2023 (2) TMI 463 - AT - Income Tax

Reopening of assessment u/s 147 - jurisdiction for reopening and recording reasons without application of mind and without making proper enquiry etc - HELD THAT - AO recorded the reasons for reopening the assessment and after seeking and being accorded approval by competent authority, issued and served the notice u/s 148 of the Act. Thus, it is found that there was failure on the part of the assessee to disclose fully and truly all material facts. On the basis of cogent and tangible information received and after ascertaining the fact that no scrutiny assessment had been made and the fact that the purchases had been made from the dummy companies of Rajendra Jain group who during the course of a search unequivocally admitted that he was an entry provider, the A.O. formed a prima facie belief that income - Thus, we do not find any error or infirmity in the approach of Ld. A.O. in reopening the case of the assessee for Assessment Year 2007-08 and also the order of the Ld. CIT(A) in affirming the approach of the Ld. A.O. Thus, we do not find any error committed by the Ld.CIT(A) in confirming the reopening of the case by the A.O. accordingly, Ground No. 1 is dismissed. Bogus purchases - Assessee was unable to establish the authenticity and genuineness of purchase made from M/s Avi Export and Mauli implex Pvt. Ltd. and M/s Vitraj Jewelers, the assessee was also unable to controvert the admission of one Sh. Rajender Jain made during the course of search, wherein it was admitted by Shri Rajendra Jain was engaged in providing accommodation entries to interested parties through a network of concerns including Vitrag Jewellers, Moulimani and Avi Export further the claim that the purchases were reflected in the purchase ledger was not established and the claim of the assessee that purchases were subsequently sold to parties also could not be proved before the Lower Authorities. Therefore, we do not find any error or infirmity in the assessment order and the order of the Ld.CIT(A) in confirming the assessment order. Accordingly, Ground No. 2 and its sub grounds are dismissed.

Issues Involved:
1. Assumption of jurisdiction for reopening the assessment.
2. Confirmation of the addition of Rs. 62,12,124/- by the CIT(A).

Issue-wise Detailed Analysis:

1. Assumption of Jurisdiction for Reopening the Assessment:

The assessee challenged the reopening of the assessment on the grounds that the Assessing Officer (AO) assumed jurisdiction based solely on information from the Investigation Wing without independent application of mind or proper enquiry. The CIT(A) observed that the AO received information from the Investigation Wing indicating that the assessee was a beneficiary of accommodation entries from entities controlled by Rajendra Jain, who admitted during a search that his companies were involved in paper transactions rather than real trading. The AO formed a prima facie belief that income had escaped assessment based on this information and initiated reassessment proceedings after recording reasons and obtaining approval from the competent authority.

The CIT(A) referred to Explanation 2 of Section 147, which deems certain cases as instances where income has escaped assessment, including where no scrutiny assessment has been made, and the AO notices that the assessee has understated income. The CIT(A) cited judgments from the Delhi High Court and Gujarat High Court, supporting the validity of reopening assessments based on information from the Investigation Wing, even if no fresh tangible material is required when the initial return is processed under section 143(1). The CIT(A) concluded that the AO's reopening of the assessment was justified and adhered to the provisions of the Act and principles enunciated by various courts.

The Tribunal found no error or infirmity in the AO's approach in reopening the case and upheld the CIT(A)'s decision, dismissing the assessee's ground regarding the assumption of jurisdiction.

2. Confirmation of the Addition of Rs. 62,12,124/- by the CIT(A):

The assessee contended that the CIT(A) erred in confirming the addition of Rs. 62,12,124/- without considering the evidence submitted, including purchase bills, affidavits of sellers, payment through account payee cheques, and stock records. The CIT(A) observed that the AO was not convinced about the credibility and authenticity of the evidence filed by the assessee and relied on the findings of the Investigation Wing.

The CIT(A) noted that during a search at Rajendra Jain's premises, he admitted that his companies were providing bogus purchase/sale bills without actual physical delivery. The AO ascertained that the assessee had received bogus purchase bills from entities controlled by Rajendra Jain. The AO relied on the statement of Rajendra Jain, post-search inquiries, and the absence of stock at the premises of the front companies to conclude that the assessee had obtained accommodation entries.

The CIT(A) addressed the assessee's claim that the transactions were genuine and reflected in the stock register, noting that the purchase invoices lacked specifics such as size, cut, color, and purity of the diamonds, which are the basis of their price. The CIT(A) concluded that the documents produced by the assessee were self-serving and could not establish the authenticity of the transactions. The CIT(A) also addressed the retraction of Rajendra Jain's statement, citing judgments that upheld the evidentiary value of statements recorded during search operations, even if subsequently retracted, unless proven to be incorrect or given under coercion.

The CIT(A) further addressed the assessee's claim that the order was bad in law due to the denial of cross-examination, citing judgments that formal cross-examination is not mandatory if a reasonable opportunity to rebut the case is provided. The CIT(A) concluded that the addition was made after due opportunity was accorded to the assessee and upheld the AO's finding that the purchases were bogus.

The Tribunal found no error or infirmity in the assessment order and the CIT(A)'s order confirming the addition. The Tribunal dismissed the assessee's ground regarding the confirmation of the addition.

Conclusion:

The Tribunal dismissed the appeal of the assessee, upholding the CIT(A)'s decisions on both the assumption of jurisdiction for reopening the assessment and the confirmation of the addition of Rs. 62,12,124/-. The Tribunal found no error or infirmity in the approach of the AO and the CIT(A) in handling the case. The order was pronounced in the open court on 10/02/2023.

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