TaxTMI 
TaxTMI 
2025 (4) TMI 1666
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.... by not appreciating the judgment of the Hon'ble Hon'ble Supreme Court in the case of N.K. Proteins Ltd. v. DCIT [2017] 84 taxmann.com 195 (SC) in which the Hon'ble Apex Court has dismissed the SLP of the assessee against the decision of the Gujarat High Court [N.K. Industries Ltd. v. DCIT (2016) 72 taxmann.com 289 (Gujarat)] wherein 100% of bogus purchases were added to the total income of the assessee. 2. The Ld. CIT(A) has erred in limiting the addition only to the extent of 25% of bogus purchases by arriving at the conclusion that since the corresponding sales have been accepted and so entire alleged purchases cannot be disallowed. It has been clearly established while framing the Assessment Order by the AO that the purchases made by the assessee were bogus in nature. Further, the proprietors of the firms from which purchases were made i.e Sh. Vijay Kumar, Prop. M/s Evergreen Sales Corporation and Sh. Naresh Kumar, Prop. M/s Universal Foods Corporation had admitted before the ITO, Ward-2(4) in their statements recorded on 12.12.2016 and 13.12.2016 respectively, that they had not supplied any goods to the assessee company and only invoice bills have been iss....
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...., complete purchase book for the year under appeal, complete stock register, containing full details of inward and outward movement of rice bran, copy of VAT return of the assessee, wherein the details of purchases made from the two parties of ESC and UFC are reflected, and copy of respective VAT return of UFC and ESC where the respective sales to the assessee company are found recorded, copy of month-wise summary details of consumption of purchase of raw material and copy of yield chart certified by the chartered accountant for the year under appeal has been produced and filed before the AO in course of re-assessment proceedings. However, the AO has refused to give any cognizance to such documentary evidences produced and filed in course of reassessment proceeding due to the absence of any purchase agreements and details of transportation in respect of the said purchases and as such the same has remained unexplained and addition has been made of the entire amount of purchase totaling Rs.6,43,54,912/-, u/s 69C of the Act to the total income of the assessee as bogus purchase. 5. The matter was carried in appeal before the ld. CIT(A) where detail submissions were filed by the asse....
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....appellate authority, the ld. CIT(A) has dismissed the said grounds by observing as under: "5.9 As highlighted in the various judgments of higher courts quoted above, the AO has power to reopen a case, provided there is tangible material to come to the conclusion that there is escapement of income of the assessee. The contentions of the appellant that all maternal facts were disclosed before the AO during the original assessment proceedings is not acceptable because mere production of copies of accounts and bank accounts relevant to the concerned transactions does not make the same as genuine. It is not necessary that every transaction routed through banking channel is a genuine transaction. In fact, it is a case where the assessee has not fully & truly disclosed the facts related to these transactions. The case has been reopened on the basis of reasons which were not available before the AO during the original assessment proceedings. 5.10 Therefore, in my considered view, there is not enough grounds to accept the contention of the appellants, and accordingly, theses grounds of appeal are dismissed." 7. Now, the department is in appeal before the Tribunal on the....
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.... books account has not been rejected and there are absolutely no materials on record to prove that the transactions are not genuine. Since, in the instant case the purchases made by the assessee are supported with invoices and all payments are made through bank channel and the sales were also accepted by the AO then the purchase cannot be doubted, and in support of his contention, he relied on the following judgments: "(i) Judgment in the case of CIT v. Odeon Builders (P.) Ltd. as reported in [2019] 110 taxmann.com 64 (SC). INCOME TAX: Where assessee had submitted purchase bills, transportation bills, confirmed copy of accounts and VAT Registration of sellers as also their Income-tax Return and payment was made through cheques, impugned purchases could not be disallowed. (ii) Judgment in the case of PCIT vs. Tejua Rohit Kumar Kapadia reported in [2018] 94 taxmann.com 325 (SC) Where purchases made by assessee-trader were duly supported by bills and payments were made by account payee cheque, seller also confirmed transaction and there was no evidence to show that amount was recycled back to assessee, Assessing Officer was not justified in treating....
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....annot be disallowed only the portion of profit embedded to be added back to the income of the assessee." 11. He further submitted that in the instant case, addition has been made by the AO solely on the basis of some statements given Mr. Vijay Kumar and Mr. Naresh Kumar, which were recorded behind the assessee without considering any material evidences or submissions made by the assessee and without offering any opportunities of cross examination of witnesses for rebuttal of the same. In support of his arguments the assessee relied on the following judgments: "Principal Commissioner of Income-tax, Central-2, Mumbai vs. Nitin Cylinders Ltd. [2024] 159 taxmann.com 649 (Bombay)/[2024] 298 Taxman 33 (Bombay) [31-01-2024] INCOME TAX: Where Assessing Officer made an addition on account of bogus purchases solely on a statement made by only one party recorded under section 131 without adducing evidence of other necessary parties. Tribunal was justified in deleting impugned addition Section 69C of the Income-tax Act, 1961 Unexplained expenditure (Bogus purchases) Assessee-company was engaged in manufacture of high-pressure seamless cylinders Pursuant to search and seizu....
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....recorded u/sec 148 of the Act, that, any statement taken at the back of the Assessee cannot be relied upon unless chance to cross examine is given to the Assessee and the same has been reproduced by the Ld. CIT(A) at pages 10, 25 to 26 and Reliance in this regard is being placed upon the following Judgments wherein it has been held that the statements taken at the back of the Assessee cannot be used for making additions unless a chance to cross examine has been given to the Assessee. It has also been held that the Assessing Officer cannot make such additions only on the basis of surmises and conjectures: [2024] 162 taxmann.com 5 (SC) Principal Commissioner of Income-tax v. Kishore Kumar Mohapatra". (Judgment Set-1, pages 139 140) "INCOME TAX: SLP dismissed against order of High Court that where Assessing Officer denied exemption claimed by assessee under section 10(38) on long-term capital gain on sale of shares an basis of statement of entry operators recorded on various dates in some other proceedings not connected with assessee and no opportunity to cross-examine socalled entry providers was given to assessee thereby violating principles of natural Jus....
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....refore, it was concluded that how the AO had noted that the negative stock was not clear. The record produced showed that evidence was part of the account books furnished in support of the assessee's contention and the evidence had also been filed before the first Appellate Authority. Accordingly, it was held that is was not justified for rejecting the accounts simply because the names of the buyers were not mentioned in the bills of cash sales and it would not go to disbelieve the books of accounts since the assessee was trading in gold bullion. The day to day rates would have also been ascertainable from the rates declared by National market, Sarrafa Bazzars etc. Resultantly, a finding was recorded that the AO was not justified in rejecting the book version of the assessee and to apply the profit rate of 0.54% without any good reason and no comparable instance had been given and there was no valid reason to doubt the record of the assessee and the assessee had maintained quantitative tally of the stock. The Revenue had not been, thus, able to make out a case that the assessee had notadopted consistent method of accounts and the profit and gains earned by the assessee could ea....
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....iscarded as bogus. Moreover, we also find that the inward and outward movement of the stock register as examined by A.O. has not been doubted and as such the gross sales of the assessee which are also recorded in the stock register has been accepted as correct and when sales are accepted as correct, there is no reason to treat the purchase as bogus because there cannot be any extraction of finished products without input of raw materials. We also find that the entire addition of disallowances has been made on the basis of third party statement which has been recorded behind the back of the assessee without affording any opportunity to the assessee of cross examination of witnesses. As such, we are of the opinion that the statements recorded behind the back of the assessee cannot be used for making addition unless and an opportunity to cross examine the witness is allowed. 14. As such, we are of the opinion that the ld. first appellate authority has rightly arrived at a conclusion that the entire purchase cannot be considered to be bogus especially when the books of account of the assessee are not rejected then the book figures are to be accepted as correct. As such, we uphold th....
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....ned evidencing the purchase of rice bran (raw material) the payment of which has been made through bank channel. He further submitted that purchase of raw materials has been accepted by the Assessing Officer in original assessment proceedings and as such, the reopening of this assessment u/s 148 was bad in law and he strongly relied upon the judgment of the jurisdictional High Court in the case of M/s Supertech Forgings (India) Pvt. Ltd. Vs PCIT (supra) where under similar facts and circumstances on the basis of statement of the buyers that they had not made any sales to the assessee concern, the assessment was reopened u/s 148 and the Hon'ble Tribunal held that the said information was required to be corroborated and verified by the AO before taking any action u/s 148, because the original assessment has been framed u/s 143(3) after necessary verifications and as such the Hon'ble Tribunal has quashed the reopening u/s 148. 19. Subsequently, the Revenue challenged the matter before the jurisdictional High Court where the Hon'ble Court has confirmed the order of the Tribunal which has quashed the reopening of the case u/s 148 of the Act. Number of other judgment has also been cit....
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....O for reopening of the assessment proceedings and refer to the observations of the ld. CIT(A) in para nos. 5.1 to 5.10 of the appellate order. 22. We have heard the rival submissions of the counsels and we have considered the materials on record and also the contents of the paper book filed by the assessee along with the copy of the judgment set of various decisions of various courts relied upon by the assessee in support of his argument. We find that in the instant case, the original assessment was framed u/s 143(3) on 19th December, 2016 and the reopening notice u/s 148 was issued on 19th March, 2021 which has been issued beyond four years, on the basis of statement of two parties recorded behind the back of the assessee by the ITO, Ward 2(4), Abohar and on the basis of information supplied by the ITO, Ward-2(4), Abohar to the AO of the assessee, proceedings has been initiated u/s 148 without verifying the particulars and the contents of such information. The AO has not made any enquiry before issue of such notice u/s 148. We find that the Assessing Officer has not recorded his independent satisfaction. He has simply relied upon the information passed on to him by the AO, Aboh....