TMI Blog2019 (6) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ld was a tangible incriminating information having live link with formation of belief that income of the assessee has escaped assessment to invoke provisions of Section 147 in the instant appeal before us. We uphold the reopening of the assessment by the AO u/s 147 in the instant case before us and decide ground number 1 raised by assessee in memo of appeal filed with tribunal against assessee Bogus purchases - HELD THAT:- We are unable to impress ourselves with this feeble argument advanced by the assessee, firstly that was addition made by AO on account of shortage/excess of stock and it was for the assessee to show with cogent evidences/explanation that this item of stock bought from M/s Mani Prabha Impex Private Limited was infact added in its entirety to income as shortages of stock by the AO and now making further additions will lead to double additions of the same income and secondly, this tangible incriminating information of the assessee indulging in obtaining bogus accoomodation bills was received by AO after completion of the assessment by the AO for AY 2012-13 u/s 143(3) on 30.03.2014. Under these facts and circumstances of the case, in our considered view keeping in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tribunal ) in ITA no. 1158/Mum/2018 for AY 2011-12, read as under:- Ground No. 1 On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the action of the AO in initiating re-assessment proceedings under section 147 of the Act. The order under section 143(3) r.w.s. 147 of the Act is bad in law and without jurisdiction. Ground No. 2 On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the action of the AO in adding an amount of ₹ 1,21,345/- (14.55% of ₹ 8,33,985/-) being the profit element embedded in the alleged bogus purchase. The appellant craves leave to add, omit or alter grounds of appeal before or during the hearing of the appeal. 3. The brief facts of the case are that the assessee is engaged in the business of manufacturing sale/export of gold and diamond jewellery. The assessee filed its return of income on 05.08.2011 declaring total income of ₹ 3,94,63,163/-. Thereafter, the assessee also filed return of income on 29.10.2012 in response to notice issued by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch led to the reopening of the concluded assessment by the AO u/s 147 of the 1961 Act based on aforesaid fresh incriminating information received by the AO from DDIT(Inv.), Mumbai and DCIT, Surat. The assessee filed objection to reopening of the concluded assessment u/s 147 of the 1961 Act vide its letter dated 21.07.2016 which were disposed off by the AO vide letter dated 25.07.2016. 3.2 During the course of the reassessment proceedings conducted by the AO u/s 147 read with Section 143(3) of the 1961 Act, the assessee submitted copies of purchases invoices, copy of ledger account of the said party M/s Mani Prabha Impex Private Limited in the books of accounts of the assessee for the year under consideration and bank statement of the assessee showing entries reflecting payment to said party being debited in the bank account of the assessee. The assessee also submitted that it has purchased raw material from the said party namely M/s Mani Prabha Impex Private Limited and made payment by account payee cheque(s) to the said party. The assessee also claimed before the AO during reassessment proceedings that it has discharged its onus to prove genuineness of these purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the assessee by estimating additional G.P. at the rate of 14.55% of these purchases based on the GP of 14.55% already declared by the assessee, vide reassessment order dated 31.10.2016 passed by the AO u/s 143(3) read with Section 147 of the 1961 Act. 4. Aggrieved by an reassessment framed by the AO u/s 143(3) read with Section 147 of the 1961 Act vide assessment order dated 31.10.2016, the assessee filed first appeal before Ld. CIT(A) and submitted that the assessee had made purchases of raw material from this party namely Mani Prabha Impex P. Ltd., and payments were made to this party by account payee cheque. It was submitted that purchase invoices received from the said party, ledger account of said party in books of accounts of the assessee and bank statements were submitted by the assessee before the AO.The assessee also challenged reopening of the concluded assessment by the AO by submitting that reopening of the concluded assessment by invoking provisions of Section 147 was done based on information received from DGIT(Inv.), Mumbai and DCIT, Surat that the assessee has allegedly being beneficiary of bogus accommodation entry for purchase from M/s Mani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty M/s Mani Prabha Impex Private Limited could not be found out. It was submitted it is the duty of the department to find out the said party and onus is not on the assessee to tell the current whereabouts of the said party. It was submitted that assessee is dealing with numerous entities for purposes of purchases and sales.It was submitted that it is not possible to keep track of these parties. It was submitted by assessee before learned CIT(A) that the turnover of the assessee company was ₹ 140.17 crores. It was claimed that the assessee made purchases to the tune of ₹ 144.49 cores while alleged bogus purchases from M/s Mani Prabha Impex Private Limited were only to the tune of ₹ 8,33,985/- which is a meagre 0.05% of the amount offered to tax. Thus, it was claimed that the assessee has not made any bogus purchases and all its purchases are genuine. It was further submitted that no further enquiry/ investigation was conducted by the AO to find out the genuineness of these alleged bogus transactions. The assessee relied upon following judgements before learned CIT(A) to contend that no additions are warranted, as under: a) Mumbai-tribunal decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the case of CIT v. Bholanath Poly Fab Private Limited (2013) 355 ITR 390(Guj) c) Hon ble Gujarat High Court decision in the case of CIT v. Simit P. Sheth 355 ITR 290(Guj.) 6. The assessee being aggrieved by the appellate order dated 18.12.2017 passed by Ld. CIT(A) has filed an appeal with tribunal. The contentions are raised by learned counsel for the assessee that assessment was firstly completed by AO u/s 143(3) read with Section 153A of the 1961 Act on 21.03.2014. Later notice was issued by AO u/s 148 of the 1961 Act on 27.01.2016 which was within four year from the end of the assessment year. It was submitted that information was received by the AO from DGIT(Inv.), Mumbai and DCIT, Surat that Shri Rajendra Jain, Shri Sanjay Chaudhary and Shri Dharmichand Jain are providing bogus accommodation entries. It was submitted that DDIT(Inv.), Mumbai conducted search and seizure operations u/s 132 against Mahendra Brothers Export Private Limited Group, its associated concerns, Directors and related parties on 08.08.2011. The search and seizure operations in the case of Shri Rajendra Jain, Shri Sanjay Chaudhary and Shri Dharmichand Jain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the assessee had obtained bogus invoices from M/s Mani Prabha Impex Private Limited while actual material was procured from some other party, the details of which were not disclosed by the assessee to Revenue and hence profit embedded in the said purchased were brought to tax by estimating same @14.55% based on actual GP declared by the assessee. It was submitted by learned counsel for the assessee that the AO did not issue notices u/s 133(6) to said parties nor any summons were issued u/s. 131 of the 1961 Act by the AO to said parties. It was submitted that only ward inspector was deputed by AO to make further enquiries who could not locate the said party namely M/s Mani Prabha Impex Private Limited at given address. It was submitted that even Directors of the company were not examined by the AO. It was submitted by learned counsel for the assessee that even no statements are existing against against the assessee. It was prayed that additions as were made by the AO and which were later affirmed by learned CIT(A) be deleted. Without Prejudice, it was submitted that quantum of additions to income so made at 14.55% of alleged bogus purchases is excessive and prayer is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2016 by AO u/s. 148 of the 1961 Act, which notice was claimed by the AO to have been duly served on the assessee. There is no dispute between rival parties as to it. It is pertinent to mention that said notice dated 27.01.2016 issued u/s 148 by AO within four years from the end of the relevant assessment year and hence first proviso to Section 147 of the 1961 Act is not applicable. The assessee in response to aforesaid notice dated 27.01.2016 issued by the AO u/s 148 of the 1961 Act, vide letter filed with AO on 27.06.2016 submitted that return of income filed u/s 153A of the 1961 Act be treated as return of income filed in response to notice issued u/s 148 of the 1961 Act. The assessee requested AO to furnish reasons recorded u/s 147 of the 1961 Act for reopening of the concluded assessment, which were duly furnished to assessee by the AO on 19.07.2016. The assessee objected to reopening of the assessment u/s 147 of the 1961 Act. The said objections were duly disposed off by the AO. 7.5 The reasons which were recorded by the AO for reopening of concluded assessment u/s 147 of the 1961 Act were that search seizure action was conducted by DDIT(Inv.) Unit-IX(3),M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of initiation of reopening proceedings u/s 147 of the 1961 Act. The key persons of the searched group belonging to Mr Rajendra Jain, Mr Sanjay Chaudhary and Mr Dharmichand Jain did admitted their modus operandi that they were involved in providing bogus accommodation bills for sales and unsecured loans and the name of the assessee appeared as one of the beneficiaries in the list compiled by Revenue during search operations conducted by Revenue u/s 132 of the 1961 Act, the assessee being beneficiary of accommodation entry for purchases to the tune of ₹ 8,33,985/- from M/s Mani Prabha Impex Private Limited belonging to this group which was searched by Revenue u/s 132 of the 1961 Act. It is also a matter of record that the assessee did made purchases which stood reflected in its books of accounts being made from said M/s Mani Prabha Impex Private Limited to the tune of ₹ 8,33,985/- which also evidences/corroborates correctness of the information received by the AO from DGIT(Inv), Mumbai and DCIT, Surat. So, in our considered view receipt of this tangible incriminating material by the AO from DGIT(Inv.), Mumbai and DCIT, Surat that the assessee is beneficiary of accommoda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited and its related company. Based on such facts, Hon ble Bombay High Court held reopening by the AO u/s 147 of the 1961 Act to be not valid as it was held by Hon ble Court that fishing and roving enquiries are not permissible based on suspicion within mandate of Section 147/148 of the 1961 Act.While in the instant case before us, It is based on admission of key persons of searched persons that their group were indulging in providing bogus accommodation entries by way of sales and unsecured loans wherein name of the assessee also found mentioned in the list of beneficiaries of the said accommodation entries being compiled by Revenue during search operations u/s 132, the AO reopened the concluded assessment u/s 147 and we have already held that this information received by the AO from DGIT(inv.), Mumbai and DCIT, Surat to be tangible incriminating information coming into possession of the AO which has live link with formation of prima facie belief that income of the assessee has escaped assessment. 7.8 We reiterate that at this stage of invoking reopening provisions u/s 147 only prima facie belief of the AO is required as to escapement of income rather than havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a) But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. 7.9 The assessee also r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, in whose account the unaccounted money was brought through regular books of accounts. 10. In our opinion, the information supplied by the investigation wing to the Assessing Officer thus formed a prima facie basis to enable Assessing Officer to form a belief of income chargeable tax having escaped assessment. Therefore, it cannot be stated that the Assessing Officer did not have reason to believe that income chargeable to tax had escaped assessment. Being a case where return were accepted without scrutiny, we must leave the question of taxability of such allegedly escaped income to Assessing Officer to examine during scrutiny assessment. 11. The Assessing Officer perused the information supplied by the investigation wing and having formed the belief that income chargeable to tax had escaped assessment, cannot be stated to have acted mechanically. Further, mere fact that assessee had asked for certain information from the Assessing Officer, which at this stage was not supplied, would not invalidate the reasons recorded by the Assessing Officer in issuing the impugned notice. 7.11 Thus, based on o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e list compiled by Revenue during search operations conducted u/s 132 of the 1961 Act. The onus under these circumstances is still more very heavy on the assessee to prove that these purchases were infact genuine. The assessee did not even asked for cross examination of these persons before the authorities below. It is also observed by authorities below that the payments had been made with substantial delay to this party namely M/s Mani Prabha Impex Private Limited from whom alleged bogus accommodation entries by way of purchase of raw material to the tune of ₹ 8,33,985/- were obtained and no satisfactory explanation for substantial delay in making payments to this party is made by assessee even before us. The assessee had infact submitted details of purchases from concerned party and corresponding sales thereof, the quantitative reconciliation of the stock stood explained, which is accepted by the AO. The authorities below had observed that there cannot be any sales without purchases. The assessee is not coming out with all the facts which are especially in the knowledge of the assessee. The admissions made by key persons of said Mr. Rajendra Jain, Mr Sanjay C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impress ourselves with this feeble argument advanced by the assessee, firstly that was addition made by AO on account of shortage/excess of stock and it was for the assessee to show with cogent evidences/explanation that this item of stock bought from M/s Mani Prabha Impex Private Limited was infact added in its entirety to income as shortages of stock by the AO and now making further additions will lead to double additions of the same income and secondly, this tangible incriminating information of the assessee indulging in obtaining bogus accoomodation bills was received by AO after completion of the assessment by the AO for AY 2012-13 u/s 143(3) on 30.03.2014. Under these facts and circumstances of the case, in our considered view keeping in view factual matrix of the case, the profit embedded in these purchases are required to be brought to tax which requires estimation of income as held by Hon ble Supreme Court in the case of Kachwala Gems v. JCIT reported in (2007) 288 ITR 10 (SC). We would also like to refer to decision of Hon ble Bombay High court in the case of PCIT v. M/s Mohammad Haji Adam Co. in ITA no. 1004 of 2016, vide judgment dated 11.02.2019, In our considered v ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
