Raman Sood Vs ITO (ITAT Delhi)
On being seen ledger account of the seller of the goods in the relevant Financial year it is noted that there are no credits appearing in the said ledger as being no purchases from the said seller. No purchases made from the seller during the AYr. Under consideration. Evidentiary value of VAT returns can not simply be brushed aside.
The assessee duly filed audited accounts at the time of filing of the return of income which certainly puts confirmation that the assessee has maintained the books of accounts. Even the ledger account of the seller of the goods in the books of the purchaser shows payments made and no purchases made during the year.
Information or material received from Investigation Wing can constitute relevant material but simultaneously AO has to first apply his mind on the facts and assessment records of the assessee to prima facie reach a conclusion for reopening u/s 147. The AO has noted in his assessment order that the assessee has not filed the return of income but as per records the return was filed on 30.09.2009. Reasons to believe for reopening must be based on the correct facts as held by Hon’ble Bombay High Court 411 ITR 207.
Hon’ble Apex Court dismissed the Revenue’s SLP as assessment must be based on correct facts. Assessment based on wrong appreciation of facts are quashed by the ITAT New Delhi. Even there were no purchases by the assessee from seller during the year under consideration but the AO has made a disallowance of those purchases which were not even debited to the P & L Account during the year under consideration. On merits the addition could not be sustained.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is preferred by the assessee against order dated 08.03.2019 passed by the Ld. Commissioner of Income Tax (Appeals)-33, New Delhi {CIT(A)} for Assessment Year 2009-10.
2.0 The brief facts of the case are that the assessee is engaged in the business of trading of Steel Plates etc. The return of income was filed declaring a total income of Rs.2,19,175/- on 30.09.2009. On receipt of information from the office of Assistant Director of Income Tax (Inv.–II), Faridabad, regarding the assessee having received accommodation entry of alleged bogus purchase, notice u/s 148 of the Income Tax Act, 1961 (hereinafter called the ‘the Act’) was issued on 30.03.2016. Subsequently, the assessment was completed at an income of Rs.2,54,37,940/- u/s 147 r.w.s143(3) of the Act after making an addition of Rs.2,52,18,773/- on account of alleged bogus purchase.
2.1 The assessee approached the Ld. First Appellate Authority challenging the reopening of assessment as well as challenging the addition on merits of the case.
2.2 The Ld. First Appellate Authority, however, upheld the initiation of re-assessment proceedings and also upheld the addition on merits.
Aggrieved, the assessee has now approached this Tribunal and has challenged the order of the Ld. First Appellate Authority by raising the following grounds of appeal:
“1. That the order passed by the Ld. CIT(A) is bad in law and nature and liable to be quashed because:
(a) The very basis of issue of notice under section 147 and assuming jurisdiction by the AO is erroneous, as while assuming jurisdiction for reopening, the ld. AO has recorded the reasons that the Assessee has not filed his return of income for the year, therefore, the assessee has escaped income of Rs.2,48,99,600/-. Whereas, the assessee had already filed his return of income for the AY vide ack. no.011771 on 21.12.2016 declaring income of Rs.2,19,175/-.
(b)That the ld. CIT(A) failed to appreciate the fact that the reasons for reopening of assessment by the ld. AO are based on the borrowed satisfaction and that there is no application of independent mind by the PCIT in granting approval for reopening.
(c) That the ld. CIT(A) failed to appreciate the fact that the AO has not disposed of the objection so raised by the assessee in the spirit of law.
(d)That the ld. CIT(A) failed to appreciate the fact that the submission of the copy of VAT returns Filed for the year,
whereby the names of parties from whom purchases were made is appearing, and that there is no name of the party M/s Maa Durga Trading company, the alleged party in the year under assessment, Also, the details of the names of the parties from whom the purchases were made during the year were given, showing that no purchases were made from the alleged party, were totally ignored. Even the Reference by the CIT(A) of GKN Driveshaft India Ltd. Vs. ITO & Orss. (2003) 259 ITR 19 (SC) that the AO has followed the procedure is erroneous, in as much as the rejection of the objection of assessee that no purchase from the alleged parties were made, was disposed of by him, without giving any cogent reason as how the VAT Returns are unauthentic and unreliable.
2. That the ld. CIT(A) has grossly erred in confirming the addition made on account of Bogus Purchase amounting to Rs.2,52,18,773/- made from alleged parties in the previous year. The proof of VAT returns with the name of the parties, details of the purchases made were ignored and the additions were confirmed merely on whims, because:
(a) That during the preceding to previous year, the purchases were made from the alleged party. The purchase in that year has been accepted by the department. The results of that year has been accepted by the department, how the purchase, that has been made in the preceding to previous year not relevant to the assessment year can be added in this year.
(b) That the ld. CIT(A) has not considered the fact, when the Quantitative Tally of the Purchase, Sale, Opening Stock and Closing Stock is correct, how the Purchase from the alleged party can be Bogus.
3. That without prejudice to the above grounds of appeal, the ld. AO as well as ld. CIT(A) has grossly erred in disallowing the whole of the alleged purchase and holding the same as bogus.
4. The appellant craves leave for addition, modification, alteration, amendment, deletion of any of the grounds of appeal.”
3.0 The Ld. Authorized Representative (AR) drew our attention to the reasons recorded for reopening as contained in the Assessment Order. The reasons are being reproduced herein under for a ready reference:
“A letter F.No. JCIT/Range- 28/2015-16 dated 23.03.2016 forwarding herewith the letter of F.No.ADlT/INV II/FBD./2015-16/4525 dated 21.03.2016 received from O/o Asstt. Director of Income Tax (Inv.-II), Faridabad regarding sharing of information with regard to accommodation entry of bogus purchase obtained by M/s
Rama Enterprises Prop. Sh. Raman Sood(PANAREPS4176J) from Sh. Vinod Goyal through his proprietary concern i.e. M/s Maa Durga Trading Compay.
In this regard, it is submitted that Sh. Vinod Goyal prop, of M/s Maa Durga Trading Company given statement u/s 131(1) of Income Tax Act, that he had provided accommodation entries through bogus billing against which no goods were supplied by his company to the different parties. His company M/s Maa Durga Trading Company received e payment through cheques against the bills issued and then they withdrew the cash and arcer deducting the commission, remaining cash was given to the same party from which tney received cheque against bogus bills. There was no selling/ supply of goods of these parties.
Sh. Raman Sood prop, of M/s Rama Enterprises, was one of the party w’hich he provided accommodation entries though bogus billing against which no goods were supplied by M/s Maa Durga Trading Company. Sh. Raman Sood prop, of M/s Rama Enterprises gave cheques to Vinod Goyal prop, of M/s Maa Durga Company which he deposited in his banks namely Kotatk Mahindra Bank, Sector-16, Faridabad and Axis Bank, Faridabad in following manner in F.Y. 2008-09 against the bogus purchases.
