Shri Anil Kumar Saraf Huf v. The Principal Commissioner Of Income Tax (Cit), Bikaner (Raj

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 8 / 2017 Shri Anil Kumar Saraf HUF, Proprietor of M/s Pushpa Steels, Mr.Mangilal Saraf, Near Chandi Studio, Hanumangarh Town (Raj.) ----Appellant Versus The Principal Commissioner of Income Tax (CIT), Bikaner (Raj.) ----Respondent D.B. Income Tax Appeal No. 9 / 2017 Smt. Lalita Saraf D/o Ram Niwas Goyal, Bhawani Taxtiles, Opp.Chandi Studio, Ward No. 16, Hanumangarh Town (Raj.) ----Appellant----Respondent Versus The Principal Commissioner of Income Tax (CIT), Bikaner (Raj.) _____________________________________________________ For Appellant(s) : Mr. Sanjeev Johari _____________________________________________________ HON'BLE MR. JUSTICE GOVIND MATHUR HON'BLE MR. JUSTICE VINIT KUMAR MATHURJudgment 04/05/2017 These appeals are before us to examine correctness ofthe orders dated 23.11.2016, passed by the Income Tax AppellateTribunal, Division Bench, Jodhpur in Income Tax AppealsNo.118/2016 and 117/2016, respectively. The factual matrix, necessary to be noticed, is thatafter examining the annual return of income filed by the assessees, the Assessing Officer initiated a process under Section147 read with 148 of the Income Tax Act, 1961 (hereinafterreferred to as ‘the Act of 1961’) and assessed the taxable incomeafresh. Subsequently the records of the assessment years underconsideration were called for and examined by the PrincipalCommissioner of Income Tax, Bikaner. On examination of suchrecords the Commissioner noticed that the orders under Section147/143(3) of the Act of 1961 was erroneous and prejudicial tothe interest of revenue, therefore, issued notices to show causeunder Section 263 of the Act of 1961. The same were contestedby the assessees by submitting detailed objections and those wereconsidered and decided by the Commissioner of Income Tax underthe orders dated 26.2.2016. The Commissioner of Income Tax,while arriving at the conclusion that the order of assessmentcaused prejudice to the interest of the revenue and the same waserroneous, held as under:- “3.4.2 An elaborate discussion made here-in-beforeclearly suggests that the assessing officer was aware ofthe fact that the detailed and deep investigation wasconducted by the Investigation wing of the Departmentand as a result of such investigation, voluminousincriminating material has come to the possession ofDepartment. It was gathered that certain entitiesbelonging to the Mahasagar Group of cases wereindulging in giving accommodation entries in order toenable the clients to declare speculation profit/loss,Short term capital gain, long term capital gain,profit/loss on account of commodity, introduce sharemoney or introducing money in the form of gifts. The details of the transactions pertaining to the assesseehere-in have already been furnished here-in-before andare not being repeated again for the sake of brevity. details of the transactions pertaining to the assesseehere-in have already been furnished here-in-before andare not being repeated again for the sake of brevity. Now, the question arises whether while examining thecase, the Ld. Assessing Officer had taken into accountthe aforesaid incriminating material and if so, whethersuch incriminating material was confronted with theassessee. As discussed earlier, vide this office letterNo.4461 dated 23.03.2015, the issue of existence ofincriminating material in the present case was broughtto the notice of the assessee. In response to theaforesaid, the assessee vide his letter dated Nil maderequest for providing the copy of incrimination material.He further admitted that the factum of existenceof incriminating material pertaining to theassessee was not disclosed by the Ld. Officer-during the course of reassessment proceedings.Thus, there exists a situation where even theexistence of incriminating material with theAssessing Officer does not find place in the entirere-assessment proceedings. It is also undisputedfact that neither the incriminating materialprovided by the Investigation wing was examinedby the Assessing Officer himself nor the samewas confronted with the assessee. Nor the samewas utilized for the purposes of assessment. Inlight of the aforesaid, I have no hesitation,whatsoever, in my mind that the impugned order–is erroneous because (a) the principles ofnatural justice have not been observed, and (b)the AO has not applied his mind to theincriminating material which was in hispossession or which could have come to hispossession had he exercised due diligence duringthe assessment proceedings.It is undisputed that the A.O. was aware of the investigation beingconducted by the Investigation wing of the Departmentin the Mahasagar group of cases and he was also awarethat in the course of such investigation incriminatingmaterial pertaining to the assessee has been collected.The record available in my office clearly establishes thefact that not only paper report but also 5 DVDscontaining incriminating material were made availableto the A.O. The aforesaid fact is further proved by the fact that there-opening of the case for assessment year underconsideration itself was based on this reason itself.Therefore, in light of the observations made by theHon’ble Apex Court in the case of Malabar IndustrialCo. Ltd (supra), I hold that the impugned assessmentorder is erroneous. 3.4.3 Now, coming to the second condition whichneeds to b e satisfied, namely, whether the order isprejudicial to the interest of revenue. As stated in theshow cause notice dated 23.03.2015, it has beenelaborately brought out that the assessee hadbrought in huge amount of bogus purchases-amounting to Rs.85,18,926/ in the name ofcertain entities which had been found to beindulging in providing bogus accommodationentries. It has also been stated in the notice thatwith the help of such accommodation entries andbogus purchase bills the assessee has inflatedpurchases and thereby suppressed the taxableprofit.Therefore, the impugned order is alsoprejudicial to the interest of revenue. I also hold that inthe given fact situation, no person properly instructedin law would have come to the conclusion that thepurchases shown by the assessee are genuine. Therefore, I have no hesitation in holding that the viewtaken by the Assessing Officer was not permissible inlaw. Thus, the impugned assessment order isprejudicial to the interest of revenue.” Learned Commissioner, accordingly, ordered to do theassessment denovo after giving due opportunity to the assessee ofnot only being heard but also to offer his comments with regard toincriminating material available with the Assessing officer. Therefore, I have no hesitation in holding that the viewtaken by the Assessing Officer was not permissible inlaw. Thus, the impugned assessment order isprejudicial to the interest of revenue.” Learned Commissioner, accordingly, ordered to do theassessment denovo after giving due opportunity to the assessee ofnot only being heard but also to offer his comments with regard toincriminating material available with the Assessing officer. To challenge the orders passed by the Commissioner,Income Tax, appeals were preferred before the Income TaxAppellate Tribunal, Division Bench, Jodhpur that also came to bedismissed under orders impugned dated 23.11.2016. The Tribunal,after taking into consideration the entire material available onrecord, arrived at the conclusion that a detailed deep investigationwas conducted by the investigation wing and lot of incriminatingmaterial came to the possession of the department and theAssessing Officer should have properly inquired about thatincriminating material, and as such there was no wrong in makingorder to proceed denovo in light of the orders passed by thePrincipal Commissioner of Income Tax. In appeals, it is submitted by learned counsel for theappellants that the Income Tax Appellate Tribunal failed toappreciate that the powers under Section 263 of the Act of 1961are not open to be availed merely on the count of change inopinion or just for the reason that the Commissioner is not satisfied with the finding arrived by the Assessing Officer, hence,the orders impugned are bad. We do not find any merit with the argument advanced. From perusal of the orders passed by the PrincipalCommissioner of Income Tax it is apparent that the Commissionernoticed the incriminating material which was not at all taken intoconsideration by the Assessing Officer while passing the orders ofassessment. The Commissioner in quite detail considered allaspects to arrive at the conclusion that the order of assessmentwas erroneous and causing prejudice to the interest of revenue.The Income Tax Appellate Tribunal also looked into the matterthoroughly and upheld the conclusion arrived by the PrincipalCommissioner of Income Tax. The appeals as such do not involveany substantial question of law that may warrant adjudication byus. Accordingly, the appeals are dismissed. (VINIT KUMAR MATHUR)J. (GOVIND MATHUR)J.