TMI Blog2018 (10) TMI 1936X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1131/Mum/2018 - - - Dated:- 5-10-2018 - SHRI SHAMIM YAHYA, AM AND SHRI PAWAN SINGH, JM For the Appellant : Shri Ashok Mehta For the Respondent : Shri S. K. Bepari ORDER Per Shamim Yahya, A. M.: This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-53, Mumbai ( ld.CIT(A) for short) dated 28.12.2017 and pertains to the assessment year (A.Y.) 2010-11. 2. The assessee is aggrieved that the ld. CIT(A) has erred in sustaining 12.5% disallowance on account of bogus purchases and also in upholding the validity of reopening. 3. Brief facts of the case are as under: The Assessing Officer received information from Investigation Wing about vital information received from Sales Tax Department regarding parties indulging in issuing bogus bills without supply of any material. The assessee was beneficiary of seventeen such parties from whom purchases of ₹ 1,43,41,683/- was claimed as tabulated below:- Sr. No. Name of the HawalaParty F.Y. Amount (Rs.) 1 Vijay Industries 2009- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the impugned parties. These notices could not be served. This was informed to the appellant who was requested to produce the parties and furnish evidence to support the genuineness of the purchases claimed. Details such as invoices, copies of ledger account and details of transactions of goods were called. The assessee furnished purchase invoices, copy of its own bank statements showing payments being made. Quantitative tally in respect of entire purchases from the two parties and the corresponding sales. The AO noted that the parties were not produced. Inward Register, Stock Register were not produced. Relying on various case laws, the A.O. rejected the books of accounts and disallowed 12.5% of the impugned purchases. Against the above order, the assessee appealed before the ld. CIT(A) challenging both the validity of reopening as well as merits of the addition. 5. As regards the challenge to reopening, the ld. CIT(A) confirmed the A.O s action by holding as under: I have considered the submissions carefully. I am unable to accept this argument of the appellant. It is seen that the assessing officer had received credible information about parties issuing bogus bills wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rSo therefore, while on one hand the AO may not have a clinching proof but the primary responsibility which is ensued on the tax payer has also not been discharged in terms of establishing the genuineness of the transaction. Merely filing copies of his own ledger accounts and bank accounts does in no way establish that the parties actually existed and genuinely supplied material, but then considering that the books of accounts have not been disputed, purchases have not been proved as bogus and neither cheques have been shown to be received back as cash by the appellant, I am of the considered view that in the context of the situation, the cause of justice would be served by looking at the gross profit margins being declared by the appellant. The Hon'ble Gujarat High Court in the case of CIT vs. BholanathPolyFab Pvt Ltd. (2013) 355 ITR 290 and thereafter in the case of CIT vs. Simit P. Sheth ( 2013) 219 Taxman 85 (Guj) has held that in such facts and circumstances, not entire purchase price but only profit element embedded in such purchases can be added. The finding of the Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Seth. 7. Against the above order, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 reason to believe that an income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Managnese Ore Co, ltd. v. ITO(1991) 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment in its enquiry have found the parties to be providing bogus accommodation entries. The assessing officer also issued notices to these parties at the addresses provided by the assessee. All these notices have returned unserved. Assessee has not been able to produce any of the parties. The assessing officer has noted that there is no cogent evidence of the provision of goods. 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 the assessee s own vendors, whom the assessee could not produce. Hence purchase bills from these non-existent the/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 nonexistent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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