NAOZER BEJON BALDAWALA,MUMBAI vs. ACIT 19(2), MUMBAI

आदेश / O R D E R SANDEEP GOSAIN (JM): The present set of cross appeals filed by the assessee and the revenue are directed against the respective orders passed by the CIT(A)- 30, Mumbai, in the case of the aforementioned assessee, viz, Naozer Bejon Baldawala for A.Y. 2010-11 and A.Y. 2011-12, each dated. 24.10.2016, which in itself arises from the respective assessment orders passed u/s 143(3) r.w.s 147, dated. 25.03.2015 and 26.03.2015, respectively. That as common issues are involved, therefore, the said respective appeals are taken up together and disposed of by way of a consolidate order. We first advert to the cross appeals of the assessee and the revenue for A.Y. 2010-11. The assessee vide his appeal marked as had was sailed the order of the CIT(A) by raising the following grounds of appeal before us:

2. The learned Commissioner of Income Tax (Appeals) erred in not appreciating the factual matrix of the case.

3. Without prejudice to the above and in the alternative the learned Commissioner of Income Tax (Appeals) erred in not restricting the addition with reference to the gross profit of the appellant.

4. The appellant craves to add, alter or amend any of the grounds of - appeal at any time of hearing." The revenue on the other hand had challenged the order of the CIT(A) on the following grounds:

M/s. Neozer Bejon Baldawala "1. On the facts and circumstances of the case and in law, whether, Ld. CIT(A) was justified in sustaining only an addition @ 25% profit rate on total purchases of Rs.1,07,13,732/-made from 20 parties.

2. The appellant prays that the order of the Learned CIT(A) on the above grounds be set aside and that of the A.O be restored.

3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.

M/s. Neozer Bejon Baldawala

The A.O directed the assessee to produce the aforementioned parties, as well as place on record documentary evidence to substantiate the genuineness and veracity of the purchases claimed to have been M/s. Neozer Bejon Baldawala made from the-said parties, viz. (i) copy of ledger accounts; (ii) copy of invoices; (iii) copy of delivery challans; (iv) evidence in respect of transportation of goods; (v) copy of the bank statement; (vi) chart correlating the purchases and sales of the goods involved in the transactions made with the aforementioned parties; and (vii) details of the stock inventory. The assessee in compliance to the aforesaid directions of the A.O, though placed on his record the copies of the ledger accounts and the bank statements reflecting the payments made to the aforementioned parties for the purchases claimed to have been made from them, but however failed to produce either of the aforesaid parties for examination before the A.O. The A.O being of the view that as neither the assessee had produced the parties for necessary examination, nor the documentary evidence placed on record by the assessee in order to substantiate the genuineness and veracity of the purchase transactions did inspire any confidence, therefore, observed that the assessee had failed to discharge the onus as was so cast upon him. The A.O after deliberating on the facts of the case concluded that in the absence of the relevant supporting documents which could go to evidence the genuineness of the transactions of purchase of goods claimed by the assessee to have been made from the aforementioned parties, the same could not be allowed as an expenditure for the following reasons : "(i) The assessee could not produce the parties involved for cross examination.

M/s. Neozer Bejon Baldawala

(ii) The assessee has not made available the details of transportation of the material purported to have purchased from the aforesaid Hawala dealers, such as transportation receipts, delivery challans. The items shown to have purchased from these parties are of such in nature that they require separate transportation. (iii) The assessee has not furnished any ledger account confirmation from the aforesaid dealer. The assessee has also not furnished any details as to how the items purchased from the aforesaid hawala dealers were utilized/consumed in the process of business. (iv) The deduction of VAT in the bill also does not bolster the case of the assessee. It is because of the fact that such deduction does not prove genuineness of particular transaction in terms of supply of material. Such deduction is basically lined with the payment aspect only and cannot establish the purpose for which payment is made. (v) The production of invoice is of no help to the assessee, since in the activity of accommodation entry, such documents are meticulously maintained both by the entry provider and entry seeker. It is also not important whether the amount is small or big and whether the assessee is having loss of profit. There may be number of reasons for seeking the accommodation entry as it leads of generation of the case in the hands of the assessee. (vi) The onus was upon the assessee to prove the genuineness of expenditure claimed as it was the assessee which has made the claim. (vii) The Sales Tax Department certified that the aforesaid parties are hawala operators after conducting independent enquiries. (viii) The contention that the payments are made by account payee cheque is not a fool proof method of substantiating the assesse's claim, as it was already accepted by the parsons, who have given statement, deposition of affidavit before the Sales tax authorities that cash is given back after deduction of commission/brokerage once the cheque is realized. (ix) The Sales Tax Department made a finding and uploaded in its website the name of entities which are invoiced in giving bogus bills only after it carried out detailed enquiry and investigation. (x) If all evidences point to the fact no actual goods were supplied by the above parties, then the argument of the assessee that it purchased goods in good faith is not tenable." The A.O on the basis of his aforesaid observations, held that on the basis of his independent inquiries, findings of the sales tax department

M/s. Neozer Bejon Baldawala and the details submitted by the assessee, it could fairly be concluded that the assessee had not purchased goods from the aforementioned parties and had only taken accommodation bills from them to inflate the expenses and scale down the profitability in order to reduce his 'tax burden. Thus, the A.O being of the view that the purchases claimed by the assessee were unverifiable, therefore, rejected the books of account under Sec. 145(3).

4. A.O further observed that the assessee who was engaged in the business of painting, renovation and civil construction as a contractor had failed to demonstrate beyond doubt that the material claimed to have been purchased from the aforementioned parties was consumed in the course of his aforesaid business. The A.O on the basis of his aforesaid observations concluded that now when the assessee had even failed to substantiate the consumption of the goods under consideration, therefore, disallowed the entire purchases of Rs. 1,07,13,732/- claimed by the assessee to have been made from the aforementioned parties and assessed the income at Rs. 1,50,33,400/-.

M/s. Neozer Bejon Baldawala assailing the addition made by the A.O in respect of bogus purchases, therein submitted before the CIT(A) that the same was made merely on the basis of an information received by the A.O and was not backed by any cogent evidence. The assessee submitted before the CIT(A) that it had duly substantiated the genuineness and veracity of the purchase transactions by placing on record documentary evidence in support of the entire chain of sequence of events forming part of the respective purchase transactions, i.e. from purchase invoice till the making of payment. It was submitted by the assessee that though he was unable to produce the supplier parties for reasons beyond his control, but however, by placing on record documentary evidence in support of the genuineness and veracity of the purchase transactions, the primary burden as cast on him to prove the authenticity of the purchase transactions stood duly discharged. The assessee further assailed the invoking of the provisions of Sec. 145(3) by the A.O for the reason that the accounts of the assessee were correct and complete. It was further submitted that the assessee in order to substantiate the genuineness of the purchase transactions had during the course of the assessment proceedings furnished with the A.O the control sheet showing material purchases, its consumption etc., purchase invoices, delivery challans, as well as ledger accounts showing bills/payments by the assessee to the supplier parties. The assessee submitted before the CIT(A) that by placing on record the M/s. Neozer Bejon Baldawala aforesaid documentary evidence which proved the authenticity of the purchase transactions to the hilt, the primary onus as was so cast upon him stood duly discharged. The assessee adverting to the reason for not producing the register of consumption and proof of transportation of the goods, therein submitted that as its business of repair and renovation, which remained under the supervision of the site engineers was during the year under consideration spread at about 20 sites all over the city, therefore, the requisite information could not be consolidated and furnished to the A.O. It was submitted by the assessee that the observations of the A.O that no actual delivery of the goods had taken place was beyond comprehension, because if that would had been so, then it would not had been possible to have carried out the extensive repair and renovation work of various societies during the year under consideration. The assessee further submitted that even if the books account were to be rejected, the A.O remained under a statutory obligation to have made a fair estimate on the basis of the past records of the assessee. Thus, taking support of his aforesaid contentions the assessee submitted before the CIT(A) that the entire addition made by A.O was liable to be deleted. Alternatively, it was submitted by the assessee that even if the purchases made by the assessee remained unverifiable, the disallowance was liable to be restricted only to the extent

M/s. Neozer Bejon Baldawala of 12.5% of the aggregate value of the purchases claimed by the assessee to have been made from the aforementioned parties.

M/s. Neozer Bejon Baldawala the goods under consideration, though not from the aforementioned bogus parties, but from certain unknown entities. The CIT(A) observed that now when the duly accounted contract receipts of the assessee received from the execution of the contract works of different societies by the assessee was not doubted and dislodged by the A.O, therefore, he could not have gone ahead and made addition in respect of the entire purchases, without explaining as to how the works could have been carried out without the goods in question. Thus, it was concluded by the CIT(A) that though the source of purchases as claimed by the assessee could safely be rejected, but however, in the backdrop of the aforesaid facts the purchase of goods could not be doubted. The CIT(A) on the basis of the aforesaid facts observed that it could safely be held that the assessee had obtained the bogus bills from the aforementioned parties with the intent to inflate the purchase price. The CIT(A) holding a conviction that the assessee had made the purchase of the goods, though not from the aforementioned parties, but from certain unknown entities operating in the open/grey market, therefore, concluded that the additions in the hands of the assessee were liable to be restricted only to the extent of the profit element involved in making of such purchases from the unknown entities.

M/s. Neozer Bejon Baldawala Industries vs. Commissioner of Central Excise on the proposition that it is the duty of the department to ensure that cross objection is given to the assessee, therefore, considering the facts contained in Miscellaneous applications, the Co-ordinate Bench of ITAT allowed the Miscellaneous applications filed by the assessee u/s.254 of the IT Act for A.Y.2010-11 and 2011-12 and recalled the order dated 25/10/2017 for the limited purpose of adjudicating upon the said issue in the backdrop of the aforesaid judgment of the Hon‟ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise in CA No.4228 of 2016. Hence, the present appeals are fixed before us for adjudicating the same.

is not maintainable at this stage as the matter has been recalled for a limited purpose and thus, in these circumstances, the application filed by the assessee deserves to be dismissed.

12. We have heard the Counsel for both the parties and perused the materials placed on record. It is an admitted fact that although the present appeals have been fixed by recalling the earlier order dated 25/10/2017 for limited purpose on adjudicating upon the issue in the background of the judgment of Hon‟ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise in CA No.4228 of 2016, however, the additional ground now raised by the assessee is purely legal in question and it is a settled law that legal ground can be raised by either of the parties at any stage, therefore, considering the settled proposition of law in the case of National Thermal Power Corporation vs. CIT (229 ITR 383(SC), Jute Corporation of India Ltd., vs. CIT (187 ITR 688 (SC) we allow the present application preferred by the assessee for allowing to raise the additional ground of appeal and thus adjudicating the additional ground raised by the assessee on merits.

M/s. Neozer Bejon Baldawala Additional Grounds of appeal:- 13. The additional grounds of appeal raised by the assessee relates to challenging the order of CIT(A) in upholding the proceedings initiated by the AO i/s.147 of the IT Act. The ld. AR reiterated the same arguments as raised by him before the CIT(A). In this respect, it was submitted that the reopening has been initiated only on the information received by the AO from DGIT (Investigation) and Sales Tax department regarding the alleged bogus purchases made by the assessee. He further submitted that it was beyond the information as stated in the reasons for reopening, no documents to support the conclusion drawn from the said information were on record of the Assessing Officer. Ld. AR further submitted that the Assessing Officer merely relied on the information received from the Sales Tax Department and it is apparent from the reasons recorded that the information received was general in nature and thus information did not specify that there was any assertion by the hawala dealers that the said dealers had provided any accommodation entries to the assessee. It was submitted that during the re-assessment proceedings, AO did not give an opportunity to the assessee to cross examine the dealers on whose statement the matter was reopened and additions were made. Thus, in this way, according to the ld. AR in the absence of any specific enquiry, the information on the basis of which the assessment was reopened can at best be a reason to suspect and not a reason to believe. Hence, in M/s. Neozer Bejon Baldawala such circumstances, it was requested that the order for reopening be set aside as the reopening was merely on the basis of bald information and without any cogent supportive evidence, therefore, the same is bad in law whereas on the contrary, the ld. DR relied upon the orders passed by the ld. AO and CIT(A).

M/s. Neozer Bejon Baldawala belief that income has escaped assessment. As far as in the present case, it is evident from the reasons recorded to the written submissions by the assessee that the AO has received specific and credible information from the DGIT(Inv.), Mumbai that the assessee was involved in making bogus purchases through hawala dealers to the extent of Rs.1,07,13,732/-. The information prima facie revealed that the assessee has claimed purchases for the A.Y. 2010-11 in their books. Based on this precise information, the AO issued notice u/s. 148 of the I.T. Act as he had prima-facie reasons to believe that income chargeable to tax had escaped assessment within the meaning of sec. 147 of the IT Act. Thus, there was cause or justification for the AO to invoke provisions of sec. 147 and issue notice u/s. 148.

M/s. Neozer Bejon Baldawala

Thus, considering the totality of facts and circumstances, we are of the view that the ld. CIT(A) passed well reasoned order while disposing of this ground. Thus, we find no reason to interfere in the orders passed by CIT(A) in upholding the order of reopening. Hence, under these circumstances, we dismiss this additional ground raised by the assessee.

M/s. Neozer Bejon Baldawala of the dealers to the assessee before making additions and not providing opportunity of cross examination to the assessee itself amounts to infringement of „legal rights‟ of the assessee which caused prejudice to the rights in this context. While reaching to this conclusion, we also draw strength from the judgment of Hon‟ble Delhi High Court in the case of CIT Vrs. Ashwani Gupta 322 ITR 396 (Del). After considering the judgments cited by both the parties, we find that Hon‟ble Apex Court in the case of Kapurchand Shrimal Vrs. CIT 1981 131(ITR) Page 451 has held that the duty of the Tribunal does not end with making a declaration that the assessments are illegal and it is duty bound to issue further directions. The appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute and the statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature. Therefore, considering the above judgment and keeping in view the interest of justice, we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO with a direction to provide copies of statement of the dealers and to provide opportunity of cross examination to the assessee of the said dealers on the basis of whose statement,

M/s. Neozer Bejon Baldawala additions were made and thereafter pass afresh order of assessment. It is needless here to mention that before passing the order of assessment, the AO shall provide sufficient opportunity of hearing to the assesse. Before parting, we may make it clear that our decision to restore the matter back to the file of AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the AO independently in accordance with law. With these directions, the appeal of the assessee is allowed for statistical purposes.