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TMI Blog2015 (6) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds were taken before the Ld. CIT (A) challenging the estimation of suppressed sales and undisclosed profit. The Ld. CIT (A) has failed to deal with this ground of appeal and the assessee has not raised this issue which implies that estimation of suppressed turnover and profit thereon is acceptable. Once that estimation of suppressed turnover and undisclosed profit thereon is accepted, it is very logical that unexplained investment in purchases is estimated for the purpose of relevant assessment. CIT(A) could have exercised his coterminous powers and should have caused the enquiries to be made documents requisitioned and provided proper opportunities to the assessee and decided the issue on merits rather than deleting the addition on technicalities. In the interest of justice and fair play we are therefore, of the opinion that the issue is required to be restored to the file of the Ld. CIT (A) for fresh adjudication after making necessary enquiries or causing the enquiries made from the BOI requisitioning the relevant documents and providing proper opportunity to the assessee. - Decided in favour of revenue for statistical purposes. - IT APPEAL NOS. 47 TO 49 (GAU.) OF 2004 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - including the suppressed income of ₹ 28,39,932/- discussed above, the assessed income was only on account of undisclosed investment in the suppressed purchases worked out on the basis of intimation received for suppression of sales-tax by the BOI. Similarly in the assessment year 1997-98, the A.O. worked out suppressed sales at ₹ 23,68,593/- on the basis of information of suppression of sales-tax and added income of ₹ 6,10,149/- on account of suppressed sales to the declared profit of ₹ 75,718/- and also made an addition of ₹ 2,20,990/- on account of undisclosed purchases. Thus, taking gross total income at ₹ 9,06,857/- as per working given in pages 3 to 5 of the assessment order dated 28-02-2003 for the assessment year 1997-98 and after allowing deduction u/s 80-IA on the business income of ₹ 6,85,867/- including the undisclosed income on suppressed sales, the total income assessed for the assessment year 1997-98 remained only ₹ 2,20,990/- i.e the undisclosed income on account of unexplained investment in purchases as per provisions of section 69 of the Act. Similarly as per working given at pages 3 to 5 of the assessment order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed turnover was based on the study of the seized material. The Ld D.R. also filed copy of letter dated 07-04-2001 of the BOI to the Additional CIT, Range-1, Guwahati which is placed at pages 13 to 15 of the paper hook filed by the Department and it is very clear that the BOI worked out evasion of taxes separately in the case of the assessee and its sister concern. The Ld. DR. accordingly submitted that the action of the A.O. was based on definite information and since the assessee failed to produce the books of account and comply with the requirements of notices at the time of assessment proceedings, a fair and reasonable estimate of suppressed profit and undisclosed investment in purchases was made by the A.O. and the additions had been deleted by the Ld. CIT (A). 8. The Ld. counsel of the assessee also filed a paper book and synopsis of his submission He contended that proper opportunity was not given to the assessee, the action taken by the A.O. was not based on any cogent material copies of the material received from the BOI was not made available to the assessee and the provisions of section 142(3) of the Act were not complied with and thus, there was a gross breach of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of tax in the case of the assessee was received from the BOI and the Ld. CIT(A) was not correct in holding that the assessment was based on the information which was not based on any material and the additions made were not acceptable. In our considered opinion the documentary evidence was quite specific to warrant the reopening of the assessments and justified subsequent assessments made by the A.O. It is, however very clear that the assessee was not given adequate opportunity in respect of the material used by the A.O. for the purpose of assessments. However, the failure of the assessee to produce books of account on the ground that the books of account were stolen from factory premises cannot be ignored because in absence of books of account the A.O. was left with no alternative but to estimate the turnover and the suppressed income and undisclosed investment on the basis of specific information received from the BOI. It is also observed that the assessee has accepted the decision of the AO. regarding addition of undisclosed income from suppressed turnover so far as no cross objection has been taken before the ITAT on this issue despite the fact that the Ld. CIT (A) has not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lack of opportunity was fatal to the assessment in question. The order of the Ld. CIT (A) is, therefore, set aside and he is directed to decide the issue afresh in the light of aforestated directions after giving proper opportunities to both the sides as per law. 10. The appeals filed by the Department are treated as allowed for statistical purpose. ORDER ITA No.47/Gau/2004 Hemant Sausarkar, Judicial Member - The appeal is directed at the instance of the Revenue against the order of the learned CIT(A). 2. The AO while completing the assessment u/s 143(3) read with section 147 of the IT Act vide order dated 28-2-2003 after hearing of the assessee has concluded for total taxable income of ₹ 9,24,000/- after allowing deduction u/s 80 IA of the Act. The addition u/s 69 of the Act on the basis of Bureau of Investigation (BOI) report dated 7-4-2001 relating to evasion of sales tax to the tune of ₹ 16,66,843/- for the assessment year 1996-97. 3. On getting the report from BIEO dated 7-4-2001 the AO was of the opinion that there is evasion of sales tax and not income tax. Therefore, notice u/s 148 of the Act was issued and assessment was completed after he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexplained U/s 69 of the IT Act, 1961 on suppressed purchased Based on suppressed sales figure as worked out above. For making suppressed sales of ₹ 23,68,593/ -the assessee has invested money in stock by purchasing raw materials etc. for production. As the books of account are not available, it is assumed that the purchase/sales ratio on suppressed sale remain same and the actual purchase ratio on disclosed sales is as below: Total disclosed sale 38,50,488/ - Total disclosed purchase 21,55,4 76/ - % on disclosed purchased on disclosed sale 21,55,476/38,50,488 X 10 55.98% Therefore, total value of suppressed Purchase has been worked out at 55.98% of suppressed sale of ₹ 23,68,593/- Rs.13,25,938/- As the whole amount of purchase is Generally not due at one stoke in conducting Business and as the suppressed sales have Been done in a phased manner throughout The year it is assumed that the assessee Keeps two months stock for use in Manufacturing which is a general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been brought before the AO at the time of assessment. Therefore, there is no lack of principle of natural justice to the assessee and relied on the decision in Ponkunnam Traders, Vijay Kumar Sharma and Sona Builders' case (supra). Since there is no; proper opportunity offered by the AO to confront the seized documents which is the basis of addition made by the AO during the assessment years under consideration. Therefore, addition cannot be sustained. 10. We have considered the rival submission and perused the record. 11. The learned DR has filed the copy of the notice for the assessment years 1996-97, 1997-98 and 1998-99. Nowhere the AO has brought on record that before issuing u/s 148 of the Act they have applied their mind and arrived at satisfaction for issuing notice u/s 148 of the Act. For assessment u/s 147 of the Act notice was issued u/s 148 with prior approval of the learned CIT(A) whose approval is also mechanical. Notice u/s 142(1) and 143(2) of the Act was issued and served. The assessee appeared on few occasions, but submitted that the books were stolen for which FIR was lodged which is brought on record in noting dated 10-1-1993 for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and assessment u/s 147 of the Act has to be decided since it is the basis of assessment u/s 143(3) read with section 147 of the Act. Since the notice u/s 148 of the Act issued without due application of mind, reasons brought on record and satisfaction in issuing notice u/s 148 of the Act having direct nexus with the documents seized/requisitioned not brought on record by the AO. Therefore, issuance of notice u/s 148 of the Act and mechanical approval of the learned CIT(A) cannot hold good and, therefore, assessment u/s 143(3) read with section 147 of the Act is illegal and unjustified and void. However, after perusal of the records before us we find that the AO has only considered the letter received from BIEO for escapement of sales tax, but nowhere the AO has considered the sales tax assessment records in order to brought on record the escapement of sales tax during the assessment years under consideration by the AO instead of considering the letter received from BIEO dated 7-4-2001 relating to evasion of sales tax for the assessment years under consideration, the AO should have requisitioned the complete details, assessment records and should have offered opportunity to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made by the Assessing Officer for the assessment years under consideration are based on an information received from Bureau of Investigation (E.O.), Guwahati. While completing the assessments the Assessing Officer did not have any documentary evidence to substantiate the assessments. He had also not obtained/requisitioned books of account/documents allegedly belonging to the appellant from the Bureau of Investigation (E.O.). As the information was not based on materials the addition made is not acceptable. I, therefore, direct the Assessing Officer to delete the addition. 21. We have heard the rival submission, perused the records and written submission brought on record by the assessee. The main reason for addition is BIEO report dated 7-4-2001 received by the AO relating to avoidance of sales tax. The AO has not brought on record the assessment completed under Sales Tax Act for the years under consideration. The AO has completed the assessment after considering the information received from the BIEO /523 dated 7-4-2001 which is not confronted to the assessee. The AO has not requisitioned the documents seized. Therefore, the assessment only on report/information of BIEO date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conomic Offence) (Guwahati) and that the information was not based on material and documentary evidence to substantiate the assessments ? (ii) Whether on the facts and in the circumstances of the case the order of the Ld. CIT(A) is required to be set aside with the direction to decide the issue afresh after giving proper opportunity to the assessee on the relevant information received by the A.O. on 25-02-2003 from the Bureau of Investigation (Economic Offence) ? THIRD MEMBER ORDER H.L. Karwa, President, (As A Third Member) - The following points of difference were referred to me for my decision: (i) Whether on the facts and circumstances of the case the Ld.CIT(A) was justified in deleting the additions made by the A.O. under section 69 of the Act as undisclosed investment amounting to ₹ 9,21,461/-, ₹ 2,20,990/- and ₹ 3,66,526/- for the assessment years 1996-97, 1997-98 1998-99 respectively on the ground that the reassessments made by the A.O. for the assessment years in question were based on the information received from Bureau of Investigation (Economic Offence) (Guwahati) and that the information was not based on material and documentary evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the Bureau of Investigation (E.O.), Guwahati, Assam dated 07.04.2001 was that the Tax Cell has detected evasion of tax of ₹ 16,66,843 (financial year 1995-96), ₹ 8,44,763 (financial year 1996-97) and ₹ 12,48,675 (financial year 1997-98). The Assessing Officer issued notices u/s 148 of the Act. In response to the said notices, the assessee stated that the original returns of income filed may be treated as returns furnished in response to notices u/s 148 of the Act. Thereafter, notices u/s 142(1) and 143(2) of the Act, were issued to the assessee. In response to the said notices sent by the Assessing Officer, the assessee furnished written submission stating therein that all the books of account were stolen and in support of the said contention a copy of the FIR was produced before the Assessing Officer. The assessee further claimed that a team of officials of Bureau of Investigation (E.O.) visited the business premises of M/s.Glass India, S.C.Road, Athgaon, Guwahati (assessees-sister concern) on 26th November, 1997 and seized the books and records as per seizure list given to M/s.Glass India and on the basis of seizure list of M/s.Glass India, the Bureau of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. 9. In the instant case, the only basis for making additions u/s 69 of the Act was an information forwarded by the Director, Bureau of Investigation (E.O.) vide its letter dated 07.04.2001 to the Addl. Commissioner of Income-tax, Range-1, Guwahati. The said information was communicated to the Assessing Officer vide letter dated 24th April, 2001, wherein particulars regarding economic offences (i.e. evasion of sales-tax) were mentioned. It is apparent from the records that in spite of specific request made by the assessee, the assessee was never confronted with the so called information received from the Director of Bureau of Investigation. In this case the addition was made on the basis of an information, then such an information undoubtedly has to be confronted to the assessee and he is to be allowed an opportunity of cross examination. It is apparent from records that a team of officials of Bureau of Investigation (E.O.), Guwahati, Assam cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee). I find substance in the contention of Shri Ramesh Goenka, the learned Counsel for the assessee that there was no basis for arriving at the stipulated sales-tax evasion by the A.O. relying on the books of account of a sister-concern viz., M/s.Glass India, which were never confronted to the assessee. Further more, a letter from Bureau of Investigation dated 24th February, 2003 makes it clear that the suppression of sales were calculated on ex parte basis. Para 3 of the aforesaid letter reads as under:- In order to clarify quaries from your end, it may be noted that the suppression of sales were calculated by tax officials of our wing from the seized books of the account of the assessee on ex parte basis. 11. Thus, it is clear that even the calculation of suppressed sales-tax and turn over made by the Bureau of Investigation and accepted by the A.O. was also without any basis. There is no material on record to show that the books of account/documents allegedly belonging to the assessee were requisitioned from the Bureau of Investigation. No sales-tax assessment orders pertaining to the assessee for the assessment years under consideration were requisitioned from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed DR. Even, I do not accept the views expressed by the learned AM in this regard. In my opinion, the A.O. could not prove by evidence that the assessee had made unexplained investments of huge amount during the assessment years under consideration and therefore, additions made by the Assessing Officer u/s 69 of the Act could not be sustained. The alleged information received by the A.O. from Bureau of Investigation could not be considered conclusive proof for making additions u/s 69 of the Act. It is observed that there is nothing on record to show that any action has been taken by the Sales-tax department or Bureau of Investigation, against the assessee for the assessment years under consideration regarding evasion of sales-tax. 13. In view of the above discussion, I fully agree with the views expressed by the learned Judicial Member, which is in accordance with law. 14. As regards question No.3, it is observed that the same was referred by Shri D.K Tyagi, learned Judicial Member, who was nominated as Third Member by the then President of Income Tax Appellate Tribunal. The aforesaid question was never referred by the Division Bench, who heard the appeals and both the Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passing an order in conformity with the majority opinion. ORDER H.L. Karwa, President - In these appeals, due to difference of opinion between the Members of the Division Bench, the following questions were referred for the opinion of the Third Member: (i) Whether on the facts and circumstances of the case, the Id CIT(A) was justified in deleting the additions made by the AO under section 69 of the Act as undisclosed investment amounting to ₹ 9,21,461/-, ₹ 2,20,990/- and ₹ 3,66,526/- for the assessment years 1996-97, 1997-98 and 1998-99 respectively on the ground that the reassessments made by the AO for the assessment years in question were based on the information received from Bureau of Investigation (Economic Offence), Gowahati and that the information was not based on material and documentary evidence to substantiate the assessments? (ii) Whether on the facts and in the circumstances of the case the order of the ld CIT(A) is required to be set aside with the direction to decide the issue afresh after giving proper opportunity to the assessee on the relevant information received by the AO on 25.2.2003 from the Bureau of Investigation (Econom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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