2017 (12) TMI 1667 - AT - Income Tax

Profit estimation @ 12.5% of the bogus purchase - HELD THAT - In the present case sale has not been disputed and the books of account have not been rejected - when the assessee has adduced the sufficient evidence on record which has been discussed about therefore, in the said circumstances, we are of the view that the no addition is required to be made on account of bogus purchase. Non service of noticed is not a ground to raise the addition of bogus purchase to the income of the assessee in view of the law settled in CIT Vs. M/s. Nikunj Eximp Enterprises P. Ltd. 2013 (1) TMI 88 - BOMBAY HIGH COURT . On seeing the above facts and circumstances of the present case and in view of the law settled relied by the Ld. Representative of the assessee we are of the view that the no addition is required to be raised in the instant case. We ordered accordingly, we decide this issue in favour of the assessee. Disallowance @ 10% of the television expenses, vehicle expenses, conveyance expenses, office & staff welfare expenses and sundry expenses - HELD THAT - It is incumbent upon the assessee to prove the claim by adducing the sufficient evidence on record. The assessee produced the self made vouchers and also produced the bill and vouchers in support of his claim. The AO restricted the addition to the extent of 10% on the basis of personal element. At the time of the argument the Ld. Representative of the assessee nowhere produced any other cogent evidence in support of his claim. On account of non producing the sufficient evidence in support of the claim, we are of the view that the CIT(A) has rightly restricted the claim to the extent of 10% of the expenses - Decided against assessee. Reopening of assessment - HELD THAT - AO was not having any information at that time because the Assessing Officer received the information from DGIT(Inv.), Mumbai vide letter dated 26.02.2013. When the Assessing Officer was not having any information as on 15.02.2013, therefore, it is strange in which circumstances, the Assessing Officer issued the present notice on the information received through letter dated 26.02.2013 as on date 15.02.2013. The personal knowledge of the Assessing Officer could not be the ground to invoke the proceeding u/s 147/148 of the I.T. Act. Therefore, in the said circumstances the noticed doesn t seems to be legal. It is held by Hon ble Supreme Court in the case of CIT Vs. Kurban Hussain Ibrahimji Mithiborwala 1971 (9) TMI 9 - SUPREME COURT that the notice issued for any invalid reason makes the proceeding void an without jurisdiction. - Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment.
2. Disallowance of 12.5% of alleged bogus purchases.
3. Disallowance of 10% of business expenses as personal in nature.
4. Deletion of addition on account of bogus purchases.
5. Validity of notice issued under Section 148 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Reassessment:
The assessee argued that the reassessment was bad in law and void ab initio as it was based on conjectures and surmises without concrete reasons to believe that income had escaped assessment. The reassessment was challenged on the grounds that the notice for initiating reassessment proceedings was issued before the Assessing Officer (AO) received information from the CIT-21 regarding the alleged purchases. The CIT(A) upheld the reassessment order, but the argument was not pressed by the assessee during the hearing, and thus, this issue was decided in favor of the revenue.

2. Disallowance of 12.5% of Alleged Bogus Purchases:
The assessee challenged the addition confirmed by CIT(A) at 12.5% of the bogus purchases. The AO had made the addition based on information received from DGIT(Inv.), Mumbai, regarding purchases from 20 parties amounting to ?4,14,91,279/-. The assessee provided evidence such as ledger accounts, confirmations from suppliers, MVAT challans, and purchase and sales invoices, which were not considered by the AO and CIT(A). The tribunal found that the AO and CIT(A) did not consider the evidence provided by the assessee and concluded that no addition was required on account of bogus purchases. The tribunal relied on precedents such as Vijay Protein Vs. CIT and CIT Vs. Simit P Sheth, and decided this issue in favor of the assessee, dismissing the revenue's claim.

3. Disallowance of 10% of Business Expenses as Personal in Nature:
The assessee challenged the disallowance of 10% of business expenses amounting to ?2,60,347/-, which were treated as personal in nature by the AO. The AO made this disallowance on an estimation basis due to the personal element involved. The assessee provided self-made vouchers and bills in support of the claim but failed to produce any additional cogent evidence during the hearing. The tribunal upheld the CIT(A)'s decision to restrict the claim to 10% of the expenses, deciding this issue in favor of the revenue.

4. Deletion of Addition on Account of Bogus Purchases:
The revenue challenged the CIT(A)'s decision to delete the addition of ?3,63,04,869/- on account of bogus purchases. The AO had made the addition based on the assessee's inability to prove the genuineness of the purchases and failure to produce the hawala parties for examination. The CIT(A) sustained the addition to the extent of 12.5% of the bogus purchases. The tribunal, however, found that the assessee had provided sufficient evidence to support the claim and ruled that no addition was required on account of bogus purchases, dismissing the revenue's appeal.

5. Validity of Notice Issued Under Section 148 of the Income Tax Act:
The assessee argued that the notice issued under Section 148 was invalid as it was issued before the AO received information from the Sales Tax Department. The AO issued the notice on 15.02.2013, while the information was received on 26.02.2013. The tribunal found that the AO did not have any information at the time of issuing the notice, making the notice invalid. The tribunal relied on the Supreme Court's decision in CIT Vs. Kurban Hussain Ibrahimji Mithiborwala and GKN Driveshafts (India) Ltd. Vs. DCIT, setting aside the notice under Section 147/148 of the Act. Consequently, the tribunal decided this issue in favor of the assessee, rendering adjudication on the merits academic.

Conclusion:
The tribunal partly allowed the assessee's appeal and dismissed the revenue's appeal for the assessment year 2009-10. For the assessment year 2010-11, the tribunal allowed the assessee's appeal and dismissed the revenue's appeal, setting aside the notice issued under Section 148 of the Income Tax Act.

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