RITA BHANWARLAL JAIN,MUMBAI vs. INCOME TAX OFFICER WARD 4(3), THANE

Date of hearing 23-05-2018 Date of pronouncement 20 -06-2018 O R D E R

Per G Manjunatha, AM :

The assessee has raised the following grounds of appeal:-

“I. On the facts and circumstances of the case, the entire reassessment proceedings initiated u/s 147 and notice issued u/s 148 of the Income Tax Act, 1961 ['the Act') by the learned Assessing Office are invalid. Therefore, the entire reassessment proceedings be quashed. II. On the facts and circumstances of the case, the addition made by the AO of Rs. 44,94,655 on account of purchases from alleged non genuine supplier is bad in equity and totally unwarranted. III. On the facts and circumstances of the case and in law, the learned AO erred in levying interest under Section 234B, 234C, 234D of the Act.”

2 ITA 5499/Mum/2017

Subsequently, the case has been reopened on the basis of information received from DGIT (Inv),Mumbai that the assessee had obtained bogus purchase bills from suspicious dealers listed in the list of hawala operators prepared by Sales-tax department. Accordingly, notice u/s 148 was issued on 27-03-2014 calling for return of income. In response to notice, the assessee, vide letter dated 21-04-2007 submitted that the return filed on 20-10-2007 may be treated as return filed in response to notice u/s 148 of the Act. Further, the assessee has requested for reasons for reopening of assessment. The AO, in response to assessee’s request furnished copies of reasons recorded for reopening of assessment. The case has been selected for scrutiny and notices u/s 143(2) and 142(1) of the Act alongwith questionnaire were issued. In response to notice, authorized representative of the assessee appeared from time to time and furnished the details, as called for. During the course of scrutiny assessment proceedings, the assessee was asked to file details in respect of purchases made from M/s Om Navkar

3 ITA 5499/Mum/2017 Enterprises and N.P. Chemie, in the backdrop of information received from Investigation Wing that the said parties were involved in providing accommodation entries without actual delivery of goods. In response, the assessee, vide letter dated 16-01-2015 submitted that since she had closed down her business on health ground and family matters and for want of peace of mind subject to non levy of penalty was ready to accept gross profit of 15% on the transaction effected through the above two firms. However, later on, on 09-02-2015, the assessee has filed another letter objecting to the reopening of the assessment.

4 ITA 5499/Mum/2017 before the CIT(A). Before the CIT(A), assessee has challenged reopening of assessment on the ground that the AO has formed reasonable belief of escapement of income only on the basis of information received from third party sources without there being any tangible material which suggests escapement of income. Insofar as addition made towards purchases from M/s N.P. Chemie and M/s Om Navkar Enterprises, the AO has made addition towards purchases from above parties without giving proper opportunity of cross examining the alleged non genuine suppliers, whose statements were relied upon by the AO. The assessee further submitted that the AO made addition towards purchase from above parties merely on the basis of statements of third parties ignoring all evidences filed during the course of assessment proceedings including purchase bills, payment proof and details of purchase and sales. Assessee has furnished complete details of sales and purchases and the AO has not doubted sales declared in the year. In the absence of any findings as to the incorrectness of books of account, purchases made from the above parties cannot be considered as bogus, that too, without allowing cross examination of the persons, who gave statements.

5 ITA 5499/Mum/2017 by the assessee challenging reopening of the assessment by holding that the AO has received information from DGIT(Inv) which constitutes a tangible material for formation of reasonable belief of escapement of income, therefore, there is no merit in the arguments of the assessee that the AO has formed reasonable belief without there being any tangible materials. Insofar as addition made towards disallowance of purchases, the CIT(A) observed that it is evident from the fact that during the course of assessment proceedings she had admitted estimation of net profit of 15% on the transaction effected through above said two firms. Therefore, opined that the AO was right in making addition towards purchase from above two parties and accordingly, confirmed addition made by the AO. Aggrieved by the order of CIT(A), assessee is in appeal before us.

6 ITA 5499/Mum/2017 of purchases, the Ld.AR for the assessee submitted that the assessee has filed enormous details to prove purchases, however, the AO has ignored all evidences only on the basis of information received from DGIT(Inv) without allowing assessee to cross examine the persons, who gave statements before the sales-tax department. The Ld.AR further submitted tht the AO is incorrect in making addition towards purchases from above two parties only on the basis of statement of third parties ignoring all evidences filed by the assessee.

Chemie which appeared in the list of hawala dealers prepared by sales-

7 ITA 5499/Mum/2017 tax department. The information received from Investigation Wing clearly shows that the said parties are engaged in providing accommodation entries and this fact has been confirmed in their statements given before the sales-tax authorities. Based on the above information, the AO reached to the conclusion that purchases from above two parties are bogus in nature and hence made addition towards total purchases from above two parties. It is also an admitted fact that the assessee has filed certain basic evidences including purchase bills and payment proof for the purchases. This fact has not been disputed by the AO. It is also an admitted fact that the assessee has maintained books of account. The AO has not pointed out any inconsistencies or irregularities in the books of account. The AO also not disputed sales declared by the assessee. Under these facts, it is difficult to accept the findings of the AO that purchases from the above two parties are totally bogus and also it is not supported by valid evidence. Although the assessee has filed certain basic evidence, but, failed to furnish further evidence in the backdrop of findings of Investigation department of sales-tax department. Therefore, we are of the considered view that there is no merit in the argument of the assessee that purchases from above two parties are genuine and supported by valid evidence.

Order pronounced in the open court on 20th June, 2018.