped income under the normal assessment procedure. Normal assessment is being done on the basis of material and evidence available on record. In the normal assessment procedure, Assessing Officer sees the facts through the records. In the search cases facts get exposed directly. If you go to a Doctor, he will first examine you through his stethoscope. If doubt persists he will advise X-ray etc. But once Surgeon cuts open the body, he can see the things directly. Likewise in the search cases, when things get exposed to the revenue official, there is nothing further left to see. Chances of escapement are not there. Escapement is possible so long the object is hidden from the eyes. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er by the A.O. He also relied on the decision of the Hon'ble Bombay High Court in the case of Prashant S. Joshi vs. ACIT reported in 324 ITR 154 and various other decisions. 4. The ld. D.R., on the other hand, submitted that the original return in this case was filed on 31.12.1999 declaring total income at Rs. 1,68,410/-. The assessment was completed u/s 143(1), there was no scrutiny assessment and notice u/s 148 was issued on 29.7.2004. Since in this case there was no scrutiny assessment and proper reasons have been recorded for re-opening of the assessment, therefore, such re-opening is valid. For this proposition, he relied on the decision of Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in 291 ITR 500 (SC) and the decision of Kolkata Bench of ITAT in the case of Som Datt Builders Pvt. Ltd. vs. DCIT reported in 98 ITD 78. Referring to the unreported decision of the Hon'ble Guwahati High Court in the case of M/s Peerchand Ratanlal Baid (HUF) (a copy of which is filed by the ld. D.R.), he submitted that the Hon'ble Guwahati High Court has dissented from the decision of Hon'ble Gujarat High Court in the case of Cargo clearing Agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s 80HHC Rs. 63,50,720/- has held as under:- "In the course of block assessment proceedings, the assessee was asked to furnish details of proof of the purchases and export claims to have been made in the block period. The assessee submitted vide letter dated 28.03.2002 photo copies of purchase and sale bills and also submitted as under:- "M/s galaxy Exports and M/s Kunal Exports were partnership firms in which apart from the family of Mr. Kamal Johari the family of Mr. Hariom Sharma was also Partner in the said firms. Due to certain disputes between them, their firms were dissolved in Aug 1998. Powerful Impex Pvt. Ltd. is a company owned by the family of Mr. Kamal Johari and since the exports to be made were to belong to Mr. Kamal Johari family and since there was stock of diamonds in the above partnership firms, the same was purchased from them instead of purchasing from outside. Similarly purchase from Prime Star Exports was made, as the said company was dealing in local trade and all exports were being done through Powerful Impex Pvt. Ltd. which had various Import/export code to carry out exports." However, the assessee has not furnished any independent conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents, which conclusively prove the fact of export of goods outside India. Customs are part of the Revenue Department of the government and their attestation could not be doubted unless otherwise proved beyond doubt. The export proceeds were realized through banking channel by Vyasa Bank in convertible foreign exchange as certified by them in their Certificates. The A.O. has held these remittances as hawala transactions. This is a serious allegation under exchange control regulations. In the absence of any evidence to prove these allegations, the A.O. was not justified in his conclusion when the documentary evidence states otherwise. It is further seen that there is no reason to disbelieve the bank as it is an independent body. Further, the appellant has received import licenses from the office of Director General of Foreign Trade on the basis of these exports. Therefore, it is not correct to assume that such licenses were issued without verifying the genuineness of the exports by the issuing authority. Section 114 of the Indian Evidence Act, 1872 provides for a legal presumption that the official acts have been regularly performed unless the contrary is proved. Hence, the acts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in turn the assessee's exports of diamond to be non-genuine. The ld. D.R. has supported the order of Assessing Officer which the ld. A.R. of assessee has supported order of Ld. CIT(A). We have considered the rival contentions as also the relevant matter on record. From the perusal of record we find that it was contended by Ld. AR of assessee before Ld. CIT(A) that the Assessing Officer's inference was based on mere suspicion/surmises and there was no evidence on record to substantiate the same citing 248 ITR 562 (Guj) it was contended before the Ld. CIT(A) that the assessee had disclosed the particulars of income or expenditure in the returns/books of account and on the same material Assessing Officer wanted to take a different view but such income could not be treated as undisclosed income, the ld. CIT(A) noted that the Assessing Officer had not referred to any specific or ....evidence found during search to justify his action. The ld. CIT(A) held that in the absence of any evidence the Assessing Officer's finding to the effect that foreign remittances received by assessee were hawala transactions was not tenable in law as no addition could be made merely on suspicion. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r during search under s.132 or during survey under s. 133A, it is upto the AO to make block assessment under s. 158BC or if he feels that reassessment is called for under s. 147, it is upto him to elect between the two and make assessment under the provision he finds appropriate. However, once the AO, after conducting search and based on materials gathered during search under s.132, proceeds to make block assessment under s.158BC, then he cannot, based on the same materials which in this case is deposit amounts found during search, proceed to make assessment under s. 147 after block assessment was cancelled by the first appellate authority. The AO obviously cannot get over the findings in the order of the first appellate authority against a block assessment by invoking powers under s. 147. During block assessment, the AO obviously considered as to whether bank deposits in the names of family members of the assessee found during search represent his undisclosed income but accepted the assessee's contention that the same belong to his family members. Rightly or wrongly only the interest from these deposits were assessed as part of undisclosed income of the assessee for the block peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer." 5.10 The various other decisions relied on by the Ld. Counsel for the assessee also supports his case. From the various documents placed in the paper book we find it as an attempt on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties therefore, the reason itself is wrong. Referring to page 1 to 16 of the paper book, he drew the attention of the Bench to page 11 where the details of purchases and sales are given. He submitted that the assessee during the impugned assessment year has made only one purchase of Rs. 11,40,000/- from Mr. Vijay Bhav. Similarly, the assessee has sold during the year to M/s Galaxy Trading Co. Rs. 299,990.00, M/s Prime Star Exports Rs. 1290195.00 and M/s Dauji and Co Rs. 9 lacs. He submitted that M/s Galaxy Trading Co. is different from Galaxy Exports. There is no purchase from galaxy Exports or M/s Kunal Exports or from M/s Prime Star exports. Therefore, the reasons recorded in the notice issued u/s 148 are wrong and, therefore, 148 proceeding is bad in law and hence to be quashed. 8. The ld. D.R. on the other hand submitted that since the notice has been issued within a period of 4 years from the end of the relevant assessment year, therefore, the re-assessment proceedings cannot be held as invalid. 9. We have considered the rival arguments made by both the sides, pursued the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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