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TMI Blog2017 (8) TMI 1633X X X X Extracts X X X X X X X X Extracts X X X X ..... dition in respect of the alleged escaped income for which the assessment was reopened. Whether the AO is entitled to make addition in respect of any other escaped income, if he did not make any addition in respect of items for which the assessment was reopened? - This question came to the consideration of Hon ble jurisdictional Bombay High Court in the case of Jet Airways Ltd [ 2010 (4) TMI 431 - BOMBAY HIGH COURT ] and it was held that the assessing officer is not entitled to make addition of any other escaped income, if he does not make addition of any income for which the assessment was reopened. Since the facts available in the instant case are identical in nature, by following the decision of Jurisdictional High Court, we hold that the AO is not entitled to make the impugned additions when he did not make any addition in respect of items for which the assessment was reopened. Accordingly we set aside the order passed by Ld CIT(A) and quash the assessment order passed by the AO in the reassessment proceedings. AY 2010-11 - AO has made the impugned addition only on the basis of information received from Sales tax authorities. We also notice that the AO did not make any independe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ularly called Hawala dealers) are engaged in providing accommodation bills without actually supplying the materials. From the details collected from the Sales tax department, it was noticed that the assessee has purchased materials from those hawala dealers during the years relevant to the AY 2009-10 and 2010-11. Accordingly the AO re-opened the assessment of the assessment year 2009-10. He estimated the additional income earned by the assessee at 10% of the alleged bogus purchases and added the same to the total income of the assessee. In assessment year 2010- 11 also, the AO added 10% of the alleged bogus purchases as income of the assessee. 3. In the appellate proceedings, the Ld CIT(A) sustained the estimate of 10% made by the AO. Since the assessee submitted that there is a mistake in the quantum of alleged bogus purchases in both the years, the Ld CIT(A) directed the AO to verify the same and allow relief accordingly. Aggrieved, the assessee has filed these appeals before us. 4. In assessment year 2009-10, the Ld A.R first argued on the ground relating to validity of reopening of assessment. He submitted that the AO has reopened the assessment to assess the alleged bogus purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation, who were alleged to have provided only accommodation bills without actually supplying the materials. However, we notice that he did not make any addition in respect of purchases made from the above said parties. However, the AO has considered the purchases made from the following parties for making addition in the reopened the assessment:- (a) M/s Crescent Chemical Trading Co. (b) M/s Pharma Trading House (c) M/s Odyssey Chemicals. Even though the quantum of purchases made from M/s Manish Enterprises and M/s J P Enterprises matched with the quantum of purchases made from M/s Crescent Chemical Trading Co and M/s Pharma Trading House respectively, yet the fact remains that they are altogether different parties. It is a settled proposition of law that the provisions of income tax should be construed strictly. In the case of reopening of already completed assessment, the relevant provisions shall be subjected to more strict interpretation. Accordingly we are of the view that there is merit in the contentions of the assessee that the AO did not make any addition in respect of the alleged escaped income for which the assessment was reopened. 8. Now the question that arises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly pleaded that the entire addition should be deleted as it has been made merely on presumptions. The assessee relied upon following case laws in support of its contentions:- (a) Shri Rajeev G Kalathil (ITA No.6727/Mum/2012) (b) Paresh Arvind Gandhi (ITA No.5706/Mum/2013) (c) Babulal C Borana (282 ITR 251) 11. The Ld CIT(A) was not fully convinced with the contentions of the assessee. He noticed that the invoices have been raised even on Sundays and further there was no evidence for transportation of goods. Hence, in principle, he agreed with the AO that 10% of the amount of purchases should be considered as extra profit earned by the assessee. Since the assessee contended that there is a mistake in the quantification of purchases, he directed the AO to verify the same and accordingly sustain the addition. Aggrieved, the assessee has filed this appeal. 12. The Ld A.R submitted that the assessing officer has made the impugned addition merely on the basis of information received from the Sales tax authorities. He submitted that the AO did not offer the opportunity of cross examination to the assessee. He also did not make any independent enquiry with the suppliers. He submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged bogus purchases by observing that the nonproduction of suppliers before the AO cannot be considered to draw adverse inferences. However, since the assessee has purchased the goods locally and in the absence of transportation bills, the co-ordinate bench directed the AO to restrict the addition in the range of 3.5% to 4% of the value of purchases. 17. In the instant case also, we notice that the assessee has reconciled the purchases with sales. There should not be any doubt that the sales could not be made without making corresponding purchases. The AO has also accepted the purchases as well as sales. However, since the assessee did not furnish evidences for transportation of goods, the AO presumed that the assessee would have made extra profit and accordingly estimated the same at 10% of the value of purchases. We have noticed that the AO has made the addition without making any independent enquiries. The decision relied upon by the assessee (supra) also considers certain decisions wherein identical addition made by the AO has been deleted for want of proper enquiries. However, we have noticed that the assessee has also failed to prove the transportation of goods. During the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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