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2009 (11) TMI 31 - HC - Income TaxReopening of an assessment basis adjudication order passed by the Collector of Customs alleged that he was the only person investing in his business which was not disclosed to the Department of Income Tax. On this basis notice under Section 148 of the Act was issued for the assessment year 1993-94 stating that appellant had invested in purchasing of goods which had escaped assessment held that - The finding recorded by the Commissioner of Customs and upheld by the CEGAT amply depicts that it was the appellant who had imported the aforesaid material and undervalued the same to the extent of Rs.10, 79, 995/-. This would clearly mean that assessee made an unexplained investment of the aforesaid amount namely the appellant had invested this money in importing the goods which were unexplained. Therefore addition under Section 69 of the Act could validly be made.
Issues Involved:
1. Justification in initiating proceedings under Section 147 of the Income Tax Act. 2. Justification in upholding the addition of Rs.10,79,995/- under Section 69 of the Income Tax Act for unexplained investment in alleged imports of goods. Issue-wise Detailed Analysis: 1. Justification in initiating proceedings under Section 147 of the Income Tax Act: The appellant challenged the validity of the notice under Section 147 of the Income Tax Act, arguing that the proceedings were initiated by the Assessing Officer (AO) at the instance of the Commissioner of Income Tax (CIT) without independent application of mind. The appellant based this argument on a noting that indicated the CIT desired action against the appellant and another individual. The court rejected this argument, stating that the noting must be read in the context of other circumstances and reasons. The information received from the customs authorities, based on an adjudication order by the Commissioner of Customs, implicated the appellant in fraud. The CIT forwarded this information to the AO for necessary action. The AO independently examined the matter, applied his mind, and concluded that income had escaped assessment. The AO's reasons for initiating the proceedings were his own and depicted his independent application of mind. The court highlighted several aspects: - The CIT only directed the AO to take necessary action without specifying the type of action. - The AO independently examined the matter and decided to issue a notice under Section 148. - The AO's reasons for initiating the proceedings were recorded independently. The court referenced two Supreme Court judgments (Raymonds Woollen Mills and ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd.) to support its decision, emphasizing that the presence of prima facie material was sufficient for reopening the case. The court concluded that there was material on record for the AO to form the opinion that income had escaped assessment. 2. Justification in upholding the addition of Rs.10,79,995/- under Section 69 of the Income Tax Act: The Commissioner of Customs found that the appellant was the real importer of goods undervalued to the extent of Rs.10,79,995/-. The AO, in reassessment proceedings, confronted the appellant with the fact that the actual value of the imported goods was Rs.17,48,969/- against the declared value of Rs.4,85,892/-. The AO added the difference as unexplained investment. The CIT(A) modified the AO's order, considering the import value as Rs.10,79,995/- instead of Rs.17,48,969/-. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s order. The appellant argued that since the goods were confiscated, there was no question of escapement of income. The court rejected this argument, stating that the appellant had made an unexplained investment of Rs.10,79,995/- in importing the goods, justifying the addition under Section 69. The court noted that the appellant did not claim any loss due to confiscation before the AO or CIT(A) and raised this issue for the first time before the ITAT in written submissions. The court emphasized that the appellant did not file an application under Section 254(2) of the Income Tax Act to point out that such a plea was not considered by the ITAT. Conclusion: The court dismissed the appeal, upholding the initiation of proceedings under Section 147 and the addition of Rs.10,79,995/- under Section 69. The court also imposed costs of Rs.10,000/- on the appellant.
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