M/S Amrit Trading Company v. Commissioner Of Income Tax (Appeals) & Another

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.338 of 2005 Date of decision: 5.1.2011 M/s Amrit Trading Company. -----Appellant. Vs. Commissioner of Income Tax (Appeals) & another. -----Respondents CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Akshay Bhan, Advocatefor the appellant.for the appellant. Mr. K.K. Mehta, Standing Counselfor the respondents. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of I.T.A. Nos.338 to 342 and514 of 2005, as all the appeals filed by the assessees involvecommon questions relating to validity of reassessmentproceedings. 2. I.T.A. No.338 of 2005 has been preferred by theassessee under Section 260-A of the Income Tax Act, 1961 (forshort, “the Act”) against the order of the Income Tax AppellateTribunal, Chandigarh in I.T.A. No.959/Chandi/96 for theassessment year 1991-92 raising following questions of law:- “i)Whether in the facts and circumstances of thepresent case the action of the authorities belowin initiating the reassessment proceedingsmerely on the basis of communication dated12.12.1992 without any reasonable groundhaving rational connection, is legally sustainablein the eyes of law?present case the action of the authorities belowin initiating the reassessment proceedingsmerely on the basis of communication dated12.12.1992 without any reasonable groundhaving rational connection, is legally sustainablein the eyes of law? ii)Whether in the facts and circumstances of thepresent case, the action of the authorities belowin holding the consignment sales to be the saleson account of trading without investigating thesame appropriately and acting on its ownpresumption is legally sustainable in the eyes oflaw?present case, the action of the authorities belowin holding the consignment sales to be the saleson account of trading without investigating thesame appropriately and acting on its ownpresumption is legally sustainable in the eyes oflaw? iii)Whether in the facts and circumstances of thepresent case, the action of the authorities belowin acting on its own presumption is legallysustainable in the eyes of law?”present case, the action of the authorities belowin acting on its own presumption is legallysustainable in the eyes of law?” 2. The assessee is engaged in the business of timber sales and consignment sales. Its return for the assessment yearin question was processed under Section 143(1)(a) of the Act, butthereafter, notice dated 15.2.1993 was issued under Section 148of the Act, based on information received from Assistant Directorof Income Tax, indicating that there was escapement of incomefrom tax on account of assessee having treated certain sales tobe consignment transactions. After due consideration, theassessment was made resulting in additions on account ofundisclosed investment in trading activities. The CIT(A) set asidethe reopening of the assessment following earlier order in some other cases wherein assessment was framed under Section 143(3) of the Act and reassessment proceedings were initiatedwithout obtaining necessary sanction under Section 151(1) of theAct. On appeal by the revenue, the Tribunal set aside the orderof the CIT(A) and restored that of the Assessing Officer and heldthat sanction under Section 151(1) was not required whereassessment was made under Section 143(1)(a) of the Act wheninitiation of reassessment was within the statutory period. Thefinding of the Tribunal is as under:- other cases wherein assessment was framed under Section 143(3) of the Act and reassessment proceedings were initiatedwithout obtaining necessary sanction under Section 151(1) of theAct. On appeal by the revenue, the Tribunal set aside the orderof the CIT(A) and restored that of the Assessing Officer and heldthat sanction under Section 151(1) was not required whereassessment was made under Section 143(1)(a) of the Act wheninitiation of reassessment was within the statutory period. Thefinding of the Tribunal is as under:- “19. In the case of M/s Bharat Trading Co. and M/sAssam Timber Store, the AO had received theinformation from the Assistant Director of Income-tax(Investigation) Hissar on 12.12.92. The reasons forreopening of assessments had been recorded on15.2.1993 i.e. after the receipt of information from theADI, Hisar. The report is based on enquiry. A perusalof the sum and substance of the report, which hasbeen reproduced elsewhere in this order, clearlyindicates a sound basis for formation of the belief thatincome of the assessees had escaped assessments.We are, therefore, of the considered view that theproceedings for reassessments in the case of M/sBharat Trading Co. for the assessment year 90-91and 91-92 and in the case of M/s Assam Timber Storefor the assessment year 90-91 and 91-92 had beenvalidly initiated. The CIT(A) was, therefore, notjustified in canceling the reassessments for theassessment years 90-91 & 91-92 in the case of M/sBharat Trading Co. and in the case of M/s AssamTimber Store. The orders of the CIT(A) in the case of M/s Bharat Trading Co. in I.T.A. nos.1572 &1573/Chandi/95 for the assessment years 90-91 and91-92 and in the case of M/s Assam Timber Store inI.T.A. No.751 & 752/Chandi/96 for the assessmentyears 90-91 & 91-92 are set aside. 20.The CIT(A) has also deleted the trading additionmade by the AO. It is observed from the assessmentorders that assessee had given sufficient opportunityto establish that the goods had been received fromAssam parties on consignment basis. Sinceassessee had failed to establish that the goods hadbeen sold on commission basis and since on enquiryalso the parties were not found to exist, the AO wasjustified in treating the commission sales as tradingsales and assessing the profit accordingly. The AOhas also been reasonable in determining the profitson the basis of the rate of profit disclosed by theassessee in respect of trading of timber other thansales on consignment. Since the determination ofprofit made by the AO is reasonable, we, in the caseof M/s Bharat Trading Co. restore the additions ofRs.1,08,620 for the assessment year 90-91 andRs.69,420 for the assessment year 91-92 and in thecase of M/s Assam Timber Store restore the additionsof Rs.8500/- for the assessment year 90-91 andRs.19,250 for the assessment year 91-92. Theassessment of Rs.57,800 and Rs.47,620 on accountof unexplained investment is also justified. Theorders of the CIT(A) are accordingly set aside andthose of the AO restored.” We have heard learned counsel for the parties. 4.It is not disputed that in the case of theappellants/assessees the earlier assessment was under Section143(1)(a) of the Act, in which case the CIT(A) was not justified ininvoking Section 151(1) of the Act, which is applicable only ifinitially assessment was regular assessment under Section 143(3) or Section 147 of the Act. The view taken by the Tribunal,thus, does not require any interference. The questions of lawclaimed by the assessee have to be answered against it. Accordingly, the appeals are dismissed. A photocopy of this order be placed on the file of otherconnected case. (ADARSH KUMAR GOEL) JUDGE January 05, 2011ashwani (AJAY KUMAR MITTAL) JUDGE