ASST CIT 19(3), MUMBAI V. TUBES INDIA, MUMBAI

ITA 3145/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8174 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 04-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHAN
• Assessee Lawyers: RAJESH CHAMARIA
• Keywords: Reopening of assessment; Bogus purchase; Depreciation; Peak credit; Tangible material; Accommodation entries; Assessment record; Reason to believe; Reassessment proceedings
• Section: 69C; 143(3); 133(6); 148; 6; 10; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI RAM LAL NEGI , J M ./ I.T.A. NO S . 2230 TO 2232/MUM/2016 ( / ASSESSMENT YEAR S : 2009 - 10 TO 2 011 - 12 ) TUBES INDIA 11/15, 2 ND PATHAN STREET, KUMBHARWADA 5 TH LANE, MUMBAI - 400 004 / VS. THE ASST. CIT, CIRCLE 19(3), ROOM NO. 206, 2 ND FLOOR, MATRU MANDIR, TARDEO, MUMBAI - 400 00 7 ./ ./ PAN/GIR NO. AAAET 4281 A (ASSESSE E) : (REVENUE) ./ I.T.A. NO S . 3145 TO 3147/MUM/2016 ( / ASSESSMENT YEARS: 2009 - 10 TO 2011 - 12 ) THE ASST. CIT, CIRCLE 19(3), ROOM NO. 206, 2 ND FLOOR, MATRU MANDIR, TARDEO, MUMBAI - 400 007 / VS. TUBES INDIA 11/15, 2 ND PATHAN STR EET, KUMBHARWADA 5 TH LANE, MUMBAI - 400 004 (REVENUE) : (ASSESSEE) ASSESSEE BY : SHRI RAJESH CHAMARIA RE VENUE BY : SHRI M. C. OMI NINGSHAN / DATE OF HEARING : 05.12.2017 / DATE OF PRONOUNCEMENT : 07.12 .2017 / O R D E R PER BENCH : TH ESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARISING OUT OF THE COMMON ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) , PERTAINING TO THE ASSESSMENT YEAR 2009 - 10 TO 2011 - 12. 2 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 2. THE COMMON GROUNDS OF APPEAL IN ASSESSEE S CASE READ AS UNDER: (1) ON THE FA CTS AND IN LAW, THE LD. CI T (A) ERRED IN UPHOLDING RE - OPENING OF ASSESSMENT COMPLETED U/S 143 (3) OF THE ACT, SOLELY ON THE BASIS OF LIST OF 'SUSPICIOUS DEALERS' UPLOADED ON WEBSITE OF SALES TAX DEPT., WITHOUT PROVING THA T ALLEGED BOGUS PARTIES HAVE ACTUALLY PROVIDED ACCOMMODATION ENTRIES TO APPELLANT. (2) ON THE FACTS AND IN LAW, THE LD. CIT (A) ERRED IN UPHOLDING PURCHASES MADE FROM ALLEGED BOGUS PARTIES AS ACCOMMODATION ENTRIES, IGNORING THE FACT THAT APPELLANT IS A TRADER AND THERE ARE DOCUMENTARY EVIDENCES AVAILABLE TO SUBSTANTIATE PURCHASES I.E. PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES, QUANTITATIVE RECORDS ARE MAINTAINED AND FOR EVERY PURCHASE THERE WAS CORRESPONDING SALES WHICH HAS BEEN ACCEPTED BY AO, (3) ON THE FACTS AND IN LAW AND WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEAL, THE LD. CIT (A) ERRED IN SUSTAINING ADDITION ESTIMATED @ 12.5% ON THE ALLEGED BOGUS PURCHASES , ON THE GROUND THAT THE MOTIVE OF OBTAINING BOGUS BILLS WAS TO SUP PRESS TRUE PROFIT WITHOUT REDUCING THE G P ALREADY EARNED ON SUCH PURCHASES. (4) ON THE FACTS AND IN LAW AND WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEAL, THE LD. CIT (A) ERRED IN SUSTAINING AN ADDITION TO THE EXTENT OF 12.5% OF THE ALLEGED BOGUS PURCHA SES WITHOUT REDUCING THE GP ALREADY SHOWN BY THE APPELLANT ON THE ALLEGED BOGUS PURCHASES. 3. THE COMMON GROUNDS OF APPEAL IN REVENUES APPEAL READ AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTI FIED IN CONFIRMING ADDITION @12.5% OF TOTAL PURCHASE HELD AS BOGUS BY THE A.O.? 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. SINCE FACTS ARE IDENTICAL, WE ARE R EFERRING TO THE FACTS AND FIGURES FROM ASSESSMENT YEAR 2009 - 10. 5. IN THIS CASE, T HE ASSESSEE IS A PARTNERSHIP FIRM, ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METAL PIPES AND TUBES. THE RETURN OF INCOME FOR THE 3 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 YEAR UNDER APPEAL WAS F ILED DECLARING TOTAL INCOME OF RS. 72,22,654/ - . THE ASSESSMENT U/S . 143(3) OF THE ACT WAS COMPLETED ASSESSING THE TOTAL INCOME AT RS. 73,65,740/ - . THEREAFTER, INFORMATION WAS RECEIVED THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES IN THE FORM OF PURCHASE BILLS. ON THE BASIS OF TANGIBLE MATERIAL AVAILABLE, THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT ON 26.02. 2013. THE ASSESSMENT U/S. 143(3) R.W.S 147 WAS COMPLETED BY THE ASSESSING OFFICER ON 27. 03. 2014 , DETERMINING THE TOTAL INCOME AT RS. 1,22,10,970/ - . 6. DURING THE COURSE OF REOP ENING ASSESSMENT PROCEEDINGS, TO ASCERTAIN THE GENUINENESS OF PURCHASES SHOWN IN THE ACCOUNTS, NOTICES U/S 133(6) WERE SENT TO M/S SHIV INDUSTRIE S, M/S KIRAN SALES COR PORATION/ NIDHI IMPEX INDIA, M/S UNIVERSAL ENTERPRISES, M/S LAKSHMI TRADING, M/S GOODLUCK META L S AND M/S KHUSH IMPEX P LTD. OUT OF WHICH THERE IS NO RESPONSE TO THE NOTICE ISSUE D U/S. 133(6) OF THE ACT IN THE CASE OF M/S SHIV INDUSTRIES AND IN THE OTHER CAS ES, SAID NOTICES WERE RETURNED UNDELIVERED BY THE POSTAL AUTHORITIES. FURTHER, ASSESSING OFFICER OBSERVED THAT THE PARTIES TIN MATCHED WITH THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT WITH REGARD TO THE HAWALA OPERATORS AVAILABLE IN PUBLI C DOMAIN ON THE WEBSITE OF THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA. AR HAS NOT FILED ANY DOCUMENTARY EVIDENCES AND NOT RESPONDED TO THE ORDER SHEET ENTRY DATED 24 - 12 - 2013 TO PRODUCE THE PARTIES. IN THESE CIRCUMSTANCES, ASSESSING OFFICER ISSUE D SHOW CAUSE NOTICE TO FURNISH THE DETAILS AND ALSO TO PRODUCE THE PARTIES FOR VERIFICATION. 4 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 SUBSEQUENTLY, VIDE LETTER DATED 16 - 01 - 2014 & 06 - 02 - 2014, FURNISHED THE LEDGER ACCOUNTS, XEROX COPIES OF SALE INVOICES, DELIVERY CHALLANS CHART SHOWING BILL WISE PU RCHASES IN RESPECT OF THE PURCHASE PARTIES AND AT THE SAME TIME OBJECTED THE REASSESSMENT PROCEEDINGS STATING THAT THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, WHERE THE PURCHASES WERE EXAMINED AND REQUESTED NOT TO MAKE ANY ADDITION IN RESPECT OF BO GUS PURCHASES IN THE REASSESSMENT PROCEEDINGS U/S 147 IN RESPECT OF ALLEGED PARTIES ON THE BASIS OF THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT. ASSESSING OFFICER WITHOUT ACCEPTING THE SUBMISSIONS AND CONTENTIONS OF THE APPELLANT, CONCLUDED THAT THE ASSESSEE DID NOT PURCHASE ANY GOODS FROM THE ABOVE PARTIES AND HENCE ADDITION IN RESPECT OF PEAK AMOUNT OF INVESTMENT MADE OUT OF UNACCOUNTED MONEY BY THE ASSESSEE FOR PURCHASE OF MATERIALS FROM THE PARTIES, WHICH WORKED OUT TO RS. 48,45,233/ - , U/S 69C OF THE ACT, RELYING ON SEVERAL JUDGMENTS QUOTED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER WORKED OUT THE COMBINED PEAK CREDIT FOR THE YEAR MERGING THE LEDGER ACCOUNTS OF THE PARTIES AFTER ADDING THE PURCHASES AND DEDUCTING PAYMENTS MADE DATE WISE AND STATING THAT SUCH PEAK REPRESENTS THE AMOUNT OF UNDISCLOSED CASH THAT HAS BEEN UTILIZED IN THIS ARRANGEMENT AND INCOME TO THE SAID EXTENT HAS ESCAPED THE ASSESSMENT AND ADDED THE SAME TO THE TOTAL INCOME ASSESSED AS PER THE ORDER PASSED U/S 143(3) R.W.S. 147 OF THE ACT. 5 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 7. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) CHALLENGING BOTH THE VA LIDITY OF REOPENING AND MERITS OF THE ADDITION. 8. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE R EOPENING BY OBSERVING AS UNDER: 2.5.4 I HAVE PERUSED THE SUBMISSIONS OF THE APPELLANT AND THE MATERIAL ON RECORD FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT. THE FACTS AS APPEARING FROM THE ASSESSMENT ORDER ARE THAT THE RETURN OF INCOME WAS TAKEN UP FO R SCRUTINY AND ASSESSMENT U/S 143(3) OF THE ACT WAS FINALIZED ENHANCI NG THE RETURNED INCOME FROM RS. 72,22,654/ - TO RS . 73,65,740/ - . SUBSEQUENTLY THE ASSESSMENT WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON 26 - 02 - 2013 TO CONSIDER THE INFORMATION RECEI VED DURING THE ASSESSMENT PROCEEDINGS OF THE A.Y. 2010 - 11 WITH REGARD TO THE ACCOMMODATION ENTRIES FROM SOME PARTIES TO INFLATE PURCHASES. 2.5.5 SECTION 147 OF THE ACT CONFERS JURISDICTION ON THE ASSESSING OFFICER TO REOPEN ASSESSMENT SUBJECT TO THE CONDIT IONS LAID DOWN THEREIN. THE RELEVANT PROVISIONS OF SECTION 147 OF THE ACT ARE AS UNDER: '147. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE ' PROVISI ONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RE - COMPUTE THE LOSS OR TH E DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 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 THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSE SSMENT - FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUBSECTION (1) OF SECTION 142 OR 6 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR.' 2.5.6 THUS, IT IS LAID DOWN IN THE F IRST PROVISO TO SECTION 147 OF THE ACT THAT WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECT ION 143 R.W.S. 147 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, N O ACTION SHALL BE TAKEN UNDER THE SECTION AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTIO N 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB - SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. 2.5.7 THE FACTS OF THE PRESENT CASE ARE NOW TESTED IN THE LIGHT OF THE AFORESAID P ROVISIONS OF SEC. 147 AS APPLICABLE TO THE YEAR UNDER CONSIDERATION. ON VERIFICATION OF DETAILS PLACED ON RECORD, IT IS FOUND THAT THE NOTICE UNDER SECTION 148 OF THE ACT FOR THE ASSESSMENT YEAR UNDER APPEAL WAS ISSUED ON 26 - 02 - 2013 AFTER RECORDING THE FOL LOWING REASONS BY THE ASSESSING OFFICER: 'INFORMATION WAS RECEIVED IN THIS CASE FROM THE OFFICE OF THE DGIT (I NV.), THAT THIS ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES TO INFLATE ITS PURCHASES. AN INQUIRY U/S 133(6) OF THE IT ACT, 1961 IN A NUMBER OF SCRUTIN Y CASES, INCLUDING IN THE CASE OF THE ASSESSEE IN AY 2010 - 11, REVEALED THAT SEVERAL OF THESE PARTIES ARE NOT AVAILABLE AT THE GIVEN ADDRESS AND THE NOTICES HAVE BEEN RETURNED BY THE POSTAL DEPT. WITH THE REMARKS 'NOT KNOWN', 'LEFT', 'UNCLAIMED, ETC. THE AS SESSEE HAS BEEN UNABLE TO PRODUCE THESE PARTIES OR PROVE GENUINENESS OF PURCHASES MADE FROM THEM INCLUDING THE TRANSPORT DETAILS, DELIVERY CHALLANS ETC. THIS INDICATE THAT THE ASSESSEE HAD ADOPTED A MODUS OPERANDI TO DECREASE ITS TRUE PROFITS BY INFLATING ITS EXPENSES INCLUDING PURCHASE EXPENSES BY TAKING ACCOMMODATION ENTRIES FROM SUCH PARTIES. THE RECORDS OF THE ASSESSEE FOR THIS A.Y. ALSO REVEAL THAT THE ASSESSEE HAS ADOPTED THIS MODUS OPERANDI IN THIS YEAR AS WELL. THIS IS APPARENT FROM THE DETAILS OF P URCHASES FROM THESE PARTIES (FROM WHOM THE ASSESSEE HAD TAKEN ACCOMMODATION BILLS) IN FY2008 - 09 RELEVANT TO AY 2009 - 10, WHICH ARE AS FOLLOWS: - TIN NAME AMOUNT OF SALE TO ASSESSEE IN FY 2007 - 08 (RS) 27680272629V SHIV INDUSTRIES 11,039 27620641456V KIR AN SALES CORPORATION/ NIDHI IMPEX INDIA 3137940 27090277 5 61 REVATHI STEEL TRADERS 135980 27020229342 UNIVERSAL ENTERPRISE 2614238 7 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 27620378101V LAXMI TRADING 221626 TOTAL 6120823 2. ON THE BASIS OF THE AFORESAID TANG IBLE MATERIAL AVAILABLE WITH ME NOW, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX, AS INDICATED BY THE ACCOMMODATION BILLS FOR PURCHASES TO THE TUNE OF RS. 61,20,823/ - FROM THE AFORESAID PARTIES HAS ESCAPED ASSESSMENT FOR THE A. Y. 2009 - 10 WITHIN THE MEANING OF SECTION 147 OF THE IT. ACT, 1961. A NOTICE U/S. 148 R.W.S. 147 IS THEREFORE, BEING ISSUED TO RE - ASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT, WHICH COMES TO MY NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS FOR RE ASSESSMENT FOR A. Y. 2009 - 10'. 2.5.8 IF THE PERIOD BETWEEN THE END OF THE RELEVANT ASSESSMENT YEAR UNDER APPEAL I.E. 31.03.2009 AND THE DATE OF ISSUANCE OF THE NOTICE UNDER SECTION 148 ON 22.03.2013 IS RECKONED, IT IS EVIDENT THAT THE NOTICE WAS ISSUED WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN THE PRESENT CASE, IT IS AN ADMITTED POSITION THAT PRIOR TO ISSUE OF NOTICE UNDER SEC 148, ASSESSMENT WAS MADE UNDER SEC 143(3). IN SUCH CASE FOR REOPENING THE ASSESSMENT WHICH WAS FINALIZED U/S 143(3) OF THE ACT, THE CONDITIONS ARE THE INCOME CHARGEABLE TO TAX SHOULD HAVE ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE EITHER (I) TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTI CE ISSUED UNDER SUB - SECTION (1) OF SECTION 142 OR SECTION 148, OR (II) TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. IT IS AN UNDISPUTED POSITION THAT THERE IS NO FAILURE ON THE PART OF THE APPELLANT AS FAR AS THE FIRST CONDI TION IS CONCERNED. INSOFAR AS THE SECOND CONDITION IS CONCERNED, THOUGH THE APPELLANT IS STATING THAT THE ISSUE IS CONSIDERED IN THE ORIGINAL ASSESSMENT, THEY COULD NOT PRODUCE ANY NOTICE OR LETTER CALLING AND VERIFYING THE DETAILS OF PURCHASES BY THE AO DURING SUCH PROCEEDINGS. ON PERUSAL OF THE ASSESSMENT RECORDS AND ORDER IT IS NOTICED THAT THE ADDITIONS MADE ARE DISALLOWANCES UNDER DIFFERENT EXPENDITURE HEADS LIKE MISCELLANEOUS EXPENSES, TELEPHONE EXPENSES AND CONVEYANCE EXPENSES ON ADHOC BASIS. AS CO ULD BE SEEN FROM THE ASSESSMENT ORDER, THE ISSUE OF INFORMATION ABOUT THE ACCOMMODATION ENTRIES WAS NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE A.Y. 2010 - 11. IN VIEW OF THIS POSITION, THE ISSUE OF BOGUS PURCHASES WERE NOT THE ISSUE IN THE O RIGINAL ASSESSMENT AND PURCHASES WERE NOT VERIFIED. ON THE DATE OF RECORD ING REASONS, NEW MATERIAL IN THE FORM OF NEW INFORMATION R E CEIVED BY THE AO HAS COME ON RECORD BY THE AO TO TRIGGER REOPENING OF ASSESSMENT B EYOND FOUR YEARS. IN THESE CIRCUMSTANCES, THE CONDITION PRECEDENT FOR A VALID EXERCISE OF THE POWER TO REOPEN THE ASSESSMENT, WITHIN FOUR YEARS FROM END OF THE RELEVANT ASSESSMENT YEAR, IS PRESENT IN THE 8 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 CASE. THE CONDITIONS WHICH ARE PRESCRIBED BY THE STATUTE FOR THE EXERCISE OF SUCH A POWER ARE FULFILLED. 2.5.9 SINCE IN THE ORIGINAL ASSESSMENT, THE ISSUE WAS NOT VERIFIED BY THE ASSESSING OFFICER AND THE SAME IS A NEW INFORMATION, AND TANGIBLE' MATERIAL HAS BEEN RECEIVED BY THE ASSESSING OFFICER AND WAS AVAILABLE WITH HIM AT THE TIME OF RECORDING REASONS, AND ALSO NOTHING ON RECORD SUGGESTS THAT THE MATERIAL FILED BY THE APPELLANT ALONG WITH THE RETURN AND AVAILABLE ON RECORD INDICATE THAT THE ISSUE WAS VERIFIED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE NOTICE UNDER SECTION 148 OF THE ACT HAVING BEEN ISSUED WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IS DONE CORRECTLY. FOR THE FOREGOING REASONS, IT IS HELD THAT REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT WAS DONE/PROPERLY FOLLOWING THE DUE PROCESS OF LAW AND THERE IS NO INFIRMITY OR ILLEGALITY IN REOPENING THE ASSESSMENT AND THE NOTICE ISSUED U/S.148 FOR THE YEAR UNDER CONSIDERATION IS PERFECTLY LEGAL AND VALID. 9 . A S REGARDS THE MERITS OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT THE SALES HAVE NOT BEEN DOUBTED. HE PROCEED ED TO CONFIRM 12.5% ADDITION FOR THE BOGUS PURCHASE. 10. AG AINST THE ABOVE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 11 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. AS REGARDS THE REOPENING OF THE ASSESSEE, ON A CAREFUL CONSIDERATION, WE NOTE THAT IN THIS CASE INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER FROM DGIT INVESTIGATION (MUMBAI) THERE ARE SOME PARTIES WHO ARE ENGAGED IN THE HAWAL A TRANSACTIONS AND ARE ALSO INVOLVED IN ISSUING BOGUS PURCHASE BILLS FOR SALE OF MATERIAL WITHOUT DELIVERY OF GOODS, WHICH INFORMATION WAS BASED ON INFORMATION RECEIVED BY REVENUE FROM MAHARASHTRA SALES TAX AUTHORITY. INFORMATION WAS RECEIVED THAT THE ASSE SSEE WAS 9 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 BENEFICIARY OF HAWALA ACCOMMODATION ENTRIES FROM ENTRY PROVIDERS BY WAY OF BOGUS PURCHASE. THE ACCOMMODATION ENTRY PROVIDER HAS DEPOSED AND ADMITTED BEFORE THE MAHARASHTRA SALES TAX AUTHORITY VIDE STATEMENT/ AFFIDAVIT THAT THEY WERE ENGAGED IN PRO VIDING BOGUS ACCOMMODATION ENTRIES WHEREIN BOGUS SALE BILLS WERE ISSUED WITHOUT DELIVERY OF GOODS, IN CONSIDERATION FOR COMMISSION. THESE, ACCOMMODATION ENTRY PROVIDERS, ON RECEIPT OF CHEQUES FROM PARTIES AGAINST BOGUS BILLS FOR SALE OF MATERIAL, LATER ON WITHDREW CASH FROM THEIR BANK ACCOUNTS, WHICH WAS RETURNED TO BENEFICIARIES OF BOGUS BILLS AFTER DEDUCTION OF THEIR AGREED COMMISSION. THE ASSESSEE WAS STATED TO BE ONE OF THE BENEFICIARIES OF THESE BOGUS ENTRIES OF SALE OF MATERIAL FROM HAWALA ENTRY OPERA TORS IN FAVOUR OF THE ASSESSEE WHEREIN THE ASSESSEE MADE ALLEGED BOGUS PURCHASES THROUGH THESE BOGUS BILLS ISSUED BY HAWALA ENTRY PROVIDERS IN FAVOUR OF THE ASSESSEE. THESE DEALERS WERE SURVEYED BY THE SALES TAX INVESTIGATION DEPARTMENT WHEREBY THE DIRECTO RS OF THESE DEALERS HAVE ADMITTED IN A DEPOSITION VIDE STATEMENTS/AFFIDAVIT MADE BEFORE THE SALES TAX DEPARTMENT THAT THEY WERE INVOLVED IN ISSUING BOGUS PURCHASE BILLS WI THOUT DELIVERY OF ANY MATERIAL. THERE IS A LIST OF SUCH PARTIES WHEREIN THE ASSESSEE IS STATED TO BE BENEFICIARY OF BOGUS PURCHASE BILLS. 12. FROM THE ABOVE, WE FIND THAT TANGIBLE AND COGENT INCRIMINATING MATERIAL WERE RECEIVED BY THE ASSESSING OFFICER WHICH CLEARLY SHOWED THAT THE ASSESSEE WAS BENEFICIARY OF BOGUS PURCHASE ENTRIES FROM B OGUS ENTRY PROVIDERS WHICH FORMED THE REASON TO BELIEVE BY THE ASSESSING OFFICER THAT INCOME HAS ESCAPED ASSESSMENT. THE 10 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 INFORMATION SO RECEIVED BY THE AO HAS LIVE LINK WITH REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. ON THIS INCRIMINATING TANGIB LE MATERIAL INFORMATION, ASSESSMENT WAS REOPENED. AT THIS STAGE THERE HAS TO BE PRIMA FACIE BELIEF BASED ON SOME TANGIBLE AND MATERIAL INFORMATION ABOUT ESCAPEMENT OF INCOME AND THE SAME IS NOT REQUIRED TO BE PROVED TO THE GUILT. IN THIS REGARD, I REFER TO THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT(A) VS. RAJESH JHAVERI STOCK BROKERS P. LTD , 291 ITR 500: - 'SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO LAX IF HE HAS REASON TO BELIEVE THAT I NCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE (HAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANAGNESE ORE CO, LTD. V. ITO(1991) 191 ITR 662, FOR INITIATION OF ACTION UNDER SECTION 147(A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ES SENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY Q UESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY T HE AO IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO, (P.) LTD. (1996) 217 ITR 597 (SUPREME COURT): RAYMOND WOOLLEN MILLS LTD. V. ITO (1999) 236 ITR 34 (SUPREME COURT). 13. THE ABOVE DISCUSSION AND PRECEDENT FROM HONBLE APEX COURT FULLY JUSTIFY THE VALIDITY OF REOPENING IN THIS CASE. FURTHER WE FIND THAT THE LD. CIT(A) HAS CAREFULLY EXAMINED THE ISSUE AND HAS PROPERLY APPRECIATED THE ISSUE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE SAME. ACCORDINGLY, WE UPHOLD THE ORD ER OF THE LD. CIT(A) ON THE 11 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 ISSUE OF REOPENING. SINCE, THE ISSUE HAS BEEN DECIDED ON THE BASIS OF THE HONBLE APEX COURT DECISION, THE OTHER CASE LAWS REFERRED BY ASSESSEE ARE NOT SUPPORTING THE ASSESSEES CASE. 14. WE FURTHER NOTE THAT CREDIBLE AND COGE NT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS. THE ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION ASSESSMENT WAS REOPENED. THE CREDIBILITY OF INFORMATION RELATING TO REOPENING REMAINS UN - ASSAILED. IN SUCH FACTUAL SCENARIO, THE ASSESSING OFFICER HAS MADE THE N ECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NECESSARY EVIDENCE RELATING TO TRA NSPORTATION OF THE GOODS WAS ALSO NOT ON RECORD. IN THIS FACTUAL SCENARIO, IT IS AMPLY CLEAR THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS IS BOGUS AND NON - EXISTENT. 15 . THE SALES TAX DEPARTMENT IN ITS ENQUIRY HAS FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THE SE NOTICES HAVE RETURNED 12 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NEITHER THE ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PARTIES. IN SUCH CIRCUMSTANCES, THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT. WE FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEES OWN VENDORS, WHOM THE ASSESSEE COULD NOT PRODUCE. THE PURCHASE BILLS FROM THESE NON - EXISTENT/BOGUS PARTIES CANNOT BE TAKEN AS COGENT EVIDENCE OF PURCHASES. IN LIGHT OF THE OVER WHELMING EVIDENCE, THE REVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL VS. CIT [1995] 214 ITR 801 (SC) AND CIT VS. DURGA PRASA D MORE [1971] 82 ITR 540 (SC). IN THE PRESENT CASE, THE ASSESSEE WANTS THAT THE UNASSAILABLE FACT THAT THE SUPPLIERS ARE NON - EXISTENT AND, THUS, BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF HONBLE APEX COURT DECISIONS. 16 . IN THESE CIRCUMSTANCES, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO. 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS. DY . CIT VIDE ORDER DATED 20.06.2016, WHEREIN 100% OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS EXPOUNDED THAT WHEN PURCHASE BILLS HAVE B EEN FOUND TO BE BOGUS, 100% DISALLOWANCE 13 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DATED 16.1.2017. 17. WE FURTHER FIND THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014) HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN THE SALES HAVE NOT BEEN DOUBTED. HOWEVER, THE FACTS OF THAT CASE WERE DIFFERENT. FURTHERMORE, THE SALES IN THAT CASE WERE BASICALLY TO GOVERNMENT DEPARTMENTS. HOWEVER, THE RATIO EMANATING FROM THE ABOVE HON'BLE JURISDICTIONAL HIGH COURT DECISION IS THAT WHEN SALES ARE NOT DOUBTED 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE SUSTAINED. THE FACTS OF THIS CAS E INDICATE THAT THE ASSESSEE HAS ENGAGED INTO DEALING IN THE GREY MARKET. DEALINGS IN GREY MARKET GIVE THE ASSESSEE SAVINGS FROM THE PAYMENT OF NECESSARY TAXES AND THE ASSESSEE ALSO USES UNDISCLOSED SUMS. THESE ARE AT THE EXPENSE OF THE EXCHEQUER. IN THESE CIRCUMSTANCES, AS EXPOUNDED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMITH P. SETH , 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES S ERVES THE INTEREST OF JUSTICE. ACCORDINGLY, WE FIND THAT THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) IS A PPOSITE AND DOES NOT NEED ANY INTERFERENCE ON OUR PART. ACCORDINGLY, WE UPHOLD THE SAME. THE LD. COUNSEL OF THE ASSESSEE OF THE FAIRLY AGREED TO THE ABOVE PROPOSITION. 14 ITA NO S . 2230 TO 2232/M / 16 AND 3145 TO 3147/M / 16 18. IN THE RESULT, THE SE APPEALS BY THE ASSESSEE AND THE REVENUE STAND DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON 07.12.2017 SD/ - SD/ - ( RAM LAL NEGI ) (S HAMIM YAHYA ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 07.12.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASST T. REGISTRAR) , / ITAT, MUMBAI