ACIT CIRCLE- 15 (1)(2), MUMBAI vs. M/S D G INFRASTRUCTURE PVT. LTD, MUMBAI

The above titled appeals have been preferred by the Revenue against the orders dated 10.12.2018 & 27.02.2018 of the Commissioner of Income Tax (Appeals) [hereinafter referred A.Y. 2010-11 2. At the outset, we would like to state that neither the assessee nor his authorised representative attended the proceedings nor any letter seeking for adjournment was filed before the bench. Therefore, we are proceeding to dispose of these appeals on merit after hearing the Ld. D.R..

The facts in brief are that the assessee had made purchases which were stated to be bogus as per the intimation received from DGIT Investigation Wing and the case of the assessee was reopened under section 147 by issuing notice u/s 148 of the Act dated 31.03.2017. The assessee vide letter dated 11.04.2017 requested the AO to treat the return filed originally on 23.09.2010 as return in response to notice issued under section 148 of the Act. Thereafter, the information/details were called for from the assessee from time to time during the assessment proceedings and were filed before the AO, however, the AO was not satisfied with the information and explanation of the assessee and added a sum of 25% of the said bogus purchases by treating the same as non genuine thereby making an addition of Rs.10,48,758/- to the income of the assessee in 3 & ITA No.1754/M/2019 M/s. D.G. Infrastructure Pvt. Ltd. M/s. Disha Dynamic Buildwell Pvt. Ltd. the assessment framed under section 143(3) read with section 147 of the Act vide order dated 16.10.2017.

In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee by following the Hon’ble Gujarat High Court decision in the case of CIT vs. Simit P. Sheth (2013) 356 ITR 451 (Guj) and directed the AO to apply GP rate of 12.5% to the income to assessee the bogus purchases.

After hearing the Ld. D.R. and perusing the material on record, we find that Ld. CIT(A) has passed a very reasoned order by following the Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (supra). In this case undoubtedly the assessee was beneficiary of bogus purchase entries taken from Krishna Steel Industries to the tune of Rs.41,95,034/- which were found to be non genuine and thus, in order to assess the income thereon, the AO applied a rate of 25% on the alleged bogus purchases which was reduced to 12.5% by Ld. CIT(A). In our view, the order passed by Ld. CIT(A) is very reasoned one passed after following the Hon’ble Gujrat High Court decision as stated above. Accordingly, we are inclined to dismiss the appeal of the Revenue.

The Revenue has challenged the order of Ld. CIT(A) wherein the entire addition of bogus purchases of Rs.5,76,23,613/- has been deleted by Ld. CIT(A) as made by the AO against the unsecured loans of Rs.5,76,23,613/- as unexplained credits by 4 & ITA No.1754/M/2019 M/s. D.G. Infrastructure Pvt. Ltd. M/s. Disha Dynamic Buildwell Pvt. Ltd. framing assessment under section 143(3) read with section 147 of the Act vide order dated 28.12.2017.

In this case, the case of the assessee was reopened after AO received information from DDIT(Inv.) Wing that assessee is beneficiary of accommodation entries of Rs.5 lakhs taken by the assessee from Rajat Diamonds whose proprietor is Shri Gautam Jain and the income has escaped assessment accordingly. The case of the assessee was reopened under section 147 read with section 148 by issuing notice dated 31.03.2017. In the assessment framed, the AO added the entire amount of unsecured loans raised from directors and other parties. However, the AO did not add Rs.5 lakhs borrowed from another i.e. from Rajat Diamond Exim Pvt. Ltd. for which the assessment was reopened by recording reasons under section 148(2) of the Act.

The Ld. CIT(A) deleted the addition by relying on the decision of Honble jurisdictional High Court in CIT V/s. Jet Airways (I) Ltd. 331 ITR 236 (Bom) by observing and holding as under: 6.4.1 I have considered the rival contentions. In the case of Jet Airways (supra), the Hon'ble Bombay High Court held that as per provisions of Section 147 as amended by by Finance (No. 2) Act, 2009, if after issuing a notice under section 148, the AO accepts contention of assessee and holds that income, for which he had initially formed a reason to believe that it had escaped assessment, has, as a matter of fact, not escaped assessment, it is not open to him (AO) to independently assess some other income. In my view, the decision of the Hon'ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. (supra) is squarely applicable to the appellant's case. In the course of the appellate proceedings, letter dated 19.12.2018 was sent to the AO calling for his comments in this regard. The relevant portion of the letter is reproduced below: "2. In the course of appellate proceedings, the appellant contended that the assessment was reopened on the ground that the appellant had made a bogus claim of loan Rs.5,00,000/- from Rajat Diamonds and therefore, income of Rs.5,00,000/- had escaped assessment. However, in the 5 & ITA No.1754/M/2019 M/s. D.G. Infrastructure Pvt. Ltd. M/s. Disha Dynamic Buildwell Pvt. Ltd. assessment order the AO did not make any addition in respect of the loan of Rs.5,00,000/- claimed to have been taken from Rajat Diamonds. The AR of the appellant contended that in view of the decision of the Hon'ble Bombay High Court in the case of CIT vs. Jet Airways (331 ITR 236), the addition made of Rs.5, 76,23,613/- is not sustainable.

Prima facie it appears that the appellant's contention is correct. I request you to offer your comments in this regard, if any, by 07.01.2019." 6.4.2 In response, the AO by letter dated 17.01.2019 received in this office on 23.01.2019 has submitted as under: "The assessment was reopened on the ground that the assessee had made a bogus claim of loan of Rs.5,00,000/- from Rajat Diamonds and therefore, income of Rs.5,00,000/- had escaped assessment. However, in assessment order AO has disallowed an amount of Rs,5,76,23,613/- as unexplained credit. It was seen from the Balance Sheet that during the F.Y. 2011-12 the assessee has shown Unsecured Loans received from the Directors & shareholder at Rs.2,40,23,613/- and Inter Corporate Deposits at Rs.3,36,00,000/~ totaling to Rs.5,76,23,613/-. The assessee vide notice u/s,142(l) dated 18.12.2017 was asked to furnish details regarding unsecured loans. In response, the assessee did not file any details; no account confirmations of any type were furnished by the assessee. Moreover, there was information received from DG/T (Investigation), Mumbai that the assessee company has obtained bogus unsecured loan entries of Rs.5,00,000/-, In the absence of any details, confirmations, prima fade, it appears that the loans shown in the account are nothing but just the unaccounted income of the assessee company router as unsecured loan. However, the AO has investigated the matter in depth and found that amount of Rs,5,76,23,613/- shown as unsecured loan has not been substantiated during the course of assessment proceedings. Hence, the then AO has constraint to add the same to the total income of the assessee. In view of the above facts, it is requested that case may be decided on merits and contention of the assessee may be rejected." 6.4.3 I find from the AO's letter that he has not been able to rebut the appellant's contention that the addition made by the AO of Rs. 5,76,23,6137- is not sustainable in view of the decision of the Hon'ble Bombay High Court cited above. Therefore, in view of the discussions above, particularly in para 6.4.1 above, I direct the AO to delete the addition of Rs. 5,76,23,613/-. In the result ground of appeal

Accordingly this ground is allowed.”

In the result, both the appeals of the Revenue are dismissed.