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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI KULDIP SINGH & SHRI AMARJIT SINGH
आदेश / O R D E R PER AMARJIT SINGH, AM:
The present filed by the assessee is directed against the order passed by the PCIT, Mumbai-17, which in turn arises from the assessment order passed by the A.O u/s 144 r.w.s 147 of the Income Tax Act, 1961, dated 11.12.2017 for A.Y. 2010-11. The assessee has assailed the impugned order on the following grounds before us:
“(1) The learned Principal Commissioner of Income Tax, Mumbai-17 erred in passing an order u/s 263 without jurisdiction and
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without considering the fact the order was neither erroneous nor prejudicial to the interest of revenue.
(2) The learned Principal Commissioner of Income Tax, Mumbai-17 erred in passing an order u/s 263 merely based on the fact that the Assessing Officer has failed to examine the issue properly. The learned Principal Commissioner of Income Tax, MumBai-17 failed to appreciate the fact that he cannot replace his opinion with the opinion of the Assessing Officer.
(3) The learned Principal Commissioner of Income Tax, Mumbai-17 failed to appreciate that the Assessing Officer had already applied his mind on the issue for which reopening was done u/s 147 and had following the order of Gujarat High Court in the case of C.I.T. v/s Bholanath Ply. Fab Pvt Ltd and in the case of C.I.T. v/s Simit P Sheth passed a speaking order u/s 144 read with Section 147 and therefore no order revision u/s 263 cannot be done.
(4) The learned Principal Commissioner of Income Tax, Mumbai-17 failed to consider the factual and legal submission made against notice u/s 263 and to appreciate that the assessee was a trader and therefore what could be added was only the profit margin estimation which was correctly done by the learned Assessing Officer and therefore The learned Principal Commissioner of Income Tax, Mumbai-17 had no jurisdiction of revision u/s 263 in the issue.
(5) The assessee claims to leave to add, alter, amend any of the grounds of appeal.
The fact in brief is that return of income was filed by the assessee on 13.08.2010 declaring total income of Rs.21,67,620/-. Subsequently, the case of the asesssee was reopened by issuing of notice u/s 148 of the
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Act on the reason that assessee has obtained accommodation entries for bogus purchases from the following concerns:
Name TIN No. PAN Amount Siddhivinayak Steel 27050389521V AGVPS7889Q 13,901,735 Chanchal Tube 27460355491V AVFPS0644A 4,505,956 Corporation Asian Steel 27860346638V AWZPS2908L 3,734,484 Surat Tube 27550304371V APMPS5397D 4,484,740 Corporation Total 2,66,26,915
In this case information was received from the office of DGIT (Inv.)- Mumbai, and also from the Sales Tax Department, Mumbai regarding concern involved in providing accommodation entries without doing any actual business. In response to notice u/s 148 the assessee has sought the reason recorded for reopening the assessment u/s 148 of the Act and the same was provided to the assessee. Thereafter notice u/s 142(1) of the Act was issued on 27.09.2017 asking the assessee to furnish the various details pertaining to the purchase and sales made during the year under consideration. However, neither assessee has attended the assessment proceedings nor furnished any detail. The assessing officer has provided a number of opportunities to the assessee to make compliance during the course of assessment proceedings, but assessee has failed to make any compliance. The detail of un-complied notices issued and served during the course of assessment on the assessee are as under:
Sr. No. Notice u/s Notice issue date 1. Notice u/s 148 07.03.2017 2 Notice u/s 143(2) and 142(1) 27.09.2017
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alongwith annexure 3. Notice u/s 142(1/Reminder 10.11.2017 4. Notice u/s 142(1)/Show cause notice 24.11.2017
Consequently, the assessing officer has completed the assessment u/s 144 of the Act. The assessing officer has downloaded the return of income himself from the system and noticed that in the profit and loss account the assessee has shown purchases of Rs.13,62,94,614/-. The assessing officer has noticed from the list of the parties who were providing accommodation entries without doing any actual business that the assessee was one of the party who had also obtained accommodation entries in respect of bogus purchases from those parties to the amount of Rs.2,66,26,915/- during the year under consideration. All these parties were issuing bills without delivering any goods or services. The payments received by those parties were returned to the assessee in cash after deducting small commission. In their statement recorded by the Investigation Department of the revenue they admitted that they were merely providing accommodation entries without supplying of any material. In the light of above facts and circumstances the A.O stated that onus to prove the genuineness of the purchases from the hawala parties was on the assessee , however, the assessee has not submitted any details. The A.O has also stated that assessee has failed to produce any of the supplier, brokers or transporters in spite of providing a number of opportunities. The A.O has also stated that assessee has not given any evidence to substantiate that there were actual purchases from the parties listed above in this order. Therefore, the A.O has drawn conclusion that purchases made from the aforesaid parties were bogus and were not genuine. The A.O concluded that assessee has intentionally inflated the purchases by taking accommodation entries to reduce the
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profit element. However, the AO has restricted the addition to the amount of Rs.33,28,364/- being 12.5% of the non-genuine purchases of Rs.2,66,26,915/-.
Subsequently, the ld. Principal CIT -17, Mumbai, on perusal of the assessment record observed that Assessing Officer had erred in adding only 12.5% of the bogus purchases amounting to Rs.33,28,364/- and referred the decision of the Hon’ble Supreme Court in the case of N.K. Proteins Vs. DCIT (2017) 184 taxman.com 195 (SC), wherein it is held that the entire bogus purchases was required to be brought to tax. The ld. Pr. CIT stated that the assessing officer has committed error by not doing complete enquiries into the genuineness of the total purchase transaction and made only ad-hoc addition. Therefore, the ld. Pr. CIT observed that the assessment order is erroneous insofar it is prejudicial to the interest of revenue in the light of Explanation 2 to sub-section (1) of Sec. 263 of the Act. Therefore, show cause notice u/s 263 of the Act, dated 12.03.2020 was issued to the assessee. The assessee responded that issue of addition of bogus purchases was already pending in appeal before the ld. CIT(A) and stated that Pr. CIT had no power u/s 263 to review the order of the assessing officer. The ld. Pr. CIT has not agreed with the submission of the assessee stating that the subject matter of these revision proceedings was the genuineness and taxability of 87.5% of the purchases amounting to Rs.2,32,98,550/- which was not at all the subjection matter of appeal before the ld. Pr. CIT. The ld. Pr.CIT has also stated that Sec. 263(1)(C) talks about matters considered and decided and in this case matter has not be decided by the ld. CIT(A). The ld. Pr. CIT has also referred the judicial pronouncements of Hon’ble Supreme Court in the case of Rajmandir Estate (P) Ltd. Vs. PCIT, Kolkata-III (2017)
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reported in 77 taxman.com 285 and the decision of Hon’ble Supreme Court in the case of Malabar Industrial Company Ltd. Vs. CIT (294 ITR 89) and the decision of Mahalaxmi Liquor Promoters Pvt. Ltd. Vs. CIT (2013) 29 taxman.com 70 of the ITAT. The ld. Pr. CIT has held that on perusal of the assessment records it is clear that assessing officer has failed to examine the issue and has not applied his mind on the facts and circumstances of the case for the purpose of determining the genuineness of the claim. The ld. Pr. CIT has also referred that Explanation 2 (a) below Sec. 263 of the I.T. Act specified that the order passed by the assessing officer shall be deemed to be erroneous insofar as it is prejudicial to the interest of the revenue if in the opinion of the Pr. CIT, the order was passed without making any inquiries or verifications which should have been made by the assessing officer. The ld. Pr.CIT has also referred the decision of ITAT, Mumbai in the case of Anuj Jayaendra Shah Vs. Pr.CIT 35, (2016) reported in 16 taxman.com 38 wherein it is held that if the order passed without making inquiries or verification by the A.O which should have been made or the order is passed along with any relief without enquiry into the claim the order shall be deemed to be erroneous and prejudicial to the interest of the revenue. Therefore, the ld. Pr.CIT has set aside the order passed by the assessing officer u/s 143(3) of the Act in accordance with provision of Explanation 2 to Sec. 263(1) of the Act and directed the assessing officer to conduct requisite enquiries to arrive at the correct conclusion as per law and frame the order of assessment de novo.
During the course of appellate proceedings the ld. Counsel contended that ld. Pr.CIT has not considered the fact of the case and the order passed by the assessing officer was neither erroneous nor
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prejudicial to the interest of the revenue. The ld. Counsel has filed a paper book comprising copies of notice issued u/s 263, 148, 143(2), 142(1) along with copies of judicial pronouncements relied upon by the ld. Counsel.
On the other hand, the ld. D.R has referred para 6.5 and stated that in the aforesaid para the A.O has clearly established that because of not furnishing any detail and evidence the assessee has failed to prove the genuineness of the purchases made from the alleged parties. However, at para 6.8 of the assessment order without verifying any relevant material the assessing officer has restricted the addition to 12.5% of the purchases as non-genuine expenditure. The ld. D.R has also referred the decision of Hon’ble Supreme Court in the case of Malabar Industrial Company Ltd. Vs. CIT (294 ITR 89).
Heard both the sides perused the material available on record. The assessing officer has specifically reopened the assessment u/s 147 of the Act on the basis of information received that assessee has obtained accommodation entries in respect of bogus purchases from the hawala parties without delivery of goods. During the course of reassessment proceedings, the assessing officer has issued a number of notices as referred above in this order, however, the assessee has not made any compliance before the assessing officer. The assessee has even not furnished any basic detail of transactions of sale and purchases made by him during the year under consideration. Under the circumstances the A.O has categorically stated that assessee has failed to establish the genuineness of the purchases as no evidence has been submitted by the assessee to prove the genuineness of the purchases. Without retreating the facts as reported in this order it is observed that the case of the
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assessee was specifically reopened to verify the genuineness of purchases. However, the assessee has not produce any detail before the assessing officer during the course of reassessment proceedings in spite of issuing a number of notices the assessee has deliberately not made any compliance before the assessing officer. Even the basic detail of purchase and sales made during the year were not available before the assessing officer before estimating the bogus purchases being 12.5% of the purchases made by the assessee from the hawala entries providing parties. Such material facts demonstrate that before estimating the bogus purchases no material and details pertaining to the impugned purchases made by the assessee from the alleged parties was available with the assessing officer. Even during the course of appellate proceedings before us the assessee has failed to furnish the basic details pertaining to the purchase and sale made to prove the genuineness of the transactions. The case law referred by the ld. Counsel are factually distinguishable from the basic facts prevailing in the case of the assessee, as the ld. Counsel except making legal submission on the validity of invoking provision of Sec. 263 of the Act has neither brought to our notice any material, nor even slightly demonstrate that the assessing officer had examined the relevant material pertaining to purchase transaction from the alleged parties before arriving at estimation addition @ 12.5% of the bogus purchases. Looking to above facts and circumstances, we consider that in view of the Explanation 2 to Section 263 the order in this case is passed without any enquiry or verification by the assessing officer, therefore, order of the assessing officer is deemed to be erroneous and prejudicial to the interest of the revenue. Therefore, in our considered opinion, the exercise of power u/s 263 of the Act to revise the assessment order is valid except the
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observation of the Pr. CIT that 100% of non-genuine purchases to be added to the total income of the assessee. We consider that the percentage of bogus purchases to be added in this case is to be determined by the assessing officer as per law after verification of the relevant material to be produced by the assessee. Therefore, we uphold the impugned order of the ld. Pr. CIT subject to aforesaid terms and conditions. Accordingly, the Grounds of appeal of the assessee are dismissed. 6. In the result, the appeal stand dismissed.
Order pronounced in the open court on 28.02.2022 Sd/- Sd/- (Kuldip Singh) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 28.02.2022 Rahul Sharma, Sr. P.S. आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. 2. ��थ� / The Respondent. आयकर आयु�(अपील) / The CIT(A)- 3. आयकर आयु� / CIT 4. 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण DR, ITAT, Mumbai गाड� फाईल / Guard file. 6. स�ािपत �ित //True Copy// आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण/ ITAT, Bench, Mumbai.