2024 (1) TMI 487 - AT - Income Tax

Validity of reopening of assessment - change of jurisdiction of AO - as argued approval granted u/s. 151 is mechanical and AO has not carried out any independent enquiry before the issue of notice u/s. 148 - allegation of borrowed satisfaction - assessee s case was reopened on the basis of information received from DGIT (Investigation) Mumbai which in turn was based on information from Sales Tax department that assessee has made bogus purchases from two parties - as argued AO has failed to issue copy of order passed by ld. PCIT for change of jurisdiction from AO Ward 25(2)(1) Mumbai to AO Ward 32(3)(1), Mumbai - HELD THAT - We agree with the contention of the ld. DR that once the order of transfer u/s 127 has been passed by the competent authority transferring the case from one AO to another within the same city, no opportunity of hearing is required to be given and neither assessee has ever raised this objection that no order u/s. 127 has been passed. Accordingly the contention and ground raised by the assessee is rejected. AO has failed to issue notice u/s. 129 for change of incumbency from AO Shri Hemant Gaikwad to AO Shri Kundan Kumar - Once, the notice u/s. 129 has been issued by the ld. AO before passing the assessment order and has given opportunity to the assessee to represent case then such an allegation is incorrect. From the perusal of the notice u/s. 129 dated 05/01/2015, we find that ld. AO has issued notice and there is no illegality which assessee has tried to make that ld. AO has failed to issue notice u/s. 129, accordingly, this ground is also rejected. AO has got approval u/s. 151 and approving authority has approved the reasons in a mechanical fashion by stating Yes, I am satisfied - Once the reasons have been recorded and such reasons are otherwise are sustainable in law for which no objections have been raised by the assessee before the ld. AO nor the reasons have been challenged before us, then if such reasons have been approved by the authority u/s. 151, we do not find any infirmity that approving authority should give satisfaction in a detailed manner or give a satisfaction on such reasons stating that he is satisfied with the reasons recorded by the ld. AO. Thus, it cannot be said that on the facts of the present case, approval has been obtained in a mechanical way. Accordingly, this ground is also rejected. AO has relied upon the report of DGIT (Investigation), Mumbai which is a borrowed satisfaction - Here in this case, from the perusal of the reasons it is seen that there was a specific information that assessee has purchased goods from the parties who were found to be providing bogus bills. The assessee in the books of accounts has debited the purchase made from these parties and therefore, prima facie, there was a reason to believe that these might be bogus purchases. Further, even during the course of assessment proceedings, these parties were untraceable in the enquiry conducted u/s. 133(6) and assessee also could not produce these parties, thus it cannot be held that reasons were not based on any tangible material. Therefore, it cannot be held that reasons recorded by the ld. AO is merely a borrowed satisfaction. Accordingly, ground No.4 is also rejected. AO has failed to give assessee opportunity of cross examination of the parties who had deposed before the DGIT (Investigation) Mumbai - Assessee has made the purchases from parties who have not confirmed the purchases. AO has made the addition on the basis of his inquiry and assessee has not produced these parties. There is no statement which requires cross examination then where is the question that AO should have given opportunity of cross examination. Very importantly neither before the ld. AO nor before the ld. CIT (A), assessee has ever asked for any cross examination nor there is any reference of any statement. Accordingly, such ground is ill-conceived and same is rejected. Estimation of income - bogus purchases - AO has applied gross profit rate of 15% on the aggregate alleged bogus purchases - There is no delivery of goods purchased from alleged parties or even if assessee has taken accommodation bills from these parties then assessee has made purchase of goods may be from grey market. At the most it could be a case of suppression of gross profit by inflating the purchases through accommodation hawala bills. The sources of purchases are from the books and the quantity of purchase and corresponding quantity of sales has not been doubted. Therefore, AO has applied Gross Profit. But in such case, such a huge GP rate of 15% of trading in ferrous and non-ferrous metal is unwarranted. In the A.Y.2009-10, the VAT of ferrous and non-ferrous metal was @4% and if at all assessee had tried to inflate the purchases only to save VAT to the extent of 4%. Moreover, before us certain Tribunal decisions have been filed wherein on trading of ferrous and non-ferrous metals GP addition of 2% has been made on such kind of alleged bogus purchases. Accordingly, we apply GP rate of 2% on the alleged bogus purchases. Appeal of the assessee is partly allowed.

Summary

Issues involved:
The issues involved in the judgment include challenging the jurisdiction of the Assessing Officer, validity of proceedings under section 148, approval granted under section 151, reliance on borrowed satisfaction for issuing notice, failure to provide copies of relied-upon evidence, lack of opportunity for cross-examination, and imposition of interest under section 234A.

Challenging Jurisdiction of Assessing Officer:
The appeal was filed against the order passed by the ld. CIT(A)-Mumbai for the quantum of assessment under section 143(3) r.w.s. 147 for the A.Y. 2009-10. The grounds of appeal challenged various legal aspects, including the jurisdiction of the ld. AO and the proceedings under section 148. The appellant raised concerns about the change of jurisdiction from one Assessing Officer to another and the approval granted under section 151, stating that it was done in a mechanical fashion without independent inquiry.

Validity of Proceedings under Section 148:
The appellant contested the validity of the proceedings under section 148, arguing that the approval granted under section 151 was mechanical and lacked independent inquiry. The appellant raised objections regarding the notice issued for a change in incumbency and the reliance on the report of DGIT (Investigation), Mumbai without conducting further investigation.

Reliance on Borrowed Satisfaction for Issuing Notice:
The appellant challenged the reliance on borrowed satisfaction for issuing the notice under section 148. It was argued that the ld. AO placed reliance on the report of DGIT (Investigation), Mumbai without conducting an independent inquiry and without tangible material evidence to justify the need for further investigation.

Failure to Provide Copies of Relied-Upon Evidence:
The appellant contended that the ld. AO failed to furnish copies of evidence relied upon, depriving the appellant of the opportunity to rebut or controvert the same. The appellant highlighted the importance of providing access to the evidence relied upon to ensure a fair assessment process.

Lack of Opportunity for Cross-Examination:
The appellant raised concerns about the lack of opportunity for cross-examination of the parties who deposed before the DGIT (Investigation), Mumbai and the Sales Tax Department. However, it was noted that there was no reference to any statements requiring cross-examination, and the appellant did not request cross-examination before the authorities.

Imposition of Interest under Section 234A:
The appellant contested the imposition of interest under section 234A on the assessed total income, arguing that the original return of income was filed before the due date and the tax liability was discharged by the payment of self-assessment tax under section 140A. The appellant questioned the basis for levying interest under section 234A in this context.

Conclusion:
The Tribunal partially allowed the appeal, addressing the various legal grounds raised by the appellant. The Tribunal considered the arguments regarding jurisdiction, validity of proceedings, reliance on borrowed satisfaction, and lack of opportunity for cross-examination. Ultimately, the Tribunal applied a gross profit rate of 2% on the alleged bogus purchases, differing from the initial assessment. The order was pronounced on 29th December 2023.