PRAKASH METAL INDISTRIES,PUNE vs. INCOME TAX OFFICER 5(3), PUNE, PUNE

At the outset, I find the appeal is time barred by limitation by 32 days before the Tribunal. The assessee filed a condonation petition stating that it did not receive any communication either online/offline about the impugned order at an early date and therefore were unaware of the proceedings. It is further stated that their Advocate was frequently to his native place to look after his uncle who was ill, however, his Assessee by : Shri Tanaji Shelke Revenue by : Shri Vinod Pawar Date of hearing : 23.12.2024 Date of pronouncement : 03 .03.2025 Prakash Metal Industries uncle passed away. It is therefore prayed for condoning the delay of 32 days occurred in filing the appeal. 3. After analyzing the averments made in the condonation petition and nothing contrary to disbelieve the averments made therein, I am of the view that there was ‘reasonable cause’ 4. Assessee has raised the following grounds of appeal : “1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous both on facts and in law. 2.1 That the Commissioner of Income Tax (Appeals) has erred in dismissed appeal without verification of provision related addition of Rs.26,63,369/- the issue of addition was not recorded reason before notice u/s.148 issued nor given proper opportunity being addition made in assessment order, the rebuttable submission as presented with appeal order, not fully discussed in his decision with appeal order as per ground No. 03 before CIT appeals the same may be verified and considered accordingly.

2 That the learned Commissioner of Income Tax (Appeals) erred in confirm the addition of Rs. 1,81,715/-on basis of G.P. Percentage, made by Assessing officer is unjustified the same please may be verified and deleted or reduced accordingly. 2.3 That the learned Commissioner of Income Tax (appeals) has erred to verify and consider the facts and circumstances as submission and confirm the addition of Rs.26,63,369/- on account of third party payment The same please may be justified and deleted. 3. Any other ground that may be urged at the time of hearing.”

Before me, Ld. Counsel for the assessee has not pressed Grounds of appeal No.2.2. The said ground is therefore dismissed as ‘Not Pressed’. Prakash Metal Industries

Succinctly, the facts of the case emanating from the record are that the assessee is a partnership firm engaged in the business of manufacturing of Engineering products. Income of Rs.3,69,131/- disclosed in the return of income for the A.Y. 2010-11 furnished on 15.10.2010. The return was processed u/s.143(1) of the Act. Thereafter, based on the information received from the Sales Tax Department, Maharashtra that the assessee was allegedly a beneficiary of Hawala transactions in respect of bogus purchases made through Hawala operators, the case was reopened by issuance of notice u/s.148 of the Act. In reply to notice u/s.148, the assessee furnished copy of ITR filed u/s.139(1) of the Act filed on 15.10.2010. During the course of proceedings, the assessee was called upon to furnish the payments made to Sundry creditors namely M/s. Anupam Metal, Indoswe Engg. Ltd. Moksh Metal & tubes, New Muk Metal Inds, Shree Kesar Implex Metal Pvt. Ltd. M/s. Moksha Metals Private Limited and M/s. Neelam Industries Ltd. to which the assessee has furnished the details. 6.1 Ld. AO found that Shree Kesar Implex Metal Pvt. Ltd. M/s. Moksha Metals Private Limited and M/s. Neelam Industries Ltd. were issuing bogus bills and the assessee was found to be one of the beneficiary of Hawala bills to the extent of Rs.17,50,630/-. Ld. AO issued notice to the assessee to prove the genuineness of purchases claimed to be made from the above dealers. The assessee expressed his inability to produce the confirmation of the vendors. Thereafter, ld. AO issued notices u/s.133(6) dated 21.12.2015 to the Hawala dealers requiring them to furnish ledger account extract, bank statement, confirmation of transactions made with assessee, P&L account, Balance sheet etc. However, those notices were returned back unserved by the postal authorities. In the event, Prakash Metal Industries ld. AO issue a show cause notice to the assessee to explain as to why the claim of purchases made from alleged hawala parties should not be declined. There was no compliance by the assessee.

2 Ground No.2 is relating to cessation of liabilities, the AO has rightly brought on record that the payments were not made to the actual creditors but to some other concerns which is evident from the chart given by the AO on page 8 of the assessment order. The appellant is now saying that the payments are made to sister concerns on behalf of the creditors. However, no such authority letters were produced by the appellant from the creditors for making such payment either before the AO or during appellate proceedings. The treatment given by the appellant in books to all the 5 creditors by paying the amounts to some other concerns show that the creditors had ceased to exist and the appellant debited the amounts paid to other parties to square off the creditors. There is likelihood that creditors were settled outside the books and the payments made to other concerns were debited against the creditors with an intension to square off their accounts in the books. Thus, in the absence of any such correspondence from the creditors, the contention of the appellant is held to be after thought and cannot be accepted. Ground No.2 is dismissed. 5.3 Ground No.3 is relating to not fulfilling the conditions and provisions issue of notice u/s 148 of the Act. It is seen from the records that the AO had received report from the Sales Tax Department, Maharashtra, which indicated that the appellant was beneficiary of hawala entry providers. The said hawala operator has admitted before the Sales Tax Department that they are in the business of issuing bogus bills i.e. engaged in fraudulent action of providing bills to other parties without any actual transactions of goods/material to many persons including the appellant. Based on this report, the assessing officer had reason to believe that income has escaped the assessment. In the given facts and circumstances, I am convinced that the re-opening in this case is justified. Ths ground of appeal No.3 is dismissed.

4 Ground No.4 is general in nature and hence not adjudicated. 6. In the result, the appeal is treated to have been dismissed for statistical purpose.”

I notice that the assessee has raised three grounds of which Grounds of appeal No.2.2 is not pressed. What remains is the legal issue challenging the validity of reopening proceedings in Ground No.2.1 and the addition of Rs.26,63,369/- in Ground No.2.3. So far as the reopening proceedings are concerned, I observe that there was a specific information about bogus purchases made by the assessee and ld. AO proceeded on the said information and after properly recording the reasons has also made addition of Rs.1,81,715/- Prakash Metal Industries on the basis of such information and the reasons recorded. Once the AO has made addition on the issue raised in the reasons recorded, then he can make other additions on the issues observed by him during the course of reassessment proceedings. Therefore, the action of the AO of reopening of the assessment proceedings is valid in view of the settled judicial precedents. Thus, Ground of appeal No.2.1 raised by the assessee challenging the reopening is dismissed. 12. Apropos to Ground No.2.3 where the addition of Rs.26,63,369/- has been made u/s.41(1) of the Act for cessation of liability for those creditors which the assessee has not to repay, I note that the assessee during the proceedings before ld.CIT(A) has claimed that the amounts payable to the alleged creditors have been paid to third parties on behalf of the alleged creditors. Following is the chart which depicts the names of the sundry creditors outstanding as on 31.03.2016 but the payments have been made to some other concerns :

I further observe that before both the lower authorities assessee had miserably failed to file any confirmation of the parties who have received the payment on behalf of the alleged creditors appearing in the books of assessee. Until and unless it is proved that the sundry creditors appearing in the books of assessee amounting to Rs.26,63,369/- are genuine and on their request payments have been made to other parties, the impugned addition cannot be deleted. However, considering the facts of the case and the submissions filed by the assessee and considering the fact that ld.CIT(A) has not dealt the issue in detail, I deem it proper to restore the issue to the file of ld.CIT(A) for adjudication of Ground No.2.3 afresh and to pass a speaking order. Therefore, Ground No.2.3 raised by the assessee is allowed for statistical purposes. 14. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced on this 03rd day of March, 2025. - (MANISH BORAD) ACCOUNTANT MEMBER

अपीलाथ / The Appellant. 2. यथ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, “(SMC)” बच, पुणे/ DR, ITAT, “(SMC)” Bench, Pune. 5. गाड फ़ाइल / Guard File. आदेशानुसार / BY ORDER,