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2016 (4) TMI 381 - ITAT MUMBAI

2016 (4) TMI 381 - ITAT MUMBAI - TMI - Reopening of assessment - CBDT on the basis of Volckar committee report sent a memorandum to the AO intimating the list of companies involved in the paying kickbacks to Iraqi Government during supplies made under ”Oil for Food Programme and the AO recorded reasons u/s 148(2) Held that:- We note that the AO had mechanically recorded the reasons on the basis of CBDT information without even verifying the fact whether the assessee charged such expenses in the .....

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of the facts as stated above the re-opening of assessment cannot be justified by the AO by just mechanically recording the reasons without any application of mind. We therefore annul and quash the re-assessment proceedings and also the consequent order of assessment passed u/s 143(3) /147 of the Act by allowing the appeal of the assessee on technical ground in favour of assessee - I.T.A. No 4266/Mum/2009 - Dated:- 8-3-2016 - SHRI C.N. PRASAD, JM AND SHRI RAJESH KUMAR, AM For The Appellant : Shr .....

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Circle - 6 (2), Mumbai, ["the A.O."] whereby the A.O. passed the order u/s. 143 (3) r.w.s. 147 of the Income-tax Act, 1961 ("the Act") without giving sufficient, proper and adequate opportunity of being heard to the Appellant. 1.2 It is submitted that in the facts and the circumstances of the case, and in law, the assessment order be held as bad and illegal also on the ground that the same is based on the materials that were not at all confronted to the Appellant, in spite of .....

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mitted that in the facts and the circumstances of the case, and in law, the reassessment was bad, illegal and void as mandatory preconditions for initiating reassessment proceedings, as well as completion thereof, were not complied with. 2.3 It is prayed that the reassessment being annulled and be held as null and void WITHOUT FURTHER PREJUDICE TO THE ABOVE 3.1 The Id. CIT (A) erred in confirming the addition / disallowance made by the AO on account of the following items: a) Inland transportati .....

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for. 2. The brief facts of the case are that the assessee filed its return of income on 28.10.2002 declaring total income of ₹ 65,71,260/-. The AO received an information from the CBDT on the basis of Volcker Committee appointed by the United Nations that the assessee company made illegal payment in the shape of ASFF(after sales service fee) of 177593US$ equivalent to ₹ 86,64,762/-and ITF (inland transportation Fee) OF 84100 US$ equivalent to ₹ 41,03,239/-. As matter of fact th .....

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g that the AO was justified in making the additions by disallowing inland transportation charges and ASSF as these amount were actually paid to Iraqi authorities either directly or through an agent for procuring the contract in Iraq and further held that Volkar Committee report could not doubted otherwise the committee would not have reported the payments. 3. At the outset, the ld AR for the assessee submitted that the ground no 1 is in support of ground no 2 and 3.The first issue raised by the .....

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aqi Government under Oil for Food Programme. It was argued that the assessee had never paid any ASSF to the Iraqi government and not charged to the profit and loss account . Secondly inland transportation fee 84100US$ were never paid and incurred and it was just a suspicion of the AO whereas the assessee has incurred, paid and charged ₹ 14,29,604/- as transportation charges overseas which were paid in Jordan and not inland transportation fee. The ld counsel submitted before us that since t .....

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re us that no ASFF was charged to profit and loss account and therefore no question of disallowance and the transportation charges were incurred out of genuine business needs and were paid in Jordan not to the govt. of Iraq. Ultimately the ld counsel submitted that the re-opening was not covered by the proviso to section 147 and thus case of the assessee was wrongly re-opened. 4. Per contra the ld DR relied on the orders of authorities below. 5. We have considered the rival submissions and perus .....

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ecuted two contracts with government of Iraq under the Oil for Food Programme.In the process of executing the contract , kickbacks in the form of inland transportation fee and after sales services fee were paid by the company. ASSF which were generally 10% kickback requirement on humanitarian contract was provided in the contract as a basis to inflate the prices. The list of Indian companies received alongwith the aforesaid memorandum of CBDT provide following information wherein illegal payment .....

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essee company made illegal payment in the shape of ASSF and Inland Transportation Fee , contract fee etc by inflating the cost of goods supplied to the Government of Iraq and accordingly by reasons of doing so by the assessee , income attributable to the extent of illegal commission incurred has escaped assessment within the meaning of section 147 of the Act and this gives me reasons to believe that income chargeable to tax has escaped assessment 6. As is seen from the above reasons recorded by .....

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