TMI Blog2022 (5) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... mation during the course of regular assessment proceedings and there was no allegation by Ld. AO that income escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment Explanation-1 to Sec.147 makes it very clear that production before the AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of foregoing proviso. The same squarely applies to the fact of the present case since the information received by Ld. AO was a subsequent event which was not available at the time of regular assessment proceedings. At the time of original assessment proceedings, no such information was available with Ld. AO and there was no question of formation of any belief on the issue. Therefore, this plea is also to be rejected. We would confirm the impugned order upholding the validity of reassessment proceedings. Bogus purchases - The purchases were taken in the inventory and accounted for in the books of accounts for which the assessee filed copies of extracts from ERP system. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings and no new tangible material was brought on record in the case of the Appellant for re-opening the assessment. 1.3. The AO erred in not clearly estal3lishing that the Appellant has failed to fully and truly disclose the material facts required for the assessment which is a mandatory condition for reopening of assessment under section 147 of the Act beyond 4 years from the end of the relevant assessment year. The learned CIT(A) failed to appreciate the same. 1.4. The learned CIT(A) has erred in upholding the action of the AO in invoking the provisions of section 148 of the Act. 1.5. The AO has erred in relying on the third party sworn statements for initiating the reassessment proceedings and the learned CIT(A) erred in upholding the same. 1.6. The learned CIT(A) has erred in not considering the jurisprudence relied upon by the Appellant wherein it was held that re-assessment done by merely relying on the third party oath / sworn statements is invalid. 2. Disallowance of purchases from M/s sun Diam by treating it as an accommodation entry amounting to Rs.46,26,890/- 2.1. The AO erred in disallowing the purchases made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s judicial pronouncements, the copies of which have been placed on record. On merits, it was submitted that the purchase were duly substantiated by purchase order, invoices, entries in the books of accounts, bank statements as well as the affidavit of agent who received goods on behalf of the assessee. The Ld. Sr. DR, on the other hand, submitted that the assessee could not establish utilization of purchased material and the copies of delivery challans were not furnished. It transpires that the assessee has purchased precious stones from a suspicious entity M/s Sun Diam under two invoices. Having heard rival submissions and after due consideration of material on record, our adjudication would be as given in succeeding paragraphs. Assessment Proceedings 4.1 The assessee being resident corporate assessee is stated to be engaged in manufacturing and trading of watches, clocks, jewellery, eyewear, precision engineering, accessories and licensed products etc. The return of income for the year was scrutinized u/s. 143(3) of the Act on 27.12.2011. However, the case was re-opened and notice u/s. 148 was issued on 31.03.2015 which is beyond 4 years from the end of relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icity of the transactions. Therefore, these purchases were disallowed and added back to assessee s income as bogus purchases. Appellate proceedings 5.1 Before Ld. CIT(A), the assessee contested the validity of reassessment proceedings as well as quantum additions on merits. The Ld. CIT(A), relying upon the decision of the Hon ble Supreme Court in the case of Raymond Woollen Mills Limited Vs ITO (236 ITR 34) upheld the validity of assessment proceedings by observing that at the stage of reopening, only prima facie material has to be there before Ld. AO. The sufficiency or correctness of the material is not to be considered at this stage. 5.2 On merits, the Ld. CIT(A) confirmed the addition since the assessee could not produce the details of utilization of materials and copies of delivery challans. The assessee had also filed copy of affidavit given by agent Shri Sharad Jobanputra regarding the delivery of products to the assessee which was held to be self-serving document. Accordingly, the additions were confirmed. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 6. First we take up the legal grounds as urged by Ld. AR. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the meaning of foregoing proviso. The same squarely applies to the fact of the present case since the information received by Ld. AO was a subsequent event which was not available at the time of regular assessment proceedings. At the time of original assessment proceedings, no such information was available with Ld. AO and there was no question of formation of any belief on the issue. Therefore, this plea is also to be rejected. The decision of Hon ble Supreme Court in ITO Vs Lakhmani Mewal Das (103 ITR 437) has been referred by Ld. AR to submit that the reasons for formation of belief for reopening of assessment must have rational connection with or relevant bearing on formation of belief and rational connection postulates that there must be direct nexus or live link between material coming to AO s notice and formation of his belief that there has been escapement of assessee's income from assessment in particular year because of his failure to disclose fully and truly all material facts. The duty on the assessee is to make true and full disclosure of primary facts at the time of original assessment and it is for AO to draw correct inference from primary facts. If AO draws ..... X X X X Extracts X X X X X X X X Extracts X X X X
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