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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI R.K. PANDA
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER Assessment Year: 2011-12 Anirudh Kumar, Vs. ITO, D-1, 2nd Floor, Ward-32(5), Hauz Khas, New Delhi. New Delhi. PAN: AAIPK1426A (Appellant) (Respondent) Assessee by : Ms Lalita Krishnamurthy, CA & Ms Himani Jain, CA Revenue by : Shri R.K. Gupta, Sr. DR Date of Hearing : 03.08.2021 Date of Pronouncement : 16.09.2021 ORDER
This appeal filed by the assessee is directed against the order dated 11th September, 2019 of the CIT(A)-11, New Delhi, relating to Assessment Year 2011-12.
Facts of the case, in brief, are that the assessee is an individual and has filed his return of income on 28th Sept., 2011 declaring loss of Rs.6,98,788/-. On the basis of information received from the Investigation Wing that the assessee
AO reopened the case of the assessee u/s 147 of the IT Act, 1961, after recording reasons.
Accordingly, notice u/s 148 of the Act was issued to the assessee on 29th 3. March, 2017. In response to the same, the assessee submitted, vide letter dated 9th April, 2018 that the return already filed on 28th September, 2011 may be treated as return filed in response to notice u/s 148 of the IT Act. During the course of assessment proceedings, the AO confronted the assessee regarding the taxability of accommodation entry to the tune of Rs.19,64,235/-. Rejecting the various explanations given by the assessee, the AO made addition of Rs.19,64,235/- to the total income of the assessee u/s 68 of the IT Act being the bogus purchase made by him from M/s. Mayank Impex amounting to Rs.19,64,235/-, the details of which are as under:-
Before CIT(A), the assessee, apart from challenging the addition of Rs.19,64,235/-, also challenged the validity of reassessment proceedings. However, the ld.CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the addition made by the AO as well as the reassessment proceedings initiated by him.
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:- 2 “1. That the assumption of jurisdiction by the Assessing Officer under section 147 of the Income Tax Act, 1961, is arbitrary, unjust and bad in law and consequently order of Id. CIT(Appeals) as sustained is not tenable on facts and in law.
2. That there was no valid material with the Assessing Officer as contemplated to assume the jurisdiction under section 147 of the Income Tax Act, 1961 and consequently the reassessment so framed mechanically and without application of mind on the basis of such invalid assumption of jurisdiction is bad in law and consequently order of ld. CIT(Appeals) as sustained is not tenable on facts and in law.
3. That the addition of Rs.19,64,235/- made under Section 68 of the Act on account of bogus purchases and sustained by Id. CIT(Appeals) is arbitrary, unjust, unwarranted on facts and in law and at any rate very excessive.
4. That as the purchase is supported by invoice of Mayank Impex containing its address, VAT, CST, PAN, Bill number, date and weight, rate, description of the diamonds sold to the assessee, place of sale and delivery of the diamonds sold to the assessee and the payment of such invoice has been made by the assessee by account payee cheque and reflected in the bank account of the assessee, the addition of Rs.19,64,235/- made under Section 68 of the Act on account of bogus purchases and sustained by ld. CIT(Appeals) is unjust, unwarranted and not tenable on facts and in law.
5. That as the diamonds purchased from Mayank Impex are being utilized / sold to customers against payment by customer and against sale invoice issued to them by assessee and such sale proceeds are offered to tax and is verifiable from the records of the assessee, disallowance of Rs.19,64,235/- made under Section 68 of the Act on account of bogus purchases by taking the sale proceeds at 100 percent would give a distorted picture of the profits of the assessee and consequently order of Id. CIT(Appeals) as sustained is not tenable on facts and in law.
6. That as Mayank Impex had not specified the name of the assessee and transaction with the assessee in their statement on oath, the addition of Rs.19,64,235/- made under Section 68 of the Act on account of bogus purchases in the hands of the assessee and sustained by Id. CIT(Appeals) is arbitrary, unjust and unwarranted on facts and in law.
7. That based on such general statement the AO without verifying the facts, without bringing any adverse material on record, without carrying out any further investigation to substantiate the allegation that the purchase is not genuine and without giving an opportunity to the assessee to confront Mayank Impex in relation to the transaction with the assessee, making of addition of Rs.19,64,235/- under Section 68 of the Act on account of bogus 3 Id. CIT(Appeals) was unjustified and unwarranted on facts and in law.
8. That the addition of Rs.19,64,235/- made under Section 68 of the Act on account of bogus purchases in the hands of the assessee cannot be made merely because the purchases are not verifiable because as far as the assessee is concerned the purchase is duly supported by an invoice and payment by account payee cheque and those many diamonds are being utilized/sold to customers against payment by customer and against sale invoice issued to them by assessee.
9. The above grounds are independent and without prejudice to one another.
Your appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal at the time of hearing.”
The ld. Counsel for the assessee submitted that the assessee had purchased diamonds from M/s Mayank Impex and had filed copy of purchase invoice dated 23rd October, 2010 and 11th March, 2011 mentioning the address, VAT TIN No. CST TIN No., PAN, Bill No. , invoice date and weight of diamonds, rate, description of diamonds sold to the assessee, etc. The payments were made to the supplier by account payee cheque and such payments are reflected in the bank statement of the assessee. She submitted that as far as the assessee is concerned, he has made a genuine business transaction and the diamonds became part of his stock-in-trade for being utilized in the normal course of his business. She submitted that the sales have not been disputed by the AO. She submitted that the AO, in the instant case, without bringing any other material or evidence on record, has simply reopened the assessment on the basis of information received from the Investigation Wing.
6.1 Referring to the decision of the coordinate Bench of the Tribunal in the case of Nihal Chand Rakyan vs ACIT, vide order dated 12th December, 2017, he submitted that under identical facts and circumstances, the Tribunal has held the reassessment proceedings to be invalid where such reopening was made on the basis of information received from the Addl.CIT, Central Range, Surat from the search and seizure operation carried out by the DCIT (Investigation) in the case of the very same Rajendra Jain Group, M/s Sanjay Chaudhary Group and M/s Dharmichand Jain Group.
6.2 She also relied on the following decisions wherein it has been held that reopening on the basis of information received from the Investigation Wing without independent application of mind by the Assessing Officer is invalid :- a. M/s Lavitra Technologies Pvt. Ltd. vs. ITO (ITA No.2912/Del/2013 order dated 14.07.2016). b. G & G Pharma India Limited vs. ITO (ITA No.3149/Del/2013 order dated 09.1.2015). c. Pr.CIT vs. G & G Pharma India Ltd. (ITA 545/2015 order dated 08.10.2015). d. DCIT vs. M/s Viney Auto Pvt. Ltd. (ITA No.291/Del/2010 order dated 14.03.2016). e. M/s MKM Finsec (P) Ltd. vs. ITO (ITA No.5203/Del/2013 order dated 08.08.2016).
The ld. DR, on the other hand, heavily relied on the order of the CIT(A).
I have heard the rival arguments made by both the sides and perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find the AO in the instant case made addition of Rs.19,64,235/- u/s 68 of the IT Act, 1961 being bogus purchase made by the assessee from M/s Mayank Impex in the order passed u/s 143(3)/147 of the IT Act, 1961. A perusal of the reasons recorded for reopening the assessment, copy of which is placed at page 261 of the Paper Book, shows that the following reasons were recorded for reopening of the assessment:- “Reasons for reopening the case u/s 147/148 of the I.T. Act, 1961 For A.Y. 2008-09. The Addl. Commissioner of Income Tax, Central Range, Surat vide letter no.SRT/Addl.CIT/CR/Rajendra Jain, Dharmichand Jain, Sanjay Choudhary Gr./2014-15/506 dated 13/03/2015 has informed that a search and seizure operation u/s 132 of the I.T. Act 1961 in the case of Sh. Rajendra Jain, Sh. Sanjay Choudhary and Sh. Dharmichand Jain Group was carried out on 03/10/2013 by the DGIT (Inv.), Mumbai Charge. During investigation it was found that Sh. Rajendra Jain, Sh. Sanjay Choudhary and Sh. Dharmichand Jain were some of the entry providers operating in Mumbai, indulging in providing accommodation entries in the nature of bogus sales and unsecured loans. During investigation it was also revealed that besides above lender group, some other entry providers were also engaged in providing accommodation entry. As per information provided, M/s N.N. Association, the assessee was one of the beneficiaries of such bogus accommodation entries. The complete details of the transactions between the entry provider and the assessee are as under:-
From above it is clear that this issue could not be examined for the assessment year under consideration. Therefore, I have reasons to believe that the income of the assessee to the extent of Rs.14,54,400/- for A.Y.