A.K. Lumbers Ltd Vs ACIT (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT) Delhi has set aside an assessment order against A.K. Lumbers Ltd., which had added over Rs. 93 lakh for alleged bogus sales and commission. The Tribunal found the reassessment proceedings initiated by the Assessing Officer (AO) to be invalid due to a lack of proper application of mind and the denial of the assessee’s right to cross-examine a key witness.
The case originated from an e-filed return by A.K. Lumbers Ltd. for the assessment year 2011-12, declaring an income of Rs. 46,11,710/- with a turnover of Rs. 37.58 crores. Subsequently, the assessment was reopened based on information from the Deputy Director of Income Tax (Investigation), Gurgaon. This information stemmed from a search action conducted in the Spaze Group of cases in February 2016, which suggested that the group was involved in providing “purchase accommodation entries” through non-genuine proprietorship/partnership concerns. The information specifically implicated Shri Kishori Sharan Goyal, who allegedly controlled these paper concerns and admitted to earning commission from “bogus billing,” facilitating transactions for fictitious purchases and sales without physical goods movement.
The AO, relying on this information, recorded reasons to believe that income chargeable to tax had escaped assessment. The reasons cited two specific transactions involving A.K. Lumbers Ltd. with M/s Sai Kirpa Enterprises and M/s Balaji Enterprises, totaling Rs. 20,00,000/-, which were described as bogus sales against which A.K. Lumbers Ltd. allegedly provided unaccounted cash. Additionally, a 1% commission on these transactions was also implicated. However, the Tribunal observed significant discrepancies in the AO’s reasoning. It noted that Shri K.S. Goyal’s statements never explicitly mentioned A.K. Lumbers Ltd. Furthermore, the AO failed to verify the actual transaction amounts with the implicated parties, which were substantially higher than the Rs. 10 lakh per party initially stated in the reopening reasons. The Tribunal highlighted that the AO seemingly relied solely on the investigation wing’s information without independent verification or examination of documents provided by the assessee, such as forest department permissions and details of transporters, which supported the legitimacy of the sales.
