TMI Blog2018 (11) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transaction. - Decided partly in favour of assessee. - I.T.A. Nos. 1612/Mum/2018 - - - Dated:- 2-11-2018 - SHRI SHAMIM YAHYA, AM For The Appellant : None For The Respondent : Shri S. K. Bepari ORDER Per Shamim Yahya, A. M.: This is an appeal by the assessee wherein the assessee is aggrieved that the learned Commissioner of Income Tax (Appeals)-51, Mumbai ( ld.CIT(A) for short) dated 12.12.2017 has erred in sustaining 9% disallowance on account of bogus purchases. 2. Briefly stated the facts of the case are that the assessee is engaged in the business of trading in ferrous and non-ferrous metal. The assessee filed its return of income on 29.09.2010 declaring total income of ₹ 4,97,580/-. The Sales Tax authorities had carried out a detailed investigation and had recorded statements and/or obtained affidavits/depositions from the various hawala dealers who had admitted that they are only engaged in providing accommodation entries of purchases/sales without any actual delivery of goods. This information was received by the AO through the DGIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansportation of the material such as delivery challan, transport receipts, octroi receipts, weigh-bridge slip, etc. could not be submitted by the assessee booked by it. However, the assessee could, tally the bogus purchases with the corresponding sales. Therefore, the AO concluded that the assessee had made the said purchases from the grey market. Thereafter, the AO proceeded to make an addition of ₹ 16,35,695/- being 12.5% of the alleged bogus purchases of ₹ 1,30,85,562/-. 5.2 In the appellate proceedings, the assessee submitted that all the details of sales and purchases of goods including names and addresses of the suppliers etc. were furnished to the AO and all the payments had been made by cheque. Moreover, a chart giving details of the purchases and a corresponding sales was also submitted. Therefore, it was contended by the assessee that the action of the AO of making an addition of ₹ 16,35,695/- by estimating the profit @ 12.5% of the alleged bogus purchases is not correct. The assessee explained in course of the appellate proceedings that the AO has adopted the rate of 12.5% by relying upon the decision ITAT, Ahmedabad in the case of Simit P Sheth (ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who are engaged in the hawala transactions and are also involved in issuing bogus purchase bills for sale of material without delivery of goods, which information was based on information received by Revenue from Maharashtra Sales Tax Authority. Information was received that the assessee was beneficiary of hawala accommodation entries from entry providers by way of bogus purchase. The accommodation entry provider has deposed and admitted before the Maharashtra Sales Tax Authority vide statement/ affidavit that they were engaged in providing bogus accommodation entries wherein bogus sale bills were issued without delivery of goods, 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 favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is whether there was relevant material on which a reasonable person could have formed a requisite belief Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co, (P.) Ltd. (1996) 217 ITR 597 (Supreme Court): Raymond Woollen Mills Ltd. v. ITO (1999) 236 ITR 34 (Supreme Court). 9. The above discussion and precedent from Apex Court fully justify the validity of reopening in this case. 10. As regards the merits, I note the decision of the Hon ble Gujarat High Court in the case of Pr CIT vs. Tejua Rohitkumar Kapadia (in Tax Appeal no 691/2017 vide order dated 04.05.2018). In this case, the Hon ble High Court has confirmed the deletion of disallowance on account of alleged bogus purchase as necessary documentary evidence for the purchase was on record. The special leave petition against this order has been dismissed by the Hon ble Supreme Court in its decision dated 04.05.2018 in Special Leave Petition (Civil) Diary No. 12670/2018. 11. Upon careful consideration I find that the assessee has provide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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