2019 (8) TMI 762 - AT - Income Tax

Admission of additional ground - approval u/s 153D - HELD THAT - Admittedly, the assessee has taken legal ground challenging validity of assessment order passed by the AO in light of valid approval u/s 153D, for the first time, before the Tribunal. We find that additional ground taken by the assessee is purely a legal issue which questions the authority of the AO passing assessment order in light of specific provisions provided u/s 153D. Therefore, we are of the considered view that there is a merit in additional ground filed by the assessee and hence, the same is admitted for adjudication. Approval u/s 153D - validity of assessment order passed u/s 143(3) r.w.s. 153A - HELD THAT - Though, copy of approval letter is not available in the assessment record, but the contents of approval letter issued by the competent authority has been reproduced in verbatim in the assessment order at para 7. Further, the approval granted in other group cases is very much available in the assessment folder. Therefore, it cannot be said that no approval had been taken. Further, the approval u/s 153D is an administrative procedure which requires to be complied with by the officers, who is discharging the assessment functions. The administration action of the department is not very much relevant for the assessee to justify its case, on merits. Therefore, when assessee goes to question the administrative procedure, rather contending its case on merits, that too, after a lapse of 4 to 5 years, then obviously, a doubt arises about intend of the assessee in taking this ground and such an attempt is derail the issue on merits and to escape on technical ground. Therefore, we are of the considered view that there is no merit in the additional ground taken by the assessee challenging validity of assessment order passed by the AO u/s 143(3) r.w.s. 153A. - additional ground rejected Addition u/s 69C - bogus purchases - MD make statements u/s 131 that the company has not followed standard operating procedures in respect of certain purchases from certain parties - HELD THAT - It is an admitted fact that during the course of survey u/s 133A, certain loose papers, bills and other relevant documents were found, as per which, the assessee has taken accommodation / bogus purchase bills to the extent of 13.86 crores for FYs 2006-07 to 2010-11. The said quantification has been made on the basis of discrepancies noticed in respect of purchase bills from those parties in comparison to the standard operating procedure followed by the assessee in respect of central purchase department. When these discrepancies were confronted to the managing director of the assessee, Shri Ajit B Kulkarni, in his statement recorded u/s 131 he had categorically admitted that no standard operating procedure were followed in respect of purchases from 22 parties. This fact has been confirmed by the Executive Director of the company, Shri Ashok Kumar Wadhera and shri Vipin S Shah, Chief Accounts Officer of the company. Further, during the course of assessment proceedings, the AO has carried out enquiries to ascertain correctness of purchases from the above parties in light of facts brought out by the survey party and also in light of report of sales-tax department. Enquiries conducted by the AO prove the fact that purchases from the above parties are bogus which are not supported by necessary evidence. We are of the considered view that the AO has not only made addition on the basis of third party information without confronting those statements to the assessee, but carried out further verification which proved fact that those purchases are bogus in nature. In fact, the facts brought out by the AO during assessment Proceedings clearly establishes the fact of accepting bogus purchase bills from hawala dealers. Accordingly, we reject the arguments of the assessee that purchases from above parties are genuine, which are supported by necessary evidences. Hon ble Supreme Court in the case of NK Proteins Ltd vs DCIT 2017 (1) TMI 1090 - SC ORDER dismissed appeal filed by the assessee and confirmed the findings of Hon ble Gujarat High Court 2016 (6) TMI 1139 - GUJARAT HIGH COURT in respect of bogus purchases, where the Hon ble Gujarat High Court, after analysing necessary facts at para 6 of the order, held that once the Tribunal having come to a categorical finding that the purchases from certain parties are bogus, it was not incumbent on it to restrict the disallowance to the extent of 25% of such purchases. - we are of the considered view that the AO was right in making 100% addition towards bogus purchases u/s 69C. The Ld.CIT(A), after considering relevant facts, has rightly confirmed the findings of Ld.AO. - appeal filed by the assessee is dismissed

Issues Involved:
1. Validity of assessment orders under section 143(3) read with section 153A in the absence of valid prior approval under section 153D.
2. Addition towards bogus purchases from certain parties.
3. Alleged violation of principles of natural justice.

Issue-wise Detailed Analysis:

1. Validity of Assessment Orders under Section 143(3) Read with Section 153A in the Absence of Valid Prior Approval under Section 153D:
The assessee challenged the validity of the assessment orders arguing that the Assessing Officer (AO) passed the assessment orders without obtaining the necessary prior approval from the Additional Commissioner of Income Tax (Addl. CIT) as required under section 153D of the Income Tax Act, 1961. The assessee contended that the absence of such approval renders the assessment orders void ab initio. The Revenue, however, argued that the AO had indeed obtained the necessary approval, as evidenced by the affidavits of the officers involved and the mention of the approval in the assessment order.

The Tribunal noted that the AO had recorded in the assessment order that approval was obtained from the Addl. CIT. Furthermore, affidavits from the officers confirmed the issuance of the approval. Although the approval letter was not found in the assessment folder, the Tribunal considered the circumstantial evidence and the affidavits sufficient to establish that the approval was indeed obtained. Consequently, the Tribunal rejected the additional ground raised by the assessee, holding that the assessment orders were valid.

2. Addition Towards Bogus Purchases from Certain Parties:
The AO made additions towards bogus purchases based on a survey conducted under section 133A and information from the Sales Tax Department, which indicated that the assessee had obtained accommodation bills from hawala dealers. The AO observed discrepancies in the standard operating procedures (SOPs) followed by the assessee for these purchases and noted the absence of key documentation. The assessee failed to produce confirmations from the parties or produce the parties for verification.

The Tribunal upheld the AO's addition, noting that the AO had conducted thorough inquiries and the assessee could not substantiate the purchases with necessary evidence. The Tribunal referred to the Supreme Court's decision in the case of N.K. Proteins Ltd., which held that 100% of bogus purchases could be added to income. The Tribunal found that the AO's conclusion that the purchases were bogus was well-supported by the evidence and upheld the addition.

3. Alleged Violation of Principles of Natural Justice:
The assessee argued that the CIT(A) had violated the principles of natural justice by not providing a reasonable opportunity to present its case. However, during the hearing, the assessee's representative chose not to press this ground. Consequently, the Tribunal dismissed this ground as not pressed.

Conclusion:
The Tribunal dismissed all the appeals filed by the assessee and upheld the validity of the assessment orders and the additions made towards bogus purchases. The cross objections filed by the Revenue were also dismissed as infructuous. The order was pronounced in the open court on 10-04-2019.

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