NAVNIDHI STEEL AND ENGG CO. P.LTD, MUMBAI V. DCIT 5(2)(1), MUMBAI

ITA 3420/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1012 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHADR
• Keywords: Reopening of assessment; Bogus purchase; Unexplained cash credit; Gift; Recovery proceedings; Depreciation; Search and seizure; Difference of opinion; Accommodation entries; Onus to prove; Bogus loan; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 69C; 40A(3); 143(3); 142(1); 133(6); 131; 68; 246; 69; 148; 132; 144; 139

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.3420/MUM/2017 ASSESSMENT YEAR: 2007-08 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. C/O- D.C. BOTHRA & CO. LLP CA (FORMERLY KNOWN AS D.C. BOTHRA & CO.) 297, TARDEO ROAD, 1 ST FLOOR, WILLE MANSION, OPP. BANK OF INDIA, NANA CHOWK MUMBAI-400007 / VS. DCIT-5(2)(1), ROOM NO.571, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / ASSESSEE / REVENUE P.A. NO. AACCN2748R $ % & / ASSESSEE BY SHRI RAJKUMAR SINGH $ % & / REVENUE BY MS. N. HEMALATHA-DR / DATE OF HEARING 04/01/2018 & / DATE OF ORDER: 08/01/2018 ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 2 & / O R D E R THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 17/02/2017 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, CONFIRMING THE ADDITION OF RS.25 LAKH MADE U/S 68 A ND DISALLOWANCE OF INTEREST PAID ON THE SAID LOAN AMOU NTING TO RS.1,00,823/- MADE U/S 69C OF THE INCOME TAX ACT, 1 961 (HEREINAFTER THE ACT), WITHOUT APPRECIATING THE EVI DENCES AND CONFIRMATION MADE BY THE LOAN CREDITOR INCLUDING AF FIDAVIT FURNISHED BEFORE THE LD. ASSESSING OFFICER. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI RAJKUMAR SINGH, CONTENDED THAT EXCEPT THE STAT EMENT OF SHRI BHAVARLAL JAIN, THERE IS NO INCRIMINATING MATE RIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER AND THE IMPUGNED LOAN WAS PAID SUBSEQUENTLY. IT WAS CONTENDED THAT T HE ONUS CASTE UPON THE ASSESSEE WAS DULY DISCHARGED AND THE ASSESSEE IS NOT TO PROVE THE SOURCE OF SOURCE. THE LD. COUNSEL RELIED UPON THE DECISION IN THE CASE OF M/S RUSHABH ENTERPRISES VS ACIT (ITA MP/1580/MUM/2017) ORDER DA TED 15/11/2017, M/S RELIANCE CORPORATION VS INCOME TAX OFFICER (ITA NO.1069 TO 1071/MUM/2017 AND ITA ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 3 NO.4946/MUM/2016) ORDER DATED 12/04/2017 AND ANOTHE R DECISION OF THE SMC BENCH IN THE CASE OF INCOME TAX OFFICER VS GUJARAT CONSTRUCTION (ITA NO.7040/MUM/2016) ORDE R DATED 24/05/2017. ON THE OTHER HAND, MS. N. HEMAL ATHA, LD. DR, STRONGLY DEFENDED THE ADDITION BY EXPLAININ G THAT SHRI BHAVARLAL JAIN FLOATED ABOUT COMPANIES AND MER ELY BOOK ENTRIES ARE PROVIDED AND THE PAPER WORK HAS BEEN DO NE AND EVEN THE INITIAL BURDEN WAS NOT DISCHARGED. IT WAS CONTENDED THAT THE FUNDS JUST CAME IN AND MOVED OUT WHICH ARE MERELY ACCOMMODATION ENTRIES AND THIS GROUP IS ESTABLISHED BOGUS ENTRY PROVIDER. THE LD. DR RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI SURESH L. SATYANI VS I NCOME TAX OFFICER (ITA NO.3452/MUM/2016) ORDER DATED 25/04/20 17. 2.1. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S, IN BRIEF, ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE SUP PLY OF FERROUS AND NON-FERROUS METIAL, DECLARED INCOME OF RS.14, 27,691/- IN ITS RETURN FILED ON 24/10/2007, WHICH W AS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 DATED 26/03/ 2014, ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 4 AFTER RECORDING THE REASONS, WHICH WAS DULY SERVED UPON THE ASSESSEE. THE ASSESSEE VIDE LETTER DATED 08/04/201 4 CLAIMED THAT THE ORIGINAL RETURN FILED ON 24/10/200 7 MAY BE TREATED TO BE RETURN FILED IN RESPONSE TO NOTICE U/ S 148 OF THE ACT. SUBSEQUENTLY, NOTICES U/S 143(2) AND 142(1) WE RE SERVED UPON THE ASSESSEE TO WHICH THE ASSESSEE ATTENDED TH E PROCEEDINGS AND FILED THE DETAILS. DURING REASSESS MENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF LOANS AND ADVANCES TAKEN FROM THE GROUP COMPANIES O F SHRI BHAVARLAL JAIN. THE ASSESSEE VIDE REPLY DATED 03/03 /2015 CLAIMED THAT THE LOAN CREDITOR M/S MAHALAXMI GEMS P VT. LTD. HAS INFORMED THE ASSESSEE THAT THEY HAVE RECEIVED N OTICES U/S 133(6) OF THE ACT AND HAVE FILED THE RELEVANT D ETAILS. THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED WITH THE FOL LOWING REASONING:- (I) M/S. MAHALAXMI GEMS PVT. LTD. IS A GROUP CONCERN OF M/S. BHANWARLAL JAIN AND WHO IS PROVIDIN G ACCOMMODATION ENTRIES TO REDUCE THE PROFIT LIABLILT Y. (II) FURTHER, ON PERUSAL OF THE BANK STATEMENT PERI OD 21/09/2006 TO 30/09/2006, IT REVEALS THAT ON 25/09/2006 THE CLOSING BANK BALANCE OF RS.51912/- ONLY. ON 29/09/2006, THERE IS A DEPOSITS OF RS.23,00,000/- AND RS.2,00,000/- AND ON THE SAME DA Y THE ADVANCES GIVEN TO THE ASSESSEE COMPANY. ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 5 (III) ON PERUSAL OF THE STATEMENT FURTHER REVEALS THAT M/S MAHALAXMI GEMS PVT. LTD. IS RECEIVING COMMISSIO N INCOME ON THE BOGUS LOAN AMOUNT. ON 25/09/2006, THERE ARE DEPOSITS OF RS.10,00,000/- & RS.13,00,000 /- AND ON THE SAME DAY AN AMOUNT OF RS.22,57,415/- HAS BEEN TRANSFERRED TO SOME OTHER ACCOUNT. (IV) IT MEANS THAT BHANWARLAL JAIN GROUP COMPANIES ARE PROVIDING ONLY ACCOMMODATION ENTRIES AND NO GENUINE TRANSACTIONS. IN THE LIGHT OF THE ABOVE FACTS, THE LD. ASSESSING OFFICER TREATED THE AMOUNT OF RS.25 LAKHS TAKEN AS LOANS/AD VANCES AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 2.2. ON APPEAL BEFORE THE LD. COMMISSIONER OF INCO ME TAX (APPEAL), THE FACTUAL MATRIX WAS CONSIDERED AND FINALLY THE ADDITION MADE BY THE LD. ASSESSING OFFICER WAS AFFIRMED ON THE GROUND THAT THE CREDITWORTHINESS OF THE PART IES AND THE GENUINENESS OF THE TRANSACTION WERE NOT SATISFA CTORILY EXPLAINED. 2.3. THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNA L. THE ASSESSEE AS WELL AS THE REVENUE HAS FILED CERTAIN D ECISIONS, WHEREIN, BROADLY, SHRI BHANVARLAL JAIN AND ITS GROU P ARE INVOLVED. ONE OF SUCH CASES IS OF SHRI SURESH L. S ATYANI, (ITA NO.3452/MUM/2016) WHEREIN, VIDE ORDER DATED 25/04/2 017 BY AN ELABORATE DISCUSSION, THE APPEAL OF THE ASSES SEE WAS ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 6 DISMISSED. THE RELEVANT PORTION FROM THE AFORESAID ORDER IS REPRODUCED HEREUNDER:- THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 3452/MUM/2016, IS DIRECTED AGAINST THE APPELLATE OR DER DATED 29 TH APRIL, 2016 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 34, MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2010-11, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDER DA TED 30.03.2015 PASSED BY LEARNED ASSESSING OFFICER (HER EINAFTER CALLED THE AO) U/S 143(3) R.W.S. 147 OF THE INCOM E-TAX ACT,1961 (HEREINAFTER CALLED THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL , MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE LEARNED ASSESSING OFFICER HAD VALIDLY ISSUED THE NO TICE U/S, 148 I.T. ACT, 1961 WITHOUT APPRECIATING THE FACT THAT PROCEE DINGS U/S 147 OF THE I.T. ACT, WERE INITIATED MERELY ON THE BASIS OF INF ORMATION FROM THE DGIT (INV.) AND NOT ON BASED ON PROPER APPLICATION OF MI ND ON THE PART OF THE LEARNED ASSESSING OFFICER SO AS TO COME TO AN INDEP ENDENT CONCLUSION THAT HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAP ED ASSESSMENT DURING THE YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER IN REJECTIN G THE BOOKS OF ACCOUNT AND THEREBY CONFIRMING THE ADDITION OF RS.5,44,037/ - BEING 9% OF THE PURCHASES OF RS.60,44,860/- WHICH WERE HELD TO BE N OT GENUINE BY THE LEARNED ASSESSING OFFICER, THOUGH THE SAID PURCHASE S AND THE CORRESPONDING SALES WERE DULY REFLECTED IN BOOKS OF ACCOUNT AND PAYMENTS FOR THE SAID PURCHASES WERE MADE BY ACCOUN T PAYEE CHEQUES AND THE CORRESPONDING SALES WERE ALSO RECOR DED IN BOOKS OF ACCOUNT. 3. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END ANY OF THE ABOVE GROUNDS OF APPEAL OR TAKE UP A FRESH GROUND(S ) OF APPEAL ON OR BEFORE THE DATE OF HEARING. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN BUSINESS OF TRADING IN DIAMONDS, GOLD AN D JEWELLERY. THE ASSESSEE HAD FILED RETURN OF INCOME FOR ASSESSM ENT YEAR ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 7 2010-11 ON 26 TH SEPTEMBER, 2010 WHICH WAS PROCESSED U/S 143(1) OF THE ACT AND THE INCOME DECLARED WAS ACCEP TED. LATER ON, THE ASSESSMENT WAS RE-OPENED U/S 147 OF THE ACT WIT HIN A PERIOD OF 4 YEARS FROM THE END OF ASSESSMENT YEAR BY ISSU E OF NOTICE U/S 148 OF THE ACT DATED 26 TH MARCH, 2014 ON THE BASIS OF INFORMATION THAT THE ASSESSEE HAD INDULGED IN SHOWI NG BOGUS PURCHASES BY TAKING ACCOMMODATION/FICTITIOUS BILLS FROM CERTAIN ENTITIES FROM WHOM THE ASSESSEE HAS NOT PURCHASED A NY MATERIAL. THE ASSESSEE IN RESPONSE TO NOTICE U/S 148 OF 1961 ACT SUBMITTED THAT RETURN OF INCOME FILED ON 26-09-2010 MAY BE TR EATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF 1961 ACT. THE AO ISSUED NOTICE U/S 143(2) OF 1961 ACT AND REASONS RE CORDED FOR RE- OPENING OF THE ASSESSMENT WERE FURNISHED BY THE AO TO THE ASSESSEE. THE ASSESSEE RAISED OBJECTIONS TO THE REO PENING OF THE ASSESSMENT AND THE SAME WAS DISPOSED BY THE AO THRO UGH A SPEAKING ORDER DATED 9 TH JANUARY, 2015. THE A.O. RECEIVED INFORMATION FROM DIT (INV.), MUMB AI VIDE LETTER DATED 13.03.2014 THAT A SEARCH AND SEIZURE ACTION W AS CARRIED OUT IN THE CASE OF BANWARLAL JAIN GROUP CASES BY TH E INVESTIGATION WING OF MUMBAI ON 3 RD OCTOBER, 2013. THE SEARCH HAD REVEALED VARIOUS INCRIMINATING DOCUMENTS IN RESPECT OF HAWAL A ENTRIES PROVIDED BY THE BANWARLAL JAIN GROUP BY WAY OF ISS UING BOGUS BILLS TO VARIOUS PERSONS. THE SEARCH FURTHER REVEAL ED THAT VARIOUS ENTITIES WERE CREATED, MAJORITY OF THEM BELONG TO N ATIVE PLACE OF BANWARLAL JAIN AND FAMILY. WHILE EXAMINATION ON OAT H, THE PROPRIETOR, DIRECTOR AND PARTNER OF THESE DUMMY ENT ITIES ACCEPTED THAT THEY WERE MERELY EMPLOYEES OF BANWARLAL JAIN A ND FAMILY GROUP AND THEY DID NOT HAVE ANY GENUINE KNOWLEDGE O F DIAMOND BUSINESS. IT WAS ALSO REVEALED THAT THEY DID NOT EV EN HAVE BASIC KNOWLEDGE ABOUT THE CONCERN IN WHICH THEY ARE SHOWN AS PROPRIETOR, DIRECTOR AND PARTNER. IT WAS ALSO ESTAB LISHED THAT THE OWNER, DIRECTOR, PARTNERS AND PROPRIETOR WERE GIVEN SALARY AND THEY WERE RESIDING IN THE FLAT OWNED BY BANWARLAL J AIN. IT WAS ALSO COME TO THE NOTICE THAT THE BUSINESS WAS CARRI ED OUT BY THESE PEOPLE FROM THE PREMISES OWNED BY BANWARLAL JAIN SI TUATED AT 316, PANCHARATNA, OPERA HOUSE, 210 PANCHRATNA, 105 PANCHRATNA WHICH WAS HAVING OWNERSHIP OF BANWARLAL JAIN GROUP. ALL THESE PROPRIETORS, DIRECTORS AND PARTNER S WERE KEPT FOR THE NAME SAKE AND THEY WERE NOT AWARE OF IMPORTERS OR ACTUAL BUYERS SHOWN IN THE BOOKS OF ACCOUNT. STATEMENTS WE RE RECORDED U/S 132 AND 131 OF 1961 ACT , WHEREBY THESE EMPLOYE ES HAVE ACCEPTED AND ADMITTED THAT THEY WERE DUMMY PROPRIET OR, DIRECTOR AND PARTNERS OF VARIOUS CONCERNS WHOSE AFFAIRS ARE MANAGED AND CONTROLLED BY BANWARLAL JAIN GROUP. THE STATEMENTS OF THESE EMPLOYEES WERE CONFRONTED TO BANWARLAL JAIN AND IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT AT 16, MOH AN BUILDING, GIRGAUM, MUMBAI, SHRI BANWARLAL JAIN ADMITTED THAT HE ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 8 MANAGES AND CONTROLS THE BUSINESS AFFAIRS OF ALL TH E CONCERNS IN WHICH THE PERSONS WERE EMPLOYEES, WHO WERE SHOWN AS PROPRIETOR, DIRECTOR AND PARTNERS. IT WAS ALSO ADMI TTED THAT ALL THE BENAMI CONCERNS WERE NOT IN THE GENUINE BUSINESS AN D NO STOCK OF DIAMOND WAS FOUND FROM THE PREMISES. THE BOOKS O F ACCOUNTS OF ALL THESE PERSONS WERE NOT MAINTAINED IN RESPECT IVE OFFICE AND WERE FOUND FROM BACK OFFICE 16, MOHAN BUILDING, GIR GAUM, MUMBAI AND AT FLAT NO. 233, GROUND FLOOR, NAVTARA, GIRGAIM, MUMBAI. IT WAS FOUND THAT THE ACTUAL IMPORTERS OF R OUGH DIAMONDS IMPORT PART OF THE DIAMONDS FROM BENAMI CO NCERNS OPERATED BY BANWARLAL JAIN AND FAMILY WITH A VIEW T O SUPPRESS THEIR TURNOVER AND PROFIT. THE CONSIGNMENTS WERE SE NT ON CREDIT BY THE SUPPLIERS IN THE NAME OF BENAMI CONCERNS AT THE INSTANCE OF ACTUAL IMPORTER AND ON RECEIPT OF THE CONSIGNME NT BY ALL THESE BENAMI CONCERNS, THE DIAMONDS WERE HANDED OVER TO T HE REAL IMPORTER RESULTING INTO BOGUS AND NON-EXISTENCE STO CK IN THE BOOKS OF THE BENAMI CONCERNS. THESE TRANSACTIONS WE RE NOT RECORDED IN THE REGULAR BOOKS OF BENAMI CONCERNS. A GAINST THE BOGUS NON-EXISTENCE STOCK, BOGUS SALE BILL WERE IS SUED TO VARIOUS DIAMOND MERCHANTS WHO USUALLY BUY ROUGH DIAMONDS FR OM UNDISCLOSED PARTIES AND REQUIRES PURCHASE BILLS TO BALANCE THEIR ACCOUNTS TO CIRCUMVENT PROVISIONS OF SECTION 40A(3) OF THE ACT. BY ADOPTING THESE MEASURES, THE PURCHASES WERE INFLATE D AS RAW MATERIAL DIAMOND WERE AVAILABLE IN GREY MARKET AT M UCH LOWER PRICE .THE DIAMOND MERCHANTS ISSUES CHEQUES IN FAVO UR OF BENAMI CONCERNS AGAINST PURCHASE BILLS OBTAINED BY THEM AGAINST WHICH THEY RECEIVE CASH. THE LIST OF SUCH BENAMI CO MPANIES WAS FOUND DURING THE COURSE OF SEARCH AND OTHER DETAILS FOUND DURING SEARCH IN RESPECT OF THE ASSESSEE ARE REPRODUCED HE REUNDER:- PURCHASES MADE IN INDIVIDUAL CAPACITY BY THE ASSESS EE SR. NO. NAME OF THE PARTY WHO HAS ISSUED BOGUS BILLS TO THE ASSESSEE AMOUNT OF SUCH BOGUS BILL IN RS. 1 MAYUR EXPORTS 19,04,240/ - 2 NAVKAR DIAMOND 26,800/ - TOTAL 19,3 1,040/ - AND IN THE CAPACITY AS PROPRIETORSHIP CONCERN M/S. SATYANI BROTHERS SR. NO. NAME OF THE PARTY WHO HAS ISSUED BOGUS BILLS TO THE ASSESSEE AMOUNT OF SUCH BOGUS BILL IN RS. 1 PRIME STAR 31,06,320/ - 2 MOHIT ENTERPRISES 10,07,500/ - 3 MAYUR EXP ORT 19,04,240/ - 4 NAVKAR DIAMOND 26,800/ - TOTAL 60,44,860/ - ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 9 IN HIS STATEMENT RECORDED , SHRI BANWARLAL JAIN ADM ITTED TO HAVE BENAMI CONCERNS AS ITS OWN CONCERNS. THE ASSESSEE WAS ASKED TO EXPLAIN THE PURCHASES OF RS. 19,31,040/- MADE IN HIS INDIVIDUAL CAPACITY AS WELL PURCHASES OF RS. 60,44,860/- MADE IN PROPRIETORSHIP CONCERN NAME LY M/S SATYANI BROTHERS FROM SAID PARTIES AS THESE CONCERN S WERE ACCEPTED BY MR BANWARLAL JAIN TO BE HIS BENAMI CONC ERNS AND ADMITTED TO HAVE ISSUED BOGUS/ACCOMMODATION BILLS T O THE ASSESSEE. THE ASSESSEE SUBMITTED COPY OF INVOICES, COPY OF AC COUNT OF PARTIES, EXTRACT OF STOCK REGISTER , COPY OF BANK A CCOUNT FROM WHEREIN CHEQUES WERE REFLECTED. NOTICES U/S 133(6) OF THE ACT WERE ISSUED TO THE ABOVE REFERRED PARTIES WHICH WER E BENAMI OF SH. BANWARLAL JAIN FROM WHOM PURCHASES WERE CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE TO PRODUCE THE FOLLOWING DETAILS:- 1. YOUR P.A.N AND DETAILS OF INCOME TAX ASSESSING OFFI CER. 2. NATURE OF BUSINESS ACTIVITY UNDERTAKEN BY YOU. 3. WHETHER ANY AMOUNT IS OUTSTANDING, IF YES, PLEAS E FURNISH THE SAME WITH REFERENCE TO YOUR RETURN OF INCOME FILED BY YOU I.E. SUNDRY DEBTOR/CREDITOR HIGHLIGHTING THE ENTRIES IN THE SAME. 4. PLEASE CONFIRM WHETHER YOU HAVE DONE TRANSACTION WITH SHRI SURESH SATYANI (PROP OF SATYANI BROTHERS), IF YES, EXPLAIN NATURE OF TRANSACTION. 5. PLEASE PRODUCE COPY OF THE ACCOUNT WITH SHRI SUR ESH SATYANI (PROP OF SATYANI BROTHERS) FOR F.Y. 01.04.2009 TO 3 1.03.2010. 6. PLEASE PRODUCE COPY OF ACKNOWLEDGEMENT OF YOUR R ETURN FOR AY 2010-11. 7. PLEASE EXPLAIN FROM WHERE YOU HAD PURCHASED MATE RIAL WHICH IN TURN WAS SUPPLIED TO SHRI SURESH SATYANI (PROP OF SATYAN I BROTHERS). PLEASE ALSO PRODUCE PROOF. 8. PLEASE PRODUCE COPY OF YOUR BANK ACCOUNT FOR THE MONTHS WHEREIN CHEQUES RECEIVED FROM ABOVE REFERRED ASSESSEE IS DE POSITED AND CHEQUES PAID BY YOU FOR CORRESPONDING PURCHASE ARE DEBITED IN YOUR BANK ACCOUNT. 9. PLEASE PROVIDE DETAILS OF SALES TAX ASSESSMENT C OMPLETED IN YOUR CASE FOR AY 2010-11. IN RESPONSE TO NOTICES U/S 133(6) OF 1961 ACT, ONLY PART DETAILS WERE FILED BY SAID PARTIES I.E. COPY OF LEDGER, COP Y OF SALE BILL, COPY OF IT RETURN AND BANK BOOK. THE SAID PARTIES TO WHO M NOTICES U/S ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 10 133(6) OF 1961 ACT WERE ISSUED DID NOT FURNISH FOLL OWING DETAILS DESPITE BEING ASKED BY THE AO TO SUBMIT THE SAME: 1. WHETHER YOU HAVE DONE TRANSACTION WITH SHRI SURE SH SATYANI (PROP OF SATYANI BROTHERS), IF YES, EXPLAIN NATURE OF TRANSACTION. 2. PLEASE EXPLAIN FROM WHERE YOU HAD PURCHASED MATE RIAL WHICH IN TURN WAS SUPPLIED TO SHRI SURESH SATYANI ( PROP OF SATYANI BROTHERS). PLEASE ALSO PRODUCE PROOF. 3. PLEASE PRODUCE COPY OF YOUR BANK ACCOUNT FOR THE MONTHS WHEREIN CHEQUES RECEIVED FROM ABOVE REFERRED ASSESS EE IS DEPOSITED AND CHEQUES PAID BY YOU FOR CORRESPONDING PURCHASE ARE DEBITED IN YOUR BANK ACCOUNT. 4. PLEASE PROVIDE DETAILS OF SALES TAX ASSESSMENT C OMPLETED IN YOUR CASE FOR AY 2010-11. THUS, THE AO OBSERVED THAT CRUCIAL DETAILS WHICH WE RE REQUIRED TO PROVE GENUINENESS OF THE TRANSACTION WERE NOT PROVI DED BY THESE PARTIES FROM WHOM THE ASSESSEE MADE PURCHASES AND T HUS NOTICES ISSUED U/S 133(6) OF 1961 REMAINED UN-COMPL IED WITH. THE ASSESSEE WAS CONFRONTED BY THE AO WITH THE FACT THAT THESE PARTIES DID NOT SENT COMPLETE INFORMATION WHEREIN G ENUINENESS OF PURCHASES COULD BE PROVED. THE AO OBSERVED THAT ONU S TO PROVE GENUINENESS OF TRANSACTION SHIFTED BACK TO THE ASSE SSEE. THE ASSESSEE COULD NOT PRODUCE THE PARTIES BEFORE THE A .O. IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAS MERELY FUR NISHED LEDGER ACCOUNT, INVOICES, BANK STATEMENT AND EXTRACT OF ST OCK REGISTER. THE AO OBSERVED THAT MERELY PAYMENTS WERE MADE BY C HEQUE DOES NOT ESTABLISH THAT PURCHASES WERE GENUINE , MO RE-SO WHEN MR BANWARLAL JAIN ADMITTED THAT HIS BENMAI CONCERNS WERE ONLY ISSUING BOGUS/ACCOMMODATION BILLS WITHOUT ACTUAL SU PPLYING ANY MATERIAL. . THE PARTIES TO WHOM NOTICES U/S 133(6) OF 1961 ACT WERE ISSUED DID NOT SUPPLIED COMPLETE INFORMATION. THUS, AO CONCLUDED THAT THE ASSESSEE PURCHASED MATERIAL FROM GREY MARKET AT LOWER PRICES AND TO COVER/MATCH FOR SALES ACTUAL LY MADE BY THE ASSESSEE, THE ASSESSEE OBTAINED BOGUS BILLS FROM TH ESE PARTIES WHO WERE BENAMI ENTITIES OF MR BHANWARLAL JAIN. BOO KS OF ACCOUNTS WERE REJECTED BY THE A.O. U/S 145(3) OF 19 61 ACT. THE AO RELIED ON DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V CHANDRA VILAS HOTELS (1987) 164 ITR 102(GUJ.) , CIT V. NAVASARI COTTON AND SILK MILLS LIMITED (1982) 135 I TR 546(GUJ) AND KARJAN CO-OPERATIVE COTTON SALES GINNING AND PR ESSING SOCIETY V. CIT (1993) 109 ITR 17(GUJ.) , HONBLE DE LHI HIGH COURT IN CIT V. NIPUN BUILDERS AND DEVELOPERS PRIVATE LIM ITED IN ITA NO. 120/2012 DATED 07-01-2013 AND CIT V. N R PORTFO LIO PRIVATE LIMITED IN ITA NO. 1018/1019 OF 2011 DATED 22.11.20 13. THE ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 11 A.O. RELYING ON THE RATIO OF THE DECISION OF IN THE CASE OF SANJAY OILCAKE INDUSTRIES V. CIT 316 ITR 274 (GUJ), BHOLAN ATH POLYFAB PVT LTD 40 TAXMAN 494(GUJ) AND M/S. VIJAY PROTEINS LTD. (1996) 58 ITD 428 (AHD) AND 25% OF SUCH PURCHASES OF RS. 6 0,44,860/- STOOD DISALLOWED BY THE AO TREATING AS ELEMENT OF P ROFIT EMBEDDED IN THE TRANSACTION , WHICH LED TO DISALLOWANCE TO T HE TUNE OF RS. 15,11,215/- AND FOR THE PURCHASES MADE BY THE ASSES SEE FROM M/.S. NAVKAR DIAMONDS AND MAYUR EXPORTS AGGREGATING TO RS 19,31,040/- , IT WAS OBSERVED BY THE AO THAT THE SA ME WERE INCLUDED TWICE BY ERROR, VIDE ASSESSMENT FRAMED BY THE AO U/S 143(3) R.W.S. 147 OF 1961 ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) R.WS. 147 OF 1961 ACT, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND REITERATED ITS SUB MISSIONS. THE ASSESSEE CONTENDED THAT ADDITIONS HAVE BEEN MADE BA SED ON SUSPICION. IT WAS SUBMITTED THAT INVOICES WERE PROD UCES, PAYMENTS WERE MADE BY CHEQUE AND THE ENTRIES WERE R ECORDED IN BOOKS OF ACCOUNTS AND STOCK REGISTER WAS SUBMITTING WHEREIN PURCHASES AND SALES WERE RECONCILED. THE AFFIDAVITS OF THE PARTIES WERE ALSO SUBMITTED TO SUBSTANTIATE THAT PURCHASES ARE GENUINE. THE LEARNED CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE AS TO LEGALITY AND VALIDITY OF RE-OPENING U/S 147/148 OF 1961 ACT, AS THE RE-OPENING WAS DONE BASED ON INFORMATION WHICH WAS A TANGIBLE INFORMATION THAT ASSESSEE HAD MADE PURCHAS ES FROM BENAMI CONCERNS OF BHANWARLAL JAIN WHO WERE ENGAGE D IN PROVIDING HAWALA/ACCOMMODATION ENTRIES AS ADMITTED BY MR BHANWARLAL JAIN IN STATEMENT RECORDED U/S 132(4) OF 1961 ACT. THE LEARNED CIT(A) REFERRED TO IN INSTRUCTION NO 2 OF 2008 DATED 22-02-2008 WHEREIN THE REVENUE HAS IN CERTAIN CASES CONCERNING DIAMOND TRADERS/MANUFACTURES DECIDED TO ACCEPT RETU RN OF INCOME, IF THE INCOME DECLARED BY TAX-PAYER IS HIGH ER THAN 6% OF TOTAL TURNOVER PROVIDED SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED . THESE CASES HOWEVER EXCLUDE CASES , IN TER-ALIA, WHERE THERE IS INFORMATION REGARDING ESCAPMENT OF I NCOME. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAS SHOWN INCOME @4.52% OF TURNOVER. THE LD. CIT(A) AFTER CONSIDERIN G THE FACTS OF THE CASE, HELD THAT FAIR AND REASONABLE MARGIN IS C ONSIDERED TO BE 9% OF THE PURCHASES COST OF RS. 60,44,860/- . THE S AID PERCENTAGE IS ALSO BASED ON THE FACTS AND FIGURES FOR ASSESSME NT YEAR 2008- 09, 2009-10, 2011-12 AND 2012-13. THE LEARNED CIT( A) OBSERVED THAT THE ASSESSEE IS ARGUING IN ALTERNATIVE TO ACCE PT THE MARGIN @3% AS WAS BASED ON APPELLATE ORDER PASSED FOR ASSE SSMENT YEAR 2012-13 BY LEARNED CIT(A)-21, MUMBAI , WHILE THE AS SESSEE APPELLATE PROCEEDINGS WERE WITH LEARNED CIT(A)-34, MUMBAI. THE LEARNED CIT(A) OBSERVED THAT SAID MARGIN IS BASED ON FIGURE OF TOTAL SALES, NET PROFIT AND QUANTUM OF BOGUS PURCHA SE FOR THAT ASSESSMENT YEAR BUT AS PER LEARNED CIT(A), ONE HAS TO LOOK AT ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 12 PROFIT MARGIN OF VARIOUS YEARS TO ARRIVE AT DECISIO N AND AVERAGE MARGIN IS TO BE ADOPTED. THUS, THE LEARNED CIT(A) R ESTRICTED THE ADDITION TO THE TOTAL INCOME TO 9% OF THE PURCHASES OF RS. 60,44,860/- , WHICH WORKS OUT TO RS. 5,44,037/- WH ICH BRING THE NET MARGIN TO 7.22% ON TOTAL TURNOVER, VIDE APPELLA TE ORDER DATED 29-04-2016 PASSED BY LD. CIT(A). 5. AGGRIEVED BY THE APPELLATE ORDER DATED 29-04-201 6 PASSED BY THE LD. CIT(A), THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSMENT WAS REOPENED U/S 147/148 OF THE ACT. TH E ASSESSEE RAISED OBJECTIONS TO RE-OPENING BUT THE A.O. REJECT ED THE SAME. IT WAS SUBMITTED THAT ORIGINAL ASSESSMENT WAS FRAMED U /S 143(1) OF THE ACT AND THE RE-OPENING WAS DONE WITHIN FOUR YEA RS FROM THE END OF ASSESSMENT . THE REASONS RECORDED FOR RE-OPE NING HAVE BEEN PLACED IN THE PAPER BOOK PAGE NO. 3. IT IS SUB MITTED THAT SEARCH AND SEIZURE OPERATION WAS CARRIED OUT U/S 13 2 OF 1961 ACT IN THE CASE OF BHANWARLAL JAIN GROUP AND BASED ON T HIS THE REOPENING OF ASSESSMENT WAS DONE U/S 147 OF THE ACT . THE ASSESSEE HAD RAISED OBJECTIONS WHICH ARE PLACED AT PAPER BOOK PAGE NO. 7 TO 9. THE A.O. DISPOSED OF THE OBJECTIO NS AND PASSED ORDER DATED 09-01-2015, COPY OF WHICH IS PLACED AT PAPER BOOK PAGE 10 TO 13. THE LD. COUNSEL SUBMITTED THAT NO O PPORTUNITY WAS GIVEN FOR CROSS EXAMINATION OF SAID MR BHANWARL AL JAIN. THE LD. COUNSEL DREW OUR ATTENTION TO CONCLUSION REACHE D BY THE LD. CIT(A) WHILE DISMISSING THE GROUND CHALLENGING THE REOPENING OF CONCLUDED ASSESSMENT. THE LD. COUNSEL RELIED ON TH E DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. M/S ASHISH INTERNATIONAL, INCOME TAX APPEAL NO. 4299 OF 2009 O RDER DATED 22 ND FEBRUARY, 2011 AND SUBMITTED THAT SINCE NO OPPORTU NITY WAS GRANTED TO THE ASSESSEE TO CROSS EXAMINE MR BHANWAR LAL JAIN AND HENCE, ADDITION CANNOT BE SUSTAINED. IT WAS SUBMITT ED THAT ADDITION OF 25% OF THE ALLEGED BOGUS PURCHASES OF RS. 60,44,860/- , WHICH COMES TO RS. 15,11,215/- WERE A DDED TO THE INCOME BY THE AO. THE LD. CIT(A) REDUCED THE ADDIT IONS TO 9% OF SUCH ALLEGED BOGUS PURCHASES. IT WAS STATED BY LEA RNED AR THAT THE REVENUE HAS NOT FILED ANY APPEAL AGAINST THE RE LIEF GRANTED BY LEARNED CIT(A). IT IS SUBMITTED THAT THE ASSESSEE IS A TRADER AND INCOME DECLARED WAS 4.52% WHICH WAS ENHANCED BY LEA RNED CIT(A) TO 7.22%. IT WAS SUBMITTED THAT PROFIT IS R ANGING BETWEEN 4.5% TO 7% IN ASSESSMENT YEAR 2008-09, 2009-10, 201 0-11 AND 2012-13. IT WAS SUBMITTED THAT THE LD. CIT (A)-21 R ESTRICTED THE ADDITIONS TO 3% OF ALLEGED BOGUS PURCHASES FOR THE ASSESSMENT YEAR 2012-13 IN THE CASE OF ONE OF THE GROUP CONCER N OF THE ASSESSEE NAMELY M/S SATYANIS THE JEWELLER STORE PRI VATE LIMITED , FOR WHICH APPELLATE ORDER DATED 30-03-2015 PASSED BY LEARNED CIT(A)-21 IS PLACED ON RECORD WHICH IS PLACED IN FI LE. IT WAS ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 13 SUBMITTED THAT THE SAID ASSESSEE M/S SATYANIS THE J EWELLERY STORE PRIVATE LIMITED HAD ACCEPTED THE SAID ADDITIO N OF 3% ON ALLEGED BOGUS PURCHASED AS WAS MADE BY LEARNED CIT( A)-21 FOR ASSESSMENT YEAR 2012-13 AND NO APPEAL TO THE TRIBUN AL HAS BEEN FILED BY THE ASSESSEE CONTESTING APPELLATE ORDER DA TED 30-03-2015 PASSED BY LEARNED CIT(A). IT WAS SUBMITTED THAT NO TICES WERE ISSUED TO 4 PARTIES BY THE AO U/S 133(6) OF 1961 AC T IN THE CASE OF THE ASSESSEE AND THEY COULD NOT REPLY CERTAIN QU ESTIONS BUT LATER ON AFFIDAVITS WERE PLACED ON RECORD BEFORE TH E LD. CIT(A) WHICH ARE PLACED AT PAPER BOOK PAGE 18-19, 36-37, 5 0-51,67-68. 5. THE LD. D.R. REFERRED TO THE LD. CIT(A)S ORDER VIDE PARA 32 SUBMITTED THAT THE LD. CIT(A) IS QUITE RIGHT IN APP LYING ADDITION TO INCOME TO THE TUNE OF 9% OF THE PURCHASE OF RS. 60 ,44,860/- WHICH IS FAIR AND REASONABLE . IT IS SUBMITTED THAT LEARNED CIT(A) CONSIDERED THE AVERAGE MARGIN FROM ASSESSMENT YEAR 2008-09 TO 2012-13 FOR APPLYING THIS RATE OF ADDITION WHICH IS FAIR, REASONABLE AND RATIONAL, WHEREBY NET MARGIN OF THE ASSESSEE ON TOTAL TURNOVER HAS GONE UP FROM 4.52% TO 7.22%. DU RING SEARCH PROCEEDINGS U/S 132(1) OF 1961 ACT, SHRI BHANWARILA L JAIN ADMITTED IN THE STATEMENT RECORDED U/S 132(4) OF 19 61 ACT THAT HE WAS INSTRUMENTAL IN PROVIDING BOGUS/ ACCOMMODAT ION ENTRIES BY PROVIDING BOGUS INVOICE TOWARDS BOGUS PURCHASES . THE BENAMI COMPANIES/ENTITIES WERE CREATED BY SAID MR B HANWARLAL JAIN IN THE NAME OF HIS BENAMIS WHO WERE HIS EMPLO YEES TO UNDERTAKE THESE BOGUS TRANSACTIONS. THE NOTICES U/ S 133(6) OF 1961 ACT WERE ISSUED TO VARIOUS EMPLOYEES-BENAMIS O F MR BHANWARLAL JAIN WHO DID NOT SUPPLIED THE INFORMATIO N SOUGHT BY THE AO. THE ASSESSEE FURNISHED THEIR AFFIDAVIT BEFO RE LEARNED CIT(A) BUT COULD NOT PRODUCE THESE PARTIES BEFORE T HE AO/CIT(A) FOR RECORDING THEIR STATEMENTS. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE CASE LAW S RELIED UPON. WE HAVE OBSERVED THAT THE ASSESSEE IS ENGAGED IN B USINESS OF TRADING IN DIAMONDS, GOLD AND JEWELLERY. A SEARCH OPERATION WAS CONDUCTED IN THE CASE OF MR BHANWARLAL JAIN GROUP BY REVENUE ON 03-10-2013 U/S 132(1) OF 1961 ACT AND STATEMENT OF MR BHANWARLAL JAIN WAS RECORDED U/ S 132(4) OF THE ACT WHEREIN HE ADMITTED THAT HE WAS ENGAGED IN THE ISSUANCE OF BOGUS BILLS AND WERE ENGAGED IN PROVIDING ACCOMM ODATION ENTRIES THROUGH VARIOUS FRONT CONCERNS OPENED IN TH E NAME OF HIS EMPLOYEES , AFTER BEING CONFRONTED WITH THE STATEME NTS OF HIS EMPLOYEES RECORDED U/S 132 AND 131 OF 1961 ACT. THE SAID MR.BHANWARLAL JAIN ADMITTED THAT HE HAS OPENED SEVE RAL BENAMI CONCERNS IN THE NAME OF HIS EMPLOYEES WHO WERE HIS BANAMIS ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 14 AND WERE ONLY PAID SALARY BY SAID MR BHANWARLAL JAI N AND THESE BANAMI CONCERNS WERE USED BY MR BHANWARLAL JAIN AS HIS FRONT ENTITIES TO PROVIDE BOGUS/ACCOMMODATION ENTRIES. TH E LARGE NUMBER OF SAID CONCERNS WERE OPERATING FROM 2-3 PRE MISES OWNED BY MR BHANWARLAL JAIN AS DETAILED IN PRECEDING PARA S OF THIS ORDER. DURING SEARCH U/S 132(1) OF 1961 ACT, NEITHE R BOOKS OF ACCOUNTS OF THESE BENAMI CONCERNS WERE RECOVERED FR OM THEIR REGISTERED PREMISES NOR ANY STOCK OF DIAMOND WAS FO UND IN THE SAID PREMISES BY REVENUE. THE BOOKS OF ACCOUNTS OF THESE BENAMI CONCERNS WERE RECOVERED BY REVENUE FROM SOME OTHER PREMISES AND THAT TOO OWNED BY MR BHANWARLAL JAIN, THE DETAI LS ARE IN PRECEDING PARAS OF THIS ORDER WHICH ARE NOT REPEA TED. THE SO CALLED PROPRIETOR/DIRECTORS/PARTNERS OF THESE BANAM I COMPANIES /CONCERNS WHO WERE IN-FACT EMPLOYEES OF MR BHANWARL AL JAIN ADMITTED IN THEIR STATEMENT RECORDED U/S 132/131 OF 1961 ACT THAT THEY DO NOT HAVE ANY KNOWLEDGE OF AFFAIRS OF T HE SAID CONCERNS WHICH WERE HELD IN THEIR NAMES NOR THEY HA D ANY KNOWLEDGE OF DIAMOND TRADE. THE MODUS OPERANDI ADOP TED BY SAID MR BHANWARLAL JAIN WAS THAT HE THROUGH THESE B ENAMI CONCERNS USED TO IMPORT DIAMONDS ON BEHALF OF ACTUA L IMPORTERS AND THE DIAMONDS WERE HANDED OVER WITHOUT INVOICES TO THESE ACTUAL IMPORTERS BY THESE BENAMI CONCERNS OF MR BHA NWARLAL JAIN , AND THE SAID IMPORTERS USED TO PAY CASH AGAINST S UPPLIES OF DIAMOND TO THEM MADE WITHOUT ANY INVOICES. THE INTE NTION OF THESE IMPORTERS WERE TO SUPPRESS THEIR TURNOVER AND CONSEQUENTLY PROFITS AND HENCE THESE FRONT CONCERNS OF MR BAHNWA RLAL JAIN WERE USED TO IMPORT DIAMONDS. THEREAFTER, TO COMPLE TE BOOKS OF ACCOUNTS, THESE BENAMI CONCERNS OF MR BHANWARLAL JA IN USED TO ISSUE BOGUS BILLS TO VARIOUS CONCERNS / ENTITIES WH O WANTED BILLS TO COVER THEIR SALES IN BOOKS OF ACCOUNT. NO MATERI AL WAS SUPPLIED AGAINST THESE BOGUS BILLS WHICH WERE MERELY ACCOMMO DATION / HAWALA ENTRIES. THESE PARTIES ISSUED CHEQUES TO BEN AMI CONCERNS OF MR BHANWARLAL JAIN AGAINST WHICH CASH WAS HANDED BACK BY THESE BENAMI CONCERNS TO THE PARTIES WHO OBTAINED B ILLS FROM CONCERNS OF BHANWARLAL JAIN. THESE CONCERNS WHO USE D TO OBTAIN BOGUS BILLS FROM MR BHANWARLAL JAIN BENAMI CONCERNS , USED TO ACTUALLY PURCHASE DIAMONDS FROM GREY MARKET AT LOW COST AND TO SAVE TAXES ETC. WERE USING FRONT COMPANIES OF MR BH ANWARLAL JAIN . THE FOREIGN SUPPLIERS USED TO SUPPLY DIAMOND TO B ENAMI CONCERNS OF MR BHANWARLAL JAIN ON CREDIT BASIS. THE PROCEEDS OF CHEQUES SO OBTAINED BY THESE BENAMI CONCERNS FROM T HESE BOGUS BILLS ISSUED TO VARIOUS CONCERNS WERE UTILIZED TO M AKE PAYMENT FOR IMPORTS. WE FIND THAT THE ASSESSEE FILED ITS RETURN OF INCOM E WITH REVENUE ON 26-09-2010 WHICH WAS PROCESSED BY THE REVENUE U/ S 143(1) OF THE ACT. THUS, THERE WAS NO SCRUTINY ASSESSME NT U/S 143(3) R.W.S. 143(2) OF 1961 ACT FRAMED BY REVENUE AGAINST THE ASSESSEE. ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 15 THE CASE OF THE ASSESSEE WAS RE-OPENED BY THE AO U/ S 147 OF 1961 ACT BY ISSUE OF NOTICE DATED 26.03.2014 U/S 14 8 OF 1961 ACT, WHICH WAS RE-OPENED WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE REASONS FOR RE-OPENING WERE RE CORDED BY THE AO ON 26-03-2014, WHICH WERE SUPPLIED TO THE ASSESS EE VIDE LETTER DATED 06-06-2014 AND THE ASSESSEE OBJECTED T O THE REASONS SO RECORDED VIDE LETTER DATED 26-06-2014 , WHICH OB JECTIONS WERE DISPOSED OF BY REVENUE VIDE ORDERS DATED 09-01-2015 . THEREAFTER, THE ASSESSMENT WAS FRAMED BY THE REVENU E U/S 143(3) R.W.S. 147 OF 1961 ACT VIDE ASSESSMENT ORDER DATED 30-03- 2015. THUS, THE GENESIS OF THE CASE IS THE INFORMATION WH ICH WAS RECEIVED BY THE A.O. FROM DIT (INV.), MUMBAI THAT T HERE WERE SEARCH U/S 132(1) OF 1961 ACT IN THE CASE OF MR BHA NWARLAL JAIN GROUP ON 03-10-2013 AND STATEMENT OF MR BHANWARLAL JAIN WAS RECORDED U/S 132(4) OF THE ACT WHEREIN HE ADMITTED THAT HE WAS ENGAGED IN THE ISSUANCE OF BOGUS BILLS AND WERE ENG AGED IN PROVIDING ACCOMMODATION ENTRIES THROUGH VARIOUS FRO NT CONCERNS OPENED IN THE NAME OF HIS EMPLOYEES , ON BEING CONF RONTED WITH THE STATEMENT RECORDED OF EMPLOYEES U/S 132 AND 131 OF 1961 ACT . THE SAID BHANWARLAL JAIN ADMITTED THAT HE HAS OPENED SEVERAL BENAMI CONCERNS IN THE NAME OF EMPLOYEES WH O WERE HIS BANAMIS AND WERE ONLY PAID SALARY BY SAID MR BHANW ARLAL JAIN AND THESE BANAMI CONCERNS WERE USED BY MR BHANWARLA L JAIN TO PROVIDE BOGUS/ACCOMMODATION ENTRIES WITHOUT SUPPLYI NG ANY MATERIAL. THE LARGE NUMBER OF SAID CONCERNS WERE OP ERATING FROM 2-3 PREMISES OWNED BY MR BHANWARLAL JAIN AS DETAILE D IN PRECEDING PARAS OF THIS ORDER. DURING SEARCH U/S 1 32(1) OF 1961 ACT, NEITHER BOOKS OF ACCOUNTS OF THESE BENAMI CONC ERNS WERE RECOVERED FROM THEIR REGISTERED PREMISES NOR ANY ST OCK OF DIAMOND WAS FOUND BY REVENUE. THE BOOKS OF ACCOUNTS OF THESE BENAMI CONCERNS WERE RECOVERED BY REVENUE FROM SOME OTHER PREMISES AND THAT TOO OWNED BY MR BHANWARLAL JAIN, THE DETAILS ARE IN PRECEDING PARAS OF THIS ORDER WHICH ARE NOT REPEATED. THE SO CALLED PROPRIETOR/DIRECTORS/PARTNERS OF THESE BA NAMI COMPANIES /CONCERNS ADMITTED IN THEIR STATEMENT REC ORDED U/S 132/131 OF 1961 ACT THAT THEY DO NOT HAVE ANY KNOWL EDGE OF AFFAIRS OF THE SAID CONCERNS NOR THEY HAD ANY KNOWL EDGE OF DIAMOND TRADE. THE MODUS OPERANDI ADOPTED BY SAID M R BHANWARLAL JAIN WAS THAT HE THROUGH THESE BENAMI CO NCERNS USED TO IMPORT DIAMONDS ON BEHALF OF ACTUAL IMPORTE RS AND THE DIAMONDS WERE HANDED OVER WITHOUT INVOICES TO ACTUA L IMPORTERS BY THESE BENAMI CONCERNS OF MR BHANWARLAL JAIN , WH O USED TO PAY CASH AGAINST THESE SUPPLIES OF DIAMOND TO THEM MADE WITHOUT ANY INVOICES. THE INTENTION OF THESE IMPORT ERS WAS TO SUPPRESS TURNOVER AND CONSEQUENTLY PROFITS. THEREAF TER, TO COMPLETE BOOKS OF ACCOUNTS, THESE BENAMI CONCERNS O F MR BHANWARLAL JAIN USED TO ISSUE BOGUS BILLS TO VARIOU S CONCERNS ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 16 WHO WANTED BILLS TO COVER THEIR SALES IN BOOKS OF A CCOUNT. NO MATERIAL WAS SUPPLIED AGAINST THESE BOGUS BILLS ISS UED BY THE SAID BENAMI CONCERNS OF MR BHANWARLAL JAIN. THESE PARTIE S ISSUED CHEQUES TO BENAMI CONCERNS OF MR BHANWARLAL JAIN AG AINST WHICH CASH WAS HANDED BACK BY THESE CONCERNS TO THE PARTI ES WHO OBTAINED BILLS FROM CONCERNS OF BHANWARLAL JAIN. TH ESE CONCERNS WHO USED TO OBTAIN BILLS FROM MR BHANWARLAL JAIN BE NAMI CONCERNS, USED TO ACTUALLY PURCHASE DIAMONDS FROM G REY MARKET AT LOW COST AND TO SAVE TAXES ETC. WERE USING FRONT CONCERNS OF MR BHANWARLAL JAIN . THE FOREIGN SUPPLIERS USED TO SUP PLY DIAMOND TO BENAMI CONCERNS OF MR BHANWARLAL JAIN ON CREDIT BASIS. THE PROCEEDS OF CHEQUES SO OBTAINED BY THESE BENAMI CON CERNS FROM THESE BOGUS BILLS ISSUED TO VARIOUS CONCERNS WERE U TILIZED TO MAKE PAYMENT FOR IMPORTS. THERE IS A LIST OF 2 SUCH PAR TIES WHEREIN THE ASSESSEE IS STATED TO BE BENEFICIARY OF BOGUS PURCH ASE BILLS TO THE TUNE OF RS.19,31,040 AS RECORDED IN REASONS RECORDE D BY REVENUE ON 26-03-2014. THUS, TANGIBLE AND MATERIAL INCRIMIN ATING INFORMATION WAS RECEIVED BY THE AO WHICH CLEARLY IN DICTED ASSESSEE TO BE BENEFICIARY OF BOGUS PURCHASE ENTRIE S TO THE TUNE OF RS. 19,31,040/- FROM 2 BOGUS ENTRY PROVIDERS WHI CH FORMED THE REASONS TO BELIEVE BY THE AO IN FORMING AN OPINION THAT INCOME HAS ESCAPED ASSESSMENT AND THE INFORMATION SO RECEI VED BY THE AO HAS LIVE LINK WITH REASONS TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT, WHEREIN THE REVENUE RECORDED REASONS TO BELIEVE BASED ON AFORE-STATED INCRIMINATING TANGIBLE AND MA TERIAL INFORMATION INDICTING ASSESSEE THAT INCOME OF THE A SSESSEE HAS ESCAPED ASSESSMENT AND THE ASSESSMENT NEED TO BE R E-OPENED U/S 147 OF 1961 ACT BASED ON SUCH MATERIAL AND TANG IBLE INCRIMINATING INFORMATION INDICTING ASSESSEE. AT TH IS STAGE THERE HAS TO BE A PRIMA-FACIE BELIEF BASED ON SOME TANGIB LE AND MATERIAL INFORMATION ABOUT ESCAPEMENT OF INCOME AND THE SAME IS NOT REQUIRED TO BE PROVED TO THE HILT. THUS, AT THI S STAGE , THERE HAS TO BE PRIMA-FACIE SATISFACTION OF THE AO BASED ON TANGIBLE AND MATERIAL INCRIMINATING INFORMATION IN HIS POSSESSIO N LEADING TO REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT . THAT IS IN A SUBSEQUENT STAGE WHEN ASS ESSMENT IS BEING FRAMED U/S 143(3) R.W.S. 147 OF 1961 WHERE NE CESSARY AND DETAILED OPPORTUNITIES ARE REQUIRED TO BE GIVEN TO THE ASSESSEE FOR REBUTTAL BEFORE FASTENING TAX LIABILITY AS PER SCHE ME AND MANDATE OF 1961 ACT. IT IS TO BE NOTED ALSO THAT IN THE INS TANT CASE NO SCRUTINY ASSESSMENT U/S 143(3) R.W.S. 143(2) OF 196 1 ACT WAS FRAMED ORIGINALLY BY THE REVENUE WHILE PROCESSING A SSESSEES RETURN OF INCOME FILED WITH REVENUE . RETURN OF IN COME OF THE ASSESSEE WAS ORIGINALLY PROCESSED BY REVENUE U/S 14 3(1) OF THE ACT ONLY. THERE WAS , THUS, NO FORMATION OF OPINION AS INTIMATION U/S 143(1) OF 1961 ACT IS NOT AN ASSESSMENT. THUS, THERE CANNOT BE A CHANGE OF OPINION AS NO OPINION WAS INITIALLY FORMED BY THE AO AS RETURN WAS ORIGINALLY PROCESSED U/S 143(1) O F 1961 ACT ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 17 AND NO SCRUTINY ASSESSMENT WAS FRAMED BY REVENUE U/ S 143(3) R.W.S. 143(2) OF 1961 ACT. THUS, IT COULD NOT BE SA ID THAT NO TANGIBLE AND MATERIAL INCRIMINATING MATERIAL WAS RE CEIVED BY THE A.O. , RATHER IT IS ONLY AFTER RECEIPT OF TANGIBLE AND MATERIAL INCRIMINATING MATERIAL BY THE AO FROM DIT(INV) INCR IMINATING ASSESSEE AS DETAILED ABOVE , THE ASSESSMENT WAS RE OPENED U/S 147 OF THE ACT BASED ON SUCH TANGIBLE AND MATERIAL INCRIMINATING INFORMATION , AND NOTICES U/S 148 WAS ISSUED BY THE AO ON 26 TH MARCH, 2014, WHICH IS ISSUED WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THUS, IT CANNOT BE SAID THAT THE REVENUE HAS REOPENED THE ASSESSMENT BASED UPON SUSPICION RA THER GENESIS OF RE-OPENING IS INCRIMINATING INFORMATION RECEIVED FROM DIT(INV), MUMBAI BASED ON INFORMATION RECEIVED FROM DIT(INV) WHICH IN TURN WAS BASED ON SEARCH AND SEIZURE OPERA TION U/S 132(1) OF 1961 ACT CARRIED OUT IN THE CASE OF MR BH ANWARLAL JAIN GROUP CASE, WHEREIN HE DEPOSED IN STATEMENT RECORD ED U/S 132(4) OF 1961 ACT OF BEING ENGAGED IN PROVIDING BO GUS ACCOMMODATION ENTRIES WITHOUT SUPPLYING ANY MATERIA L WHEREIN ONLY BOGUS BILLS WERE ISSUED AND THE CHEQUE AMOUNT WAS RETURNED BACK TO THE BENEFICIARIES IN CASH . THE AS SESSEE IS STATED TO BE BENEFICIARY IN THE SAID LIST OF HAVING ALLEGE DLY RECEIVED ENTRIES FROM 2 BOGUS ACCOMMODATION ENTRY PROVIDERS WHO WERE ACTING AS FRONT AND BENAMI CONCERNS OF MR BHANWARLA L JAIN TO THE TUNE OF RS. 19,31,040/-. THE ORIGINAL RETURN WAS PR OCESSED U/S 143(1) OF THE ACT, AND THUS NO OPINION WAS FORMED A ND HENCE THERE IS NO CHANGE OF OPINION. RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT V. RAJ ESH JHAVERI, (2007) 291 ITR 500 (SC), WHEREIN HONBLE SUPREME CO URT VIDE ORDERS DATED 23-05-2007 HAS HELD AS UNDER : 11. IT IS TO BE NOTED THAT SUBSTANTIAL CHANGES HAVE BE EN MADE TO SECTION 143(1) WITH EFFECT FROM JUNE 1, 1999. UP TO MARCH 31, 1989, AFTER A RETURN OF INCOME WAS FILED THE ASSESS ING OFFICER COULD MAKE AN ASSESSMENT UNDER SECTION 143(1) WITHO UT REQUIRING THE PRESENCE OF THE ASSESSEE OR THE PRODU CTION BY HIM OF ANY EVIDENCE IN SUPPORT OF THE RETURN. WHERE THE ASSESSEE OBJECTED TO SUCH AN ASSESSMENT OR WHERE THE OFFICER WAS OF THE OPINION THAT THE ASSESSMENT WAS INCORRECT OR INCOMP LETE OR THE OFFICER DID NOT COMPLETE THE ASSESSMENT UNDER SECTI ON 143(1), BUT WANTED TO MAKE AN INQUIRY, A NOTICE UNDER SECTI ON 143(2) WAS REQUIRED TO BE ISSUED TO THE ASSESSEE REQUIRING HIM TO PRODUCE EVIDENCE IN SUPPORT OF HIS RETURN. AFTER CO NSIDERING THE MATERIAL AND EVIDENCE PRODUCED AND AFTER MAKING NEC ESSARY INQUIRIES, THE OFFICER HAD POWER TO MAKE ASSESSMENT UNDER SECTION 143(3). WITH EFFECT FROM 1-4-1989, THE PROV ISIONS UNDERWENT SUBSTANTIAL AND MATERIAL CHANGES. A NEW S CHEME WAS INTRODUCED AND THE NEW SUBSTITUTED SECTION 143( 1) PRIOR TO THE SUBSEQUENT SUBSTITUTION WITH EFFECT FROM 1-6-19 99, IN CLAUSE ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 18 (A), A PROVISION WAS MADE THAT WHERE A RETURN WAS F ILED UNDER SECTION 139 OR IN RESPONSE TO A NOTICE UNDER SECTIO N 142(1), AND ANY TAX OR REFUND WAS FOUND DUE ON THE BASIS OF SUC H RETURN AFTER ADJUSTMENT OF TAX DEDUCTED AT SOURCE, ANY ADV ANCE TAX OR ANY AMOUNT PAID OTHERWISE BY WAY OF TAX OR INTEREST , AN INTIMATION WAS TO BE SENT WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 143(2) TO THE ASSESSEE SPECIFYING THE SUM S O PAYABLE AND SUCH INTIMATION WAS DEEMED TO BE A NOTICE OF DE MAND ISSUED UNDER SECTION 156. THE FIRST PROVISO TO SECT ION 143(1)(A) ALLOWED THE DEPARTMENT TO MAKE CERTAIN ADJUSTMENTS IN THE INCOME OR LOSS DECLARED IN THE RETURN. THEY WERE AS FOLLOWS : (A) AN ARITHMETICAL ERROR IN THE RETURN, ACCOUNTS AND DOCUMENTS ACCOMPANYING IT WERE TO BE RECTIFIED; (B) ANY LOSS CARRIED FORWARD, DEDUCTION, ALLOWANCE OR RELIEF WHICH ON THE BASIS OF THE INFORMATION AVAILABLE IN SUCH RETURN, ACCOUNTS OR DOCUMENTS, WAS PRIMA FACIE ADMISSIBLE, BUT WHICH WAS N OT CLAIMED IN THE RETURN WAS TO BE ALLOWED; (C) ANY LOSS CARRIED FORWARD, RELIEF CLAIMED IN THE RETURN WHICH ON THE BASIS OF THE INFORMATION AS AVAILABLE IN SUCH RETURNS ACCOUNTS OR DOCUMENTS WERE PRIMA FACIE INADMISSIBLE WAS TO BE DISALLOWED. 12. WHAT WERE PERMISSIBLE UNDER THE FIRST PROVISO TO S ECTION 143(1)(A) TO BE ADJUSTED WERE, (I) ONLY APPARENT AR ITHMETICAL ERRORS IN THE RETURN, ACCOUNTS OR DOCUMENTS ACCOMPANYING T HE RETURN, (II) LOSS CARRIED FORWARD, DEDUCTION ALLOWANCE OR RELIEF , WHICH WAS PRIMA FACIE ADMISSIBLE ON THE BASIS OF INFORMAT ION AVAILABLE IN THE RETURN BUT NOT CLAIMED IN THE RETURN AND SIMILA RLY (III) THOSE CLAIMS WHICH WERE ON THE BASIS OF THE INFORMATION A VAILABLE IN THE RETURN, PRIMA FACIE INADMISSIBLE, WERE TO BE RECTIFIED/ALLOWED/DISALLOWED. WHAT WAS PERMISSIBLE WAS CORRECTION OF ERRORS APPARENT ON THE BASIS OF THE D OCUMENTS ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 19 ACCOMPANYING THE RETURN. THE ASSESSING OFFICER HAD NO AUTHORITY TO MAKE ADJUSTMENTS OR ADJUDICATE UPON ANY DEBATABLE I SSUES. IN OTHER WORDS, THE ASSESSING OFFICER HAD NO POWER TO GO BEHIND THE RETURN, ACCOUNTS OR DOCUMENTS, EITHER IN ALLOWING O R IN DISALLOWING DEDUCTIONS, ALLOWANCE OR RELIEF. 13. ONE THING FURTHER TO BE NOTICED IS THAT INTIMATION UNDER SECTION 143(1)(A) IS GIVEN WITHOUT PREJUDICE TO THE PROVISI ONS OF SECTION 143(2). THOUGH TECHNICALLY THE INTIMATION ISSUED WA S DEEMED TO BE A DEMAND NOTICE ISSUED UNDER SECTION 156, THAT DID NOT PER SE PRECLUDE THE RIGHT OF THE ASSESSING OFFICER TO P ROCEED UNDER SECTION 143(2). THAT RIGHT IS PRESERVED AND IS NOT TAKEN AWAY. BETWEEN THE PERIOD FROM 1-4-1989 TO 31-3-1998, THE SECOND PROVISO TO SECTION 143(1)(A), REQUIRED THAT WHERE ADJUSTMEN TS WERE MADE UNDER THE FIRST PROVISO TO SECTION 143(1)(A), AN IN TIMATION HAD TO BE SENT TO THE ASSESSEE NOTWITHSTANDING THAT NO TAX OR REFUND WAS DUE FROM HIM AFTER MAKING SUCH ADJUSTMENTS. WITH EFFECT FROM 1-4- 1998, THE SECOND PROVISO TO SECTION 143(1)(A) WAS S UBSTITUTED BY THE FINANCE ACT, 1997, WHICH WAS OPERATIVE TILL 1-6 -1999. THE REQUIREMENT WAS THAT AN INTIMATION WAS TO BE SENT T O THE ASSESSEE WHETHER OR NOT ANY ADJUSTMENT HAD BEEN MADE UNDER T HE FIRST PROVISO TO SECTION 143(1) AND NOTWITHSTANDING THAT NO TAX OR INTEREST WAS FOUND DUE FROM THE ASSESSEE CONCERNED. BETWEEN 1-4- 1998 AND 31-5-1999, SENDING OF AN INTIMATION UNDER SECTION 143(1)(A) WAS MANDATORY. THUS, THE LEGISLATIVE INTE NT IS VERY CLEAR FROM THE USE OF THE WORD 'INTIMATION' AS SUBSTITUTE D FOR 'ASSESSMENT' THAT TWO DIFFERENT CONCEPTS EMERGED. W HILE MAKING AN ASSESSMENT, THE ASSESSING OFFICER IS FREE TO MAK E ANY ADDITION AFTER GRANT OF OPPORTUNITY TO THE ASSESSEE. BY MAKI NG ADJUSTMENTS UNDER THE FIRST PROVISO TO SECTION 143(1)(A), NO AD DITION WHICH IS IMPERMISSIBLE BY THE INFORMATION GIVEN IN THE RETUR N COULD BE MADE BY THE ASSESSING OFFICER. THE REASON IS THAT UNDER SECTION 143(1)(A) NO OPPORTUNITY IS GRANTED TO THE ASSESSEE AND THE A SSESSING OFFICER PROCEEDS ON HIS OPINION ON THE BASIS OF THE RETURN FILED BY THE ASSESSEE. THE VERY FACT THAT NO OPPORTUNITY OF BEIN G HEARD IS GIVEN UNDER SECTION 143(1)(A) INDICATES THAT THE ASSESSIN G OFFICER HAS TO PROCEED ACCEPTING THE RETURN AND MAKING THE PERMISS IBLE ADJUSTMENTS ONLY. AS A RESULT OF INSERTION OF THE E XPLANATION TO SECTION 143 BY THE FINANCE (NO. 2) ACT OF 1991 WITH EFFECT FROM 1- 10-1991, AND SUBSEQUENTLY WITH EFFECT FROM 1-6-1994 , BY THE FINANCE ACT, 1994, AND ULTIMATELY OMITTED WITH EFFE CT FROM 1-6- 1999, BY THE EXPLANATION AS INTRODUCED BY THE FINAN CE (NO. 2) ACT OF 1991 AN INTIMATION SENT TO THE ASSESSEE UNDER SE CTION 143(1)(A) WAS DEEMED TO BE AN ORDER FOR THE PURPOSES OF SECTI ON 246 BETWEEN 1-6-1994, TO 31-5-1999, AND UNDER SECTION 2 64 BETWEEN 1- 10-1991, AND 31-5-1999. IT IS TO BE NOTED THAT THE EXPRESSIONS 'INTIMATION' AND 'ASSESSMENT ORDER' HAVE BEEN USED AT DIFFERENT ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 20 PLACES. THE CONTEXTUAL DIFFERENCE BETWEEN THE TWO E XPRESSIONS HAS TO BE UNDERSTOOD IN THE CONTEXT THE EXPRESSIONS ARE USED. ASSESSMENT IS USED AS MEANING SOMETIMES 'THE COMPUT ATION OF INCOME', SOMETIMES 'THE DETERMINATION OF THE AMOUNT OF TAX PAYABLE' AND SOMETIMES 'THE WHOLE PROCEDURE LAID DO WN IN THE ACT FOR IMPOSING LIABILITY UPON THE TAX PAYER'. IN THE SCHEME OF THINGS, AS NOTED ABOVE, THE INTIMATION UNDER SECTIO N 143(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSES SMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTO RY PROVISIONS AS THEY STOOD AT DIFFERENT POINTS OF TIME. UNDER SECTI ON 143(1)(A) AS IT STOOD PRIOR TO 1-4-1989, THE ASSESSING OFFICER HAD TO PASS AN ASSESSMENT ORDER IF HE DECIDED TO ACCEPT THE RETURN , BUT UNDER THE AMENDED PROVISION, THE REQUIREMENT OF PASSING OF AN ASSESSMENT ORDER HAS BEEN DISPENSED WITH AND INSTEAD AN INTIMA TION IS REQUIRED TO BE SENT. VARIOUS CIRCULARS SENT BY THE CENTRAL BOARD OF DIRECT TAXES SPELL OUT THE INTENT OF THE LEGISLATUR E, I.E., TO MINIMIZE THE DEPARTMENTAL WORK TO SCRUTINIZE EACH AND EVERY RETURN AND TO CONCENTRATE ON SELECTIVE SCRUTINY OF RETURNS. THESE ASPECTS WERE HIGHLIGHTED BY ONE OF US (D.K. JAIN J) IN APOGEE IN TERNATIONAL LTD. V. UNION OF INDIA [1996] 220 ITR 248 (DELHI) . IT MAY BE NOTED ABOVE THAT UNDER THE FIRST PROVISO TO THE NEWLY SUB STITUTED SECTION 143(1), WITH EFFECT FROM 1-6-1999, EXCEPT AS PROVID ED IN THE PROVISION ITSELF, THE ACKNOWLEDGEMENT OF THE RETURN SHALL BE DEEMED TO BE AN INTIMATION UNDER SECTION 143(1) WHERE (A) EITHER NO SUM IS PAYABLE BY THE ASSESSEE, OR (B) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGEMENT IS NOT DONE BY ANY ASSESSING OFFICER, BUT MOSTLY BY MINISTERIAL STAFF. CAN IT BE SAID THAT ANY 'ASSESSMENT' IS DONE BY THEM ? THE REPLY IS AN EMPH ATIC 'NO'. THE INTIMATION UNDER SECTION 143(1)(A) WAS DEEMED TO BE A NOTICE OF DEMAND UNDER SECTION 156, FOR THE APPARENT PURPOSE OF MAKING MACHINERY PROVISIONS RELATING TO RECOVERY OF TAX AP PLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDICATED TO BE PAYABLE I N THE INTIMATION BECAME PERMISSIBLE. AND NOTHING MORE CAN BE INFERRE D FROM THE DEEMING PROVISION. THEREFORE, THERE BEING NO ASSESSMENT UNDER SECTION 143(1)(A), THE QUESTION OF CHANGE OF OPINIO N, AS CONTENDED, DOES NOT ARISE. 14. ADDITIONALLY, SECTION 148 AS PRESENTLY STANDS IS D IFFERENTLY COUCHED IN LANGUAGE FROM WHAT WAS EARLIER THE POSIT ION. PRIOR TO THE SUBSTITUTION BY THE DIRECT TAX LAWS (AMENDMENT) ACT , 1987, THE PROVISION READ AS FOLLOWS : '148. ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSE SSMENT.(1) BEFORE MAKING THE ASSESSMENT, REASSESSMENT OR RECOM PUTATION UNDER SECTION 147, THE ASSESSING OFFICER SHALL SERV E ON THE ASSESSEE A NOTICE CONTAINING ALL OR ANY OF THE REQU IREMENTS WHICH MAY BE INCLUDED IN A NOTICE UNDER SUB-SECTION (2) O F SECTION 139; ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 21 AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF THE NOTICE WERE A NOTICE ISSUED U NDER THAT SUB- SECTION. (2) THE ASSESSING OFFICER SHALL, BEFORE ISSUING AN Y NOTICE UNDER THIS SECTION, RECORD HIS REASONS FOR D OING SO.' 15. SECTION 147 PRIOR TO ITS SUBSTITUTION BY THE DIREC T TAX LAWS (AMENDMENT) ACT, 1987, STOOD AS FOLLOWS : '147. INCOME ESCAPING ASSESSMENT.IF HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR). EXPLANATION 1.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY: (A) WHERE INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (B) WHERE SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR (A) THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT, B Y REASON OF THE OMIS SION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN UNDER SECTION 139 FOR ANY ASSESSMENT YEAR TO THE ASSESSING OFFICER OR TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT Y EAR, OR (B) NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE ASSE SSEE, THE ASSESSING OFFICER HAS IN CONSEQUENCE OF INFORMA TION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 22 (C) WHERE SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT OR UNDER THE INDIAN INCOME- TAX ACT, 1922 (11 OF 1922); OR (D) WHERE EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED. EXPLANATION 2.PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVE RED BY THE ASSESSING OFFICER WILL NOT NECES-SARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THIS SECTION.' 16. SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMEN T YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PH RASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATI ON. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEV E THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED T HE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME C OURT IN CENTRAL PROVINCES MANGANESE 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) FULFI LMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSE NTIAL. 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 TH E ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHET HER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF. WHETHE R THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS I S SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO. (P.) ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 23 LTD. [1996] 217 ITR 597 (SC) ; RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC) . 17. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM 1-4-1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISION S OF SECTION 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMEN T FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JURISDICTION UNDER SECTION 14 7(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED FIRSTLY TH E ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHARGEABLE TO INCOME TAX HAVE ESCA PED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON T O BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER (I) OMISSION OR FAILURE ON THE PART OF THE A SSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSAR Y FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASS ESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UND ER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER F OR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS HOWEVER TO BE NOTED TH AT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE F ALLS WITHIN THE AMBIT OF THE PROVISO TO SECTION 147. THE CASE AT HAND IS COVERED BY THE MAIN PROVISION AND NOT THE PROVISO. 18. SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULF ILLED, THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDIN G UNDER SECTION 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. 19. INEVITABLE CONCLUSION IS THAT HIGH COURT HAS WRONG LY APPLIED ADANI EXPORTS CASE (SUPRA) WHICH HAS NO APPLICATION TO THE CASE ON THE FACTS IN VIEW OF THE CONCEPTUAL DIFFERENCE BETWEEN SECTION 143(1) AND SE CTION 143(3) OF THE ACT. ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 24 20. LEARNED COUNSEL FOR THE RESPONDENT SUBMITTED THAT OTHER POINTS ARE AVAILABLE TO BE RAISED. SINCE NO O THER POINT WAS URGED BEFORE THE HIGH COURT, WE FIND NO REASON TO EXAMINE IF ANY OTHER POINT WAS AVAILABLE. THE APPEA L IS ALLOWED WITHOUT ANY ORDERS AS TO COSTS. THUS, WE HOLD THAT REOPENING IS VALID AND LEGAL IN THE INSTANT CASE AS THE RATIO OF DECISION OF HONBLE SU PREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P RIVATE LIMITED(SUPRA) IS DIRECTLY AND SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CASE, AS IN THE INSTANT CASE A LSO NO ASSESSMENT WAS ORIGINALLY FRAMED U/S 143(2) R.WS. 1 43(3) OF 1961 ACT WHILE THE RETURN OF INCOME WAS ORIGINAL LY PROCESSED U/S 143(1) OF 1961 ACT , AND HENCE NO OPI NION WAS FORMED BY THE AO AS PROCESSING U/S 143(1) OF 19 61 ACT CANNOT BE SAID TO BE AN ASSESSMENT AND HENCE TH ERE IS NO QUESTION OF CHANGE OF OPINION IN THE INSTANT CASE. THE RE-OPENING WAS ALSO DONE WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR AND FIRST PROVISO TO SECTION 147 OF 1961 ACT IS NOT APPLICABLE. THE AO HAS RECEIVED AN TANGIBLE AND MATERIAL INCRIMINATING INFORMATION FRO M DIT(INV) , MUMBAI WHICH WAS BASED ON INCRIMINATING INFORMATION EMANATING FROM SEARCHES IN CASE OF MR BHANWARLAL JAIN GROUP WHICH WE HAVE DETAILED IN PRECEDING PARAS AND IT WAS REFLECTED IN SAID INCRIMINATING INFORMATION THAT THE ASSESSEE WAS BENEFICIARY OF BOGUS ACCOMMODATION ENTRY TO THE TUN E OF RS. 19,31,040/- FROM 2 HAWALA DEALERS, WHICH INFORMATION IS A TANGIBLE AND MATERIAL INFORMATION SUFFICIENT FOR THE PURPOSES OF RE-OPENING OF THE ASSESSMENT IN THE INSTANT CASE AS THE SAID RE-OPENI NG IS DONE BY THE AO WITHIN FOUR YEARS FROM THE END OF TH E ASSESSMENT YEAR AND NO SCRUTINY ASSESSMENT U/S 143( 3) R.W.S. 143(2) OF 1961 ACT WAS FRAMED ORIGINALLY BY REVENUE, THUS, CONSEQUENTLY FIRST PROVISO TO SECTIO N 147 OF 1961 ACT WAS NOT APPLICABLE IN THE INSTANT CASE UNDER APPEAL BEFORE THE TRIBUNAL. THE INCRIMINATING TANG IBLE AND MATERIAL INFORMATION SO RECEIVED BY THE AO IS WITH REGARD TO THE FACTS PREVIOUSLY DISCLOSED WHICH HAS COMES INTO POSSESSION OF THE AO WHICH TENDS TO EXPOSE THE UNTRUTHFULNESS OF THOSE FACTS AS WERE DISCLOSED IN THE RETURN OF INCOME BY THE ASSESSEE, WHICH RETURN OF I NCOME WAS INCIDENTALLY ALSO NOT SCRUTINIZED BY THE REVENU E. THE INCRIMINATING INFORMATION SO RECEIVED BY THE AO IN THE INSTANT CASE WHICH BECAME FOUNDATION FOR RE-OPENING OF THE ASSESSMENT WAS SUFFICIENT TO FORM REASONS TO BE LIEVE BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT, AS TH E ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 25 ASSESSEE WAS SPECIFICALLY INCRIMINATED IN THE SAID INFORMATION HAVING RECEIVED BOGUS ACCOMMODATION ENTRIES FOR PURCHASES TO THE TUNE OF RS. 19,31,040/ - FROM 2 BOGUS ENTRY PROVIDERS BEING HAWALA TRADERS PROVID ING ACCOMMODATION PURCHASE BILLS WITHOUT ACTUAL DELIVER Y OF MATERIAL . IN SUCH SITUATIONS, IT IS NOT A CASE OF MERE CHANGE OF OPINION OR THE DRAWING OF A DIFFERENT INF ERENCE FROM THE SAME FACTS AS WERE EARLIER AVAILABLE BUT A CTING ON FRESH INFORMATION EXPOSING UN-TRUTHFULNESS OF INFORMATION FURNISHED IN RETURN OF INCOME FILED WIT H REVENUE. WE ARE OF THE CONSIDERED VIEW THAT ON THE BASIS OF INFORMATION RECEIVED AND IF THE ASSESSING OFFICE R IS SATISFIED THAT REASONABLE GROUND EXISTS TO BELIEVE, THEN IN THAT CASE THE POWER OF THE ASSESSING AUTHORITY EXTE NDS TO RE-OPENING OF ASSESSMENT, WHICH IN THE INSTANT CASE THE CONDITIONS ARE DULY MET FOR RE-OPENING BASED ON FAC TUAL MATRIX OF THE CASE. THE TANGIBLE AND MATERIAL INCRIMINATING INFORMATION SO RECEIVED BY THE AO FRO M DIT(INV.), MUMBAI AS DETAILED ABOVE IS SO OBVIOUS T HAT TO SAY THAT THE AO HAS NOT APPLIED HIS MIND TO REACH SATISFACTION IN FORMING REASONS TO BELIEVE THAT INC OME OF ASSESSEE HAS ESCAPED ASSESSMENT TO INITIATE RE-OPEN ING U/S 147 OF 1961 , IS TOO FAR-FETCHED AND SUCH CONTE NTION OF THE ASSESSEE IS OUT-RIGHTLY REJECTED. THERE IS LIVE LINK BETWEEN MATERIAL AND TANGIBLE INCRIMINATING INFORMA TION RECEIVED BY THE ASSESSEE AND FORMATION OF REASONS T O BELIEVE THAT INCOME OF THE ASSESSE HAS ESCAPED ASSESSMENT IN THE INSTANT CASE UNDER APPEAL BEFORE US. THUS, RESPECTFULLY FOLLOWING THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED(SUPRA), WE HOLD THAT RE-OPE NING OF THE ASSESSMENT AS DONE IN THE INSTANT CASE BY TH E AO U/S 147 OF 1961 WAS VALID AND LEGAL WHICH IS UPHELD BY US , AND THE CONTENTIONS OF THE ASSESSEE ARE , HERE BY, REJECTED. NO CONTRARY DECISION OF HONBLE APEX COUR T IS BROUGHT TO OUR NOTICE . THIS GROUND OF THE ASSESSEE CHALLENGING LEGALITY AND VALIDITY OF RE-OPENING IS HEREBY DISMISSED. WE ORDER ACCORDINGLY. WE HAVE OBSERVED THAT NOTICE U/S 133(6) OF THE ACT WERE ISSUED BY THE A.O. TO FOUR BENAMI CONCERNS OF MR BHANWARLAL JAIN FROM WHOM THE ASSESSEE ALLEGEDLY OBTAINED BOGUS BILLS FOR PURCHASE OF DIAMONDS AGA INST WHICH THEY ONLY GAVE PART REPLIES. THE ASSESSEE FAI LED TO PRODUCE THESE FOUR PARTIES BEFORE THE AO DESPITE BE ING CALLED UPON BY REVENUE TO PRODUCE THEM. THE ASSESSE E ALSO COULD NOT PROVE THE MOVEMENT OF MATERIAL SO ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 26 PURCHASED FROM THESE ALLEGED ENTRY PROVIDERS. THESE ARE INFORMATION WHICH ARE ESPECIALLY IN THE KNOWLEDGE O F THE ASSESSEE AND THE ONUS IS ON THE ASSESSEE TO PROVE T HAT PURCHASES MADE BY HIM ARE GENUINE AS THESE PURCHASE S ARE RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESS EE. SECTION 106 OF INDIAN EVIDENCE ACT ,1872 CLEARLY STIPULATES AS UNDER: 106. BURDEN OF PROVING FACT ESPECIALLY WITHIN KNOWLEDGE WHEN ANY FACT IS ESPECIALLY WITHIN THE KNOWLEDGE OF ANY PERSON, THE BURDEN OF PROVING THAT FACT IS UPON HIM . ILLUSTRATIONS (A)**** (B) A IS CHARGED WITH TRAVELING ON A RAILWAY WITHOU T A TICKET. THE BURDEN OF PROVING THAT HE HAD A TICKET IS ON HIM. THE ASSESSEE WAS NOT ABLE TO DISCHARGE BURDEN CAST U/S 106 OF 1872 ACT AS THE ASSESSEE DID NOT FILE DOCUMENTS FOR SHOWING MOVEMENT OF GOODS FROM SUPPLIER TO ASSE SSEE AS EVIDENCE NOR THESE PARTIES WERE PRODUCED BEFORE THE REVENUE. THE ASSESSEE DID NOT SUBMITTED DOCUMENTARY EVIDENCE TO SHOW THAT THERE WAS MOVEMENT OF GOODS . THE ASSESSEE FILED BEFORE THE LEARNED CIT(A), AFFIDAVI TS EXECUTED BY THESE PARTIES FROM WHOM THE ASSESSEE MADE PURCHASES WHEREIN THESE PARTIES HAVE SUBMITTED THAT TRANSACTIONS WERE GENUINE. THE SAME PARTIES WHILE DEPOSING BEFORE DIT(INV) IN AN STATEMENT RECORDED U /S 132/131 OF THE ACT HAVE EXPRESSED THEIR LACK OF KNOWLEDGE ABOUT THE STATE OF AFFAIRS OF THESE CONCE RNS AS WELL ADMITTED THAT THEY DO NOT HAVE KNOWLEDGE OF DIAMOND TRADE. THE SAID MR BHANWARLAL JAIN WHEN CONFRONTED WITH STATEMENTS U/S 132 AND 131 OF THESE PERSONS, ADMITTED WHILE DEPOSING STATEMENT U/S 132( 4) TO BE ENGAGED IN PROVIDING HAWALA/ACCOMMODATION ENTRIE S. THE AO RELYING UPON JUDICIAL PRECEDENTS MADE THE DISALLOWANCE TO THE TUNE OF 25% OF BOGUS PURCHASES OF RS. 60,44860/-, WHEREIN DISALLOWANCE WORKED OUT TO RS.15,11,215/-WHICH WERE ADDED TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A) RESTRICTED THE ADDITION TO INCOME BY APPLYING AVERAGE MARGIN OF 9% TO THE SAID ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 27 BOGUS PURCHASES OF RS. 60,44,860/- , WHEREIN ADDITI ON TO THE INCOME WORKED OUT TO RS. 5,44,037/- WHICH BRING S THE NET MARGIN TO 7.22% AS AGAINST DECLARED NET PRO FIT MARGIN OF 4.52% OF TURNOVER. THE LEARNED CIT(A) W HILE COMPUTING DISALLOWANCE HAS CONSIDERED THE NET PROFI T MARGIN OF THE ASSESSEE ITSELF FOR SEVERAL YEARS FRO M ASSESSMENT YEAR 2008-09 TO 2012-13 TO COME TO APPLY ING NET PROFIT MARGIN OF 7.22% OF TOTAL TURNOVER FOR PR EVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR UNDER APPEAL WHICH WAS BASED ON AVERAGE NET MARGIN OF THE ASSESSEE ITSELF FOR VARIOUS YEARS. THE LEARNED CIT( A) IN OUR CONSIDERED VIEW HAS THUS ADOPTED FAIR, REASONABLE A ND RATIONAL BASIS WHICH WAS BASED ON AN HONEST ESTIMA TION TO ARRIVE AT DISALLOWANCE / ADDITION TO INCOME TO A RRIVE AT NET PROFIT MARGIN OF 7.22% OF TURNOVER CONSIDERING THAT BOOKS OF ACCOUNTS OF THE ASSESSEE WERE ALREADY REJE CTED BY REVENUE . THE ASSESSEE IS NOW CONTEMPLATING THAT THE LEARNED CIT(A)-21,MUMBAI IN THE CASE OF ONE OF THE GROUP CONCERN NAMELY SATYANIS THE JEWELLERY STORE PRIVAT E LIMITED WHILE ADJUDICATING APPEAL FOR ASSESSMENT Y EAR 2012-13 HAS RESTRICTED DISALLOWANCE TO 3% OF ALLEGE D BOGUS PURCHASES WHICH IS ACCEPTED BY THE SAID TAX-P AYER AND NO FURTHER APPEAL IS FILED BY THE SAID TAX-PAYE R WITH THE TRIBUNAL AGAINST APPELLATE ORDERS OF LEARNED CI T(A) FOR ASSESSMENT YEAR 2012-13. HOWEVER, IT IS NOT KNOWN WHETHER REVENUE HAS FILED AN APPEAL AGAINST THE APPELLATE ORDER OF LEARNED CIT(A)-21 IN THE CASE OF THE ASSESSEE SATYANIS THE JEWELLERY STORE PRIVATE LIMIT ED BEFORE THE TRIBUNAL AGAINST THE RELIEF GRANTED TO T HE ASSESSEE BY LEARNED CIT(A)-21,MUMBAI AND FATE OF SU CH APPEAL , IF ANY IS NOT KNOWN. THE ASSESSEE ALSO COU LD NOT SHOW THAT HOW APPELLATE ORDER OF LEARNED CIT(A)- 34,MUMBAI IN ASSESSEES OWN CASE WHICH HAS ESTIMATE D INCOME AT NET MARGIN @7.22% ON TOTAL TURNOVER WHIC H IS BASED ON AVERAGE NET MARGIN OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 TO 2012-13 IS PERVERSE OR ARBITRARY NOT SUSTAINABLE AT LAW. THE FACTS OF EACH CASE IS DIFFERENT, THE ASSESSEE IS TRADER IN DIAMOND WHILE THE SAID TAX-PAYER M/S SATYANIS THE JEWELLERY STORE PRIVATE LIMITED IS MANUFACTURER AND TRADER OF DIAMOND, GOL D AND JEWELLERY. PRINCIPLES OF RES-JUDICATA IS NOT APPLIC ABLE IN THE INCOME TAX PROCEEDINGS AND EVERY YEAR IS A DIFF ERENT YEAR ALTHOUGH WE AGREE THAT PRINCIPLES OF CONSISTEN CY IS TO BE APPLIED (REF RADHASOAMI SATSANG V. CIT (1992) 193 ITR 321(SC) ) . THE ASSESSEE CANNOT TAKE RECOURSE T O ESTIMATION DONE BY ANOTHER LEARNED CIT(A) WHILE ADJUDICATING APPEAL OF ANOTHER TAX-PAYER WHOSE FACT S ARE DIFFERENT AND IN ANY CASE ESTIMATION REQUIRES SOME GUESS ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 28 WORK BASED ON FACTS ON RECORDS WHICH NEED TO BE REASONABLE, REALISTIC, RATIONAL AND FAIR ESTIMATION BASED ON HONEST WORKING AND SHOULD NOT BE ARBITRARY OR PERVERSE ESTIMATION WHICH OBVIOUSLY REQUIRES SOME G UESS WORK. IN SUCH CIRCUMSTANCES, PROFITS NEEDS TO BE ESTIMATED WHICH DEFINITELY INVOLVED SOME ESTIMATION/GUESS WORK BUT THE SAID ESTIMATION/GUESS WORK SHOULD BE FAIR , HONEST AND RATIONAL KEEPING IN VIEW FACTUAL MATRIX OF THE CASE AND CANNOT BE ARBITRARIL Y APPLIED AT THE DISCRETION OF AUTHORITIES . WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE. REFERENCE IS DRAWN TO DECISION OF HONBLE SUPREME C OURT IN THE CASE OF KACHWALA GEMS V. JCIT (2007) 288 ITR 10(SC) , WHEREIN HONBLE LORDSHIPS HELD AS UNDER : 4. THE FACTS OF THE CASE ARE IN A SHORT COMPASS. THE APPELLANT-ASSESSEE DEALS IN PRECIOUS AND SEMI-PRECI OUS STONES. IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THE FOLLOWING DEFECTS IN THE BOOKS OF ACCOU NT OF THE ASSESSEE : '1. THE ASSESSEE HAS NOT MAINTAINED AND KEPT ANY QUANTITATIVE DETAILS/STOCK REGISTER FOR THE GOODS T RADED IN BY THE ASSESSEE. 2. THERE IS NO EVIDENCE ON RECORD OR DOCUMENT TO VE RIFY THE BASIS OF THE VALUATION OF THE CLOSING STOCK SHOWN B Y THE ASSESSEE. THE ASSESSEE IS NOT ABLE TO PREPARE SUCH DETAILS EVEN WITH THE HELP OF BOOKS OF ACCOUNT MAINTAINED, PURCHASE BILLS & SALE INVOICES. 3. PROVISIONS OF SECTION 145(3) ARE CLEARLY ATTRACT ED IN THIS CASE. 4. THE GENUINENESS OF PURCHASES TO THE EXTENT OF RS . 42 LAKHS (APPROX.) IS NOT PROVED WITHOUT ANY DOUBT. 5. THE GP RATE DECLARED BY THE ASSESSEE AT 13.49 PE R CENT DURING THE ASSESSMENT YEAR IS NOT A MATCH TO THE RE SULT DECLARED BY THE ITSELF IN THE PREVIOUS ASSESSMENT Y EARS. 6. M/S. GEM PLAZA, ENGAGED IN LOCAL SALES OF SIMILA R GOODS DECLARED VOLUNTARILY RATE OF 35 PER CENT IN ITS ASS ESSMENT FOR THE ASSESSMENT YEAR 1997-98. 7. M/S. DHADDA EXPORTS, ANOTHER ASSESSEE DEALING IN SAME ITEMS, BUT DOING EXPORT BUSINESS DECLARED GP R ATE OF 43.8 PER CENT (EVEN WITHOUT CONSIDERING THE VALUE O F EXPORT INCENTIVES) IN ASSESSMENT YEAR 1997-98.' 5. THEREAFTER, THE BOOKS OF ACCOUNT OF THE ASSESSEE W ERE REJECTED BY THE ASSESSING OFFICER AND HE RESORTED T O BEST ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 29 JUDGMENT ASSESSMENT UNDER SECTION 144 OF THE INCOME -TAX ACT. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER MENTIONED SOME COMPARABLE CASES AND WAS OF THE VIEW THAT THE CASE OF THE ASSESSEE IS MORE OR LESS HAVIN G SIMILAR FACTS AS THAT OF M/S. GEM PLAZA WHERE THE GROSS PRO FIT HAS BEEN TAKEN AS 35.48 PER CENT. THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT OF THE ASSESSEE AS 40 PE R CENT. 6. THE ASSESSING OFFICER FURTHER HELD THAT THE ASSESS EE HAS SHOWN BOGUS PURCHASES IN ORDER TO REDUCE THE GR OSS PROFITS. 7. IN APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS ) UPHELD MOST OF THE FINDINGS OF THE ASSESSING OFFICE R, BUT REDUCED THE GROSS PROFIT FROM 40 PER CENT TO 35 PER CENT. 8. IN FURTHER APPEAL, THE TRIBUNAL HAD GIVEN FURTHER RELIEF TO THE ASSESSEE AND REDUCED THE GROSS PROFIT RATE TO 3 0 PER CENT. 9. THE COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT THE INCOME-TAX AUTHORITIES WRONGLY HELD THAT A PPELLANT HAS SHOWN BOGUS PURCHASES, AND THE BOOKS OF ACCOUNT WERE WRONGLY REJECTED. 10. IN OUR OPINION, WHETHER THERE WERE BOGUS PURCHASES OR NOT, IS A FINDING OF FACT, AND WE CANNOT INTERFERE WITH THE SAME IN THIS APPEAL. AS REGARDS THE REJECTION OF TH E BOOKS OF ACCOUNT, COGENT REASONS HAVE BEEN GIVEN BY THE I NCOME- TAX AUTHORITIES FOR DOING SO, AND WE SEE NO REASON TO TAKE A DIFFERENT VIEW. 11. IT IS WELL-SETTLED THAT IN A BEST JUDGMENT ASSESSM ENT, THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT THE AUTHORITIES CONCERNED SHOULD TRY TO MAKE AN HON EST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDG MENT ASSESSMENT, AND SHOULD NOT ACT TOTALLY ARBITRARILY, BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVO LVED IN A BEST JUDGMENT ASSESSMENT, AND IT IS THE ASSESS EE HIMSELF WHO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS. IN OUR OPINION, THERE WAS NO ARBITRARINES S IN THE PRESENT CASE ON THE PART OF THE INCOME-TAX AUTHORIT IES. THUS, THERE IS NO FORCE IN THIS APPEAL, AND IT IS D ISMISSED ACCORDINGLY. NO COSTS. IN OUR CONSIDERED VIEW IN THE INSTANT CASE LEARNED CIT(A) MADE AN HONEST ATTEMPT TO ESTIMATE NET MARGIN ON TO TAL TURNOVER BY ADDING TO INCOME 9% OF BOGUS PURCHASES WHICH LED TO NET MARGIN OF 7.22% ON TOTAL TURNOVER AS AGAINST NET MARGIN OF 4.52% ON TOTAL TURNOVER DECLA RED BY THE ASSESSEE , WHICH NET MARGIN ARRIVED AT 7.22% ON TOTAL ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 30 TURNOVER WAS BASED ON AVERAGE NET MARGIN OF THE ASSESSEE ITSELF FOR ASSESSMENT YEAR 2008-09 TO 2012 -13, WHICH IN OUR CONSIDERED VIEW WAS AN HONEST, REALIST IC AND RATIONAL ATTEMPT MADE BY LEARNED CIT(A) AND DOES N OT FALL IN THE ARENA OF ARBITRARINESS AND PERVERSITY R EQUIRING OUR INTERFERENCE, AND HENCE WE DECLINE TO INTERFERE WITH THE WELL REASONED APPELLATE ORDER OF LEARNED CIT(A ). THE RIGHT OF CROSS EXAMINATION IS NOT ABSOLUTE. THE ASS ESSEE HAS TO FIRST DISCHARGE ITS PRIMARY ONUS CAST UNDER LAW AND IF THE SAME STOOD DULY DISCHARGED WHICH IS NOT REBUTTED BY AUTHORITIES , BUT DESPITE THAT THEN ALS O THE AUTHORITIES PROCEED TO PUT ASSESSEE TO PREJUDICE SO LELY RELYING ON THE BASIS OF INCRIMINATING STATEMENT RE CORDED OF THIRD PARTY AT THE BACK OF THE ASSESSEE, THEN CE RTAINLY THE RIGHT TO CROSS EXAMINATION THE SAID THIRD PARTY WHOSE INCRIMINATING STATEMENT WAS RECORDED AT THE BACK OF THE ASSESSEE IS RELIED UPON BY AUTHORITIES TO PREJUDICE THE ASSESSEE WILL BECOME ABSOLUTE. THERE WAS AN INCRIMINATING TANGIBLE AND MATERIAL INFORMATION WIT H THE REVENUE AGAINST THE ASSESSEE THAT THE ASSESSEE HAS OBTAINED BOGUS INVOICES FROM BENAMI CONCERNS OF MR BHANWARLAL JAIN WHO WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES THROUGH FRONT COMPANIES/CONCERNS OPENED IN THE NAME OF HIS BENAMI S . THE SAID MR BHANWARLAL JAIN DURING THE COURSE OF SE ARCH PROCEEDINGS U/S 132(1) OF 1961 ACT WHILE DEPOSING I N STATEMENT RECORDED U/S 132(4) OF 1961 ACT STATED TH AT HE WAS ENGAGED IN PROVIDING BOGUS ACCOMMODATION ENTRIE S THROUGH CONCERNS/ENTITIES CREATED THROUGH VARIOUS EMPLOYEES WHEN HE WAS CONFRONTED WITH THE VARIOUS STATEMENTS RECORDED U/S 132 AND 131 OF 1961 ACT OF HIS BENAMIS. THE SAID EMPLOYEES HAVE STATED THAT THEY H AVE NO KNOWLEDGE OF THESE CONCERNS STATE OF BUSINESS A S WELL THEY LACKED INFORMATION ABOUT DIAMOND TRADE. THE ASSESSEE FAILED TO PRODUCE THESE FOUR PARTIES FROM WHOM PURCHASES WERE MADE BY THE ASSESSEE BEFORE REVENUE. THE ENTRIES FOR PURCHASE ARE APPEARING IN BOOKS OF THE ASSESSEE AND IT WAS INCUMBENT ON THE ASSESSEE TO BR ING ON RECORD COGENT MATERIAL TO SUBSTANTIATE THAT PURC HASES WERE GENUINE. THE ASSESSEE IS IN POSSESSION OF THE FACTS WHICH WERE ESPECIALLY IN THE KNOWLEDGE OF THE ASSES SEE W.R.T. THESE BOGUS PURCHASES AND BURDEN OF PROOF LA Y ON THE ASSESSEE TO SUBSTANTIATE THAT PURCHASES ARE GEN UINE. THE ASSESSEE COULD NOT ESTABLISH MOVEMENT OF MATERI AL AS WELL COULD NOT PRODUCE THE PARTIES BEFORE REVENUE. THE BOOKS OF ACCOUNTS WERE REJECTED BY AO U/S 145(3) OF 1961 ACT. THUS, WE ARE INCLINED TO CONFIRM THE APPELLAT E ORDER OF LEARNED CIT(A) AND THIS APPEAL FILED BY THE ASSE SSEE IS ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 31 DISMISSED. IT IS NOT BROUGHT ON RECORD BEFORE US TH AT REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST TH E PART RELIEF GIVEN BY LEARNED CIT(A) TO THE ASSESSEE. WE ORDER ACCORDINGLY. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN I TA NO. 3452/MUM/2016 FOR ASSESSMENT YEAR 2010-11 IS DISMISSED AS INDICATED ABOVE. 2.4. I HAVE ALSO PERUSED SOME OTHER ORDERS WHICH W ERE FILED BY THE ASSESSEE IN ITS FAVOUR. IN THE CASE OF M/S RUSABH ENTERPRISES (ITA NO.1580/MUM/2017), THE SMC BENCH O F THE MUMBAI TRIBUNAL BROADLY ON TECHNICAL/LEGAL GROU NDS DECIDED IN FAVOUR OF THE ASSESSEE AND THE DIVISION BENCH IN THE CASE OF RELIANCE CORPORATION (ORDER DATED 12/04 /2017) DECIDED IN FAVOUR OF THE ASSESSEE THEREIN ALSO THE ASSESSEE WAS ONE OF THE BENEFICIARY OF THE SAID ACCOMMODATIO N ENTRIES. THE TOTALITY OF FACTS, CLEARLY INDICATES THAT MR. B HANWARLAL JAIN & GROUP ARE INVOLVED IN PROVIDING ACCOMMODATIO N ENTRIES AND THE PAPER WORK HAS BEEN DONE VERY STRON GLY. BUT I FIND THAT THE DIVISION BENCH IN THE CASE OF SURES H L. SATYANI (ORDER DATED 25/04/2017) HAS MADE AN ELABOR ATE DISCUSSION ON THE FACTUAL MATRIX, WHEREIN ALSO, IN RESPONSE TO NOTICES ISSUED U/S 133(6) FILED THE PART DETAILS OF THE PARTIES AND ALSO SOME OF THE PARTIES WHO DID NOT FURNISHED CERTAIN ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 32 DETAILS. THE BENAMI CONCERNS OF SHRI BHANWARLAL JAI N USE TO ISSUE BOGUS BILLS TO VARIOUS CONCERNS/ENTITIES WHO WANTED BILL TO COVER THEIR SALES IN BOOKS OF ACCOUNTS. THE BENC H HAS ALREADY CONSIDERED THE DECISION FROM HON'BLE APEX C OURT IN THE CASE OF SHRI RAJESH JHAVERI (2007) 291 ITR 500 (SC), WHEREIN, VIDE ORDER DATED 23/05/2007 HELD AS UNDER: - 11. IT IS TO BE NOTED THAT SUBSTANTIAL CHANGES HAVE BE EN MADE TO SECTION 143(1) WITH EFFECT FROM JUNE 1, 199 9. UP TO MARCH 31, 1989, AFTER A RETURN OF INCOME WAS FILED THE ASSESSING OFFICER COULD MAKE AN ASSESSMENT UNDER SE CTION 143(1) WITHOUT REQUIRING THE PRESENCE OF THE ASSESS EE OR THE PRODUCTION BY HIM OF ANY EVIDENCE IN SUPPORT OF THE RETURN. WHERE THE ASSESSEE OBJECTED TO SUCH AN ASSESSMENT O R WHERE THE OFFICER WAS OF THE OPINION THAT THE ASSES SMENT WAS INCORRECT OR INCOMPLETE OR THE OFFICER DID NOT COMPLETE THE ASSESSMENT UNDER SECTION 143(1), BUT WANTED TO MAKE AN INQUIRY, A NOTICE UNDER SECTION 143(2) WAS REQUI RED TO BE ISSUED TO THE ASSESSEE REQUIRING HIM TO PRODUCE EVI DENCE IN SUPPORT OF HIS RETURN. AFTER CONSIDERING THE MATERI AL AND EVIDENCE PRODUCED AND AFTER MAKING NECESSARY INQUIR IES, THE OFFICER HAD POWER TO MAKE ASSESSMENT UNDER SECT ION 143(3). WITH EFFECT FROM 1-4-1989, THE PROVISIONS U NDERWENT SUBSTANTIAL AND MATERIAL CHANGES. A NEW SCHEME WAS INTRODUCED AND THE NEW SUBSTITUTED SECTION 143(1) P RIOR TO THE SUBSEQUENT SUBSTITUTION WITH EFFECT FROM 1-6-19 99, IN CLAUSE (A), A PROVISION WAS MADE THAT WHERE A RETUR N WAS FILED UNDER SECTION 139 OR IN RESPONSE TO A NOTICE UNDER SECTION 142(1), AND ANY TAX OR REFUND WAS FOUND DUE ON THE BASIS OF SUCH RETURN AFTER ADJUSTMENT OF TAX DEDUCT ED AT SOURCE, ANY ADVANCE TAX OR ANY AMOUNT PAID OTHERWIS E BY WAY OF TAX OR INTEREST, AN INTIMATION WAS TO BE SEN T WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 143(2) TO TH E ASSESSEE SPECIFYING THE SUM SO PAYABLE AND SUCH INTIMATION W AS DEEMED TO BE A NOTICE OF DEMAND ISSUED UNDER SECTIO N 156. THE FIRST PROVISO TO SECTION 143(1)(A) ALLOWED THE DEPARTMENT TO MAKE CERTAIN ADJUSTMENTS IN THE INCOME OR LOSS D ECLARED IN THE RETURN. THEY WERE AS FOLLOWS : ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 33 (A) AN ARITHMETICAL ERROR IN THE RETURN, ACCOUNTS AND DOCUMENTS ACCOMPANYING IT WERE TO BE RECTIFIED; (B) ANY LOSS C ARRIED FORWARD, DEDUCTION, ALLOWANCE OR RELIEF WHICH ON THE BASIS OF THE INFORMATION AVAILABLE IN SUCH RETURN, ACCOUNTS OR DOCUMENTS, WAS PRIMA FACIE ADMISSIBLE, BUT WHICH WAS NOT CLAIMED IN THE RETURN WAS TO BE ALLOWED; (C) ANY LOSS CARRIED FORWARD , RELIEF CLAIMED IN THE RETURN WHICH ON THE BASIS OF THE INFORMATION AS AVAILABLE IN SUCH RETURNS ACCOUNTS OR DOCUMENTS WERE PRIMA FACIE INADMISSIBLE WAS TO BE DISALLOWED. 12. WHAT WERE PERMISSIBLE UNDER THE FIRST PROVISO TO S ECTION 143(1)(A) TO BE ADJUSTED WERE, (I) ONLY APPARENT AR ITHMETICAL ERRORS IN THE RETURN, ACCOUNTS OR DOCUMENTS ACCOMPANYING T HE RETURN, (II) LOSS CARRIED FORWARD, DEDUCTION ALLOWANCE OR RELIEF , WHICH WAS PRIMA FACIE ADMISSIBLE ON THE BASIS OF INFORMAT ION AVAILABLE IN THE RETURN BUT NOT CLAIMED IN THE RETURN AND SIMILA RLY (III) THOSE CLAIMS WHICH WERE ON THE BASIS OF THE INFORMATION A VAILABLE IN THE RETURN, PRIMA FACIE INADMISSIBLE, WERE TO BE RECTIFIED/ALLOWED/DISALLOWED. WHAT WAS PERMISSIBLE WAS CORRECTION OF ERRORS APPARENT ON THE BASIS OF THE D OCUMENTS ACCOMPANYING THE RETURN. THE ASSESSING OFFICER HAD NO AUTHORITY TO MAKE ADJUSTMENTS OR ADJUDICATE UPON ANY DEBATABLE I SSUES. IN OTHER WORDS, THE ASSESSING OFFICER HAD NO POWER TO GO BEHIND THE RETURN, ACCOUNTS OR DOCUMENTS, EITHER IN ALLOWING O R IN DISALLOWING DEDUCTIONS, ALLOWANCE OR RELIEF. 13. ONE THING FURTHER TO BE NOTICED IS THAT INTIMATION UNDER SECTION 143(1)(A) IS GIVEN WITHOUT PREJUDICE TO THE PROVISI ONS OF SECTION 143(2). THOUGH TECHNICALLY THE INTIMATION ISSUED WA S DEEMED TO BE A DEMAND NOTICE ISSUED UNDER SECTION 156, THAT DID NOT PER SE PRECLUDE THE RIGHT OF THE ASSESSING OFFICER TO P ROCEED UNDER SECTION 143(2). THAT RIGHT IS PRESERVED AND IS NOT TAKEN AWAY. ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 34 BETWEEN THE PERIOD FROM 1-4-1989 TO 31-3-1998, THE SECOND PROVISO TO SECTION 143(1)(A), REQUIRED THAT WHERE ADJUSTMEN TS WERE MADE UNDER THE FIRST PROVISO TO SECTION 143(1)(A), AN IN TIMATION HAD TO BE SENT TO THE ASSESSEE NOTWITHSTANDING THAT NO TAX OR REFUND WAS DUE FROM HIM AFTER MAKING SUCH ADJUSTMENTS. WITH EFFECT FROM 1-4- 1998, THE SECOND PROVISO TO SECTION 143(1)(A) WAS S UBSTITUTED BY THE FINANCE ACT, 1997, WHICH WAS OPERATIVE TILL 1-6 -1999. THE REQUIREMENT WAS THAT AN INTIMATION WAS TO BE SENT T O THE ASSESSEE WHETHER OR NOT ANY ADJUSTMENT HAD BEEN MADE UNDER T HE FIRST PROVISO TO SECTION 143(1) AND NOTWITHSTANDING THAT NO TAX OR INTEREST WAS FOUND DUE FROM THE ASSESSEE CONCERNED. BETWEEN 1-4- 1998 AND 31-5-1999, SENDING OF AN INTIMATION UNDER SECTION 143(1)(A) WAS MANDATORY. THUS, THE LEGISLATIVE INTE NT IS VERY CLEAR FROM THE USE OF THE WORD 'INTIMATION' AS SUBSTITUTE D FOR 'ASSESSMENT' THAT TWO DIFFERENT CONCEPTS EMERGED. W HILE MAKING AN ASSESSMENT, THE ASSESSING OFFICER IS FREE TO MAK E ANY ADDITION AFTER GRANT OF OPPORTUNITY TO THE ASSESSEE. BY MAKI NG ADJUSTMENTS UNDER THE FIRST PROVISO TO SECTION 143(1)(A), NO AD DITION WHICH IS IMPERMISSIBLE BY THE INFORMATION GIVEN IN THE RETUR N COULD BE MADE BY THE ASSESSING OFFICER. THE REASON IS THAT UNDER SECTION 143(1)(A) NO OPPORTUNITY IS GRANTED TO THE ASSESSEE AND THE A SSESSING OFFICER PROCEEDS ON HIS OPINION ON THE BASIS OF THE RETURN FILED BY THE ASSESSEE. THE VERY FACT THAT NO OPPORTUNITY OF BEIN G HEARD IS GIVEN UNDER SECTION 143(1)(A) INDICATES THAT THE ASSESSIN G OFFICER HAS TO PROCEED ACCEPTING THE RETURN AND MAKING THE PERMISS IBLE ADJUSTMENTS ONLY. AS A RESULT OF INSERTION OF THE E XPLANATION TO SECTION 143 BY THE FINANCE (NO. 2) ACT OF 1991 WITH EFFECT FROM 1- 10-1991, AND SUBSEQUENTLY WITH EFFECT FROM 1-6-1994 , BY THE FINANCE ACT, 1994, AND ULTIMATELY OMITTED WITH EFFE CT FROM 1-6- 1999, BY THE EXPLANATION AS INTRODUCED BY THE FINAN CE (NO. 2) ACT OF 1991 AN INTIMATION SENT TO THE ASSESSEE UNDER SE CTION 143(1)(A) WAS DEEMED TO BE AN ORDER FOR THE PURPOSES OF SECTI ON 246 BETWEEN 1-6-1994, TO 31-5-1999, AND UNDER SECTION 2 64 BETWEEN 1- 10-1991, AND 31-5-1999. IT IS TO BE NOTED THAT THE EXPRESSIONS 'INTIMATION' AND 'ASSESSMENT ORDER' HAVE BEEN USED AT DIFFERENT PLACES. THE CONTEXTUAL DIFFERENCE BETWEEN THE TWO E XPRESSIONS HAS TO BE UNDERSTOOD IN THE CONTEXT THE EXPRESSIONS ARE USED. ASSESSMENT IS USED AS MEANING SOMETIMES 'THE COMPUT ATION OF INCOME', SOMETIMES 'THE DETERMINATION OF THE AMOUNT OF TAX PAYABLE' AND SOMETIMES 'THE WHOLE PROCEDURE LAID DO WN IN THE ACT FOR IMPOSING LIABILITY UPON THE TAX PAYER'. IN THE SCHEME OF THINGS, AS NOTED ABOVE, THE INTIMATION UNDER SECTIO N 143(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSES SMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTO RY PROVISIONS AS THEY STOOD AT DIFFERENT POINTS OF TIME. UNDER SECTI ON 143(1)(A) AS IT STOOD PRIOR TO 1-4-1989, THE ASSESSING OFFICER HAD TO PASS AN ASSESSMENT ORDER IF HE DECIDED TO ACCEPT THE RETURN , BUT UNDER THE AMENDED PROVISION, THE REQUIREMENT OF PASSING OF AN ASSESSMENT ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 35 ORDER HAS BEEN DISPENSED WITH AND INSTEAD AN INTIMA TION IS REQUIRED TO BE SENT. VARIOUS CIRCULARS SENT BY THE CENTRAL BOARD OF DIRECT TAXES SPELL OUT THE INTENT OF THE LEGISLATUR E, I.E., TO MINIMIZE THE DEPARTMENTAL WORK TO SCRUTINIZE EACH AND EVERY RETURN AND TO CONCENTRATE ON SELECTIVE SCRUTINY OF RETURNS. THESE ASPECTS WERE HIGHLIGHTED BY ONE OF US (D.K. JAIN J) IN APOGEE IN TERNATIONAL LTD. V. UNION OF INDIA [1996] 220 ITR 248 (DELHI) . IT MAY BE NOTED ABOVE THAT UNDER THE FIRST PROVISO TO THE NEWLY SUB STITUTED SECTION 143(1), WITH EFFECT FROM 1-6-1999, EXCEPT AS PROVID ED IN THE PROVISION ITSELF, THE ACKNOWLEDGEMENT OF THE RETURN SHALL BE DEEMED TO BE AN INTIMATION UNDER SECTION 143(1) WHERE (A) EITHER NO SUM IS PAYABLE BY THE ASSESSEE, OR (B) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGEMENT IS NOT DONE BY ANY ASSESSING OFFICER, BUT MOSTLY BY MINISTERIAL STAFF. CAN IT BE SAID THAT ANY 'ASSESSMENT' IS DONE BY THEM ? THE REPLY IS AN EMPH ATIC 'NO'. THE INTIMATION UNDER SECTION 143(1)(A) WAS DEEMED TO BE A NOTICE OF DEMAND UNDER SECTION 156, FOR THE APPARENT PURPOSE OF MAKING MACHINERY PROVISIONS RELATING TO RECOVERY OF TAX AP PLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDICATED TO BE PAYABLE I N THE INTIMATION BECAME PERMISSIBLE. AND NOTHING MORE CAN BE INFERRE D FROM THE DEEMING PROVISION. THEREFORE, THERE BEING NO ASSESSMENT UNDER SECTION 143(1)(A), THE QUESTION OF CHANGE OF OPINIO N, AS CONTENDED, DOES NOT ARISE. 14. ADDITIONALLY, SECTION 148 AS PRESENTLY STANDS IS D IFFERENTLY COUCHED IN LANGUAGE FROM WHAT WAS EARLIER THE POSIT ION. PRIOR TO THE SUBSTITUTION BY THE DIRECT TAX LAWS (AMENDMENT) ACT , 1987, THE PROVISION READ AS FOLLOWS : '148. ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSE SSMENT.(1) BEFORE MAKING THE ASSESSMENT, REASSESSMENT OR RECOM PUTATION UNDER SECTION 147, THE ASSESSING OFFICER SHALL SERV E ON THE ASSESSEE A NOTICE CONTAINING ALL OR ANY OF THE REQU IREMENTS WHICH MAY BE INCLUDED IN A NOTICE UNDER SUB-SECTION (2) O F SECTION 139; AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF THE NOTICE WERE A NOTICE ISSUED U NDER THAT SUB- SECTION. (A) THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT, B Y REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESS EE TO MAKE A RETURN UNDER SECTION 139 FOR ANY ASSESSMENT YEAR TO THE ASSESSING OFFICER OR TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, I NCOME ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 36 (2) THE ASSESSING OFFICER SHALL, BEFORE ISSUING AN Y NOTICE UNDER THIS SECTION, RECORD HIS REASONS FOR D OING SO.' 15. SECTION 147 PRIOR TO ITS SUBSTITUTION BY THE DIREC T TAX LAWS (AMENDMENT) ACT, 1987, STOOD AS FOLLOWS : '147. INCOME ESCAPING ASSESSMENT.IF HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR). EXPLANATION 1.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY: (A) WHERE INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (B) WHERE SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR (C) WHERE SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT OR UNDER THE INDIAN INCOME- TAX ACT, 1922 (11 OF 1922); OR (D) WHERE EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED. EXPLANATION 2.PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVE RED BY CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT Y EAR, OR (B) NOTWITHSTANDING THAT THERE HAS BEE N NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE ASSE SSEE, THE ASSESSING OFFICER HAS IN CONSEQUENCE OF INFORMA TION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGE ABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 37 THE ASSESSING OFFICER WILL NOT NECES-SARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THIS SECTION.' 16. SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMEN T YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PH RASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATI ON. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEV E THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED T HE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME C OURT IN CENTRAL PROVINCES MANGANESE 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) FULFI LMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSE NTIAL. 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 TH E ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHET HER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF. WHETHE R THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS I S SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO. (P.) LTD. [1996] 217 ITR 597 (SC) ; RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC) . 17. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM 1-4-1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISION S OF SECTION 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMEN T FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JURISDICTION UNDER SECTION 14 7(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED FIRSTLY TH E ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 38 ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHARGEABLE TO INCOME TAX HAVE ESCA PED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON T O BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER (I) OMISSION OR FAILURE ON THE PART OF THE A SSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSAR Y FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASS ESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UND ER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER F OR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS HOWEVER TO BE NOTED TH AT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE F ALLS WITHIN THE AMBIT OF THE PROVISO TO SECTION 147. THE CASE AT HAND IS COVERED BY THE MAIN PROVISION AND NOT THE PROVISO. 18. SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULF ILLED, THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDIN G UNDER SECTION 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. 19. INEVITABLE CONCLUSION IS THAT HIGH COURT HAS WRONG LY APPLIED ADANI EXPORTS CASE (SUPRA) WHICH HAS NO APPLICATION TO THE CASE ON THE FACTS IN VIEW OF THE CONCEPTUAL DIFFERENCE BETWEEN SECTION 143(1) AND SE CTION 143(3) OF THE ACT. 20. LEARNED COUNSEL FOR THE RESPONDENT SUBMITTED THAT OTHER POINTS ARE AVAILABLE TO BE RAISED. SINCE NO O THER POINT WAS URGED BEFORE THE HIGH COURT, WE FIND NO REASON TO EXAMINE IF ANY OTHER POINT WAS AVAILABLE. THE APPEA L IS ALLOWED WITHOUT ANY ORDERS AS TO COSTS. 2.5. IN THE LIGHT OF THE AFORESAID DISCUSSION, NOW I SHALL DEAL WITH PROVISIONS OF SECTION 68 OF THE ACT, THE ASSESSEE IS EXPECTED TO OFFER AN EXPLANATION WITH RESPECT TO TH E NATURE ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 39 AND SOURCE OF CASH CREDITS TO THE SATISFACTION OF T HE ASSESSING OFFICER. FOR READY REFERENCE SECTION 68 OF THE ACT IS REPRODUCED HEREUNDER:- 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, I N THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR : PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATI ON MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMO UNT BY WHATEVER NAME CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SATISFAC TORY, UNLESS (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFER S AN EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSIN G OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM RE FERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERRED TO IN CLAUSE (23FB)OF S ECTION 10. 2.6. AS PER SECTION 68 OF THE ACT, ONUS IS UPON TH E ASSESSEE TO DISCHARGE THE BURDEN SO CAST UPON. FIRS T BURDEN IS UPON THE ASSESSEE TO SATISFACTORILY EXPLAIN THE CREDIT ENTRY ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 40 CONTAINED IN HIS BOOKS OF ACCOUNTS. THE BURDEN HAS TO BE DISCHARGED WITH POSITIVE MATERIAL (OCEANIC PRODUCTS EXPORTING COMPANY VS CIT 241 ITR 497 (KERALA.). THE LEGISLATURE HAD LAID DOWN THAT IN THE ABSENCE OF SA TISFACTORY EXPLANATION, THE UNEXPLAINED CASH CREDIT MAY BE CHA RGED U/S 68 OF THE ACT. MY VIEW IS FORTIFIED BY THE RATIO LA ID DOWN IN HONBLE APEX COURT IN P. MOHANKALA (2007)(291 ITR 2 78)(SC). A CLOSE READING OF SECTION 68 AND 69 OF THE ACT MAK ES IT CLEAR THAT IN THE CASE OF SECTION 68, THERE SHOULD BE CRE DIT ENTRY IN THE BOOKS OF ACCOUNT WHEREAS IN THE CASE OF 69 THER E MAY NOT BE AN ENTRY IN SUCH BOOKS OF ACCOUNT. THE LAW IS WE LL SETTLED, THE ONUS OF PROVING THE SOURCE OF A SUM, FOUND TO B E RECEIVED/TRANSACTED BY THE ASSESSEE, IS ON HIM AND WHERE IT IS NOT SATISFACTORILY EXPLAINED, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS INCOME OF THE ASSESSEE AND NO FURTH ER BURDEN LIES ON THE REVENUE TO SHOW THAT INCOME IS FROM ANY OTHER PARTICULAR SOURCE. WHERE THE ASSESSEE FAILED TO PRO VE SATISFACTORILY THE SOURCE AND NATURE OF SUCH CREDIT , THE REVENUE IS FREE TO MAKE THE ADDITION. THE PRINCIPL E LAID DOWN IN GANPATI MUDALIAR (1964) 53 ITR 623/A. GOVIN DA RAJULU MUDALIAR (34 ITR 807)(SC) AND ALSO CIT VS DU RGA ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 41 PRASAD MORE (72 ITR 807)(SC) ARE THE LANDMARK DECIS IONS. THE RATIO LAID DOWN THEREIN ARE THAT IF THE EXPLANA TION OF THE ASSESSEE IS UNSATISFACTORY, THE AMOUNT CAN BE TREAT ED AS INCOME OF THE ASSESSEE. THE RATIO LAID DOWN IN DAU LAT RAM RAWATMAL 87 ITR 349 (SC) FURTHER SUPPORTS THE CASE OF THE ASSESSEE. IN THE CASE OF A CASH ENTRY, IT IS NECES SARY FOR THE ASSESSEE TO PROVE NOT ONLY THE IDENTITY OF THE CRED ITOR BUT ALSO THE CAPACITY OF THE CREDITOR AND GENUINENESS OF THE TRANSACTIONS. THE ONUS LIES ON THE ASSESSEE, UNDER THE FACTS AVAILABLE ON RECORD. A HARMONIOUS CONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 OF THE INCOM E TAX ACT WILL BE THAT APART FROM ESTABLISHING THE IDENTITY O F THE CREDITOR, THE ASSESSEE MUST ESTABLISH THE GENUINENE SS OF THE TRANSACTION AS WELL AS THE CREDITWORTHINESS OF THE CREDITORS. IN CIT VS KORLAY TRADING COMPANY LTD. 232 ITR 820 ( CAL.), IT WAS HELD THAT MERE MENTION OF FILE NUMBER OF CREDIT OR WILL NOT SUFFICE AND EACH ENTRY HAS TO BE EXPLAINED SEPARATE LY BY THE ASSESSEE (CIT VS R.S. RATHAORE) 212 ITR 390 (RAJ.). THE HONBLE GUWAHATI HIGH COURT IN NEMI CHANDRA KOTHARI VS CIT (264 ITR 254)(GAU) HELD THAT TRANSACTION BY CHE QUES MAY NOT BE ALWAYS SACROSANCT. ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 42 2.7. THE RATIO LAID DOWN IN ACIT VS RAJEEV TANDON 294 ITR (AT) 219 (DEL.), WHICH WAS CONFIRMED BY HONBLE HIGH COURT , IN 294 ITR 488, SUPPORTS THE CASE OF THE RE VENUE. IDENTICAL RATIO WAS LAID DOWN IN CIT VS ANIL KUMAR 392 ITR 552 (DEL.), WHEREIN IT WAS HELD THAT MERE IDENTIFIC ATION OF THE DONOR AND MOVEMENT OF GIFT THROUGH BANKING CHANNEL IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF GIFT. IN THE LIGHT OF THE FOREGOING DISCUSSION, I FOUND THAT THE SUBMISSIONS OF THE ASSESSEE WERE DULY CONSIDERED BY THE LD. ASSESSING OFFICER AS WELL AS BY THE LD. COMMISSIONER OF INCOME TAX (APPE AL) AND IT WAS FOUND BY THE LD. ASSESSING OFFICER THAT M/S MAHALAXMI GEMS PVT. LTD. IS A GROUP CONCERN OF BHAN WARLAL JAIN WHO IS PROVIDING ACCOMMODATION ENTRIES TO REDU CE PROFIT LIABILITY AND FROM THE BANK STATEMENT FROM 21/09/20 06 TO 30/09/2006, IT WAS FOUND THAT ON 25/09/2006, THE CL OSING BALANCE WAS MERELY RS.51,912/- ONLY AND ON 29/09/200 6 THERE WAS DEPOSIT OF RS.23 LAKH AND RS.2 LAKH AND O N THE SAME DAY THE ADVANCES WERE GIVEN TO THE ASSESSEE CO MPANY. FROM THE STATEMENT, IT WAS FURTHER FOUND THAT THE M AHALAXMI GEMS RECEIVED COMMISSION ON BOGUS LOAN AMOUNT AND O N 25/09/2006, THERE ARE DEPOSITS OF RS.10 LAKHS AND 1 3 LAKHS ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 43 AND ON THE SAME DAY THE AMOUNT OF RS.22,57,415 WAS TRANSFERRED TO SOME OTHER ACCOUNT. THE TOTALITY OF FACTS, CLEARLY INDICATES THAT THE COMPANIES OF SHRI BHANWA RLAL JAIN GROUPS ARE MERELY PROVIDING ACCOMMODATION ENTRIES A ND NO GENUINE TRANSACTION IS MADE. IT IS NOT THE CASE THA T THE ADDITION WAS MERELY MADE ON THE BASIS OF STATEMENT R ATHER THE BANK STATEMENT ITSELF REVEALS SO. THEREFORE, TH E ADDITION WAS RIGHTLY TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. I FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL), RESULTANTLY, T HE APPEAL OF THE ASSESSEE IS DISMISSED. FINALLY, APPEAL OF THE ASSESSEE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 04/01/2018. SD/- (JOGINDER SINGH) !' / JUDICIAL MEMBER MUMBAI; DATED : 08/01/2018 F{X~{T? P.S / ! &($)!*+,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. ITA NO.3420/MUM/2017 NAVNIDHI STEEL & ENGG. CO. PVT. LTD. 44 3. )) * / THE CIT, MUMBAI. 4. )) * / CIT- , MUMBAI 5. +,-' , )'#$' / , / DR, ITAT, MUMBAI 6. -01$ / GUARD FILE. &( / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI