TaxTMI 
TaxTMI 
2019 (7) TMI 1595
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....ppeals)-14, the appellant prefers the following amongst other grounds: 1 On the facts and in the circumstances of the case, and in law, the Learned CIT(A) has erred in upholding the reopening of the assessment on the premise that information received from the Sales tax department that the purchases are bogus constitutes enough reason to believe for re opening of the assessment, and also holding at Para 4 of his order that "at the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief whether the material would conclusively prove escapement is not the concern at that stage. This is because the formation of belief by the AO is within the realm of subjective, satisfaction. Therefore, as the case was re-opened on the basis of specific information received by the AO, the re-assessment proceedings is held as valid." 2 On the facts and in the circumstances of the case, and in law, the Learned Commissioner of Income tax (Appeals), erred inter alia a) in sustaining the addition to the extent of 12.5% of the alleged bogus purchases by holding in para 5.3 of his order "Looking into the entirety....
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....was selected for scrutiny under CASS by Revenue for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act and assessment order dated 22.03.2012 was originally framed by the AO against the assessee u/s 143(3) of the 1961 Act. Thereafter , reasons were recorded by the AO for reopening of the concluded assessment u/s 147 of the 1961 Act, and notice dated 19.02.2015 u/s 148 of the 1961 Act was issued by AO to the assessee within four years from the end of the assessment year. The assessee vide letter dated 25.02.2015 requested AO to treat return of income filed by it on 27.09.2010 as return of income filed in persuance to notice issued u/s 148 of the 1961 Act. A copy of reasons recorded by the AO for reopening of the concluded assessment were furnished to the assessee by the AO vide letter dated 17.08.2015. The notices u/s 143(2) and Section 142(1) of the 1961 Act were later issued to the assessee in compliance with statutory requirements. These are admittedly undisputed facts between rival parties. 3.3 The AO had received information from DGIT(Inv.) Mumbai that the assessee has claimed bogus purchases to the tune of Rs. 33,65,552/- in previous year relevant ....
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....n 147 of the 1961 Act, the assessee filed first appeal with learned CIT(A). The assessee filed detailed submissions before learned CIT(A), who was pleased to partly allow the appeal of the assessee by upholding disallowance to the tune of 12.5% of the alleged bogus purchases as profit embedded in these alleged bogus purchases vide appellate order dated 28.02.2017, instead of disallowance of 100% of alleged bogus purchases as was earlier done by the AO in reassessment order dated 11.03.2016, by holding as under:- " 4. As regards ground No.l, I have considered the submissions made. In the case of Rajesh Jhaveri Stockbrokers Pvt LTD vs ACIT 291 ITR 500( SC) Hb' Apex Court held that "at the initiation stage, what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is because the formation of belief by the A.O is within the realm of subjective satisfaction." Therefore as the case was reopened on....
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....el Traders ITA No. 2801/And/2008 dated 20/5/2011 also profit element of 12.5% was sustained. 5.3 Looking into entirety of the facts, therefore in my considered opinion only the profit derived out of such transactions should be assessed to tax and relying on the decision in the case of Bholenath Poly Fab Pvt. Ltd (Supra), addition to the extent of 12.5% of such tainted purchases is considered reasonable and sustained as the suppressed profit element embedded in such purchases. In absence of any further details this estimation is in addition to the gross profit shown by the appellant. The A.O is to take action accordingly." 4.2 As could be seen from appellate order passed by ld. CIT(A), the reopening of the concluded assessment u/s. 147 was upheld on legal ground as in the opinion of learned CIT(A) the reopening was done based on tangible incriminating material received by AO from DGIT(Inv.), Mumbai which in turn was based on information received from Maharashtra Sales Tax Department that the assessee is beneficiary of alleged bogus purchases from aforesaid four parties, totalling to Rs. 33,65,552/- thus such incriminating information having a live link/nexus with formation of bel....
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....15 dated 28.02.2018 . On legal ground with respect to challenge to reopening of concluded assessment u/s. 147 of the 1961 Act, this legal issue was not pressed by learned counsel for the assessee and prayers were made by learned counsel for the assessee to dismiss this legal challenge to reopening of concluded assessment as not being pressed. So far as challenge to additions made to the income of assessee on merits, the learned counsel for the assessee prayed that the issue may be restored to the file of the AO for denovo determination of the issue by the AO on merits in accordance with law. It was also brought to the notice of the Bench at this stage by learned counsel for the assessee that in the preceding year vide ITA no. 4904/Mum/2016 and ITA no. 5395/Mum/2016 for AY 2009-10 in assessee's own case, the tribunal in cross appeals had passed common order dated 11.12.2017 , wherein tribunal upheld the disallowance to the tune of 12.5% of alleged bogus purchases being profits embedded in these bogus purchases in addition to income declared by the assessee and appellate order passed by learned CIT(A) for AY 2009-10 was upheld by tribunal. The Ld. Counsel for the assessee also relied....
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....rt decision in the case of Principal CIT vs. Meenakshi Overseas (P.) Ltd. [2017] 395 ITR 677 (Delhi), CIT vs. Jyoti Prakash Dutta [2014] 367 ITR 568 (Bom); CIT vs. Vardhman Industries [2014] 363 ITR 625 (Raj); CIT vs. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal.). The ld. Counsel of the assessee further submitted that findings of the Sales Tax Department have not been given to the assessee and the assessee has not been provided any opportunity to cross examine the said hawala dealers. The ld. Counsel of the assessee further submitted that the books have not been rejected in this case, sales have been accepted, profits have been declared have not found to be unreasonable. Hence, the ld. Counsel of the assessee submitted that no addition is liable to be made in this case. 8. Per contra, the ld. Departmental Representative submitted that the reopening has been made upon cogent materials received by the Assessing Officer. The ld. Departmental Representative submitted that the information from the Sales Tax Department is not akin to newspaper report. For the reopening, the ld. Departmental Representative relied upon the Hon'ble Gujarat High Court decision in 73 taxman.com....
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....x Investigation Department whereby the directors of these dealers have admitted in a deposition vide statements/affidavit made before the Sales Tax Department that they were involved in issuing bogus purchase bills without delivery of any material. There is a list of such parties wherein the assessee is stated to be beneficiary of bogus purchase bills. 10. From the above, we find that tangible and cogent incriminating material were received by the AO which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and 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 permi....
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.... reopened the assessment of the assessee by issuing notice u/s. 148 dated 19.02.2015 based on the tangible incriminating material received from DGIT(Inv.), Mumbai which was based on information received from Maharashtra Sales Tax Department that the assessee had made bogus purchases to the tune of Rs. 33,65,552/- from four parties who are hawala dealers, as under:- Sr No. Name of the Purchasing Parties Amt. (in Rs. } 1 Siddhivinayak Steel 67,500 2 Vijay Steels 16,427 3 Shiv Industries 29,250 4 Shrcc Navdurga Steel Traders 32,52,375 Total 33,65,552 6.4 The Revenue has received this information from Maharashtra VAT Department that the aforesaid four parties were involved in providing hawala accommodation entries without supplying any material by issuing false invoices and the assessee is beneficiaries of these accommodation entries aggregating to Rs. 33,65,552/- from aforesaid four parties. These parties have stated on oath before Maharashtra Sales Tax Department that they were engaged in providing accommodation entries wherein they were issuing bogus bills without supplying any material and the assessee was listed as one of the beneficiaries of these bogus ....
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....low. The onus was on the assessee to produce these parties before the authorities below and also to prove genuineness of these purchases. We have also observed that tribunal in the immediately preceding year viz. AY 2009-10 on the similar factual matrix prevailing in that year in assessee's own case was pleased to up-hold the appellate order of the Ld. CIT(A) wherein disallowance to the tune of 12.5% of bogus purchases towards embedded profits in these bogus purchases were upheld on merits in addition to income declared by the assessee, vide detailed and well reasoned common order dated 11.12.2017 in cross appeals in ITA no. 4904 & 5395/Mum/2016 , by holding as under :- "12. As regards the merits of the case, we find that credible and cogent information was received in this case by the assessing officer that certain accommodation entry provider/bogus suppliers were being used by certain parties to obtained bogus bills. The assessee was found to have taken accommodation entry/bogus purchase bills during the concerned assessment year from different parties. Based upon this information assessment was reopened. The credibility of information relating to reopening remains un-assailed.....
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....16.1.2017. 15. We further note that Hon'ble Rajasthan high court has similarly taken note of decisions of the apex court on the issue of bogus purchases in the case of CIT Jaipur vs Shruti Gems in ITA No. 658 of 2009. The Hon'ble High Court has referred to the decision of CIT Jaipur vs. Aditya Gems, D. B. in ITA No. 234 of 2008 dated 02.11.2016, wherein the Hon'ble Court had inter alia held as under: "Considering the law declared by the Supreme Court in the case of Vijay Proteins Ltd. Vs. Commissioner of Income Tax, Special Leave to Appeal (C) No.8956/2015 decided on 06.04.2015 whereby the Supreme Court has dismissed the SLP confirmed the order dated 09.12.2014 passed by the Gujarat High Court and other decisions of the High Court of Gujarat in the case of Sanjay Oilcake Industries Vs. Commissioner of Income Tax (2009) 316 ITR 274 (Guj) and N.K. Industries Ltd. Vs. Dy. C.I.T., Tax Appeal No.240/2003 decided on 20.06.2016, the parties are bound by the principle of law pronounced in the aforesaid three judgments. 16. However, we note that the Hon'ble jurisdictional High Court in the case of Nikunj Eximp Enterprises (in Writ petition no 2860, order dt. 18.6.2014) has upheld ....