ARUN AGARWAL,MUMBAI vs. ITO 24(1)(2), MUMBAI

In all these appeals the assessee is challenging the order of the Ld.CIT(A) in sustaining the reopening of assessment u/s.147 of the Act

In so far as the reopening of assessments u/s.147 is concerned, the Learned Counsel for the assessee submits that assessments were reopened merely relying on the information received from the Maharashtra Sales Tax Department without giving copy of the statement of suppliers recorded and without providing the fact that reopening was made in the absence of proof of the amounts paid to the dealers was returned to the assessee. Therefore, it was contended that the reopening of assessments is bad in law.

Ld. DR vehemently supported the orders of the authorities below.

On a careful consideration of the facts in this case we find that the assessments were reopened after an enquiry conducted u/s. 131 of the Act by the Deputy Director of the Income Tax (Investigation)Unit –VII(3), Mumbai and also after obtaining information from the Sales Tax Department that the dealers from whom the assessee purchased materials have provided only accommodation bills without delivery of goods. Based on these informations the assessments were reopened by 3 TO 7497/MUM/2016 Shri Arun Agarwal the Assessing Officer. The Ld.CIT(A) rightly sustained the reopening of assessments placing reliance on the decision of the Hon'ble Delhi High Court in the case of Money Growth Investment & Consultants (P) Ltd. v. ITO [921 Taxmann.com 438] wherein it has been held that reopening of assessment based on the statement recorded by the Investigation Wing was valid as the appellant has failed to disclose the primary facts. The Assessing Officer collected tangible materials to suggest that the appellant primarily has not disclosed true and correct particulars of income. In the circumstances we uphold the reopening of assessments in all these cases.

Coming to the merits of the case, briefly stated facts are that the Assessing Officer reopened the assessments for all these Assessment Years 2007-08 to 2011-12 on obtaining the information from the Sales Tax Department that the dealers namely M/s. Foram Traders/Apple Industries and M/s. VSK Enterprises from whom the assessee made purchases are providing only accommodation entries without delivery of goods. The Assessing Officer issued notices u/s. 133(6) of the Act to the said dealers and the notices were duly served. However, no replies have been received from the said dealers. Therefore, the assessee was required to prove the genuineness of the purchases made from these two parties along with the necessary details. Assessee furnished copy of the ledger

The Learned Counsel for the assessee before us submits that the purchases made from these two parties are genuine. The parties have confirmed through their letters addressed to the Assessing Officer in response to the notice issues u/s. 133(6) of the Act stating that they have sold the goods to the assessee. Further he submits that these replies by 5 TO 7497/MUM/2016 Shri Arun Agarwal the dealers have sent through speed post on 09.03.2015. The Learned Counsel for the assessee further referring to Page No.35 to 80 of the Paper Book filed for the Assessment Year 2007-08 submitted that goods have been delivered by the dealers and they have issued delivery challans and the place of delivery of goods is also clearly mentioned on the delivery challans. Therefore, the purchases made by the assessee cannot be treated as non-genuine.

Learned Counsel for the assessee further submits that the statements said to have been recorded from the dealers by the Sales Tax Department (Investigation Wing) have not been supplied to the assessee for rebuttal and there was no cross examination provided to the assessee. The Learned Counsel for the assessee submits that the addition made towards bogus purchases is based only on the Sales Tax Department information and no other evidence was brought on record to suggest that the purchases made by the assessee were non-genuine. He further submitted that the assessee is only into wholesale paper business and the margin from the business is only 1 to 1.5% and this year margin i.e. 2007-08 is 1.24% as reported in the tax audit report. Therefore, it is submitted that the assessee has not suppressed any profit margin from the business. Learned Counsel for the assessee further referring to Page No.461 of the Paper Book submits that on identical circumstances the 6 TO 7497/MUM/2016 Shri Arun Agarwal Coordinate Bench in assessee’s group case where the assessee is a Director deleted the addition made towards bogus purchases. He submitted that facts being identical the same be followed.

Ld. DR vehemently supported the orders of the authorities below. Written submissions were also made by the Ld.DR.

Heard both sides, perused the orders of the authorities below. The assessments for the Assessment Years 2007-08 to 2011-12 were reopened based on the information of the Sales Tax Department that the dealers from whom the assessee is purchased materials were shown as only the parties providing accommodation entries without delivery of goods. Notice issued u/s.133(6) of the Act were served on the parties however no replies have been received by the Assessing Officer till the completion of the assessment. The Assessing Officer required the assessee to prove the genuineness of the purchases and assessee filed copy of ledger account along with the copies of purchases, invoices, delivery challans and affidavits from the dealers confirming the sales of the assessee. The assessee further could not produce the parties before the Assessing Officer as required by him. Therefore, the Assessing Officer disbelieving the affidavits filed by the dealers estimated the profit element at 12.5% relying on the decision of the Hon'ble Gujarat High Court

We find from the materials placed before us that the purchases were supported by the delivery challans and the place of delivery also mentioned on the delivery challans by the supplier. The Assessing Officer did not disbelieve the delivery of goods from the dealers. However, he was of the opinion that the assessee has obtained only bills from these dealers and assessee has made purchases from gray market. The basis for such finding of the Assessing Officer is not based on any evidences on record. On the other hand, the record shows before us that the dealers have issued delivery challans for the goods along with invoices to the goods purchased by the assessee. We also find that in response to notice u/s. 133(6) of the Act by the Assessing Officer the dealers by letters dated 07.03.2015 confirmed that they made sales to the assessee along with the copy of affidavit dated 08.01.2015. They also provided the details like the PAN NO./TAN NO. and the amount of goods sold to the assessee during the Assessment Years 2007-08 to 2011-12 along with the bank details and statement of bank account and the copy of income tax returns filed by them for the Assessment Years 2007-08 to 2011-12. It appears that these details were provided by the dealers directly to the Assessing Officer just before completion of assessment by sending through speed