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TMI Blog2018 (3) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A)-51, Mumbai, dated 11.09.2015, which in itself arises from the assessment order passed by the A.O under Sec. 143(3) r.w. Sec. 147 of the Income tax Act, 1961, (for short Act ). The revenue assailing the order of the CIT(A) had raised before us the following grounds of appeal:- 1. on the facts and in the circumstances and in law, the Ld. CIT(Appeal) has erred in quashing the assessment made u/s.143(3) r.w.s. 147 by holding that Assessing Officer had no reason to believe that the income has escaped assessment and there was no failure on the part of the assessee to disclose fully and truly all material facts ignoring the fact that the Directors and the employees of the assessee company accepted the bogus expenditure and bogus purchase during the search and also the assessee company was unable to produce the books of account. 2. On the facts and in the circumstances and in law, the Ld. CIT(Appeal) has erred in not considering on merit and not upholding the addition made by the Assessing Officer for bogus expenditure and non-genuine purchase of ₹ 15,97,22,639/-. The appellant craves, leave to add, to amend and /or alter any of the grounds of appeal, if n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs . 1,52,88,32,328/-. Further, after giving effect to the CIT(A) order dated 06.06.2011 book prof i t u/s 115JB has been reduced to ₹ 1,49,68,65,328/-. 2. Subsequently, an information has been received from DDIT (Inv.), Unit- IV (1), Mumbai vide his letter dated 25.03.2013 that a search u/s 132 of the I .T. Ac t was car r ied out on the assessee on 14.03.2013. This information reveals that the bogus purchase for the period pertaining to F Y 2009 -10 to 2011-12 formed an average 1.04% of turnover. So, considering, turnover of ₹ 1673,34,28,055/- for FY:2005-06 relevant to the A.Y. 2006-07, prima facie bogus purchase comes at around ₹ 17,40,27,652/- It is also submitted that the DDIT (Inv.), Unit IV(1), Mumbai that exact quantification of bogus purchases for the period of F.Y. 2005-06 relevant to the A. Y. 2006-07 may take some more time. Since the matter for F.Y. 2005-06 relevant to the A. Y. 2006-07 is going to be barred on 31.03.2013, the DDIT(Inv.), Unit IV(1), Mumbai has recommended to reopen the assessment for A.Y. 2006-07 on the basis of facts enumerated above. Thus, I have reasons to believe that the income of ₹ 17,40,27,652/- in respec t of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to light subsequent to the search action, the assessing officer has reasons to believe that there has been an escapement of income. The practice of Assessee in indulging of booking of bogus purchases through interfering with the accounting software is clearly a fact of failure on part of the assessee to truly and fully disclose material facts required for assessment and thus the reopening based on this fact is truly in conformity with the provisions of Section 147 and thus valid in law, and not barred by limitation and well within jurisdiction. With respect to the case laws cited from the Jurisdictional High Court, it is a fact that all the referred case laws mandates that the reopening should be based on material facts that leads the assessing officer to believe that there has been an escapement of income due to failure on part of the Assessee to truly and fully disclose all details. This obligation has been fully conformed by the assessing officer. The reopening has been based on material facts received from DDIT(Inv.), Unit-IV(1) on the tax evasion practices of assessee by booking bogus purchases, unearthed during search. This fact clearly brings out that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase bills for the assessment year 2006-07. The assessee did not possess the bills in its registered office, whereas stated that the same were present at its Daman Office. Thus, owing to failure of assessee to produce the requi red documents on t ime, the quantification became difficult and the same was decided on as per records available with the department. Evidences gathered during search have been given due cognizance and on the receipt of information of the same- the Assessing Officer had reasons to believe that there has been escapement of income resulting due to booking of bogus purchases. Non-disclosure of such practices and information by the assessee clearly is a failure on part of the assessee to truly and fully disclose details required for assessment. It is once again reiterated that reopening based on information on statements recorded during search and evidences gathered u/s 132, which were earlier not available before the assessing officer during assessment u/s 143(3), is valid, legal and complete in jurisdiction and in complete consonance with the provisions of the Income Tax Act. With respect to reliance placed on decision of the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Sr. No. DOC. NO. PARTY NAME AMOUNT (Rs.) 1. 52009976 GR/IR CLG. 1,22,87,833/- 2. 52009985 GR/IR CLG. 1,22,87,833/- 3. 52011353 INNOSOFT 80,98,865/- 4. 52011343 INNOSOFT 10,29,116/- 5. 52011344 INNOSOFT 10,29,116/- 6. 52013979 N I SHETTY 21,50,632/- 7. 52013965 G. SELVAM ENGINEERING 12,31,726/- 8. 52013831 SAV ENGINEERING 10,29,116/- 9. 52020794 GET ENGINEERING 45,99,820/- 10. 52015968 G. SELVAM ENGINEERING 33,20,967/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mehra in the disclosure made by him during the course of the search proceedings, therefore, the same on the said count were to be taken as genuine. The A.O was also not impressed by the submissions of the assessee that as the Assistant Manager-Accounts of M/s Enercon India Ltd. had joined the company in the year 2010, therefore, there was every possibility that he may not be aware of the correct factual position for the period under consideration. The A.O further observed that as the GR/IR clearing account checked the quantity of goods received against the quantity of goods invoiced and then posts the balance accordingly, therefore, as long as there would be a difference in the invoices received and goods received, there would remain a balance in the GR/IR account. The A.O in the backdrop of his aforesaid observations concluded that as the GR/IR clearing account clearly revealed discrepancies in the purchases of the assessee, therefore, the contention of the assessee that no adverse inferences on the said count was liable to be drawn could not be accepted. The A.O further rejected the claim of the assessee that Shri Yogesh Mehra in his statement which was recorded under strain had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). The assessee assailed the validity of the re-assessment proceedings before the CIT(A), as well as challenged the additions made by the A.O on merits. The CIT(A) deliberated at length on the contentions raised by the assessee as regards the validity of the reassessment proceedings in the backdrop of the observations of the A.O and the material available on record. The CIT(A) after perusing the reasons to believe on the basis of which the reassessment proceedings were initiated in the hands of the assessee, observed that the A.O had reopened the concluded assessment of the assessee, not on the basis of any independent application of mind on his part, but rather, on the basis of the recommendations made by the DDIT(Inv.),Unit-IV(1), Mumbai. The CIT(A) in the backdrop of the aforesaid facts observed that as there was a clear absence of valid assumption of jurisdiction by the A.O to reopen the concluded assessment of the assessee, therefore, the assessment order passed by him under Sec. 143(3) r.w. Sec. 147 of the Act could not be sustained. 7. The CIT(A) observed that a perusal of the reasons to believe revealed that there was no failure on the part of the assessee to disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Jet Airways Ltd. (2011) 331 ITR 236 (Bom) , the reassessment framed in the hands of the assessee could not be sustained and was liable to be quashed. 9. The CIT(A) after perusing the facts available on record observed that the A.O received information from DDIT(Inv.), as per which the average bogus purchase of the assessee for the F.Y 2009-10 to 2011- 12 formed 1.04% of the turnover. The CIT(A) observed that on the basis of the aforesaid bogus purchase/turnover ratio pertaining to F.Ys 2009-10 to 2011-12, the A.O had reopened the case of the assessee for the year under consideration, viz. A.Y. 2006-07, for the reason that the income of ₹ 17,40,27,652/- (which is 1.04% of the turnover of ₹ 16,73,34,28,055/-) in respect of bogus purchases made by the assessee during the year had escaped assessment. The CIT(A) holding a strong conviction that the discrepancies found in purchases of the assessee for the F.Ys 2009-10 to 2011-12 could not have validly constituted a reason to believe that such discrepancies also existed during the year under consideration, viz. A.Y 2006-07, therefore, reopenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to disclose fully and truly all the material facts necessary for its assessment for the year under consideration, therefore, the concluded assessment which was earlier framed in its case under Sec.143(3) of the Act on 24.12.2009 could not have been disturbed after a lapse of a period of 4 years from the end of the relevant assessment year. 11. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that the CIT(A) in the present case had quashed the reassessment proceedings for multiple reasons, viz. (i) the reopening of the concluded assessment of the assessee by the A.O on the basis of the recommendation and borrowed satisfaction of the DDIT(Inv.) Unit-IV (1), Mumbai, could not be sustained in the eyes of law; (ii) that in the absence of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment for the year under consideration, the concluded assessment of the assessee which was earlier framed under Sec. 143(3), dated 24.12.2009 could not have been reopened after the lapse of a period of 4 years from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration could be gathered. We rather find that a perusal of the reasons to believe revealed that the reassessment proceedings had been initiated for the reason that by adopting the average of bogus purchase/turnover ratio of 1.04% for the period F.Ys: 2009-10 to 2011-12, as had so emerged during the course of the search proceedings conducted on the assessee, a similar discrepancy in respect of the purchases of the assessee could be inferred and the bogus purchases in the hands of the assessee by adopting the said basis worked out at ₹ 17,40,27,652/-. We are of the considered view that as in the case of the assessee before us the regular assessment in its case was already concluded under Sec. 143(3) on 24.12.2009, therefore, in the absence of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment for the year under consideration, the said concluded assessment of the assessee could not have been reopened after the lapse of a period of 4 years from the end of the relevant assessment year. We are afraid that in the case before us, though the A.O while recording the reasons to believe had alleged that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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