SHRI RAJ KUMAR GOEL,KOLKATA vs. ITO, WARD 36(1), KOLKATA, KOLKATA

The assessee is a partnership firm and is engaged in the business of trading in Bearing. It filed its return of income u/s 143(1) on 22.09.2010 declaring total income of Rs. 3,09,233/-. The assessment was reopened u/s 147 and assessment was completed u/s 143(1) read with Section 147 determining the total income at Rs. 28,26,345/- by adding an amount of Rs. 25,17,112/- as bogus purchases made from hawla dealers. On appeal the first appellate authority confirmed the same. Further aggrieved the assessee is in Shri Raj Kumar Goel A.Yr.2010-11 appeal before us by challenging the legality of reopening of assessment and addition made on merits.

The ld. Counsel for the assessee Shri Sunil Surana filed a paper book running into 157 pages and submitted that the reopening is bad in law as it suffers from non- application of mind by the AO and was based only on certain information received from DGIT(Inv.), Mumbai. He argued that the so called information was not verified or cross-examined. He made various submissions as to why the reopening had to be held as bad in law and also relied on certain case laws, which would be dealt by me during the course of the order. On merits he pointed out that the assessing officer himself has held in his order that, the assessee had made purchases of all the “Bearing” in question and it could have been a case where the purchases have been made from different parties and whereas the bills were obtained from hawla dealers in Mumbai. He took this Bench through the various evidences filed by the assessee including bills, payment by account payee cheques, delivery details and corresponding sales and the receipts of sale proceeds. He further pointed out that a mistake was committed by the assessing officer while discussing a particular challan S/08-09-832, which was mentioned in the computer generated tax invoice as 832 and argued that there is no change in the invoice no.

The ld. DR Mr. Amitava Bhattacharya on the other hand opposed the contentions of the assessee and submitted that the reopening was made as the assessee has made excessive claim and deduction by submitting bogus bills of purchases. He relied on the order of the Ld. CIT(A) and submitted that both on the issue of re-opening as well as on merits the Ld. CIT(A) has dealt, in detail, with the arguments of the assessee.

He argued that the information was received from the DGIT(Inv.)- Mumbai and the Assessing Officer has no power to investigate the correctness of the information, unless 2

On merits he referred to the order of the Assessing Officer as well as the order of the Ld. CIT(A) and submitted that the assessee has no stock register. He submitted that there is a difference between original challan numbers and computer generated challans and hence the invoice produced cannot be relied upon. On facts he relied on the order of the Ld. CIT(A) and prayed the same be upheld.

I have carefully considered rival contentions, perused the prayers on record, orders of the authorities below, case law cited and hold as follows. First I take up the issue on merits. The assessing officer’s order is self-contradictory. The entire addition is based on certain information received from DIT(Inv), Kolkata, which is in turn based on information available on the official website of the Department of Sales Tax, Govt. of Maharashtra, wherein a list of alleged hawla dealers was put up. The assessing officer stated that the assessee’s claim that, it has maintained stock register, is not correct and that the closing stock was specifically ascertained and valued at the end of the year. At the same time, he mentioned in his order that the maintenance of stock register would not be sufficient to prove the claim of the assessee. He also states that stock movement as per details in this case, and some purchase bills, do not prove that the purchases have actually been made. At page 6 of his order, the AO states as follows: “ It is not been doubted that the goods sold by the assessee have not been purchases at all. The dispute is whether the assessee had actually purchased goods from the above mentioned parties.” Later at page 7 of the order he held as follows: “There is no doubt that the assessee had purchased goods as reflected in the purchase bills and also sold the same. But the purchases were obviously not made from the above mentioned parties as no documents in support of movement and receipt of goods have been produced by the assessee and the Sales Tax Department, Govt. of Maharashtra has also found the aforesaid parties as non-genuine dealers who had issued false bills 3

The above findings of the AO goes against his conclusion that the entire purchases of Rs. 25,17,112/- are bogus and the same has to be added to the income. When the purchase is said to have been made from some parties and when bill are obtained for those purchases from those hawla dealers, the amount of purchase cannot be added. At best a percentage of such purchases should be taken as profits.

Be as it may, the assessee has produced purchase bills and had made payments by account payee cheques. Delivery details and also corresponding sales of these purchases have been filed. Against these evidences, the assessing officer has merely relied on the letter received from DIT(Inv)-Kolkata, which just mentions that the payments were made against the issue of false bills without delivery of goods, as said to have been stated in the official website of Department of Sales Tax, Govt. of Maharasthra. No further evidences is available with the assessing officer. The assessing officer issued letter to the suppliers and these letters were returned with comments ‘unknown’. Return of the letters does not by itself take us to a conclusion that the purchases are bogus. The mistake that the assessing officer committed was at page 6 of his order. He doubted the tax invoice number mentioned in the case of “Omkar Metal and Alloys Corporation Ltd.” In fact there is no difference at all. Merely relying as some publication in the website of the Maharashtra Sales Tax authorities for making this addition cannot be sustained. No material/information was gathered by the AO from the authority which alleged that the dealers in question are Hawla Dealers.

Thus, in our view, the assessee has discharged the burden of proof that lay on him. All possible evidences have been produced to prove the genuineness of the purchases by the assessee. On the other hand, the assessing officer has made this disallowance based

Coming to the issue of reopening the assessing officer has recorded the following reasons for reopening :