Case Law Details
Lexus Softmac Vs DCIT (ITAT Surat)
ITAT Surat held that as per section 150(2), re-assessment permission u/s 150(1) of the Act would not be available to the Department, since time limit for re-assessment as stated under section 149 has expired.
Facts- The assessee-firm is engaged in the business of manufacturing of diamond processing machinery. AO noticed that Shri Kamal J. Zaveri group had provided accommodation entries at Rs.24,60,439/- of bogus purchases i.e., Amar Enterprises at Rs.12,29,869/- and Mahadev Sales Corporation at Rs.12,30,570/- to the assessee. Thus, the AO had reason to believe that income of Rs.24,60,439/- had escaped assessment within the meaning of section 147 of the Act. Therefore, the case was reopened and notice u/s 148 of the Act was issued on 28.03.2019. After hearing the assessee, AO added Rs.24,72,741/- including commission of Rs.12,302/- u/s 69C of the Act to the total income of the assessee.
CIT(A) deleted the disallowance of Rs.24,60,439/- made by AO on account of bogus purchases. The CIT(A), however, directed the assessee to produce the copies of ledger account and other relevant details before AO to verify the claim of the assessee. The CIT(A) further held that since these bogus purchases of Rs.24,60,439/- from M/s Amar Enterprises and M/s Mahadev Sales Corporation were made in March, 2011 i.e., FY.2010-11, the AO was directed to tax these amount in AY.2011-12 as per the provisions of the Act.
Conclusion- Held that in the present case, the assessment year directed to be re-opened is AY.2011-12. The date on which AY.2011-12 ends is 31.03.2012. Therefore, time limit for re-opening a case of AY.2011-12 u/s 147 of the Act, as per section 149 of the Act i.e., 6 years from the relevant assessment year, is 31.03.2018. In the case before us, the subject matter of appeal is the order of AO u/s 143(3) r.w.s. 147 of the Act for AY.2012-13. The date on which AO passed the above order was 28.11.2019; therefore, re-opening of case for AY.2011-12 is time barred as per the clear provisions of section 150(2) of the Act. Hence, the direction of the CIT(A) is not in accordance with law and is liable to be quashed.
FULL TEXT OF THE ORDER OF ITAT SURAT
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 09.05.2024 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2012-13.
2. The grounds of appeal raised by the assessee are as under:
1. The learned CIT(A) has grossly erred in law and on the fats and in circumstances of the case in directing the AO to re-open the assessment proceeding in the case of the assessee for assessment year 2011-12 by invoking the provisions of the 150 of the Income tax Act, 1961.
2. On the facts and merits of the case, the appellant craves for admission of additional evidences in the interest of natural justice and equity.
3. Appellant craves for stay of demand. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
3. Brief facts of the case are that assessee-firm filed its return of income for AY.2012-13 on 22.09.2012, declaring total income of Rs.3,41,63,640/-. The assessee-firm is engaged in the business of manufacturing of diamond processing machinery. A survey action u/s 133A of the Act was conducted by Investigation Wing, Surat in the case of Shri Kamal Jayantilal Zaveri, proprietor of M/s Rishit Corporation on 24.03.2015. Shri Kamal Jayantilal Zaveri was found to be engaged in the business of providing of ‘bogus bill entries’ and ‘accommodation loan entries’ on commission basis through various proprietary concerns, firms and other dummy concerns in the names of his father, mother, wife, friends and other non-descript persons. It was found that Shri Kamal Zaveri has maintained 68 bank accounts in his name as well as in the names of his family members, relatives and other non-descript persons. Statement of Shri Kamal J. Zaveri was recorded on oath u/s 131(1A) of the Act and in answer to Question No.3 and 5, Shri Kamal J. Zaveri categorically stated that he is engaged in providing all types of bogus/fabricated bills i.e., sales bills, purchase bills and job work bills. He received account payee cheques from various parties and subsequently the amount was given back to the party in cash after deducting his commission @ 1/2%. The Assessing Officer (in short, ‘AO’) noticed that Shri Kamal J. Zaveri group had provided accommodation entries at Rs.24,60,439/- of bogus purchases i.e., Amar Enterprises at Rs.12,29,869/- and Mahadev Sales Corporation at Rs.12,30,570/- to the assessee. These accommodation entries were taken by assessee for introducing his unaccounted money into their books of account without paying the due taxes. Thus, the AO had reason to believe that income of Rs.24,60,439/- had escaped assessment within the meaning of section 147 of the Act. Therefore, the case was reopened and notice u/s 148 of the Act was issued on 28.03.2019. In compliance to the notice, the assessee-firm had filed its return of income for AY.2012-13 on 24.04.2019, declaring total income of Rs.3,41,63,640/-. After hearing the assessee, AO added Rs.24,72,741/- including commission of Rs.12,302/- u/s 69C of the Act to the total income of the assessee.
4. Aggrieved by the order of AO, the assessee filed this appeal before CIT(A). The findings of the CIT(A) are at page nos. 14 to 17 of the appellate order. The CIT(A) noticed that the alleged bogus purchases of Rs.24,60,439/-from M/s Amar Enterprises and M/s Mahadev Sales Corporation were made in the month of March, 2011 and were debited in the books of account; therefore, no disallowance can be made in FY.2010-11, relevant to subject AY.2011-12. The appellant neither purchased nor debited these purchases in the books of account during the year under consideration (AY.2012-13). Accordingly, the CIT(A) deleted the disallowance of Rs.24,60,439/- made by AO on account of bogus purchases. The CIT(A), however, directed the assessee to produce the copies of ledger account and other relevant details before AO to verify the claim of the assessee. The CIT(A) further held that since these bogus purchases of Rs.24,60,439/- from M/s Amar Enterprises and M/s Mahadev Sales Corporation were made in March, 2011 i.e., FY.2010-11, the AO was directed to tax these amount in AY.2011-12 as per the provisions of the Act.
5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Ld. Authorized Representative (Ld. AR) of the assessee filed a paper book including written submission, audit report, computation of income, assessment order, CIT(A)’s order and three decisions of ITAT and Hon’ble Bombay High Court. In the written submission, it was submitted that the CIT(A) has grossly erred in law in directing the AO to re-open the assessment proceeding in the case of the assessee for AY.2011-12 by invoking the provision of the 150 of the Act. Since the purchases of Rs.24,60,349/- from M/s Amar Enterprise and Mahadev Sales Corporation were made in earlier year i.e., A.Y. 2011-12, the CIT(A) directed the AO to tax the said amount of Rs.24,60,349/-on account of alleged bogus purchase in AY.2011-12. However, while issuing such impugned direction, the CIT(A) completely ignored the restrictive provisions of the section 150(2) of the Act. The Ld. AR referred to the provisions of section 150(1) and 150(2) and 149 of the Act and submitted that the order of the subject matter of the appeal is order u/s 143 r.w.s 147 of the Act of AY.2012-13 which was passed on 28.11.2019. As per section 149 of the Act, the re-opening of the assessment, reassessment or re-computation u/s 147 of the Act is permitted upto 6 years from the end of the relevant assessment year. Accordingly, for AY.2011-12, the reopening time limit would be limited to March 31, 2018 i.e., 6 years from March 31, 2012. Therefore, at the time of passing of the order of the subject matter of appeal i.e., on 28 11.2019, time limit to re-open the assessment of AY.2011-12 has already been expired. Thus, any such assessment, reassessment or recomputation as is referred to in section 150(1) could not have been made on 28.11.2019 for AY.2011-12, as the same is time barred and bad in law. Hence, the direction of the CIT(A) is against the clear provisions of the Act, and therefore, the direction was requested to be quashed. For this, he relied on the following decisions viz: (i) Nilay Kiritbhai Tailor vs. ITO, ITA No.220/Srt/2017, dated 22.11.2018, (ii) Lotus Investments Ltd. vs. ACIT, 288 ITR 459 (Bombay) and (iii) Ramesh Chand Soni, HUF vs. ITO, 191 TTJ 137 (Jaipur – Trib.).
6. On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) of the revenue supported the order of lower authorities.
7. We have heard both the parties and perused the materials available on record. We have also carefully perused the provisions of section 149 and 150 of the Act as well as the decisions relied upon by the Ld. AR. We find that the CIT(A) has in principle concurred with the findings of the AO that the purchases from M/s Amar Enterprises and Mahadev Sales Corporation amounting to Rs.24,60,439/- were in the nature of bogus and accommodation entries. However, he deleted the addition of Rs.24,72,741/- inclusive of commission of Rs.12,302/-, being commission for the bogus accommodation entry, on the ground that purchases were made in March, 2011. Therefore, the disallowance could be made in the FY.2010-11 relevant to AY.2011-12. Thereafter, he directed AO to tax the above amount in AY.2011-12. In this regard, the Ld. AR submitted that reopening of the case for AY.2011-12 was already time barred as per provisions of section 150(2) of the Act.
7.1 Before proceeding further, it would be apt to reproduce the relevant provisions of the Act to decide the contention of the Ld. AR. The relevant sections to decide the issue are sections 149, 150(1) and 150(2) of the Act. The same are reproduced below for ready reference and clarity:
“149. Time limit for notice. (1) No notice under section 148 shall be issued for the relevant assessment year,-
a. if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
b. if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.”
150 (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or re-computation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.
(2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or re-computation as is referred to in that subsection relates to an assessment year in respect of which an assessment, reassessment or re-computation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or re-computation may be taken section 150(2) of the Act stipulate that no assessment or reassessment of any assessment year can be made under the provision of Section 150(1) of the Act if it was not possible to make such assessment at the time of the passing of the order which is the subject matter of the appeal.”
7.2 According to clause (b) of sub-section (1) of section 149 of the Act, no notice u/s 148 of the Act shall be issued if more than 6 years have elapsed from the end of the relevant assessment year. Sub-section (1) of section 150 permits that notice u/s 148 may be issued, notwithstanding anything contain in section 149, in consequence of or to give effect to any finding or direction in an order passed by any authority by way of appeal, reference or revision. However, subsection (2) of section 150 of the Act stipulates that no assessment or reassessment of any assessment year can be made u/s 150(1) of the Act, if it was not possible to make such assessment at the time of the passing of the order which is the subject matter of appeal. Let us discuss the relevant dates in the present appeal to see whether the direction of the CIT(A) to re-open case of assessee for AY.2011-12 is possible in the light of the provisions discussed above. In the present case, the assessment year directed to be re-opened is AY.2011-12. The date on which AY.2011-12 ends is 31.03.2012. Therefore, time limit for re-opening a case of AY.2011-12 u/s 147 of the Act, as per section 149 of the Act i.e., 6 years from the relevant assessment year, is 31.03.2018. In the case before us, the subject matter of appeal is the order of AO u/s 143(3) r.w.s. 147 of the Act for AY.2012-13. The date on which AO passed the above order was 28.11.2019; therefore, re-opening of case for AY.2011-12 is time barred as per the clear provisions of section 150(2) of the Act. Hence, the direction of the CIT(A) is not in accordance with law and is liable to be quashed. The decisions relied upon by the Ld. AR are also clearly applicable to the facts of the present case. The Co-ordinate Bench, ITAT, Surat in case of Nilay Kiritbhai Tailor (supra), after considering the decision of Hon’ble Bombay High Court in case of Lotus Investments Ltd. (supra) and provisions of section 150(1) & 150(2), held that sub-section (2) of section 150 makes it clear that re-assessment permission u/s 150(1) of the Act would not be available to the Department, when the period of limitation for such assessment or re-assessment has expired at the time when the order which was subject matter of appeal was passed. The Co-ordinate bench (supra), therefore held that the CIT(A) was not justified in his order to direct AO u/s 150(1) to re-open the case of the assessee. In view of the facts and clear provisions of the Act and the decisions cited supra, we find that the CIT(A) was not justified in directing the AO to re-open the assessment for AY.2011-12. Accordingly, ground of appeal raised by the assessee is allowed and the direction of the CIT(A) to re-open AY.2011-12 is quashed.
8. Since we have quashed the order of the CIT(A), the other grounds are become academic in nature and hence are not adjudicated.
9. In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 12/11/2024.
Author Bio
