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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI RAVISH SOOD
आदेश / ORDER PER RAVISH SOOD, JM
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 23.05.2022, which in turn arises from the order passed by the A.O under Sec. 147 r.w.s.143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 27.12.2017 for the assessment year 2010-11. The assessee has assailed the impugned order on the following grounds of appeal before us: “Revised Ground No.1 1. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in sustaining the addition of Rs.1,40,260/- i.e. 25% of Rs.5,61,050/- on the count of alleged bogus purchases of “rice bran” from M/s. Syndicate Corporation; disallowance of Rs.1,40,260/- is baseless estimation merely on presumption, surmises and without having any corroborative material/evidence brought on record by the ld. AO, more so, when the ld. AO has not rejected the books of account by applying section 145(3), addition of Rs.1,40,260 is liable to be deleted. 2. On the facts & circumstances of the case and in law, ld. AO & Id. CIT(A) has erred in disallowing Rs.1,40,260 which is 25% of the alleged bogus purchases at Rs.5,61,050 considered by the ld. AO from M/s. Syndicate Corporation, Raipur; arbitrary/ baseless estimation of 25% is on mere presumption, surmises and without having any basis/supporting corroborative evidence /material brought on record, is invalid & is liable to be deleted.”
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Also the assessee has raised additional grounds of appeal which reads as under:
“Additional Ground No.1. On the facts and circumstances of the case and in law, reasons recorded are based on information of bogus purchase bills of Rs.5,61,050 from the alleged bogus firm (Syndicate Corporation); there is no live link with the alleged unverified information received wherefrom; reopening cannot be resorted to for fishing or roving inquiry on mere suspicion that income chargeable to tax may have escaped assessment; it is not the 'reasons to believe' in the eyes of law as mandated u/s. 147 since thereafter, he has made addition of Rs.1,40,260 on estimation of 25% on adhoc basis on that count; reopening u/s.148 is liable to be quashed." Additional Gr.No.2: "2. On the facts and circumstances of the case and in law, the 'reasons to believe' contain not the reasons but the conclusions of the Id AO one after the other; there is no independent application of mind by the ld AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment; the conclusions of the Id AO are at best a reproduction of the conclusions of the information from extraneous sources; indeed it is a 'borrowed satisfaction'; in the absence of live link between the tangible material and the formation of the reason to believe that income has escaped assessment; reassessment u/s147/148 is liable to be quashed." Additional Gr.No.3: "2. On the facts and circumstances of the case and in law, reasons are recorded on 31-3-17 & notice issued u/s148 on the same day itself, i.e., on 31-3-17 by mentioning that after approval of Addl. CIT/ CIT/ Chief CIT; the alleged approval granted u/s. l51 would be in most mechanical & routine manner without there being any application of mind by the sanctioning authority on that very short period of time of few hours or minutes; in abs on the basis of bonafide believe on his part ence of a valid approval as mandated by law u/s.151
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by the appropriate sanctioning authority since it is beyond 4 years reopening of assessment u/s.147/148 would be invalid, bad in law and without jurisdiction and hence, is liable to be quashed.” As the assessee by raising the aforesaid additional grounds of 2. appeal has assailed the validity of the jurisdiction assumed by the A.O for initiating proceedings u/s.147 of the Act, which would not require looking any further beyond the facts available on record, therefore, I have no hesitation in admitting the same. My aforesaid view that where an additional ground of appeal involving purely a question of law requiring no further verification of facts is raised before the Tribunal, though for the first time, then, the same merits admission is supported by the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT (1998) 229 ITR 383 (SC).
Succinctly stated, the assessee firm which is engaged in the business of trading of various agricultural produce like moong daal, arahar daal, kokum DOC, rice bran, refined oil etc., had filed its return of income for the A.Y 2010-11 on 15.10.2010, declaring an income of Rs. Nil. The return of income filed by the assessee was processed as such u/s.143(1) of the Act.
On the basis of information received by the A.O that the assessee as a beneficiary had procured bogus purchase bills of Rs.5,61,050/- from M/s. Syndicate Corporation, Raipur, the case of the assessee firm
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was reopened u/s.147 of the Act. Notice u/s.148 of the Act dated 31.03.2017 was issued to the assessee. In compliance, the assessee firm filed its return of income on 27.04.2017, declaring an income of Rs.1,90,400/-.
During the course of the assessment proceedings, it was observed by the A.O that the assessee had claimed to have purchased rice bran of Rs.5,61,050/- from the aforesaid tainted party, viz. M/s. Syndicate Corporation, Raipur. It was observed by the A.O that as the aforesaid party, viz. M/s. Syndicate Corporation, Raipur was engaged in providing bogus bills, therefore, its registration was cancelled by the Commercial Tax Department, Chhattisgarh. On a perusal of the purchases which the assessee had claimed to have made from the aforesaid party, it was observed by the A.O that the same comprised of four purchase transactions, as under:
Date Amount 01.01.2010 Rs.1,37,200/- 03.01.2010 Rs.1,42,100/- 05.01.2010 Rs.1,42,100/- 05.01.2010 Rs.1,39,650/- Total Rs.5,61,050/-
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On the basis of verification carried out by the A.O, it was gathered by him that the vehicles/lorry numbers mentioned in the purchase bills were either as that of light goods vehicles or those of vehicles which were not compatible to carry load of 28MT or 29MT as was stated in the bills/vouchers. Apart from that, it was observed by the A.O that though the aforesaid supplier concern had only purchased iron & steel during the year, but the assessee firm had claimed to have purchased rice bran from it. As the assessee failed to substantiate the authenticity of the purchase transactions in question on the basis of supporting documentary evidences, therefore, the A.O was of the view that the assessee had procured the goods in question i.e. rice bran not from the aforementioned party but from the open/gray market. On the basis his aforesaid observations, the A.O holding a conviction that the assessee on the basis of bogus purchase bills would have booked the impugned purchases in its books of accounts at an inflated value, thus disallowed 25% of the same and made an addition of Rs.1,40,260/- in the hands of the assessee.
Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success.
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before me.
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As the Ld. Authorized Representative (for short ‘AR’) for the assessee has confined his contentions to two issues, viz. (i). that the assessee had made genuine purchases from the aforesaid party, therefore, the lower authorities had wrongly held the purchases in question as bogus; and (ii). that the A.O had wrongly assumed jurisdiction for initiating proceedings u/s.147 of the Act, therefore, I restrict my adjudication to the said respective issues.
It is the claim of the Ld. AR that both the lower authorities had most arbitrarily held the purchases made by the assessee from M/s. Syndicate Corporation, Raipur as bogus.
I have given a thoughtful consideration and find no substance in the aforesaid claim of the Ld. AR. As is discernible from the orders of the lower authorities, it transpires that the assessee had failed to place on record any material which would irrefutably evidence the genuineness of the purchases which were claimed by the assessee to have been made from the aforesaid tainted party, viz. M/s. Syndicate Corporation, Raipur. On the contrary, the fact that the alleged supplier viz. M/s. Syndicate Corporation, Raipur during the year under consideration was only trading in Iron and steel, while for the assessee had stated to have purchased rice bran from it in itself belies its said claim. Also, the fact that the goods that had been claimed by the
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assessee to have received from the aforesaid party through vehicles which were not compatible to carry load as was stated in the bills/vouchers also supports the view taken by the lower authorities that the assessee had not many any genuine purchases from the said party. Accordingly, I uphold the view taken by the lower authorities that the assessee had not made any genuine purchases from the aforementioned party.
Adverting to the claim of the assessee that the A.O had wrongly assumed jurisdiction u/s 147 of the Act, I think it fit to cull out the “reasons to believe” which forms the very basis for taking recourse to the said proceedings by the A.O, as under:
“The assessee filed the return of income for A.Y. 2010-11 declaring total income at Rs. Nil on 15/10/2010. The return was processed u/s. 143(1) and accordingly, the order u/s 143(1) was passed on 18.04.2011. Information in respect of bogus purchased bills taken by the assessee during the financial year 2009-10 relevant to A.Y.2010-11 is in the possession of this office. It has been seen that the assessee has taken bogus purchase bills from bogus dealer namely Syndicate Corporation amounting to total of Rs.5,61,050/- during F.Y.2009-10 pertaining to A.Y.2010-11. Thus, the assessee has suppressed his total, income by way of debiting bogus purchases. Therefore, in view of para (b) of explanation 2 of section 147, income chargeable to tax amounting to Rs.5,61,050/- has escaped assessment. In view of above, I have reasons to believe that income chargeable to tax amounting to Rs.5,61,050/- has escaped assessment for A.Y.2010-11 within the meaning of section 147 of the Income Tax Act, 1961.”
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The claim of the ld. A.R that the formation of belief of the A.O bears no nexus with the material available on record and is merely based on suspicion, does not find favor with me. As per the settled position of law, the A.O for taking recourse to proceedings u/s 147 of the Act is required to arrive at a bonafide belief on the basis of material available on record that the income of the assessee chargeable to tax had escaped assessment. No obligation is cast upon the A.O at the stage of taking recourse to proceedings u/s 147 of the Act to conclusively prove that the income of the assessee chargeable to tax had escaped assessment. As is discernible from the aforesaid “reasons to believe”, the A.O had clearly arrived at a bonafide belief on the basis of the material available with him that the income of the assessee chargeable to tax had escaped assessment. Accordingly, finding no substance in the claim of the ld. A.R that the belief of the A.O that the income of the assessee chargeable to tax had escaped assessment has no nexus with the material available on record, and is merely based on a pretence, does not find favor with me, as there was sufficient material available with the A.O for taking recourse to proceedings u/s.147 of the Act. Thus, the additional ground of appeal No.1 raised by the assessee is dismissed in terms of the aforesaid observations.
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Apropos, the claim of the Ld. AR that there is no independent application of mind by the A.O, and the proceedings u/s.147 of the Act have been initiated by him on the basis of a borrowed satisfaction, I am unable to subscribe to the same. On a careful perusal of the “reasons to believe”, I find that the A.O after referring to the material as was available before him had clearly applied his mind, and had on the basis of a bonafide belief so arrived at by him taken recourse to proceedings u/s.147 of the Act. Quality of the “reasons to believe”, as per the settled position of law, cannot be allowed as a basis for the assessee to assail the validity of jurisdiction assumed by the A.O u/s.147 of the Act. Thus, the additional ground of appeal No.2 raised by the assessee is dismissed in terms of the aforesaid observations.
Apropos, the claim of the assessee that as the “reasons to believe”, dated 31.03.2017 was followed by issuance of notice u/s.148 of the Act on the same date, i.e., on 31.03.2017 after obtaining approval of the appropriate authority u/s.151 of the Act, therefore, it could safely be inferred that the approval had been granted by the sanctioning authority in a mechanical manner, I am afraid does not find favour with me. On a perusal of the sanction granted by the appropriate authority u/s.151 of the Act, I find that the latter had approved the “reasons to believe” recorded by the A.O with an observation that the case was fit for reopening, and thus, had granted
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sanction for issuing notice u/s.148 of the Act. I, thus, not finding any merit in the aforesaid claim of the ld. A.R reject the same. Thus, the additional ground of appeal No.3 raised by the assessee is dismissed in terms of the aforesaid observations.
Resultantly, the appeal of the assessee is dismissed in terms of the aforesaid observations.
Order pronounced in open court on 26th day of December, 2022. Sd/- (रवीश सूद /RAVISH SOOD) �या�यक सद�य/JUDICIAL MEMBER रायपुर / Raipur; �दनांक / Dated : 26th December, 2022 ***SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals), Raipur (C.G.) 4. The Pr. CIT-1, Raipur (C.G.) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, रायपुर / DR, ITAT, “SMC” Bench, Raipur. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.