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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER (A.Y. 2012-13) Triveni Rubbers 8, Punjani Industrial Estate, Pokhran Road No.2, Khopat, Thane (West)-400602. PAN: AAAFT7619N ...... Appellant Vs. DCIT, Circle-3, Thane. ..... Respondent Appellant by : Sh. Sanjay Brahme Respondent by : Sh. Pramod Nikalje Date of hearing : 15/06/2022 Date of pronouncement : 12/09/2022 ORDER PER GAGAN GOYAL, A.M:
This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi [hereinafter referred to as (‘NFAC’] dated 27.08.2021 for the Assessment Year (AY) 2012-13. The assessee has raised the following grounds of appeal: (1) The CIT Appeal of National Faceless Appeal Centre has erred in confirming the order of ACIT (2) The CIT Appeal National Faceless Appeal Centre has erred in confirming the validity of Notice u/s148 and reopening thereof.
(3) The CIT Appeal National Faceless Appeal Centre has erred in confirming the Action of Assessing Officer in Issuance of Notice u/s 148 when the information based on the CIT Appeals Order for earlier year 2011-12. (4) The CIT Appeal National Faceless Appeal Centre has erred in confirming the Addition of Rs.12.38.032/-being consumption of material under alleged Hawala Purchase of last year. (5) The CIT Appeal National Faceless Appeal Centre has erred in confirming the Addition towards alleged Hawala Purchases though these alleged Hawala Purchases were of earlier year. (6) The Appellant craves leave to add, alter, amend, and modify aforesaid ground/s of Appeal at or any time before the hearing as they may be advised from time to time.”
Brief facts of the case are that the assessee has filed its return of income on 30.09.2012 declaring total income at Rs. 8,29,064/-. Thereafter a notice under section 148 of the Income Tax Act (for short ‘the Act’) dated 28.03.2018 was issued to the assessee. The case of the assessee was re-opened because of an information received from the Sales Tax Department, Government of Maharashtra to the effect that the assessee was one of the beneficiary who had obtained bogus purchase bills from M/s JMD Organics of Rs. 17,06,513/- during the A.Y. 2011-12. In A.Y. 2011-12, total hawala purchase amounting to Rs. 17, 06,513/- has been disallowed and added back to the income of the assessee. Against the assessment order, assessee filed an appeal before the Ld. CIT (A). The ld. CIT(A) partly allowed the appeal of the assessee on the ground that during the year assessee consumed only Rs. 4,68,481/- out of hawala purchases and balance amount of Rs. 12,38,032/- remain unconsumed and became part of closing stock i.e. opening stock for A.Y. 2012-13.
As far as the character of purchases made by assessee do not change from hawala purchase to genuine purchase. The only difference is part of hawala purchase get disallowed in A.Y. 2011-12 and for remaining amount assessee’s case was re-opened to the assessed as bogus purchase included in the opening stock.
We have gone through the order of AO passed under section 143(3) read with section 147 of the Act, order of Ld. CIT (A) and submissions of the assessee. It is pertinent to mention here that each A.Y. is a separate unit and has to be evaluated separately based on the facts and law applicable to that year. As discussed (supra) assessee entered into a transaction of bogus purchase during the A.Y. 2011-12 amounting to Rs. 17,06,513/-, out of this Rs. 4,68,481/- were disallowed in the A.Y. 2011-12 itself on the ground that this much of amount have been consumed by the assessee and balance amount of Rs. 12,38,032/- is embedded in closing stock. So, this year AO re-opened the case under section 148 of the Act and added back this amount of Rs. 12, 38,032/- embedded in opening stock of current year.
We have given due consideration to the grounds taken by the assessee and found force in the same on the following fronts: i. Each year is separate year. Bogus purchases made during the A.Y. 2011-12 has to be added back in the same year and cannot be added back in next A.Ys. ii. There is no valid reason of re-opening was there with the AO, as there is no information about the assessee made bogus purchase during the current A.Y. Order of Ld. CIT (A) for A.Y. 2011-12 can never be a basis for re-opening the case of A.Y. 2012-13.
iii. In the present case there is no applicability of section 69C of the Act. “69C. Unexplained expenditure, etc. - Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him as not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be may be deemed to be the income of the assessee for such financial year: Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income." In order to invoke S. 69C there has to be reasonable evidence to come to the conclusion that the expenditure has been incurred and the assessee is not able to explain the source of the same. It is seen that 69C can be applied when the entries are duly reflected in books of accounts and the Assessee does not offer any explanation on the source of such expenditure. In case of Appellant, they had offered the explanation duly supported by bills and challans, the entries towards purchases were duly reflected in books of accounts, and as against it the Appellant had produced all the proofs and also bank statement to convey that payments were made by crossed account payee cheques The Assessing Officer has not rejected the Books of Accounts and the Turnover and the closing stock has duly been accepted and therefore the addition based on earlier year’s finding, is bad in law.
It is pertinent to note that Section 69C cannot be invoked if there are entries in the books of accounts. In the case of the Appellant, the purchases were made in the earlier year i.e. AY 2011-12 and that too they were entered in the regular books of accounts and having carried the part of the material as closing stock in that year, and further the AO having accepted the consumption of the said closing stock, section 69C cannot be invoked from that angle also.
In this case the principle of separation of A.Y. is to be applied i.e. each A.Y. has to be evaluated and assessed based on their own facts and law applicable. In this case, transaction of bogus purchase was entered into by the assessee in the previous A.Y. whatever may be the reason only a part of that was added during the previous A.Y., now Department wants to add back the balance amount of bogus purchase made during the previous A.Y. which is not tenable in law.
Assessee’s contentions has force in terms of assuming jurisdiction under section 147 of the Act by the AO as for the year under consideration there is no reason based on which assessee’s case can be re-opened under section 148 of the Act.
In view of the above observations based on facts of the case and law applicable, appeal filed by the assessee is allowed. Order pronounced in the open court on 12th day of September, 2022. Sd/- Sd/- (PAVAN KUMAR GADALE) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, िदनांक/Dated: 12/09/2022 SK, Sr.PS