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A.C.I.T., Circle-35, Kolkata Versus M/s. More International

2016 (4) TMI 334 - ITAT KOLKATA

Reopening of assessment - Held that:- AO for initiating the reopening of the assessment proceedings beyond the period of 4 years from the end of the relevant assessment year has to establish that there was escapement of income chargeable to tax because of the failure of the assessee to disclose fully and truly the material facts necessary for the assessment. Neither in the reasons recorded for reopening the assessment nor in the order of re-assessment u/s147 of the Act. The AO has not brought ou .....

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ssessee - ITA No.997/Kol/2013, ITA No.556/Kol/2013 - Dated:- 2-3-2016 - Shri N.V.Vasudevan, JM and Shri Waseem Ahmed, AM For The Department : Shri S.P.Choudhury & Shri Soumitra Choudhury,Advocate For The Assessee : Shri Rajendra Prasad, JCIT, Sr.DR ORDER PER BENCH ITA No.997/Kol/13 is an appeal by the Revenue while ITA No.556/Kol/13 is an appeal by the Assessee. Both these appeals are directed against the order dated 4.1.2013 of CIT(A)-XX, Kolkata, relating to AY 1996-97. 2. At the time of h .....

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of import and while they are in high sea. For AY 96-97, the Assessee filed a return of income on 29.11.1996 declaring total income of ₹ 21,889/-. An order of assessment was passed u/s.143(3) of the Act on the said return of income on 30.3.1999. The total income of the Assessee was determined by the AO in the said order at ₹ 16,51,168/-. In the said order of assessment the AO has acknowledged the fact that there was a search and seizure operation at the business premises of the Assess .....

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s. The difference of ₹ 16,09,632 was sought to be added to the total income of the Assessee. The Assessee in reply had submitted that the sale figure of ₹ 16,09,632 was in fact sale made to an entity by name M/S.Canny Enterprises which is duly recorded in the books of accounts of the Assessee and the entry in the seized document of the said sum as sale to Sagittarious Era is a mistaken description written by the Accountant of the Assessee. This explanation was not accepted and one of .....

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tax income that has escaped assessment. The reasons recorded by the AO for issue of notice u/s.148 of the Act for making an order of reassessment u/s.147 of the Act have been set out by the AO in his letter dated 27.3.2003 addressed to the Commissioner of Income Tax seeking prior sanction for issue of notice u/s.148 after lapse of 4 years from the end of the relevant AY. The reasons as stated in the said letter was that the AO received information from the DRI that M/s. More International i.e., .....

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issued show-cause notice on account of evasion of duty on imports and all these imports prima facie are found not disclosed for income tax purposes in relevant AY. Hence the AO entertained belief that income chargeable to tax has escaped assessment exceeding ₹ 1 lac. 5. The Assessee vide letter dated 27.11.2003 of its counsel pointed out that it was filing return of income in response to the notice dated 28.3.2003 under protest and that the initiation of reassessment proceedings is barred .....

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he previous year relevant to AY 2006-07 imported 504 MTS of HDPE valued at ₹ 1,36,87,350/- and sought clearance of the same from the Kandla Customs House with forged/tampered licences and evaded customs duty amounting to ₹ 1,05,79,669/-. The AO has further referred to the fact that when the above facts were confronted to the Assessee, the Assessee pleaded that the aforesaid sales had been duly disclosed in the books of accounts maintained on the basis of which total income was declar .....

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28.12.2000 held that the Assessee evaded customs duty amounting to ₹ 1,05,79,669/- and the same has to be regarded as suppressed sales not recorded in the regular books of accounts and added the aforesaid sum to the total income of the Assessee. 6. The Assessee challenged the validity of initiation of reassessment proceedings u/s.148 of the Act before the CIT(A). The reasons recorded by the AO before issuing notice u/s.148 of the Act are set out in page-6 para-2 of the CIT(A) s order. The .....

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d only where income chargeable to tax has escaped assessment for that assessment by reasons of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. According to the assessee the assessment in the present case was sought to be re-opened, after expiry of 4 years from the end of the relevant assessment year and an order of assessment u/s 143(3) has already been passed. It was therefore, submitted by him that the proceedings u .....

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ssment proceedings u/s.147 of the Act in the case of another sister concern of the Assessee viz., Ashwani Kumar More in ITA No.953/Kol/2005 order dated 15.7.2006, was held to be bad in law and the order of the Tribunal has also been upheld by the Hon ble Calcutta High Court. It was pointed out that the ITAT in coming to the aforesaid conclusion had placed reliance on the decision of the Hon ble Supreme Court in the case of Coca cola Export Corporation Vs. ITO 231 ITR 200 (SC) wherein it was held .....

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d in law and in holding so followed the decision of the Hon ble ITAT in the case of Ashwini Kumar More (supra). The following were the relevant observations of the CIT(A): 5.3 I have perused the assessment order and considered the submission of the appellant. In the case of Shri Ashwani Kumare More, A.Y. 1996-97 on the identical facts, the ITAT, Kolkata "C" Bench in their order no. I.T.A. No.953 (Kol) of 2005 dated 14.07.2006 has held- "We have perused the orders of authorities ca .....

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sion, that will be dealt' by the Custom Department. We agree with the Id. Counsel that even if finally it is establi shed that the assessee had evaded custom duty, that will be a liability for the assessee but under no circumstances it can be taken as income of the asses assessable under the I.T. Act. Therefore, we hold that the jurisdiction u/s.147 has not been validly assumed. " 8. Since the initiation of reassessment proceedings were held to be bad and invalid, the CIT(A) did not con .....

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unt involve in this case not less that ₹ 1,05,79,669/- and the information has not been proved incorrect. The addition on the part of Custom Duty Evasion resulting in evasion of Income Tax as the assessee has not shown the sales in regular books of account so it can be termed as suppressed sales, which the A.O. has rightly observed in his order u/s 147/143(3). 3. The department craves leave to put additional ground/grounds and/or to alter/amen d/modify the present grounds. 9. We have heard .....

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Ashwani Kumar More is a business Associate of the Assessee carrying on business at the same business premises of the Assessee and was subjected to search and seizure operations by the DRI. In his case reassessment proceedings were initiated on identical reasons. The reasons recorded in the case of Ashwani Kumar More (supra) are set out in para 9 page-5 of the order of the Tribunal dated 14.7.2006 a copy of which is placed at pages 16 to 24 of the Assessee s paper book. The operative portion of .....

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the AO in the present case also it was at the stage of show cause notice before the Customs Authorities. The decision rendered by the Tribunal will therefore squarely apply to the present case . 11. We are also of the view that admittedly, the proviso to sec.147 of the Act referred to in the earlier part of this order is applicable in the present case since assessment for AY 96-97 had been completed by the AO originally u/s.143(3) of the Act and the reassessment proceedings were sought to be in .....

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f re-assessment u/s147 of the Act. The AO has not brought out facts to show any omission on the part of the assessee to disclose fully and truly the material facts when the original assessment was completed. We are of the view that the re-opening of the completed assessment u/s 143(3) of the Act beyond the period of 4 years cannot be justified. We hold that the re-opening of the assessment is beyond the time contemplated by the proviso to sec.147 of the Act and therefore, initiation of re-assess .....

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nd of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reasons of the failure on the part of the assessee to disclose all material facts necessary for his assessment for that assessment year. The reasons recorded by the AO nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons .....

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assessment for the concerned assessment year. It is for the AO to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the AO. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. Th .....

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