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ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by revenue is directed against the order of ld. Commissioner of Income-tax Appeals (ld. CIT(A)-12, Mumbai dated 14.01.2019 for Assessment Year 2020-11.
Brief facts of the case are that the assessee is a company engaged in the business of Publication of educational books, filed its return of income for Assessment Year 2020-11 declaring income of Rs. 1.60 crore. The return of income was selected for scrutiny and assessment was completed under section 143(3) on 14.03.2013 accepting the return income. Subsequently, case was reopened under section 147. The assessing officer reopened the case on the basis of information received from the DGIT (Inv.), Mumbai, Mum 2019-M/s Jeevandeep Prakashan Pvt. Ltd.
who in turn received information from the Sales Taxes Department Government of Maharashtra that certain dealers were engaged in providing the accommodation entry without actual delivery of goods. The assessee is one of the beneficiaries of such accommodation entry. On the basis of such information, the Assessing Officer made his opinion about the re-opening of the case. Notice under section 148 dated 30.09.2010 was served upon the assessee. Reasons of re-opening were provided to the assessee on 22.07.2015. The Assessing Officer after serving notice under section 143(2) and 142(1) proceeded for re-assessment. During the re- assessment, the Assessing Officer noted that the assessee has shown purchases of Rs. 4,00,878/- from Adinath Trading Company, whose name was listed in the list of bogus entry provider. The Assessing Officer issued show-cause notice why the purchases shown from hawala traders should not be treated as bogus and to bring to tax. The assessee filed its reply dated 23.02.2016. The reply of assessee was not accepted by Assessing Officer (the contents of reply are not recorded in the assessment order). The Assessing Officer on the basis of on the basis of various decisions of Higher Courts as mentioned in paragraph-9 of the assessment order, took his view that the assessee has shown purchases from the undisclosed supplier. The Assessing Officer disallowed the entire purchases of Rs. 4,00,878/- in assessment order passed under section 143(3) r.w.s. 147 on 10.03.2016. 2 Mum 2019-M/s Jeevandeep Prakashan Pvt. Ltd.
On appeal before the ld. CIT(A), the addition was restricted to 12.5% of the purchases. The ld. CIT(A) restricted the purchases on the basis of decision of Hon’ble Gujarat High Court in CIT vs. Simith P. Sheth (356 ITR 451). The ld CIT(A) held that saving of VAT and other incidental charges can be brought to tax in such purchases. Aggrieved by the order ld. CIT(A), the revenue has filed the present appeal before us. Though the revenue has raised as many as seven grounds of appeal
, however, in our view the sole and substantial ground of appeal is that “if the ld CIT(A) erred in restricting the disallowance of bogus purchases to the extent of 12.5%”.
4. We have heard the submissions of the ld. Departmental Representative (DR) for the revenue s and the learned Authorised representative (ld AR for the assessee and also carefully perused the order of the tax authorities below. The ld. DR for the revenue supported the order of Assessing Officer. The ld. DR submits that the investigation wing of the income tax department made full-fledged investigation about the modus operandi of the hawala traders who were engaged in providing bogus entry without actual delivery of the goods. The assessee is one of the beneficiaries of such bogus bill. The ld. DR for the revenue submits that the entire purchases should be disallowed as the assessee failed to prove the genuineness of the purchases.
Mum 2019-M/s Jeevandeep Prakashan Pvt. Ltd.
On the other hand, the ld. Authorized Representative (AR) of the assessee submits that during the period under reference, the assessee purchases Diary for distribution to its customer. The assessee is regularly purchasing the similar Diaries in earlier year’s i.e in Financial Year (FY) 2008-09 & 2010-11 and in subsequent F Y 2011-12. The Diaries were purchased for increasing the market share and business relationship with customers. The assessee produced the bills, sample Diary, Ledger Account with bank statement highlighting the payment made to the parties. The ld. AR of the assessee further submits that original assessment was completed under section 143(3) only on satisfaction of the Assessing Officer. The re- opening was based merely on the information of DGIT(Inv.), without arriving at own satisfaction, was merely a change of opinion. The Assessing Officer has not discussed the documentary evidences furnished by assessee. The assessing officer made additions on the basis of third party information, without reference to the assessee. The assessing officer made addition without making any independent inquiry. The ld. AR of the assessee prayed for dismissal of appeal.
We have considered the rival contention of both the parties and perused the order of lower authorities. We have noted that after re-opening of the assessment, the Assessing Officer proceeded for re-opening. The assessee field its reply to the show-cause notice issued by Assessing Officer, vide its reply dated 23.02.2016. We have noted that the Assessing Officer has 4 Mum 2019-M/s Jeevandeep Prakashan Pvt. Ltd.
not referred the contents of reply filed by assessee. The assessee in the statement of fact before ld CIT(A) claimed that evidences with regards to ledger accounts and the payments through banking channel were provided to the assessing officer. We have seen that the assessing officer has not made any independent investigation. The books of account of assessee were not rejected. The Assessing Officer has not given any finding on the documentary evidences furnished by assessee. We have further noted that the assessee has shown return income of Rs. 1.60 crore. The alleged bogus purchases is only to the extent of Rs. 4,00,000/- only. The assessee has categorically stated that the purchases were made in the form of Diary for distribution to the customers. At the worst it may be a case of inflating expenses. The assessing officer has not verified and examined the fact that the diaries were distributed on not. The ld. CIT(A) after considering the contention of assessee restricted the addition to the extent of 12.5% of the alleged bogus purchases by following the decision of Hon’ble Gujarat High Court in CIT vs. Simith P. Sheth (supra). We have noted that despite furnishing sufficient evidence in the form of ledger accounts and payment through banking channel, the Assessing Officer has not brought any adverse material against the assessee. In our the ld CIT(A) has brought the element avoidance of VAT and other charges to tax, embedded in such bogus purchases. Considering the peculiar facts of the present case, we do Mum 2019-M/s Jeevandeep Prakashan Pvt. Ltd.