DCIT, CENTRAL CIRCLE- 4(1), MUMBAI, MUMBAI vs. KANAKIA SPACES REALTY PVT. LTD., MUMBAI

PER NARENDRA KUMAR BILLATYA, AM:

LT.A. No. 1639/Mum/2024 & C.O. No. 86/Mum/2024, are pertaining to AY 2011-12. appeal by the revenue and cross-objection by the assessee preferred

against the order of the ld. CIT(A) -52, Mumbai, dated 30/01/2024,

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“LL. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in reducing the disallowance from 100% to 12.5% of the bogus purchases, i.e. from Rs. 13,52,010/- to Rs. 1,69,001/- and thus reducing the taxable income by Rs. 11,83,009/-, without appreciating the fact that the assessee couldn't prove the genuineness of these bogus purchases.

“LL. The learned CIT(A) has erred in upholding the reopening of assessment by issuing notice u/s 148 of the Act.

areas after afrez01 INCOMETAX APPELLATE TRIBUNAL Nil. This return was selected for scrutiny assessment and subsequently an order u/s 143(3) of the Act was passed on 28/03/2013 assessing total income at Rs.4,14,25,180/-. This assessment was framed in the old name of the assessee, namely, Centaur Mercantile Pvt. Ltd.

as under:- The Reasons for Re-opening in case of M/s. Centaur Mercantile P. Ltd Assessment Year: 2011-12

“It has been found that the assessee has made bogus purchases from the following parties in the respective quanta stated against them.

S.No [Name of supplier TIN of supplier Amount of Pam purchase in Rs. 1 _| Siddivinayak Trading 27830560491V 31,149 Re | Company I 3 | [2 | Subh Enterprises 27330733135V___|3,29,913 | [3 [RB Enterprises _|27550544543V___|9,90,948 | Se eS | Total 113,52,010

The above suppliers have admitted before the Sales Tax Department of the State of Maharashtra that they have been involved in the supply of bogus bills, without delivery of goods. The statements of the managing persons of the above concerns have been recorded before the Sales Tax Authorities. In these statements the above parties have admitted that they have been’ engaged in supplying bogus bills in their names to many beneficiaries parties. This information was received by the O/o the DGIT (Inv.), Mumbai from sales Tax Department and was forwarded to the respective Assessing Officers after processing.

The above mentioned information leads to drawing a prima facie

conclusion that the assessee has taken bogus bills from the above parties and has therefore inflated its purchases in its books, through such bogus bills. The inflation of purchases has therefore led reduction in profits and has led to the escapements of income to the above extent.

‘Therefore, there is a reason to believe that the income chargeable to tax to the extent of Rs.13,52,010/- has escaped assessment and has’ subsequently come to the notice of this office. This issue needs to be examined and the said income brought to tax.” a:

Nj

INCOMETAX APPELLATE TRIBUNAL

Central Circle - 4 (1),

Mumbai

Respected Madam,

Re: M/s Centaur Mercantile P. Ltd PAN: AACCC4199F Assessment year 2011-12

Our above client is in receipt of notice u/s 142(1) with annexure requiring for submitting the details / explanations called for in the said notice. In reference to the same & under the instructions from our above client, we submit as under —

4 Our objections against the reasons recorded for issuance of notice u/s 147 of the | T Act

- Separately submitted

2 In respect of purchases made form alleged bogus parties —

a) Copy of bills - Sample bill at ‘A’

b) Proof of transportation - Free delivery at site

c) Purchase register - Enclosed at ‘B’

d) Ledger account of parties - Enclosed at ‘C’

e) Copy of stock register - Not maintained

f) Material receipt register = Sample GRN at ‘D’

9) Description of material purchased - Aggregates

h) Use of material purchased - In construction

i) Proof of payment made - Bank Statement ‘E”

St ven AAND

areas after afrez01 INCOMETAX APPELLATE TRIBUNAL In response to the same & under the instructions from our above client, we submit as under —

Search action u/s 132 was carried out on Kanakia group on 29/03/2011. Also survey action u/s 133 A was also carried out on Kanakia group on 29/12/2014. Nothing incriminating was found whereby it can be alleged that these donation is mere accommodating entry. Moreover, in my return of income filed for above assessment year, deduction u/s 35 AC was claimed and during the course of assessment proceedings details regarding donation given with receipt was filed. Please note that deduction u/s 35 AC was allowed in the assessment passed u/s 143(3).

As against these you have relied on the search in the premises of Navjeevan Charitable Trust wherein it is stated that “this trust is engaged in providing accommodation entry by accepting donation cheques and returned in cash after deducting nominal commission. You have paid a sum of Rs. 3 Crore to Navjeevan Charitable Trust & claimed deduction u/s 35 AC of the Act. You are show caused as to why the deduction claimed u/s 35 AC be not allowed.”

However, you have not stated whether any evidence was found in that search indicating return of cash of Rs. 3 Cr to these assessee. You have also not stated as to whether the main trustee had said that against cheque of Rs. 3 Cr, cash s returned to these assessee. Thus, you have merely suspected that the donation by these assessee is an- accommodation entry.

Before replying in detail, it is requested in the interest of natural justice, to provide the following —

- Copy of statement s recorded of Trustees wherein there is confirmation of returning of cash to these assessee.

- Documents / papers seized from place where search was conducted wherein noting is found about returning of cash to these assessee.

- Any other direct proof or statement in support of allegation of the Department.

Since the Trust is notified by the National Committee, Ministry of Finance, Government of India, for the purpose of deduction u/s 35 AC of the | T Act, 1961, deduction is allowable u/s 35 AC to these assessee. Enclosed herewith receipt issued by the Trust & approval of Trust u/s 35AC - Annexure ice

Further, we request you to provide us an opportunity for cross examination of the principal officer, Navjeevan Charitable Trust who had said having returned cash against cheque to these assessee at your convenient time.

On receipt of the same, we shall submit our further reply.

Thanking you,

CERTIFIED TRITe copy

Yours Sincerely,

Nilo

Encl: A above

QO sconetaereuare moa.

The Deputy Commissioner of Income Tax, Central Circle - 4 (1), Mumbai

Respected Madam, Re: M/s Centaur Mercantile P. Ltd PAN: AACCC4199F Assessment year 2011-12 Our above client is in receipt of reasons for reopening of assessment u/s 147 of the | T Act, 1961. The same reads as under -

“The assessee filed its Return of Income on 28/09/2011 declaring total loss of Rs.3,05,31,399/- This office is having information that the assessee has obtained bills of bogus purchases from the following parties:-

TIN No Name of the Party Amount (In Rs.) * 27830560491V M/s Siddivinayak Trading 34,1494 Company 27330733135V M/s Subh Enterprises 3,29,913/- 27550544543V MWs RB Enterprises 9,90,948/- Total 13,52,010/-

It would not be out of place to mention here that the specific information was received from the office of the DGIT (Inv), Mumbai that the assessee made purchases from the above mentioned parties as per details given in the above table. It was informed that the Sales Tax Department, Mumbai, Govt. of Maharashtra carried on detailed enquiries in respect of above parties and recorded statements, deposition, affidavit etc of main persons of above concen which established that no actual goods or services are delivered by these parties to their customers and they have issued bogus bills after charging small commission.

In view of defailed enquiries made by the Sales Tax Department, it is evident that the assessees took bills worth Rs. 13,52,010/ at least from the above parties to inflate its purchases. Hence, | have reason to believe that income chargeable to fax has escaped assessment by reason of failure on the part of assessee to disclose fully and truly all material facts necessary for that assessment year i.e for AY 2011-12 within the meaning-of-section-147 of thre Income Tax Act, “1961.”

We object the above reasons on the following facts —

2s

Assessee is builder & developers.

Search action u/s 132 was carried out on the assessee on 29-03-2011. The same was concluded on 24-05-2011. Search revealed that the assessee company along with other group concern had shown various purchases from paper entities which have only issued accommodation bills.

On 24-05-2011, final statement of Shri Rasesh Kanakia was recorded u/s 132(4). In the final statement, he confirmed sum of Rs. 39,42,19,151/- in the hands of various group concerns on account of purchases made from parties who are known to be paper entities issuing accommodation bills whose credentials were in doubt.

In the hands of assessee, sum of Rs. 17,05,48,209/- was admitted on account of purchases made from parties who are known to be paper entities issuing accommodation bills whose credentials were in doubt.

As regards above admission of bogus purchases, there were no supporting documents available.

As regards genuine purchases, details like PO / Bills / Challan / Copy of account / GRN etc were submitted with ADIT, Unit V(2), Mumbai - Copy enclosed at ‘A’

Thereafter notice u/s 153 A was issued for A Y 2005-06 to A Y 2010-11. Assessee filed return of income for A Y 2005-06 to A Y 2010-11 in response to notice u/s 153 A of the I T Act.

Assessee also filed return of income for A Y 2011-12 u/s.139(1) of the I T Act.

Assessment for A Y 2005-06 to A Y 2011-12 were completed u/s 153 A r.w s 143(3) / 143(3) as the case may be with the prior approval of Additional Commissioner of Income

Tax, Central Circle - 23, Mumbai

In respect of above parties, we submit the copy of ledger account, sample copy of bill / delivery challan / PO / GRN, bank statement reflecting payment made to them for your kind perusal - Annexure ‘B’

From the bills, it is seen that item purchase from above parties is of 13,52,010/-. Challan reflects the date of delivery, site address, lorry no, tota! quantity delivered, receiver signature. Bank statement reflects the payment to above listed parties is made by an account payee cheque only.

The purchases made have been utilized for the construction work carried out for the project. The construction work could not be carried_out-unless-materials have been utilized for the same. :

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Thus, purchases are genuine as confirmed by the above facts & documentary evidences and question of treating the same as accommodation bills to inflate the cost does not arise.

You are requested to take a note of our above objection to reopening of assessment u/s 147 of the | T Act, 1961. Thanking you,

Yours Sincerely,

nil CRETE ett: mane rlet

Encl: = ©

raised by the assessee were very specific and point-wise as mentioned

hereinabove.

anerasy ance fre5201 INCOMETAX APPELLATE TRIBUNAL

“5. 8. The appellant has raised another contention that Assessing Officer has not disposed off the objection filed by the appellant against reopening. In this regard, find that the AO had issued notice u/s 148 dt. 06.06.2014. The appellant's response came much later after 18 months vide letter dt. 02.12.2015 stating that its return filed earlier be considered. The objections to reopening have been subsequently made on 19.01.2016. Given the inordinate delay of 18 months by the appellant, it would not be prudent to lay blame on the AO. Hence, this part of the argument of the appellant is not sustainable.

“Whether on the facts and circumstances of the case and in law, the Tribunal was justified in restoring the issue to the Assessing Officer after having quashed/set aside the order dated 14th December, 2009 passed by the Assessing Officer without having disposed of the objections filed by the appellant to the reasons recorded in support f the reopening Notice dated 28th March, 2008.?”

“8. We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters.

The Hon’ble High Court of Bombay in the case of MSPL Gases Ltd.

vs. DCIT in ITA No. 1269 of 2015 dated 27/01/2016, observed as under:-

“4, When the Petition reached effective hearing for the first time on 23 July 2015 for admission, the Revenue accepted the position that the order dated 3* February 2015 passed on reopening of assessment for AY 2010-11 is without jurisdiction and the same be set aside. However, we were disturbed as on quite a few occasions we had noticed the orders on reassessment were being passed without disposing of the objections. However, in Court the Revenue accepts the position that the order is not sustainable. We were of the view that if a mechanism could be put in place by the Revenue to recall an order such as this (where even the Revenue concedes that the order dated 3"February 2015 is without jurisdiction). This for the reason that otherwise Assessees are being unnecessarily harassed and have to move the Court to remedy the injustice to have the order which is ex facie without jurisdiction, set aside.

SEER SEE EEE SEEDER EES SEEEEEE SESE EERE SSE SHEER SEE

facts:-

The Hon'ble High Court, consequently held as under:-

“\...This passing of the draft Assessment order without having disposed of the objections is in defiance of the Supreme Court's decision in GKN Driveshafts (India) Ltd. (supra). Thus, the draft Assessment order dated 30th March, 2015 is not sustainable being without jurisdiction. This for the reason that it has been passed without disposing of the objections filed by the Petitioner to the reasons recorded in support of their impugned notice. Accordingly, we set aside the draft Assessment order dated 30th March, 2015. We are not dealing the validity of the reasons in support of the impugned notice in the present facts as the time limit to pass the Assessment order as provided under 4th Proviso to sub-section(2) of Section 153 of the Act has already expired when the petition was filed.”

The Co-ordinate bench in the case of Manish Rajnarain Goswami vs.

ITO in ITA No. 3960/Mum/2023, was considering the disposal of objections by the AO and found that all the objections of the assessee

were not disposed off. The Co-ordinate Bench held as under:-

“15. Let us examine the validity of reopening from another angle, the assessee raised objections to reopening and the objections of the assessee read as under: “Lam in in receipt of your notice u/s. 148 of the Income Tax Act 1961, dated 18/6/2018 along with reasons recorded for reopening for the A.y. 2011-12. I submit as under:

I object to the said reassessment since there does not appear to be any independent finding of escapement by your goodseif and there is merely a reliance on the directions of the Asst. DIT (Inv), Unit -2 (1), Kolkata. The law on reassessment is clear to the effect that an assessment can be reopened only if the Assessing Officer has reasons to believe that income of the assesses has escaped assessment. The formation of this belief is a jurisdictional condition and its absence can vitiate the re- assessment proceedings. without prejudice to above I further submit that case is reopened beyond the limitation period of four years I have disclosed all the facts while filing income tax return.

4, I also request you to give us opportunity to file further objections based on material provided by you. In case your goodself is going to rely on the evidences provided by Asst. DIT(Inv) Kolkata collected on Wheelers Developers Put Ltd, you are requested to kindly provide me all such evidences and statements taken during search /survey and also provide us an opportunity to cross examine concerned persons.

In view of the above I request Your Honor to drop the reassessment proceedings and oblige.”

Order disposing the objections raised by the assessee read as under: -

“ORDER DISPOSING OFF THE OBJECTIONS RAISED ON THE RE-OPENING OF THE ASSESSMENT w/s. 148 OF THE I.T. ACT Kindly refer to the above wherein you have been submitted reply to this office letter dated 18/06/2018. 2. In your submission, you have stated that you are required the documents which are the basis of reopening of your assessment for the year under consideration and without that the objection cannot be filed without! proper examination of the same.

areas after afrez01 INCOMETAX APPELLATE TRIBUNAL material on the basis of which a case can be reopened. It is further held that the sufficiency or correctness of material is not a thing to be considered at this stage.

Order pronounced in the Court on 20t December, 2024 at Mumbai. (SANDEEP SINGH KARHAIL) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated 20/12/2024 WL

anerasy ance fre5201 INCOMETAX APPELLATE TRIBUNAL TeRt HY vfefeta sAf¥a/Copy of the Order forwarded to so PF PNP

amiterelf_/ The Appellant

were / The Respondent

UafNa sr sTYsAT / Concerned Pr. CIT

MTT sya (ste) / The crT(A)-

faurfta ufaffe , snrex anfteta ater, dag /DRITAT, Mumbai, ms wie) Guard file.

HIRIARY BY ORDER,Assistant Registrar Rivas ITAT, Mumbai