2019 (5) TMI 696 - HC - Income Tax

Reopening of assessment u/s 147 - bogus purchases - CIT(Appeal) has held that 15% of unverifiable/bogus purchases is to be added to the income of the appellant also confirmed by ITAT - HELD THAT - Copy of reasons recorded were supplied to the assessee alongwith notice u/s.142(1) and notice u/s.143(2) dated 21.4.2014. The Assessing Officer on examination of purchase details noted that the assessee had shown purchases from M/s. JPK Trading Pvt. Ltd. Amounting to ₹ 20,96,965/-. However, as per the statement of Shri Praveen Kumar Jain, it was found that M/s. JPK Trading Pvt. Ltd. had never sold any goods and were only issuing bogus sale invoices and charged commission. CIT(A) and ITAT have noted the request of the appellant for permitting cross examination of the Director of the said company Shri Praveen Kumar Jain of M/s. JPK Trading (I) Pvt. Ltd. Tribunal that the Assessing Officer taking resort to various case laws made the trading addition of ₹ 5,24,240/- by disallowing 25% of unverifiable purchases of ₹ 20,96,965/-. CIT(A), however, reduced the trading addition to ₹ 5,24,240/- by relying on the judgement of the ITAT Jaipur Bench dated 22.10.2014 in Anuj Kumar Varshney vs. ITO 2015 (4) TMI 533 - ITAT JAIPUR . The CIT(A) has also upheld the earlier orders by dismissing the appeal and noted that the CIT(A) has elaborately discussed the issue raised by the assessee in his order, which was not interfered by this Court. No substantial question of law. We are inclined to concur with the view taken by the ITAT as also the CIT(A). In our view, the present appeal does not raise any question of law much less substantial question of law.

Summary

Issues:
1. Condonation of delay in filing appeal.
2. Challenge against ITAT judgment.
3. Validity of reopening proceedings under section 147.
4. Sustaining addition of unverifiable purchases.
5. Cross-examination of witnesses.
6. Dismissal of appeal by the High Court.

Condonation of Delay in Filing Appeal:
The High Court, in this judgment, condoned a delay of 78 days in filing the appeal based on the application under section 5 of the Limitation Act. The delay was considered and allowed, enabling the appeal to proceed.

Challenge Against ITAT Judgment:
The appeal was filed against the ITAT judgment which dismissed the assessee's appeal and a subsequent application for rectification. The CIT(A) partly allowed the appeal filed by the assessee against the assessment order. The ITAT confirmed the CIT(A) order, leading to the dismissal of the appeal. The High Court concurred with the view taken by the ITAT and the CIT(A), finding no substantial question of law raised in the appeal.

Validity of Reopening Proceedings under Section 147:
The assessee challenged the validity of the initiation of proceedings under section 147 of the Income Tax Act, 1961, based on borrowed satisfaction. The Tribunal did not adjudicate on this specific contention raised by the assessee regarding the validity of reopening. The High Court noted that the Tribunal's order did not address the issue of validity of reopening, which was a crucial aspect of the case.

Sustaining Addition of Unverifiable Purchases:
The CIT(A) had sustained the addition of ?3,14,545 out of the total addition of ?5,24,240 made by the Assessing Officer. The ITAT upheld this decision, reducing the trading addition based on case law references. The High Court agreed with the ITAT and CIT(A) decisions, stating that no substantial question of law was raised in this regard.

Cross-Examination of Witnesses:
The counsel for the assessee argued that the authorities erred in sustaining the addition without allowing the opportunity to cross-examine the seller. The High Court noted that the objection raised in response to the notice under section 148 was not considered, emphasizing the importance of providing an opportunity for cross-examination as per settled legal principles.

Dismissal of Appeal by the High Court:
The High Court dismissed the appeal, stating that no substantial question of law was raised. The order of the Tribunal was not interfered with, leading to the dismissal of the writ petition seeking rectification of the Tribunal's order. The High Court found no grounds for entertaining the writ petition, resulting in its dismissal.

This comprehensive analysis of the judgment covers all the issues involved in detail, highlighting the key legal arguments and decisions made by the authorities and the High Court.