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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of ld. CIT(A)-51, Mumbai dated 22.01.2018 for Assessment Year 2007-08, which in turn arises from the assessment order dated 219.03.2015 passed under section 143(3) r.w.s 147 of the Income-tax Act (for short “the Act”).
The assessee has raised the following grounds of appeal:
1. On facts and in the circumstances of the case and in law learned CIT (A) erred in upholding reopening u/s 147 of I.T. Act, 1961.
2. On facts and in the circumstances of the case and in law learned CIT (A) erred in concluding that impugned purchases are bogus/ not genuine. 3. Learned CIT (A) erred in observing that the supplier was not found at the stated address and that he did not respond to notice u/ s 133(6) of Mum 2018-Haresh Rasiklal Shah.
I.T. Act, 1961 and consequently erred in drawing erroneous conclusion that impugned purchases are bogus/ not genuine.
4. Learned CIT (A) erred in observing that basic onus cast on assessee was not discharged and consequently erred in drawing erroneous conclusion.
On facts and in the circumstances of the case and in law learned CIT (A) erred in holding that opportunity to cross examine was not required to be provided although it was AO. who was relying on the statement of certain person/ s and copies of those statements were not provided to appellant although statements and cross examination was demanded in the course of proceedings before AO.
Brief facts of the case are that the assessee is an individual engaged in the business of manufacturer and exporter of diamonds, jewellery and pearls. The assessee filed his return of income for Assessment Year 2007-08 declaring total income at Rs. 5,61,780/-. The return was processed under section 143(1) of the Act. Subsequently, the assessment was re-opened under section 147 on the basis of information received from DGIT (Investigation), Mumbai that assessee is one of the beneficiary of accommodation entries of Rs. 8,47,098/-, received from various bogus concern controlled by Bhanwarlal Jain Group, wherein a search and seizure operation was carried out by investigation wing of revenue on 03.10.2013. Therefore, the Assessing Officer on the basis of such information made a belief for re-opening the assessment. After serving the notices under section 143(2) and 142(1) the assessing officer proceeded for reassessment. During the assessment proceeding, the Assessing Officer noted that assessee has received accommodation Mum 2018-Haresh Rasiklal Shah. entries in the form of bogus purchases purchased from Kothari & Co. for Rs. 8,47,098/-. The Assessing Officer confronted this fact to the assessee. The assessee filed its reply and stated that the assessee has made purchases by making payment through banking channel. The assessee also furnished the books of account and confirmation of the parties. The assessee further stated that the purchases made from Kothari & Co. (supra) was duly received and exported. The copy of export bill and invoices with supporting documentary evidence were furnished. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer after detailed discussion about the modus operandi of hawala operators and considering the submission of the assessee made disallowance of 8% of the impugned purchase. The Assessing Officer made addition/disallowance on the basis of Benign Assessment Procedure (BAP). The Assessing Officer also observed that BAP was also applicable for those diamonds merchants, who were showing a profit margin of 8% of the turnover. The Assessing Officer on the basis of BAP took his view that margin in the market for a petty dealer is also 8% and the same margin is being shown from the grey market. On appeal before CIT(A) the action of assessing officer in reopening was confirmed, however, on additions on account of disallowance of bogus the assessing officer was directed to reduce the profit margin already shown by the assessee in its books in respect of 3 ITA No. 2256 Mum 2018-Haresh Rasiklal Shah. alleged hawala purchases from the profit margin computed by assessee.
Aggrieved further the assessee has filed present appeal before this Tribunal.
We have heard the submissions of the learned authorised representative (AR) for the assessee and the learned departmental representative ( DR) for the revenue and gone through the orders of the lower authorities. We have also deliberated on various case laws relied by the lower authorities. We have seen that the assessee has not challenged the quantum of additions/ disallowances rather challenged the validity of reopening and denial of the opportunity of cross examination by the assessing officer. The ld. AR of the assessee also submits that the reasons of re-opening have no live link to the assessee. At the time of reasons recorded, the Assessing Officer has not applied his mind.
Reasons to believe that issue solely based on the information received from third party. Reason is nothing but a borrowed satisfaction. The approval by Joint Commissioner was given in a mechanical way and without application of mind.
In support of his submission, the ld. AR of the assessee relied upon the decisions of Hon’ble Bombay High Court in Smt. KalpanaShantilal Haria vs. ACIT ( WP(L) No. 3063 of 2017), Hon’ble Bombay High Court in PCIT vs. Shodiman Investments Pvt. Ltd. in of 2015, CIT vs. S. Goyanka Lime and Chemicals Ltd. [231 Taxman 73 4 ITA No. 2256 Mum 2018-Haresh Rasiklal Shah.
(MP)] and Pioneer Town Planners Pvt. Ltd. vs. DCIT (ITA No. 132/Del/2018. 5. On the other hand the ld DR for the revenue supported the order of the authorities below. The ld. DR further submits that the assessee has not raised such ground of appeal before the First Appellate Authority (FAA).
6. We have considered the submission of both the parties and have gone through the orders of authorities below. We have also deliberated on various case law referred by lower authorities. We have noted that the ld. CIT(A) passed the impugned order and also noted that hearing of the appeal was fixed on 18.12.2017. On 18.12.2017, none appeared on behalf of assessee. The case was again fixed for 28.12.2017 and again none appeared on behalf of assessee, however, written submissions were filed in Tapal with the request to decide the appeal on the basis of written submission. Now before us, the ld. AR of the assessee vehemently submitted that no fair and proper opportunity was given to the assessee. Considering the submission of ld. AR of the assessee that his submission regarding the approval by JCIT in validity of reasons recorded was not adjudicated by ld. CIT(A) and other contention is raised for the first time before us, therefore, we deem it appropriate to restore this issue to the file of ld. CIT(A) to decide all the issues and the contentions raised by the assessee afresh. Needles to say that before 5 Mum 2018-Haresh Rasiklal Shah. passing the order afresh, the ld. CIT(A) shall grant opportunity to the Assessing Officer by serving notice of hearing. The assessee is also directed to fully co-operate and not to seek adjournment without any valid reasons and to file all his evidence in his power and possession without any delay before the ld. CIT(A). In the result, ground no.1 of the appeal is allowed for statistical purpose.
As we have restored the ground no.1 to the file of ld. CIT(A), therefore, discussion on other grounds of appeal have become academic.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 20/08/2019.