AI Drafter 
TaxTMI 
TaxTMI 
2019 (10) TMI 127
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....N/2017 & 2591/PUN/2017 Shri R.S. Syal, VP And Shri Partha Sarathi Chaudhury, JM For the Assessee(s) : Shri Krishna Gujrathi - Sr. No.1, 41, Shri M.K. Kulkarni - Sr. No.2, 8, 24 & 28, Shri C.H. Naniwadekar - Sr. No.3, Ms. M.N. Kulkarni - Sr. No.4-7, Smt. Deepa Khare - Sr. No.9, 45 & 46, Shri B.V. Mane - Sr. 11 - 13, Shri S.D. Pathak - Sr. No.14, Shri Mahavir Jain - Sr. No.23, Shri Anil Lodha - Sr. No.29 - 35, Shri Neelesh Khandelwal - Sr. No.25-27, Shri Pramod Shingte - Sr. 36, 37 &44, Shri D.R. Barbe - Sr. No.38 & 39, Shri M.R. Bhagwat -Sr. No.40, Shri Sunil Ganoo - Sr. No.42, Shri Sharad Shah - Sr. No.43, Shri V.L. Jain -Sr. No.47 - 50, None - Sr. No.10, 15-19, 21, 22, Written submissions - Sr. No.20 For the Revenue : Shri S.P. Walimbe - Sr. No.1 - 19, 24-35 38-42, 44 -50 And Shri Pushkaraj B. Patil - Sr. No.20-23, 36, 37 & 43 ORDER PER BENCH : This batch of 50 appeals consisting of 37 appeals by the assessees and 13 appeals by the Revenue relate to captioned assessment years. 2. In some of the appeals, there is a delay of certain days. The respective assessees have filed affidavits giving reasons leading to the delayed filing of the appeals. We are satisfied ....
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....ngs of the first category, namely, where the objection has been raised generally. 6. It is clear that the AO got specific information from the Sales tax Department about the concerned assessees being beneficiaries of fake accommodation entries from hawala dealers. The contention of the assessees in such general cases that reassessment on the given basis is wrong, in our considered opinion, is completely unfounded. 7. The Hon'ble Supreme Court in Raymond Woolen Mills vs. ITO (1999) 236 ITR 34 (SC) has held that there should be reason to believe about the escapement of income at the stage of initiation of reassessment proceedings. Sufficiency or correctness of such material cannot be considered at that stage. The Hon'ble Apex Court has held in ACIT vs. Rajesh Jhaveri Stock Broker (P) Ltd. (2007) 291 ITR 500 (SC) that : `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 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 AO should have finally ascertained the fact by le....
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.... the material available and the conclusion reached by the AO for reopening the assessment, the Hon'ble High Court refused to interfere by observing that the expression `reason to believe' cannot be read to mean that the AO should have finally established beyond doubt that income chargeable to tax has escaped assessment. Similar view has been taken by the Hon'ble Gujarat High Court in Pr. CIT VS. Laxmiraj Distributors Pvt. Ltd. (2019) 410 ITR 495 (Guj) and the SLP filed by the assessee against such judgment has since been dismissed in (2018) 405 ITR (St) 27. 10. Reverting to the facts of the instant cases, it is seen that the concerned AOs received information from the Sales Tax Department about the details of accommodation entry providers and the assesses had also recorded purchases from such hawala entry providers. There was a close nexus between the report of the Sales tax Department and the formation of belief by the Assessing Officer about the escapement of income of the assessee for the year(s) under consideration. Such information was specific, not general or vague. Thus, it is abundantly clear that receipt of such an information was sufficient enough for the Assessing Off....
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....initiation of reassessment and accordingly deleted the addition in question on account of bogus purchases. The Revenue has challenged the quashing of the reassessment and the assessee in her Cross Objection has also challenged the initiation of re-assessment proceedings by the AO on the ground that the assessee was not supplied reasons to believe u/s.148 of the Act despite specific request. 15. The facts of this case are that notice u/s.148 was issued on 26-06-2014. The assessee filed return in response to notice u/s.148 on 13-11-2014 and requested the AO to furnish the reasons recorded for issuing notice u/s.148. The assessment was taken up by means of notice u/s.142(1) dated 23-09-2015. The assessment order was passed on 04- 03-2016. The assessee challenged the initiation of reassessment proceedings before the ld. CIT(A) contending that despite the specific request made by the assessee for supply of reasons, the AO failed to furnish the same. Relevant discussion has been made on pages 3 onwards of the impugned order. The ld. CIT(A) called for a report from the AO on the written submissions filed by the assessee assailing non-supply of reasons to believe. The AO vide his report....
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....hases made through bogus bills were sold as such and the Hon'ble High Court directed to compute the normal profit as well as profit arising from hawala transactions and then directed to make addition towards bogus purchases on account of difference between such two profits rates. However, in the facts of the extant case, the purchases made through hawala entries have not been sold as such. Such purchases, being, of raw material, have been consumed and gone into the manufacturing of products by the assessee thereby losing identity of separate purchase price and the corresponding sale price. Both the sides have fairly admitted that the ratio of the Hon'ble jurisdictional High Court in the case of Pr.CIT Vs. Mohommad Haji Adam & Co. (supra) cannot be applied to the facts of the instant case. 21. In this regard, it is relevant to note that the Pune Benches of the Tribunal has disposed off a group of cases on such an issue before the afore referred verdict of the Hon'ble High Court. Vide the lead order in the case of M/s. Chhabi Electricals Pvt. Ltd. and others Vs. DCIT dated 28-04-2017 in ITA No.795/PUN/2014 and others, the Tribunal has made certain categories. Findings in respect o....
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....he argument on behalf of the assessee before the Tribunal is that the AO failed to provide opportunity of cross examination and confront the assessee with the adverse statements of the alleged hawala dealers. The ld. AR put forth that in the absence of the AO following the principles of natural justice, the addition was liable to be deleted. In support of such a contention, she relied on the judgment dated 02-09- 2015 of the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II (2015) 62 taxmann.com 3 (SC) and certain other decisions. 28. We have gone through this judgment. The factual position of the case rendered in the content of Central Excise is that some of the products manufactured were sold to dealers against which the assessee filed declaration showing the particulars of the goods at which those were sold ex-factory. The Revenue found that there was price difference between the goods sold at ex-factory and delivery basis in comparison to the goods which were sold to the buyers from their depots. Investigation was carried out. Statements of two buyers were recorded. The assessee was called upon to explain as to w....
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....(supra) delivered by two Hon'ble Judges in the context of Central Excise, was confronted with a situation in which the Hon'ble High Court set-aside the order of assessment on the ground that no opportunity of cross-examination was granted. Overturning the view of the Hon'ble High Court, the Hon'ble Supreme Court held that: "At the highest the High Court should have directed the AO to grant an opportunity to the assessee to cross-examine the concerned witness". As a consequence of that, the Hon'ble Supreme Court set-aside the judgment of the Hon'ble High Court by holding that : `In the circumstances, we are of the view that the High Court should not have quashed the assessment proceedings vide impugned order' and accordingly remitted the matter to lower authorities for disposal on merits. 31. The Hon'ble Delhi High Court in CIT Vs. P. C. Chemicals (2013) 359 ITR 129 (Delhi), following M. Pirai Choodi (supra), has restored the matter in the absence of the AO granting opportunity to crossexamine the witnesses, which formed the basis for addition. 32. The Hon'ble Madras High Court in CIT Vs. S.V. Sreenivasan (2018) 404 ITR 433 (Madras) considered both the judgments of Hon'ble Sup....
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....e facts of the instant case, it is found that the AO relied on certain material, for which cross-examination was not afforded to the assessee for its own fault. It is not a case that the AO lacked jurisdiction to proceed with the assessment. It is further not a case that the AO made the addition on his whims and fancies and without there being any material to substantiate the same. Per contra, it is a case of making the addition on the basis of relevant evidence but simply using the same without granting opportunity to cross examine. Thus it is an irregularity coming in the otherwise valid and lawful proceedings. Such an irregularity in not allowing an opportunity to cross examine the witnesses, who deposed against the assessee, can be regularized if the assessment proceedings are brought back to the stage at which the irregularity stepped it. Similar view has been taken by the Pune Benches of the tribunal in the case of Thermax Ltd. vs. DCIT (ITA No. 512/PN/2014) vide its order dated 13.09.2019. We, therefore, set aside the impugned order to this extent and remit the matter to the file of the AO with a direction to first confront the assessee with the adverse material and allow an....
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....hat backdrop of the facts that the AO proceeded to complete the assessment by estimating income at 9%. However, it was after the completion of the assessment u/s.143(3) that the AO got specific information about the assessee having received accommodation bills from hawala entry operators to the tune of Rs. 22.25 crores. It is on the basis of such tangible information coming to the AO after the completion of the original assessment that he initiated reassessment proceedings. In our considered opinion, the factual panomora as obtaining during the course of original assessment proceedings and the information coming into existence after the completion of assessment proceedings leading to initiation of reassessment proceedings, is quite different. In the course of the original assessment proceedings, the AO examined the genuineness of all expenses and purchases recorded in the books of account in a general manner. It was only pursuant to the specific information received from the Sales Tax Department unearthing the racket of hawala dealers, who had issued fake purchase bills to various traders including the assessee, that the reassessment was taken up. In our considered opinion, the ass....
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....1-2014 about his receiving information from Sales Tax Department qua unearthing the racket of hawala dealers who had issued fake purchase bills to various traders including the assessee. The assessee wrote a letter dated 28-02-2014 to the AO, whose copy has been placed at page 18 of the paper book, submitting that the original return filed by it may be taken as return filed in response to notice u/s.148. Such a letter was received by the AO on 3.3.2014. It was further requested vide the same letter to provide a copy of reasons for issuing notice u/s.148 so as to enable it to file objections. The AO supplied the reasons on 02-03-2015 as has been recorded in his letter dated 23-03-2015, a copy of which has been placed on page 77 of the paper book. On receipt of such reasons, the assessee filed a letter raising objections against the initiation of reassessment, which was filed with the AO on 09-03-2015. The AO disposed of such objections by means of his order passed on 23-03-2015. Then, the assessment order was passed on 27-03-2015 making addition on account of bogus purchases. The view point of the assessee is that the AO did not afford opportunity to the assessee for filing writ ....
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....wing the judgment in the case of Asian Paints Ltd. (supra), which is squarely applicable in the facts and circumstances of the instant case, we quash the resultant reassessment order. Similar view has been taken by the Pune Benches of the Tribunal in ITO Vs. Gagandeep Amarpal Maan Vs. in ITA No.656/PUN/2017 vide its order dated 23-05-2018. 52. In the result, the appeal of the assessee is allowed on this legal issue and the Departmental appeal is dismissed. Rajesh U. Pardeshi - ITA No.2932/PUN/2017 53. The ground challenging the initiation of reassessment proceedings was not pressed by the ld. AR, which is hereby dismissed. 54. The only issue raised on merits is against the confirmation of addition on account of bogus purchases. 55. The facts of the instant case are mutatis mutandis similar to M/s. Prima Pvt. Ltd. (ITA No.1951/PUN/2017) disposed off supra. Here also, the assessee did not directly sell the goods purchased through hawala transactions. These were consumed as raw material in manufacturing. Following our view taken in M/s. Prima Pvt. Ltd., (supra), we set aside the impugned order and remit the matter to the file of AO for recomputing the amount of addit....
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....h Court in the above noted case and recompute the amount of additions, if any, after allowing a reasonable opportunity of hearing to the assessee. 65. In the result, the appeal is partly allowed for statistical purposes. Renuka Auto Components India Pvt. Ltd. - ITA Nos.1659 & 1660/PUN/2018 66. In these appeals, the grounds challenging the initiation of reassessment proceedings were not pressed. The same are, therefore, dismissed as such. 67. On merits, the AO made addition @100% of bogus purchases which was confirmed by the ld. CIT(A) as such. The assessee is aggrieved by the confirmation of addition to this extent. 68. We have heard both the sides and gone through the relevant material on record. The ld. AR submitted that the entries recorded in the books of account which have been treated by the Revenue as accommodation entries are in the nature of purchase of raw material which have been consumed in the manufacturing process. It was, therefore, submitted that there can be no ascertainment of separate profit in respect of such bogus purchases and genuine purchases. 69. Having heard both the sides, we find that the facts and circumstances of this case are similar....