M/s. Johnson Cables Pvt.Ltd, Pune V. Income-tax Officer, Ward - 14(1), Pune

ITA 1383/PUN/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3832 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-08-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 30-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ARISE OUT OF COMMON PASSED; RELATING TO ASSESSMENT YEARS
• Keywords: Bogus purchase; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . ., . / ITA NOS. 1382 & 1383/PUN/2018 / ASSESSMENT YEARS : 2010-11 & 2011-12 M/S. JOHNSON CABLES PVT. LTD., 538, A-1, SHANIWAR PETH, PUNE 411 030 PAN : AABCJ1793P VS. ITO, WARD-14(1), PUNE (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THESE TWO APPEALS BY THE ASSESSEE RELATING TO THE ASSESSMENT YEARS 2010-11 & 2011-12 ARISE OUT OF THE CO MMON ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) - 2, PUNE ON 22-06-2018. 2. BRIEFLY STATED, THE FACTS FOR A.Y. 2010-11 ARE THAT THE ASSESSING OFFICER (AO) GOT INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE RECEIVED FAKE PURCHASE BILLS F ROM HAWALA DEALERS, LISTED ON PAGE 2 OF THE ASSESSMENT ORDER, TO THE APPELLANT BY SHRI RISHABH GUJRATHI RESPONDENT BY SHRI SHASHANK DEOGADKAR DATE OF HEARING 16-08-2019 DATE OF PRONOUNCEMENT 16-08-2019 ITA NOS.1382 & 1383/PUN/2018 M/S. JOHNSON CABLES PVT. LTD. 2 TUNE OF RS.1,28,26,897/-. NOTICE WAS ISSUED U/S 148. AF TER ENTERTAINING OBJECTIONS FROM THE ASSESSEE, THE AO MADE ADDITION @12.5% OF BOGUS PURCHASES AMOUNTING TO RS.16,03,362/- . 3. SIMILAR IS THE POSITION FOR THE A.Y. 2011-12. FOR THIS YE AR ALSO, THE ASSESSEE WAS FOUND TO HAVE RECEIVED ACCOMMODA TION BILLS TO THE TUNE OF RS.1,11,79,133/-. APPLYING THE SAME PERCENTAGE OF 12.5%, THE AO MADE ADDITION OF RS.13,97,39 1/-. THE LD. CIT(A) UPHELD THE ASSESSMENT ORDERS. 4. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD. IN SO FAR AS THE INITIATION OF REASSESS MENT IS CONCERNED, IT IS CLEAR THAT THE AO GOT SPECIFIC INFORMATION FRO M THE SALES TAX DEPARTMENT ABOUT THE ASSESSEE BEING A BENEFICIA RY OF FAKE ACCOMMODATION ENTRIES FROM HAWALA DEALERS. THE CONTENTION OF THE ASSESSEE THAT REASSESSMENT ON SUCH BASIS IS WRONG, IN MY CONSIDERED OPINION, COMPLETELY UNFOUNDED. 5. THE HONBLE 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. ITA NOS.1382 & 1383/PUN/2018 M/S. JOHNSON CABLES PVT. LTD. 3 THE HONBLE 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 CA USE 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 ASSESS MENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOULD H AVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. EXPLAINING THE POSITION FURTHER, IT LAID DOWN 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 RELEVAN T 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 SO BECAUSE THE FORMATION OF BELIEF BY THE AO IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION. 6. AT THIS STAGE, IT IS RELEVANT TO TAKE NOTE OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN PHOOLCHAND BAJRANG LAL AND ANR VS. ITO AND ANR (1993) 203 ITR 456 (SC), IN WHICH THE AOS ITA NOS.1382 & 1383/PUN/2018 M/S. JOHNSON CABLES PVT. LTD. 4 JURISDICTION TO INITIATE REASSESSMENT WAS CHALLENGED. REPELLING THE ASSESSEES ARGUMENTS, THE HONBLE SUPREME COURT HELD TH AT AN ITO ACQUIRES JURISDICTION TO REOPEN ASSESSMENT UNDER S . 147(A) R/W S. 148 ONLY IF ON THE BASIS OF SPECIFIC, RELIABLE AND RELEVANT INFORMATION COMING TO HIS POSSESSION SUBSEQUENTLY, H E HAS REASONS WHICH HE MUST RECORD, TO BELIEVE THAT BY REAS ON OF OMISSION OF FAILURE ON THE PART OF THE ASSESSEE TO MAKE A TR UE AND FULL DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR HIS ASSESS MENT DURING THE CONCLUDED ASSESSMENT PROCEEDINGS, ANY PART OF HIS INCOME, PROFIT OR GAINS CHARGEABLE TO INCOME-TAX HAS ESCAPE D ASSESSMENT. HE MAY START REASSESSMENT PROCEEDINGS EITHER BECAUSE SOME FRESH FACTS COME TO LIGHT WHICH WERE NOT PREVIOUSLY DISCLOSED OR SOME INFORMATION WITH REGARD TO THE F ACTS PREVIOUSLY DISCLOSED COMES INTO HIS POSSESSION WHICH TEND TO EXPOSE THE UNTRUTHFULNESS OF THOSE FACTS. IN THAT CASE, TH E ITO WAS HELD TO HAVE RIGHTLY INITIATED THE REASSESSMENT PROCEEDINGS ON THE BASIS OF SUBSEQUENT INFORMATION, WHICH WAS SPECIFIC, RELEVANT AND RELIABLE. 7. IN BRIGHT STAR SYNTEX PVT. LTD. VS. ITO (2016) 387 ITR 231 (BOM) , THE AO INITIATED THE REASSESSMENT ON THE BASIS OF SOME ITA NOS.1382 & 1383/PUN/2018 M/S. JOHNSON CABLES PVT. LTD. 5 INFORMATION INDICATING THE ASSESSEE AS A BENEFICIARY TO ACCOMMODATION ENTRY. THE ASSESSEE CHALLENGED THE INITIATION O F REASSESSMENT BY WAY OF A WRIT. DISMISSING THE PETITION, THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT AT THE STAGE OF INITIATION OF REASSESSMENT, THE AO IS NOT REQUIRED TO HAVE CONCLUSIVE EVIDENCE THAT INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT. AS THE REASONS RECORDED FOR REOPENING ESTAB LISHED A LINK BETWEEN THE MATERIAL AVAILABLE AND THE CONCLUSION REACHED BY THE AO FOR REOPENING THE ASSESSMENT, THE HONBLE HIGH C OURT REFUSED TO INTERFERE BY OBSERVING THAT THE EXPRESSION `REAS ON TO BELIEVE CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINA LLY ESTABLISHED BEYOND DOUBT THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. SIMILAR VIEW HAS BEEN TAKEN BY THE H ONBLE 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. 8. REVERTING TO THE FACTS OF THE INSTANT CASE, IT IS SEEN THAT THE AO RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT ABOU T THE BENEFICIARIES OF ACCOMMODATION ENTRIES, WHICH INCLUDED THE ITA NOS.1382 & 1383/PUN/2018 M/S. JOHNSON CABLES PVT. LTD. 6 NAME OF THE ASSESSEE. THERE WAS A CLOSE NEXUS BETWEEN 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 UNDER CONSIDERATION. SUCH INFORMATION WAS SPECIFIC, NOT GENERAL OR VAGUE. THUS, IT IS ABUNDANTLY CLEAR THAT SUCH A MATERIAL WAS SUFFICIENT ENOUGH FOR THE ASSESSING OF FICER TO INITIATE THE REASSESSMENT. IN MY CONSIDERED OPINION, NO EXCEPTION CAN BE TAKEN TO THE VIEW CANVASSED BY THE ASSESS ING OFFICER IN INITIATING THE REASSESSMENT ON THIS SCORE. THE GROUN D TAKEN BY THE ASSESSEE IS THUS DISMISSED. 9. NOW I TURN TO THE MERITS OF THE CASE IN WHICH CHALLENG E HAS BEEN LAID TO THE MAKING OF ADDITION ON THE BASIS OF BOGUS PURCHASE BILLS RECEIVED BY THE ASSESSEE AS ACCOMMODATION E NTRIES FROM HAWALA DEALERS. IT IS SEEN THAT THE ISSUE OF BOGUS PU RCHASES HAS RECENTLY COME UP FOR CONSIDERATION BEFORE THE HONBLE BOMBAY HIGH COURT IN PR.CIT VS. MOHOMMAD HAJI ADAM & CO. VIDE ITS JUDGMENT DATED 11-02-2019 IN ITA NO.1004 OF 2016 AND OTHERS, THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT NO AD HOC ADDITION AT THE RATE OF 10% OF BOGUS PURCHASES IS WARRANTED. RATHER THE ADDITION SHOULD BE MADE TO THE EXTENT OF ITA NOS.1382 & 1383/PUN/2018 M/S. JOHNSON CABLES PVT. LTD. 7 DIFFERENCE BETWEEN THE GROSS PROFIT RATE ON GENUINE PURCH ASES AND GROSS PROFIT RATE ON HAWALA PURCHASES. SUCH DETAILS A RE NOT READILY AVAILABLE WITH THE LD. AR AS WELL TO FACILITATE THE CALCULATION OF GROSS PROFIT RATES OF GENUINE AND HAWALA PURCHASES. UNDER THESE CIRCUMSTANCES, I SET-ASIDE THE I MPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF THE AO FOR APPLYING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE NOTED CASE AND RECOMPUTE THE AMOUNT OF ADDITIONS, IF ANY, AFTER ALLOWING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 10. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH AUGUST, 2019. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 16 TH AUGUST, 2019 ITA NOS.1382 & 1383/PUN/2018 M/S. JOHNSON CABLES PVT. LTD. 8 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-2, PUNE 4. THE PR.CIT- 6, PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 16-08-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 16-08-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -- JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -- JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *