TMI Blog2022 (3) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... show that there is any infirmity in the reasons recorded. The satisfaction has been recorded by the learned principal Commissioner of income tax as per performa at serial number 12 has clearly recorded his satisfaction which shows that he has gone through the reasons recorded by the learned assessing officer and then he is satisfied with the proposal of issuing notice u/s 148 and thereafter he granted his approval. Naturally, when reasons recorded are sound enough to stand on its own legs, clear, unassailable, manner or language of recording approval does not matter much. More so, as there is no specific manner and language of recording such approval prescribed by law, therefore approval granted if shows application of sound mind, deserves to be upheld. All decision cited before us shows flawed reasons and consequently approval also failed. In view of this, we are not in agreement with the argument of the learned authorised representative that the approval granted by the learned principal Commissioner of income tax is cryptic and does not show application of mind. - Decided against assessee. Bogus purchases - The amount of purchase consideration paid to above 4 parties are th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case and in law, the Ld. CIT(A) has erred in law by not appreciating the fact that the onus to justify the claim of expenses is on the assessee and the same has failed to discharge it in relation to the purchases made from the non-existent vendors? 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law by ignoring, the fact that the assessee could not substantiate its claim of purchases from non-existent vendors by means of relevant supporting documents related to movement and delivery of goods, stock register, etc. to arrive at disallowance at 12.5% of the purchases from the non-existent vendors? 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not appreciating the law correctly that once the purchase are unverifiable/ not genuine/ bogus, the same should have been disallowed in entirety, particularly in view of the ratio of the decision of the Hon ble Gujarat High Court in Tax Appeal No. 242 of 2003 dated 20/06/2016 in the case of N.K. Proteins Ltd. against which the SLP was dismissed by the Hon ble Apex Court? 6. the appellant craves leaves to add, amend, al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;26,25,58,657/- in case of four persons. Therefore, after recoding reasons, notice under section 148 of the Act was issued on 07.10.2016. Assessee raised an objection that he has received notice dated 07.10.2016 issued under section 148 of the Act only on 27.07.2017. The assessee has also raised objection with respect to the service of the notice. The LD AO rejected the same while passing assessment order. Subsequently, notices under section 133 (6) were issued to those [ 4 ] parties. Out of them, three notices returned back, however, one notice did not return. Thus, no replies were received. Local inquiries also resulted that nobody knows whereabouts of these parties. On the basis of the same, the Assessing Officer issued show cause notice to assessee on 17.11.2017 that why the above sum of ₹26,25,58,657/- should not be added as unexplained expenditure under section 69C of the Act. 07. During the course of assessment proceedings, the assessee furnished the audited accounts, Tax Audit Report, computation, bank accounts, and the details of the parties from whom assessee has purchased along with the details of sales. 08. Learned AO also obtained affidavits of these partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was served only on 27.07.2017 and therefore, the assessment order consequently passed by the learned Assessing Officer without serving any notice u/s 148 of the Act within the time limit is liable o be quashed as non est. 013. The learned Authorised Representative further referred to the approval granted by Pr. Commissioner of Income Tax on 03.10.2016 to the issue of notice under section 148 of the Act. He referred to Serial No.12 of ITNS-10 being from for recording the reasons for initiating the proceedings under section 147 of the Act and for obtaining of approval and stated that the approval is cryptic and same is not sustainable. 014. Coming to the merits of the addition, he submitted that assessee has a business of trading in steel. The accounts of the assessee are audited under section 44AB of the Act. The assessee also maintains the quantitative details of the purchase and sale. He referred to Schedule C‟ of the Tax Audit Report wherein the quantitative details are tabulated. He further referred to statement placed at page No. 56 onwards wherein the quantities purchased from the four alleged entities were shown which have been sold to one Bill power Limited. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was issued on 07.10.2016 and handed over to the postal authorities on 13.10.2016; hence, the notice was correctly served within time. 016. On the issue of addition, he relied on the decision of Hon‟ble Supreme Court in the case of NK proteins Ltd. and Vijay Proteins Limited and Hon'ble Delhi High court in the case of La Medica and Arun Malhotra, where 100% addition is sustained of bogus purchases. He therefore submitted that as the order of the learned Assessing Officer is in conformity with law laid down by the Hon‟ble Supreme Court of India and therefore, the learned CIT (A) was not correct in restricting the addition to the extent of 12.5% of such purchases. Therefore, the order of the learned CIT (A) is required to be set aside. 017. The learned Authorised Representative in rejoinder submitted that the Hon‟ble Bombay High Court in Mohammad Haji Adam And Co. (supra) which is on identical facts has accepted the addition to the limited extent because of comparison of gross profit. He also stated that in this case, the Hon'ble Bombay High Court considered the decision of N K Industries Ltd. vs. Dy. CIT in Tax Appeal No. 240 of 2003 dated 20 June 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence notice under section 148 of the Act is initiated. Such reasons were recorded purportedly within time and approval was obtained on 03.10.2016 from the Pr. Commissioner of Income Tax-1, Thane. He recorded the approval stating that I have gone through the reasons recorded. I am satisfied that it is a fit case for issue of notice under section 148. The proposal for issue of notice under section 148 is approved. 021. Based on this approval, the Assessing Officer issued notice under section 148 of the Act on 07.10.2016. The Assessing Officer also issued various notices under section 142(1) of the Act. On 28.11.2017, the assessee was supplied the reasons on request of the assessee vide letter dated 27.11.2017. On 30.10.2017, the assessee submitted that notice under section 148 of the Act dated 07.10.2016 has not at all been received by the assessee, the copy of notice under section 148 of the Act was only received on 27.07.2017, and therefore, notice was not issued within the time limit prescribed under the provisions of Section 149 of the Act. Therefore, initiation of reassessment proceedings is invalid. The assessee also referred to the letter of ld AO dated 24.10.2017 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the signature placed on the above notice as well as the signature of the assessee completely matches, we are of the opinion that notice u/s 148 of the act has been served on the assessee himself on 16/2/2017. 023. Coming to the other aspect of the reopening of the assessment where the assessee has challenged that the approval was mechanical; we find that the reasons recorded by the learned AO remain unassailed. The learned authorised representative could not show that there is any infirmity in the reasons recorded. The satisfaction has been recorded by the learned principal Commissioner of income tax as per performa at serial number 12 has clearly recorded his satisfaction which shows that he has gone through the reasons recorded by the learned assessing officer and then he is satisfied with the proposal of issuing notice u/s 148 of the income tax act and thereafter he granted his approval. Naturally, when reasons recorded are sound enough to stand on its own legs, clear, unassailable, manner or language of recording approval does not matter much. More so, as there is no specific manner and language of recording such approval prescribed by law, therefore approval granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d gross profit in the books of account of ₹ 2,22,910/- of gross profit at 0.09%. Assessee has demonstrated the above transaction is with respect to the identical purchases transactions from above 4 parties and sale of the same quantity of material to bill Power Ltd. Copies of the purchase bill from above 4 parties as well as the copies of the sale bills to bill Power Ltd were also placed on record. The amount of purchase consideration paid to above 4 parties are through account payee cheques and the sale consideration received by assessee from bill Power Ltd is also through account payee cheques. As held by the honourable Bombay High Court in case of principal Commissioner of income tax versus Muhammad Haji Adam and Co and others in ITA number 1004 of 2016 dated 11/2/2019 that when compared the purchases and sale statement of the assessee, revenue accepted the sale, there is no reason to reject the purchases because without purchases there could not have been sale of goods. As the fact of purchases from hawala parties is not disputed, the additions limited to the extent of bringing the gross profit rate on purchases at the same rate of other genuine purchases were upheld. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... honourable Supreme Court has distinguishable facts. 028. The learned departmental representative further relied upon the decision of the honourable Delhi High Court in case of CIT Vs La Medica [2001] 117 Taxman 628 (Delhi)/ [2001] 250 ITR 575 (Delhi) however, in that decision it was not the case that the material purchased by the assessee has been sold to the third party and sales has been accepted by the revenue. In that case, raw material was purchased by the assessee and there was no correlation with the corresponding sales. 029. The learned departmental representative further relied upon the decision of the honourable Delhi High Court in case of CIT versus Arun Malhotra 2014] 47 taxmann.com 385 (Delhi) where the purchases were held to be bogus then the addition was deleted, honourable High Court sent matter back to the coordinate bench to decide afresh after considering all the material. Therefore, factually there was no guidance available that how much addition should have been upheld in that particular case. 030. Coming to the last decision in the case of Vijay Proteins Ltd [2015] 58 taxmann.com 44 (Gujarat) where 25% of purchases were held to be income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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