2021 (3) TMI 821

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.... 147 r.w.s 143(3) of the Act after making an addition of Rs. 2,52,18,773/- on account of alleged bogus purchase. 2.1 The assessee approached the Ld. First Appellate Authority challenging the reopening of assessment as well as challenging the addition on merits of the case. 2.2 The Ld. First Appellate Authority, however, upheld the initiation of re-assessment proceedings and also upheld the addition on merits. 2.3 Aggrieved, the assessee has now approached this Tribunal and has challenged the order of the Ld. First Appellate Authority by raising the following grounds of appeal: "1. That the order passed by the Ld. CIT(A) is bad in law and nature and liable to be quashed because: (a) The very basis of issue of notice under section 147 and assuming jurisdiction by the AO is erroneous, as while assuming jurisdiction for reopening, the ld. AO has recorded the reasons that the Assessee has not filed his return of income for the year, therefore, the assessee has escaped income of Rs. 2,48,99,600/-. Whereas, the assessee had already filed his return of income for the AY vide ack. no.011771 on 21.12.2016 declaring income of Rs. 2,19,175/-. (b) That the ld....

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....ogus. 4. The appellant craves leave for addition, modification, alteration, amendment, deletion of any of the grounds of appeal." 3.0 The Ld. Authorized Representative (AR) drew our attention to the reasons recorded for reopening as contained in the Assessment Order. The reasons are being reproduced herein under for a ready reference: "A letter F.No. JCIT/Range- 28/2015-16 dated 23.03.2016 forwarding herewith the letter of F.No.ADlT/INVII/ FBD./2015-16/4525 dated 21.03.2016 received from O/o Asstt. Director of Income Tax (Inv.-II), Faridabad regarding sharing of information with regard to accommodation entry of bogus purchase obtained by M/s Rama Enterprises Prop. Sh. Raman Sood(PANAREPS4176J) from Sh. Vinod Goyal through his proprietary concern i.e. M/s Maa Durga Trading Compay. In this regard, it is submitted that Sh. Vinod Goyal prop, of M/s Maa Durga Trading Company given statement u/s 131(1) of Income Tax Act, that he had provided accommodation entries through bogus billing against which no goods were supplied by his company to the different parties. His company M/s Maa Durga Trading Company received e payment through cheques against the bills iss....

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....k Rs. 5,00,000/- 21. 02.01.2009 Cheque deposited in Kotak Mahindra Bank Rs. 1,60,000/- 22. 03.01.2009 Cheque deposited in Kotak Mahindra Bank Rs, 4,00,000/- 23. 06.01.2009 Cheque deposited in Kotak Mahindra Bank Rs. 1,00,000/- 24. 14.01.2009 Cheque deposited in Kotak Mahindra Bank Rs. 65,000/- 25. 30.01.2009 FTD from 286.200,1917 to ?86.201.88 Rs. 7,50,000/- 26. 03.02.2009 FTD from 286.200.1917 to 286.201.88 Rs. 3,95,000/- 27. 05.02.2009 FTD from 286.200.1917 to 286.201.88 Rs. 10,20,000/- 28. 07.02.2009 FTD from 286.200.1917 to 286.201.88 Rs. 6,45,000/- 29. 10.02.2009 FTD from 286.200.1917 to 286.201.88 Rs. 9,90,000/- 30. 11,02.2009 FTD from 286.200.1917 to 286.201.88 Rs. 9,90,000/- 31. 11.02.2009 FTD from 286.200.1917 to 286,201.88 Rs. 12,60,000/- 32. 12.02.2009 FTD from 286.200.1917 to 286.201.88 Rs. 9,90,000/- 33. 13.02.2009 FTD from 286.200.1917 to 286.201.88 Rs. 12,25,000/- 34. 18.02.2009 FTD from 286.200.1917 to 286.201.88 Rs. 8,55,000/- 35. 18.02.2009 FTD from 286.200.1917 to 286.201.88 Rs. 8,10....

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....ning vide letter dated 26.12.2016 submitting that the reasons recorded were not correct in as much as the assessee had not made any purchase from M/s Maa Durga Trading Company during the assessment year under consideration and, therefore, the reopening, which was initiated on the ground of alleged bogus purchase was not maintainable. The Ld. AR also submitted that the copies of VAT returns filed by the assessee for the assessment year under consideration had also been furnished before the Assessing Officer wherein the details of party-wise purchases were stated and even in the VAT returns the name of M/s Maa Durga Trading Company was not appearing. He drew our attention to the copies of VAT returns and also copy of the ledger account of M/s Maa Durga Trading Company placed in the Paper Book and our attention was drawn to the fact that the said ledger account only contained opening balance and debits pertaining to payments made to M/s Maa Durga Trading Company during the year under consideration and that there were no purchases from the said company in the relevant year. It was also submitted that apparently these aspects were ignored by the Lower Authorities, although the same had ....

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....any and there are no credits appearing in the said ledger account which could be depicting purchases made from this company. The assessee had submitted both, before the Assessing Officer as well as Ld. CIT(A), that he has not made any purchases from M/s Maa Durga Trading Company during the year under consideration. The assessee has submitted copies of VAT returns which contains party-wise break-up of purchases made by the assessee during the year under consideration before the Lower Authorities. However, these VAT returns were not considered to be proper evidence by the Lower Authorities on the ground that they were not certified by the VAT Authorities. The only reason for rejecting the contention of the assessee was that the assessee could not produce the books of account before the Lower Authorities. In our considered opinion this approach of the Lower Authorities is not correct in as much as it remains undisputed that the assessee had duly filed copies of audited accounts at the time of filing of the return of income and so it cannot be inferred that the assessee did not maintain any books of account. Further the evidentiary value of the VAT returns cannot be simply be brushed a....

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....fficer. The Hon'ble Bombay High Court in the case of Ankita A. Chokesy vs. ITO and Ors. [2009] 411 ITR 207 (Bombay) has held that the conditions precedent for issuance of notice for reassessment is that the 'reasons to believe' that income has escaped assessment must be based on correct facts, notice based on wrong facts is without jurisdiction and has to be quashed. Similarly, the Delhi Bench of the Tribunal in the case of DCIT vs. M/s K.L.A. Foods (India) Ltd. in ITA No.2846/Del/2015, vide order dated 8th April, 2019, has held that the condition precedent for issuance of notice for reassessment is that 'reason to believe' that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and is liable to be quashed. The Hon'ble Delhi High Court in the case of PCIT vs. M/s SNG Developers Ltd., reported in 404 ITR 312 has held that condition precedent for issue of notice for reassessment is that the 'reason to believe' that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and has to be quashed. This order of the Hon'ble Delhi High was challenged before the Hon'ble Ap....