TMI Blog2016 (7) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... at additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. - Decided against assessee - TAX APPEAL NO. 542 of 2015 - - - Dated:- 29-6-2016 - Akil Kureshi And A. J. Shastri, JJ. For the Appellant : Mr Pranav G Desai, Advocate For the Respondent : Mr B. S. Soparkar, Advocate TAX APPEAL NO. 542 of 2015 TO TAX APPEAL NO. 547 of 2015 With TAX APPEAL NO. 550 of 2015 TO TAX APPEAL NO. 557 of 2015 With TAX APPEAL NO. 558 of 2015 With TAX APPEAL NO. 560 of 2015 TO TAX APPEAL NO. 564 of 2015 With TAX APPEAL NO. 580 of 2015 TO TAX APPEAL NO. 585 of 2015 With TAX APPEAL NO. 590 of 2015 TO TAX APPEAL NO. 597 of 2015 With TAX APPEAL NO. 632 of 2015 TO TAX APPEAL NO. 637 of 2015 With TAX APPEAL NO. 2 of 2016 TO TAX APPEAL NO. 9 of 2016 With TAX APPEAL NO. 10 of 2016 TO TAX APPEAL NO. 17 of 2016 With TAX APPEAL NO. 37 of 2016 TO TAX APPEAL NO. 44 of 2016 With TAX APPEAL NO. 80 of 2016 TO TAX APPEAL NO. 87 of 2016 With TAX APPEAL NO. 90 of 2016 With TAX APPEAL NO. 91 of 2016 With TAX APPEAL NO. 93 of 2016 With TAX APPEAL NO. 96 of 2016 Date : 29/06/2016 JUDGMENT ( Per Honourable Mr. Justice Akil Kureshi ) 1. This group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of assessment was challenged by the assessee before the CIT(Appeals). The assessee questioned both, the validity of the re-opening of assessment as well as the additions made by the Assessing Officer in the said order. The CIT(Appeals) in a detailed order dated 07.02.2013 rejected the assessee's ground of invalidity of the re-assessment but granted partial relief in the additions made by the Assessing Officer by adopting gross profit rate of 9% on the suppressed sales instead of 25% as was adopted by the Assessing Officer. 4. This decision of the CIT(Appeals) gave rise to two cross appeals. The assessee approached the Tribunal on the grounds of validity of re-assessment as well as on the additions confirmed by the CIT (Appeals). The department approached the Tribunal insofar as the order of CIT(Appeals) granted partial relief to the assessee. The Tribunal, by the impugned judgement dated 27.02.2015, limited its focus on the question of validity of the reopening of the assessment. The Tribunal declared that the Assessing Officer could not have re-opened the assessment. For coming to such a conclusion, the Tribunal made following observations: 16. We find on an analys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what would happen to the order of reassessment, if ultimately the Excise Department were to drop the proceedings without levying any duty or penalty from the petitioner. 20. Further the show cause notice issued by the Excise Department contains the allegation of the Excise Department that the assessee has suppressed sales for the purpose of making payment of excise duty. A perusal of recorded reasons does not show that the AO verified the particulars declared by the assessee in its income tax return. Nowhere in the recorded reasons, the sale declared by the assessee in its income tax return, has been brought on record. The AO, as per the recorded reasons, has not verified the income tax return of the assessee vis a vis the alleged escapement of income to arrive at the satisfaction to the effect that the assessee has not disclosed such income in the return of income, and has concluded that the alleged sales, on which the excise duty was allegedly not paid by the assessee, was income chargeable to income tax and has escaped the assessment under the Income Tax Act. 21. In our considered view the information contained in the show cause notice of the Excise Department can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Soparkar and Mr. Hemani appearing for the assessees in different tax appeals opposed the Revenue's appeal on following ground: Mere show cause notice issued by the Excise Department cannot be the basis for re-opening of an assessment, since the Assessing Officer cannot be stated to be in possession of tangible material enabling him to form a belief that income chargeable to tax has escaped asseessment. It was contended that the Assessing Officer had no information beyond what was collected by the Excise department and that, therefore, notice for re-opening was bad in law. Reliance was placed on the decision of this Court in case of Futura Ceramics Pvt. Ltd. And anr vs. State of Gujarat through Secretary and ors(supra) in which, it was observed that the Value Added Tax Authority could not have acted in a mechanical manner and passed the order of assessment merely on the basis of issuance of showcause notice by the Excise Department. 7. To answer the question framed in this group of appeals, we may refer to the reasons recorded by the Assessing Officer for reopening of the assessment which read as under: 1. The assessee is engaged in the business of manufacturing of cera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales personnel during their visit to the dealers or even by the angadias. Evidence of such transfer of cash also forms part of the exhaustive show cause issued by the CED. Discreet verification from the banks revealed that, over ₹ 1000 crores were exchanged hands as unaccounted cash amounts, in the aforesaid manner, through a number of shroffs situated in Morbi, Rajkot, Himmatnagar and Ahmedabad. Therefore, the DGCEI conducted a detailed investigation in the matter and factory premises of the assessee was covered under search on 17.01.2008 during which several incriminating documents were recovered, which lead to the confirmation of the intelligence. Records and documents as listed in the annexures tot he panchnamas dated 17.1.2008 drawn at the factory premises of the assessee, were seized by them for further investigation. Report on such detailed investigation is contained in the show cause notice issued by the Excise department. In the said report, corroborative evidence were also gathered and kept on record by the Excise department. Hence, the said report of the excise department is foolproof and there is substantial material evidence of suppression of sale. The show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax has escaped assessment. 9. It can thus be seen that the entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was alongwith report and show-cause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the re-opening could not and should not have been declared as invalid, on the ground that he proceeded on the show-cause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in the letter of Directorate of Investigation could be said to be definite information and the Assessing Officer could act upon such information for taking action under Section 147(b) of the Act. In such background, the Supreme Court observed as under: 12. Ms. Gauri Rastogi, the learned counsel appearing for the respondents, has urged that the letter of Shri Bagai was received by the Income tax Officer on March 26, 1974 and on the very next day, that is, on March 27, 1974, he issued the impugned notice under Section 147(b) of the Act and that he did not have conducted any inquiry or investigation into the information sent by Shri Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri Bagai does not mean that the Income Tax Officer did not apply his mind to the information contained in the said letter of Shri Bagai. On the basis of the said facts and information contained in the said letter, the Income Tax officer, without any further investigation, could have formed the opinion that there was reason to believe that the income of the assessee chargeable to tax had escaped assessment. The High Court, in our opinion, was in err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is for forming such a belief, it cannot be said that the issuance of notice was invalid. Inasmuch as, as a result of our order, the reassessment proceedings have not to go on we don not and we ought not to express any opinion on the merits. 13. In case of AGR Investment Ltd. vs. Additional Commissioner of Income Tax and anr (supra), a Division Bench of Delhi High Court considered the validity of reopening of assessment where the notice was based on information received from Directorate of investigation that the assessee was beneficiary of bogus accommodation entries. The Court while upholding the validity of reopening observed that sufficiency of reason cannot be considered in a writ petition. It was observed as under: 23 The present factual canvas has to be scrutinized on the touchstone of the aforesaid enunciation of law. It is worth noting that the learned counsel for the petitioner has submitted with immense vehemence that the petitioner had entered into correspondence to have the documents but the assessing officer treated them as objections and made a communication. However, on a scrutiny of the order, it is perceivable that the authority has passed the order deali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were made to the assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score. 14. Learned Single Judge of Madras High Court in case of Sterlite Industries (India) Ltd. vs. Assistant Commissioner of Income Tax reported in [2008] 302 ITR 275 (Mad) upheld the notice for reopening which was based on information from enforcement directorate showing possible inflation of purchases made by the assessee. 15. Under the circumstances, in our opinion, the Tribunal committed a serious error in declaring the re-opening of assessment as invalid that too relying on the decision of this Court in case of Futura Ceramics Pvt. Ltd. And anr vs. State of Gujarat through Secretary and ors(supra). This was a case where the assessee had challenged an order of re-assessment passed by the Value Added Tax Authority under the Gujarat Value Added Tax Act, 2003. The entire order was based on the notice issued by the Excise Department against the assessee for having allegedly evaded excise duty. The assessment order proceeded solely on such notice and without there being an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner. 11. All in all, the Asstt. Commissioner has acted in a mechanical manner and passed final order of assessment merely on the premise that the Excise Department has issued a show cause notice alleging clandestine removal of the goods. Such order, therefore, cannot be sustained and is accordingly quashed. When the order is ex facie illegal and wholly untenable in law, mere availability of alternative remedy would not preclude us from interfering at this stage in a writ petition. 16. Thus, the decision in case of Futura Ceramics Pvt. Ltd. And anr vs. State of Gujarat through Secretary and ors(supra) was rendered in an entirely different background and had no direct application to the question whether on the basis of information supplied by the Excise Department to the Assessing Officer of suppression of valuation of goods or clandestine removal of goods for evading excise duty, notice for re-opening of the assessment could have been issued. 17. Under the circumstances, we answer the question in favour of the Revenue and allow all appeals and set aside the respective judgements of the Tribunal. Since the Tribunal had not addressed the merits of the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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