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TMI Blog2018 (2) TMI 1957X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessment order passed by the Assessing Officer which is bad in law and void ab initio as it is based on conjectures and surmises without there being concrete reason that the income has escaped the assessment. 2.2 The Ld. CIT(A) failed to consider the plea of the Appellant that the notice for initiating reassessment proceedings was issued by AO on 15 February, 2013 whereas the assessing officer received information from the CIT-21 regarding the alleged purchases vide letter dated 26th February, 203 which goes to show that the Assessing Officer did not have reasons to believe that income has escaped assessment and initiated proceedings merely on reason to suspect. 2.3 The Ld. CIT(A) erred in upholding the reassessment order without appreciating that the Assessing Officer had passed a vague order for rejecting the objections raised by the Appellant and the said order was not even a speaking order as per the principles laid down by the Supreme Court in the case of GKN Drivershafts (India) limited. 3 Re: Disallowance of 6^amounting to Rs. 4,27,338/- in respect of certain purchases alleged to be bogus in nature. 3.1 The Ld. CIT(A) grossly erred in making a disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils furnished by the assessee are of the nature of secondary evidence and no primary evidence in the form of producing the relevant parties has been filed to prove the genuineness of the purchase. 4. The Ld. CIT(A) has failed to appreciate the finding of the Assessing Officer that the purchases have been made out of undisclosed income and the same remained unexplained which required to be added u/s 69C of the I.T. Act. 5. On the facts and circumstances of the case, the Ld. CIT(A) erred in sustaining the addition to the extent of Rs. 4,27,338/- by taking the GP @ 6% of the bogus purchases of Rs. 71,22,300/- not considering the facts that the entire purchases are bogus. 6. The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored. 7. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 5. The brief facts of the case are that the assessee filed his return of income for the A.Y. 2011-12 on 27.09.2011 declaring total income to the tune of Rs. 8,09,528/-. The return was processed u/s 143(1) of the I.T. Act. Thereafter, an information was received from DGIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and net profit ratio declared in immediately preceding year was at Rs. 25,95,237/- i.e., 1.645% and Rs. 515571/- i.e., 0.32% on total turnover of Rs. 157694151/- respectively. During the course of assessment proceeding the matter of controversy is in connection with the reopening of the case and on merits and the Assessee contested the matter by providing the documents available with him but the Assessing Officer was not satisfied, therefore, the bogus purchase to the tune of Rs. 71,22,300/- was added to the income of the assessee. The assessee filed an appeal before the CIT(A) who restricted the claim of the assessee to the extent of 6% of the bogus purchase. The assessee was not satisfied, therefore, filed the present appeal before us. However, the revenue has also filed an appeal in which the contention of the revenue is that whole addition of bogus purchase is liable to be added to the income of the assessee. ISSUE NO.1& 2:- 7. Under this issue the assessee has challenged the validity of the notice issued u/s 148 of the I.T. Act. The Ld. Representative of the assessee has argued that the Assessing Officer received the information from Sales Tax Department vide letter dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Vs. DCIT (2003) 259 ITR 19 (SC), Hemant Traders Vs. ITO (2015) 375 ITR 167 (Bombay). Since the notice is not justifiable and is not in accordance with law, therefore, we set aside the notice u/s 147/148 of the Act. Accordingly, this issue is being decided in favour of the assessee against the revenue. . ISSUE NO.3:- 9. Under this issue the assessee has challenged the addition confirmed by CIT(A) @ 6% of the bogus purchase. The Ld. Representative of the assessee has argued that the Assessing Officer has raised the addition on the basis of the information received by the DGIT(Inv.), Mumbai in connection with the purchase from 9 parties total to the tune of Rs. 71,22,300/- but the evidence adduced by assessee has not been considered by the AO as well as CIT(A), therefore, the order passed by the CIT(A) is wrong against law and facts and is liable to be set aside. It is also argued that that in the year of consideration the gross profit ratio of the assessee was @ 1.90% and in the immediate prescribing year the gross profit was @ 1.645%, therefore, at the time of assessing the profit embedded in the bogus purchase the ratio @ 2% is liable to be considered in the interest of just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which lies at page no. 106-113 of the paper book. 2. Macos Iron & Steel P. Ltd.:- The assessee given the ledger A/c. which lies at page no. 114 of the paper book. The assessee has also submitted the confirmation of account by the supplier which lies at page no. 115-118 of the paper book. 3. Dhiren Mercantile P. Ltd.:- The assessee has given the ledger A/c. which lies at page no. 119 of the paper book. The assessee has also submitted the confirmation of account by the supplier which lies at page no. 120 of the paper book. The assessee has also submitted the Purchase and Sales invoices along with delivery challans which lies at page no. 121-132of the paper book. 4. P. K. Trading Co.:- The assessee has given the ledger A/c. which lies at page no. 149 of the paper book. The assessee has also submitted the Purchase and Sales invoices along with delivery challans which lies at page no. 150-153 of the paper book. 5. Revika Trade Impex P. Ltd.:- The assessee has given the ledger A/c. which lies at page no. 133 of the paper book. The assessee has also submitted the Purchase and Sales invoices along with delivery challans which lies at page no 134-137 of the paper book. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim and to know about the existence said 9 parties but the parties were not available at the given address. Sufficient evidence has been submitted by the assessee before the AO. Non service of notice nowhere falsify the claim of the assessee. The assessee has adduced the sufficient evidence in support of the claim against 8 parties. No doubt if the bogus purchase established then in the said circumstances the profit embedded to the bogus purchase is liable to be considered to the income of the assessee in view of the law settled in Vijay Protein Vs. CIT 58 ITT 458 (Ahd) and CIT Vs. Simit P Sheth 356 ITR 451 (Gujrat High Court). In the present case sale has not been disputed and the books of account have not been rejected. In the instant case, when the assessee has adduced the sufficient evidence on record which has been discussed above, therefore, in the said circumstances, we are of the view that the no addition is required to be made on account of bogus purchase. Non service of noticed is not a ground to raise the addition of bogus purchase to the income of the assessee in view of the law settled in CIT Vs. M/s. Nikunj Eximp Enterprises P. Ltd. 2016 taxman.com 171 (Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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