Ram Kishan Bindal, Faridabad V. ITO, Ward-2(2), Faridabad

ITA 6405/DEL/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1089 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 13-07-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 30-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Tangible material; Accommodation entries
• Section: 147; 133(6); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.6405/Del/2019 Assessment Year: 2011-12 Sh. Ram Kishan Bindal, Prop. M/s. Bindal Trading Co., 926, Laxmi Bhawan, Near Rest House, Ballabgarh, Faridabad Vs. Income Tax Officer, Ward-2(2) Faridabad PAN :AARPB5665K (Appellant) (Respondent) ORDER This is an appeal by the assessee against order dated 31.05.2019 of learned Commissioner of Income Tax (Appeals), Faridabad for the assessment year 2011-12. 2. In ground no. 1, the assessee has challenged the validity of reopening of assessment under section 147 of the Income-tax Act, 1961 (in short ‘the Act’). Appellant by Sh. Ajay Wadhwa, Advocate Respondent by Sh. Om Parkash, Sr. DR Date of hearing 14.07.2022 Date of pronouncement 12.10.2022 ITA No.6405/Del/2019 AY: 2011-12 2 | Page 3. Briefly the facts are, the assessee, a resident individual, is engaged in the business of trading in dye blocks. For the assessment year under dispute, the assessee filed its return of income in regular course which was processed under section 143(1) of Act. Subsequently, the Assessing Officer received information from the Investigation Wing that certain purchases made by the assessee during the year under consideration are non-genuine and in the nature of accommodation entry. Based on such information, the Assessing Officer reopened the assessment under section 147 of the Act. In course of assessment proceeding, the Assessing Officer called upon the assessee to prove the genuineness of purchases worth of Rs.1,74,97,140/-, failing which, the amount would be treated as bogus purchase. Though, the assessee made his submissions against the proposed addition, however, the Assessing Officer was not convinced. Stating that the purchases from M/s. Jai Shiv Enterprises are merely accommodation entries, the Assessing Officer treated the purchases of Rs.1,74,97,450/- as bogus. However, instead of the disallowing 100% of such purchases, he disallowed 10% of the purchases made, which worked out to Rs.17,49,745/-. Though, the assessee filed an appeal before learned Commissioner ITA No.6405/Del/2019 AY: 2011-12 3 | Page (Appeals) contesting the addition made as well as the validity of reopening of assessment, however, learned Commissioner (Appeals) did not find merit in the submissions of the assessee. Of course, learned Commissioner (Appeals) granted partial relief to the assessee by restricting the addition of Rs.15,43,000/-, having found that the actual quantum of alleged bogus purchases is to the tune of Rs.1,54,30,067/-. 3. Before me, learned counsel appearing for the assessee submitted that the reopening of assessment is invalid, as, the Assessing Officer has reopened the assessment merely relying upon the information received from the Investigation Wing. He submitted, the Assessing Officer has not independently applied his mind to establish ‘live link’ between the material available and escapement of income. He submitted, no adverse material was confronted to the assessee. Even, opportunity of cross- examination was not given to the assessee, though, reliance was place on the statement recorded from a third party. Thus, he submitted, the reopening of assessment is invalid. 4. As regards merits, learned counsel for the assessee submitted, in course of assessment proceeding, the assessee had furnished quantitative tally of purchase and sales and nothing ITA No.6405/Del/2019 AY: 2011-12 4 | Page adverse was found by the Assessing Officer. He submitted, the Assessing Officer has not even doubted the sales effected by the assessee. Thus, he submitted, the addition made on purely ad- hoc basis is unsustainable. 5. Learned Departmental Representative strongly relied upon the observations of learned Assessing Officer and learned Commissioner (Appeals). 6. I have considered rival submissions and perused the materials on record. As regards the validity of reopening of assessment under section 147 of the Act, admittedly, in case of the assessee the return of income filed was processed under section 143(1) of the Act and not subjected to scrutiny. Therefore, the Assessing Officer had no occasion to verify the affairs of the assessee as furnished in the return of income. Subsequently, the Assessing Officer received information from the Investigation Wing indicating that certain purchases made by the assessee are non- genuine. Thus, the Assessing Officer had tangible material in his possession to form belief that income has escaped assessment. At the stage of reopening of assessment, the Assessing Officer is required to form a prima facie belief regarding escapement of income. At this stage, the Assessing Officer is not required to ITA No.6405/Del/2019 AY: 2011-12 5 | Page come to a definite conclusion that income has actually escaped assessment. At the stage of reopening assessment what is required to be seen is, whether there is relevant and tangible material available before the Assessing Officer, on which, a reasonable person could have formed belief regarding escapement of income. In the facts of the present case, undoubtedly, there was requisite information before the Assessing Officer to form belief regarding escapement of income. Whether the information available ultimately translates into a conclusive finding of actual escapement of income is not required to be seen at the time of reopening of assessment but can be examined at the time of assessment proceeding. Therefore, in my opinion, the reopening of assessment under section 147 of the Act is valid. 7. As regards the merits of the issue, on a perusal of the impugned assessment order, it is observed that the Assessing Officer has merely proceeded on the basis of information received from the Investigation Wing. He has not conducted any inquiry independently and has not brought any sort of evidence on record to corroborate the finding of the Investigation Wing. Even, there is nothing in assessment order to suggest that the Assessing Officer has conducted preliminary inquiry by issuing notice under ITA No.6405/Del/2019 AY: 2011-12 6 | Page section 133(6) of the Act to the selling party to ascertain the genuineness of the purchases. The Assessing Officer has not expressed any doubt, whatsoever, regarding the sales affected by the assessee. More surprising is the fact that though the Assessing Officer has disallowed 10% of the alleged bogus purchases, the basis for such disallowance is not forthcoming from the assessment order. 8. As regards the observation of the Assessing Officer that the Authorized Representative of the assessee agreed for the addition, before us, learned counsel appearing for the assessee has submitted that the assessee had not given any such instruction to the Authorized Representative to agree for the addition. Be that as it may, it appears on record, not only the assessee has furnished quantitative tally of purchase and sales but the Assessing Officer has accepted the sales turnover of the assessee. Even, by restricting the addition to 10% of the purchases, the Assessing Officer has impliedly accepted that purchases, in fact, were made by the assessee. In such a scenario, in my considered opinion, the addition made by the Assessing Officer cannot be sustained. Accordingly, I delete the addition. Thus, the assessee succeeds on merits. ITA No.6405/Del/2019 AY: 2011-12 7 | Page 9. In the result, the appeal is partly allowed. Order pronounced in the open court on 12 th October, 2022 Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 12 th October, 2022. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi