TaxTMI 
TaxTMI 
2020 (12) TMI 1185
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....ealers and assessee was also one of the beneficiary from those dealers. The assessments were reopened U/s. 147 of the Act based on the information received from DGIT(Inv.) Mumbai, that the assessee has availed accommodation entries from M/s. Royal Enterprises which is said to be providing accommodation entries without there being transportation of any goods. In the reassessment proceedings, the assessee was required to prove the genuineness of the purchases made from the above party and produce the party before the Assessing Officer. In response, assessee vide letter dated 18.02.2016 submitted that the purchases made are genuine and M/s. Royal Enterprises had closed his domestic business and settled abroad. Assessee further submitted that the payments are made through account payee cheques as such contended that all the purchases are genuine. However, parties were not produced before the Assessing Officer. 3. Not convinced with the submissions of the assessee the Assessing Officer treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there being any transportation of materials and the assessee might have made ....
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....he rules of the Evidence Act, but he must act in consonance with natural justice, and one such rule is that he should not use any material against an assessee without giving the assessee an opportunity to meet it He is not bound to divulge the source of his information. There is no denial of natural justice if the ITO refuses to produce an information for cross-examination though if a witness is examined in the presence of the assessee, the assessee must be allowed to cross-examine him. 7.13 In the light of above decision, a conclusion can be drawn that adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee and if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the AO to allow cross-examination. But this rule is not applicable where the material or evidence used is of collateral nature. In the present case, the AO has not made the addition solely on the basis of material gathered by the STA, GOM. The material gathered by the STA, GOM passed on to the IT Department has given a clue to t....
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....The Hon'ble jurisdictional High Court of Bombay in the case of Naresh K. Pahuja vs. Income Tax Appellate Tribunal: (2015) 375 ITR 0526 (Bom) has held that "mere routing of a gift through a banking channel would not by itself establish that the gift is genuine and the genuineness or non-genuineness of the gift would have to be established by other evidence." And the Hon'ble Supreme Court of India in the case of CIT vs. P. Mohanakala & Ors. (2007) 291 ITR 0278 has held that "The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence." 7.16 It emerges from the above decisions that it is mandatory for the appellant to establish the genuineness of transaction by independent supporting evidences and the payment by way of bank cheques or payment through the process of banking transaction in itself is of no consequence. Therefore, in my view, purchase transaction in the present case cannot be considered genuine merely because the payments were made through account payee cheques. 7.1 The Hon'ble Supreme Court of India in the case of Commis....
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....erence between the purchase price of unaccounted material and rate of purchase of accounted for goods. There may be a saving on account of sales-tax and other taxes and duties which may be leviable in respect of manufacture of sale of goods in question. The suppliers or the manufacturers make a substantial saving in the income-tax in respect of income from sale of unaccounted goods produced and sold by them. This may also be one of the factors due to which the seller may be willing to charge lower rates for unaccounted goods as compared to accounted for goods. 7.20 Apparently, the motive behind obtaining bogus bills is inflation of purchase price so as to suppress the profits Therefore, in light of the above discussion, taking in to account the totality of the facts, it will be reasonable to estimate the profit embedded in the accommodation entries of bogus purchases as undisclosed profit of the appellant. 7.21 The profit from such transactions varies with nature of business and no uniform yardstick can be adopted for estimation of such profit and the estimations of profit embedded in accommodation entries of bogus purchases transactions @ 12.5% out of purchase price accounted ....