TaxTMI 
TaxTMI 
2017 (9) TMI 640
X X X X Extracts X X X X
X X X X Extracts X X X X
....8-09. The return of income for this year was filed by the assessee on 10.09.2008 declaring a total income of Rs. 1,78,429/-. The same was merely processed u/s. 143(1) of the Act. Subsequently the A.O. received information from the Sales Tax Department and also from the office of the DGIT(Inv), Mumbai that the assessee is a beneficiary of accommodation bill of purchases from certain bogus hawala dealers. The information was that the concerned dealers had not sold any actual goods but had given accommodation entries of sales made to the assessee. The A.O. noted that the assessee has taken accommodation entries from M/s. Arun Paper & Iron Traders, a hawala dealer. Accordingly the A.O. initiated action section 147 of the Act. 5. The A.O.'s observation regarding the enquiry made in this regard is as under: 4. The assessee was asked to submit the relevant bills, delivery challans, bank payment details, transportation details, stock register entry details and any other supporting documents to substantiate the purchases from M/s. Arun Paper & Iron Traders. Ledger account along with the copies of the purchase bills, delivery challan and payment made to such party reflected in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....purchases made from the said party fixing hearing on 23.02.2014. None attended 011 the said date nor was any reply filed in respect of the bogus purchases. 4.5 The submission made by the assessee has been carefully pursued along with material on records. In the instant case, assessee has not been able to furnish additional relevant documents called for to prove the genuineness of purchases made from the above referred parties. The onus is on the assessee to prove the various entries in his books of accounts to corroborative details and documents. It is also a fact that the bills and delivery challan submitted by the assessee and M/s Arun Paper & Iron Traders were not identical though for same quantity of goods: As both the bills are not identical, it clearly proves that the same are only accommodation bills issued and generated as and when required without any transaction. This goes to prove that the bills are really non-genuine and only accommodation entries as per the information made available by the Sales tax department. In view of the differences pointed above, I am constrained to draw a negative conclusion against the assessee and hold that these parties from whom, p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n this case before issue of the notice u/s 148 are very specific and the source of the information is clearly spelt out therein. 11.3 The Gujarat High Court in the recent case of Peass Industrial Engineers Pvt Ltd vs. DCIT in SLA No. 3249 of 2016 dated 05/08/2016 has approved the action of the AO taken on the basis of the information received from the office of DGIT(Inv). In this case the facts were similar to the case of the present assessee. The High Court after considering the various case laws on the subject has upheld the issuance of notice u/s 148 of the Act with the following decision: "we are of the opinion that when the Authority is armed with the tangible material in the form of specific information received by the Investigation Wing, Ahmedabad is through/y justified in issuing a notice for reassessment. It is revealed from the said additional material available on hand a reasonable belief is formed by the Assessing Authority that income of the petitioner has escaped assessment and therefore, once the reasonable belief is formulated by the Authority on the basis of cogent tangible material, the Authority is not expected to conclude at this stage the issu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. In any case the term' borrowed satisfaction' is used by the Courts to denote proceedings where the reasons to believe are recorded by a different officer than the one who actually issues the notice u/s 148 of the Act. This is not the case in these proceedings. This ground of appeal is, therefore, dismissed. 8. On merits of the case, the ld. CIT(A) held that since the sales are not doubted by the A.O., the assessee must have made his purchases from some other sources in the grey market. Therefore, keeping in mind the Hon'ble Gujarat High Court's decision, the ld. CIT(A) directed that disallowance be restricted to 25% of the bogus purchases. 9. Against the above order, the assessee is in appeal before the ITAT. 10. I have heard the learned counsel and perused the records. As regards the reopening of the assessee, on a careful consideration, I note 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 b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar 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 lega/ 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, Itd. 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 requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what 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 s....