TaxTMI 
TaxTMI 
2018 (10) TMI 258
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....sessee for re-opening the case under section 147 were ignored. 3. On the other hand, the learned DR Shri Satishchandra Rajore defended the reopening of assessment by submitting that the assessee made purchases from Hawala parties and the notices issued under section 133(6) of the Act were never served upon them as the addresses were fictitious and the parties never appeared before the learned Assessing Officer. At this stage, the Bench asked the assessee whether the concerned parties can be produced before the learned Assessing Officer, the learned counsel for the assessee contended that he is unable to produce the parties. At this stage, the learned DR also contended that no corroborative evidence relating to transaction of goods and genuineness of purchases were ever filed by the assessee. 4. We have considered the rival submissions and perused the material available on record. So far as, reopening of assessment u/s 147/148 of the Act on the plea that the Ld. Assessing Officer ignored the fact that there was no reason to believe that income has escaped assessment as there was no tangible material with the Assessing Officer and independent application of mind is concerned, we fi....
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....ore 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 necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed ; ....
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....m 01/04/1989, the Assessing Officer has wide powers to initiate proceedings of reopening. The Hon'ble Kerala High Court in CIT vs Abdul Khadar Ahmad (2006) 156 taxman 206 (Kerala) even went to the extent so long as the AO has independently applied his mind to all the relevant aspect and has arrived to a belief the reopening cannot be said to be invalid. 4.3. We are aware that "mere change of opinion" cannot form the basis of reopening when the necessary facts were fully and truly disclosed by the assessee in that situation, the ITO is not entitled to reopen the assessment merely on the basis of change of opinion. However, powers under amended provision are wide enough where there is a reasonable belief with the Assessing Officer, that income has escaped assessment, because the powers with effect from 01/04/1989 are contextually different and the cumulative conditions spelt out in clauses (a) and (b) of section 147, prior to its amendment are not present in the amended provision. The only condition for action is that the Assessing Officer "should have reason to believe" that income chargeable to tax has escaped assessment. Such belief can be reached in any manner and is not qualifi....
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....he initiation stage formation of reasonable belief is needed and not a conclusive finding of facts. Identical ratio was laid down in Brijmohan Agrawal vs ACIT (2004) 268 ITR 400, 405 (All.) and Ratnachudamani S. Utnal vs ITO (2004) 269 ITR 272, 277 (Karnataka) applying Sowdagar Ahmed Khan vs ITO (1968) 70 ITR 79(SC). 4.5 So far as, the meaning of expression, "reason to believe" is concerned, it refers to belief which prompts the Assessing Officer to apply section 147 to a particular case. It depend upon the facts of each case. The belief must be of an honest and reasonable person based on reasonable grounds. The Assessing Officer is required to act, not on mere suspicion, but on direct or circumstantial evidence. Our view find support from the ratio laid down in following cases:- i. Epica Laboratories Ltd. vs DCIT 251 ITR 420, 425-426 (Bom.), ii. Vishnu Borewell vs ITO (2002) 257 ITR 512 (Orissa), iii. Central India Electric Supply Company Ltd. vs ITO (2011) 333 ITR 237 (Del.), iv. V.J. Services Company Middle East ltd. vs DCIT (2011) 339 ITR 169 (Uttrakhand), v. CIT vs Abhyudaya Builders (P. ) Ltd. (2012) 340 ITR 310 (All.), vi. CIT vs Dr. Devendra Gupta (2011) 336....
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....annexures and consequently Explanation 2(c)(iv) of section 147 would apply. The reassessment proceedings after four years were valid. 4.9. In the case of Deputy CIT v. Gopal Ramnarayan Kasat, (2010) 328 ITR 556 (Bom), it was not the case of the assessee that the notice issued was after the expiry of the time limit provided in section 153(2). The reassessment proceedings were held to be valid. In Indian Hume Pipe Co. Ltd. v. Asst. CIT, (2012) 348 ITR 439 (Bom), both in the computation of taxable long-term capital gains in the original return of income and in the computation that was submitted in response to the query of the Assessing Officer there was a complete silence in regard to the dates on which the amounts were invested, as such there being a failure to disclose fully and truly material facts necessary for assessment. The reassessment proceedings were held to be valid. This view was also confirmed in following cases:- a. Dalmia P. Ltd. v. CIT, (2012) 348 ITR 469 (Del); b. CIT v. K. Mohan & Co. (Exports), (2012) 349 ITR 653 (Bom); c. Remfry & Sagar v. CIT, (2013) 351 ITR 75 (Del); d. OPG Metals & Finsec Ltd. v. CIT, (2013) 358 ITR 144 (Del). 4.10. In the case of Venu....
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....nancing of vehicles and consumer durables on 'hire-purchase basis' as well as on 'lease/rent basis', a reassessment notice issued after four years has been held not to suffer from any illegality as the same was based on the bona fide action of the competent authority to determine whether or not the vehicles in respect of which the petitioner had been claiming depreciation, were actually owned by it. 4.12. In Jawand Sons v. CIT(A), (2010) 326 ITR 39 (P & H), in the initial assessment, the benefit of deduction of the duty drawback and DEPB under section 80-IB was wrongly granted to the assessee, for which it was not entitled. Therefore, reassessment proceedings to withdraw the deduction were held to be valid. Likewise, in CIT v. Hindustan Tools & Forgings P. Ltd., (2008) 306 ITR 209 (P & H), where, the assessee in the regular assessment had been allowed deduction more than actually allowable under section 80HHC. Therefore, the action initiated by the AO for reassessment under section 147(b) could not be held to be invalid. 4.13. In the case of Markanda Vanaspati Mills Ltd. v. CIT, (2006) 280 ITR 503 (P & H), wherein, the information furnished by the assessee gave n....
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....uthority during the course of enquiry. The notice was held to be valid by the Hon'ble High Court. In the case of Vippy Processors Pvt. Ltd. v. CIT, (2001) 249 ITR 7, 8 (MP), where the need to issue notice arose due to noticing of vast difference in value of properties disclosed by the assessee and that of the report of the Valuation Officer and the reasons that led to the issue of the notice were duly recorded and the same were also adequate and based on relevant facts and material, initiation was upheld. In Triple A Trading & Investment Pvt. Ltd. v. Asst. CIT, (2001) 249 ITR 109, 110-11 (MP), where the notice was issued after recording reasons in that regard, initiation was upheld. 4.16. Likewise, Hon'ble Gujarat High Court in Garden Finance Ltd. v. Add/. CIT, (2002) 257 ITR 481, 489, 494-95, special leave petition dismissed by the Supreme Court: (2002) 255 ITR (St.) 7-8 (SC), where the assessee was holding shares in an amalgamating company and he was allotted shares in the amalgamated company and such shares were sold by him and he has disclosed the market price of such shares as on the date of amalgamation as the cost of acquisition of such shares and has not disclosed the cost....
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....o in whose hands the amount in question had to be assessed. The ITO was justified in taking proceedings under section 147 for assessing the amounts in the hands of the petitioners according to the claim made by the petitioners. Likewise, Hon'ble Kerala High Court in CIT v. Dr. Sadique Ummer, (2010) 322 ITR 602 (Ker), where, the Assessing Officer collected further information to complete the reassessments which was also permissible under the Act. The finding of the first appellate authority as well as the Tribunal, that the Assessing Officer had no material to believe that the income had escaped assessment was wrong and contrary to facts. The assessee had not maintained any books of account. Therefore, the reopening of assessments was held to be valid and within time. In the case of CIT v. Uttam Chand Nahar, (2007) 295 ITR 403 (Raj), the notice requiring the assessee to file the return within 30 days was in accordance with section 148 as it must be deemed to be in force with effect from 1-4-1989, and in force as on the date notice was issued. There was no violation of section 148 in respect of the specified period within which the return is to be submitted. The reassessment proceedi....
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....e validly reopened under Explanation 2(c) to section 147. Likewise, in CIT v. N. Jayaprakash, (2006) 285 ITR 369 (Ker), where, the assessee could not, after having persuaded the assessing authority to withdraw the notice dated 1-10-1993, pointing out that it was not in conformity with law, be allowed to contend that the notice was valid due to the omission of the time-limit by the Finance (No.2) Act, 1996, with effect from 1-4-1989. In the absence of specific provision in the Finance (No. 2) Act, 1996, invalidating proceedings initiated by the Income-tax Officer, the action taken by him applying the then existing law could not be said to be invalid. 4.21. Likewise, in CIT v. S.R. Talwar, (2008) 305 ITR 286 (All), the factum of taking advances or loan from T and K, in which the assessee was one of the directors had not been disclosed nor a copy of the ledger account of the assessee maintained by the company filed. In view of the absence of these details, the Assessing Officer could not examine the taxability of advances or loan raised by the assessee. There was failure to disclose material facts necessary for assessment. The reassessment proceedings were held to be valid. In anoth....
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....e balance-sheet of the assessee-firm for the previous year relevant to the assessment year 1989-90. These materials had a direct link and nexus for formation of a belief by the Assessing Officer that income of the assessee-firm had escaped assessment because of failure of the assessee to disclose fully and truly all material facts necessary for the assessment. In the case of CIT v. Best Wood Industries & Saw Mills, (2011) 331 ITR 63 (Ker), the assessee challenged the validity of the reassessment on the ground that the AO had exceeded his jurisdiction under section 147 and both the first appellate authority as well as the Tribunal accepted the contention of the assessee holding that so far as the reassessments related to assessment of unexplained trade credits, they were invalid. On appeal, it has been held that the reassessments were to be valid. In Honda Siel Power Products Ltd. v. Deputy CIT, (2012) 340 ITR 53 (Del), there being omission and failure on the part of the assessee to disclose fully and truly material facts Thus reassessment proceedings were held to be valid. 4.25. In Atma Ram Properties Private Ltd. v. Deputy CIT, (2012) 343 ITR 141 (Del), as the books of account an....
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....1 (Guj)]; CIT v. Dhanalekshmi Bank Ltd. [(2013) 357 ITR 448 (Ker)]; xvi. Sitara Diamond Pvt. Ltd. v. ITO [(2013) 358 ITR 424 (Bom)]; xvii. Rayala Corporation P. Ltd. v. Asst. CIT [(2014) 363 ITR 630 (Mad)]. 4.27. So far as, the decision in the case of CIT vs Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) is concerned, the Hon'ble Apex Court, while coming to a particular conclusion, only in a situation, when not a single piece of paper or document was recovered, therefore, the Hon'ble Court held that since there was no tangible material found and the addition was merely on the basis of statement only then reopening of assessment u/s 147 of the Act was not permissible. Likewise, in the case of CIT vs S. Khader Khan Son (2012) 254 CTR 228 (SC), affirming the decision of Madras High Court in (2008) 300 ITR 157 (Mad.), the whole addition was made solely on the basis of statement u/s 133A and no other material was found, in that situation, it was held that the such statement has no evidentiary value. 4.28. In the case of Aradhna Estate Pvt. Ltd. vs DCIT (2018) 91 taxmann.com 119 (Gujarat), the Hon'ble High Court observed/held as under:- "In reasons recorded by the Assessing....
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.... four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of the failure on part of the assessee to make return under section 139 or in response to a notice issued under sub-section (1) of section 142 or 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. In this context, it is well settled that the requirement of full and true disclosure on part of the assessee is not confined to filing of return alone but would continue all throughout during the assessment proceedings also. In this context, the materials on record would suggest that the Assessing Officer had received fresh information after the assessment was over prima facie suggesting that sizeable amount of income chargeable to tax in case of the assessee had escaped assessment and that such escapement was on account of failure on part of the assessee to disclose truly and fully all material facts. The Assessing Officer formed such a belief on the basis of such materials placed before him and upon perusal of such material. This is not a case where the Assessing Officer was reexamining the materials an....
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....d detailed reasons pointing out the material available which had a live link with formation of belief that the income chargeable to tax had escaped assessment. At this stage, as is often repeated, one would not go into sufficiency of such reasons. [Para 13] Section 68 as is well known, provides that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. That the share application money received by the assessee from above-noted companies was only by nature of accommodation entries and in reality, it was the funds of the assessee which was being re-routed. Undoubtedly. Section 68 would have applicability. Proviso added by the Finance Act, 2012 with effect from 1-4-2013, does not change this position. [Para 14] As per this proviso, where the assessee is a company and the sum so credited consists of share application money, share capital, share premium or any such amount by ....
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....eferred by both sides- I. Allied Strips Ltd. v. Asstt. CIT [2016] 384 ITR 424/69 taxmann.com 444 (Delhi) (para 5), II. Harikrishan Sunderlal Virmani v. Dy. CIT [2017] 394 ITR 146 (Guj.) (para 5), III. Raymond Woolen Mills Ltd.v. ITO [1999] 236 ITR 34 (SC) (para 6), IV. Yogendrakumar Gupta v. ITO [2014] 366 ITR 186/46 taxmann.com 56 (Guj.) (para 6), V. Aaspas Multimedia Ltd. v. Dy. CIT [2017] 83 taxmann.com 82/249 Taxman 568 (Guj.) (para 6), VI. Jayant Security & Finance Ltd. v. Asstt. CIT [Sp. Civil Application No. 18921 of 2017, dated 12-2-2018] (para 12), VII. Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC) (para 13) and VIII. Pr. CIT v. Gokul Ceramics [2016] 241 Taxman 1/71 taxmann.com 341 (Guj.) (para 16). 4.30. The sum and substance of the aforesaid decision was that since the Assessing Officer was having sufficient material at his command to form a reasonable belief that income chargeable to tax had escaped assessment, merely because this transactions were scrutinize by the Assessing Officer during the original assessment, would not preclude him from reopening assessment. Thus, the assessment notice was held to be j....
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....long with the reasons of reopening. Thereafter, notice under section 142(1) and 143(2) were issued and served upon the assessee. Another notice under section 142(1) dated 24.11.2014, was served upon the assessee calling for specific details. As per the Revenue, assessee could not submit the documentary evidence to prove the genuineness of the transaction/purchases of the said parties. Even no confirmation from the parties was submitted. Even the addresses of the parties were not furnished by the assessee. Thus, we found that there was fresh information with the Assessing Officer, which in our view, entitle the Assessing Officer to have prima facie reason to believe that income chargeable to tax had escaped assessment. The ratio laid down by Hon'ble Apex Court in Claggett Brachi Company Ltd. vs CIT 177 ITR 409 (Supreme Court), Hon'ble Bombay High Court in Anusandhan Investment Ltd. vs DCIT 287 ITR 482 and Piaggio Vhicles Pvt. Ltd. vs DCIT 290 ITR 377 (Bom.) held that in a case of reopening after four years subsequent to scrutiny assessment, contradiction was recovered by between tax audit report and return of income, it was a case of omissions and/or failure on the part of ....
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....the Commissioner of Income-tax (Appeals) confirming 25 per cent. of the amounts claimed is fair and reasonable and no interference is called for. The Commis sioner of Income-tax (Appeals) has gone through the purchase prices of the raw material prevalent at the time and rightly came to the con clusion that the disallowance to the extent of 25 per cent. was called for. It is established that the parties were not traceable ; they opened the bank accounts in which the cheques were credited but soon thereafter the amounts were withdrawn by bearer cheques. That fairly leads to the conclusion that these parties were perhaps creation of the assessee itself for the purpose of banking purchases into books of account because the purchases with bills were not feasible. Thus, the abovenoted parties become conduit pipes between the assesseefirm and the sellers of the raw materials. Under the circumstances, it was not impossible for the assessee to inflate the prices of raw materials. Accordingly, an addition at the rate of 25 per cent. for extra price paid by the assessee than over and above the prevalent price is fair and reasonable and we accordingly confirm the finding of the Commis sioner....
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....een the assessee and the actual seller. In such a situation, the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal) as well as by the Tribunal was affirmed. Hon'ble Apex Court in Kachwala Gems vs JCIT (2007) 158 taxman 71 observed that an element of guesswork is inevitable in cases, where estimation of income is warranted. 7.2. The Hon'ble Gujarat High Court in CIT vs Bholanath Poly Fab. Pvt. Ltd. (2013) 355 ITR 290 (Guj.) held/observed as under:- "5. Having come to such a conclusion, however, the Tribunal was of the opinion that the purchases may have been made from bogus parties, nevertheless, the purchases themselves were not bogus. The Tribunal adverted to the facts and data on record and came to the conclusion that the entire quantity of opening stock, purchases and the quantity manufactured during the year under consideration were sold by the assessee. Therefore, the purchases of the entire 1,02,514 metres of cloth were sold during the year under consideration. The Tribunal, therefore, accepted the assessee's contention that the finished goods were purchased by the assessee, may be not from the parties shown in the accounts, but from other sources.....
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.... in a best judgment assessment there is always a certain degree of guess work. No doubt, the authorities should try to make an honest and fair estimate of the income even in a best judgment assessment and should not act totally arbitrarily but there is necessarily some amount of guess work involved in a best judgment assessment. 8. Examining the facts of the present case in the light of the aforesaid decisions, the decision of the Tribunal, being based on an estimate, does not give rise to any question of law so as to warrant interference. 9. In so far as the proposed questions (C), (D) and (E) are concerned, the same are similar to the proposed question (A) wherein the Tribunal has restricted the addition to 25 per cent. on similar facts. In the circumstances, for the reasons stated hereinabove, the said grounds of appeal do not give rise to any question of law. 10. As regards the proposed question (B) which pertains to the deletion of addition of Rs. 7,88,590 made on account of inflation of expenses paid to Metal and Machine Trading Co. (MMTC), the Assessing Officer has found that MMTC was a partnership firm of Shri Nitin Gajjar along with his father and brother operating f....
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....into consideration. In the absence of any material to the contrary being pointed out on behalf of the Revenue, the impugned order being based on concurrent findings of fact recorded by the Tribunal upon appreciation of the evidence on record, does not give rise to any question of law in so far as the present ground of appeal is concerned. 14. In relation to the proposed question (F) which relates to the deletion of addition of Rs. 44,54,426 made on account of purchase of crane and allowing depreciation on the same, the Assessing Officer observed that the assessee had purchased a crawler crane for an amount of Rs. 24,61,000 excluding the cost of spare parts of Rs. 14,98,490. The Assessing Officer after examining the evidence on record and considering the explanation given by the assessee, made addition of Rs. 44,54,426, Rs. 39,59,490 being the purchase price of the crane along with its spare parts and Rs. 4,94,936 being depreciation claimed by the assessee. The Commissioner (Appeals), upon appreciation of evidence on record, was of the view that the Assessing Officer has not appreciated the facts of the case properly and had made disallowance which was not permitted by the Incom....
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....isallowed in respect thereof. The Tribunal was, therefore, justified in deleting the addition as well as disallowance of depreciation. 17. In the light of the aforesaid discussion, it is not possible to state that there is any legal infirmity in the impugned order made by the Tribunal so as to warrant interference. In the absence of any question of law, much less, a substantial question of law, the appeal is dismissed." 7.4. The Hon'ble jurisdictional High Court in the case of CIT vs Ashish International Ltd. (ITA No.4299/2009) order dated 22/02/2011, observed/held as under:- "The question raised in this appeal is, whether the Tribunal was justified in deleting the addition on account of bogus purchases allegedly made by the assessee from M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. According to the revenue, the Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. in his statement had stated that there were no sales / purchases but the transactions were only accommodation bills not involving any transactions. The Tribunal has recorded a finding of fact that the assessee had disputed the correctness of the above statement and admittedly the assessee was not ....
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....gus. It may be stated that the assessee was given credit facilities for a short duration and the payments were given by cheques. When that is so, it cannot be said that the entries for the purchases of the goods made in the books of account were bogus entries. We, therefore, do not find that the conclusion arrived at by the Tribunal is against the weight of evidence. In that view of the matter, we answer the question in the affirmative, that is, in favour of the assessee and against the Revenue. Accordingly, the reference stands disposed of with no order as to costs." 7.6. The Mumbai Bench of the Tribunal in the case of DCIT vs Rajeev G. Kalathil (2015) 67 SOT 52 (Mum. Trib.)(URO), identically, held as under:- "2.2.Aggrieved by the order of the AO, assessee preferred an appeal before the First Appellate Authority(FAA).Before him it was argued that assessee had filed copies of bills of purchase from DKE and NBE, that both the suppliers were registered dealers and were carrying proper VAT and registration No.s, that ledger accounts of the parties in assessee's books showed bills accounted for, that payment was made by cheques, that a certificate from the banker giving detail....
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....he suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. As far as the case of Western Extrusion Industries. (supra)is concerned, we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But, in the case before us, there is nothing, in the order of the AO, about the cash traial. Secondly, proof of movement of goods is not in doubt. Thererfore, considering the peculiar facts and circumstances of the case under appeal, we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on file to endorse the view taken by the AO. So, confirming the order of the FAA, we decide ground no.1 against the AO." 7.7. The ratio laid down in the case of M/s Neeta Textiles vs Income Tax Officer 6138/Mum/2013, order dated 27/05/2013, Shri Jigar V. Shah vs Income Tax Office....
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.... the assessee in relation to addition of Rs. 11.99 crores made in respect of bogus purchases. We have carefully considered the elaborate arguments made by the learned representatives of both sides. We have also carefully gone through the orders of the learned Departmental authorities as well as all other documents submitted in the various paper books submitted by the learned representatives of both sides, to which our attention was drawn during the course of hearing. We have also carefully gone through all the judgments cited by the learned representatives. 50. One of the main arguments advanced on behalf of the assessee was that the purchases made from five suppliers in question were duly recorded in the regular books of accounts in the normal course. The IT return for asst. yr. 1998-99 had been submitted on 30th Nov., 1998 i.e. before the date of search on 24th Feb., 1999 on the basis of such regular books of accounts which include all the transactions of purchases made from them. Likewise the transactions of purchases made from these parties were recorded in the regular books of accounts till the date of search in the normal manner. Therefore, the question relating to addition....
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....d is the principle that a decision to be law under Article 141 must not be a mere conclusion by which the case is disposed of. Because, a conclusion, a mere conclusion, may be on facts, it may not and does not necessarily involve consideration of law. It is well settled that An. 141 will not be attracted if law is not declared or stated vocally to support the conclusion reached for deciding the lis. A mute declaration of the mere conclusion is not contemplated under Article 141. (vide Manager, Panjarapole, Deodar v. C.M. Nat (1997) 2 GLR 1321, 1325)." 53. Let us now refer to the decision of the Hon'ble Gujarat High Court in the case of N.R. Paper & Boards Ltd. (supra) keeping in view the principles laid down in the aforesaid judgments of the Hon'ble apex Court and the Hon'ble Gujarat High Court. The Hon'ble Gujarat High Court in the case of N.R. Paper Boards Ltd. (supra) was dealing with the reference application under Section 256(2) submitted by the CIT. It has been observed in the said judgment at pp. 529 and 530 as under: "Earlier the assessee invoked the writ jurisdiction of this Court seeking to challenge the notices issued to them under Section 143(2) of....
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....ry under Section 143(3) for regular assessment which was pending when the block assessment was made, the AO who comes across evidence and material which was not found or made available in the process of block assessment, cannot ignore the same and he will be duty-bound to make the regular assessment taking into account such evidence and material gathered in the enquiry under Section 143(3) to ensure that proper assessment of total income is made and tax is determined on the basis of such assessment." 54. The Hon'ble High Court in this judgment while declining to call for reference of various questions proposed in the said reference application, relied upon its judgment in the case of N.R. Paper & Boards Ltd. (supra). It may also be relevant here to reproduce the relevant extracts from the said judgment appearing at pp. 741 and 742 : "The definition of "undisclosed income" in Section 158B(b) includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transaction, where such asset, entry or other document or transaction representing wholly or partly income or property which has not ....
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....ered in the block period, were required to be stayed or dropped or substituted by the proceedings of this chapter. Under Sub-section (3) of Section 158BA, where the date of filing the return of income under Section 139(1) for any previous year has not expired, and the income of that previous year or the transactions relating to such income are duly recorded, then such income is not required to be included in the block period. This obviously means that the regular assessment of that previous year which has remained pending, will proceed notwithstanding that it was falling in the block period. The same would be the case where the block period includes only a part of the previous year of which the return is filed for regular assessment, and the regular assessment can proceed notwithstanding that the undisclosed income for a part of that previous year was within the block period." 55. It is apparent from a plain reading of the aforesaid decisions of the Hon'ble Gujarat High Court in the case of N.R. Paper & Boards Ltd. (supra) that the issue decided is as to whether after making of block assessment, regular assessment is barred or prohibited by law. The Hon'ble High Court h....
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....espect of purchases made from the alleged bogus suppliers has originated on the basis of material found and seized during the search. Certain blank bill books, signed cheque books and other documents of various parties including these five supplier concerns were found and seized from the office premises of the assessee during the search. The post-search investigation clearly indicates that these five parties did not in fact supply any material to the assessee but they were only issuing fictitious bills. They may be called "billing agents" or "name lenders". Whether they acted as billing agents/name lenders for and on behalf of the assessee as well as for and on behalf of various other parties, is a different question but ample material has been brought on record to adequately prove that these five parties from whom the assessee claimed to have made purchases of wash cotton seed oil were not the real suppliers of such material but they were only issuing fictitious bills. The falsity of the claim for purchases shown as purchases made from these billing agents/name lenders resulting in addition on account of either bogus purchases or inflated purchases will surely come within the ambi....
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....Such information as would be available with the AO can be made the base for computation of undisclosed income of the block period. The term, the AO used in Section 158BB(1), is distinct from authorised officers who conducted the search. It, therefore, clearly indicates that the post-search investigation made by the Dy. DIT/Addl. DIT and by the AO in furtherance to the evidence found during the search can be validly taken into consideration, if such material available with the AO exposes the falsity of the entries recorded in the regular books of accounts in normal course. 58. It may also be relevant here to add that the regular assessments for asst. yrs. 1998-99 and 1999-2000 have already been completed by the AO vide orders dt. 28th March, 2001 and 27th March, 2002. The AO has not made any addition in respect of such bogus bills obtained by the assessee from these billing agents/name lenders. The addition of only Rs. 1,18,13,717 has been made in respect of alleged unaccounted payments to Krishna Industries and Vimal Industries, which perhaps represent payments deposited in the bank accounts of these two billing agents name lenders after the date of search. It is not known what....
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....authorised officer that the documents seized by him do not reveal any undisclosed income, but the income or transactions referred to in the documents had been duly shown by him in his books of account or if the assessee gives any information to the effect that the first impression of the authorised officer with regard to the nature of the documents was not correct, we are sure that such a notice would help the assessee himself. If the assessee is called upon to give some information or to explain certain documents or writings seized during the process of search, in our opinion, no harm can be caused to the assessee and as stated hereinabove, such particulars can be helpful not only to the Department but to the assessee also. We, therefore, do not agree with the submissions made by the learned advocate, Shri Puj, that such a notice can be issued only before intimation of proceedings under Section 132of the Act. Moreover, even under the provisions of Section 133 of the Act, the AO or the officers referred to in the said section are having power to call for information. So issuance of such a notice during or after the search cannot be said to be bad in law." 60. Reliance placed by t....
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....rned counsel is that the burden of establishing that these five suppliers were bogus suppliers or that they were benamis of the assessee, lies on the Department. Such serious nature of allegation demands a credible proof of a high order to support such allegations. The burden of establishing mala fides therefore clearly lies on the Revenue. Equally well settled principle of law emerging from the various decisions cited by the learned representatives of both sides, is that the onus lies on the assessee to prove the genuineness of any expenditure, which is claimed as deduction in computing its taxable income. Therefore, the onus in the instant case, squarely lies on the assessee to prove the genuineness of purchases of cotton seed oil said to have been purchased from these five parties, which have been held to be bogus parties by the Departmental authorities. It is incumbent on the assessee to prove that the suppliers were genuine suppliers of cotton seed oil and they really supplied the raw material to the assessee. Such a burden had to be discharged by the assessee with very strong, cogent and clinching evidence in view of blatant denial by all the five parties coupled with the var....
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....m. The corresponding debits in the bank account in the normal course should have been given by way of cheques to those mills from whom M/s Adinath Corporation purchased the wash cotton seed oil and supplied the same to the assessee. However, we do not find any mention in this bank account showing any cheque issued to any party. All the withdrawals are by way of self cash cheques. It is true that the bank accounts of other parties were not introduced by Shri Nileshbhai K. Patel as in the case of Adinath Corporation but there is some interconnection of this concern with the others. M/s Tirupati Corporation is owned by the same person, namely, Shri J.J. Doshi. For example, the following three cheques have been debited in the account of M/s Adinath Corporation as per the copy placed at p. 37 of the paper book dt. 21st Oct., 2002 submitted by the Department: Date Cheque No. Amount 15-4-1998 942352 2,59,429 15-4-1998 942358 2,82,945 17-4-1998 942369 3,97,792 These amounts have been credited in the bank account of M/s Tirupati Corporation with Visnagar Nagrik Sahakari Bank Ltd. A copy of account of Tirupati Corporation in the books of the assessee has also ....
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....and the Department has not been able to ascertain as to which other parties have made payments by cheques to M/s Vimal Industries. A perusal of bank account of M/s Vimal Industries submitted at pp. 69 to 78 indicates that substantial transactions have also continued in this account even after December, 1998, when the purchases by the assessee from this party had discontinued. After December, 1998, most of the withdrawals in the bank account of M/s Vimal Industries are by way of cheques against which the expression "self" has not been mentioned in the copies of bank statements. This account has been finally closed on 12th May, 1999. No inquiry has also been made by the Department about destination of withdrawals made by cheques from this bank account. But the practice of withdrawing substantial amounts till the purchases by the assessee from M/s Vimal Industries continued to apply in the case of M/s Vimal Industries, though various payments even prior to December, 1998 have been made by cheques other than the cheques marked as "self" cheques. (B)(iv) Krishna Industries : They opened bank account No. 4203 with Visnagar Nagrik Sahakari Bank Ltd. Usmanpura Branch on 30th June, 1998....
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....e debits are mostly supported by narration such as GJ-3T-2492 on 9th July, 1998 for Rs. 35,12,040. A perusal of the bank account shows that inspite of transactions running into more than Rs. 12 crores in this bank account, the balance at the end of most of the days throughout the period was ranging between Rs. 1,000 to Rs. 6,000. (B)(vi) These are some of the unusual features pertaining to the bank accounts of these bogus suppliers. If they would have been genuine suppliers capable of supplying wash cotton seed oil to the tune of several lacs/crores in a short period like in the present case, they would surely invest adequate capital of their own, which in the present case, is not evident from their bank accounts which shows that all these accounts were opened with initial amount of Rs. 1000 or Rs. 1100 and balance in all these accounts for most of the times ranged between small figures of Rs. 1000 to Rs. 10,000. Had they really supplied the goods on credit of such large magnitude to the assessee, as claimed by the assessee, they will have some evidence of substantial contribution of capital and/or substantial credit purchases made from various mills/big traders. The debits in ....
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....he paper book submitted by the Department on 21st Oct., 2002. The assessee in this letter has submitted in para 8.1 that copies of accounts of all these five parties from the books of accounts of the assessee are furnished. In para 9 it has, inter alia, been stated as under: "It may please further be noted that certain affidavits are there and certain other evidences were also found during search but since the transactions recorded in the books of account in the normal course and therefore it does not fall within the purview of block assessment." It is apparent from the aforesaid letter that even after receiving the copies of affidavits/statements and other documents on the basis of which the AO suspected the genuineness of these purchases, the assessee did not ask the ITO to produce these suppliers and brokers for their cross-examination nor any material in rebuttal of such clinching and categorical denial by the suppliers and brokers, was furnished. The AO thereafter once again gave a show-cause notice dt. 8th Jan., 2001 which has been reproduced at p. 28 of the assessment order. The AO clearly stated that the purchases made from all these parties are bogus in nature. The g....
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....epresentative submitted that these affidavits were submitted at the fag end of the period of limitation in the case of Shri Nilesh K. Patel. The affidavit of Shri J.J. Doshi, who is proprietor of two parties, namely, M/s Adinath Corporation and M/s Tirupati Corporation was submitted to the AO along with the letter dt. 20th April, 2001. Copy of the letter has been placed at p. 29 of the Departmental paper book. It was pointed out by the learned Senior Departmental Representative that 20th April, 2001 was Friday. The next two days were holidays being Saturday and Sunday. One more holiday was there on 27th April, 2001 on account of Mahavir Jayanti. The case was going to be barred by limitation of time on 30th April, 2001. The assessee produced all these affidavits at the fag end of the assessment proceedings, when it was soon going to be barred by limitation of time. No request for cross-examination of these suppliers or brokers was made by the assessee in any of the letters submitted to the AO during the course of assessment proceedings. 66. The burden lies on the assessee to prove that the suppliers were genuine suppliers and they really had capacity to supply wash cotton seed oil....
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....t of deduction of any expenditure. Therefore the onus to prove the genuineness of purchases from these parties lies on the assessee. Such a burden, in the instant case, was very heavy in view of clear and unequivocal affidavits/statements given by suppliers. It is equally well settled law that an admission made by the concerned persons is an extremely important piece of evidence. It is true that it cannot be said to be conclusive. The party who wants to retract from an earlier admission can show that it was obtained under coercion and it is incorrect. However allegation of coercion cannot be accepted on a mere statement; it is to be supported by positive evidence. Likewise the incorrectness of earlier admission also has to be proved by producing cogent material and evidence. The assessee rested with submission of subsequent affidavits of suppliers. The least, in rebuttal of earlier affidavits/statements, which the assessee should have done, in addition to submission of their affidavits, is to produce all those suppliers and brokers along with the books of accounts, purchase vouchers and evidence to show their capacity to supply goods worth several lakhs/crores in such short p....
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....ard register and the same are verifiable from the regular books of accounts as well as inward register, stock register lying seized with the Department. The AO has not adversely commented on the aforesaid submissions made on behalf of the assessee during the course of assessment proceedings. (B) The Tribunal required the learned Senior Departmental Representative to verify from the seized inward register/daily gate outward register lying seized with the Department, the fact whether entries in respect of receipt of material represented by these fictitious invoices are recorded in such daily gate outward register/inward register. The learned Senior Departmental Representative vide para 3.12 of his written submissions has admitted that all the entries of such purchases made from bogus parties are appearing in the inward register but he has pointed out certain strange coincidence in relation to those entries. For instance, he has pointed out that nine trucks shown as per inward register 2311 to 2319 have been shown as received on 16th Nov., 1997 from M/s Tirupati Corporation. All such nine trucks have been emptied within one hour and 15 minutes as per inward and outward time recorded....
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....tion of stock found during the course of search and as per books of accounts is enclosed from which it would be seen that all the items found as per the stock inventory prepared at the time of search are fully verifiable as per the stock records maintained by the assessee-company. The AO accepted this explanation after detailed verification and no addition has been made in the assessment order in relation to any unexplained stocks found during the course of search. This also proves the fact that the material in question had really been received. 69. Now let us consider the assessee's submissions that assuming that the purchase invoices were obtained from name lenders/billing agents but the material has really been received/purchased, the assessee is entitled to deduction of reasonable price in respect of such material purchased and consumed. The AO has also reported in the remand report submitted to the CIT(A) that such purchases have been made almost at the prevailing market rate/price charged by other regular dealers. Therefore no disallowance of any part amount would be justified in the present case, as was done in the case of Vijay Proteins Ltd. (1996) 55 TTJ (Ahd) 76 :....
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....llers may be willing to charge lower rates for unaccounted goods as compared to accounted goods. The assessee is engaged in the business which is subject to frequent checking by civil supply department of the State Government. The regular checks are made at the factory premises in order to verify whether hoarding is done or not. Thus, there is effective check by food and civil supplies department of the State Government so far as quantitative details are concerned. The main area left with the concerns like the assessee would, therefore, be suppression of income by inflating the purchase price of raw material. Such material received by the assessee from unknown suppliers or from undisclosed sources also enable the assessee to utilise their black money/unaccounted funds for making purchases of such raw material in cash from open market. The assessee has shown credit purchases from these name lenders/billing agents. A statement of peak has been reproduced in earlier part of this order which shows that the peak amount credited in the account of one of these name lenders/billing agents relating to credit sales alleged to have been made by them to the assessee is Rs. 1,54,14,534. This ....
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....ine the figure of undisclosed income liable to tax in the block assessment under Chapter XIV-B. The entire amount of bogus purchases cannot be treated as undisclosed income/concealed income, because material in question had really been received. The inflated portion of purchase price mentioned in the fictitious invoices are within exclusive knowledge of the assessee. The assessee is not willing to tell the truth. Therefore, the estimate of such undisclosed income liable to tax in block assessment in relation to such bogus purchases of Rs. 11.99 crores will have to be made. As already stated hereinbefore, the real mills/wholesale dealers genuinely engaged in sale and supply of such material may be willing to sell such unaccounted goods at a much lower rates in view of various manifold advantages, such as savings in all kinds of taxes, duties, utilisation of black money and various other factors, The legislature in its wisdom has amended Section 40A(3)by the Finance Act, 1995 w.e.f. 1st April, 1996 which provides for disallowance of 20 per cent of such expenditure incurred otherwise than by crossed or account payee cheques. This figure of 20 per cent must have been arrived at by ta....
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....as that case relates to a concern engaged in the similar nature of business and there also purchase invoices were obtained from billing agents/name lenders but material in fact had been received from unknown sources. The Tribunal after a careful consideration in that case confirmed the disallowance of 25 per cent out of total amount of such bogus purchases. No separate addition was made in respect of peak credit in the accounts of those bogus suppliers as the amount of disallowance made at the rate of 25 per cent adequately covered the amount of unexplained peak credit. One of us (AM) was a party to the said decision in the case of Vijay Proteins Ltd. (supra). 71. On a careful consideration of the entire relevant facts, we are of the opinion that it would be just and proper to direct the AO to restrict the addition on account of inflated purchases to 25 per cent i.e. Rs. 3 crores which is approximately equal to 25 per cent of Rs. 11.99 crores shown to have been purchased from these five bogus suppliers. 72. Now we will deal with ground No. 4 raised in NKPL's appeal. The assessee has challenged the confirmation of an addition of Rs. 3,86,968 being the profit on alleged sales....
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....asis of sale invoices found and seized in file marked as Annex. A-6. The addition in respect of unaccounted sales was made to the tune of Rs. 2,05,86,761. 73. The learned CIT(A) has dealt with this issue in paras 8 to 8.2 on pp. 24 and 25 of his order. The learned CIT(A) has observed that since both the concerns, viz. NKPL and NKIL belong to the same group and addition on account of unaccounted sales has already been confirmed by him in the case of NKIL, no further addition can be made in respect of unexplained purchases in the hands of the appellant. Since what can be taxed is only the profit on the aforesaid sales of Rs. 2,05,86,761, after reducing Rs. 2,01,99,793 being the cost of purchases made by the assessee from NKIL, addition should be sustained only to the tune of Rs. 3,86,968 in substitution of both the aforesaid additions made by the AO. The CIT(A) accordingly sustained the addition of Rs. 3,86,968. 74. The learned counsel appearing on behalf of the assessee reiterated his arguments as were made before the learned Departmental authorities, In the written submissions submitted before the CIT(A), it was submitted vide paras 4.2 to 4.4 that these transactions had not ac....
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.... same truck numbers and same weight, quantity of wash cotton seed oil which are mentioned in the sale bills issued by NKIL in favour of NKPL, lying amongst seized sale bills file. The assessee has not given any specific reply to the aforesaid submissions made in the written submissions given by the learned Senior Departmental Representative that what was purchased through these sale invoices issued by NKIL to NKPL was wash cotton seed oil and what was sold by the assessee to Triveni Corporation and Tirupati Corporation was soyabean oil. Copies of some relevant seized documents have been submitted by the Department in their paper book dt. 22nd Oct., 2002. Copies of bills issued by NKIL to NKPL included in Annex. A-6 clearly shows that the sale invoices were issued by them for wash cotton seed oil. It also bears truck numbers, delivery challan numbers and inward date and number and date on the seal of NKPL. The sale invoices issued by NKPL in favour of Triveni Corporation and Tirupati Corporation are for "Exp. Soyabean Oil". These bills also contain truck numbers and delivery challan numbers, etc. 76. The assessee in the rejoinder has simply stated in para 13.1 that the allegation ....
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....e found and seized as per Annex. A-6 and verify the same with the entries of relevant dates in the seized inward and outward registers. He should also examine the original minute book. In case he considers it necessary he may examine the concerned persons of the respective concerns who prepared these sale and purchase invoices/bills which were found and seized during the course of search and which according to the assessee did not represent real transactions. The AO will pass fresh order after conducting proper investigation in accordance with the provisions of law and after providing adequate and reasonable opportunity to the assessee. 79. Ground No. (6) relates to levy of interest under Section 158BFA(1). No arguments were advanced by the learned representatives of both sides in relation to this point. The AO is directed to grant consequential relief. 80. Ground No. (7) relates to initiation of penalty proceedings under Section 271(1)(c). No such ground can be raised in an appeal against the assessment order. Separate appeal will lie against any such penalty, if and when levied. This ground is therefore infructuous and is rejected accordingly. IT(SS)A No. 41/Ahd/2002 in t....
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.... of Rs. 6,63,19,496 made in respect of alleged unexplained deposits in the accounts of bogus suppliers. The said point has been discussed in para 13 of assessment order passed in the case of NKIL which is reproduced below: "13. Unaccounted payments: As already discussed in the preceding paras, certain bank accounts were found during the course of search of different concerns. After inquiries it was held that" these concerns are bogus and purchases made by the assessee to these concerns are added as bogus purchases. From the perusal of these bank accounts, it is noticed that in the bank account of Krishna Marketing, total amount of Rs. 2,47,14,062 is deposited during the financial year 1998-99. In the bank account of Somnath Industries total deposits made is amounting to Rs. 3,24,57,568 during the financial year 1998-99. These also represent payments made by assessee group concerns for purchases and other expenses. Inquiries are being conducted from banks to find the concerns which made these payments for purchases and other expenses. Substantive disallowance will be made in these concerns after conclusion of inquiries, However, protectively the addition is made in the case of t....
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....of those suppliers obtained by the Dy. DIT, which have been discussed while dealing with the issue relating to bogus purchases, made an addition of Rs. 37,19,85,062 which was bifurcated in two years falling in the block period as under: ................ .............. The AO has briefly discussed the evidence against the assessee in relation to such bogus suppliers which, inter alia, include the affidavits/statements given by the suppliers denying having supplied any goods to NKPL and NKIL and statements of brokers and other facts discussed in the assessment orders passed in the case of NKPL and NKIL. The AO has also discussed various replies and affidavits of suppliers submitted on behalf of the assessee in rebuttal of the earlier affidavits. The AO thus made an addition in respect of entire amount found credited in the bank accounts of these so-called bogus suppliers aggregating to Rs. 37,19,85,062 in the hands of Shri Nileshbhai K. Patel on substantive basis, 86. Before the CIT(A) the assessee prepared and compiled the details from copies of bank accounts of these suppliers supplied by the Department to the assessee and furnished the following summarised details. "The de....
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.... be made in the hands of those concerns after necessary inquiries and investigation. The assessee has placed reliance on the following judgments before the CIT(A): (i) CIT v. Daulatram Rawatmal (1973) 87 ITR 349 (SC) (ii) Parakh Foods Ltd. v. Dy. CIT (1998) 64 ITD 396 (Pune) (iii) Omkarmal Gaurishankar v. ITO (1991) 39 TTJ 223 (Ahd) (iv) Dimco Silk Mills v. ITO (1999) 107 Taxman 41 (Mag) 88. The CIT(A) after considering the entire relevant facts and material gave the following findings in para 4.8 of his appellate order in the case of Shri Nileshbhai K. Patel."4.8 I have carefully considered the submissions made by the appellant's counsel, Shri Ashwini Shah and have also perused the facts of the case laws cited and also the materials which was found during the course of search and also further inquiries conducted by the AO during the course of assessment. After perusing the said materials and records, I have no hesitation in holding that the inference drawn that the moneys deposited in the said accounts belong to the appellant is not supported by sufficient evidence for the following reasons: (a) The appeal in respect of NKIL has been disposed of by the undersigned ....
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....s the appellant or that it is based on any material discovered as a result of search. (d) The appellant has strongly submitted that the transactions between the account holders and the appellant are only in the capacity of his being MD of NKIL and NKPL and that he has never done any business in his individual capacity. It is further submitted that no adverse inference can be drawn for mere introduction to the proprietor of the concern for opening a bank account. Reliance is placed on the decision of Tribunal, Ahmedabad in the case of Dimco Silk Mills v. ITO (supra) which is relied upon as mentioned earlier in this order. It is submitted that the onus is on the AO to hold that the said deposits are on account of undisclosed income of the appellant and this view is correct in view of the decision of the Supreme Court in the case of CIT v. Daulatram Rawatmal (supra). (e) It is further submitted that as discussed by the AO himself in the orders of NKIL and NKPL, no cheque books were found from the residential premises of the appellant in respect of any of the above account holders relating to the abovementioned concerns. This is found to be correct since the same were found from ....
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....38 and 39): 10.1 The learned AO has made addition of Rs. 5.71 crores as unaccounted payments. 10.2 The assessee made purchases which is considered as bogus and the assessee also made payment for such purchases by cheques. The learned AO obtained bank statement of the said suppliers and the total deposits made in the said accounts by the assessee-company and outsiders are considered as payment made by the assessee-company and is also considered as unaccounted payments. Therefore, the learned AO has made addition of Rs. 5.71 crores as unaccounted payments on protective basis. The details of such unaccounted payments and purchases are given below: Purchases considered as bogus in the case of NKIL: Somnath Industries 1,14,78,000 Krishna Marketing 51,67,228 Sejal Enterprises 1,26,48,060 ------------- 2,92,93,288 ------------- The details of deposit of cheques in the bank account from the above referred companies and outsiders are as under: ... ... 10.3 From the above, it may please be seen that the total deposits from the accounts is Rs. 5.71 crores whereas the total purchases from the three concerns are Rs. 2.92 crores. In other wo....
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....e of NKIL which is being contested. Therefore, the question of making any addition as unexplained deposit in the case of assessee-company does not arise." 6.2 I have carefully considered the same and in view of my findings given in respect of Krishna Marketing and Somnath Industries, there is no justification for treating the same as income of the appellant in the block assessment. In respect of the addition of Rs. 91,47,866, addition of Rs. 1,26,48,060 has already been confirmed and there is no basis for making further addition in the absence of any additional evidence that the same is corelated with purchases out of unexplained monies. This would amount to double taxation. In view of the above facts, these 2 additions are directed to be deleted." 91. The learned Senior Departmental Representative relied upon the reasons mentioned in the assessment orders. The Bench persistently required the learned Senior Departmental Representative to furnish the details of inquiries made subsequent to the completion of these assessments, as indicated in the assessment order of NKIL and NKPL that inquiries will be made as to which other concerns have given cheques to these billing agents/nam....
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.... on page No. 37, it is seen that this a/c is introduced by N.K. Industries Ltd. Kindly see page No. 34 which is the account opening form of Issan Overseas Ltd. This account is also introduced by N.K. Industries Ltd. 4. Kindly see the page No. 38 in which the Mehsana Urban Co-op. Bank Ltd. has stated that as per statement of a/c of Adinath Corporation a/c No. 531 of credit entries by transfer in the period from 17th April, 1998 to 7th July, 1998 from N.K. Proteins Ltd. Ahmedabad." 92. The various correspondence exchanged by the AO with the concerned banks are only upto May, 2001, The learned Senior Departmental Representative submitted that in view of the difficulties indicated in the aforesaid letters, it has not been possible to conduct further enquiries. In reply to a specific query from the Bench, the learned Senior Departmental Representative candidly admitted that no further enquiries were made after May, 2001. The Department has also not produced any evidence to show that they conducted any further investigation to find out as to which other parties have given cheques to these bogus suppliers in whose bank accounts such cheques aggregating to several crores of rupees have....
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....verseas were benamidars of the assessee or cheques given by Swastik/Issan Overseas came out of the funds belonging to the persons or concerns of NK group. These cheques of Swastik/Issan Overseas constitute a small figure of about Rs. 10 lakhs which is a small fraction of the total deposits aggregating to more than Rs. 44 crores deposited in the bank accounts of such bogus suppliers/name lenders/billing agents. The Department has not even examined the partners/proprietors/directors of Swastik Overseas Ltd. and Issan Overseas Ltd. The Department has not made any serious efforts to find out the complete names, addresses of various other concerns which gave cheques to all these bogus suppliers, which have been credited in their respective bank accounts. The concerned IT authorities having vast powers vested upon them under the provisions of the Act could very easily obtain complete details of all the persons who gave these cheques to these bogus suppliers. They could also find out various withdrawals made from these bank accounts of various bogus suppliers and ascertain the destination of those amounts withdrawn by various cheques other than self cheques debited in those bank account....
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....iries continued only upto May, 2001. The assessment in the case of NKPL and NKIL were made on 30th April, 2001. The assessment in the case of Nileshbhai Patel was completed on 28th Feb., 2001. No effective efforts were made by the officers of the Department for further investigation in this regard. The AO on p. 35 in the case of NKPL and on p. 39 of the assessment order in the case of NKIL has observed that the inquiries are being conducted from the banks to find out the names and particulars of other, concerns which made these payments for purchases and other expenses. Substantive disallowances will be made in the cases of those concerns after conclusion of enquiries. The additions were protectively made in the cases of NKIL and NKPL subject to further investigation so that appropriate additions can be made in the hands of the concerns who gave such cheques to these bogus suppliers. However, no further inquiries have been made and no additions have been made in the cases of any such other concerns who really gave cheques to these bogus suppliers. 95. The learned counsel appearing for the assessee submitted that the results of search conducted on all the persons and concerns be....
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....ed along with letter dt. 18th Dec., 2002 by the learned Senior Departmental Representative further supports the assessee's contention. For example, cheques of Madhukant Agrotech (P) Ltd. were credited in the bank account of Karnavati Industries. M/s Madhukant Agrotech have no connection whatsoever with the assessee. This strongly supports the view that Karnavati Industries, if they are treated as bogus suppliers/billing agents/name lenders, they are acting as such on behalf of other parties. Similar inference can be drawn from the bank opening forms of Swastik Overseas Ltd. and Issan Overseas Ltd. The Department ought to have examined Shri Rajesh B. Mehta and other directors/owners of those concerns to find out as to who were real persons who gave such cheques to these bogus suppliers. The learned counsel drew our attention to the copies of bank statements submitted by the learned Senior Departmental Representative along with the letter dt. 18th Dec., 2002. In those bank statements the bankers appear to have given hand-written narration such as KCC, PNB, Manekchowk, AMCO etc. The assessee had no bank account with PNB, KCC or any of these places which are hand written and wh....
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....ounts or that the suppliers are benamidar persons/concerns, the following tests are very vital and significant: (i) Who provided the funds for deposit (ii) Who enjoyed these funds (iii) What is ultimate destination of these funds. 98. The Department has to prove by bringing on record definite, positive and clinching evidence on all these three aspects to support their conclusion that these bank accounts are benami accounts and deposits in these bank accounts in the names of suppliers really belong to NKPL or NKIL or Shri Nileshbhai Patel and they were the persons who enjoyed these funds and the entire funds have directly or indirectly flown back in their favour. The degree of proof for proving the concept of benami bank accounts/benami persons is very stronger and that has to be discharged by bringing positive material on record. Such conclusion cannot be derived on the basis of mere suspicion and surmises. It may be relevant here to repeat once again that so far as purchases claimed to have been made by NKPL and NKIL from these concerns are concerned, the burden was on the assessees to prove genuineness of purchases but the same principle would not apply when the Departm....
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....,49,194. In addition to this, a cheque of Rs. 3,64,01,316 was given by Triveni towards goods sold by NKPL. This left the balance deposit aggregating to Rs. 21,89,82,084 received by bogus suppliers/billing agents from other parties/third parties with which it is contended that the persons or concerns of NX Group had no connection whatsoever. The names and particulars of parties who deposited the cheques in the bank accounts of these suppliers after the search have also not been brought on record, It was primary duty of the Department to find out as to which other parties/concerns have given these cheques which have been deposited in the bank accounts of these bogus parties. The Department has completely failed to discharge such burden, which heavily lies on them to support their conclusion that any of these three assessees were real owners of cheques of all such other concerns/third parties deposited in the bank accounts of these bogus suppliers. The Department has also not made any investigation to prove destination of the funds withdrawn by self cheques and by other cheques given to other parties. The Department has thus failed to discharge the burden of proving that the origin an....
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....provisions of the IT Act. The Department cannot exonerate such "other concerns" by leaving investigation at incomplete stage like this. It would be imperative to mention that the time limit for initiating action under Section 147has been reduced to only six years in Section 149. The time left with the officers of the Department now is very short. It is, therefore, necessary to strive the best possible time-bound programme for ascertaining the full particulars viz. names and addresses of all other concerns/parties/persons whose cheques have been deposited in the bank accounts of these bogus suppliers, so that timely action can be initiated against all such other persons/concerns/parties. If, as a result of further investigation, it comes to the notice of the Department that those other concerns/third parties are benamis of the persons and concerns of assessee's group, the Department will be entitled to take necessary action under Section 147, if they have in their possession adequate material to justify formation of reasonable belief which should be much more stronger than the reasons to suspect, If the AO comes across evidence and material which were not found or made available....
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....to Rs. 2,50,427 for asst. yr. 1995-96, Rs. 62,75,837 for asst. yr. 1998-99 and Rs. 61,21,796 for asst. yr. 1999-2000 amounting in all to Rs. 1,26,48,060 are bogus and thereby has erred in confirming addition of Rs. 1,26,48,060 as undisclosed income. 2.2 The appellant says and submits that the purchases of Rs. 2,50,427 for asst. yr. 1995-96 and Rs. 62,75,835 for asst. yr. 1998-99 is recorded in the books of accounts and that the income-tax return for asst. yr. 1995-96 and asst. yr. 1998-99 were submitted prior to the date of search and purchases of Rs. 61,21,796 for asst. yr. 1999-2000 have been recorded in the normal manner in books of accounts prior to the date of search i.e. 24th Feb., 1999 and, therefore, such transactions are not considered as undisclosed income as provided in Section 158BA(3). 2.3 The appellant further says and submits that the learned CIT(A) has erred in placing reliance on finding based on inquiry made by Addl. DPT under Section 131(1A) and that the learned Dy. CIT has not made any independent inquiry and therefore, the addition made on the basis of inquiry made by learned Addl. DIT under Section 131(1A) is illegal and not warranted since the learned Add....
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....the profit. 2.10 The appellant further says and submits that the assessee-company has made the payment of the entire purchases by cheques to the suppliers which is not disputed. 3. The learned CIT(A) has erred in placing reliance on finding given by Addl. DIT in his appraisal report and has erred in ignoring the other submissions regarding factum of purchases and regarding the recording of purchases in the books of accounts in the normal manner. 4.1 The learned CIT(A) has erred in confirming the addition of Rs. 2,01,99,793 being alleged sales made by the company inasmuch as the transaction have never taken place. 4.2 The appellant further says and submits that, alternatively, only profit of the sales amount can be taxed and not the entire gross amount. 5.1 The learned CIT(A) has erred in confirming the addition to the extent of Rs. 19 lakhs as unaccounted deposit with Pari L T Shroff inasmuch as no evidences were adduced by the learned Dy. CIT as undisclosed income of the appellant. 5.2 The appellant further says and submits that the disclosure under VDIS Scheme was made by the appellant on the basis of the notice issued by the Department. Now, Department cannot change ....
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....se of NKIL (IT (SS) A No. 38/Ahd/2002), all of which deal with the issue relating to bogus purchases made from bogus suppliers. The AO made an addition of Rs. 2,92,93,288 in respect of purchases made from the following three alleged bogus suppliers : -------------- 106. The AO has discussed the facts relating to these bogus concerns in para 6 on pp. 6 to 16 of the assessment order. The facts pertaining to purchases made from Somnath Industries have been discussed on pp. 7 to 9 of the assessment order. The AO has observed that during the investigation, it was found that NKIL has shown purchases, inter alia, from Somnath Industries. The results of investigation revealed that this concern was owned by one Shri K.R. Soni. He was summoned under Section 131(1A) and his statement was recorded on 7th June, 1999. The relevant portion of his statement has been extracted on pp. 7 and 8 of the assessment order. Shri K.R. Soni has categorically denied having supplied any such material. He admitted that he was signing bill books, blank cheque books, application for registration of sales-tax in the name of Somnath Industries at the instance of Shri Nileshbhai Patel who used to give him Rs....
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....purchases are recorded in the books of accounts in the normal course before the date of search and therefore it does not fall within the purview of block assessment. The AO has thereafter discussed the various show-cause notices given by him and the replies received from the assessee in this regard. The show-cause notices and the replies were also almost as that in the case of NKPL. The AO arrived at the conclusion that all such purchases made from these three parties are bogus purchases and he disallowed the total purchases of Rs. 2,92,93,288 made from them. 110. The learned CIT(A) has dealt with this issue in para 5 on pp. 4 to 11 of his order. The CIT(A) has observed in para 5.5 of his order that except 2 blank sale bills in respect of Sejal Enterprises appearing at Annex. A-88/2 and A/88/5, no other blank bill or voucher was found during the course of search. The CIT(A) asked the AO to verify this fact vide letter dt. 4th Jan., 2002. The AO in reply to the said letter submitted that no blank bills or cheques were found and seized in respect of M/s Somnath Industries and Krishna Marketing. The CIT(A) following the judgment of the Hon'ble Gujarat High Court in the case of N....
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....es. They had no capacity to supply raw material of such large magnitude. The bank accounts were opened and operated in similar manner as in the case of NKPL. 113. During the course of hearing, the Bench specifically required the assessee to produce all these three parties along with their records. The learned counsel contended that the assessee cannot produce them along with their records as they are not under the control of the assessee. The assessee has thus refused to produce these three suppliers along with their relevant records before the Tribunal inspite of specific opportunity granted to them. 114. We have carefully considered the submissions made by the learned representatives. In our view, the order passed by the learned CIT(A) deleting the addition of Rs. 1,14,78,000 and Rs. 51,67,228 in respect of purchases made from Somnath Industries and Krishna Marketing, is not justified, The CIT(A) relying upon the judgment of the Hon'ble Gujarat High Court in the case of N.R. Paper & Boards (supra) has agreed with the assessee's contention that so far as purchases from these two concerns are concerned, they cannot be considered in the block assessment under Chapter....
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....and the sale invoices issued by them in the name of NKIL are fictitious invoices. The burden lies on the assessee to support any claim for deduction made by them. In the present case such burden should have been discharged by the assessee only by producing those three suppliers along with their records so that the genuineness of their purchases, sales, financial capacity and all other relevant facts could be examined. The assessee has not produced them before the AO. We gave a specific opportunity to the assessee to produce all of them before the Tribunal along with their records. The assessee has expressed their inability to produce them before the Tribunal. However, it is also true that the receipt of material shown to have been purchased from these three parties had really been received as per facts and evidence brought on record, which are similar as in the case of NKPL. 116. It may also be relevant here to mention that the Bench required the learned Senior Departmental Representative to submit a peak statement in relation to the amounts of these three parties. The learned Senior Departmental Representative submitted copies of those statements which show that the transactions....
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....r the assessee is a manufacturer or a trader or both. In the present appeal, undisputedly the notice issued u/s 133(6) of the Act was never replied by the concerned party. It is worth mentioning that even before this Tribunal the assessee was asked to produce this party so that the genuineness of the transaction can be explained but the learned counsel for the assessee expressed his inability to produce the party, which clearly establishes that the genuineness of the transaction is under doubt or it can be said not established by the assessee or remained to be established. So far as the decision relied upon by the assessee in the case of Nikunj Exim Enterprises Pvt. Ltd. is concerned, we are of the view that in the present appeal the assessee is a manufacturer/trader/both (which is to be established by the assessee), therefore, the assessee is directed to establish the genuineness of the transactions, which has not been done by the assessee. The observation of the learned CIT(A) that it was a case of non-compliance to the notice issued u/s. 133(6) is concerned, itself is an admission that the party either did not respond or was not available at the given address. Under section 68 o....