SANJAY SHRAWAN AGRAWAL,NASHIK vs. INCOME-TAX OFFICER,

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

There are 4 appeals filed by 2 different assessees under consideration. Out of which ITA Nos. 2619 to 2621/PUN/2016 are filed by Shri Sanjay Shrawan Agrawal against the common order of CIT(A)-1,

Nashik, dated 07-09-2016 for the A.Yrs. 2009-10 to 2011-12 and the

appeal ITA No. 2618/PUN/2016 is filed by Shri Vivek Shrawan Agrawal

for the A.Y. 2011-12. The grounds by the two assessee in these appeals

are common, therefore, they are being taken up together for

adjudication in this composite order.

I shall first take up the appeals pertaining to Shri Sanjay

Shrawan Agrawal.

ITA No.2619 to 2621/PUN/2016-Shri Sanjay Shrawan Agrawal A.Yrs. 2009-10 to 2011-12

assessment years the grounds raised by the assessee for A.Y. 2009-10

are extracted as under :

“1. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax, (Appeals)-I, Nashik, is not justified in confirming validity of notice issued u/s.148 particularly when AO has issued the said notice on the basis of information received from third party and without application of mind.

From the above, it is evident that whole Ground Nos. 1 to 3 deals

with a legal issue qua the information source; summarily refusing the

objection of the assessee and the failure to grant cross examination and

the Ground Nos. 4 and 5 are on facts.

is engaged in the business of manufacturing of electrical testers under

the name and style of “M/s. Shri Krishna Industries”. Assessee filed

the returns of income for the A.Yrs. 2009-10 to 2011-12 declaring total

income of Rs.9,83,810/-, Rs.10,44,390/- and Rs.13,36,110/-

respectively. On the basis of information received from the Sales Tax

Department, AO issued notices u/s.148 of the Act to the assessee. For

the A.Y. 2009-10, AO found that assessee made purchases from M/s.

Mascot Enterprises, Mumbai amounting to Rs.11,26,125/-. For the

year, 2010-11, assessee made purchases from 3 suppliers amounting to

Rs.16,64,335/- and for the A.Y. 2011-12 the assessee made purchases

from 4 suppliers amounting to Rs.16,20,958/-. Eventually, the AO

came to the conclusion that the purchases made by the assessee are

bogus purchases or the assessee might have inflated the purchases.

and added 100% of the purchases for the years under consideration to

the total income of the assessee.

addition of entire bogus purchases made by the assessee for the

assessment years under consideration. Assessee also raised the issue

relating to validity of the reassessment u/s.147 of the Act qua the

availability of tangible material for invoking the said provisions. CIT(A)

dismissed the validity of the re-assessment proceedings linked

objections raised by the assessee and relied heavily on the judgment

ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in 291 ITR

discussion of CIT(A) in holding the reassessment proceedings as valid.

CIT(A) relied on the information gathered from the Sales Tax

department in this regard. On merits, CIT(A) after considering series of

decisions eventually restricted the addition to 25% of the purchases

made by the assessee by observing as under :

“6.89 Thus, in my opinion the facts on record demonstrate that this is not a case of bogus purchases but a case of inflated purchases and at best from bogus parties. Considering the facts and circumstances of the case, to meet the ends of justice, the AO is directed to restrict the disallowance of purchases to 25% of purchases, i.e. Rs.2,81,530/-, Rs.4,16,080/- and Rs.4,05,239/- for A.Yrs. 2009-10, 2010-11 and 2011- 12 respectively.”

Assessee requested for grant of cross examination of the

witnesses of the Revenue and the same was not successfully given for

the assessee.

filed the present appeals before the Tribunal with the grounds extracted

above.

assessee brought our attention to Ground No.3 in all the appeals and

submitted that in this case assessee asked to grant an opportunity of

cross examination of the parties and the same was denied. Further,

he submitted that the addition made by AO in the re-assessment will

not survive as the same are made at the back of the assessee. Relying

on the decision of Supreme Court in the case of M/s. Andaman Timber

Industries Vs. CIT, Civil Appeal No. 4228/2006, dated 02.09.2015

(Supreme Court), Ld. Counsel submitted that making addition at the

back of the assessee is not justified. On merit, Ld. Counsel submitted

that in this case where the assessee has successfully established the

trail of goods, therefore, invoking the provisions of 145 (3) of the Act are

not sustainable. However, he submitted that the Tribunal is ceased up

with the similar issue in many cases and on the applicability of the

judgment of Supreme Court in the case of M/s. Andaman Timber

Industries (Supra). The outcome of the said decisions as per the

Tribunal may be adopted for adjudication of these appeals on the issue

relating to making addition without granting the benefit of cross

examination.

correctness of making additions at the back of the assessee by the

Assessing Officer without granting benefit of cross examination of the

assessee. In my view, this issue is covered in favour of assessee by

virtue of decision of Tribunal in the case of Anita Sanjay Agrawal Vs.

ITO and others in ITA Nos.2622 to 2624/PUN/2016. For the sake of

completeness, relevant para is extracted herein below:

“25. The facts and issues arising before us are squarely covered by the facts and issues before the Hon'ble Supreme Court in M/s. Andaman Timber Industries Vs. Commissioner of Central Excise (supra) and applying the said principle / ratio to the facts of the present case, we hold that where the assessee had sought cross-examination of the witnesses at the earliest stage i.e. while objecting to the reasons recorded for reopening the assessment, which duly has been acknowledged by the Assessing Officer in his order disposing of objections raised by the assessee against reopening of assessment. But the Assessing Officer though asked the assessee to collect the statement but failed to allow cross-examination though he admitted that the same would be allowed in due course of time. On a later date, the Assessing Officer concludes that the letters sent under section 133(6) of the Act to the dealer were returned back. But the same cannot be reason for denying cross-examination. In the absence of allowing cross-examination of witnesses used against the assessee, where the addition was made in the hands of assessee on the basis of aforesaid statements recorded by the Sales Tax Department, we hold that no addition on account of bogus purchases can be made in the hands of assessee. The assessee had also established factum of trail of goods. Accordingly, we

delete the addition made on account of bogus purchases. The grounds of appeal raised by the assessee are thus, allowed.”

Considering the above, I am of the opinion that the decision of the

Tribunal is self explanatory and the addition made by AO without

granting cross examination is unsustainable. Reliance is placed on the

ratio of Hon'ble Apex Court in the case of M/s. Andaman Timber

Industries Vs. CIT (supra). Accordingly, Ground No.3 raised by the

assessee in all three appeals is allowed. Considering my decision above,

the remaining grounds raised by the assessee on merits are dismissed

as being academic.

Now I shall now take up the appeal of Shri Vivek Shrawan

Agrawal.

ITA No.2618/PUN/2016 – Shri Vivek Shrawan Agrawal Assessment Year : 2011-12

“1. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax, (Appeals)-I, Nashik, is not justified in confirming validity of notice issued u/s.148 particularly when AO has issued the said notice on the basis of information received from third party and without application of mind. 2. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax, (Appeals)-I, Nashik, is not justified in upholding the order passed by the AO u/s. 147 of the Act as the AO has not summarily rejected the objections raised against reasons recorded for the notice issued u/s.148 of the Act, by way of speaking order. 3. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax, (Appeals)-I, Nashik, is not justified in confirming the disallowance of purchases to the extent of 25%, particularly when the AO has not allowed the appellant the cross- examination of the witness of the revenue i.e. parties from whom the purchases were made as well as the competent Sales Tax Authority on the basis of whose information the notice u/s.148 of the Act was issued by the AO.

the issues, i.e. (1) validity of reassessment proceedings u/s.147 of the

Act and (2) not allowing the cross examination of the witnesses by the

AO, and (3) restricting the addition to 25% of the purchases, are

identical to the grounds raised by for the A.Y. 2009-10. Both the

parties also informed that their arguments on the issues shall remain

same in this appeal also. Following the same parity of reasoning given

by me in Para No.8 of this order while deciding the appeal of Shri

Sanjay Shrawan Agrawal for A.Y. 2009-10, I allow the legal ground No.3

relating to allowing of cross examination in favour of the assessee. All

the remaining grounds/issues raised by the assessee discussed above

are thus dismissed as being academic. Accordingly, the grounds raised

by the assessee are partly allowed.

Order pronounced on this 28th day of March, 2018.

Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 28th March, 2018. Satish

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप �ेिषत �ेिषत/Copy of the Order is forwarded to : �ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune