TMI Blog2019 (8) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... aid that no approval had been taken. Further, the approval u/s 153D is an administrative procedure which requires to be complied with by the officers, who is discharging the assessment functions. The administration action of the department is not very much relevant for the assessee to justify its case, on merits. Therefore, when assessee goes to question the administrative procedure, rather contending its case on merits, that too, after a lapse of 4 to 5 years, then obviously, a doubt arises about intend of the assessee in taking this ground and such an attempt is derail the issue on merits and to escape on technical ground. Therefore, we are of the considered view that there is no merit in the additional ground taken by the assessee challenging validity of assessment order passed by the AO u/s 143(3) r.w.s. 153A. - additional ground rejected Addition u/s 69C - bogus purchases - MD make statements u/s 131 that the company has not followed standard operating procedures in respect of certain purchases from certain parties - HELD THAT:- It is an admitted fact that during the course of survey u/s 133A, certain loose papers, bills and other relevant documents were found, as per whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gus purchases u/s 69C. The Ld.CIT(A), after considering relevant facts, has rightly confirmed the findings of Ld.AO. - appeal filed by the assessee is dismissed - ITA No. 3874/Mum/2015, ITA No.3875/Mum/2015, ITA No.3876/Mum/2015, ITA No.7120/Mum/2016, C.O. No.100/Mum/2018, C.O. No.101/Mum/2018, C.O. No.102/Mum/2018 And C.O. No.254/Mum/2018 - - - Dated:- 10-4-2019 - Shri G Manjunatha (ACCOUNTANT MEMBER) And Shri. Ravish Sood (JUDICIAL MEMBER) For The Assessee : Shri Harshwardhabn Datar/Shri Mangar Shukla For The Respondent : Shri Awungshi Gimson ORDER Per G Manjunatha, AM: This bunch of four appeals filed by the assessee and four cross objections filed by the revenue are directed against separate, but identical orders of CIT(A)-51, Mumbai dated 17-03-2016, 18-03-2016 and 12-08-2016 and they pertain to AYs 2007-08, 2008-09, 2009-10 and 2011-12. Since, facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed of by this consolidated order. 2. The assessee has, more or less raised common grounds of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Electricity by the Hon. Jurisdictional Bombay high Court. 4. The Ld.AR for the assessee, at the time of hearing, submitted that additional ground taken by the assessee challenging validity of assessment order passed u/s 143(3) r.w.s. 153A, in absence of valid approval under the provisions of section 153D of the Income-tax ACT, 1961 is a legal issue which questions the jurisdiction of the AO, passing assessment order. Therefore, the same may be admitted and decided the issue on merit. In this regard, the assessee has relied upon the decision of Hon ble Supreme Court in the case of National Thermal Power Corporation Ltd vs CIT 229 ITR 383 (SC). 5. On the other hand, the Ld.DR strongly opposed additional ground filed by the assessee and submitted that the assessee failed to make out a case by placing necessary facts before the AO at the time of assessment in connection with the additional ground taken challenging validity of assessment order. Therefore, in absence of any facts as to availability of necessary material before the AO in connection with additional ground, the same may not be admitted at a later stage merely for the reason that it is a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers were found including bills for purchases and other related documents, as per which it was noticed that the assessee had not followed key and important standard operating procedures (SOPs) in respect of certain purchases made from certain parties / suppliers. It was further observed that the assessee had taken accommodation bills / bogus purchases to the extent of ₹ 12.86 crores between financial years 2006-07 to 2010-11. In the statement recorded u/s 131, the assessee has admitted failure of following standard operating procedure in respect of purchases, although it has followed SOPs in respect of its purchase department. Further, Shri Ajit B Kulkarni, in his statement recorded during the course of survey also confirmed that there is no proper documentation like delivery challans, transporters slips, weighment slip, stamping at site for receipt of material, truck No. in respect of bills, etc. in respect of 22 vendors appearing in the list suspicious. 8. During the course of assessment proceedings, the AO, in order to verify correctness of purchases claimed to have been made from certain parties, issued a show cause notice and asked the assessee to file com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be there was found to be absent in case of the transactions where the purchases were involved. Therefore, he was of the opinion that in absence of any proper documentation and also entries in the books of account in respect of purchases from those parties, it is difficult to accept the argument of the assessee that purchases from those parties were genuine in nature. The AO further observed that another very crucial aspect also needed to be considered was that despite giving opportunity to the assessee in this regard, the assessee failed to submit confirmations from those 22 parties, although sufficient time was given. The assessee neither furnished confirmation nor produced the parties. Therefore, without furnishing basic documents required for the purpose of verification of transactions, asking for a cross examination of the parties is an attempt made to escape on technical grounds without substantiating the purchases from the so-called parties. Accordingly, he made addition towards purchases from those 22 parties u/s 69C of the Income-tax Act, 1961. The relevant observations of the AO are as under:- 6.3. It may be pertinent to mention here that it can be seen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er survey operations to produce parties before Your honour and submit external confirmation on or before 18.3.2013. After verification of the facts, it is submitted that during the relevant year the transactions with the parties as appearing in the show cause notice dt. 8.3.2013 have been capitalized and have not been claimed as deduction from taxable income and hence no addition can be made to returned income. The rest of the submissions are on the same lines as before. 10. Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee has challenged addition made by the AO towards bogus purchases in absence of incriminating material found as a result of search in light of certain judicial precedents including the decision of Hon ble Bombay High Court in the case of CIT vs Murli Agro Products (2014) 49 taxmann.com 172, in the assessment made u/s 153A. On merits, the assessee has reiterated its submissions made before the AO and argued that purchases from those parties were supported by necessary evidences, therefore, merely for the reason of not following standard operating procedures, no adve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , because the AO has passed assessment order without obtaining necessary prior approval from the Addl.CIT of concerned range, which is a requirement of the statute, as per the provisions of section 153D of the Act. The Ld.AR further submitted that when there is no prior approval from the authority, who is superior to the AO, who passed assessment order, as per the provisions of section 153D, then the whole proceedings is invalid void ab initio and hence, the AO did not have any jurisdiction to make assessment under the provisions of the Act. The Ld.AR further submitted that although the AO stated to have taken approval from the Addl.CIT, Central Range-4, Mumbai before completion of assessment, but, there was no evidence available in the file for having taken approval u/s 153D of the Act, which is evident from the fact that when the assessee has filed an application under the provisions of RTI Act, 2005, the department has furnished reply and categorically stated that neither the copy of a request letter filed by the AO nor copy of approval granted u/s 153D of the I.T.ACT, 1961 was found in the folder. However, in the 153D approval maintained in the office of Addl CIT, Central Range ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to furnish copy of approval letter to take advantage of non availability of the letter in the folders. Otherwise, the assessee has not disputed the fact of approval by the AO before passing the assessment order, either by filing necessary petition before the AO or before the first appellate authority by taking a specific ground challenging validity of assessment order. The Ld.DR further submitted that although the Act, mandates obtaining prior approval from the authority under the provisions of section 153D, but, such requirement is only an administrative requirement which has to be complied with by the AO before passing assessment order. In this case, the AO has complied with the requirement of law which is evident from the fact that he had obtained prior approval from the competent authority us 153D of the Act. 15. The Ld.DR referring to affidavit filed by Shri Abhijit Pathankar (DR), ITAT, G-Bench, Mumbai, who was the then Additional CIT, submitted that the officer, who was holding the charge of Range Addl.CIT at the time of passing assessment order, categorically stated in his affidavit that he had issued necessary approval u/s 153D, vide letter No.Addl.CIT/CR-4/Approvl- 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 25-03- 2013. It is also not in dispute that the assessee has not raised any objection, whatsoever, with regard to the issue of approval u/s 153D either before the AO or before the first appellate authority. The assessee has taken the legal ground for the first time before the Tribunal by filing additional ground of appeal. Therefore, the whole issue needs to be apprised in the light of above facts and also the conduct of the assessee. Admittedly, the department, in reply to RTI application clarified that neither copy of approval request letter filed by the AO to the Addl. Commissioner, nor copy of approval granted u/s 153D of the Act, was found in the assessment order folder. However, it was further stated that in the 153D approval folder maintained in the office of Addl.CIT, Range-4, the approval granted in other group cases were traced. The assessee claims that mere mentioning of having been taken approval u/s 153D in the assessment order is not sufficient and what is required to be seen is whether the department is able to provide copy of approval letter granted by the Addl.CIT, or not. Since the department has categorically stated that approval granted u/s 153D of the Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment record, but the contents of approval letter issued by the competent authority has been reproduced in verbatim in the assessment order at para 7. Further, the approval granted in other group cases is very much available in the assessment folder. Therefore, it cannot be said that no approval had been taken. Further, the approval u/s 153D is an administrative procedure which requires to be complied with by the officers, who is discharging the assessment functions. The administration action of the department is not very much relevant for the assessee to justify its case, on merits. Therefore, when assessee goes to question the administrative procedure, rather contending its case on merits, that too, after a lapse of 4 to 5 years, then obviously, a doubt arises about intend of the assessee in taking this ground and such an attempt is derail the issue on merits and to escape on technical ground. Therefore, we are of the considered view that there is no merit in the additional ground taken by the assessee challenging validity of assessment order passed by the AO u/s 143(3) r.w.s. 153A of the Income-tax Act, 1961. Although, the assessee has relied upon certain judicial prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of certain purchases from certain parties. During the course of survey, it was further noticed that where the assessee is not following standard operating procedures in respect of purchases from certain parties, the same was matching with the list of suspicious / hawala dealers prepared by the sales-tax department. On the basis of information gathered during the course of survey, coupled with report of sales-tax department, it was noticed that the assessee had taken accommodation bills / bogus purchase to the extent of ₹ 13.86 crores in FYs 2006-07 to 2010-11. During the course of assessment proceedings, when the AO called upon the assessee to file complete details of purchases from the so-called hawala dealers, the assessee furnished certain details including purchase bills, but could not file confirmations from the parties. When the AO called upon the assessee to produce the parties in person, the assessee could not do so. Further, on the basis of information filed by the assessee, the AO observed that in respect of purchases from 22 parties, certain very important and key documentation chart, always been there was found to be missing in case of the transactions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences were missing, the AO came to the conclusion that purchases from those parties were bogus which is further supported by investigation carried out during the course of survey, where they have admitted lapse in SOPs followed in respect of certain purchases. Accordingly, there is no error in the findings recorded by the lower authorities while making addition towards bogus purchases and, therefore, their orders should be upheld. 22. We have heard both the parties, perused material available on record and gone through the orders of authorities below. The addition made by the AO is based on report of sales-tax department which is further supported by the survey conducted at the business premises of the assessee, where it was noticed that in respect of purchases from 22 parties, the assessee had not followed SOPs, whereas in respect of general purchases, SOP has been meticulously followed. The AO reached to the conclusion that purchases from 22 parties are bogus in nature when the assessee has failed to file confirmations from those parties and also failed to produce the parties in person, when specifically asked to do so. The AO has brought out number of discrep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are not supported by necessary evidence. This is because when the AO has called upon the assessee to file confirmation from the parties, the assessee could not file confirmations. The assessee also could not produce the parties in person for verification when the AO has specifically asked the assessee to do so. Therefore, we are of the considered view that the AO has not only made addition on the basis of third party information without confronting those statements to the assessee, but carried out further verification which proved fact that those purchases are bogus in nature. In fact, the facts brought out by the AO during assessment Proceedings clearly establishes the fact of accepting bogus purchase bills from hawala dealers. Accordingly, we reject the arguments of the assessee that purchases from above parties are genuine, which are supported by necessary evidences. 24. Having said so, let us examine what is the amount of addition needs to be made when the purchases are proved to be bogus which are not supported by necessary evidence. The assessee claims that in case of bogus purchases, only profit element embedded in such purchases needs t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid down by the Hon ble Supreme Court in the case of NK Proteins Ltd vs DCIT (2017) 292 CTR 354 (SC) is squarely applicable to the facts of assessee case, where the Hon ble Supreme Court dismissed appeal filed by the assessee and confirmed the findings of Hon ble Gujarat High Court in respect of bogus purchases, where the Hon ble Gujarat High Court, after analysing necessary facts at para 6 of the order, held that once the Tribunal having come to a categorical finding that the purchases from certain parties are bogus, it was not incumbent on it to restrict the disallowance to the extent of 25% of such purchases. The relevant findings of the Court are as under:- 6. The Tribunal in the case of Vijay Proteins Ltd. (supra) has observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25% of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd. (supra) In the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that he did not want to press ground 3 and hence, the same has been dismissed, as not pressed. 28. In the result, appeal filed by the assessee is dismissed. ITAs No.3875, 3876/Mum/2015 7120/Mum/2016 28. The facts and issues involved in these three appeals are identical to the facts and issues which we have already considered in ITA No.3874/Mum/2015. The reasons give by us in preceding paragraphs in ITA No.3874/Mum/2015 shall, mutatis mutandis apply to these appeals also. Therefore, for details reasons given by us in preceding paragraphs, we dismiss these appeals filed by the assessee. 29. In the result, all the appeals filed by the assessee are dismissed. COs No.100 to 102/Mum/2017 CO No.254/Mum/2018 30. The revenue has filed these cross objections against additional ground filed by the assessee challenging validity of assessment order passed by the AO u/s 143(3) r.w.s. 153A, in absence of prior approval of competent authority under the provisions of section 153D of the Income-tax Act, 1961. Since, we have already decided additional ground taken by the assessee challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X
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