2020 (10) TMI 1144 - AT - Income Tax

Reopening of assessment - basis of satisfaction recorded by some other authority (i.e. third party) like Sale Tax, Mumbai - Whether No Enquiry by the Assessing officer (AO) - Non recording own satisfaction - bogus purchase of packing materials - HELD THAT - After going through the judgment passed by the in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. 2007 (5) TMI 197 - SUPREME COURT we are of the view that the reopening of the assessment on the basis of the specific information is legally valid. - Decided against assessee. Bogus purchases - Assessee has filed all the documentary evidences for the purchase of packaging material from two parties namely (i) M/s DD Corporation and (ii) M/s Amit Trading Co. The assessee has also filed the copy of the purchase bill with challan of both the parties, party confirmation, registration certificate and statement of payment with bank statement which the assessee has already submitted before the AO as well as before the Ld. CIT(A) in the shape of paper book. Assessee has also filed the documentary evidences before us in the shape of paper book mentioned above. Documentary evidences filed by the assessee for substantiating the claim of assessee and establishing the genuineness of purchase of packing material from the afore-mentioned two parties which has not been falsified by the AO by making any enquiry or producing any documentary evidences contrary to the evidences filed by the assessee. Even otherwise, Ld. DR has not filed any contrary evidences before us to falsify the claim of the assessee. - Decided in favour of assessee.

Summary

Issues Involved:
1. Justification for reopening the assessment based on third-party satisfaction.
2. Legitimacy of disallowance of expenses on account of bogus purchases of packing materials.

Detailed Analysis:

1. Justification for Reopening the Assessment:
The primary issue was whether the Deputy Commissioner of Income Tax Circle 9(1), Kolkata, was justified in reopening the assessment based on satisfaction recorded by a third party, specifically the Sales Tax Department, Mumbai. The reopening was challenged on the grounds that the Assessing Officer (AO) did not record his own satisfaction. The Tribunal referred to the Supreme Court judgment in ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., which clarified that for reopening under section 147, the AO only needs to have reason to believe that income has escaped assessment. The Tribunal upheld the reopening of the assessment, stating that it was legally valid based on specific information, dismissing the assessee's ground on this issue.

2. Legitimacy of Disallowance of Expenses on Account of Bogus Purchases:
The second issue concerned the disallowance of expenses claimed for purchases of packing materials, which the AO deemed bogus based on reports from the Sales Tax Department and subsequent inquiries. The assessee argued that all documentary evidence supporting the purchases was provided, and no further inquiry was conducted by the AO to disprove these documents. The Tribunal reviewed the documentary evidence submitted by the assessee, including purchase bills, party confirmations, registration certificates, and bank statements showing payments. The Tribunal emphasized that the AO failed to conduct meaningful inquiries or produce contrary evidence to disprove the assessee's claims. Citing several judicial precedents, the Tribunal concluded that the disallowance was not sustainable as the assessee had discharged its onus by providing credible evidence. Consequently, the Tribunal deleted the additions made by the AO and upheld the genuineness of the purchases.

Conclusion:
The Tribunal ruled in favor of the assessee on both issues. It upheld the reopening of the assessment as legally valid but found the disallowance of expenses for packing materials to be unjustified, leading to the deletion of the additions. The appeals were partly allowed for the assessment years 2009-10 and 2010-11, and fully allowed for the assessment year 2011-12.