AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 229
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...., State of Maharashtra. The said list revealed the name of a party viz. Atul Traders from which the assessee had procured purchase bill(s) of Rs..8,58,707/- during the year under consideration. Accordingly, the case was reopened under Section 147 of the Act and the total income of the assessee was assessed at Rs..3,35,07,940/- after making addition of Rs..8,58,707/- on account of bogus purchase. During the course of assessment proceedings, notices under Section 133(6) of the Act were issued to M/s. Pawan Enterprises and Alankar Steels which were dispatched to the address. However, the envelope containing the said notice was received back „unserved‟ from the 'postal authorities with the postal remarks "not known". By the said notice under Section 133(6) of the Act, the above parties were required to furnish the following information / details/documents; * Purchase orders, invoices, lorry receipts, check post entries, gate entries, goods receipt notes, issue of material, production record of consumption, delivery challans, Octroi charges in relation to the goods supplied to the assessee from A.Y. 2007-08 to till date. * Copies of Income Tax Returns, ....
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.... 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 inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191ITR 6621, 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 state. This is so because the formation of belief by the Assessing Off....
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....ained bank account of Atul Traders which has been annexed as Annexure 1 to the assessment order approves that M/s. Atul Traders is a Hawala Dealer because he has made payments to the parties who has also been identified as Hawala dealers by the state VAT department and further there are regular huge cash withdrawals from the account of M/s. Atul Traders which gives credibility to the findings of the AO as recorded in the assessment order to make the addition. The AO has rightly relied on the case laws of Kachwala Gems/Precision Finance Private Limited and Saravana Constructions Private Limited does not give credibility to the genuineness of the purchases only because the payments have been made through the banking channel. Similarly in the case of Rajeev G. Kalathil vs. DCIT relied upon by the appellant it has been held that transportation of goods to the site is one of the deciding factor to be considered for resolving the issue. But in the present case the AO has brought on record that no information regarding transportation of goods to the business premises of the appellant have been furnished during the course of assessment proceedings and for this the detailed discussion has b....
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....S1099L) on various dates which is used in the manufacture of components such as plungers, stoppers, stems and gear blanks, used for finished goods. * The assessee says that the above mentioned purchases from M/s. Atul Traders were used in manufacturing and sales thereof which were made in the regular course of business and the same were supported by copies of the bills/delivery challans. * The sales tax assessment has been made by wrongly treating the said dealer and assessee's purchases as not genuine and disallowed the setoff claimed for the said purchases. The assessee has paid the MVAT due as per the order, as the Sales tax law clearly spells the liability when the selling dealer has not paid their VAT liability. However the fact that MVAT has been paid on such purchases does not in any manner indicate that the purchases are bogus as alleged. * The assessment under the MVAT Act, 2002 has been made as the said dealers failed to make MVAT payments which is the basis for allowing set off under the MVAT Act, 2002. It is the set off that has been disallowed under the MVAT Act and not the purchases which are genuine. Addition has been made merely on the....
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....gible considering the sales turnover of Rs..18,86,79,030/-. * The assessee submitted the photocopies of the following during the assessment proceedings: 1) Copy of Purchase orders 2) Copy of Invoice copies and delivery challans 3) GRR report issued by our Stores and Inspection dept. 4) Bin card maintained by the stores for quantitative record. 5) Bank statement highlighting the payments confirming the payments made by Account Payee cheque. 6) Bank Certificate confirming the payments made by Account Payee Cheque and, 7) Ledger copy of Atul Traders duly confirmed and signed by him. 6. On the other hand, the learned D.R. contended that the assessee could not prove the genuineness of purchases either before the AO or before the CIT(A). Accordingly both the lower authorities were justified in adding the entire amount of purchases in assessee‟s income. 7. We have heard the rival contentions and carefully gone through the orders of the authorities below. We have also deliberated on the judicial pronouncements relied upon by the lower authorities in the respective orders as well as cited by the learned A.R.....