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H.V. Goradia (HUF) Versus ITO, Circle-32 (1) (5) , Mumbai

2016 (6) TMI 527 - ITAT MUMBAI

Validity of reopening of assessment u/s. 147 of the Act - Held that:- We are unable to agree with the contentions of the assessee with regard to the issue relating to validity of reopening of assessment. We notice that the assessing officer has received information from the investigation wing on the basis of search conducted by the sales tax authorities. The parties from whom the assessee has claimed to have purchased goods have admitted before the sales tax authorities that they have given only .....

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profit rate at 30%. Since the assessee was contending that the purchases were genuine one, it did not have an opportunity to advance its arguments with regard to the rate of 30% adopted by the AO. Accordingly, we are of the view that the assessee should be provided with an opportunity to advance its arguments on the rate of profit estimated by the AO. Accordingly we set aside this matter relating to estimation of profit from bogus purchases to the file of the AO with the direction to decide the .....

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44, Mumbai for A.Y. 2009-10 on following issues : a) Validity of reopening of assessment u/s. 147 of the Act. b) Confirming the addition of gross profit at 30% of non-genuine purchases. 2. Facts relating to the issues are stated in brief. The assessee is carrying on the business of trading in Iron and Steel through its proprietary concern named M/s. Essvee Enterprises. It filed THE return of income for the year under consideration on 18.9.2009 and the same was processed u/s. 143(1) of the Act. S .....

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e objection raised by the assessee. 3. During the course of assessment proceedings the Assessing Officer issued notice u/s. 133(6) of the Act to the supplier of goods but all the notices were returned by the postal authorities with the postal remarks unclaimed/left . Hence the Assessing Officer asked the assessee to produce the supplier along with the entry register, lorry receipt of purchase of goods, stock register etc. The Assessing Officer asked the assessee as to why these purchases should .....

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r came to the conclusion that the assessee did not make purchases from these hawala dealers and it has only availed benefits from them by procuring accommodation bills, i.e., without taking physical delivery of goods. The Assessing Officer expressed the view that the assessee should have obtained the accommodation bills, only to account for items purchased from grey market. The Assessing Officer further took the view that the assessee should have purchased goods at lower price and accommodation .....

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by the assessee stood at 1.64% and 0.17% respectively and the same was considered to be low by him. Accordingly the Assessing Officer proceeded to estimate the profit that the assessee would have made on impugned purchases (difference between the value shown in accommodation bills and the actual purchase cost in grey market) and estimated the same at 30% of the purchase value. Accordingly he added a sum of ₹ 90.86 lakhs to the total income declared by the assessee. 4. Before learned CIT(A .....

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the assessing officer did not apply his mind to the information received from the investigation wing and he has reopened the assessment in a mechanical manner. In this regard, he placed reliance on the decision rendered by Hon ble Delhi High Court in the case of CIT Vs. Kamadhenu Steel & Alloys Ltd (248 CTR 33) and submitted that the assessing officer could not draw adverse inference without making any enquiries. 6. On the contrary, the Ld D.R submitted that the assessing officer should have .....

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officer has received information from the investigation wing on the basis of search conducted by the sales tax authorities. The parties from whom the assessee has claimed to have purchased goods have admitted before the sales tax authorities that they have given only accommodation bills without actually supplying goods. In our view, this information received by the AO was sufficient to form belief that there was escapement of income. In our view, it cannot be said that the assessing officer has .....

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Net Profit declared by the assessee was consistent with that show in the past several years. He submitted that the AO has not brought any material to support his view that the assessee might have purchased goods from grey market. Accordingly he submitted that there is no justification in estimating the gross profit on the alleged bogus purchases @ 30%. 9. The Ld D.R submitted that the assessing officer has rejected the books of account, since the assessee could not prove the purchases by produc .....

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erused the record. We notice that the assessing officer has not simply followed the report given by the Sales tax department. but he has carried out his own enquiries. The AO has issued notices u/s 133(6) of the Act and all the notices have been returned back by the postal department with the remarks Unclaimed/left . Hence the assessing officer has asked the assessee to produce those suppliers, but the assessee did not produce them. The assessee also did not furnish evidences for transportation .....

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ntained by the assessee. 11. We notice that the assessee could not substantiate its contentions that the goods were transported directly from suppliers place to the customers place by producing any other evidence or confirmation from the customers. Since the suppliers were claimed to have been trading in steel products, they should be having sufficient space to stock the goods and also they should have proper business address. However, it is not understandable as to why they should refrain from .....

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