SURESH L. SATYANI, MUMBAI V. ITO 23(3)(4), MUMBAI

ITA 3452/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1140 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Reopening of assessment; Bogus purchase; Recovery proceedings; Depreciation; Search and seizure; Opportunity of being heard; Difference of opinion; Accommodation entries; Onus to prove; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 40A(3); 143(3); 133(6); 131; 246; 27; 148; 132; 144; 139

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.3452/ MUM/2016 ( / ASSESSMENT YEAR : 2010-11) SHRI SURESH L. SATYANI, FLAT NO. 402, WAHEEDA APARTMENTS, 1628/6 PALI HILL, BANDRA (W), MUMBAI 400 050. / V. INCOME TAX OFFICER 23(3)(4), ROOM NO. 104, MATRU MANDIR, TARDEO ROAD, MUMBAI 400 007. ./ PAN : ANTPS2903A ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI BIREN GABHAWALA REVENUE BY : SHRI B.S. BIST, DR / DATE OF HEARING : 08-03-2017 / DATE OF PRONOUNCEMENT : 25-04-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 3452/MUM/2016, IS DIRECTED AGAINST THE APPELLATE OR DER DATED ITA 3452/MUM/2016 2 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 INCOME-TAX A CT,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 CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE LEARNED ASSESSING OFFICER HAD VALIDLY ISSUED THE NOTI CE U/S, 148 I.T. ACT, 1961 WITHOUT APPRECIATING THE FACT THAT PROCEEDIN GS U/S 147 OF THE I.T. ACT, WERE INITIATED MERELY ON THE BASIS OF INFOR MATION FROM THE DGIT (INV.) AND NOT ON BASED ON PROPER APPLICATION OF MIN D ON THE PART OF THE LEARNED ASSESSING OFFICER SO AS TO COME TO AN INDEPEN DENT CONCLUSION THAT HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT DURING THE YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER IN REJECTING T HE 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 NO T GENUINE BY THE LEARNED ASSESSING OFFICER, THOUGH THE SAID PURCHASES AND THE CORRESPONDING SALES WERE DULY REFLECTED IN BOOKS OF ACCOUNT AND PAYMENTS FOR THE SAID PURCHASES WERE MADE BY ACCOUNT PAYEE CHEQUES AND THE CORRESPONDING SALES WERE ALSO RECORDED IN BO OKS OF ACCOUNT. 3. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OF THE ABOVE GROUNDS OF APPEAL OR TAKE UP A FRESH GROUND(S) OF APPEAL ON OR BEFORE THE DATE OF HEARING. ITA 3452/MUM/2016 3 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 2010- 11 ON 26 TH SEPTEMBER, 2010 WHICH WAS PROCESSED U/S 143(1) OF THE ACT AND THE INCOME DECLARED WAS ACCEPTED. LATER ON, THE ASSESSMENT WAS RE-OPENED U/S 147 OF THE ACT WITHIN A PERIOD OF 4 YEARS FROM THE END OF ASSESSMENT YEAR BY ISSUE OF NOTICE U/S 148 OF THE ACT DATED 26 TH MARCH, 2014 ON THE BASIS OF INFORMATION THAT THE ASSESSEE HAD INDULGED IN SHOWING BOGUS PURCHASE S BY TAKING ACCOMMODATION/FICTITIOUS BILLS FROM CERTAIN ENTITIE S FROM WHOM THE ASSESSEE HAS NOT PURCHASED ANY MATERIAL. THE AS SESSEE IN RESPONSE TO NOTICE U/S 148 OF 1961 ACT SUBMITTED TH AT RETURN OF INCOME FILED ON 26-09-2010 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF 1961 ACT. THE AO ISSU ED NOTICE U/S 143(2) OF 1961 ACT AND REASONS RECORDED FOR RE-OPEN ING OF THE ASSESSMENT WERE FURNISHED BY THE AO TO THE ASSESSEE . THE ASSESSEE RAISED OBJECTIONS TO THE REOPENING OF THE ASSESSMENT AND THE SAME WAS DISPOSED BY THE AO THROUGH 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 THE IN VESTIGATION WING OF MUMBAI ON 3 RD OCTOBER, 2013. THE SEARCH HAD REVEALED ITA 3452/MUM/2016 4 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 CARRIED OU T 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 PARTNERS WERE KEPT FOR T HE NAME SAKE AND THEY WERE NOT AWARE OF IMPORTERS OR ACTUAL BUYE RS SHOWN IN THE BOOKS OF ACCOUNT. STATEMENTS WERE RECORDED U/S 132 AND 131 OF 1961 ACT , WHEREBY THESE EMPLOYEES HAVE ACCEPTED AND ADMITTED THAT THEY WERE DUMMY PROPRIETOR, DIRECTOR AND PARTNERS OF VARIOUS CONCERNS WHOSE AFFAIRS ARE MANAGED AND C ONTROLLED BY BANWARLAL JAIN GROUP. THE STATEMENTS OF THESE EMPLO YEES WERE CONFRONTED TO BANWARLAL JAIN AND IN THE STATEMENT R ECORDED U/S ITA 3452/MUM/2016 5 132(4) OF THE ACT AT 16, MOHAN BUILDING, GIRGAUM, M UMBAI, SHRI BANWARLAL JAIN ADMITTED THAT HE MANAGES AND CONTROL S THE BUSINESS AFFAIRS OF ALL THE CONCERNS IN WHICH THE P ERSONS WERE EMPLOYEES, WHO WERE SHOWN AS PROPRIETOR, DIRECTOR A ND PARTNERS. IT WAS ALSO ADMITTED THAT ALL THE BENAMI CONCERNS WERE NOT IN THE GENUINE BUSINESS AND NO STOCK OF DIAMOND WAS FOUND FROM THE PREMISES. THE BOOKS OF ACCOUNTS OF ALL THESE PERSON S WERE NOT MAINTAINED IN RESPECTIVE OFFICE AND WERE FOUND FROM BACK OFFICE 16, MOHAN BUILDING, GIRGAUM, MUMBAI AND AT FLAT NO. 233 , GROUND FLOOR, NAVTARA, GIRGAIM, MUMBAI. IT WAS FOUND THAT THE ACTUAL IMPORTERS OF ROUGH DIAMONDS IMPORT PART OF THE DIAM ONDS FROM BENAMI CONCERNS OPERATED BY BANWARLAL JAIN AND FAMI LY WITH A VIEW TO SUPPRESS THEIR TURNOVER AND PROFIT. THE CON SIGNMENTS WERE SENT ON CREDIT BY THE SUPPLIERS IN THE NAME OF BENA MI CONCERNS AT THE INSTANCE OF ACTUAL IMPORTER AND ON RECEIPT OF THE CONSIGNMENT BY ALL THESE BENAMI CONCERNS, THE DIAMONDS WERE HAN DED OVER TO THE REAL IMPORTER RESULTING INTO BOGUS AND NON-EXIS TENCE STOCK IN THE BOOKS OF THE BENAMI CONCERNS. THESE TRANSACTION S WERE 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 ITA 3452/MUM/2016 6 PRICE .THE DIAMOND MERCHANTS ISSUES CHEQUES IN FAVO UR OF BENAMI CONCERNS AGAINST PURCHASE BILLS OBTAINED BY THEM AG AINST WHICH THEY RECEIVE CASH. THE LIST OF SUCH BENAMI COMPANIE S WAS FOUND DURING THE COURSE OF SEARCH AND OTHER DETAILS FOUND DURING SEARCH IN RESPECT OF THE ASSESSEE ARE REPRODUCED HEREUNDER :- 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 19,31,040/ - 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 EXPORT 19,04,240/ - 4 NAVKAR DIAMOND 26,800/ - TOTAL 60,44,860/ - 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 ITA 3452/MUM/2016 7 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 WERE BEN AMI OF SH. BANWARLAL JAIN FROM WHOM PURCHASES WERE CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE TO PRODUCE THE FOLLOWING DETAI LS:- 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 YO U I.E. SUNDRY DEBTOR/CREDITOR HIGHLIGHTING THE ENTRIES IN THE SAM E. 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 31.03.2010 . 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 SATYANI BRO THERS). PLEASE ALSO PRODUCE PROOF. ITA 3452/MUM/2016 8 8. PLEASE PRODUCE COPY OF YOUR BANK ACCOUNT FOR THE MONTHS WHEREIN CHEQUES RECEIVED FROM ABOVE REFERRED ASSESSEE IS DEPOSITED AND CHEQUES PAID BY YOU FOR CORRESPONDING PURCHASE ARE DEBITED IN YOUR BANK ACCOUNT. 9. PLEASE PROVIDE DETAILS OF SALES TAX ASSESSMENT COM PLETED 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 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 SURESH SATYANI (PROP OF SATYANI BROTHERS), IF YES, EXPLAIN NATURE OF TRANSAC TION. 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 M ONTHS WHEREIN CHEQUES RECEIVED FROM ABOVE REFERRED ASSESSEE IS DE POSITED AND CHEQUES PAID BY YOU FOR CORRESPONDING PURCHASE ARE DEBITED IN YOUR BANK ACCOUNT. 4. PLEASE PROVIDE DETAILS OF SALES TAX ASSESSMENT COMP LETED 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-COMPLIED WITH . THE ASSESSEE WAS CONFRONTED BY THE AO WITH THE FACT THA T THESE PARTIES DID NOT SENT COMPLETE INFORMATION WHEREIN GENUINENE SS OF ITA 3452/MUM/2016 9 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 , MORE-SO WHEN MR BANWARLAL JAIN ADMITTED THAT HIS BENMAI CONCERNS WE RE 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. BOOKS O F ACCOUNTS WERE REJECTED BY THE A.O. U/S 145(3) OF 1961 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 ITR 546(GU J) AND KARJAN CO-OPERATIVE COTTON SALES GINNING AND PRESSING SOCI ETY V. CIT (1993) 109 ITR 17(GUJ.) , HONBLE DELHI HIGH COURT IN CIT V. NIPUN BUILDERS AND DEVELOPERS PRIVATE LIMITED IN ITA NO. 120/2012 DATED 07-01-2013 AND CIT V. N R PORTFOLIO PRIVATE L IMITED IN ITA NO. 1018/1019 OF 2011 DATED 22.11.2013. THE A.O. RE LYING ON THE RATIO OF THE DECISION OF IN THE CASE OF SANJAY OILC AKE INDUSTRIES V. ITA 3452/MUM/2016 10 CIT 316 ITR 274 (GUJ), BHOLANATH POLYFAB PVT LTD 40 TAXMAN 494(GUJ) AND M/S. VIJAY PROTEINS LTD. (1996) 58 IT D 428 (AHD) AND 25% OF SUCH PURCHASES OF RS. 60,44,860/- STOOD DISALLOWED BY THE AO TREATING AS ELEMENT OF PROFIT EMBEDDED IN THE TRANSACTION , WHICH LED TO DISALLOWANCE TO THE 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 RECORDED I N BOOKS OF ACCOUNTS AND STOCK REGISTER WAS SUBMITTING WHEREIN PURCHASES AND SALES WERE RECONCILED. THE AFFIDAVITS OF THE PA RTIES WERE ALSO SUBMITTED TO SUBSTANTIATE THAT PURCHASES ARE GENUIN E. THE LEARNED CIT(A) REJECTED THE CONTENTIONS OF THE ASSE SSEE 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 PURCHASES FROM B ENAMI CONCERNS OF BHANWARLAL JAIN WHO WERE ENGAGED IN PR OVIDING ITA 3452/MUM/2016 11 HAWALA/ACCOMMODATION ENTRIES AS ADMITTED BY MR BHAN WARLAL JAIN IN STATEMENT RECORDED U/S 132(4) OF 1961 ACT. THE LEARNED CIT(A) REFERRED TO IN INSTRUCTION NO 2 OF 2008 DATE D 22-02-2008 WHEREIN THE REVENUE HAS IN CERTAIN CASES CONCERNING DIAMOND TRADERS/MANUFACTURES DECIDED TO ACCEPT RETURN OF IN COME, IF THE INCOME DECLARED BY TAX-PAYER IS HIGHER THAN 6% OF T OTAL TURNOVER PROVIDED SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED . THESE CASES HOWEVER EXCLUDE CASES , INTER-ALIA, WHERE THERE IS INFORMATION REGARDING ESCAPMENT OF INCOME. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAS SHOWN INCOME @4.52% OF TURNOVER. T HE LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE, HELD THAT FAIR AND REASONABLE MARGIN IS CONSIDERED TO BE 9% OF THE PU RCHASES COST OF RS. 60,44,860/- . THE SAID PERCENTAGE IS ALSO BASED ON THE FACTS AND FIGURES FOR ASSESSMENT YEAR 2008-09, 2009-10, 2011-12 AND 2012-13. THE LEARNED CIT(A) OBSERVED THAT THE ASSES SEE IS ARGUING IN ALTERNATIVE TO ACCEPT THE MARGIN @3% AS WAS BASE D ON APPELLATE ORDER PASSED FOR ASSESSMENT YEAR 2012-13 BY LEARNED CIT(A)-21, MUMBAI , WHILE THE ASSESSEE APPELLATE PROCEEDINGS W ERE WITH LEARNED CIT(A)-34, MUMBAI. THE LEARNED CIT(A) OBSER VED THAT SAID MARGIN IS BASED ON FIGURE OF TOTAL SALES, NET PROF IT AND QUANTUM OF BOGUS PURCHASE FOR THAT ASSESSMENT YEAR BUT AS PER LEARNED CIT(A), ONE HAS TO LOOK AT PROFIT MARGIN OF VARIOUS YEARS TO ARRIVE AT DECISION AND AVERAGE MARGIN IS TO BE ADOPTED. THUS, THE LEARNED CIT(A) RESTRICTED THE ADDITION TO THE TOTAL INCOME TO 9% OF THE PURCHASES OF RS. 60,44,860/- , WHICH WORKS OUT TO RS. 5,44,037/- ITA 3452/MUM/2016 12 WHICH BRING THE NET MARGIN TO 7.22% ON TOTAL TURNOV ER, VIDE APPELLATE 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 BHANWARLAL J AIN. THE LD. COUNSEL DREW OUR ATTENTION TO CONCLUSION REACHED BY THE LD. CIT(A) WHILE DISMISSING THE GROUND CHALLENGING THE REOPENI NG 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 ITA 3452/MUM/2016 13 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 ADDED TO THE INCOME BY THE AO. THE LD. CIT(A) REDUCED THE ADDITIONS TO 9% OF SUCH ALLEGED BOGUS PURCHASES. IT WAS STATED BY LEARNED AR THAT THE REVENUE HAS NOT FILED ANY APPEAL AGAINST THE RELIEF GRANTED BY LEARNED CIT(A). IT IS SUBMITTED THAT THE ASSESSEE IS A TRA DER AND INCOME DECLARED WAS 4.52% WHICH WAS ENHANCED BY LEARNED CI T(A) TO 7.22%. IT WAS SUBMITTED THAT PROFIT IS RANGING BET WEEN 4.5% TO 7% IN ASSESSMENT YEAR 2008-09, 2009-10, 2010-11 AND 2012-13. IT WAS SUBMITTED THAT THE LD. CIT (A)-21 RESTRICTED THE ADDITIONS TO 3% OF ALLEGED BOGUS PURCHASES FOR THE ASSESSMENT YE AR 2012-13 IN THE CASE OF ONE OF THE GROUP CONCERN OF THE ASSESSE E NAMELY M/S SATYANIS THE JEWELLER STORE PRIVATE LIMITED , FOR W HICH APPELLATE ORDER DATED 30-03-2015 PASSED BY LEARNED CIT(A)-21 IS PLACED ON RECORD WHICH IS PLACED IN FILE. IT WAS SUBMITTED TH AT THE SAID ASSESSEE M/S SATYANIS THE JEWELLERY STORE PRIVATE L IMITED HAD ACCEPTED THE SAID ADDITION OF 3% ON ALLEGED BOGUS P URCHASED AS WAS MADE BY LEARNED CIT(A)-21 FOR ASSESSMENT YEAR 2 012-13 AND NO APPEAL TO THE TRIBUNAL HAS BEEN FILED BY THE ASS ESSEE CONTESTING APPELLATE ORDER DATED 30-03-2015 PASSED BY LEARNED CIT(A). IT WAS SUBMITTED THAT NOTICES WERE ISSUED TO 4 PARTIES BY THE AO U/S ITA 3452/MUM/2016 14 133(6) OF 1961 ACT IN THE CASE OF THE ASSESSEE AND THEY COULD NOT REPLY CERTAIN QUESTIONS BUT LATER ON AFFIDAVITS WER E PLACED ON RECORD BEFORE THE LD. CIT(A) WHICH ARE PLACED AT PA PER BOOK PAGE 18-19, 36-37, 50-51,67-68. 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%. DURING SEARCH PRO CEEDINGS U/S 132(1) OF 1961 ACT, SHRI BHANWARILAL JAIN ADMITTED IN THE STATEMENT RECORDED U/S 132(4) OF 1961 ACT THAT HE WAS INSTRUMENTAL IN PROVIDING BOGUS/ ACCOMMODATION ENTR IES BY PROVIDING BOGUS INVOICE TOWARDS BOGUS PURCHASES. T HE BENAMI COMPANIES/ENTITIES WERE CREATED BY SAID MR BHANWARL AL JAIN IN THE NAME OF HIS BENAMIS WHO WERE HIS EMPLOYEES TO UNDERTAKE THESE BOGUS TRANSACTIONS. THE NOTICES U/S 133(6) O F 1961 ACT WERE ISSUED TO VARIOUS EMPLOYEES-BENAMIS OF MR BHANWARLA L JAIN WHO DID NOT SUPPLIED THE INFORMATION SOUGHT BY THE AO. THE ASSESSEE FURNISHED THEIR AFFIDAVIT BEFORE LEARNED CIT(A) BUT COULD NOT PRODUCE THESE PARTIES BEFORE THE AO/CIT(A) FOR RECO RDING THEIR STATEMENTS. ITA 3452/MUM/2016 15 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 13 2(4) OF THE ACT WHEREIN HE ADMITTED THAT HE WAS ENGAGED IN THE ISSUANCE OF BOGUS BILLS AND WERE ENGAGED IN PROVIDING ACCOMMODA TION ENTRIES THROUGH VARIOUS FRONT CONCERNS OPENED IN THE NAME O F 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 AND WERE ONLY PAID SALARY BY SAID MR BHANWARLAL JAIN AN D 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 ITA 3452/MUM/2016 16 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 HAD ANY KNO WLEDGE 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 IMPORTERS AN D THE DIAMONDS WERE HANDED OVER WITHOUT INVOICES TO THESE ACTUAL IMPORTERS BY THESE BENAMI CONCERNS OF MR BHANWARLAL JAIN , AND THE SAID IMPORTERS USED TO PAY CASH AGAINST SUPPLIE S OF DIAMOND TO THEM MADE WITHOUT ANY INVOICES. THE INTENTION OF THESE IMPORTERS WERE TO SUPPRESS THEIR TURNOVER AND CONSE QUENTLY PROFITS AND HENCE THESE FRONT CONCERNS OF MR BAHNWA RLAL JAIN WERE USED TO IMPORT DIAMONDS. THEREAFTER, TO COMPLETE BO OKS 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 MATERIAL 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 ITA 3452/MUM/2016 17 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 BEN AMI CONCERNS OF MR BHANWARLAL JAIN ON CREDIT BASIS. THE PROCEEDS OF CHEQUES SO OBTAINED BY THESE BENAMI CONCERNS FROM THESE BOGUS BILLS ISSUED TO VARIOUS CONCERNS WERE UTILIZED TO MAKE PAYMENT F OR 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 ASSESSMENT U/S 143(3) R.W.S. 143(2) OF 1961 ACT FRAMED BY REVENUE AGAINST THE ASSESSEE. 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 148 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 TO THE R EASONS SO RECORDED VIDE LETTER DATED 26-06-2014 , WHICH OBJEC TIONS WERE DISPOSED OF BY REVENUE VIDE ORDERS DATED 09-01-2015 . THEREAFTER, THE ASSESSMENT WAS FRAMED BY THE REVENUE U/S 143(3) R.W.S. 147 OF 1961 ACT VIDE ASSESSMENT ORDER DATED 30-03-2015. ITA 3452/MUM/2016 18 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 OPE NED SEVERAL BENAMI CONCERNS IN THE NAME OF EMPLOYEES WHO WERE H IS BANAMIS AND WERE ONLY PAID SALARY BY SAID MR BHANWARLAL JAI N AND THESE BANAMI CONCERNS WERE USED BY MR BHANWARLAL JAIN TO PROVIDE BOGUS/ACCOMMODATION ENTRIES WITHOUT SUPPLYING ANY M ATERIAL. THE LARGE NUMBER OF SAID CONCERNS WERE OPERATING FR OM 2-3 PREMISES OWNED BY MR BHANWARLAL JAIN AS DETAILED IN PRECEDING PARAS OF THIS ORDER. DURING SEARCH U/S 132(1) OF 1 961 ACT, NEITHER BOOKS OF ACCOUNTS OF THESE BENAMI CONCERNS WERE REC OVERED FROM THEIR REGISTERED PREMISES NOR ANY STOCK OF DIAMOND WAS FOUND BY REVENUE. THE BOOKS OF ACCOUNTS OF THESE BENAMI CONC ERNS WERE RECOVERED BY REVENUE FROM SOME OTHER PREMISES AND T HAT TOO OWNED BY MR BHANWARLAL JAIN, THE DETAILS ARE IN PRE CEDING PARAS OF THIS ORDER WHICH ARE NOT REPEATED. THE SO CALLED PROPRIETOR/DIRECTORS/PARTNERS OF THESE BANAMI COMPA NIES /CONCERNS ADMITTED IN THEIR STATEMENT RECORDED U/S 132/131 OF ITA 3452/MUM/2016 19 1961 ACT THAT THEY DO NOT HAVE ANY KNOWLEDGE OF AFF AIRS OF THE SAID CONCERNS NOR THEY HAD ANY KNOWLEDGE OF DIAMOND TRAD E. THE MODUS OPERANDI ADOPTED BY SAID MR BHANWARLAL JAIN W AS THAT HE THROUGH THESE BENAMI CONCERNS USED TO IMPORT DIAMON DS ON BEHALF OF ACTUAL IMPORTERS AND THE DIAMONDS WERE HA NDED OVER WITHOUT INVOICES TO ACTUAL IMPORTERS BY THESE BENAM I CONCERNS OF MR BHANWARLAL JAIN , WHO USED TO PAY CASH AGAINST T HESE SUPPLIES OF DIAMOND TO THEM MADE WITHOUT ANY INVOICES. THE I NTENTION OF THESE IMPORTERS WAS TO SUPPRESS TURNOVER AND CONSEQ UENTLY PROFITS. THEREAFTER, TO COMPLETE BOOKS OF ACCOUNTS, THESE BENAMI CONCERNS OF MR BHANWARLAL JAIN USED TO ISSUE BOGUS BILLS TO VARIOUS CONCERNS WHO WANTED BILLS TO COVER THEIR SA LES IN BOOKS OF ACCOUNT. NO MATERIAL WAS SUPPLIED AGAINST THESE BOG US BILLS ISSUED BY THE SAID BENAMI CONCERNS OF MR BHANWARLAL JAIN. THESE PARTIES ISSUED CHEQUES TO BENAMI CONCERNS OF MR BHANWARLAL JAIN AGAINST WHICH CASH WAS HANDED BACK BY THESE CONCERNS TO THE PARTIES 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 BAS IS. 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 ITA 3452/MUM/2016 20 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 WHICH 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 THIS ST AGE , THERE HAS TO BE PRIMA-FACIE SATISFACTION OF THE AO BASED ON TANG IBLE 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 ITA 3452/MUM/2016 21 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 AND NO SCRUTINY ASSESSMENT WAS FRAMED BY REVENUE U/S 14 3(3) R.W.S. 143(2) OF 1961 ACT. THUS, IT COULD NOT BE SAID THAT NO TANGIBLE AND MATERIAL INCRIMINATING MATERIAL WAS RECEIVED BY THE A.O. , RATHER IT IS ONLY AFTER RECEIPT OF TANGIBLE AND MATERIAL I NCRIMINATING MATERIAL BY THE AO FROM DIT(INV) INCRIMINATING ASSE SSEE AS DETAILED ABOVE , THE ASSESSMENT WAS REOPENED U/S 1 47 OF THE ACT BASED ON SUCH TANGIBLE AND MATERIAL INCRIMINATING I NFORMATION , 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 T HE ASSESSMENT YEAR. THUS, IT CANNOT BE SAID THAT THE REVENUE HAS REOPENED THE ASSESSMENT BASED UPON SUSPICION RATHER GENESIS OF R E-OPENING IS INCRIMINATING INFORMATION RECEIVED FROM DIT(INV), M UMBAI BASED ON INFORMATION RECEIVED FROM DIT(INV) WHICH IN TURN WAS BASED ON SEARCH AND SEIZURE OPERATION U/S 132(1) OF 1961 ACT CARRIED OUT IN THE CASE OF MR BHANWARLAL JAIN GROUP CASE, WHEREIN HE DEPOSED IN STATEMENT RECORDED U/S 132(4) OF 1961 ACT OF BEING ENGAGED IN ITA 3452/MUM/2016 22 PROVIDING BOGUS ACCOMMODATION ENTRIES WITHOUT SUPPL YING ANY MATERIAL WHEREIN ONLY BOGUS BILLS WERE ISSUED AND THE CHEQUE AMOUNT WAS RETURNED BACK TO THE BENEFICIARIES IN CA SH . THE ASSESSEE IS STATED TO BE BENEFICIARY IN THE SAID LI ST OF HAVING ALLEGEDLY RECEIVED ENTRIES FROM 2 BOGUS ACCOMMODATI ON ENTRY PROVIDERS WHO WERE ACTING AS FRONT AND BENAMI CONCE RNS OF MR BHANWARLAL JAIN TO THE TUNE OF RS. 19,31,040/-. THE ORIGINAL RETURN WAS PROCESSED U/S 143(1) OF THE ACT, AND THU S NO OPINION WAS FORMED AND HENCE THERE IS NO CHANGE OF OPINION . RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI, (2007) 291 ITR 500 (SC), WH EREIN HONBLE SUPREME COURT 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, 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 ASSESSMENT WAS INCORRECT OR INCOMPLETE OR THE OFFICER DID NOT COMP LETE THE ASSESSMENT UNDER SECTION 143(1), BUT WANTED TO MAKE AN INQUIRY, A NOTICE UNDER SECTION 143(2) WAS REQUIRED 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 SECTION 143(3). WITH EFFECT FROM 1-4-1989, THE PROVISIONS UNDERWENT SUBSTANTIAL AND MATERIAL CHANGES. A NEW SCHEME WAS INTRODUCED AND THE NEW SUBSTITUTED SECTION 143(1) P RIOR TO THE ITA 3452/MUM/2016 23 SUBSEQUENT SUBSTITUTION WITH EFFECT FROM 1-6-1999, IN CLAUSE (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 SUCH RETURN AFTER ADJUSTMENT OF TAX DEDUCTED AT SOURCE, ANY ADVANCE TAX OR ANY AMOUNT PAID OTHERWISE BY WAY OF TAX OR INTEREST, AN INTIMATION WAS TO BE SENT WITHOUT PREJ UDICE TO THE PROVISIONS OF SECTION 143(2) TO THE ASSESSEE SPECIF YING THE SUM SO PAYABLE AND SUCH INTIMATION WAS DEEMED TO BE A NOTICE OF DEMAND ISSUED UNDER SECTION 156. THE FIRS T PROVISO TO SECTION 143(1)(A) ALLOWED THE DEPARTMENT TO MAKE CERTAIN ADJUSTMENTS IN THE INCOME OR LOSS DECLARED IN THE R ETURN. 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 NOT CLAIMED IN THE RETURN WAS TO BE ALLOWED; (C) ANY LOSS CARRIED FORWARD, RELIEF CLAIMED IN THE RET URN 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 ACCOMPA NYING THE RETURN, (II) LOSS CARRIED FORWARD, DEDUCTION ALLOWA NCE OR RELIEF, WHICH WAS PRIMA FACIE ADMISSIBLE ON THE BASIS OF IN FORMATION AVAILABLE IN THE RETURN BUT NOT CLAIMED IN THE RETU RN AND SIMILARLY (III) THOSE CLAIMS WHICH WERE ON THE BASI S OF THE INFORMATION AVAILABLE IN THE RETURN, PRIMA FACIE IN ADMISSIBLE, ITA 3452/MUM/2016 24 WERE TO BE RECTIFIED/ALLOWED/DISALLOWED. WHAT WAS PERMISSIBLE WAS CORRECTION OF ERRORS APPARENT ON TH E BASIS OF THE DOCUMENTS ACCOMPANYING THE RETURN. THE ASSESSIN G OFFICER HAD NO AUTHORITY TO MAKE ADJUSTMENTS OR ADJ UDICATE UPON ANY DEBATABLE ISSUES. IN OTHER WORDS, THE ASSE SSING OFFICER HAD NO POWER TO GO BEHIND THE RETURN, ACCOU NTS OR DOCUMENTS, EITHER IN ALLOWING OR IN DISALLOWING DED UCTIONS, ALLOWANCE OR RELIEF. 13. ONE THING FURTHER TO BE NOTICED IS THAT INTIMATION UNDER SECTION 143(1)(A) IS GIVEN WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 143(2). THOUGH TECHNICALLY THE INTIMATION I SSUED WAS DEEMED TO BE A DEMAND NOTICE ISSUED UNDER SECTION 1 56, THAT DID NOT PER SE PRECLUDE THE RIGHT OF THE ASSESSING OFFICER TO PROCEED UNDER SECTION 143(2). THAT RIGHT IS PRESERV ED AND IS NOT TAKEN AWAY. BETWEEN THE PERIOD FROM 1-4-1989 TO 31-3- 1998, THE SECOND PROVISO TO SECTION 143(1)(A), REQU IRED THAT WHERE ADJUSTMENTS WERE MADE UNDER THE FIRST PROVISO TO SECTION 143(1)(A), AN INTIMATION 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 SUBSTITUTED BY THE FINANCE ACT, 1997, WHICH WAS OPERATIVE TILL 1-6-199 9. THE REQUIREMENT WAS THAT AN INTIMATION WAS TO BE SENT T O THE ASSESSEE WHETHER OR NOT ANY ADJUSTMENT HAD BEEN MAD E UNDER THE FIRST PROVISO TO SECTION 143(1) AND NOTWI THSTANDING THAT NO TAX OR INTEREST WAS FOUND DUE FROM THE ASSE SSEE CONCERNED. BETWEEN 1-4-1998 AND 31-5-1999, SENDING OF AN INTIMATION UNDER SECTION 143(1)(A) WAS MANDATORY. T HUS, THE LEGISLATIVE INTENT IS VERY CLEAR FROM THE USE OF TH E WORD 'INTIMATION' AS SUBSTITUTED FOR 'ASSESSMENT' THAT T WO DIFFERENT CONCEPTS EMERGED. WHILE MAKING AN ASSESSMENT, THE ASSESSING OFFICER IS FREE TO MAKE ANY ADDITION AFTE R GRANT OF OPPORTUNITY TO THE ASSESSEE. BY MAKING ADJUSTMENTS UNDER THE FIRST PROVISO TO SECTION 143(1)(A), NO ADDITION WHICH IS IMPERMISSIBLE BY THE INFORMATION GIVEN IN THE RETUR N COULD BE MADE BY THE ASSESSING OFFICER. THE REASON IS THAT U NDER ITA 3452/MUM/2016 25 SECTION 143(1)(A) NO OPPORTUNITY IS GRANTED TO THE ASSESSEE AND THE ASSESSING OFFICER PROCEEDS ON HIS OPINION O N THE BASIS OF THE RETURN FILED BY THE ASSESSEE. THE VERY FACT THAT NO OPPORTUNITY OF BEING HEARD IS GIVEN UNDER SECTION 1 43(1)(A) INDICATES THAT THE ASSESSING OFFICER HAS TO PROCEED ACCEPTING THE RETURN AND MAKING THE PERMISSIBLE ADJUSTMENTS O NLY. AS A RESULT OF INSERTION OF THE EXPLANATION TO SECTION 1 43 BY THE FINANCE (NO. 2) ACT OF 1991 WITH EFFECT FROM 1-10-1 991, AND SUBSEQUENTLY WITH EFFECT FROM 1-6-1994, BY THE FINA NCE ACT, 1994, AND ULTIMATELY OMITTED WITH EFFECT FROM 1-6-1 999, BY THE EXPLANATION AS INTRODUCED BY THE FINANCE (NO. 2 ) ACT OF 1991 AN INTIMATION SENT TO THE ASSESSEE UNDER SECTI ON 143(1)(A) WAS DEEMED TO BE AN ORDER FOR THE PURPOSE S OF SECTION 246 BETWEEN 1-6-1994, TO 31-5-1999, AND UND ER SECTION 264 BETWEEN 1-10-1991, AND 31-5-1999. IT IS TO BE NOTED THAT THE EXPRESSIONS 'INTIMATION' AND 'ASSESS MENT ORDER' HAVE BEEN USED AT DIFFERENT PLACES. THE CONT EXTUAL DIFFERENCE BETWEEN THE TWO EXPRESSIONS HAS TO BE UN DERSTOOD IN THE CONTEXT THE EXPRESSIONS ARE USED. ASSESSMENT IS USED AS MEANING SOMETIMES 'THE COMPUTATION OF INCOME', SOMETIMES 'THE DETERMINATION OF THE AMOUNT OF TAX P AYABLE' AND SOMETIMES 'THE WHOLE PROCEDURE LAID DOWN 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 ASSESSMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTORY PROVISIONS AS THEY STOOD AT DIFFERENT POI NTS OF TIME. UNDER SECTION 143(1)(A) AS IT STOOD PRIOR TO 1-4-19 89, THE ASSESSING OFFICER HAD TO PASS AN ASSESSMENT ORDER I F HE DECIDED TO ACCEPT THE RETURN, BUT UNDER THE AMENDED PROVISION, THE REQUIREMENT OF PASSING OF AN ASSESSM ENT ORDER HAS BEEN DISPENSED WITH AND INSTEAD AN INTIMATION I S REQUIRED TO BE SENT. VARIOUS CIRCULARS SENT BY THE CENTRAL BOARD OF DIRECT TAXES SPELL OUT THE INTENT OF THE LEGISLATURE, I.E., TO MINIMIZE THE DEPARTMENTAL WOR K TO SCRUTINIZE EACH AND EVERY RETURN AND TO CONCENTRATE ON SELECTIVE SCRUTINY OF RETURNS. THESE ASPECTS WERE H IGHLIGHTED BY ONE OF US (D.K. JAIN J) IN APOGEE INTERNATIONAL LTD. V. UNION ITA 3452/MUM/2016 26 OF INDIA [1996] 220 ITR 248 (DELHI) . IT MAY BE NOTED ABOVE THAT UNDER THE FIRST PROVISO TO THE NEWLY SUBSTITUT ED 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) WHE RE (A) EITHER NO SUM IS PAYABLE BY THE ASSESSEE, OR (B) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGEM ENT IS NOT DONE BY ANY ASSESSING OFFICER, BUT MOSTLY BY MINIST ERIAL STAFF. CAN IT BE SAID THAT ANY 'ASSESSMENT' IS DONE BY THEM ? THE REPLY IS AN EMPHATIC '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 APPLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDICATED TO BE PAYABLE I N THE INTIMATION BECAME PERMISSIBLE. AND NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISION. THEREFORE, THERE BEING NO ASSESSMENT UNDER SECTION 143(1)(A), THE QUESTION OF CHANGE OF OPINION, 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 (AMENDME NT) ACT, 1987, THE PROVISION READ AS FOLLOWS : '148. ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT.(1) BEFORE MAKING THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION UNDER SECTION 147, TH E ASSESSING OFFICER SHALL SERVE ON THE ASSESSEE A NOT ICE CONTAINING ALL OR ANY OF THE REQUIREMENTS WHICH MAY BE INCLUDED IN A NOTICE UNDER SUB-SECTION (2) OF SECTI ON 139; AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF THE NOTICE WERE A NOTICE IS SUED UNDER THAT SUB-SECTION. (2) THE ASSESSING OFFICER SHALL, BEFORE ISSUING ANY NOTICE UNDER THIS SECTION, RECORD HIS REASONS FOR DOING SO .' ITA 3452/MUM/2016 27 15. SECTION 147 PRIOR TO ITS SUBSTITUTION BY THE DIREC T TAX LAWS (AMENDMENT) ACT, 1987, STOOD AS FOLLOWS : '147. INCOME ESCAPING ASSESSMENT.IF (A) THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT, B Y REASON OF THE OMISSION 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 YEAR, 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 CHARGE ABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 T O 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 TH E RELEVANT ASSESSMENT YEAR). EXPLANATION 1.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE IN COME 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 ITA 3452/MUM/2016 28 (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 OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHI CH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED 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 ASSESS MENT YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN T HE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. 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 BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATU TE 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) FULFILMENT OF THE TWO REQUISITE COND ITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER ITA 3452/MUM/2016 29 WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT O F ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUS E 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 PRO VISIONS OF SECTION 147, SEPARATE CLAUSES (A) AND (B) LAID D OWN 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 FIRSTL Y THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHARGEABLE TO INCOME TAX HA VE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER (I) OMISSION OR FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FA CTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THE SE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIE D BEFORE THE ASSESSING OFFICER COULD HAVE JURISDICTIO N TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 14 7(A). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS I F THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ITA 3452/MUM/2016 30 ASSESSMENT IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS HOWEVER TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITH IN THE AMBIT OF THE PROVISO TO SECTION 147. THE CASE A T 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 R EASON TO EXAMINE IF ANY OTHER POINT WAS AVAILABLE. THE AP PEAL 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 SUPREME COURT I N THE CASE OF RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED(SUPRA) IS DIRECTLY AND SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CAS E, AS IN THE INSTANT CASE ALSO NO ASSESSMENT WAS ORIGINALLY FRAM ED U/S 143(2) ITA 3452/MUM/2016 31 R.WS. 143(3) OF 1961 ACT WHILE THE RETURN OF INCOME WAS ORIGINALLY 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 1961 A CT CANNOT BE SAID TO BE AN ASSESSMENT AND HENCE THERE IS NO QUES TION OF CHANGE OF OPINION IN THE INSTANT CASE. THE RE-OPENING WAS ALSO DONE WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR AND FIRS T PROVISO TO SECTION 147 OF 1961 ACT IS NOT APPLICABLE. THE AO H AS 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 W HICH WE HAVE DETAILED IN PRECEDING PARAS AND IT WAS REFLECTED I N SAID INCRIMINATING INFORMATION THAT THE ASSESSEE WAS BEN EFICIARY OF BOGUS ACCOMMODATION ENTRY TO THE TUNE OF RS. 19,31, 040/- FROM 2 HAWALA DEALERS, WHICH INFORMATION IS A TANGIBLE AND MATERIAL INFORMATION SUFFICIENT FOR THE PURPOSES OF RE-OPENI NG 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 THE ASSESS MENT YEAR AND NO SCRUTINY ASSESSMENT U/S 143(3) R.W.S. 143(2) OF 1961 ACT WAS FRAMED ORIGINALLY BY REVENUE, THUS, CONSEQUENTLY FI RST PROVISO TO SECTION 147 OF 1961 ACT WAS NOT APPLICABLE IN THE I NSTANT CASE UNDER APPEAL BEFORE THE TRIBUNAL. THE INCRIMINATIN G TANGIBLE AND MATERIAL INFORMATION SO RECEIVED BY THE AO IS WITH REGARD TO THE FACTS PREVIOUSLY DISCLOSED WHICH HAS COMES INTO POS SESSION OF THE AO WHICH TENDS TO EXPOSE THE UNTRUTHFULNESS OF THOS E FACTS AS WERE DISCLOSED IN THE RETURN OF INCOME BY THE ASSES SEE, WHICH ITA 3452/MUM/2016 32 RETURN OF INCOME WAS INCIDENTALLY ALSO NOT SCRUTINI ZED BY THE REVENUE. THE INCRIMINATING INFORMATION SO RECEIVED BY THE AO IN THE INSTANT CASE WHICH BECAME FOUNDATION FOR RE-OPE NING OF THE ASSESSMENT WAS SUFFICIENT TO FORM REASONS TO BELIEV E BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT, AS THE ASSESSEE WAS SPECIFICALLY INCRIMINATED IN THE SAID INFORMATION H AVING RECEIVED BOGUS ACCOMMODATION ENTRIES FOR PURCHASES TO THE TU NE OF RS. 19,31,040/- FROM 2 BOGUS ENTRY PROVIDERS BEING HAWA LA TRADERS PROVIDING ACCOMMODATION PURCHASE BILLS WITHOUT ACTU AL DELIVERY OF MATERIAL . IN SUCH SITUATIONS, IT IS NOT A CASE OF MERE CHANGE OF OPINION OR THE DRAWING OF A DIFFERENT INFERENCE FRO M THE SAME FACTS AS WERE EARLIER AVAILABLE BUT ACTING ON FRESH INFOR MATION EXPOSING UN-TRUTHFULNESS OF INFORMATION FURNISHED IN RETURN OF INCOME FILED WITH REVENUE. WE ARE OF THE CONSIDERED VIEW THAT ON THE BASIS OF INFORMATION RECEIVED AND IF THE ASSESSING OFFICER I S SATISFIED THAT REASONABLE GROUND EXISTS TO BELIEVE, THEN IN THAT C ASE THE POWER OF THE ASSESSING AUTHORITY EXTENDS TO RE-OPENING OF AS SESSMENT, WHICH IN THE INSTANT CASE THE CONDITIONS ARE DULY M ET FOR RE- OPENING BASED ON FACTUAL MATRIX OF THE CASE. THE TA NGIBLE AND MATERIAL INCRIMINATING INFORMATION SO RECEIVED BY T HE AO FROM DIT(INV.), MUMBAI AS DETAILED ABOVE IS SO OBVIOUS T HAT TO SAY THAT THE AO HAS NOT APPLIED HIS MIND TO REACH SATISFACTI ON IN FORMING REASONS TO BELIEVE THAT INCOME OF ASSESSEE HAS ESCA PED ASSESSMENT TO INITIATE RE-OPENING U/S 147 OF 1961 , IS TOO FAR- FETCHED AND SUCH CONTENTION OF THE ASSESSEE IS OUT- RIGHTLY REJECTED. ITA 3452/MUM/2016 33 THERE IS LIVE LINK BETWEEN MATERIAL AND TANGIBLE IN CRIMINATING INFORMATION RECEIVED BY THE ASSESSEE AND FORMATION OF REASONS TO BELIEVE THAT INCOME OF THE ASSESSE HAS ESCAPED ASSE SSMENT IN THE INSTANT CASE UNDER APPEAL BEFORE US. THUS, RESPECT FULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED(SUPRA), WE HO LD THAT RE- OPENING OF THE ASSESSMENT AS DONE IN THE INSTANT CA SE BY THE AO U/S 147 OF 1961 WAS VALID AND LEGAL WHICH IS UPHELD BY US , AND THE CONTENTIONS OF THE ASSESSEE ARE , HEREBY, REJEC TED. NO CONTRARY DECISION OF HONBLE APEX COURT IS BROUGHT TO OUR NO TICE . THIS GROUND OF THE ASSESSEE CHALLENGING LEGALITY AND VAL IDITY 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 FO R PURCHASE OF DIAMONDS AGAINST WHICH THEY ONLY GAVE PART REPLIES. THE ASSESSEE FAILED TO PRODUCE THESE FOUR PARTIES BEFORE THE AO DESPITE BEING CALLED UPON BY REVENUE TO PRODUCE THEM. THE ASSESSE E ALSO COULD NOT PROVE THE MOVEMENT OF MATERIAL SO PURCHASED FRO M THESE ALLEGED ENTRY PROVIDERS. THESE ARE INFORMATION WHIC H ARE ESPECIALLY IN THE KNOWLEDGE OF THE ASSESSEE AND THE ONUS IS ON THE ASSESSEE TO PROVE THAT PURCHASES MADE BY HIM ARE GENUINE AS THESE PURCHASES ARE RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ITA 3452/MUM/2016 34 SECTION 106 OF INDIAN EVIDENCE ACT ,1872 CLEARLY ST IPULATES AS UNDER: 106. BURDEN OF PROVING FACT ESPECIALLY WITHIN KNOW LEDGE 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 HI M. 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 ASSESSEE AS EVID ENCE NOR THESE PARTIES WERE PRODUCED BEFORE THE REVENUE. THE ASSESSEE DID NOT SUBMITTED DOCUMENTARY EVIDENCE TO SHOW THAT THE RE WAS MOVEMENT OF GOODS . THE ASSESSEE FILED BEFORE THE L EARNED CIT(A), AFFIDAVITS EXECUTED BY THESE PARTIES FROM WHOM TH E ASSESSEE MADE PURCHASES WHEREIN THESE PARTIES HAVE SUBMITTED THAT TRANSACTIONS WERE GENUINE. THE SAME PARTIES WHILE D EPOSING BEFORE DIT(INV) IN AN STATEMENT RECORDED U/S 132/131 OF TH E ACT HAVE EXPRESSED THEIR LACK OF KNOWLEDGE ABOUT THE STATE O F AFFAIRS OF THESE CONCERNS AS WELL ADMITTED THAT THEY DO NOT HA VE KNOWLEDGE OF DIAMOND TRADE. THE SAID MR BHANWARLAL JAIN WHEN CONFRONTED WITH STATEMENTS U/S 132 AND 131 OF THESE PERSONS, A DMITTED WHILE DEPOSING STATEMENT U/S 132(4) TO BE ENGAGED IN PROV IDING ITA 3452/MUM/2016 35 HAWALA/ACCOMMODATION ENTRIES. THE AO RELYING UPON J UDICIAL 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 B Y APPLYING AVERAGE MARGIN OF 9% TO THE SAID BOGUS PURCHASES OF RS. 60,44,860/- , WHEREIN ADDITION TO THE INCOME WORKED OUT TO RS. 5,44,037/- WHICH BRINGS THE NET MARGIN TO 7.22% AS AGAINST DECLARED NET PROFIT MARGIN OF 4.52% OF TURNOVER. THE LEARNED CIT(A) WHILE COMPUTING DISALLOWANCE HAS CONSIDERED THE NET PROFIT MARGIN OF THE ASSESSEE ITSELF FOR SEVERAL YEARS FRO M ASSESSMENT YEAR 2008-09 TO 2012-13 TO COME TO APPLYING NET PRO FIT MARGIN OF 7.22% OF TOTAL TURNOVER FOR PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR UNDER APPEAL WHICH WAS BASED ON AVE RAGE NET MARGIN OF THE ASSESSEE ITSELF FOR VARIOUS YEARS. TH E LEARNED CIT(A) IN OUR CONSIDERED VIEW HAS THUS ADOPTED FAIR, REASO NABLE AND RATIONAL BASIS WHICH WAS BASED ON AN HONEST ESTIMA TION TO ARRIVE AT DISALLOWANCE / ADDITION TO INCOME TO ARRIVE AT N ET PROFIT MARGIN OF 7.22% OF TURNOVER CONSIDERING THAT BOOKS OF ACCO UNTS OF THE ASSESSEE WERE ALREADY REJECTED BY REVENUE . THE ASS ESSEE IS NOW CONTEMPLATING THAT THE LEARNED CIT(A)-21,MUMBAI IN THE CASE OF ONE OF THE GROUP CONCERN NAMELY SATYANIS THE JEWEL LERY STORE PRIVATE LIMITED WHILE ADJUDICATING APPEAL FOR ASSE SSMENT YEAR 2012-13 HAS RESTRICTED DISALLOWANCE TO 3% OF ALLEGE D BOGUS PURCHASES WHICH IS ACCEPTED BY THE SAID TAX-PAYER A ND NO FURTHER ITA 3452/MUM/2016 36 APPEAL IS FILED BY THE SAID TAX-PAYER WITH THE TRIB UNAL AGAINST APPELLATE ORDERS OF LEARNED CIT(A) FOR ASSESSMENT Y EAR 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 THE ASSESSEE BY LEARNED CIT(A)-21,MUMBAI AND FATE OF SUCH APPEAL , IF ANY I S NOT KNOWN. THE ASSESSEE ALSO COULD NOT SHOW THAT HOW APPELLATE ORDER OF LEARNED CIT(A)-34,MUMBAI IN ASSESSEES OWN CASE WHI CH HAS ESTIMATED INCOME AT NET MARGIN @7.22% ON TOTAL TUR NOVER WHICH IS BASED ON AVERAGE NET MARGIN OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 TO 2012-13 IS PERVERSE OR ARBITRARY NO T SUSTAINABLE AT LAW. THE FACTS OF EACH CASE IS DIFFERENT, THE AS SESSEE IS TRADER IN DIAMOND WHILE THE SAID TAX-PAYER M/S SATYANIS THE JEWELLERY STORE PRIVATE LIMITED IS MANUFACTURER AND TRADER O F DIAMOND, GOLD AND JEWELLERY. PRINCIPLES OF RES-JUDICATA IS NOT AP PLICABLE IN THE INCOME TAX PROCEEDINGS AND EVERY YEAR IS A DIFFEREN T YEAR ALTHOUGH WE AGREE THAT PRINCIPLES OF CONSISTENCY IS TO BE AP PLIED (REF RADHASOAMI SATSANG V. CIT (1992) 193 ITR 321(SC) ) . THE ASSESSEE CANNOT TAKE RECOURSE TO ESTIMATION DONE BY ANOTHER LEARNED CIT(A) WHILE ADJUDICATING APPEAL OF ANOTHER TAX-PAYER WHOSE FACTS ARE DIFFERENT AND IN ANY CASE ESTIMATIO N REQUIRES SOME GUESS 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 EST IMATION WHICH ITA 3452/MUM/2016 37 OBVIOUSLY REQUIRES SOME GUESS WORK. IN SUCH CIRCUMS TANCES, PROFITS NEEDS TO BE ESTIMATED WHICH DEFINITELY INVO LVED SOME ESTIMATION/GUESS WORK BUT THE SAID ESTIMATION/GUESS WORK SHOULD BE FAIR , HONEST AND RATIONAL KEEPING IN VIEW FACT UAL MATRIX OF THE CASE AND CANNOT BE ARBITRARILY APPLIED AT THE DISCR ETION OF AUTHORITIES . WE HAVE GONE THROUGH THE CASE LAWS RE LIED UPON BY THE ASSESSEE. REFERENCE IS DRAWN TO DECISION OF HON BLE SUPREME COURT IN THE CASE OF KACHWALA GEMS V. JCIT (2007) 2 88 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. ITA 3452/MUM/2016 38 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 RATE O F 43.8 PER CENT (EVEN WITHOUT CONSIDERING THE VALUE OF EXP ORT 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 JUDGMENT ASSESSMENT UNDER SECTION 144 OF THE INCOME -TAX ACT. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER MENTI ONED SOME COMPARABLE CASES AND WAS OF THE VIEW THAT THE CASE OF THE ASSESSEE IS MORE OR LESS HAVING SIMILAR FACTS A S THAT OF M/S. GEM PLAZA WHERE THE GROSS PROFIT HAS BEEN TAKE N AS 35.48 PER CENT. THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT OF THE ASSESSEE AS 40 PER CENT. 6. THE ASSESSING OFFICER FURTHER HELD THAT THE ASSESS EE HAS SHOWN BOGUS PURCHASES IN ORDER TO REDUCE THE GROSS PROFITS. 7. IN APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS ) UPHELD MOST OF THE FINDINGS OF THE ASSESSING OFFICER, 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 30 PE R CENT. 9. THE COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT THE INCOME-TAX AUTHORITIES WRONGLY HELD THAT APPELL ANT HAS SHOWN BOGUS PURCHASES, AND THE BOOKS OF ACCOUNT WER E 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 THE BOO KS OF ACCOUNT, COGENT REASONS HAVE BEEN GIVEN BY THE INCOME-TAX AU THORITIES FOR DOING SO, AND WE SEE NO REASON TO TAKE A DIFFER ENT 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 HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSE SSMENT, ITA 3452/MUM/2016 39 AND SHOULD NOT ACT TOTALLY ARBITRARILY, BUT THERE I S NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGME NT ASSESSMENT, AND IT IS THE ASSESSEE HIMSELF WHO IS T O BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS. IN OUR OPINION, THERE WAS NO ARBITRARINESS IN THE PRESENT CASE ON THE PART OF THE INCOME- TAX AUTHORITIES. THUS, THERE IS NO FORCE IN THIS AP PEAL, AND IT IS DISMISSED ACCORDINGLY. NO COSTS. IN OUR CONSIDERED VIEW IN THE INSTANT CASE LEARNED CIT(A) MADE AN HONEST ATTEMPT TO ESTIMATE NET MARGIN ON TOTAL TURN OVER BY ADDING TO INCOME 9% OF BOGUS PURCHASES WHICH LED TO NET MA RGIN OF 7.22% ON TOTAL TURNOVER AS AGAINST NET MARGIN OF 4 .52% ON TOTAL TURNOVER DECLARED BY THE ASSESSEE , WHICH NET MARGI N ARRIVED AT 7.22% ON TOTAL TURNOVER WAS BASED ON AVERAGE NET MA RGIN OF THE ASSESSEE ITSELF FOR ASSESSMENT YEAR 2008-09 TO 2012 -13, WHICH IN OUR CONSIDERED VIEW WAS AN HONEST, REALISTIC AND RA TIONAL ATTEMPT MADE BY LEARNED CIT(A) AND DOES NOT FALL IN THE ARE NA OF ARBITRARINESS AND PERVERSITY REQUIRING OUR INTERFER ENCE, AND HENCE WE DECLINE TO INTERFERE WITH THE WELL REASONED APP ELLATE ORDER OF LEARNED CIT(A). THE RIGHT OF CROSS EXAMINATION IS N OT ABSOLUTE. THE ASSESSEE HAS TO FIRST DISCHARGE ITS PRIMARY ONUS CA ST UNDER LAW AND IF THE SAME STOOD DULY DISCHARGED WHICH IS NOT REBUTTED BY AUTHORITIES , BUT DESPITE THAT THEN ALSO THE AUTHOR ITIES PROCEED TO PUT ASSESSEE TO PREJUDICE SOLELY RELYING ON THE BA SIS OF INCRIMINATING STATEMENT RECORDED OF THIRD PARTY AT THE BACK OF THE ASSESSEE, THEN CERTAINLY THE RIGHT TO CROSS EXAMINA TION THE SAID THIRD PARTY WHOSE INCRIMINATING STATEMENT WAS RECOR DED AT THE BACK OF THE ASSESSEE IS RELIED UPON BY AUTHORITIES TO PREJUDICE THE ITA 3452/MUM/2016 40 ASSESSEE WILL BECOME ABSOLUTE. THERE WAS AN INCRIMI NATING TANGIBLE AND MATERIAL INFORMATION WITH THE REVENUE AGAINST THE ASSESSEE THAT THE ASSESSEE HAS OBTAINED BOGUS INVOI CES FROM BENAMI CONCERNS OF MR BHANWARLAL JAIN WHO WERE ENGA GED 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 SEARCH PROC EEDINGS U/S 132(1) OF 1961 ACT WHILE DEPOSING IN STATEMENT RECO RDED U/S 132(4) OF 1961 ACT STATED THAT HE WAS ENGAGED IN PR OVIDING BOGUS ACCOMMODATION ENTRIES THROUGH CONCERNS/ENTITIES CRE ATED THROUGH VARIOUS EMPLOYEES WHEN HE WAS CONFRONTED WITH THE V ARIOUS STATEMENTS RECORDED U/S 132 AND 131 OF 1961 ACT OF HIS BENAMIS. THE SAID EMPLOYEES HAVE STATED THAT THEY HAVE NO KN OWLEDGE OF THESE CONCERNS STATE OF BUSINESS AS WELL THEY LACK ED INFORMATION ABOUT DIAMOND TRADE. THE ASSESSEE FAILED TO PRODUCE THESE FOUR PARTIES FROM WHOM PURCHASES WERE MADE BY THE ASSESS EE 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 PURCHASES WERE GENUINE. THE ASSESSEE IS IN POSSESSION OF THE FACTS WHICH WERE E SPECIALLY IN THE KNOWLEDGE OF THE ASSESSEE W.R.T. THESE BOGUS PURCHA SES AND BURDEN OF PROOF LAY ON THE ASSESSEE TO SUBSTANTIATE THAT PURCHASES ARE GENUINE. THE ASSESSEE COULD NOT ESTABLISH MOVEM ENT OF MATERIAL AS WELL COULD NOT PRODUCE THE PARTIES BEFO RE REVENUE. THE BOOKS OF ACCOUNTS WERE REJECTED BY AO U/S 145(3) OF 1961 ACT. ITA 3452/MUM/2016 41 THUS, WE ARE INCLINED TO CONFIRM THE APPELLATE ORDE R OF LEARNED CIT(A) AND THIS APPEAL FILED BY THE ASSESSEE IS DIS MISSED. IT IS NOT BROUGHT ON RECORD BEFORE US THAT REVENUE IS IN APPE AL BEFORE THE TRIBUNAL AGAINST THE PART RELIEF GIVEN BY LEARNED C IT(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 DISMIS SED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH APRIL , 2017. # $ % &' 25-04-2017 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI; & DATED 25-04-2017 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS ITA 3452/MUM/2016 42 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI