Income Tax Appellate Tribunal - Delhi
Hemera India Pvt. Ltd., Gurgaon vs Ito Ward-11(2), New Delhi on 27 September, 2024
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B": NEW DELHI
BEFORE SHRI SAKTIJIT DEY, HON'BLE VICE PRESIDENT
AND
SHRI M. BALAGANESH, ACCOUNTANT MEMBER
ITA No. 8256/Del/2019
(Assessment Year: 2010-11)
Hemera India Pvt. Ltd, Vs. ITO,
103/75, Silver OAK Ward-11(2),
Apartment, DLF Phase-1, New Delhi
Gurgaon
(Appellant) (Respondent)
PAN:AACCH0915L
Assessee by : Shri Ranjan Chopra, CA
Revenue by: Shri Shayam Manohar Singh, Sr. DR
Date of Hearing 13/07/2024
Date of pronouncement 27/09/2024
ORDER
PER M. BALAGANESH, A. M.:
1. The appeal in ITA No. 8256/Del/2019 for AY 2010-11, arises out of the order of the Commissioner of Income Tax (Appeals)-22, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 119/18-
19/CIT(A)-22, New Delhi dated 31.07.2019 against the order of assessment passed u/s 143(3)/147 of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 22.12.2017 by the Assessing Officer, ITO, Ward-11(2), New Delhi (hereinafter referred to as „ld. AO‟).
2. The Ground Nos 1 to 5 raised by the assessee are challenging the validity of reopening of assessment u/s 147 of the Act. The interconnected issue challenged by the assessee is that since the information received from third party which triggered the reopening was pursuant to the search action carried out in the hands of the third party, Page | 1 ITA No. 8256/Del/2019 Hemera India Pvt. Ltd the right course of action would be to proceeded u/s 153C of the Act in the hands of the assessee and not u/s 147 of the Act. This being a preliminary legal issue, we proceed to dispose of the same first.
3. We have heard the rival submissions and perused the materials available on record. The assessee is a limited company and had filed its return of income for the Asst Year 2010-11 on 15.10.2010 declaring total income of Rs 10,41,096/-. This was duly processed u/s 143(1) of the Act on 17.3.2011. Later this assessment was sought to be reopened vide issuance of notice u/s 148 of the Act on 30.3.2017 based on the information received from DCIT, Central Circle 7(4), Mumbai that assessee had obtained certain bogus accommodation entries in the form of purchase bills from Loha Ispat Ltd during the financial year 2012-13 and this fact was detected during the course of search action u/s 132 of the Act carried out in the case of Loha Ispat Ltd. The reasons recorded for reopening the assessment are reproduced hereunder:-
"Reason for issue of notice u/s 148 in the case of M/s Hemera India Pvt. Ltd. for the A.Y. 2010-11 As per the ITD database, the assessee filed its Return of Income vide Ack. No. 171606301151010 dated 15.10.2010, at the Returned Income of Rs.10,41,096/-. The same was processed on 17.03.2011 u/s 143(1) of the Act. According to ITD database assessment u/s 143(3) has not been done in this case.
In this case, information has been received from the office of the Dy. Commissioner of Income Tax, Central Circle -7 (4) Mumbai. vide letter No. F.No.DCIT-CC-7(4)/Loha Ispat/2016-17 Dated 22.02.2017 mentioning therein that a "search operation was carried out in the case of M/s Loha Ispat Ltd) M/s Loha Ispat Ltd. had taken bogus purchase from various accommodation entry providers and the case generated thereof was brought back as investment in share capital of the assessee company providers/capital/premium Later for the F.Y.2012-13-as per the additional information received from the DCIT Circle-7(4), Mumbai M/s Loha Ispat Ltd. had accounted bogus purchase from M/s Utkantha Trading Pvt. Ltd. and other group of companies of Sh. Abhishek S.Morarka, M/s Loha Ispať Ltd. filed revised return and offered Rs.88.69 Page | 2 ITA No. 8256/Del/2019 Hemera India Pvt. Ltd Crores to tax. During the A.Y.2013-14 the M/s Loha Ispat Ltd. was found to have made bogus purchase of Rs.2521.41 Crores and sales of Rs.2615.15 Crores. The assessee M/s Loha Ispat Ltd. has admitted bogus sales to companies like Aeroflex Industries India Pvt. Ltd. (Rs. 141.61 Crores). Forward Export Trading (Rs.403.29 Crores) and M/s Hemara India Pvt. Ltd.(Rs.98.60 Crores). These parties obtained bogus purchase invoice from M/s Loha Ispat Ltd. to reduce their taxable income to the extent of bogus purchases.
As per the report of Central Circle -7 (4), Mumbai name of various companies being identified after extensive verification of seized documents as a result of search operation conducted in the case of M/s Loha Ispat Ltd, Further Director of M/s Loaha Ispat Ltd. has also admitted this fact that he has made bogus sales to different identities during the F.Y.2009-10 and F.Y.2010-11..
After receipt of the information from Central Circle 7(4), Mumbai, return of income of the assessee company for the A.Y. 2010-11 were downloaded from the ITD system and the same was examined in the light of information received from Central Circle 7(4) Mumbai. On examination of the return of income, it has been found that during the year under consideration, the assessee company has shown total sales of Rs.59,56,50,170/- and total purchase of Rs. 59,51,84,317/- and have shown trading profit of Rs. 996225/-which is only 0.17% on total turnover.
It is seen that the assessee is claiming to have made sale and purchase of crores of rupees but it has shown nil opening as well as closing stock. In a genuine business of trade, stock in hand can rarely be Nil. This shows that the assessee is fabricating its trading figures. The margin/profit shown by the assessee is not commensurate to the profit of trading concern.
Further it is seen that the assessee has shown huge creditors & debtor's at the close of the year under consideration. Though these figures at the beginning of the year is NIL, but closing figures of creditors & debtors are declared at Rs.385780673/- and 385592695/- respectively. In comparison to the turnover; these figures are abnormally very high, which further confirms that the assessee is fabricating its books of account.
The list of sundry creditors shows that the assessee has shown sum of Rs.38,53,75,357/- as payable to M/s Loha Ispat Ltd. This further substantiate that the information received from the central circle 7 (4) Mumbai and which is established facts that M/s Loha Ispat Ltd engaged in providing bogus sales and purchases. Accordingly this sum payable to M/s Loha Ispat Ltd. is clearly seem accommodation entry taken by the Page | 3 ITA No. 8256/Del/2019 Hemera India Pvt. Ltd assessee and it shown that assessee company was not doing any real business, but it is involved in accommodation entry activities. The total sale and purchase of assessee is also bogus, therefore expenses of assessee company Rs10, 25,982/- are also not genuine in absence of any real business carried out by the assessee.
Considering facts mentioned above in the case and the assessee company nature of business, it is established that company is engaged in the business of providing bogus accommodation entries, and therefore income of such transactions must be estimated @ 1.5% of the total sale of the year. The aggregate of such bogus sale transactions amount to Rs. 59,56,50,170/- and hence the commission income of the assessee company @ 1.5% is determined at Rs.89,34,752/-and same is escaped income of the assessee during the year.
Thus it is clear that income to the tune of Rs.89,34,752/- is clearly escaped income of the assessee company which is @ 1.5% of total sale of the assessee company during the year, which has not been offered for taxation, but has been shown in the books of account as bogus liability.
Keeping in view the above facts, I have reason to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for above assessment year 2010-11, the income chargeable to tax to the extent of above mentioned amounting to Rs.89,34,752/- as mentioned above has escaped assessment within the meaning of section 147/148 of the Act.
Moreover, as the case pertains to a period beyond four years from the end of relevant assessment years, for issuing the notice u/s 148, necessary approval/sanction may kindly be accorded by the Pr. Commissioner. of Income Tax, Delhi, In view of the amended provision of section 151 w.e.f.0.1.06.15...
Submitted for kind perusal and approval please.
I.T.O-W-11(2) New Delhi"
4. The ld. AO framed the reassessment u/s 143(3) r w s 147 of the Act on 22.12.2017 by estimating commission income at the rate of 1.5.% of total transactions of purchases treating it as bogus. The main reason for making such addition was that the assessee does not have opening balance or closing balance of dues payable to Loha Ispat Ltd , there are Page | 4 ITA No. 8256/Del/2019 Hemera India Pvt. Ltd huge debtors and creditors balance outstanding in the balance sheet of the assessee and the Director of Loha Ispat Ltd had admitted in the statement u/s 132(4) of the Act that his company was involved in issuing bogus accommodation bills in the form of bogus sale bills to assessee company. This action of the ld. AO was upheld by the ld. CIT(A).
5. Admittedly, the reopening has been made in the case of the assessee based on the information received from DCIT Central Circle 7(4), Mumbai. The DCIT Central Circle 7(4) , Mumbai is the assessing officer of Loha Ispat Ltd. It is not in dispute that Loha Ispat Ltd was subjected to search action u/s 132 of the Act at Mumbai, wherein it was detected that they were engaged in providing accommodation sale bills to assessee company. This fact is conceded by the ld. CIT(A) in page 20 para 5 of his order. Hence this becomes a search material that was seized from a third party premises which was sought to be used against the assessee. Hence we hold that the right course of action would be to invoke the provisions of section 153C of the Act in the case of the assessee and not u/s 147 of the Act. Further we find that the information received from DCIT Central Circle 7(4), Mumbai admittedly pertains only to Asst Year 2013-14 and not for the year under consideration. This fact is very much evident from the reasons recorded for reopening the assessment that are reproduced hereinabove. Hence the assessment for the Asst Year 2010-11 could not have been validly reopened u/s 147 of the Act by the ld. AO. Hence the assumption of jurisdiction u/s 147 of the Act fails on this count also and accordingly we have no hesitation to quash the reassessment proceedings initiated on the assessee for the Asst Year 2010-11. Accordingly, the Grounds 1 to 5 raised by the assessee are allowed.
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6. Since reopening of assessment is quashed, the other grounds raised by the assessee on merits need not be gone into, as it would be academic in nature and they are left open.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 27/09/2024.
-Sd/- -Sd/-
(SAKTIJIT DEY) (M. BALAGANESH)
VICE PRESIDENT ACCOUNTANT MEMBER
Dated: 27/09/2024
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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