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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
1. This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-28, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) r.w.s. 147 of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal filed by the assessee read as under:
1. The Ld. Commissioner of Income Tax (Appeals) - 28, Mumbai [hereinafter referred to as the "Ld. CIT(A)”] erred in confirming the action of the Ld. A.O. in reopening the assessment of the Appellant by issuance of the notice dated Ranmal Pukhraj Jain 2 12.03.2014 under section 148 of the Act without recording valid and proper reasons to show that any income chargeable to tax has escaped assessment. Hence, the notice dated 12.03.2014 under section 148 and subsequent assessment order passed under section 143 r.w.s. 147 is bad in law and the same may be quashed and set aside. 2. (i) The Ld. CIT (A) erred In making ad -hoc disallowance of Rs.2,30,250/- being 12.5% of total purchases amounting to Rs.18,42,006/- made during the year from M/s. M. R. Corporation treating the same as accommodation entries without appreciating that the purchases are duly recorded m the books of accounts and the same are supported by proper documentary evidences. Hence treating the purchases as accommodation entries and thereby making ad -hoc disallowance of Rs.2,30,250/- being 12.5% on Rs.18,42,006/-is unjustified and the same may be deleted.
(ii) The Ld. CIT(A) further erred in making disallowance of 12.5% on total purchases amounting to Rs.18,42,006/- merely on the basis of information received from sales tax department and third party statements without providing the Appellant an opportunity to cross examine them. Hence, the disallowance of Rs.2,30,250/- being 12.5% of Rs.18,42,006/- treating the same as alleged bogus purchases is unjustified and the same may be deleted.
(iii) The Ld. CIT(A) failed to appreciate that the DGFT Licence purchased during the year are duly accounted in the bock of the Appellant and the same are supported by proper documentary evidences. The same has been subsequently sold by the Appellant and the profit earned thereon is offered for tax. Hence, the addition of Rs.2,30,250/- by treating the purchases as bogus is unjustified and the same may be deleted.
Briefly stated, the facts are that the assessee filed his return of income for the assessment year (AY) 2010-11 on 17.09.2009 declaring total income of Rs.2,68,150/-. Subsequently, the AO received Ranmal Pukhraj Jain 3 information from the Director General of Income Tax (Inv), Mumbai that as per the investigation conducted by the Sales Tax Department, Government of Maharashtra, the assessee had obtained accommodation entries without physical delivery of goods amounting to Rs.18,42,006/- from M R Corporation. The TIN No. 27710551730V provided by the above party by the assessee to the AO is same as appearing in the information received from the Sales Tax Department. On the basis of the said information, the AO reopened the assessment by issuing notice u/s 148 of the Act to the assessee. In response to a query raised by the AO, the assessee filed copies of (i) ledger account of the purchase party, (ii) purchase bills, (iii) payment details through account payee cheques. However, considering the inquiries conducted by the Sales Tax Department, the AO estimated the profit @ 12.5% on purchase of Rs.18,42,006/- which comes to Rs.2,30,250/-.
In appeal, the Ld. CIT(A) agreed with the reasons given by the AO and confirmed the addition of Rs.2,30,250/-. 5. Before us, the Ld. counsel of the assessee submits that the appellant is dealing/trading in export DGFT licenses. Those licenses are issued by the Government of India to the exporter and those are sold by them in the market through agents like the assessee and ultimately used by importer for items/materials mentioned in the respective licenses. It is further submitted that during the course of reassessment proceedings, the assessee had submitted relevant documents. However, the AO resorted to ad-hoc disallowance @ 12.5% on purchase of Rs.18,42,006/- and made an addition of Rs.2,30,250/-.
Ranmal Pukhraj Jain 4 On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A) confirming the addition of Rs.2,30,250/- made by the AO.
We have heard the rival submissions and perused the relevant materials on record. In the instant case, the return of income filed by the assessee for the impugned assessment year was processed u/s 143(1). The reopened the assessment with the following reasons:
“Information is received from Director General (Investigation), Mumbai bearing No. Corr.field/DGIT(Inv)/2013-14 dated 26.12.2013 regarding Sales Tax Department’s action hawala operator in issuing bogus purchase bills. The above assessee is one of the beneficiary who has obtained bogus purchase bills from the following parties for the FY 2010-11 to the tune of Rs.1,842,006/- Sr. No. Name of the purchase party Amount in (Rs)
M R Corporation 18,42,006/- Total 18,42,006/- In view of the above, I have reasons to believe that income chargeable to tax to the tune of Rs.18,42,006/- has escaped assessment for AY 2010-11. Issued notice u/s 148 of the Income Tax Act, 1961.” In the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500 (SC), it has been held that intimation u/s 143(1)(a) is not an assessment. Thus the AO in the present case has rightly issued the notice u/s 148 by recording the reasons extracted above.