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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
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
Since the grounds raised by the assessee are identical for all the
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.
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.
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.
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 to the extent of 25% i.e. Rs.2,81,530/- of the purchases made from parties called as suspicious parties.
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 to the extent of 25% i.e. Rs.2,81,530/- of the purchases made from parties called as suspicious parties by holding that the said purchases are inflated particularly when the appellant has made the said purchases at prevailing market rate only.
The Appellant craves for addition to, deletion, alteration, modification, change any of the grounds.”
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.
Briefly stated relevant facts are that assessee is an individual and
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.
In the First Appellate Proceedings, the assessee questioned the
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
Contents of Para No.4.5 to 4.12 of the order of CIT(A) contains the
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.
Aggrieved with the part relief given by the CIT(A), the assessee
filed the present appeals before the Tribunal with the grounds extracted
above.
Before us, deviating from the grounds, Ld. Counsel for the
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.
Ld. DR for the Revenue relied on the order of CIT(A) dutifully.
I heard both the sides on the legal aspect of the issue relating to
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.
In the result, all three appeals of the assessee are partly allowed.
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
Grounds raised by the assessee read 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. 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.
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 to the extent of 25% i.e. Rs.4,83,105/- of the purchases made from parties called as suspicious parties. 5. 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 to the extent of 25% i.e. Rs.4,83,105/- of the purchases made from parties called as suspicious parties by holding that the said purchases are inflated particularly when the appellant has made the said purchases at prevailing market rate only. 6. The Appellant craves for addition to, deletion, alteration, modification, change any of the grounds.”
From the above, I find the grounds raised by the assessee on both
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.
In the result, appeal of the assessee is partly allowed.
To sum up, the appeals filed by both the assessees 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