Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘SMC: NEW DELHI
Before: SHRIS.RIFAUR RAHMAN
(Assessment Year: 2012-13) Goel Pawan Kumar & Family (HUF), vs. ITO, Ward 34 (4), RF – 12A, Ground Floor, New Delhi. TDI Espania Royal, Sonepat – 131 001 (Haryana). (PAN : AAAHG7789J) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Roshan Kumar, Advocate REVENUE BY : Shri B.S. Anand, Sr. DR Date of Hearing : 05.03.2025 Date of Order : 21.05.2025 O R D E R
The assessee has filed this appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 23.09.2024 for the Assessment Year 2012-13.
Brief facts of the case are, assessee filed its return of income declaring of Rs.4,17,410/- for AY 2012-13 on 12.04.2019. Subsequently, AO received information from DDIT (Inv.), Unit 6 (1), Delhi that assessee transacted with M/s. Shree Krishna Trading Company during the year under consideration which raises suspicion that how the assessee who is doing business of fabrics/clothes has a business relation with the alleged company which trades in sale of cashew nuts. The Assessing Officer, in order to verify, initiated reassessment proceedings u/s 147 of the Income-tax Act, 1961 (for short ‘the Act’) and notice u/s 148 was issued on 31.03.2019. In response, the assessee filed the return of income on 12.04.2019 declaring income at Rs.4,17,410. Accordingly, the Assessing Officer issued notice u/s 143 (2) of the Act on 12.09.2019. During reassessment proceedings, the assessee filed the submissions as called for and submitted that the assessee is in proprietorship of the firm carrying on business of purchase and sale of fabrics in wholesale and retail market under name and style of M/s. Giriraj Enterprises. Before the Assessing Officer, assessee submitted that he made the payment of Rs.24,20,165 on various dates through banking channel and claimed that the transactions are backed by the delivery challan and sale receipts. However, Assessing Officer observed that assessee failed to establish that any goods have been delivered by M/s. Shree Krishna Trading Co. in respect of the bills submitted by the assessee. Accordingly, Assessing Officer concluded the assessment by disallowing the entire bogus purchases of Rs.24,20,165/- 3. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A) who confirmed the addition made by the Assessing Officer and dismissed the appeal of the assessee by observing that the assessee has not submitted any new material or any additional evidences to support his case.
Aggrieved assessee is in appeal before us raising following grounds of appeal:-
1. Reopening of Assessment is Invalid and Without Jurisdiction: That the LD. [CIT(A)] erred in law and on facts in upholding the reopening of the assessment under Section 147/148 of the Income Tax Act, 1961, without satisfying the jurisdictional preconditions for such reopening, as neither any new material was brought on record nor was any independent inquiry conducted to validate the reopening of the case. The entire reopening proceedings are bad in law and deserve to be quashed.
2. Non-Application of Mind by the Assessing Officer: That the LD. [CIT(A)] erred in upholding the action of the Assessing Officer (AO) in making an addition of Rs.24,20,165 creating tax demand of Rs.13,59,670/- on account of alleged bogus purchases without independent application of mind and by relying solely on the information received from the Investigation Wing without conducting further independent inquiries. The addition made is arbitrary, baseless, and liable to be deleted.
3. Denial of Opportunity to Cross-Examine: That the LD. CIT(A) failed to appreciate that the Appellant was not provided an opportunity to cross- examine the persons whose statements formed the basis of the alleged bogus purchases, violating the principles of natural justice. The addition made without such cross-examination is unjust and ought to be set aside.
4. Failure to Appreciate Documentary Evidence: That the learned CIT(A) failed to properly consider the documentary evidence submitted by the Appellant, including purchase bills, payment proofs through banking channels, and audited financial statements, all of which clearly substantiated the genuineness of the transactions in question. The addition made on the ground of bogus purchases is contrary to the evidence on record and deserves to be deleted.
5. Incorrect Application of Law Regarding Bogus Purchases: That the learned CIT(A) erred in confirming 100% disallowance of the alleged bogus purchases, ignoring judicial precedents wherein a reasonable percentage i.e Gross Profit Rate has been held to be sufficient in cases of alleged bogus purchases. The entire addition is excessive, unjustified, and ought to be deleted or substantially reduced in accordance with the settled legal principles.
7. Erroneous Reliance on Information Without Further Investigation: That the learned CIT(A) and the AO erred in relying solely on the information received from the Investigation Wing without making any further inquiry, verification, or investigation as required under Section 133(6) or 131 of the Act. The failure to conduct such inquiries makes the addition wholly unsustainable.
7. Books of Accounts Duly Audited: That the learned CIT(A) failed to appreciate that the books of accounts of the Appellant were duly audited by a Chartered Accountant as required under the Income Tax Act, 1961, and no discrepancies were found in the transactions with M/s Shri Krishna Trading Company. Therefore, the addition made by the AO on the assumption of bogus purchases is bad in law.
Violation of Principles of Natural Justice: That the learned CIT(A) erred in confirming the addition made by the Ld. AO without giving the Appellant a fair opportunity of being heard and without considering the submissions and evidence provided. This is a clear violation of the principles of natural justice, rendering the reassessment proceedings void.
Disregard of Relevant Precedent in Assessment and Disregard of Consistency in Assessments: Arbitrary and Disproportionate Addition in Contravention of Prior Treatment of Similar Transactions in the case of the assessment of the Karta, involving identical facts and transactions, including purchases from the same party, the (Ld. AO) had added only 12.5% of the purchases to the income. However, the said order and reasoning have been completely disregarded in the present case, where the Ld. AO has arbitrarily added 100% of the sales as income of the assessee. This selective and inconsistent approach not only violates the principles of judicial consistency but also fails to provide any justification for the deviation, thereby rendering the addition unsustainable in law.”
At the time of hearing, ld. AR of the assessee submitted that based on the submission of third party in the survey proceedings, the additions were made in the hands of the assessee. He submitted that the case of the assessee was already subjected to regular assessment and AO has accepted the return of income. He submitted that ld. CIT (A) has sustained the additions made by the Assessing Officer. He pleaded that in case the purchases are considered as bogus, the Department has not suspected the corresponding sales declared by the assessee and prayed that assessee has declared GP rate of 2.1% already declared in his return of income and the same may be sustained.
6. On the other hand, ld. DR of the Revenue relied on the orders of the authorities below.
Considered the rival submissions and material placed on record. I observed that based on the information received from Investigation Wing, the purchases declared by the assessee were found to be bogus purchases. At the same time, I observed that assessee has already declared the sales and also recorded accommodation entries, the Assessing Officer has disallowed the whole purchases as not proper. However, I observed that Hon’ble High Court has considered similar issues and they held that in case of bogus purchases, only certain percentages has to be sustained as income of the assessee considering the actual benefit earned by the assessee in such transactions. I observed that assessee has already declared GP rate of 2.1% in its return of income. Therefore, in my considered opinion, in the cases of bogus purchases, various Benches of ITAT has sustained GP rate of 12.5% as reasonable addition. In the present case, assessee has already declared GP rate of 2.1% (approx.) in the return of income, therefore, the differential rate of 10% may be added as income of the assessee i.e. 12.5% minus 2.5% and I hold and direct accordingly.