SUREAKSHA DB REALTY,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX 30(3), MUMBAI

This appeal is filed by assessee against the appellate order of The Commissioner of Income tax (Appeals)-41, Mumbai [the learned CIT (A)] dated 29 December 2017 for Assessment Year 2011-12. Assessee has raised the following grounds of appeal:-

Later on, Assessing Officer found that information has been received from DGIT (Investigation), Mumbai, that assessee has obtained accommodation entry in the form of bogus purchases of ₹9,80,300/-, therefore, after recording reasons, notice under section 148 of the Act was issued on 22nd April, 2014.

In response to that, assessee submitted that original return filed might be considered as return of income filed in response to the above notice. Subsequent to that, the requisite notices were issued.

During the course of assessment proceedings, assessee was asked to furnish the details of purchases for verification as well as to produce suppliers to prove genuineness of purchases. On 1/02/2016, Assessee submitted copies of purchase bills, delivery challans, bank payments details, copies of accounts etc. However, it expressed its inability to produce parties. As key persons of the suppliers have denied to have made any genuine sale to their customers before the Sale Tax Authorities, and as assessee failed to produce the suppliers

At the time of recording reasons, the Assessing Officer noted that assessee has not filed any return for Assessment Year 2011-12. However, in response to notice u/s 148 of the Act, assessee has submitted to treat the return filed under section 139(1) of the Act on 30 September 2011 as return filed in response to notice u/s 148 of the Act. The learned Assessing Officer examined whether on ITD system return filed by assessee is available or not. The learned Assessing Officer found that return for Assessment Year 2011-12 is not available. Assessee was questioned about the ROI. Assessee submitted that in terms of its written submissions dated 20th September, 2011 and 30th September, 2011 addressed to ACIT, Central Circle-32, Mumbai for filing the return in physical format along with audited financial statements and form no. 10CCB for the reason that the Director of the Company were jailed and the digital signature could not be affixed of the signatory to the return of income, Therefore, Assessee filed return of income manually [ In paper format and not online] on 30th September, 2011 and therefore the same is not available on ITD.

The learned Assessing Officer held that physical return filed on 30 September 2011 is not a valid return filed under section 139(1) of the Act. The Assessing Officer relied upon the decision of co-ordinate Bench in case of shri Dwarkadas G. Panchmatiya vs. ACIT in ITA No. 4727/Mum/2012 for Assessment Year 2008-09 dated 30 January 2015. Accordingly, he held that the claim of deduction under section 80IB of the Act does not satisfy the conditions prescribed under section 80AC of the Act, which are mandatory. He therefore, disallowed the deduction under section 80IB of the Act of ₹52, 18, 31,943/-.

The assessee aggrieved with the above order preferred an appeal before the learned CIT (A). Assessee challenged the reopening of the assessment on several counts but the LD CIT [A] held that

The learned Authorized Representative as per grounds no. 1 and 2 of the appeal challenged the reopening of the assessment. He submitted that the case of the assessee was not selected for scrutiny

On the issue of merits of the case referring to grounds no. 3 and 4, he stated that the disallowance of deduction under section 80IB was not part of the reasons recorded. Therefore, if the assessee succeeds on grounds no. 1 and 2, or on ground no 5 , grounds no. 3 and 4 become academic.

He stated that assessee has challenged the addition of ₹9,80,300/- made under section 69C of the Act. If assessee succeeds on ground no. 5 even then, grounds no. 3 & 4 do not survive for the reason that reopening has been made for only one ground of addition under section 69C of the Act of ₹9,80,300/- and if the same does not survive no other addition can be made. For this proposition, he relied on the decision of Hon'ble Bombay High Court in case of Jet Airways.

He also relied on the decision of Pune Bench of ITAT that even if the addition is deleted in any appellate proceedings on the issue on which reopening is made, and then other additions which are not part of reasons for reopening do not survive. He referred to the decision in case of Prabhakar Damodar Gawade vs. ITO (200 TTD 1017).

Even otherwise on the merits, he submitted that assessee filed manual return of income, as on that date the digital signature of the Director could not be affixed because of peculiar reasons. It was

The learned DR submitted that there is no infirmity found in the reopening of the assessment as information was available with the learned assessing officer that assessee has booked purchases without receipt of material. This information was received from the director general of income tax (investigation). As the assessee has not filed any return of income electronically which was mandatory to be filed at that particular time, the learned assessing officer was having a belief that income of assessee has escaped assessment. The information received from director general of income tax, investigation, Mumbai is a tangible material. In absence of any return of income, no further enquiry was required to be made. Therefore, there is no infirmity in action of the learned assessing officer in reopening of the assessment u/s 148 of the act. He further submitted that merely there is a difference in small amount and in name of the some of the parties, reopening cannot be said to be invalid. He further submitted that when the assessment is reopened, the whole assessment is open before the assessing officer and he can make any further addition more adjustment to the income of the assessee. Hence, according to him there is no infirmity in disallowance of deduction u/s 80 IB (10) of the act. On the merits of addition of bogus purchase, he submitted that assessee has failed to

We have carefully considered the rival contention and perused the orders of the lower authorities. We have also perused the paper book containing 143 pages filed by the learned authorised representative as well as case law compilation where nine decisions have been cited.

Facts as available on record shows that the learned assessing officer has reopened the assessment by recording following reasons:-

On careful perusal of the above reasons recorded by the learned assessing officer, we find that as he could not find any return of income filed by the assessee in ITD system, there was no question of making further inquiries. It is an admitted fact that assessee has not filed any return of income electronically. It was mandatory at that time. Therefore, the learned assessing officer was of a reasonable belief that assessee has booked bogus purchases of ₹ 980,300/– during the year. As there was no information available about the details of the payment made by the assessee, recording of those transactions in the books of the assessee and any further information about the income of the assessee, no fault can be found in reopening of the assessment.

Merely some difference in mentioning of the amount, when the name of the party is mentioned correctly does not make the reopening of the assessment invalid. Further with respect to the claim of the

The learned authorised representative has relied upon the decision of the honourable Delhi High Court in case of principal Commissioner of income tax versus G & G Pharma India Ltd 384 ITR 147 to submit that prior to forming of reason to believe that income has escaped assessment there has to be a proper application of mind by the assessing officer. According to the decision, the learned assessing officer should have applied his mind to the materials produced to conclude that he has reason to believe that income has escaped assessment. Carefully reading the facts of that case it is evident that the return of income in that particular case was assessed u/s 143 (3) of the income tax act 1961. Therefore, the learned assessing officer was having the original return of income as well as the material produced during the course of assessment proceedings before him. Further in that case the learned assessing officer has categorically stated before honourable high court that the material could not be located on basis of which the learned assessing officer has formed his opinion regarding reopening of the assessment. These facts are evident at Placitum 6 at page number 150 in first paragraph itself. Therefore, reliance on this decision does not help the case of the assessee.

Assessee further relied upon the decision of coordinate bench in case of Vaman international private limited versus DCIT in ITA number 1040/M/2017 dated 27/9/2017, which has also been upheld by the honourable Bombay High Court in ITA number 1940 of 2017 dated 29/1/2020. We have carefully perused the facts of that particular case wherein also the reasons recorded at paragraph number 9 at page number 15 clearly shows that assessee has filed its return of

In view of above facts, we are of the view that the learned assessing officer had valid „reason to believe‟ that income of the assessee has escaped assessment when a specific information in the form of „tangible material‟ received from DGIT investigation that assessee has obtained only bills without material from different parties amounting to ₹ 980,300/–. Therefore, we confirm the order of the learned CIT – A in upholding the reopening of the assessment. Ground number 1 and 2 of the appeal of the assessee are dismissed.

Coming to ground number 5 where the addition of ₹ 980,300/– is made u/s 69C of the income tax act is challenged, we find that assessee has submitted as per letter dated 19/11/2015 before the learned assessing officer, detailed note on standard operating procedure in respect of purchases. Assessee is also stated that it is engaged in the business of real estate development. Assessee has also produced the invoices of purchase of goods from each of the parties, their ledger accounts from the books of accounts of the assessee, bank statement of assessee showing payment made to different parties, delivery challans and material receipt note of goods received from those parties. On verification of the delivery notes it is found that the material received has been certified by the project engineer, Chief engineer and quality checked by the assessee. In material receipt note, there is a reference of lorry number and the date of receipt of material. Therefore it is apparent that assessee has produced all the details available with it to show that the goods have been purchased from those parties, debt due to them is

Identical issue arose before the honourable Bombay High Court in case of principal Commissioner of income tax versus Shapporjii Pallonji and Co Ltd (2020) 423 ITR 220 (Bom) wherein the information was received from sales tax Department, government of Maharashtra that two parties had not actually sold any material to the assessee. In response to the very of the learned assessing officer, copies of the bills and entries made in books of accounts relating to such purchases were produced. However, the learned

As the learned assessing officer was having the complete details about these suppliers, he should have made some enquiry with the suppliers about mentioning of the lorry receipts etc. in the invoices. The learned assessing officer has not carried out any independent enquiry. The assessee has so far produced all possible available details with respect to receipt of material. Undoubtedly, no confirmation is available with the assessee of the five parties, but the signature on the bills wherein the complete material is available and receipt of payment by cheque itself shows are third-party confirmation of the transaction at least with respect to purchase of these goods. As far as the records maintained by the godown keeper, the Chief engineer and site engineer of the assessee has certified receipt of goods. Further we find that in paragraph number 43 of the order of the learned CIT – A where he has mentioned nine different evidences for which the addition is made by the learned assessing officer, we find that the learned assessing officer is not at all referred to failure of the assessee in producing any of these nine evidences. The only allegation of the assessing officer is that assessee has failed to show receipt of goods as well as failed to produce those parties. Furthermore, looking to the nature of the business, assessee cannot be asked to produce more details then what is generally kept by an assessee in that line of the business.

Identical issue also arose in case of ACIT versus Mahesh K Shah ITA number 5194/M/2014 dated 31/1/2017 wherein even the addresses were given and 133 (6) inquiries were made by the learned assessing

In view of these facts, the addition made by the learned assessing officer and confirmed by the learned CIT – A cannot be upheld. Accordingly, ground number 5 of the appeal is allowed and the learned assessing officer is directed to delete the addition of ₹ 980,300/– made u/s 69C of the act with respect to purchases from five different parties.

Now it is apparent that only issue in the reasons for reopening of the assessment was with respect to alleged bogus purchases of ₹ 980,300/–, This addition has been deleted by us for the reasons given hereinabove, whether any other disallowance, which was not part of the reasons for reopening of the assessment, can be made by the learned assessing officer or not. The issue also arises that the addition for which the assessment was reopened has been made by the learned assessing officer, confirmed by the learned CIT – A and deleted by the tribunal, even then such other additions/disallowances which were not part of reasons of the reopening of the assessment, can be upheld or not.

This issue has been decided by the coordinate bench in case of Prabhakar Damodar Gawade V ITO (200 TTJ 1017) dated 9/05/2019. The coordinate bench in that case followed the decision

Even otherwise, the fact shows that assessee has consistently been allowed deduction u/s 80 IB (10) in earlier assessment years as well as subsequent assessment years. For peculiar reasons, assessee could not file electronic return of income but has filed manual return of income within time allowed u/s 139 (1) of the act.

Therefore respectfully following the decision of the coordinate bench, we hold that the disallowance of deduction u/s 80 IB (10) of the act made by the learned assessing officer and confirmed by the learned CIT – A is not sustainable in law. Accordingly, ground number 3 and 4 of the appeal are allowed.

In the result, appeal of the assessee is partly allowed.