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TMI Blog2020 (8) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... s power while issuing notice U/s. 148 of the Act. Accordingly, the reopening of the assessment for the A.Y. 2008-09 and 2010-11 are invalid and the same is quashed. Estimation of income - bogus purchases - HELD THAT:- It is clear that the ld. CIT(A) has principally followed the decisions of this Tribunal for estimation of the income after rejection of books of account. However, the addition sustained by the ld. CIT(A) is not based on the average G.P. declared by the assessee in the preceding years. For the A.Y. 2005-06 to 2007-08, the average G.P. declared by the assessee is (-2.38%) where for the A.Y. 2008-09 the G.P. declared by the assessee is (-0.69%) which is better than the average of past history of the G.P. declared by the assessee. Similarly, for the A.Y. 2010-11, the assessee has declared G.P. of (-4.64%) which is less than the average of past history and therefore, the income of the assessee is required to be estimated by taking average of G.P. declared by the assessee in the preceding year at (-2.38%). However, since we have quashed the reopening of the assessment for the A.Y. 2008-09 and 2010-11, therefore, no consequential addition is called for. For the A.Y. 2011-12, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onds. The assessee has one Export Oriented Unit (EOU) at Jaipur, two Domestic Tariff Area (DTA) units. The assessee also has one Santacruz Electronics Export Processing Zone located in Mumbai. The assessee filed its return of income for the year under consideration declaring loss of Rs. 86,49,010/-. The scrutiny assessment was completed U/s. 143(3) of the Income Tax Act, 1961 (in short, the Act) and the matter was carried up to this Tribunal as well as to the Hon'ble Rajasthan High Court. Thereafter, the A.O. issued notice U/s. 148 of the Act on 30/03/2015 by recording the reasons that the assessee has received accommodation entries of bogus purchases and consequently the income assessable to tax has escaped assessment. Similarly, for the A.Y. 2010-11, assessment was completed U/s. 143(3) of the Act and thereafter the A.O. issued notice U/s. 148 of the Act on 10/11/2017 respectively. The return of income filed for the A.Y. 2011-12 was processed U/s. 143(1) of the Act on 28/01/2012 and thereafter the A.O. issued notice U/s. 149 of the Act on 23/3/2018. The reassessment proceeding was completed U/s. 143(3) r.w.s. 147 of the Act whereby the A.O. made additions after rejecting book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g after four years in case of scrutiny, assessment was completed U/s. 143(3) of the Act is not valid. He has referred to proviso to Section 147 of the Act and submitted that the A.O. is barred to invoke provisions of Section 147 of the Act after expiry of four years when the original assessment was completed U/s. 143(3) as there is no failure on the part of assessee to furnish fully and truly all material facts necessary for assessment. In support of his contention, he has relied upon the decision of Hon'ble Bombay High Court in the case of OHM Stock Brokers Pvt. Ltd. Vs. CIT (2013) 351 ITR 443 (Bom) as well as decision of this Tribunal dated 17/12/2019 in the case of M/s. Zari Silk India Pvt. Ltd. Vs. DCIT in ITA No. 1103/JP/2019. The ld. AR has also relied upon series of decisions of the Hon'ble High Court as well as Supreme Court on the point that the A.O. has no power to exercise U/s. 147 of the Act to review its own decision when there was no suppression of any material facts by the assessee. 6. On the other hand, the ld DR has submitted that submitted that after completion of the assessment U/s. 143(3) of the Act, the A.O. received information from the Investigation W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply to question No. 7 of the assessee is also reproduced as under: 7. Details of purchases and sales exceeding Rs. 5 lacs made during the year under assessment in the given format are enclosed. Thus, the A.O. has taken up the issue of verifying the purchases and sales both of the assessee at the time of scrutiny assessment and after satisfying himself has completed the assessment U/s. 143(3) of the Act. The A.O. has reopened the assessment while recording the reasons as under: In this case, on the basis of information brought on record, it is noted that the assessee has taken accommodation entry of Rs. 57,60,222/- in the nature of bogus purchases from Impex Gems and Rs. 92,04,996/- from the JEWEL DIAM. The concern indulges in providing accommodation entries in lieu of cash obtained from the beneficiaries and not doing any genuine business activity as divulged during the course of search and seizure proceedings in the case of Bhanwarlal Jain, Mumbai. The assessee is a beneficiary who has taken the accommodation entries in the nature of bogus purchases which is not genuine as the seller was not carrying on any genuine business activity and was providing accommodation entries in lie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee was not disputed by the A.O., therefore, when all these relevant documents were produced before the A.O. as called for by the A.O. vide notice issued U/s. 142(1) of the Act then the subsequent information received by the A.O. from the Investigation Wing, Mumbai regarding some of the suppliers indulged in providing accommodation entries of bogus purchases would not change the fact that the assessee produced all the necessary details at the time of scrutiny assessment completed U/s. 143(3) of the Act. Therefore, when there is no failure on the part of the assessee to disclose fully and truly all relevant material necessary for assessment and even there is no allegation by the A.O. in the reasons recorded for reopening of the assessment then the A.O. has no power to invoke provisions of Section 147 of the Act after expiry of four years from the end of the assessment year. The Coordinate Bench of this Tribunal in the case of M/s. Zari Sild India Pvt. Ltd. Vs. DCIT in ITA No. 1103/JP/2019 dated 17/12/2019 has considered an identical issue in para 7 as under: 7. We have considered the rival submissions as well as the relevant material on record. There is no dispute that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration. The AO has stated in the order that in response to the notice issued under section 142(1) the ld. A/R of the assessee attended from to time and furnished the requisite information/details and case was discussed with him. The AO has again stated in the assessment order regarding the necessary details produced by the assessee along with the books of account as under:- The assessee was asked to furnish necessary details and to produce complete books of accounts and other records for verification of trading results declared. In compliance thereto the details required were furnished. Books of accounts consisting of cash book, ledger, bank books, purchase sales vouchers, bills and vouchers for expenses were produced. The details furnished and records produced were put to test check. After examination of the records produced, the trading results declared by the assessee company are accepted. All these facts manifest that the assessee produced all requisite details as called for by the AO which include the name and address, PAN of the shareholders, books of account, purchase and sale vouchers, bills/vouchers for expenses. The details produced by the assessee were also checked by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9). However, both these persons failed to produce any documents or information in respect of shares so allotted to 08 companies at huge premium. No justification for computation of high premium was given despite specific questioning. Thus, prima facie, the share application money of Rs. 1.10 crores introduced in F.Y. 2007-08 relevant to A.Y. 2008-09 is nothing but accommodation entries. Bosus Purchases: It was alleged that the assessee has indulged in inflation of purchases through introduction of bogus purchase bills worth Rs. 21,57,500/- from one New Planet Trading Co. Pvt. Ltd., a shell company owned and operated by Praveen Kumar Jain of Bhayander, Mumbai. In this context, the said original purchase bill was retrieved along with the inward registers for relevant period. It was noticed that goods purported to have been purchased through this company were not found entered in the inward registers. The said registers have also been impounded. Thus, the assertion of bogus entries provided by Praveen Kumar Jain, (as admitted by him during search action on 01.10.2013 at Mumbai) stands corroborated in this survey action. The in-house Chartered Accountant Sh. Virendra Dadhich was specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record of inventory register showing the entries of the alleged purchases. Moreover, during the assessment proceedings under section 143(3), the AO has specifically called for purchase and sales vouchers, bills along with cash book, ledger, bank book and those details were furnished by the assessee for the verification and examination of the AO. The last part of the reasons recorded by the AO is referring the information gathered during the survey as well as material impounded and information received from the Investigation Wing Mumbai. However, except the non availability of the application form at the time of survey and the purchases were not found in the Inward Register at the place of survey, nothing else was detected during the survey proceedings. Most importantly, the AO in the reasons recorded has not made any allegation of failure on the part of the assessee to disclose fully and truly all relevant facts necessary for assessment. In the absence of any allegation that the income has escaped assessment due to the failure on the part of the assessee to disclose fully and truly all the relevant facts necessary for assessment, the reopening after 4 years from the end of the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. M/s. Ansal Housing Finance Leasing Co. Ltd. in ITA 18/1999 dated 31.10.2012 wherein it is held that the income from unsold portion of stock in trade is also assessable under the head Income from house property. On examination of details filed, it is found that the assessee was having 12722.82 Sq. ft. unsold area as on 1.4.2011, meaning thereby that at least this portion of stock 12722.82 sq. ft. was unsold during the F.Y. 2007-08 also. Further, as per the rent agreement dated 27.06.2006 entered by the assessee with M/s. Dominos. Pizza India Ltd. as regards 447.32 sq. ft. of the ground floor of the project, rent of Rs. 70 per sq. ft. per month is shown to be receivable on the let out portion. Since no details of unsold portion for the F.Y. 2007-08 have been filed by the assessee, and unsold portion of 12722.82 sq. ft. was available with the assessee as on 01.04.2011, it is clear that at least area of 12722.82 sq. ft. was unsold during the F.Y. 2007-08 also. Keeping in view the above facts, I have reason to believe that income to the tune of Rs. 1,06,87,168 (12722.82 sq. ft. x 70 per sq. ft. per month x 12 months) has escaped assessment to tax under the head Income from house pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry for assessment. Even otherwise, we find that all the relevant material in respect of the issue of assessment of rental income of the unsold stock was already available with the Assessing Officer at the time of scrutiny assessment. Hence, when the original assessment was framed under section 143(3) and the reopening is after the expiry of four years from the end of the relevant assessment year then the Assessing Officer is not permitted to reopen the assessment until and unless the conditions prescribed in the proviso to section 147 are satisfied. The Assessing Officer himself has not alleged that the income proposed to assess has escaped assessment for want of disclosure of all material facts necessary for assessment. The ld. Commissioner of Income Tax (Appeals) has considered this issue in para 3.1.2 as under:- 3.1.2 Determination: (i) I have duly considered the submission of the appellant, assessment order and the material placed on record. The brief facts of the case are that the appellant company has developed a commercial complex known as 'Silver Square'. It has filed its return of income for the year under consideration u/s. 139(1) declaring total income at Rs. 1,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee, and unsold portion of 12722.82 Sq. ft. was available with the assessee as on 01.04.2011, it is clear that at least area of 12722.82 Sq. ft. was unsold during the F.Y. 2007-08 also. Keeping in view the above facts, I have reason to believe that income to the tune of Rs. 1,06,87,168/- (12722.82 Sq. ft. * 70 per Sq. ft. per month * 12 months) has escaped assessment to tax under the head Income from house property for the A.Y. 2008-09 within the meaning of provisions of sec. 147 of the I.T. Act (ii) It is to be noted that the assessment in this was reopened after 4 years from the end of the relevant assessment year and thus, the proviso to section 147 comes in to operation, according to which, proceeding u/s. 147 can be initiated if two conditions are satisfied, namely (1) the AO must have reason to believe that income chargeable to tax has escaped assessment and; (2) he must have reason to believe that such income has escaped assessment by reason of omission or failure on the part of the assessee to disclose fully and truly material facts necessary for his assessment, for that assessment year. Both the condition should be cumulatively satisfied to confer jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs. M/s. Ansal Housing Finance Leasing Co. Ltd. (Supra). It is to be noted that this is not a relevant reason for initiating proceedings u/s. 147 of the Act as the judgment rendered by even the Hon'ble Supreme Court is an expression of opinion on the interpretation of statute. The power u/s. 147 of the Act will have to be invoked by the AO in accordance with the said provision. In other words, merely because a judgment has been rendered, the same cannot be a ground for reopening the assessment under s. 147 of the Act. Reliance is placed on CIT Vs. Baer Shoes (India) (P) Ltd. [2010] 235 CTR 194 (Mad.), wherein it was held that where material facts were fully disclosed and assessment was completed allowing deduction u/s. 80HHC on export incentive, such an assessment cannot be reopened based upon a subsequent decision of Supreme Court. Further, in the case of DCIT Vs. Simplex Concrete Piles [India] Ltd. [2012] 25 taxmann.com 283 (SC), it has been held by the Hon'ble Apex Court that an assessment stood closed on basis of law as it stood at relevant time cannot be reopened in view of subsequent reversal of legal position by judgment of Supreme Court. (vii) In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcentage was made. The assessee also pointed out that identical question had come up for consideration during the scrutiny assessments for the assessment years 2008-09 and 2009-10 and the claim of the assessee was accepted. [Para 14] It was after such consideration that the Assessing Officer passed the order of assessment and made no disallowance on the assessee's claim of exempt income of Rs. 130 crores. Two things thus immediately become clear. First is that, there was no failure on the part of the assessee to disclose the relevant facts truly and fully. The claim was made in the return with full disclosures in the statement of income and the accounts maintained by the assessee. The fact that the claim was also supported by an addendum in the partnership deed was pointedly brought to the notice of the Assessing Officer in reply to the queries raised by him. There was thus, true and full disclosure of all material facts. The second thing is that this very issue with all its elements had come up for consideration before the Assessing Officer during the original assessment for very assessment year. The notice for reopening must fail both on the ground of no failure on the part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, while Explanation (I) may not lead to an automatic presumption of disclosure, unless there is some fresh tangible material available with the Assessing Officer, he will not be able to show that there was a failure on the part of assessee to disclose fully and truly all material facts. If the material is that which was already available during the original assessment proceedings, the Assessing Officer will be unable to show that there has been a failure by the assessee to disclose fully and truly all material facts.[Para 25] The expression 'will not necessarily amount to disclosure' as used in Explanation 1 to section 147 brings in an element of subjectivity and also the requirement of assessing on a case-to-case basis where in fact there has been a full disclosure by virtue of the assessee producing the account books and other evidence in the first instance. This explanation, therefore, would not relieve the Assessing Officer of the burden of demonstrating the assessee's failure to make a full and true disclosure of all material facts necessary for the assessment for the assessment year in question.[Para 26] A second aspect of the matter is that the above jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasonably drawn and what legal inferences have ultimately to be drawn. [Para 6] (emphasis supplied) (xi) It may be mentioned that in the case of Akshar Developers Vs. ACIT [2018] 95 taxmann.com 104 (Bombay), it has been held by the Hon'ble High Court of Bombay that: 3. This petition under Article 226 of the Constitution of India challenges the re-opening notice dated 30th March, 2017 issued under Section 148 of the Income Tax Act, 1961 (the Act) seeking to re-open the assessment for Assessment Year 2010-11. The assessment for the Year 2010-11 was completed on 20th March, 2014 under Section 143(3) read with Section 153A of the Act. The reasons in support of the impugned notice is the information received from the Deputy Director of Income-Tax (INV) Unit 7(4) stating that the petitioner had a Bank Account bearing No. 36/CD/441 with Abhudaya Co-operative Bonk Limited, APM, Vashi Branch, Navi Mumbai it is alleged in the reasons that the petitioner had failed to disclose the aforesaid bank account during the assessment proceedings. The petitioner had filed its objections by letter dated 23rd May, 2017 to the reasons inter-alia pointing out that during the course of assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct were not satisfied. Therefore, in view of the above discussion, looking to the facts and circumstances of the case, it is held that the reassessment proceedings initiated by the AO under consideration were bad in law and consequently, the assessment order based on such bad initiation cannot be allowed to be sustained and thus, hereby quashed. Thus it is clear that the ld. CIT (A) has followed various decisions including the decision of Hon'ble Jurisdictional High Court in case of CIT vs. Hindustan Zinc Ltd. 393 ITR 264 (Raj.) Accordingly, in view of the above facts and circumstances as well as the binding precedents on the issue, we do not find any error or illegality in the impugned order of the ld. CIT (A) qua this issue. In the said case the ld. CIT (Appeals) as well as the Tribunal has considered the judgment of Hon'ble Jurisdictional High Court in case of CIT vs. Hindustan Zinc Ltd. 393 ITR 264 (Raj.) wherein it was held that the duty of the assessee to disclose fully and truly all material facts necessary for his assessment does not extend beyond the furnishing of all the primary facts before the assessing authority and the AO was satisfied with the said disclosure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-09 is taken as a lead case for deciding this issue in ground No. 2, which is common in all three appeals. 10. In the reassessment proceedings, the A.O. rejected the books of account of the assessee by invoking provisions of Section 145(3) of the Act and thereafter made addition @ 25% of the purchases made from these two parties namely Impex Gems and Jewel Diam. Thus, the A.O. made trading addition equivalent to 25% of alleged unverifiable purchases. On appeal, the ld. CIT(A) has restricted the addition to a lump sum amount after considering the G.P. declared by the assessee for the preceding years. 11. Before us, the ld AR of the assessee has submitted that the ld. CIT(A) has not considered the average of G.P. declared by the assessee for the preceding years but sustained the addition on lump sum basis which is not in accordance with the principle laid down by the Hon'ble Jurisdictional High Court. In support of his contention, he has relied upon the following decisions: (i) ITAT, Jaipur Bench, Jaipur in case of Vijay Kedia (HUF) Vs. ACIT (ITA No. 197 248/JP/2016) decided on 29-01-2018 (ii) ITAT, Jaipur Bench, in case of DCIT Vs. Gem Paradise (ITA No. 747 65/JP/12) vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce the finding of the ld. CIT(A) in para 3.3.2 and 3.3.4 as under: 3.3.2 Since, certain purchases remained unverifiable and even in reopened proceedings, assessee could not get them verified by producing the parties for verification therefore books of account are not reliable. Once provision of Section 145(3) are applicable, income is to be estimated by seeing past history. The Hon'ble ITAT Jaipur Bench in various decisions as cited by ld AR of the assessee also held that the basis of estimation should be the past history of the assessee. In the recent decision of Allied Gems Corporation ITA No. 794/JP/2011 and Rajkumar Agarwal ITA No. 504/JP/2013 the Hon'ble ITAT restricted the addition to the average GP rate based on past years. Thus, in view of above judicial pronouncement after rejecting Books of Accounts, the past history of the assessee has to be seen for estimating the profit of the appellant. 3.3.4 In view of these facts, the addition made by the Assessing Officer is restricted to Rs. 15,00,000/- which is upheld. The balance addition of Rs. 22,56,116/- is deleted. These grounds of appeal are partly allowed. Thus, it is clear that the ld. CIT(A) has principally foll ..... X X X X Extracts X X X X X X X X Extracts X X X X
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