Case Law Details
Dove Consultants Pvt. Ltd. Vs DCIT (ITAT Delhi)
Reopening Based on Information must be Reliable and Some Evidence to Believe Purchase as Bogus, Proceedings Quashed By Delhi ITAT
We have considered the rival contentions of both the Ld. Representative of the parties. A perusal of the reasons recorded for reopening of the assessment (as reproduced above) would show that the Assessing Officer had only an information that the assessee M/s. Dove Consultants Pvt. Ltd. has made a transaction with M/s. Bhola Trading Company. However, there was no reliable information that the said transaction was a sham transaction. The assessee admittedly is engaged in the business of Electric Contractor. The assessee purchased electric cables from the said M/s. Bhola Trading Company. The Assessing Officer, however, doubted the said transaction. However, it has been noted by the Assessing Officer himself that during the investigation, ledger account of M/s. Bhola Trading Company in the books of assessee company was reflecting the aforesaid transaction of Rs 2,36,76,932/-. The purchase invoices were also produced before the investigation wing. The Assessing Officer further mentioned about the gross turnover of the assessee and observed that the income of the assessee company has considerably increased from AY 2008-09 to AY 2009-10. The Ld. Counsel, in this respect has submitted that the assessment year under consideration is AY 2009-10 and the assessee’s income as per the reasons recorded has considerably increased. The sales / consumption of the material by the assessee has also not been doubted by the Assessing Officer. There is no mention of any evidence available before the AO to show that the aforesaid transaction was a bogus transaction. The assessing officer merely on the basis of suspicion observed that the aforesaid entry might be a bogus entry and that the assessee might have purchased the material from outside. A perusal of the reasons recorded by the Assessing Officer does not show that the Assessing Officer had any credible information or evidence to believe that the aforesaid transaction made by the assessee was bogus, rather, a reading of the whole of the contents of the document containing reasons for reopening of the assessment would reveal that the reopening of the assessment has been made merely on the basis of suspicion. Even the sales / consumption of the material purchased through the aforesaid transaction has not been doubted. Even the turnover and gross profits of the assessee during the year have considerably increased.
We, therefore, do not find any justification on the part of the assessing officer for reopening of the assessment. The same being bad in law, the consequential assessment made by the assessing officer is quashed. The appeal of the assessee stands allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
Appellant, Dove Consultants Pvt. Ltd., New Delhi (hereinafter referred to as ‘the assessee’), by filing the present appeal sought to set aside the impugned order dated 07.01.2019 passed by the Commissioner of Income-tax (Appeals)-03, New Delhi , qua the assessment year 2009-10 on the grounds inter alia that :-
“1. That on the facts and in the circumstances of the case and in law, ld. CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that assumption of jurisdiction u/s 148 was by Ld. AO was in violation of mandatory jurisdictional conditions stipulated under the Act;
1.1 That on the facts and in the circumstances of the case and in law, ld. CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that no where assessee is validly issued and served with jurisdictional notice u/s 148 dated 31.03.2016 without which entire proceedings are void ab initio;
1.2 That on the facts and in the circumstances of the case and in law, ld. CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that assessee is not supplied valid reasons to believe along with approval if any before completion of assessment proceedings without which entire proceedings are void ab initio;
1.3 That on the facts and in the circumstances of the case and in law, ld. CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that just because cheques credited in a/c of bhola trading co were credited into other accounts from where cash was withdrawn as stated in para 3.9 of assessment order and just because proprietor of said concern did not appear in response to summons before investgationwing cant give rise to valid reasons to believe as at best it can be reason to suspect only and without reasons to believe entire proceedings are void ab initio (Refer ground no 4 before CIT-A);
1.4 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that Ld AO has just on basis of modus operandi of bank a/c of bhola trading co said concern is treated by Id AO as entry provider (para 3.10 of assessment order) without any valid reason to believe and tangible material being brought on records and no material is confronted and cross examined to assessee during assessment proceedings despite specific request for cross examination noted in para 3.7 of assessment order without which entire proceedings are void ab initio;
1.5 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that no back material like, investigation wing report details vis a vis assessee, and statements etc if any recorded by investigation wing, was lawfully confronted to assessee thus invalidating entire reopening and even cross examination request has not been adhered to by Ld AO/Ld CIT-A;
2. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that addition is mechanically made u/s 69 on a/c of alleged unexplained expenditure by Ld AO where all purchases made by assessee are fully recorded and section 69 cant apply to recorded purchases in books of accounts thus addition of Rs 59,19,233 deserves to be deleted in toto;
3. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that on basis of prodigious evidences brought on records (like bills , ledger a/c, bank statement, consumption of items purchased etc refer para 3.3 , 3.10 of assessment order) burden lying on assessee has been fully discharged and met so addition made by Ld AO (Rs 59,19,233 and confirmed by CIT-A in impugned order deserves to be deleted as stated ground of non production of vendor to draw adverse inference is held not to be a valid ground (para 3.5 and para 3.7 of AO assessment order).
3.1 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that none of evidence filed by assessee is overruled in accordance with law ;
3.2 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that when sales/turnover are not doubted purchase cant be doubted is well settled principle;
3.3 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that payment of purchases is made through banking channel as replied in our letter to AO refer page 2 &3 of assessment order and duly accepted at para 3.8 of assessment order which fact is no where contradicted and no material is brought on records for cash flying back to assessee herein from stated banking channel payments without which entire addition is bad and deserves to be deleted;
3.4 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that it was specifically pointed out to Ld CIT-A vide ground no 6 of appeal that assessee fully cooperated with investigation wing in summon proceedings and filed necessary details which plea has not been objectively considered, without which entire addition is bad and deserves to be deleted;
4. That on the facts and circumstances of the case and in law, ld. CIT-A erred in not restoring the returned income declared by assessee in its return of income.
5. That on the facts and in the circumstances of the case and in law, ld. CIT-A erred in not deleting the addition made by Ld. AO which was also unlawful and made in violation of principles of natural justice as no back material are confronted and cross examined to assessee during assessment/appeal proceedings despite repeated requests made in this regard which is sufficient to strike down the assessment framed (refer ground no. 5 before CIT-A).
That the appellant craves leave to add add/alter any/all grounds of appeal before or at the time of hearing of the appeal.”
2. The brief facts of the case are that during the year under consideration, the assessee company was engaged in the business of electrical contractor. The return of income declaring income of Rs. 59,93,110/- was filed by the assessee on 27.09.2009 and processed u/s 143(1) of the Income Tax Act, 1961. Thereafter the assessment was reopen u/s 147 read with section 148 of the Income Tax Act, and the impugned addition of Rs. 59,19,233/- was made by the Assessing Officer in the assessment framed u/s 147 / 143(3) of the Income Tax Act.
3. The addition made by the assessing officer has been confirmed by the Ld. CIT(A). Being aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
4. At the outset, the Ld. Counsel for the assessee has submitted that the assumption of jurisdiction by the assessing officer to reopen the assessment was bad in law as the Assessing Officer did not have any reason to believe that the income of the assessee has escaped assessment. In this respect he had relied upon the copy of the reasons recorded for reopening of the assessment, the contents of the same are reproduced as under :-
5. The Ld. Counsel has submitted that in the aforesaid reasons recorded by the Assessing Officer for reopening of the assessment, there is no mention of any reliable information or evidence coming to the possession of the Assessing Officer which may be sufficient to form the belief by the assessing officer that the income of the assessee has escaped assessment.
6. The Ld. DR on the other hand has submitted that the due satisfaction was recorded by the Assessing Officer before reopening of the assessment and that the Assessing Officer has rightly reopened the assessment as he has information from the investigation wing that the assessee has obtained a bogus entry of purchase.
7. We have considered the rival contentions of both the Ld. Representative of the parties. A perusal of the reasons recorded for reopening of the assessment (as reproduced above) would show that the Assessing Officer had only an information that the assessee M/s. Dove Consultants Pvt. Ltd. has made a transaction with M/s. Bhola Trading Company. However, there was no reliable information that the said transaction was a sham transaction. The assessee admittedly is engaged in the business of Electric Contractor. The assessee purchased electric cables from the said M/s. Bhola Trading Company. The Assessing Officer, however, doubted the said transaction. However, it has been noted by the Assessing Officer himself that during the investigation, ledger account of M/s. Bhola Trading Company in the books of assessee company was reflecting the aforesaid transaction of Rs. 2,36,76,932/-. The purchase invoices were also produced before the investigation wing. The Assessing Officer further mentioned about the gross turnover of the assessee and observed that the income of the assessee company has considerably increased from AY 2008-09 to AY 2009-10. The Ld. Counsel, in this respect has submitted that the assessment year under consideration is AY 2009-10 and the assessee’s income as per the reasons recorded has considerably increased. The sales / consumption of the material by the assessee has also not been doubted by the Assessing Officer. There is no mention of any evidence available before the AO to show that the aforesaid transaction was a bogus transaction. The assessing officer merely on the basis of suspicion observed that the aforesaid entry might be a bogus entry and that the assessee might have purchased the material from outside. A perusal of the reasons recorded by the Assessing Officer does not show that the Assessing Officer had any credible information or evidence to believe that the aforesaid transaction made by the assessee was bogus, rather, a reading of the whole of the contents of the document containing reasons for reopening of the assessment would reveal that the reopening of the assessment has been made merely on the basis of suspicion. Even the sales / consumption of the material purchased through the aforesaid transaction has not been doubted. Even the turnover and gross profits of the assessee during the year have considerably increased.
8. It has been held time and again that there is a lot of difference between the ‘reasons to believe’ and ‘reasons to suspect’. That the reopening of the assessment cannot be made on mere suspicion in the absence of any reliable information or evidence to form the belief that the income has escaped assessment. In this case, there is no mention of any such reliable document / evidence which may be sufficient to form the belief that the transaction in question was a bogus transaction or that the income of the assessee had escaped assessment.
9. We, therefore, do not find any justification on the part of the assessing officer for reopening of the assessment. The same being bad in law, the consequential assessment made by the assessing officer is quashed. The appeal of the assessee stands allowed.
Order pronounced in open court on this 29th day of September, 2021.
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