BELMARKS METAL WORKS,NEW DELHI vs. ITO, WARD- 32(2), NEW DELHI

The facts in brief are that the assessee’s case was reopened u/s.148 on the basis of information received from the Investigation Wing, New Delhi, wherein it was mentioned that Maharashtra VAT Department has forwarded the details of non-genuine/bogus bill availed by the assessee during the year. The Investigation Wing had forwarded the copies of statements of concerned bogus billers (Hawala dealers) along with their TIN and PAN details of beneficiaries, wherein the assessee was also found to be one of the beneficiaries mentioned in the information. In the information, it was mentioned that assessee has taken bogus bill of Rs.1,93,066/- from M/s. Supreme Enterprises. Based on this information, assessee’s case was reopened u/s.147 and accordingly, notice u/s.148 was issued on 28.02.2014. In response to which assessee has filed the return of income and submitted that original return was filed on 29.09.2011 be treated as return filed in response to notice u/s.148. The Assessing Officer confronted the said information received from DIT (Investigation) to the assessee which was as under:

In response, the assessee vide letter dated 13.11.2014 submitted that assessee firm has no transaction with M/s. Supreme Enterprises. Further, assessee has enclosed a tax invoice dated 19.07.2010 issued by M/s. Krupa Trading Company for the sale of CRCA Coil for Rs.1,93,066/-. It was stated that M/s. Krupa Trading Company, was dealer in iron steel and hardware, having office at C/28/304, Mangal Shanti Nagar, CHS Limited, 3rd Floor, Shanti Nagar, Sect-3, Meera Road, East Mumbai, and was duly acknowledged by M/s. Belmarks Metal Works. On perusal of the bill of M/s. Krupa Trading Company dated 19.07.2010 issued in the favour of M/s. Belmarks Metal Works B-273, MIDC Malegaon, Sinner, Nasik, Mumbai, it was stated that TIN Number is 27500257887V dated 20.01.2009. However, Assessing Officer observed that as per the information provided by the DGIT (Inv.), Mumbai, M/s. Supreme Enterprises was also having the same TIN 27500257887V. Again, the Assessing Officer asked the assessee as to why the purchase of Rs.1,93,066/- made from M/s. Supreme Enterprises be not treated as bogus. The assessee submitted and stated as under:- “Please refer to Annexure-III, the assessee firm has no transaction with M/s Supreme Enterprises it appears that the reopening is purely based on information of Investigate Wing. Such a re-opening is bad in law as per the above cited Tribunal Order. We humbly submit that an order of a superior authority (in this case, Tribunal) is to be followed in letter and spirit unless it is reversed by another of the jurisdictional or even non-jurisdictional High Court and/or Apex Court. Please see CIT v. Smt. Godavaridevi Saraf (1978) 113 ITR 5 (Bom.): AC1T v. Shiv Shakti Flour Mills (P) Limited (2014) 162 TTJ (Gau.) (TM) 568; Nanubhai D. Desai v. ACIT (2014) 162 TTJ (Ahd.)(SB) 673. Not only has a wrong name been quoted, even the figure of alleged bogus expenditure has shifted from Rs.193,006.00 to Rs. 1,96,006.00. The Hon’ble Supreme Court categorically stated in Phool Chand Bajarang Lai v. ITO (1993) 203 ITR 456 (SC) that an Income Tax Officer acquired jurisdiction which comes into his

The ld. Assessing Officer however treated the information received from the Investigation Wing to be correct and after incorporating the invoices and the details received from Maharashtra VAT Department that M/s. Krupa Trading Company was not registered with Maharashtra VAT Department, held that the purchase of Rs.1,93,066/- is bogus and added the same to the income of the assessee.

Ld. CIT (A) after incorporating the assessment order has simply confirmed the assessment without even adjudicating either on legal issue or on merits.

Before us, the ld. counsel for the assessee submitted that assessee is a manufacturer of cycle parts and has maintained regular books of account which is subjected to audit. As per the information received, it was stated that assessee has made purchases from M/s. Supreme Enterprises, whereas no such purchase was made from the said party. In fact, it was made from M/s. Krupa Trading Co and the purchases of Rs.1,93,066/- has been duly disclosed in the books of account and corresponding sales and gross profit has been accepted, therefore, there was no occasion to treat the purchases of Rs.1,93,066/- as bogus. In any case and without prejudice, he submitted that, at the best, only profit element on such purchase if at all treated to be bogus can be added. In support, he strongly relied upon the judgment of Hon’ble High Court in the case of PCIT vs. Nandkishor Huaschand Jalan, (2019) 412 ITR 357 (Guj.) and CIT vs. Bholanath Poly Fab Pvt. Ltd., (2013) 355 ITR 290 (Guj.). On validity of reopening, he submitted that, the reopening was based on information received by Investigation Wing and Assessing Officer has even failed to apply his mind on the information, because had he done so then he would have to come to the conclusion that assessee has not made purchase from M/s. Supreme Enterprises for that amount. In support, he relied upon the judgment of Hon’ble Delhi High Court in the case of PCIT vs. SNG Developers Ltd., (2018) 404 ITR 312 (Del.).

On the other hand, ld. DR has strongly relied upon the order of the Assessing Officer and Ld. CIT(A) and submitted that, here in this case the information sent by the Investigation Wing specifically contained the details of the assessee who was mentioned as a beneficiary of the bogus purchases made from M/s. Supreme Enterprises. Apart from that, it can be seen that the TIN number of M/s. Krupa Trading Co. and M/s. Supreme Enterprises are the same. Thus, onus was heavily upon the assessee to rebut the said information by credible evidence. Accordingly, the order of the Assessing Officer should be confirmed.

After considering the aforesaid submissions and on perusal of the material placed on record, I find that on the basis of information received from the Investigation Wing which was based on information forwarded by Maharashtra VAT Department that the assessee has availed Hawala entry of bogus bill purchases of Rs.1,93,066/- in the financial year 2010-11. Based on this information, reopening has been done u/s.148. However, before the authorities below assessee’s contention has been that, firstly, assessee has not made any purchases from M/s. Supreme Enterprises albeit it has made purchases from M/s. Krupa Trading Co. for the same tax invoice dated 19.07.2010 for sale of CRCA coil for Rs.1,93,066/-; secondly, the said purchases have been duly debited in the books of account. The adverse inference has been drawn by the Assessing Officer on the ground that both M/s. Supreme Enterprises and M/s. Krupa Trading Co. have the same TIN number and M/s. Krupa Trading Co. with the same TIN was not registered with the Maharashtra VAT Department and registration of M/s. Supreme Enterprises has already been cancelled by the Maharashtra VAT Department. Accordingly, he has treated the entire purchases as bogus. However, from the perusal of the record, it is seen that, nowhere Assessing Officer has disputed that the source of purchase is outside the books of account. In fact the purchase of same amount and invoice has been recorded in the books of account and duly disclosed and the amount has been paid through banking channels. The corresponding sales have also not been disputed including the directed expenses and the gross profit. At the most, this could be a case where assessee has made purchases in cash and has taken an accommodation bill for same quantity for which cheque amount has been issued. In such a case also, the source of purchase are from the books, therefore, the entire purchases cannot be treated as income of the assessee especially when books of account have not been rejected and sales and GP stands accepted in the trading account. It could be at best, a case of suppression of GP on the purchase of Rs.1,93,066/-. Under these facts and circumstances, I hold that profit element of such amount should be added as income. Accordingly, Assessing Officer is directed to apply the GP declared by the assessee on purchase of Rs.1,93,066/- and balance amount should be deleted.

In so far as validity of reopening u/s.148 is concerned, I do not find any merits in the contention of the ld. counsel for the reason that, firstly, there was a categorical information wherein the assessee’s name was appearing along with details of the parties from whom the assessee has made purchases which were found to be Hawala operator providing accommodation bogus bills. The Assessing Officer after receiving the information has independently applied his mind and recorded his reason to believe as to why such a purchase is not genuine. Thus, I do not find any infirmity in the jurisdiction accorded u/s.147 and the same is dismissed.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 5th March, 2020.