TaxTMI 
TaxTMI 
2023 (7) TMI 1660
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..... CIT(A) ought to have held that the assessment order passed is invalid and bad in law. 2. The Ld. CIT(A) has erred in holding that the reopening of the assessment order by issue of notice u/s. 148 of the Act is valid. The Ld. CIT(A) ought to have appreciated that the reopening of the assessment and the consequential assessment order is invalid and bad in law. 3. The Ld. CIT(A) has erred in upholding the addition made by the A.O. u/s. 69C of the Act of Rs. 104,99,73,000/- on account of devolvement of LC by holding it to be bogus and unexplained expenditure. 4. The Ld. CIT(A) has erred in not holding that the A.O. has erred in invoking the provisions of S. 115BBE of the Act. 5. The Ld. CIT(A) has erred in not holding that the assessment order has been passed in gross violations of the principles of natural justice. 6. The Ld. CIT(A) has erred in passing the order in violation of the principles of natural justice. 3. The relevant facts in brief are that the Appellant, a private limited company engaged in trading of iron and steel, filed its original return of income on 28/10/2017 declaring `Nil' income. 4. During the relevant pre....
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....l' income returned by the Appellant. The aggregate amount of LCs amount outstanding to the banks remaining unpaid was added in the hands of the Appellant as income under Section 69C of the Act chargeable to tax at the rate of 60% in terms of Section 115BBE of the Act. 5. Being aggrieved, the Appellant preferred appeal before the CIT(A) challenging the Assessment Order, dated 29/09/2021, passed under Section 147 read with Section 144B of the Act on the ground of lack of jurisdiction to initiate reassessment proceedings as well as on the merits of the addition. However, the contentions/submissions advanced on behalf of the Appellant in appeal did not find any favour with the CIT(A) and the appeal was dismissed vide order, dated 30/12/2022. 6. Being aggrieved, the Appellant has preferred the present appeal before the Tribunal. 7. Learned Authorised Representative for the Appellant made detailed submission relying upon the documents forming part of the paper- book which can be summarized as under: (i) The reassessment proceeding as well as the consequential assessment order is bad in law as the requirements of Section 147 of the Act are not fulfilled in the facts ....
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....Mahip Marketing Private Limited and Harsh Steel Trade Private and/or their directors are not related to the Appellant and/or its directors. (vii) The Assessing Officer has made addition by invoking provisions of Section 69C of the Act which cannot be attracted in the present case as there is no dispute that the source of expenditure was the LC amounts disbursed by the banks. The Assessing Officer has accepted both the purchases and sales made by the Appellant. Addition has been made under Section 69C of the Act questioning the source of the expenditure. 8. Per Contra, the Learned Departmental Representative relied upon the order passed by the Assessing Officer and the CIT(A). The Learned Departmental Representative made following submissions: (i) The reassessment proceedings were initiated on the basis of tangible material being information share in the 96th meeting of Regional Economic Intelligence Council, Mumbai. The information receive that the Appellant got issued LCs from various banks on the basis of bogus purchase transactions which were encashed by the beneficiaries (i.e. Mahip Marketing Private Limited and Harsh Steel Trade Private Limited) being enti....
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.... placed on behalf of the Appellant is in the nature of an interim order and therefore, the same cannot be taken as final word of the issue. (vi) The FIR filed by the CBI clearly shows that the Appellant was involved in bogus purchase transactions (vii) Perusal of reasons recorded and the assessment order passed by the Assessing Officer would show that addition of INR 104,99,73,370/- has been by the Assessing Officer on account of booking bogus expenditure even though reference has been made by the Assessing Officer to Section 69C of the Act. Since the Appellant did not furnish the details of purchases made, the Assessing Officer made addition of LC amount outstanding. 9. In rejoinder, the Learned Authorised Representative for Appellant submitted that: (i) the submission made by the Learned Departmental Representative that the no documents relating to movement of goods were filed by the Appellant is factually incorrect as the Appellant had filed documents related to the purchase of goods on sample basis vide reply letter dated 24/09/2021. (ii) The addition has been made under Section 69C of the Act on account of unexplained expenditure and not ....
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....ated 13/03/2021 under Section 148 of the Act. 11.2. The Appellant was appraised of the reasons recorded for reopening assessment vide notice, dated 28/09/2020, issue under Section 143(2) read with Section 147 of the Act. After downloading the notice from the website, the Appellant filed reply on 11/01/2021 wherein reference was made to paragraph 1 of the aforesaid notice dealing with the reasons recorded for reopening assessment. Thereafter, vide notice dated 28/01/2021, issued under Section 142(1) of the Act the reasons recorded for re-opening the assessment were again communicated to the Appellant and in response the Appellant also filed submission dated 08/02/2021 whereby the Appellant objected to reopening of assessment and requested that the re-assessment proceedings be dropped. On perusal of the aforesaid submission dated 08/02/2021, we find that reference was made to reasons recorded for reopening the assessment. Thus, while the Appellant was aware of reasons recorded for reopening the assessment, the Appellant kept insisting for the copy of reasons recorded for reopening the assessment and in effect wanted copy of the reasons recorded annexed to the form for recording....
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....nd No. 1 and 2 raised by the Appellant are dismissed. 12. Ground No. 3 & 4 12.1. Ground No. 3 & 4 are directed against the addition of INR 104,99,73,370/- made by the Assessing Officer under Section 69C of the Act and levy of tax at rate of 60% under Section 115BBE of the Act. 12.2. On perusal of the Assessment Order, we note that while the Appellant has furnished details of stock statement, MVAT assessment, details of purchasers along with corresponding sales with account confirmation given by the parties making purchases from the Appellant, and details of suits for recovery filed by the Appellant in support of the contention that the purchases/sales were genuine and the default made by the Appellant in making payments to banks was on account of genuine hardship caused by the fact that the parties making purchases from the Appellant failed to make payments for goods purchased. We find that the Assessing Officer rejected the aforesaid documents/details without making any independent inquiry or verification. The basis of addition made by the Assessing Officer was the charges leveled against the Appellant in the FIR filed by the CBI and the information shared by the Regional....
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....ase parties. In this context, the Assessing Officer has referred to 7 such parties tabulated in para 6 of the assessment order from whom the total purchases effected amounted to Rs.37,45,965/-. The Assessing Officer has also observed that enquiries were made by him by issuing notices u/s 133(6) of the Act to such parties which revealed that such parties were not available at the given addresses since the notices were returned by the postal authorities with the remarks 'not known', 'left', 'unclaimed', etc. In this background, the assessee was show caused as to why the purchases amounting to Rs.37,45,965/- debited to the Profit & Loss Account should not be treated as bogus by invoking Sec. 69C of the Act. In response, assessee furnished a detailed explanation contesting the stand of the Assessing Officer and such explanation has been reproduced by the Assessing Officer in para 7 of his order. In particular, assessee also asserted that there was no justification for invoking Sec. 69C of the Act in the present case as assessee had explained the source of expenditure and, therefore, Sec. 69C of the Act was inapplicable. The Assessing Officer was not satisfied wi....
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....parties in question have not been explained in the context of Sec. 69C of the Act. Therefore, in my view, invoking of Sec. 69C of the Act in the present case to treat the purchases of Rs.37,45,965/- stated to have been made from the 7 parties in question is on a wrong footing. Thus, on this aspect also, assessee deserves to succeed." (Emphasis Supplied) 12.4. We concur with the above decision of the Tribunal. There is no dispute about the source of expenditure in the facts of the present case. The banks have leveled allegation upon the Appellant for misappropriation/siphoning of funds given by the bank on encashment of LCs in collusion with related parties. Given the aforesaid facts and circumstances, the provisions of Section 69C of the Act cannot be attracted in the present case. Therefore, we delete the addition of INR 104,99,73,370/- made by the Assessing Officer under Section 69C of the Act. 12.5. Before parting we would like to observe that during the course of hearing, the Learned Departmental Representative made an attempt to support the addition made by the Assessing Officer by contending that Assessing Officer has incorrectly mentioned Section 69C in place ....