2017 (11) TMI 318

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....d in confirming addition of Rs. 15,05,155/- out of Rs. 28,94,528/- on estimated profit element on treating the genuine purchases of Rs. 2,31,56,224/- as non-genuine purchases as the said purchases made considered as bogus from the impugned 10 parties of which information has been received from Sales Tax Department and the said information has been forwarded by the DGIT (Inv.),Wing, Mumbai to the Assessing Officer. Provisions of the Act ought to have been properly construed and regard being had to facts of the case no such additions to be made. Reasons assigned by him are wrong and insufficient to justify the additions. 2. The order made under section u/s 143(3) r.w.s. 147 of the Act by the learned Assessing Officer is bad-....

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....e above parties who claimed to have supplied goods to the assessee company. All the notices have been returned un-served by the postal authorities. The assessee was asked to produce the parties for verification for which it has expressed its inability to produce them before the Assessing Officer. Therefore, the Assessing Officer concluded that the assessee has obtained bogus purchase bills to reduce profits by inflating purchases. By following the decision of Hon'ble High Court of Gujrat in the case of Simit P Seth, 2013 (356 ITR 451), the Assessing Officer has disallowed 12.5% of bogus purchase of Rs. 2,31,56,224/-which works out to Rs. 28,94,5287- as unexplained income. 4. Against the above order, the assessee appealed before the l....

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....sion. 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 assessee wherein the assessee made alleged bogus purchases through these bogus bills issued by hawala entry providers in favour of the assessee. These dealers were surveyed by the Sales Tax Investigation Department whereby the directors of these dealers have admitted in a deposition vide statements/affidavit made before the Sales Tax Depart....

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....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 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 ....

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....ce relating to transportation of the goods was also not on record. In this factual scenario it is amply clear that assessee has obtained bogus purchase bills. Mere preparation of documents for purchases cannot controvert overwhelming evidence that the provider of these bills are bogus and non-existent. 11. The Sales Tax Department in its enquiry have found that 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 t....

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....d 20.06.2016, wherein hundred percent of the bogus purchases was held to be added in the hands of the assessee and tribunals restriction of the addition to 25% of the bogus purchases was set aside. It was expounded that when purchase bills have been found to be bogus 100% disallowance was required. The special leave petition against this order along with others has been dismissed by the Hon'ble Apex Court vide order dated 16.1.2017. 14. I further note that Hon'ble Rajasthan High Court in the case of CIT Jaipur v. M/s. Shruti Gems in ITA No.658/2009 vide order dated 23.05.2017 has inter alia referred to the decision of Hon'ble Rajasthan High Court in ITA No.234/2008 in case of CIT Jaipur v. Aditya Gems for the following decision:- ....