TaxTMI 
TaxTMI 
2018 (11) TMI 263
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Mumbai. Since, the assessee was also one of the beneficiaries of the accommodation entries provided by the said hawala dealer, M/s Navratan Impex of Rs. 3,04,980/-, the assessment of the assessee was reopened by issue of notice u/s. 148. To ascertain the genuineness of the said purchases, the AO issued notices u/s. 133(6) which could not be served and were returned back by the postal authorities with the remarks 'not known'/'no such address'/'left' etc. The AO, therefore, asked the assessee to produce the parties along with their books of accounts and also furnish evidences to establish the genuineness of the said transaction. The assessee was unable to produce the said parties. Since the assessee could tally the purchases with the corresponding sales, the AO concluded that the assessee has purchased the said goods from the grey market. Thereafter, the AO proceeded to add an amount of Rs. 38,123/- being 12.5% of the total hawala purchases of Rs. 3,04,980/- for A.Y. 2008-09. 3. On similar reasoning, the Assessing Officer (A.O.) in this case has made 12.5% addition on account of bogus purchase as under for other years: A.Y. 2010-11 Rs.14,73,814/- A.Y. 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons recorded for reopening and the objections raised by the assessee against the reopening of assessment have also been duly disposed off by the AO. Thus, the AO has also duly complied with the procedure requirement laid out by the Hon'ble Supreme Court in the case if GKN Driveshafts (1) (125 taxmann. 963) for reopening of assessments. 5. However, on merits he restricted the disallowance to 9%, the ld. CIT(A)'s observation on merits are as under: 6.1 To ascertain the genuineness of the said purchases, the AO issued notices u/s. 133(6) which could not be served and were returned back by the postal authorities with the remarks 'not known'/'no such address'/''left' etc. The AO, therefore, asked the assessee to produce the parties alongwith their books of accounts and also furnish evidences to establish the genuineness of the said purchase transactions. The assessee was unable to produce the said parties. Further, the vital documents related to transportation of the material such as delivery challan, transport receipts, octroi receipts, weigh-bridge slip, etc. could not be submitted by the assessee booked by it. However, the assessee could tally the bogus pur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see that the rate adopted by the AO of 12.5% after considering the decision of the Hon'ble ITAT Ahmedabad in the case of Simit P Sheth (supra) is on the higher side, considering that the sales tax then prevalent at Gujarat was of 10% as against sales tax of 4% in Maharashtra. Therefore, after considering the factual position in the case of the assessee, it will be appropriate if the rate of 12.5% adopted by the AO is scaled down to 9% 6. Against the above order, the assessee is in appeal before the ITAT. 7. I have heard both the counsel and perused the records. In support of his case, the learned counsel of the assessee has placed reliance upon the decision of Hon'ble Gujarat High Court in the case of Pr CIT vs. Tejua Rohitkumar Kapadia (in Tax Appeal no 691/2017 vide order dated 04.05.2018). In this case, the Hon'ble High Court has confirmed the deletion of disallowance on account of alleged bogus purchase as necessary documentary evidence for the purchase was on record. The special leave petition against this order has been dismissed by the Hon'ble Supreme Court in its decision dated 04.05.2018 in Special Leave Petition (Civil) Diary No. 12670/2018. 8. As regards the reope....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the same is not required to be proved to the guilt. In this regard, I refer to the decision of the Hon'ble Apex Court in the case of CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. Ltd, 291 ITR 500:- "Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to lax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the 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 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....