2018 (12) TMI 1128 - AT - Income Tax

Reopening of assessment - Receipt of accommodation entries - addition of gross profit only with respect to the alleged bogus purchase of the goods - Held that - The reasons recorded shows that assessee has received an accommodation entry from Mohit international for purchase of diamond. The income of the assessee was not assessed earlier under section 143 (3) of the income tax act. There is a tangible material available with the learned assessing officer to reopen the case of the assessee as it was found that Mohit international is operated by Mr. Praveen Jain who is an accommodation entry provider. Further the first proviso to section 147 applies only with respect to the assessment made under section 143 (3) of the income tax act and not otherwise. In view of this, we do not find any infirmity in the order of the learned commissioner of income tax appeals in upholding the reassessment proceedings. On the merits when the assessee has already shown gross profit in the books of account on sale of those goods which are allegedly purchased from an accommodation entry provider no further addition can be made on account of the gross profit as it would amount to double addition. Hence we reverse the finding of the learned commissioner of income tax appeals in upholding the addition of ₹ 9 0000/- . However with respect to the addition of rupees 11360 on account of the alleged commission on the accommodation entry provided by the Praveen Jain group, we do not find any infirmity in the order of the learned commissioner of income tax appeals in upholding the addition to that extent for the simple reason that there is no denial from the assessee that assessee has not purchased goods from M/s Mohit international which is part of Praveen Jain group. - Decided partly in favour of assessee.

Summary

Issues:
1. Jurisdiction of reassessment based on satisfaction note
2. Validity of purchases and absence of telephone/VAT numbers on invoices
3. Submission of valid payment details for purchases
4. Delay in filing appeal and condonation of delay
5. Reopening of assessment based on third-party statement
6. Merits of the case regarding alleged bogus purchases and commission

Jurisdiction of Reassessment:
The appeal was filed against the order of the ld CIT(A) for the Assessment Year 2007-08. The assessee challenged the jurisdiction of reassessment, arguing that the AO erred in assuming jurisdiction without proper investigation. The AO had initiated reassessment based on a satisfaction note and the absence of telephone and VAT numbers on invoices from M/s Mohit international. The Tribunal upheld the reassessment proceedings, stating that tangible material supported the reopening due to the involvement of an accommodation entry provider.

Validity of Purchases and Absence of Details:
The AO considered the purchases from M/s Mohit international as bogus due to missing details on the invoices. The assessee claimed payment by cheques, but the AO deemed the transactions ingenuine. The Tribunal noted that the purchases were supported by bills and payments made by cheques. It highlighted that the absence of evidence showing the amount recycled back to the assessee, coupled with sales made from the purchases, aligned with a previous Gujarat High Court decision.

Submission of Payment Details:
The assessee failed to provide documentary evidence for the purchases, citing a sealing drive in 2007. The AO made additions on account of bogus purchases and commission. The Tribunal considered the assessee's submissions and overturned the addition of gross profit, emphasizing that double addition was unwarranted when sales were already accounted for.

Delay in Filing Appeal and Condonation:
The assessee faced a delay in filing the appeal, attributing it to conversion from a partnership firm to a proprietorship and international travel engagements. The Tribunal, after considering the reasons for delay, condoned the delay and admitted the appeal.

Reopening of Assessment:
The reassessment was based on a third-party statement regarding accommodation entries from Mohit international. The Tribunal upheld the reassessment, citing the involvement of an accommodation entry provider and the applicability of the first proviso to section 147.

Merits of the Case - Alleged Bogus Purchases and Commission:
The Tribunal analyzed the alleged bogus purchases and commission. It found that the assessee had validly purchased goods, supported by bills and payments. The Tribunal reversed the addition of gross profit but upheld the commission addition, as there was no denial of purchases from Mohit international. The appeal was partly allowed based on these findings.