TMI Blog2018 (11) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus purchase. Disallowance in this case be restricted to 12.5 % of 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. 1613, 1614 & 1615/Mum/2018 - - - Dated:- 2-11-2018 - Shri Shamim Yahya, AM For the Appellant : Shri Bhupendra Shah For the Respondent : Shri S. K. Bepari ORDER PER SHAMIM YAHYA, A. M.: These are appeals by the 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. Brief facts of the case are that the assessee is engaged in the business of trading in ferrous and non-ferrous metal. The assessee filed his return of income on 28.09.2008 declaring total income of ₹ 1,43,110/-. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment of the assessee was reopened by the AO by issue of notice u/s 148. 5.1 It is observed that a notice u/s 148 of the Act was issued in this case on the basis of specific information received by the AO from Sales Tax Department through the DGIT (Inv), Mumbai that the assessee was one of the beneficiary of accommodation entries in the nature of bogus sales/ purchases from M/s Navratan Impex of ₹ 3,04,980/-. On the basis of this information and after due consideration of other relevant facts, the assessment for the relevant year was reopened by the AO. 5.2 In my considered view, the information received by the AO through Departmental channels was credible and actionable, and was sufficient to invoke the provisions of Sec 147 of the Act. I would like to mention that at the time of issue of notice u/s 148, the AO is only required to form a broad opinion about income escaping tax in the hands of the assessee and he is not required to exactly quantify the amount of concealment. The sufficiency of reason cannot be challenged at the time of reopening of assessment as held by the Hon'ble Supreme Court in the cases of Raymond Woollen Mills (236 ITR 34) and Rajesh Jhaver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also been approved by the on'ble Gujarat High Court. It was pointed out by the assessee that in Para 7 of the aid order of the Hon'ble ITAT, it has been noted that the malpractice of bogus urchases is mainly to save 10% sales tax. After considering this, the Hon'ble ITAT estimated the additional profit on the alleged bogus purchases @ 12.5%. It was therefore submitted by the assessee that since as against 10% sales tax then applicable in Gujarat, the rate of sales tax in Maharashtra is of only 4%, therefore the rate applied by the AO of 12.5% is on the higher side. 6.3 The contentions of the assessee have been duly considered. It is a fact that the said alleged hawala suppliers were found to be non-existent at the stated addresses. The assessee could neither provide their latest addresses nor produce the parties before the AO. However, the assessee was in a position to reconcile the purchases from the alleged hawala suppliers with the corresponding sales. Therefore, the action of the AO of concluding that the said purchases have been made from the grey market cannot be faulted. Since the assesses was in a position to reconcile the alleged hawala purchase with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 9. From the above, I find 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11. As regards the merits, upon careful consideration I find that the assessee has provided the documentary evidence for the purchase. Adverse inference has been drawn due to the inability of the assessee to produce the suppliers. I find that in this case the sales have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from Hon'ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises (in writ petition no 2860, order dt. 18.6.2014). In this case the Hon ble High Court has upheld 100% allowance for the purchases said to be bogus when sales are not doubted. However in that case all the supplies were to government agency. In the present case, the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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