TaxTMI 
TaxTMI 
2022 (7) TMI 1260
X X X X Extracts X X X X
X X X X Extracts X X X X
....on'ble Commissioner of Income Tax (A) erred in confirming validity of re-opening of the assessment under section 147 on the ground or grounds as stated in the appellate order or otherwise. 2. On the facts and circumstances of the case and in Law the ld. Commissioner of Income Tax (Appeals) (referred as CIT(A)) erred in confirming the ex parte order passed by the Assessing Officer (referred as AO) on the ground or grounds as contained in the appellate order or otherwise. 3. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in confirming the addition on account of disallowance of expenditure of Rs. 11,29,59,517/- by adopting estimated G.P. Ratio of 12.5% of purchases on the ground or grounds as contained in the appellate order or otherwise. 4. The Appellant crave leaves to add, amend, alter, modify and or withdraw any of the above grounds of appeal, which are without prejudice to one another." 03. In ITA No. 1186/Mum/2019, the learned Assessing Officer has raised following grounds of appeal:- "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing to restrict the disallowa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gated and concluded that assessee's books of account are manipulated and fabricated to suit the personal purposes and diversion of funds for personal purposes. The Chief promoter of reliable group of companies Mr. Nemachand Gala has used Assessee Company. The allegations were; a. Last return of income of above company is not filed for last two to three years. b. In All books of accounts, fabrication and manipulation are done at address of company. c. Company is engaged in manufacturing and financial statements were showing business loss. d. Entries are recorded on adhoc and arbitrary basis without supporting document e. Books are manipulated to suit personal purposes f. Books of accounts till 31st March, 2011 are not recorded and are in process of manufacturing g. Intentional loss with deliberate intention to default the bank and avoiding the liabilities is the main business of the company h. Diversion of the funds of the bank i. Directors and their families acquired huge personal wealth. j. Significant benami properties acquired in Gujarat 06. Therefore, ld AO noted that as assessee has no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t order itself. Further, wrong facts are mentioned in the reasons recorded and merely, based on tax evasion petition, the learned Assessing Officer has reopened the assessment. Therefore, reasons to belief are based on borrowed satisfaction. ii. The learned Assessing Officer has not made any addition on the reasons recorded and therefore, no addition could have been made on any other issues by the learned Assessing Officer, he relied on the decision Hon'ble Bombay High Court in case of CIT vs. Jet Airways in Income Tax appeal No. 1714 of 2009 (Bom) dated 12th April, 2010 [331 ITR 236] where in it is held that, if after issuing a notice under section 148, he accepts contention of assessee and holds that income, for which he had initially formed a reason to believe that it had escaped assessment, has, as a matter of fact, not escaped assessment, it is not open to him to independently assess some other income iii. Mere intimation by the CBI i.e. third party information cannot be the basis of the reopening of the assessment. For this proposition, he relied on the decision of Hon'ble Supreme Court in case of Anirudhsinhji Karansinhji Jadeja v. State of Gujarat,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eted without looking at the basic provisions of Section 68 of the income tax act. He submitted that the learned CIT - A did not consider that addition of the credit during the year is required to be made at least. He submitted that in both these cases, the creditworthiness and genuineness of the transaction is not proved. It was also stated that assessee has not submitted anything except by confirmation and in one case copy of acknowledgement of return of income. The annual accounts of the lender company also do not show the creditworthiness of the party or do not confirm the amount. Reasons given by the learned CIT - for deleting addition are not germane to the addition u/s 68 of the act. 011. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also perused the paper book filed by the assessee containing 222 pages, which also included the submission made, by the assessee during the remand proceedings. 012. Now we first come to the appeal of the assessee on the issue of reopening. The appellant is a company engaged in the business of manufacturing and trading of industry papers. The assessee has not filed its return of i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ice issued u/s 142 (1) of the act was complied with after one year. Thus, it cannot be said that assessee has filed any return of income. Assessee has also not shown that in the notice issued u/s 142 (1) of the act learned assessing officer has granted time to the assessee to file the return of income in response to that notice of 12 months. Thus, the return filed by the assessee on 18/9/2012 does not have any validity. In view of this, we do not find any infirmity in the finding of the learned assessing officer in the reasons recorded for reopening of the assessment that assessee has not filed return of income for assessment year 2009 - 10. b. As assessee has not filed any return of income for the impugned assessment year, the allegations made in the tax evasion petition forwarded by Central investigation bureau is correct that assessee has not filed the last return of income for at least 2 to 3 years. Even before us it was not shown that assessee has filed any return of income for the earlier years. It was also not shown before the learned CIT - A. Therefore, it is evident that for this assessment year as well as for earlier years no return of income is available with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the investigation made by the Central bureau of investigation is a tangible material available with the assessing officer. l. Assessee on the receipt of tax evasion petition from the other assessing officer, examine whether the assessee has filed return of income for this year or not. He did not find the return of income for this year, therefore, it cannot be said that the learned assessing officer has not applied his mind. In view of this the decision of the honourable Bombay High Court relied upon by the assessee in case of Shodiman investment Pvt Ltd [ supra ] also do not help. Hence it cannot be said that it is a borrowed satisfaction of the learned assessing officer. m. With respect to the reliance on the decision of the honourable Bombay High Court in case of Jet Airways (supra), it is apparent that the learned assessing officer has made the addition/disallowances based on reasons recorded by him. Even the CIT - A has also upheld part of the addition/disallowances on such reasons. Therefore, reliance on that decision does not help. 013. In view of this, we do not find any infirmity in the order of the learned CIT - An in upholding the validity of the reo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowance in court to 12.5% of bogus purchases he noted that the total purchases of Rs. 888,827,942/- is made from specialty papers private limited and Rs. 14,848,200/- is from another sister concern global paper Impex Ltd amounting in all to Rs. 903,676,142/- and 12.5% of the same comes to Rs. 112,959,517/-. He sustained this addition. He also considered the gross profit ratio of the assessee and stated that it is shown too less by the assessee and therefore it should be ignored. He noted that gross profit ratio of the assessee over a period of 3 years ranges from 0.14% to 1.07% and gross profit ratio in manufacturing segment is 6.38% to 104.67 % . On careful reading of the order of the learned CIT - A, we do not find any infirmity in the reasoning given for sustaining the disallowance of Rs. 112,959,517/-. Further it is a case of the circular trading entered into by the assessee along with its related parties where there is no evidence whether the rates charged by the parties in the circular rate were at market rate and further when the goods are sold without any physical movement of the goods, the sales and the purchases are not at all reliable. The transactions are also rooted th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the global paper Impex private limited. We find that the global paper Impex private limited is a sister concern where the opening balance in the account was Rs. 28 lakhs and credit during the year were Rs. 35,807,576/- and debited in the account of Rs 2, 49,84,201/- resulting into a closing balance of Rs. 1,36,23,375/-. This is challenged as per ground number 3 that sum of Rs. 35,807,576/- received from this company added by the learned assessing officer u/s 68 of the income tax act should have been upheld by the learned CIT - A. With respect to this account, the learned CIT - A held that assessee has produced the copy of account which shows that the money is transferred from the cash credit account of UCO bank of assessee to global paper Impex private limited and thereafter the money is received back from that party. He noted that these kind of circular transactions are repeated. He also noted that the ultimate source of fund remains the cash credit account maintained in UCO bank. 021. As per ground number 4 was found that Mr. Nemchand J Gala had the opening credit balance of Rs. 6,969,166/-, Rs. 8,12,600/- was received during the year, Rs. 136,500/- is repaid during the year....