ITO 4(3)(1), MUMBAI vs. PAREKH PIPES P. LTD, MUMBAI

The Revenue as well as assessee have filed the above mentioned appeals against the order dated 29.07.2016 passed by the Commissioner of Income Tax (Appeals)-9, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009-10.

We have heard the arguments advanced by the Ld. Representative of the parties and perused the record. We noticed that the case of the assessee was reopened by issuance of notice u/s 148 of the Act on the basis of the receipt of information received from the Investigation Wing Mumbai in which it was conveyed that the Sales Tax Department of Maharashtra informed about the various parties whose deals with the bogus purchase business. The assessee was one of the beneficiaries of Rs.94,804,881/- from various parties. The notice was given to the assessee and the assessee failed to prove the CO. No. 207/M/2017 A.Y. 2009-10 genuineness of the claim, therefore, by applying the ratio of the judgment in the case of Simit P Sheth (2013) 356 ITR 451 (Guj). The AO restricted the addition to the extent of 12.5% of the bogus purchase in sum of Rs.94,804,881/-. In appeal, the CIT(A) has deleted the said addition on the basis of this fact that the G.P. Ratio was not properly considered and the G.P. ratio of the last of the A.Y. 2006-07 & 2007-08 comes to the 6.05% and for the current year the G.P. ratio comes to the extent of 7.25%. No doubt, the G.P. ratio is different in every preceding year but how the addition has been ordered to be deleted is not understandable. The AO issued the notice u/s 133(6) of the Act which were not served to the parties and assessee failed to substantiate the genuineness of the claim of the purchase in question. On the basis of similar facts and circumstances, the Hon’ble Gujarat High Court has passed the order in the case of Simit P Sheth (2013) 356 ITR 451 (Guj) in which the profit embedded to the bogus purchase has been considered for raising the addition in the income of the assessee. It is correct method to raise the addition subsequently in the case where the assessee has failed to prove his purchase beyond the reasonable doubt. Taking into account, all the facts and circumstances and considering the judgment delivered by the Gujarat High Court in the case of Simit P Sheth (2013) 356 ITR 451 (Guj), we are of the view that the interest of justice would met when the bogus purchase we restricted to the extent of 12.5% (-) G.P. of the current year, therefore, in the said circumstances, we set aside the CO. No. 207/M/2017 A.Y. 2009-10 finding of the CIT(A) and restrict the addition of bogus purchase to the extent of 12.5% (-) G.P. of the current year. Accordingly, these issues are decided in favour of the revenue against the assessee.

The assessee has filed the present cross objection against the order dated 29.07.2016 passed by the Commissioner of Income Tax (Appeals)-9, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009- 10.

The assessee has raised the cross-objection: - "1. The Id. CIT(A) erred in law and on facts in confirming the action of the W. A.0. in re-opening the completed assessment in gross violation of the provisions of s.147 and in passing an order of re-assessment u/s. 143(3) r.w.s. 147 in violation of the provisions of law.

Your appellant submits that: a. The original assessment was completed u/s 143(3) under an order dt.28.11.2011 on due consideration of the material available on records and produced during the course of assessment and on proper application of mind by AO. and that the action of the AO. who was not in possession of any information to enable him to reopen a completed assessment nor any mind was applied by him to such alleged information, if any, nor was any copy thereof furnished to your appellant by him. The Ld. CIT(A) confirmed the action of AO. who just relied upon the information available on the Maharashtra Sales Tax Department site (mahavat.gov.in).

Your respondent pleads that the said re-opening by the A.O. be held to be bad in law and the said order of re-assessment passed by him be quashed."

The facts of the present case are quite similar to the facts of the case which has been narrated above while deciding the appeal of the CO. No. 207/M/2017 A.Y. 2009-10 revenue bearing above, therefore, there is not need to repeat the same. CROSS OBJECTION 1 & 2 9. Under these cross objection the assessee has challenged the reopening u/s 147/148 of the Act specifically in the circumstances when the AO received the information from the Investigation Wing then no enquiry was conducted by AO, therefore, the order is not liable to be sustainable in the eyes of law. In support of these contention, the Ld. Representative of the assessee has placed reliance upon the law settled in P. S. Veerappa Vs. CIT, 127 ITR 247 (Mad) and CIT Vs. Adani Export, 240 ITR 224 (Guj). It is also argued that on account of change of opinion the provision u/s 147/148 of the Act is not liable to be invoked and in support of this contention, the Ld. Representative of the assessee has relied upon the law settled in the case of Bharat Jayantilal Patel, 378 ITR 596 (Bom) and Kelvinator of India Ltd., 320 ITR 561 (SC). On the other hand, the Ld. Representative of the Department has refuted the said contention. It is a case in which the assessment of the assessee was reopened on the basis of the information received from the Investigation Wing, Mumbai of Income Tax Department in which it was conveyed that the Sales Tax Authorities of Maharashtra conducted the enquiry and found that the parties which has been mentioned in the assessment order are indulging by giving the bogus entries of purchases. No CO. No. 207/M/2017 A.Y. 2009-10 doubt, after the receipt of the information, the AO issued the notices to the parties’ u/s 133(6) of the Act but no notice was served. It is incumbent upon the assessee to prove the purchase as genuine. The notice was given to the assessee and the assessee has also submitted the reply, it is not a case of change of opinion and the AO took into the notice on receipt of the information from DGIT Investigation, the law relied by the Ld. Representative of the assessee is distinguishable with the facts of the present case. Taking into account, all the facts and circumstances, we are of the view that the notice issued u/s 147/148 of the Act is quite reasonable which is not reliable to be set aside in accordance with law. Accordingly, we decide these cross- objection against the assessee.

In the result, the appeal filed by the revenue is hereby ordered to be partly allowed and the cross-objection of the assessee is hereby ordered to be dismissed. Order pronounced in the open court on 30/04/2019. Sd/- Sd/- (RAJESH KUMAR) (AMARJIT SINGH) लेखा सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai ददनांक Dated : 30/04/2019 Vijay CO. No. 207/M/2017 A.Y. 2009-10