2017 (10) TMI 590 - AT - Income Tax

Bogus claim of expenditure in respect of purchase of blown bitumen and also transport expenses - Held that - In respect of the observations of the Ld. CIT (A) that blown bitumen is not a suitable raw material for production of Crumb Rubber modifier, whereas its raw material is natural asphalt is concerned, record does not support this observation of the Ld.CIT (A). In our opinion on this aspect there should have some enquiry conducted by the authorities below as to whether the blown bitumen has got any role in the manufacturing of Crumb Rubber Modifier, let alone it is not a suitable raw material. Nextly, insofar as the existence or non existence of Mahesh Roadways is concerned, except the bald statement that was made by Bhupinder in the complaint that Mahesh Roadways does not exist at all, the AO did not make any enquiries on that aspect by taking steps under law. So also the AO relied upon the statement of Bhupinder on the aspect of any excessive expenditure. In all fairness the AO should have enquired the truth or otherwise of the statement of Bhupinder Kumar Sekhri instead of believing it to be a gospel truth. We, therefore, find that there is want of enquiry on the part of the AO in respect of the purchase of blown bitumen and also about the transport charges. Since we believe that the verification of the fact on this aspect has a bearing on the assessment of the income of the assessee for the relevant years, we deem it just and necessary to set aside these two issues to the file of the AO for ascertaining the truth by making enquiries by affording an opportunity to the assessee to produce the relevant documents, if any.

Summary

Issues:
1. Assessment years 2006-07 to 2009-10 related to search proceedings in Tinna Group of Cases.
2. Time-barred assessment for AY 2006-07 under Section 153C.
3. Addition of transportation expenses and bogus purchases for AY 2009-10.

Analysis:

Issue 1:
The appeals of the assessee for assessment years 2006-07 to 2009-10 were a result of search proceedings in Tinna Group of Cases. The facts and issues being the same, the tribunal decided to dispose of them through a common order.

Issue 2:
Regarding the assessment year 2006-07, the argument was made that the assessment was time-barred under the proviso to Section 153C. The contention was that the assessments for the years preceding 2012-13 could not be framed, as the seized papers were handed over after November 2012. Relying on relevant case laws, the tribunal found the assessment for AY 2006-07 to be time-barred and quashed it.

Issue 3:
For the assessment year 2009-10, the AO made additions on transportation expenses and bogus purchases. The AO relied on a criminal complaint and statements to make these additions. The tribunal noted that there was a lack of proper enquiry by the AO on various aspects, such as the suitability of blown bitumen as raw material and the existence of Mahesh Roadways. It was observed that the AO should have conducted further investigations before making the additions. Therefore, the tribunal set aside these issues for the AO to conduct proper enquiries and afford the assessee an opportunity to produce relevant documents.

In conclusion, the tribunal dismissed the appeal for AY 2006-07 as time-barred and allowed the appeals for AY 2009-10 for further investigation by the AO.