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2022 (7) TMI 1260 - ITAT MUMBAIReopening of assessment u/s 147 - reasons recorded by the learned assessing officer shows that there was a tax evasion petition received by the income tax Officer - HELD THAT:- As central bureau of investigation has investigated and come to the conclusion that the assessee’s books of accounts are manipulated and fabricated to suit the personal purposes and diversion of funds for the personal purposes of the chief promoter of Reliable group of companies Mr. Nemchand Gala. There were also finding with respect to the investigation made by the Department of Central investigation bureau stating that all books of accounts maintained by the assessee are fabricated and are not reliable, as not maintained day to day. There was also an allegation of diversion of funds of the banks and the company used for the personal purpose of the directors. On the receipt of this letter from the ITO 1 (2) 4), Mumbai, AO found that assessee has not filed return of income for assessment year 2009 – 10 and therefore he has reason to believe that income has escaped assessment. No infirmity in the order of the learned CIT – An in upholding the validity of the reopening of the assessment. Accordingly, ground number 1 of the appeal of the assessee is dismissed. Estimation of income - bogus purchases - HELD THAT:- As it is a case of the circular trading entered into by the assessee along with its related parties where there is no evidence whether the rates charged by the parties in the circular rate were at market rate and further when the goods are sold without any physical movement of the goods, the sales and the purchases are not at all reliable. The transactions are also rooted through journal entries. The quantity of goods involved in the circular trading is also not ascertained that how much is involved in circular trading and what is the actual sale and purchase of the assessee. The assessee has purchased 2,44,29,155 KG and sold the same quantity and there is no opening stock and closing stock during the year. Therefore, the explanation of the assessee becomes unreliable with respect to the gross profit shown by the assessee. No infirmity in the order of the CIT – A in upholding disallowance of expenditure estimating income at the rate of 12.5% of such bogus purchases. Accordingly, ground number 3 of the appeal is dismissed. Addition u/s 68 - HELD THAT:- Merely because a person is a promoter/director of the group, the genuineness of the transaction and creditworthiness of that person requires to be proved independently. Even before us, no evidence is produced except the copy of reply of the assessee dated 28/9/2017 wherein the bank statement of Mekan Gala for the month of March 2009 was produced. CIT – A also did not care to identify whether the amount of credit is in the name of Mr. Nemchand J gala or Mekan J Gala, whether these are different persons or one person, and if they are different, what is the relationship. Thus, assessee has failed to show the genuineness of the transaction with respect to this party also as far as the credit received during the year in that account are concerned. The findings of the learned CIT – A cannot be sustained. Accordingly, the amount credited in the account of global Impex paper private limited and Mr. NJ Gala are required to be added u/s 68 of the income tax act as assessee has failed to prove the genuineness of the transaction. In view of this ground number, 3 and 4 of the appeal of the learned assessing officer are allowed.
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