Supertech Forgings (India) Pvt. Ltd. Vs DCIT (ITAT Amritsar)
No addition in respect of bogus Purchases can be made during the year under consideration
No addition in respect of bogus Purchases can be made during the year under consideration where the purchases made from the same parties have been accepted in subsequent year by Department. Reassessment is invalid where the Assessing Officer has not applied his mind and had merely relied upon the information received by him from the investigating wing. Reason to suspicion, how so ever strong cannot be part take the character of reason to believe. Once the Assessing Officer formed an opinion on the information available on record and framed the assessment, then the Assessing Officer cannot be permitted to change his opinion based on same information.
M/s Supertech Forgings (India) Pvt.Ltd. Vs. Dy.CIT, Circle- IV. Jalandhar ITA Nos.563/Asr/2018 Assessment Year 2010-11 {In the Income-Tax Appellate Tribunal, Amritsar Bench, Amritsar }
1) Reopening under section 147 is not valid where AO did not apply his mind to arrive at an independent satisfaction that there was escapement of income. (Para 20)
We are of the considered view that the Assessing Officer was duty bound to record his independent satisfaction to arrive at prima facie satisfaction that there is escapement of income during the assessment year under consideration. The reasons to reopen reproduced at page 5 above clearly show that the Assessing Officer has merely relied upon the report of the investigating wing whereas, it is necessary for the Assessing Officer to apply his mind on the information received from the investigating wing. But, the AO did not apply his mind to arrive at an independent satisfaction that there was escapement of income.
2) Reopening U/s 147 is quashed due to Non-applicability of mind by the Assessing Officer before issuing the reasons to reopen. Para 20
Firstly, that the statement of Shri Madan Lal Pahuja is silent about giving any benefit to the Assessee and Secondly, the Assessing Officer, before initiation the proceedings of reopening, was required to examine the record like VAT Assessment completed in the case of Shri Madan Lal Pahuja on 01.03.2012, whereby the VAT Department accepted the sales made by Shri Madan Lal Pahuja to the Assessee therein. Further, in the assessment under VAT for the Assessee, the VAT Department has accepted the purchases made by the Assessee from Shri Madan Lal Pahuja. Once the sale by Shri Madan Lal Pahuja made to the Assessee and purchases made by the Assessee from Shri Madan Lal Pahuja were accepted, even after registration of FIR on 13.09.2009 against Shri Madan Lal Pahuja, then the non-examination of the Assessment Orders passed by VAT clearly shows the non-applicability of mind by the Assessing Officer before issuing the reasons to reopen.
3) No addition on account of Bogus Purchases can be made for the year under consideration where Purchases from same parties accepted in subsequent Assessment Year by department by framing assessment U/s 143(3) (Para 20)
Further, the Assessee has also placed on record the Assessment Order passed in the case of the Assessee for the assessment year 2010-11 which was passed on 18.06.2012 and thereafter the assessment year for 2011-12 which was passed on 04.06.2013. The consistent stand of the Assessee in the reply submitted by him in response to the reasons to reopen to AO, was that the Assessee has been receiving the goods from the parties described above and purchases accepted by the Assessing Officer in the subsequent assessment year i.e. 2011-12.In view of the judgment of the Hon’ble High Court of Punjab & Haryana in the matter of Leader Valves (P.) Ltd [2006] 285 ITR 435 (PUNJ. & HAR.), the additions based on the alleged bogus purchase bill for the assessment year 2010-11 are not sustainable.
4) Reason to suspicion, how so ever strong cannot be part take the character of reason to believe. (Para 21)
The aforesaid information was available in the record of the Assessing Officer before issuing the reasons to reopen. However, the Assessing Officer has not applied his mind and had merely relied upon the information received by him from the investigating wing. We may safely rely upon the decision in [2018] 93 taxmann.com 153 HIGH COURT OF BOMBAY PCIT-5 v. Shodiman Investments (P.) Ltd] for this preposition. Further, if we look into the reasons to reopen the assessment, then it is clear that the Assessing Officer had merely relied upon the report of investigating wing and the statement of Shri Madan Lal Pahuja. The abovesaid information was required to be corroborated and verified by the Assessing Officer as, the information at best can be the reasons to give rise to mere suspicion. However, the reason to suspicion, how so ever strong cannot be part take the character of reason to believe. For the reason to believe it is essential that there should be convincing evidence in possession of the Assessing Officer, which give rise to the prima facie conclusion that there is escapement of income. Admittedly, in the present case, the Assessing Officer completed the regular assessment under scrutiny on 18.06.2012 after examining the books of accounts of the Assessee etc.
5) In Reassessment U/s 147 Assessing Officer cannot be permitted to change his opinion (Para 22)
In our opinion, once the information was available in the assessment record of the Assessee company for the assessment year 2010-11, which was subject matter of scrutiny assessment and on the basis of this information, the assessment was completed and the additions were made. In our opinion, the same information was admitted to be correct by the Assessing Officer in the reasons to reopen as it is matching with the information received from the Investigation wing. In our considered opinion, once the Assessing Officer formed an opinion on the information available on record and framed the assessment, then the Assessing Officer cannot be permitted to change his opinion based on same information. This is not allowed in view of the decision of the Hon’ble Supreme Court in the matter [2010] 187 Taxman 312 SUPREME COURT OF INDIA Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd.]. Therefore, the reopening made by the Assessing Officer cannot be sustained.
6) No addition can be made on Merits (Para 25 and 27)
Even the GP on the amount of sale cannot be added in the hands of the Assessee as the sales made by Shri Madan Lal Pahuja and others were accepted by the department in the Assessment Order passed under Section 143(3) of the Act. Once the sales have been accepted in the hands of the seller, the same cannot be doubted in the hands of the purchaser. In the light of the factual matrix of the case and judicial precedents, we are of the considered opinion that no addition can be sustained against the Assessee, on merits.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
This appeal has been filed by the assessee against the order of the ld. Commissioner of Income Tax(Appeals)-2, Jalandhar, dated 16.10.2018, in respect of Assessment Year 2011- 12.
2. The assessee has taken following Grounds
“1. That the ld.CIT(A) has grossly misdirected himself in law and on facts, in upholding the validity of reopening of the case u/s.147/148, by not appreciating the assessee’s contentions in correct perspective. His reliance on a few judicial authorities, not relevant to the facts of this case, is also misplaced.
2. That the ld.CIT(A), swayed by the so-called prevailing menace of bogus bills, misconstrued the facts and the legal position of this case, to uphold the addition of Rs.4,26,93,470/-, as made by the ld.AO, alleging that the purchases made by assessee of the said value, were bogus.
3. That the ld.CIT(A) was wholly unjustified in holding that the assessee failed to produce one Mr Madan Lal Pahuja, the supplier, whose statement, recorded by ADIT, (Inv), Ludhiana, not witnessed by anyone else, was the sole basis to initiate proceedings u/s.147/148.
4. That Mr Madan Lal Pahuja, being the sole witness of revenue, ought to have been allowed cross examination by the assessee, which having not been allowed by the AO even when asked for, rendered the impugned assessment illegal, being in gross violation of sacred principles of natural justice. The ld.CIT(A), not only erred in not holding the impugned order bad on this score, but also committed a grave legal error to shift the onus on assessee to produce the said person.
5. That when neither the stock tally, nor the sales made were disputed, holding the purchases bogus was prime facie uncalled for, which the ld.CIT(A) ought to have appreciated to delete the addition made by ld.AO.
6. That the revenue itself having taken a contrary stand in the reassessment proceedings of Mr Madan Lal Pahuja, wherein the same very sales made by him were held to be his business turnover in his assessment for AY 2010-11, the ld.CIT(A) committed a grave error in ignoring this contention, to uphold the addition made by ld.AO.
7. That the ld.CIT(A) was not justified in just brushing aside various judicial decisions, relied upon by assessee, squarely applicable to the facts of this, case by wrongly holding the same as distinguishable on facts.
8. That the orders of the authorities below are against law and facts of the case.
9. That the assessee reserves the right to amend, alter or raise an additional ground of appeal before the disposal of this appeal.”
3. Briefly, the facts on record are that the appellant company is engaged in the business of manufacturing of ACSR Conductors (Aluminum conductor steel reinforce),DPC Wire Strips (double paper covered wire), steel wire ropes,PVC Cables and besides trading of M.S Pipes, aluminum wire and allied products.
3.1 Primarily, the assessment has been framed u/s 143(3) on 12.06.2012 and the trading results were accepted by the department during complete scrutiny. However, certain other additions were made by the AO and later on the assessee approached CIT(A) who had provided part relief of Rs. 3.50 L out of the total additions. Neither the department nor the appellant had filed appeal against the order of the CIT (A).
3.2 The case was reopened u/s 147 on 30.03.2017 on the basis of the information received by the AO from the investigation wing in the form of statement recorded in the case of Sh Madan Lal Pahuja.
3.3 In the reasons recorded, the AO has mentioned that the purchases made from Madan lalPahuja M/S Shiv bholeKirpa Traders Rs. 1.05 Cr, Lovy Steel and Allied Industries Rs. 0.17 Cr and Jatinder kumar prop. Shree Nath Ispatudhyog Rs. 2.06 Cr are bogus and as such there is escapement of income to the tune of Rs. 4.26 Cr: –
3.4 In the reasons to believe dated, 22 March 2017 it was mentioned as under:-
As per the information received from the Investigation Wing, Ludhiana, it has been found that the assessee company had taken bogus purchase bills from the concerns owned by Sh. Madan Lal Pahuja and Sh. Jatinder Kumar during the F.Y.2009-10 as per the details given below: –
