TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 138
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....and in the circumstances of the case and in Law, the Ld.CIT(A)-IV, Surat ought to have upheld the order of the Assessing Officer. [4] It is, therefore, prayed that the order of the Ld.CIT(A)-IV, Surat may be set-aside and that of the Assessing Officer restored. 2. Briefly stated facts are that the case of the assessee was reopened and the assessment u/s.143 r.w.s.147 of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 28/12/2007, thereby the Assessing Officer (AO in short) made addition of Rs. 3,14,37,602/- on account of the bogus purchases treated as income from undisclosed sources. Against this, the assessee filed an appeal before the ld.CIT(A), raising various grounds including the ground against validity and illegality for reopening of the assessment. The ld.CIT(A) after considering the submissions made by the assessee, allowed the appeal, thereby the addition made by the AO was deleted. Now the Revenue is in appeal before us. 3. The effective ground in Revenue's appeal is against the deletion of addition by the ld.CIT(A). The ld.CIT-DR Shri Subhash Bains supported the order of the AO and submitted that there was no illegality for re....
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....missions made by the so-called supplier was holding a bank account in the Surat City itself and from the bank it transpired that the payments so made was through Shroff, wherein the 'Bindal' or 'JB' marked on the back side of the cheques. He submitted that during the original assessment proceedings a letter was sent to the concerned Central Excise Authorities and the reply from the said authority was received by the AO after passing of the assessment order. Therefore, he submitted that the assessment was reopened on the basis of the new material which was not available with the AO during the regular course of assessment proceedings. 3.2. On the contrary, ld.Sr.counsel for the assessee Shri S.N.Soparkar strongly supported the order of the ld.CIT(A) and submitted that all details were furnished before the AO during the original assessment proceedings. He submitted that the assessee had given all the details and confirmation from one Shri Satish Tuteja and Smt. Veena Tuteja w/o.late Shri Ashok Kumar Tuteja as its proprietor. He submitted that so far as the assessee is concerned, he had given all the details related to the transaction. He submitted that the material was transported th....
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....o the assessee only on 27/12/2007 and reassessment was completed on the next date i.e. on 28/12/2007. The Revenue has not placed any material for controverting the finding of the ld.CIT(A). Therefore, the finding of the ld.CIT(A) that the assessee was not given proper opportunity to rebut the reasons recorded for reopening the assessment is justified. Further, we find that the AO, for re-opening the assessment proceedings recorded the following reasons on 28/03/2007. "In the course of perusal of records, it is found that the abovementioned assessee firm has made huge purchase transaction with some M/s.Ashok Synthetics, Hisar. The supplier party is the only one outsider party from which the said firm has purchased cloths; otherwise all purchases have been made in the local market of Surat. Since Surat city itself is a big market for supplying fabrics, therefore the said transaction has created a doubt in the mind of the undersigned. 2. In the mean time, a reference has been received by the office from the Income-tax Officer, Hisar (who has the jurisdiction over M/s.Ashok Synthetics) during the month of March, 2007. The relevant extract of that reference letter is reproduced as bel....
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....rial was not purchased, how the manufacturing of cloths could be made. In view of above facts and circumstances of the case, it is submitted that when the raw material (grey fabrics) was not received by the firm M/s.Ashok Synthetics, how the finished goods could be genuine. Moreover, this firm was not in existence during the billing period 1.4.2003 to 31.03.2004 (bill dated 12.09.2003) and transactions worth Rs. 31437602 between M/s.Ashok Synth3etics, Hisar and JB Exports, Surat seem to be ingenuine." 3. After getting the above reference, the doubt of the undersigned transformed into reason to believe that the purchases made from M/s.Ashok Synthetics are not genuine. 4. Therefore, in view of the above, the assessing officer has reason to believe that the income has escaped assessment for A.Y. 2004-05 in the case of abovementioned assessee. In view of the reason recorded above, as per the provisions of the section 147 r.w.s. 148 of the Income Tax Act, the case is reopened." 4.1. The contention of ld.Sr.counsel for the assessee during the course of hearing was that against these reasons the assessee filed objections and such objections ought to have been decided by the AO by way....
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.... of M/s.Ashok Synthetics. The said Power of Attorney was executed on 22/04/2002 and the same was duly notarized. The ld.Sr.counsel for the assessee has also drew our attention towards letter of Shri Satishkumar Tuteja duly notarized which is enclosed at page Nos.40 to 46 of the paper-book, wherein he has confirmed that the material was, in fact, supplied to the assessee-firm. However, the AO without considering these material came to the conclusion that all the trading transactions with M/s.Ashok Synthetics was just a business façade and every supportive documents as mentioned by the assessee in its submissions were namely part of a make believe arrangements. The AO has not recorded in the assessment order as to how the Power of Attorney given by Smt.Veena Tuteja and claiming as Proprietor of Ashok Synthetics is not correct without examining her and how the statement of Shri Satishkumar Tuteja in the form of letter duly notarised is not correct. From the material, it is evident that the plant & machinery are belonging to M/s.Ashok Synthetics was in use. The AO has not given any finding in respect of the nature of activity carried out by the assessee by such plant & machinery....
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....on of Hon'ble Coordinate Bench rendered in the case of Totaram B.Sharma in ITA Nos.2239 & 2291/Ahd/2004(supra), wherein the Tribunal has held as under:- "9. We have considered the rival submissions and the facts and circumstances of the case as well as various decisions relied upon by the parties, but before considering merits of the case, are of the opinion that first it is necessary to consider the concept as to the so-called bogus purchases and its impact upon the taxable income of an assessee. 9.1. Usually, the Revenue takes a stand that if the parties, from whom the assessee as claimed to have made purchases of goods for re-sale or of rawmaterial to be consumed in manufacturing its own goods, are not found available at the address given by the assessee or if the assessee is not able to produce evidence to the satisfaction of the Assessing Officer that the relevant purchases were, in fact, made from the same parties, from whom he is claiming to have purchased, such purchases are bogus/unverifiable/ingenuine and proceeds to make addition to that extent considering the same as having been purchased with the undisclosed investment and this stand is taken, in spite of the fact th....
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....lso, but the question still remains to be considered is that why the Revenue still makes addition for such purchases considering the same as to having been purchased from undisclosed interest. The answer is that such as addition is made without applying mind to the affect of such findings and it is so, because an addition can be made only if it is found that payment of price for such purchase is not recorded in the books of account. If the payment of purchase price is found recorded in the books of account, then there is no question of making any addition on account of undisclosed investment. Example - II:- Qty. Value Qty. Value Say, Opening stock Nil Nil Sales A/2 100 Purchase:- A 100 C.stock A/2 50 (cost price) 50 Total : 150 150 If the Assessing Officer's findings are to the purchases being bogus, i.e. if assessee has not made any purchase; is considered, then the trading account will be - Qty. Value Qty. Value Opening stock Nil Nil Sales ½ 100 Purchases Nil Nil C.stock ½ 50 Gross profit 150 150 In the above situation, though there is closing stock of Rs. 50/- only (being as per cost price), sales being of Rs. 100/- only, yet the G.P. is Rs. ....
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....other way of making addition and that can be only when the Revenue is able to establish that the assessee has inflated the purchases-either by way of value or by way of quantity. But, so far as quantity is concerned, the onus is on the assessee to establish that whatever quantity was purchases, was either sold or was available in closing stock. (c) So far as inflation of purchase price is concerned, here again, we are of the opinion that the onus is on the Revenue to establish this fact. (d) Another way of making addition in assessee's hands can be if Revenue succeeds in establishing that the purchase price paid by the assessee through its books of account has come back to the assessee and here again, we are of the opinion that onus is on the Revenue to establish such a fact. 9.4. Meaning thereby that there cannot be any addition either on account of undisclosed investment or on account of undisclosed sales or undisclosed profit on the ground that some purchases are considered to be bogus or ingenuine only for want of availability of the seller. 10. From the above discussion, we are of the opinion that in a given case, if - Until the Revenue establishes such fact by cogent ma....