NIRANJAN B. MAJANI,MUMBAI vs. INCOME TAX OFFICER - 24(3)-2, MUMBAI

Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by assessee for Assessment Year [AY] 2009-10 assails the order of the Ld. Commissioner of Income-Tax (Appeals)-51 [CIT(A)], Mumbai, Appeal No. CIT(A)-36/IT-417/ITO- 24(3)(2)/14-15 dated 01/05/2017. The assessment for impugned AY was framed by Ld. Income Tax Officer 24(3)(2), Mumbai [AO] u/s 143(3) read ITA.No.5025/Mum/2017 Niranjan B Majani Assessment Year-2009-10 with Section 147 of the Income Tax Act,1961 on 30/01/2015. The assessee has raised the following grounds of appeal:-

2. Ld. CIT(A) is erred to mingle the issue of jurisdiction with the procedure which AO has followed without appreciating that both are distinct and in the absence of the former the AO has no authority to initiate the later and hence, it is inconsequential to deliberate on the procedural aspect.

3. Ld. CIT(A) is erred to confirm the estimated addition without appreciating the facts as evident from the order of assessment that AO does not have any material from the creditors or department of sales tax to hold that transaction of purchase were bogus. On Merit:

4. Ld. CIT(A) is erred to confirm the order estimating the profit without appreciating the reasons to hold transaction of purchase as suspicious by the sales tax authority and upload on its website viz a viz facts of the case, thus, the addition confirmed is merely on surmises and under wrong belief of bogus purchase.

5. Ld. CIT(A) is erred to confirm the additions made on failure to serve the notice issues u/s.133(6) of the Act and produced before the AO overlooking the facts that the creditors were the defaulters of the revenue and there default have made the appellant liable to compensate the revenue.

6. Ld. CIT(A) is failed to appreciate that the rate of GP applied is without bringing any comparative case with that of the appellant, it is also not appreciated that following this addition applicable rate of GP is 19.6% in contrast to prima facie claimed @12.5% 2.1 Facts leading to the same are that the assessee being resident individual engaged in the business as trader of iron and steel was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY on 30/01/2015 at Rs.13,48,730/- after sole addition of certain bogus purchases for Rs.8,80,899/- The original return was filed on 30/09/2010 at Rs.4,67,830/- which was processed u/s 143(1). 2.2 The reassessment proceedings were initiated upon receipt of certain information from Sales Tax Department, Maharashtra regarding dealers indulging in bogus purchase bills and it was noted that the assessee stood beneficiary of such bogus purchase bills to the tune of Rs.70,47,195/- from five such parties. Consequently, notice u/s 148 ITA.No.5025/Mum/2017 Niranjan B Majani Assessment Year-2009-10 dated 10/03/2014 was issued to the assessee which was followed by statutory notices u/s 143(2) and 142(1). 2.3 To confirm the impugned transactions, notices u/s 133(6) dated 15/07/2014 was issued to the suppliers. However, the same could not be served and returned back un-served with remarks like left, not known etc. The assessee, in turn, contended that the purchases were genuine since payment to the suppliers was made through banking channels. However, not convinced, Ld. AO noted that the assessee could not substantiate the delivery of material with delivery challans etc. and hence failed to discharge the onus casted on him to prove the purchase transactions. Finally, Ld. AO estimated addition against the same @12.5% which came to Rs.8,80,899/-.

3. Aggrieved, the assessee contested the same without any success on legal grounds as well as on merits before Ld. CIT(A) vide impugned order dated 01/05/2017 where the Ld. CIT(A), after considering various contentions & submissions, confirmed the stand of Ld. AO. Aggrieved, the assessee is in further appeal before us.

ITA.No.5025/Mum/2017 Niranjan B Majani Assessment Year-2009-10 5. We have carefully heard the rival contentions and perused relevant material on record. So far as legal ground raised by the assessee is concerned, the same is devoid of any merit. The copy of reasons records by Ld. AO as placed on record reveal that the reassessment proceedings have been initiated upon receipt of certain information from the Sales Tax Department, Maharashtra with respect to parties indulging in providing accommodation entries without delivering any goods. The Ld. AO, after duly considering the same, has resorted to reassessment proceedings. It is noted that the AY under question is 2009-10 and the notice has been issued within 4 years of relevant AY and the original return of income has been processed u/s 143(1). Hence, the only condition as envisaged by Section 147 is that the Assessing Officer has reason to believe that certain income has escaped assessment and nothing more. This belief may be based upon any cogent material which comes to his notice subsequently. The information as received from state government authority, in our opinion, was sufficient enough to trigger action on the part of Ld. AO. Hence, finding the same to be quite valid, we reject the legal grounds raised by the assessee.

6. On merits, we are of the considered opinion that there could be no sale without purchase of material since the assessee was engaged in trading activities. The sales turnover achieved by the assessee has not been disputed / disturbed by the revenue and the payments were through banking channels. At the same time, the assessee could not produce even a single confirmation from any of the five parties and all notices issued u/s 133(6) were returned back, which cast serious doubt on assessee’s claim. Therefore, in such a situation, the addition, which ITA.No.5025/Mum/2017 Niranjan B Majani Assessment Year-2009-10 could be made, was to account for profit element embedded in these purchase transactions to factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which both the lower authorities have rightly done. Therefore, finding the same quite fair & reasonable, we see no reason to disturb the same.

7. Resultantly, the assessee’s appeal stands dismissed. Order pronounced in the open court on 01st November, 2017.