SNEHALATA AHNAND RANE, Mumbai V. INCOME TAX OFFICER-WARD 3(3), KALYAN

ITA 1785/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5061 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPARIDR
• Keywords: Reopening of assessment; Bogus purchase; Bogus Share capital; Capital asset; Gift; Business income; Depreciation; Transfer pricing; Search and seizure; International transaction; Question of law; Cost of acquisition; Tangible material; Difference of opinion; Accommodation entries; Competent authority; Assessment record; Onus to prove; Reason to believe; Documents seized; Change of opinion; Reassessment proceedings
• Section: 44AD; 69C; 143(3); 133A; 131; 68; 148; 139

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NOS.1785, 1786 & 1787/MUM/2018 ASSESSMENT YEAR:2009-10, 2010-11 & 2011-12 SNEHALATA AHNAND RANE, PROP. M/S TEJAL ENGG. 102, MAMAL APARTMENT, SUBHASH ROAD, NAVPADA, DOMBIVALI (WEST), MUMBAI-421202 / VS. INCOME TAX OFFICER-3(3), I.T. OFFICES, RAVI MANSION, 2 ND FLOOR, MURBAD ROAD, KALYAN (WEST) / ASSESSEE / REVENUE P.A. NO . ADOPR9601H $ % & / 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 THIS BUNCH OF THREE APPEALS ARE BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 22/12/2017 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI, APPROVING THE AC TION OF ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 2 THE LD. ASSESSING OFFICER UNDER SECTION 147/148 AND FURTHER THE ADDITION ON ACCOUNT OF DISALLOWANCES MA DE UNDER SECTION 69C OF THE INCOME TAX ACT, 1961 (HERE INAFTER THE ACT) ON THE AMOUNTS AS MENTIONED IN THE RESPECT IVE APPEAL. 2. DURING HEARING, NONE WAS PRESENT FOR THE ASSESSEE. THE REGISTERED AD LETTER SENT TO THE ASSE SSEE WAS RETURNED UNSERVED BY THE POSTAL AUTHORITIES. THE AS SESSEE NEITHER FURNISHED THE NEW ADDRESS, IF THERE IS CHAN GE IN THE ADDRESS, NOR MOVED ANY APPLICATION FOR ADJOURNMENT, THEREFORE, I HAVE NO OPTION BUT TO PROCEED EX-PARTE , QUA THE ASSESSEE AND TEND TO DISPOSE OF THIS APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE LD. DR, SHRI S. K . BEPARI, STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (AP PEAL) MAY BE SUSTAINED. 2.1. THE GROUND NO.1 & 2, RAISED BY THE ASSESSEE PERTAINS TO ISSUANCE OF NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) AND CONS EQUENT FRAMING THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 3 THE ACT, WHICH IS BAD IN LAW. 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 THAT THERE WAS N O REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AS TH ERE WAS NO TANGIBLE MATERIAL WITH THE ASSESSING OFFICER AND INDEPENDENT APPLICATION OF MIND IS CONCERNED, WE FI ND THAT THERE WAS INFORMATION WITH THE ASSESSING OFFICER TH AT ASSESSEE MADE BOGUS PURCHASES FROM THE HAWALA PARTI ES AND THE NOTICES SENT U/S.133(6) WERE RETURNED BACK UNSERVED BY THE POSTAL DEPARTMENT, IN THIS BACKGROU ND, I SHALL ANALYZE WHETHER THE LD. ASSESSING OFFICER WA S RIGHT IN RE-OPENING THE ASSESSMENT U/S.147 OF THE ACT. 2.2. IN THE LIGHT OF THE FOREGOING DISCUSSIONS, IT IS OU R 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 SECTION 147 OF THE ACT FOR READY REFERENCE AND ANALYSIS:- . 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 T O 153, 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 4 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 TH E RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE O N THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN R ESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT, FOR THAT 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) LOCATE D OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT FOR ANY A SSESSMENT YEAR: PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTER S WHICH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERENCE OR REV ISION, 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 OFFICER 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 CHARG EABLE 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 DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE 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 THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN T HE RETURN ; ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 5 (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 REASON S RECORDED 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 FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT Y EAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012. 2.3. IF THE AFORESAID PROVISION OF THE ACT IS ANAL YZED, WE FIND THAT AFTER INSERTION OF EXPLANATION -3 TO S ECTION 147 OF THE ACT BY THE FINANCE (NO.2) ACT OF 2009 WITH E FFECT FROM 01/04/1989 SECTION 147 HAS AN EFFECT THAT ASSESSING OFFICER HAS TO ASSESS OR REASSESS INCOME (SUCH INCO ME) WHICH HAS ESCAPED ASSESSMENT AND WHICH WAS BASIS OF FORMATION OF BELIEF AND, IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSM ENT AND WHICH CAME TO THE NOTICE DURING THE COURSE OF ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 6 PROCEEDINGS. IDENTICAL RATIO WAS LAID DOWN BY HON BLE JURISDICTIONAL HIGH COURT IN CIT VS JET AIRWAYS IND IA PVT. LTD. (2010) 195 TAXMAN 117 (MUM.) AND THE FULL BENC H DECISION FROM HONBLE KERALA HIGH COURT IN CIT VS B EST WOOD INDUSTRIES AND SAW MILLS (2011) 11 TAXMAN.COM 278 (KERALA)(FB). A PLAIN READING OF EXPLANATION-3 TO SECTION 147 CLEARLY DEPICTS THAT THE ASSESSING OFFICER HAS POWER TO MAKE ADDITION, WHERE HE ARRIVED TO A CONCLUSION THA T INCOME HAS ESCAPED ASSESSMENT WHICH CAME TO HIS NOT ICE DURING THE COURSE OF PROCEEDINGS OF REASSESSMENT U/ S 148. MY VIEW IS FORTIFIED BY THE DECISION IN MAJINDER SI NGH KANG VS CIT (2012) 25 TAXMAN.COM 124/344 ITR 358 (P & H) AND JAY BHARAT MARUTI LTD. VS CIT (2010) TAX LR 476 (DE L.) 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 POW ERS TO INITIATE PROCEEDINGS OF REOPENING. THE HONBLE KER ALA HIGH COURT IN CIT VS ABDUL KHADAR AHMAD (2006) 156 TAXMA N 206 (KERALA) EVEN WENT TO THE EXTENT SO LONG AS THE AO HAS INDEPENDENTLY APPLIED HIS MIND TO ALL THE RELEVANT ASPECT ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 7 AND HAS ARRIVED TO A BELIEF THE REOPENING CANNOT BE SAID TO BE INVALID. 2.4. 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 ME RELY ON THE BASIS OF CHANGE OF OPINION. HOWEVER, POWERS UN DER AMENDED PROVISION ARE WIDE ENOUGH WHERE THERE IS A REASONABLE BELIEF WITH THE ASSESSING OFFICER, THAT INCOME HAS ESCAPED ASSESSMENT, BECAUSE THE POWERS WITH EFF ECT FROM 01/04/1989 ARE CONTEXTUALLY DIFFERENT AND THE CUMULATIVE CONDITIONS SPELT OUT IN CLAUSES (A) AND (B) OF SECTION 147, PRIOR TO ITS AMENDMENT ARE NOT PRESENT IN THE AMENDED PROVISION. THE ONLY CONDITION FOR ACTION I S THAT THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEV E THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. S UCH BELIEF CAN BE REACHED IN ANY MANNER AND IS NOT QUAL IFIED BY A PRE-CONDITION OF FAITH AND TRUE DISCLOSURE OF MAT ERIAL FACTS BY AN ASSESSEE AS CONTEMPLATED IN PRE-AMENDED SECTI ON 147. VIEWED IN THAT ANGLE, POWER TO REOPEN ASSESSM ENT IS ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 8 MUCH WIDER UNDER THE AMENDED PROVISION. OUR VIEW I S FORTIFIED BY THE DECISION FROM HONBLE DELHI HIGH C OURT IN BAWA ABHAI SINGH VS DCIT (2001) 117 TAXMAN 12 AND RAKESH AGARWAL 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 BENEFIT FOR THE REVENUE, WHICH ARE AIMED AT GATHERING THE ESCAPED INCOME. AT THE SAME TIME, I AM AWARE THAT POWERS U/S 147 AND 148 OF THE ACT ARE NO T UNBRIDLED ONE AS IT IS HEDGED WITH SEVERAL SAFEGUAR DS CONCEIVED IN THE INTEREST OF ELIMINATING ROOM FOR A BUSE OF THIS POWER BY THE AO. HOWEVER, THE MATERIAL AVAILA BLE ON RECORD, CLEARLY INDICATES THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, THEREFORE, THE LD. ASSESSING OF FICER WAS WITHIN HIS JURISDICTION TO REOPEN THE ASSESSMEN T. THE HONBLE APEX COURT IN ESS ESS KAY ENGINEERING CO. PVT. LTD. (2001) 247 ITR 818 (SC) HELD THAT MERELY BECAU SE THE CASE OF THE ASSESSEE WAS CORRECT IN ORIGINAL ASSESS MENT FOR THE RELEVANT ASSESSMENT YEAR, IT DOES NOT PRECLUDE THE ITO TO REOPEN THE ASSESSMENT OF AN EARLIER YEAR ON THE BASIS OF ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 9 FINDING OF HIS FACT THAT FRESH MATERIAL CAME TO HIS KNOWLEDGE. 2.5. UNDER SECTION 147, AS SUBSTITUTED WITH EFFECT FROM 01/04/1989, THE SCOPE OF REASSESSMENT HAS BEEN WIDENED. AFTER SUCH SUBSTITUTION, THE ONLY RESTRICT ION, PUT IN THAT SECTION IS THAT REASON TO BELIEVE. THAT R EASON HAS TO BE A REASON OF A PRUDENT PERSON WHICH SHOULD BE FAIR AND NOT NECESSARILY DUE TO FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND PARTIALLY SOME MATERIAL FACTS RE LEVANT FOR ASSESSMENT (DR. AMINS PATHOLOGY LABORATORY VS JCIT (2001) 252 ITR 673, 682 (BOM.) IDENTICAL RATIO WAS LAID DOWN BY HONBLE DELHI HIGH COURT IN UNITED ELECTRIC AL COMPANY PVT. LTD. VS CIT (2002) 258 ITR 317, 322 (D EL.) AND PRAFULL CHUNNILAL PATEL VS ACIT 236 ITR 832, 83 8 (GUJ.). THE ESSENTIAL REQUIREMENT FOR INITIATING REASSESSMENT PROCEEDING U/S 147 R.W.S 148 OF THE AC T IS THAT THE LD. ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT FOR ANY ASSESSMENT YEAR. THE HONBLE GUJARAT HIGH C OURT IN PRAFULL CHUNNILAL PATEL VS ACIT (SUPRA) EVEN WEN T TO THE ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 10 EXTENT THAT AT THE INITIATION STAGE FORMATION OF RE ASONABLE BELIEF IS NEEDED AND NOT A CONCLUSIVE FINDING OF FA CTS. IDENTICAL RATIO WAS LAID DOWN IN BRIJMOHAN AGRAWAL VS ACIT (2004) 268 ITR 400, 405 (ALL.) AND RATNACHUDAM ANI S. UTNAL VS ITO (2004) 269 ITR 272, 277 (KARNATAKA) APPLYING SOWDAGAR AHMED KHAN VS ITO (1968) 70 ITR 79(SC). 2.6. 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 MUST BE OF AN HONEST AND REASONABLE PERSON BASED ON REASONA BLE GROUNDS. THE ASSESSING OFFICER IS REQUIRED TO ACT, NOT ON MERE SUSPICION, BUT ON DIRECT OR CIRCUMSTANTIAL EVI DENCE. MY VIEW FIND SUPPORT FROM THE RATIO LAID DOWN IN FO LLOWING 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.), ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 11 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.) 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) 2.7. 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 12 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 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 . 2.8. 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 OFFI CER, THE REOPENING OF THE ASSESSMENT WAS HELD TO BE VALID. ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 13 2.9. THE HONBLE JURISDICTIONAL HIGH COURT IN GIRILAL & CO. V. S.L. MEENA, ITO, (2008) 300 ITR 43 2 (BOM), HELD THAT IN ORDER TO INVOKE THE EXTRAORDIN ARY JURISDICTION OF THE COURT THE PETITIONER MUST ALSO MAKE OUT A CASE THAT NO PART OF THE RELEVANT MATERIAL HA D BEEN KEPT OUT FROM THE ASSESSING OFFICER). THE INFORMATION WAS IN THE ANNEXURES AND CONSEQUENTLY EXPLANATION 2(C)(IV) OF SECTION 147 WOULD APPLY. TH E REASSESSMENT PROCEEDINGS AFTER FOUR YEARS WERE VALI D. 2.10. IN THE CASE OF DEPUTY CIT V. GOPAL RAMNARAYA N 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 TH AT WAS SUBMITTED IN RESPONSE TO THE QUERY OF THE ASSESSING OFFICER THERE WAS A COMPLETE SILENCE IN REGARD TO THE DATES ON WHICH THE AMOUNTS WERE INVESTED, AS SUCH THERE BEIN G A ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 14 FAILURE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE REASSESSMENT PROCEEDINGS WERE H ELD TO BE VALID. THIS 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). 2.11. IN THE CASE OF VENUS INDUSTRIAL CORPORATION V. ASST. CIT, (1999) 236 ITR 742, 746 (P & H) [WHERE I NITIATION WAS STARTED WITHIN FOUR YEARS FOR RE-EXAMINING THE DEDUCTION UNDER SECTION 80HHC, WAS HELD TO BE WRONG LY ALLOWED IN THE ORIGINAL ASSESSMENT. IDENTICALLY, IN THE CASE OF HAPPY FORGING LTD. V. CIT, (2002) 253 ITR 413,41 6-17 (P & H), WHERE EXCISE DUTY PAID IN ADVANCE WAS SHOWN A S AN ASSET IN THE BALANCE SHEET AND WAS ALLOWED AS A DED UCTION, REASSESSMENT 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 HELD TO BE VALID. IN THE CASE OF VIPAN K HANNA V. CIT, (2002) 255 ITR 220, 230 (P & H), WHERE FROM THE ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 15 FACTS IT WAS CLEAR THAT THE ASSESSEE HAD CLAIMED DEPRECIATION IN THE RETURN AT THE RATE OF 50 PER CE NT AND HE HAD NOWHERE DISPUTED THE FACT THAT THE ADMISSIBLE R ATE OF DEPRECIATION TO HIM WAS 40 PER CENT., SUCH FACT ALO NE WAS SUFFICIENT TO INITIATE REASSESSMENT PROCEEDINGS UND ER SECTION 147 AND, THEREFORE, SUCH INITIATION WAS SUS TAINED. THE HONBLE PUNJAB & HARYANA HIGH COURT IN MRS. RAM A SINHA V. CIT, (2002) 256 ITR 481, 483, 486, WHERE T HE REASSESSMENT NOTICE HAS BEEN ISSUED ON THE BASIS OF DEFINITE INFORMATION FROM CBI REGARDING INVESTMENTS BY THE ASSESSEE WHICH HAD NOT BEEN DISCLOSED DURING THE OR IGINAL ASSESSMENT PROCEEDINGS, SUCH INITIATION HAS BEEN UP HELD. 2.12. IN THE CASE OF PAL JAIN V. ITO, (2004) 267 I TR 540, 544-45, 548, 549 (P & H), APPLYING PHOOL CHAND BAJRANG LAL V. ITO, (1993) 203 ITR 456 (SC), ALTHOU GH THE TRANSACTION OF SALE OF SHARES WAS DISCLOSED AND ACC EPTED IN THE ORIGINAL ASSESSMENT, BUT THE SUBSEQUENT DISCOVE RY BY THE DDI (INVESTIGATION) REVEALED THAT THE TRANSACTI ON WAS NOT GENUINE, A REASSESSMENT NOTICE AFTER FOUR YEARS HAS BEEN HELD TO BE VALID BECAUSE THERE WAS NO TRUE DIS CLOSURE ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 16 OF THE MATERIAL FACTS. IN THIS REGARD, THE PETITION ER-ASSESSEE CANNOT DRAW ANY SUPPORT FROM THE STATEMENT FOR CHALLENGING THE VALIDITY OF THE NOTICE FOR REASSESS MENT. IT GOES WITHOUT SAYING THAT FOR THE PURPOSE OF MAKING THE ASSESSMENT, THE ASSESSING OFFICER SHALL HAVE TO CON FRONT THE PETITIONER WITH THE ENTIRE MATERIAL IN HIS POSSESSI ON ON THE BASIS OF WHICH HE PROPOSES TO MAKE THE ADDITIONS. I N PUNJAB LEASING PVT. LTD. V. ASST. CIT, (2004) 267 I TR 779, 781-82 (P & H), WHERE DEPRECIATION WAS ALLOWED TO T HE ASSESSEE, WHO WAS ENGAGED IN THE BUSINESS OF FINANC ING OF VEHICLES AND CONSUMER DURABLES ON 'HIRE-PURCHASE BA SIS' AS WELL AS ON 'LEASE/RENT BASIS', A REASSESSMENT NOTIC E ISSUED AFTER FOUR YEARS HAS BEEN HELD NOT TO SUFFER FROM A NY ILLEGALITY AS THE SAME WAS BASED ON THE BONA FIDE A CTION OF THE COMPETENT AUTHORITY TO DETERMINE WHETHER OR NOT THE VEHICLES IN RESPECT OF WHICH THE PETITIONER HAD BEE N CLAIMING DEPRECIATION, WERE ACTUALLY OWNED BY IT. 2.13. 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 17 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 HAD BEEN ALLOWED DEDUCTION MORE THAN ACTUALLY ALLOWABLE UNDER SECTION 80HHC. THEREFORE, THE ACTION INITIATED BY T HE AO FOR REASSESSMENT UNDER SECTION 147(B) COULD NOT BE HELD TO BE INVALID. 2.14. 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 N OT FORM THE SOLE BASIS FOR THE ASSESSING OFFICER TO INITIA TE REASSESSMENT PROCEEDING BUT HE ALSO TOOK INTO CONSIDERATION THE LETTER WRITTEN BY THE ASSISTANT ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 18 COMMISSIONER AS WELL AS THE FACT THAT NO RETURN HAD BEEN FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 1995-96. THUS, IT WAS HELD THAT THE ASSESSING OFFICER HAD RIGHTLY INV OKED THE JURISDICTION TO INITIATE THE REASSESSMENT PROCEEDIN GS UNDER SECTION 147. IN THE CASE OF CIT V. HUKAM SINGH, (2 005) 276 ITR 347 (P & H), IT WAS HELD THAT THE RESPONDEN TS DID NOT HAVE THE LOCUS STANDI TO QUESTION THE ORDERS OF REASSESSMENT ON THE GROUND OF LACK OF NOTICE. NON-I SSUANCE OF NOTICE TO SOME OF THE LEGAL HEIRS OF THE LATE P WAS MERELY AN IRREGULARITY AND THE SAME DID NOT AFFECT THE VAL IDITY OF THE REASSESSMENT ORDERS. LIKEWISE, IN TILAK RAJ BE DI V. JOINT CIT, (2009) 319 ITR 385 (P & H), WHEREIN, FAC TS COMING TO LIGHT IN A SUBSEQUENT ASSESSMENT YEAR COU LD VALIDLY FORM THE BASIS FOR INITIATING REASSESSMENT PROCEEDINGS, IN VIEW OF EXPLANATION 2 TO SECTION 14 7. THE ACTION OF THE INCOME TAX AUTHORITIES IN REOPENING T HE ASSESSMENT OF THE ASSESSEE AND RESTRICTING THE DEDU CTION UNDER SECTION 80-IB WAS HELD TO BE VALID. 2.15. IN THE CASE OF SMT. USHA RANI V. CIT, (2008) 301 ITR 121 (P & H), THERE WAS NOTHING ON RECORD TO SHO W THE ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 19 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 728, 736-37, 739 (PAT), WHERE THE INVESTIGATION REPORT I NDICATED THAT THE OFFICER HAD REASON TO BELIEVE THAT ON ACCO UNT OF FAILURE ON THE PART OF THE PETITIONER-ASSESSEE TO D ISCLOSE TRUE AND FULL FACTS, INCOME HAD BEEN GROSSLY UNDER ASSESSED, REASSESSMENT PROCEEDINGS WERE HELD VALIDL Y INITIATED. 2.16. 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 20 AND THAT OF THE REPORT OF THE VALUATION OFFICER AND THE REASONS THAT LED TO THE ISSUE OF THE NOTICE WERE DU LY RECORDED AND THE SAME WERE ALSO ADEQUATE AND BASED ON RELEVANT FACTS AND MATERIAL, INITIATION WAS UPHELD. IN TRIPLE A TRADING & INVESTMENT PVT. LTD. V. ASST. CIT, (200 1) 249 ITR 109, 110-11 (MP), WHERE THE NOTICE WAS ISSUED A FTER RECORDING REASONS IN THAT REGARD, INITIATION WAS UP HELD. 2.17. 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 COURT: (2002) 255 ITR (ST.) 7-8 (SC), WHERE THE ASSESSEE W AS HOLDING SHARES IN AN AMALGAMATING COMPANY AND HE WA S ALLOTTED SHARES IN THE AMALGAMATED COMPANY AND SUCH SHARES WERE SOLD BY HIM AND HE HAS DISCLOSED THE MA RKET PRICE OF SUCH SHARES AS ON THE DATE OF AMALGAMATION AS THE COST OF ACQUISITION OF SUCH SHARES AND HAS NOT DISC LOSED THE COST OF ACQUISITION OF SHARES IN THE AMALGAMATING C OMPANY IN ACCORDANCE WITH SECTION 49(2) READ WITH SECTION 47(VII), INITIATION OF REASSESSMENT PROCEEDINGS AFTER FOUR Y EARS HAS BEEN SUSTAINED BECAUSE THERE WAS FAILURE ON THE PAR T OF THE ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 21 ASSESSEE TO DISCLOSE MATERIAL FACTS NECESSARY FOR ASSESSMENT. LIKEWISE, IN SUMAN STEELS V. UNION OF INDIA, (2004) 269 ITR 412,418-19 (RAJ), WHERE THE RETURN O F THE ASSESSEE FOR ASSESSMENT YEAR 1995-96 WAS PROCESSED UNDER SECTION 143(1)(A) ACCEPTING THE NET PROFIT RATE DEC LARED BY THE ASSESSEE, WHO CARRIED ON CON- TRACT BUSINESS, I NITIATION OF REASSESSMENT PROCEEDINGS BY ISSUING A NOTICE DAT ED 15- 5-2001 PROPOSING TO REASSESS PETITIONER-ASSESSEE AT HIGHER RATE IN VIEW OF THE PRESUMPTIVE RATE PRESCRIBED UND ER SECTION 44AD HAS BEEN SUSTAINED. IN THE CASE OF D R. SAHIB RAM GIRI V. ITO, (2008) 301 ITR 294 (RAJ), THE REASSESSMENT PROCEEDINGS WERE INITIATED AFTER RECOR DING REASONS IN WRITING BY THE AO. THE NON-AVAILABILITY OF A FEW DOCUMENTS DEMANDED BY THE ASSESSEE WOULD NOT MAKE T HE REASSESSMENT PROCEEDINGS INITIATED FOR THE REASONS RECORDED IN DETAIL ILLEGAL. 2.18. IN THE CASE OF DESH RAJ UDYOG : CHAMAN UDYOG V. ITO, (2009) 318 ITR 6 (ALL), IN THE ASSESSMENT Y EARS IN QUESTION, THE MATTER WAS STILL TO BE DECIDED FINALL Y BY THE ASSESSING AUTHORITY WHETHER THE INCOME SHOULD BE TR EATED ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 22 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 NO T ENTITLED FOR THE DEDUCTION ON THE DUTY DRAWBACK AMOUNT UNDER SECTION 80-IB AND SINCE IT HAD BEEN ALLOWED IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(1), IT HA D ESCAPED ASSESSMENT. ON THESE FACTS THE INITIATION O F THE PROCEEDINGS UNDER SECTION 147 READ WITH SECTION 148 FOR ASSESSMENT YEARS 2005-06 AND 2006-07 WAS LEGAL AND IN ACCORDANCE WITH LAW. 2.19. 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 ASSESSED TO TAX IN THE HANDS OF P, HE HAD TAKEN A S TAND THAT THE AMOUNT DID NOT BELONG TO HIM AND INSTEAD BELONGED TO S. THUS, IT WAS NOT CLEAR AS TO IN WHOS E HANDS ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 23 THE AMOUNT IN QUESTION HAD TO BE ASSESSED. THE ITO WAS JUSTIFIED IN TAKING PROCEEDINGS UNDER SECTION 147 F OR ASSESSING THE AMOUNTS IN THE HANDS OF THE PETITIONE RS ACCORDING TO THE CLAIM MADE BY THE PETITIONERS. LI KEWISE, HONBLE KERALA HIGH COURT IN CIT V. DR. SADIQUE UMM ER, (2010) 322 ITR 602 (KER), WHERE, THE ASSESSING OFFI CER COLLECTED FURTHER INFORMATION TO COMPLETE THE REASS ESSMENTS WHICH WAS ALSO PERMISSIBLE UNDER THE ACT. THE FINDI NG OF THE FIRST APPELLATE AUTHORITY AS WELL AS THE TRIBUN AL, THAT THE ASSESSING OFFICER HAD NO MATERIAL TO BELIEVE TH AT THE INCOME HAD ESCAPED ASSESSMENT WAS WRONG AND CONTRAR Y TO FACTS. THE ASSESSEE HAD NOT MAINTAINED ANY BOOKS OF ACCOUNT. THEREFORE, THE REOPENING OF ASSESSMENTS WA S HELD TO BE VALID AND WITHIN TIME. IN THE CASE OF CIT V . UTTAM CHAND NAHAR, (2007) 295 ITR 403 (RAJ), THE NOTICE REQUIRING 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 S ECTION 148 IN RESPECT OF THE SPECIFIED PERIOD WITHIN WHICH THE ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 24 RETURN IS TO BE SUBMITTED. THE REASSESSMENT PROCEED INGS WERE HELD TO BE VALID. 2.20. 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 ESCAPING ASSESSMENT UNDER SECTION 147 WHICH WAS NOT TIME BARRED OR OTHERWISE INVALID. LIKEWISE, IN ATUL TR ADERS V. ITO, (2006) 282 ITR 536 (ALL), THE ACCOUNT BOOKS OR RECORD AND OTHER MATERIAL WERE ALL COMMON WHICH WERE BEING CONSIDERED BY THE CIT(A) IN THE PROCEEDINGS RELATIN G TO THREE APPEALS. THE PETITIONER HAD NOTICE AND OPPORT UNITY OF BEING HEARD. THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALIDLY INITIATED. IN THE CASE OF INDUCTOTHERM (IN DIA) P. LTD. V. LAMES KURIAN, ASST. CIT, (2007) 294 ITR 341 (GUJ ), THE ASSESSING OFFICER HAD FOUND THAT THERE WERE ERRORS IN THE COMPUTATION OF ALLOWANCES. THE REASSESSMENT PROCEED INGS WERE HELD TO BE VALID. IN THE CASE OF PAPAYA FARMS PVT. LTD. VS. DCIT, (2010) 323 ITR 60 (MAD), WHERE THE ASSESS EE HAD ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 25 FURNISHED INCORRECT PARTICULARS AND THEREFORE, THE REOPENING OF THE ASSESSMENT WAS HELD TO BE JUSTIFIED. 2.21. 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 PENAL INTEREST WHICH HAD ACCRUED NOT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR BUT IN EARLIER YEAR S. THIS THE ASSESSEE HAD NOT DISCLOSED. THE REASSESSMENT WA S HELD TO BE VALID. LIKEWISE, IN KUSUM INDUSTRIES P. LTD. V. CIT, (2008) 296 ITR 242 (ALL), AS THE AWARD HAD BECOME F INAL IT WOULD BE TAKEN THAT THE DIRECTORS OF THE ASSESSEE H AD ACCEPTED THE FACTUM OF EARNING OF SECRET PROFIT NOT REFLECTED IN THE BOOKS OF ACCOUNT, WHICH WAS ALSO BINDING ON THE COMPANY. THE NON-APPEARANCE OF ONE OF THE ARBITRATO RS AND ONE OF THE DIRECTORS IN RESPECT OF THE SUMMON ISSUE D UNDER SECTION 131 WOULD NOT MAKE THE REASSESSMENT INVALID . THE HONBLE KERALA HIGH COURT IN CIT V. INDO MARINE AGE NCIES (KERALA) P. LTD., (2005) 279 ITR 372 (KER), HELD TH AT THE ENTRY WOULD AMOUNT TO AN ORDER UNDER SECTION 144. T HE ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 26 MERE FACT THAT IT WAS NOT COMMUNICATED TO THE ASSES SEE WOULD NOT MAKE SUCH AN ASSESSMENT RECORDED IN THE O RDER SHEET ILLEGAL AND THAT WOULD NOT BAR FURTHER PROCEE DINGS 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) 285 ITR 369 (KER), WHERE, THE ASSESSEE COULD NOT, AFTER HAVING PERSUADED THE ASSESSING AUTHORITY TO WITHDRAW THE N OTICE DATED 1-10-1993, POINTING OUT THAT IT WAS NOT IN CO NFORMITY WITH LAW, BE ALLOWED TO CONTEND THAT THE NOTICE WAS VALID DUE TO THE OMISSION OF THE TIME-LIMIT BY THE FINANC E (NO.2) ACT, 1996, WITH EFFECT FROM 1-4-1989. IN THE ABSENC E OF SPECIFIC PROVISION IN THE FINANCE (NO. 2) ACT, 1996 , INVALIDATING PROCEEDINGS INITIATED BY THE INCOME-TA X OFFICER, THE ACTION TAKEN BY HIM APPLYING THE THEN EXISTING LAW COULD NOT BE SAID TO BE INVALID. 2.22. 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 H AD NOT BEEN DISCLOSED NOR A COPY OF THE LEDGER ACCOUNT OF THE ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 27 ASSESSEE MAINTAINED BY THE COMPANY FILED. IN VIEW O F THE ABSENCE OF THESE DETAILS, THE ASSESSING OFFICER CO ULD NOT EXAMINE THE TAXABILITY OF ADVANCES OR LOAN RAISED B Y THE ASSESSEE. THERE WAS FAILURE TO DISCLOSE MATERIAL FA CTS NECESSARY FOR ASSESSMENT. THE REASSESSMENT PROCEEDI NGS WERE HELD TO BE VALID. IN ANOTHER CASE, THE HONBL E ALLAHABAD HIGH COURT IN CHANDRA PRAKASH AGRAWAL V. ASST. CIT, (2006) 287 ITR 172 (ALL), WHEREIN, THE INCOME- TAX DEPARTMENT HAD SENT A REQUISITION ON 27-3-2002, UND ER SECTION 132A REQUISITIONING THE BOOKS OF ACCOUNT AN D OTHER DOCUMENTS SEIZED BY THE CENTRAL EXCISE DEPARTMENT. THE RECORD OF THE PROCEEDING DATED 18-4-2002, SHOWED TH AT THE REQUISITION WAS NOT FULLY EXECUTED AS ALL THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS HAD NOT BEEN DELIVERED TO THE REQUISITIONING AUTHORITY. THE PROCEEDINGS INITIATED UNDER SECTION 147 WAS HELD TO BE VALID. 2.23. 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 28 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 . 2.24. LIKEWISE, IN CIT V. ABDUL KHADER AHAMED, (2006) 285 ITR 57 (KER), IT WAS CLEAR FROM THE REAS ONS RECORDED BY THE DEPUTY CIT THAT HE PRIMA FACIE HAD REASON TO BELIEVE THAT THE ASSESSEE HAD OMITTED TO DISCLOS E FULLY AND TRULY THE MATERIAL FACTS AND THAT AS A CONSEQUE NCE INCOME HAD ESCAPED ASSESSMENT. THE REASSESSMENT WAS HELD TO BE VALID. IN THE CASE OF U.P. STATE BRASSW ARE CORPORATION LTD. V. CIT, (2005) 277 ITR 40 (ALL), T HE PRINCIPLES LAID DOWN BY THE CALCUTTA HIGH COURT IN CIT V. NEW CENTRAL JUTE MILLS CO. LTD. : (1979) 118 ITR 10 05 (CAL) DID CONSTITUTE INFORMATION ON A POINT OF LAW WHICH SHOULD BE TAKEN INTO CONSIDERATION BY THE ITO IN FORMING H IS BELIEF THAT THE INCOME TO THAT EXTENT HAD ESCAPED ASSESSME NT TO TAX AND, THE REASSESSMENT WAS HELD TO BE VALID. IN SUNDER ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 29 CARPET INDUSTRIES V. ITO, (2010) 324 ITR 417 (ALL), HELD THAT THE DEPARTMENTAL VALUER'S REPORT CONSTITUTED MATERI AL FOR ENTERTAINING A BELIEF OF ESCAPED INCOME IN THE YEAR S UNDER CONSIDERATION. THE REASSESSMENT PROCEEDING WAS HELD TO BE VALID. 2.25. 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 LIABILITIES TOWARDS SUNDRY CREDITORS IN THE BALANCE -SHEET OF THE 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 (KER), THE ASSESSEE CHALLENGED THE VALIDITY OF T HE REASSESSMENT ON THE GROUND THAT THE AO HAD EXCEEDED HIS JURISDICTION UNDER SECTION 147 AND BOTH THE FIRST A PPELLATE ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 30 AUTHORITY AS WELL AS THE TRIBUNAL ACCEPTED THE CONT ENTION OF THE ASSESSEE HOLDING THAT SO FAR AS THE REASSESSMEN TS 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 POWE R PRODUCTS LTD. V. DEPUTY CIT, (2012) 340 ITR 53 (DEL ), THERE BEING OMISSION AND FAILURE ON THE PART OF THE ASSES SEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS THUS REASSE SSMENT PROCEEDINGS WERE HELD TO BE VALID. 2.26. IN ATMA RAM PROPERTIES PRIVATE LTD. V. DEPUT Y CIT, (2012) 343 ITR 141 (DEL), AS THE BOOKS OF ACCO UNT AND OTHER MATERIAL WERE NOT PRODUCED AND NO LETTER WAS FILED, THE ORDER PASSED BY THE COMMISSIONER (APPEALS) IN T HE ASSESSMENT YEAR 2001-02 WOULD CONSTITUTE 'INFORMATI ON' OR MATERIAL FROM ANY EXTERNAL SOURCE AND, AS SUCH, THE REASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 20 00-01 WERE HELD TO BE VALID. LIKEWISE, IN THE CASE OF C IT V. SMT. R. SUNANDA BAI, (2012) 344 ITR 271 (KER), THE REASSESSMENT IN QUESTION WERE HELD TO BE VALID ON T HE FACT THAT THE ASSESSEE CLAIMED AND WAS GIVEN RELIEF UNDE R ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 31 SECTION 80HHA FOR THE THREE PRECEDING YEAR WHICH DISENTITLED HER FOR DEDUCTION UNDER SECTION 80HH FO R THE ASSESSMENT YEARS 1992-93 AND 1993-94. 2.27. 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 FIRE BOILER, THE REASSESSMENT WAS HELD TO BE VALID. IN THE CASE OF CONVERGYS CUSTOMER MANAGEMENT V. ASST. DIT, (201 3) 357 ITR 177 (DEL), WHERE THERE BEING PRIMA FACIE MA TERIAL IN THE POSSESSION OF THE ASSESSING OFFICER TO FORM A T ENTATIVE BELIEF THAT SECTION 9(1)(I) HELD ATTRACTED, SAID RE ASON BY ITSELF CONSTITUTED A RELEVANT GROUND TO REOPEN THE ASSESSM ENT OF THE ASSESSEE. 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)]; ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 32 V. KERALA FINANCIAL CORPORATION V. JOINT CIT [(2009) 30 8 ITR 434 (KER)]; VI. MAVIS SATCOM LTD. V. DEPUTY CIT [(2010) 325 ITR 428 (MAD)]; VII. CIT V. MADHYA BHARAT ENERGY CORPORATION LTD. [(2011) 337 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 (BOM)]; XVII. RAYALA CORPORATION P. LTD. V. ASST. CIT [(2014) 363 IT R 630 (MAD)]. 2.28. SO FAR AS, THE DECISION IN THE CASE OF CIT V S KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC) IS ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 33 CONCERNED, THE HONBLE APEX COURT, WHILE COMING TO A PARTICULAR CONCLUSION, ONLY IN A SITUATION, WHEN NO T A SINGLE PIECE OF PAPER OR DOCUMENT WAS RECOVERED, THEREFORE , THE HONBLE COURT HELD THAT SINCE THERE WAS NO TANGIBLE MATERIAL FOUND AND THE ADDITION WAS MERELY ON THE B ASIS OF STATEMENT ONLY THEN REOPENING OF ASSESSMENT U/S 147 OF THE ACT WAS NOT PERMISSIBLE. LIKEWISE, IN THE CASE OF CIT VS S. KHADER KHAN SON (2012) 254 CTR 228 (SC), AFFIRMI NG THE DECISION OF MADRAS HIGH COURT IN (2008) 300 ITR 157 (MAD.), THE WHOLE ADDITION WAS MADE SOLELY ON THE B ASIS OF STATEMENT U/S 133A AND NO OTHER MATERIAL WAS FOUND, IN THAT SITUATION, IT WAS HELD THAT THE SUCH STATEMENT HAS NO EVIDENTIARY VALUE. 2.29. 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 FROM THE INVESTIGATION WING OF THE DEPARTMENT AT CALCUTTA RE GARDING SHELL COMPANIES WHICH HAD GIVEN ACCOMMODATION ENTRIES FOR SHARE PREMIUM TO SURAT BASED COMPANIES. A LIST OF 114 CALCUTTA BASED COMPANIES WAS PROVIDED WHICH HAD GIVEN ACCOMMODATION ENTRIES TO S UCH SURAT BASED COMPANIES. STATEMENTS OF MANY ENTRY OPERATORS AND D UMMY DIRECTORS RECORDED DURING VARIOUS SEARCH AND SEIZURE OPERATIO N, SURVEY OPERATION AND INVESTIGATION WERE CHECKED. THE ASSESSING OFFIC ER THEREUPON ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 34 PROCEEDED TO RECORD THAT 'ON PERUSAL OF DATA SO PRO VIDED BY THE DEPUTY DIRECTOR (INVESTIGATION), IT IS NOTICED THAT DURING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS ACCEPTED SH ARE CAPITAL/SHARE PREMIUM FROM THE FOLLOWING ENTRIES/PARTIES WHICH HA VE BEEN PROVED TO BE SHELL COMPANIES BASED ON THE INVESTIGATION CONDUCTE D BY THE DEPUTY DIRECTOR (INVESTIGATION). UNDERNEATH, HE PROVIDED A LIST OF 17 COMPANIES WHO HAD TRANSACTED WITH THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION AND WERE ALLOTED EQUITY SHARES BY PUR PORTED INVESTMENT OF SIZEABLE SHARE CAPITAL AND SHARE PREMIUM AMOUNTS. O N VERIFICATION OF SUCH MATERIALS, THE ASSESSING OFFICER NOTED THAT TH E ASSESSEE HAD RECEIVED SHARE CAPITAL/SHARE PREMIUM AMOUNT, SINCE THE INVESTOR COMPANIES WERE FOUND TO BE SHELL COMPANIES INDULGIN G IN PROVIDING ACCOMMODATION ENTRIES, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE SHARE CAPITAL/SHARE PREMIUM CLAIMED TO HAVE BEEN RE CEIVED FROM THE COMPANY BY THE ASSESSEE WAS NOT GENUINE. AMOUNT IS NOTHING BUT ASSESSEE'S OWN MONEY INTRODUCED IN THE GARB OF SHAR E CAPITAL/SHARE PREMIUM FROM THE SHELL COMPANIES AND THEREFORE, SUC H AMOUNT IS LIABLE TO BE TAXED UNDER SECTION 68. HE THEREFORE, RECORDE D HIS SATISFACTION THAT THE INCOME HAD ESCAPED ASSESSMENT AND THAT THIS WAS DUE TO THE ASSESSEE HAVING FAILED TO DISCLOSE 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 ESCAPED ASSESSMENT, HE MAY SUBJECT TO THE PROVISIONS OF SEC TIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME. PROVISO TO SECTION 147 OF COURSE REQUIRES THAT WHERE THE ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SH ALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF THE FOUR YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON PART OF THE ASSESSEE TO MAKE RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR 148 OR TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YE AR. IN THIS CONTEXT, IT IS WELL SETTLED THAT THE REQUIREMENT OF FULL AND TR UE DISCLOSURE ON PART OF THE ASSESSEE IS NOT CONFINED TO FILING OF RETURN AL ONE BUT WOULD CONTINUE ALL THROUGHOUT DURING THE ASSESSMENT PROCEEDINGS AL SO. IN THIS CONTEXT, THE MATERIALS ON RECORD WOULD SUGGEST THAT THE ASSE SSING OFFICER HAD RECEIVED FRESH INFORMATION AFTER THE ASSESSMENT WAS OVER PRIMA FACIE SUGGESTING THAT SIZEABLE AMOUNT OF INCOME CHARGEAB LE TO TAX IN CASE OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND THAT SUC H ESCAPEMENT 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 REEXAMINING THE MATERIALS AND THE DOCUMENTS ALREADY ON RECORD FILED BY THE ASSESSEE ALONG WITH THE RETURN OR SUBSEQUENTLY, BROUGHT ON R ECORD DURING THE ASSESSMENT PROCEEDINGS. IT WAS A CASE WHERE ENTIREL Y NEW SET OF DOCUMENTS AND MATERIALS WAS PLACED FOR HIS CONSIDER ATION COMPILED IN THE FORM OF REPORT RECEIVED FROM THE INVESTIGATION WING. SUCH MATERIAL ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 35 WAS PERUSED BY THE ASSESSING OFFICER AND UPON EXAMI NATION THEREOF, HE FORMED A BELIEF THAT THE ASSESSEE COMPANY HAD RECEI VED SHARE APPLICATION AND SHARE PREMIUM MONEY FROM AS MANY AS 20 DIFFEREN T INVESTOR COMPANIES WHO WERE FOUND TO BE SHELL COMPANIES AND INDULGING IN GIVING ACCOMMODATION ENTRIES. FROM THIS VIEW POINT, SINCE THE ASSESSING OFFICER HAD SUFFICIENT MATERIAL AT HIS COMMAND TO FORM SUCH A BELIEF. SUCH MATERIALS DID NOT FORM PART OF THE ORIGINAL ASSESSM ENT PROCEEDINGS AND WAS PLACED BEFORE THE ASSESSING OFFICER ONLY AFTER THE ASSESSMENT WAS COMPLETED. SINCE ON THE BASIS OF SUCH MATERIALS, AS SESSING OFFICER, CAME TO A REASONABLE BELIEF THAT INCOME CHARGEABLE TO TA X HAD ESCAPED ASSESSMENT, MERELY BECAUSE THESE TRANSACTIONS WERE SCRUTINISED BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT AL SO WOULD NOT PRECLUDE HIM FROM REOPENING THE ASSESSMENT. HIS SCRUTINY DUR ING 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 ASSESSING OFFICER, AS NOTED, RECEIVED FRESH MATERIAL AFTER THE ASSESSM ENT WAS OVER, PRIMA FACIE , SUGGESTING THAT THE ASSESSEE COMPANY HAD RECEIVED BOGUS 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 WO ULD NOT MAKE ANY DIFFERENCE. THE SCRUTINY WAS ON THE BASIS OF DISCLO SURES MADE AND MATERIALS SUPPLIED BY THE ASSESSEE. SUCH MATERIAL I S FOUND TO BE PRIMA FACIE UNTRUE AND DISCLOSURES NOT TRUTHFUL. EARLIER SCRUT INY OR EXAMINATION ON THE BASIS OF SUCH DISCLOSURES OR MATERIALS WOULD NOT DEBAR A FRESH ASSESSMENT. EACH INDIVIDUAL CASE OF THIS NATURE IS BOUND TO HAVE SLIGHT DIFFERENCE IN FACTS. [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 AVAILABL E WHICH HAD A LIVE LINK WITH FORMATION OF BELIEF THAT THE INCOME CHARGEABLE TO TAX 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 PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NA TURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, I N THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR. THAT THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE FR OM ABOVE-NOTED COMPANIES WAS ONLY BY NATURE OF ACCOMMODATION ENTRI ES AND IN REALITY, IT WAS THE FUNDS OF THE ASSESSEE WHICH WAS BEING RE-RO UTED. UNDOUBTEDLY. SECTION 68 WOULD HAVE APPLICABILITY. PROVISO ADDED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 1-4-2013, DOES NOT CHANGE THI S POSITION. [PARA 14] ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 36 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, EXPLANATION OFFERED BY THE ASSESSEE COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS THE PERSON IN WHOSE NAME SUCH CREDIT IS RECO RDED IN THE BOOKS OF THE COMPANY ALSO OFFERS AN EXPLANATION ABOUT THE NA TURE AND SOURCE OF SUM SO CREDITED AND SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER HAS BEEN FOUND TO BE SATISFACTORY. ESSENTIA LLY, THIS PROVISO EASES THE BURDEN OF PROOF ON THE REVENUE WHILE MAKING ADD ITION UNDER SECTION 168 WITH RESPECT TO NON GENUINE SHARE APPLICATION M ONEY OF THE COMPANIES. EVEN IN ABSENCE OF SUCH PROVISO AS WAS T HE CASE GOVERNING THE PERIODS WITH WHICH WE ARE CONCERNED IN THE PRES ENT CASE, IF FACTS NOTED BY THE ASSESSING OFFICER AND RECORDED IN REAS ONS ARE ULTIMATELY ESTABLISHED, INVOCATION OF SECTION 68 WOULD BE CALL ED 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 ASSE SSING OFFICER AND NOTED THE GIST OF HIS REASONS FOR RESORTING TO REOP ENING OF THE ASSESSMENT. THE ASSESSING OFFICER HAD PERUSED THE MATERIALS PLA CED FOR HIS CONSIDERATION AND THEREUPON, UPON EXAMINATION OF SU CH MATERIALS FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. [PARA 16] IN THE RESULT, PETITION IS DISMISSED. [PARA 17] 2.30. 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 CONSIDERED 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] (PA RA 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) ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 37 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) 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] (PARA 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). ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 38 2.31. 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 WAS HELD TO BE JUSTIFIED. IN THE PRESENT APP EAL BEFORE THIS TRIBUNAL, IT IS NOTED THAT THE LD. ASSESSING O FFICER RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE MADE PURCHASES FROM PARTIES, WHICH WER E DECLARED SUSPICIOUS AND THESE PARTIES IN THEIR STAT EMENT AND ALSO ON THE BASIS OF SPOT VERIFICATION/SURVEY A CTION, ETC, DULY ADMITTED THE FACT, THEY HAVE NO ACTUALLY DELIV ERED THE GOODS AND MERELY PROVIDED THE BILLS AND REFUNDED BA CK THE CASH AFTER DEDUCTING THEIR NOMINAL COMMISSION. THE DETAILS OF SUCH PURCHASES/PARTIES IS AVAILABLE ON RECORD AN D DISCUSSION HAS BEEN MADE IN THE ASSESSMENT ORDER AS WELL AS IN THE IMPUGNED ORDER. ON EXAMINATION OF THE DET AILS, IT WAS FOUND THAT THE PARTIES WERE INDULGED IN ISSUING BOGUS BILLS WITHOUT PHYSICAL DELIVERY OF THE GOODS. THUS, THE LD. ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 39 ASSESSING OFFICER RECORDED THE REASONS/SATISFACTION , AS PER THE PROVISIONS OF SECTION 147 AND ISSUED NOTICES UN DER SECTION 148 OF THE ACT FOR REOPENING THE ASSESSMENT . SUBSEQUENTLY, NOTICES UNDER SECTION 143(2) AND 142( 1) ALONG WITH DETAILED QUESTIONNAIRE WERE ALSO SERVED UPON THE ASSESSEE, THUS, CONSIDERING THE TOTALITY OF FAC TS AND THE AFOREMENTIONED JUDICIAL PRONOUNCEMENTS, I FIND NO INFIRMITY IN REOPENING THE ASSESSMENT, CONSEQUENTLY , THIS GROUND OF THE ASSESSEE IS HAVING NO MERIT, THEREFOR E, DISMISSED. 3. SO FAR AS, MERIT OF THE CASE WITH RESPECT TO DISALLOWANCE MADE UNDER SECTION 69C OF THE ACT AND CONSEQUENT ADDITION AS HAS BEEN MENTIONED IN THE RESPECTIVE APPEAL IS CONCERNED, BEFORE ADVERTING FU RTHER, I DEEM IT APPROPRIATE TO CONSIDER VARIOUS DECISIONS F ROM HON'BLE HIGH COURTS / HON'BLE APEX COURT, SO THAT I CAN REACH TO A FAIR CONCLUSION. THE HON'BLE GUJARAT HI GH COURT IN SANJAY OILCAKES INDUSTRIES VS. CIT (2009) 316 IT R 274 (GUJ.) HELD AS UNDER:- 11. HAVING HEARD THE LEARNED ADVOCATES APPEARING FOR THE RESPECTIVE PARTIES, IT IS APPARENT THAT NO ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 40 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 T HE TRIBUNAL HAS 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 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 41 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 I S 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 NOT WHETHER THE PURCHASE PRICE REFLECTED IN THE BOOKS OF ACCOUNT MATCHES THE PURCHASE PRICE STATED TO HAVE 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 OF EVIDENCE AVAILABLE ON RECORD, MADE IT POSSIBLE FOR THE 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. IN THE AFORESAID CASE, THE HON'BLE HIGH COURT ACCEP TED THAT THE APPARENT SELLERS, WHO ISSUED THE SAID BILL S WERE NOT ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 42 TRACEABLE AND THE GOODS RECEIVED FROM PARTIES OTHER THAN THE PERSONS, WHO HAD ISSUED THE BILLS FOR SUCH GOOD S. THE 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 INEVITA BLE IN CASES, WHERE ESTIMATION OF INCOME IS WARRANTED. 3.1 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 AND 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 43 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 EARLIE R DECISION IN THE CASE OF SANKET STEEL TRADERS AND ALSO MADE REFERENCE TO THE TRIBUNAL'S DECISION IN THE CASE OF VIJAY PROTEINS LTD. V. ASST. CIT [1996] 58 ITD 428 (AHD). 6. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTED 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 TRIBUN AL HAVING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE THE CLOTH 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 OILCAKE INDUSTRIES V. CIT [2009] 316 ITR 274 (GUJ). SUCH DECISION IS ALSO FOLLOWED BY THIS COURT IN A JUDGMENT DATED AUGUST 16, 2011, IN TAX APPEAL NO. 679 OF 2010 IN THE CASE OF CIT V. KISHOR AMRUTLAL PATEL. IN THE RESULT, TAX APPEAL IS DISMISSED. 3.2 LIKEWISE, THE HON'BLE GUJARAT HIGH COURT IN CI T VS VIJAY M. MISTRY CONSTRUCTION LTD. (2013) 355 ITR 498 (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, ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 44 HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE AMOUNT. HE, HOWEVER, WAS OF THE VIEW THAT THE 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 DEGREE OF GUESS WORK. NO DOUBT, THE AUTHORITIES SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE 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 LIGHT OF THE AFORESAID DECISIONS, THE DECISION OF T HE 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 THE 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. ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 45 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, TH E 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 THE 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 ITS 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 SUCH 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 DIRECTLY FROM MMTC ; THE DIFFERENCE COULD NOT BE THE NET PROFIT I N THE HANDS OF MMTC ; AND THAT WHILE CONDUCTING THE ENTIRE EXERCISE MMTC WOULD HAVE TO INCUR CERTAIN EXPENDITURE IN TRANSPORTATION, IN ENGAGING PERSONNEL 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 ADDITI ON. ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 46 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 CIRCUMSTANCES, 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 THE COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL. IT IS NOT THE CASE OF THE REVENUE THAT TH E 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 THE CONTRARY BEING POINTED OUT ON BEHAL F OF THE REVENUE, THE IMPUGNED ORDER BEING BASED ON CONCURRENT FINDINGS OF FACT RECORDED BY THE TRIBUNA L UPON APPRECIATION OF THE EVIDENCE ON RECORD, DOES NOT GIVE RISE TO ANY QUESTION OF LAW IN SO FAR AS T HE PRESENT 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 SPARE PARTS AND RS. 4,94,936 BEING DEPRECIATION CLAIMED BY 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 47 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 THE 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 OFFICE R 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 ON ACCOUNT OF TECHNICAL INFIRMITIES AND THAT THE EVIDENCE SUCH AS OCTROI RECEIPT ; HYPOTHECATION OF THE CRANE TO THE BANK; EXISTENCE OF THE CRANE EVEN TILL DATE WITH TH E 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 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 TRIBUNAL, THE ASSESSEE PRODUCED THE EVIDENCE THAT THE CRANE IN 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 THE COMMISSIONER (APPEALS) WAS LEGALLY AND FACTUALLY CORRECT IN DELETING THE DISALLOWANCE OF COST OF CRANE 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 48 EXPENSES TO THE PROFIT AND LOSS ACCOUNT, AND AS SUCH THE QUESTION OF DISALLOWING THE SAME AND ADDING THE SAME TO THE INCOME WOULD NOT ARISE. MOREOVER, IN THE ABSENCE OF ANY EVIDENCE TO INDICATE THAT THE PURCHASE 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 THE PROFIT AND LOSS ACCOUNT, NO ADDITION COULD HAVE BEEN MADE IN RESPECT OF THE PURCHASE PRICE NOR COULD HAVE DEPRECIATION BEEN DISALLOWED IN RESPECT THEREOF. THE 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 QUESTION OF LAW, MUCH LESS, A SUBSTANTIAL QUESTION OF LAW, THE APPEAL IS DISMISSED. 3.3. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ASHISH INTERNATIONAL LTD. (ITA NO.4299/20 09) 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 49 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. 3.4. 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 ASSESSEE WENT IN SECOND APPEAL BEFORE THE TRIBUNAL. IT WAS URGED ON BEHALF OF THE ASSESSEE THAT THE TRANSACTIONS IN 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 THE REVENUE, IT WAS URGED THA T 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, THER E WERE CERTAIN DOUBTFUL FEATURES, BUT THE EVIDENCE WA S 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 AFORESAI D QUESTION HAS BEEN REFERRED TO THIS COURT FOR OPINIO N. ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 50 ON A PERUSAL OF THE ORDER OF THE TRIBUNAL, IT CLEAR LY APPEARS THAT WHETHER THE SAID TRANSACTIONS WERE BOGUS OR NOT WAS A QUESTION OF FACT. THE TRIBUNAL H AS ALSO POINTED OUT THAT NOTHING IS SHOWN TO INDICATE THAT ANY PART OF THE FUND GIVEN BY THE ASSESSEE TO THESE PARTIES CAME BACK TO THE ASSESSEE IN ANY FORM . IT IS FURTHER OBSERVED BY THE TRIBUNAL THAT THERE I S 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 THESE OBSERVATIONS, THE TRIBUNAL ULTIMATELY HAS OBSERVED THAT THERE ARE CERTAIN DOUBTFUL FEATURES, BUT THE EVIDENCE IS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE PARTIES WERE BOGUS. IT MAY BE STATED THA T THE ASSESSEE WAS GIVEN CREDIT FACILITIES FOR A SHOR T DURATION AND THE PAYMENTS WERE GIVEN BY CHEQUES. WHEN THAT IS SO, IT CANNOT BE SAID THAT THE ENTRIES FOR THE PURCHASES OF THE GOODS MADE IN THE BOOKS OF ACCOUNT WERE BOGUS ENTRIES. WE, THEREFORE, DO NOT F IND THAT THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS AGAINST THE WEIGHT OF EVIDENCE. IN THAT VIEW OF THE MATTER, WE ANSWER THE QUESTION IN THE AFFIRMATIVE, THAT IS, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, THE REFERENCE STANDS DISPOSED OF WITH NO ORDER AS TO COSTS. 3.5. 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 ASSESSEE 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, THAT LEDGER ACCOUNTS OF THE PART IES IN ASSESSEE'S BOOKS SHOWED BILLS ACCOUNTED FOR, THA T ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 51 PAYMENT WAS MADE BY CHEQUES, THAT A CERTIFICATE FROM THE BANKER GIVING DETAILS OF CHEQUE PAYMENT TO THE SAID PARTIES WAS ALSO FURNISHED. COPIES OF THE CONSIGNMENT, RECEIVED FROM THE GOVERNMENT APPROVED TRANSPORT CONTRACTORS SHOWING THAT MATERIAL PURCHASED WAS ACTUALLY DELIVERED AT THE SITE WAS FURNISHED BEFORE THE AO. IT WAS ALSO ARGUED THAT SOME OF THE MATERIAL PURCHASED FROM THE SAID PARTIE S WERE LYING PART OF CLOSING STOCK AS ON 31.03.2009 A S 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 WI TH BANK CERTIFICATE HAT THE SUPPLIERS WAS SHOWN AS DEFAULT UNDER THE MAHARASHTRA VAT ACT COULD NOT BE SUFFICIENT EVIDENCES TO HOLD THAT THE PURCHASES WER E NON-GENUINE, THAT THE AO HAD NOT BROUGHT ANY INDEPENDENT AND RELIABLE EVIDENCES AGAINST THE ASSESSEE TO PROVE THE NON-GENUINENESS OF THE PURCHASES, THAT THERE WAS NO EVIDENCE REGARDING CASH RECEIVED BACK FROM THE 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 ORDER 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 52 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 THE ADDITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWALA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATION AND TAKE IT TO LOGICAL END. BUT, HE LEFT THE JOB AT INITIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DETAILS OF T HE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. WE FIND THAT NO SUCH EXERCISE WAS DONE. TRANSPORTATION OF GOOD TO THE SITE IS ONE OF THE DECIDING FACTOR TO BE CONSIDERED FOR RESOLVI NG THE ISSUE. THE FAA HAS GIVEN A FINDING OF FACT THAT PART OF THE GOODS RECEIVED BY THE ASSESSEE WAS FORMING PART OF CLOSING STOCK. AS FAR AS THE CASE O F WESTERN EXTRUSION INDUSTRIES. (SUPRA)IS CONCERNED, WE FIND THAT IN THAT 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 THE ORDER OF THE AO , ABOUT THE CASH TRAIAL. SECONDLY, PROOF OF MOVEMENT OF GOODS IS NOT IN DOUBT. THERERFORE, CONSIDERING T HE 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 ENDORS E THE VIEW TAKEN BY THE AO. SO, CONFIRMING THE ORDER OF THE FAA, WE DECIDE GROUND NO.1 AGAINST THE AO . 3.6. THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS NIKUNJ EXIM ENTERPRISES PVT. LTD. (2015) 372 ITR 61 9 (BOM.) HELD/OBSERVED AS UNDER:- ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 53 7. WE HAVE CONSIDERED THE SUBMISSION ON BEHALF OF THE REVENUE. HOWEVER, FROM THE ORDER OF THE TRIBUNAL DATED APRIL 30, 2010, WE FIND THAT THE TRIBUNAL HAS DELETED THE ADDITIONS ON ACCOUNT OF BOGUS PURCHASES NOT ONLY ON THE BASIS OF STOCK STATEMENT, I.E., RECONCILIATION STATEMENT BUT ALSO IN VIEW OF THE OTHER FACTS. THE TRIBUNAL RECORDS THAT THE BOOKS OF ACCOUNT OF THE RESPONDENT-ASSESSEE HAVE NOT BEEN REJECTED. SIMILARLY, THE SALES HAVE NOT BEEN DOUBTED AND IT IS AN ADMITTED POSITION THAT SUBSTANTIAL AMOUNT OF SALES HAVE BEEN MADE TO THE GOVERNMENT DEPARTMENT, I.E., DEFENCE RESEARCH AND DEVELOPMENT LABORATORY, HYDERABAD. FURTHER, THERE WERE CONFIRMATION LETTERS FILED BY THE SUPPLIERS, COPIES OF INVOICES FOR PURCHASES AS WELL AS COPIES OF BANK STATEMENT ALL OF WHICH WOULD INDICATE THAT THE PURCHASES WERE IN FACT MADE. IN OUR VIEW, MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME-TAX (APPEALS), ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT-ASSESSEE. THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF INCOME-TAX (APPEALS) HAVE DISALLOWED THE DEDUCTION OF RS. 1.33 CRORES ON ACCOUNT OF PURCHASES MERELY ON THE BASIS OF SUSPICION BECAUSE THE SELLERS AND THE CANVASSING AGENTS HAVE NOT BEEN PRODUCED BEFORE THEM. WE FIND THAT THE ORDER OF THE TRIBUNAL IS WELL A REASONED ORDER TAKING INTO ACCOUNT ALL THE FACTS BEFORE CONCLUDING THAT THE PURCHASES OF RS. 1.33 CRORES WAS NOT BOGUS. NO FAULT CAN BE FOUND WITH THE ORDER DATED APRIL 30, 2010, OF THE TRIBUNAL. 3.7. IF THE RATIO LAID DOWN BY HON'BLE JURISDICTIO NAL HIGH COURT IN THE AFORESAID CASE OF M/S NIKUNJ EXIM P. ENTERPRISES PVT. LTD.((SUPRA)) IS ANALYZED WITH THE FACTS OF THE PRESENT APPEAL, IT IS NOTED THAT THE LD. ASSESS ING OFFICER ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 54 RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE CONCERNED PARTIES STATED OATH BEFORE THEM THAT THEY MERELY PROVIDED ENTRIES TO THE BENEFICIARIES WITHOU T ACTUAL EFFECTING THE DELIVERY OF GOODS. BEFORE THE LD. ASS ESSING OFFICER, THE ASSESSEE PRODUCED COMPARATIVE DETAILS OF GP/NP RATES FOR HAWALA YEARS, PRECEDING TWO YEARS A ND SUBSEQUENT TWO ASSESSMENT YEARS. THE LD. COMMISSION ER OF INCOME TAX (APPEAL) HAS SUMMARIZED THE FACTS IN PARA- 9.15 OF THE IMPUGNED ORDER. IF THE CHART IS ANALYZE D, THE ASSESSEE HAVE DECLARED GP @ 36.03% TO 51.38% DECLAR ED FORM ASSESSMENT YEAR 2012-13 AND 2013-14 RESPECTIVE LY. THE LD. ASSESSING OFFICER DISALLOWED THE ENTIRE PUR CHASES, WHEREAS, THE LD. COMMISSIONER OF INCOME TAX (APPEAL ) CONFIRMED THE ADDITION MADE BY THE LD. ASSESSING OF FICER. IF THE RATIO LAID DOWN IN THE AFORESAID CASES IS KEPT IN JUXTAPOSITION WITH THE FACTS OF THE APPEALS, I AM O F THE VIEW THERE CANNOT BE SALE WITHOUT PURCHASES, THEREFORE, EVEN IF IT IS PRESUMED THAT THE ASSESSEE PURCHASED THE GOODS F ROM THE GREY MARKET STILL THE PROFIT ELEMENT, EMBEDDED THEREIN, CAN BE TAXED. IF THE GROSS PROFIT DECLARED FROM ASS ESSMENT YEAR 2007-08 TO 2013-14 IS AVERAGED, IT COMES TO 42 %, ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 55 THEREFORE, THE ADDITION CAN BE SUSTAINED TO THE EXT ENT OF 42% OF THE BOGUS PURCHASES, CONSEQUENTLY, THE APPEA LS OF THE ASSESSEE ARE PARTLY ALLOWED. FINALLY, THE APPEALS OF THE ASSESSEE ARE PARTLY ALL OWED. 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 ITA NO.1785, 1786 & 1787/MUM/2018 SNEHLATA AHNAND RANE 56