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TMI Blog2017 (12) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... ces available to substantiate purchases i.e. payments were made by account payee cheques, quantitative records are maintained and for every purchase there was corresponding sales which has been accepted by AO, (3) On the facts and in law and without prejudice to above grounds of appeal, the Ld. CIT (A) erred in sustaining addition estimated @ 12.5% on the alleged bogus purchases, on the ground that the motive of obtaining bogus bills was to suppress true profit without reducing the G P already earned on such purchases. (4) On the facts and in law and without prejudice to above grounds of appeal, the Ld. CIT (A) erred in sustaining an addition to the extent of 12.5% of the alleged bogus purchases without reducing the GP already shown by the appellant on the alleged bogus purchases. 3. The common grounds of appeal in Revenue's appeal read as under: 1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in confirming addition @12.5% of total purchase held as bogus by the A.O.? 2. The appellant prays that the order of the ld. CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 4. Since facts ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on the basis of the information received from the Sales Tax Department. Assessing Officer without accepting the submissions and contentions of the appellant, concluded that the assessee did not purchase any goods from the above parties and hence addition in respect of peak amount of investment made out of unaccounted money by the assessee for purchase of materials from the parties, which worked out to Rs. 48,45,233/-, u/s 69C of the Act, relying on several judgments quoted in the assessment order. The Assessing Officer worked out the combined peak credit for the year merging the ledger accounts of the parties after adding the purchases and deducting payments made date wise and stating that such peak represents the amount of undisclosed cash that has been utilized in this arrangement and income to the said extent has escaped the assessment and added the same to the total income assessed as per the order passed u/s 143(3) r.w.s. 147 of the Act. 7. Against the above order, the assessee appealed before the ld. Commissioner of Income Tax (Appeals) challenging both the validity of reopening and merits of the addition. 8. The ld. Commissioner of Income Tax (Appeals) confirmed the reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment. 2.5.7 The facts of the present case are now tested in the light of the aforesaid provisions of sec. 147 as applicable to the year under consideration. On verification of details placed on record, it is found that the notice under section 148 of the Act for the assessment year under appeal was issued on 26-02-2013 after recording the following reasons by the Assessing Officer: "Information was received in this case from the office of the DGIT(Inv.), that this assessee has taken accommodation entries to inflate its purchases. An inquiry u/s 133(6) of the IT Act, 1961 in a number of scrutiny cases, including in the case of the assessee in AY 2010-11, revealed that several of these parties are not available at the given address and the notices have been returned by the postal dept. with the remarks 'not known', 'left', 'unc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and truly all material facts necessary for his assessment. It is an undisputed position that there is no failure on the part of the appellant as far as the first condition is concerned. Insofar as the second condition is concerned, though the appellant is stating that the issue is considered in the original ^ assessment, they could not produce any notice or letter calling and verifying the details of purchases by the AO during such proceedings. On perusal of the assessment records and order it is noticed that the additions made are disallowances under different expenditure heads like miscellaneous expenses, telephone expenses and conveyance expenses on adhoc basis. As could be seen from the assessment order, the issue of information about the accommodation entries was noticed during the course of assessment proceedings for the A.Y. 2010-11. In view of this position, the issue of bogus purchases were not the issue in the original assessment and purchases were not verified. On the date of recording reasons, new material in the form of new information received by the AO has come on record by the AO to trigger reopening of assessment beyond four years. In these circumstances, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in consideration for commission. These, accommodation entry providers, on receipt of cheques from parties against bogus bills for sale of material, later on withdrew cash from their bank accounts, which was returned to beneficiaries of bogus bills after deduction of their agreed commission. The Assessee was stated to be one of the beneficiaries of these bogus entries of sale of material from hawala entry operators in favour of the assessee wherein the assessee made alleged bogus purchases through these bogus bills issued by hawala entry providers in favour of the assessee. These dealers were surveyed by the Sales Tax Investigation Department whereby the directors of these dealers have admitted in a deposition vide statements/affidavit made before the Sales Tax Department that they were involved in issuing bogus purchase bills without delivery of any material. There is a list of such parties wherein the assessee is stated to be beneficiary of bogus purchase bills. 12. From the above, we find that tangible and cogent incriminating material were received by the Assessing Officer which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refully examined the issue and has properly appreciated the issue. Hence, we do not find any infirmity in the same. Accordingly, we uphold the order of the Ld. CIT(A) on the issue of reopening. Since, the issue has been decided on the basis of the Hon'ble Apex Court decision, the other case laws referred by assessee are not supporting the assessee's case. 14. We further note that credible and cogent information was received in this case by the assessing officer that certain accommodation entry provider/bogus suppliers were being used by certain parties to obtained bogus bills. The assessee was found to have taken accommodation entry/bogus purchase bills during the concerned assessment year from different parties. Based upon this information assessment was reopened. The credibility of information relating to reopening remains un-assailed. In such factual scenario, the assessing officer has made the necessary enquiry. The issue of notice to all the parties have returned unserved. Assessee has not been able to provide any confirmation from any of the party. Assessee has also not been able to produce any of the parties. Necessary evidence relating to transportation of the goods was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s said to be bogus when the sales have not been doubted. However, the facts of that case were different. Furthermore, the sales in that case were basically to government departments. However, the ratio emanating from the above Hon'ble jurisdictional High Court decision is that when sales are not doubted 100% disallowance for bogus purchase cannot be sustained. The facts of this case indicate that the assessee has engaged into dealing in the grey market. Dealings in grey market give the assessee savings from the payment of necessary taxes and the assessee also uses undisclosed sums. These are at the expense of the Exchequer. In these circumstances, as expounded by the Hon'ble Gujarat High Court in the case of Simith P. Seth, 12.5% disallowance out of the bogus purchases serves the interest of justice. Accordingly, we find that the order of ld. Commissioner of Income Tax (Appeals) is apposite and does not need any interference on our part. Accordingly, we uphold the same. The ld. Counsel of the assessee of the fairly agreed to the above proposition. 18. In the result, these appeals by the assessee and the Revenue stand dismissed. Order pronounced in the open court on 07.12.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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