TaxTMI 
TaxTMI 
2025 (11) TMI 1933
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....grossly erred in law and on the facts and circumstances of the case in dismissing the appeal of the Appellant by confirming the order dated 26.03.2023 passed by the respondent without considering that the same was erroneous and bad in law as the same was passed without any valid satisfaction note on record. 3. That the CIT(A) grossly erred in law and on the facts and circumstances of the case in dismissing the appeal of the Appellant by confirming the order dated 26.03.2023 passed by the respondent without considering that the same was without jurisdiction and thus void ab initio. 4. That the CIT(A) gross erred in law and on the facts and circumstances of the case in dismissing the appeal of the Appellant by confirming the order dated 26.03.2023 passed by the respondent without considering that the order dated 16.09.2022 centralizing the case of the appellant by the Pr. Commissioner of Income Tax-4, New Delhi was passed without any opportunity of being heard to the appellant. 5. That the CIT(A) gross erred in law and on the facts and circumstances of the case in dismissing the appeal of the Appellant by confirming the order dated 26.03.2023 passed by the ....
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.... satisfaction as recorded by the Assessing Officer for assumption of jurisdiction u/s 153C of the Act is arbitrary and bad in law and consequently the assessment so framed in furtherance of such invalid jurisdiction is also invalid. 4. That without prejudice to the aforementioned grounds, the satisfaction alleged to have been recorded by the Assessing Officer is not qua each year but has been recorded in a consolidated manner for the assessment years 2015-16 to 2021-22 and consequently the alleged satisfaction as recorded by the AO is not in accordance with law and so the assessment framed in furtherance of such invalid satisfaction is arbitrary, unjust and bad in law. 5. That there was no incriminating material qua the assessee found during the course of search on 26. 10.2020 carried on one Mr. Sanjay Jain and accordingly in the absence of incriminating material found during the course of search qua the assessee, the assumption of jurisdiction u/s 153C of the Act and assessment framed in furtherance thereof is arbitrary, unjust and bad in law." 3. Brief facts are that there was a search on 26.10.2020 in the cases of Sanjay Jain & Mehta Group and in the premise....
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.... the appellant assessee as beneficiary of accommodation entries. So much so, even the name of the appellant assessee has not been found in the papers as was reproduced and pointed by the assessing officer in his assessment order. 2.2 During the course of hearing, the appellant assessee furnished the details of the parties from whom the purchases of cements were made by and also stated that the payments against the purchases have been made only through banking channels. It is not the case of the assessing officer that whatever the payments made by the appellant assessee from banking channels have come back to the appellant assessee. The appellant assessee also stated that against various purchases, the e-way bills have also been issued in accordance with the GST provisions and all the parties are duly registered under the GST Act. However, the assessing officer was of the view that the purchases made from the following parties which are admittedly operated by Sanjay Jain are not genuine and are bogus purchases and on the basis of such inference derived from the statements of Sanjay Jain and other intermediaries namely Nikhil Sachhar and Bharat Bhushan, the assessin....
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....hased by the appellant assessee because without purchase of such important materials, it is impossible, to execute the contracts. 3.3 Such types of issues with regard to bogus purchases have also come up before courts from time to time, including the Supreme Court, in various types of cases including civil contractors and sub- contractors and the courts always held that if the sales have been accepted, it cannot be imagined that no purchases have been made because without purchases, sales cannot be made. The courts held that if the alleged so-called purchases are not genuine in the opinion of the Department, then it has to be presumed that the appellant assessee would have purchased the material from someone else and in such circumstances, only the profits embedded in such purchases may be disallowed. Case Laws 1. Purchases utilized in manufacture of goods and sales have been accepted. Payments have been made through banking channel. No evidence that the amount has come back to the assessee. Books of accounts have not been rejected - entire purchases cannot be disallowed. Only the profit embedded therein should be disallowed. ● 174 taxmann.....
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..... Such statements were recorded behind the back of the assessee. Based on the inference drawn from such statements, the AO made the addition by way of disallowance of all the purchases alleged to have been made from the entities controlled by Sanjay Jain. (ii) During the course of assessment proceedings, the AO has not put these persons to the assessee for cross-examination. (iii) It is a settled proposition of law that cross-examination is a sine qua non of due process of taking evidence and no adverse inference can be drawn against the party unless the party has put on notice made out against him. (iv) It is not out of place to mention here that opportunity to cross- examine is one of the corner stones of natural justice which has been elevated as a fundamental right in the Indian Constitution. The Calcutta High Court in the case of CIT vs. Eastern Commercial Enterprises in 210 ITR 103, while considering the right of cross- examination, observed as under: "It is not just a question of form or a question of giving an adverse party its privilege but the necessity of the process of testing the truth of oral evidence of a witness. Without truth bei....
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....f Sanjay Jain, it has been alleged that certain books of accounts and ledgers on the computer was found. During the course of search, the statement of Sanjay Jain was also recorded on 26. 10.2020 wherein he has stated that he is operating various companies wherein not only the actual business is conducted but also accommodation entries have been provided to various entities through intermediaries. 1.1 In the statement, the authorized officer, who had recorded the statement of Sanjay Jain had raised various queries and named various persons (the information would be available with the Department) to whom the accommodation entries were provided. In the statement, the said Sanjay Jain admitted certain entities and furnished the names to whom the said Sanjay Jain had provided the accommodation entries, but Sanjay Jain has not named the appellant assessee, nor the authorized officer had put up any question because the name of the appellant assessee was not in the books of accounts. 1.2 Thereafter, the assessing officer of the person searched i.e., Sanjay Jain had recorded a consolidated satisfaction note for the assessment year 2019-20 and 2020-21 on 05.08.2022 and sen....
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....ntemplated under the law for the assumption of jurisdiction under section 153C of the Act which cannot be made the basis for the assumption of jurisdiction inter alia because: (i) The so-called satisfaction as recorded by the assessing officer is a mechanical satisfaction without application of mind because no incriminating material relating to the appellant assessee either has been discussed or pointed out. In the case of Saksham Commodities Ltd. v. ITO [464 ITR 1 (Delhi) ], the Hon'ble Delhi High Court observed: [para 51] 51. Ultimately Section 153C is concerned with books, documents or articles seized in the course of a search and which are found to have the potential to impact or have a bearing on an assessment which may be undergoing or which may have been completed. The words "have a bearing on the determination of the total income of such other person" as appearing in Section 153C would necessarily have to be conferred pre-eminence. Therefore, and unless the AO is satisfied that the material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening or assessing all over again all the ....
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....he satisfaction note. Therefore, the very satisfaction which is totally based on the inference and not material, as alleged to have been recorded by the assessing officer for the assumption of jurisdiction under section 153C of the Act is not a valid satisfaction in law and so the issuance of notice under section 153C of the Act by the assessing officer is also invalid and the proceedings in furtherance thereof are also invalid. (iii) No incriminating material (a) The case of the appellant assessee is of unabated assessment because the appellant assessee had filed its original return for assessment year 2019-20 on 31.10.2019 and for assessment year 2020-21 on 25.11.2020 and thereafter no notices u/s 143(2) of the Act were issued within the limitation prescribed under law and accordingly whatever income was disclosed had become final. Thereafter, the notices u/s 153C of the Act were issued on 03.11.2022. As already submitted above, all the purchases as made by the appellant assessee have been duly recorded in the books of accounts and the payments have also been made through banking channel. In other words, all transactions are duly recorded and disclosed ....
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....t in the case of V.C. Shukla (supra) and Common Cause (A Registered Society) v. Union of India [394 ITR 220 (SC)] held that a sheet of paper containing jottings in loose form, not shown to form a part of the books of accounts regularly maintained, does not constitute material evidence and cannot be made the basis of addition. The SLP filed by the Revenue against the judgment of the Hon'ble Karnataka High Court was dismissed by the Hon'ble Supreme Court in the case of DCIT v. Sunil Kumar Sharma [469 ITR 271 (SC)]. (iv) On perusal of the satisfaction note, it is clear that a consolidated satisfaction has been recorded by the assessing officer for initiation of proceedings under section 153C for assessment years 2015-16 to 2021-22. It has been held by the Hon'ble Karnataka High Court in the case of DCIT v. Sunil Kumar Sharma [469 ITR 197 (Karnataka), that the satisfaction note for the purpose of assumption of jurisdiction under section 153C has to be recorded separately for each assessment year and the consolidated satisfaction note, if recorded, will vitiate the entire assessment proceedings. Against the judgment of the Hon'ble Karnataka High Court, the SLP f....
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....ses amounting to Rs. 1,61,71,338/- have been made through e-way bills, the details whereof have been placed at pages 622 to 796 of the paper book. The E-way bill number has been duly mentioned on the concerned invoices and some of the energy bills were also filed before the Assessing Officer to prove the case. As already submitted in earlier submissions, the purchases from the aforesaid parties are mainly of cement and some purchases were in respect of iron and steel. The cement was consumed while executing the civil contracts and sub- contacts awarded by the semi government authorities located in Haryana and the execution has to be made in accordance with the standards prescribed by the Haryana PWD prevailing in the relevant years. 2.1 All the civil contracts were subjected to not only audits by the Government authorities but under the supervision of various other Government authorities meant for monitoring the projects. Till date none of the Government authorities have raised any objection with regard to the quality of work and all the payments on the completion of works have been duly recorded in the books of accounts and have been accepted by the Assessing Officer. Eve....
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.... proceeds relating thereto have also been accepted by the Assessing Officer and the books of accounts have not been rejected by the Assessing Officer, then it has to be presumed that the assessee made the actual purchases of cement etc. which have been consumed while executing the on tracts because without cement and steel, the civil works cannot be executed and accordingly whatever the disallowance on account of alleged bogus purchases has been made by the Assessing Officer, the same deserves to be deleted. 4. However, in the alternative it is bought to your kind notice that it has been consistently held by the courts and even the Hon'ble Supreme Court that where the proceeds of the civil contract have been accepted by the Assessing Officer and the books of accounts have not been rejected, then it has to be presumed that the purchases would have been made by the assessee from grey market if the alleged purchases are not verifiable and in such circumstances it would be reasonable to restrict the addition to the extent or profits embedded in such alleged purchases. 5. During the course, the Hon'ble Bench has required the assessee to furnish the GP chart eve....