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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI KULDIP SINGH, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the assessee against order of Learned Commissioner of Income-tax (Appeals)-9, Mumbai [hereinafter for short "Ld. CIT(A)] dated 29.08.2018 for the A.Y.2008-09.
Brief facts of the case are, assessee filed its return of income on 29.09.2008 declaring total income of ₹.19,80,340/-. The return was 2 ITA.NO. 6115/MUM/2018 (A.Y: 2008-09) M/s. Yunicorn Synthetics Mills Pvt. Ltd., processed u/s. 143(1) of Income-tax Act, 1961 (in short “Act”). Assessing Officer received certain information from DDIT (inv.) – III(2), Mumbai that a search and seizure action was carried out in the case of Shri Praveen Kumar Jain Group on 01.10.2013. In the statement recorded during the course of the search, Mr. Praveen Kumar Jain (for short “PKJ”) had admitted that the only activity carried out by all concerns controlled by him is providing accommodation entries in the nature of bogus unsecured loans, share application money, bogus sales and LTCG etc. It was further, informed that the assessee has taken accommodation entries in the nature of purchase from the following accommodation entry operators run, controlled and operated by PKJ.
Name of hawala entry Sr. No. Amount operator 1 Ansh Merchandise Pvt Ltd., 3,22,98,089 (New Planet Trading Co P Ltd) 2. Casper Enterprises P Ltd., 33,045,407 (Ostwal Trading (I) P. Ltd. 3 Easy Mercantile Co P Ltd. 2,300,001 4 Kailash International 33,386,558 5 Mohit International 453,824 6 R J Enterprises 30,808,842
Based on the above information, Assessing Officer reopened the assessment by issue of notice u/s. 148 of the Act on 04.03.2015. Assessing Officer subsequently passed order u/s. 143(3) r.w.s. 147 of the 3 ITA.NO. 6115/MUM/2018 (A.Y: 2008-09) M/s. Yunicorn Synthetics Mills Pvt. Ltd., Act on 23.02.2016 by making addition on the above alleged purchases at the Gross Profit ratio @6.3% amounting to ₹.84,00,588/-. Aggrieved assessee preferred an appeal before the Ld.CIT(A)-9, Mumbai and raised several grounds including challenging the reopening of assessment. For the sake of clarity it is reproduced below: - “The Appellant company is aggrieved by the order dated 23/02/2016 passed u/s. 143(3) r.w.s. 147 of Income-tax Act, 1961 by the Income Tax Officer, Ward-4(3)(3), Mumbai (hereinafter referred to as "the AO") and is in appeal 1. BECAUSE, the impugned reassessment order is illegal, invalid and void ab initio as the requisite conditions of reopening have not been fulfilled.
2. BECAUSE, reopening of impugned assessment year is invalid since the AO has not provided the statements relied upon by him for reopening of assessment and for drawing inference in the assessment order.
3. Because, the reasons recorded are merely on suspicion, gossip and rumors and is not based upon any tangible material which could lead to inference that any specific transaction with the appellant is bogus.
Because, the reasons are general in nature and no details of specific transactions have been provided in such reasons recorded."
4. Ld.CIT(A) dismissed the ground raised by the assessee on the issue of reopening and however, adjudicated the other grounds on merits. While dismissing the ground raised by the assessee on reopening of assessment, he observed that on a perusal of the Assessment Order shows that Assessing Officer was in receipt of concrete information from DDIT(INV), Mumbai about the search and seizure action which is carried
4 ITA.NO. 6115/MUM/2018 (A.Y: 2008-09) M/s. Yunicorn Synthetics Mills Pvt. Ltd., out in the case of PKJ Group. During the course of search Mr. PKJ stated that through a web of concerns run, operated and controlled by him and his associates, he is engaged in providing accommodation entries of various nature. Ld.CIT(A) observed that Assessing Officer stated in reasons recorded that assessee had taken accommodation entries in the nature of purchase from the accommodation entry providers run and controlled by PKJ. At that stage, any established fact of escapement of income was not required as held by Hon'ble Jurisdictional High Court in the case of ECGC v. Addl. CIT (Writ Petition No. 502 of 2012), he observed that in the present case based on the information received, Assessing Officer had a reasonable belief that income of the assessee would have escaped income. Accordingly, he held that the reopening of assessment is valid and accordingly, he dismissed the ground raised by the assessee.
Aggrieved assessee is in appeal before us and raised similar grounds of appeal raised before the Ld.CIT(A).
At the time of hearing, Ld. AR of the assessee submitted that the Assessing Officer proceeded to complete the assessment based on the statement made by PKJ and this is the sole information which was available before the Assessing Officer to reopen the assessment.
5 ITA.NO. 6115/MUM/2018 (A.Y: 2008-09) M/s. Yunicorn Synthetics Mills Pvt. Ltd., However, he submitted that Assessing Officer has not share the above statement with the assessee and assessee was not given any opportunity to cross-examine. He submitted that assessee has raised grounds before the Ld.CIT(A) objecting for not granting opportunity to the assessee. However, he submitted that Ld.CIT(A) has not decided the various issues raised by the assessee, in this regard he relied on the decision of the Hon'ble Supreme Court in the case of CIT v. M/s. Odeon Builders Pvt. Ltd., in Civil Appeal Nos. 9604-9605 of 2018 dated 21.08.2019. Further, he submitted that the issue may be sent back to Ld.CIT(A) to decide the issue of jurisdiction.
On the other hand, Ld.DR submitted that Ld.CIT(A) has clearly brought on record that assessee has taken accommodation entries from the accommodation entry provider PKJ and he supported the findings of the Ld.CIT(A) that Assessing Officer has reason to believe that income has escaped. He submitted that the Ld.CIT(A) has reasonably decided the issue which is proper and reasonable, considering the fact that the issue involved is bogus purchases.
Considered the rival submissions and material placed on record, we observe from the record that Assessing Officer has reopened the 6 ITA.NO. 6115/MUM/2018 (A.Y: 2008-09) M/s. Yunicorn Synthetics Mills Pvt. Ltd., assessment solely relying on the statement made by PKJ, that he (PKJ) stated that the activity carried by all the concerns controlled by him is providing accommodation entries. When the assessee was objected for reopening of assessment and further, assessee has objected that the assessee was not shared with the statement of PKJ and also opportunity was not granted for cross examination by the Assessing Officer as well as Ld.CIT(A). Assessee has filed a specific ground on the issue of reopening and however, we observe that Ld.CIT(A) dismissed the same without giving a proper finding on the issue of reopening and cross examination. Particularly on the issue of reliance by the Assessing Officer on the third party information and the statement received from Investigation Wing.
In the similar situation Hon'ble Supreme Court in the case of CIT v. M/s. Odeon Builders Pvt. Ltd., (supra) held as under:- “However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact
7 ITA.NO. 6115/MUM/2018 (A.Y: 2008-09) M/s. Yunicorn Synthetics Mills Pvt. Ltd., of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s.Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,8667-, is directed to be deleted." The ITAT by its judgment dated 16th May, 2014 relied on the selfsame reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT.”
In line with the above decision, we are inclined to remit this issue back to the file of the Ld.CIT(A) to decide the issue of reopening of assessment u/s. 147 of the Act. We direct the Ld.CIT(A) to adjudicate the above issues raised by the assessee in its appeal after providing adequate opportunity of being heard to the assessee.
In the result, appeal filed by the assessee is allowed for statistical purpose.
Order pronounced in the open court on 28th July, 2022