TaxTMI 
TaxTMI 
2024 (2) TMI 983
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....e treated as income from Hawala dealers as per the information provided by Sales Tax Department, Maharashtra which is bad in law. 2. On the facts and in law, the Hon. CIT (A) erred in confirming the judgements in favor of Appellant which is also against the law. 3. Briefly stated, facts of the case are that during the year under consideration, the assessee was carrying proprietary business under the name and style of M/s Robin International. The assessee filed return of income for assessment year 2009-10 on 27.09.2009 and for assessment year 2010-11 on 23.09.2010, declaring total income of Rs. 2,67,352/- and Rs. 3,10,624/- respectively. 3.1 Subsequently, the Assessing Officer received information from the Investigation Wing of the Income-tax Department that during assessment year 2009-10 and 2010-11, the assessee obtained bogus purchase bills from certain 'hawala' dealers and accordingly the Assessing Officer recorded reasons to believe that income escaped assessment, therefore, he reopened the assessment by way of issuing notice u/s 148 of the Income-tax Act, 1961 (in short the 'Act'). In the reassessment completed u/s 147 of the Act for assessment year 2009-10 on 0....
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....income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. 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 the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer." 6.2 Further, the Hon'ble Supreme Court in Central Provinces Manganese Ore Co. Ltd vs ITO [1991] 191 ITR 662 has observed that at the stage of initiation of proceedings u/s 147 of the Act, what is relevant is the existence of reasons to make the Income-tax Officer believe that there has been under-assessment of the assessee's income for a particular year. The final outcome of proceedings is not relevant. Also, Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd Vs ITO [1999] 236 ITR 34 (SC) while examining the issue of....
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....Calcutta Discount Co. Ltd v ITO (1961) 41 ITR 191 201-02 (SC) examining the power of court to investigate the belief of the AO has held as under:- "All that is necessary to give special jurisdiction under section 147(a) is that the Assessing Officer had when he assumed jurisdiction some prima facie grounds for thinking that there has been some non-disclosure of material facts. Whether these grounds were adequate or not for arriving at such conclusion would not be open for the Courts' Investigation. Clearly it is the duty of the assessee who wants the court to hold that jurisdiction was lacking, to establish that Assessing Officer had no material at all before him for believing that there had been such non-disclosure." 7 In the present case, a perusal of the assessment order clearly suggests that information received by the Assessing Officer was specific, giving the details of Hawala Dealers and the amounts of bogus purchases made by the appellant during the year under consideration. The information received by the Assessing Officer also contained the affidavits/deposition of these Hawala Dealers wherein they had admitted of providing bogus purchase bills to va....
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....RPRISES АЕАРТ8181Р 2009-10 1,03,116 27820645517V V M UDYOG AGKPC6868L 2009-10 86,424 27750595164Ý DEEP ENTERPRISES .AMTP59884P 2009-10 91,702 27470616755V SOMNATH INTERNATIONAL AISPG1601K 2009-10 54,808 27660660931V SHREE SAI TRADING CO ATQPP8547E 2009-10 76,607 27630606579V PAWAN ENTERPRISES AEPPT8679H 2009-10 7,02,338 27960673085V K K TRADING COMPANY ARIPS0295C 2009-10 48,308 27650549144V MAHAVIR ENTERPRISES AACPT9032D 2009-10 51,480 Total 12,89,039 6.3 Regarding the assessment year 2010-11, the list of bogus parties is reproduced as under: Tin of Hawala Dealers Name of Hawala Dealer PAN of Hawala Dealer Assessment year Amount in Rupees 1 2 3 4 5 27760622173V DHRUV SALES CORPORATION AHYPD6115E 2010-11 109,221 27040651087V RIDDHI ENTERPRISES ACHPT0444J 2010-11 89,450 27820645517V V M UDYOG AGKPC6868L 2010-11 47,424 27520680408V SHANTINATH CORPORATION ABFPW4096G 2010-11 47,918 27540616280V NAVDE....
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.... rejected the contentions of the assessee that no cross examination was provided to the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: "10. I have considered the facts of the case and submissions made by the appellant. A perusal of the assessment order clearly suggests that the Assessing Officer had confessions of various Hawala Dealers from whom the appellant has claimed to have made purchases. The confessions made by these Hawala Dealers have been summarized by the Assessing officer in para 4.1 of the assessment order. Further, during the assessment proceedings, the assessee was asked to furnish confirmation, purchase bills, delivery challans, lorry receipts and stock register for these purchases, however, the assessee could produce only ledger extract for purchases and copies of purchase bills. Thereafter, the Assessing officer issued notice u/s 133(6) of the Act to these persons from whom the purchases were claimed to have been made. However, these notices remained unserved. Thereafter, the AR of the assessee vide order sheet dated 25/02/2015 was requested to produce these persons, however, the AR expressed inability to produce these vendors. ....
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....ellant has attempted to produce these parties before the Assessing Officer. Even the confirmations from so called vendors could not be filed by the appellant. Considering the totality of facts of the case and the legal position on this issue, it is held that the appellant has failed to substantiate the purchases claimed to have been made from 9 parties as mentioned earlier in this order. 14. The appellant has taken an argument that the Assessing Officer made additions merely on the basis of information provided by the Sales Tax Department and without providing an opportunity of cross-examination. This argument of the appellant is factually incorrect because during the assessment proceedings, the Assessing Officer conducted independent investigation wherein these persons were found not traceable. Thereafter, the AR of the appellant was asked to produce these persons but the AR conveyed his inability to produce these vendors. In view of these facts, the argument of the appellant that the addition was made solely on the basis of information provided by the Sales Tax Department is factually incorrect. 15. One of the arguments taken by the appellant is that no opportun....
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....a person before it is accepted against somebody else, that somebody else should have an opportunity of meeting it whether it (sic), by way of interrogation or by way of comment does not matter. So long as the party charged has a fair and reasonable opportunity to see, comment and criticise the evidence, statement or record on which the charge is being made against him the demands and the test of natural justice are satisfied. Cross-examination in that sense is not the technical cross-examination in a Court of law in the witness-box." (emphasis supplied) Further, in para 105, following has been observed - 105. In our opinion right to cross-examine the witness who made adverse report, is not an invariable attribute of the requirement of the dictum, audi alteram partern. The principles of natural justice do not require formal cross-examination. Formal cross-examination is a part of procedural justice. It is governed by the rules of evidence and is the creation of Court. It is part of legal and statutory justice and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has....
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.... of affairs is based on primary evidence. In this case, the assessee had failed to lead any primary evidence, viz. GRNs, octroi receipts, delivery challans, etc. which would show that the supplies were indeed made. "(para 24). 16.5 The assesses cannot seek to cross examine their own witnesses who are known and connected to him and not regarded as third party, since under the rule of evidence the right to cross examine is given for the witness of the opposite party. For example, if the assessee makes a claim of purchase/investment/transaction in the Return of income and files the necessary details of the parties in support of the claim as witness and if the Revenue has collected material to rebut such claim which may be in the form of the statement recorded, the assessee has to discharge the onus cast upon him and in such condition he cannot take the plea of cross examination of his own witnesses unless he claims in the proceedings that the witnesses on which he relied upon turned hostile. 16.6 Where there are sufficient materials before the Assessing Officer/Appellate Authorities, the opportunity of cross-examination may not be given, being irrelevant. In the case....
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....cross examined would cause prejudice to the assessee as nowhere in the report the names of the assessees feature. The investigation report states that the investigation has not commenced from the individuals but it has commenced who had dealt with the penny stocks, concept of working backwards. This is a very significant factor to be remembered. Therefore, there has been absolute anonymity of the assessee in the process of investigation. The endeavour of the department is to examine the "modus operandi" adopted and in that process now seek to identify the assessees who have benefited on account of such "modus operandi". Therefore, considering the factual scenario no prejudice has been established to the assessee by not furnishing the investigation report in its entirety nor making the persons available for cross examination as admitted by the department in substantial number of cases the assessees have not been specifically indicted by those persons from whom statements have been recorded. 59. We are conscious of the fact that there may be exceptions however nothing has been brought before us to show that there was an exception in any of these appeals heard by us. In a few....
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....e the right to cross examine is given for the witness of the opposite party 17.2 In the present case, a perusal of assessment order suggests that all the material which was available with the AO was confronted with the appellant and appellant had filed his replies on various aspects. It may be mentioned that the appellant was asked to produce the persons from whom purchases were claimed to have been made, however, the AR of the appellant conveyed his inability to produce these persons. As per AO, the appellant is a beneficiary of accommodation entry racket and as held by Hon. ITAT, Delhi bench in the case of Meghna Towers (supra), cross examination is not necessary. Moreover, as discussed earlier in this order, the addition was not made solely on the basis of confession of the Hawala Dealers. Considering the facts of the case and the case laws discussed above, it is held that cross-examination is not necessary in this case. 18. In view of the above discussion, it is held that the appellant has failed to substantiate the purchases amounting to Rs. 12,89,039/- claimed to have been made from 9 Hawala Dealers as tabulated earlier in this order. Accordingly, the action....
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....ing Officer had received the statement of the persons who were hawala dealers and who had admitted to have just issued bills of sale without delivery of goods. In such circumstances, there is evidence against the respective assessee that where the seller of the goods, has admitted not to have entered into real transaction of sale of goods. Against such non-transaction, there can be no delivery of goods, then it is case of passing of bills of sale and purchases. against which no VAT has been paid. Such bogus purchases are then to be added in the hands of assessee. Where the Assessing Officer had confronted the assessee with the information received, supplied copies of statements and where the persons have not been traced and no confirmation has been filed by the assessee in this regard, then the addition is to be made in the hands of assessee on account of such bogus purchases. In the facts and circumstances of some cases, the goods have been transferred by such hawala dealers to the respective purchasers, against which the assessee has to discharge onus of establishing the trail of goods which are transferred and further sold by them. Where the assessee is able to produce evidence ....
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....n account of such bogus purchases. IV. The next instance is the case of goods which have been admittedly sold by the hawala dealer and has been received by the assessee, who in turn had maintained quantitative details and also evidence of its movement i.e. transportation details and quality control details of consumption of the said material or exact details of sale of the same consignment through same transporter directly to the party, then the total purchases cannot be added in the hands of assessee. However, since the purchases are made from the grey market, some estimation needs to be made in the hands of assessee. The Tribunal in M/s. Chetan Enterprises Vs. ACIT (supra) has already held that the addition be made by estimating the same @ 10% of the alleged hawala purchases, over and above the GP shown by the respective assessee. V. Another set of cases where the statements recorded by the Sales Tax Department have been handed over to the assessee and the copies of same have been supplied to the assessee, then where the assessee established the case of receipt of goods and its onward transmission, then the factum of purchases by the assessee stands established ....
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....ered similar facts and circumstance in the case of "PCIT Vs Pinaki D Pinani" (Bombay ITA/1543 of 2017), wherein the assessee being civil contractor, with evidential stock records and sales, was abie to demonstrate the quantity of material consumed in execution of work contract undertaken and thereby established the nexus. 8. In the light of aforesaid discussion, we are of the considered view that, the ratio laid down by the Hon'ble Supreme Court in the case of "NK Proteins Ltd vs DCIT" (Supra) is squarely applicable to the facts of assessee case, where the Hon'ble Supreme Court dismissed appeal of assessee and confirmed the findings of Hon'ble Gujarat High Court in respect of bogus or sham purchases, wherein the Hon'ble Lordships, after analysing necessary facts, by para 6 of the order have held that; "6. The Tribunal in the case of Vijay Proteins Ltd. (supra) has observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25% of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find t....
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....ase, the appellant has neither filed quantitative details of goods nor the appellant has filed any document substantiating that the goods mentioned in these bogus purchase bills were actually sold to some buyers. As noted by the Assessing Officer, the appellant is not maintaining any stock register. Therefore, in the present case, there is complete absentia with regards to quantitative details or further transmission of material to the buyers. In the absence of these details, it cannot be simply presumed that the goods were procured by the appellant from grey market. Accordingly, by following the ratio laid down in the above-mentioned cases, the whole of the amount corresponding to bogus purchases needs to be disallowed. Accordingly, the action of the Assessing Officer of disallowing whole of the amount corresponding to the bogus purchases is upheld. The addition of Rs. 12,89,039/- is accordingly confirmed. The grounds no. 2 and 3 filed by the appellant are DISMISSED." 6.7 We have heard rival submission of the parties and perused the relevant material on record. Before us, the Ld. Counsel for the assessee submitted that sales have not been doubted by the Ld. Assessing Officer an....