SHAF BROADCAST P.LTD,MUMBAI vs. DCIT CIR 9(3), MUMBAI

Facts relating to the case are stated in brief. The assessee-company is engaged in the business of trading in computer system and software. It filed its return of income for the year under consideration on 26.10.2004 declaring a total income of ` 1.80 crores. The Assessing Officer received information that a company named M/s. Washington Software Ltd. has issued bogus bills for supply of software and it was noticed that the assessee has purchased software for a value of ` 50.44 lakhs from the above said company. Hence, the Assessing Officer reopened the assessment by issuing notice u/s. 148 of the Act. The assessee contended that it had really purchased the software from M/s. Washington Software Ltd. and in support of the same, it furnished copies of invoice issued by M/s. Washington Software Ltd. Along with ledger account and bank statement evidencing payment towards same. However, the Assessing Officer placed reliance on the sworn statement given by Shri Sanjay D. Sonawane, in his capacity as a director of M/s. Washington Software Ltd., wherein he had stated that the bills that were issued by his company were only accommodation bills and they have been issued by receiving commission of 1% on the value of bills. He had also confessed that his company did not have the capacity for developing software. When statement given by Shri Sanjay D. Sonawane was put to the assessee, the assessee asked for cross examination of the above said person. The Assessing Officer, however took the view that the assessee should have produced Shri Sanjay D. Sonawane, if it wished to cross examine him. Accordingly he held that purchase of software valuing at ` 50.44 lakhs made from M/s. Washington Software Ltd. is bogus purchases and 3 M/s. Shaf Broadcast Pvt. Ltd.

The first legal issue urged by the assessee relates to the validity of reopening of assessment. We notice that the AO has reopened the assessment upon receiving information that the purchases made from M/s Washington Software Ltd were bogus purchases. Accordingly we are of the view that the assessing officer had proper reasons for entertaining the belief that the income of the assessee has escaped the assessment. Accordingly we are of the view that the Ld CIT(A) was justified in upholding the validity of reopening of assessment.

The next legal issue urged by the assessee during the course of hearing is that the assessment is bad in law, since the AO has completed the assessment without furnishing the reason for reopening. At the time of hearing, the Ld D.R submitted copy of order sheet noting made by the AO, a copy of which was also furnished to the assessee. A careful perusal of the same would show that the AO has noted down that he has furnished the reasons for reopening along with the notice u/s 142(1) of the Act on 21-07-2011. When these facts were put before Ld A.R, he submitted that the assessee has received notice u/s 142(1) of the Act only and the copy of reason for reopening was not received. The Ld A.R also furnished an affidavit obtained from the assessee in support of this submission.

We heard Ld D.R, who submitted that the reasons were furnished to the assessee along with notice u/s 142(1) of the Act. Having heard rival submissions we are of the view that the noting made by the AO in the assessment record should be given preference to the affidavit filed by the assessee for the reason that the assessee has fairly accepted that it has received notice u/s 142(1) of the Act. The order sheet noting clearly mention that the reason for reopening has been supplied along with notice issued u/s 142(1) of the Act. Accordingly we decline to entertain the affidavit and also 4 M/s. Shaf Broadcast Pvt. Ltd.

The Ld A.R also submitted that the assessee was not allowed opportunity to cross examine the director of M/s Washington Software Ltd. On merits, the Ld A.R submitted that the assessee has sold the softwares purchased from the above said company and accordingly submitted that it could not have sold the softwares without purchasing them. During the course of hearing, the Ld A.R was directed to furnish one to one reconciliation of the purchase bills and sales bills. However, till date the same was not filed.

Since the assessing officer has not allowed opportunity of cross examination and since the AO also did not examine the claim of the assessee that the softwares have been sold to others, we are of the view that this issue requires fresh examination at the end of the AO. Accordingly we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the same afresh by duly considering the information and explanations that may be furnished by the assessee. The AO should allow opportunity of cross examination, if so demanded by the assessee.

In the result, the appeal filed by the assessee is treated as partly allowed for statistical purposes.