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Facts
The assessee's original return for AY 2016-17 was re-opened by the AO under Section 147. The AO made additions for alleged bogus purchases and sales. The CIT(A) upheld the AO's additions, leading to the present appeal by the assessee.
Held
The Tribunal held that Section 69C could not be applied as purchases were made through bank account and appeared in the assessee's books. It also held that Section 68 could not be invoked for alleged bogus sales as the amount was already offered as turnover, leading to double taxation.
Key Issues
Whether additions for bogus purchases and sales are justified when transactions are routed through banks and already offered as turnover, and if principles of natural justice were violated by the lower authorities.
Sections Cited
250, 147, 144B, 148, 142(1), 151, 69C, 68, 145(3), 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
O R D E R
PER VIMAL KUMAR, JM:
This appeal filed by the Assessee is against order dated 29.04.2024 of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as 'the Ld. CIT(A)'] passed u/s 250 of the Income Tax Act, 1961, [hereinafter referred to as 'the Act'] arising out of assessment order dated 25.03.2022 of the Ld. Assessing Officer u/s 147 r.w.s 144B of the Act for Assessment Year 2016-17.
Brief facts of the case are that the assessee filed his original return of income on 14.10.2016 declaring total income of Rs.4,42,670/- along with computation of income, Auditors' Report and Audited Accounts of the assessee. Ld. AO on basis of incriminating and tangible information and after following due process, re-opened the assessee’s case for assessment/reassessment u/s 147 of the Act. Accordingly, notice dated 31.03.2021 under section 148 of Income Tax Act was issued to the assessee. The assessee also received notice under section 142(1) dated 23.11.2021 and 07.01.2022 seeking various details and information from the assesse. In reply thereto, the assessee filed letter dated 23.01.2022 requesting that original return filed for AY 2016-17 may be considered as return filed in response to notice under section 148 dated 31.03.2021. Through this letter, the assessee had also requested for providing copies of the reasons recorded for reopening of the case. Accordingly, the AO provided copy of reasons recorded for reopening of the case along with approval under section 151 of Income Tax Act vide letter dated 26.01.2022.On completion of proceedings, Ld. AO passed order dated 25.03.2022 u/s 147 r.w.s 144B of the Act for Assessment Year 2016-17.
Against order dated 25.03.2022 of Ld. AO, the appellant assessee filed appeal before the Ld. CIT(A) which was dismissed vide order dated 29.04.2024.
Being aggrieved appellant assessee preferred present appeal on following grounds: "
1. That the order of the learned Commissioner of Income Tax (Appeals) under section 250 of Income Tax Act, 1961 is bad in law and against facts of the case.
2. The learned CIT(A) has erred in not passing any order on the revised/additional grounds of appeal taken by the assessee in written submissions dated 24/5/2023 and erred in not giving his finding on such revised/additional grounds of appeal taken by the assessee. Therefore, the order of learned CIT(A), passed in gross violation of principles of natural justice, deserves to be quashed.
3. The learned CIT(A) has erred in not providing opportunity of personal hearing through VC in spite of repeated requests made by the assessee for the same. Therefore, the order so passed is in violation of principles of natural justice and deserves to be quashed.
4. Learned CIT(A) has erred in confirming addition of Rs.1,38,32,272/- made u/s 690 for alleged bogus purchases and Rs. 1,47,20,000/- made u/s 68 for alleged bogus sales made by the assessee in spite of the fact that the assessee submitted all the bills for purchase and sales and entire purchases and sales were routed through bank account of the assessee.
5. Alternatively, the learned AO has erred in passing a high pitched assessment order by adding 100% of alleged bogus purchase and sales without appreciating that alleged bogus purchases Rs. 1.38,32.272 and alleged bogus sales Rs. 1,47,20,000 were set off against each other.
The assessee raise the following additional grounds of appeal before the Hon'ble Bench of ITAT for adjudication as under 6.1 The learned AO has erred in reopening of the case of the assessee on "borrowed satisfaction', on the basis of Information available on the 'Insight portal of the department, without doing any independent enquiry at his end, and without forming his "reason to believe 6.2 The learned AO has passed order without providing the assessee copies of all the documents in his possession being report of DDIT(Inv.) and statements of Shri Ashok Kumar Gupta, and without providing opportunity of cross examination of witnesses of the Income Tax Department. Therefore, the order passed by the learned AO in gross disregard of principles of natural justice, is void ab-initio. Relief may please be granted by quashing the reassessment proceedings. 6.3 That the approval under section 151 was accorded in mechanical and routine manner, without application of mind by the Joint CIT, Range 19, Delhi. 6.4 The learned AO has erred in alleging that the assessee has made bogus purchases of Rs. 1,38,32,272/- and bogus sales of Rs 1,47,20,000/-even without rejecting the books of accounts under section 145(3). Therefore, the entire assessment order is bad in law and deserves to be quashed. 6.5 The learned AO has erred in giving only two days time to the assessee to give the reply of final show cause notice dated 22/3/2022, which is against all the principles of natural justice and assessment order passed on the basis of such show cause notice deserved to be quashed. 6.6 The learned AO has erred in charging huge interest of Rs. 86,07,721 under various provisions of Income Tax Act and in starting the penalty proceedings u/s 271(1)(c) of Income Tax Act. It is submitted that above grounds of appeal are legal grounds and in view of decision of Hon'ble Supreme Court in the case of National Thermal Power Co Ltd (229 ITR 383-SC) the assessee may be allowed to raise these grounds of appeal before the Hon'ble Bench."
Ld. Authorized Representative for appellant assessee submitted that Ld CIT(A) erred in not passing any order on the revised/additional grounds of appeal
taken by assessee in written submissions dated 24.05.2023. The Ld. CIT(A) erred in confirming addition of Rs. 1,38,32,272/- made u/s 69C for alleged bogus purchases of Rs. 1,47,20,000/- u/s 68 for alleged bogus sales made by the assessee in spite of the facts that assessee submitted all bills of purchase and sales and entire profit and sales were routed through the bank account of assessee. The Ld. AO erred in passing high pitched assessment order by adding 100% of alleged bogus purchase and sales without appreciating that alleged bogus purchase of Rs. 1,38,32,272/- and alleged bogus sale of Rs. 1,47,20,000/- were set off against each other. The Ld. AO without providing assesse copies of documents in his possession i.e. report of DDIT (Inv.) and statements of Sh. Ashok Kumar Gupta without providing opportunities of cross examination of witness. Appellant through application dated 14.10.2024 in ITAT Rule-29 had submitted copy of assessment order in case of Shri Sushil Kumar Jain in which purchases from the firms of the same Shri Ashok Kumar Gupta. The Hon'ble High Court of Gujrat in Pr. CIT vs. KFC Exports (P.) Ltd. reported in [2025] 172 txmann.com 157 (Guj) as held that Tribunal had rightly made addition of difference between sales and purchase and also making addition of 0.02% of Sales by disallowing expenses.
6. Ld. Departmental Representative relied on order of Ld. CIT(A).
7. From examination of record, in light of aforesaid rival contention, it is crystal clear that Ld. CIT(A) vide order dated 29.04.2024 upheld order dated 25.03.2022 of Ld. AO making additions of Rs.1,38,32,272/-u/s 69C in alleged bogus purchases and Rs. 1,47,20,000/- u/s 68 for alleged bogus sales made by assessee. During the course of assessment proceedings, assessee submitted copies of purchase/ sales bills of four parties namely (i) Sh. Parth International, (2) SA Agro International (3) Gunn Enterprises and Ridhi Sidhi Impex etc. All the payments were made or received from the parties through bank account and no payment was received in cash. Ld.AO invoked the section 69C for making addition of Rs.1,38,32,272/- for alleged bogus purchases. The section can be invoked only in cases where shares of expenses is not explained. In present case, entire purchases had been made through bank account of assessee. All the transactions appeared in books of accounts of the assessee which were accepted by the Ld. AO. So section 69C could not have been applied in the case of the assessee.
8. Ld. AO had invoked section 68 for making addition of Rs.1,47,20,000/- for alleged bogus sales. This section cannot be invoked as the assessee has already offered this amount for taxation as 'Turnover' in the Trading account of the assessee. If this amount is again added, it will amount to double taxation of same income which is not permissible in law. Reliance is placed on the following decision. Mahaveer Kumar Jian vs. CIT [2008] 92 taxmann.com 340 (SC).
In view of above material facts, the additions made by Ld. AO vide order dated 25.03.2022 being illegal are set aside. Ground of Appeal
nos.1,4 & 5 are accepted
10. Grounds of Appeal Nos.2, 3, 6 to 6.6. being academic are left open.