2022 (2) TMI 178 - AT - Income Tax

Reopening of assessment u/s 147 - assessee has challenged reopening of assessment on the grounds that the impugned reopening u/s 148 of the regular assessment already concluded u/s 143(3) of the Act, after the expiry of the statutory period of 4 years is illegal and bad-in-law requiring outright annulment - HELD THAT - So far this plea of assessee we note that ld Counsel did not submit the copy of the original assessment order therefore, it can not be ascertained that assessee has submitted entire books of accounts, bills, vouchers, purchases/sales invoices, bank statements etc. for verification of assessing officer. We have examined the paper book submitted by the assessee and noticed that during the reassessment proceedings the assessee submitted, ITR copy, PAN, ledger account, VAT return and affidavit in respect of Sun Daim, Vitrag and Moulimani. We do not find any documents which were submitted during the original assessment proceedings. Therefore, it seems to us that during the original assessment proceedings, the assessee has not submitted entire books of accounts, bills, vouchers, bank statements, purchases/sales vouchers, details of direct and indirect expenses incurred by assessee and other necessary evidences to disclose fully and truly all material facts necessary for making original assessment, therefore, assessee cannot take the benefit of proviso to section 147 of the Act, hence, we dismiss the ground no.1 raised by the assessee. Whether assessment order was framed without providing opportunity to cross examine? - HELD THAT - We find merits in the submissions of ld DR for the Revenue that assessee is doing transactions with these benami entities of Shri Rajendra Jain Group, Shri Sanjay Choudhary Group and Dharmichand Jain Group of Mumbai, they know to each other, hence opportunity to cross examine is not necessary. We also note that during the assessment stage the assessee did not ask the assessing officer to provide an opportunity for cross examination. We note that during the assessment stage assessee did not submit required details and documents and did not assist the assessing officer in making the reassessment, (vide last para of the assessment order). The ld DR also submits that Fraud vitiates everything , these all are associated concerns and interconnected business concerns, hence opportunity to cross examine is not necessary. Hence, we dismiss ground no.4 raised by the assessee. Bogus purchases - HELD THAT - The issue raised by the assessee is covered by the judgment of Pankaj K. Choudhary 2019 (8) TMI 1769 - ITAT SURAT as held AO. did not make any inquiry on the documentary evidences filed by assessee and did not doubt the explanations. Since the documentary evidences filed on record have not been doubted by A.O. and no adverse finding have been given and no inquiry have been made into the claim of assessee, therefore, there was no basis to treat such purchases as bogus - Entire addition is wholly unjustified and even it is not a fit case where Gross Profit rate of 5% be applied for sustaining the part addition - Decided in favour of assessee. Grounds raised by the assessee are partly allowed.

Issues Involved:
1. Validity of proceedings initiated under Section 148 of the Income Tax Act, 1961.
2. Adequacy of sanction from the appropriate authority for reopening the assessment.
3. Rejection of books of account without pointing out any defect.
4. Violation of principles of natural justice by not providing an opportunity for cross-examination.
5. Sustaining the addition of ?13,49,440/- by treating genuine purchases as suspicious.

Detailed Analysis:

1. Validity of Proceedings under Section 148:
The assessee argued that the proceedings under Section 148 were initiated without jurisdiction and based on borrowed reasons. The Tribunal noted that the Assessing Officer (AO) had received a report from the Investigation Wing, Mumbai, indicating that the assessee was a beneficiary of accommodation entry operators. The AO had reason to believe that income had escaped assessment based on this report. The Tribunal emphasized that the expression "escaped assessment" implies that income for a particular year went unnoticed by the AO. The AO formed a belief from the examination and information received. The Tribunal found that the reopening of the assessment was justified as per the provisions of Section 147 of the Act, citing the judgment of the Gujarat High Court in Pushpak Bullion Pvt Ltd. The Tribunal rejected the assessee's contention regarding the jurisdiction and upheld the validity of the proceedings under Section 148.

2. Adequacy of Sanction for Reopening:
The assessee did not press this ground during the hearing, and it was dismissed as not pressed.

3. Rejection of Books of Account:
The assessee did not press this ground during the hearing, and it was dismissed as not pressed.

4. Violation of Principles of Natural Justice:
The assessee argued that the assessment order was framed without providing an opportunity to cross-examine and without furnishing the material and evidence to the assessee, violating the principles of natural justice. The Tribunal found merit in the Revenue's submission that the assessee was engaged in transactions with benami entities and hence, the opportunity for cross-examination was not necessary. The Tribunal noted that during the assessment stage, the assessee did not request the AO to provide an opportunity for cross-examination. The Tribunal dismissed this ground, stating that the interconnected business concerns did not necessitate cross-examination.

5. Sustaining the Addition of ?13,49,440/-:
The CIT(A) had sustained the addition of ?13,49,440/- by treating genuine purchases as suspicious purchases, disallowing 12.5% of the impugned purchases. The Tribunal referred to the judgment of the Coordinate Bench in the case of Pankaj K. Choudhary, where it was held that in cases of bogus purchases, the addition should be restricted to a reasonable percentage of the impugned purchases. The Tribunal noted that the AO had not made any independent investigation and solely relied on the report of the Investigation Wing. The AO did not dispute the sales of the assessee and made no comment on the documentary evidence furnished by the assessee. The Tribunal found that the CIT(A) had reasonably restricted the disallowance to 12.5% of the impugned purchases, considering the overall facts and circumstances. The Tribunal partly allowed the appeal of the assessee, restricting the disallowance to 6% of the impugned purchases to meet the possibility of revenue leakage.

Conclusion:
The Tribunal upheld the validity of the proceedings under Section 148 and dismissed the grounds related to the adequacy of sanction and rejection of books of account as not pressed. It dismissed the ground related to the violation of principles of natural justice and partly allowed the appeal of the assessee by restricting the disallowance to 6% of the impugned purchases. The order was pronounced on 31/01/2022.

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