ITO Vs Mukesh Mahavirprasad Sen (ITAT Surat)
Search was initiated against the assessee. However, notice was not issued u/s 143(2). AO reopened the matter and issued notice u/s 148. Held, reassessment of proceedings u/s 148, without issuance of notice u/s 143(2), is unsustainable in law
Facts-
AO had reason to believe that an income has escaped assessment in the hands of the assessee. Therefore, the case was reopened and notice u/s 148. In absence of any reply from the assessee, AO confirmed the bogus purchase. Being aggrieved, assessee carried the matter to CIT(A). CIT(A) quashed the reassessment proceedings initiated u/s 147/148. Being aggrieved, revenue preferred the present appeal.
Conclusion-
Held that in absence of notice under section 143(2) of the Act, the Assessing Officer could not assume jurisdiction and this defect cannot be cured subsequently, since it is not procedural defect but it is the defect that goes to the root of the jurisdiction.
Held that for completing the assessment under section 148 of the Act, compliance with the procedure of issue of notice under Section 143 (2) was mandatory.
We are of the view that in the absence of fulfillment of mandatory requirement of issuance of notice under section 143(2) of the Act, the assumption of jurisdiction by issuance of notice of reopening itself would not be sustainable in law.
FULL TEXT OF THE ORDER OF ITAT SURAT
Captioned two appeals filed by Revenue, pertaining to Assessment Years 2007-08 and 2008-09, are directed against the separate orders passed by the ld.Commissioner of Income Tax(Appeals) [Ld.CIT(A)], which in turn arise out of separate assessment orders passed by the Assessing Officer under section 144 r.w.s 147 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”].
2. Since, the issues involved in all the appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No.106/SRT/2017, for assessment Year 2007-08, have been taken into consideration for deciding the above appeals en masse.
3. Grounds of appeal raised by the Revenue in lead case in ITA No.106/SRT/2017 for A.Y. 2007-08 are as follows:
“i) On the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred deleting the addition of Rs. 3,99,61,340/- made on account of bogus purchase.
ii) On the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in quashing the reassessment order passed by the assessing officer u/s 144 r.w.s. 147 of the Act the basis of the additional grounds of appeal submitted by the assessee because the assessing officer vide his letter dated 30.12.2014 furnished the reasons recorded by him for the purpose of reopening the case of the assessee for assessment and also request the assessee to file objections, if any against the re-opening of the assessment. However, the assessee did not object to the same as no other correspondence attendance was made by the assessee.
iii) On the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in appreciating the fact that the concerns like M/s Mihir Diamonds, M/s. Krishna Dial and M/s Karishma Diamonds Pvt Ltd from which the assessee made the said purchases amounting to Rs. 3,99,61,340/-, were non-existent entities and they were used for providing bogus purchase bills to the assessee. The entire modus operandi of such bogus transactions was accepted in statement u/s 132(4) of the Act by the respective key persons of Shri Gautam Jain Group in light of the various documents/evidences found and seized from their premises.
iv) On the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in holding commission income @0.50% on bogus purchase on the basis that proper books of accounts and stock register were maintained without considering the fact that neither these books of accounts were submitted by the assessee before the assessing officer during the assessment proceedings nor by the Ld CIT(A) during the appellate proceedings, thereby not giving ample opportunity to examine the same.
v) On the facts and in the circumstance of the case and in law, the Ld CIT(A) erred in treating commission @ 0.50% on bogus purchase without appreciating the fact that the assessee never either attended the office of the assessing officer or filed any submission before him during the assessment proceedings as well as during the remand proceedings.
vi) On the facts and in the circumstance of the case and in law, the Ld CIT(A) erred in admitting the additional evidence because the assessee did not fulfil any of the conditions laid down under Rule 46A(1) for filing of additional evidences and the same was also conveyed by the assessing officer in his remand report.
vi) On the facts and in the circumstances of the case and in Law, the Ld.CIT(A), Surat ought to have upheld the order of the Assessing Officer. It is, therefore, prayed that the order of the Ld CIT(A)-1 Surat may be set-aside and that of the Assessing Officer’s order may be restored.”
4. Brief facts as discernable from the orders of lower authorities are that during the assessment proceedings, the assessing officer got a letter bearing no. DI(Inv)-II/Information/LJ/Bogus sales/2013-14/838, dated 13.03.2014, alongwith enclosures, from the Director of Income Tax (Investigation)-II, Mumbai, through the Commissioner of Income Tax – II, Surat and the Addl. Commissioner of Income Tax, Range-6, Surat. The assessing officer observed that said letter contained details of accommodation entries of bogus purchases, sales, unsecured loan, share capital, etc., given by Shri Bhawarlal Jain group of Mumbai, a leading entry provider. A search and seizure action was carried out by the Investigation wing, Mumbai in the Bhawarlal Jain group of cases on 03.10.2013, which resulted in collection of evidences and other findings, which conclusively proved that the said Shri Bhawarlal Jain and his son, Shri Rajesh Bhawarlal Jain had, through a web of 70 benami concerns, run and operated by them in the names of their employees, provided accommodation entries to various parties in respect of bogus unsecured loans and bogus purchases. Various evidences found and seized from the premises of the said Shri Bhawarlal Jain and his son proved the above facts. The evidences will having details of calendar year wise (Jan to Dec) accounts of these benami entities right from F.Y. 2004-05 onwards. The assessing officer noted that the said group has indulged in giving such accommodation entries of about Rs.25,000 crores. Shri Bhawarlal Jain has admitted the entire nature of bogus transactions in his statement recorded u/s 132(4) of the Income Tax Act, 1961 recorded at 16, Mohan Building, JSS Road, Girgaum, Mumbai – 04, on 11.10.2013. It was also stated by the dummy partners/ Directors/ proprietors of the entities of this group that they are closely known and associated with Shri Bhawarlal Jain and that they belong to the native place of Shri Bhawarlal Jain and that they were made partners/ Directors/ proprietors of the entities of this group at the direction of Shri Bhawarlal Jain & his family but the entities were managed and controlled by the latter. It was further admitted by the dummy partners/ Directors/ proprietors of the entities of this group that they were merely employees of Shri Bhawarlal Jain and his family and that they were looking after miscellaneous office work like depositing cheques in banks, handing over parcels to clients, making data entry, etc.
5. On being asked about various aspects of the business of this group, the dummy partners/ Directors/ proprietors of the entities of this group, they expressed their ignorance and stated that they are not involved in any such activities and that they are paid lump sum salary in cash. During the course of search, blank cheque books signed by the dummy partners/ Directors/ proprietors of the entities of this group were also found, which were seized. Similarly, books of account in the name of the dummy partners/ Directors/ proprietors of the entities of this group were also found, which were also seized. The assessing officer noted that according to the regular books of accounts and the returns of income filed by different entities of the group, the business of these entities are disclosed to be trading of rough and finished diamonds and manufacturing of diamond jewellery. However, no stock of diamond was found from any of the premises searched or surveyed. It was also seen that no books of account were maintained by the group at the respective registered offices and the books of account of all the 70 entities were found from two secret offices located at (i) 16, Mohan Building, JSS Road., Girgaum, Mumbai – 04 and (ii) Plot no. 233, Ground Floor, Navkar House, Vitthal Bhai Patel Road, Girgaum, Nr. PrarthnaSamaj, V.P.road, Mumbai -04. The statements of all the persons recorded during the course of search revealed that this group was engaged in giving accommodation entries and this fact has also been admitted by the employees, the dummy partners/ dummy Directors/ dummy proprietors of the entities of this group as also by Shri Bhawarlal Jain. The assessing officer observed that investigations made by the investigation wing revealed that actual importers of rough diamonds import part of their diamond requirement through benami entities operated by Shri Bhawarlal Jain & family, which ensures benefit of suppression of turnover, profits and capital requirement of the former. The consignments are sent on credit by the suppliers in the names of these benami entities at the instance of the actual importers and on receipt of the imported consignments from Customs, through CHA, the consignment is handed over to the actual importer and the bogus stock is entered in the books of the benami entities and the same is not recorded in the books of the actual importer. These benami entities of Shri Bhawarlal Jain group thereafter issue bogus sale bills against the bogus stock.
6. From the details and evidences made available through the above referred letter dated 13.03.2014 of the Director of Income Tax (Investigation), Mumbai, it was observed by the assessing officer that the following entities of Shri Bhawarlal Jain group have given accommodation entries of bogus purchases as under, during F.Y. 2006-07 to the assessee Shri Mukesh Mahavirprasad Sen.
Name of the entry provider – Amount (in Rs.)
