2018 (10) TMI 1759 - HC - Income Tax

Deduction u/s 10AA denied - Bogus purchases - HELD THAT - We are inclined to concur with the view taken by the Tribunal which is based on the facts proved by statement of Shri Praveen Jain. The appellant despite being provided opportunity failed to prove the genuineness of the transactions and failed to produce the parties along with their books of accounts from whom such transactions were made to verify the same. Relied judgment of the Supreme Court in Commissioner of Income Tax Delhi Vs. M/s. Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT does not offer any assistance to the appellant in the present case. It cannot be said that the Assessing Officer in the subsequent assessment order has arrived at a view that it has taken only on the basis of whatever material was available with him at the time of framing of initial assessment order. Indisputably the Assessing Officer at the subsequent stage has relied upon the statement of Shri Praveen Jain recorded under Section 132 (4) of the Act. It is on that basis that he called upon the appellant to prove the genuineness of the transactions. Therefore the Assessing Officer has rightly disallowed the deduction under Section 10AA of the Act. As regards the argument of the appellant for not providing him opportunity of cross examine Shri Praveen Jain in the first place the Assessing Officer himself required the appellant to produce representative of the concerned parties along with their books of accounts and he failed to produce them. Secondly no such prayer was ever made by the appellant before the Assessing Officer to summon Shri Praveen Jain for his cross-examination. No substantial question of law

Issues:
1. Challenge to the judgment of the Income Tax Appellate Tribunal.
2. Dispute regarding deduction under Section 10AA of the Income Tax Act.
3. Reassessment proceedings initiated under Section 147/148 of the Act.
4. Alleged unexplained expenditure and disallowance.
5. Failure to cross-examine a key person during assessment proceedings.

Issue 1: Challenge to the judgment of the Income Tax Appellate Tribunal
The appellant challenged the judgment of the Income Tax Appellate Tribunal, which dismissed the appeal against the de-novo assessment order passed under Section 143(3)/263 of the Act. The Tribunal held that the reassessment was not a case of change of opinion as fresh information was considered. The appellant contended that the reassessment order did amount to a change of opinion and relied on the principle that reassessment cannot be made based on existing material. The Tribunal's decision was based on receiving new information for the reassessment.

Issue 2: Dispute regarding deduction under Section 10AA of the Income Tax Act
The appellant, a diamond manufacturing firm, claimed deductions under Section 10AA of the Act for profits from exports made by its unit at SEZ, Surat. The Commissioner of Income Tax cancelled the original assessment allowing the deductions, leading to de-novo assessment disallowing the deductions. The CIT(A) allowed the deductions, but the Assessing Officer initiated reassessment proceedings under Section 148, disallowing a portion of the claimed amount. The Tribunal upheld the disallowance due to lack of proof of the genuineness of purchases from certain entities.

Issue 3: Reassessment proceedings initiated under Section 147/148 of the Act
Reassessment proceedings were initiated under Section 147/148 based on alleged bogus purchases made by the appellant from certain entities. The Assessing Officer disallowed a portion of the claimed amount as unexplained expenditure, citing non-existence of the supplying entities. The appellant argued that all relevant documents were provided during the original assessment, and the reassessment was unjustified. The Tribunal upheld the reassessment based on new evidence indicating the purchases were non-genuine.

Issue 4: Alleged unexplained expenditure and disallowance
The appellant faced disallowance of claimed deductions under Section 10AA due to alleged bogus purchases from entities controlled by a key person engaged in providing accommodation entries. Despite opportunities, the appellant failed to prove the genuineness of the transactions or produce the supplying entities for verification. The disallowance was upheld by the Tribunal based on the lack of evidence provided by the appellant.

Issue 5: Failure to cross-examine a key person during assessment proceedings
The appellant argued that they were not provided with the opportunity to cross-examine a key person involved in the alleged bogus purchases. However, the Tribunal held that the appellant failed to prove the genuineness of the transactions and did not request cross-examination during the assessment proceedings. The Tribunal cited previous judgments to support the rejection of the appellant's argument regarding the lack of cross-examination opportunity.

This comprehensive analysis of the judgment highlights the key legal issues involved, the arguments presented by the parties, and the reasoning behind the court's decision on each issue.

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