TaxTMI 
TaxTMI 
2017 (4) TMI 402
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....ances of the case and in law the learned Commissioner of Income Tax (Appeal) erred in confirming addition of Rs. 2997908/- on account of gross profit @ 12.50% on alleged bogus purchases of Rs. 23983261/- to the total income of the Appellant. Provisions of the Act ought to have been properly construed and regard being had to facts of the case no such addition should have been made. 2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming conclusion of the Assessing Officer that purchases made by the appellant to the tune of Rs. 23983261/- is bogus and non genuine. Reasons assigned by him are wrong and insufficient to support such conclusion. 3. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in estimating rate of gross profit of 12.50% on alleged bogus purchases over and above gross profit declared by the appellant on such purchases. Reasons assigned by him are wrong and insufficient to justify such rate of gross profit of 12.50% 4. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (....
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.... by the issue of notice u/s. 148 of the Act on 25th March, 2014 which was duly served on the assessee. In response to notice u/s 148 of 1961 Act , the assessee submitted that original return of income filed by the assessee on 25th September, 2009 u/s 139(1) of 1961 Act may be treated as return filed in response to notice u/s. l48 of 1961 Act. Reasons recorded by the AO prior to issue of notice u/s 148 of the Act were also provided by the AO to the assessee. The assessee filed objections for the reopening of the assessment vide letter dated 02.06.2014 which were disposed off by the A.O. vide letter dated 06.05.2014. The A.O. while disposing off objections to re-opening observed that as per records of the Sales tax department there were 28 parties from whom the assessee had made hawala transactions who were involved in bogus billing. It was observed by AO that these parties just issue bills for commission without actual supply of goods. In an sworn Affidavit Cum Declaration filed before Sales Tax Investigation Branch, Mumbai and in deposition before the Assistant Commissioner of Sales tax, Investigation Branch, Mumbai ,the directors of the said 28 entities have admitted of issuing on....
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....08B 2008-09 833,173 POOJA STEEL & ALLOYS ACSPC2231P 2008-09 1,369,290 NAVODAY TRADE IMPEX PVT LTD AACCN3641F 2008-09 2,024,972 VISHESH STEEL SUPPLIERS AXVPS3398H 2008-09 3,586,202 The assessee was asked by the AO to furnish details of sale and purchases giving name, address and the amount etc. . The assessee filed the details and from the details , the A.O. observed that the details were exactly matching with the information available with the A.O. Notices u/s.133(6) of the Act were issued by the AO to all the above 28 parties. All these notices except one notice were either returned un-served or were not replied to. Only one party namely M/s Ranakpur Sales Corporation, categorically stated that they have not supplied any material to the assessee concern. The assessee was confronted with the same whereby the assessee was asked to produce the parties and also file the documents to substantiate the claim of purchase and stock register, particulars of the transporter, medium of transport, date of transport, transport voucher, octroi post records and payment particulars etc.. The assessee submitted that an affidavit signed befor....
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....y challans, vehicle numbers, weighment slips, details of godowns, details of octroi payment etc. . However, the assessee did not produce the original documents before the A.O. . The assessee also did not file documents for showing movement of goods from supplier to assessee and from assessee to customer as evidence although it stated in its reply that said documents are being filed. The assessee in nutshell submitted that a mere affidavit filed by a person cannot in itself be an evidence. It was submitted that the assessee was victimized for the fault of the other parties. The sales were not disputed by the Revenue as without a purchase how there can be sales. It was submitted that there was no cash deposit in the bank and the payments have been made by the assessee to selling parties by account payee cheques. It was also submitted that all purchase and sale transactions are supported by tax invoice , delivery challans , lorry receipts etc.. The assessee submitted that notice u/s 133(6) of the Act returned back due to change in the address and also there is a five year gap between the date when transactions took place and the time when notice u/s 133(6) of 1961 Act was issued. The ....
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....complete details, documents and evidences. It was observed that the assessee has not submitted confirmations from these parties nor transportation details of the material purported to be purchased from these suppliers were furnished . The assessee also failed to produce suppliers, transporters or brokers before the AO for verification and enquiry. The AO held that since the assessee had made sales which were duly quantitatively reconciled by the assessee with purchases , the AO held that purchases were made by the assessee but the same were made at low price from grey market and to cover deficiencies in documents, invoices were obtained from these 28 suppliers who issued bogus bills to the assessee without supplying any material. Thus, the AO held that the assessee failed to prove the onus cast upon it to prove that purchases to the tune of Rs. 2,39,83,261/- made by the assessee were genuine purchases , which were held by the AO to be bogus purchases as no material was supplied to the assessee by these suppliers which material in-fact was purchased from grey market at lower price which led to higher margin of profits which need to be estimated and added to the income of the assesse....
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.... within four years from the end of assessment year by issue of notice u/s 148 of 1961 Act, dated 25-03-2014. It is submitted that no independent enquiry has been made by the A.O. and the AO merely relied upon the information received from VAT department. Only at the fag end of the period when the assessment was getting time barred, the assessment was framed. No opportunity was granted to the assessee before framing assessment and no cross examination was allowed, was the contention of the assessee before the tribunal. The A.O. did not doubt the investment made in the purchases by the assessee . Our attention was specifically drawn to page 16 of the assessment order passed by the AO. The issue now is with regard to application of GP ratio as to what is the reasonable rate of GP ratio to be applied which is fair, reasonable, rational and honest so far as assessee is concerned. The A.O. has estimated GP ratio of 12.5% of alleged bogus purchases while no credit is given for declared GP ratio. It is submitted that notice u/s 133(6) of 1961 Act were issued by the AO to all 28 parties but the same were un-served except in one case , wherein the said party deposed against the assessee and ....
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....cepted. The ld. Counsel also submitted that written submissions are placed before the tribunal which should be considered by tribunal. The ld. Counsel for assessee also relied upon the decisions as submitted in case laws /paper book placed in file bur specifically our attention was drawn to following case laws:- 1. Signature Hotels (P) Ltd. v. ITO (2011) 338 ITR 0051 (Delhi HC) 2. Eveready Industries India Limited v. JCIT (2000) 243 ITR 0540(Gau. HC) 3. Varshaben Sanatbhai Patel v. ITO, Special Civil Application NO. 12873 , 12875 OF 2014, ORDERS DATED 13/10/2015(2015) 282 CTR 00705(GUJ.HC) 10. We have carefully considered the rival submissions and also perused the material available on record. We have also carefully gone through the case laws relied upon by the both parties as well written submissions filed by the assessee. We have observed that the assessee is engaged in the business as supplier in ferrous and non-ferrous metals. We find that the assessee filed its return of income with Revenue on 25th September, 2009 which was processed by the Revenue u/s 143(1) of the Act on 24th January, 2011. Thus, no scrutiny assessment u/s 143(3) r.w.s. 143(2) of 1961 Act w....
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....nts/affidavits 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 28 such parties wherein the assessee is stated to be beneficiary of bogus purchase bills to the tune of Rs. 2,39,83,261/-. Thus, tangible and material incriminating information was received by the AO which clearly indicted assessee to be beneficiary of bogus purchase entries to the tune of Rs. 2,39,83,261/- from 28 bogus entry providers which formed the reasons to believe by the AO in forming an opinion that income has escaped assessment and the information so received by the AO has live link with reasons to believe that income has escaped assessment, wherein the Revenue recorded reasons to believe based on afore- stated incriminating tangible and material information indicting assessee that income of the assessee has escaped assessment and the assessment need to be re-opened u/s 147 of 1961 Act based on such material and tangible incriminating information indicting assessee. At this stage there has to be a prima-facie belief based on some tangible and material information about escapement of income and the same is not requ....
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....eived entries from 28 bogus accommodation entry providers to the tune of Rs. 2,39,83,261/-. The original return was processed u/s 143(1) of the Act, and thus no opinion was formed and hence there is no change of opinion. Reliance is placed on the decision of Hon'ble Supreme Court in the case of ACIT v. Rajesh Jhaveri, (2007) 291 ITR 500 (SC), wherein Hon'ble Supreme Court vide orders dated 23-05-2007 has held as under : "11. It is to be noted that substantial changes have been made to section 143(1) with effect from June 1, 1999. Up to March 31, 1989, after a return of income was filed the Assessing Officer could make an assessment under section 143(1) without requiring the presence of the assessee or the production by him of any evidence in support of the return. Where the assessee objected to such an assessment or where the officer was of the opinion that the assessment was incorrect or incomplete or the officer did not complete the assessment under section 143(1), but wanted to make an inquiry, a notice under section 143(2) was required to be issued to the assessee requiring him to produce evidence in support of his return. After considering the material and evidence produced....
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.... documents, either in allowing or in disallowing deductions, allowance or relief. 13. One thing further to be noticed is that intimation under section 143(1)(a) is given without prejudice to the provisions of section 143(2). Though technically the intimation issued was deemed to be a demand notice issued under section 156, that did not per se preclude the right of the Assessing Officer to proceed under section 143(2). That right is preserved and is not taken away. Between the period from 1-4-1989 to 31-3-1998, the second proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent to the assessee notwithstanding that no tax or refund was due from him after making such adjustments. With effect from 1-4-1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till 1-6-1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between 1-4-1998 and 31-5-1999, se....
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....d to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K. Jain J) in Apogee International Ltd. v. Union of India [1996] 220 ITR 248 (Delhi). It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgement is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any "assessment" is done by them ? The reply is an emphatic "no". The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible.....
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.... has been made the subject of excessive relief under this Act or under the Indian Income- tax Act, 1922 (11 of 1922); or (d)where excessive loss or depreciation allowance has been computed. Explanation 2.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not neces-sarily amount to disclosure within the meaning of this section." 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax 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 Assessing Officer has cause or justification to know or suppose that 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 Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuil....
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....e ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. 18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. 19. Inevitable conclusion is that High Court has wrongly applied Adani Exports case (supra) which has no application to the case on the facts in view of the conceptual difference between section 143(1) and section 143(3) of the Act. 20. Learned counsel for the respondent submitted that other points are available to be raised. Since no other point was urged before the High Court, we find no reason to examine if any other point was available. The appeal is allowed without any orders as to costs." Thus, we hold that reopening is valid and legal in the instant case as the ratio of decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra) is directly and squarely applicable to the facts of the instant case, ....
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....mation exposing un-truthfulness of information furnished in return of income filed with Revenue. We are of the considered view that on the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to re-opening of assessment, which in the instant case the conditions are duly met for re-opening based on factual matrix of the case. The tangible and material incriminating information so received by the AO from DGIT(Inv.), Mumbai which in turn was based on information received from Maharashtra Sales Tax Authorities incriminating assessee to be beneficiary of Hawala transactions being recipient of bogus accommodation entries from 28 entry operators to the tune of Rs. 2,39,83,261/- which is based on deposition and admission of these entry providers before other Government authority being Maharashtra VAT authorities is so obvious that to say that the AO has not applied his mind to reach satisfaction in forming reasons to believe that income of assessee has escaped assessment to initiate re-opening u/s 147 of 1961 , is too far-fetched and such contention of the assessee is....
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.... or specific material before the AO to come to conclusion that income has escaped assessment , while in the instant case before us there were definite tangible and material incriminating information before the AO based on information received from the DGIT(Inv) , Mumbai which is backed with information from Maharashtra Sales Tax Department that there are 28 entities through whom assessee made bogus purchases of material as these entities were engaged in providing accommodation entries only without supplying any material, which in turn was also supported by deposition's by way of affidavit/statements of these 28 hawala entry providers. While, we are conscious that the reassessment notice should not have been routinely issued, at the same time, the nature of power is wide enough that when there is an escapement of income and the Revenue has information ruling that this escapement is also relatable to suppression of material facts (which could include false claims), the power to reopen concluded assessment can validly be exercised . This contention is supported by decision of Hon'ble Delhi High Court in the case of Principal CIT v. Paramount Communication Private Limited (2017) 79 tax....
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....se bills without delivery of any material. There is a list of 28 such parties wherein the assessee is stated to be beneficiary of bogus purchase bills to the tune of Rs. 2,39,83,261/-. It was observed by AO that these parties just issue bogus bills in lieu for earning commission without actual supply of goods. In an sworn Affidavit Cum Declaration filed before Sales Tax Investigation Branch, Mumbai and in deposition before the Assistant Commissioner of Sales tax, Investigation Branch, Mumbai ,the directors of the said 28 entities have admitted of issuing only invoices for sake of entry without delivery of goods. The Directors of the said 28 entities stated in their sworn affidavit that they had only supplied bills on receipt of cheques and later on cash was withdrawn from banks and after deduction of agreed commission, balance money was returned in cash to the assessee. The details of the aforesaid bogus parties from whom the assessee is stated to have purchased material are as under:- ASHTAVINAYAK SALES AGENCY AFWPN2169J 2008-09 21,194 STELCO STEEL INDUSTRIES AFYPJ0025K 2008-09 371,948 RELIANT METAL CORPORATION ALAPR6303A 2008-09 468,667 PADM....
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....or verification, details and documentary evidence of delivery challans, vehicle numbers, weighment slips, details of godowns, details of octroi payment etc. . However, the assessee did not produce the original documents before the A.O. . The assessee also did not file documents for showing movement of goods from supplier to assessee and from assessee to customer as evidence although it stated in its reply that said documents are being filed. The assesee did not submitted documentary evidence to show that there was movement of goods. The AO observed that the assessee filed delivery challan in one case only and that too there was no mention of transportation details. It was observed that the assessee has not submitted confirmations from these parties nor transportation details of the material purported to be purchased from these suppliers were furnished . Statement of purchase and sales showing name of the supplier and customers, date of purchase and sales , quantity purchased and sold to show one to one co-relation between purchases and sales were submitted by the assessee before the AO. The assessee also submitted VAT audit report. It was submitted that sales are fully vouched and ....
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....d. The assesee did not submitted documentary evidence to show that there was movement of goods. The assessee filed delivery challan in one case only and that too there was no mention of transportation details. The assessee did not file confirmations from these parties nor transportation details of the material purported to be purchased from these suppliers were furnished . The parties were also not produced before the authorities below. The only party who responded to notice u/s 133(6) of 1961 Act issued by the AO namely Ranakpur Sales Corporation deposed against the assessee. The assessee did not ask for cross examination of Ranakpur Sales Corporation who appeared before the AO in response to notice u/s 133(6) of 1961 Act and deposed against the assessee by confirming that bogus bills were issued by them in lieu of commission while no material was supplied against bogus invoices raised by them. The right of cross examination is not absolute. The assessee has to first discharge its primary onus cast under law and if the same stood duly discharged which is not rebutted by authorities , but despite that then also the authorities proceed to put assessee to prejudice solely relying on ....
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....orts, another assessee dealing in same items, but doing export business declared GP rate of 43.8 per cent (even without considering the value of export incentives) in assessment year 1997- 98." 5. Thereafter, the books of account of the assessee were rejected by the Assessing Officer and he resorted to best judgment assessment under section 144 of the Income-tax Act. The Assessing Officer in the assessment order mentioned some comparable cases and was of the view that the case of the assessee is more or less having similar facts as that of M/s. Gem Plaza where the Gross Profit has been taken as 35.48 per cent. The Assessing Officer estimated the Gross Profit of the assessee as 40 per cent. 6. The Assessing Officer further held that the assessee has shown bogus purchases in order to reduce the Gross Profits. 7. In appeal, the Commissioner of Income-tax (Appeals) upheld most of the findings of the Assessing Officer, but reduced the Gross Profit from 40 per cent to 35 per cent. 8. In further appeal, the Tribunal had given further relief to the assessee and reduced the Gross Profit rate to 30 per cent. 9. The counsel for the assessee has submitted before us that the inco....