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2018 (4) TMI 625

hat the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the guilt. - The facts and circumstances of the present case indicate that assessee has engaged into dealings in the grey market. Dealings in the grey market give the assessee various savings at the expense of the Exchequer. Hence, on the overall consideration of facts and circumstances and following the decision in the case of CIT vs Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] we hold that a disallowance of 12.5% of the bogus purchase would meet the end of justice. Accordingly, we modify the order's of authorities below and direct that the disallowance in this case should be restricted to 12.5% of the bogus purchase. - Decided partly in favour of a .....

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2011-12. The Assessing Officer rejected the explanation of the assessee ow the ground that the assessee had not produced a single party. Further, the AO mentioned that the confirmations filed were self-made ones without any supporting evidences like copy of PAN card, Driving license or passport so that the signature of alleged hawala parties could be verified. The sample bills were not supported by transportation bills, octroi paid bills and loading and unloading details. Therefore, the ledger accounts and copy of bills are not sufficient to prove the genuineness of the transaction. The Assessing Officer has also relied upon the deposition made by the Principal Officer of the alleged concerns before the Sales Tax Department wherein all of them had admitted that they were not doing any genuine business but were indulged in providing accommodation entries to people who needed their services. The Assessing Officer has treated the expenditure incurred on such purchases as unexplained. The Assessing Officer rejected the assessee's reliance OR the judgment of the Gujarat High Court in the case of CIT Vs Simit P. Shah on the grounds that the purchases itself were not doubted. The Asse .....

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be treated as unexplained. The assessee was not given any opportunity to cross-examine the parties despite the fact that assessee had specifically asked for the same. h) The appellant has placed reliance on various decisions, namely, CIT v. Smt. Laxmi Mehrotra [(2014)] 222 Taxmann lll(Mag.) (All. HQ], Nivi Trading Ltd v. UOI (Bom)(HC), Mehta Parikh & Co Ltd. 30 ITR 181 (SC), Plus Paper Food Pac Ltd v ITO (Bombay High Court), Ramjidas Mahaiiram (1936) 42 ITR 25 (Cal), CIT v Dumraon Cold Storage & Refrigeration Service (1974) 97 ITR 137 (Patna), CIT v Kurban Hussain Ibrahimji Mithiborwala (1972) 82 ITR 821 (SC), Thyyabali Mulla Jeevaji Kapasi (1967) 661JTR 147 (SC) etc. 6. Considering the above submissions, as regards the reopening, the ld. Commissioner of Income Tax (Appeals) confirmed the same by observing as under: 5.1 So far the validity of re-opening is concerned, it is found that the reasons for reopening was provided by the AO wherein receipt of information from DGIT(Inv.), Mumbai regarding involvement of the assessee in bogus purchases has been mentioned. Therefore, it is found that the notice under section 148 was issued on the basis of fresh information and tangibl .....

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than what was recorded in the reasons for reopening. (g) The assessment was reopened on the reasoning of bogus purchases were as completing assessment purchases were treated as genuine. 11. Furthermore, the ld. Counsel of the assessee submitted that the ld. Commissioner of Income Tax (Appeals) has passed a very laconic order. He submitted that the assessment order should not have been passed u/s. 143(2) rather should have been passed u/s. 144 of the Act. Furthermore, the ld. Counsel of the assessee referred to several case laws including those referred before the ld. Commissioner of Income Tax (Appeals). He also referred to certain case laws from the ITAT on the issue of merits. He also referred to few judgments from the following case laws from the Hon'ble jurisdictional High Court: 1. CIT vs. M/s. Golani Brothers (in ITA No. 17 of 2015 and others dated 29.08.2017) 2. CIT vs. M/s. Ashish International (in ITA No. 4299 of 2009 dated 22.02.2011) 12. The ld. Departmental Representative, on the other hand, relied upon the orders of the authorities below. He vehemently reiterated that the purchases are bogus inasmuch as no evidence of delivery has been furnished. He submitted that .....

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that tangible and cogent incriminating material were received by the AO which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the guilt. In this regard, we refer to the decision of the Hon'ble Apex Court in the case of CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. Ltd, 291 ITR 500:- "Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to lax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the AO has cause or justification to know or suppose (hat income had escaped assessment, it can be said to have .....

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e the reopening. Furthermore, the ld. Counsel of the assessee has alleged that the reopening was done on bogus purchase while in completing the assessment, purchases were treated as genuine. This in our opinion has no merits. The Assessing Officer has confirmed 100% of the purchase as unexplained expenditure. 17. As regards merits of addition, we find 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, 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 has been confirmed by the learned CIT(A) and by ITAT as above. Furthermore it is noted that in such factual scenario 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. The necessary evidence for t .....

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n ITA No. 658 of 2009. The Hon ble High Court has referred to the decision of CIT Jaipur vs. Aditya Gems, D. B. in ITA No. 234 of 2008 dated 02.11.2016, wherein the Hon ble Court had inter alia held as under: "Considering the law declared by the Supreme Court in the case of Vijay Proteins Ltd. Vs. Commissioner of Income Tax, Special Leave to Appeal (C) No.8956/2015 decided on 06.04.2015 whereby the Supreme Court has dismissed the SLP confirmed the order dated 09.12.2014 passed by the Gujarat High Court and other decisions of the High Court of Gujarat in the case of Sanjay Oilcake Industries Vs. Commissioner of Income Tax (2009) 316 ITR 274 (Guj) and N.K. Industries Ltd. Vs. Dy. C.I.T., Tax Appeal No.240/2003 decided on 20.06.2016, the parties are bound by the principle of law pronounced in the aforesaid three judgments. 21. However, we note that this is not an appeal by the Revenue. Upon careful consideration we find that sales in these cases are not doubted. When sales are not doubted, 100% disallowance for bogus purchase is not sustainable as per the decision of the Hon ble jurisdictional High Court in the case of Nikunj Eximp Enterprises (in writ petition no 2860, order dt. .....

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