Rajnikant B.Desai, Nadiad vs Assessee

This is an appeal filed by the Revenue against the order of ld. CIT(A) dated 8th March, 2011 for AY 2002-03 and the Cross Objection has been filed by the assessee.

ITA No.1567/Ahd/2011 & CO. 163/Ahd/2011 2 Asst. Year 2002-03

2. The grounds of appeal raised by the Revenue are as under :-

1. The ld. CIT(A) erred in law and on facts in quashing the notice issued u/s 148 of the IT Act and consequently in annulling the assessment order dated 18.11.2009 passed under section 143(3) r.w.s. 147 of the I.T. Act.

2. The ld. CIT(A) further erred in law and on facts in annulling the assessment in which addition of Rs.59,32,051/- was made on account of unexplained capital as per digital date derived from the lap-top.

3. The ld. CIT(A) further erred in law and on facts in annulling the assessment in which addition of Rs.52,16,180/- was made on account of unexplained cash receipts and payments as digital data derived from the lap-top.

3. Facts of the case are that the assessee had filed his return of income u/s 139 on 31.03.2003 declaring total income of Rs.42,375/-. A search u/s 132 was carried out in this case and the group cases of Shri Rameshbhai Babubhai Shah of Nadiad on 03/04/2008. Many incriminating documents/materials were seized during the course of search, inter alia, Lenovo make lapton. In the said lapton, data of 65 companies (as per software's language), i.e. entities'(files), books of account for different period was found. Among these 65 entities, the assessee was the one of whom books of account in the name of (company as per tally software) 2Parshwa Corporation was maintained. During the course of ITA No.1567/Ahd/2011 & CO. 163/Ahd/2011 3 Asst. Year 2002-03

search as well as post search enquiries, the key person of the group Shri Rameshbhai B. Shah categorically stated that these accounts were being maintained for various business transactions/accounts which were either totally out of books or partly out of books. Therefore, these files contained data of unaccounted business transactions/information of unaccounted income. Shri Rameshbhai B. Shah failed to submit bifurcation of accounted and unaccounted income/business during the course of search as well as post search investigation. Thus the department came in possession of the information about the files containing the date of unaccounted business transactions/information of unaccounted income. Accordingly, the Assessing Officer issued notice under section 148 on 31.3.2009 and subsequently questionnaires were issued calling for details/information. They were served upon the assessee. In response to the notices, the assessee made its submissions along with objections before the Assessing Officer. The Assessing Officer considered the submissions/objections but rejected the same and made addition in question. The addition was made on the ground that the assessee could not explain the source of cash receipts of Rs.8,59,350/- and cash payments of Rs.59,65,178/-. The addition of Rs.8,59,350/- was made on account of unexplained cash receipts. The addition of Rs.59,65,178/- was made as the cash ITA No.1567/Ahd/2011 & CO. 163/Ahd/2011 4 Asst. Year 2002-03

payments including the negative cash balance were more than the cash receipts.

4. The matter was carried in appeal before the first appellate authority, who after considering material available on record and the submissions of assessee, and following the decision of Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. 320 ITR 561 (SC) annulled the assessment order. The Revenue being aggrieved with the order of ld. first appellate authority has preferred this appeal before the Tribunal. The ld. DR supported the order of AO whereas the ld. AR relied on the order of first appellate authority and submitted a bunch of Tribunal decisions on the issue.

5. After considering the rival submissions and going through the material available on record carefully, we find that the AO has made the reassessment without disposing of the objections of the assessee. An identical issue came up before the Tribunal and the Tribunal, in a recent decision in the case of ACIT, Cen.Cir.-2, Baroda vs. M/s Sagar Developers vide order dated 10/04/2015 in ITA No.1538/Ahd/2011 for AY 2002-03 the Tribunal has decided the issue by observing as under :-

ITA No.1567/Ahd/2011 & CO. 163/Ahd/2011 5 Asst. Year 2002-03 "7. We have heard the rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the respondent assessee in terms of Rule -27 of the Income-tax Appellate Tribunal Rules, 1963 supported the order of CIT(A) on the ground that the impugned assessment order was bad in law as the reassessment was made without disposing off the objections raised by the assessee against the initiation of reassessment proceedings by a separate order. We find that, in the instant case, it is not in dispute that the assessee filed his objections against the issuance of notice u/s 148 of the Act vide his letter dated 11.11.2009 which was received by the office of the Assessing Officer on 16.11.2009. Thereafter, the AO passed the impugned re-assessment order on 20.11.2009 disposing off the objections to reassessment proceedings of the assessee in the order itself. Thus these facts show that the objections raised by the assessee against the issuance of notice u/s 148 of the Act were not disposed off by the AO by passing a speaking order thereon and allowing reasonable time to the assessee after communicating the fate of the objections before processing with the reassessment. The Hon'ble Gujarat High Court in the case of General Motors India P. Ltd. vs. DCIT (supra) has held as under :-

''From the aforesaid discussion, we are of the considered opinion that the writ petition under article 226 of the Constitution of India is maintainable where no order has been passed by the AO deciding the objection filed by the assessee under section 148 of the Act and assessment order has been passed or the order deciding an objection under section 148 of the Act has not been communicated to the assessee and assessment order has decided along with the assessment order. If the objection under section 148 has been rejected without there being any tangible material available with the AO to form an opinion that there is escapement of income from assessment and in the absence of reasons having direct link with the formation of the belief, the writ court under article 226 can quash the notice issued under section 148 of the Act. The writ petition filed by the petitioner is maintainable. The AO is mandated to decide the objection to the notice under section 148 and supply or communicate it to the assessee. The assessee gets an opportunity to challenge the order in a writ petition. Thereafter, the AO may pass the reassessment order. We hold that it was not open to the AO to decide the objection to notice under section 148 by a composite assessment order. The AO was required to, first decide the objection of the assessee filed under section 148 and serve a copy of the order on the assessee. And after giving some reasonable time to the assessee for challenging his order, it was open to him to pass an assessment order. This was not done by the AO therefore, the order on the ITA No.1567/Ahd/2011 & CO. 163/Ahd/2011 6 Asst. Year 2002-03 objection to the notice under section 148 and the assessment order passed under the Act deserves to be quashed."

8. Therefore, respectfully following the above decision of the Hon'ble Jurisdictional High Court, we are of the considered view that the impugned order of reassessment passed by the AO without disposing off the objections raised by the assessee against the issuance of notice u/s 148 by a separate order is liable to be quashed. We order accordingly. Thus, this ground of appeal of the Revenue is dismissed."

Nothing contrary has been brought to our knowledge on behalf of Revenue. Facts being similar so, respectfully following the above order of the Tribunal and in view of the decision of the Hon'ble Gujarat High Court in the case General Motors India P. Ltd. vs. DCIT 354 ITR 0244 (Guj), and in view of the decision of Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. (supra) we are of the view that ld. CIT(A) has rightly annulled the assessment order. We find no infirmity in the order of ld. CIT(A). Therefore, the grounds raised by the Revenue in this appeal, have become in fructuous and hence dismissed. The appeal filed by the Revenue is dismissed. Since we are deciding the matter on preliminary issue we are refraining to comment on merit of the issue at hand. However, revenue is at liberty to raise the issue on merit as and when required to do so.

6. The C.O. was not pressed. Hence the same is dismissed as not pressed.

ITA No.1567/Ahd/2011 & CO. 163/Ahd/2011 7 Asst. Year 2002-03

7. In the result, the appeal of Revenue and the Cross Objection of assessee both are dismissed.

Pronounced in the open Court on this the 24th day of June, 2015.

Sd/- Sd/- (Anil Chaturvedi) (Shailendra Kumar Yadav) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 24/6/2015 Mahata/- Copy of the order forwarded to: 1. The Appellant 2. The Respondent 3. The CIT concerned 4. The CIT(A) concerned 5. The DR, ITAT, Ahmedabad 6. Guard File BY ORDER

Dy.Registrar,ITAT, Ahmedabad 1. Date of dictation: 04/06/2015

2. Date on which the typed draft is placed before the Dictating Member: 15/06/2015 other Member:

3. Date on which approved draft comes to the Sr. P. S./P.S.:

4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________

5. Date on which the fair order comes back to the Sr. P.S./P.S.:

6. Date on which the file goes to the Bench Clerk: 24/6/2015

7. Date on which the file goes to the Head Clerk:

8. The date on which the file goes to the Assistant Registrar for signature on the order:

9. Date of Despatch of the Order: