AMIT JAIN,ROHINI, DELHI vs. ITO WARD 49(1), DELHI, DELHI

That the Ld. CIT(A) erred in upholding the reassessment and order u/s 148A(d), which are bad in law for non- compliance with mandatory procedure u/s 148A, as the assessee’s reply and evidences to notice u/s 148A(b) were not considered, rendering the order illegal. 2. That the Ld. CIT(A) erred in confirming the reopening of assessment based on vague and borrowed information without independent verification and application of mind by the AO, on existence of tangible material establishing escapement of income. 1

That the Ld. CIT(A) erred in confirming the addition of Rs.1,72,14,502/- made by the ld.AO on account of alleged bogus purchases, ignoring the documentary evidences placed on record. 5. That the Ld. CIT(A) erred in confirming the addition despite the fact that no defect has been pointed out in the books of account and the same have not been rejected u/s. 145. 6. That the Ld. CIT(A) erred in ignoring that the impugned purchases were fully supported by cogent documentary evidence viz: purchase invoices, e-way bills, GST records, stock details and bank payments with corresponding sales duly recorded and not disputed by the Ld. AO. 7. That the Ld. CIT(A) erred in sustaining the addition merely on the basis of suspicion arising from non- availability of the supplier, which cannot substitute legal evidence. 8. That the Ld. CIT(A) erred in confirming the addition without any material on record to establish that purchases are fictitious or any cash has been received back by the Appellant.

During proceedings before us the ld. Counsel has filed additional grounds. The ld. Counsel argued that keeping in view the judgment of Hon’ble Supreme court in the case of NTPC Limited Vs. CIT 229 ITR 383 (SC) this additional ground based on jurisdictional issue may kindly be taken up for hearing.

The Ld. DR argued that the matter may be taken up on merit.

During proceedings before us the ld. Counsel of the assessee has filed a synopsis on different grounds of appeal alongwith synopsis on additional ground which is also reproduced as under:-

Per contra the ld. DR argued that the jurisdictional issue taken up by the assessee that the notice issued u/s.148 of the Act is beyond the 3 years from the end of the A.Y. 2019-20 and as per law the mandatory approval u/s.151 to have been obtained from PCCIT concern whereas it has been obtained from the PCIT which renders the reassessment void-ab-inito.

The Ld. DR has also filed a written submission on this issue which is reproduced as under :-

We have heard both the parties on the jurisdictional issue and we have considered the written synopsis filed by both the parties on this issue. In our considered view the chart submitted by the revenue date wise clearly shows that the notice issued by the revenue in this case with the approval of the PCIT is within the required time as per the provision and amendments brought in the Act and, therefore, the additional ground on this jurisdictional issue taken by the assessee is dismissed.

Now we proceed to decide the case on merit. In the written submission filed by the Ld. Counsel of the assessee the issue on merit has also been discussed i.e. with regard to the conformation of addition made by the AO amounting to Rs.17214502/- as bogus expenditure of purchases. We find that the AO made this addition on the ground that the assessee could not substantiate the genuineness of actual purchases of material from one concerned i.e. M/s. R. S. International and the assessee also failed to provide any evidence in support of collection/ transport of material. Therefore, the AO treated the transaction as bogus expenditure claimed by the assessee. The Ld. CIT(A) on this issue as given his finding as under :-

The appellant has not denied that he effected "purchases" of Rs. 1,72,14,502 from m/s R.S. International (Proprietary Concern of Sh. Rohan Sharma (PAN: JRDPS8590A)). The appellant claims that the purchase was genuine. 6.1 Investigation carried out by the investigation wing showed that this party (R.S international) was maintaining an account with DBS bank India Limited (A/c No. 820210215022). During the year it showed credits of Rs. 25.44 crore and debits of Rs. 26.39 crore. But he (Rohan Sharma) did not file any ITR. Physical verification revealed that no business was carried out at address of m/s R.S.

The Ld. DR relied heavily on the findings given below.

We have heard both the parties on the merits of this case and we have also considered the orders passed by the authorities below. We find that the AO has made the addition treating the entire purchases made from M/s. R. S. International a concern of Sh. Rohan Sharma as fictitious purchase, therefore, denied the expenditure u/s.37(1) of the Act and made the addition of that. The Ld. CIT(A) has also confirmed this addition accepting the logic from the addition made by the AO. But here it is important to note as pointed in the written submission filed by the Ld. Counsel of the assessee that the books of accounts were not rejected nor the sales made out of such alleged bogus purchases have been rejected by the revenue. It is also important to note that the profit earned on such sales have been offered by the assessee and the revenue has accepted taxes thereon. Therefore, in our considered opinion it is tantamount to double taxation if the entire purchases are denied. There is possibility that the assessee made purchases from grey market as sales have not been denied by the revenue of such purchases, therefore, instead of treating the entire expenditure for purchases as bogus only the profit evaded thereon should be brought to taxes. Therefore, in our considered view, in the fitness of things in case the net profit is enhanced by 2% on alleged bogus purchases, then the justice would be made. Accordingly, the AO is directed to re-compute income of the assessee and charge taxes there on.

In the result, the appeal filed by the assessee is partly allowed.