TMI Blog2023 (7) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the Department after detailed enquiry and after taking the statement of various Hawala operators on record and on the basis of evidence furnished by such Hawala operates, had come to the conclusion that the assessee had made bogus purchases from the two parties. In the instant facts the assessee had made a specific requisition for allowing the opportunity of cross-examination of the concerned persons on the basis of whose statement the additions have been made in the hands of the assessee (by holding that the purchases from M/s. Param Trading Company and M/s. Rheem Tradelink Pvt. Ltd. is bogus). Accordingly, in the interest of justice, the matter is being set-aside to the file of Ld. CIT(Appeals) so as to offer the assessee an opportunity of cross-examining the concerned persons on the basis of whose statements the aforesaid addition have been made in the hands of the assessee. Appeal of the assessee is allowed for statistical purposes. - I.T.A. No. 2812/Ahd/2016 - - - Dated:- 5-6-2023 - Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Appellant : Shri Rajesh C. Shah, A.R. For the Respondent : Shri N. J. Vyas, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be directed to be modified accordingly 4. That the CIT (Appeals) also erred in confirming the charging of Interest of Rs 2515510/- u/s 234B of the IT Act on the ground of being of consequential nature without appreciating the fact that this Interest was absolutely against the provisions of section 234B(1) and 234B(3) of the Act since in the Intimation as 143(1) of the Act dt. 31- 7-2014, the appellant was granted refund of Rs. 1323785/- on 11-8- 2014 and no such interest was chargeable charged at all. It is therefore, submitted that the interest of Rs.2515510/- charged u/s 234B(3) is bad-in-law and on facts and, therefore, the same be cancelled. 5. That the CIT (Appeals) also erred in confirming the charging of Interest of Rs.52921/- u/s 234D of the Act for 8 months on the ground of being of consequential nature without appreciating the fact that the refund of Rs.1323790/- was issued on 11-8-2014 and, therefore, correct interest that can be charged comes to Rs. 46332/- for the period 11-8-2014 to 25-2-2015 and, therefore, the same be reduced to Rs.46332/-. 3. Ground No.1 :- We shall first deal the assessee s challenged to validity of reopening of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Appellant is reopened on the basis of information regarding bogus purchase received from ADIT(Inv.), Unit-III, Kolhapur. The notice u/s 148 of the Act is issued on 03/06/2014 i.e within four years from the end of Assessment Year and accordingly the argument of the Appellant that the relevant particulars were available during the course of original assessment made u/s 143(3) of the Act and accordingly present re-assessment u/s 147 of the Act in the absence of any failure on the part of Appellant to disclose material facts is required to be quashed is not acceptable. The reopening of assessment for the year under consideration carried out within four years from the end of the Assessment year and accordingly this ground of the Appellant challenging validity of re-assessment carried out u/s 143(3) r.w.s 147 of the Act is not acceptable. The Hon'ble Gujarat High court in the case of Praful Chunibhai Patel V/s ACIT 236 ITR 832 has held as under:- On a proper interpretation of section 147 of the Act, it would appear that the power to make assessment or reassessment within four years of the end of the relevant assessment year would be attracted even in cases where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s duty, to reopen the door and demand the amount legally owing. His formation of belief is not a judicial decision, but an administrative decision. It does not determine any thing at this initial stage, but the Assessing Officer has a duty to proceed so as to obtain what the taxpayer was always bound to pay if the increase is justified at all. The decision to initiate the proceedings is not to be preceded by any judicial or quasi-judicial enquiry. His reasoning may be the result of official information or his own investigation or may come from any source that he considers reliable. His reason is not to be judged by a court by the standard of what the ideal man would think. He is the actual man trusted by the Legislature and charged with the duty of forming of a belief, for the mere purposes of determining whether he should proceed to collect what is strictly due by law, and no other authority can substitute its standard of sufficient reason in the circumstances, or his opinion or belief for his. Unless the ground or material on which his belief is based, is found to be so irrational as not to be worthy of being called a reason by any honest man, his conclusion that it constitutes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions received by the firm from membership fees as soon as received, there was no question of any change of opinion when on the relevant facts being found the Assessing Officer while protectively assessing the assessee for the year 1993-94, noted that this was a case for issuance of a notice under section 148, which came to be issued thereafter. When the amount of taxable income and of the tax payable thereon were not ascertained at all by the Assessing Officer in respect of the transfer made by the assessee in favour of the firm on 19-9-1990, there obviously was no opinion formed in that regard and, consequently, there would not arise any question of a mere change of opinion. In cases where the Assessing Officer had overlooked something at the first assessment, there can be no question of any change of opinion when the income which was chargeable to tax is actually taxed as it ought to have been under the law but was not, due to an error committed at the first assessment. The Assessing Officer, therefore, clearly had a reason to believe that the income chargeable to tax in the form of capital gains in respect of the transfer that took place on 19-9-1990, had escaped assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such statements are inadmissible since statements are not in capacity of proprietor / director of M/s. Param Trading and M/s. RHEEM Tradelink Pvt. Ltd. Further, he submitted that the Assessing Officer issued notices under Section 148 immediately on receipt of the letter from ADIT without carrying out any verification of the information received from the ADIT on 03.06.2014. Accordingly, for the reasons cited above the Counsel for the assessee submitted that the re- assessment proceedings are liable to be set-aside. 7. On going through the arguments put forth by the Counsel for the assessee and summary of arguments placed before us, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in holding that the re-assessment proceedings were validly initiated by the Assessing Officer. In the present facts, the Assessing Officer observed that the assessee had made substantial purchases amounting to Rs. 21.30 crores from the aforesaid two parties i.e. M/s. Param Trading and M/s. Rheem Tradelink Pvt. Ltd. Further, during the course of investigation in the case of Sangli based Hawala dealers, the statements of master mind behind Hawala racket namely Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation that assessee had made bogus purchases to the tune of Rs. 21.30 crores on the basis of information received from ADIT (Inv.), Kolhapur. Accordingly, we are of the considered view, that in the instant facts the Assessing Officer had sufficient material / information in his position to form a prima facie belief that income had escaped assessment and hence issuance of notice for reopening the re-assessment proceedings was justified, looking into the facts of the instant case. Accordingly, looking into the facts of the instant case, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in holding that re-assessment proceedings have been validly initiated under Section 147 of the Act. In the result, Ground No.1 of the assessee s appeal is dismissed. Ground No. 2:- Merits of the case and G.P. addition 8. The brief facts in relation to this ground of appeal are that during the course of assessment, the Assessing Officer observed that the assessee had made bogus purchases amounting to Rs. 21.30 crores from two parties i.e. M/s. Param Trading Company and M/s. Rheem Tradelinks Pvt. Ltd. The Assessing Officer observed that from a perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Nasik, Kolhapur, Nandurbar, Jalgon etc. i.e. for final supply to all the stations / places which are in and around Sangli. The above circumstances show that the assessee has not purchased the articles from aforesaid parties. The Assessing Officer further observed that from analysis of the data, it is evident that the Gross Profit (G.P.) has not reduced because of higher turnover as stated by the assessee, but it has reduced in the year where the assessee had made huge purchases from entry providers mentioned above. The Assessing Officer observed that in A.Y. 2011-12, when the assessee was carrying out the same activity, it had declared Gross Profit (G.P.) at 15.25%. But in the impugned assessment order, when the assessee was having transaction with entry providers, the G.P. reduced to 10.75%. Since the purchases from M/s. Param Trading Company and M/s. Rheem Tradelink Pvt. Ltd. amounting to Rs. 21.30 crores constituted almost 40% of the total turnover and is found to be bogus in nature, it is conclusively proved that purchases of Rs. 21.30 crores stated to be made from M/s. Param Trading Company and M/s. Rheem Tradelink Pvt. Ltd. are entered in the books only to inflate the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parekh and Shri Dinesh Amrutlal Parekh and he is only a name lender. Statement of Shri Suresh Amrutal Parekh and in reply to Q. No. 12 had admitted that he had indulged in the activity of providing accommodation bills/entries to various business houses/ business concerns/ entities/persons. 3.7. The Assessing Officer has further contended that the Appellant has made payment/purchased goods from above parties in the year under consideration aggregating to Rs. 213049900/-. The Assessing Officer has referred to statement of Statement of Shri Suresh Amrutal Parekh and in reply to Q. No. 12 had admitted that he had indulged in the activity of providing accommodation bills/entries to various business houses/ business concerns/ entities/persons. For this purpose various bank accounts in the names of different persons i.e. friends, their employees, their family members etc were opened and operated. Shri Suresh A Parekh, also provided a list of entities their proprietor /partner/ director etc., bank accounts and total turnover of accommodation bills provided through such entities and the details in Annexure-A which were provided to the appellant at the time of the assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elink Pvt. Ltd. as is evident from the enquiries conducted by the ADIT (Inv.) Unit-Ill, Kolhapur. In the above circumstances, the book result declared by the assessee is rejected u/s. 45 of the Act by the AO. As stated above, there is no denying the fact that the assessee has made sales, as the sales made by the assessee are to Maharashtra Government. The only question here is that whether the expenditure debited by the assessee in the P L A/c. towards purchase made are genuine or not. From the detailed discussion made above, it is held by the A.O. that the purchases shown to have been made from hawala are not genuine even though the assessee might have purchased such material from others which gives it more profit than actually declared by the assessee. Considering the fact that the assessee has declared G.P. at 15.25% in the immediately preceding year where no trading transactions are with the entry providers the assessee's nature of business is a/so not changed, the A.O. has considered it reasonable to adopt the G.P. at 15.25% as declared by the assessee itself in the immediately preceding year is reasonable. By applying the G.P. at 15.25% the G.P. works out to Rs. 8,19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovement of goods, there cannot be sales without having purchase of the goods. It is also disputed by AO that the payments made to these parties had flown back to the appellant. Therefore, the totality of facts show that it was a case where the goods received from the parties other than the above two parties who has issued the bills. It is to be presumed that the appellant had procured goods from parties or source and in order to regularize such purchases, he had taken bills from the aforesaid two parties. The total sale made by the appellant is accepted by A.O. Under the circumstances, one has to believe that the purchases made from said two parties were not bogus but they were made from the parties other than those mentioned in the books of accounts. Therefore, when the purchases themselves were not completely held bogus and non-existent by the A.O., the entire amount of purchases should not be added back to the income of the appellant but only reasonable profit embedded therein could be added. The A.O. has done the same by estimating the reasonable profit embedded therein on the basis of the result of the previous year of the appellant company. The same is substantiated by the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the F.Y. 2011- 12 along with the Copies of Tax Invoices, Delivery Notes and Lorry Receipts of Samarth Roadways and Pavan Transport, proves that purchases were genuinely made. A Statement showing the details of Educational Booklet sets sold to Sarva Shiksha Abhiyan, Maharashtra during the year 2011-12 along with the copies of the relevant bills , Transport Receipts i.e. L.R., Octroi Exemption certificate (Free Pass) on sample basis, where applicable, also supports the genuineness of the transaction. Copies of various orders received from various centers of Maharashtra Prathmik Shikshan Parishad. Sarva Shiksha Abhiyan also point towards the genuineness of sale of articles. Copies of various Inspection Reports issued by Superintendence Company of India (Pvt.) Ltd. along with their bills addressed to The Education Officer (Primary) of various Jilla Parishad (on sample basis), also supports that the transactions were genuine. Copies of Assessment orders under Gujarat VAT Act showing acceptance of purchases and sales also supports the genuineness of the aforesaid transaction. The above evidences have not been controverted or challenged by the A.O. and, therefore, clearly p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has not been named in the report. If such be the case, unless and until the assessee shows and proves that she/he was prejudiced on account of such report/statement mere mentioning that non-furnishing of the report or non-availability of the person for cross examination cannot vitiate the proceedings. The assessees have miserably failed to prove the test of prejudice or that the test of fair hearing has not been satisfied in their individual cases. In all the cases, the assessees have been issued notices under sections 143(2) and 142(1) they have been directed to furnish the documents, the assessee have complied with the directions, appeared before the Assessing Officer and in many cases represented by Advocates/Chartered Accountants, elaborate legal submissions have been made both oral and in writing and thereafter the assessments have been completed. Nothing prevented the assessee from mentioning that unless and until the report is furnished and the statements are provided, they would not in a position to take part in the inquiry which is being conducted by the Assessing Officer in scrutiny assessment under section 143(3). The assessee were conscious of the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so not submitted any submissions as regarding the investigations conducted by the ld. A.O. We find that there is a direct investigation report of the Investigation Wing, Kolkata. There is the investigation report of the SEBI which is also on record and all these reports have clearly stated that there is an illegal racket going on where the prices of shares of lesser known company having no financial credentials are jacked up and the prices kept on raising till desired level and thereafter are routed through entry providers in order to obtain bogus long term capital gain and claiming exemption u/s 10(38) of the Act. This is nothing but tax evasion which is not permissible within the frame work of the Income-tax Act. It is further true that the A.O has recorded the statement of various entry providers which were recorded during the course of investigation by the Investigation Wing and they have admitted that they were dealing in penny stocks including shares of Mishka which were jacked up for the purposes of providing bogus long term capital gain. The assessee was even confronted with the statement of these entry providers who themselves have admitted that they were engaged in provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, we also of the considered view that Ld. CIT(Appeals) and the Assessing Officer have correctly observed that when the assessee is admittedly operating on such a low profit margin, since as per the assessee s own admission, the G.P. rate reduced during the impugned assessment year owing to increase in volume of sales, there seems to be no justifiable reason for substantially increasing the transportation cost by transporting the articles from Sangli to Ahmedabad and then again taking the articles back from Ahmedabad to various locations surrounding the area of Sangli. As noted above, the Hon ble Supreme Court in the case of Sumati Dayal vs. CIT (Supra) has stressed the importance of surrounding circumstances and human probabilities, looking into the facts of each case. However, we also observe that in the instant facts the assessee had made a specific requisition for allowing the opportunity of cross-examination of the concerned persons on the basis of whose statement the additions have been made in the hands of the assessee (by holding that the purchases from M/s. Param Trading Company and M/s. Rheem Tradelink Pvt. Ltd. is bogus). Accordingly, in the interest of justice, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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