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TMI Blog2023 (7) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have also indicated the material found in the search operation carried out on the DSC Group of Companies, which gave reasons to believe that income chargeable to tax had escaped assessment. The arguments advanced on behalf of the appellant/revenue, that notwithstanding the absence of a specific allegation that the respondent/assessee had failed to disclose, fully and truly, all material facts, the reopening of the assessment was sustainable because it was a result of search action, is flawed. Thus, the argument that the search action spoke for itself fails to recognize that the AO had to apply his mind to the material available on record, which at the relevant point in time, would have impelled him to form a belief that because of the failure on the part of the respondent/assessee to disclose, fully and truly, all material facts necessary for assessment, income otherwise chargeable to tax had escaped assessment. No such exercise was carried out by the AO at the relevant point in time. It is only after reassessment had been triggered, that information was sought by the AO concerning the purchase made by the respondent/assessee from JMD. We, thus, tend to agree that the jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn filed under Section 139 of the Act, should be treated as a return filed in response to the notice dated 28.03.2013, issued under Section 148 of the Act. 4.5 Furthermore, the respondent/assessee also called upon the AO to furnish a copy of the reasons recorded for triggering the reassessment proceeding. 5. It appears that thereafter, a notice dated 30.12.2013 was issued to the respondent/assessee under Section 143(2) of the Act, whereby, the respondent/assessee, inter alia, was called upon, to have its authorized representative [in short, AR ] attend the reassessment proceeding scheduled to take place on 06.01.2014. 6. Evidently, it is on this date, i.e., 06.01.2014, that, upon the AR of the respondent/assessee seeking a copy of the reasons recorded by the AO for triggering the reassessment proceeding, the same was furnished. 7. Having received a copy of the reasons recorded by the AO, the respondent/assessee filed its objections dated 10.01.2014, at the hearing held by the AO on 20.01.2014. 8. The AO disposed of the objections filed by the respondent/assessee via an order dated 22.01.2014. The record shows that on 07.02.2014, the respondent/assessee was served with a notice un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by Mr Salil Aggarwal, learned senior counsel. 16. Although via the order dated 02.12.2022, we had directed both sides to file their written submissions in the matter, we have received written submissions only on behalf of the respondent/assessee. 17. That being said, the arguments advanced by Mr Kumar, on behalf of the appellant/revenue, were broadly the following: (i) Even though there is no allegation that the respondent/assessee had failed to disclose, fully and truly, all material facts necessary for carrying out the assessment proceeding, since in the reasons recorded by the AO for triggering the reassessment proceeding, there is a reference to the fact the reopening of assessment was triggered due to a search action, the escapement of income was obvious and therefore, the necessary jurisdictional attributes for reopening stood embedded in the reassessment action taken by the AO. (ii) The purchases qua which the addition was made by the AO were secured from a partnership concern, going by the name, JMD Building Material Suppliers [hereafter referred to as JMD ], in which two partners were employees of the respondent/assessee. (iii) Since the respondent/assessee could produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY in issue, i.e., AY 2006-07. Analysis and Reasoning 19. Having perused the record and considered the submissions made by the counsel for the parties, what has emerged from the record is that the trigger for reopening the assessment was the search operation carried out against the DSC Group of Companies. 20. The AO, in the reasons recorded by him, adverted to the fact that in the post-search proceedings, the respondent/assessee had failed to produce supporting documents, i.e., bills and vouchers as well as khaki [i.e., slips issued by local authorities for extracting boulders from mines] amounting to Rs. 3,94,03,687/-. 21. Besides this, the AO was also not satisfied with the claim for purchases made from an entity going by the name, Aggarwal Iron Steel Co. to the tune of Rs .8,79,55,368/-. These were also categorized by the AO as bogus purchases. 22. In addition thereto, the AO was of the view that cash payments made through one H.S. Buildtech, a sub-contractor, to the tune of Rs. 36,54,533/-, remained unexplained. According to the AO, the unexplained cash payments contravened the provisions of Section 40A(iii) of the Act. 23. Based on the aforesaid, the AO, in the reasons record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material facts, the reopening of the assessment was sustainable because it was a result of search action, is flawed. 28. Thus, the argument that the search action spoke for itself fails to recognize that the AO had to apply his mind to the material available on record, which at the relevant point in time, would have impelled him to form a belief that because of the failure on the part of the respondent/assessee to disclose, fully and truly, all material facts necessary for assessment, income otherwise chargeable to tax had escaped assessment. 29. It appears that no such exercise was carried out by the AO at the relevant point in time. It is only after reassessment had been triggered, that information was sought by the AO concerning the purchase made by the respondent/assessee from JMD. 30. We, thus, tend to agree with Mr Aggarwal s submission that the jurisdictional ingredients for reopening the assessment provided in the first proviso to Section 147 1 of the Act were absent, both in form and substance and therefore, the proceedings were bad in law. [ See Haryana Acrylic Manufacturing Company v. ITO 2 ] -------------------- Notes 1. Section 147, as it stood before amendment made v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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