TaxTMI 
TaxTMI 
2019 (8) TMI 762
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....ess raised common grounds of appeal in all the appeals. For the sake of brevity, grounds of appeal raised for AY 2007-08 are extracted below:- "1. On the given facts, circumstances and judicial pronouncements; Hon. CIT (A) erred in confirming the action of the Ld. Assessing Officer on account of bogus purchases of Rs. 43,14,0767- under the head business income; such addition is bad in law and liable to be deleted. 2. Without prejudice to above; on the given facts, circumstances and judicial pronouncements; Hon. CIT(A) erred in confirming the action of the Ld. Assessing Officer on account of bogus purchases of Rs. 43»14>O76/- under the head business income; such addition is excessive and liable to be reduced. 3. On the given facts, circumstances and legal propositions; Hon. CIT (A) erred in passing the order in absence of reasonable opportunity of making the submissions to the assessee in principles of natural justice and such order is in violation of principles of natural justice and liable to be quashed." 3. The assessee has also filed a petition for admission of additional ground, vide its letter dated 27-03-2017 and taken a legal ground challe....
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....le Bombay High Court in the case of Ultratech Cements Ltd vs CIT Income Tax Appeal No. 1060 of 2014 dated 18-04-2017. 6. We have heard both the parties and perused material available on record. Admittedly, the assessee has taken legal ground challenging validity of assessment order passed by the AO in light of valid approval u/s 153D of the Act, for the first time, before the Tribunal. We find that additional ground taken by the assessee is purely a legal issue which questions the authority of the AO passing assessment order in light of specific provisions provided u/s 153D of the Act. Therefore, we are of the considered view that there is a merit in additional ground filed by the assessee and hence, the same is admitted for adjudication. 7. The brief facts of the case extracted from ITA No.3874/Mum/2015 for AY 2007-08 are that a search and seizure action u/s 132(1) of the Income-tax Act, 1961 was carried out in the cases of Pratibha Industries group on 10-03- 2011 at the office premises as well as residential premises of the directors / partners of the group. Consequent upon the search, notices u/s 153A of the Income-tax Act, 1961 were issued requiring assessee to furnish re....
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....ponse, the assessee, vide its letter dated 08-03-2013 filed a detailed submission which has been reproduced at para 3 on pages 4 & 5 of AOs order. The main argument of the assessee before the AO was that during the course of survey, no incriminating document was found which suggested inflation of purchases by booking bogus / accommodation bills, therefore, merely on the basis of information received from sales-tax department and also for failure to follow standard operating procedures in respect of certain purchases, no adverse inference could be drawn so as to treat purchases from 22 parties as bogus, when assessee has filed complete details of purchases including purchase bills. Although there is a lapse in SOP followed in respect of certain purchases, which is due to inadvertent mistakes of the persons, who was maintaining records in respect of central purchase department, but otherwise, in respect of all other purchases, no discrepancy was noticed either during survey operations or during assessment proceedings. Therefore, in absence of any finding as to incorrectness in books of account and other details, no adverse inference could be drawn in respect of purchases from above p....
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....f the statements were not handed over by the survey officials to the assessee. In this regardit is pertinent to note that subsequently thereafter as requested by the assessee the copies of the Statements and all jrnpounded material was duly handed over to assessee and so acknowledged by assessee. It was further prayed that assessee should be given time to produce external confirmation of 22 parties regarding which adverse finding were there. With respect, to the same assessee was informed that he was free to submit the said confirmations. Further it was also told to the assessee that it is free to produce these parties before the undersigned in support of its contention. However, at the same time the assessee's request to the undersigned in the reply to issue summons to the 22 parties for cross examination was rejected, after recording a finding that onus is on the assessee to prove the genuineness of these transactions with the said parties. 6.4 On the appointed date assessee has filed another reply which has reiterated majority of the contentions of the earlier reply. The so called external confirmations have neither been submitted before me nor have the parties been pro....
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....e challenging addition made towards bogus purchases in absence of incriminating material in the assessments framed u/s 153A by holding that during search and survey, certain incriminating materials were found and seized as per which, the assessee is beneficiary of accommodation / bogus purchase bills issued by hawala dealers and this fact was further supported by the report of sales-tax department where the parties admitted in their statements that they were involved in providing accommodation bills without there being any actual business activity. Insofar as addition made towards bogus purchases, the Ld. CIT(A) observed that although the AO has brought out various facts in respect of bogus purchases including failure to follow standard operating procedures in respect of alleged bogus purchases, the assessee failed to counter the finding of facts recorded by the AO, except stating that no addition could be made on third party statement, without confronting those statements to the assessee. The Ld.CIT(A) further observed that the question of cross examination and furnishing statement would arise only in case, where the assesseee has filed necessary basic details. Since the assessee ....
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....self, has admitted the fact that there was no proof of taking approval u/s 153D, even though the AO has mentioned in his assessment order that prior approval from the competent authority has been taken before passing the assessment order would not validate the assessment order passed by the AO, unless the approval taken u/s 153D was indicated to the assessee. The Ld.AR further submitted that it is an admitted fact that the department has expressed its inability to furnish copy of approval letter issued by the competent authority u/s 153D of the Act. Therefore, even though now they stated that approval u/s 153D has been issued in all group cases cannot cure non availability of approval letter in the case of the assessee. Therefore, in absence of proper approval u/s 153D of the Act, the assessment order passed by the AO u/s 143(3) r.w.s. 153A is void ab initio and liable to be quashed. In this regard, he relied upon certain judicial precedents including the decision of ITAT, Mumbai Bench "H" in the case of Hiklass Moving Picture Ltd vs ACIT in ITA Nos. 936 to 931/Mum/2013 dated 30-09-2016. The assessee also relied upon the decision of ITAT, Pune Bench in the case of Ali Ghulamali Som....
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....y approval from the Addl.CIT, Cent.Range-4, Mumbai vide letter dated 25-03-2013. If, we go through the affidavits filed by two senior officers, who were part of proceedings in the case of the assessee, have categorically stated that the approval required to be obtained under the Act, has been obtained before passing the assessment order. He, further submitted that mere absence of document from case records cannot undo a statutory action which has been completed after following due procedure of law. He, further stated that as long as both officers, who were in charge of the assessment in assessee case, found that the assessee was always avoiding taking proper statutory remedies. The assessee had enough time to opt for option available to it, but when both officers were not in charge, on account of transfers to other jurisdiction, the assessee has taken legal ground to derive undue benefit, therefore, the whole issue needs to be appreciated in the perspective of issue before the lower authorities. The Ld.DR further submitted that when the approval required to be taken under the provisions of the Act, has been taken which is supported by the secondary evidence in form of affidavit of ....
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....e by way of additional ground, we find that there is a serious suspicion raises about the conduct of the assessee in taking additional ground challenging the issue of approval u/s 153D of the I.T. Act, 1961, for the first time, before the Tribunal. The assessee never disputed this issue before the lower authorities. The assessee has taken this issue for the first time before the Tribunal after ascertaining the fact in connection with its RTI application that no such approval was available in the assessment folder. When the assessee has not raised the issue before the CIT(A), then there is a serious doubt arise in the mind about the intend of the assessee to take a legal ground before the Tribunal. In this factual background, if we examine the contents of the approval mentioned by the AO in the assessment order coupled with affidavits filed by two senior most officers, who were in charge of the assessment proceedings, we find that both officers have stated in their affidavits about requirement of law under the provisions of section 153D of the Income-tax Act, 1961. The then AO, Shri Milind Rajguru, Joint Commissioner of Income-tax (Retd) had filed an affidavit and stated that mandat....
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....come-tax Act, 1961. In this case, the AO has categorically recorded at para 7 of his assessment order in respect of approval taken u/s 153D and such reference has been further strengthened by the affidavits of two officer, who were part of assessment proceedings. Therefore, the case laws relied upon by the assessee cannot be considered as applicable to the facts of assessee case. 18. In this view of the matter and considering facts and circumstances of the case, we are of the considered view that there is no merit in the additional ground taken by the assessee challenging validity of assessment order passed u/s 143(3) r.w.s. 153A of the I.T. Act, 1961 in light of provisions of section 153D of the I.T.ACT, 1961. Hence, we reject additional ground taken by the assessee. 19. The next issue that came up for our consideration is addition towards bogus purchases from certain parties. The facts borne out from the records are that when the assessment proceedings u/s 143(3) r.w.s. 153A was in progress, there was a survey action u/s 133A of the Income-tax Act, 1961 at the office premises of the assessee by the DDIT(Inv), Unit I(2), Mumbai. The said survey was conducted on the basis of ....
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.... purchases without appreciating the fact that mere deficiencies in SOPs followed by the assessee in respect of certain parties, is not a ground to come to the conclusion that purchases from the above parties are bogus, when assessee has furnished details including purchase bills from the parties. The assessee, at the best, could file whatever information available with it. But it could not be expected from the assessee to produce parties in person when the parties were not immediately available at the time of proceedings. The Ld.AR further submitted that except stating that SOP was not followed in respect of certain purchases, no other adverse comments were made in respect of purchases from above parties. No adverse comments were made in respect of sales declared by the assessee. In absence of any finding as to incorrectness in books of account or sales made outside the books, purchases from certain parties could not be disallowed merely for the reason that the assessee could not file confirmations from those parties. The Ld.AR further submitted that if at all the purchases are considered to be bogus in nature, and then a reasonable percentage of profit may be estimated like other ....
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....proper entries by the store keeper of the goods receipt note in the SAP system and absence of stamp and signature in delivery challan. The AO further brought out more fact to the effect that the assessee is meticulously following standard operating procedure in respect of general purchases except purchase from 22 parties, where these lacunae were noticed. The assessee, except stating that no cross examination was allowed to verify the statement of third parties, but no other evidence has been filed to justify purchases from those parties including confirmation from the parties. Therefore, the AO came to the conclusion that purchases from 22 parties were bogus in nature which is not supported by necessary evidences. 23. It is an admitted fact that during the course of survey u/s 133A, certain loose papers, bills and other relevant documents were found, as per which, the assessee has taken accommodation / bogus purchase bills to the extent of 13.86 crores for FYs 2006-07 to 2010-11. The said quantification has been made on the basis of discrepancies noticed in respect of purchase bills from those parties in comparison to the standard operating procedure followed by the assessee in....
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....es needs to be taxed, but, not whole purchases from so-called hawala dealers. The Tribunal further considering facts of each case has directed the AO to estimate profit of 10 to 15% depending nature of trade. The Tribunal, while arriving at a conclusion that only profit element in bogus purchases needs to be taxed had recorded categorical finding that the AO has done incomplete enquiries without reaching to a conclusion that purchases from those parties were, in fact, bogus. In many of the cases, the AO has issued notices u/s 133(6), but said notices were returned unanswered by the postal authorities with the remark, 'left' or 'unknown'. When the notices were returned unanswered, the AO ought to have carried out further enquiries to ascertain the identity of the parties and genuineness of transactions between them, but the AO did not do so. Under these facts, the Tribunal reached to a conclusion that only profit element embedded in those purchases needs to be taxed. 25. In this case, on perusal of facts available on record, we find that the AO has not made addition only on the basis of report of sales-tax department. In fact, the AO has conducted all possible enquiries during th....
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....2,92,93,2887- represented alleged purchases from bogus suppliers it was not incumbent on it to restrict the disallowance to only Rs. 73,23,3227-. 6.1 In the case of NR Paper & Boards Ltd. (supra), this Court has discussed the issue as to whether after making of block assessment, regular assessment is barred or prohibited by law. This court has held that there would be no overlapping in the nature of assessment made under this Chapter of undisclosed income and the regular assessment made u/s 143(3). However, if the said decision is read in context of questions raised in the present appeal, it cannot be read as having held that even if the material found during the course of search expose the falsity of the entries made in the regular books of accounts, the consequent concealed income cannot be assessed as undisclosed income in the block assessment under Chapter XIV-B. The said decision shall therefore not be applicable on the facts and circumstances of the present case. The Tribunal is justified in holding the same against the assessee and in favour of revenue." 26. In this view of the matter and respectfully following the ratio laid down by Hon'ble Supreme Court in the ....