Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI SANDEEP SINGH KARHAIL
These cross appeals have been filed by either parties challenging the order dated 25.03.2019, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals)– 26, Mumbai [“learned CIT(A)”], for the assessment year 2011–12. As in the appeal filed by the assessee, validity of reassessment proceedings initiated by the Assessing Officer is also challenged, same is dealt first in this order.
./2019 Assessee’s Appeal – A.Y. 2011–12
In this appeal, the assessee has raised following grounds:– “1. In the facts and circumstances of the case and in law the learned CIT(A) erred in confirming A.0's action of reopening the assessment under section 147 r.w.s. 148 of the Act.
2. In the facts and circumstances of the case and in law the learned CIT(A) erred in holding that reassessment proceedings under section 148 r.w.s. 147 of the Act are validly initiated by taking satisfaction of JCIT as per the provisions of section 151(2) of the Act when such satisfaction is not required as the original assessment was passed u/s. 143(3) of the Act by DCIT.
3. In the facts and circumstances of the case and in law the learned CIT(A) erred in estimating profit being 10% of the alleged bogus purchases at Rs. 4,24,95,239/-, when the books of accounts of the assessee are not rejected u/s. 14 of the Income Tax Act 1961.
4. In the facts and circumstances of the case and in law the learned CIT(A) erred in estimating profit at 10% of the alleged bogus purchases of Rs 4,24,95,239/-.”
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019
The issue arising in ground Nos. 1 and 2 in assessee‟s appeal is pertaining to validity of reassessment proceedings initiated by the Assessing Officer.
The brief facts of the case pertaining to this issue as emanating from the record are: The assessee is a sole proprietor carrying out the trading business of procuring and selling of Textile goods under the name and style of „Sagar Enterprise‟. For the year under consideration, the assessee filed its return of income on 24/09/2011 declaring total income of Rs. 58,91,820. The return was selected for scrutiny and notice under section 143(2) of the Act was issued. Further, notice under section 142 (1) along with detailed questionnaire was also issued upon the assessee. During the course of assessment proceedings, it was observed that purchase of Rs. 41,32,60,527 have been debited to the profit and loss accounts. On the website of Sales Tax Department, information was available regarding the parties who had merely taken entries of purchases from hawala dealers. Further information was also received from DGIT (investigation), Mumbai, that the assessee has shown purchases from various concerns, who are appearing in the list of suspicious dealers as per the Sales Tax Department. Accordingly, the assessee was asked to submit the list of purchases reflected in hawala list displayed on the website of Sales Tax Department, Maharashtra. Further, on perusal of the details of purchases filed by the assessee and list of suspicious dealers as released by the Sales Tax Department, it was observed by the Assessing Officer that purchase of Rs.
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019 4,29,61,906 made by the assessee during the relevant financial year from following 13 parties are not genuine purchases:
Sl. Name of the Party Amount (Rs.) No 1. Shri Lok Roop Rawal 16,16,171 Prop. M/s. Milestone Corporation 2. Shri Rasik B. Shah 96,07,084 Prop. M/s. Deep Enterprises 3. Shri Ashwin V. Ghatalia 20,72,165 Prop. M/s. Ghatalia Steel / Divine Entp 4. M/s. Akshar distributor Pvt. Ltd. 22,30,442 5. Shri Rakesh S. Gupta 12,50,816 Prop. M/s. Emco Industries 6. M/s. Sejal Enterprises 57,91,154 7. Shri Sadhuram K. Gupta 8,85,838 8. Shri Rajesh M. Nandola 47,22,957 Prop. M/s. Harsh Corpn.
9. M/s. Urvin General Trading Pvt. Ltd. 5,24,236 10. M/s. Darshat Trading Pvt. Ltd. 24,89,943 Shri Ashwin P. Mehta 11. 5,18,581 Prop. M/s. Ambika Sales 12. Shri Manoj Kumar S. Yadav 20,82,670 Shri Harish S. Kotian 13. 93,69,849 Prop. M/s. Balaji Impex
Notices under section 133(6) of the Act were issued to the above parties at the addresses furnished by the assessee calling for information about the transactions done by them with the assessee during the period from 01/04/2010 to 31/03/2011 along with copy of Ledger, bank statement, balance sheet with schedules and acknowledgement of income
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019 tax return filed for the assessment year 2011 – 12. Further the assessee was also asked to furnish all the necessary documentary evidences and also to produce the aforesaid 13 parties and establish the genuineness of the purchases from the said parties amounting to Rs. 4,29,61,906. In reply, assessee submitted that the activities of the proprietary concern right from the inception are supplying of textile items like bedsheets, towel, lungis, undergarments, blankets, mosquito nets etc. to the Canteen stores managed by the Ministry of Defence, Government of India. Assessee further submitted that while carrying on the said business, it procured the raw materials from the various parties and get it manufactured through job works by maintaining the quality. In some cases, assessee submitted that it get the goods manufactured from the small factories. After the finished goods are received, the same are sold to CSD. All such purchase activities are supported by quantitative details. The purchases are backed by the payments and all are routed through Books of Accounts. The assessee also referred to transport receipts, delivery challans and bills issued to CSD towards the supply of said material.
After considering the submissions made by the assessee and the facts available on record, the Assessing Officer vide order dated 30/12/2013 passed under section 143 (3) of the Act held that the assessee has neither produced the 13 parties nor furnished any documentary evidences to establish the genuineness of the purchases made from them
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019 during the relevant assessment year, despite sufficient opportunity being granted. The Assessing Officer further observed as under:
“After taking into consideration, that the assessee has debited the amount of Rs.9,49,504/– as purchases from M/s. Milestone Corporation and not Rs.14,16,171/– the unproved purchases are computed at Rs.4,24,95,239/–. The facts in the present case clearly show that the purchases of Rs.4,24,95,239/– made from Shri Lok Roop Rawal (Prop. M/s. Milestone Corporation), Shri Rasik B. Shah, (Prop M/s. Deep Enterprises), Shri Ashwin V Ghatalia (Prop. M/s. Ghatalia Steel / Divine Entp), M/s. Akshar Distributor Pvt. Ltd. Shri Rakesh S Gupta (Prop. M/s. Emco Industries), M/s. Sejal Enterprises, Shri Sadhuram K Gupta (Prop. M/s. Shakti Trdg. Co.), Shri Rajesh M Nandola (Prop. M/s. Harsh Corpn.) M/s. Urvin General Trading Pvt. Ltd., M/s. Darshat Trading Pvt. Ltd., Shri Ashwin P. Mehta (Prop. M/s. Ambika Sales), Shri Manoj Kumar S. Yadav, Shri Harish S. Kotian (Prop. M/s. Balaji Impex) are not genuine purchases as the notice u/s 133(6) issued to them seeking details of their transactions with the assessee has been returned back “Unserved” by the postal authorities. The names of these eight parties are also appearing in list of Suspicious dealers of the Sales tax department wherein these parties are marked as hawala dealers who are merely issuing bills to various parties without actual purchase and sale of goods having taken place.”
Accordingly, the Assessing Officer, inter-alia, treated the sum of Rs. 4,24,95,239 as unexplained expenditure under section 69C of the Act and added the same to the returned income of the assessee.
7. In appeal, learned CIT(A) vide order dated 07/10/2014 noted that the Assessing Officer made the addition under section 69C of the Act with regard to entire purchases made by assessee from parties whose name appeared in the website of MAHAVAT as suspicious dealers while taking a cue from the aforesaid information. The learned CIT(A) further noted that the Assessing Officer has not disputed the fact that the assessee had in fact purchased the goods and also made sales out of such purchases. The learned CIT(A) accordingly held that the goods purchased from above
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019 parties are not conclusively proved to be non-genuine or bogus and there is no question of disallowing the entire purchases made from certain alleged bogus parties, when the corresponding sales are treated as genuine. The learned CIT(A) restricted the disallowance out of the alleged bogus purchases to 10%, which resulted in addition to an extent of Rs. 42,49,524. Being aggrieved by the aforesaid order, the assessee preferred appeal before the Tribunal.
While the appeal before the Tribunal was pending, the Assessing Officer vide notice dated 07/01/2016 issued under section 148 of the Act initiated reassessment proceedings in the case of the assessee for the year under consideration.
Vide letter dated 08/06/2016, the assessee requested the Assessing Officer to provide a copy of the reasons recorded for reopening the assessment. The reasons recorded for reopening the assessment provided by the Assessing Officer vide letter dated 14/06/2016, which is forming part of the paper book at page No. 77 – 78, reads as under:
“2. As requested, the reasons recorded for issuing notice u/s 148 of the I.T. Act, 1961, in your case for A.Y. 2011–12. “The DGIT (Inv.) vide letter no.DGIT(Inv.)/Corr.Field/2012–13 dated 26/12/2012 has forwarded information regarding assessees who had taken bogus purchase bills to reduce and suppress profit. The Sales Tax Authorities had taken action against a number of hawala dealers who had issued bogus purchase bills to various assessees of Mumbai to suppress their profit. On the basis of this action Sales Tax Authorities had forwarded the names of assessee to the DGIT (Inv.), who are beneficiaries of the hawala bills and had either suppressed or reduced from profits.
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019
In the instant case, Shri Sunil H. Khanna, order u/s 143(3) was passed on 30/12/2013. As information received from DGIT (Inv.) as per the above mentioned reference, the assessee had taken bogus bills from following party to suppress the profit. The details of bills and party from whom bill have been taken are as under:–
Sl. Name of party from whom bogus TIN no. PAN Amount (Rs.) No. bill has been taken 1. 27910671027V SEJAL ENTERPRISES ABMFS1997F 5,791,154 2. 2730350341V SHAKTI TRADING CO. AIOPG8087B 885,838 3. 27860582930V MILESTONE CORPORATION AFCPR4544M 1,416,171 4. 27750595164V DEEP ENTERPRISES AMTPS9884P 9,607,084 5. 27500560624V R.K. TRADERS BHWPS6408N 2,587,549 6. 27240608588V HARSH CORPORATION ADKPN3382R 4,722,957 7. 27330733135V SHUB ENTERPRISES AEAPY4830K 2,082,670 8. 27910717005V AKSHAR DISTRIBUTORS P. LTD. AAHCA6544M 2,230,442 9. 27020712790V DARSHAT TRADING PVT. LTD. AADCD1270D 2,489,943 10. 27110537510V URVIN GENERAL TRADING P. LTD. AAACU8128J 524,236 11. 27120772196V AMBIKA SALES CORPORATION ALGPM7120A 518,581 GHATALIA STEELS / DIVINE 12. 27950092109V AALPG1552E 2,072,165 ENTERPRISES 13. 27960713049V EMCO INDUSTRIES APRPG7943L 1,250,816 14. 27200756632V PAVITRA TRADERS AHOPJ2514P 1,701,478 15. 27750735135V SHREYANS CORPORATION AKLPJ0741J 2,127,616 16. 27750752983V ELEVEN IMPEX ADWPN1614N 3,169,538 17. 27060746233V BALAJI IMPEX AMVPK344R 9,369,849 18. 27920794551V PLUTO MULTITRADE P. LTD. AAFCP5947B 14,757,701 19. 27040801631V VIVA TRADING PRIVATE LIMITED AADCV3609A 20,020,057 TOTAL: 8,73,25,845/–
An analysis of the data is carried out. In view of the above facts, I have reason to believe that income chargeable to tax amounting more than one lakhs has escaped assessment for the A.Y. 2011–12 within the meaning of the section 147 of the Act. The case falls under the provisions of selection 151(2) and therefore permission may kindly be granted reopen the case u/s 147 of the Act and to issue Notice u/s 148 of the Income Tax Act, 1961.”
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019
The assessee vide letter dated 13/07/2016 objected to the initiation of reassessment proceedings under section 148 of the Act. The Assessing Officer vide order dated 09/08/2016 rejected the objections filed by the assessee against initiation of reassessment proceedings and held that there is tangible information in the possession of the Department with regard to suppression of income by the assessee for the year under consideration, by referring to information received from DGIT (Investigation) vide letter dated 26/12/2012.
Pursuant to notices issued under section 143 (2) and section 142 (1) by the Assessing Officer, which were duly replied by the assessee, the Assessing Officer vide order dated 05/12/2016 passed under section 143 (3) read with section 147 of the Act disallowed an amount of Rs. 4,43,63,899 under section 69C of the Act in respect of 6 out of 19 parties mentioned in the information received from DGIT (Investigation).
The learned CIT(A) vide impugned order dated 25/03/2019, inter- alia, dismissed the appeal filed by the assessee on the issue of reopening of assessment. Further on merits, learned CIT(A) following the approach adopted by it vide earlier order dated 07/10/2014, which was also upheld by the Co-ordinate Bench of the Tribunal vide order dated 03/11/2017 in restricted the disallowance out of the alleged bogus purchases to 10%. Being aggrieved, the assessee is in appeal before us.
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019
During the course of hearing, Shri Prakash Pandit, learned Authorised Representative (“learned AR”) submitted that reopening of assessment in the present case is bad in law as same is based upon the change of opinion of the Assessing Officer. The learned AR further submitted that the information received from DGIT (investigation) was already available with the Assessing Officer at the time of conclusion of original scrutiny assessment proceedings under section 143 (3) of the Act and only on the basis of this information, the Assessing Officer initiated the reassessment proceedings in the present case.
On the other hand, Shri Hoshang B. Irani, learned Departmental Representative (“learned DR”) submitted that addition was not made in respect of all the parties mentioned in the information received from DGIT (Investigation), which is now done by the Assessing Officer vide reassessment proceedings. Further, learned DR relied upon the impugned order.
We have considered the rival submissions and perused the material available on record. In the present case, DGIT (Investigation) had communicated to the Assessing Officer the information received by it from the Sales Tax Department that the assessee has shown purchases from 19 concerns, who are appearing in the list of suspicious dealers as per the Sales Tax Department. Accordingly, the assessee was asked to furnish the details of purchases from the alleged suspicious dealers. The Assessing Officer vide order dated 30/12/2013 passed under section 143 (3) of the Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019 Act, after perusal of the details furnished by the assessee and the list of suspicious dealers as released by the Sales Tax Department observed that purchases of Rs. 4,29,61,906 made by the assessee, during the year under consideration, from 13 out of 19 parties are not genuine purchases. As a result, the Assessing Officer, inter-alia, made addition of Rs. 4,24,95,239 under section 69C of the Act as unexplained expenditure. In further appeal, against the order passed under section 143 (3) of the Act, the learned CIT(A) also taken note of the fact that scrutiny assessment was conducted on the basis of information received from DGIT (Inv.) and the addition was made by the Assessing Officer under section 69C of the Act with regard to purchases made by the assessee from parties whose names appeared on the website of MAHAVAT as suspicious dealers.
The order dated 09/08/2016 passed by the Assessing Officer disposing off assessee‟s objection, which is forming part of the paper book at page No. 87 – 88, reads as under:
“3.2 The Assessing Officer received information from DGIT (Inv.) vide letter dated 26.12.12 the assessee had taken bogus bill from following party to suppress the profit. The details of bill and party from whom bills have been taken are as under:–
Sl. Name of party from whom bogus TIN no. PAN Amount (Rs.) No. bill has been taken 1. 27910671027V SEJAL ENTERPRISES ABMFS1997F 5,791,154 2. 2730350341V SHAKTI TRADING CO. AIOPG8087B 885,838 3. 27860582930V MILESTONE CORPORATION AFCPR4544M 1,416,171 4. 27750595164V DEEP ENTERPRISES AMTPS9884P 9,607,084 5. 27500560624V R.K. TRADERS BHWPS6408N 2,587,549 6. 27240608588V HARSH CORPORATION ADKPN3382R 4,722,957
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019
27330733135V SHUB ENTERPRISES AEAPY4830K 2,082,670 8. 27910717005V AKSHAR DISTRIBUTORS P. LTD. AAHCA6544M 2,230,442 9. 27020712790V DARSHAT TRADING PVT. LTD. AADCD1270D 2,489,943 URVIN GENERAL TRADING P. 10. 27110537510V AAACU8128J 524,236 LTD. 11. 27120772196V AMBIKA SALES CORPORATION ALGPM7120A 518,581 GHATALIA STEELS / DIVINE 12. 27950092109V AALPG1552E 2,072,165 ENTERPRISES 13. 27960713049V EMCO INDUSTRIES APRPG7943L 1,250,816 14. 27200756632V PAVITRA TRADERS AHOPJ2514P 1,701,478 15. 27750735135V SHREYANS CORPORATION AKLPJ0741J 2,127,616 16. 27750752983V ELEVEN IMPEX ADWPN1614N 3,169,538 17. 27060746233V BALAJI IMPEX AMVPK344R 9,369,849 18. 27920794551V PLUTO MULTITRADE P. LTD. AAFCP5947B 14,757,701 19. 27040801631V VIVA TRADING PVT. LTD. AADCV3609A 20,020,057 TOTAL: 8,73,25,845/–
The assessment u/s 143(3) for A.Y. 2011–12 was completed on 30.12.2013 by making addition only on the following bills.
Sl. Name of party from whom bogus bill PAN Amount (Rs.) No. has been taken 1. SEJAL ENTERPRISES ABMFS1997F 57,91,154 2. SHAKTI TRADING CO. AIOPG8087B 8,85,838 3. MILESTONE CORPORATION AFCPR4544M 9,49,504 4. DEEP ENTERPRISES AMTPS9884P 96,07,084 5. AKSHAR DISTRIBUTORS P. LTD AAHCA6544M 22,30,442 6. DARSHAT TRADING PVT. LTD. AADCD1270D 24,89,943 7. URVIN GENERAL TRADING P. LTD. AAACU8128J 5,24,236 8. AMBIKA SALES CORPORATION ALGPM7120A 5,18,581 GHATALIA STEELS / DIVINE 9. AALPG1552E 20,72,165 ENTERPRISES 10. EMCO INDUSTRIES APRPG7943L 12,50,816 11. BALAJI IMPEX AMVPK3444R 93,69,849 12. HARSH CORPORATION ADKPN3382R 47,22,957 TOTAL: Rs.4,04,12,569
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019
From the conjoint reading of the aforesaid order along with the reasons for reopening the assessment (mentioned supra), it is clearly evident that in the present case reassessment proceedings under section 148 of the Act were initiated on the basis of very same information received from DGIT (Investigation) with regard to alleged bogus purchases made by the assessee from suspicious dealers. It is quite surprising that the Assessing Officer only considered the transactions with parties at serial No. 1, 2, 3, 4, 6, 8, 9, 10, 11, 12, 13 and 17 of the aforesaid information received from DGIT (Investigation) during original scrutiny assessment proceedings and made the addition vide order passed under section 143(3) of the Act; while the transactions with parties at serial No. 5, 7, 14, 15, 16, 18 and 19, details of which were also available with the Assessing Officer at the time of original scrutiny assessment proceedings, were not considered at all and was left. Further, it is also not the case of the Revenue that the details pertaining to parties at serial No. 5, 7, 14, 15, 16, 18 and 19 were received only after completion of original scrutiny assessment proceedings. Thus, in view of the above, it is evident that the reassessment proceedings initiated in the present case is based upon reappraisal of material already available on record i.e. information received from the DGIT (Inv.).
For initiating the proceeding under section 147 of the Act, the Assessing Officer is required to have „reason to believe‟ that income chargeable to tax has escaped assessment. In present case, reassessment proceedings are nothing but mere change of opinion by Assessing Officer
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019 with regards to material already available on record and considered during the course of original scrutiny assessment proceedings. That it is settled law that „reason to believe‟ can never be the outcome of a change of opinion. It is essential that before any action is taken by the Assessing Officer he should substantiate his satisfaction. Thus, where the reasons recorded by the Assessing Officer disclose no more than mere change of opinion, the reassessment proceedings and assessment order pursuant thereto are liable to be quashed. Existence of a valid "reason to believe" is a sine qua non to exercise the jurisdiction under Section 147 of the Act. The expression „reason to believe‟ imports the cumulative presence of following four elements viz. some tangible material or materials to establish that income has escaped assessment; nexus between such material and the belief of escapement of income from assessment as envisaged under Section 147; application of mind by the Assessing Officer to such material; and an inference, based on reason drawn tentatively by the officer that income has escaped assessment.
The Hon‟ble Jurisdictional High Court in the case of Asian Paints Ltd. v/s DCIT: [2009] 308 ITR 195 (Bom.), observed as under:
“10. It is further to be seen that the legislature has not conferred power on the AO to review its own order. Therefore, the power under s. 147 cannot be used to review the order. In the present case, though the AO has used the phrase "reason to believe", admittedly between the date of the order of assessment sought to be reopened and the date of formation of opinion by the AO, nothing new has happened, therefore, no new material has come on record, no new information has been received; it is merely a fresh application of mind by the same AO to the same set of facts and the reason that has been given is that the some material which was available on record while assessment order was made was inadvertently excluded
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019 from consideration. This will, in our opinion, amount to opening of the assessment merely because there is change of opinion. The Full Bench of the Delhi High Court in its judgment in the case of Kelvinator (supra) referred to above, has taken a clear view that reopening of assessment under s. 147 merely because there is a change of opinion cannot be allowed. In our opinion, therefore, in the present case also, it was not permissible for respondent No. 1 to issue notice under s. 148.”
As is evident from the facts available on record, no new information was received by the Assessing Officer at the time of initiation of reassessment proceedings, and it was merely a fresh application of mind to the same set of facts [i.e. information received from DGIT (Investigation)] as were available at the time of original scrutiny assessment proceedings. Thus, in view of the above, we are of the considered opinion that the reopening of assessment under section 147 of the Act, in the present case, is bad in law and therefore is set aside. Accordingly, the impugned order passed by the learned CIT(A), inter-alia, upholding the reassessment proceedings is also set aside. As a result, ground no. 1 raised in assessee‟s appeal is allowed.
In view of our aforesaid findings, ground no.2 raised in assessee‟s appeal need no separate adjudication.
As, we have decided the issue of jurisdiction in favour of the assessee, ground nos. 3 and 4 raised in assessee‟s appeal pertaining to merits are rendered academic in nature and are, accordingly, dismissed as infructuous. ./2019 Revenue’s Appeal – A.Y. 2011–12
Sunil H. Khanna ITA Nos. 3415/Mum./2019 and 3868/Mum./2019
Further, in the appeal filed by the Revenue, grounds pertaining to relief granted by the learned CIT(A) are raised. In view of our findings in assessee‟s appeal, same are also rendered academic in nature and are, accordingly, dismissed as infructuous.
In the result, the appeal by the assessee is partly allowed, while the appeal by the Revenue is dismissed. Order pronounced in the open court on 12/05/2022