Appeal Details
Counselvise Citation
[2018] 119 COUNSELVISE.COM (IT) 5066 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
6 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-10-2018
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
SMC
Assessment Year
2010-2011
Appeal Filed On
16-03-2018
Judgement Text
, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.1729 & 1730/MUM/2018 ASSESSMENT YEAR:2010-11 & 2011-12 SHRI DINESHKUMAR C. DOSHI, PROP. JAGRUTI METAL INDS. OFFICE NO.305, 3 RD FLOOR,13/12, VIRCHAND UMERSHWAY, B, 3 RD PANJRAPOLE LANE, C. P. TANK, MUMBAI-400004 / VS. INCOME TAX OFFICER-19(1)(4), ROOM NO.222, 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI-400007 / ASSESSEE / REVENUE P.A. NO . AHMPD4114D $ % & / ASSESSEE BY NONE $ % & / REVENUE BY SHRI S.K. BEPARI-DR / DATE OF HEARING 11/10/2018 & / DATE OF ORDER: 11/10/2018 & / O R D E R THESE TWO APPEALS ARE BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 10/01/2018 OF THE LD. FIRST AP PELLATE AUTHORITY, MUMBAI. THE FIRST GROUND RAISED BY THE A SSESSEE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 2 PERTAINS TO UPHOLDING THE REOPENING OF ASSESSMENT U NDER SECTION 147/148 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT). 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E , MOVED APPLICATION FOR ADJOURNMENT, WHICH WAS REJECT ED, AS NO PLAUSIBLE REASONING WAS ADDUCED FOR SEEKING ADJOURNMENT. SHRI S. K. BEPARI, LD. DR, DEFENDED T HE ADDITION SUSTAINED BY THE LD. COMMISSIONER OF INCOM E TAX (APPEAL) BY ARGUING THAT THE ADDITION SUSTAINED BY THE LD. FIRST APPELLATE AUTHORITY AT THE RATE OF 6.5% MA Y BE ENHANCED TO 12.5% OF BOGUS PURCHASES, AS DONE BY TH E LD. ASSESSING OFFICER. SO FAR AS, REOPENING OF ASSESSM ENT UNDER SECTION 147 IS CONCERNED, THE STAND OF THE LD. ASSE SSING OFFICER WAS DEFENDED. 2.1. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SO FAR AS , RE- OPENING OF ASSESSMENT U/S 147/148 OF THE ACT ON THE PLEA THAT THE LD. ASSESSING OFFICER IGNORED THE FACT THA T THERE WAS NO REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESS MENT AS THERE WAS NO TANGIBLE MATERIAL WITH THE ASSESSING O FFICER AND ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 3 INDEPENDENT APPLICATION OF MIND IS CONCERNED, I FIN D THAT THERE WAS INFORMATION WITH THE ASSESSING OFFICER TH AT ASSESSEE IS ONE OF THE BENEFICIARIES OF ACCOMMODATI ON ENTRIES PROVIDED BY THE SOME OF THE MVAT DEALERS, WHO WERE INDULGED IN ISSUING BOGUS SALE/PURCHASE BILLS AND T HE NOTICES SENT U/S.133(6) WERE ISSUED TO EIGHT PARTIES WERE R ETURNED BACK UNSERVED BY THE POSTAL DEPARTMENT, WITH THE RE MARK, NOT KNOWN, NOT TRACEABLE AND LEFT ETC. THE LD . ASSESSING OFFICER ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM SUCH PARTIES WITH SUPPORTING EV IDENCES AND ALSO TO PRODUCE FOR SUCH VERIFICATION, THE ASSE SSEE FAILED TO DO SO. IN THIS BACKGROUND, I WILL ANALYZE WHET HER THE LD. ASSESSING OFFICER WAS RIGHT IN RE-OPENING THE ASSE SSMENT U/S.147 OF THE ACT. 4.1. IN THE LIGHT OF THE FOREGOING DISCUSSIONS, IT IS MY BOUNDED DUTY TO EXAMINE THE VALIDITY OF REOPENING U /S 147 R.W.S 148 OF THE ACT, THEREFORE, BEFORE ADVERTING FURTHER I AM REPRODUCING HEREUNDER THE RELEVANT PROVISION OF SEC TION 147 OF THE ACT FOR READY REFERENCE AND ANALYSIS:- ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 4 . IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 1 53, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHAR GEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT Y EAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 1 53 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER T HE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSE E TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE I NDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR : PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHI CH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERENCE OR REVISIO N, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT. EXPLANATION 1.PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENC E COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFF ICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY : (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF AN Y OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DU RING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARG EABLE TO INCOME-TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE A SSESSING OFFICER ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 5 THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN ; (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REP ORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESS ED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RA TE ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED; (D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INC LUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA. EXPLANATION 3.FOR THE PURPOSE OF ASSESSMENT OR REA SSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSES S OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED A SSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THA T THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RE CORDED UNDER SUB- SECTION (2) OF SECTION 148. EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION, AS AMENDED BY THE F INANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BE GINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012. 4.2. IF THE AFORESAID PROVISION OF THE ACT IS ANAL YZED, I FIND THAT AFTER INSERTION OF EXPLANATION -3 TO SECT ION 147 OF THE ACT BY THE FINANCE (NO.2) ACT OF 2009 WITH EFFE CT FROM 01/04/1989 SECTION 147 HAS AN EFFECT THAT ASSESSING OFFICER HAS TO ASSESS OR REASSESS INCOME (SUCH INCOME) WHIC H HAS ESCAPED ASSESSMENT AND WHICH WAS BASIS OF FORMATION OF BELIEF AND, IF HE DOES SO, HE CAN ALSO ASSESS OR RE ASSESS ANY ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 6 OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH CAME TO THE NOTICE DURING THE COURSE OF PROCEEDINGS. ID ENTICAL RATIO WAS LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN CIT VS JET AIRWAYS INDIA PVT. LTD. (2010) 195 TAXMA N 117 (MUM.) AND THE FULL BENCH DECISION FROM HONBLE KER ALA HIGH COURT IN CIT VS BEST WOOD INDUSTRIES AND SAW MILLS (2011) 11 TAXMAN.COM 278 (KERALA)(FB). A PLAIN READING OF EXPLANATION-3 TO SECTION 147 CLEARLY DEPICTS THAT T HE ASSESSING OFFICER HAS POWER TO MAKE ADDITION, WHERE HE ARRIVED TO A CONCLUSION THAT INCOME HAS ESCAPED ASS ESSMENT WHICH CAME TO HIS NOTICE DURING THE COURSE OF PROCE EDINGS OF REASSESSMENT U/S 148. MY VIEW IS FORTIFIED BY THE DECISION IN MAJINDER SINGH KANG VS CIT (2012) 25 TAXMAN.COM 124 /344 ITR 358 (P & H) AND JAY BHARAT MARUTI LTD. VS CIT ( 2010) TAX LR 476 (DEL.) AND V. LAKSHMI REDDY VS ITO (2011 ) 196 TAXMAN 78 (MAD.). THE PROVISION OF THE ACT IS VERY MUCH CLEAR AS WITH EFFECT FROM 01/04/1989, THE ASSESSING OFFICER HAS WIDE POWERS TO INITIATE PROCEEDINGS OF REOPENIN G. THE HONBLE KERALA HIGH COURT IN CIT VS ABDUL KHADAR AH MAD (2006) 156 TAXMAN 206 (KERALA) EVEN WENT TO THE EXT ENT SO LONG AS THE AO HAS INDEPENDENTLY APPLIED HIS MIND T O ALL THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 7 RELEVANT ASPECT AND HAS ARRIVED TO A BELIEF THE REO PENING CANNOT BE SAID TO BE INVALID. 4.3. I AM AWARE THAT MERE CHANGE OF OPINION CANN OT FORM THE BASIS OF REOPENING WHEN THE NECESSARY FACT S WERE FULLY AND TRULY DISCLOSED BY THE ASSESSEE IN THAT S ITUATION; THE ITO IS NOT ENTITLED TO REOPEN THE ASSESSMENT MERELY ON THE BASIS OF CHANGE OF OPINION. HOWEVER, POWERS UNDER AMENDED PROVISION ARE WIDE ENOUGH WHERE THERE IS A REASONAB LE BELIEF WITH THE ASSESSING OFFICER, THAT INCOME HAS ESCAPED ASSESSMENT, BECAUSE THE POWERS WITH EFFECT FROM 01/04/1989 ARE CONTEXTUALLY DIFFERENT AND THE CUMUL ATIVE CONDITIONS SPELT OUT IN CLAUSES (A) AND (B) OF SECT ION 147, PRIOR TO ITS AMENDMENT ARE NOT PRESENT IN THE AMEND ED PROVISION. THE ONLY CONDITION FOR ACTION IS THAT T HE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. SUCH BEL IEF CAN BE REACHED IN ANY MANNER AND IS NOT QUALIFIED BY A PRE- CONDITION OF FAITH AND TRUE DISCLOSURE OF MATERIAL FACTS BY AN ASSESSEE AS CONTEMPLATED IN PRE-AMENDED SECTION 147 . VIEWED IN THAT ANGLE, POWER TO REOPEN ASSESSMENT IS MUCH ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 8 WIDER UNDER THE AMENDED PROVISION. MY VIEW IS FORT IFIED BY THE DECISION FROM HONBLE DELHI HIGH COURT IN BAWA ABHAI SINGH VS DCIT (2001) 117 TAXMAN 12 AND RAKESH AGARW AL VS ACIT (1996) 87 TAXMAN 306 (DEL.). THE HONBLE APEX COURT IN CIT VS SUN ENGINEERING WORKS PVT. LTD. 198 ITR 297 (SC) CLEARLY HELD THAT PROCEEDINGS U/S 147 ARE FOR THE B ENEFIT FOR THE REVENUE, WHICH ARE AIMED AT GATHERING THE ESCA PED INCOME. AT THE SAME TIME, I AM AWARE THAT POWERS U/S 147 AND 148 OF THE ACT ARE NOT UNBRIDLED ONE AS IT IS H EDGED WITH SEVERAL SAFEGUARDS CONCEIVED IN THE INTEREST OF ELI MINATING ROOM FOR ABUSE OF THIS POWER BY THE AO. HOWEVER, T HE MATERIAL AVAILABLE ON RECORD, CLEARLY INDICATES THA T INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, THEREFORE , THE LD. ASSESSING OFFICER WAS WITHIN HIS JURISDICTION TO R EOPEN THE ASSESSMENT. THE HONBLE APEX COURT IN ESS ESS KAY ENGINEERING CO. PVT. LTD. (2001) 247 ITR 818 (SC) H ELD THAT MERELY BECAUSE THE CASE OF THE ASSESSEE WAS CORRECT IN ORIGINAL ASSESSMENT FOR THE RELEVANT ASSESSMENT YEA R, IT DOES NOT PRECLUDE THE ITO TO REOPEN THE ASSESSMENT OF AN EARLIER YEAR ON THE BASIS OF FINDING OF HIS FACT THAT FRESH MATERIAL CAME TO HIS KNOWLEDGE. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 9 4.4. UNDER SECTION 147, AS SUBSTITUTED WITH EFFECT FROM 01/04/1989, THE SCOPE OF REASSESSMENT HAS BEEN WIDE NED. AFTER SUCH SUBSTITUTION, THE ONLY RESTRICTION, PUT IN THAT SECTION IS THAT REASON TO BELIEVE. THAT REASON HA S TO BE A REASON OF A PRUDENT PERSON WHICH SHOULD BE FAIR AND NOT NECESSARILY DUE TO FAILURE OF THE ASSESSEE TO DISCL OSE FULLY AND PARTIALLY SOME MATERIAL FACTS RELEVANT FOR ASSESSME NT (DR. AMINS PATHOLOGY LABORATORY VS JCIT (2001) 252 ITR 673, 682 (BOM.) IDENTICAL RATIO WAS LAID DOWN BY HONBLE DE LHI HIGH COURT IN UNITED ELECTRICAL COMPANY PVT. LTD. VS CIT (2002) 258 ITR 317, 322 (DEL.) AND PRAFULL CHUNNILAL PATEL VS ACIT 236 ITR 832, 838 (GUJ.). THE ESSENTIAL REQUIREMENT FOR INITIATING REASSESSMENT PROCEEDING U/S 147 R.W.S 14 8 OF THE ACT IS THAT THE LD. ASSESSING OFFICER MUST HAVE REA SON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT FOR ANY ASSESSMENT YEAR. THE HONBLE GUJ ARAT HIGH COURT IN PRAFULL CHUNNILAL PATEL VS ACIT (SUPR A) EVEN WENT TO THE EXTENT THAT AT THE INITIATION STAGE FOR MATION OF REASONABLE BELIEF IS NEEDED AND NOT A CONCLUSIVE FI NDING OF FACTS. IDENTICAL RATIO WAS LAID DOWN IN BRIJMOHAN AGRAWAL VS ACIT (2004) 268 ITR 400, 405 (ALL.) AND RATNACHUDAM ANI S. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 10 UTNAL VS ITO (2004) 269 ITR 272, 277 (KARNATAKA) AP PLYING SOWDAGAR AHMED KHAN VS ITO (1968) 70 ITR 79(SC). 4.5 SO FAR AS, THE MEANING OF EXPRESSION, REASON TO BELIEVE IS CONCERNED, IT REFERS TO BELIEF WHICH PR OMPTS THE ASSESSING OFFICER TO APPLY SECTION 147 TO A PARTICU LAR CASE. IT DEPENDS UPON THE FACTS OF EACH CASE. THE BELIEF MUS T BE OF AN HONEST AND REASONABLE PERSON BASED ON REASONABLE GR OUNDS. THE ASSESSING OFFICER IS REQUIRED TO ACT, NOT ON ME RE SUSPICION, BUT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE . MY VIEW FIND SUPPORT FROM THE RATIO LAID DOWN IN FOLLOWING CASES:- I. EPICA LABORATORIES LTD. VS DCIT 251 ITR 420, 425-426 (BOM.), II. VISHNU BOREWELL VS ITO (2002) 257 ITR 512 (ORISSA), III. CENTRAL INDIA ELECTRIC SUPPLY COMPANY LTD. VS ITO (201 1) 333 ITR 237 (DEL.), IV. V.J. SERVICES COMPANY MIDDLE EAST LTD. VS DCIT (2011) 339 ITR 169 (UTTRAKHAND), V. CIT VS ABHYUDAYA BUILDERS (P. ) LTD. (2012) 340 ITR 310 (ALL.), VI. CIT VS DR. DEVENDRA GUPTA (2011) 336 ITR 59 (RAJ.), VII. EMIRATES SHIPPING LINE FZE VS ASST. DIT (2012) 349 I TR 493 (DEL.). VIII. REFERENCE MAY ALSO MADE TO FOLLOWING JUDICIAL DECISI ONS:- IX. SAFETAG INTERNATIONAL INDIA P. LTD. (2011) 332 ITR 622 (DEL.), X. CIT VS ORIENT CRAFT LTD. (2013) 354 ITR 536 (DEL.) ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 11 XI. ACORUS UNITECH WIRELSS PVT. LTD. VS ACIT (2014) 362 IT R 417 (DEL.). XII. PRAFUL CHUNILAL PATEL: VASANT CHUNILAL PATEL VS ASST. CIT (1999) 832, 843-44, 844-45 (GUJ.), XIII. VENUS INDUSTRIAL CORPORATION VS ASST. CIT (1999) 236 I TR 742, 746 (PUNJ.), XIV. SRICHAND LALCHAND TALREJA VS ASST. CIT (1998) 98 TAXM AN 14, 19 (BOM.), XV. USHA BELTRON LTD. VS JCIT (1999) 240 ITR 728, 736-37, 739 (PAT.) XVI. KAPOOR BROTHERS VS UNION OF INDIA (2001) 247 ITR 32 4, 331, 332-33 XVII. VIPPY PROCESSORS PVT. LTD. VS CIT (2001) 249 ITR 7, 8 (MP) 4.6. IN DILIP S. DAHANUKAR VS ASST. CIT (2001) 248 ITR 147, 150-51 (BOM.). THE HONBLE JURISDICTIONAL HIGH COURT HELD AS UNDER:- HELD, THAT THERE WAS MATERIAL ON RECORD ON THE BASIS OF SURVEY AND STATEMENT OF PERSON TO SHOW THAT THE ASSESSEE HAD WRONGFULLY CLAIM DEDUCTION U/S 80IA. THEREFORE, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 1994- 95. IDENTICALLY IN THE CASE OF SRICHAND LALCHAND TALREJ A V. ASST. CIT, (1998) 98 TAXMAN 14, 19 (BOM), WHERE THE INFORMATION REGARDING ACQUISITION OF THE ASSET WAS NOT AVAILABLE WITH THE ASSESSING OFFICER DURING THE REL EVANT ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 12 ASSESSMENT YEAR 1992-93 AND SUCH INFORMATION WAS DISCLOSED IN THE RETURN FOR THE ASSESSMENT YEAR 199 5-96, THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT THE ASSESSING OFFICER CAN FORM A BONA FIDE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME IN RELATION TO ASSESSMENT YEAR 1992-93 . 4.7. THE HONBLE JURISDICTIONAL HIGH COURT IN EXP ORT CREDIT GUARANTEE CORPORATION OF INDIA LTD. V. ADDL. CIT, (2013) 350 ITR 651 (BOM), WHERE THERE HAD BEEN NO APPLICATION OF MIND TO THE RELEVANT FACTS DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER , THE REOPENING OF THE ASSESSMENT WAS HELD TO BE VALID. 4.8. THE HONBLE JURISDICTIONAL HIGH COURT IN GIRILAL & CO. V. S.L. MEENA, ITO, (2008) 300 ITR 432 (BOM), HELD THAT IN ORDER TO INVOKE THE EXTRAORDINARY JURISDICT ION OF THE COURT THE PETITIONER MUST ALSO MAKE OUT A CASE THAT NO PART OF THE RELEVANT MATERIAL HAD BEEN KEPT OUT FROM THE ASSESSING OFFICER). THE INFORMATION WAS IN THE ANNEXURE AND CONSEQUENTLY EXPLANATION 2(C)(IV) OF S ECTION ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 13 147 WOULD APPLY. THE REASSESSMENT PROCEEDINGS AFTER FOUR YEARS WERE VALID. 4.9. IN THE CASE OF DEPUTY CIT V. GOPAL RAMNARAYAN KASAT, (2010) 328 ITR 556 (BOM), IT WAS NOT THE CAS E OF THE ASSESSEE THAT THE NOTICE ISSUED WAS AFTER THE EXPIR Y OF THE TIME LIMIT PROVIDED IN SECTION 153(2). THE REASSESS MENT PROCEEDINGS WERE HELD TO BE VALID. IN INDIAN HUME PIPE CO. LTD. V. ASST. CIT, (2012) 348 ITR 439 (BOM), BOTH I N THE COMPUTATION OF TAXABLE LONG-TERM CAPITAL GAINS IN T HE ORIGINAL RETURN OF INCOME AND IN THE COMPUTATION THAT WAS SU BMITTED IN RESPONSE TO THE QUERY OF THE ASSESSING OFFICER T HERE WAS A COMPLETE SILENCE IN REGARD TO THE DATES ON WHICH TH E AMOUNTS WERE INVESTED, AS SUCH THERE BEING A FAILURE TO DIS CLOSE FULLY AND TRULY MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. THI S VIEW WAS ALSO CONFIRMED IN FOLLOWING CASES:- A. DALMIA P. LTD. V. CIT, (2012) 348 ITR 469 (DEL); B. CIT V. K. MOHAN & CO. (EXPORTS), (2012) 349 ITR 653 (BOM); C. REMFRY & SAGAR V. CIT, (2013) 351 ITR 75 (DEL); D. OPG METALS & FINSEC LTD. V. CIT, (2013) 358 ITR 144 (DEL). ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 14 4.10. IN THE CASE OF VENUS INDUSTRIAL CORPORATION V. ASST. CIT, (1999) 236 ITR 742, 746 (P & H) [WHERE INITIAT ION WAS STARTED WITHIN FOUR YEARS FOR RE-EXAMINING THE DEDU CTION UNDER SECTION 80HHC, WAS HELD TO BE WRONGLY ALLOWED IN THE ORIGINAL ASSESSMENT. IDENTICALLY, IN THE CASE OF HAPPY FORGING LTD. V. CIT, (2002) 253 ITR 413,416-17 (P & H), WHERE EXCISE DUTY PAID IN ADVANCE WAS SHOWN AS AN ASSET I N THE BALANCE SHEET AND WAS ALLOWED AS A DEDUCTION, REASS ESSMENT NOTICE ON THE GROUND THAT EXCISE DUTY WAS SHOWN AS AN ASSET IN THE BALANCE SHEET AND WAS NOT ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT. THE REOPENING AT THIS STAGE WAS H ELD TO BE VALID. IN THE CASE OF VIPAN KHANNA V. CIT, (2002) 255 ITR 220, 230 (P & H), WHERE FROM THE FACTS IT WAS CLEAR THAT THE ASSESSEE HAD CLAIMED DEPRECIATION IN THE RETURN AT THE RATE OF 50 PER CENT AND HE HAD NOWHERE DISPUTED THE FACT TH AT THE ADMISSIBLE RATE OF DEPRECIATION TO HIM WAS 40 PER C ENT., SUCH FACT ALONE WAS SUFFICIENT TO INITIATE REASSESSMENT PROCEEDINGS UNDER SECTION 147 AND, THEREFORE, SUCH INITIATION W AS SUSTAINED. THE HONBLE PUNJAB & HARYANA HIGH COURT IN MRS. RAMA SINHA V. CIT, (2002) 256 ITR 481, 483, 486, WH ERE THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 15 REASSESSMENT NOTICE HAS BEEN ISSUED ON THE BASIS OF DEFINITE INFORMATION FROM CBI REGARDING INVESTMENTS BY THE A SSESSEE WHICH HAD NOT BEEN DISCLOSED DURING THE ORIGINAL AS SESSMENT PROCEEDINGS, SUCH INITIATION HAS BEEN UPHELD. 4.11. IN THE CASE OF PAL JAIN V. ITO, (2004) 267 I TR 540, 544-45, 548, 549 (P & H), APPLYING PHOOL CHAND BAJR ANG LAL V. ITO, (1993) 203 ITR 456 (SC), ALTHOUGH THE TRANS ACTION OF SALE OF SHARES WAS DISCLOSED AND ACCEPTED IN THE OR IGINAL ASSESSMENT, BUT THE SUBSEQUENT DISCOVERY BY THE DDI (INVESTIGATION) REVEALED THAT THE TRANSACTION WAS N OT GENUINE, A REASSESSMENT NOTICE AFTER FOUR YEARS HAS BEEN HEL D TO BE VALID BECAUSE THERE WAS NO TRUE DISCLOSURE OF THE M ATERIAL FACTS. IN THIS REGARD, THE PETITIONER-ASSESSEE CANN OT DRAW ANY SUPPORT FROM THE STATEMENT FOR CHALLENGING THE VALI DITY OF THE NOTICE FOR REASSESSMENT. IT GOES WITHOUT SAYING THA T FOR THE PURPOSE OF MAKING THE ASSESSMENT, THE ASSESSING OFF ICER SHALL HAVE TO CONFRONT THE PETITIONER WITH THE ENTI RE MATERIAL IN HIS POSSESSION ON THE BASIS OF WHICH HE PROPOSES TO MAKE THE ADDITIONS. IN PUNJAB LEASING PVT. LTD. V. ASST. CIT, (2004) 267 ITR 779, 781-82 (P & H), WHERE DEPRECIATION WAS ALLOWED ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 16 TO THE ASSESSEE, WHO WAS ENGAGED IN THE BUSINESS OF FINANCING OF VEHICLES AND CONSUMER DURABLES ON 'HIR E- PURCHASE BASIS' AS WELL AS ON 'LEASE/RENT BASIS', A REASSESSMENT NOTICE ISSUED AFTER FOUR YEARS HAS BEE N HELD NOT TO SUFFER FROM ANY ILLEGALITY AS THE SAME WAS BASED ON THE BONA FIDE ACTION OF THE COMPETENT AUTHORITY TO DETE RMINE WHETHER OR NOT THE VEHICLES IN RESPECT OF WHICH THE PETITIONER HAD BEEN CLAIMING DEPRECIATION, WERE ACTUALLY OWNED BY IT. 4.12. IN JAWAND SONS V. CIT(A), (2010) 326 ITR 39 (P & H), IN THE INITIAL ASSESSMENT, THE BENEFIT OF DEDUC TION OF THE DUTY DRAWBACK AND DEPB UNDER SECTION 80-IB WAS WRON GLY GRANTED TO THE ASSESSEE, FOR WHICH IT WAS NOT ENTIT LED. THEREFORE, REASSESSMENT PROCEEDINGS TO WITHDRAW THE DEDUCTION WERE HELD TO BE VALID. LIKEWISE, IN CIT V. HINDUSTAN TOOLS & FORGINGS P. LTD., (2008) 306 ITR 209 (P & H), WHERE, THE ASSESSEE IN THE REGULAR ASSESSMENT H AD BEEN ALLOWED DEDUCTION MORE THAN ACTUALLY ALLOWABLE UNDE R SECTION 80HHC. THEREFORE, THE ACTION INITIATED BY THE AO FO R REASSESSMENT UNDER SECTION 147(B) COULD NOT BE HELD TO BE INVALID. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 17 4.13. IN THE CASE OF MARKANDA VANASPATI MILLS LTD. V. CIT, (2006) 280 ITR 503 (P & H), WHEREIN, THE INFOR MATION FURNISHED BY THE ASSESSEE GAVE NO CLUE TO THE PAYME NT OF LIABILITY IN REGARD OF THE SALES TAX COLLECTED IN E XCESS. THE ASSESSING OFFICER WAS HELD TO BE VALIDLY INITIATED THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 FOR BOTH THE YEARS UNDER CONSIDERATION. IN THE CASE OF SAT NAR AIN V. CIT, (2010) 320 ITR 448 (P & H), THE DOCUMENT DID NOT FO RM THE SOLE BASIS FOR THE ASSESSING OFFICER TO INITIATE R EASSESSMENT PROCEEDING BUT HE ALSO TOOK INTO CONSIDERATION THE LETTER WRITTEN BY THE ASSISTANT COMMISSIONER AS WELL AS TH E FACT THAT NO RETURN HAD BEEN FILED BY THE ASSESSEE FOR A SSESSMENT YEAR 1995-96. THUS, IT WAS HELD THAT THE ASSESSING OFFICER HAD RIGHTLY INVOKED THE JURISDICTION TO INITIATE TH E REASSESSMENT PROCEEDINGS UNDER SECTION 147. IN THE CASE OF CIT V. HUKAM SINGH, (2005) 276 ITR 347 (P & H), IT WAS HELD THAT THE RESPONDENTS DID NOT HAVE THE LOCUS STANDI TO QUESTION THE ORDERS OF REASSESSMENT ON THE GROUND O F LACK OF NOTICE. NON-ISSUANCE OF NOTICE TO SOME OF THE LEGAL HEIRS OF THE LATE P WAS MERELY AN IRREGULARITY AND THE SAME DID NOT AFFECT THE VALIDITY OF THE REASSESSMENT ORDERS. LIKEWISE, IN TILAK RAJ ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 18 BEDI V. JOINT CIT, (2009) 319 ITR 385 (P & H), WHER EIN, FACTS COMING TO LIGHT IN A SUBSEQUENT ASSESSMENT YEAR COU LD VALIDLY FORM THE BASIS FOR INITIATING REASSESSMENT PROCEEDI NGS, IN VIEW OF EXPLANATION 2 TO SECTION 147. THE ACTION OF THE INCOME TAX AUTHORITIES IN REOPENING THE ASSESSMENT OF THE ASSESSEE AND RESTRICTING THE DEDUCTION UNDER SECTIO N 80-IB WAS HELD TO BE VALID. 4.14. IN THE CASE OF SMT. USHA RANI V. CIT, (2008) 301 ITR 121 (P & H), THERE WAS NOTHING ON RECORD TO SHO W THE RELATIONSHIP BETWEEN THE DONOR AND THE DONEE, CAPAC ITY OF THE DONOR TO MAKE GIFTS AND THE OCCASION THEREFORE. THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS TO PROVE THE GIFTS . THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN THE CASE OF USHA BELTRON LTD. V. JOINT CIT, (1999) 240 ITR 7 28, 736- 37, 739 (PAT), WHERE THE INVESTIGATION REPORT INDIC ATED THAT THE OFFICER HAD REASON TO BELIEVE THAT ON ACCOUNT O F FAILURE ON THE PART OF THE PETITIONER-ASSESSEE TO DISCLOSE TRU E AND FULL FACTS, INCOME HAD BEEN GROSSLY UNDER ASSESSED, REAS SESSMENT PROCEEDINGS WERE HELD VALIDLY INITIATED. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 19 4.15. IN THE CASE OF KAPOOR BROTHERS V. UNION OF I NDIA, (2001) 247 ITR 324, 331, 332-33 (PAT), WHERE THE MA TERIAL EVIDENCE FOR THE PURPOSE OF REOPENING OF THE ASSESS MENT ALREADY COMPLETED HAS BEEN BROUGHT TO THE NOTICE OF THE AUTHORITY DURING THE COURSE OF ENQUIRY. THE NOTICE WAS HELD TO BE VALID BY THE HONBLE HIGH COURT. IN THE CASE OF VIPPY PROCESSORS PVT. LTD. V. CIT, (2001) 249 ITR 7, 8 (M P), WHERE THE NEED TO ISSUE NOTICE AROSE DUE TO NOTICING OF V AST DIFFERENCE IN VALUE OF PROPERTIES DISCLOSED BY THE ASSESSEE AND THAT OF THE REPORT OF THE VALUATION OFFICER AND THE REASONS THAT LED TO THE ISSUE OF THE NOTICE WERE DULY RECOR DED AND THE SAME WERE ALSO ADEQUATE AND BASED ON RELEVANT FACTS AND MATERIAL, INITIATION WAS UPHELD. IN TRIPLE A TRADI NG & INVESTMENT PVT. LTD. V. ASST. CIT, (2001) 249 ITR 1 09, 110-11 (MP), WHERE THE NOTICE WAS ISSUED AFTER RECORDING R EASONS IN THAT REGARD, INITIATION WAS UPHELD. 4.16. LIKEWISE, HONBLE GUJARAT HIGH COURT IN GARD EN FINANCE LTD. V. ADD/. CIT, (2002) 257 ITR 481, 489, 494-95, SPECIAL LEAVE PETITION DISMISSED BY THE SUPREME COU RT: (2002) 255 ITR (ST.) 7-8 (SC), WHERE THE ASSESSEE WAS HOLD ING SHARES ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 20 IN AN AMALGAMATING COMPANY AND HE WAS ALLOTTED SHAR ES IN THE AMALGAMATED COMPANY AND SUCH SHARES WERE SOLD B Y HIM AND HE HAS DISCLOSED THE MARKET PRICE OF SUCH SHARE S AS ON THE DATE OF AMALGAMATION AS THE COST OF ACQUISITION OF SUCH SHARES AND HAS NOT DISCLOSED THE COST OF ACQUISITIO N OF SHARES IN THE AMALGAMATING COMPANY IN ACCORDANCE WITH SECT ION 49(2) READ WITH SECTION 47(VII), INITIATION OF REAS SESSMENT PROCEEDINGS AFTER FOUR YEARS HAS BEEN SUSTAINED BEC AUSE THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE MATERIAL FACTS NECESSARY FOR ASSESSMENT. LIKEWISE, IN SUMAN STEELS V. UNION OF INDIA, (2004) 269 ITR 412,418-19 (RAJ), WHERE THE RETURN OF THE ASSESSEE FOR ASSESSMENT YEA R 1995-96 WAS PROCESSED UNDER SECTION 143(1)(A) ACCEPTING THE NET PROFIT RATE DECLARED BY THE ASSESSEE, WHO CARRIED ON CON- TRACT BUSINESS, INITIATION OF REASSESSMENT PROCEEDINGS BY ISSUING A NOTICE DATED 15-5-2001 PROPOSING TO REASSESS PETITI ONER- ASSESSEE AT HIGHER RATE IN VIEW OF THE PRESUMPTIVE RATE PRESCRIBED UNDER SECTION 44AD HAS BEEN SUSTAINED. IN THE CASE OF DR. SAHIB RAM GIRI V. ITO, (2008) 301 ITR 2 94 (RAJ), THE REASSESSMENT PROCEEDINGS WERE INITIATED AFTER R ECORDING REASONS IN WRITING BY THE AO. THE NON-AVAILABILITY OF A FEW ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 21 DOCUMENTS DEMANDED BY THE ASSESSEE WOULD NOT MAKE T HE REASSESSMENT PROCEEDINGS INITIATED FOR THE REASONS RECORDED IN DETAIL ILLEGAL. 4.17. IN THE CASE OF DESH RAJ UDYOG : CHAMAN UDYOG V. ITO, (2009) 318 ITR 6 (ALL), IN THE ASSESSMENT YEAR S IN QUESTION, THE MATTER WAS STILL TO BE DECIDED FINALL Y BY THE ASSESSING AUTHORITY WHETHER THE INCOME SHOULD BE TR EATED UNDER THE HEAD 'BUSINESS INCOME' OR 'PROPERTY INCOM E'. THE ASSESSEE WOULD GET OPPORTUNITY TO SHOW SUFFICIENT C AUSE TO THE ASSESSING AUTHORITY DURING THE COURSE OF ASSESS MENT. THUS, IT COULD NOT BE SAID THAT THERE WAS NO RELEVA NT MATERIAL TO INITIATE PROCEEDINGS UNDER SECTION 147. IN THE CASE OF KARTIKEYA INTERNATIONAL V. CIT, (2010) 329 ITR 539 (ALL), IN VIEW OF THE MATTER, THE PETITIONER WAS NOT ENTITLED FOR THE DEDUCTION ON THE DUTY DRAWBACK AMOUNT UNDER SECTION 80-IB AND SINCE IT HAD BEEN ALLOWED IN THE ASSESSMENT ORD ER PASSED UNDER SECTION 143(1), IT HAD ESCAPED ASSESSMENT. ON THESE FACTS THE INITIATION OF THE PROCEEDINGS UNDER SECTI ON 147 READ WITH SECTION 148 FOR ASSESSMENT YEARS 2005-06 AND 2 006-07 WAS LEGAL AND IN ACCORDANCE WITH LAW. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 22 4.18. LIKEWISE, IN THE CASE OF SUNIL KUMAR LAIN: S URESH CHANDRA LAIN V. ITO, (2006) 284 ITR 626 (ALL), NOTWITHSTANDING THE FACT THAT THE AMOUNT HAD BEEN A SSESSED TO TAX IN THE HANDS OF P, HE HAD TAKEN A STAND THAT THE AMOUNT DID NOT BELONG TO HIM AND INSTEAD BELONGED T O S. THUS, IT WAS NOT CLEAR AS TO IN WHOSE HANDS THE AMO UNT IN QUESTION HAD TO BE ASSESSED. THE ITO WAS JUSTIFIED IN TAKING PROCEEDINGS UNDER SECTION 147 FOR ASSESSING THE AMO UNTS IN THE HANDS OF THE PETITIONERS ACCORDING TO THE CLAIM MADE BY THE PETITIONERS. LIKEWISE, HONBLE KERALA HIGH COU RT IN CIT V. DR. SADIQUE UMMER, (2010) 322 ITR 602 (KER), WHERE, THE ASSESSING OFFICER COLLECTED FURTHER INFORMATION TO COMPLETE THE REASSESSMENTS WHICH WAS ALSO PERMISSIBLE UNDER THE ACT. THE FINDING OF THE FIRST APPELLATE AUTHORITY AS WEL L AS THE TRIBUNAL, THAT THE ASSESSING OFFICER HAD NO MATERIA L TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT WAS WRONG AN D CONTRARY TO FACTS. THE ASSESSEE HAD NOT MAINTAINED ANY BOOKS OF ACCOUNT. THEREFORE, THE REOPENING OF ASSESSMENTS WAS HELD TO BE VALID AND WITHIN TIME. IN THE CASE OF CIT V . UTTAM CHAND NAHAR, (2007) 295 ITR 403 (RAJ), THE NOTICE R EQUIRING ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 23 THE ASSESSEE TO FILE THE RETURN WITHIN 30 DAYS WAS IN ACCORDANCE WITH SECTION 148 AS IT MUST BE DEEMED TO BE IN FORCE WITH EFFECT FROM 1-4-1989, AND IN FORCE AS ON THE DATE NOTICE WAS ISSUED. THERE WAS NO VIOLATION OF SECTIO N 148 IN RESPECT OF THE SPECIFIED PERIOD WITHIN WHICH THE RE TURN IS TO BE SUBMITTED. THE REASSESSMENT PROCEEDINGS WERE HELD T O BE VALID. 4.19. IN THE CASE OF CIT V. C. V. LAYACHANDRAN, (2 010) 322 ITR 520 (KER), WHERE, THE ASSESSEE DID NOT CONC EDE THE INCOME ON CAPITAL GAIN EITHER UNDER THE UN-AMENDED PROVISION OR UN-DER THE AMENDED PROVISION, THE RECO URSE OPEN TO THE DEPARTMENT WAS TO BRING TO TAX INCOME ESCAPI NG ASSESSMENT UNDER SECTION 147 WHICH WAS NOT TIME BAR RED OR OTHERWISE INVALID. LIKEWISE, IN ATUL TRADERS V. I TO, (2006) 282 ITR 536 (ALL), THE ACCOUNT BOOKS OR RECORD AND OTHER MATERIAL WERE ALL COMMON WHICH WERE BEING CONSIDERE D BY THE CIT(A) IN THE PROCEEDINGS RELATING TO THREE APPEALS . THE PETITIONER HAD NOTICE AND OPPORTUNITY OF BEING HEAR D. THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALIDLY IN ITIATED. IN THE CASE OF INDUCTOTHERM (INDIA) P. LTD. V. LAMES K URIAN, ASST. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 24 CIT, (2007) 294 ITR 341 (GUJ), THE ASSESSING OFFICE R HAD FOUND THAT THERE WERE ERRORS IN THE COMPUTATION OF ALLOWANCES. THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN THE CASE OF PAPAYA FARMS PVT. LTD. VS. DC IT, (2010) 323 ITR 60 (MAD), WHERE THE ASSESSEE HAD FURNISHED INCORRECT PARTICULARS AND THEREFORE, THE REOPENING OF THE ASS ESSMENT WAS HELD TO BE JUSTIFIED. 4.20. IN THE CASE OF CIT V. KERALA STATE CASHEW DEVELOPMENT CORPORATION LTD., (2006) 286 ITR 553 (K ER), WHEREIN, THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING SHOULD NOT HAVE CLAIMED DEDUCTION OF PEN AL INTEREST WHICH HAD ACCRUED NOT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR BUT IN EARLIER YEARS. THIS T HE ASSESSEE HAD NOT DISCLOSED. THE REASSESSMENT WAS HELD TO BE VALID. LIKEWISE, IN KUSUM INDUSTRIES P. LTD. V. CIT, (200 8) 296 ITR 242 (ALL), AS THE AWARD HAD BECOME FINAL IT WOULD B E TAKEN THAT THE DIRECTORS OF THE ASSESSEE HAD ACCEPTED THE FACTUM OF EARNING OF SECRET PROFIT NOT REFLECTED IN THE BOOKS OF ACCOUNT, WHICH WAS ALSO BINDING ON THE COMPANY. THE NON-APPE ARANCE OF ONE OF THE ARBITRATORS AND ONE OF THE DIRECTORS IN RESPECT OF ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 25 THE SUMMON ISSUED UNDER SECTION 131 WOULD NOT MAKE THE REASSESSMENT INVALID. THE HONBLE KERALA HIGH COURT IN CIT V. INDO MARINE AGENCIES (KERALA) P. LTD., (2005) 279 I TR 372 (KER), HELD THAT THE ENTRY WOULD AMOUNT TO AN ORDER UNDER SECTION 144. THE MERE FACT THAT IT WAS NOT COMMUNIC ATED TO THE ASSESSEE WOULD NOT MAKE SUCH AN ASSESSMENT RECO RDED IN THE ORDER SHEET ILLEGAL AND THAT WOULD NOT BAR FURT HER PROCEEDINGS UNDER SECTION 147. THUS, THE ASSESSMENT WAS HELD TO BE VALIDLY REOPENED UNDER EXPLANATION 2(C) TO SECTION 147. LIKEWISE, IN CIT V. N. JAYAPRAKASH, (2006) 28 5 ITR 369 (KER), WHERE, THE ASSESSEE COULD NOT, AFTER HAVING PERSUADED THE ASSESSING AUTHORITY TO WITHDRAW THE NOTICE DATE D 1-10- 1993, POINTING OUT THAT IT WAS NOT IN CONFORMITY WI TH LAW, BE ALLOWED TO CONTEND THAT THE NOTICE WAS VALID DUE TO THE OMISSION OF THE TIME-LIMIT BY THE FINANCE (NO.2) AC T, 1996, WITH EFFECT FROM 1-4-1989. IN THE ABSENCE OF SPECIF IC PROVISION IN THE FINANCE (NO. 2) ACT, 1996, INVALIDATING PROC EEDINGS INITIATED BY THE INCOME-TAX OFFICER, THE ACTION TAK EN BY HIM APPLYING THE THEN EXISTING LAW COULD NOT BE SAID TO BE INVALID. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 26 4.21. LIKEWISE, IN CIT V. S.R. TALWAR, (2008) 305 ITR 286 (ALL), THE FACTUM OF TAKING ADVANCES OR LOAN FR OM T AND K, IN WHICH THE ASSESSEE WAS ONE OF THE DIRECTORS HAD NOT BEEN DISCLOSED NOR A COPY OF THE LEDGER ACCOUNT OF THE A SSESSEE MAINTAINED BY THE COMPANY FILED. IN VIEW OF THE ABS ENCE OF THESE DETAILS, THE ASSESSING OFFICER COULD NOT EXA MINE THE TAXABILITY OF ADVANCES OR LOAN RAISED BY THE ASSESS EE. THERE WAS FAILURE TO DISCLOSE MATERIAL FACTS NECESSARY FO R ASSESSMENT. THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN ANOTHER CASE, THE HONBLE ALLAHABAD HIGH COURT IN CHANDRA PRAKASH AGRAWAL V. ASST. CIT, (2006) 287 IT R 172 (ALL), WHEREIN, THE INCOME-TAX DEPARTMENT HAD SENT A REQUISITION ON 27-3-2002, UNDER SECTION 132A REQUIS ITIONING THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS SEIZED BY THE CENTRAL EXCISE DEPARTMENT. THE RECORD OF THE PROCEE DING DATED 18-4-2002, SHOWED THAT THE REQUISITION WAS NO T FULLY EXECUTED AS ALL THE BOOKS OF ACCOUNT AND OTHER DOCU MENTS HAD NOT BEEN DELIVERED TO THE REQUISITIONING AUTHOR ITY. THE PROCEEDINGS INITIATED UNDER SECTION 147 WAS HELD TO BE VALID. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 27 4.22. IN RAMILABEN RATILAL SHAH V. CIT, (2006) 282 ITR 176 (GUJ), HELD THAT THE NOTING IN THE DIARY CONSTITUTED SUFFICIENT INFORMATION FOR THE ESCAPEME NT OF INCOME BY EITHER NON-DECLARATION OF CORRECT SALE CONSIDERATION OR FURNISHING OF INACCURATE PARTICULA RS AS REGARDS SALE CONSIDERATION. THUS, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD FAILED T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT OF THE RELEVANT ASSESSMENT YEAR. THE REASSESSMENT PROCEEDINGS HAD BEEN VALIDLY INITIATED . 4.23. LIKEWISE, IN CIT V. ABDUL KHADER AHAMED, (2 006) 285 ITR 57 (KER), IT WAS CLEAR FROM THE REASONS REC ORDED BY THE DEPUTY CIT THAT HE PRIMA FACIE HAD REASON TO BE LIEVE THAT THE ASSESSEE HAD OMITTED TO DISCLOSE FULLY AND TRUL Y THE MATERIAL FACTS AND THAT AS A CONSEQUENCE INCOME HAD ESCAPED ASSESSMENT. THE REASSESSMENT WAS HELD TO BE VALID. IN THE CASE OF U.P. STATE BRASSWARE CORPORATION LTD. V. CI T, (2005) 277 ITR 40 (ALL), THE PRINCIPLES LAID DOWN BY THE C ALCUTTA HIGH COURT IN CIT V. NEW CENTRAL JUTE MILLS CO. LTD . : (1979) 118 ITR 1005 (CAL) DID CONSTITUTE INFORMATION ON A POINT OF ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 28 LAW WHICH SHOULD BE TAKEN INTO CONSIDERATION BY THE ITO IN FORMING HIS BELIEF THAT THE INCOME TO THAT EXTENT H AD ESCAPED ASSESSMENT TO TAX AND, THE REASSESSMENT WAS HELD TO BE VALID. IN SUNDER CARPET INDUSTRIES V. ITO, (2010) 324 ITR 417 (ALL), HELD THAT THE DEPARTMENTAL VALUER'S REPO RT CONSTITUTED MATERIAL FOR ENTERTAINING A BELIEF OF E SCAPED INCOME IN THE YEARS UNDER CONSIDERATION. THE REASSE SSMENT PROCEEDING WAS HELD TO BE VALID. 4.24. IN AUROBINDO SANITARY STORES V. CIT, (2005) 276 ITR 549 (ORI), THERE BEING A SUBSTANTIAL DIFFERENCE BETWEEN THE FIGURES OF LIABILITIES TOWARDS SUNDRY CREDITORS IN THE PARTY LEDGERS OF THE ASSESSEE-FIRM AND THE FIGURES OF LIA BILITIES TOWARDS SUNDRY CREDITORS IN THE BALANCE-SHEET OF TH E ASSESSEE-FIRM FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1989-90. THESE MATERIALS HAD A DIRE CT LINK AND NEXUS FOR FORMATION OF A BELIEF BY THE ASSESSIN G OFFICER THAT INCOME OF THE ASSESSEE-FIRM HAD ESCAPED ASSESS MENT BECAUSE OF FAILURE OF THE ASSESSEE TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. I N THE CASE OF CIT V. BEST WOOD INDUSTRIES & SAW MILLS, (2011) 331 ITR 63 ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 29 (KER), THE ASSESSEE CHALLENGED THE VALIDITY OF THE REASSESSMENT ON THE GROUND THAT THE AO HAD EXCEEDED HIS JURISDIC TION UNDER SECTION 147 AND BOTH THE FIRST APPELLATE AUTH ORITY AS WELL AS THE TRIBUNAL ACCEPTED THE CONTENTION OF THE ASSESSEE HOLDING THAT SO FAR AS THE REASSESSMENTS RELATED TO ASSESSMENT OF UNEXPLAINED TRADE CREDITS, THEY WERE INVALID. ON APPEAL, IT HAS BEEN HELD THAT THE REASSESSMENTS WERE TO BE VALID. IN HONDA SIEL POWER PRODUCTS LTD. V. DEP UTY CIT, (2012) 340 ITR 53 (DEL), THERE BEING OMISSION AND F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y MATERIAL FACTS THUS REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. 4.25. IN ATMA RAM PROPERTIES PRIVATE LTD. V. DEPUT Y CIT, (2012) 343 ITR 141 (DEL), AS THE BOOKS OF ACCOUNT A ND OTHER MATERIAL WERE NOT PRODUCED AND NO LETTER WAS FILED, THE ORDER PASSED BY THE COMMISSIONER (APPEALS) IN THE ASSESSM ENT YEAR 2001-02 WOULD CONSTITUTE 'INFORMATION' OR MATE RIAL FROM ANY EXTERNAL SOURCE AND, AS SUCH, THE REASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2000-01 WERE HE LD TO BE VALID. LIKEWISE, IN THE CASE OF CIT V. SMT. R. SU NANDA BAI, (2012) 344 ITR 271 (KER), THE REASSESSMENT IN QUEST ION WERE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 30 HELD TO BE VALID ON THE FACT THAT THE ASSESSEE CLAI MED AND WAS GIVEN RELIEF UNDER SECTION 80HHA FOR THE THREE PREC EDING YEAR WHICH DISENTITLED HER FOR DEDUCTION UNDER SECTION 8 0HH FOR THE ASSESSMENT YEARS 1992-93 AND 1993-94. 4.26. IN THE CASE OF AQUAGEL CHEMICALS P. LTD. V. ASST. CIT, (2013) 353 ITR 131 (GUJ), SINCE THERE BEING SU FFICIENT MATERIAL ON RECORD FOR THE ASSESSING OFFICER TO FOR M A BELIEF AS REGARDS THE ESCAPEMENT OF INCOME IN RELATION TO THE CLAIM OF DEPRECIATION IN RESPECT OF THE BUILDING OF COAL FIR E BOILER, THE REASSESSMENT WAS HELD TO BE VALID. IN THE CASE OF CONVERGYS CUSTOMER MANAGEMENT V. ASST. DIT, (2013) 357 ITR 17 7 (DEL), WHERE THERE BEING PRIMA FACIE MATERIAL IN THE POSSE SSION OF THE ASSESSING OFFICER TO FORM A TENTATIVE BELIEF TH AT SECTION 9(1)(I) HELD ATTRACTED, SAID REASON BY ITSELF CONST ITUTED A RELEVANT GROUND TO REOPEN THE ASSESSMENT OF THE ASS ESSEE. REFERENCE MAY ALSO BE MADE TO I. AJAI VERMA V. CIT [(2008) 304 ITR 30 (ALL)]; II. ASHOK ARORA V. CIT [(2010) 321 ITR 171 (DEL)]; III. CIT V. CHANDRASEKHAR BALAGOPAL [(2010) 328 ITR 619 (KER)]; IV. JAYARAM PAPER MILLS LTD. V. CIT [(2010) 321 ITR 56 ( MAD)]; V. KERALA FINANCIAL CORPORATION V. JOINT CIT [(2009) 308 ITR 434 (KER)]; ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 31 VI. MAVIS SATCOM LTD. V. DEPUTY CIT [(2010) 325 ITR 428 ( MAD)]; VII. CIT V. MADHYA BHARAT ENERGY CORPORATION LTD. [(2011) 3 37 ITR 389 (DEL)]; VIII. KONE ELEVATOR INDIA P. LTD. V. ITO [(2012) 340 ITR 45 4 (MAD)]; IX. VIJAY KUMAR SABOO V. ASST. CIT [(2012) 340 ITR 382 ( KARN)]; X. SIEMENS INFORMATION SYSTEMS LTD. V. ASST. CIT [(2012) 3 43 ITR 188 (BOM)]; XI. I.P. PATEL & CO. V. DEPUTY CIT [(2012) 346 ITR 207 (GUJ)]; XII. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. V. DEPUTY CI T [(2012) 346 ITR 228 (GUJ)]; XIII. VIDEO ELECTRONICS LTD. V. JOINT CIT [(2013) 353 ITR 73 (DEL)]; XIV. A G GROUP CORPORATION V. HARSH PRAKASH [(2013) 353 I TR 158 (GUJ)]; XV. INDUCTOTHERM (INDIA) P. LTD. V. M. GOPALAN, DEPUTY CIT [(2013) 356 ITR 481 (GUJ)]; CIT V. DHANALEKSHMI BAN K LTD. [(2013) 357 ITR 448 (KER)]; XVI. SITARA DIAMOND PVT. LTD. V. ITO [(2013) 358 ITR 424 (B OM)]; XVII. RAYALA CORPORATION P. LTD. V. ASST. CIT [(2014) 363 I TR 630 (MAD)]. 4.27. SO FAR AS, THE DECISION IN THE CASE OF CIT V S KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC) IS CONCERNED, THE HONBLE APEX COURT, WHILE COMING TO A PARTICULA R CONCLUSION, ONLY IN A SITUATION, WHEN NOT A SINGLE PIECE OF PAPER OR DOCUMENT WAS RECOVERED, THEREFORE, THE HON BLE COURT HELD THAT SINCE THERE WAS NO TANGIBLE MATERIA L FOUND AND THE ADDITION WAS MERELY ON THE BASIS OF STATEME NT ONLY ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 32 THEN REOPENING OF ASSESSMENT U/S 147 OF THE ACT WAS NOT PERMISSIBLE. LIKEWISE, IN THE CASE OF CIT VS S. KH ADER KHAN SON (2012) 254 CTR 228 (SC), AFFIRMING THE DECISION OF MADRAS HIGH COURT IN (2008) 300 ITR 157 (MAD.), THE WHOLE ADDITION WAS MADE SOLELY ON THE BASIS OF STATEMENT U/S 133A AND NO OTHER MATERIAL WAS FOUND, IN THAT SITUATION, IT WAS HELD THAT THE SUCH STATEMENT HAS NO EVIDENTIARY VAL UE. 4.28. IN THE CASE OF ARADHNA ESTATE PVT. LTD. VS D CIT (2018) 91 TAXMANN.COM 119 (GUJARAT), THE HON'BLE HI GH COURT OBSERVED/HELD AS UNDER:- IN REASONS RECORDED BY THE ASSESSING OFFICER FOR R EOPENING THE ASSESSMENT. HE POINTED OUT THAT THE INFORMATION WAS RECEIVED FR OM THE INVESTIGATION WING OF THE DEPARTMENT AT CALCUTTA REGARDING SHELL COMPANIES WHICH HAD GIVEN ACCOMMODATION ENTRIES FOR SHARE PREMIUM TO SU RAT BASED COMPANIES. A LIST OF 114 CALCUTTA BASED COMPANIES WAS PROVIDED WHICH HAD GIVEN ACCOMMODATION ENTRIES TO SUCH SURAT BASED COMPANIES . STATEMENTS OF MANY ENTRY OPERATORS AND DUMMY DIRECTORS RECORDED DURING VARIOUS SEARCH AND SEIZURE OPERATION, SURVEY OPERATION AND INVESTIGATI ON WERE CHECKED. THE ASSESSING OFFICER THEREUPON PROCEEDED TO RECORD THA T 'ON PERUSAL OF DATA SO PROVIDED BY THE DEPUTY DIRECTOR (INVESTIGATION), IT IS NOTICED THAT DURING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE COMPAN Y HAS ACCEPTED SHARE CAPITAL/SHARE PREMIUM FROM THE FOLLOWING ENTRIES/PA RTIES WHICH HAVE BEEN PROVED TO BE SHELL COMPANIES BASED ON THE INVESTIGA TION CONDUCTED BY THE DEPUTY DIRECTOR (INVESTIGATION). UNDERNEATH, HE PRO VIDED A LIST OF 17 COMPANIES WHO HAD TRANSACTED WITH THE ASSESSEE COMP ANY DURING THE YEAR UNDER CONSIDERATION AND WERE ALLOTED EQUITY SHARES BY PURPORTED INVESTMENT OF SIZEABLE SHARE CAPITAL AND SHARE PREMIUM AMOUNTS . ON VERIFICATION OF SUCH MATERIALS, THE ASSESSING OFFICER NOTED THAT TH E ASSESSEE HAD RECEIVED SHARE CAPITAL/SHARE PREMIUM AMOUNT, SINCE THE INVES TOR COMPANIES WERE FOUND TO BE SHELL COMPANIES INDULGING IN PROVIDING ACCOMMODATION ENTRIES, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE S HARE CAPITAL/SHARE PREMIUM CLAIMED TO HAVE BEEN RECEIVED FROM THE COMP ANY BY THE ASSESSEE WAS NOT GENUINE. AMOUNT IS NOTHING BUT ASSESSEE'S O WN MONEY INTRODUCED IN THE GARB OF SHARE CAPITAL/SHARE PREMIUM FROM THE SH ELL COMPANIES AND ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 33 THEREFORE, SUCH AMOUNT IS LIABLE TO BE TAXED UNDER SECTION 68. HE THEREFORE, RECORDED HIS SATISFACTION THAT THE INCOME HAD ESCAP ED ASSESSMENT AND THAT THIS WAS DUE TO THE ASSESSEE HAVING FAILED TO DISCL OSE TRULY AND FULLY ALL FACTS. [PARA 7] SECTION 147 PROVIDES INTER ALIA THAT IF THE ASSESSING OFFICER HAS THE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT, HE MAY SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, A SSESS OR REASSESS SUCH INCOME. PROVISO TO SECTION 147 OF COURSE REQUIRES T HAT WHERE THE ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF THE FOUR YEARS FROM THE END OF THE RELEVANT ASSE SSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON PART OF THE ASSESSEE TO MAKE RETURN UNDER SECTIO N 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT ASSESSMENT YEAR. IN THIS CONTEXT, IT IS WELL SETTLED THAT THE REQUIREMENT OF FULL AND TRUE DISCLOSURE ON PART OF THE ASSESSEE IS NOT CONFINED TO FILING OF RETURN ALONE BUT WOULD CONTINUE ALL THROUGHOUT DURING THE ASSESS MENT PROCEEDINGS ALSO. IN THIS CONTEXT, THE MATERIALS ON RECORD WOULD SUGG EST THAT THE ASSESSING OFFICER HAD RECEIVED FRESH INFORMATION AFTER THE AS SESSMENT WAS OVER PRIMA FACIE SUGGESTING THAT SIZEABLE AMOUNT OF INCOME CHARGEAB LE TO TAX IN CASE OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND THAT SUCH E SCAPEMENT WAS ON ACCOUNT OF FAILURE ON PART OF THE ASSESSEE TO DISCL OSE TRULY AND FULLY ALL MATERIAL FACTS. THE ASSESSING OFFICER FORMED SUCH A BELIEF ON THE BASIS OF SUCH MATERIALS PLACED BEFORE HIM AND UPON PERUSAL O F SUCH MATERIAL. THIS IS NOT A CASE WHERE THE ASSESSING OFFICER WAS REEXAMIN ING THE MATERIALS AND THE DOCUMENTS ALREADY ON RECORD FILED BY THE ASSESS EE ALONG WITH THE RETURN OR SUBSEQUENTLY, BROUGHT ON RECORD DURING THE ASSES SMENT PROCEEDINGS. IT WAS A CASE WHERE ENTIRELY NEW SET OF DOCUMENTS AND MATERIALS WAS PLACED FOR HIS CONSIDERATION COMPILED IN THE FORM OF REPOR T RECEIVED FROM THE INVESTIGATION WING. SUCH MATERIAL WAS PERUSED BY TH E ASSESSING OFFICER AND UPON EXAMINATION THEREOF, HE FORMED A BELIEF THAT T HE ASSESSEE COMPANY HAD RECEIVED SHARE APPLICATION AND SHARE PREMIUM MONEY FROM AS MANY AS 20 DIFFERENT INVESTOR COMPANIES WHO WERE FOUND TO BE S HELL COMPANIES AND INDULGING IN GIVING ACCOMMODATION ENTRIES. FROM THI S VIEW POINT, SINCE THE ASSESSING OFFICER HAD SUFFICIENT MATERIAL AT HIS CO MMAND TO FORM SUCH A BELIEF. SUCH MATERIALS DID NOT FORM PART OF THE ORI GINAL ASSESSMENT PROCEEDINGS AND WAS PLACED BEFORE THE ASSESSING OFF ICER ONLY AFTER THE ASSESSMENT WAS COMPLETED. SINCE ON THE BASIS OF SUC H MATERIALS, ASSESSING OFFICER, CAME TO A REASONABLE BELIEF THAT INCOME CH ARGEABLE TO TAX HAD ESCAPED ASSESSMENT, MERELY BECAUSE THESE TRANSACTIO NS WERE SCRUTINISED BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMEN T ALSO WOULD NOT PRECLUDE HIM FROM REOPENING THE ASSESSMENT. HIS SCR UTINY DURING THE ASSESSMENT WILL NECESSARILY BE ON THE BASIS OF THE DISCLOSURES MADE BY THE ASSESSEE. [PARA 8] THE CONTENTION THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY FACTS CANNOT BE ACCEPTED. THE ASSES SING OFFICER, AS NOTED, ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 34 RECEIVED FRESH MATERIAL AFTER THE ASSESSMENT WAS OV ER, PRIMA FACIE , SUGGESTING THAT THE ASSESSEE COMPANY HAD RECEIVED B OGUS SHARE APPLICATION/PREMIUM MONEY FROM NUMBER OF SHELL COMP ANIES. [PARA 10] MERELY BECAUSE THE TRANSACTIONS IN QUESTION WERE EX AMINED BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT WOULD NOT MA KE ANY DIFFERENCE. THE SCRUTINY WAS ON THE BASIS OF DISCLOSURES MADE AND M ATERIALS SUPPLIED BY THE ASSESSEE. SUCH MATERIAL IS FOUND TO BE PRIMA FACIE UNTRUE AND DISCLOSURES NOT TRUTHFUL. EARLIER SCRUTINY OR EXAMINATION ON TH E BASIS OF SUCH DISCLOSURES OR MATERIALS WOULD NOT DEBAR A FRESH ASSESSMENT. EA CH INDIVIDUAL CASE OF THIS NATURE IS BOUND TO HAVE SLIGHT DIFFERENCE IN F ACTS. [PARA 11] THE NEXT CONTENTION THAT THE ASSESSING OFFICER DID NOT DEMONSTRATE ANY MATERIAL ENABLING HIM TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IS FALLACIOUS. THE ASSESSING OFF ICER RECORDED DETAILED REASONS POINTING OUT THE MATERIAL AVAILABLE WHICH H AD A LIVE LINK WITH FORMATION OF BELIEF THAT THE INCOME CHARGEABLE TO T AX HAD ESCAPED ASSESSMENT. AT THIS STAGE, AS IS OFTEN REPEATED, ON E WOULD NOT GO INTO SUFFICIENCY OF SUCH REASONS. [PARA 13] SECTION 68 AS IS WELL KNOWN, PROVIDES THAT WHERE AN Y SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREV IOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THAT THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE FROM ABOVE-NOTED COM PANIES WAS ONLY BY NATURE OF ACCOMMODATION ENTRIES AND IN REALITY, IT WAS THE FUNDS OF THE ASSESSEE WHICH WAS BEING RE-ROUTED. UNDOUBTEDLY. SE CTION 68 WOULD HAVE APPLICABILITY. PROVISO ADDED BY THE FINANCE ACT, 20 12 WITH EFFECT FROM 1-4- 2013, DOES NOT CHANGE THIS POSITION. [PARA 14] AS PER THIS PROVISO, WHERE THE ASSESSEE IS A COMPAN Y AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, EXPLANA TION OFFERED BY THE ASSESSEE COMPANY SHALL BE DEEMED TO BE NOT SATISFAC TORY, UNLESS THE PERSON IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF THE COMPANY ALSO OFFERS AN EXPLANATION ABOUT THE NATURE AND SOURCE O F SUM SO CREDITED AND SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OF FICER HAS BEEN FOUND TO BE SATISFACTORY. ESSENTIALLY, THIS PROVISO EASES TH E BURDEN OF PROOF ON THE REVENUE WHILE MAKING ADDITION UNDER SECTION 168 WIT H RESPECT TO NON GENUINE SHARE APPLICATION MONEY OF THE COMPANIES. E VEN IN ABSENCE OF SUCH PROVISO AS WAS THE CASE GOVERNING THE PERIODS WITH WHICH WE ARE CONCERNED IN THE PRESENT CASE, IF FACTS NOTED BY THE ASSESSIN G OFFICER AND RECORDED IN REASONS ARE ULTIMATELY ESTABLISHED, INVOCATION OF S ECTION 68 WOULD BE CALLED FOR. [PARA 15] THE CONTENTION THAT THE ASSESSING OFFICER HAD MEREL Y AND MECHANICALLY ACTED ON THE REPORT OF THE INVESTIGATION WING ALSO CANNOT BE ACCEPTED. ONE HAS REPRODUCED THE REASONS RECORDED BY THE ASSESSIN G OFFICER AND NOTED THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 35 GIST OF HIS REASONS FOR RESORTING TO REOPENING OF T HE ASSESSMENT. THE ASSESSING OFFICER HAD PERUSED THE MATERIALS PLACED FOR HIS CONSIDERATION AND THEREUPON, UPON EXAMINATION OF SUCH MATERIALS F ORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. [P ARA 16] IN THE RESULT, PETITION IS DISMISSED. [PARA 17] 4.29. THE HON'BLE GUJARAT HIGH COURT WHILE VALIDAT ING THE REOPENING OF ASSESSMENT UNDER SECTION 147/148 O F THE ACT IN A LATER ORDER (AFORESAID) DATED 20/02/2018 O N THE ISSUE OF CASH CREDIT (SHARE APPLICATION MONEY) DULY CONSI DERED THE ARGUMENTS OF BOTH SIDES AND FOLLOWED THE FOLLOWING THE DECISIONS I. JAYANT SECURITY AND FINANCE LTD. V. ASSTT. CIT [SPECIAL CIVIL APPLICATION NO. 18921 OF 2017, DATED 12-2-2018] (PAR A 12); II. RAYMOND WOOLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC) (PARA 13); III. CIT V. RAJESH JHAVERI STOCK BROKERS (P.) LTD. [2007] 291 ITR 500/161 TAXMAN 316 (SC) (PARA 13) IV. PR. CIT V. GOKUL CERAMICS [2016] 241 TAXMAN 1/71 TAXMANN.COM 341 (GUJ.) (PARA 16) AND DISTINGUISHED THE FOLLOWING DECISIONS I. ALLIED STRIPS LTD. V. ASSTT. CIT [2016] 384 ITR 424/69 TAXMANN.COM 444 (DELHI) (PARA 11) AND II. YOGENDRAKUMAR GUPTA V. ITO [2014] 366 ITR 186/46 TAXMANN.COM 56 (GUJ.) (PARA 11) ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 36 THE HON'BLE HIGH COURT WHILE UPHOLDING THE VALIDITY OF REOPENING ALSO CONSIDERED FOLLOWING DECISION, WHICH WERE REFERRED BY BOTH SIDES- I. ALLIED STRIPS LTD. V. ASSTT. CIT [2016] 384 ITR 424/69 TAXMANN.COM 444 (DELHI) (PARA 5), II. HARIKRISHAN SUNDERLAL VIRMANI V. DY. CIT [2017] 394 ITR 146 (GUJ.) (PARA 5), III. RAYMOND WOOLEN MILLS LTD.V. ITO [1999] 236 ITR 34 (SC) (PARA 6), IV. YOGENDRAKUMAR GUPTA V. ITO [2014] 366 ITR 186/46 TAXMANN.COM 56 (GUJ.) (PARA 6), V. AASPAS MULTIMEDIA LTD. V. DY. CIT [2017] 83 TAXMANN.COM 82/249 TAXMAN 568 (GUJ.) (PARA 6), VI. JAYANT SECURITY & FINANCE LTD. V. ASSTT. CIT [SP. CIVIL APPLICATION NO. 18921 OF 2017, DATED 12-2-2018] (PAR A 12), VII. ASSTT. CIT V. RAJESH JHAVERI STOCK BROKERS (P.) LTD. [2007] 291 ITR 500/161 TAXMAN 316 (SC) (PARA 13 ) AND VIII. PR. CIT V. GOKUL CERAMICS [2016] 241 TAXMAN 1/71 TAXMANN.COM 341 (GUJ.) (PARA 16). 4.30. THE SUM AND SUBSTANCE OF THE AFORESAID DECIS ION WAS THAT SINCE THE ASSESSING OFFICER WAS HAVING SUF FICIENT MATERIAL AT HIS COMMAND TO FORM A REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, ME RELY BECAUSE THIS TRANSACTIONS WERE SCRUTINIZE BY THE AS SESSING OFFICER DURING THE ORIGINAL ASSESSMENT, WOULD NOT P RECLUDE HIM FROM REOPENING ASSESSMENT. THUS, THE ASSESSMENT NOTICE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 37 WAS HELD TO BE JUSTIFIED. REFERRING TO THE SAID EXP LANATION IN CONSOLIDATED PHOTO & FINVEST LTD. (2006) 281 ITR 39 4 (DEL.), HON'BLE HIGH COURT OBSERVED AS UNDER:- 8. IT IS CLEAR FROM THE ABOVE THAT THE TWO CRITICAL A SPECTS WHICH NEED TO BE ADDRESSED IN ANY ACTION UNDER SECTION 147 ARE WH ETHER THE ASSESSING OFFICER HAS 'REASON TO BELIEVE' THAT ANY INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT AND WHETHER THE PROPOSED REASSES SMENT IS WITHIN THE PERIOD OF LIMITATION PRESCRIBED UNDER THE PROVISO T O SECTION 147. EXPLANATION (1 ) TO THE SAID PROVISION MAKES I T CLEAR THAT PRODUCTION OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH THE A SSESSING OFFICER COULD WITH DUE DILIGENCE DISCOVER MATERIAL EVIDENCE WOULD NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO THAT STIPULATES AN EXTENDED PERIOD OF LIMITATION FOR ACT ION IN CASES WHERE THE ESCAPEMENT ARISES OUT OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT. 4.31. THE FORMATION OF OPINION BY THE ASSESSING OF FICER HAS TO BE CONSIDERED ON THE TOUCH STONE WHETHER THE RE WAS REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND FOR THAT PURPOSE, THE HON'BLE APEX C OURT IN RAYMOND WOOLEN MILLS LTD. VS INCOME TAX OFFICER THR OWS LIGHT ON THE ISSUE AND FURTHER BY HON'BLE JURISDICT IONAL HIGH COURT IN M/S GIRILAL & COMPANY VS INCOME TAX OFFICE R 300 ITR 432 (BOM.). IN THE APPEAL BEFORE ME, THE LD. AS SESSING OFFICER RECEIVED INFORMATION DATED FROM DGIT(INV.) THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF ACCOMMODATI ON ENTRIES PROVIDED BY THE SOME OF THE MVAT DEALERS, WHO WERE INDULGED IN ISSUING BOGUS SALE/PURCHASE BILLS, WHIC H WAS ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 38 INVESTIGATED AND KEPT ON PUBLIC DOMAIN BY THE SALES TAX DEPARTMENT AND FURTHER, THE NOTICES ISSUED UNDER SE CTION 133(6) OF THE ACT TO SUCH EIGHT PARTIES BY THE LD. ASSESSING OFFICER WERE RETURNED BACK BY THE POSTAL AUTHORITIE S WITH THE REMARK NOT KNOWN NOT TRACEABLE AND LEFT ETC. TH E ASSESSEE ALSO COULD NOT PROVE THE GENUINENESS OF THE PURCHAS ES FROM THESE PARTIES, THEREFORE, THE LD. ASSESSING OFFICER WAS UNDER A REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT WHICH IN MY OPINION WAS SUFFICIENT TO IN ITIATE REASSESSMENT PROCEEDINGS. EXPLANATION-1 TO SECTION 147 OF THE ACT SUPPORTS MY VIEW. THUS, THE FIRST GROUND RA ISED BY THE ASSESSEE IS HAVING NO MERIT, CONSEQUENTLY, DISMI SSED. 3. SO FAR AS, THE ISSUE WITH RESPECT TO CONFIRMATI ON OF ADDITION TO THE EXTENT OF 6.5% OF THE ALLEGED BOGUS PURCHASES AS AGAINST THE ADDITION @12.5% MADE BY THE LD. ASSE SSING OFFICER IS CONCERNED, IT IS NOTED THAT THE LEARNED ASSESSING OFFICER MADE THE ADDITION @12.5% OF SUCH BOGUS PURC HASES, WHICH WAS REDUCED TO 6.5% BY THE LEARNED CIT(A). T HE ASSESSEE HAS CHALLENGED THE RETENTION OF ADDITION T O THE EXTENT OF 6.5% WHEREAS, THE ARGUMENT OF LD. DR IS THAT IT ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 39 SHOULD BE ENHANCED TO 12.5% AS DONE BY THE LD. ASSE SSING OFFICER. 7. BEFORE ADVERTING FURTHER, I DEEM IT APPROPRIATE TO CONSIDER VARIOUS DECISIONS FROM HON'BLE HIGH COURTS /HON'BLE APEX COURT, SO THAT WE CAN REACH TO A PROPER CONCLU SION. THE HON'BLE GUJARAT HIGH COURT IN SANJAY OILCAKES INDUS TRIES VS CIT (2009) 316 ITR 274 (GUJ.) HELD AS UNDER:- 11. HAVING HEARD THE LEARNED ADVOCATES APPEARING F OR THE RESPECTIVE PARTIES, IT IS APPARENT THAT NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER OF THE TRIBUNAL DATED APRIL 29, 1994, READ WITH THE ORDER DATED SEPTEMBER 29, 1994, MADE IN MISCELLANEOUS APPLICATION. IN THE PRINCIPAL ORDER THE TRIBUNAL HA S RECORDED THE FOLLOWING FINDINGS : '8.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE FACTS ON RECORD. IN OUR OPINION, THE ACTION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) CONFIRMING 25 PER CENT. OF THE AMOUNTS CLAIMED IS FAIR AND REASONABLE AND NO INTERFERENCE IS CALLED FOR. THE COMMIS SIONER OF INCOME-TAX (APPEALS) HAS GONE THROUGH THE PURCHASE PRICES OF THE RAW MATERIAL PREVALENT AT THE TIME AND RIGHTLY CAME TO THE CON CLUSION THAT THE DISALLOWANCE TO THE EXTENT OF 25 PER CENT. WAS CALLED FOR. IT IS ESTABLISHED THAT THE PARTIES WERE NOT TRACEABLE ; THEY OPENED THE BANK ACCOUNTS IN WHICH THE CHEQUES WERE CREDITED BUT SOON THEREAFTER THE AMOUNTS WERE WITHDRAWN BY BEARER CHEQUES. THAT FAIRLY LEADS TO THE CONCLUSION THAT THESE PARTIES WERE PERHAPS CREATION OF THE ASSESSEE ITSELF FOR THE PURPOSE OF BANKING PURCHASES INTO ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 40 BOOKS OF ACCOUNT BECAUSE THE PURCHASES WITH BILLS WERE NOT FEASIBLE. THUS, THE ABOVENOTED PARTIES BECOME CONDUIT PIPES BETWEEN THE ASSESSEE-FIRM AND THE SELLERS OF THE RAW MATERIALS. UNDER THE CIRCUMSTANCES, IT WAS NOT IMPOSSIBLE FOR THE ASSESSEE TO INFLATE THE PRICES OF RAW MATERIALS. ACCORDINGLY, AN ADDITION AT THE RATE OF 25 PER CENT. FOR EXTRA PRICE PAID BY THE ASSESSEE THAN OVER AND ABOVE THE PREVALENT PRICE IS FAIR AND REASONABLE AND WE ACCORDINGLY CONFIRM THE FINDING OF THE COMMIS SIONER OF INCOME-TAX (APPEALS).' 12. THUS, IT IS APPARENT THAT BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE CONCURRENTLY ACCEPTED THE FINDING OF THE ASSESSING OFFICER THAT THE APPARENT SELLERS WHO HAD ISSUED SALE BILLS WERE NOT TRACEABLE. THAT GOODS WERE RECEIVED FROM THE PARTIES OTHER THAN THE PERSONS WHO HAD ISSUED BILLS FOR SUCH GOODS. THOUGH THE PURCHASES ARE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENT THEREOF BY ACCOUNT PAYEE CHEQUES, THE CHEQUES HAVE BEEN DEPOSITED IN BANK ACCOUNTS OSTENSIBLY IN THE NAME OF THE APPARENT SELLERS, THEREAFTER THE ENTIRE AMOUNTS HAVE BEEN WITHDRAWN BY BEARER CHEQUES AND THERE IS NO TRACE OR IDENTITY OF THE PERSON WITHDRAWING THE AMOUNT FROM THE BANK ACCOUNTS. IN THE LIGHT OF THE AFORESAID NATURE OF EVIDENCE IT IS NOT POSSIBLE TO RECORD A DIFFERENT CONCLUSION, DIFFERENT FROM THE ONE RECORDED BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL CONCURRENTLY HOLDING THAT THE APPARENT SELLERS WERE NOT GENUINE, OR WERE ACTING AS CONDUIT BETWEEN THE ASSESSEE-FIRM AND THE ACTUAL SELLERS OF THE RAW MATERIALS. BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE, THEREFORE, COME TO THE CONCLUSION THAT IN SUCH CIRCUMSTANCES, THE LIKELIHOOD OF THE PURCHASE PRICE BEING INFLATED CANNOT BE RULED OUT AND THERE IS NO MATERIAL TO DISLODGE SUCH FINDING. THE ISSUE IS NO T WHETHER THE PURCHASE PRICE REFLECTED IN THE BOOKS OF ACCOUNT MATCHES THE PURCHASE PRICE STATED TO HAVE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 41 BEEN PAID TO OTHER PERSONS. THE ISSUE IS WHETHER THE PURCHASE PRICE PAID BY THE ASSESSEE IS REFLECTED AS RECEIPTS BY THE RECIPIENTS. THE ASSESSEE HAS, BY SET O F EVIDENCE AVAILABLE ON RECORD, MADE IT POSSIBLE FOR TH E RECIPIENTS NOT BEING TRACEABLE FOR THE PURPOSE OF INQUIRY AS TO WHETHER THE PAYMENTS MADE BY THE ASSESSEE HAVE BEEN ACTUALLY RECEIVED BY THE APPARENT SELLERS. HENCE, THE ESTIMATE MADE BY THE TWO APPELLATE AUTHORITIES DOES NOT WARRANT INTERFERENCE. EVEN OTHERWISE, WHETHER THE ESTIMATE SHOULD BE AT A PARTICULAR SUM OR AT A DIFFERENT SUM, CAN NEVER BE AN ISSUE OF LAW. 7.1 IN THE AFORESAID CASE, THE HON'BLE HIGH COURT A CCEPTED THAT THE APPARENT SELLERS, WHO ISSUED THE SAID BILL S WERE NOT TRACEABLE AND THE GOODS RECEIVED FROM PARTIES OTHER THAN THE PERSONS, WHO HAD ISSUED THE BILLS FOR SUCH GOODS. T HE PURCHASES WERE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENTS, THROUGH BANKING CHANNEL AND THUS THE APPA RENT SELLERS WERE NOT GENUINE OR WERE ACTING AS CONDUIT BETWEEN THE ASSESSEE AND THE ACTUAL SELLER. IN SUCH A SITUA TION, THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AS WELL AS BY THE TRIBUNAL WAS AFFIRMED. HON'BLE APEX COURT IN KACHWALA GEMS VS JCIT (2007) 158 TAXM AN 71 OBSERVED THAT AN ELEMENT OF GUESSWORK IS INEVITABLE IN CASES, WHERE ESTIMATION OF INCOME IS WARRANTED. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 42 7.2. THE HON'BLE GUJARAT HIGH COURT IN CIT VS BHOLANATH POLY FAB. PVT. LTD. (2013) 355 ITR 290 (G UJ.) HELD/OBSERVED AS UNDER:- 5. HAVING COME TO SUCH A CONCLUSION, HOWEVER, THE TRIBUNAL WAS OF THE OPINION THAT THE PURCHASES MAY HAVE BEEN MADE FROM BOGUS PARTIES, NEVERTHELESS, THE PURCHASES THEMSELVES WERE NOT BOGUS. THE TRIBUNAL ADVERTED TO THE FACTS AND DATA ON RECORD A ND CAME TO THE CONCLUSION THAT THE ENTIRE QUANTITY OF OPENING STOCK, PURCHASES AND THE QUANTITY MANUFACTURED DURING THE YEAR UNDER CONSIDERATION WERE SOLD BY THE ASSESSEE. THEREFORE, THE PURCHASES OF THE ENTIRE 1,02,514 METRES OF CLOTH WERE SOLD DURING THE YEAR UNDER CONSIDERATION. THE TRIBUNAL, THEREFORE, ACCEPTED THE ASSESSEE'S CONTENTION THAT THE FINISHED GOODS WERE PURCHASED BY THE ASSESSEE, MAY BE NOT FROM THE PARTIES SHOWN IN THE ACCOUNTS, BUT FROM OTHER SOURCES. IN THAT VIEW OF THE MATTER, THE TRIBUNAL WAS OF THE OPINION THAT NOT THE ENTIRE AMOUNT, BUT THE PROFIT MARGIN EMBEDDED IN SUCH AMOUNT WOULD BE SUBJECTED TO TAX. THE TRIBUNAL RELIED ON ITS EARLIER DECISION IN THE CASE OF SANKE T STEEL TRADERS AND ALSO MADE REFERENCE TO THE TRIBUNAL'S DECISION IN THE CASE OF VIJAY PROTEINS L TD. V. ASST. CIT [1996] 58 ITD 428 (AHD). 6. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTE D NO ERROR. WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS IS ESSENTIALLY A QUESTION OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE THE CLOTH ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 43 AND SELL THE FINISHED GOODS. IN THAT VIEW OF THE MATTER, AS NATURAL COROLLARY, NOT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDED THEREIN WOULD BE SUBJECT TO TAX. THIS WAS THE VIEW OF THIS COURT IN THE CASE OF SANJAY OILCAK E INDUSTRIES V. CIT [2009] 316 ITR 274 (GUJ). SUCH DECISION IS ALSO FOLLOWED BY THIS COURT IN A JUDGME NT DATED AUGUST 16, 2011, IN TAX APPEAL NO. 679 OF 2010 IN THE CASE OF CIT V. KISHOR AMRUTLAL PATEL. I N THE RESULT, TAX APPEAL IS DISMISSED. 7.3. LIKEWISE, THE HON'BLE GUJARAT HIGH COURT IN C IT VS VIJAY M. MISTRY CONSTRUCTION LTD. (2013) 355 ITR 49 8 (GUJ.) HELD/OBSERVED AS UNDER:- 6. AS IS APPARENT FROM THE FACTS NOTED HEREINABOVE , THE COMMISSIONER (APPEALS) AFTER APPRECIATING THE EVIDENCE ON RECORD HAS FOUND THAT THE ASSESSEE HAD IN FACT MADE THE PURCHASES AND, HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE AMOUNT. HE, HOWEVER, WAS OF THE VIEW THAT TH E ASSESSEE HAD INFLATED THE PURCHASES AND, ACCORDINGLY, BY PLACING RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF VIJAY PROTEINS (SUPRA) RESTRICTED THE DISALLOWANCE TO 20 PER CENT. THE TRIBUNAL IN THE IMPUGNED ORDER HAS FOLLOWED ITS EARLIER ORDER IN THE CASE OF VIJAY PROTEINS TO THE LETTER AND ENHANCED THE DISALLOWANCE TO 25 PER CENT. THUS, IN BOTH CASES, THE DECISION OF THE COMMISSIONER (APPEALS) AS WELL AS THAT OF THE TRIBUNAL IS BASED ON ESTIMATE. THIS HIGH COURT IN THE CASE OF SANJAY OIL CAKE [2009] 316 ITR 274 (GUJ) HAS HELD THAT WHETHER AN ESTIMATE SHOULD BE AT A PARTICULAR SUM OR AT A DIFFERENT SUM CAN NEVER BE A QUESTION OF LAW. 7. THE APEX COURT IN THE CASE OF KACHWALA GEMS [2007] 288 ITR 10 (SC) HAS HELD THAT IN A BEST JUDGMENT ASSESSMENT THERE IS ALWAYS A CERTAIN ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 44 DEGREE OF GUESS WORK. NO DOUBT, THE AUTHORITIES SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF T HE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT AND SHOULD NOT ACT TOTALLY ARBITRARILY BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGMENT ASSESSMENT. 8. EXAMINING THE FACTS OF THE PRESENT CASE IN THE L IGHT OF THE AFORESAID DECISIONS, THE DECISION OF THE TRIBUNAL, BEING BASED ON AN ESTIMATE, DOES NOT GIVE RISE TO ANY QUESTION OF LAW SO AS TO WARRANT INTERFERENCE. 9. IN SO FAR AS THE PROPOSED QUESTIONS (C), (D) AND (E) ARE CONCERNED, THE SAME ARE SIMILAR TO THE PROPOSED QUESTION (A) WHEREIN THE TRIBUNAL HAS RESTRICTED TH E ADDITION TO 25 PER CENT. ON SIMILAR FACTS. IN THE CIRCUMSTANCES, FOR THE REASONS STATED HEREINABOVE, THE SAID GROUNDS OF APPEAL DO NOT GIVE RISE TO ANY QUESTION OF LAW. 10. AS REGARDS THE PROPOSED QUESTION (B) WHICH PERTAINS TO THE DELETION OF ADDITION OF RS. 7,88,59 0 MADE ON ACCOUNT OF INFLATION OF EXPENSES PAID TO METAL AND MACHINE TRADING CO. (MMTC), THE ASSESSING OFFICER HAS FOUND THAT MMTC WAS A PARTNERSHIP FIRM OF SHRI NITIN GAJJAR ALONG WITH HI S FATHER AND BROTHER OPERATING FROM BHAVNAGAR. A PERUSAL OF THEIR TRANSACTIONS WITH THE ASSESSEE INDICATED THAT THERE IS SOME INFLATION OF EXPENSES AS DETAILED IN PARAGRAPH 6.1 OF THE ASSESSMENT ORDER. AFTER CONSIDERING THE EVIDENCE ON RECORD, THE ASSESSING OFFICER DISALLOWED THE AMOUNT RS. 7,88,590 ON ACCOUNT OF PAYMENT MADE TO MMTC. 11. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER (APPEALS), WHO UPON APPRECIATION OF THE EVIDENCE ON RECORD FOUND THAT THE ASSESSING OFFICER HAD NOT REJECTED THE GENUINENESS OF THE PURCHASES MADE FROM MMTC WHILE MAKING THE DISALLOWANCE. HIS OBSERVATIONS WERE BASED ON INFLATION OF RATES WHICH WERE BEING CHARGED FROM TH E ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 45 ASSESSEE. ACCORDING TO THE COMMISSIONER (APPEALS), THOUGH MMTC IN SOME RESPECT COULD BE ATTRIBUTED TO BE ASSOCIATED WITH THE ASSESSEE-COMPANY, STILL IT COULD NOT BE EXPECTED THAT MMTC WAS CARRYING OUT IT S BUSINESS WITHOUT ANY MOTIVE OR PROFIT. ACCORDING TO THE COMMISSIONER (APPEALS), IT WAS PROVED BY THE ASSESSEE THAT THE RATES CHARGED BY MMTC WERE COMPARABLE WITH THE PREVAILING MARKET RATES, NO SUC H ADDITION CAN STAND. THE COMMISSIONER (APPEALS) TOOK NOTE OF THE FACT THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE PURCHASES HAD BEEN DIRECTLY EFFECTED FROM THIRD PARTIES AND NOT DIRECT LY FROM MMTC ; THE DIFFERENCE COULD NOT BE THE NET PRO FIT IN THE HANDS OF MMTC ; AND THAT WHILE CONDUCTING TH E ENTIRE EXERCISE MMTC WOULD HAVE TO INCUR CERTAIN EXPENDITURE IN TRANSPORTATION, IN ENGAGING PERSONNE L IN THE OFFICE AND OTHER OPERATIONS AND WAS ACCORDINGLY OF THE VIEW THAT THERE WAS NO CASE OF ACTUAL INFLATION OF RATES AND DELETED THE ADDITION. 12. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS CONCURRED WITH THE FINDINGS RECORDED BY THE COMMISSIONER (APPEALS) AND HAS FOUND THAT THE ASSESSEE HAD MADE PURCHASES FROM MMTC AT THE PREVAILING MARKET RATES AND THAT MMTC HAD INCURRED CERTAIN EXPENDITURE IN ENGAGING PERSONNEL IN THE OFFICE AND OTHER OPERATIONS AND WOULD MAKE SOME INCOME FROM THE ENTIRE EXERCISE. IN THE CIRCUMSTANC ES, THE PURCHASES MADE BY THE ASSESSEE FROM MMTC WOULD NOT BE HIT BY THE PROVISIONS OF SECTION 40A(2 ) OF THE ACT. 13. THUS, THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS BASED ON CONCURRENT FINDINGS OF FACT RECORDED BY TH E COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL. IT IS NOT THE CASE OF THE REVENUE THAT THE TRIBUNAL HAS TAKEN INTO ACCOUNT ANY IRRELEVANT MATERIAL OR THAT ANY RELEVANT MATERIAL HAS NOT BEEN TAKEN INTO CONSIDERATION. IN THE ABSENCE OF ANY MATERIAL TO TH E CONTRARY BEING POINTED OUT ON BEHALF OF THE REVENUE , THE IMPUGNED ORDER BEING BASED ON CONCURRENT FINDINGS OF FACT RECORDED BY THE TRIBUNAL UPON ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 46 APPRECIATION OF THE EVIDENCE ON RECORD, DOES NOT GI VE RISE TO ANY QUESTION OF LAW IN SO FAR AS THE PRESEN T GROUND OF APPEAL IS CONCERNED. 14. IN RELATION TO THE PROPOSED QUESTION (F) WHICH RELATES TO THE DELETION OF ADDITION OF RS. 44,54,42 6 MADE ON ACCOUNT OF PURCHASE OF CRANE AND ALLOWING DEPRECIATION ON THE SAME, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PURCHASED A CRAWLER CRANE FOR AN AMOUNT OF RS. 24,61,000 EXCLUDING THE COST OF SPARE PARTS OF RS. 14,98,490. THE ASSESSING OFFICER AFTER EXAMINING THE EVIDENCE ON RECORD AND CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE, MADE ADDITION OF RS. 44,54,426, RS. 39,59,490 BEING THE PURCHASE PRICE OF THE CRANE ALONG WITH ITS SPAR E PARTS AND RS. 4,94,936 BEING DEPRECIATION CLAIMED B Y THE ASSESSEE. THE COMMISSIONER (APPEALS), UPON APPRECIATION OF EVIDENCE ON RECORD, WAS OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACTS OF THE CASE PROPERLY AND HAD MADE DISALLOWANCE WHICH WAS NOT PERMITTED BY THE INCOME- TAX ACT. IT WAS HELD THAT DISALLOWANCE COULD ONLY HAVE BEEN MADE IN RESPECT OF EXPENSES DEBITED TO TH E PROFIT AND LOSS ACCOUNT WHEREAS IN THE PRESENT CASE THE PURCHASE OF CRANE AND SPARE PARTS OF THE CRANE AND OTHER MACHINERIES WERE IN THE NATURE OF ACQUISITION OF CAPITAL ASSET. ACCORDING TO THE COMMISSIONER (APPEALS), THE DISALLOWANCE COULD HAVE BEEN MADE ON DEPRECIATION ONLY IF AT ALL THE ASSESSING OFFICER CONCLUSIVELY PROVED THAT THE PURCHASES OF CRANE AND OTHER PARTS ARE BOGUS. UPON APPRECIATION OF THE MATERIAL ON RECORD THE COMMISSIONER (APPEALS) FOUND THAT THE ASSESSING OFFICER HAS SIMPLY BRUSHED ASIDE ALL THE EVIDENCE O N ACCOUNT OF TECHNICAL INFIRMITIES AND THAT THE EVIDE NCE SUCH AS OCTROI RECEIPT ; HYPOTHECATION OF THE CRANE TO THE BANK; EXISTENCE OF THE CRANE EVEN TILL DATE WIT H THE ASSESSEE CONCLUSIVELY PROVED THAT THE CRANE WAS PURCHASED AND IT WAS IN USE EVEN AS ON DATE WITH THE ASSESSEE. THE COMMISSIONER (APPEALS) ACCORDINGLY FOUND THAT THERE WAS NO SCOPE FOR ANY ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 47 DISALLOWANCE AND ACCORDINGLY DELETED THE DISALLOWANCE MADE ON ACCOUNT OF PURCHASE OF CRANE AND ALLOWED THE DEPRECIATION AS CLAIMED BY THE ASSESSEE. 15. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS NOTED THAT THE COST OF CRANE WAS NEVER CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. BEFORE THE TRIBUN AL, THE ASSESSEE PRODUCED THE EVIDENCE THAT THE CRANE I N QUESTION WAS REGISTERED WITH THE RTO AND THE SAME WAS WHOLLY AND EXCLUSIVELY USED FOR THE PURPOSES OF ITS BUSINESS. THE TRIBUNAL, THEREFORE, HELD THAT TH E COMMISSIONER (APPEALS) WAS LEGALLY AND FACTUALLY CORRECT IN DELETING THE DISALLOWANCE OF COST OF CRA NE AS WELL AS DEPRECIATION THEREON. 16. FROM THE FACTS EMERGING FROM THE RECORD, IT IS APPARENT THAT THE ASSESSEE HAD NEVER CLAIMED THE COST OF THE CRANE IN THE RETURN NOR HAD IT DEBITED THE EXPENSES TO THE PROFIT AND LOSS ACCOUNT, AND AS SUC H THE QUESTION OF DISALLOWING THE SAME AND ADDING THE SAME TO THE INCOME WOULD NOT ARISE. MOREOVER, IN TH E ABSENCE OF ANY EVIDENCE TO INDICATE THAT THE PURCHA SE WAS BOGUS OR THAT THE CRANE IN FACT DID NOT EXIST, THE QUESTION OF DISALLOWING THE DEPRECATION IN RESPECT OF THE SAME ALSO WOULD NOT ARISE. WHEN THE ASSESSEE HAD CONCLUSIVELY PROVED THE PURCHASE AND EXISTENCE OF THE CRANE, AND HAD NOT DEBITED THE EXPENSES TO T HE PROFIT AND LOSS ACCOUNT, NO ADDITION COULD HAVE BEE N MADE IN RESPECT OF THE PURCHASE PRICE NOR COULD HAV E DEPRECIATION BEEN DISALLOWED IN RESPECT THEREOF. TH E TRIBUNAL WAS, THEREFORE, JUSTIFIED IN DELETING THE ADDITION AS WELL AS DISALLOWANCE OF DEPRECIATION. 17. IN THE LIGHT OF THE AFORESAID DISCUSSION, IT IS NOT POSSIBLE TO STATE THAT THERE IS ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER MADE BY THE TRIBUNAL SO AS TO WARRANT INTERFERENCE. IN THE ABSENCE OF ANY QUESTIO N OF LAW, MUCH LESS, A SUBSTANTIAL QUESTION OF LAW, T HE APPEAL IS DISMISSED. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 48 7.4. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ASHISH INTERNATIONAL LTD. (ITA NO.4299/2009) ORDER DATED 22/02/2011, OBSERVED/HELD AS UNDER:- THE QUESTION RAISED IN THIS APPEAL IS, WHETHER THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES ALLEGEDLY MADE BY THE ASSESSEE FROM M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. ACCORDING TO THE REVENUE, THE DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. IN HIS STATEMENT HAD STATED THAT THERE WERE NO SALES / PURCHASES BUT THE TRANSACTIONS WERE ONLY ACCOMMODATION BILLS NOT INVOLVING ANY TRANSACTIONS. THE TRIBUNAL HAS RECORDED A FINDING OF FACT THAT THE ASSESSEE HAD DISPUTED THE CORRECTNESS OF THE ABOVE STATEMENT AND ADMITTEDLY THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE CONCERNED DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. WHO HAD MADE THE ABOVE STATEMENT. THE APPELLATE AUTHORITY HAD SOUGHT REMAND REPORT AND EVEN AT THAT STAGE THE GENUINENESS OF THE STATEMENT HAS NOT BEEN ESTABLISHED BY ALLOWING CROSS EXAMINATION OF THE PERSON WHOSE STATEMENT WAS RELIED UPON BY THE REVENUE. IN THESE CIRCUMSTANCES, THE DECISION OF THE TRIBUNAL BEING BASED ON THE FACT, NO SUBSTANTIAL QUESTION OF LAW CAN BE SAID TO ARISE FROM THE ORDER OF THE TRIBUNAL. THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 7.5. THE HON'BLE GUJARAT HIGH COURT IN CIT VS M.K. BROTHERS (163 ITR 249) HELD/OBSERVED AS UNDER:- BEING AGGRIEVED BY THE AFORESAID ORDER, THE ASSESS EE WENT IN SECOND APPEAL BEFORE THE TRIBUNAL. IT WAS URGED ON BEHALF OF THE ASSESSEE THAT THE TRANSACTIO NS IN ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 49 QUESTION WERE NORMAL BUSINESS TRANSACTIONS AND THE ASSESSEE HAD MADE PAYMENTS BY CHEQUES. THE PARTIES DID NOT COME FORWARD AND IF THEY DID NOT COME, THE ASSESSEE SHOULD NOT SUFFER. HOWEVER, ON BEHALF OF T HE REVENUE, IT WAS URGED THAT DETAILED INQUIRIES WERE MADE AND THEREAFTER THE CONCLUSION WAS REACHED. THE TRIBUNAL FOUND THAT THERE WAS NO EVIDENCE ANYWHERE THAT THESE CONCERNS GAVE BOGUS VOUCHERS TO THE ASSESSEE. NO DOUBT, THERE WERE CERTAIN DOUBTFUL FEATURES, BUT THE EVIDENCE WAS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE BY THE ASSESSEE FROM THE SAID PARTIES WERE BOGUS. THE TRIBUNAL ACCORDINGLY, DID NOT SUSTAIN THE ADDITION RETAINED BY THE APPELLATE ASSISTANT COMMISSIONER. HENCE, AT THE INSTANCE OF THE REVENUE, THE AFORESAID QUESTION HAS BEEN REFERRED TO THIS COURT FOR OPINION. ON A PERUSAL OF THE ORDER OF THE TRIBUNAL, IT CLEAR LY APPEARS THAT WHETHER THE SAID TRANSACTIONS WERE BOG US OR NOT WAS A QUESTION OF FACT. THE TRIBUNAL HAS ALS O POINTED OUT THAT NOTHING IS SHOWN TO INDICATE THAT ANY PART OF THE FUND GIVEN BY THE ASSESSEE TO THESE PAR TIES CAME BACK TO THE ASSESSEE IN ANY FORM. IT IS FURTHE R OBSERVED BY THE TRIBUNAL THAT THERE IS NO EVIDENCE ANYWHERE THAT THESE CONCERNS GAVE VOUCHERS TO THE ASSESSEE. EVEN THE TWO STATEMENTS DO NOT IMPLICATE THE TRANSACTIONS WITH THE ASSESSEE IN ANY WAY. WITH THE SE OBSERVATIONS, THE TRIBUNAL ULTIMATELY HAS OBSERVED THAT THERE ARE CERTAIN DOUBTFUL FEATURES, BUT THE EVIDEN CE IS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE PARTIES WERE BOGUS. IT MAY BE STATED THAT THE ASSESSEE WAS GIVEN CREDIT FACILITIE S FOR A SHORT DURATION AND THE PAYMENTS WERE GIVEN BY CHEQUES. WHEN THAT IS SO, IT CANNOT BE SAID THAT TH E ENTRIES FOR THE PURCHASES OF THE GOODS MADE IN THE BOOKS OF ACCOUNT WERE BOGUS ENTRIES. WE, THEREFORE, DO NOT FIND THAT THE CONCLUSION ARRIVED AT BY THE TRIB UNAL IS AGAINST THE WEIGHT OF EVIDENCE. IN THAT VIEW OF THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 50 MATTER, WE ANSWER THE QUESTION IN THE AFFIRMATIVE, THAT IS, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVEN UE. ACCORDINGLY, THE REFERENCE STANDS DISPOSED OF WITH NO ORDER AS TO COSTS. 7.6. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS RAJEEV G. KALATHIL (2015) 67 SOT 52 (MUM. TRIB.)(URO), IDENTICALLY, HELD AS UNDER:- 2.2.AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS ARGUED THAT ASSESS EE HAD FILED COPIES OF BILLS OF PURCHASE FROM DKE AND NBE, THAT BOTH THE SUPPLIERS WERE REGISTERED DEALERS AND WERE CARRYING PROPER VAT AND REGISTRATION NO.S, THA T LEDGER ACCOUNTS OF THE PARTIES IN ASSESSEE'S BOOKS SHOWED BILLS ACCOUNTED FOR, THAT PAYMENT WAS MADE B Y CHEQUES, THAT A CERTIFICATE FROM THE BANKER GIVING DETAILS OF CHEQUE PAYMENT TO THE SAID PARTIES WAS A LSO FURNISHED. COPIES OF THE CONSIGNMENT, RECEIVED FROM THE GOVERNMENT APPROVED TRANSPORT CONTRACTORS SHOWING THAT MATERIAL PURCHASED WAS ACTUALLY DELIVERED AT T HE SITE WAS FURNISHED BEFORE THE AO. IT WAS ALSO ARGUE D THAT SOME OF THE MATERIAL PURCHASED FROM THE SAID PARTIES WERE LYING PART OF CLOSING STOCK AS ON 31.03.2009 AS PER THE STATEMENT SUBMITTED ON RECORD . AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE ASSESSEE, FAA HELD THAT THE TRANSACTIONS WERE SUPPORTED BY PROPER DOCUMENTARY EVIDENCES, THAT THE PAYMENTS MADE TO THE PARTIES BY THE ASSESSEE WERE IN CONFIRMATION WITH BANK CERTIFICATE,T HAT THE SUPPLIERS WAS SHOWN AS DEFAUL T UNDER THE MAHARASHTRA VAT ACT COULD NOT BE SUFFICIE NT EVIDENCES TO HOLD THAT THE PURCHASES WERE NON-GENUI NE, THAT THE AO HAD NOT BROUGHT ANY INDEPENDENT AND RELIABLE EVIDENCES AGAINST THE ASSESSEE TO PROVE TH E NON-GENUINENESS OF THE PURCHASES, THAT THERE WAS NO EVIDENCE REGARDING CASH RECEIVED BACK FROM THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 51 SUPPLIERS. FINALLY, HE DELETED THE ADDITION MADE BY THE AO . 2.3.BEFORE US, DEPARTMENTAL REPRESENTATIVE ARGUED THAT BOTH THE SUPPLIERS WERE NOT PRODUCED BEFORE TH E AO BY THE ASSESSEE, THAT ONE OF THEM WAS DECLARED HAWALA DEALER BY VAT DEPARTMENT, THAT BECAUSE OF CHEQUE PAYMENT MADE TO THE SUPPLIER TRANSACTION CANNOT BE TAKEN AS GENUINE. HE RELIED UPON THE ORDE R OF THE G BENCH OF MUMBAI TRIBUNAL DELIVERED IN THE CASE OF WESTERN EXTRUSION INDUSTRIES. (ITA/6579/MUM/2010-DATED 13.11.2013). AUTHRORISED REPRESENTATIVE (AR) CONTENDED THAT PAYMENTS MADE BY THE ASSESSEE WERE SUPPORTED BY THE BANKERS STATEMENT, THAT GOODS RECEIVED BY THE ASSESSEE FROM THE SUPPLIE WAS PART OF CLOSING STOCK,THAT THE TRANSPORTER HAD ADMITTED THE TRANSPORTATION OF GOODS TO THE SITE.HE RELIED UPON THE CASE OF BABULA BORANA (282 ITR251), NIKUNJ EXIMP ENTERPRISES (P) LTD. (216TAXMAN171)DELIVERED BY THE HONBLE BOMBAY HIGH COURT. 2.4.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AO HAD MADE TH E ADDITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWA LA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATIO N AND TAKE IT TO LOGICAL END. BUT, HE LEFT THE JOB AT INITIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TA KE PLACE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DET AILS OF THE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT A S WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. WE FIND THAT NO SUCH EXERCISE W AS DONE. TRANSPORTATION OF GOOD TO THE SITE IS ONE OF THE DECIDING FACTOR TO BE CONSIDERED FOR RESOLVING THE ISSUE. THE FAA HAS GIVEN A FINDING OF FACT THAT PART OF TH E GOODS RECEIVED BY THE ASSESSEE WAS FORMING PART OF CLOSING STOCK. AS FAR AS THE CASE OF WESTERN EXTRUS ION INDUSTRIES. (SUPRA)IS CONCERNED, WE FIND THAT IN TH AT MATTER CASH WAS IMMEDIATELY WITHDRAWN BY THE SUPPLIER AND THERE WAS NO EVIDENCE OF MOVEMENT OF GOODS. BUT, IN THE CASE BEFORE US, THERE IS NOTHING , IN ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 52 THE ORDER OF THE AO, ABOUT THE CASH TRAIAL. SECONDL Y, PROOF OF MOVEMENT OF GOODS IS NOT IN DOUBT. THERERF ORE, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY AND THERE ARE NOT SUFFICIENT EVIDENCE ON FILE TO ENDORSE THE VIEW TAKEN BY THE AO. SO, CONFIRMING TH E ORDER OF THE FAA, WE DECIDE GROUND NO.1 AGAINST THE AO . 7.7. THE RATIO LAID DOWN IN THE CASE OF M/S NEETA TEXTILES VS INCOME TAX OFFICER 6138/MUM/2013, ORDER DATED 27/05/2013, SHRI JIGAR V. SHAH VS INCOME TAX OFFICE R (ITA NO.1223/M/2014) ORDER DATED 22/01/2016, M/S IMPERIA L IMP. & EXP. VS INCOME TAX OFFICER ITA NO.5427/MUM/2 015, ORDER DATED 18/03/2016 SUPPORTS THE CASE OF THE ASS ESSEE AND THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. HOW EVER, AS RELIED BY THE LD. DR, THE HON'BLE GUJARAT HIGH C OURT IN THE CASE OF N.K. INDUSTRIES LTD.,ETC VS DCIT (SUPRA) CO NSIDERING VARIOUS DECISIONS DECIDED THE ISSUE IN FAVOUR OF TH E REVENUE AND THE HON'BLE APEX COURT DISMISSED THE SLP VIDE O RDER DATED 16/01/2017 (SLP NO.(C) 769 OF 2017). I FIND T HAT IN THAT CASE, DURING SEARCH PROCEEDINGS, CERTAIN BLANK SIGN ED CHEQUE BOOKS AND VOUCHERS WERE FOUND AND THUS THE PURCHASE S MADE FROM THESE CONCERNS, WERE TREATED AS BOGUS BY THE ASSESSING OFFICER. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 53 7.8. THE HON'BLE GUJARAT HIGH COURT IN N.K. INDUST RIES LTD. VS DCIT (IT APPEAL NO.240, 261, 242, 260 AND 2 41 OF 2003), VIDE ORDER DATED 20/06/2016 CONSIDERED THE D ECISION OF THE TRIBUNAL AND VARIOUS JUDICIAL DECISIONS INCL UDING THE CASE OF VIJAY PROTEINS AND SANJAY OILCAKES INDUSTRI ES LTD., M/S WOOLEN CARPET FACTORY VS ITAT (2002) 178 CTR 42 0 (RAJ.), THE TRIBUNAL WAS HELD TO BE JUSTIFIED IN DE CIDING THE CASE AGAINST THE ASSESSEE. THE HON'BLE APEX COURT CONFIRMED THE DECISION OF THE HIGH COURT FOR ADDING THE ENTIR E INCOME ON ACCOUNT OF BOGUS PURCHASES (SLP (C) NOS. 769 OF 201 7, ORDER DATED 16/01/2017. 7.9. IN SUCH TYPE OF CASES, BROADLY, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AS WELL AS THIS TRIBUNAL HAS FOLLOWED THE DECISIONS FROM HON'BLE GUJARAT HIG H COURT IN THE CASE OF SIMIT P. SETH (2013) 356 ITR 451 (GU J.), CIT VS VIJAY M. MISTRY CONSTRUCTION LTD. (2013) 355 ITR 49 8 (GUJ.), CIT VS BHOLA NATH POLY FAB. (P.) LTD. (2013) 355 IT R 290 (GUJ.) AND VARIOUS OTHER DECISIONS OF THE TRIBUNAL AND THE DECISION OF M/S NIKUNJ EXIMP(SUPRA) FROM HON'BLE JURISDICTIONAL HIGH COURT, WHEREIN, THE AGGREGATE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 54 DISALLOWANCE WAS RESTRICTED TO 12.5%. ADMITTEDLY, T HERE CANNOT BE SALE WITHOUT PURCHASES. THE CASE OF THE REVENUE IS THAT THERE IS BOGUS NATURE OF PURCHASES MADE FRO M SUPPLIERS AND THE PARTIES WERE NOT FOUND EXISTING A T THE GIVEN ADDRESSES. 7.10. THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE C ASE OF N K PROTEINS LTD. VS. DCIT (2004) 83 TTJ AHD 904 MADE AN ELABORATE DISCUSSION WITH RESPECT TO THE ISSUE ON B OGUS PURCHASES, THE RELEVANT PORTION FROM THE ORDER IS R EPRODUCED HERE UNDER: 49. WE WILL NOW DEAL WITH THE MAIN GROUND RAISED B Y THE ASSESSEE IN RELATION TO ADDITION OF RS. 11.99 CRORE S MADE IN RESPECT OF BOGUS PURCHASES. WE HAVE CAREFULLY CONSI DERED THE ELABORATE ARGUMENTS MADE BY THE LEARNED REPRESENTATIVES OF BOTH SIDES. WE HAVE ALSO CAREFUL LY GONE THROUGH THE ORDERS OF THE LEARNED DEPARTMENTAL AUTH ORITIES AS WELL AS ALL OTHER DOCUMENTS SUBMITTED IN THE VAR IOUS PAPER BOOKS SUBMITTED BY THE LEARNED REPRESENTATIVE S OF BOTH SIDES, TO WHICH OUR ATTENTION WAS DRAWN DURING THE COURSE OF HEARING. WE HAVE ALSO CAREFULLY GONE THRO UGH ALL THE JUDGMENTS CITED BY THE LEARNED REPRESENTATIVES. 50. ONE OF THE MAIN ARGUMENTS ADVANCED ON BEHALF OF THE ASSESSEE WAS THAT THE PURCHASES MADE FROM FIVE SUPP LIERS IN QUESTION WERE DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS IN THE NORMAL COURSE. THE IT RETURN FOR ASST. YR. 1 998-99 HAD BEEN SUBMITTED ON 30TH NOV., 1998 I.E. BEFORE THE D ATE OF SEARCH ON 24TH FEB., 1999 ON THE BASIS OF SUCH REGU LAR BOOKS OF ACCOUNTS WHICH INCLUDE ALL THE TRANSACTIONS OF P URCHASES MADE FROM THEM. LIKEWISE THE TRANSACTIONS OF PURCHA SES ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 55 MADE FROM THESE PARTIES WERE RECORDED IN THE REGULA R BOOKS OF ACCOUNTS TILL THE DATE OF SEARCH IN THE NORMAL M ANNER. THEREFORE, THE QUESTION RELATING TO ADDITION IN RES PECT OF PURCHASES MADE FROM THESE SUPPLIERS DOES NOT COME W ITHIN THE AMBIT OF BLOCK ASSESSMENT. HEAVY RELIANCE WAS P LACED ON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN T HE CASE OF CIT V. N.R. PAPER & BOARDS LTD . (SUPRA) AND OTHER SUCH DECISIONS. 51. BEFORE WE GO THROUGH THE RATIO OF JUDGMENT OF T HE HON'BLE GUJARAT HIGH COURT IN THE CASE OF NR PAPER & BOARDS LTD. (SUPRA), IT WOULD BE RELEVANT HERE TO R EFER TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT V. SUN ENGINEERING WORKS (P) LTD . (1992) 198 ITR 297 (SC). THE HON'BLE SUPREME COURT HAS OBSERVED AS UNDER AT P. 320 OF 198 ITR; 'SUCH AN INTERPRETATION WOULD BE READING THAT JUDGM ENT TOTALLY OUT OF CONTEXT IN WHICH THE QUESTIONS AROSE FOR DECISION IN THAT CASE. IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OUT A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CONTEXT OF THE QUESTION UN DER CONSIDERATION AND TREAT IT TO BE THE COMPLETE 'LAW' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERE D IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THIS COURT . A DECISION OF THIS COURT TAKES ITS COLOUR FROM THE QU ESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND, W HILE APPLYING THE DECISION TO A LATER CASE, THE COURTS M UST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT, TO SUP PORT THEIR REASONINGS. IN MADHAV RAO JIVAJI RAO SCINDIA BAHADUR V. UNION OF INDIA (1971) 3 SCR 9 : AIR 1971 SC 530, THIS COURT CAUTIONED (AT P. 578 OF AIR 1971 SC): 'IT IS NOT PROPER TO REGARD A WORD, A CLAUSE OR A S ENTENCE OCCURRING IN A JUDGMENT OF THE SUPREME COURT, DIVOR CED FROM ITS CONTEXT, AS CONTAINING A FULL EXPOSITION O F THE LAW ON A QUESTION WHEN THE QUESTION DID NOT EVEN FALL TO B E ANSWERED IN THAT JUDGMENT'.' 52. A USEFUL REFERENCE MAY BE MADE TO THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE CO- ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 56 OPERATIVE BANK LTD. V. CIT (2001) 250 ITR 229 (GUJ). AT P. 265, THE HON'BLE HIGH COURT HAS OBSERVED AS UNDER: 'AS PER THE SETTLED LEGAL POSITION, A DECISION IS A N AUTHORITY FOR WHAT IT ACTUALLY DECIDES AND NOT NECESSARILY FO R WHAT LOGICALLY FOLLOWS FROM IT. EQUALLY WELL SETTLED IS THE PRINCIPLE THAT A DECISION TO BE LAW UNDER ARTICLE 141 MUST NOT BE A MERE CONCLUSION BY WHICH THE CASE IS DISPOSED OF. B ECAUSE, A CONCLUSION, A MERE CONCLUSION, MAY BE ON FACTS, IT MAY NOT AND DOES NOT NECESSARILY INVOLVE CONSIDERATION OF L AW. IT IS WELL SETTLED THAT AN. 141 WILL NOT BE ATTRACTED IF LAW IS NOT DECLARED OR STATED VOCALLY TO SUPPORT THE CONCLUSIO N REACHED FOR DECIDING THE LIS. A MUTE DECLARATION OF THE MER E CONCLUSION IS NOT CONTEMPLATED UNDER ARTICLE 141. (VIDE MANAGER, PANJARAPOLE, DEODAR V. C.M. NAT (1997) 2 GLR 1321, 1325).' 53. LET US NOW REFER TO THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF N.R. PAPER & BOARDS LTD. (SUPRA) KEEPING IN VIEW THE PRINCIPLES LAID DOWN IN THE AFO RESAID JUDGMENTS OF THE HON'BLE APEX COURT AND THE HON'BLE GUJARAT HIGH COURT. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF N.R. PAPER BOARDS LTD. (SUPRA) WAS DEALING WITH THE REFERENCE APPLICATION UNDER SECTION 256(2) SUBMITTED BY THE CIT. IT HAS BEEN OBSERVED IN THE SAID JUDGMENT AT P P. 529 AND 530 AS UNDER: 'EARLIER THE ASSESSEE INVOKED THE WRIT JURISDICTION OF THIS COURT SEEKING TO CHALLENGE THE NOTICES ISSUED TO TH EM UNDER SECTION 143(2) OF THE ACT BY WHICH THE ASSESSEES WERE REQUIRED TO ATTEND THE OFFICE OF THE REVENUE IN CON NECTION WITH THE RETURN OF INCOME SUBMITTED BY THEM FOR THE ASST. YR. 1995-96. THE ASSESSEE POINTED OUT THAT THE SEARCH A ND SEIZURE OPERATION CARRIED OUT ON 1ST DEC., 1995, WA S CONCLUDED ON 6TH JAN., 1996. THEIR BLOCK ASSESSMENT UNDER CHAPTER XIV-B OF THE ACT WAS MADE FOR THE BLOCK PER IOD FROM 1ST APRIL, 1985 TO 6TH JAN., 1996. IN ACCORDAN CE WITH THE PROVISIONS OF SECTION 158BB OF THE ACT, THE TOTAL INCOME WAS WORKED OUT AFTER GIVING CREDIT FOR THE AMOUNT DISCL OSED. THE ASSESSEE POINTED OUT THAT THE INCOME FOR THE ASST. YR. 1995-96 WAS ALREADY COMPUTED IN THE ASSESSMENT FOR THE BLOC K PERIOD. HENCE, THERE WAS NO QUESTION OF PROCEEDING WITH THE REGULAR ASSESSMENT FOR THE ASST. YR. 1995-96. IT WA S FURTHER SUBMITTED THAT IN ANY EVENT NO ADDITION COULD BE MA DE TO THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 57 TOTAL INCOME DISCLOSED IN THE SAID RETURNS IN VIEW OF THE BLOCK ASSESSMENT MADE FOR THE PERIOD WHICH INCLUDED THE S AID ASST. YR. 1995-96. THE DIVISION BENCH OF THIS COURT IN TH E CASE OF N.R. PAPER & BOARDS LTD. V. DY. CIT (1998) 234 ITR 733 (GUJ) CONSIDERED THE PROVISIONS IN DETAIL. THE COUR T POINTED OUT THAT THE BLOCK ASSESSMENT OF UNDISCLOSED INCOME TO BE CHARGED AT A HIGHER RATE OF TAX PRESCRIBED WAS INDE PENDENT OF THE PENDING REGULAR ASSESSMENTS AND IT OPERATED IN A DIFFERENT FIELD FROM THE ASSESSMENT OF UNDISCLOSED INCOME WHICH WAS NOT AND WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THE ACT. UNDISCLOSED INCOME, BY CHAPTER XIV-B, IS CLASSIFIED SEPARATELY FOR THE PURPOSES OF ASSESSMEN T AND IS REQUIRED TO BE WORKED OUT IN THE MANNER PRESCRIBED THEREIN AND TREATED TO A HIGHER RATE OF TAX. THIS PROCESS D ID NOT DISTURB THE ASSESSMENTS ALREADY MADE, OF THE PREVIO US YEARS, AND WAS ONLY INTENDED TO SNIFF OUT WHAT HAD REMAINE D HIDDEN AND NOT DISCLOSED BY THE ASSESSEE. THERE WOU LD, THEREFORE, BE NO OVERLAPPING IN THE NATURE OF THE A SSESSMENT MADE UNDER THIS CHAPTER OF UNDISCLOSED INCOME AND T HE REGULAR ASSESSMENT MADE UNDER SECTION 143(3) . THE POWERS OF REGULAR ASSESSMENT ARE KEPT INTACT AND SO ARE AL L THE APPELLATE, REVISIONAL AND OTHER POWERS AFFECTING SU CH REGULAR ASSESSMENT AND ALL THE STATUTORY CONSEQUENC ES FLOWING FROM THE EXERCISE OF SUCH POWERS WOULD FOLL OW ALONG SIDE OF THIS SPECIAL ASSESSMENT PROCEDURE DEVISED F OR DEALING WITH UNDISCLOSED INCOME AS A RESULT OF SEARCH. IT, THEREFORE, FOLLOWS THAT THE INQUIRY UNDER SECTION 143(3) FOR REGULAR ASSESSMENT WHICH WAS PENDING WHEN THE BLOCK ASSESSM ENT WAS MADE, THE AO WHO COMES ACROSS EVIDENCE AND MATE RIAL WHICH WAS NOT FOUND OR MADE AVAILABLE IN THE PROCES S OF BLOCK ASSESSMENT, CANNOT IGNORE THE SAME AND HE WIL L BE DUTY-BOUND TO MAKE THE REGULAR ASSESSMENT TAKING IN TO ACCOUNT SUCH EVIDENCE AND MATERIAL GATHERED IN THE ENQUIRY UNDER SECTION 143(3) TO ENSURE THAT PROPER ASSESSMENT OF TOTAL INCOME IS MADE AND TAX IS DETERMINED ON THE B ASIS OF SUCH ASSESSMENT.' 54. THE HON'BLE HIGH COURT IN THIS JUDGMENT WHILE D ECLINING TO CALL FOR REFERENCE OF VARIOUS QUESTIONS PROPOSED IN THE SAID REFERENCE APPLICATION, RELIED UPON ITS JUDGMENT IN THE CASE OF N.R. PAPER & BOARDS LTD. (SUPRA). IT MAY ALSO BE RE LEVANT HERE TO REPRODUCE THE RELEVANT EXTRACTS FROM THE SA ID JUDGMENT APPEARING AT PP. 741 AND 742 : ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 58 'THE DEFINITION OF 'UNDISCLOSED INCOME' IN SECTION 158B(B) INCLUDES ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON AN Y ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANS ACTION, WHERE SUCH ASSET, ENTRY OR OTHER DOCUMENT OR TRANSA CTION REPRESENTING WHOLLY OR PARTLY INCOME OR PROPERTY WH ICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE P URPOSES OF THE ACT. IT, THEREFORE, FOLLOWS THAT WHAT THE AS SESSEE HAD ALREADY DISCLOSED OR WOULD HAVE DISCLOSED IS NOT TO BE TREATED AS UNDISCLOSED INCOME. FROM THE PROVISIONS OF SECTION 158BA(1) , IT WOULD APPEAR THAT THE AO CAN PROCEED TO ASSESS THE UNDISCLOSED I NCOME ONLY IF A SEARCH IS INITIATED UNDER SECTION 132 OF THE ACT BY THE AUTHORISED OFFICER. THE TOTAL UNDISCLOSED INCOM E RELATING TO THE BLOCK PERIOD IS TO BE CHARGED TO TAX AT THE HIGHER RATE OF 60 PER CENT PRESENTLY SPECIFIED IN SECTION 113 OF THE ACT AFTER SUCH UNDISCLOSED INCOME IS ASSESSED IN ACCORD ANCE WITH THE PROVISIONS OF THIS CHAPTER BY THE AO AS INCOME OF THE 'BLOCK PERIOD' AS DEFINED IN SECTION 158B(A) OF THE ACT. THIS HAS TO BE DONE 'IRRESPECTIVE OF THE PREVIOUS YEAR O R YEARS TO WHICH SUCH INCOME RELATES AND IRRESPECTIVE OF THE F ACT WHETHER REGULAR ASSESSMENT FOR ANY ONE OR MORE OF T HE RELEVANT ASSESSMENT YEARS IS PENDING OR NOT' AS PRO VIDED IN SUB-SECTION (2) OF SECTION 158BA . THIS EXPRESSION CLEARLY INDICATES THAT THE BLOCK ASSESSMENT OF UNDISCLOSED INCOME AND ITS BEING CHARGED TO A HIGHER RATE OF TAX PRESC RIBED, WAS INDEPENDENT OF THE PENDING REGULAR ASSESSMENTS AND IT OPERATED IN A DIFFERENT FIELD FROM THE ASSESSMENT O F UNDISCLOSED INCOME WHICH WAS NOT AND WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THE ACT. UNDISCLOSED INCOME, BY THIS CHAPTER, IS CLASSIFIED SEPARATELY FOR THE PURP OSES OF ASSESSMENT AND IS REQUIRED TO BE WORKED OUT IN THE MANNER PRESCRIBED THEREIN AND TREATED TO A HIGHER RATE OF TAX. THIS PROCESS DID NOT DISTURB THE ASSESSMENTS ALREADY MAD E, OF THE PREVIOUS YEARS, AND WAS ONLY INTENDED TO SNIFF OUT WHAT HAD REMAINED HIDDEN AND WOULD NOT HAVE BEEN DISCLOSED B Y THE ASSESSEE. THERE WOULD, THEREFORE, BE NO OVERLAPPING IN THE NATURE OF THE ASSESSMENT MADE UNDER CHAPTER OF UNDI SCLOSED INCOME AND THE REGULAR ASSESSMENT MADE UNDER SECTION 143(3) OF THE ACT. IF THE PENDING REGULAR ASSESSMENT PROCEEDINGS WERE TO BE FROZEN AND GOT SUBSTITUTED BY THE ASSESSMENT OF THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 59 UNDISCLOSED INCOME OF THE BLOCK PERIOD, THE LEGISLA TURE WOULD HAVE BEEN SPECIFIC ON THAT ASPECT AND WOULD HAVE MA DE IT CLEAR THAT THE PENDING REGULAR ASSESSMENT PROCEEDIN GS SHOULD BE DROPPED. THE PROVISIONS OF THIS CHAPTER D O NOT EITHER EXPRESSLY OR BY NECESSARY IMPLICATION EVEN R EMOTELY INDICATE THAT THE REGULAR ASSESSMENT PROCEEDINGS OF A PREVIOUS YEAR COVERED IN THE BLOCK PERIOD, WERE REQ UIRED TO BE STAYED OR DROPPED OR SUBSTITUTED BY THE PROCEEDI NGS OF THIS CHAPTER. UNDER SUB-SECTION (3) OF SECTION 158BA , WHERE THE DATE OF FILING THE RETURN OF INCOME UNDER SECTION 139(1) FOR ANY PREVIOUS YEAR HAS NOT EXPIRED, AND THE INCOME OF TH AT PREVIOUS YEAR OR THE TRANSACTIONS RELATING TO SUCH INCOME ARE DULY RECORDED, THEN SUCH INCOME IS NOT REQUIRED TO BE INCLUDED IN THE BLOCK PERIOD. THIS OBVIOUSLY MEANS THAT THE REGULAR ASSESSMENT OF THAT PREVIOUS YEAR WHICH HAS REMAINED PENDING, WILL PROCEED NOTWITHSTANDING THAT IT WAS FALLING IN THE BLOCK PERIOD. THE SAME WOULD BE THE CASE WHERE THE BLOCK PERIOD INCLUDES ONLY A PART OF THE PREVIOUS YEAR OF WHICH THE RETURN IS FILED FOR REGULAR ASSES SMENT, AND THE REGULAR ASSESSMENT CAN PROCEED NOTWITHSTANDING THAT THE UNDISCLOSED INCOME FOR A PART OF THAT PREVIOUS YEAR WAS WITHIN THE BLOCK PERIOD.' 55. IT IS APPARENT FROM A PLAIN READING OF THE AFOR ESAID DECISIONS OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF N.R. PAPER & BOARDS LTD. (SUPRA) THAT THE ISSUE DEC IDED IS AS TO WHETHER AFTER MAKING OF BLOCK ASSESSMENT, REGULA R ASSESSMENT IS BARRED OR PROHIBITED BY LAW. THE HON' BLE HIGH COURT HAS HELD THAT THERE WOULD BE NO OVERLAPPING I N THE NATURE OF ASSESSMENT MADE UNDER THIS CHAPTER OF UND ISCLOSED INCOME AND THE REGULAR ASSESSMENT MADE UNDER SECTION 143(3) . THE POWERS OF REGULAR ASSESSMENT ARE KEPT INTACT. ALL THE PROVISIONS AFFECTING SUCH REGULAR ASSESSMENTS A ND ALL THE STATUTORY CONSEQUENCES FLOWING FROM EXERCISE OF SUC H POWERS WOULD FOLLOW ALONG WITH THIS SPECIAL ASSESSMENT PRO CEDURE DEVISED FOR DEALING WITH UNDISCLOSED INCOME AS A RE SULT OF SEARCH. 56. THE LEGISLATURE THOUGHT IT FIT TO INSERT AN EXP LANATION TO SECTION 158BA BY THE FINANCE (NO. 2) ACT, 1998 WITH RETROSPECTIVE EFFECT FROM 1ST JULY, 1995 TO EXPLAIN AND DECLARE THAT THE ASSESSMENT MADE UNDER CHAPTER XIV- B OF ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 60 THE ACT SHALL BE IN ADDITION TO THE REGULAR ASSESSM ENT IN RESPECT OF EACH PREVIOUS YEAR INCLUDED IN THE BLOCK PERIOD, AND THE TOTAL UNDISCLOSED INCOME RELATING TO THE BL OCK PERIOD SHALL NOT INCLUDE THE INCOME ASSESSED IN ANY REGULA R ASSESSMENT AS INCOME OF SUCH BLOCK PERIOD. IT FURTH ER PROVIDES THAT THE INCOME ASSESSED IN THIS CHAPTER S HALL NOT BE INCLUDED IN THE REGULAR ASSESSMENT OF ANY PREVIOUS YEAR INCLUDED IN THE BLOCK PERIOD. THE MERE FACT THAT TH E AO IS EMPOWERED TO ASSESS THE CONCEALED INCOME IN REGULAR ASSESSMENT DOES NOT LEAD TO THE CONCLUSION THAT WHA T THE ITO CAN ASSESS IN REGULAR ASSESSMENT CANNOT BE ASSESSED IN BLOCK ASSESSMENT. THE HON'BLE GUJARAT HIGH COURT WHILE DE ALING WITH THE REFERENCE APPLICATION UNDER SECTION 256(2) HAS DECLINED TO REFER THE VARIOUS QUESTIONS SUGGESTED B Y THE CIT MAINLY ON THE GROUND THAT THE QUESTIONS PROPOSED BY THE REVENUE DID NOT RAISE ANY QUESTION OF LAW AND IT HA S ALSO BEEN OBSERVED THAT WHERE THE ASSESSEE HAS DISCLOSED THE PARTICULARS OF INCOME OR EXPENDITURE IN THE RETURN/ BOOKS OF ACCOUNTS, THE AO CANNOT TAKE A DIFFERENT VIEW ON TH E BASIS OF 'SAME MATERIAL'. SUCH OBSERVATIONS HAVE BEEN MADE B Y FOLLOWING THE JUDGMENT REPORTED IN (1998) 234 ITR 7 33 (GUJ) (SUPRA). THE JUDGMENT OF THE HON'BLE GUJARAT HIGH C OURT IN THE CASE OF N.R. PAPER & BOARDS LTD., IF READ IN TH E CONTEXT OF QUESTIONS RAISED BEFORE THE COURT, CANNOT BE READ A S HAVING HELD THAT EVEN IF THE MATERIAL FOUND DURING THE COU RSE OF SEARCH EXPOSES THE FALSITY OF THE ENTRIES MADE IN T HE REGULAR BOOKS OF ACCOUNTS, THE CONSEQUENT CONCEALED INCOME CANNOT BE ASSESSED AS UNDISCLOSED INCOME IN BLOCK ASSESSME NT UNDER CHAPTER XIV-B. IN THE PRESENT CASE THE ADDITION IN RESPECT OF PURCHASES MADE FROM THE ALLEGED BOGUS SUPPLIERS HAS ORIGINATED ON THE BASIS OF MATERIAL FOUND AND SEIZE D DURING THE SEARCH. CERTAIN BLANK BILL BOOKS, SIGNED CHEQUE BOOKS AND OTHER DOCUMENTS OF VARIOUS PARTIES INCLUDING TH ESE FIVE SUPPLIER CONCERNS WERE FOUND AND SEIZED FROM THE OF FICE PREMISES OF THE ASSESSEE DURING THE SEARCH. THE POS T-SEARCH INVESTIGATION CLEARLY INDICATES THAT THESE FIVE PAR TIES DID NOT IN FACT SUPPLY ANY MATERIAL TO THE ASSESSEE BUT THE Y WERE ONLY ISSUING FICTITIOUS BILLS. THEY MAY BE CALLED ' BILLING AGENTS' OR 'NAME LENDERS'. WHETHER THEY ACTED AS BI LLING AGENTS/NAME LENDERS FOR AND ON BEHALF OF THE ASSESS EE AS WELL AS FOR AND ON BEHALF OF VARIOUS OTHER PARTIES, IS A DIFFERENT QUESTION BUT AMPLE MATERIAL HAS BEEN BROU GHT ON RECORD TO ADEQUATELY PROVE THAT THESE FIVE PARTIES FROM WHOM THE ASSESSEE CLAIMED TO HAVE MADE PURCHASES OF WASH ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 61 COTTON SEED OIL WERE NOT THE REAL SUPPLIERS OF SUCH MATERIAL BUT THEY WERE ONLY ISSUING FICTITIOUS BILLS. THE FA LSITY OF THE CLAIM FOR PURCHASES SHOWN AS PURCHASES MADE FROM TH ESE BILLING AGENTS/NAME LENDERS RESULTING IN ADDITION O N ACCOUNT OF EITHER BOGUS PURCHASES OR INFLATED PURCHASES WIL L SURELY COME WITHIN THE AMBIT OF UNDISCLOSED INCOME AS DEFI NED IN SECTION 158B(B) AS AMENDED BY THE FINANCE ACT , 2002 WITH RETROSPECTIVE EFFECT FROM 1ST JULY, 1995. THE SAID PROVISION IS REPRODUCED BELOW: '158B--IN THIS CHAPTER, UNLESS THE CONTEXT OTHERWIS E REQUIRES,-- (A)......:.... (B) 'UNDISCLOSED INCOME' INCLUDES ANY MONEY, BULLIO N, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS, WHERE SUCH MONEY, BULLIO N, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BO OKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THIS AC T OR ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE.' IT MAY ALSO BE RELEVANT HERE TO REPRODUCE SECTION 158BB(1) : '158BB(1).--THE UNDISCLOSED INCOME OF THE BLOCK PER IOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOU S YEARS FALLING WITHIN THE BLOCK PERIOD COMPUTED IN ACCORDA NCE WITH THE PROVISIONS OF THIS ACT, ON THE BASIS OF EVIDENC E FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION A S ARE AVAILABLE WITH THE AO AND RELATABLE TO SUCH EVIDENC E, AS REDUCED BY THE AGGREGATE OF THE TOTAL INCOME, OR AS THE CASE MAY BE, AS INCREASED BY THE AGGREGATE OF THE LOSSES OF SUCH PREVIOUS YEARS, DETERMINED......' 57. A PLAIN READING OF SECTION 158B(B) CLEARLY INDICATES THAT ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER T HIS CHAPTER WHICH IS FOUND TO BE FALSE AS A RESULT OF S EARCH WILL COME WITHIN THE AMBIT OF UNDISCLOSED INCOME UNDER C HAPTER XIV-B. THE EXPRESSIONS 'ON THE BASIS OF EVIDENCE FO UND AS A RESULT OF SEARCH' OR 'OTHER DOCUMENTS AND SUCH OTHE R ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 62 MATERIALS OF INFORMATION AS ARE AVAILABLE WITH THE AO AND RELATABLE TO SUCH EVIDENCE, THE UNDISCLOSED INCOME SO DETECTED AS A RESULT OF SEARCH AND/OR AS A RESULT O F OTHER MATERIAL OR INFORMATION AS ARE AVAILABLE WITH THE A O, WILL BE ASSESSABLE AS UNDISCLOSED INCOME IN ASSESSMENT FOR THE BLOCK PERIOD. IT MAY BE RELEVANT HERE TO MENTION THAT SUC H OTHER MATERIAL OR INFORMATION AS ARE AVAILABLE WITH THE A O USED IN SECTION 158BB(1) WOULD INCLUDE MATERIAL, INFORMATION AND EVIDENCE GATHERED AS A RESULT OF POST-SEARCH INVEST IGATION ON THE BASIS OF EVIDENCE FOUND DURING THE SEARCH OR FO UND AS A RESULT OF SEARCH. SUCH INFORMATION AS WOULD BE AVAI LABLE WITH THE AO CAN BE MADE THE BASE FOR COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD. THE TERM, T HE AO USED IN SECTION 158BB(1) , IS DISTINCT FROM AUTHORISED OFFICERS WHO CONDUCTED THE SEARCH. IT, THEREFORE, CLEARLY IN DICATES THAT THE POST-SEARCH INVESTIGATION MADE BY THE DY. DIT/ADDL. DIT AND BY THE AO IN FURTHERANCE TO THE E VIDENCE FOUND DURING THE SEARCH CAN BE VALIDLY TAKEN INTO CONSIDERATION, IF SUCH MATERIAL AVAILABLE WITH THE AO EXPOSES THE FALSITY OF THE ENTRIES RECORDED IN THE REGULAR BOOKS OF ACCOUNTS IN NORMAL COURSE. 58. IT MAY ALSO BE RELEVANT HERE TO ADD THAT THE RE GULAR ASSESSMENTS FOR ASST. YRS. 1998-99 AND 1999-2000 HA VE ALREADY BEEN COMPLETED BY THE AO VIDE ORDERS DT. 28 TH MARCH, 2001 AND 27TH MARCH, 2002. THE AO HAS NOT MA DE ANY ADDITION IN RESPECT OF SUCH BOGUS BILLS OBTAINE D BY THE ASSESSEE FROM THESE BILLING AGENTS/NAME LENDERS. TH E ADDITION OF ONLY RS. 1,18,13,717 HAS BEEN MADE IN R ESPECT OF ALLEGED UNACCOUNTED PAYMENTS TO KRISHNA INDUSTRIES AND VIMAL INDUSTRIES, WHICH PERHAPS REPRESENT PAYMENTS DEPOSITED IN THE BANK ACCOUNTS OF THESE TWO BILLING AGENTS NAME LENDERS AFTER THE DATE OF SEARCH. IT IS NOT KN OWN WHAT HAS BEEN DECIDED IN FURTHER APPEAL, IF ANY, MADE BE FORE THE CIT(A) FOR ASST. YR. 1999-2000. THIS CLEARLY SHOWS THAT THE ASSESSEE AS WELL AS THE AO BOTH HAD UNDERSTOOD THE RELEVANT PROVISIONS IN THE SAME MANNER, NAMELY, THAT THE ADD ITION, IF ANY, IS REQUIRED TO BE MADE IN RESPECT OF ALLEGED B OGUS PURCHASES OR INFLATED PURCHASES MADE FROM THESE FIV E SUPPLIERS, IT IS TO BE MADE IN THE BLOCK ASSESSMENT AND NOT NECESSARILY IN THE REGULAR ASSESSMENT. IF THIS POIN T IS NOT CONSIDERED IN BLOCK ASSESSMENT, IT WILL ESCAPE TAX ALTOGETHER, AS REGULAR ASSESSMENTS HAVE ALREADY BEEN MADE, IN W HICH NO SUCH ADDITIONS HAVE BEEN MADE. IN VIEW OF THE AFORE SAID ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 63 FACTS AND DISCUSSIONS, WE ARE OF THE VIEW THAT THE QUESTION RELATING TO ADDITION OF PURCHASES MADE, FROM THESE BOGUS SUPPLIERS OR ADDITION IN RESPECT OF INFLATED PURCHA SE PRICE SHOWN AS PAID TO THESE BOGUS SUPPLIERS COMES WITHIN THE AMBIT OF BLOCK ASSESSMENT UNDER CHAPTER XIV-B. 59. THE OTHER MAIN ARGUMENT ADVANCED BY THE LEARNED COUNSEL WAS THAT THE IMPUGNED ASSESSMENT MADE BY TH E AO FOR THE BLOCK PERIOD IS SOLELY BASED ON ENQUIRIES M ADE BY THE ADDL. DIT/DY. DIT AND ON THE APPRAISAL REPORT SENT BY THEM. ALL THE AFFIDAVITS/STATEMENTS ON WHICH THE AO HAS P LACED RELIANCE WERE OBTAINED BY THE INVESTIGATION WING. T HE AO HAS SIMPLY RELIED ON THE APPRAISAL REPORT. THE LEAR NED COUNSEL HAS VEHEMENTLY ARGUED THAT THE ADDL. DIT/DY . DIT HAVE NO POWER TO CONDUCT ENQUIRY AFTER THE SEARCH. THE CIT(A) HAS PLACED RELIANCE ON THE JUDGMENT OF THE H ON'BLE GUJARAT HIGH COURT IN THE CASE OF ARTI GASES V. DY. DIT (SUPRA). THE HON'BLE GUJARAT HIGH COURT IN THAT CAS E AT P. 63 HAS OBSERVED AS UNDER: 'WE ARE OF THE VIEW THAT THE NOTICES UNDER SECTION 131(1A) CAN ALSO BE ISSUED AFTER COMPLETION OF THE SEARCH UNDERTAKEN UNDER THE PROVISIONS OF SECTION 132 OF THE ACT. IN OUR OPINION, IT WOULD BE ABSOLUTELY LOGICAL TO CALL FOR INFORMATION SO AS TO HAVE BETTER PARTICULARS OR TO HAVE A COMPLETE IDEA ABOUT THE MATERIAL SEIZED DURING THE SEARCH. IF SOME MATERIAL IS SEIZED AT THE TIME OF THE SEARCH A ND THE AUTHORISED OFFICER WANTS TO HAVE SOME DETAILS SO AS TO UNDERSTAND THE NATURE OF THE DOCUMENTS, HE MAY ISSU E NOTICE UNDER SECTION 131(1A) OF THE ACT. IN OUR OPINION, IN A GIVEN CASE SUCH A NOTICE CANNOT ONLY HELP THE DEPARTMENT BUT CAN ALSO HELP THE ASSESSEE. IF THE ASSESSEE IS IN A POS ITION TO GIVE MORE EXPLANATION SO AS TO SATISFY THE AUTHORISED OF FICER THAT THE DOCUMENTS SEIZED BY HIM DO NOT REVEAL ANY UNDIS CLOSED INCOME, BUT THE INCOME OR TRANSACTIONS REFERRED TO IN THE DOCUMENTS HAD BEEN DULY SHOWN BY HIM IN HIS BOOKS O F ACCOUNT OR IF THE ASSESSEE GIVES ANY INFORMATION TO THE EFFECT THAT THE FIRST IMPRESSION OF THE AUTHORISED OFFICER WITH REGARD TO THE NATURE OF THE DOCUMENTS WAS NOT CORRE CT, WE ARE SURE THAT SUCH A NOTICE WOULD HELP THE ASSESSEE HIMSELF. IF THE ASSESSEE IS CALLED UPON TO GIVE SOME INFORMATIO N OR TO EXPLAIN CERTAIN DOCUMENTS OR WRITINGS SEIZED DURING THE PROCESS OF SEARCH, IN OUR OPINION, NO HARM CAN BE C AUSED TO THE ASSESSEE AND AS STATED HEREINABOVE, SUCH PARTIC ULARS CAN ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 64 BE HELPFUL NOT ONLY TO THE DEPARTMENT BUT TO THE AS SESSEE ALSO. WE, THEREFORE, DO NOT AGREE WITH THE SUBMISSI ONS MADE BY THE LEARNED ADVOCATE, SHRI PUJ, THAT SUCH A NOTI CE CAN BE ISSUED ONLY BEFORE INTIMATION OF PROCEEDINGS UNDER SECTION 132 OF THE ACT. MOREOVER, EVEN UNDER THE PROVISIONS OF SECTION 133 OF THE ACT, THE AO OR THE OFFICERS REFERRED TO IN THE SAID SECTION ARE HAVING POWER TO CALL FOR INFOR MATION. SO ISSUANCE OF SUCH A NOTICE DURING OR AFTER THE SEARC H CANNOT BE SAID TO BE BAD IN LAW.' 60. RELIANCE PLACED BY THE LEARNED COUNSEL ON THE J UDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASES OF CIT V. PLANTATION CORPORATION OF KERALA (SUPRA) AND ANDHRA PRADESH CHAMBERS V. STATE OF AP AND ORS . (2001) 247 ITR 36 (SC) HOLDING THAT RESORT TO ANY INTERPRETATIVE PROC ESS TO UNFOLD LEGISLATIVE INTENT IN A CASE WHERE STATUTORY LANGUAGE IS CLEAR, IS IMPERMISSIBLE, IS MISPLACED, AS THE JU DGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF ARTI GASES (SUPRA) IS A DIRECT DECISION INVOLVING INTERPRETATI ON OF THE RELEVANT PROVISIONS CONTAINED IN THE IT ACT , 1961. FURTHERMORE, THERE IS NO MERIT IN THE AFORESAID SUB MISSIONS OF THE 4EARNED COUNSEL AS THE AO HAS PROVIDED ADEQU ATE AND REASONABLE OPPORTUNITY TO THE ASSESSEE IN RESPECT O F ALL SUCH MATERIAL, AFFIDAVITS, STATEMENTS OBTAINED BY THE DY . DIT/ADDL. DIT IN THE COURSE OF ASSESSMENT PROCEEDIN GS FOR THE BLOCK PERIOD. A PERUSAL OF THE ASSESSMENT ORDER AT P. 2 SHOWS THAT THE AO GAVE COMPLETE DETAILS ABOUT SUCH INQUIRIES, AFFIDAVITS/STATEMENTS ALONG WITH THE LET TER DT. 4TH DEC., 2000. THEREAFTER, THE AO GAVE SEVERAL OPPORTU NITIES TO THE ASSESSEE IN RESPECT OF ALL SUCH MATERIAL GATHER ED BY THE ADDL. DIT/DY. DIT BEFORE USING THE SAME AGAINST THE ASSESSEE IN THE ASSESSMENT ORDER. THE AO HAS THUS F ULLY COMPLIED WITH THE RELEVANT PROVISIONS OF LAW AND TH E PRINCIPLES OF NATURAL JUSTICE BEFORE USING THE MATE RIAL AGAINST THE ASSESSEE. THIS CONTENTION OF THE LEARNE D COUNSEL ALSO, THEREFORE, HAS NO MERIT. 61. WE HAVE CAREFULLY GONE THROUGH ALL THE DECISION S CITED BY THE LEARNED REPRESENTATIVES OF THE PARTIES. IT IS W ELL SETTLED LAW THAT EACH CASE WILL DEPEND ON THE FACTS AND CIRCUMSTANCES OF THAT CASE. THE DECISION IN EVERY C ASE HAS TO BE ARRIVED AT ON THE BASIS OF APPRECIATION OF FACTS , MATERIAL AND EVIDENCE EXISTING ON RECORDS. HOWEVER, SUCH EVI DENCE EXISTING ON RECORDS SHOULD BE APPRECIATED AND EVALU ATED ON ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 65 THE BASIS OF PRINCIPLES OF LAW EMERGING FROM VARIOU S DECISIONS CITED BY THE LEARNED REPRESENTATIVES. WE HAVE ALSO INDICATED HEREINBEFORE AS TO HOW THE FACTS OF VARIO US CASES RELIED UPON BY THE LEARNED COUNSEL ARE DIFFERENT AN D DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. WE WILL HOWEVER BEAR IN MIND THE VARIOUS PRINCIPLES LAID DO WN BY THE HON'BLE COURTS WHILE CONSIDERING THE FACTS AND MATERIAL RELATING TO THE PRESENT CASE. 62. THE MOST IMPORTANT PRINCIPLE OF LAW EMERGING FR OM THE VARIOUS DECISIONS CITED BY THE LEARNED COUNSEL IS T HAT THE BURDEN OF ESTABLISHING THAT THESE FIVE SUPPLIERS WE RE BOGUS SUPPLIERS OR THAT THEY WERE BENAMIS OF THE ASSESSEE , LIES ON THE DEPARTMENT. SUCH SERIOUS NATURE OF ALLEGATION D EMANDS A CREDIBLE PROOF OF A HIGH ORDER TO SUPPORT SUCH AL LEGATIONS. THE BURDEN OF ESTABLISHING MALA FIDES THEREFORE CLE ARLY LIES ON THE REVENUE. EQUALLY WELL SETTLED PRINCIPLE OF L AW EMERGING FROM THE VARIOUS DECISIONS CITED BY THE LE ARNED REPRESENTATIVES OF BOTH SIDES, IS THAT THE ONUS LIE S ON THE ASSESSEE TO PROVE THE GENUINENESS OF ANY EXPENDITUR E, WHICH IS CLAIMED AS DEDUCTION IN COMPUTING ITS TAXABLE IN COME. THEREFORE, THE ONUS IN THE INSTANT CASE, SQUARELY L IES ON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES OF C OTTON SEED OIL SAID TO HAVE BEEN PURCHASED FROM THESE FIVE PAR TIES, WHICH HAVE BEEN HELD TO BE BOGUS PARTIES BY THE DEPARTMENTAL AUTHORITIES. IT IS INCUMBENT ON THE AS SESSEE TO PROVE THAT THE SUPPLIERS WERE GENUINE SUPPLIERS OF COTTON SEED OIL AND THEY REALLY SUPPLIED THE RAW MATERIAL TO THE ASSESSEE. SUCH A BURDEN HAD TO BE DISCHARGED BY THE ASSESSEE WITH VERY STRONG, COGENT AND CLINCHING EVIDENCE IN VIEW OF BLATANT DENIAL BY ALL THE FIVE PARTIES COUPLED WITH THE VARIOUS OTHER CIRCUMSTANTIAL EVIDENCE REFERRED TO IN THE AS SESSMENT ORDER. 63. LET US EXAMINE THE FACTS RELATING TO THESE FIVE PARTIES FROM WHOM THE ASSESSEE CLAIMED TO HAVE MADE PURCHAS ES OF WASH COTTON SEED OIL AGGREGATING TO RS. 11.99 CRORE S. THE DETAILED FACTS STATED BY THE AO IN THE ASSESSMENT O RDER IN RELATION TO ALL THESE FIVE PARTIES VIZ. ADINATH COR PORATION, TIRUPATI CORPORATION, M/S KRISHNA INDUSTRIES, M/S KARNAVATI INDUSTRIES AND M/S VIMAL INDUSTRIES, CLEA RLY INDICATE THE FOLLOWING FACTS AND FEATURES: ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 66 (A) CERTAIN BLANK BILL BOOKS, BLANK SIGNED CHEQUE B OOKS, LETTER HEADS AND VOUCHERS OF THESE CONCERNS WERE FO UND FROM THE BUSINESS PREMISES OF THE ASSESSEE DURING THE CO URSE OF SEARCH CONDUCTED ON 24TH FEB., 1999. (B)(I) THERE ARE VARIOUS SIMILAR FEATURES IN RELATI ON TO BANK ACCOUNTS OF ALL THESE SUPPLIERS. FOR INSTANCE, THE BANK ACCOUNT OF ADINATH CORPORATION WAS OPENED ON 17TH A PRIL, 1998 BY DEPOSITING RS. 1,000 IN CASH ON THAT DATE D URING THE BLOCK PERIOD FROM 17TH APRIL, 1998 TO 7TH JULY, 199 8. THE TOTAL DEPOSITS IN THEIR BANK ACCOUNT WAS RS. 2,10,5 4,076.50. WHENEVER ANY CHEQUE GIVEN BY THE ASSESSEE TOWARDS PAYMENT OF PURCHASE PRICE TO THIS PARTY WAS CREDITE D IN THEIR BANK ACCOUNT, ON THAT VERY DAY, ON MOST OF THE OCCA SIONS, AN EQUIVALENT AMOUNT HAD BEEN WITHDRAWN BY A SELF CHEQ UE. FOR INSTANCE, CHEQUE OF RS. 3,69,857 WAS CREDITED I N THEIR BANK ACCOUNT ON 23RD APRIL, 1998 AND THERE IS A CAS H WITHDRAWAL OF AN EQUIVALENT AMOUNT ON THAT VERY DAY . MOST OF THE TIMES, THERE IS A WITHDRAWAL OF AN EQUIVALEN T AMOUNT BY SELF CHEQUE ON THE DATE OF DEPOSIT OF THE CHEQUE ON THEIR ACCOUNT. THIS BANK ACCOUNT WAS INTRODUCED BY SHRI NILESHBHAI K. PATEL, AS DIRECTOR OF THE APPELLANT-C OMPANY. THE BALANCE IN THIS BANK ACCOUNT AFTER SUCH WITHDRA WAL SOON AFTER THE DEPOSIT OF THE CHEQUE MOSTLY REMAINED AT THE SAME FIGURE OF RS. 5041. THE LEARNED DEPARTMENTAL REPRES ENTATIVE HAS SUBMITTED A COPY OF LETTER DT. 20TH MARCH, 2001 FROM MEHSANA URBAN CO-OP. BANK LTD. STATING THAT AS PER THE STATEMENT OF ACCOUNT OF ADINATH CORPORATION ACCOUNT NO. 531, ALL CREDIT ENTRIES BY TRANSFER DURING THE PERI OD FROM 17TH APRIL, 1998 TO 7TH JULY, 1998 ARE FROM NKPL. IT CLE ARLY SHOWS THAT SO FAR IN BANK ACCOUNT OF ADINATH CORPORATION IS CONCERNED, THE ENTIRE CHEQUES DEPOSITED IN THIS BAN K ACCOUNT WERE GIVEN BY THE APPELLANT-COMPANY TOWARDS PAYMENT S OF PURCHASE BILLS OBTAINED FROM THEM. THE CORRESPONDIN G DEBITS IN THE BANK ACCOUNT IN THE NORMAL COURSE SHOULD HAV E BEEN GIVEN BY WAY OF CHEQUES TO THOSE MILLS FROM WHOM M/ S ADINATH CORPORATION PURCHASED THE WASH COTTON SEED OIL AND SUPPLIED THE SAME TO THE ASSESSEE. HOWEVER, WE DO N OT FIND ANY MENTION IN THIS BANK ACCOUNT SHOWING ANY CHEQUE ISSUED TO ANY PARTY. ALL THE WITHDRAWALS ARE BY WAY OF SELF CASH CHEQUES. IT IS TRUE THAT THE BANK ACCOUNTS OF OTHER PARTIES WERE NOT INTRODUCED BY SHRI NILESHBHAI K. P ATEL AS IN THE CASE OF ADINATH CORPORATION BUT THERE IS SOME I NTER- CONNECTION OF THIS CONCERN WITH THE OTHERS. M/S TIR UPATI ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 67 CORPORATION IS OWNED BY THE SAME PERSON, NAMELY, SH RI J.J. DOSHI. FOR EXAMPLE, THE FOLLOWING THREE CHEQUES HAV E BEEN DEBITED IN THE ACCOUNT OF M/S ADINATH CORPORATION A S PER THE COPY PLACED AT P. 37 OF THE PAPER BOOK DT. 21ST OCT ., 2002 SUBMITTED BY THE DEPARTMENT: DATE CHEQUE NO. AMOUNT 15-4-1998 942352 2,59,429 15-4-1998 942358 2,82,945 17-4-1998 942369 3,97,792 THESE AMOUNTS HAVE BEEN CREDITED IN THE BANK ACCOUN T OF M/S TIRUPATI CORPORATION WITH VISNAGAR NAGRIK SAHAK ARI BANK LTD. A COPY OF ACCOUNT OF TIRUPATI CORPORATION IN THE BOOKS OF THE ASSESSEE HAS ALSO BEEN PLACED AT P. 42 TO 45 OF THE SAID PAPER BOOK, WHICH SHOWS THAT THE PURCHASE BILLS WERE OBTAINED FROM TIRUPATI CORPORATION ONLY UPTO 1 3TH FEB., 1998. THEREAFTER, THAT ACCOUNT WAS DISCONTINU ED AND PURCHASE BILLS WERE OBTAINED FROM ADINATH CORPORATI ON FROM 8TH APRIL, 1998 TO 7TH JULY, 1998. LIKEWISE, C HEQUE NO. 79489 DT. 7TH JULY, 1998 FOR RS. 3,79,967 DEBITED I N THE ACCOUNT OF KRISHNA INDUSTRIES IN THE BOOKS OF THE A SSESSEE HAS BEEN DEPOSITED IN THE BANK ACCOUNT NO. 531 WITH MEHSANA URBAN CO-OP. BANK LTD. IN THE NAME OF M/S ADINATH CORPORATION. IT MAY ALSO BE RELEVANT HERE T O MENTION THAT THE TOTAL PURCHASES CLAIMED TO HAVE BE EN MADE BY THE ASSESSEE FROM M/S ADINATH CORPORATION DURING THE PERIOD FROM 8TH APRIL, 1998 TO 7TH JULY, 1998 WAS R S. 2,16,13,276 OUT OF WHICH DEPOSITS IN THEIR BANK ACC OUNT WERE ONLY RS. 2,10,54,076. THIS IMPLIES THAT REMAINING C HEQUES MUST HAVE BEEN DEPOSITED BY M/S ADINATH CORPORATION IN SOME OTHER BANK ACCOUNTS. (B)(II) THE BANK ACCOUNT OF M/S TIRUPATI CORPORATIO N WAS ALSO OPENED WITH AN INITIAL DEPOSIT OF RS. 1,000 ON 29TH SEPT., 1997. THE CHEQUES DEPOSITED IN THIS ACCOUNT WHICH A RE MOSTLY FROM NKPL (ASSESSEE-COMPANY) ARE ALSO FOLLOWED BY IMMEDIATE WITHDRAWAL OF AN EQUIVALENT AMOUNT ON MOS T OF THE OCCASIONS LEAVING A BALANCE OF RS. 7,616 ON MOS T OF THE DAYS. MOST OF THE CHEQUES ARE EITHER CASH WITHDRAWN OR HAVE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 68 BEEN ISSUED IN FAVOUR OF TRIVENI CORPORATION, AS IS APPARENT FROM THE NARRATION GIVEN IN THE COPY OF BANK STATEM ENT PLACED AT PP. 67 AND 68 OF THE PAPER BOOK DT. 1ST J ULY, 2002 SUBMITTED BY THE ASSESSEE. (B)(III) THE BANK ACCOUNT OF M/E VIMAL INDUSTRIES W AS ALSO OPENED WITH AN INITIAL DEPOSIT OF RS. 1,000 ON 18TH JUNE, 1998. THE TRANSACTIONS OF PURCHASE BILLS OBTAINED F ROM THIS PARTY PERTAINED TO THE PERIOD FROM JULY, 1998 TO DE CEMBER, 1998. M/S VIMAL INDUSTRIES HAD ALSO WITHDRAWN THE AMOUNTS FROM TIME TO TIME BY WAY OF SELF CHEQUES SO ON AFTER THE RESPECTIVE CHEQUES FROM VARIOUS PARTIES WERE CR EDITED. IT IS TRUE THAT THE TOTAL DEPOSITS IN THE ACCOUNT OF M /S VIMAL INDUSTRIES WITH MEHSANA URBAN CO-OP. BANK LTD. ACCO UNT NO. 1117 AS PER THE ASSESSMENT ORDER FOR THE PERIOD FROM 18TH JUNE, 1998 TO 19TH APRIL, 1999 IS RS. 10,50,05,834 AND PURCHASES MADE BY THE ASSESSEE FROM THIS PARTY HAS BEEN SHOWN AT RS. 11,48,34,121 ONLY, WHICH INDICATES THA T M/S VIMAL INDUSTRIES HAVE RECEIVED REMAINING CHEQUES FR OM VARIOUS OTHER PARTIES AND THE DEPARTMENT HAS NOT BE EN ABLE TO ASCERTAIN AS TO WHICH OTHER PARTIES HAVE MADE PA YMENTS BY CHEQUES TO M/S VIMAL INDUSTRIES. A PERUSAL OF BA NK ACCOUNT OF M/S VIMAL INDUSTRIES SUBMITTED AT PP. 69 TO 78 INDICATES THAT SUBSTANTIAL TRANSACTIONS HAVE ALSO C ONTINUED IN THIS ACCOUNT EVEN AFTER DECEMBER, 1998, WHEN THE PURCHASES BY THE ASSESSEE FROM THIS PARTY HAD DISCO NTINUED. AFTER DECEMBER, 1998, MOST OF THE WITHDRAWALS IN TH E BANK ACCOUNT OF M/S VIMAL INDUSTRIES ARE BY WAY OF CHEQU ES AGAINST WHICH THE EXPRESSION 'SELF' HAS NOT BEEN ME NTIONED IN THE COPIES OF BANK STATEMENTS. THIS ACCOUNT HAS BEEN FINALLY CLOSED ON 12TH MAY, 1999. NO INQUIRY HAS AL SO BEEN MADE BY THE DEPARTMENT ABOUT DESTINATION OF WITHDRA WALS MADE BY CHEQUES FROM THIS BANK ACCOUNT. BUT THE PRA CTICE OF WITHDRAWING SUBSTANTIAL AMOUNTS TILL THE PURCHASES BY THE ASSESSEE FROM M/S VIMAL INDUSTRIES CONTINUED TO APP LY IN THE CASE OF M/S VIMAL INDUSTRIES, THOUGH VARIOUS PA YMENTS EVEN PRIOR TO DECEMBER, 1998 HAVE BEEN MADE BY CHEQ UES OTHER THAN THE CHEQUES MARKED AS 'SELF' CHEQUES. (B)(IV) KRISHNA INDUSTRIES : THEY OPENED BANK ACCOU NT NO. 4203 WITH VISNAGAR NAGRIK SAHAKARI BANK LTD. USMANP URA BRANCH ON 30TH JUNE, 1998 WITH AN INITIAL DEPOSIT O F RS. 1,100. THE TOTAL DEPOSITS IN THIS BANK ACCOUNT FOR THE PERIOD FROM 30TH JUNE, 1998 TO 21ST JULY, 1998 WERE RS. 29 ,93,310 ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 69 AS MENTIONED AT P. 20 OF THE ASSESSMENT ORDER WHICH TALLIES WITH COPIES OF BANK STATEMENT FURNISHED AT P. 79 OF THE PAPER BOOK DT. 1ST JULY, 2002. THE ASSESSEE IN THE PAPER BOOK HAS ALSO SUBMITTED COPY OF BANK STATEMENT OF KRISHNA IN DUSTRIES WITH MEHSANA URBAN CO-OP. BANK ACCOUNT NO. 1130. TH IS ACCOUNT WAS OPENED WITH AN INITIAL DEPOSIT OF RS. 1 ,000 ON 2ND JULY, 1998. THE TOTAL PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE FROM THIS PARTY WERE OF RS. 3,19,56,782. THE TOTAL DEPOSITS CREDITED IN THE BAN K ACCOUNTS OF KRISHNA INDUSTRIES AS MENTIONED AT P. 34 OF THE ASSESSMENT ORDER IN RS. 2,79,01,621. THE DEPOSITS I N BANK ACCOUNT NO. 4203 WITH VISNAGAR NAGRIK SAHAKARI BANK WERE FOLLOWED BY WITHDRAWAL OF AN EQUIVALENT AMOUNT ON THE SAME DAY WHEN THE CHEQUES WERE CREDITED. HOWEVE R, MOST OF THE WITHDRAWALS IN OTHER BANK ACCOUNT NO. 1 130 WITH MEHSANA URBAN CO-OP. BANK ARE ALSO BY WAY OF SELF C HEQUES BUT THERE ARE OTHER FEW WITHDRAWALS BY WAY OF CHEQUES/DDS. FOR EXAMPLE THERE IS A DEBIT OF RS. 6, 50,100 BY WAY OF DEMAND DRAFT DT. 28TH JULY, 1998. LIKEWISE, THERE ARE SOME WITHDRAWALS BY CHEQUES ALSO. BUT MOST OF THE WITHDRAWALS FROM THIS BANK ACCOUNT ARE BY WAY OF SE LF CHEQUES OF SUBSTANTIAL AMOUNTS WITHDRAWN ALMOST ON THE SAME DAY WHEN CORRESPONDING CHEQUES WERE CREDITED I N THE SAID BANK ACCOUNT. (B)(V) KARNAVATI INDUSTRIES : THEY ALSO OPENED THEI R ACCOUNT ON 29TH DEC., 1997 WITH INITIAL DEPOSIT OF RS. 1,00 0. THE TOTAL DEPOSITS IN THE SAID ACCOUNT FROM 29TH DEC., 1997 T O 29TH DEC., 1998 ARE RS. 12,30,13,608 AS PER COPY OF BANK STATEMENT SUBMITTED AT PP. 87 TO 101 OF THE SAID PA PER BOOK. THE TOTAL PURCHASE BILLS OBTAINED BY THE ASSESSEE F ROM THIS PARTY WERE ONLY OF RS. 38,10,000, A COPY OF ACCOUNT OF KARNAVATI INDUSTRIES IN THE BOOKS OF ASSESSEE SUBMI TTED AT PP. 57 TO 59 SHOWS THE TOTAL DEBITS IN THIS ACCOUNT TO THE TUNE OF RS. 2,28,77,001. THE TOTAL CREDITS HAVE BEEN SHO WN AT RS. 2,26,14,069 FOR THE PERIOD FROM 18TH JUNE, 1998 TO 31ST MARCH, 1999. THERE IS A CLOSING BALANCE OF RS. 2,62 ,932 AS ON 31ST MARCH, 1999. THE NATURE OF DEBITS IN THIS ACCO UNTS HAVE NOT BEEN DISCUSSED. THERE ARE VARIOUS CREDITS IN TH IS ACCOUNT WITH THE NARRATION THAT THE 'AMOUNT RECEIVED FROM V IMAL INDUSTRIES ON THEIR BEHALF'. THE DEBITS ARE MOSTLY SUPPORTED BY NARRATION SUCH AS GJ-3T-2492 ON 9TH JULY, 1998 F OR RS. 35,12,040. A PERUSAL OF THE BANK ACCOUNT SHOWS THAT INSPITE OF TRANSACTIONS RUNNING INTO MORE THAN RS. 12 CRORE S IN THIS ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 70 BANK ACCOUNT, THE BALANCE AT THE END OF MOST OF THE DAYS THROUGHOUT THE PERIOD WAS RANGING BETWEEN RS. 1,000 TO RS. 6,000. (B)(VI) THESE ARE SOME OF THE UNUSUAL FEATURES PERT AINING TO THE BANK ACCOUNTS OF THESE BOGUS SUPPLIERS. IF THEY WOULD HAVE BEEN GENUINE SUPPLIERS CAPABLE OF SUPPLYING WA SH COTTON SEED OIL TO THE TUNE OF SEVERAL LACS/CRORES IN A SHORT PERIOD LIKE IN THE PRESENT CASE, THEY WOULD SURELY INVEST ADEQUATE CAPITAL OF THEIR OWN, WHICH IN THE PRESENT CASE, IS NOT EVIDENT FROM THEIR BANK ACCOUNTS WHICH SHOWS TH AT ALL THESE ACCOUNTS WERE OPENED WITH INITIAL AMOUNT OF R S. 1000 OR RS. 1100 AND BALANCE IN ALL THESE ACCOUNTS FOR M OST OF THE TIMES RANGED BETWEEN SMALL FIGURES OF RS. 1000 TO R S. 10,000. HAD THEY REALLY SUPPLIED THE GOODS ON CREDI T OF SUCH LARGE MAGNITUDE TO THE ASSESSEE, AS CLAIMED BY THE ASSESSEE, THEY WILL HAVE SOME EVIDENCE OF SUBSTANTIAL CONTRIB UTION OF CAPITAL AND/OR SUBSTANTIAL CREDIT PURCHASES MADE FR OM VARIOUS MILLS/BIG TRADERS. THE DEBITS IN THEIR BANK ACCOUNTS WOULD HAVE MOSTLY BEEN BY WAY OF CROSSED/ACCOUNT PA YEE CHEQUES ISSUED IN FAVOUR OF THOSE OIL MILLS/BIG TRA DERS FROM WHOM THEY HAVE PURCHASED SUCH MATERIAL AND IN TURN SUPPLIED TO THE ASSESSEE. THE MAJOR WITHDRAWALS BY SELF CHEQUES IMMEDIATELY WHEN THE CHEQUES IN THEIR BANK ACCOUNTS WERE CREDITED EXPOSES THE IMPOSSIBILITY OF THEIR HAVING SUPPLIED SUCH MATERIAL OF LACS/CRORES OF RUP EES ON CREDIT TO THE ASSESSEE. (C) THE ITO MADE INQUIRIES FROM SALES-TAX AUTHORITI ES IN RESPECT OF SOME OF THESE SUPPLIERS. THOSE INQUIRIES REVEALED THAT THE COPIES OF RATION CARDS GIVEN BY THESE NAME LENDERS TO SALES-TAX DEPARTMENT WERE FOUND TO BE FAKE, COPI ES OF ELECTRICITY BILLS DID NOT PERTAIN TO THE ADDRESSES GIVEN. ALSO THE RESIDENTIAL ADDRESSES OF OWNERS GIVEN TO THE SA LES-TAX AUTHORITIES WERE NOT CORRECT. (D) THE NOTICE SENT BY THE IT AUTHORITIES TO THESE SUPPLIERS AT THE ADDRESSES GIVEN TO THE BANKS WERE RETURNED BACK . THE INQUIRIES CONDUCTED THROUGH THE INSPECTOR REVEALED THAT NONE OF THEM EXISTED AT THE GIVEN ADDRESSES. (E) MOST VITAL AND SIGNIFICANT EVIDENCE BROUGHT ON RECORDS BY THE IT AUTHORITIES IS CLEAR AND CATEGORICAL ADMI SSION BY ALL THESE PARTIES IN THE FORM OF AFFIDAVITS/STATEME NTS. COPIES OF AFFIDAVITS/STATEMENTS GIVEN BY ALL THESE SUPPLIE R CONCERNS ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 71 REFERRED TO IN THE ASSESSMENT ORDERS CLEARLY INDICA TE THAT ALL OF THEM HAVE CLEARLY DENIED HAVING SUPPLIED ANY MAT ERIAL TO THE ASSESSEE, THEY ALSO STATED THAT THEY WERE BEING PAID PETTY MONTHLY AMOUNTS BY SHRI NILESH K. PATEL FOR S IGNING CHEQUES, BILLS AND OTHER DOCUMENTS IN THE NAMES OF THESE BOGUS CONCERNS. THE ASSESSEE CONTENDED, THAT NO REL IANCE ON THESE AFFIDAVITS/STATEMENTS OBTAINED BY THE DY. DIT /ADDL. DIT BEHIND BACK OF THE ASSESSEE, SHOULD BE PLACED, AS THEY WERE NOT EXAMINED IN THE PRESENCE OF THE ASSESSEE N OR THE ASSESSEE WAS ALLOWED TO CROSS-EXAMINE THEM. IT IS P ERTINENT TO MENTION HERE THAT THE AO VIDE VERY FIRST QUESTIO NNAIRE DT. 4TH DEC., 2000 WHICH IS REPRODUCED AT P. 2 AND 3 OF THE ASSESSMENT ORDER GAVE COMPLETE GIST OF INQUIRIES CO NDUCTED IN RESPECT OF PURCHASES MADE FROM THESE PARTIES. CO PIES OF ALL RELEVANT STATEMENTS/AFFIDAVITS GIVEN BY THE OWN ERS OF THESE SUPPLIER CONCERNS HAD ALSO BEEN PROVIDED, AS IS EVIDENT FROM PARA 9 OF THE SAID LETTER DT. 4TH DEC., 2000. THE ASSESSEE FURNISHED REPLY DT. 26TH DEC., 2000. COPY OF THIS L ETTER HAS BEEN PLACED ON PP. 10 TO 13 OF THE PAPER BOOK SUBMI TTED BY THE DEPARTMENT ON 21ST OCT., 2002. THE ASSESSEE IN THIS LETTER HAS SUBMITTED IN PARA 8.1 THAT COPIES OF ACCOUNTS O F ALL THESE FIVE PARTIES FROM THE BOOKS OF ACCOUNTS OF THE ASSE SSEE ARE FURNISHED. IN PARA 9 IT HAS, INTER ALIA, BEEN STATE D AS UNDER: 'IT MAY PLEASE FURTHER BE NOTED THAT CERTAIN AFFIDA VITS ARE THERE AND CERTAIN OTHER EVIDENCES WERE ALSO FOUND D URING SEARCH BUT SINCE THE TRANSACTIONS RECORDED IN THE B OOKS OF ACCOUNT IN THE NORMAL COURSE AND THEREFORE IT DOES NOT FALL WITHIN THE PURVIEW OF BLOCK ASSESSMENT.' IT IS APPARENT FROM THE AFORESAID LETTER THAT EVEN AFTER RECEIVING THE COPIES OF AFFIDAVITS/STATEMENTS AND O THER DOCUMENTS ON THE BASIS OF WHICH THE AO SUSPECTED TH E GENUINENESS OF THESE PURCHASES, THE ASSESSEE DID NO T ASK THE ITO TO PRODUCE THESE SUPPLIERS AND BROKERS FOR THEI R CROSS- EXAMINATION NOR ANY MATERIAL IN REBUTTAL OF SUCH CL INCHING AND CATEGORICAL DENIAL BY THE SUPPLIERS AND BROKERS , WAS FURNISHED. THE AO THEREAFTER ONCE AGAIN GAVE A SHOW -CAUSE NOTICE DT. 8TH JAN., 2001 WHICH HAS BEEN REPRODUCED AT P. 28 OF THE ASSESSMENT ORDER. THE AO CLEARLY STATED THAT THE PURCHASES MADE FROM ALL THESE PARTIES ARE BOGUS IN NATURE. THE GIST OF INQUIRIES CONDUCTED BY THE DEPARTMENT A LONG WITH THE COPIES OF STATEMENTS/AFFIDAVITS HAVE ALREA DY BEEN GIVEN TO THE ASSESSEE ALONG WITH THE LETTER DT. 4TH DEC., 2000, ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 72 THE ASSESSEE WAS GIVEN ONE MORE OPPORTUNITY TO EXPL AIN THE SAME. 64. THE ASSESSEE SUBMITTED A REPLY DT. 22ND JAN., 2 001 WHICH HAS BEEN REPRODUCED AT PP. 28 AND 29 OF THE ASSESSM ENT ORDER. IN THIS LETTER THE ASSESSEE HAS INTER ALIA, SIMPLY STATED AS UNDER: 'YOU HAVE BASED YOUR SUCH OPINION ON THE BASIS OF STATEMENTS AND AFFIDAVITS OF CERTAIN PARTIES. IN THIS CONNECTION, IT MAY PLEASE BE NOTED THAT AS FAR AS THE COMPANY IS CONCERNED, THE COMPANY HAS PURCHASED THE GOODS FROM THESE PARTIES AND HAS MADE THE PAYMENT T HROUGH A/C PAYEE CHEQUE WHICH IS NOT DISPUTED BY ANY OF TH E ABOVE REFERRED PARTIES. FURTHER, IT MAY PLEASE BE NOTED THAT STATEMENTS AND AFFIDAVITS APPEARS TO BE SIMILAR. IF THE STATEMENTS ARE RECORDED FROM DIFFERENT PARTIES, CONTENTS ARE BOUND TO BE DIFFERENT.' THE ASSESSEE DID NOT ASK THE AO EVEN AT THIS STAGE TO EXAMINE OR CROSS-EXAMINE THE SUPPLIERS AND THE BROKERS IN T HEIR PRESENCE. THE ASSESSEE ONLY REPEATED THE ARGUMENTS THAT MATERIAL HAD REALLY BEEN RECEIVED AND THE PAYMENTS HAD BEEN MADE BY ACCOUNT PAYEE CHEQUES. IT WAS ALSO STA TED THAT SINCE THESE TRANSACTIONS ARE RECORDED IN THE REGULA R BOOKS OF ACCOUNTS, THEREFORE, THE QUESTION OF CONSIDERING TH E SAME IN BLOCK ASSESSMENT DOES NOT ARISE. 65. THEREAFTER, IT APPEARS THAT THE AFFIDAVITS OF S OME OF THESE SUPPLIERS RETRACTING FROM THEIR EARLIER AFFIDAVITS GIVEN TO DY. DIT, WERE FURNISHED IN THE COURSE OF ASSESSMENT PRO CEEDINGS IN THE CASE OF SHRI NILESH K. PATEL. A COPY OF LETT ER DT. 23RD FEB., 2001 FROM SHRI NILESHBHAI PATEL TO THE DY. CI T HAS BEEN PLACED AT PP. 30 TO 32 OF THE DEPARTMENT'S PAP ER BOOK. IN THIS LETTER IT HAS BEEN STATED THAT THE ORIGINAL AFFIDAVITS OF PROPRIETORS OF EIGHT CONCERNS INCLUDING ALL THESE F IVE PARTIES IN QUESTION IN THE PRESENT CASE ARE ENCLOSED HEREWI TH. THE AFFIDAVIT OF SHRI J.J. DOSHI, PROPRIETOR OF M/S ADI NATH CORPORATION AND M/S TIRUPATI CORPORATION, THOUGH SPECIFICALLY STATED AS HAVING BEEN ENCLOSED WITH TH IS LETTER DT. 23RD FEB., 2001 WAS NOT SUBMITTED WITH THE SAID LET TER. ONLY FOUR AFFIDAVITS APPEAR TO HAVE BEEN SUBMITTED ALONG WITH THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 73 SAID LETTER DT. 23RD FEB., 2001 IN THE ASSESSMENT P ROCEEDINGS IN THE CASE OF SHRI NILESHBHAI K. PATEL. THE LEARNE D SENIOR DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THESE AF FIDAVITS WERE SUBMITTED AT THE FAG END OF THE PERIOD OF LIMI TATION IN THE CASE OF SHRI NILESH K. PATEL. THE AFFIDAVIT OF SHRI J.J. DOSHI, WHO IS PROPRIETOR OF TWO PARTIES, NAMELY, M/ S ADINATH CORPORATION AND M/S TIRUPATI CORPORATION WA S SUBMITTED TO THE AO ALONG WITH THE LETTER DT. 20TH APRIL, 2001. COPY OF THE LETTER HAS BEEN PLACED AT P. 29 O F THE DEPARTMENTAL PAPER BOOK. IT WAS POINTED OUT BY THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE THAT 20TH APRIL, 2001 WAS FRIDAY. THE NEXT TWO DAYS WERE HOLIDAYS BEING SATURDAY AND SUNDAY. ONE MORE HOLIDAY WAS THERE ON 27TH APRIL, 2001 ON ACCOUNT OF MAHAVIR JAYANTI. THE CASE WAS GOING TO BE BARRED BY LIMITATION OF TIME ON 30TH AP RIL, 2001. THE ASSESSEE PRODUCED ALL THESE AFFIDAVITS AT THE F AG END OF THE ASSESSMENT PROCEEDINGS, WHEN IT WAS SOON GOING TO BE BARRED BY LIMITATION OF TIME. NO REQUEST FOR CROSS- EXAMINATION OF THESE SUPPLIERS OR BROKERS WAS MADE BY THE ASSESSEE IN ANY OF THE LETTERS SUBMITTED TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 66. THE BURDEN LIES ON THE ASSESSEE TO PROVE THAT T HE SUPPLIERS WERE GENUINE SUPPLIERS AND THEY REALLY HA D CAPACITY TO SUPPLY WASH COTTON SEED OIL OF SUCH LAR GE MAGNITUDE COSTING SEVERAL LAKHS/CRORES WITHIN SUCH SHORT PERIOD AND THEY IN FACT HAD SUPPLIED SUCH MATERIAL TO THE ASSESSEE. IN THE NORMAL COURSE, IF THESE PURCHASES OF RS. 11.99 CRORES WOULD HAVE REALLY AND GENUINELY BEEN MADE FR OM THESE PARTIES, AS CLAIMED BY THE ASSESSEE, THE ASSE SSEE WOULD AT ONCE RAISE A STRONG PROTEST AFTER RECEIVING THE COPIES OF STATEMENTS OF THOSE SUPPLIERS/BROKERS EXPLICITLY AN D EMPHATICALLY DENYING SUCH TRANSACTIONS AND THE ASSE SSEE WOULD HAVE SUBMITTED IN THE VERY FIRST REPLY TO SHO W-CAUSE NOTICE DT. 4TH DEC., 2000 THAT THEIR AFFIDAVITS ARE BLATANTLY FALSE AND ALL THESE PERSONS SHOULD BE EXAMINED IN T HEIR PRESENCE. THE ASSESSEE SHOULD HAVE HIMSELF PRODUCED ALL THESE SUPPLIERS/BROKERS SOON AFTER THE RECEIPT OF F IRST SHOW- CAUSE NOTICE OR WELL BEFORE THE COMPLETION OF THE B LOCK ASSESSMENT BEFORE THE AO TO ACQUAINT HIM WITH THE R EALITY IN REBUTTAL OF THOSE AFFIDAVITS/STATEMENTS OBTAINED BE HIND HIS BACK BY THE DY. DIT. THE ASSESSEE SIMPLY SUBMITTED THE AFFIDAVITS OF THESE SUPPLIERS AT THE FAG END OF THE ASSESSMENT PROCEEDINGS AND DID NOT PRODUCE THESE SUPPLIERS BEF ORE THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 74 AO ALONG WITH THEIR BOOKS OF ACCOUNTS AND RECORDS F ROM WHICH THE CAPACITY OF THE SUPPLIERS AND THE REALITY AND GENUINENESS OF CREDIT SALES OF SUCH LARGE MAGNITUDE MADE BY THEM TO THE ASSESSEE COULD HAVE BEEN VERIFIED. THE ASSESSEE ALSO DID NOT PRODUCE THE BROKERS THROUGH WHOM IT WA S STATED BY SHRI NILESHBHAI PATEL THAT THE PURCHASES FROM TH ESE PARTIES WERE MADE THROUGH THEM. THE SUPPLIERS WHO C OULD GIVE THEIR AFFIDAVITS SUBSEQUENTLY IN WHICH THEY HA VE RETRACTED FROM THEIR EARLIER AFFIDAVITS/STATEMENTS TO DY. DIT, WERE THEREFORE FULLY CO-OPERATING WITH THE ASS ESSEE AND THERE IS NO REASON AS TO WHY THE ASSESSEE DID NOT O R COULD NOT PRODUCE THEM BEFORE THE AO FOR THEIR EXAMINATION AL ONG WITH THE RELEVANT RECORDS. 67. IN THE INTEREST OF FAIR PLAY AND JUSTICE, A SPE CIFIC OPPORTUNITY WAS GIVEN TO THE LEARNED COUNSEL APPEAR ING FOR THE ASSESSEE DURING THE COURSE OF HEARING BEFORE US , TO PRODUCE ALL THESE SUPPLIERS ALONG WITH THEIR RECORD S BEFORE THE TRIBUNAL. THE LEARNED COUNSEL AFTER A DEEP CONS IDERATION SUBMITTED A REPLY ON THE NEXT DATE OF HEARING THAT THE ASSESSEE CANNOT PRODUCE ANY OF THOSE SUPPLIERS BEFO RE THE TRIBUNAL, AS THEY ARE NOT UNDER THE CONTROL OF THE ASSESSEE. IT IS WELL SETTLED LAW THAT ONUS LIES ON THE ASSESSEE TO SUPPORT ITS CLAIM FOR GRANT OF DEDUCTION OF ANY EXPENDITURE. TH EREFORE THE ONUS TO PROVE THE GENUINENESS OF PURCHASES FROM THESE PARTIES LIES ON THE ASSESSEE. SUCH A BURDEN, IN THE INSTANT CASE, WAS VERY HEAVY IN VIEW OF CLEAR AND UNEQUIVOC AL AFFIDAVITS/STATEMENTS GIVEN BY SUPPLIERS. IT IS EQU ALLY WELL SETTLED LAW THAT AN ADMISSION MADE BY THE CONCERNED PERSONS IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE . IT IS TRUE THAT IT CANNOT BE SAID TO BE CONCLUSIVE. THE P ARTY WHO WANTS TO RETRACT FROM AN EARLIER ADMISSION CAN SHOW THAT IT WAS OBTAINED UNDER COERCION AND IT IS INCORRECT. HO WEVER ALLEGATION OF COERCION CANNOT BE ACCEPTED ON A MERE STATEMENT; IT IS TO BE SUPPORTED BY POSITIVE EVIDEN CE. LIKEWISE THE INCORRECTNESS OF EARLIER ADMISSION ALS O HAS TO BE PROVED BY PRODUCING COGENT MATERIAL AND EVIDENCE. T HE ASSESSEE RESTED WITH SUBMISSION OF SUBSEQUENT AFFID AVITS OF SUPPLIERS. THE LEAST, IN REBUTTAL OF EARLIER AFFIDAVITS/STATEMENTS, WHICH THE ASSESSEE SHOULD HA VE DONE, IN ADDITION TO SUBMISSION OF THEIR AFFIDAVITS, IS T O PRODUCE ALL THOSE SUPPLIERS AND BROKERS ALONG WITH THE BOOKS OF ACCOUNTS, PURCHASE VOUCHERS AND EVIDENCE TO SHOW TH EIR CAPACITY TO SUPPLY GOODS WORTH SEVERAL LAKHS/CRORES IN SUCH ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 75 SHORT PERIOD. THE ASSESSEE OBTAINED THOSE SUBSEQUEN T SELF- SERVING AFFIDAVITS FROM THE SUPPLIERS. THEREFORE, T HE ONUS LIES UPON THE ASSESSEE TO PRODUCE THOSE PERSONS ALONG WI TH THEIR RECORDS, TO PROVE THAT EARLIER AFFIDAVITS DO NOT CO NTAIN TRUE AND CORRECT FACTS AND WERE OBTAINED UNDER COERCION. THE ASSESSEE FAILED TO PRODUCE THEM BEFORE THE AO. THEY HAVE ALSO FAILED TO PRODUCE THEM BEFORE THE TRIBUNAL ALO NG WITH THEIR RELEVANT RECORDS, THOUGH A SPECIFIC OPPORTUNI TY WAS GRANTED TO THEM DURING HEARING. ALL THESE FACTS PRO VE BEYOND DOUBT THAT ALL THE FIVE SUPPLIER CONCERNS WE RE CREATED/FLOATED ONLY FOR THE PURPOSES OF ISSUING FAKE/FICTITIOUS BILLS. THEY HAD NO CAPACITY TO SUPP LY WASH COTTON SEED OIL OF SUCH LARGE MAGNITUDE TO THE ASSE SSEE. THEY ALSO DID NOT HAVE ADEQUATE CAPITAL AND INFRASTRUCTU RE FOR CARRYING OUT BUSINESS OF SUCH LARGE SCALE. NONE OF THEM APPEAR TO BE EXISTING INCOME-TAX ASSESSEE AS GIR NUMBER/PAN NUMBER AND WARD, ETC. ARE NOT STATED IN ANY OF THEIR AFFIDAVITS. WE THEREFORE AGREE WITH THE FI NDINGS OF THE LEARNED DEPARTMENTAL AUTHORITIES THAT ALL THESE SUPPLIERS WERE ONLY NAME LENDERS/BILLING AGENTS. THE PURCHASE S CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE FROM THEM DO NOT REPRESENT GENUINE PURCHASES MADE FROM THOSE PARTIES . 68. THE QUESTION STILL REMAINS TO BE CONSIDERED IS AS TO WHETHER THE ASSESSEE HAD IN FACT RECEIVED THE MATER IAL IN QUESTION WHICH WAS CLAIMED AS ALLEGEDLY PURCHASED F ROM THESE NAME LENDERS/BILLING AGENTS. THE EVIDENCE EXI STING ON RECORDS, WHICH WILL BE DISCUSSED IN DETAILS HEREINA FTER, INDICATES THAT THE MATERIAL IN QUESTION 'WASH COTTO N SEED OIL' SHOWN AS PURCHASED THROUGH SUCH FICTITIOUS INVOICES OBTAINED IN THE NAMES OF FIVE BOGUS PARTIES, APPEAR TO HAVE REALLY BEEN RECEIVED. SUCH EVIDENCE ON RECORDS ARE BRIEFLY AS FOLLOWS: (A) VARIOUS RECORDS OF CONTEMPORARY PERIOD INCLUDIN G GENERAL INWARD REGISTER, DAILY GATE OUTWARD REGISTE R WERE FOUND AND SEIZED DURING THE COURSE OF SEARCH. GATE OUTWARD REGISTER WAS MAINTAINED BY SECURITY STAFF OF THE FA CTORY OF NKPL. IN THE ASSESSMENT ORDER, THE AO WHILE PLACING RELIANCE ON THE STATEMENT OF SHRI KAMLESH L. PATEL HAS OBSERVED THAT CERTAIN PURCHASES ARE NOT FOUND IN TH E INWARD REGISTER, WHICH IS MOST RELIABLE AND AUTHENTIC REGI STER. THE ASSESSEE GAVE EXPLANATION VIDE LETTER DT. 22ND JAN. , 2001 AND STATED THAT ALL THE PURCHASES FROM THESE PARTIES HA VE DULY ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 76 BEEN RECORDED IN THE SEIZED INWARD REGISTER AND THE SAME ARE VERIFIABLE FROM THE REGULAR BOOKS OF ACCOUNTS AS WE LL AS INWARD REGISTER, STOCK REGISTER LYING SEIZED WITH T HE DEPARTMENT. THE AO HAS NOT ADVERSELY COMMENTED ON T HE AFORESAID SUBMISSIONS MADE ON BEHALF OF THE ASSESSE E DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (B) THE TRIBUNAL REQUIRED THE LEARNED SENIOR DEPART MENTAL REPRESENTATIVE TO VERIFY FROM THE SEIZED INWARD REGISTER/DAILY GATE OUTWARD REGISTER LYING SEIZED W ITH THE DEPARTMENT, THE FACT WHETHER ENTRIES IN RESPECT OF RECEIPT OF MATERIAL REPRESENTED BY THESE FICTITIOUS INVOICES A RE RECORDED IN SUCH DAILY GATE OUTWARD REGISTER/INWARD REGISTER. THE LEARNED SENIOR DEPARTMENTAL REPRESENT ATIVE VIDE PARA 3.12 OF HIS WRITTEN SUBMISSIONS HAS ADMIT TED THAT ALL THE ENTRIES OF SUCH PURCHASES MADE FROM BOGUS P ARTIES ARE APPEARING IN THE INWARD REGISTER BUT HE HAS POI NTED OUT CERTAIN STRANGE COINCIDENCE IN RELATION TO THOSE EN TRIES. FOR INSTANCE, HE HAS POINTED OUT THAT NINE TRUCKS SHOWN AS PER INWARD REGISTER 2311 TO 2319 HAVE BEEN SHOWN AS REC EIVED ON 16TH NOV., 1997 FROM M/S TIRUPATI CORPORATION. ALL SUCH NINE TRUCKS HAVE BEEN EMPTIED WITHIN ONE HOUR AND 1 5 MINUTES AS PER INWARD AND OUTWARD TIME RECORDED IN THE SAID REGISTER. IT HAS BEEN POINTED OUT THAT THE TAN KERS RECEIVED FROM OTHER REGULAR DEALERS HAVE TAKEN MORE THAN 4 TO 5 HOURS IN CARRYING OUT THE ENTIRE PROCESS OF UN LOADING WHICH INCLUDES WEIGHMENT, TAKING SAMPLE FROM THE TA NKER FOR THE PURPOSE OF CHECKING THE QUALITY, COLOUR AND ODOUR AND THEN AFTER OBTAINING LAB REPORT IT HAS TO BE EM PTIED IN THE ASSESSEE'S TANKS. THE ASSESSEE IN THE REJOINDER HAS REPLIED THAT THEY HAD ADEQUATE CAPACITY TO UNLOAD 10 TO 12 TANKERS AT THEIR UNLOADING STATION. IT HAS ALSO BEEN SUBMIT TED THAT THERE ARE OTHER INSTANCES WHERE THIRD PARTIES HAVE UNLOADED THEIR TANKERS WITHIN SUCH SHORT TIME. THE DAY-TO-DA Y STOCK RECORDS ARE PREPARED ON THE BASIS OF RAW MATERIAL E NTERED INTO THE SAID INWARD REGISTER. THE RECEIPT OF MATER IAL IS ALSO CORROBORATED BY VARIOUS OTHER DOCUMENTS OF CONTEMPO RARY PERIOD SUCH AS WEIGHMENT OF THE MATERIAL INWARD REC EIPTS AND ANALYSIS REPORTS ETC. ALL THESE DOCUMENTS WERE FURNISHED TO THE AO TO PROVE THE FACT OF REAL RECEIPT OF MATE RIAL SHOWN AS PURCHASED THROUGH SUCH FICTITIOUS INVOICES. (C) THE LEARNED CIT(A) CALLED FOR A REMAND REPORT F ROM THE AO DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E HIM. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 77 AS ALREADY STATED HEREINBEFORE, THE AO IN HIS REMAN D REPORT DT. 26TH DEC., 2001 HAS CLEARLY STATED THAT THE TES T CHECK OF THE PURCHASE BILLS AND OTHER SUPPORTING DOCUMENTS W ITH REFERENCE TO INWARD REGISTER, STOCK REGISTER ETC. H AVE BEEN MADE AND IT IS FOUND THAT THE ENTRIES IN RESPECT OF PURCHASES MADE FROM THE ABOVE PARTIES ARE ENTERED AND CONSUME D. THIS REMAND REPORT GIVEN BY THE AO AFTER VERIFYING THE RELEVANT FACTS STATED IN THE DOCUMENTS PRODUCED BY THE ASSESSEE WITH THE CONTENTS OF SEIZED REGISTERS, PRO VIDE A CLINCHING PROOF IN FAVOUR OF THE ASSESSEE'S CONTENT ION THAT THE MATERIAL IN QUESTION HAD REALLY BEEN RECEIVED AND U SED IN THE PROCESS OF PRODUCTION. (D) ONE MORE VITAL EVIDENCE WHICH SUPPORTS THE ASSE SSEE'S CONTENTION ABOUT REAL RECEIPT OF MATERIAL IN QUESTI ON IS THAT A DETAILED STOCK INVENTORY WAS PREPARED BY THE AUTHOR ISED OFFICERS OF THE DEPARTMENT AT THE TIME OF CONDUCTIN G THE SEARCH ON 24TH FEB., 1999 AND 29TH FEB., 1999. THE AO REQUIRED THE ASSESSEE TO RECONCILE THE STOCKS FOUND DURING THE COURSE OF SEARCH WITH THE STOCK RECORDS AND FINANCI AL BOOKS OF ACCOUNTS. THE ASSESSEE SUBMITTED A REPLY VIDE LE TTER DT. 14TH MARCH, 2001 IN WHICH IT WAS STATED THAT COMPLE TE RECONCILIATION OF STOCK FOUND DURING THE COURSE OF SEARCH AND AS PER BOOKS OF ACCOUNTS IS ENCLOSED FROM WHICH IT WOULD BE SEEN THAT ALL THE ITEMS FOUND AS PER THE STOCK INVE NTORY PREPARED AT THE TIME OF SEARCH ARE FULLY VERIFIABLE AS PER THE STOCK RECORDS MAINTAINED BY THE ASSESSEE-COMPANY. T HE AO ACCEPTED THIS EXPLANATION AFTER DETAILED VERIFICATI ON AND NO ADDITION HAS BEEN MADE IN THE ASSESSMENT ORDER IN R ELATION TO ANY UNEXPLAINED STOCKS FOUND DURING THE COURSE O F SEARCH. THIS ALSO PROVES THE FACT THAT THE MATERIAL IN QUES TION HAD REALLY BEEN RECEIVED. 69. NOW LET US CONSIDER THE ASSESSEE'S SUBMISSIONS THAT ASSUMING THAT THE PURCHASE INVOICES WERE OBTAINED F ROM NAME LENDERS/BILLING AGENTS BUT THE MATERIAL HAS RE ALLY BEEN RECEIVED/PURCHASED, THE ASSESSEE IS ENTITLED TO DED UCTION OF REASONABLE PRICE IN RESPECT OF SUCH MATERIAL PURCHA SED AND CONSUMED. THE AO HAS ALSO REPORTED IN THE REMAND RE PORT SUBMITTED TO THE CIT(A) THAT SUCH PURCHASES HAVE BE EN MADE ALMOST AT THE PREVAILING MARKET RATE/PRICE CHARGED BY OTHER REGULAR DEALERS. THEREFORE NO DISALLOWANCE OF ANY P ART AMOUNT WOULD BE JUSTIFIED IN THE PRESENT CASE, AS W AS DONE IN THE CASE OF VIJAY PROTEINS LTD. (1996) 55 TTJ (AHD) 76 : ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 78 (1996) 58 ITD 428 (AHD) OR IN SOME OTHER CASES. HE ALSO POINTED OUT THAT PART DISALLOWANCES MADE IN RESPECT OF INFLATION OF PURCHASE PRICE MADE IN THE CASES OF AD INATH INDUSTRIES AND ARUN INDUSTRIES HAVE BEEN DELETED BY THE TRIBUNAL AND THOSE ORDERS OF THE TRIBUNAL HAVE BEEN CONFIRMED BY THE HON'BLE GUJARAT HIGH COURT. THE JU DGMENT OF THE HON'BLE GUJARAT HIGH COURT IS BINDING, SAYS THE LEARNED COUNSEL. WE HAVE ALREADY INDICATED WHILE DI SCUSSING THE RATIO OF PRINCIPLES LAID DOWN BY THE HON'BLE GU JARAT HIGH COURT IN THESE TWO CASES THAT THE FACTS OF THE PRESENT CASE ARE TOTALLY DIFFERENT. IN THE PRESENT CASE THE RE IS AN UNEQUIVOCAL, CLEAR AND EMPHETIC DENIAL BY THESE SUP PLIERS AS WELL AS BROKERS IN THEIR FIRST AFFIDAVITS/STATEMENT S SUBMITTED TO THE DY. DIT. THE ASSESSEE HAS NOT PRODUCED THOSE SUPPLIERS/BROKERS BEFORE THE AO ALONG WITH THE RELE VANT RECORDS. THE TRIBUNAL ALSO GAVE THE ASSESSEE A SPEC IFIC OPPORTUNITY TO PRODUCE THOSE SUPPLIERS/BROKERS ALON G WITH THEIR BOOKS OF ACCOUNTS AND OTHER RELEVANT RECORDS. THE ASSESSEE HAS EXPRESSED THEIR INABILITY TO PRODUCE T HEM BEFORE THE TRIBUNAL. THE FACTS OF THOSE TWO CASES ARE THER EFORE TOTALLY DISTINGUISHABLE AS IN THOSE CASES THERE WAS NO SUCH CLEAR BUT CATEGORICAL DENIAL BY THE BROKERS/SUPPLIE RS. THE ASSESSEE MUST HAVE OBTAINED FICTITIOUS BILLS FROM S UCH BILLING AGENTS/NAME LENDERS WITH A VIEW TO DERIVE SOME DEFI NITE GAIN. IT IS TRUE THAT THE MATERIAL IN QUESTION WAS RECEIVED BY THE ASSESSEE BUT THOSE MATERIALS WERE NOT RECEIVED FROM THESE BILLING AGENTS/NAME LENDERS' BUT WERE RECEIVE D FROM UNDISCLOSED SOURCES OR FROM UNKNOWN PARTIES, WHICH WAS WITHIN SPECIAL AND EXCLUSIVE KNOWLEDGE OF THE ASSES SEE AND THE ASSESSEE IS NOT WILLING TO DISCLOSE THE TRUE FA CTS TO THE DEPARTMENT. IT IS WELL KNOWN THAT UNACCOUNTED MATER IAL MAY BE AVAILABLE IN THE MARKET AT MUCH LOWER PRICE AS COMPARED TO THE PURCHASES MADE FROM GENUINE DEALERS ON THE STRENGTH OF GENUINE BILLS. THE REAL SUPPLIERS M AY BE WILLING TO SELL THOSE PRODUCTS AT A MUCH LOWER RATE IN VIEW OF MANIFOLD REASONS. THERE MAY BE SAVING ON ACCOUNT OF EXCISE DUTY, SALES-TAX OR OTHER TAXES WHICH MAY BE LEVIABL E IN RESPECT OF MANUFACTURE AND SALE OF SUCH GOODS. THE REAL SUPPLIERS OR THE OIL MILLS MAY DERIVE SUBSTANTIAL S AVING OF INCOME-TAX IN RESPECT OF INCOME FROM SALE OF UNACCO UNTED GOODS PRODUCED AND SOLD BY THEM. THERE MAY BE VARIO US FACTORS DUE TO WHICH SELLERS MAY BE WILLING TO CHAR GE LOWER RATES FOR UNACCOUNTED GOODS AS COMPARED TO ACCOUNTE D GOODS. THE ASSESSEE IS ENGAGED IN THE BUSINESS WHIC H IS ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 79 SUBJECT TO FREQUENT CHECKING BY CIVIL SUPPLY DEPART MENT OF THE STATE GOVERNMENT. THE REGULAR CHECKS ARE MADE A T THE FACTORY PREMISES IN ORDER TO VERIFY WHETHER HOARDIN G IS DONE OR NOT. THUS, THERE IS EFFECTIVE CHECK BY FOOD AND CIVIL SUPPLIES DEPARTMENT OF THE STATE GOVERNMENT SO FAR AS QUANTITATIVE DETAILS ARE CONCERNED. THE MAIN AREA L EFT WITH THE CONCERNS LIKE THE ASSESSEE WOULD, THEREFORE, BE SUPPRESSION OF INCOME BY INFLATING THE PURCHASE PRI CE OF RAW MATERIAL. SUCH MATERIAL RECEIVED BY THE ASSESSEE FR OM UNKNOWN SUPPLIERS OR FROM UNDISCLOSED SOURCES ALSO ENABLE THE ASSESSEE TO UTILISE THEIR BLACK MONEY/UNACCOUNT ED FUNDS FOR MAKING PURCHASES OF SUCH RAW MATERIAL IN CASH F ROM OPEN MARKET. THE ASSESSEE HAS SHOWN CREDIT PURCHASE S FROM THESE NAME LENDERS/BILLING AGENTS. A STATEMENT OF P EAK HAS BEEN REPRODUCED IN EARLIER PART OF THIS ORDER WHICH SHOWS THAT THE PEAK AMOUNT CREDITED IN THE ACCOUNT OF ONE OF THESE NAME LENDERS/BILLING AGENTS RELATING TO CREDIT SALE S ALLEGED TO HAVE BEEN MADE BY THEM TO THE ASSESSEE IS RS. 1, 54,14,534. THIS ONLY GIVES AN IDEA OF THE LARGE AMOUNT OF BLAC K MONEY KEPT UTILISED BY THE ASSESSEE FOR MAKING UNACCOUNTE D PURCHASES FROM OPEN MARKET IN CASH AND OBTAINING TH E BILLS FROM BILLING AGENTS/NAME LENDERS TO RECORD SUCH QUA NTITY OF MATERIAL PURCHASED IN THEIR STOCK REGISTERS, TO MEE T THE EFFECTIVE CHECKING DONE BY THE CIVIL SUPPLY DEPARTM ENT AND BY OTHER DEPARTMENTS. THE ASSESSEE HAS NOT ONLY DER IVED THE BENEFIT OF CIRCULATION OF LARGE BLACK MONEY FOR PUR CHASES OF SUCH UNACCOUNTED MATERIAL FROM OPEN MARKET BUT HAS ALSO DERIVED EXTRA PROFIT BY PURCHASING THEM AT A MUCH L OWER RATE FROM THE REAL SUPPLIERS/MILLS, WHO HAD REALLY SUPPLIED THE MATERIAL IN QUESTION TO THE ASSESSEE. THEREFORE WHAT WAS ACTUAL PROFIT DERIVED BY THE ASSESSEE FROM SUCH DEVICE/PRACTICE ADOPTED BY THEM IS EXCLUSIVELY KNOW N TO THE ASSESSEE, THE ASSESSEE DOES NOT WANT TO TELL THE TR UTH BUT SIMPLY WANTS TO HAVE TOTAL DELETION ON TECHNICAL AN D LEGAL GROUNDS WHICH HAVE NO VALID BASE WHATSOEVER. 70. THE QUESTION WHICH NOW ARISES FOR OUR CONSIDERA TION IS AS TO WHETHER THE ENTIRE AMOUNT OF THE SAID BOGUS P URCHASES SHOULD BE DISALLOWED OR THE ASSESSEE SHOULD BE HELD TO BE ELIGIBLE FOR GRANT OF DEDUCTION OF A REASONABLE AMO UNT OF PURCHASE PRICE OF WASH COTTON SEED OIL WHICH IN FAC T HAD REALLY BEEN RECEIVED BY THE ASSESSEE BUT WAS SOUGHT TO BE SUPPORTED BY FICTITIOUS INVOICES OBTAINED FROM BILL ING AGENTS/NAME LENDERS. IT IS WELL SETTLED LAW THAT TA X CAN BE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 80 LEVIED ONLY ON REAL INCOME. IT IS AN ELEMENTARY RUL E OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASES FRO M SALES, OTHERWISE IT WOULD AMOUNT TO LEVY OF INCOME-TAX ON GROSS RECEIPTS OR ON SALES. SUCH RECOURSE IS NOT PERMISSI BLE UNDER ANY PROVISIONS CONTAINED IN THE IT ACT . THE FACTS AND DISCUSSION MADE HEREINABOVE SHOW THAT THE PURCHASE INVOICES OBTAINED FROM FIVE NAME LENDERS/BILLING AG ENTS ARE FICTITIOUS. THE MATERIAL AND EVIDENCE FOUND DURING THE COURSE OF SEARCH AND POST-SEARCH INVESTIGATION CONDUCTED B Y THE OFFICERS OF THE DEPARTMENT HAVE ADEQUATELY EXPOSED THE FALSITY OF SUCH ENTRIES OF PURCHASES MADE IN THE RE GULAR BOOKS OF ACCOUNTS. THE UNDISCLOSED INCOME DERIVED B Y THE ASSESSEE OUT OF PURCHASES AGGREGATING TO RS. 11.99 CRORES SHOWN AS HAVING BEEN PURCHASED FROM THESE BILLING AGENTS/NAME LENDERS WILL, THEREFORE, HAVE TO BE EST IMATED ON A REASONABLE AND RATIONAL BASIS SO AS TO DETERMINE THE FIGURE OF UNDISCLOSED INCOME LIABLE TO TAX IN THE BLOCK AS SESSMENT UNDER CHAPTER XIV-B. THE ENTIRE AMOUNT OF BOGUS PUR CHASES CANNOT BE TREATED AS UNDISCLOSED INCOME/CONCEALED I NCOME, BECAUSE MATERIAL IN QUESTION HAD REALLY BEEN RECEIV ED. THE INFLATED PORTION OF PURCHASE PRICE MENTIONED IN THE FICTITIOUS INVOICES ARE WITHIN EXCLUSIVE KNOWLEDGE OF THE ASSE SSEE. THE ASSESSEE IS NOT WILLING TO TELL THE TRUTH. THEREFOR E, THE ESTIMATE OF SUCH UNDISCLOSED INCOME LIABLE TO TAX I N BLOCK ASSESSMENT IN RELATION TO SUCH BOGUS PURCHASES OF R S. 11.99 CRORES WILL HAVE TO BE MADE. AS ALREADY STATED HERE INBEFORE, THE REAL MILLS/WHOLESALE DEALERS GENUINELY ENGAGED IN SALE AND SUPPLY OF SUCH MATERIAL MAY BE WILLING TO SELL SUCH UNACCOUNTED GOODS AT A MUCH LOWER RATES IN VIEW OF VARIOUS MANIFOLD ADVANTAGES, SUCH AS SAVINGS IN ALL KINDS O F TAXES, DUTIES, UTILISATION OF BLACK MONEY AND VARIOUS OTHE R FACTORS, THE LEGISLATURE IN ITS WISDOM HAS AMENDED SECTION 40A(3) BY THE FINANCE ACT , 1995 W.E.F. 1ST APRIL, 1996 WHICH PROVIDES FOR DISALLOWANCE OF 20 PER CENT OF SUCH EXPENDITURE INCURRED OTHERWISE THAN BY CROSSED OR ACCOUNT PAYEE CHEQUES. THIS FIGURE OF 20 PER CENT MUST HAVE BEEN ARRIVED AT BY TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS. THIS 20 PER CENT DISALLOWANCE IS CONTEMPLATED IN CASES WHERE BLACK M ONEY IS NOT EMPLOYED IN RESPECT OF SUCH UNACCOUNTED PURCHAS ES. IT IS APPLICABLE ONLY IN CASES WHERE THE PAYMENT OF EXPEN DITURE EXCEEDING RS. 20,000 IS MADE OTHERWISE THAN BY A CR OSSED CHEQUE OR CROSSED DEMAND DRAFT. HERE IS A CASE WHER E NOT ONLY THE BENEFIT BY WAY OF AVOIDANCE OF VARIOUS KIN DS OF ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 81 TAXES SUCH AS EXCISE DUTY, SALES-TAX AT VARIOUS STA GES OF INPUTS ARE THERE BUT IT IS A CASE WHERE SUCH PURCHA SES ON THE STRENGTH OF FICTITIOUS INVOICES GIVEN BY THE BILLIN G AGENTS/NAME LENDERS ARE TREATED AS CREDIT PURCHASES . THEREFORE, WHILE ESTIMATING THE AMOUNT LIABLE TO BE TREATED AS UNDISCLOSED INCOME IN RELATION TO SUCH PURCHASES AGGREGATING TO RS. 11.99 CRORES, THE QUESTION RELAT ING TO UNEXPLAINED NON-GENUINE CREDIT SHOWN IN THE ACCOUNT S OF THESE NAME LENDERS/BILLING AGENTS WILL HAVE TO BE K EPT IN MIND. THE ASSESSEE'S COUNSEL CONTENDED THAT NO SUCH ADDITION WAS MADE BY THE AO UNDER SECTION 68 NOR SECTION 68 APPLIES IN RELATION TO SUCH CREDIT PURCHASES. ALL THESE FAC TS AND DECISIONS SUBMITTED BY THE LEARNED COUNSEL ARE NOT RELEVANT BECAUSE WE ARE NOT MAKING ANY FRESH ADDITION IN RES PECT OF ANY UNEXPLAINED CASH CREDIT BUT THIS VITAL FACTOR I S BEING TAKEN INTO CONSIDERATION WHILE ESTIMATING THE AMOUN T OF UNDISCLOSED INCOME LIABLE TO TAX IN THE BLOCK ASSES SMENT IN RELATION TO SUCH PURCHASES OF RS. 11.99 CRORES. THE PEAK CREDIT AS ON ANY ONE DATE IN THE ACCOUNT OF ONE OF THESE BILLING AGENTS/NAME LENDERS IS RS. 1,54,14,534. THI S CHART WAS SUBMITTED BY THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE AND COPIES WERE GIVEN TO THE LEARNED COUNSEL FOR THE ASSESSEE. NO MISTAKE IN THE SAID PEAK STATE MENTS WERE POINTED OUT BY THE LEARNED COUNSEL. THE ADDITI ON IN RESPECT OF SUCH UNEXPLAINED PART CREDIT IN THE ACCO UNTS OF BOGUS SUPPLIERS CAN BE MADE UNDER SECTION 68 OR 69C IN VIEW OF DECISIONS IN THE CASES OF VIJAY PROTEINS LT D. (SUPRA) AND IS ALSO SUPPORTED BY JUDGMENT OF HON'BLE RAJAST HAN HIGH COURT IN THE CASE OF INDIAN WOOLLEN CARPET FAC TORY V. ITAT. NO SEPARATE OR FRESH ADDITION IS BEING MADE B Y US BUT THIS IMPORTANT FACTOR IS TAKEN INTO CONSIDERATION A S TO HOW MUCH ADDITION OUT OF ADDITION OF RS. 11.99 CRORES S HOULD BE SUSTAINED. APART FROM THIS THE ESTIMATE OF 25 PER C ENT DISALLOWANCE MADE IN THE CASE OF VIJAY PROTEINS (SU PRA) IS ALSO RELEVANT AS THAT CASE RELATES TO A CONCERN ENG AGED IN THE SIMILAR NATURE OF BUSINESS AND THERE ALSO PURCHASE INVOICES WERE OBTAINED FROM BILLING AGENTS/NAME LENDERS BUT MATERIAL IN FACT HAD BEEN RECEIVED FROM UNKNOWN SOU RCES. THE TRIBUNAL AFTER A CAREFUL CONSIDERATION IN THAT CASE CONFIRMED THE DISALLOWANCE OF 25 PER CENT OUT OF TO TAL AMOUNT OF SUCH BOGUS PURCHASES. NO SEPARATE ADDITIO N WAS MADE IN RESPECT OF PEAK CREDIT IN THE ACCOUNTS OF T HOSE BOGUS SUPPLIERS AS THE AMOUNT OF DISALLOWANCE MADE AT THE RATE OF 25 PER CENT ADEQUATELY COVERED THE AMOUNT OF UNEXPL AINED ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 82 PEAK CREDIT. ONE OF US (AM) WAS A PARTY TO THE SAID DECISION IN THE CASE OF VIJAY PROTEINS LTD. (SUPRA). 71. ON A CAREFUL CONSIDERATION OF THE ENTIRE RELEVA NT FACTS, WE ARE OF THE OPINION THAT IT WOULD BE JUST AND PROPER TO DIRECT THE AO TO RESTRICT THE ADDITION ON ACCOUNT OF INFLA TED PURCHASES TO 25 PER CENT I.E. RS. 3 CRORES WHICH IS APPROXIMATELY EQUAL TO 25 PER CENT OF RS. 11.99 CRO RES SHOWN TO HAVE BEEN PURCHASED FROM THESE FIVE BOGUS SUPPLI ERS. 72. NOW WE WILL DEAL WITH GROUND NO. 4 RAISED IN NK PL'S APPEAL. THE ASSESSEE HAS CHALLENGED THE CONFIRMATIO N OF AN ADDITION OF RS. 3,86,968 BEING THE PROFIT ON ALLEGE D SALES MADE BY THE COMPANY. THE AO HAS DEALT WITH THIS ISS UE IN PARA 8 ON P. 35 AND ONWARDS OF THE ASSESSMENT ORDER . DURING THE COURSE OF SEARCH, ONE LOOSE PAPER FILE W AS SEIZED FROM THE PREMISES OF NKPL, WHICH IS MARKED AS ANNEX . A-G OF PANCHNAMA PREPARED AT THE TIME OF SEARCH. IN THI S FILE, CERTAIN SALE BILLS OF NKIL IN RESPECT OF SALES MADE TO NKPL WERE FOUND. THE SAID FILE ALSO CONTAINED CERTAIN SA LE BILLS ISSUED BY NKPL IN RESPECT OF SALES MADE TO TRIVENI CORPORATION AND TIRUPATI CORPORATION. THESE BILLS O F PURCHASES AND SALES FOUND FROM THE SAID SEIZED FILE WERE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE ASSES SEE AS WELL AS IN THE BOOKS OF NKIL. BEFORE THE AO, IT WAS SUBM ITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE-COMPANY RA ISED CERTAIN SALE BILLS IN FAVOUR OF TRIVENI CORPORATION AND TIRUPATI CORPORATION IN ANTICIPATION OF GOODS TO BE PURCHASED FROM NKIL. FINALLY, NKIL COULD NOT DELIVE R THE GOODS AND THEREFORE, THE COMPANY ALSO DID NOT GIVE DELIVERY TO TRIVENI CORPORATION AND TIRUPATI CORPORATION. TH EREFORE ALL THESE PURCHASE AND SALE BILLS ARE CANCELLED BIL LS. NO ACTUAL PURCHASE OF GOODS OR SALE OF GOODS WAS MADE BY THE ASSESSEE. THE DELIVERY OF THE GOODS WAS ALSO NOT EF FECTED. THIS FACT WAS VERIFIABLE FROM THE INWARD REGISTER L YING SEIZED WITH THE DEPARTMENT IN WHICH SUCH TRANSACTIO NS ARE NOT RECORDED. THE ASSESSEE-COMPANY HAS ALSO NOT REC EIVED ANY PAYMENT FROM TRIVENI CORPORATION AND TIRUPATI CORPORATION IN RESPECT OF THESE SALE BILLS WHICH CA N BE VERIFIED FROM THEIR BANK STATEMENTS AVAILABLE WITH THE IT DEPARTMENT. THE COMPANY ALSO PASSED A BOARD RESOLUT ION FOR CANCELLATION OF THE BILLS IN RESPECT OF ABOVERE FERRED TRANSACTIONS. A COPY OF BOARD RESOLUTION WAS ALSO S UBMITTED TO THE AO. THE AO CONSIDERED THE SUBMISSIONS MADE O N ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 83 BEHALF OF THE ASSESSEE. IT WAS FOUND THAT THE SEIZE D BILLS BEAR THE GATE ENTRY NUMBERS AT THE FACTORY PREMISES OF N KPL. THEREFORE, THERE IS NO DOUBT THAT THE ASSESSEE MADE PURCHASES FROM NKIL AND ALSO SOLD THE GOODS TO TRIV ENI CORPORATION AND TIRUPATI CORPORATION AS PER PURCHAS E BILLS AND SALE BILLS FOUND AND SEIZED IN THE FILE MARKED AS ANNEX. A-6. THE AO THEREFORE MADE AN ADDITION OF RS. 2,01, 99,793 IN RESPECT OF UNACCOUNTED PURCHASES FROM NKIL FOR THE BLOCK PERIOD FOR ASST. YR. 1998-99. THE AO ALSO MADE SEPA RATE ADDITION IN RESPECT OF UNACCOUNTED SALES SO MADE TO TRIVENI CORPORATION AND TIRUPATI CORPORATION ON THE BASIS O F SALE INVOICES FOUND AND SEIZED IN FILE MARKED AS ANNEX. A-6. THE ADDITION IN RESPECT OF UNACCOUNTED SALES WAS MADE T O THE TUNE OF RS. 2,05,86,761. 73. THE LEARNED CIT(A) HAS DEALT WITH THIS ISSUE IN PARAS 8 TO 8.2 ON PP. 24 AND 25 OF HIS ORDER. THE LEARNED CIT( A) HAS OBSERVED THAT SINCE BOTH THE CONCERNS, VIZ. NKPL AN D NKIL BELONG TO THE SAME GROUP AND ADDITION ON ACCOUNT OF UNACCOUNTED SALES HAS ALREADY BEEN CONFIRMED BY HIM IN THE CASE OF NKIL, NO FURTHER ADDITION CAN BE MADE IN RE SPECT OF UNEXPLAINED PURCHASES IN THE HANDS OF THE APPELLANT . SINCE WHAT CAN BE TAXED IS ONLY THE PROFIT ON THE AFORESA ID SALES OF RS. 2,05,86,761, AFTER REDUCING RS. 2,01,99,793 BEI NG THE COST OF PURCHASES MADE BY THE ASSESSEE FROM NKIL, ADDITI ON SHOULD BE SUSTAINED ONLY TO THE TUNE OF RS. 3,86,96 8 IN SUBSTITUTION OF BOTH THE AFORESAID ADDITIONS MADE B Y THE AO. THE CIT(A) ACCORDINGLY SUSTAINED THE ADDITION OF RS . 3,86,968. 74. THE LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE REITERATED HIS ARGUMENTS AS WERE MADE BEFORE THE LE ARNED DEPARTMENTAL AUTHORITIES, IN THE WRITTEN SUBMISSION S SUBMITTED BEFORE THE CIT(A), IT WAS SUBMITTED VIDE PARAS 4.2 TO 4.4 THAT THESE TRANSACTIONS HAD NOT ACTUALLY TAK EN PLACE. IT WAS ADMITTED THAT THERE WAS A SEAL OF SALE ENTRY ON THE BILLS OF NKIL BUT THE TRANSACTIONS DID NOT FINALLY TAKE P LACE. THIS CAN BE VERIFIED FROM THE DAY-TO-DAY STOCK REGISTER MAINTAINED BY NKIL AND NKPL. NO EVIDENCE WHATSOEVER HAS BEEN ADDUCED BY THE AO TO PROVE THAT THE ASSESS EE HAS IN FACT PURCHASED AND SOLD WASH COTTON SEED OIL. THE A DDITION CANNOT BE MADE MERELY ON THE BASIS OF CERTAIN LOOSE PAPERS FOUND DURING THE SEARCH. COPY OF BOARD'S RESOLUTION CONFIRMING THE CANCELLATION OF THESE BILLS WAS ALSO FURNISHED ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 84 AT THE TIME OF ASSESSMENT. AN ALTERNATIVE PRAYER WA S ALSO MADE BEFORE THE CIT(A) THAT IF THE ASSESSEE'S CONTE NTION IS NOT ACCEPTED, THEN ONLY PROFIT ON SUCH SALES AMOUNT ING TO RS. 3,86,968 CAN BE TAXED. THE CIT(A) AFTER CONSIDERING THESE SUBMISSIONS CONFIRMED THE ADDITION TO THE EXTENT OF RS. 3,86,968. THE LEARNED COUNSEL ON THE STRENGTH OF SI MILAR ARGUMENTS URGED THAT THE ADDITION OF RS. 3,86,968 S HOULD BE CANCELLED. 75. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, VEHEMENTLY CONTENDED THAT THE CIT(A) HA S ERRED IN DELETING THE ADDITION OF RS. 2,01,99,793 BEING P URCHASES MADE FROM NKIL, WHICH ARE PROVED BEYOND DOUBTS FROM THE SALES INVOICES ISSUED BY NKIL IN FAVOUR OF NKPL, WH ICH WERE FOUND AND SEIZED FROM THE BUSINESS PREMISES OF NKPL . THOSE SALE BILLS BEAR THE GATE ENTRY NUMBER. IT ALSO CONT AINS ALL OTHER PARTICULARS SUCH AS TRUCK NUMBER ETC. A SUBSE QUENT RESOLUTION OF THE BOARD CANNOT NULLIFY THE FACTS SO CLEARLY REVEALED FROM THE DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH. THE CIT(A) HAS GROSSLY ERRED IN D IRECTING THE AO TO RESTRICT THE ADDITION TO RS. 3,86,968. TH E LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE MADE ELABORATE ARGUMENTS IN THIS REGARD IN PARA 3.12 OF HIS WRITTE N SUBMISSIONS DT. 29TH OCT., 2002 WHICH HAVE BEEN REP RODUCED HEREINBEFORE. IT HAS BEEN MENTIONED IN THE SAID LET TER THAT WHAT WAS PURCHASED BY THE ASSESSEE FROM NKIL THROUG H SUCH SALE BILLS ISSUED BY NKIL WAS WASH COTTON SEED OIL. HOWEVER, COPIES OF SALE BILLS ISSUED BY NKPL (THE A SSESSEE) TO TRIVENI CORPORATION AND TIRUPATI CORPORATION ARE FOR SALE OF SOYABEAN OIL. HOW CAN A PERSON SELL SOYABEAN OIL OUT OF PURCHASE OF WASH COTTON SEED OIL, THE LEARNED SENIO R DEPARTMENTAL REPRESENTATIVE HAS ALSO POINTED OUT TH AT THERE ARE SOME ENTRIES IN THE INWARD REGISTER IN THE NAME OF M/S KOTHARI GLOBAL WHICH BEAR THE SAME TRUCK NUMBERS AN D SAME WEIGHT, QUANTITY OF WASH COTTON SEED OIL WHICH ARE MENTIONED IN THE SALE BILLS ISSUED BY NKIL IN FAVOU R OF NKPL, LYING AMONGST SEIZED SALE BILLS FILE. THE ASS ESSEE HAS NOT GIVEN ANY SPECIFIC REPLY TO THE AFORESAID SUBMI SSIONS MADE IN THE WRITTEN SUBMISSIONS GIVEN BY THE LEARNE D SENIOR DEPARTMENTAL REPRESENTATIVE THAT WHAT WAS PURCHASED THROUGH THESE SALE INVOICES ISSUED BY NKIL TO NKPL WAS WASH COTTON SEED OIL AND WHAT WAS SOLD BY THE ASSES SEE TO TRIVENI CORPORATION AND TIRUPATI CORPORATION WAS SOYABEAN OIL. COPIES OF SOME RELEVANT SEIZED DOCUME NTS HAVE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 85 BEEN SUBMITTED BY THE DEPARTMENT IN THEIR PAPER BOO K DT. 22ND OCT., 2002. COPIES OF BILLS ISSUED BY NKIL TO NKPL INCLUDED IN ANNEX. A-6 CLEARLY SHOWS THAT THE SALE INVOICES WERE ISSUED BY THEM FOR WASH COTTON SEED OIL. IT AL SO BEARS TRUCK NUMBERS, DELIVERY CHALLAN NUMBERS AND INWARD DATE AND NUMBER AND DATE ON THE SEAL OF NKPL. THE SALE I NVOICES ISSUED BY NKPL IN FAVOUR OF TRIVENI CORPORATION AND TIRUPATI CORPORATION ARE FOR 'EXP. SOYABEAN OIL'. T HESE BILLS ALSO CONTAIN TRUCK NUMBERS AND DELIVERY CHALL AN NUMBERS, ETC. 76. THE ASSESSEE IN THE REJOINDER HAS SIMPLY STATED IN PARA 13.1 THAT THE ALLEGATION OF THE LEARNED SENIOR DEPA RTMENTAL REPRESENTATIVE THAT THE SUPPLIES BY M/S KOTHARI GLO BAL IS NOT CORRECT SINCE KOTHARI GLOBAL HAS SUPPLIED FROM SOME TRADERS OR MANUFACTURERS NEARBY AHMEDABAD. THE SUPP LY WAS IN DECEMBER, 1997. THE OLD RECORDS ARE NOT AVAI LABLE. FURTHER IT WAS ALSO MENTIONED THAT SUCH EVIDENCE IS BEING PRODUCED FOR THE FIRST TIME BEFORE THE TRIBUNAL. SU CH OBJECTION WAS NOT RAISED BY THE ADDL. DIT OR BY THE AO OR CIT(A). THE SAME CANNOT THEREFORE BE RAISED FOR THE TIME BEFORE THE TRIBUNAL. 77. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LEARNED REPRESENTATIVES OF BOTH SIDES AND HAVE GONE THROUGH THE ORDERS OF THE LEARNED DEPARTMENTAL AUTHORITIES. THE CONTENTION OF THE ASSESSEE THAT SUBMISSIONS MADE WI TH REFERENCE TO ENTRIES OF MATERIAL RECEIVED FROM KOTH ARI GLOBAL CONSTITUTE ADDITIONAL EVIDENCE, IS NOT CORRECT. SUC H A SUBMISSION HAS BEEN MADE ON THE BASIS OF SEIZED INW ARD REGISTER OF NKPL LYING SEIZED WITH THE DEPARTMENT. THE ASSESSEE HAS HIMSELF HEAVILY RELIED UPON THE ENTRIE S OF THE SAID REGISTER WHILE DEALING WITH THE MAIN GROUND OF ADDITION RELATING TO RECEIPT OF MATERIAL PURCHASED FROM BOGU S SUPPLIERS. IT IS EVIDENT FROM THE PHOTO COPIES OF S ALE INVOICES ISSUED BY NKIL TO NKPL AND FROM COPIES OF SALE BASI S ISSUED BY NKPL TO TRIVENI CORPORATION AND TIRUPATI CORPORA TION THAT WHAT WAS PURCHASED BY THE ASSESSEE FROM NKIL W AS WASH COTTON SEED OIL AND WHAT WAS SOLD BY THE ASSES SEE TO TRIVENI CORPORATION AND TIRUPATI CORPORATION WAS SOYABEAN OIL. THESE TWO ITEMS OF PURCHASE AND SALE REFLECTED FROM THE SEIZED INVOICES HAVE NO NEXUS WITH EACH OT HER. THE ENTRIES IN THE SEIZED INWARD REGISTER AND OUTWARD R EGISTER ARE ALSO REQUIRED TO BE THOROUGHLY CHECKED WITH REF ERENCE TO ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 86 THE QUANTITY WEIGHT AND TRUCK NUMBERS MENTIONED IN THESE INVOICES FORMING PART OF A-6 IN THE LIGHT OF SIMILA R MATERIAL CLAIMED TO HAVE BEEN RECORDED AS RECEIVED FROM KOTH ARI GLOBAL. NATURE OF PURCHASES FROM KOTHARI GLOBAL HAV E TO BE EXAMINED WITH REFERENCE TO THEIR INVOICES AND ITS C OMPARISON WITH SEIZED INVOICES. 78. ON A CAREFUL CONSIDERATION OF THE ENTIRE RELEVA NT FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE ORDERS PASSE D BY THE CIT(A) AND THE AO IN RELATION TO THIS GROUND SHOULD BE SET ASIDE AND THE MATTER SHOULD BE RESTORED BACK TO THE AO WITH A DIRECTION TO DECIDE THE SAME AFTER CONDUCTING A D EEP INVESTIGATION. THE AO SHOULD EXAMINE EACH INVOICE O F SALE AND PURCHASE FOUND AND SEIZED AS PER ANNEX. A-6 AND VERIFY THE SAME WITH THE ENTRIES OF RELEVANT DATES IN THE SEIZED INWARD AND OUTWARD REGISTERS. HE SHOULD ALSO EXAMIN E THE ORIGINAL MINUTE BOOK. IN CASE HE CONSIDERS IT NECES SARY HE MAY EXAMINE THE CONCERNED PERSONS OF THE RESPECTIVE CONCERNS WHO PREPARED THESE SALE AND PURCHASE INVOICES/BILLS WHICH WERE FOUND AND SEIZED DURING T HE COURSE OF SEARCH AND WHICH ACCORDING TO THE ASSESSEE DID N OT REPRESENT REAL TRANSACTIONS. THE AO WILL PASS FRESH ORDER AFTER CONDUCTING PROPER INVESTIGATION IN ACCORDANCE WITH THE PROVISIONS OF LAW AND AFTER PROVIDING ADEQUATE AND REASONABLE OPPORTUNITY TO THE ASSESSEE. 79. GROUND NO. (6) RELATES TO LEVY OF INTEREST UNDE R SECTION 158BFA(1) . NO ARGUMENTS WERE ADVANCED BY THE LEARNED REPRESENTATIVES OF BOTH SIDES IN RELATION TO THIS P OINT. THE AO IS DIRECTED TO GRANT CONSEQUENTIAL RELIEF. 80. GROUND NO. (7) RELATES TO INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) . NO SUCH GROUND CAN BE RAISED IN AN APPEAL AGAINST THE ASSESSMENT ORDER. S EPARATE APPEAL WILL LIE AGAINST ANY SUCH PENALTY, IF AND WH EN LEVIED. THIS GROUND IS THEREFORE INFRUCTUOUS AND IS REJECTE D ACCORDINGLY. IT(SS)A NO. 41/AHD/2002 IN THE CASE OF N.K. PROTEIN S LTD. : 81. WE WILL NOW DEAL WITH THE CROSS APPEAL SUBMITTE D BY THE REVENUE IN THE CASE OF N.K. PROTEINS LTD. BEING IT (SS) A NO. 41/AHD/2002. THE REVENUE HAS RAISED THE FOLLOWING T WO GROUNDS IN THIS APPEAL: ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 87 '1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS. 31,48,13,392 MADE ON A /C OF UNEXPLAINED INVESTMENTS. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 2,01,99,792 MADE ON A/ C OF UNEXPLAINED PURCHASES.' 82. THE AO HAS DISCUSSED THIS POINT IN PARA 7 ON PP . 34 AND 35 OF THE ASSESSMENT ORDER WHICH IS REPRODUCED AS U NDER: '7. UNACCOUNTED PAYMENTS: AS ALREADY DISCUSSED IN THE PRECEDING PARAS, CERTAI N BANK ACCOUNTS WERE FOUND DURING THE COURSE OF SEARCH OF DIFFERENT CONCERNS. AFTER INQUIRIES IT WAS HELD THAT THESE CO NCERNS ARE BOGUS AND PURCHASES MADE BY THE ASSESSEE FROM THESE CONCERNS ARE ADDED AS BOGUS PURCHASES. FROM THE PER USAL OF THESE BANK ACCOUNTS, IT IS NOTICED THAT THESE ARE I N FOLLOWING NAMES : RS. 1. ADINATH CORPORATION 2,10,54,076 2. TIRUPATI CORPORATION 3,33,07,324 3. VIMAL INDUSTRIES 7,26,74,355 4. KARNAVATI INDUSTRIES 12,34,73,600 5. KRISHNA INDUSTRIES 2,79,01,621 6. TRIVENI CORPORATION 3,64,01,356 ----------- ----- TOTAL 31,48,12,332 ----------- ---- ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 88 THESE ALSO REPRESENT PAYMENTS MADE BY ASSESSEE GROU P CONCERNS FOR PURCHASES AND OTHER EXPENSES. INQUIRIE S ARE BEING CONDUCTED FROM BANKS TO FIND OUT THE CONCERNS WHICH MADE THESE PAYMENTS FOR PURCHASES AND OTHER EXPENSE S. SUBSTANTIVE DISALLOWANCE WILL BE MADE IN THESE CONC ERNS AFTER CONCLUSION OF INQUIRIES. HOWEVER, PROTECTIVEL Y THE ADDITION IS MADE IN THE CASE OF THE ASSESSEE BEING UNACCOUNTED PAYMENTS IN ASST. YR. 1999-2000. (EMPHASIS, ITALICIZED IN PRINT, SUPPLIED BY US) THE REFORE TOTAL AMOUNT OF RS. 31,48,12,332 IS ADDED AS UNACCOUNTED PAYMENTS FOR THE BLOCK PERIOD IN RESPECTIVE ASSESSM ENT YEARS AS UNDER: ASST YR. AMOUNT 1998-99 RS. 2,12,73,188 1999-2000 RS. 29,35,39,144 (UNACCOUNTED PAYMENTS RS. 31,48,12,332)' 83. THE ADDITION OF SIMILAR NATURE WAS IN THE CASE OF NKIL WHICH IS SUBJECT-MATTER OF REVENUE'S APPEAL IN IT(S S)A NO. 38/AHD/2002. GROUND NO. (2) OF REVENUE'S APPEAL IN IT(SS)A NO. 38/AHD/2002 IN THE CASE OF NKIL RELATES TO DELETION OF ADDITION OF RS. 6,63,19,496 MADE IN RES PECT OF ALLEGED UNEXPLAINED DEPOSITS IN THE ACCOUNTS OF BOG US SUPPLIERS. THE SAID POINT HAS BEEN DISCUSSED IN PAR A 13 OF ASSESSMENT ORDER PASSED IN THE CASE OF NKIL WHICH I S REPRODUCED BELOW: '13. UNACCOUNTED PAYMENTS: AS ALREADY DISCUSSED IN THE PRECEDING PARAS, CERTAI N BANK ACCOUNTS WERE FOUND DURING THE COURSE OF SEARCH OF DIFFERENT CONCERNS. AFTER INQUIRIES IT WAS HELD THAT' THESE C ONCERNS ARE BOGUS AND PURCHASES MADE BY THE ASSESSEE TO THESE C ONCERNS ARE ADDED AS BOGUS PURCHASES. FROM THE PERUSAL OF T HESE BANK ACCOUNTS, IT IS NOTICED THAT IN THE BANK ACCOU NT OF ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 89 KRISHNA MARKETING, TOTAL AMOUNT OF RS. 2,47,14,062 IS DEPOSITED DURING THE FINANCIAL YEAR 1998-99. IN THE BANK ACCOUNT OF SOMNATH INDUSTRIES TOTAL DEPOSITS MADE I S AMOUNTING TO RS. 3,24,57,568 DURING THE FINANCIAL Y EAR 1998-99. THESE ALSO REPRESENT PAYMENTS MADE BY ASSE SSEE GROUP CONCERNS FOR PURCHASES AND OTHER EXPENSES. IN QUIRIES ARE BEING CONDUCTED FROM BANKS TO FIND THE CONCERNS WHICH MADE THESE PAYMENTS FOR PURCHASES AND OTHER EXPENSE S. SUBSTANTIVE DISALLOWANCE WILL BE MADE IN THESE CONC ERNS AFTER CONCLUSION OF INQUIRIES, HOWEVER, PROTECTIVEL Y THE ADDITION IS MADE IN THE CASE OF THE ASSESSEE BEING UNACCOUNTED PAYMENTS IN ASST. YR. 1999-2000. IN THE BANK ACCOUNT OF SEJAL ENTERPRISES, TOTAL DEP OSIT IS MADE AMOUNTING TO RS. 91,47,866 BY THE ASSESSEE FOR WHICH NO EXPLANATION WAS FURNISHED BY THE ASSESSEE. THERE FORE, AMOUNT OF RS. 91,47,866 IS ADDED AS UNACCOUNTED PAY MENTS IN THE HANDS OF THE ASSESSEE FOR THE BLOCK PERIOD I N THE ASST. YR. 1999-2000. (UNACCOUNTED DEPOSIT RS. 91,47,866) (UNACCOUNTED PAYMENTS RS. 5,71,71,630)' 84. THE ADDITIONS IN RESPECT OF DEPOSITS IN THE ACC OUNTS OF THESE ALLEGED BOGUS SUPPLIERS HAVE ALSO BEEN MADE I N THE CASE OF SHRI NILESHBHAI K. PATEL ON SUBSTANTIVE BAS IS. A SHOW-CAUSE NOTICE WAS ISSUED BY THE AO ON 18TH JAN. , 2001 TO SHRI NILESHBHAI K. PATEL IN WHICH IT WAS STATED THAT SEVERAL BLANK CHEQUE BOOKS AND VOUCHERS OF NUMBER O F CONCERNS WERE FOUND AND SEIZED AT THE OFFICE PREMIS ES OF NKPL. THE AFFIDAVITS WERE FILED BY THE OWNERS OF TH OSE CONCERNS. FROM ALL THESE AFFIDAVITS IT IS CLEAR THA T THESE ARE BOGUS CONCERNS CREATED BY YOU. THE BUSINESS OF THES E CONCERNS WERE TOTALLY MANAGED BY YOU. THE BANK ACCO UNTS RELATING TO THOSE CONCERNS WERE ALSO MANAGED BY YOU AS STATED BY SO-CALLED PROPRIETORS OF THESE CONCERNS. THE AO, THEREFORE, REQUIRED THE ASSESSEE TO EXPLAIN AS TO W HY THE AMOUNTS DEPOSITED IN THE BANK ACCOUNTS OF THESE SUP PLIERS BE NOT TREATED AS UNACCOUNTED INCOME OF THE ASSESSEE. THE DETAILS OF AMOUNTS DEPOSITED IN THESE BANK ACCOUNTS WERE GIVEN IN THE AFORESAID SHOW-CAUSE NOTICE AS UNDER; NO. NAME OF THE HOLDER AMOUNT CREDITED ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 90 1. KRISHNA INDUSTRIES 29,93,310 2. TRIVENI CORPORATION 3,64,01,356 3. KARNAVATI INDUSTRIES 12,30,13,600 4. ADINATH CORPORATION 2,10,54,076 5. TIRUPATI CORPORATION 3,33,37,324 6. VIMAL INDUSTRIES 10,50,05,834 7. KRISHNA INDUSTRIES 6,52,08,617 8. SOMNATH INDUSTRIES 3,25,77,224 9. KRISHNA MARKETING 2,47,14,062 ------------- TOTAL 44,43,05,403 -------------- IT APPEARS THAT THESE DEPOSITS IN THE BANK ACCOUNTS OF THESE SUPPLIERS ARE FOR THE PERIOD UPTO THE DATE WHEN COPIES OF THEIR BANK ACCOUNTS WERE OBTAINED BY THE DY. DIT/ADDL. DIT. HOWEVER, DETAILS IN RESPECT OF DEPOSITS IN THEIR BANK ACCOUNTS UPTO THE DATE OF SEARCH I.E. 24TH FEB., 1999 HAVE BEEN GIVEN IN PARA 10 ON P. 33 OF THE ASSESSMENT ORDER, WHICH ARE AS UNDER: .. 85. THE AO RELYING UPON THE AFFIDAVITS OF THOSE SUPPLIERS OBTAINED BY THE DY. DIT, WHICH HAVE BEEN DISCUSSED WHILE DEALING WITH THE ISSUE RELATING TO BOGUS PURCHASES, MADE AN ADDITION OF RS. 37,19,85,062 WHICH WAS BIFURCATED IN TWO YEARS FALLING IN THE BLOCK PERIOD AS UNDER: . .. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 91 THE AO HAS BRIEFLY DISCUSSED THE EVIDENCE AGAINST T HE ASSESSEE IN RELATION TO SUCH BOGUS SUPPLIERS WHICH, INTER ALIA, INCLUDE THE AFFIDAVITS/STATEMENTS GIVEN BY THE SUPP LIERS DENYING HAVING SUPPLIED ANY GOODS TO NKPL AND NKIL AND STATEMENTS OF BROKERS AND OTHER FACTS DISCUSSED IN THE ASSESSMENT ORDERS PASSED IN THE CASE OF NKPL AND NK IL. THE AO HAS ALSO DISCUSSED VARIOUS REPLIES AND AFFID AVITS OF SUPPLIERS SUBMITTED ON BEHALF OF THE ASSESSEE IN RE BUTTAL OF THE EARLIER AFFIDAVITS. THE AO THUS MADE AN ADDITIO N IN RESPECT OF ENTIRE AMOUNT FOUND CREDITED IN THE BANK ACCOUNTS OF THESE SO-CALLED BOGUS SUPPLIERS AGGREGATING TO R S. 37,19,85,062 IN THE HANDS OF SHRI NILESHBHAI K. PAT EL ON SUBSTANTIVE BASIS, 86. BEFORE THE CIT(A) THE ASSESSEE PREPARED AND COM PILED THE DETAILS FROM COPIES OF BANK ACCOUNTS OF THESE S UPPLIERS SUPPLIED BY THE DEPARTMENT TO THE ASSESSEE AND FURN ISHED THE FOLLOWING SUMMARISED DETAILS. 'THE DETAILS OF DEPOSITS OF CHEQUES IN THE BANK ACC OUNT FROM THE ABOVE REFERRED COMPANIES AND OUTSIDERS ARE GIVE N BELOW : NAME OF SUPPLIERS AMOUNT RECEIVED BY CHEQUE FROM NK PL AMOUNT RECEIVED BY CHEQUE FROM OUTSIDERS TOTAL AMOU NT RECEIVED SOMNATH INDUSTRIES 1,05,26,152 2,19,31,416 3,24,57,568 KRISHNA MARKETING 51,67,228 1,95,46,834 2,47,14,062 SEJAL ENTERPRISES 1,26,48,060 FROM NKPL 2,83,41,440 4,14,78,250 5,71,71,630 VIMAL INDUSTRIE S 1,48,34,121 5,78,40,234 7,26,74,355 KARNAVATI INDUS TRIES 38,10,000 11,96,63,600 12,34,73,600 ADINATH CORPORA TION 2,16,13276 2,10,54076 TIRUPATI CORPORATION 4,76,93, 575 3,33,07,324 KRISHNA INDUSTRIES 31,95,67,82 27902721 11,99,07,754 17,75,03834 27,84,12,076 TRIVENI CORPORATION(GOODS ARE SOLD BY NKPLAND SALE PROCEEDS AREACCOUNTED FOR IN THEBOOKS) 3,64,01,316 TOTAL 14, 82,49,194 21,89,82,084 37,19,85,062 87. IT WAS SUBMITTED BEFORE THE CIT(A) THAT SO FAR AS PAYMENTS AGGREGATING TO RS. 2,83,41,440 AND RS. 11,99,07,754 MENTIONED IN THE AFORESAID CHART ARE C ONCERNED, ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 92 THESE PAYMENTS WERE MADE BY NKIL AND NKPL RESPECTIV ELY TO THESE SUPPLIERS BY CHEQUES. HENCE DEPOSITS IN TH E BANK ACCOUNTS OF THESE SUPPLIERS TO THE EXTENT THE DEPOS ITS REPRESENTING CHEQUES RECEIVED FROM NKIL AND NKPL, C ANNOT BE TREATED AS UNEXPLAINED DEPOSITS. THE ISSUE RELAT ING TO ALLEGED BOGUS PURCHASES MADE BY NKPL AND NKIL FROM THESE CONCERNS HAS BEEN DEALT WITH SEPARATELY IN TH E RESPECTIVE ASSESSMENT ORDERS BUT THOSE PAYMENTS MAD E BY CHEQUES BY NKIL AND NKPL BY NO STRETCH OF IMAGINATI ON BE TREATED AS UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT S OF THOSE BOGUS SUPPLIERS. THE SAME ADDITION CANNOT BE MADE I N THE HANDS OF EITHER NKIL OR NKPL, NOR IN THE CASE OF SH RI NILESHBHAI K. PATEL. AS REGARDS THE DEPOSITS AGGREG ATING TO RS. 21,89,82,084 ARE CONCERNED, IT WAS CONTENDED TH AT ALL THESE DEPOSITS IN THE BANK ACCOUNTS OF VARIOUS SUPP LIERS HAVE BEEN RECEIVED BY CHEQUES FROM OTHER PARTIES. THE AO HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT SUCH UND ISCLOSED DEPOSITS IN THE BANK ACCOUNTS OF THESE SUPPLIERS WE RE MADE BY NKIL OR BY SHRI NILESHBHAI K. PATEL, ON THE OTHE R HAND, THE AO, WHILE PASSING THE ASSESSMENT ORDERS IN THE CASES OF NKIL AND NKPL, HAD OBSERVED THAT THE INQUIRIES WOUL D BE MADE IN RELATION TO THOSE DEPOSITS BY CHEQUES IN TH E ACCOUNTS OF THESE SUPPLIERS TO FIND OUT WHICH OTHER CONCERNS HAVE MADE PAYMENTS BY CHEQUES TO THESE SUPPLIERS AND SUBSTANTIVE ADDITIONS WILL BE MADE IN THE HANDS OF THOSE CONCERNS AFTER NECESSARY INQUIRIES AND INVESTIGATIO N. THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWING JUDGM ENTS BEFORE THE CIT(A): (I) CIT V. DAULATRAM RAWATMAL (1973) 87 ITR 349 (SC) (II) PARAKH FOODS LTD. V. DY. CIT (1998) 64 ITD 396 (PUNE) (III) OMKARMAL GAURISHANKAR V. ITO (1991) 39 TTJ 22 3 (AHD) (IV) DIMCO SILK MILLS V. ITO (1999) 107 TAXMAN 41 (MAG) 88. THE CIT(A) AFTER CONSIDERING THE ENTIRE RELEVAN T FACTS AND MATERIAL GAVE THE FOLLOWING FINDINGS IN PARA 4. 8 OF HIS APPELLATE ORDER IN THE CASE OF SHRI NILESHBHAI K. P ATEL. '4.8 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE APPELLANT'S COUNSEL, SHRI ASHWINI SHAH AND HAVE ALS O PERUSED THE FACTS OF THE CASE LAWS CITED AND ALSO T HE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 93 MATERIALS WHICH WAS FOUND DURING THE COURSE OF SEAR CH AND ALSO FURTHER INQUIRIES CONDUCTED BY THE AO DURING T HE COURSE OF ASSESSMENT. AFTER PERUSING THE SAID MATERIALS AN D RECORDS, I HAVE NO HESITATION IN HOLDING THAT THE I NFERENCE DRAWN THAT THE MONEYS DEPOSITED IN THE SAID ACCOUNT S BELONG TO THE APPELLANT IS NOT SUPPORTED BY SUFFICIENT EVI DENCE FOR THE FOLLOWING REASONS: (A) THE APPEAL IN RESPECT OF NKIL HAS BEEN DISPOSED OF BY THE UNDERSIGNED AS PER ORDER DT. 16TH JAN., 2001 WHILE APPEAL IN RESPECT OF NKPL HAS BEEN DISPOSED OF BY THE UNDERSI GNED AS PER ORDER DT, 21ST JAN., 2002. FOR THE SAKE OF CONV ENIENCE, THE VARIOUS CONTENTS AND FACTS RELATING TO THE STAT EMENTS AND EVIDENCES DISCUSSED BY THE AO IN THE BLOCK ASSESSME NT ORDER OF THE APPELLANT, ARE NOT DISCUSSED AGAIN. THE SAME HAVE BEEN ELABORATELY DISCUSSED THEREIN. IN THE CASE OF SEJAL ENTERPRISES, ADDITION OF RS. 1,26,48,060 WAS UPHELD ON ACCOUNT OF BOGUS PURCHASES IN THE CASE OF NKIL WHER EAS FINDING WAS GIVEN THAT, IN RESPECT OF SOMNATH INDUS TRIES AND KRISHNA MARKETING, THERE WAS NO MATERIAL FOR CONSID ERING THE ADDITIONS UNDER SECTION 158BC , IN THE ABSENCE OF ANY MATERIAL DISCOVERED DURING THE COURSE OF SEARCH. SI MILARLY, IN RESPECT OF BOGUS PURCHASES RELATING TO VIMAL IND USTRIES, KARNAVATI INDUSTRIES, ADINATH CORPORATION, TIRUPATI CORPORATION, KRISHNA INDUSTRIES TOTALLING RS. 11,99 ,07,754 WAS UPHELD IN THE ORDERS OF NKPL AS DISCUSSED ABOVE . IT WAS NOTED THAT THE SAID PAYMENTS ORIGINATED IN THE BOOK S OF NKIL AND NKPL AND WERE THROUGH CHEQUE PAYMENTS AND THE TRANSACTIONS HAVE BEEN DULY REFLECTED IN THE BOOKS OF NKIL AND NKPL. THUS, THE SOURCE OF THE SAID DEPOSITS STA NDS ESTABLISHED. (B) IN RESPECT OF DEPOSITS OF RS. 21,89,82,084, THE AMOUNT IS STATED TO BE RECEIVED FROM OUTSIDERS I.E. OTHER THA N NKIL AND NKPL. THE AO HAS NOT BROUGHT ANY EVIDENCE IN THIS R ESPECT THAT THE APPELLANT WAS BENAMIDAR OF SUCH PARTIES. A S A MATTER OF FACT, EVEN THE NAMES OF PARTIES FROM WHOM SUCH AMOUNTS HAVE BEEN RECEIVED AND DEPOSITED IN THE SAI D BANK ACCOUNTS HAVE NOT BEEN DISCUSSED ANYWHERE IN THE ASSESSMENT ORDER. THE ONLY REFERENCE MADE BY THE AO IS AT P. 39 OF THE ORDER IN THE CASE OF NKIL AND AT P. 35 OF THE ORDER IN THE CASE OF NKPL, IN WHICH THE AO HAD OBSERVED T HAT INQUIRIES WILL BE MADE IN RESPECT OF THOSE CONCERNS AND SUBSTANTIVE ADDITION MADE IN THOSE CASES. IN VIEW O F THESE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 94 FACTS, THERE IS NO JUSTIFICATION FOR TREATING THE S AME AS UNDISCLOSED INCOME OF THE APPELLANT AND THAT TOO WI THOUT ANY FINDING OR SUPPORTING EVIDENCE EMERGING OUT OF SEARCH ACTION UNDER SECTION 132 IN THE CASE OF APPELLANT. (C) IN RESPECT OF THE AMOUNT OF RS. 3,64,01,316 AS STATED IN THE WRITTEN SUBMISSIONS BEFORE ME, THE AMOUNT IS REPRESENTED TOWARDS SALE BY NKPL AND THE TRANSACTIO NS ARE DULY RECORDED IN THE BOOKS OF ACCOUNT. THERE IS NO FINDING THAT THE SOURCE OF THE SAME IS THE APPELLANT OR THA T IT IS BASED ON ANY MATERIAL DISCOVERED AS A RESULT OF SEARCH. (D) THE APPELLANT HAS STRONGLY SUBMITTED THAT THE TRANSACTIONS BETWEEN THE ACCOUNT HOLDERS AND THE AP PELLANT ARE ONLY IN THE CAPACITY OF HIS BEING MD OF NKIL AN D NKPL AND THAT HE HAS NEVER DONE ANY BUSINESS IN HIS INDI VIDUAL CAPACITY. IT IS FURTHER SUBMITTED THAT NO ADVERSE I NFERENCE CAN BE DRAWN FOR MERE INTRODUCTION TO THE PROPRIETO R OF THE CONCERN FOR OPENING A BANK ACCOUNT. RELIANCE IS PLA CED ON THE DECISION OF TRIBUNAL, AHMEDABAD IN THE CASE OF DIMCO SILK MILLS V. ITO (SUPRA) WHICH IS RELIED UPON AS MENTIONED EARLIER IN THIS ORDER. IT IS SUBMITTED THAT THE ONU S IS ON THE AO TO HOLD THAT THE SAID DEPOSITS ARE ON ACCOUNT OF UNDISCLOSED INCOME OF THE APPELLANT AND THIS VIEW I S CORRECT IN VIEW OF THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. DAULATRAM RAWATMAL (SUPRA). (E) IT IS FURTHER SUBMITTED THAT AS DISCUSSED BY TH E AO HIMSELF IN THE ORDERS OF NKIL AND NKPL, NO CHEQUE BOOKS WER E FOUND FROM THE RESIDENTIAL PREMISES OF THE APPELLAN T IN RESPECT OF ANY OF THE ABOVE ACCOUNT HOLDERS RELATIN G TO THE ABOVEMENTIONED CONCERNS. THIS IS FOUND TO BE CORREC T SINCE THE SAME WERE FOUND FROM THE RESIDENCE OF KAMLESHBH AI PATEL. AS SUCH, ADDITION MADE BY THE AO OF RS. 37,1 9,85,062 CANNOT BE SUSTAINED AND THEREFORE DIRECTED TO BE DE LETED.' 89. THE CIT(A) GAVE THE FOLLOWING FINDINGS IN RELAT ION TO THIS GROUND RAISED IN THE REVENUE'S APPEAL IN THE CASE O F NKPL IN PARA 7.4 ON PP. 23 AND 24 OF HIS ORDER: '7.4 I HAVE CONSIDERED THE SUBMISSIONS MADE AND ALS O PERUSED THE FACTS. IT IS NOTED THAT THE AO HAS TREA TED THE TOTAL OF DEPOSITS APPEARING IN THE BANK ACCOUNTS OF THE S AID 5 PARTIES POINTED OUT BY THE APPELLANT IN PARA 3.2 OF THE SUBMISSIONS. IT IS SUBMITTED THAT PURCHASES FROM TH E ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 95 APPELLANT RECORDED ONLY FOR RS. 11.99 CRORES AND TH E REST IS FROM THE OUTSIDE PARTIES FOR WHICH NO FINDINGS HAVE BEEN GIVEN BY THE AO. IN RESPECT OF THE AMOUNT OF RS. 3, 64,01,316, NO FINDING HAS BEEN GIVEN BY THE AO AND THE TRANSAC TION HAS ALREADY BEEN CONSIDERED IN THE CASE OF NKIL. IT IS NOTED THAT THE CONTENTION OF THE APPELLANT ARE CORRECT AND THE APPEAL OF NKIL BEARING APPEAL NO. CIT(A)-VI (NOW III)/CC2/54/ 01- 02 HAS ALREADY BEEN DISPOSED OF AS PER ORDER DT. 16 TH JAN., 2002. AFTER PERUSING THE POINTS MADE BY THE APPELLA NT, I FIND THAT THERE IS NO JUSTIFICATION IN MAKING DOUBLE ADD ITION FIRST BY WAY OF TREATING THE SAME AS BOGUS PURCHASES AND THAN CONSIDERING THE SAME AS UNEXPLAINED DEPOSITS IN THE BANK ACCOUNTS OF THE PROPRIETORS/CONCERNS. IT IS RELEVAN T TO NOTE THAT IT IS OBSERVED BY THE AO THAT WITHDRAWALS MADE RELATING TO PURCHASES OF NKPL HAVE BEEN USED BY THE APPELLAN T ITSELF. 7.5 IN VIEW OF THE ABOVE FACTS, I DO NOT SEE ANY JU STIFICATION IN MAKING FURTHER ADDITION ON THE BASIS OF DEPOSITS IN THE SAID ACCOUNTS WITHOUT ANY BASIS. THE ADDITION MADE ON TH IS ACCOUNT ON PROTECTIVE BASIS, THEREFORE, CANNOT BE S USTAINED AND DIRECTED TO BE DELETED.' 90. THE CIT(A) IN THE CASE OF NKIL HAS CONSIDERED T HIS ISSUE IN PARA 6 TO 6.2 ON PP. 12 TO 14 OF HIS ORDER AS UN DER: '6. THIS RELATES TO ADDITION OF RS. 5,71,71,630 IN RESPECT OF DEPOSITS IN THE BANK ACCOUNT OF THE SAID SUPPLIERS AND RS. 91,47,866 ON ACCOUNT OF UNDISCLOSED DEPOSITS IN THE SAID BANK ACCOUNT. THIS HAS BEEN DISCUSSED AND REFERRED BY TH E APPELLANT IN PARA 2.2 OF ITS WRITTEN SUBMISSIONS RE PRODUCED ABOVE. THE SAID ADDITIONS HAVE BEEN MADE ON PROTECT IVE BASIS. IT IS PLEADED BY THE APPELLANT IN THE WRITTE N SUBMISSIONS AS PER PARA 10 AS UNDER: '10, UNACCOUNTED PAYMENT OF RS. 5.71 CRORES (PARA 1 3PAGE NO. 38 AND 39): 10.1 THE LEARNED AO HAS MADE ADDITION OF RS. 5.71 C RORES AS UNACCOUNTED PAYMENTS. 10.2 THE ASSESSEE MADE PURCHASES WHICH IS CONSIDERE D AS BOGUS AND THE ASSESSEE ALSO MADE PAYMENT FOR SUCH PURCHASES BY CHEQUES. THE LEARNED AO OBTAINED BANK STATEMENT OF THE SAID SUPPLIERS AND THE TOTAL DEPOS ITS MADE IN THE SAID ACCOUNTS BY THE ASSESSEE-COMPANY AND OU TSIDERS ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 96 ARE CONSIDERED AS PAYMENT MADE BY THE ASSESSEE-COMP ANY AND IS ALSO CONSIDERED AS UNACCOUNTED PAYMENTS. THE REFORE, THE LEARNED AO HAS MADE ADDITION OF RS. 5.71 CRORES AS UNACCOUNTED PAYMENTS ON PROTECTIVE BASIS. THE DETAI LS OF SUCH UNACCOUNTED PAYMENTS AND PURCHASES ARE GIVEN B ELOW: PURCHASES CONSIDERED AS BOGUS IN THE CASE OF NKIL: RS. SOMNATH INDUSTRIES 1,14,78,000 KRISHNA MARKETING 51,67,228 SEJAL ENTERPRISES 1,26,48,060 ------------- 2,92,93,288 ------------- THE DETAILS OF DEPOSIT OF CHEQUES IN THE BANK ACCOUNT FROM THE ABOVE REFERRED COMPANIES AND OUTSIDERS ARE AS UNDER: 10.3 FROM THE ABOVE, IT MAY PLEASE BE SEEN THAT THE TOTAL DEPOSITS FROM THE ACCOUNTS IS RS. 5.71 CRORES WHERE AS THE TOTAL PURCHASES FROM THE THREE CONCERNS ARE RS. 2.9 2 CRORES. IN OTHER WORDS, THE SAID CONCERNS ARE ALSO DEALING WITH OUTSIDERS WHICH PROVES THAT THE SAID CONCERNS ARE N OT BENAMIDAR. EVEN THE PAYMENT BY THE OUTSIDERS ARE CONSIDERED PAYMENT MADE BY THE COMPANY WITHOUT ANY BASIS AND EVIDENCES. FURTHER, THE PAYMENT FOR PURCH ASES IS BY CHEQUES AND THEY ARE REFLECTED IN THE ACCOUNTS R EGULARLY MAINTAINED BY THE COMPANY AND, THEREFORE, SUCH PAYM ENT FOR PURCHASES IS ACCOUNTED PAYMENT AND CANNOT BE CONSIDERED AS UNACCOUNTED PAYMENTS. 10.4 EVEN IF IT IS CONSIDERED AS UNACCOUNTED PAYMEN T, THE ADDITION IS ALREADY MADE FOR PURCHASES AND, THEREFO RE, THERE IS NO QUESTION OF MAKING FOR FURTHER ADDITION FOR UNACCOUNTED PAYMENTS, IF SO MADE, IT IS DOUBLE ADDI TION. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 97 10.5 THE PROTECTIVE ASSESSMENT IS NORMALLY MADE, IF THE DEPARTMENT IS IN DOUBT ABOUT THE PERSON IN WHOSE HA NDS THE INCOME IS TAXABLE. THE LEARNED AO HAS ALSO STATED T HAT THE INQUIRIES WOULD BE MADE IN THE HANDS OF THE SAID SU PPLIERS AND, THEREFORE, THE SUBSTANTIVE ADDITION WOULD BE M ADE IN THE HANDS OF THE SUPPLIERS. NOW, THE SAID CONCERNS ARE TREATED AS BENAMIDAR AND THE DEPOSITS IN THE ACCOUN TS OF SUPPLIERS OF NKIL AND NKPL IS TREATED AS UNDISCLOSE D INCOME IN THE CASE OF NILESH K. PATEL AND THEREFORE , THE QUESTION OF TREATING ANY SUCH PAYMENTS AS UNACCOUNT ED IN THE CASE OF NKIL EVEN ON PROTECTIVE BASIS DOES NOT ARISE.' 6.1 SIMILARLY, IN RESPECT OF ADDITION OF RS. 91.47 LAKHS, IT HAS BEEN SUBMITTED AS UNDER AS PER PARA 11 OF THE WRITT EN SUBMISSIONS AS UNDER: 11. UNACCOUNTED DEPOSIT OF RS. 91.47 LAKHS (PARA 13 PAGE NO. 39) : 11.1 THE LEARNED AO HAS MADE ADDITION OF RS. 91.47 LAKHS AS UNEXPLAINED DEPOSIT SINCE IT IS ARGUED THAT THE COM PANY HAS MADE SUCH DEPOSITS IN THE ACCOUNT OF SEJAL ENTERPRI SES. IN OTHER WORDS, SEJAL ENTERPRISES IS TREATED AS BENAMI DAR OF NKIL. THERE IS NO EVIDENCE WHATSOEVER ADDUCED BY TH E LEARNED AO FOR HOLDING SEJAL ENTERPRISES AS BENAMID AR OF THE COMPANY. IN FACT, THE COMPANY HAS MADE DEPOSIT SINCE IT IS ARGUED THAT THE COMPANY HAS MADE SUCH DEPOSITS I N THE ACCOUNT OF SEJAL ENTERPRISES. 11.2 IN OTHER WORDS, SEJAL ENTERPRISES IS TREATED A S BENAMIDAR OF NKIL. THERE IS NO EVIDENCE WHATSOEVER ADDUCED BY THE LEARNED AO FOR HOLDING SEJAL ENTERPR ISES AS BENAMIDAR OF THE COMPANY. IN FACT, THE COMPANY HAS MADE PURCHASES FROM SEJAL ENTERPRISES TO THE EXTENT OF R S. 1,26,48,060 AND SUCH PURCHASES ARE CONSIDERED AS BO GUS AND THE ADDITION IS ALREADY MADE IN THE CASE OF NKI L WHICH IS BEING CONTESTED. THEREFORE, THE QUESTION OF MAKI NG ANY ADDITION AS UNEXPLAINED DEPOSIT IN THE CASE OF ASSE SSEE- COMPANY DOES NOT ARISE.' 6.2 I HAVE CAREFULLY CONSIDERED THE SAME AND IN VIE W OF MY FINDINGS GIVEN IN RESPECT OF KRISHNA MARKETING AND SOMNATH INDUSTRIES, THERE IS NO JUSTIFICATION FOR TREATING THE SAME AS INCOME OF THE APPELLANT IN THE BLOCK ASSESSMENT. IN RESPECT OF THE ADDITION OF RS. 91,47,866, ADDITION OF RS. 1,26 ,48,060 HAS ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 98 ALREADY BEEN CONFIRMED AND THERE IS NO BASIS FOR MA KING FURTHER ADDITION IN THE ABSENCE OF ANY ADDITIONAL E VIDENCE THAT THE SAME IS CO-RELATED WITH PURCHASES OUT OF UNEXPLAINED MONIES. THIS WOULD AMOUNT TO DOUBLE TAX ATION. IN VIEW OF THE ABOVE FACTS, THESE 2 ADDITIONS ARE D IRECTED TO BE DELETED.' 91. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE RELIED UPON THE REASONS MENTIONED IN THE ASSESSMENT ORDERS . THE BENCH PERSISTENTLY REQUIRED THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE TO FURNISH THE DETAILS OF INQUIRIES MADE SUBSEQUENT TO THE COMPLETION OF THES E ASSESSMENTS, AS INDICATED IN THE ASSESSMENT ORDER O F NKIL AND NKPL THAT INQUIRIES WILL BE MADE AS TO WHICH OT HER CONCERNS HAVE GIVEN CHEQUES TO THESE BILLING AGENTS /NAME LENDERS WHICH HAVE BEEN DEPOSITED IN THEIR BANK ACC OUNTS AND ADDITIONS ON SUBSTANTIVE BASIS WILL BE MADE AFT ER COMPLETING THOSE INQUIRIES IN THE CASES OF SUCH OTH ER CONCERNS WHO GAVE THOSE CHEQUES. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE SUBMITTED A LETTER DT. 18TH DEC., 2002. THE RELEVANT EXTRACTS OF THE SAID LETTE R ARE REPRODUCED AS BELOW: 'AS DIRECTED DURING THE COURSE OF HEARING BY YOUR H ONOUR, I AM SUBMITTING HEREWITH DETAILS OF BANK ENQUIRIES CA RRIED OUT IN THE GROUP CASES OF N.K. CONCERNS. IT IS SUBMITTE D THAT THERE ARE LARGE NUMBER OF CHEQUES AND BANKS ARE INVOLVED DUE TO WHICH ENQUIRIES HAVE NOT CONDUCTED YET. THERE ARE P RACTICAL DIFFICULTIES ALSO DUE TO WHICH ENQUIRIES HAVE NOT R EACHED ITS CONCLUSION. KINDLY SEE THE PAGE NO. 6 OF THE ENCLOS URE WHICH IS THE REPLY FROM THE MEHSANA URBAN CO-OP. BANK LTD . THE BANK HAS SUBMITTED AS FOLLOWS: 'YOU ARE REQUESTED TO NOTE THAT WE PRESENT ALL OUR BANK CLEARING IN COMPUTERISED FLOPPY AND MAINTAIN OUR AL L RECORDS IN COMPUTERS. YOU ARE REQUESTED TO NOTE THA T WE HAVE THE RECORD OF THE NAME OF THE BRANCH THROUGH W HICH THE INSTRUMENTS WERE PRESENTED BY OUR BANK. MOREOVER, A LL ORIGINAL INSTRUMENTS ARE PRESENTED TO THE CONCERNED BRANCH OF THE BANK. THEREFORE IT IS NOT POSSIBLE TO FURNIS H THE DATA AS PER YOUR REQUIREMENTS.' 2. PAGE NO. 40 TO 49 ALL THE DETAILS FURNISHED BY T HE MEHSANA URBAN CO-OP. BANK LTD. IN THE DETAILS FILED BY THE BANK, THE CHEQUE NUMBER AND NAME OF THE BANK MENTIONED. THEY HAVE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 99 NOT MENTIONED THE BRANCH OF THE BANK. KINDLY SEE TH E PAGE NO. 39 WHEREIN THE REPLY THE BANK HAS WRITTEN THAT WE DON'T HAVE RECORDS OF THE BANK BRANCH FROM WHICH THESE INSTRUMENTS WERE PRESENTED. KINDLY SEE THE PAGE NO. 1 IN WHICH CO-OPERATIVE BANK OF AHMEDABAD LTD. HAS STATE D THAT THE CHEQUE NO. 44156 AS MENTIONED IS NOT CLEAR FROM THIS BRANCH AND SO WE ARE UNABLE TO FURNISH FURTHER DETA ILS AS REQUIRED BY YOU. THE KALUPUR COMMERCIAL CO-OP. BANK LTD. HAS STATED AS APPEARED AT PAGE NO. 4 THAT FURNISH T HE NAME OF THE COMPANY UNDER N.K. GROUP AND THE DATE OF CLE ARANCE OF CHEQUE. ON PAGE NO. 50, THE SABARMATI CO-OP. BAN K LTD. HAS STATED DUE TO SHIFTING PROCESS OUR RECORDS RELA TED TO OUR BRANCH WE ARE UNABLE TO SUBMIT ALL SUCH DATA IN TIM E. 3. KINDLY SEE THE PAGE NO. 20 OF WHICH THE BANK HAS GIVEN A/C NO. 4002, THIS BANK A/C IS IN THE NAME OF SWAST IK OVERSEAS LTD. FROM THE BANK A/C OPENING FOUND WHICH IS ON PAGE NO. 37, IT IS SEEN THAT THIS A/C IS INTRODUCED BY N.K. INDUSTRIES LTD. KINDLY SEE PAGE NO. 34 WHICH IS THE ACCOUNT OPENING FORM OF ISSAN OVERSEAS LTD. THIS ACCOUNT IS ALSO INTRODUCED BY N.K. INDUSTRIES LTD. 4. KINDLY SEE THE PAGE NO. 38 IN WHICH THE MEHSANA URBAN CO-OP. BANK LTD. HAS STATED THAT AS PER STATEMENT O F A/C OF ADINATH CORPORATION A/C NO. 531 OF CREDIT ENTRIES B Y TRANSFER IN THE PERIOD FROM 17TH APRIL, 1998 TO 7TH JULY, 19 98 FROM N.K. PROTEINS LTD. AHMEDABAD.' 92. THE VARIOUS CORRESPONDENCE EXCHANGED BY THE AO WITH THE CONCERNED BANKS ARE ONLY UPTO MAY, 2001, THE LE ARNED SENIOR DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT I N VIEW OF THE DIFFICULTIES INDICATED IN THE AFORESAID LETT ERS, IT HAS NOT BEEN POSSIBLE TO CONDUCT FURTHER ENQUIRIES. IN REPL Y TO A SPECIFIC QUERY FROM THE BENCH, THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE CANDIDLY ADMITTED THAT NO FURTHER ENQUIRIES WERE MADE AFTER MAY, 2001. THE DEPARTMENT HAS ALSO NOT PRODUCED ANY EVIDENCE TO SH OW THAT THEY CONDUCTED ANY FURTHER INVESTIGATION TO FI ND OUT AS TO WHICH OTHER PARTIES HAVE GIVEN CHEQUES TO THESE BOGUS SUPPLIERS IN WHOSE BANK ACCOUNTS SUCH CHEQUES AGGRE GATING TO SEVERAL CRORES OF RUPEES HAVE BEEN DEPOSITED. OUR ATTENTION HAS BEEN INVITED TOWARDS BANK ACCOUNT OPENING FORM IN RESPECT OF ACCOUNT NO. 4002 IN THE NAME OF SWASTIK OVERSEAS LTD. PLACED AT P. 37 OF THE DOCUME NTS ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 100 SUBMITTED ALONG WITH THE LETTER DT. 18TH DEC., 2002 . THIS ACCOUNT WAS INTRODUCED BY N.K. INDUSTRIES. THE PERS ONS AUTHORISED TO OPERATE THE BANK ACCOUNT IN THE NAME OF SWASTIK OVERSEAS LTD. IS SHRI R.B. MEHTA AND ONE OT HER MEHTA. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATI VE WAS REQUESTED TO SHOW THE PHOTO COPY OF THE STATEME NT OF RAJESH MEHTA-BROKER WITH A VIEW TO FIND OUT WHETHER THE SIGNATURE ON THIS BANK ACCOUNT OPENING FORM TALLIES WITH THE SIGNATURE OF THE SAID BROKER. IT WAS FOUND THAT SIG NATURE ON THIS BANK ACCOUNT OPENING FORM APPEARS TO BE OF THE SAME PERSON VIZ. SHRI RAJESH MEHTA-BROKER. THE BENCH REQ UIRED THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE TO S TATE AS TO WHETHER SHRI RAJESH MEHTA-BROKER HAS BEEN INTERR OGATED IN RELATION TO TRANSACTIONS CARRIED OUT IN THE NAME OF SWASTIK OVERSEAS LTD. THE LEARNED SENIOR DEPARTMENT AL REPRESENTATIVE ADMITTED THAT NO SUCH INTERROGATION OF SHRI RAJESH MEHTA WAS MADE. THE EXTRACTS FROM THE STATEM ENT OF SHRI RAJESH MEHTA REPRODUCED ON P. 10 OF THE ASSESS MENT ORDER IN THE CASE OF NKPL SHOWS THAT NOT A SINGLE Q UESTION WAS PUT BY THE AO OR ADDL. DIT TO SHRI RAJESH MEHTA ABOUT SWASTIK OVERSEAS LTD. 93. LIKEWISE, THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE HAS ALSO DRAWN OUR ATTENTION TO THE BANK ACCOUNT OPENING FORM OF ISSAN OVERSEAS LTD. PLACED AT P. 34 OF THE SAID PAPER BOOK. ONE OF THE PERSONS AUTHORIS ED TO OPERATE THE BANK ACCOUNT ON BEHALF OF ISSAN OVERSEA S LTD. IS SHRI RAJESH MEHTA, THE SAME PERSON WHO CLAIMED TO H AVE ACTED AS BROKER ON BEHALF OF THE ASSESSEE. NOT A SI NGLE QUESTION WAS PUT TO SHRI RAJESH MEHTA-BROKER IN THE SAID STATEMENT REPRODUCED AT P. 10 OF THE ASSESSMENT ORD ER IN THE CASE OF NKPL AND AT P. 9 OF THE ASSESSMENT ORDER IN THE CASE OF NKIL. THERE IS NO DISCUSSION ABOUT ANY TRANSACTI ON CARRIED OUT BY THE ASSESSEE WITH SWASTIK OVERSEAS L TD. AND ISSAN OVERSEAS LTD. IN THE ASSESSMENT ORDER. COPY O F BANK ACCOUNT OF TIRUPATI CORPORATION SUBMITTED AT P. 20 OF THE SAID SUBMISSIONS BY THE DEPARTMENT SHOWS THAT THE C HEQUES GIVEN BY M/S SWASTIK OVERSEAS AND ISSAN OVERSEAS WE RE ALSO DEPOSITED IN THE BANK ACCOUNT OF TIRUPATI CORP ORATION. NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT SWASTIK OVERSEAS AND ISSAN OVERSEAS WERE BENAMIDARS OF THE ASSESSEE OR CHEQUES GIVEN BY SWASTIK/ISSAN OVER SEAS CAME OUT OF THE FUNDS BELONGING TO THE PERSONS OR C ONCERNS OF NK GROUP. THESE CHEQUES OF SWASTIK/ISSAN OVERSEA S ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 101 CONSTITUTE A SMALL FIGURE OF ABOUT RS. 10 LAKHS WHI CH IS A SMALL FRACTION OF THE TOTAL DEPOSITS AGGREGATING TO MORE THAN RS. 44 CRORES DEPOSITED IN THE BANK ACCOUNTS OF SUC H BOGUS SUPPLIERS/NAME LENDERS/BILLING AGENTS. THE DEPARTME NT HAS NOT EVEN EXAMINED THE PARTNERS/PROPRIETORS/DIRECTOR S OF SWASTIK OVERSEAS LTD. AND ISSAN OVERSEAS LTD. THE DEPARTMENT HAS NOT MADE ANY SERIOUS EFFORTS TO FIND OUT THE COMPLETE NAMES, ADDRESSES OF VARIOUS OTHER CONCERNS WHICH GAVE CHEQUES TO ALL THESE BOGUS SUPPLIERS, WHICH HA VE BEEN CREDITED IN THEIR RESPECTIVE BANK ACCOUNTS. THE CON CERNED IT AUTHORITIES HAVING VAST POWERS VESTED UPON THEM UND ER THE PROVISIONS OF THE ACT COULD VERY EASILY OBTAIN COMP LETE DETAILS OF ALL THE PERSONS WHO GAVE THESE CHEQUES T O THESE BOGUS SUPPLIERS. THEY COULD ALSO FIND OUT VARIOUS WITHDRAWALS MADE FROM THESE BANK ACCOUNTS OF VARIOU S BOGUS SUPPLIERS AND ASCERTAIN THE DESTINATION OF TH OSE AMOUNTS WITHDRAWN BY VARIOUS CHEQUES OTHER THAN SEL F CHEQUES DEBITED IN THOSE BANK ACCOUNTS. NO SERIOUS EFFORTS HAVE BEEN MADE FOR FINDING OUT THE COMPLETE PARTICU LARS OF VARIOUS DEBITS AND CREDITS IN THE BANK ACCOUNTS OF ALL SUCH BOGUS SUPPLIERS EXCEPT LOCATING DETAILS OF CHEQUES GIVEN BY NKPL AND NKIL AS PER BOOKS OF ACCOUNTS OF THESE TWO CONCERNS. THE LEARNED SENIOR DEPARTMENTAL REPRESENT ATIVE SIMPLY RELIED UPON THE REASONS MENTIONED IN THE ASS ESSMENT ORDERS TO SUPPORT SUCH A GROUND RAISED IN ALL THE A FORESAID THREE APPEALS BY THE REVENUE; ONE IN THE CASE OF NK PL; NKIL AND SHRI NILESHBHAI K. PATEL. THE LEARNED SENI OR DEPARTMENTAL REPRESENTATIVE ALSO DREW OUR ATTENTION TO LETTER DT. 23RD MAY, 2001 SENT BY MADHAVPURA MERCAN TILE CO-OP. BANK LTD. TO THE AO INFORMING THEM THAT CHEQ UE NO. 162824 AND 162854 WERE ISSUED BY M/S MADHUKANT AGROTECH (P) LTD. IN FAVOUR OF KARNAVATI INDUSTRIES . COPY OF CURRENT ACCOUNT CARD WAS ALSO ANNEXED WITH THIS LET TER WHICH SHOWS DETAILS OF A/C NO. 362 IN THE NAME OF M/S MAD HUKANT AGROTECH (P) LTD. THE ADDRESS OF M/S MADHUKANT AGRO TECH (P) LTD. AS GIVEN IN THE ACCOUNT OPENING FORM IS AS UNDER: MADHUKANT AGROTECH (P) LTD. AAROHI, NR VIJAY RESTAURANT, UNIVERSITY ROAD, NAVRANGPURA, AHMEDABAD. 94. THE PERSONS AUTHORISED TO OPERATE THE SAID BANK ACCOUNT ARE SHRI KIRITBHAI K. SHAH AND SHRI MAULIK K, SHAH. THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 102 ACCOUNT WAS INTRODUCED BY GIRIRAJ TRADING CO., GIRISHKUMAR K. SHAH-HUF. COPY OF RESOLUTION PASSED FOR OPENING OF THE SAID BANK ACCOUNT BY MADHUKANT AGROT ECH (P) LTD. WAS ALSO SUPPLIED BY THE SAID BANKERS TO T HE AO. THE BENCH REQUIRED THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE TO STATE AS TO WHETHER ANY FURTHER INVESTIGATION WAS MADE FROM M/S MADHUKANT AGROTECH (P) LTD. TO SHOW AS TO WHETHER THEY HAD ANY DIRECT OR I NDIRECT CONNECTION WITH ANY OF THE PERSONS OR CONCERNS OF N .K. GROUP. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATI VE ADMITTED THAT NO FURTHER ENQUIRIES WERE MADE FROM MADHUKANT AGROTECH (P) LTD. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE ALSO TRIED TO EXPLAIN T HAT THE BANKERS HAVE INDICATED THAT THEY DID NOT HAVE THE R ECORDS OF BANK BRANCHES FROM WHICH VARIOUS INSTRUMENTS RELATI NG TO SUCH BANK ACCOUNTS WERE PRESENTED. FOR EXAMPLE, ATT ENTION WAS INVITED TOWARDS LETTER DT. 20TH MARCH, 2001 OF MEHSANA URBAN CO-OP. BANK LTD. P. 39 OF THIS PAPER BOOK IN WHICH THEY HAVE INDICATED THAT THE AO SHOULD CONTACT SERV ICE BRANCH/HEAD OFFICE OF RESPECTIVE BANKS FOR THE REQU IRED DETAILS. HOWEVER ALL THESE INQUIRIES CONTINUED ONLY UPTO MAY, 2001. THE ASSESSMENT IN THE CASE OF NKPL AND N KIL WERE MADE ON 30TH APRIL, 2001. THE ASSESSMENT IN TH E CASE OF NILESHBHAI PATEL WAS COMPLETED ON 28TH FEB., 200 1. NO EFFECTIVE EFFORTS WERE MADE BY THE OFFICERS OF THE DEPARTMENT FOR FURTHER INVESTIGATION IN THIS REGARD. THE AO ON P. 35 IN THE CASE OF NKPL AND ON P. 39 OF THE ASSESSMENT ORD ER IN THE CASE OF NKIL HAS OBSERVED THAT THE INQUIRIES ARE BE ING CONDUCTED FROM THE BANKS TO FIND OUT THE NAMES AND PARTICULARS OF OTHER, CONCERNS WHICH MADE THESE PAY MENTS FOR PURCHASES AND OTHER EXPENSES. SUBSTANTIVE DISAL LOWANCES WILL BE MADE IN THE CASES OF THOSE CONCERNS AFTER C ONCLUSION OF ENQUIRIES. THE ADDITIONS WERE PROTECTIVELY MADE IN THE CASES OF NKIL AND NKPL SUBJECT TO FURTHER INVESTIGA TION SO THAT APPROPRIATE ADDITIONS CAN BE MADE IN THE HANDS OF THE CONCERNS WHO GAVE SUCH CHEQUES TO THESE BOGUS SUPPL IERS. HOWEVER, NO FURTHER INQUIRIES HAVE BEEN MADE AND NO ADDITIONS HAVE BEEN MADE IN THE CASES OF ANY SUCH O THER CONCERNS WHO REALLY GAVE CHEQUES TO THESE BOGUS SUP PLIERS. 95. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE RESULTS OF SEARCH CONDUCTED ON A LL THE PERSONS AND CONCERNS BELONGING TO THIS GROUP SHOW T HAT NO UNACCOUNTED MONEY, BULLION, JEWELLERY, STOCK OR ANY OTHER ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 103 VALUABLE ASSETS WERE FOUND FROM ANY OF THE PERSONS OR CONCERNS EXCEPT MEAGRE QUANTITY OF JEWELLERY AND CA SH ETC. THE UNEXPLAINED JEWELLERY WAS DISCLOSED BY THE ASSE SSEES OF THIS GROUP IN THE BLOCK RETURN WHICH HAVE BEEN ACCE PTED BY THE DEPARTMENT, THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED CASH IN THE HANDS OF DIFFERENT PERSONS OF THIS GROUP WAS MADE BY THE AO BUT SAME WAS DELETED BY TH E CIT(A) AND NO FURTHER APPEAL HAS BEEN PREFERRED BY THE REVENUE IN RELATION TO SUCH DELETION. THIS CLEARLY PROVES THAT THE ASSESSEE, DID NOT OWN ANY OTHER UNACCOUNTED ASS ETS OR DEPOSITS WHATSOEVER. THE LEARNED COUNSEL CONTENDED THAT NO ADDITION COULD BE VALIDLY MADE IN THE HANDS OF SHRI NILESH K. PATEL AS HE WAS NOT CARRYING ON ANY PERSONAL BUSINE SS. THE ENTIRE EVIDENCE WHICH CONTAINS REFERENCE OF HIS NAM E IS IN HIS CAPACITY AS MD/DIRECTOR IN NKPL AND NKIL. THERE IS NO MATERIAL OR EVIDENCE ON RECORD THAT ANY FUNDS WERE PROVIDED BY SHRI NILESHBHAI PATEL FOR DEPOSITS IN A LL OR ANY OF THESE BANK ACCOUNTS. SHRI NILESHBHAI PATEL HAD N O TRANSACTIONS WITH ANY OF THESE SUPPLIERS. MERE INTR ODUCTION OF SOME BANK ACCOUNTS CANNOT LEAD TO THE CONCLUSION THAT THE ASSESSEE WERE THE REAL OWNERS OF THE AMOUNTS CREDIT ED IN THE BANK ACCOUNTS OF SUCH SUPPLIERS PARTICULARLY WHEN A LL SUCH CREDITS IN THE BANK ACCOUNTS OF THOSE SUPPLIERS ARE BY WAY OF CHEQUES DEPOSITED IN THESE ACCOUNTS. SUCH CHEQUES O THER THAN CHEQUES GIVEN BY NKPL AND NKIL TOWARDS PURCHASE INVOICES WERE GIVEN BY OUTSIDE PARTIES/THIRD PARTIE S WITH WHOM NEITHER SHRI NILESHBHAI PATEL, NOR NKPL NOR NK IL HAD ANY CONNECTION WHATSOEVER. THE BURDEN SQUARELY LIES UPON THE REVENUE TO PROVE THAT SUCH CHEQUES WERE DE POSITED BY THESE ASSESSEES. THE LEARNED COUNSEL RELIED UPON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT V. DAULATRAM RAWATMAL (SUPRA); AND THE DECISION OF TRIBUNAL IN THE CASE OF PARAKH FOODS LTD. V. DY. CIT (SUPRA) AND VARIOUS OTHER DECISIONS REFERRED TO IN PARA 4.7 OF THE ORDER OF CIT(A) IN THE CASE OF SHRI NILESHBHAI PATEL. THE LE ARNED COUNSEL FURTHER POINTED OUT THAT NO NOTICE UNDER SECTION 158BD HAD BEEN ISSUED TO ANY OTHER CONCERNS WHO GAVE SUC H CHEQUES TO THESE SUPPLIERS. RELIANCE WAS ALSO PLACE D ON THE DECISION IN THE CASE REPORTED IN 68 ITD 273 (SIC). THE LEARNED COUNSEL CONTENDED THAT THE DOCUMENTS SUBMITTED ALON G WITH LETTER DT. 18TH DEC., 2002 BY THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE FURTHER SUPPORTS THE AS SESSEE'S CONTENTION. FOR EXAMPLE, CHEQUES OF MADHUKANT AGROT ECH (P) LTD. WERE CREDITED IN THE BANK ACCOUNT OF KARNA VATI ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 104 INDUSTRIES. M/S MADHUKANT AGROTECH HAVE NO CONNECTI ON WHATSOEVER WITH THE ASSESSEE. THIS STRONGLY SUPPORT S THE VIEW THAT KARNAVATI INDUSTRIES, IF THEY ARE TREATED AS BOGUS SUPPLIERS/BILLING AGENTS/NAME LENDERS, THEY ARE ACT ING AS SUCH ON BEHALF OF OTHER PARTIES. SIMILAR INFERENCE CAN BE DRAWN FROM THE BANK OPENING FORMS OF SWASTIK OVERSE AS LTD. AND ISSAN OVERSEAS LTD. THE DEPARTMENT OUGHT T O HAVE EXAMINED SHRI RAJESH B. MEHTA AND OTHER DIRECTORS/O WNERS OF THOSE CONCERNS TO FIND OUT AS TO WHO WERE REAL P ERSONS WHO GAVE SUCH CHEQUES TO THESE BOGUS SUPPLIERS. THE LEARNED COUNSEL DREW OUR ATTENTION TO THE COPIES OF BANK ST ATEMENTS SUBMITTED BY THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE ALONG WITH THE LETTER DT. 18TH DEC., 2002. IN THOSE BANK STATEMENTS THE BANKERS APPEAR TO HAVE GI VEN HAND-WRITTEN NARRATION SUCH AS KCC, PNB, MANEKCHOWK , AMCO ETC. THE ASSESSEE HAD NO BANK ACCOUNT WITH PNB , KCC OR ANY OF THESE PLACES WHICH ARE HAND WRITTEN AND W HICH HAVE BEEN HIGHLIGHTED IN THE COPIES OF THOSE BANK S TATEMENTS SUBMITTED BY THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE. THE DEPARTMENT HAS MISERABLY FAILED TO BRING ANY EVIDENCE ON RECORD TO SHOW THAT ANY OF TH E CHEQUES OF OUTSIDE PARTIES/THIRD PARTIES WERE IN AN Y WAY CONNECTED WITH ANY OF THE PERSONS OR CONCERNS OF N. K. GROUP. THE LEARNED COUNSEL STRONGLY SUPPORTED THE O RDERS OF THE CIT(A) IN ALL THESE THREE CASES IN RELATION TO THE AFORESAID COMMON GROUND. 96. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE LEARNED REPRESENTATIVES OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE LEARNED DEPARTMENTAL AUTH ORITIES AND ALL OTHER DOCUMENTS SUBMITTED IN THE COMPILATIO N TO WHICH OUR ATTENTION WAS DRAWN DURING THE HEARING. I T IS EVIDENT FROM THE FACTS DISCUSSED HEREINBEFORE THAT THE ADDITION IN RESPECT OF UNEXPLAINED DEPOSITS IN THE BANK ACCOUNTS OF VARIOUS SUPPLIERS WERE MADE IN THE CASE S OF NKPL AND NKIL ON PROTECTIVE BASIS WITH THE OBSERVAT ION THAT FURTHER INQUIRIES WILL BE MADE FROM VARIOUS BR ANCHES OF BANKS TO ASCERTAIN THAT WHICH OTHER CONCERNS HAVE G IVEN SUCH CHEQUES WHICH HAVE BEEN DEPOSITED IN THE BANK ACCOUNTS OF THESE BOGUS SUPPLIERS. IT IS ALSO CLEAR FROM THE FACTS DISCUSSED ABOVE THAT THE DEPARTMENT DID NOT M AKE ANY SERIOUS EFFORTS TO MAKE EFFECTIVE INVESTIGATION OR DEEP FURTHER PROBE IN THIS REGARD AFTER COMPLETION OF THE ASSESS MENTS ON 30TH APRIL, 2001. SOME LETTERS WERE SENT TO THE BAN KERS IN THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 105 MONTH OF MARCH TO MAY, 2001 AND THEREAFTER THE MATT ER WAS NOT PURSUED. 97. THE DEPOSITS IN THE BANK ACCOUNTS OF THESE BOGU S SUPPLIERS CAN BE VALIDLY ADDED IN THE HANDS OF ANY OF THESE ASSESSEES ONLY IF THE DEPARTMENT DISCHARGES THE BUR DEN OF PROVING THAT THESE SUPPLIERS WERE BENAMIDARS OF ANY ONE OF THESE THREE ASSESSEES OF N.K. GROUP AND THE DEPARTM ENT HAS TO FURTHER DISCHARGE THE BURDEN OF PROOF THAT THE D EPOSITS IN THESE BANK ACCOUNTS BY WAY OF CHEQUES WERE MADE OUT OF FUNDS PROVIDED BY THESE PERSONS OR CONCERNS OF N.K. GROUP. SUCH A BURDEN HAS TO BE DISCHARGED BY THE REVENUE B Y BRINGING POSITIVE AND CLINCHING EVIDENCE ON RECORD. NO SUCH EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE DEPARTME NT TO PROVE THAT THE CHEQUES OF THIRD PARTIES DEPOSITED I N THE BANK ACCOUNTS OF THESE SUPPLIERS WERE OUT OF FUNDS PROVI DED BY ANY OF THESE THREE ASSESSEES. IN ORDER TO PROVE THA T THE BANK ACCOUNTS IN THE NAMES OF THESE SUPPLIERS ARE BENAMI ACCOUNTS OR THAT THE SUPPLIERS ARE BENAMIDAR PERSONS/CONCERNS, THE FOLLOWING TESTS ARE VERY VITA L AND SIGNIFICANT: (I) WHO PROVIDED THE FUNDS FOR DEPOSIT (II) WHO ENJOYED THESE FUNDS (III) WHAT IS ULTIMATE DESTINATION OF THESE FUNDS. 98. THE DEPARTMENT HAS TO PROVE BY BRINGING ON RECO RD DEFINITE, POSITIVE AND CLINCHING EVIDENCE ON ALL TH ESE THREE ASPECTS TO SUPPORT THEIR CONCLUSION THAT THESE BANK ACCOUNTS ARE BENAMI ACCOUNTS AND DEPOSITS IN THESE BANK ACCO UNTS IN THE NAMES OF SUPPLIERS REALLY BELONG TO NKPL OR NKI L OR SHRI NILESHBHAI PATEL AND THEY WERE THE PERSONS WHO ENJOYED THESE FUNDS AND THE ENTIRE FUNDS HAVE DIREC TLY OR INDIRECTLY FLOWN BACK IN THEIR FAVOUR. THE DEGREE O F PROOF FOR PROVING THE CONCEPT OF BENAMI BANK ACCOUNTS/BENAMI PERSONS IS VERY STRONGER AND THAT HAS TO BE DISCHAR GED BY BRINGING POSITIVE MATERIAL ON RECORD. SUCH CONCLUSI ON CANNOT BE DERIVED ON THE BASIS OF MERE SUSPICION AN D SURMISES. IT MAY BE RELEVANT HERE TO REPEAT ONCE AG AIN THAT SO FAR AS PURCHASES CLAIMED TO HAVE BEEN MADE BY NK PL AND NKIL FROM THESE CONCERNS ARE CONCERNED, THE BURDEN WAS ON THE ASSESSEES TO PROVE GENUINENESS OF PURCHASES BUT THE SAME PRINCIPLE WOULD NOT APPLY WHEN THE DEPARTMENT WANTS TO ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 106 TREAT THE ENTIRE DEPOSITS IN THESE BANK ACCOUNTS IN THE NAMES OF VARIOUS SUPPLIERS AS BENAMI DEPOSITS/BENAMI ACCO UNTS OF THESE ASSESSEES. THE HON'BLE SUPREME COURT IN THE C ASE OF DAULATRAM RAWATMAL (SUPRA) HAS OBSERVED AT P. 360 A S UNDER: 'THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REA L IS ON THE PARTY WHO CLAIMS IT TO BE SO. AS IT WAS THE DEPARTM ENT WHICH CLAIMED THAT THE AMOUNT OF FIXED DEPOSIT RECEIPT BE LONGED TO THE RESPONDENT-FIRM EVEN THOUGH THE RECEIPT HAD BEE N ISSUED IN THE NAME OF BISWANATH, THE BURDEN LAY ON THE DEP ARTMENT TO PROVE THAT THE RESPONDENT WAS THE OWNER OF THE A MOUNT DESPITE THE FACT THAT THE RECEIPT WAS IN THE NAME O F BISWANATH. A SIMPLE WAY OF DISCHARGING THE ONUS AND RESOLVING THE CONTROVERSY WAS TO TRACE THE SOURCE A ND ORIGIN OF THE AMOUNT AND FIND OUT ITS ULTIMATE DESTINATION . SO FAR AS THE SOURCE IS CONCERNED, THERE IS NO MATERIAL ON TH E RECORD TO SHOW THAT THE AMOUNT CAME FROM THE COFFERS OF THE RESPONDENT-FIRM OR THAT IT WAS TENDERED IN BURRABAZ AR CALCUTTA BRANCH OF THE CENTRAL BANK, ON 15TH NOV., 1944, ON BEHALF OF THE RESPONDENT. AS REGARDS THE DESTINATIO N OF THE AMOUNT, IT HAS ALREADY BEEN MENTIONED THAT THERE IS NOTHING TO SHOW THAT IT WENT TO THE COFFERS OF THE RESPONDE NT. ON THE CONTRARY, THERE IS POSITIVE EVIDENCE THAT THE AMOUN T WAS RECEIVED BY BISWANATH ON 22ND JAN., 1946. IT WOULD THUS FOLLOW THAT BOTH AS REGARDS THE SOURCE AS WELL AS T HE DESTINATION OF THE AMOUNT, THE MATERIAL ON THE RECO RD GIVES NO SUPPORT TO THE CLAIM OF THE DEPARTMENT.' 99. IN THE PRESENT CASE THE DEPARTMENT HAS NOT EVEN FOUND OUT THE NAMES OF THE CONCERNS/PARTIES WHO GAVE CHEQ UES TO THESE BOGUS SUPPLIERS AGGREGATING TO RS. 21,89,82,0 84 UPTO THE DATE OF SEARCH AND FURTHER AMOUNT DEPOSITED IN THEIR BANK ACCOUNT EVEN AFTER THE DATE OF SEARCH UPTO THE TIME WHEN DY. DIT/ADDL. DIT HAD OBTAINED COPIES OF BANK ACCOUNTS OF THESE SUPPLIERS FROM RESPECTIVE BANKS. IT WILL BE WORTHWHILE TO REPEAT THAT AS PER CHART GIVEN IN PAR A 86 TOTAL DEPOSITS IN THE BANK ACCOUNTS OF THOSE BOGUS SUPPLI ERS AS PER SHOW-CAUSE NOTICE DT. 18TH JAN., 2001 ISSUED BY THE AO TO SHRI NILESHBHAI PATEL, WAS RS. 44,43,05,403 OUT OF WHICH THE TOTAL DEPOSITS IN THEIR BANK ACCOUNTS UPTO THE DATE OF SEARCH WAS ONLY RS. 37,19,85,062. OUT OF THIS, THE PAYMENT MADE BY NKIL AND NKPL TOWARDS PURCHASE INVOICES SUPPLIED BY THESE BOGUS SUPPLIERS WERE TO THE TUNE OF RS: 14,82 ,49,194. IN ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 107 ADDITION TO THIS, A CHEQUE OF RS. 3,64,01,316 WAS G IVEN BY TRIVENI TOWARDS GOODS SOLD BY NKPL. THIS LEFT THE B ALANCE DEPOSIT AGGREGATING TO RS. 21,89,82,084 RECEIVED BY BOGUS SUPPLIERS/BILLING AGENTS FROM OTHER PARTIES/THIRD P ARTIES WITH WHICH IT IS CONTENDED THAT THE PERSONS OR CONC ERNS OF NX GROUP HAD NO CONNECTION WHATSOEVER. THE NAMES AN D PARTICULARS OF PARTIES WHO DEPOSITED THE CHEQUES IN THE BANK ACCOUNTS OF THESE SUPPLIERS AFTER THE SEARCH HAVE A LSO NOT BEEN BROUGHT ON RECORD, IT WAS PRIMARY DUTY OF THE DEPARTMENT TO FIND OUT AS TO WHICH OTHER PARTIES/CO NCERNS HAVE GIVEN THESE CHEQUES WHICH HAVE BEEN DEPOSITED IN THE BANK ACCOUNTS OF THESE BOGUS PARTIES. THE DEPARTMEN T HAS COMPLETELY FAILED TO DISCHARGE SUCH BURDEN, WHICH H EAVILY LIES ON THEM TO SUPPORT THEIR CONCLUSION THAT ANY O F THESE THREE ASSESSEES WERE REAL OWNERS OF CHEQUES OF ALL SUCH OTHER CONCERNS/THIRD PARTIES DEPOSITED IN THE BANK ACCOUN TS OF THESE BOGUS SUPPLIERS. THE DEPARTMENT HAS ALSO NOT MADE ANY INVESTIGATION TO PROVE DESTINATION OF THE FUNDS WITHDRAWN BY SELF CHEQUES AND BY OTHER CHEQUES GIVE N TO OTHER PARTIES. THE DEPARTMENT HAS THUS FAILED TO DI SCHARGE THE BURDEN OF PROVING THAT THE ORIGIN AND DESTINATI ON OF THESE FUNDS WERE THESE ASSESSEES AND NONE ELSE. THE CIT(A), IN OUR VIEW, HAS RIGHTLY DELETED THE ADDITIONS SO M ADE BY THE AO IN ALL THESE THREE CASES UNDER CONSIDERATION. 100. WE WILL, HOWEVER, LIKE TO OBSERVE THAT THE OFF ICERS OF THE DEPARTMENT CANNOT LEAVE THE INVESTIGATION OF SUCH A N IMPORTANT MATTER IN A LAMENTABLE AND INCOMPLETE POS ITION LIKE THIS. THE DEPARTMENT HAS VAST POWERS UNDER SECTION 131(1A) OR SECTION 133 AND OTHER RELEVANT PROVISIONS BY WHICH THEY CAN COMPELL THE CONCERNED BANKS TO GIVE THEM COMPLETE DETAILS OF THE CONCERNS/PERSONS WHOSE CHEQ UES HAVE BEEN DEPOSITED IN THE BANK ACCOUNTS OF ALL THE SE BOGUS SUPPLIERS/BILLING AGENTS/NAME LENDERS. THE DEPARTME NT CAN ALSO FIND OUT THE DETAILS OF AMOUNTS WITHDRAWN FROM THESE BANK ACCOUNTS OF BOGUS SUPPLIERS OTHERWISE THAN BY WAY OF SELF CHEQUES. THE NAMES AND ADDRESSES OF THE PARTIE S TO WHOM SUCH CHEQUES/DEMAND DRAFTS HAVE BEEN GIVEN CAN BE OBTAINED FROM THE RESPECTIVE BRANCH OF THE CONCERNE D BANKS. THE DEPARTMENT CAN ALSO OBTAIN PHOTO COPIES OF SELF CHEQUES BY WHICH THE NAMES OF THE PERSONS WHO HAVE WITHDRAW N SUCH CASH CAN BE FOUND OUT BY INTERROGATION OF CONC ERNED PERSONS INCLUDING BOGUS SUPPLIERS/CONCERNED EMPLOYE ES OF THE BANKS AND CONCERNED EMPLOYEES OF THE CONCERNS O F ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 108 ASSESSEE GROUP AND OTHER CONCERNS WHO GAVE SUCH CHE QUES. THE TOTAL DEPOSITS IN THE BANK ACCOUNT OF THESE BOG US SUPPLIERS/BILLING AGENTS/NAME LENDERS IS MORE THAN RS. 44 CRORES. THE DEPARTMENT HAS ONLY FOUND OUT THE DETAI LS OF CHEQUES GIVEN BY NKIL AND NKPL WHICH IS ONLY A SMAL L PORTION THEREOF. THE DETAILS OF MAJOR CREDITS IN AL L THESE ACCOUNTS HAVE NOT YET BEEN FOUND OUT BY THE DEPARTM ENT. IT IS INCUMBENT ON THE PART OF THE DEPARTMENT TO FIND OUT COMPLETE DETAILS OF ALL OTHER CONCERNS WHO GAVE SUC H CHEQUES TO THESE BOGUS SUPPLIERS. THOSE OTHER CONCERNS MIGH T ALSO HAVE TAKEN FICTITIOUS PURCHASE INVOICES FROM THESE BOGUS SUPPLIERS. THEY MAY NOT HAVE EVEN RECEIVED THE MATE RIAL SOUGHT TO HAVE BEEN SUPPLIED TO THOSE OTHER CONCERN S THROUGH SUCH FICTITIOUS INVOICES ISSUED BY SUCH BIL LING AGENTS. AFTER CARRYING OUT NECESSARY INVESTIGATION AND FIND ING OUT THE NAMES AND ADDRESSES OF OTHER PERSONS AND CONCER NS, WHOSE CHEQUES HAVE BEEN CREDITED IN THE BANK ACCOUN TS OF THESE BOGUS SUPPLIERS, NECESSARY ACTION AGAINST THO SE CONCERNS/PERSONS SHOULD BE INITIATED UNDER SECTION 158BD OR UNDER SECTION 147 OR ANY OTHER RELEVANT PROVISIONS OF THE IT ACT . THE DEPARTMENT CANNOT EXONERATE SUCH 'OTHER CONCERNS' BY LEAVING INVESTIGATION AT INCOMPLETE ST AGE LIKE THIS. IT WOULD BE IMPERATIVE TO MENTION THAT THE TI ME LIMIT FOR INITIATING ACTION UNDER SECTION 147 HAS BEEN REDUCED TO ONLY SIX YEARS IN SECTION 149 . THE TIME LEFT WITH THE OFFICERS OF THE DEPARTMENT NOW IS VERY SHORT. IT IS, THEREFORE, NEC ESSARY TO STRIVE THE BEST POSSIBLE TIME-BOUND PROGRAMME FOR ASCERTAINING THE FULL PARTICULARS VIZ. NAMES AND AD DRESSES OF ALL OTHER CONCERNS/PARTIES/PERSONS WHOSE CHEQUES HA VE BEEN DEPOSITED IN THE BANK ACCOUNTS OF THESE BOGUS SUPPL IERS, SO THAT TIMELY ACTION CAN BE INITIATED AGAINST ALL SUC H OTHER PERSONS/CONCERNS/PARTIES. IF, AS A RESULT OF FURTHE R INVESTIGATION, IT COMES TO THE NOTICE OF THE DEPART MENT THAT THOSE OTHER CONCERNS/THIRD PARTIES ARE BENAMIS OF T HE PERSONS AND CONCERNS OF ASSESSEE'S GROUP, THE DEPAR TMENT WILL BE ENTITLED TO TAKE NECESSARY ACTION UNDER SECTION 147 , IF THEY HAVE IN THEIR POSSESSION ADEQUATE MATERIAL TO JUSTIFY FORMATION OF REASONABLE BELIEF WHICH SHOULD BE MUCH MORE STRONGER THAN THE REASONS TO SUSPECT, IF THE AO COM ES ACROSS EVIDENCE AND MATERIAL WHICH WERE NOT FOUND OR MADE AVAILABLE IN THE PROCESS OF BLOCK ASSESSMENT BUT AR E DISCOVERED AS A RESULT OF POST-SEARCH INVESTIGATION , HE CAN CERTAINLY USE SUCH INFORMATION FOR MAKING REGULAR ASSESSMENT UNDER SECTION 143(3) WHICH ALSO INCLUDES ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 109 REASSESSMENT UNDER SECTION 147 SUBJECT TO FULFILMENT OF CONDITIONS PRECEDENT MENTIONED IN THE OTHER PROVISI ONS OF THE ACT. IT WILL BE THE DUTY OF THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE WHO REPRESENTED THIS CA SE BEFORE US TO BRING THIS FACT TO THE NOTICE OF THE L EARNED CHIEF CIT, LEARNED CIT, AND LEARNED DG (INVESTIGATION) SO THAT FURTHER INVESTIGATION IN THIS REGARD MAY RECEIVE SE RIOUS ATTENTION, WHICH IT DESERVES, AND TIMELY ACTION CAN BE INITIATED AGAINST SUCH OTHER CONCERNS/PERSONS UNDER SECTIONS 147 , 158BD OR OTHER RELEVANT PROVISIONS. 101. NOW WE WILL DEAL WITH GROUND NO. (2) IN REVENU E'S APPEAL IN THE CASE OF NKPL [IT (SS) A NO. 41/A/2002 ]. THIS GROUND RELATES TO DELETION OF ADDITION OF RS. 2,01, 99,792 MADE ON ACCOUNT OF UNACCOUNTED PURCHASE. AS ALREADY STATED HEREINBEFORE, THIS ADDITION WAS MADE ON THE BASIS OF INVOICES FOUND IN ANNEX. A-6 DURING THE SEARCH. CER TAIN SALE BILLS ISSUED BY NKIL IN RESPECT OF SALES MADE TO NK PL WERE FOUND AND SEIZED DURING THE SEARCH. THESE INVOICES WERE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE ASSES SEE AS WELL IN THE BOOKS OF NKIL. WE HAVE ALREADY DEALT WITH TH IS ISSUE WHILE DEALING WITH THE CONNECTED GROUND RAISED IN T HIS REGARD IN ASSESSEE'S APPEAL. AFTER CONSIDERATION OF THE ENTIRE RELEVANT FACTS, WE CONSIDER IT JUST AND PROPER TO S ET ASIDE THE ORDERS OF THE CIT(A) AND THE AO IN RELATION TO THIS GROUND AND RESTORE THE MATTER BACK TO THE AO FOR CONDUCTIN G FURTHER PROBE AND DECIDE THIS ISSUE IN ACCORDANCE WITH THE PROVISIONS OF LAW AND AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. IT (SS) A NO. 16/AHD/2002 FILED BY ASSESSEE IN THE CASE OF NKIL: 102. NOW WE WILL DEAL WITH ASSESSEE'S APPEAL IN THE CASE OF NKIL IN IT (SS) A NO. 16/AHD/2002. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. THE LEARNED CIT(A) HAS ERRED IN REJECTING THE CO NTENTION THAT BLOCK ASSESSMENT IS VOID AB INITIO SINCE THE N OTICE ISSUED UNDER SECTION 158BC DOES NOT MENTION THE STATUS OF THE ASSESSEE AND DOES NOT MENTION CORRECT BLOCK PERIOD AND THEREFORE THE NOTICE ISSUED IS INVALID. 2.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT TH E PURCHASES MADE FROM SEJAL ENTERPRISES AMOUNTING TO RS. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 110 2,50,427 FOR ASST. YR. 1995-96, RS. 62,75,837 FOR A SST. YR. 1998-99 AND RS. 61,21,796 FOR ASST. YR. 1999-2000 AMOUNTING IN ALL TO RS. 1,26,48,060 ARE BOGUS AND T HEREBY HAS ERRED IN CONFIRMING ADDITION OF RS. 1,26,48,060 AS UNDISCLOSED INCOME. 2.2 THE APPELLANT SAYS AND SUBMITS THAT THE PURCHAS ES OF RS. 2,50,427 FOR ASST. YR. 1995-96 AND RS. 62,75,835 FO R ASST. YR. 1998-99 IS RECORDED IN THE BOOKS OF ACCOUNTS AND TH AT THE INCOME-TAX RETURN FOR ASST. YR. 1995-96 AND ASST. Y R. 1998-99 WERE SUBMITTED PRIOR TO THE DATE OF SEARCH AND PURC HASES OF RS. 61,21,796 FOR ASST. YR. 1999-2000 HAVE BEEN REC ORDED IN THE NORMAL MANNER IN BOOKS OF ACCOUNTS PRIOR TO THE DATE OF SEARCH I.E. 24TH FEB., 1999 AND, THEREFORE, SUCH TR ANSACTIONS ARE NOT CONSIDERED AS UNDISCLOSED INCOME AS PROVIDE D IN SECTION 158BA(3) . 2.3 THE APPELLANT FURTHER SAYS AND SUBMITS THAT THE LEARNED CIT(A) HAS ERRED IN PLACING RELIANCE ON FINDING BAS ED ON INQUIRY MADE BY ADDL. DPT UNDER SECTION 131(1A) AND THAT THE LEARNED DY. CIT HAS NOT MADE ANY INDEPENDENT IN QUIRY AND THEREFORE, THE ADDITION MADE ON THE BASIS OF IN QUIRY MADE BY LEARNED ADDL. DIT UNDER SECTION 131(1A) IS ILLEGAL AND NOT WARRANTED SINCE THE LEARNED ADDL. DIT ALSO CANNOT MAKE INQUIRY UNDER SECTION 131(1A) AFTER THE CONCLUSION OF SEARCH. 2.4 THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE FINDING OF THE DY. CIT AS STATED ON FROM PAGE NO. 6 TO 16 O F THE ASSESSMENT ORDER WHICH IS NOTHING BUT REPRODUCTION OF APPRAISAL REPORT AND THAT THE AO HAS NOT MADE ANY INDEPENDENT INQUIRY WHATSOEVER. THE AO HAS RELIED O NLY ON THE FINDING GIVEN BY THE ADDL. DIT AND THAT THE AO HAS ALSO NOT EXAMINED THE SUPPLIER. 2.5 THE APPELLANT FURTHER SAYS AND SUBMITS THAT THE LEARNED ADDL. DIT HAS OBTAINED AFFIDAVIT FROM THE PROPRIETO R OF SEJAL ENTERPRISES BEHIND THE BACK OF THE ASSESSEE AND THA T THE LEARNED DY. CIT HAS PLACED THE RELIANCE ON SUCH AFF IDAVIT. 2.6 THE APPELLANT FURTHER SAYS AND SUBMITS THAT THE AFFIDAVIT OBTAINED BY THE LEARNED ADDL. DIT IS SIMILAR IN CON TENTS WITH THE AFFIDAVITS AND STATEMENTS OBTAINED IN THE CASE OF N.K. PROTEINS LTD. AND THEREFORE, IT APPEARS THAT SUCH A FFIDAVIT IS ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 111 OBTAINED UNDER UNDUE INFLUENCE, THEREFORE, ANY FIND ING BASED ON SUCH AFFIDAVIT CANNOT BE RELIED UPON. 2.7 THE APPELLANT FURTHER SAYS AND SUBMITS THAT THE LEARNED DY. CIT OUGHT TO HAVE SUMMONED THE SAID PERSONS AND SHOULD HAVE FOUND OUT THE TRUTH AND THAT THE OPPORT UNITY TO CROSS-EXAMINE THE SAID PERSONS SHOULD HAVE BEEN GIV EN. 2.8 THE APPELLANT FURTHER SAYS AND SUBMITS THAT THE ASSESSEE- COMPANY HAS IN FACT, MADE PURCHASES AND HAS FURNISH ED THE EVIDENCES AT THE TIME OF ASSESSMENT BY GIVING THE D ETAILS SUCH AS DATE OF INWARD, QUANTITY RECEIVED, MRS NO., REPO RT NO. ALONG WITH THE XEROX COPY OF PURCHASE BILL, WEIGHME NT SLIP, MATERIAL INWARD RECEIPT, TRANSPORTER'S LR, ANALYSIS REPORT WITH REFERENCE TO INWARD AND STOCK REGISTER AND THA T THE ASSESSEE HAS ALSO STATED THAT IF THE PURCHASES ARE IGNORED THE PRODUCTION IS MORE THAN THE CONSUMPTION OF RAW MATE RIAL. THE APPELLANT SUBMITS THAT THE CIT(A) CALLED FOR TH E REMAND REPORT AND THE AO SUBMITTED REMAND REPORT DT. 26TH DEC., 2001 CONFIRMING THE RECEIPT OF MATERIAL AND THE CONSUMPTION THEREOF AND ABOUT THE YIELD. HOWEVER, T HE LEARNED CIT(A) HAS IGNORED THE FACTS OF THE MATERIA L RECEIVED AND IGNORED THE REMAND REPORT AND SUBMISSIONS OF TH E ASSESSEE. 2.9 THE APPELLANT FURTHER SAYS AND SUBMITS THAT THE PURCHASES WERE AT THE MARKET RATE WHICH IS CONFIRME D BY THE LEARNED DY. CIT IN THE REMAND REPORT DT. 26TH DEC., 2001 AND THEREFORE, IT IS CLEAR THAT THE PURCHASES WERE NOT MADE TO DEFLATE THE PROFIT. 2.10 THE APPELLANT FURTHER SAYS AND SUBMITS THAT TH E ASSESSEE-COMPANY HAS MADE THE PAYMENT OF THE ENTIRE PURCHASES BY CHEQUES TO THE SUPPLIERS WHICH IS NOT DISPUTED. 3. THE LEARNED CIT(A) HAS ERRED IN PLACING RELIANCE ON FINDING GIVEN BY ADDL. DIT IN HIS APPRAISAL REPORT AND HAS ERRED IN IGNORING THE OTHER SUBMISSIONS REGARDING F ACTUM OF PURCHASES AND REGARDING THE RECORDING OF PURCHASES IN THE BOOKS OF ACCOUNTS IN THE NORMAL MANNER. 4.1 THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 2,01,99,793 BEING ALLEGED SALES MADE BY THE COMPANY INASMUCH AS THE TRANSACTION HAVE NEVER TAKEN PLACE. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 112 4.2 THE APPELLANT FURTHER SAYS AND SUBMITS THAT, ALTERNATIVELY, ONLY PROFIT OF THE SALES AMOUNT CAN BE TAXED AND NOT THE ENTIRE GROSS AMOUNT. 5.1 THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF RS. 19 LAKHS AS UNACCOUNTED DEPOSI T WITH PARI L T SHROFF INASMUCH AS NO EVIDENCES WERE ADDUCED BY THE LEARNED DY. CIT AS UNDISCLOSED INCOME OF THE APPELL ANT. 5.2 THE APPELLANT FURTHER SAYS AND SUBMITS THAT THE DISCLOSURE UNDER VDIS SCHEME WAS MADE BY THE APPELL ANT ON THE BASIS OF THE NOTICE ISSUED BY THE DEPARTMENT . NOW, DEPARTMENT CANNOT CHANGE THE STAND AND IS PERMITTED TO STATE THAT THE AMOUNT WAS MORE THAN DISCLOSED UNDER VDIS SCHEME. 6.1 THE ORDER OF BLOCK ASSESSMENT IS BAD IN LAW AND ILLEGAL INASMUCH AS THE APPROVAL OF JT, CIT IS GRANTED UNDE R SECTION 158BG WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. THE POWER TO GRANT APPROVAL IS QUASI-J UDICIAL AND NOT ADMINISTRATIVE AND THEREFORE, THERE HAS TO BE A JUDICIAL APPROACH ON ENTIRE FACTS, MATERIAL AND EVI DENCE (KIRTILAL KALIDAS & CO. (1999) 64 TTJ (MAD) 77 : (1 998) 67 ITD 573 (MAD). THE JT. CIT HAS A SUPERVISORY ROLE A ND THEREFORE, APPROVAL GRANTED IS ADMINISTRATIVE IN NA TURE IN THE NORMAL COURSE BUT IN BLOCK ASSESSMENT IN CHAPTE R XIV-B A SPECIFIC PROVISION IS MADE UNDER SECTION 158BG FOR GRANTING APPROVAL. IT MEANS THAT THE POWER IS QUASI -JUDICIAL AND NOT OF ADMINISTRATIVE NATURE. 6.2 THE APPELLANT SAYS AND SUBMITS THAT THE APPROVA L GRANTED BY THE JT. CIT APPEARS TO BE MECHANICAL WIT HOUT APPLICATION OF MIND INASMUCH AS THE APPROVAL IS GRA NTED ON 30TH APRIL, 2001, I.E., DATE OF PASSING OF THE ORDE R AND THE DATE OF SERVICE OF THE ORDER. 7. THE INTEREST UNDER SECTION 158BFA(1) IS WRONGLY CHARGED. 8. THE PROCEEDINGS UNDER SECTION 271(1)(C) R/W SECTION 158BFA(2) IS WRONGLY INITIATED. 103. GROUND NO. 1 RAISED IN THIS APPEAL IS SIMILAR TO GROUND NO. 1 RAISED IN THE APPEAL OF NKPL. THE FACTS ARE S IMILAR. IN VIEW OF THE REASONS GIVEN IN OUR ORDER IN THE CASE OF NKPL IN ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 113 RELATION TO THIS GROUND, WE HOLD THAT THIS GROUND I S DEVOID OF ANY MERIT AND IS ACCORDINGLY REJECTED. 104. GROUND NO. 2 RELATES TO CONFIRMATION OF ADDITI ON OF BOGUS PURCHASES MADE FROM SEJAL ENTERPRISES AMOUNTI NG TO RS. 2,50,427 FOR ASST. YR. 1995-96, RS. 62,75,837 F OR ASST. YR. 1998-99 AND RS. 61,21,796 FOR ASST, YR. 1999-2000 AMOUNTING IN ALL TO RS. 1,26,48,060. GROUND NOS. 2. 1 TO 2.10 AND GROUND NO. 3 RELATING TO THE AFORESAID ADDITION S OF RS. 1,26,48,060 MADE IN RESPECT OF BOGUS PURCHASES ARE ALMOST SIMILAR AS RAISED IN GROUND NOS. 2.1 TO 2.10 AND GR OUND NO. 3, IN THE CASE OF NKPL RELATING TO ADDITION OF RS. 11.99 CRORES MADE IN RESPECT OF BOGUS PURCHASES IN THAT CASE. 105. THE REVENUE HAS RAISED THE GROUND RELATING TO DELETION OF THE DISALLOWANCE OF RS. 1,66,45,228 MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES. IT WILL BE APPROPRIATE TO DEAL WITH GROUND NOS. 2 AND 3 OF ASSESSEE'S APPEAL ALONG WITH GROUND NO. 1 OF APPEAL FILED BY THE REVENUE IN THE CASE OF NKIL (IT (SS) A NO. 38/AHD/2002), ALL OF WHICH DEAL WITH THE ISSUE RELATING TO BOGUS PURCHASES MADE FROM BOG US SUPPLIERS. THE AO MADE AN ADDITION OF RS. 2,92,93,2 88 IN RESPECT OF PURCHASES MADE FROM THE FOLLOWING THREE ALLEGED BOGUS SUPPLIERS : -------------- 106. THE AO HAS DISCUSSED THE FACTS RELATING TO THE SE BOGUS CONCERNS IN PARA 6 ON PP. 6 TO 16 OF THE ASSESSMENT ORDER. THE FACTS PERTAINING TO PURCHASES MADE FROM SOMNATH INDUSTRIES HAVE BEEN DISCUSSED ON PP. 7 TO 9 OF THE ASSESSMENT ORDER. THE AO HAS OBSERVED THAT DURING T HE INVESTIGATION, IT WAS FOUND THAT NKIL HAS SHOWN PUR CHASES, INTER ALIA, FROM SOMNATH INDUSTRIES. THE RESULTS OF INVESTIGATION REVEALED THAT THIS CONCERN WAS OWNED BY ONE SHRI K.R. SONI. HE WAS SUMMONED UNDER SECTION 131(1A) AND HIS STATEMENT WAS RECORDED ON 7TH JUNE, 1999. THE R ELEVANT PORTION OF HIS STATEMENT HAS BEEN EXTRACTED ON PP. 7 AND 8 OF THE ASSESSMENT ORDER. SHRI K.R. SONI HAS CATEGORICA LLY DENIED HAVING SUPPLIED ANY SUCH MATERIAL. HE ADMITT ED THAT HE WAS SIGNING BILL BOOKS, BLANK CHEQUE BOOKS, APPL ICATION FOR REGISTRATION OF SALES-TAX IN THE NAME OF SOMNAT H ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 114 INDUSTRIES AT THE INSTANCE OF SHRI NILESHBHAI PATEL WHO USED TO GIVE HIM RS. 2000 P.M. FOR ALL THIS WORK. THE BA NK ACCOUNT OF SOMNATH INDUSTRIES WAS OPENED ON 24TH AU G., 1998 WITH INITIAL DEPOSIT OF RS. 1,000 IN CASH. IT HAS BEEN CLOSED ON 12TH MAY, 1999. ONE MORE BANK ACCOUNT OF SOMNATH INDUSTRIES WAS ALSO OPENED. THE TOTAL AMOUN T OF DEPOSIT IN THESE TWO BANK ACCOUNTS UPTO THE DATE OF SEARCH WAS RS. 2,24,57,568 AS MENTIONED ON P. 9 OF THE ASS ESSMENT ORDER. THE AO HAS ALSO OBSERVED THAT IN ALMOST ALL CASES, THE DEPOSITS AND WITHDRAWALS ARE ON THE SAME DAY. THE A O ON THE BASIS OF AFORESAID EVIDENCE GAVE SIMILAR FINDIN GS THAT SOMNATH INDUSTRIES IS FICTITIOUS ENTITY AND PURCHAS ES SHOWN BY NKIL FROM THEM REPRESENTED BOGUS PURCHASES. THE FINDINGS SO GIVEN ARE RECORDED ON P. 9 OF THE ASSES SMENT ORDER. 107. THE FACTS RELATING TO KRISHNA MARKETING HAVE B EEN DISCUSSED ON PP. 9 AND 10 OF THE ASSESSMENT ORDER. THEY OPENED THEIR BANK ACCOUNT ON 18TH JUNE, 1998 WITH SABARMATI CO-OP. BANK LTD. ON 18TH JUNE, 1998 WITH INITIAL DEPOSIT OF RS. 1,100, THE PROPRIETOR OF THIS CONCER N IS SHRI RAJESH P. DOSHI. THE NATURE OF THIS BANK ACCOUNT IS EXACTLY SIMILAR TO THE OTHER BANK ACCOUNTS OF OTHER ALLEGED BOGUS SUPPLIERS. THE ADDRESS GIVEN BY SHRI R.P. DOSHI TO THE BANK WAS ALSO FICTITIOUS. SHRI R.P. DOSHI FILED AN AFFID AVIT BEFORE THE IT AUTHORITIES IN WHICH IT WAS STATED BY HIM TH AT THE WHOLE BUSINESS IS CONTROLLED BY SHRI NILESHBHAI PAT EL WHO IS THE MAIN PERSON HANDLING ALL THE DAY-TO-DAY ACTIVIT IES OF THE ASSESSEE-COMPANY. THE AO ARRIVED AT SIMILAR CONCLUS ION IN RELATION TO PURCHASES SHOWN TO HAVE BEEN MADE BY NK IL FROM THIS FICTITIOUS ENTITY. 108. THE FACTS RELATING TO SEJAL ENTERPRISES HAVE B EEN DISCUSSED BY THE AO ON PP. 10 AND 11 OF THE ASSESSM ENT ORDER. THE SUMMONS WERE ISSUED TO PROPRIETOR OF SEJ AL ENTERPRISES ON THE ADDRESS GIVEN TO THE BANK BUT TH OSE WERE RETURNED BACK AS THE PARTY WAS NOT AVAILABLE AT THE GIVEN ADDRESS. THE AO OBSERVED THAT THE FACTS IN THE CASE OF SEJAL ENTERPRISES ARE SIMILAR AND HE TREATED THESE PURCHA SES SHOWN TO HAVE BEEN MADE FROM SEJAL ENTERPRISES AS A LSO BOGUS PURCHASES. 109. THE AO THEREAFTER GAVE A NOTICE DT. 4TH DEC., 2000 IN WHICH ENTIRE MATERIAL GATHERED BEHIND BACK OF THE A SSESSEE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 115 IN RELATION TO SUCH BOGUS PURCHASES WAS SUPPLIED AN D THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY PURCHASE S MADE FROM THESE CONCERNS SHOULD NOT BE DISALLOWED. THE A SSESSEE FILED REPLY DT. 15TH DEC., 2000 STATING THAT THE EN TIRE PURCHASES ARE RECORDED IN THE BOOKS OF ACCOUNTS IN THE NORMAL COURSE BEFORE THE DATE OF SEARCH AND THEREFO RE IT DOES NOT FALL WITHIN THE PURVIEW OF BLOCK ASSESSMENT. TH E AO HAS THEREAFTER DISCUSSED THE VARIOUS SHOW-CAUSE NOTICES GIVEN BY HIM AND THE REPLIES RECEIVED FROM THE ASSESSEE IN T HIS REGARD. THE SHOW-CAUSE NOTICES AND THE REPLIES WERE ALSO AL MOST AS THAT IN THE CASE OF NKPL. THE AO ARRIVED AT THE CON CLUSION THAT ALL SUCH PURCHASES MADE FROM THESE THREE PARTI ES ARE BOGUS PURCHASES AND HE DISALLOWED THE TOTAL PURCHAS ES OF RS. 2,92,93,288 MADE FROM THEM. 110. THE LEARNED CIT(A) HAS DEALT WITH THIS ISSUE I N PARA 5 ON PP. 4 TO 11 OF HIS ORDER. THE CIT(A) HAS OBSERVED I N PARA 5.5 OF HIS ORDER THAT EXCEPT 2 BLANK SALE BILLS IN RESP ECT OF SEJAL ENTERPRISES APPEARING AT ANNEX. A-88/2 AND A/88/5, NO OTHER BLANK BILL OR VOUCHER WAS FOUND DURING THE CO URSE OF SEARCH. THE CIT(A) ASKED THE AO TO VERIFY THIS FACT VIDE LETTER DT. 4TH JAN., 2002. THE AO IN REPLY TO THE SAID LET TER SUBMITTED THAT NO BLANK BILLS OR CHEQUES WERE FOUND AND SEIZED IN RESPECT OF M/S SOMNATH INDUSTRIES AND KRI SHNA MARKETING. THE CIT(A) FOLLOWING THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF N.R. PAPE R & BOARDS (SUPRA) AND ALSO THE FACT THAT NO STATEMENT UNDER SECTION 132(4) DURING THE SEARCH IN RESPECT OF THESE PURCHASES WAS RECORDED, HE DELETED THE ADDITION MAD E BY THE AO IN RESPECT OF PURCHASES MADE FROM SOMNATH INDUST RIES AND KRISHNA MARKETING AMOUNTING TO RS. 1,14,78,000 AND RS. 51,67,228 RESPECTIVELY. THE CIT(A) HOWEVER CONF IRMED THE ADDITION IN RESPECT OF PURCHASES OF RS. 1,26,48 ,060 MADE FROM SEJAL ENTERPRISES. THE CIT(A) HAS OBSERVED THA T TWO BLANK BILLS OF SEJAL ENTERPRISES WERE FOUND DURING THE SEARCH. THE AO ISSUED SUMMONS AT THE ADDRESS GIVEN ON THE SAID BILLS BUT THE SAME WERE RETURNED BACK. THE ENT IRE DEPOSITS MADE IN THE BANK ACCOUNT OF THIS CONCERN W AS BY WAY OF TRANSFER ENTRIES FROM THE APPELLANT AND MONE YS WERE IMMEDIATELY WITHDRAWN FROM THE SAID BANK ACCOUNT. T HE CIT(A) ALSO RELIED UPON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE REPORTED IN CIT V. LA MEDICA (2001) 250 ITR 575 (DEL). THE CIT(A) ALSO OBSERVED THAT SI NCE NO AFFIDAVIT HAS BEEN SUBMITTED IN RESPECT OF SEJAL EN TERPRISES, ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 116 THE SUBMISSIONS MADE RELATING TO AFFIDAVIT OF OTHER PARTIES ARE NOT RELEVANT. IT IS ALSO FOUND FROM THE ORDERS OF THE AO AND THE CIT(A) THAT THE ASSESSEE HAD, INTER ALIA, S UBMITTED THE AFFIDAVIT OF SHRI KAUSHIK R. SURTI, PROPRIETOR, M/S SOMNATH INDUSTRIES. THE AO HAS REJECTED THE SAID AF FIDAVIT AS THE SIGNATURE THEREON DID NOT TALLY WITH THE SIG NATURE ON HIS AFFIDAVIT FILED BEFORE THE DY. DIT. 111. THE LEARNED COUNSEL MADE ORAL ARGUMENTS AND AL SO SUBMITTED WRITTEN ARGUMENTS WITH THE HEADING 'NOTES '. THE SUBMISSIONS MADE BY THE LEARNED COUNSEL ARE ALMOST SIMILAR AS WERE MADE IN THE CASE OF NKPL. RELIANCE HAS BEEN PLACED ON SIMILAR SET OF JUDGMENTS IN THIS CASE ALSO. IT H AS BEEN ARGUED THAT EVEN IF IT IS ASSUMED THAT THESE CONCER NS WERE BOGUS CONCERNS, SO FAR AS THE ASSESSEE IS CONCERNED , THE MATERIAL WAS ACTUALLY RECEIVED. THE RECEIPT OF MATE RIAL IS SUPPORTED BY SEIZED RECORDS. THIS HAS ALSO BEEN CON FIRMED BY THE AO IN THE REMAND REPORT SUBMITTED BEFORE THE CI T(A). ON THE STRENGTH OF SIMILAR ARGUMENTS AS WERE MADE IN T HE CASE OF NKPL, THE LEARNED COUNSEL CONTENDED THAT THE ADD ITION OF RS. 1,26,48,060 IN RESPECT OF PURCHASES MADE FROM S EJAL ENTERPRISES SHOULD BE DELETED. 112. ON THE OTHER HAND, THE LEARNED SENIOR DEPARTME NTAL REPRESENTATIVE RELIED UPON SIMILAR ARGUMENTS AND CONTENDED THAT ALL THESE THREE PARTIES ARE BOGUS PA RTIES. THEY HAD NO CAPACITY TO SUPPLY RAW MATERIAL OF SUCH LARGE MAGNITUDE. THE BANK ACCOUNTS WERE OPENED AND OPERAT ED IN SIMILAR MANNER AS IN THE CASE OF NKPL. 113. DURING THE COURSE OF HEARING, THE BENCH SPECIF ICALLY REQUIRED THE ASSESSEE TO PRODUCE ALL THESE THREE PA RTIES ALONG WITH THEIR RECORDS. THE LEARNED COUNSEL CONTENDED T HAT THE ASSESSEE CANNOT PRODUCE THEM ALONG WITH THEIR RECOR DS AS THEY ARE NOT UNDER THE CONTROL OF THE ASSESSEE. THE ASSESSEE HAS THUS REFUSED TO PRODUCE THESE THREE SUPPLIERS A LONG WITH THEIR RELEVANT RECORDS BEFORE THE TRIBUNAL INSPITE OF SPECIFIC OPPORTUNITY GRANTED TO THEM. 114. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS M ADE BY THE LEARNED REPRESENTATIVES. IN OUR VIEW, THE ORDER PASSED BY THE LEARNED CIT(A) DELETING THE ADDITION OF RS. 1,1 4,78,000 AND RS. 51,67,228 IN RESPECT OF PURCHASES MADE FROM SOMNATH INDUSTRIES AND KRISHNA MARKETING, IS NOT JU STIFIED, THE CIT(A) RELYING UPON THE JUDGMENT OF THE HON'BLE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 117 GUJARAT HIGH COURT IN THE CASE OF N.R. PAPER & BOAR DS (SUPRA) HAS AGREED WITH THE ASSESSEE'S CONTENTION T HAT SO FAR AS PURCHASES FROM THESE TWO CONCERNS ARE CONCERNED, THEY CANNOT BE CONSIDERED IN THE BLOCK ASSESSMENT UNDER CHAPTER XIV-B FOR THE BLOCK PERIOD BECAUSE NO DOCUMENTS REL ATING TO THOSE TWO PARTIES WERE FOUND DURING THE COURSE OF S EARCH. THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN T HE CASE OF N.R. PAPER & BOARDS HAS BEEN READ BY THE CIT(A) OUT OF CONTEXT. WE HAVE ALREADY DISCUSSED THIS ISSUE WHILE DEALING WITH THE SIMILAR GROUNDS IN THE CASE OF NKPL. THE J UDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF N. R. PAPER AND BOARDS IF READ IN THE LIGHT OF CONTEXT AND THE QUESTION DECIDED BY THE HON'BLE GUJARAT HIGH COURT, IT WOULD BE AMPLY CLEAR THAT THE RATIO OF THE HON'BLE GUJARAT H IGH COURT LAID DOWN IN THOSE CASES DOES NOT IN ANY MANNER SUP PORT THE VIEW SO TAKEN BY THE CIT(A). THE BASIC FACTS THAT T HE CONCERNS OF N.K. GROUP VIZ. NKPL AND NKIL ARE RESOR TING TO THE DEVICE OF OBTAINING FICTITIOUS PURCHASE INVOICE S FROM THE BOGUS SUPPLIERS CAME TO THE KNOWLEDGE OF THE AUTHOR ISED OFFICERS, DY. DIT/ADDL. DIT AS A RESULT OF SEARCH. THE RESULT OF SEARCH CLEARLY DEMONSTRATED THAT THE ASSESSES IS CLAIMING DEDUCTION IN RESPECT OF INFLATED PURCHASES, BY DEBI TING BOGUS PURCHASES OR MAY BE BY INFLATING THE PURCHASE PRICE BY OBTAINING THE PURCHASE INVOICES FROM NAME LENDERS/B ILLING AGENTS. IT MAY ALSO BE RELEVANT HERE TO ONCE AGAIN REFER TO THE AMENDED DEFINITION 'UNDISCLOSED INCOME' GIVEN IN SECTION 158B(B) WHICH, INTER AHA, INCLUDES ANY EXPENSES, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT, WHIC H IS FOUND TO BE FALSE. THIS DETECTION OF FALSITY OF PUR CHASES MADE FROM ALL THESE PARTIES WAS MADE BY THE DEPARTMENT O NLY AS A RESULT OF SEARCH. IF SEARCH WOULD NOT HAVE BEEN CON DUCTED, THE DEPARTMENT WOULD HAVE NEVER COME TO KNOW OF SUC H A DEVICE ADOPTED BY THE ASSESSEE. WE ARE THEREFORE OF THE CONSIDERED OPINION THAT THE ORDER PASSED BY THE CIT (A) OF DELETING SUCH ADDITIONS IS NOT VALID AND JUSTIFIED ON THE FACTS OF THE PRESENT CASE. VARIOUS OTHER FACTS AND CIRCUM STANCES RELATING TO ALL THE THREE PARTIES VIZ. SOMNATH INDU STRIES, KRISHNA MARKETING AND SEJAL ENTERPRISES ARE SIMILAR AS THAT IN THE CASE OF NKPL IN RELATION TO PURCHASES OF RS. 11.99 CRORES MADE BY THEM FROM VARIOUS SUCH BOGUS SUPPLIE RS. THE FACTS AND CIRCUMSTANCES ARE ABSOLUTELY SIMILAR. 115. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES, WE HOLD THAT ALL THE THREE PARTIES ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 118 FROM WHOM THE ASSESSEE CLAIMED TO HAVE PURCHASED MATERIAL TO THE TUNE OF RS. 2.92 CRORES ARE MERELY NAME LENDERS/BILLING AGENTS AND THE SALE INVOICES ISSUED BY THEM IN THE NAME OF NKIL ARE FICTITIOUS INVOICES. THE BURDEN LIES ON THE ASSESSEE TO SUPPOR T ANY CLAIM FOR DEDUCTION MADE BY THEM. IN THE PRESENT CASE SUCH BURDEN SHOULD HAVE BEEN DISCHARGED BY THE ASSESSEE ONLY BY PRODUCING THOSE THREE SUPPLIERS ALONG WITH THEIR RECORDS SO THAT TH E GENUINENESS OF THEIR PURCHASES, SALES, FINANCIAL CAPACITY AND ALL OTHER RELEVANT FACTS COULD BE EXAMINED. THE ASSESSEE HAS NOT PRODUCED THEM BEFORE THE AO. WE GAVE A SPECIFIC OPPORTUNITY TO TH E ASSESSEE TO PRODUCE ALL OF THEM BEFORE THE TRIBUNAL ALONG WITH THEIR RECORDS. THE ASSESSEE HAS EXPRESSED THEIR INABILITY TO PRODUCE THEM BEFORE TH E TRIBUNAL. HOWEVER, IT IS ALSO TRUE THAT THE RECEIPT OF MATERIAL SHOWN TO HAVE BEEN PURCHASED FROM THESE THREE PARTIES HAD REALLY BEEN RECEIVED AS PER FACTS AND EVIDENCE BROUGHT ON RECORD, WHICH ARE SIMILAR AS IN THE CASE OF NKPL. 116. IT MAY ALSO BE RELEVANT HERE TO MENTION THAT T HE BENCH REQUIRED THE LEARNED SENIOR DEPARTMENTAL REPRESENTA TIVE TO SUBMIT A PEAK STATEMENT IN RELATION TO THE AMOUNTS OF THESE THREE PARTIES. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE SUBMITTED COPIES OF THOSE STATEMENTS WHICH SHOW THAT THE TRANSACTIONS IN THE ACCOUNTS OF SOMNA TH INDUSTRIES COVER THE PERIOD FROM 26TH AUG., 1998 TO 1ST JAN., 1999. THE PEAK CREDIT IN THESE ACCOUNTS AS ON 27TH SEPT., 1998 WAS RS. 47,33,270. THE PEAK CREDITS IN THE ACC OUNTS OF KRISHNA MARKETING COVERS PERIOD FROM 27TH AUG., 199 8 TO 22ND SEPT., 1998. THE PEAK CREDIT IN THIS ACCOUNT A S ON 10TH SEPT., 1998 WAS RS. 33,26,780, THE ENTRIES IN THE A CCOUNT OF SEJAL ENTERPRISES COVERS THE PERIOD FROM 19TH DEC., 1997 TO 13TH NOV., 1998 IN THE AFORESAID PEAK STATEMENT SUB MITTED BY THE DEPARTMENT. THE PEAK BALANCE IN THIS ACCOUNT IS RS. 11,77,456 AS ON 1ST MAY, 1998. THESE FIGURES HAVE B EEN GIVEN JUST WITH A VIEW TO SHOW THAT CREDIT PURCHASES WERE SHOWN AS HAVING BEEN MADE FROM THESE BILLING AGENTS/NAME LENDERS TO AFORESAID EXTENT WHICH PROVES THAT THE ASSESSEE USED BLACK MONEY FOR PURCHASE OF RAW MATERIAL FROM UNDISCLOSED SOURCES WHICH ARE WITHIN THE EXCLUSIVE KNOWLEDGE OF THE ASSESSEE. ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 119 117. ON A CAREFUL CONSIDERATION OF THE ENTIRE RELEV ANT FACTS, WE ARE OF THE VIEW THAT IT WOULD BE JUST AND PROPER TO DIRECT THE AO TO RESTRICT THE ADDITION IN RESPECT OF UNDIS CLOSED INCOME RELATING TO PURCHASES SHOWN AS HAVING BEEN M ADE FROM THESE THREE BILLING AGENTS/NAME LENDERS, TO ON LY 25 PER CENT OF TOTAL PURCHASES CLAIMED TO HAVE BEEN MADE F ROM THESE THREE PARTIES I.E. 25 PER CENT OF RS. 2,92,93 ,288 WHICH COMES TO RS. 73,23,322. THE BASIS OF ADOPTING 25 PE R CENT OF SUCH PURCHASES IS SAME AS DISCUSSED IN DETAIL WHILE UPHOLDING THE ADDITION OF 25 PER CENT IN THE CASE O F NKPL IN RELATION TO SIMILAR GROUNDS. 7.11. IT IS WORTH MENTIONING HON'BLE APEX COURT IN N K PROTEINS LTD. VS. DCIT (2017) 250 TAXMAN 22 ON THE ISSUE OF INCOME FROM UNDISCLOSED SOURCES AND BOGUS PURCHASES SHOWN ON THE BASIS OF FICTITIOUS INVOICES WHERE THE ASSESSEE FILED SLP AGAINST THE DECISION OF HON'BLE GUJARAT H IGH COURT IN N K INDUSTRIES LTD. VS. DCIT (2016) 292 CTR 354 (GUJ), WHEREIN IT WAS HELD THAT ADDITION ON THE BASIS OF U NDISCLOSED INCOME COULD NOT BE RESTRICTED TO CERTAIN PERCENTAG E WHEN THE ENTIRE TRANSACTION WAS FOUND TO BE BOGUS, THE HON'B LE APEX COURT DISMISSED THE SLP AND CONFIRMED THE DECISION OF HON'BLE GUJARAT HIGH COURT. 7.12. ADMITTEDLY, IN SUCH TYPE OF CASES, THERE IS NO OPTION BUT TO ESTIMATE THE PROFIT WHICH DEPENDS UPO N THE SUBJECTIVE APPROACH OF AN INDIVIDUAL AND THE MATERI AL FACTS ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 120 AVAILABLE ON RECORD AND ALSO CONSIDERING THE FACT W HETHER THE ASSESSEE IS A MANUFACTURER OR A TRADER OR BOTH. IN THE PRESENT APPEAL, UNDISPUTEDLY THE NOTICE ISSUED U/S 133(6) O F THE ACT WAS NEVER REPLIED BY THE CONCERNED PARTIES AND RATH ER THESE PARTIES WERE FOUND NON-EXISTENCES AT THE GIVEN ADDR ESSES. IT IS WORTH MENTIONING THAT EVEN BEFORE THE LD. ASSESS ING OFFICER AND ALSO BEFORE THE LD. COMMISSIONER OF INC OME TAX (APPEAL) THE ASSESSEE EXPRESSED HIS INABILITY TO PR ODUCE THE PARTIES, WHICH CLEARLY ESTABLISHES THAT THE GENUINE NESS OF THE TRANSACTION IS UNDER DOUBT OR IT CAN BE SAID NOT ES TABLISHED BY THE ASSESSEE OR REMAINED TO BE ESTABLISHED. S O FAR AS THE DECISION IN THE CASE OF NIKUNJ EXIM ENTERPRISES PVT . LTD. IS CONCERNED, I AM OF THE VIEW THAT IN THE PRESENT APP EAL, THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. EVEN RIGHT FROM THE ASSESSMENT STAGE TILL THE STAGE OF THIS TRIBUNAL, THE ASSESSEE DID NOT PRODUC E THE PARTIES. IN SUCH A SITUATION THE FACT REMAINS THAT THE GENUINENESS OF THE TRANSACTIONS REMAINED TO THE PRO VED WITH POSITIVE MATERIAL. THEREFORE, CONSIDERING THE TOTAL ITY OF FACTS, CASES DISCUSSED HEREINABOVE, TO PLUG THE LEAKAGE OF REVENUE, I AM OF THE VIEW THAT THE LEARNED CIT(A) HAS TAKEN ONE OF THE ITA NO.1729 & 1730/MUM/2018 DINESH S. JAIN 121 BEST POSSIBLE VIEW TO ESTIMATE THE PROFIT @6.5%, WH ICH IS QUITE JUSTIFIED. THUS, THE STAND TAKEN BY THE LEAR NED CIT(A) IS AFFIRMED. FINALLY, THE APPEALS OF THE ASSESSEE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 11/10/2018. SD/- (JOGINDER SINGH) !' / JUDICIAL MEMBER MUMBAI; DATED : 11/10/2018 F{X~{T? P.S / ! &($)!*+,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. )) * ( '#$ ) / THE CIT, MUMBAI. 4. )) * / CIT(A)- , MUMBAI 5. -./' , )'#$' 1 , / DR, ITAT, MUMBAI 6. /23$ / GUARD FILE. &( / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
Other Referred Cases
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Laws Referred To
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1:1 Consultation on Legal Requirements
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1:1 Consultation on Startup Compliance
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1:1 Consultation on Salary Structuring
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Executive Hiring Offer Letter
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Initial LLP Agreement
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