TMI Blog2022 (1) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the Assessing Officer that the cash deposit in the bank account is not out of agricultural income of the assessee is that, the assessee only produced some hand written cash receipts which do not inspire confidence. This also, the Ld counsel stated, is the conclusion of the ADIT (Inv) and not of the Assessing Officer. The decisions relied upon by the Ld. Counsel also fortify the view that reasons recorded should be based on the satisfaction of the Assessing Officer and not on borrowed satisfaction - satisfaction recorded in the reasons recorded by the Assessing Officer are borrowed and not his own. Thus, the order made under section 143(3) r.w.s 147 for assessment year 2010-11 is quashed as bad in law. The additional ground raised by the assessee is allowed. Estimating the agricultural income at 40% - Estimation of the agricultural income by the Ld.CIT(A) is entirely on assumptions and presumptions. The facts being the same in all the years, and the Revenue accepting agricultural income for the A.Ys. 2011-12 and 2012-13 and the lower authorities not bringing any evidence on record to hold otherwise, taxing the agricultural income shown by the assessee, as cash credit u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudication and briefly the facts are as under: - 4. The assessee is engaged in the business of trading in garments and also has agricultural income. For the year under reference the assessee filed its return of income on 31.12.2009 declaring its total income at ₹.5,82,995/- and agricultural income at ₹.14,67,200/-. Later the Assessing Officer issued notice u/s 148 of the Act dated 21.03.2016 and reopened the assessment of the assessee. The assessee in response to the said notice, by letter dated 20.10.2016 requested the Assessing Officer to consider the original return of income filed to be in pursuance to the notice u/s 148 of the Act. 5. However, the Assessing Officer by his order dated 27.12.2016 completed the assessment u/s. 143(3) r.w.s 147 of the Act by making an addition of ₹.7,57,063/- u/s 68 of the Act, not accepting the agricultural income shown by the assessee and further made disallowance of expenses of ₹.7,10,137/- claimed by the assessee against its agricultural income, thereby making an addition of ₹.14,67,200/-. Assessing Officer further made an ad hoc disallowance of ₹.18,52,913/- being 10% of the total expenses of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, it can be said that no reasons were recorded by the Assessing Officer before issuing the impugned notice under section 148 of the Act. Accordingly, he contended that the impugned reassessment order passed under section 143(3) r.w.s 147 of the Act for assessment year 2009-10 is required to be quashed. Ld. Counsel for the assessee placed reliance on the following decisions. (i). Videsh Sanchar Nigam Ltd [340 ITR 66 (Bom)] (ii). Tata International Ltd [23 taxmann.com 18 (Mum)] 11. The Ld. DR could not controvert the above facts as brought out by the Ld. counsel for the assessee. Recording of the reasons is a pre-requisite for commencing reassessment proceedings as mandated by the provisions of section 148(2) of the Act and as the Assessing Officer has not been able to provide the reasons for reopening the assessment for this year either before completion of assessment or even at the stage of appeal proceedings, it can safely be concluded that the same have not been recorded by him. Even assuming for a moment, the Assessing Officer had in fact recorded the reasons for reopening such reasons were never provided to the assessee for its rebuttal. The assessee had no occ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context of this very Appellant, was upheld not only by this Court, but also by the Hon ble Supreme Court. This was in ETA No.1 and 5/PANJ/01 decided by the Tribunal on 4.4.2006. 15. The aforesaid decision of the ITAT was appealed by the Respondent vide Tax Appeal No.71/2006. This appeal was dismissed by this Court vide order dated 27th November, 2006, which reads thus : Heard the learned Counsel on behalf of the parties. This appeal is filed against the Order dated 4-4-2006 of the ITAT wherein in para 7 the learned ITAT has come to the conclusion that the Assessing Officer is required to give reasons, when asked for by the Assessee. Giving of reasons has got to be considered as implicit in Section 11 of the Expenditure Tax Act, 1987. It is now well settled that giving reasons in support of an order is part of complying with the principles of natural justice. In the light of that, no fault could be found with the order of the learned ITAT and as such no substantial question of law arises as well. Appeal dismissed. 16. The Respondent, instituted a Special Leave to Appeal (Civil) No.5711/2007 which was, however, dismissed by the Hon ble Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the case and in law, the Tribunal was justified in restoring the issue to the Assessing Officer after having quashed/set aside the order dated 14th December, 2009 passed by the Assessing Officer without having disposed of the objections filed by the appellant to the reasons recorded in support of the reopening Notice dated 28th March, 2008 ? 22. In the aforesaid case, the Assessing Officer had purported to dispose of the objections to the reasons in the assessment order, consequent upon reopening of the assessment. This Court, however, held that the proceedings for reopening of assessment prior to disposing of the Asessee s objections by passing a speaking order, was an exercise in excess of jurisdiction. 23. KSS Petron Private Ltd. (supra), this is what the Division Bench has observed at paragraphs 7 and 8 of the Judgment : 7. On further Appeal, the Tribunal passed the impugned order. By the impugned order it held that the Assessing Officer was not justified in finalizing the Assessment, without having first disposed of the objections of the appellant. This impugned order holds the Assessing Officer is obliged to do in terms of the Apex Court's dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a separate speaking order disposing off the preliminary objections raised by the assessee in reopening the assessment. 14. In the case of Maharashtra State Power Generation Co. Ltd., v. Addl. CIT in ITA.No. 2043/Mum/2011 dated 31.07.2019 the Tribunal considering the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd., v. ITO (supra) and the decision of the Hon'ble Jurisdictional High Court in the case of KSS Petron Pvt. Ltd., v. ACIT in ITA.No. 224 of 2014 dated 03.10.2016 and also the decision of the Coordinate Bench in the case of DCIT v. Firstsource Solutions Ltd in ITA.No. 3985 3986/Mum/2016 dated 22.05.2019, quashed the reassessment order passed u/s. 143(3) r.w.s. 147 of the Act. While quashing the re-assessment order the Coordinate Bench observed as under: - 2.1 The Ld. Authorized Representative for Assessee [AR], at the outset, submitted that the objections raised by the assessee against reopening the assessment were never disposed-off by Ld. Assessing Officer as mandated by the decision of Hon ble Supreme Court in GKN Driveshafts (India) Ltd. V/s ITO [259 ITR 19] and therefore, the reassessment proceedings stood vitiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r due consideration of factual matrix, we find that the binding judicial precedent in the shape of cited decision of Hon ble Bombay High Court squarely applies to the fact of the case. The relevant observation of Hon ble court, for ease of reference, could be extracted in the following manner: - 8. We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters. 9. In fact, to ensure that reopening notices are disposed of, expeditiously the parliament itself has provided in Section 153(2) of the Act a period of limitation within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity of re opening of assessments under section 147 of the Act, however, the Assessing Officer has not disposed of the objections independently by way of separate orders before completion of assessment proceedings under section 143(3) r/w 147 of the Act. The Hon'ble Supreme Court in GKN Driveshafts India Ltd. (supra) has held that before completion of the assessment, the Assessing Officer is duty bound to dispose of the objections of the assessee separately. Therefore, the Assessing Officer in the instant appeal has not followed the due judicial process while dealing with the objections of the assessee. For that reason, the impugned assessment orders are legally unsustainable. Now the issue which arises is, whether in such circumstances, the re assessment orders passed have to be quashed as void ab initio or they are to be restored back to the Assessing Officer for enabling him to dispose of the objections of the assessee and pass fresh assessment orders. In our view, the issue is no more res integra in view of the decision of the Hon'ble Jurisdictional High Court in KSS Petron Pvt. Ltd. (supra), wherein, the Hon'ble Jurisdictional High Court has held that if the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . State of Kerala 2001(129) ELT 11 (S.C.). Aforesaid view was again affirmed by the hon ble Supreme Court in case of Khoday Distilleries Ltd. Vs. Shree Mahadeshwara Sahakara Sakkare Karkhane Ltd. while disposing of Civil Appeal no.2432 of 2019 in judgment dated. 01.03.2019. Therefore, it cannot be said that in the aforesaid decision, the Hon'ble Supreme Court has laid down the proposition that non disposal of objections against the validity of proceedings initiated under section 147 of the Act is a procedural irregularity which can be cured if the Assessing Officer is given an opportunity to dispose of the objections of the assessee and thereafter complete the assessment. Moreover, the decision of the Hon'ble Supreme Court in GKN Driveshafts India Ltd. (supra) has not been overruled and still holds the field. The next decision cited by the learned Departmental Representative is of the Hon'ble Jurisdictional High Court in NTUC Income Insurance Co operative Ltd. v/s DDIT, [2013] 33 taxmann.com 255 (Bom.). On a careful reading of the aforesaid decision, it is evident that the facts on the basis of which the Hon'ble Jurisdictional High Court restored back the issue to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Ld. Assessing Officer. In view of the same, dealing into the merits of the case become merely academic in nature and therefore, we refrain from dealing the same. Ground No. 1 stands allowed which makes other grounds of appeal infructuous. 15. In the case of CIT v. Videsh Sanchar Nigam Ltd., [340 ITR 66] the Hon'ble Jurisdictional High Court held that since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of assessment the re-assessment order cannot be upheld. While holding so the Hon'ble High Court observed as under: - 1 Whether the Tribunal was justified in cancelling the reopening of the assessment is the question raised in this appeal. 2 The finding of fact recorded by the Income-tax Appellate Tribunal is that in the present case the reasons recorded for reopening of the assessment though repeatedly asked by the assessee were furnished only after completion of the assessment. The Tribunal following the judgment of this court in the case of CIT v. Fomento Resorts and Hotels Ltd., Income-ta Appeal No. 71 of 2006 decided on November 27, 2006, has held that though the reopening of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the assessee the information received by him from ADIT, Inv, Unit-5(2), Mumbai by letter dated 03.03.2016 which is in violation of the principles of natural justice. 19.2. It is further submitted that in the entire reasons recorded by Assessing Officer, he has brought nothing on record to prove that he has on his own carried out any independent inquiry to come to the prima facie belief that income has escaped assessment. However, he has merely relied on the information received from the Investigation wing before issuing notice under section 148 of the Act. It is submitted that the Courts have time and again held that re-opening of assessment is valid only if the reasons recorded are based on the satisfaction of the Assessing Officer and not based on borrowed satisfaction. However, it is the contention of the Ld. Counsel for the assessee that the reasons recorded clearly show that they are based on borrowed satisfaction. The Ld. counsel placed reliance on the following decisions in support of the above proposition. (i) Shodiman Investment P Ltd [422 ITR 337 (Bom)] (ii) Varshaben Sanatbhai Patel [64 taxmann.com 179 (Gujarat)] Thus, the Ld. counsel for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re also available with the Assessing Officer who has still stated in the reasons recorded that the agricultural land has been purchased by the assessee on 02.02.2008 and 26.03.2008 on the findings of the Investigation wing that the agricultural land is transferred in the name of the assessee on 04.01.2016, is erroneous. Therefore, the Ld. counsel stated that the only basis left for reopening was cash deposit in the bank account for which there is no valid reasoning given by the Assessing Officer as to how this can be considered as undisclosed income and urged that there is no belief of the Assessing Officer that income of the assessee has escaped income. 20. The Ld. DR on the other hand contended that the Ld.CIT(A) has dealt with this issue at length and reiterated the same arguments as stated by the Ld.CIT(A) in Para Nos 6.1 to 6.1.14 of his order. 21. I have heard the rival submissions and perused the orders of the Authorities below. On perusal of the reasons recorded for reopening, I notice that the Assessing Officer has merely relied on the information received from the Investigation Wing and has not made any independent inquiry on his own. Thus, the reasons recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. 24.3. It is submitted that the Ld.CIT(A) however, estimated the net agricultural income at minus ₹.2,27,925/- (negative) for A.Y.2013-14, ₹.9,46,266/- for A.Y.2014-15 and ₹.4,14,600/- for A.Y. 2015-16 and accordingly, directed that the said sums of ₹.9,46,266/- for A.Y. 2014-15 and ₹.4,14,600/- for A.Y. 2015-16 be considered as agricultural income, beside holding that the sale of goats and goat mindvi is not considered as agricultural income 24.4. It is submitted that the Ld.CIT(A) determined the net profit from agricultural income at the rate of 40% of gross agricultural income without any basis and entirely on the basis of assumptions and presumptions. The Ld.CIT(A) has not brought any comparable figures on record to support his estimation. 24.5. It is submitted that the observation of the Ld.CIT(A) that there is huge variation in salary and wages expenses and labour expenses for earlier and subsequent assessment years is erroneous, inasmuch as, if the said expenses are combined then there is no major variation: - Sr.No. Asst. Years Agricultural Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy shall still apply for each year. If the facts in different assessment years are the same and identical then different views cannot be permitted to be taken. 24.7. Regarding sale of goats and goats mindvi, the Ld. counsel for the assessee fairly submitted that a reasonable profit be estimated and suggested a rate of 5% of the sale of goat and goat mindvi, that may be added to the total income. 25. Ld. DR vehemently supported the orders of the Authorities below. 26. I have heard the rival submissions, perused the orders of the Authorities below, as regards the addition sustained by the Ld.CIT(A) estimating the agricultural income at 40%, I find that the Assessing Officer mainly relied on the findings of the Investigation wing that the agricultural land was transferred to the assessee only on 04.01.2016, and accordingly, taxed the entire agricultural income shown by the assessee under section 68 of the Act. However, the aforesaid finding of the Investigation wing relied upon by the Assessing Officer was categorically denied and disproved by the Ld. CIT(A) in Para 8.3.2 of his order based on various documentary evidences furnished by the assessee during assessment as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and goat mindvi should be estimated at the rate of 10% of the sale. This ground of appeal of the assessee gets part relief. 29. I now take up the next ground of appeal that relates to an ad hoc disallowance of 10 per cent of total purchases and other expenses debited to the profit and loss account in each of these three years. 30. The Ld. counsel for the assessee submitted that the Ld.CIT(A) ought not to have sustained the impugned disallowance made by the Assessing Officer. He submits that the books of account of the assesse are audited and no adverse remarks have been made by the auditors regarding expenses claimed in the profit and loss account. Further, the Assessing Officer has not pointed out any specific defects regarding the claim of expenses and has not rejected the books of account, however, made the disallowance only for the reason that no reply was received from the parties to whom notice under section 133(6) were issued and field enquiries revealed that no such parties existed, which the courts have time and again held is not tenable. The Ld counsel placed reliance on the decision of Hon ble Supreme Court in the case of R.G. Buildwell Engineers Ltd reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other expenses debited to Profit and Loss Account by the assessee. In other words, the Assessing Officer disallowed 10% of entire expenses debited to Profit and Loss Account in each of these years. It is the contention of the Ld. Counsel for the assessee that enquiries were made behind the back of the assessee and the Assessing Officer never put to use about non receipt of replies from the parties. Therefore, the Ld. Counsel for the assessee submits that there is violation of principles of natural justice. Ld. Counsel for the assessee also stated that the Assessing Officer has not rejected the books of account of the assessee under section 145(3) and the Auditor also has not made any adverse remarks regarding purchases/expenses claimed. It is observed from the Assessment Order that the Assessing Officer has not given any basis for disallowing the other expenses other than the purchases made by the assessee. It appears that the reports of the field enquiries were also not confronted with the assessee for its rebuttal. Therefore, taking the totality of facts and circumstances into consideration, I hold that if the disallowance is restricted to 5% it would meet the ends of justice. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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