TaxTMI 
TaxTMI 
2026 (1) TMI 193
X X X X Extracts X X X X
X X X X Extracts X X X X
....e during financial year 2012-13 (assessment year 2013-14) had undertaken following transactions: Sr. No. Source PAN Source Name PAN Information Information type Information value Remarks F.Y. 1 ALAPM8418R M/s. Shree Shyam Trading Company (Prop. Business of Shri Anand Muraks 2012-13 Bogus purchases Rs.1,94,00,000 First set of information 2 AYWPS7386N M/s. R.B. Fabrications (Prop. Business of Shri Baburam Samasi 2012-13 Bogus purchases Rs. 2,70,00,000 Second set of information 3. The transactions made by the assessee with non-existing entities. Ld. AO had reasoned to believe that income had escaped assessment within the meaning of section 147 of the Act. An order under Section 148A(d) and notice under Section 148 of the Act dated 28.07.2022 were issued. Notices under Section 143(2) of the Act copies under Section 142(1) of the Act as well as show-cause notice were issued. The assessee filed reply. Notices under Section 142(1) dated 27.12.2022 and 11.02.2023 were issued asking various details. The assessee filed part details on 20.02.2023. In response to not....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and Hon'ble Supreme Court in the case of SEBI Vs Kishore R Ajmera were relied in the matter. 7. Learned Authorized Representative for assessee relied on order of Ld. CIT(A). 8. From examination of record in light of aforesaid rival contentions, it is amply clear that Ld. CIT(A) in Para no.7 held as under: "7. Vide ground-4, the appellant challenged the action of the AO in issuing the notice of re-opening the case on the basis of investigation wing information only and without making any independent enquiry and not produced the proprietor/accused for cross examination by the assessee in respect of the transactions added in the impugned order. In other words the appellant contended that AO had not conducted any independent inquiry but merely relied on the report of the Investigation wing, meaning that AO made relied upon borrowed satisfaction and concluded the assessment. This seems to be one of the objections raised by the assessee even before the AO and before analyzing the issue it is pertinent to take a look at the AO's response as mentioned in the assessment order, relevant extract as below for ready reference: "On the matter of borrowed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n cited above and further reasoning that assessee cannot raise objections during reassessment proceedings and that the assessment is done on merits of the case. This view of the AO is not tenable as the assessee can raise legal grounds at any point of time during the proceedings. While deleting with the assessee's objection contending that the re-assessment proceedings are bad in law, the AO stated in the assessment order that "All the contentions were carefully scrutinized, considered but the same were not tenable at the stage of faceless assessment ....". As regards the appellant's contention that it was denied cross examination of the parties whose statements formed that basis for reopening of assessment as well as for making the said additions, it is noticed from the assessment order that the AO did admit that the statement recorded u/s 131 of the Act on oath from Shri BaburamSamasi the prop: M/s. R. B.Fabrications, formed the basis for reopening. The request for cross-examination was made to the AO during the course of re-assessment proceedings and the AO while denying the request made by the assessee held as follows: [assessment order page-23]: E) TH....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rop: M/s. R. B.Fabrications, thus violating the principles of natural justice and fair play. A statement of a third party cannot be the sole evidence to made an addition, unless it is corroborated by necessary documentary evidence to substantiate the so called deposition. Mere reliance on the statement of a third party cannot be made without ever granting an opportunity of cross-examination amounts to gross violation of the principles of natural justice. It is the duty of the AO to bring in all supporting evidences so that the very basis of the addition is on strong foundation and is irrefutable. Here is a case where the assessee refuted the claim of the third party and sought a cross-examination of the third party and the AO simply brushed aside the assessee's claim, thus weakening his basis/foundation for reassessment. It is discernible from 26 & 27 of the assessment order that the assessee has submitted copies of bills/tax invoices of M/s R. B. Fabrications and M/s Shree Shyam Trading Company, which the AO refused to accept and the reason mentioned is as follows: "....On careful reading of the bills/tax invoices, the same are self generated and does not bea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee to complete the sale and thus, the corresponding sales would also be bogus. Therefore, where the corresponding sales could not be held to be bogus, purchases also could not be bogus. Reliance in this regard is placed on the following judgements: * Principal Commissioner of Income-tax vs. Nitin RamdeojiLohia [2022] 145 taxmann.com 546 (Bombay High Court) - In the said case, the Assessing Officer ("AO"), basis the information received from the Sales Tax Department of the Government of Maharashtra that the assessee was a beneficiary of accommodation entries on account of bogus purchases, reopened the case of the assessee under Section 147 of the Act and made an addition on account of alleged bogus purchases. The Commissioner of Income-tax (Appeals) ("CIT(A)") allowed the appeal on the ground that the AO having not disputed the sales, it was not a case of bogus purchases and that it was at best a case of inflated purchases. The Income Tax Appellate Tribunal ("ITAT/Tribunal") has also directed the AO to delete the addition on account of bogus purchases. On further appeal by the Revenue, the Hon'ble High Court of Bombay held as under: "7. From the above ....