2017 (10) TMI 878 - AT - Income Tax

Tribunal confirms disallowance under section 69C, upholds assessment reopening, orders fresh assessment, and allows cross-appeals.

The Tribunal upheld the estimation of net profit at 6% on unproved purchases for AY 2009-10 and 2011-12, dismissing the assessee's challenge and ... Reopening of assessment - Estimating net profit @ 6% on the alleged unproved purchases - Held that:- The return of income filed by the assessee for the AY 2009-10 and 2011-12 were processed u/s 143(1) only. In the case of ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd.(2007 (5) TMI 197 - SUPREME Court) has held that information u/s 143(1)(a) is not an assessment and the notice u/s 148 issued by the AO was valid. Therefore, in the instant case after receipt of information from the Sales Tax Department, Government of Maharashtra, the AO has rightly issued the notice u/s 148. Thus the ground raised by the assessee against the issuance of notice u/s 148 by the AO for the AY 2009-10 and 2011-12 are dismissed. For estimation of NP on bogus purchases it is the duty of the AO to enforce attendance of a witness if his evidence is material. At the same time the assessee must furnish the complete address of such person.A proper hearing must always include a fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view. Cross-examination is allowed by procedural rules and evidently also by the rules of natural justice. Any witness who has been sworn on behalf of any party is liable to be cross-examined on behalf of the other party to the proceedings. In view of the above, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a fresh assessment in the light of our observation hereinbefore after giving opportunity to the assessee to cross-examine the concerned parties. We also direct the assessee to file the relevant documents/evidence before the AO. Issues:1. Estimation of net profit on alleged unproved purchases by the assessee.2. Validity of reopening assessment u/s 147/148.3. Disallowance made u/s 69C in AY 2009-10 and 2011-12.4. Cross-appeals by the assessee and the Revenue.Estimation of Net Profit on Alleged Unproved Purchases:The assessee raised a ground against the Ld. CIT(A) for estimating net profit at 6% on unproved purchases, disregarding the submission and evidence. The Ld. CIT(A) estimated profits based on the alleged bogus purchases, citing the decision in Shri Jitendra Motani case and the Hon'ble Gujarat High Court judgment. The Ld. CIT(A) calculated profits at 6% for AY 2009-10 and AY 2011-12, leading to specific profit figures. The Tribunal noted the absence of the assessee during the hearing, and the Ld. DR argued for confirming the disallowance under section 69C based on the N.K. Proteins Ltd. judgment. The Tribunal analyzed the facts and upheld the Ld. CIT(A)'s estimation of profits, dismissing the arguments against the reopening of assessment.Validity of Reopening Assessment u/s 147/148:The AO reopened the assessment under section 147/148 based on information from the Sales Tax Department, Government of Maharashtra. The assessee challenged the reopening, citing the ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd. case. The Tribunal dismissed the objection, stating that the notice u/s 148 was valid as per the Supreme Court's decision. The Tribunal upheld the AO's right to issue the notice post-receipt of information, leading to the dismissal of the assessee's objection against the reopening for AY 2009-10 and 2011-12.Disallowance Made u/s 69C in AY 2009-10 and 2011-12:The AO made additions under section 69C due to alleged bogus purchases by the assessee. The Ld. CIT(A) upheld the additions based on the percentage of bogus purchases in total purchases for both AY 2009-10 and 2011-12. The Tribunal referenced the N.K Proteins Ltd. case where the High Court directed the addition of entire bogus purchases. The Tribunal emphasized the importance of examining the concerned parties and allowing cross-examination to ensure a fair hearing. Consequently, the Tribunal set aside the Ld. CIT(A)'s order, directing a fresh assessment with an opportunity for cross-examination and submission of relevant documents before finalizing the assessment order.Cross-Appeals by the Assessee and the Revenue:The Tribunal allowed the cross-appeals filed by both the assessee and the Revenue for statistical purposes. The decision was pronounced in the open Court on 11/10/2017, concluding the proceedings related to the consolidated appeals against the order of the Commissioner of Income Tax (Appeals)-3, Nasik.This detailed analysis covers the estimation of net profit on unproved purchases, the validity of reopening assessment, disallowance under section 69C, and the outcome of the cross-appeals filed by the assessee and the Revenue before the Appellate Tribunal ITAT Mumbai in the cited judgment.