TMI Blog2019 (7) TMI 1595X X X X Extracts X X X X X X X X Extracts X X X X ..... it Kochar, Accountant Member For the Assessee : Shri. Deepak Tralshawala For the Revenue : Shri. Manish Kumar Singh,DR ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal, filed by assessee, being ITA No. 2297/Mum/2017, is directed against appellate order dated 28.02.2017, passed by learned Commissioner of Income Tax (Appeals)-14, Mumbai (hereinafter called the CIT(A) ) in appeal number CIT(A)-14/IT-378/15-16, for assessment year 2010-11 , the appellate proceedings had arisen before learned CIT(A) from assessment order dated 11.03.2016 passed by learned Assessing Officer (hereinafter called the AO ) u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter called the Act ) for AY 2010-11. 2. The grounds of appeal raised by assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) read as under:- Being aggrieved by the order of the Commissioner of Income Tax (Appeals)-14, the appellant prefers the following amongst other grounds: 1 On the facts and in the circumstances of the case, and in law, the Learned CIT(A) has erred in upholding the reopening of the assessment on the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has disclosed profits which is higher than the average rate of gross profit disclosed by the appellant; f) in not considering the fact that the Learned Assessing Officer has not found any infirmities in the sales, books of accounts or other materials nor has he found any evidence to prove that purchases from these parties are bogus. 3. Hence, it is submitted that the re opening of the assessment being bad in law be quashed or in the alternative, the addition of ₹ 420,694/- [@12.5% of the alleged bogus purchases of ₹ 33,65,552/-] upheld by the Learned Commissioner of Income tax (Appeals) being arbitrary and contrary to the principles of natural justice and equity be deleted in toto. 3. The brief facts of the case are that the assessee is in the business of manufacturing dealers in Wire Ropes, Chain Pulley Blocks etc. . 3.2 The assessee originally filed its return of income on 27.09.2010 which was processed u/s 143(1) of the 1961 Act. Thereafter, the case of the assessee was selected for scrutiny under CASS by Revenue for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act and assessment order dated 22.03.2012 was originally f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to produce all the relevant documents/evidences to support its claim of genuineness of these purchase transactions along with their filed copies of ITR s and bank statements but the assessee failed to produce before the AO relevant evidences/documents to substantiate genuineness of these purchase transactions from aforesaid four parties as well assessee also failed to produce these parties before the AO . The AO referred to and relied upon provisions of Section 101, 103 and 106 of Indian Evidence Act, 1872. The AO also relied upon decisions in the case of Nund Samant Company Private Limited v. CIT reported in (1970) 78 ITR 268(SC), Watkings Mayer(Agrico) Private Limited v. CIT (1979) 117 ITR 202(P H), CIT v. Shervani Sugar Syndicate Private Limited (1980) 125 ITR 158(All.), Eastern Sales Private Limited v. CIT (1979) 117 ITR 477(Cal.) and CIT v. West Coast Shipping Agencies Private Limited (1981) 127 ITR 442(Ker.) to hold against the assessee. The AO , thus, made additions to the income of the assessee to the tune of ₹ 33,65,552/- by disallowing entire claim for bogus purchases made by assessee, vide re-assessment order dated 11.03.2016 passed by the AO u/s 143(3) read w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the items could not be furnished, I am of the opinion that the appellant failed to prove beyond doubt that the items are purchased from the alleged parties . However it is further noted that the subsequent sales details are furnished during assessment proceeding as contended in the submission. Under the facts therefore I am of the opinion that only the embedded profit in the transactions is to be considered. 5.2 In the case of Bholenath Poly Fab Pvt. Ltd 355 ITR 290 (Guj), the Hon'ble Tribunal held that purchases were made from bogus parties. However, in this case, entire quantity of opening stock, purchase and quantity manufactured during the year under consideration were sold by the assessee. Hon'ble Tribunal held that goods were purchased from some other party and profit amount embedded in such amount amount would be subjected to tax. The decision in the case of Sanket Steel Trader vs. ITO and Vijay Protein Ltd vs ACIT 58 ITD 428(Ahd) were relied upon. Hon'ble Gujarat High Court confirmed the decision. Similarly in the case of CIT vs. Simit Sheth 38 taxman.com 385 (Guj), under similar circumstances, the addition to the extent of 12.5% was sustained rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and reasons for reopening of the concluded assessment were specified in re-assessment order passed the AO, to which our attention was drawn. It was submitted that original assessment was framed u/s. 143(3) and reopening of the concluded assessment u/s 147 was done within four years from the end of assessment by the AO by issuance of notice u/s 148, dated 19.02.2015. The learned counsel for the assessee relied upon the judgment of Hon ble Gujarat High Court in the case of PCIT v. Manzil Dineshkumar Shah (2018) 406 ITR 326(Guj.) and judgment of Hon ble Delhi High Court in the cae of PCIT v. RMG Polyvinyl India Limited (2017) 396 ITR 5(Del.). It was submitted on merits that cross examination of the said parties were not done and their statement was recorded at the back of the assessee which cannot be accepted without cross examination. The learned counsel for the assessee relied upon judgment of Hon ble Bombay High Court in the case of CIT v. Ashish International in ITA no. 4299 of 2009 vide judgment dated 22.02.2011. The Ld. Counsel for the assessee relied upon the judgment of Hon ble Bombay High Court in the case of H.R Mehta v. ACIT reported in (2016) 387 ITR 561(Bom.) . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t being pressed. While dismissing ground number 1 as above, we have noted that the learned counsel for the assessee has conceded before the Bench to dismiss Ground No. 1 as not been pressed. We have also noted that tribunal in assessee s own case for AY 2009-10 vide common orders dated 11.12.2017 in ITA no. 4904/Mum/2016 and 5395/Mum/2016 has dismissed legal challenge to reopening of the concluded assessment u/s 147 with detailed reasonings, by holding as under : 7. We have heard the counsel and perused the records. The ld. Counsel of the assessee submitted that the reopening has been based upon the information received from the Sales Tax Department. The same is based upon the website of Sales Tax Department which he claimed that was akin to newspaper information. He further submitted that the hawala dealers must have given some statements and if so the assessee would like to know how the assessee has been implicated. He further submitted that DGIT Investigation report has been said to be basis of reopening. The ld. Counsel of the assessee submitted that what is the report of the DGIT (Invtg.) is not known. The ld. Counsel of the assessee further pleaded that the original ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te that in this case information was received by the Assessing Officer from DGIT Investigation (Mumbai) there are some parties 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question 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). 11. The above discussion and precedent from Apex Court fully justify the validity of reopening in this case. Further I find that the Ld. CIT(A) has carefully examined the issue and has properly appreciated the issue. Hence, I 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. 6.3 Now coming to challenge raised by the assessee on merits of the additions to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese purchases remained unverified. The statements on oath recorded of these hawala dealers wherein these hawala dealers had admitted to be engaged in issuing false bills to provide bogus accommodation entries of purchases and sales, with assessee being listed as one of the beneficiaries of the said bogus accommodation entries has still remained un-rebutted/unshaken by the assessee. The AO made additions to the income of the assessee to the tune of entire purchases, while Ld. CIT(A) keeping in view that the assessee was able to shown consequent sales to these purchases restricted disallowance to 12.5% of bogus purchases being profits embedded in these purchases which was suppressed by assessee while filing return of income. The decision of Hon ble Supreme Court in the case of Kachwala Gems v. JCIT reported in (2007) 288 ITR 10 (SC) is relevant. In estimation some guess work is involved but it should be fair , reasonable and honest. We donot find any infirmity in estimation done by learned CIT(A). The AO on its part has rightly relied on provisions of Section 101,103 and 106 of the Indian Evidences Act, 1872. These purchases are appearing in books of accounts of the assessee and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties to be providing bogus accommodation entries. Assessee has not been able to produce any of the parties. Neither the assessee has been able to produce any confirmation from these parties. In such circumstances, there is no doubt that these parties are non-existent. We find it further strange that assessee wants the Revenue to produce assessee s own vendors, whom the assessee could not produce. The purchase bills from these nonexistent/bogus parties cannot be taken as cogent evidence of purchases. In light of the overwhelming evidence, the Revenue authorities cannot put upon blinkers and accept these purchases as genuine. This proposition is duly supported by Hon ble Apex Court decision in the case of Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC) and CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC). In the present case, the assessee wants that the unassailable fact that the suppliers are non-existent and, thus, bogus should be ignored and only the documents being produced should be considered. This proposition is totally unsustainable in light of Hon ble Apex Court decisions. 14. In these circumstances, the learned Departmental Representative has referred to Hon ble G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5% disallowance. We find following the same is just and appropriate in this case. 17. Upon the facts and circumstances, the interest of the justice will be served if 12.5% disallowance of the bogus purchase is sustained. Accordingly, we confirm the order of the ld. Commissioner of Income Tax (Appeals). 6.5 We have observed that the factual matrix in the impugned assessment year AY 2010-11 is similar to that prevailing in AY 2009-10 and we did not find any reason to deviate from detailed and well reasoned order passed by tribunal for the immediately preceding year viz. AY 2009-10 in assesses own case in ITA no. 4904 5395/Mum/2016 in cross appeals vide common order dated 11.12.2017 , thus Respectfully following the aforesaid decision of the tribunal we are upholding additions to the income of the assessee to the tune of 12.5% of Bogus Purchases towards embedded profits in these bogus purchases which was suppressed by the assessee which additions shall be in addition to the income declared by assessee .We are guided by the decision of Hon ble Supreme Court in the case of Radhasoami Satsang v. CIT reported in (1992) 193 ITR 321(SC) so as to maintain consistency and judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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