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Assessee represented by Ms. Chaitali Shah, C.A. Department represented by Shri Vinod Kumar, Sr. DR Date of Institution of Appeal 16/08/2023 Date of hearing 26/10/2023 Date of pronouncement 26/10/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A)) dated 28/07/2023 for the Assessment Year (AY) 2012-13. The assessee has raised following grounds of appeal: “1. On the facts and circumstances of the case as well as law on the subject, the ld. CIT(A) has erred in confirming the action of assessing officer in reopening the case of the assessee u/s 147 by issuing notice u/s 148 of the Act.
2. On the facts and circumstances of the case as well as law on the subject, the ld. CIT(A) has erred in confirming the action of assessing officer by sustaining the addition of Rs. 3,24,340/- (12.5% of Rs. 25,94,724) on account of alleged unexplained cash credit.
3. It is, therefore, prayed that addition made by the assessing officer and confirmed by CIT(A) may please be deleted.
Jainam Exports Vs ITO 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
Rival submissions of both the parties have been heard and record perused. The learned Authorised Representative (ld. AR) of the assessee submits that in addition to challenging the validity of reopening, the assessee also raised legal plea before Assessing Officer as well as before the ld. CIT(A) that at the time of service of notice under Section 148 of the Income Tax Act, 1961 (in short, the Act), the firm was dissolved. Such fact was communicated to the Assessing Officer in response to notice dated 08.03.2013 issued under Section 133(6) of the Act, vide reply dated 14/03/2019. Copy of dissolution deed was also furnished with such reply. The assessee again in the statement of fact, filed before the ld. CIT(A), raised similar plea that the assessee firm was dissolved on 12/03/2012 and intimation of such fact alongwith dissolution of partnership firm and discontinuation of business was communicated to the Assessing Officer. Neither the Assessing Officer nor the ld. CIT(A) took corrective measure for making assessment against the partner of dissolved firm rather passed the assessment order on non-existing entity. The ld. AR of the assessee submits that passing the order against non-existing entity is nullity and the assessment order may be quashed. To support such submission, the ld. AR of the assessee relied upon the decision of Hon'ble Gujarat High Court in the case of Adani Estate Management (P) Ltd. Vs ITO (2023) 151 Jainam Exports Vs ITO taxmann.com 387 (Gujarat) and the decision of Hon'ble Apex Court in PCIT Vs Maruti Suzuki India Ltd. (2019) 107 taxmann.com 375 (SC).
On ground No. 1 which relates to validity of reopening, the ld. AR of the assessee submits that the reasons recoded by the Assessing Officer were not the valid reasons. The Assessing Officer made reopening on the basis of third party information without recording his own satisfaction. The assessment was reopened on borrowed satisfaction. Thus, the reopening and issuance of notice under Section 148 is bad in law and the action initiated thereon is also void ab initio.
In her without prejudice submission, the ld. AR of the assessee on merit of the addition submits that the Assessing Officer made addition on account of alleged bogus purchases shown from Bhanwar Lal Jain and his group, who was allegedly indulged in providing bogus entry without actual delivery of goods. The Assessing Officer made addition of 100% of such purchases shown from Bhanwar Lal Jain and his group, however, the ld. CIT(A) restricted such addition to the extent of 12.5%. The ld. AR of the assessee submits that neither the sales of assessee was disputed nor the books of account was rejected. The Assessing Officer merely relied upon third party information without giving any finding on the evidences furnished by the assessee. The assessee has shown one to one correlation of purchases qua the sales once the sales of assessee was not disputed purchases, addition on account of expenses of purchase cannot Jainam Exports Vs ITO be disallowed. The ld AR for the assessee submits that the assessee is liable to be succeeded on all three counts. 5. On the other hand, the learned Senior Departmental Representative (ld. Sr.DR) for the revenue supported the orders of lower authorities. The ld. Sr.DR for the revenue submits that the assessee has neither raised such plea in the grounds of appeal
either before ld. CIT(A) or before the Tribunal that the assessee firm was dissolved. Therefore, such objection raised by ld. AR of the assessee should be rejected at the threshold. On validity of reopening, the ld. Sr. DR for the revenue submits that at the time of reopening, prima facie plea for reopening was that the income of assessee has escaped assessment is sufficient. The person from whom, the assessee has shown purchases is/was a well-known entry provider who was not doing any actual business activity except providing accommodation entry. Such fact was proved beyond doubt in a number of cases by accepting Bhanwar Lal Jain and his group as entry provider by various Benches of the Tribunal as well as by the Higher Courts. On the merit of addition, the ld. Sr. DR for the revenue submits that the ld. CIT(A) has reasonably restricted the addition to the extent of 12.5% of the impugned/ bogus purchases and the assessee do not deserve any further relief.
6. In rejoinder submission, the ld. AR of assessee submits that she has raised a legal plea and it was raised right from the beginning and such Jainam Exports Vs ITO fact is available on record that at the time of issuing notice under Section 148 of the Act, the assessee firm was dissolved. The legal issue can always raise at any stage, if such issue goes to the root of the case.
7. I have considered the submissions of both the parties and perused the record carefully. I have also deliberated on the various case laws relied upon by the ld. AR of the assessee. On perusal of record, I find that before issuing notice under Section 148 of the Act on 19/08/2019, the Assessing Officer issued notice under Section 133(6) of the Act on 08/03/2019 to assessee for seeking nature of business activities, return of income if any, filed by assessee with computation sheet, details of sales and purchase and bank statement. The assessee in response to such query, furnished their reply vide reply dated 14/03/2019. In reply, the assessee copy of acknowledgement of return for A.Y. 2012-13, bank statement and also submitted that firm “Jainam Exports” was dissolved. Copy of resolution deed was also filed as Annexure-A3. Reply of assessee was duly acknowledged by Assessing Officer on 18/03/2019. The Assessing Officer despite receiving such information, issued notice under Section 148 in the name of assessee firm for filing return of income. The partner of assessee filed return of income on 19/08/2019 through its partner. The Assessing Officer passed assessment order against the assessee by making addition of 100% of purchases shown from Parwati Exports, an entity managed by Bhanwar Lal Jain and his group. The