TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 967
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..... That the Ld. Commissioner of Income tax(Appeals) has failed to appreciate that the original assessment was framed u/s. 153B(1)(b) rws 143(3) and there being no failure on part of the assessee to disclose fully and truly material facts, the fresh assessment has been framed without there being a reason to believe that the income has escaped assessment but only under the realm of suspicion, making of roving and fishing enquiries and change of opinion is not permissible and as such the reassessment upheld is illegal, arbitrary and unjustified. 3. That the Ld. Commissioner of Income (Appeals) has erred in law and facts in as much the assessment has been re-opened on the basis of borrowed information without providing any opportunity to cross examine the persons who have alleged to have been providing bogus bills and as such the order passed is arbitrary and unjustified. 4. Without prejudice to the above, the Ld. Commissioner of Income tax(Appeals) has erred in upholding the addition of Rs. 10,14,600/- made on account of alleged bogus purchases which is arbitrary and unjustified. 5. That the order of the Ld. Commissioner of Income Tax (Appeals) is erroneous, arbitrary, opposed to....
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.... the bill of M/s. Kriya Impex Pvt. Ltd. for Rs. 10,14,600/- was dated 06.04.2009 and part payment thereof amounting to Rs. 5 lacs was made well before 24.07.2009 i.e. the date of search and all these documents were thoroughly scrutinized during the search and during the course of original assessment proceedings. However, all these facts were ignored and the AO rejected the objections so raised by the assessee and proceeded ahead and issued a Show Cause on 03.09.2015 asking the assessee to explain why the transaction of Rs. 10,14,600/- for purchase of jewellery from M/s. Kriya Impex Pvt. Ltd. be not treated as bogus purchase. 4. In response to the show-cause, it was submitted that the assessee submitted complete details of the transaction in terms of copy of bill of M/s. Kriya Impex Pvt. Ltd. which indicate that the delivery of goods were made at Chandigarh, copy of the bank statement evidencing the payment through banking channel, copy of the Purchase Register for the month of April, 2009 as an evidence that the purchases were duly recorded in the books of account, copy of the Stock Register as an evidence that stock was physically received and recorded in the books of account and....
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....tion of making payment on committed dates. It was submitted that it is well settled law that the AO cannot sit in the arm-chair of businessman and suggest him how to do business, whom to give credit and when not to give credit. It was, accordingly, submitted that the AO simply passed the reassessment order on the basis of conjectures and surmises and merely on suspicions and simply relying on the Third Party statement. It was further submitted that where the source of purchase has been fully explained, the purchase cannot be held as bogus. There is no cash transaction involved. The assessee's premises were searched on 24.07.2009 and no document was found to suggest that how the account of alleged bogus purchase was scared off. It was further submitted that even the value of closing stock is not in dispute and no defect has been found in its valuation, then in such cases, when the diamonds so purchased become part of the stock and get reflected in the closing stock, purchases cannot be held as bogus. It was further submitted that the assessee carried the matter in appeal before the ld. CIT(A) and aforesaid submissions and documentation were submitted, however, ld. CIT(A) has sus....
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....accommodation entries and the assessee was one of the beneficiaries of such accommodation entries. It was submitted that the assessee has contended that the reliance has been placed on the statement of a Third Party, however, the fact remains that this is the very party from whom so called purchases have been made by the assessee. No stock what-so ever was found from the premises of the seller. The seller explained its modus-operandi in detail which was duly informed to the assessee and the statement of Shri Rajender Jain was recorded on oath u/s. 132(4) wherein he confessed that he is only the entry provider. It was further submitted that the assessee made the payment after three months to the so called supplier whereas the diamond trade is a cash trade unless and until the buyer has routine dealings with the seller. It was submitted that it was a straight dealing and the seller would not have waited for three months to receive the payment. It was submitted that the assessee did not substantiate the purchases made vis-à-vis the mode of delivery and the person who made the purchases and simply stating that the stock have been shown in the books of account will not serve the ....
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.... the fact that these documentation have been submitted by the assessee in support of the purchases and forming part of assessee's stock and payments being made towards such purchases through banking channel, and as duly recorded in the books of accounts of the assessee as well as the fact that these transactions have been recorded in the books of M/s. Kriya Impex Pvt. Ltd. but at the same time, has failed to consider the same questioning their genuineness heavily relying upon the statement of Shri Rajender Jain and basis his statement has held that since the assessee was one of the beneficiaries of the accommodation entries provided by him through M/s. Kriya Impex Pvt. Ltd., the purchases from M/s. Kriya Impex Pvt. Ltd. were bogus in nature. In this regard, we find that the assessee has submitted before the Assessing officer, as evident from the written submissions dated 17.08.2015 reproduced in the reassessment order, that the search was conducted on Shri Rajendra Jain on 3/10/2013 where as the impugned transaction is dated 6/04/2009. It was submitted that the statement of Shri Rajendra Jain has been recorded at the back of the assessee, is a vague statement without any suppor....
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....ng any opportunity to the assessee to cross examine the same, which is in violation of principle of natural justice and against the law laid down by the Hon'ble Supreme Court of India in the case of Andaman Timber vs. CIT decided in Civil Appeal No. 4228 of 2006. For the sake of convenience, I am reproducing the relevant portion of the ITAT, SMC, Delhi Bench vide its order dated 06.11.2018 passed in ITA No. 3510/Del/2018 (AY 2014-15) in the case of Smt. Jyoti Gupta vs. ITO as under:- "13. Merely on the strength of statement of third party i.e.. Shri Vikrant Kayan cannot justify the impugned additions. Moreso, when specific request was made by the assessee for allowing cross examination was denied by the Assessing Officer. The first appellate authority also did not consider it fit to allow cross-examination. This is in gross violation of the principles of natural justice and against the ratio laid down by the Hon'ble Supreme Court in the case of Andaman Timber Vs. CIT Civil Appeal No. 4228 of 2006 wherein it has been held as under: "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witne....
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.... that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal." 14. Considering the facts of the case in totality, I do not find any merit in the impugned additions. The findings of the CIT(A) are accordingly set aside. The Assessing Officer is directed to allow the claim of exemption u/s. 10(38) of the Act." 6. Keeping in view of the facts and circumstances of the present case and respectfully following the order of the Tribunal, SMC Bench, Delhi in the case of Smt. Jyoti Gupta vs. ITO (Supra) and in view of the law settled by the Hon'ble Supreme Court of India in the case of Andaman Timber vs. CIT (Supra), on identical facts and circumstances, the addition in dispute is deleted and the appeal of the assessee is allowed." 10. In light of the aforesaid discussions, we are of the considered view that where the assessee has discharged the initial onus cast upon it and has submitted the necessary documentat....