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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: Shri Pawan Singh & Shri G Manjunatha
O R D E R Per G Manjunatha, AM : This appeal filed by the assessee is directed against order of the CIT(A)- 51, Mumbai dated 20-04-2018 and it pertains to AY 2011-12. The assessee has raised the following grounds of appeal:-
“1) The Learned CIT/A) has erred in upholding the action of the Learned Assessing Officer in reopening the case , the case u/s.147 of the Income Tax Act, 1961, without appreciating the facts and circumstances of the case and positron of few.
2 ITA 4068/Mum/2018
2) The Learned CIT(A) has erred in not appreciating the fact that the issue on the basis of which the case was reopened had been examined in the past at the time of the original assessment proceedings and been accepted by the Learned Assessing Officer then, proof of which was duly furnished to the Learned Assessing Officer at the time of reassessment proceedings. 3) The Learned CIT(A) has erred in upholding an addition of Rs.5,67,0007-made by the Assessing Officer on account of alleged Non genuine purchases, without appreciating the facts and circumstances of the case and position of law.”
The brief facts of the case are that the assessee had filed its return of income for the year under consideration on 29-09-2011 declaring total loss of Rs.1098,47,11,129. The assessment has been completed u/s 143(3) of the Act, on 28-02-2013 and determined total income at Rs.91 crores by rejecting brought forward losses claimed by the assessee. Subsequently, the case has been reopened u/s 147 of the Act, on the basis of information received from sales-tax department that the assessee is a beneficiary of accommodation entries of purchase bills issued by suspicious / hawala dealers. Accordingly notice u/s 148 was issued and served on the assessee. Thereafter, the case has been selected for scrutiny and during the course of assessment proceedings, AO called upon the assessee to produce evidence in respect of purchases claimed to have been made from M/s Kotson Impex Pvt Ltd amounting to Rs.5,67,000. In response, the assessee has filed various details including purchase bills and also furnished payment proof against such purchases. The 3 ITA 4068/Mum/2018 AO, after considering submissions of the assessee and also by relying upon various judicial precedents including the decision of Hon’ble Bombay High Court in the case of Hariram Bhambhani vs CIT of 2013(Bom), opined that mere furnishing of purchase bills and payment proof is not sufficient enough when information gathered during the course of assessment proceedings clearly proved that the assessee has obtained accommodation entry of purchases from suspicious / hawala dealers. Accordingly, the AO made addition of Rs.5,67,000 towards purchases claimed to have made from M/s
Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee has challenged reopening of assessment on the ground that the AO has reopened assessment on mere change of opinion without there being any tangible material which suggested escapement of income which is evident from the fact that the assessment was originally completed u/s 143(3), where the AO has called for complete details of purchases. The assessee also has furnished various details in respect of purchases from the above party and argued that no addition could be made on the basis of information received from sales-tax department when assessee had filed complete set of documents. The Ld.CIT(A), after considering submissions of the assessee and also by relying upon the decision of Hon’ble
4 ITA 4068/Mum/2018 Supreme Court in the case of Raymond Woolen Mills Ltd vs CIT 236 ITR 34 (SC) held that there is no infirmity in the action of the AO in reopening the assessment in the case of the assessee because the AO was sitting with information received from external agencies, like sales-tax department, as per which, income chargeable to tax had been escaped assessment. The Ld.CIT(A) further observed that at the time of reopening of assessment, the AO need not prove escapement of income and what is relevant is prima facie material which suggests escapement of income. In this case, there is no doubt, whatsoever, with regard to the availability of material in the possession of the AO, therefore, there was no merit in the legal ground taken by the assessee.
Insofar as addition towards purchases from M/s Kotson Impex Pvt Ltd, the Ld.CIT(A) held that although the assessee has filed purchase bills and payment proof, but when the AO had issued notice u/s 133(6), the same could not be served and was returned back by the postal authorities with the remark “not known” or “no such address”. Further, when the AO called upon the assessee to produce the party along with its books of account and also to furnish evidences, the assessee was unable to produce the said party. From the above, it was very clear that either the party was not existent or purchases from that party was bogus. Therefore, there is no error in the findings recorded by the 5 ITA 4068/Mum/2018 AO while making addition towards purchases from M/s Kotson Impex Pvt Ltd. Accordingly, he dismissed the appeal filed by the assessee.
Aggrieved by the order of CIT(A), the assessee is in appeal before us.
The Ld.AR for the assessee submitted that the Ld.CIT(A) has erred in upholding the action of the AO in reopening the assessment u/s 147 of the Act without appreciating the fact that the assessment has been reopened on mere change of opinion, because in original assessment proceedings, the AO has verified the purchase. The Ld.AR further submitted that as regards addition made by the AO towards purchase of Rs.5,67,000, he submitted that the assessee has filed all relevant details including purchase bills and payment proof for such purchases. The AO, without making any further enquiries to ascertain true nature of transactions, simply relied upon information received from sales-tax department and made addition which is incorrect.
The Ld.DR, on the other hand, strongly supported the order of the CIT(A).
We have heard both the parties, perused material available on record and gone through the orders of authorities below. As regards ground taken by the assessee challenging validity of reopening of assessment, we find that the AO has reopened assessment on the basis of information received from DGIT(Inv) which was further supported by report of sales-tax department.
Therefore, we are of the considered view that the information received from 6 ITA 4068/Mum/2018 external agencies by the AO in the form of report of investigation wing constitute a fresh material which is sufficient to form a reasonable belief of escapement of income within the meaning of section 147 of the Act and hence, we are of the considered view that there is no merit in the legal ground taken by the assessee challenging validity of reopening of assessment. Accordingly, we reject ground taken by the assessee.
Coming to the issue in question, the AO has made addition of Rs.5,67,000 towards purchases claimed to have been made from M/s Kotson Impex Pvt Ltd on the ground that although assessee has produced bills and payment proof, but failed to file further evidence in the backdrop of clear findings from the sales-tax department that the dealer is a suspicious / hawala dealer involved in providing accommodation entries. It is the claim of the assessee that merely for the reason of information received from sales-tax department, no adverse inference could be drawn against assessee when assessee has furnished necessary information including purchase bills. The assessee further contended that the total purchase of the assessee for the year under consideration is more Rs.5,000 crores, when such being the case, it is improbable to hold that the assessee was indulging in obtaining accommodation entries of purchase for Rs.5,67,000 to inflate its expenditure.
More so, when the assessee has declared huge loss of more than Rs,.1,000
7 ITA 4068/Mum/2018 crores for the year under consideration. We find that the assessee is a corporate giant involved in the business of manufacturing and selling of iron and steel products. The assessee’s turnover for the year under consideration is more than Rs.8,900 crores. The assessee has declared a net loss of Rs.1098 thousand crores. Under these facts, it is difficult to accept the arguments of the department that assessee was involved in obtaining accommodation entries for purchases amounting to Rs.5,67,000. Therefore, we are of the considered view that the AO as well as the Ld.CIT(A) were erred in making addition towards purchase of Rs.5,67,000 from M/s Kotson Impex Pvt Ltd as unexplained expenditure u/s 69C of the Act only on the basis of information received from sales-tax department ignoring evidences filed by the assessee.
Hence, we direct the AO to delete the addition made towards alleged bogus purchases.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 03 -07-2019.