TaxTMI 
TaxTMI 
2024 (8) TMI 229
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....controversy involved which is in narrow compass, with the consent of the learned advocates for the parties, the matter is taken up for hearing. 5. Brief facts of the case are that the petitioner is a partnership firm which is engaged in the business of construction, filed return of income for A.Y. 2016-17 on 21.03.2018 declaring total income at Rs. Nil. 5.1 It is the case of the petitioner that at the end of the year under consideration, total sundry creditors reflected in the balance-sheet were Rs. 10,51,28,281/- out of which, only Rs. 1,15,50,282/- were sundry creditors for expenses and Rs. 9,35,78,199/- pertained to advances received from the customers. 5.2 The case of the petitioner was selected for scrutiny. A notice under section 142(1) dated 29.08.2018 was issued calling upon the petitioner to furnish various details including the details pertaining to sundry creditors as per Point No. 12 of the said notice. 5.3 The petitioner, by reply dated 22.10.2018, furnished various details called for including the details pertaining to outstanding creditors and clarified about the bifurcation of the sundry creditors into the creditors for expenses and the amount pertaining....
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...., no details have been submitted by the assessee during the course of assessment proceedings u/s. 143(3) of the Act. Therfore, identity of the creditors, genuineness, and creditworthiness remains unexplained during the course of assessment proceedings u/s. 143(3) of the Act. Therefore, sundry creditors worth of Rs. 10,51,28,281/- required to be disallowed and added back to the total income of the assessee for the year under consideration. 3.2 Therefore, sundry creditors of Rs.10,51,28,281/- has to be disallowed and added back to the total income of the assessee and required to be taxed, which is remains to be unexplained. 4. Enquiries made by the AO as sequel to information collected/received: As per information available on records, it is noticed that the assessee has shown sundry creditors of Rs.10,51,28,281/-. However, on perusal of records, no details have been submitted by the assessee during the course of assessment proceedings u/s.143(3) of the Act. Therefore, identity of the creditors, genuineness, and creditworthiness of the creditors remains unexplained during the course of assessment proceedings w/s.143(3) of the Act Therefore, sundry creditors worth of....
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....nion on the part of the respondent as it is well settled that the words "reason to believe" suggest that firstly the belief must be that of Assessing Officer; secondly, it must be that of an honest and reasonable person based upon reasonable ground and not a mere change of opinion, suspicion, gossip or rumor and thirdly, there must be live link or close nexus between the material and information available with the Assessing Officer and the belief he has formed regarding escapement of income which belief must lead to conclusion that some income chargeable to tax has escaped assessment in the hands of the assessee concerned. 6.1 It was submitted that in the facts of the present case, notices dated 29.08.2018 and 06.11.2018 issued during the course of regular assessment deal with the very same issue of sundry creditors and ultimately, the Assessing Officer while passing the order under section 143(3) has disallowed 20% of the total sundry creditors reflected in the balance-sheet against which, the petitioner has preferred the appeal before the CIT(Appeals). 6.2 It was therefore submitted that the entire issue of sundry creditors was dealt with by the Assessing Office during the ....
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.... that the petitioner has received advances from customers amounting to Rs. 9,35,78,199/- and instead, the petitioner has filled up the column of sundry creditors outstanding of one year. It was therefore submitted that the petitioner has not made full and true disclosure with regard to sundry creditors and no contra confirmation in respect of sundry creditors were submitted even during the regular assessment proceedings or along with objections. The petitioner has also not provided any details whatsoever in respect of the amount of sundry creditors shown as advances received from the customers in the entire original assessment proceedings. 7.1 It was submitted that the impugned notice is issued after taking due diligence and observing statutory procedure within the time limit prescribed as per the audit memo dated 03.07.2019. It was submitted that as per the audit objection raised, it was found that there was under assessment of income by Rs.8,40,02,625/- which has escaped assessment. Learned Senior Standing Counsel Mr.Sanghani in support of his submissions referred to and relied upon the following averments made in the affidavit-in-reply filed on behalf of the respondent: ....
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....In nutshell, the due diligence was taken before re-opening the case of the assessee. 15. With respect to the contentions raised in Para-3.2, it is submitted that the allegation made by the assessee in this para is false. The case was not re-open on the basis of change of opinion. It is to submit that while re-opening the case of the assessee, the AO was in the possession of information by way of Audit Memo of ITO (Audit)-1, Rajkot Bearing No. CIT(Audit}, Ahmedabad.2019-20/ITO(IAP)-1, Audit Rajkot/10291 dtd. 03.07.2019 which specifically indicates the under assessment of income to the extent of Rs.8,40,02,625/while finalizing original assessment dtd. 06.12.2018. There is no mere change of opinion, but there is live link between the information with the AO which lead to form belief that the income chargeable to tax has escaped assessment. Reliance may be placed on the decision delivered by Hon. Apex Court in the case of CIT ve P.V.8, Beedies Pvt. Ltd. (237 ITR 13). 16. With respect to the contentions raised in & is submitted that the allegation made by the assessee in this para is false. While re-opening the case of the assessee, the AO was having valid jurisdiction....
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....e inappropriate to ceased the entries liability shown in the books of the assessee considering the same as bogus. Keeping such thing in mind, a show cause notice was issued in the case, where the assessee was requested to submit name and address of each creditors and contra confirmation of all the creditors having closing balance more than 5 lacs, failing which 20% of such liability i.e of Rs. 10,51,28,281/- will be considered as bogus and will be ceased. In this case, the assessee was again vide order sheet noting dated 20.11.2018 was requested to submit details asked vide show cause notice and given 7 days time to submit the details. On 27.11.2018, the AR of the assessee attended and filed adjournment letter. Accordingly, the AR of the assessee was again requested to produce the details as asked vide questionnaire, vide show cause notice and vide order sheet noting as discussed above in respect of sundry creditors, failing which addition will be made as per proposal given in show cause notice. On schedule date, neither any one attended nor any submission was filed. In absence of details, submitted, the undersigned left with no option but to treat the 20% of liability whi....