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Facts
The assessee filed its return of income, which was processed. Subsequently, based on information from the Investigation Wing, it was found that the assessee had purportedly made purchases from Laxmi Enterprises, identified as a hawala operator, which were later deemed non-genuine. The AO reopened the assessment and added the amount of purchases to the total income.
Held
The Tribunal set aside the matter to the file of the AO, directing a fresh examination of whether the assessee made purchases from Laxmi Enterprises. The assessee was given an opportunity to provide necessary documentation and attend proceedings.
Key Issues
Whether the addition made by the AO on account of alleged bogus purchases from Laxmi Enterprises is justified, and if the assessee should be given an opportunity to prove the genuineness of purchases.
Sections Cited
143(1), 147, 148, 271, 274, 234A, 234B, 234C, 64, 61
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Income Tax Appellate Tribunal, MUMBAI “D” BENCH : MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI ANIKESH BANERJEE
O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟], dated 17-09-2024, pertaining to Assessment Year (AY) 2009-10, wherein the assessee has taken the following grounds of appeal:
“The Assessment order u/s144rws147 DT 21.3.2015 is bad in law and Without Jurisdiction.
The reassessment proceeding initiated by issuing notice u/s 148 of the Act is bad in law and without jurisdiction for not fulfilling conditions laid down in section 147 to 151 of the Act.
The order of the Ld. CIT(A) dated 17.09.2024 is bad in law. 4. The Ld. CIT(A) erred in upholding the addition of Rs. 1,02,28,225/- in respect of alleged bogus purchases. 5. The Ld. AO has erred in assessing total income at Rs. 1,90,85,458/- 6. The Ld. AO has erred in not considering the revised return of income filed by the assessee. 7. The Ld. AO erred in initiating penalty u/s 271 of the Act. The Appellant prays that the penalty proceedings u/s 274 read with section 271 of the Act be dropped. 8. The Ld. AO has erred in levying interest u/s 234A, 234B and 234C of the Act. 9. The Appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.”
2. Briefly the facts of the case are that the assessee has filed its return of income on 30-09-2009 declaring total income of Rs. 88,57,233/-, which was processed u/s. 143(1) of the Income Tax Act, 1961 („the Act‟). Subsequently, basis information received from the Investigation Wing, it was found that the assessee is a beneficiary of accommodation entries provided by a hawala dealer, namely, Laxmi Enterprises during the course of search and seizure action u/s. 64 of the Maharashtra Value Added Tax Act, 2002 conducted by the Sales Tax Department, (Investigation Wing), Mumbai, wherein purchases of Rs. 1,02,28,225/- shown to have been made by the assessee from Laxmi Enterprises were found not genuine as the said party has been identified as hawala operator, providing accommodation bills. On the basis of such information, the AO reopened the assessment u/s. 147 of the Act and notice u/s. 148 of the Act was issued and duly served on the assessee. In response to the notice, the assessee sought copy of the reasons which were communicated to the assessee. Thereafter notices were issued and duly served upon the assessee. However, the assessee opted not to attend to the proceedings or submit any details called for in support of its claim in the return of income. Thereafter, the AO proceeded and passed the best judgment assessment on the basis of the material available on record. As per the AO, detailed investigation was carried out by the Sales Tax Department, Mumbai and their findings coupled with statements of these parties admitting the fact of issuance of bogus bills, the purchases made from the alleged parties are treated as „bogus purchases‟. The Investigation Wing of the Income Tax Department has provided these details after due verification and confirmation. The facts about the hawala dealers are also made available on public domain by publishing on the website of the Maharashtra Sales Tax Department. The assessee has failed to furnish any evidences to rebut these findings nor any evidences in respect of action taken by the assessee against such information on public domain. These transactions have resulted into reducing the profits of the assessee by inflating the purchases and an amount of Rs. 1,02,28,225/- was added to the total income of the assessee as non-genuine and bogus purchases.
3. The assessee thereafter carried the matter in appeal before the Ld. CIT(A) and contended that the assessee has neither made any purchases nor made any payment to Laxmi Enterprises during the FY. 2008-09. In support of copy of assessment order passed under the Maharashtra Value Added Tax Act, 2002, dt. 29-03-2021 as well as copy of Form 704 were submitted. It was further submitted that even for AY. 2010-11, a similar addition was made which has been dropped by the AO, after the matter was remitted back by the Tribunal. The submissions so filed by the assessee were considered but found acceptable by the Ld.CIT(A). The Ld.CIT(A) referred to the Form 704 (Audit Report u/s. 61 of the Maharashtra Value Added Tax Act, 2002) and noted that the entry at Sr. No.10 having TIN 27070557223V when identified on the DGST Portal, it reveals that the entry related to the transaction with Laxmi Enterprises and accordingly, the Ld.CIT(A) held that the denial of the assessee in terms of not making any purchases from the said party is not bonafide and is total misrepresentation of the facts. Further, the VAT registration of the aforesaid dealer is found inactive since 22-11-2011 which is when analysed with the investigation conducted by the VAT office, is seen sustaining towards the bogus nature of the dealer, Laxmi Enterprises. It was further held by the Ld.CIT(A) that from the brief language of the order dt. 29-03-2021 passed by the Sales Tax office, Raigad, it appears that the transactions with the bogus entity were not properly examined. Further, he referred to the remand report submitted by the jurisdictional AO dt. 03- 09-2024 wherein the AO has stated that in spite of repeated opportunities given to the assessee-company, the assessee-company failed to furnish any evidences to rebut the findings of the Sales Tax Department during the course of assessment proceedings, as well as during the course of remand proceedings. Hence, the decision of the AO is correct and there is nothing further to add to the said decision to deviate from the same. The Ld.CIT(A) accordingly held that there is no basis to interfere with the action of the AO and the appeal of the assessee was dismissed. Against the said order, the assessee has filed this appeal before us.
During the course of hearing, the Ld.AR drawn our reference to Ground No. 4 wherein the assessee has challenged the sustenance of addition of Rs. 1,02,28,225/- in respect of the bogus alleged purchases. In this regard, it was reiterated that the assessee has not made any purchases from the said party and reference was again drawn to the assessment order dt. 29-03-2021, which was passed pursuant to the order u/s. 26(5)(a) of MVAT Act, 2002 and it was submitted that there is no addition in respect of bogus purchases from Laxmi Enterprises and no demand has been raised by the Sales Tax authorities. It was further submitted that in AY. 2010-11, a similar addition was made by the AO and the Co-ordinate Bench of the Tribunal has remanded the issue back to the file of the AO and the AO has since passed the order on 07-11-2019; wherein he has accepted the fact that the assessee has not made any purchases from Laxmi Enterprises. Further, a copy of the ledger in the Books of the assessee was submitted to corroborate the fact that the assessee has not made any purchases from Laxmi Enterprises.
The Ld. DR is heard, who has relied on the order of the AO as well as order of the Ld.CIT(A).
We have heard the rival contentions and perused the material available on record. We find that under the identical facts and circumstances of the case, the addition was made in AY. 2010-11 and Co- ordinate Bench of the Tribunal has remanded the matter back to the file of the AO and the relevant findings read as under: “7. Having considered the submissions of the learned Authorised Representative, I am of the view that the assessee deserves an opportunity to establish its claim that it has not effected any purchase from Laxmi Enterprises in the relevant previous year. However, the onus to prove such fact through proper and authentic documentary evidence is entirely on the assessee. Accordingly, I restore the issue relating to the addition made on account of alleged bogus purchases to the file of the Assessing Officer for de novo adjudication after due opportunity of being heard to the assessee. In view of the above, grounds no.2 and 3 are allowed for statistical purposes and ground no.1 is dismissed as not pressed.”
Following the same, we hereby set aside the matter to the file of the AO to provide one more opportunity to the assessee and the AO is directed to carry out the necessary examination and verification as to whether the assessee has made any purchases from M/s Laxmi Enterprises and call for the necessary information and documentation. Needless to say, the assessee shall attend to the proceedings and respond to the notices and in absence of necessary compliance, the AO is at liberty to decide the matter as per law. This ground of assessee is thus allowed for statistical purposes.
The other grounds of appeal were not pressed by the Ld.AR during the course of hearing and hence, the same are dismissed as not pressed.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.