2022 (9) TMI 498 - AT - Income Tax

Reopening of Assessment u/s 147 - Reasons Recorded For Reopening Of Assessment - Addition under section 69C for failure to justify purchases and Disallowance of deduction u/s 80IB(10) - HELD THAT - On careful perusal of the above reasons recorded by the learned assessing officer, we find that as he could not find any return of income filed by the assessee in ITD system, there was no question of making further inquiries. It is an admitted fact that assessee has not filed any return of income electronically. It was mandatory at that time. Therefore, AO was of a reasonable belief that assessee has booked bogus purchases during the year. As there was no information available about the details of the payment made by the assessee, recording of those transactions in the books of the assessee and any further information about the income of the assessee, no fault can be found in reopening of the assessment. Merely some difference in mentioning of the amount, when the name of the party is mentioned correctly does not make the reopening of the assessment invalid. Further with respect to the claim of the assessee that whether the goods have been purchased from Maruti enterprises or Apex Corporation, the learned assessing officer has mentioned both the names. Therefore, it does not invalidate the reopening of the assessment. We are of the view that the AO had valid reason to believe‟ that income of the assessee has escaped assessment when a specific information in the form of tangible material‟ received from DGIT investigation that assessee has obtained only bills without material from different parties - Therefore, we confirm the order of the learned CIT A in upholding the reopening of the assessment. Ground number 1 and 2 of the appeal of the assessee are dismissed. Addition u/s 69C - We find that the AO has recorded the reasons for reopening of the assessment on the basis of specific information that 5 different parties have provided bogus bills to the assessee, he has also the information that those parties have given their statement that they are non genuine suppliers, the information is also travelled to the DGIT investigation to the learned assessing officer, therefore, it is evident that assessing officer was having information about those parties such as their address and whereabouts. Therefore when the AO was having complete information about those parties and was so sure that those are the bogus parties and has merely provided the bills without supply of the material and also having information about making a statement before a government authority, not providing the correct address by the assessee, assessee was not having the same, is not fatal to the issue. The learned assessing officer himself made any enquiry with those parties further with respect to genuineness of purchase of material by the assessee. The only allegation of the assessing officer is that assessee has failed to show receipt of goods as well as failed to produce those parties. Furthermore, looking to the nature of the business, assessee cannot be asked to produce more details then what is generally kept by an assessee in that line of the business. In view of these facts, the addition made by the learned assessing officer and confirmed by the learned CIT A cannot be upheld. Accordingly assessing officer is directed to delete the addition made u/s 69C of the act with respect to purchases from five different parties. Deduction u/s 80IB - As the reasons recorded for reopening of the assessment with respect to disallowance/addition u/s 69C of the act has already been deleted no other disallowance, which are not part of the reasons recorded by the learned assessing officer, has any legs to stand, but fails. Therefore, without going into the merits of the disallowance u/s 80 IB of the act vis- -vis filing of the return by the assessee u/s 139 (1) of the act the deduction claimed by the assessee u/s 80 IB (10) cannot be disallowed. Even otherwise, the fact shows that assessee has consistently been allowed deduction u/s 80 IB (10) in earlier assessment years as well as subsequent assessment years. For peculiar reasons, assessee could not file electronic return of income but has filed manual return of income within time allowed u/s 139 (1) of the act. Therefore as relying on Prabhakar Damodar Gawade 2019 (5) TMI 844 - ITAT PUNE we hold that the disallowance of deduction u/s 80IB (10) of the act made by the learned assessing officer and confirmed by the CIT - A is not sustainable in law. Accordingly, ground appeal are allowed.

Summary

Issues Involved:

1. Legality of the reopening of the assessment under section 147/148 of the Income-tax Act, 1961.
2. Validity of the return of income filed manually under section 139(1) instead of electronically.
3. Disallowance of deduction under section 80IB of the Income-tax Act, 1961.
4. Addition of Rs. 9,80,300/- under section 69C of the Income-tax Act, 1961 for alleged bogus purchases.

Issue-wise Detailed Analysis:

1. Legality of the Reopening of the Assessment:

The assessee challenged the reopening of the assessment on the grounds that the Assessing Officer (AO) did not have tangible material to form a belief that income had escaped assessment. The AO had received information from the DGIT (Investigation), Mumbai, regarding bogus purchases amounting to Rs. 9,80,300/-. The Commissioner of Income Tax (Appeals) [CIT (A)] upheld the reopening, stating that the information received was specific and relevant, revealing accommodation entries taken by the appellant. The Tribunal confirmed the reopening, noting that the AO had a reasonable belief based on tangible material from the DGIT (Investigation), and the absence of an electronic return justified the reopening. The Tribunal dismissed the assessee's grounds challenging the reopening.

2. Validity of the Return of Income Filed Manually:

The assessee filed a manual return of income due to the unavailability of a digital signature, citing the arrest of key directors. The AO and CIT (A) held that the manual return was invalid as per the provisions of Section 139(1) read with Rule 12(3)(iii) of the Income-tax Rules, which mandated electronic filing with a digital signature. The Tribunal upheld this finding, stating that the manual return did not meet the statutory requirements and was non-est, as if it did not exist. The Tribunal rejected the assessee's reliance on Section 292B, which allows for curing defects in returns, noting that the requirement for electronic filing was mandatory and not a curable defect.

3. Disallowance of Deduction under Section 80IB:

The AO disallowed the deduction under section 80IB, amounting to Rs. 52,18,31,943/-, on the grounds that the assessee did not file a valid return under section 139(1). The CIT (A) confirmed this disallowance, stating that the provisions of Section 80AC, which require a valid return for claiming deductions under Chapter VI-A, were not met. The Tribunal, however, noted that the deduction under section 80IB had been consistently allowed in earlier and subsequent years and that the manual return was filed within the due date. The Tribunal held that since the primary addition for which the assessment was reopened (under section 69C) was deleted, the disallowance of the deduction under section 80IB could not be sustained. The Tribunal allowed the assessee's grounds on this issue.

4. Addition under Section 69C for Alleged Bogus Purchases:

The AO added Rs. 9,80,300/- under section 69C, citing that the assessee failed to produce suppliers to verify the genuineness of purchases. The CIT (A) confirmed the addition, relying on statements from suppliers denying genuine sales. The Tribunal, however, found that the assessee provided sufficient evidence, including purchase bills, delivery challans, and bank payment details, to substantiate the purchases. The Tribunal noted that the AO did not carry out independent inquiries and relied solely on statements without providing the assessee an opportunity to cross-examine. The Tribunal deleted the addition, citing the Bombay High Court's decision in Shapporjii Pallonji and Co Ltd., which held that additions based on suspicion without independent inquiry were unjustified.

Conclusion:

The Tribunal upheld the reopening of the assessment but deleted the addition under section 69C, leading to the allowance of the deduction under section 80IB. The Tribunal emphasized that the AO must carry out independent inquiries and provide the assessee an opportunity to rebut evidence. The appeal was partly allowed, with the Tribunal directing the deletion of the addition and the allowance of the deduction.