RATNAGIRI STAINLESS P. LTD, MUMBAI V. ITO 5(3)(1), MUMBAI

ITA 4463/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1467 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: N M PORWAL
• Keywords: Bogus purchase; Recovery proceedings; Depreciation; Search and seizure; Wrong claim; Difference of opinion; Accommodation entries; Reason to believe; Change of opinion
• Section: 69C; 143(3); 142(1); 133(6); 246; 148; 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. 4463/ MUM/2016 ( / ASSESSMENT YEAR : 2009-10) M/S RATNAGIRI STAINLESS PVT. LTD., 21/23, LAXMI NIWAS, 2 ND PARSIWADA LANE, OPP V.P. ROAD POLICE STATION, MUMBAI 400 004. / V. INCOME TAX OFFICER 5(3)(1), MUMBAI. ./ PAN : AADCR2993P ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI N.M. PORWAL REVENUE BY : MS. POOJA SWAROOP ,DR / DATE OF HEARING : 02-03-2017 / DATE OF PRONOUNCEMENT : 04-04-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 4463/MUM/2016, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 30 TH MARCH,2016 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 10, M UMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2009- 10, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDER DATED 20 TH JANUARY, 2015 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) R.W.S. 147 OF THE INCOM E-TAX ACT,1961 (HEREINAFTER CALLED THE ACT). ITA 4463/MUM/2016 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI (HER EINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED I N CONFIRMING ADDITION OF RS. 2997908/- ON ACCOUNT OF GROSS PROFIT @ 12.50% ON ALLEGED BOGUS PURCHASES OF RS. 23983261/- TO THE TOTAL INCOME OF THE APPELLANT. PROVISIONS OF THE ACT OUGHT TO HAVE BEEN PROP ERLY CONSTRUED AND REGARD BEING HAD TO FACTS OF THE CASE NO SUCH ADDI TION SHOULD HAVE BEEN MADE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING CONCLUSION OF THE ASSESSING OFFICER THAT PURCHASES M ADE BY THE APPELLANT TO THE TUNE OF RS. 23983261/- IS BOGUS AND NON GENUINE. REASONS ASSIGNED BY HIM ARE WRONG AND INSUFFICIENT T O SUPPORT SUCH CONCLUSION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ESTIMATING RATE OF GROSS PROFIT OF 12.50% ON ALLEGED BOGUS PURCHASE S OVER AND ABOVE GROSS PROFIT DECLARED BY THE APPELLANT ON SUCH PURCHA SES. REASONS ASSIGNED BY HIM ARE WRONG AND INSUFFICIENT TO JUSTIF Y SUCH RATE OF GROSS PROFIT OF 12.50% 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING VALIDITY OF INITIATING PROCEEDING UNDER SECTION 147 O F THE ACT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THE INITIATION OF PROCEEDING UNDER SECTION 147 OF THE ACT AND ISSUANCE OF NOTICE UNDER S ECTION 148 IS BAD IN LAW AND CONTRARY TO THE PROVISIONS OF THE ACT AND LIA BLE TO BE CANCELLED /ANNULLED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ORDER MADE UNDER SECTION 143(3) RWS 147 OF THE ACT BY THE LEARNED ASSESSING OFFICER WHICH IS ILLEGAL, BAD-IN-LAW, ULTR A VIRES AND WITHOUT ALLOWING REASONABLE OPPORTUNITY OF THE HEARING, WITHOU T APPRECIATING THE FACTS, SUBMISSION AND EVIDENCES IN THEIR PROPER PE RSPECTIVE, WITHOUT PROVIDING COPIES OF MATERIAL USED AGAINST THE APPELLANT AND THEREFORE SAME IS LIABLE TO BE ANNULLED. 6. THE LEARNED ASSESSING OFFICER ERRED IN CHARGING INTEREST UNDER SECTION 234A, 234B, 234C AND 234D OF THE ACT. ITA 4463/MUM/2016 3 7. THE APPELLANT CRAVE LEAVE TO ADD, AMEND , ALTER AN D/OR VARY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARIN G. 3. AT THE OUTSET LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DID NOT WISH TO PRESS GROUND NO. 1,2,5 AND 6 RAISED BY THE ASSESSEE IN MEMO OF APPEAL FILED WITH THE TRIBUNAL AND PRAYE D THAT THE SAME MAY BE DISMISSED AS NOT BEING PRESSED. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE WISH TO RESTRICT HIS ARGUMENTS TO GROUND NO. 3 AND 4 RAISED BY THE ASSESSEE IN MEMO OF APPEAL FILED WITH TRIBUN AL. THE LD DR DID NOT RAISED ANY OBJECTION TO DISMISSAL OF GROUND NO.1,2, 5 AND 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERI AL ON RECORD AND WE HEREBY ORDER DISMISSAL OF GROUND NO. 1,2,5 AND 6 RA ISED BY THE ASSESSEE IN MEMO OF APPEAL FILED WITH THE TRIBUNAL AS NOT BEING PRESSED. THE GROUND NO. 7 RAISED BY THE ASSESSEE IS ALSO GENERAL AND DOES NOT REQUIRE SEPARATE ADJUDICATION BY US AND IS HEREBY ORDERED TO BE DISM ISSED AS THERE ARE NO SPECIFIC ARGUMENTS IN THIS CONTEXT RAISED BY THE AS SESSEE DURING COURSE OF HEARING BEFORE US AS WELL IN WRITTEN SUBMISSIONS BE FORE US . WE ORDER ACCORDINGLY. 4. BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF I NCOME DECLARING INCOME OF RS.6,28,330/- WAS FILED BY THE ASSESSEE ON 25 TH SEPTEMBER, 2009 WHICH WAS ORIGINALLY PROCESSED BY REVENUE U/S.143(1) OF 1961 ACT. THE ASSESSMENT WAS RE-OPENED BY THE AO U/S 147 OF 1961 ACT BY THE ISSU E OF NOTICE U/S. 148 OF THE ACT ON 25 TH MARCH, 2014 WHICH WAS DULY SERVED ON THE ASSESSEE. IN RESPONSE TO NOTICE U/S 148 OF 1961 ACT , THE ASSESS EE SUBMITTED THAT ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE ON 25 TH SEPTEMBER, 2009 U/S 139(1) OF 1961 ACT MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S. L48 OF 1961 ACT. REASONS RECORDED BY THE AO PRIOR TO ISSUE OF N OTICE U/S 148 OF THE ACT WERE ALSO PROVIDED BY THE AO TO THE ASSESSEE. THE A SSESSEE FILED OBJECTIONS FOR THE REOPENING OF THE ASSESSMENT VIDE LETTER DATED 0 2.06.2014 WHICH WERE ITA 4463/MUM/2016 4 DISPOSED OFF BY THE A.O. VIDE LETTER DATED 06.05.20 14. THE A.O. WHILE DISPOSING OFF OBJECTIONS TO RE-OPENING OBSERVED THA T AS PER RECORDS OF THE SALES TAX DEPARTMENT THERE WERE 28 PARTIES FROM WHO M THE ASSESSEE HAD MADE HAWALA TRANSACTIONS WHO WERE INVOLVED IN BOGUS BILLING. IT WAS OBSERVED BY AO THAT THESE PARTIES JUST ISSUE BILLS FOR COMMI SSION WITHOUT ACTUAL SUPPLY OF GOODS. IN AN SWORN AFFIDAVIT CUM DECLARATION FIL ED BEFORE SALES TAX INVESTIGATION BRANCH, MUMBAI AND IN DEPOSITION BEFO RE THE ASSISTANT COMMISSIONER OF SALES TAX, INVESTIGATION BRANCH, MU MBAI ,THE DIRECTORS OF THE SAID 28 ENTITIES HAVE ADMITTED OF ISSUING ONLY INVOICES FOR SAKE OF ENTRY WITHOUT DELIVERY OF GOODS, WERE THE OBSERVATION OF THE AO. THE DIRECTORS OF THE SAID 28 ENTITIES STATED IN THEIR SWORN AFFIDAVIT T HAT THEY HAD ONLY SUPPLIED BILLS ON RECEIPT OF CHEQUES AND LATER ON CASH WAS W ITHDRAWN FROM BANKS AND AFTER DEDUCTION OF AGREED COMMISSION, BALANCE MONEY WAS RETURNED IN CASH TO THE ASSESSEE. THE A.O. OBSERVED THAT THE STATEMENTS OF THE HAWALA DEALERS WERE RECORDED UNDER OATH BY THE SALES TAX AUTHORITY DURING SURVEY ACTION CONDUCTED IN THEIR PREMISES AND THEY HAVE CONFESSED TO HAVE ISSUED BOGUS BILLS IN LIEU OF FIXED COMMISSION AND THE ASSESSEE COMPANY IS ONE OF THE BENEFICIARIES WHO HAS OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS.2,39,83,261/- DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009- 10 FROM THESE TWENTY EIGHT BOGUS PARTIES AS DETAILE D BELOW :- ASHTAVINAYAK SALES AGENCY AFWPN2169J 2008-09 21,194 STELCO STEEL INDUSTRIES AFYPJ0025K 2008-09 371,948 RELIANT METAL CORPORATION ALAPR6303A 2008-09 468,667 PADMAVATI METAL &ALLOYS AFSPJ4124P 2008-09 556,674 JINESH METAL CORPORATION ARDPK1291P 2008-09 48,140 RATNAJYOTI METAL & TUBES PVT. LTD AADCR3441A 2008-09 135,742 ANIKET STEEL PVT. LTD. AAGCA0417J 2008-09 779,845 ITA 4463/MUM/2016 5 RELIABLE METAL (INDIA) AJNPD6596Q 2008-09 957,436 TYSON STEEL AND TUBES PRIVATE LIMITED AACCT9481B 2008-09 1,131,749 VIGNESHWAR IMPEX ARDPK1294J 2008-09 1,133,295 RISHAB METAL (INDIA) AACPJ6417C 2008-09 115,573 RAMANI METAL CORPORATION AIRPD5688A 2008-09 246,607 POOJA METAL & ALLOYS ACYPC4975E 2008-09 793,199 MAZDA STEEL TRADE PVT. LTD. AAECM1196L 2008-09 49,462 ARIHANT TRADE LINK BDRPS0342C 2008-09 320,881 TAMAS STEEL & ALLOYS PVT. LTD. AACCT1556F 2008-09 1,122,116 KANAK STEEL (INDIA) AFYPB6058G 2008-09 1,351,280 WEL STEEL (INDIA) AHZPD3657L 2008-09 2,651,855 TAKSHIL TRADING PVT. LTD. AABCT5406H 2008-09 112,829 RAJESHWARI TRADING PVT. LTD AACCR7829M 2008-09 2,569,340 RANAKPUR SALES CORPORATION BABPS6817D 2008-09 198,640 ELECON IMPEX PVT LTD AABCE6233E 2008-09 246,395 NAVRATAN METAL IMPEX AAIHM5090A 2008-09 256,513 PRIYA STEEL CORPN AKCPD1838M 2008-09 530,244 VANDNA METAL SYNDICATE AEWPJ3208B 2008-09 833,173 POOJA STEEL & ALLOYS ACSPC2231P 2008-09 1,369,290 NAVODAY TRADE IMPEX PVT LTD AACCN3641F 2008-09 2,024,972 VISHESH STEEL SUPPLIERS AXVPS3398H 2008-09 3,586,202 THE ASSESSEE WAS ASKED BY THE AO TO FURNISH DETAIL S OF SALE AND PURCHASES GIVING NAME, ADDRESS AND THE AMOUNT ETC. . THE ASS ESSEE FILED THE DETAILS AND FROM THE DETAILS , THE A.O. OBSERVED THAT THE DETAI LS WERE EXACTLY MATCHING WITH THE INFORMATION AVAILABLE WITH THE A.O. NOTICE S U/S.133(6) OF THE ACT ITA 4463/MUM/2016 6 WERE ISSUED BY THE AO TO ALL THE ABOVE 28 PARTIES. ALL THESE NOTICES EXCEPT ONE NOTICE WERE EITHER RETURNED UN-SERVED OR WERE NOT R EPLIED TO. ONLY ONE PARTY NAMELY M/S RANAKPUR SALES CORPORATION, CATEGORICALL Y STATED THAT THEY HAVE NOT SUPPLIED ANY MATERIAL TO THE ASSESSEE CONCERN. THE ASSESSEE WAS CONFRONTED WITH THE SAME WHEREBY THE ASSESSEE WAS A SKED TO PRODUCE THE PARTIES AND ALSO FILE THE DOCUMENTS TO SUBSTANTIATE THE CLAIM OF PURCHASE AND STOCK REGISTER, PARTICULARS OF THE TRANSPORTER, MED IUM OF TRANSPORT, DATE OF TRANSPORT, TRANSPORT VOUCHER, OCTROI POST RECORDS A ND PAYMENT PARTICULARS ETC.. THE ASSESSEE SUBMITTED THAT AN AFFIDAVIT SIGNED BEF ORE THE SALES TAX AUTHORITIES CANNOT BE RELIED UPON. IT WAS SUBMITTE D THAT THE REVENUE HAS TREATED THESE PARTIES AS HAWALA OPERATORS BECAUSE T HESE DEALERS HAVE NOT PAID TAXES COLLECTED TO VAT DEPARTMENT. THESE DEALERS WE RE RAIDED BY VAT AUTHORITIES AND THEIR DEALERSHIP WAS CANCELLED. THE ASSESSEE ASKED FOR CROSS EXAMINATION OF ALL THESE PARTIES. IT WAS SUBMITTED THAT THE SALES WERE NOT DISPUTED BY THE REVENUE AND IT WAS SUBMITTED THAT T HERE CANNOT BE SALES WITHOUT PURCHASES. THE ASSESSEE SUBMITTED THAT IT HAD PURCHASED MATERIAL FROM ALL THESE PARTIES AND THESE PARTIES ARE REGIST ERED VAT CERTIFICATE HOLDERS AND REGISTRATION CERTIFICATE IS ISSUED AFTER THOROU GH VERIFICATION OF ALL THE DOCUMENTS AND PROPER VISIT BY VAT OFFICERS. IT WAS SUBMITTED THAT ASSESSEE IS DOING BUSINESS GENUINELY AND ALL ITS PURCHASES WERE GENUINE AND FROM THE REGISTERED TIN HOLDERS WHICH IS SUPPORTED WITH TAX INVOICE AND CHALLANS. IT WAS SUBMITTED THAT ALL THE PAYMENTS WERE MADE THROU GH CHEQUE AND DEPOSITED INTO THEIR BANK ACCOUNT. ALL THE SALE AN D PURCHASE TRANSACTIONS WERE SUPPORTED WITH TAX INVOICES, DELIVERY CHALLANS , LORRY RECEIPTS AND HENCE THE ASSESSEE HAS DISCHARGED ITS BURDEN. STATEMENT O F PURCHASE AND SALES SHOWING NAME OF THE SUPPLIER AND CUSTOMERS, DATE OF PURCHASE AND SALES , QUANTITY PURCHASED AND SOLD TO SHOW ONE TO ONE CO-R ELATION BETWEEN PURCHASES AND SALES WERE SUBMITTED BY THE ASSESSEE BEFORE THE AO. THE ITA 4463/MUM/2016 7 ASSESSEE ALSO SUBMITTED VAT AUDIT REPORT. IT WAS SU BMITTED THAT SALES ARE FULLY VOUCHED AND WITHOUT PURCHASES, THERE CANNOT B E SALES AND HENCE ALL PURCHASES ARE GENUINE. THE STOCK REGISTER FOR FULL YEAR AND LEDGER COPY OF THE SUPPLIERS WERE ALSO SUBMITTED . IT WAS SUBMITTED TH AT NO ADDITION CAN BE MADE ON THE BASIS OF MERE AFFIDAVIT GIVEN BY SUPPL IERS AND IT WAS SUBMITTED THAT IT WILL BE HIGHLY UNFAIR TO TREAT THE ENTIRE P URCHASES AS BOGUS AND ADD BACK THE SAME AS INCOME U/S 69C OF 1961 ACT. THE A SSESSEE RELIED UPON SEVERAL CASE LAWS WHICH ARE ENUMERATED IN PAGE 10 & 11 OF THE ASSESSMENT ORDER. THE ASSESSEE HAS ALSO SOUGHT CROSS EXAMINAT ION OF THE PARTIES WHO HAVE GIVEN STATEMENT AGAINST THE ASSESSEE. THE ASS ESSEE WAS ALSO ISSUED A FRESH SHOW CAUSE LETTER DATED 19.09.2014, WHEREBY T HE ASSESSEE WAS SPECIFICALLY ASKED TO PRODUCE ORIGINAL BILLS AND VO UCHERS, ALL ORIGINAL DOCUMENTARY EVIDENCE OF MOVEMENT OF GOODS FOR VERIF ICATION, DETAILS AND DOCUMENTARY EVIDENCE OF DELIVERY CHALLANS, VEHICLE NUMBERS, WEIGHMENT SLIPS, DETAILS OF GODOWNS, DETAILS OF OCTROI PAYMENT ETC. . HOWEVER, THE ASSESSEE DID NOT PRODUCE THE ORIGINAL DOCUMENTS BEFORE THE A.O. . THE ASSESSEE ALSO DID NOT FILE DOCUMENTS FOR SHOWING MOVEMENT OF GOOD S FROM SUPPLIER TO ASSESSEE AND FROM ASSESSEE TO CUSTOMER AS EVIDENCE ALTHOUGH IT STATED IN ITS REPLY THAT SAID DOCUMENTS ARE BEING FILED. THE ASSESSEE IN NUTSHELL SUBMITTED THAT A MERE AFFIDAVIT FILED BY A PERSON C ANNOT IN ITSELF BE AN EVIDENCE. IT WAS SUBMITTED THAT THE ASSESSEE WAS V ICTIMIZED FOR THE FAULT OF THE OTHER PARTIES. THE SALES WERE NOT DISPUTED BY T HE REVENUE AS WITHOUT A PURCHASE HOW THERE CAN BE SALES. IT WAS SUBMITTED T HAT THERE WAS NO CASH DEPOSIT IN THE BANK AND THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE TO SELLING PARTIES BY ACCOUNT PAYEE CHEQUES. IT WAS A LSO SUBMITTED THAT ALL PURCHASE AND SALE TRANSACTIONS ARE SUPPORTED BY TAX INVOICE , DELIVERY CHALLANS , LORRY RECEIPTS ETC.. THE ASSESSEE SUBMIT TED THAT NOTICE U/S 133(6) OF THE ACT RETURNED BACK DUE TO CHANGE IN THE ADDRE SS AND ALSO THERE IS A FIVE YEAR GAP BETWEEN THE DATE WHEN TRANSACTIONS TOOK PL ACE AND THE TIME WHEN NOTICE U/S 133(6) OF 1961 ACT WAS ISSUED. THE A.O. , HOWEVER, REJECTED THE ITA 4463/MUM/2016 8 CONTENTIONS OF THE ASSESSEE AND OBSERVED THAT M/S R ANAKPUR SALES CORPORATIONS HAS CATEGORICALLY STATED THAT THEY HAV E NOT SUPPLIED ANY MATERIAL TO THE ASSESSEE COMPANY. THE AO OBSERVED THAT THE ASSESSEE DID NOT ASKED FOR CROSS EXAMINATION OF RANAKPUR SALES C ORPORATION AND RATHER IGNORED ADVERSE FINDINGS GIVEN BY RANAKPUR S ALES CORPORATION. THE ASSESSEE DID NOT SUBMITTED DOCUMENTARY EVIDENCE TO SHOW THAT THERE WAS MOVEMENT OF GOODS. THE AO OBSERVED THAT THE ASSESSEE FILED DELIVERY CHALLAN IN ONE CASE ONLY AND THAT TOO THER E WAS NO MENTION OF TRANSPORTATION DETAILS. IT WAS FURTHER OBSERVED THA T THE NOTICES ISSUED TO 28 PARTIES RETURNED UN-COMPLIED WITH. THE A.O. OBSERVED THAT THE AFFIDAVIT IS A VITAL PIECE OF EVIDENCE AND MORE SO A CORROBORATIVE EVIDENCE. THE STATEMENTS RECORDED BEFORE THE GOVERNMENT AUTHORITI ES FORM A SUBSTANTIAL CORROBORATIVE EVIDENCE. IT IS A CASE OF DEFAULT CO MMITTED THROUGH AN ORGANIZED SCAM TO DEFRAUD THE REVENUE IN A SYSTEMAT IC MANNER. THE A.O. OBSERVED THAT THE SALES WERE NOT DISPUTED, HOWEVER , AT THE SAME TIME IT IS A FACT ESTABLISHED THAT THE PURCHASES ARE NOT GENUINE AND THE PURCHASES HAVE NOT BEEN MADE FROM THE PARTIES MENTIONED IN THE SHO W CAUSE NOTICE RATHER THE GOODS WERE PURCHASED FROM LOCAL GREY MARKET WHE RE UNACCOUNTED GOODS ARE SOLD AT MUCH CHEAPER RATE. PAYMENT BY ACCOUNT P AYEE CHEQUE IN ITSELF DOES NOT MAKE ANY TRANSACTION SACROSANCT BECAUSE IN THE INSTANT CASE , CASH WAS WITHDRAWN AND RECEIVED BACK BY THE ASSESSEE AFT ER ADJUSTING THE COMMISSION. THE ASSESSEE HAS NOT FURNISHED ANY VITA L DOCUMENTS WHICH CAN PROVE MOVEMENT OF GOODS WHEREAS THE ASSESSEE WAS SP ECIFICALLY CALLED TO PRODUCE PARTICULAR OF TRANSPORTER, MEDIUM OF TRANSP ORT, DATE OF TRANSPORT, TRANSPORT VOUCHER, OCTROI POST RECORDS AND PAYMENT PARTICULARS, WARE HOUSES ETC. TO PROVE MOVEMENT OF GOODS FROM SUPPLIER TO TH E ASSESSEE AND FROM ASSESSEE TO CUSTOMER. THE ASSESSEE HAS STATED THAT DELIVERY CHALLANS AND LORRY RECEIPTS WERE SUBMITTED BUT NO SUCH DOCUMENTS HAVE BEEN FILED BY THE ASSESSEE. IT WAS OBSERVED BY THE AO THAT OUT OF 28 PARTIES, 2 7 PARTIES HAVE NOT RESPONDED TO NOTICES U/S 133(6) OF 1961 ACT ISSUED TO ITA 4463/MUM/2016 9 THEM . MOREOVER, THE ASSESSEE WAS ABSOLUTELY SILENT ABO UT M/S RANAKPUR SALES CORPORATIONS WHICH HAS COMPLETELY DENIED HAVI NG SUPPLIED ANY GOODS OR MATERIALS TO THE ASSESSEE COMPANY. THE ASSESSEE HAS NOT FURNISHED THE REQUIRED COMPLETE DETAILS, DOCUMENTS AND EVIDENCES. IT WAS OBSERVED THAT THE ASSESSEE HAS NOT SUBMITTED CONFIRMATIONS FROM T HESE PARTIES NOR TRANSPORTATION DETAILS OF THE MATERIAL PURPORTED TO BE PURCHASED FROM THESE SUPPLIERS WERE FURNISHED . THE ASSESSEE ALSO FAILED TO PRODUCE SUPPLIERS, TRANSPORTERS OR BROKERS BEFORE THE AO FO R VERIFICATION AND ENQUIRY. THE AO HELD THAT SINCE THE ASSESSEE HAD MADE SALES WHICH WERE DULY QUANTITATIVELY RECONCILED BY THE ASSESSEE WITH PURCHASES , THE AO HELD THAT PURCHASES WERE MADE BY THE ASSESSEE BUT THE SA ME WERE MADE AT LOW PRICE FROM GREY MARKET AND TO COVER DEFICIENCIES IN DOCUMENTS, INVOICES WERE OBTAINED FROM THESE 28 SUPPLIERS WHO ISSUED BOGUS B ILLS TO THE ASSESSEE WITHOUT SUPPLYING ANY MATERIAL. THUS, THE AO HELD T HAT THE ASSESSEE FAILED TO PROVE THE ONUS CAST UPON IT TO PROVE THAT PURCHASES TO THE TUNE OF RS. 2,39,83,261/- MADE BY THE ASSESSEE WERE GENUINE PUR CHASES , WHICH WERE HELD BY THE AO TO BE BOGUS PURCHASES AS NO MATERIAL WAS SUPPLIED TO THE ASSESSEE BY THESE SUPPLIERS WHICH MATERIAL IN-FACT WAS PURCHASED FROM GREY MARKET AT LOWER PRICE WHICH LED TO HIGHER MARGIN OF PROFITS WHICH NEED TO BE ESTIMATED AND ADDED TO THE INCOME OF THE ASSESSEE. THE AO RELIED UPON DECISION OF ITAT, AHMEDABAD IN THE CASE OF VIJAY PR OTEINS LIMITED V. ACIT (1996) 58 ITD 428(AHD.) AND OTHER DECISIONS. THUS, THE A.O. MADE GROSS PROFIT ADDITIONS @ 12.5% OVER THE TOTAL PURCHASES OF RS. 2 ,39,83,261/- WHICH WAS HELD TO BE NON-GENUINE , WHICH ADDITION CAME TO RS. 29,97,908/-, VIDE ASSESSMENT ORDER DATED 20-01-2015 PASSED BY LEARNED AO U/S 143(3) OF 1961 ACT. 5. AGGRIEVED BY THE ASSESSMENT ORDER DATED 20-1-201 5 PASSED BY THE A.O. U/S 143(3) OF 1961 ACT , THE ASSESSEE CARRIED THE M ATTER FURTHER BY FILING FIRST APPEAL BEFORE THE LD. CIT(A) WHO UPHELD THE ADDITIO N MADE BY THE A.O. AND ITA 4463/MUM/2016 10 DISMISSED THE APPEAL OF THE ASSESSEE VIDE APPELLATE ORDER DATED 30-03-2016 PASSED BY LEARNED CIT(A). THE LEARNED CIT(A) ALSO U PHELD THE RE-OPENING OF THE ASSESSMENT U/S 147 OF 1961 ACT , VIDE APPELLATE ORDER DATED 30-03-2016 PASSED BY LEARNED CIT(A). 6. AGGRIEVED BY THE APPELLATE ORDER DATED 30-03-201 6 PASSED BY LEARNED CIT(A), THE ASSESSEE FILED SECOND APPEAL BEFORE TH E TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUND NO. 3 IS WITH RESPECT TO CHALLENGING THE ADDITIONS MADE BY APPLYI NG GROSS PROFIT RATE OF 12.50% TO THE ALLEGED BOGUS PURCHASES TO THE TUNE O F RS.2,39,83,261/- AND GROUND NO. 4 IS WITH RESPECT TO CHALLENGE TO THE LE GALITY AND VALIDITY OF INITIATING PROCEEDING U/S 147 OF 1961 ACT BY ISSUIN G NOTICE U/S 148 OF 1961 ACT. THE LD. COUNSEL SUBMITTED THAT BASED UPON THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT THE REVENUE HAS REOPENED THE ASSESSMENT. THE GROUND NO . 1,2,5 AND 6 WERE NOT PRESSED BY THE ASS ESSEE AND WERE ALREADY DISMISSED BY US VIDE OUR ORDERS IN PRECEDING PARAS OF THIS ORDER. THE GROUND NO. 7 BEING GENERAL WAS ALSO DISPOSED OF ACCORDINGL Y AS IT DOES NOT REQUIRED SEPARATE ADJUDICATION. IT WAS SUBMITTED THAT ASSESSEE IS TRADER IN FERROUS AND NON-FERROUS METALS. THE GENESIS OF RE-OPENING WAS THAT THE SALES TAX DE PARTMENT CONDUCTED RAIDS ON THE VAT DEALERS WHO HAVE ALLEGEDLY ADMITTED IN T HEIR STATEMENTS/AFFIDAVITS THAT THEY WERE NOT INVOLVED IN ACTUAL DELIVERY OF G OODS AND HAD GIVEN ACCOMMODATION BILLS SHOWING THAT THEY HAVE SOLD THE GOODS WHEREIN ONLY PAPER INVOICE WAS ISSUED WHILE NO MATERIAL WAS DELI VERED . IT WAS SUBMITTED THAT ORIGINALLY NO SCRUTINY ASSESSMENT WAS FRAMED U /S 143(3) OF THE ACT WHILE THE RETURN OF INCOME WAS ONLY PROCESSED U/S 143(1) OF THE ACT. THE ASSESSMENT WAS RE-OPENED WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR BY ISSUE OF NOTICE U/S 148 OF 1961 ACT, DATED 25-03 -2014. IT IS SUBMITTED ITA 4463/MUM/2016 11 THAT NO INDEPENDENT ENQUIRY HAS BEEN MADE BY THE A. O. AND THE AO MERELY RELIED UPON THE INFORMATION RECEIVED FROM VAT DEPAR TMENT. ONLY AT THE FAG END OF THE PERIOD WHEN THE ASSESSMENT WAS GETTING T IME BARRED, THE ASSESSMENT WAS FRAMED. NO OPPORTUNITY WAS GRANTED TO THE ASSESSEE BEFORE FRAMING ASSESSMENT AND NO CROSS EXAMINATION WAS ALL OWED, WAS THE CONTENTION OF THE ASSESSEE BEFORE THE TRIBUNAL. TH E A.O. DID NOT DOUBT THE INVESTMENT MADE IN THE PURCHASES BY THE ASSESSEE . OUR ATTENTION WAS SPECIFICALLY DRAWN TO PAGE 16 OF THE ASSESSMENT ORD ER PASSED BY THE AO. THE ISSUE NOW IS WITH REGARD TO APPLICATION OF GP RATIO AS TO WHAT IS THE REASONABLE RATE OF GP RATIO TO BE APPLIED WHICH IS FAIR, REASONABLE, RATIONAL AND HONEST SO FAR AS ASSESSEE IS CONCERNED. THE A. O. HAS ESTIMATED GP RATIO OF 12.5% OF ALLEGED BOGUS PURCHASES WHILE NO CREDIT IS GIVEN FOR DECLARED GP RATIO. IT IS SUBMITTED THAT NOTICE U/S 133(6) OF 1 961 ACT WERE ISSUED BY THE AO TO ALL 28 PARTIES BUT THE SAME WERE UN-SERVED EX CEPT IN ONE CASE , WHEREIN THE SAID PARTY DEPOSED AGAINST THE ASSESSEE AND ADM ITTED THAT THEY WERE ENGAGED IN ACCOMMODATION ENTRIES AND HAVE ONLY PROV IDED ACCOMMODATION ENTRY TO THE ASSESSEE. THE SAID PARTY NAMELY RANAK PUR SALES CORPORATION , THUS, RESPONDED TO NOTICE U/S 133(6) OF THE ACT WHE REBY THEY CONFIRMED THAT THEY HAVE NOT SUPPLIED MATERIAL AND MERELY ISSUED I NVOICE WITHOUT SUPPLYING MATERIAL TO THE ASSESSEE AND ONLY PROVIDED ACCOMMOD ATION ENTRY TO THE ASSESSEE. THE LD. COUNSEL DREW OUR ATTENTION TO TH E ASSESSMENT ORDER PARA 3.4 AND 3.5 AND SUBMITTED THAT NO CROSS EXAMINATION WAS GRANTED TO THE ASSESSEE. OUR ATTENTION WAS ALSO DRAWN TO PARA 3.10 AND 3.11 OF THE ASSESSMENT ORDER. THE ASSESSEE RELIED UPON DECISION OF J H METAL V. ITO REPORTED IN (2001) 71 TTJ 0683(ASR.TRIB.) THE LD. C OUNSEL SUBMITTED THAT THE ASSESSEE HAS DECLARED FOLLOWING GP RATIO FOR LAST THREE YEARS: FINANCIAL YEAR % GP 2007-08 4.3% 2008-09 5.45% ITA 4463/MUM/2016 12 2009-10 4.9% 8. THE LD. D.R. SUBMITTED THAT LOCAL ENQUIRIES WER E MADE BY THE A.O. AND NOTICE U/S 133(6) WAS ISSUED TO ALL THE 28 PARTIES AND IT IS WRONG TO STATE THAT NO ENQUIRIES WERE MADE BY THE A.O. AS STATED BY THE LD. COUNSEL FOR THE ASSESSEE. IT WAS SUBMITTED THAT 27 NOTICES RETURNED UN-SERVED OR WERE NOT REPLIED WITH . ONLY ONE PARTY NAMELY RANAKPUR SALES CORPORATION RESPONDED AND DEPOSED AGAINST THE ASSESSEE. INCRIMINATING INF ORMATION WAS RECEIVED FROM SALES TAX AUTHORITIES AND SUBSEQUENT TO THAT S TATEMENT ON OATH WAS RECORDED OF THESE DEALERS BY SALES TAX AUTHORITIES IN THE FORM OF AFFIDAVITS/STATEMENTS WHEREIN IT WAS CONFIRMED BY THESE PARTIES THAT THEY ARE INDULGING IN ISSUING BOGUS ACCOMMODATION ENTRIES BE ING HAWALA TRANSACTIONS WHEREIN ONLY INVOICES WERE ISSUED WHILE NO MATERIAL WAS SUPPLIED . THE DETAILED MOVEMENT OF TRANSPORTATION OF MATERIAL WAS NOT FURNISHED BY THE ASSESSEE. THE LD. D.R. RELIED UPON THE DECISION IN THE CASE OF VIJAY PROTEINS LTD. V. CIT (2015] 58 TAXMANN.COM 44 (GUJ) WHEREIN HONBLE GUJARAT HIGH COURT AFFIRMED THE ADDITIONS TO THE TUNE OF GP RATE OF 12.5%. 9. THE LD. COUNSEL FOR THE ASSESSEE, IN THE REJOIN DER, RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF M.M. RATNAM V. ITO IN ITA NO. 540/MUM/1996 FOR A.Y. 1989-90 AND SUBMITTED THAT TH E ASSESSMENT CANNOT BE RE-OPENED. THE A.O. HAS ADMITTED THAT THE INVEST MENT IN PURCHASES WERE NOT DOUBTFUL AND HENCE THERE IS NO QUESTION OF APPL YING SECTION 69C OF 1961 ACT AS THE SOURCE IS ACCEPTED. THE LD. COUNSEL ALS O SUBMITTED THAT WRITTEN SUBMISSIONS ARE PLACED BEFORE THE TRIBUNAL WHICH SH OULD BE CONSIDERED BY TRIBUNAL. THE LD. COUNSEL FOR ASSESSEE ALSO RELIED UPON THE DECISIONS AS SUBMITTED IN CASE LAWS /PAPER BOOK PLACED IN FILE B UR SPECIFICALLY OUR ATTENTION WAS DRAWN TO FOLLOWING CASE LAWS:- 1. SIGNATURE HOTELS (P) LTD. V. ITO (2011) 338 ITR 005 1 (DELHI HC) ITA 4463/MUM/2016 13 2. EVEREADY INDUSTRIES INDIA LIMITED V. JCIT (2000) 24 3 ITR 0540(GAU. HC) 3. VARSHABEN SANATBHAI PATEL V. ITO, SPECIAL CIVIL APP LICATION NO. 12873 , 12875 OF 2014, ORDERS DATED 13/10/2015(2015) 282 CT R 00705(GUJ.HC) 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAR EFULLY GONE THROUGH THE CASE LAWS RELIED UPON BY THE BOTH PARTIES AS WELL W RITTEN SUBMISSIONS FILED BY THE ASSESSEE. WE HAVE OBSERVED THAT THE ASSESSEE IS ENGAGED IN TH E BUSINESS AS SUPPLIER IN FERROUS AND NON-FERROUS METALS. WE FIND THAT THE ASSESSEE FILED ITS RETURN OF INCO ME WITH REVENUE ON 25 TH SEPTEMBER, 2009 WHICH WAS PROCESSED BY THE REVENUE U/S 143(1) OF THE ACT ON 24 TH JANUARY, 2011. THUS, NO SCRUTINY ASSESSMENT U/S 1 43(3) R.W.S. 143(2) OF 1961 ACT WAS FRAMED BY REVENUE WHILE ORIG INALLY PROCESSING RETURN OF INCOME WHICH WAS PROCESSED U/S 143(1) OF 1961 AC T. THE CASE OF THE ASSESSEE WAS RE-OPENED BY THE AO U/S 147 OF 1961 AC T BY ISSUE OF NOTICE DATED 25.03.2014 U/S 148 OF 1961 ACT, WHICH WAS RE- OPENED WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR. THE REASONS FOR RE-OPENING WERE RECORDED BY THE AO PRIOR TO THE RE-OPENING OF THE A SSESSMENT BY THE REVENUE, WHICH WERE SUPPLIED TO THE ASSESSEE AND THE ASSESSE E OBJECTED TO THE REASONS SO RECORDED VIDE LETTER DATED 02-06-2014 , WHICH OB JECTIONS WERE DISPOSED OF BY REVENUE IN JUNE 2014 ITSELF . THEREAFTER , THE A SSESSMENT WAS FRAMED BY THE REVENUE U/S 143(3) R.W.S. 147 OF 1961 ACT VIDE ASSESSMENT ORDER DATED 20-01-2015. THIS IS THE BACKGROUND OF THE CASE WHIC H IS UNDISPUTED BETWEEN THE RIVAL PARTIES. ITA 4463/MUM/2016 14 THE GENESIS OF THE CASE IS THE INFORMATION WHICH WA S RECEIVED BY THE A.O. FROM DGIT (INV.), MUMBAI THAT THERE ARE SOME PARTIE S WHO WERE ENGAGED IN HAWALA TRANSACTIONS AND ARE INVOLVED IN ISSUING BOG US BILLS FOR SALE OF MATERIAL WITHOUT DELIVERY OF GOODS, WHICH INFORMATI ON WAS BASED ON INFORMATION RECEIVED BY REVENUE FROM MAHARASHTRA SA LES TAX AUTHORITIES THAT THE ASSESSEE IS BENEFICIARY OF HAWALA/ACCOMMODATION ENTRIES FROM 28 ENTRY PROVIDERS TO THE TUNE OF RS. 2,39,83,261/- BY WAY O F BOGUS PURCHASES . THE ACCOMMODATION ENTRY PROVIDERS HAD DEPOSED AND ADMIT TED BEFORE THE MAHARASHTRA SALES TAX AUTHORITIES VIDE STATEMENT/AF FIDAVITS THAT THEY WERE ENGAGED IN PROVIDING BOGUS ACCOMMODATION ENTRIES WH ERE IN BOGUS SALE BILLS WERE ISSUED WITHOUT DELIVERY OF GOODS , IN CONSIDER ATION FOR COMMISSION. THESE ACCOMMODATION ENTRY PROVIDERS , ON RECEIPT OF CHEQUES FROM THE PARTIES AGAINST BOGUS BILLS FOR SALE OF MATERIAL , LATER ON WITHDREW CASH FROM THEIR BANK ACCOUNTS WHICH WAS RETURNED TO BENEFICI ARIES OF BOGUS BILLS AFTER DEDUCTION OF THEIR AGREED COMMISSION . THE ASSESSEE WAS STATED TO BE ONE OF THE BENEFICIARIES OF THESE BOGUS ENTRIES OF PURCHAS E OF MATERIAL FROM THESE 28 HAWALA ENTRY OPERATORS IN FAVOUR OF THE ASSESSEE TO THE TUNE OF RS.2,39,83,261/- , WHEREIN THE ASSESSEE MADE ALLEGE D BOGUS PURCHASES TO THE TUNE OF RS.2,39,83,261/- THROUGH THESE BOGUS BILLS ISSUED BY HAWALA ENTRY PROVIDERS IN FAVOUR OF THE ASSESSEE. THESE DEALERS WERE SURVEYED BY THE SALES TAX INVESTIGATION DEPARTMENT WHEREBY THE DIRECTORS OF THESE DEALERS HAVE ADMITTED IN A DEPOSITION VIDE STATEMENTS/AFFIDAVITS MADE BEFORE THE SALES TAX DEPARTMENT THAT THEY WERE INVOLVED IN ISSUING BOGUS PURCHASE BILLS WITHOUT DELIVERY OF ANY MATERIAL. THERE IS A LIST OF 28 SU CH PARTIES WHEREIN THE ASSESSEE IS STATED TO BE BENEFICIARY OF BOGUS PURCH ASE BILLS TO THE TUNE OF RS.2,39,83,261/-. THUS, TANGIBLE AND MATERIAL INCRI MINATING INFORMATION WAS RECEIVED BY THE AO WHICH CLEARLY INDICTED ASSESSEE TO BE BENEFICIARY OF BOGUS PURCHASE ENTRIES TO THE TUNE OF RS. 2,39,83,261/- F ROM 28 BOGUS ENTRY PROVIDERS WHICH FORMED THE REASONS TO BELIEVE BY TH E AO IN FORMING AN OPINION THAT INCOME HAS ESCAPED ASSESSMENT AND THE INFORMATION SO RECEIVED ITA 4463/MUM/2016 15 BY THE AO HAS LIVE LINK WITH REASONS TO BELIEVE THA T INCOME HAS ESCAPED ASSESSMENT, WHEREIN THE REVENUE RECORDED REASONS TO BELIEVE BASED ON AFORE- STATED INCRIMINATING TANGIBLE AND MATERIAL INFORMAT ION INDICTING ASSESSEE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND THE ASSESSMENT NEED TO BE RE-OPENED U/S 147 OF 1961 ACT BASED ON SUCH MATE RIAL AND TANGIBLE INCRIMINATING INFORMATION INDICTING ASSESSEE. AT TH IS STAGE THERE HAS TO BE A PRIMA-FACIE BELIEF BASED ON SOME TANGIBLE AND MATER IAL INFORMATION ABOUT ESCAPEMENT OF INCOME AND THE SAME IS NOT REQUIRED T O BE PROVED TO THE HILT. THUS, AT THIS STAGE , THERE HAS TO BE PRIMA-FACIE S ATISFACTION OF THE AO BASED ON TANGIBLE AND MATERIAL INCRIMINATING INFORMATION IN HIS POSSESSION LEADING TO REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE H AS ESCAPED ASSESSMENT . THAT IS IN A SUBSEQUENT STAGE WHEN ASSESSMENT IS BE ING FRAMED U/S 143(3) R.W.S. 147 OF 1961 WHERE NECESSARY AND DETAILED OPP ORTUNITIES ARE REQUIRED TO BE GIVEN TO THE ASSESSEE FOR REBUTTAL BEFORE FASTEN ING TAX LIABILITY AS PER SCHEME AND MANDATE OF 1961 ACT. IT IS TO BE NOTED A LSO THAT IN THE INSTANT CASE NO SCRUTINY ASSESSMENT U/S 143(3) R.W.S. 143(2 ) OF 1961 ACT WAS FRAMED ORIGINALLY BY THE REVENUE WHILE PROCESSING ASSESSEE S RETURN OF INCOME FILED WITH REVENUE . RETURN OF INCOME OF THE ASSESSEE WA S ORIGINALLY PROCESSED BY REVENUE U/S 143(1) OF THE ACT ONLY. THERE WAS , THU S, NO FORMATION OF OPINION AS INTIMATION U/S 143(1) OF 1961 ACT IS NOT AN ASSE SSMENT. THUS, THERE CANNOT BE A CHANGE OF OPINION AS NO OPINION WAS INI TIALLY FORMED BY THE AO AS RETURN WAS ORIGINALLY PROCESSED U/S 143(1) OF 1961 ACT 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 SAID THAT NO TANGIBLE AND MAT ERIAL INCRIMINATING MATERIAL WAS RECEIVED BY THE A.O. , RATHER IT IS O NLY AFTER RECEIPT OF TANGIBLE AND MATERIAL INCRIMINATING MATERIAL BY THE AO FROM DGIT(INV) INCRIMINATING ASSESSEE AS DETAILED ABOVE , THE ASSESSMENT WAS RE OPENED U/S 147 OF THE ACT BASED ON SUCH TANGIBLE AND MATERIAL INCRIMINATING I NFORMATION , AND NOTICES U/S 148 WAS ISSUED BY THE AO ON 25 TH MARCH, 2014, WHICH IS ISSUED WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. TH US, IT CANNOT BE SAID THAT ITA 4463/MUM/2016 16 THE REVENUE HAS REOPENED THE ASSESSMENT BASED UPON SUSPICION RATHER GENESIS OF RE-OPENING IS INCRIMINATING INFORMATION RECEIVED FROM DGIT(INV), MUMBAI BASED ON INFORMATION RECEIVED FROM MAHARASHT RA SALES TAX DEPARTMENT WHEREIN BOGUS ACCOMMODATION ENTRY PROVID ERS HAVE DEPOSED AND ADMITTED BEFORE SALES TAX AUTHORITIES THAT THEY ARE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES WHEREIN ONLY BOGUS BILLS WERE ISSUED FOR SALE OF MATERIAL IN LIEU OF COMMISSION WHEREIN NO MATERIAL IS ACTUALLY SUPPLIED BY THESE ACCOMMODATION ENTRY AND THE CHEQUE AMOUNT WAS RETURNED BACK TO THE BENEFICIARIES IN CASH AFTER DEDUCTING THEIR COMMISS IONS. THE ASSESSEE IS STATED TO BE BENEFICIARY IN THE SAID LIST OF HAVING ALLEGEDLY RECEIVED ENTRIES FROM 28 BOGUS ACCOMMODATION ENTRY PROVIDERS TO THE TUNE OF RS. 2,39,83,261/-. THE ORIGINAL RETURN WAS PROCESSED U/ S 143(1) OF THE ACT, AND THUS NO OPINION WAS FORMED AND HENCE THERE IS NO C HANGE OF OPINION. RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPRE ME 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 UNDE R : 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 3 1, 1989, AFTER A RETURN OF INCOME WAS FILED THE ASSESSING OFFICER CO ULD MAKE AN ASSESSMENT UNDER SECTION 143(1) WITHOUT REQUIRING T HE PRESENCE OF THE ASSESSEE OR THE PRODUCTION BY HIM OF ANY EVIDENCE I N SUPPORT OF THE RETURN. WHERE THE ASSESSEE OBJECTED TO SUCH AN ASSE SSMENT OR WHERE THE OFFICER WAS OF THE OPINION THAT THE ASSESSMENT WAS INCORRECT OR INCOMPLETE OR THE OFFICER DID NOT COMPLETE THE ASSE SSMENT UNDER SECTION 143(1), BUT WANTED TO MAKE AN INQUIRY, A NOTICE UND ER SECTION 143(2) WAS REQUIRED TO BE ISSUED TO THE ASSESSEE REQUIRING HIM TO PRODUCE EVIDENCE IN SUPPORT OF HIS RETURN. AFTER CONSIDERIN G THE MATERIAL 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 MATE RIAL CHANGES. A NEW SCHEME WAS INTRODUCED AND THE NEW SUBSTITUTED S ECTION 143(1) PRIOR TO THE SUBSEQUENT SUBSTITUTION WITH EFFECT FR OM 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 SECTION 142(1) , AND ANY TAX OR REFUND WAS FOUND DUE ON THE BASIS OF SUCH RETURN AF TER ADJUSTMENT OF ITA 4463/MUM/2016 17 TAX DEDUCTED AT SOURCE, ANY ADVANCE TAX OR ANY AMOU NT 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 SO PAYABLE AND SUCH INTIMATION WAS DEEMED TO BE A NOTI CE OF DEMAND ISSUED UNDER SECTION 156. THE FIRST PROVISO TO SECT ION 143(1)(A) ALLOWED THE DEPARTMENT TO MAKE CERTAIN ADJUSTMENTS IN THE I NCOME 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 R ELIEF 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 ARITHMETICAL ER RORS IN THE RETURN, ACCOUNTS OR DOCUMENTS ACCOMPANYING THE RETURN, (II) LOSS CARRIED FORWARD, DEDUCTION ALLOWANCE OR RELIEF, WHICH WAS P RIMA FACIE ADMISSIBLE ON THE BASIS OF INFORMATION AVAILA BLE IN THE RETURN BUT NOT CLAIMED IN THE RETURN AND SIMILARLY (III) THOSE CLAIMS WHICH WERE ON THE BASIS OF THE INFORMATION AVAILABLE IN THE RETUR N, PRIMA FACIE INADMISSIBLE, WERE TO BE RECTIFIED/ALLOWED/DI SALLOWED. WHAT WAS PERMISSIBLE WAS CORRECTION OF ERRORS APPARENT ON TH E BASIS OF THE DOCUMENTS ACCOMPANYING THE RETURN. THE ASSESSING OF FICER HAD NO AUTHORITY TO MAKE ADJUSTMENTS OR ADJUDICATE UPON AN Y DEBATABLE ISSUES. IN OTHER WORDS, THE ASSESSING OFFICER HAD N O POWER TO GO BEHIND THE RETURN, ACCOUNTS OR DOCUMENTS, EITHER IN ALLOWI NG OR 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 WAS DEEMED TO BE A DEMAND NOTICE ISSUED UNDER SECTION 156, THAT DID NOT PER S E PRECLUDE THE RIGHT OF THE ASSESSING OFFICER TO PROCEED UNDER SECTION 143( 2). THAT RIGHT IS PRESERVED AND IS NOT TAKEN AWAY. BETWEEN THE PERIOD FROM 1-4-1989 TO ITA 4463/MUM/2016 18 31-3-1998, THE SECOND PROVISO TO SECTION 143(1)(A), REQUIRED THAT WHERE ADJUSTMENTS WERE MADE UNDER THE FIRST PROVISO TO SE CTION 143(1)(A), AN INTIMATION HAD TO BE SENT TO THE ASSESSEE NOTWITHST ANDING THAT NO TAX OR REFUND WAS DUE FROM HIM AFTER MAKING SUCH ADJUSTMEN TS. 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 1-6-1999. 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 I NTEREST WAS FOUND DUE FROM THE ASSESSEE CONCERNED. BETWEEN 1-4-1998 A ND 31-5-1999, SENDING OF AN INTIMATION UNDER SECTION 143(1)(A) WA S MANDATORY. THUS, THE LEGISLATIVE INTENT IS VERY CLEAR FROM THE USE O F THE WORD 'INTIMATION' AS SUBSTITUTED FOR 'ASSESSMENT' THAT TWO DIFFERENT CONCEPTS EMERGED. WHILE MAKING AN ASSESSMENT, THE ASSESSING OFFICER I S FREE TO MAKE ANY ADDITION AFTER 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 RETURN COULD BE MADE BY THE ASSESSING OFFICER. THE REASON IS THAT U NDER SECTION 143(1)(A) NO OPPORTUNITY IS GRANTED TO THE ASSESSEE AND THE ASSESSING 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 EXPLANATION T O SECTION 143 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 1-6-1999, BY TH E EXPLANATION AS INTRODUCED BY THE FINANCE (NO. 2) ACT OF 1991 AN IN TIMATION SENT TO THE ASSESSEE UNDER SECTION 143(1)(A) WAS DEEMED TO BE A N ORDER FOR THE PURPOSES OF SECTION 246 BETWEEN 1-6-1994, TO 31-5-1 999, AND UNDER SECTION 264 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 EXPRESSIONS 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 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 SECTION 143(1)(A) CANNO T BE TREATED TO BE AN ORDER OF ASSESSMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTORY PROVISIONS AS THEY STOOD AT DIFFERENT POINTS OF TIME. UNDER SECTION 143(1)(A) AS IT STOOD PRIOR TO 1-4-1989, TH E ASSESSING OFFICER HAD TO PASS AN ASSESSMENT ORDER IF HE DECIDED TO ACCEPT THE RETURN, BUT UNDER THE AMENDED PROVISION, THE REQUIREMENT OF PAS SING OF AN ITA 4463/MUM/2016 19 ASSESSMENT ORDER HAS BEEN DISPENSED WITH AND INSTEA D AN INTIMATION IS 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 WORK TO SCRUTINIZE EACH AND EVERY RETU RN 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 SUBSTITUT ED SECTION 143(1), WITH EFFECT FROM 1-6-1999, EXCEPT AS PROVIDED IN THE PRO VISION ITSELF, THE ACKNOWLEDGEMENT OF THE RETURN SHALL BE DEEMED TO BE AN INTIMATION UNDER SECTION 143(1) WHERE (A) EITHER NO SUM IS PAY ABLE BY THE ASSESSEE, OR (B) NO REFUND IS DUE TO HIM. IT IS SIG NIFICANT THAT THE ACKNOWLEDGEMENT IS NOT DONE BY ANY ASSESSING OFFICE R, BUT MOSTLY BY MINISTERIAL STAFF. CAN IT BE SAID THAT ANY 'ASSESSM ENT' 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 1 56, FOR THE APPARENT PURPOSE OF MAKING MACHINERY PROVISIONS REL ATING TO RECOVERY OF TAX APPLICABLE. BY SUCH APPLICATION ONLY RECOVERY I NDICATED TO BE PAYABLE IN THE INTIMATION BECAME PERMISSIBLE. AND N OTHING 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 POSITION. PRI OR TO THE SUBSTITUTION BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, THE P ROVISION 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. (2) THE ASSESSING OFFICER SHALL, BEFORE ISSUING ANY NOTICE UNDER THIS SECTION, RECORD HIS REASONS FOR DOING 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 ITA 4463/MUM/2016 20 (A) THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT, B Y REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSES SEE 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 CHARG EABLE 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 LOS S OR THE DEPRECIATION ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN SECTIONS 14 8 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 ASSES SED; 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 DISCOVERED BY TH E ASSESSING OFFICER WILL NOT NECES-SARILY AMOUNT TO D ISCLOSURE WITHIN THE MEANING OF THIS SECTION.' 16. SECTION 147 AUTHORISES AND PERMITS THE ASSESSING O FFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE H AS REASON TO ITA 4463/MUM/2016 21 BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESC APED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCO ME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON T O BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSI ON CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER S HOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINI STER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUE R WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE S UPREME COURT 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 CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON T O BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOM E. 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. WHETHER THE MATERIA LS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCER N AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF B Y 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 SUBS TANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR T O SUCH SUBSTITUTION. UNDER THE OLD PROVISIONS OF SECTION 1 47, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UND ER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JURISDICTION U NDER SECTION 147(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED FIRSTLY THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHARGEABLE TO INCOME TAX HAVE ESCAPED ASSE SSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT S UCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER (I) OMI SSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TR ULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BO TH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIE D BEFORE THE ITA 4463/MUM/2016 22 ASSESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION S UFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER FOR WHATEVER R EASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. IT I S HOWEVER TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFIL LED IF THE CASE FALLS WITHIN THE AMBIT OF THE PROVISO TO SECTI ON 147. THE CASE AT HAND IS COVERED BY THE MAIN PROVISION A ND NOT THE PROVISO. 18. SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULF ILLED, THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDING UN DER SECTION 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMEN T 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 APP LICATION TO THE CASE ON THE FACTS IN VIEW OF THE CONCEPTUAL DIFFERE NCE BETWEEN SECTION 143(1) AND SECTION 143(3) OF THE ACT. 20. LEARNED COUNSEL FOR THE RESPONDENT SUBMITTED THAT OTHER POINTS ARE AVAILABLE TO BE RAISED. SINCE NO OTHER POINT WA S URGED BEFORE THE HIGH COURT, WE FIND NO REASON TO EXAMINE IF ANY OTHER POINT WAS AVAILABLE. THE APPEAL IS ALLOWED WITHOUT ANY OR DERS 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 IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED(SUPRA) IS DIRECTLY AND SQUA RELY APPLICABLE TO THE FACTS OF THE INSTANT CASE, AS IN THE INSTANT CASE ALSO NO ASSESSMENT WAS ORIGINALLY FRAMED U/S 143(2) R.WS. 143(3) OF 1961 ACT WHILE TH E RETURN OF INCOME WAS ORIGINALLY PROCESSED U/S 143(1) OF 1961 ACT , AND H ENCE NO OPINION 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 QUESTION OF CHA NGE OF OPINION IN THE ITA 4463/MUM/2016 23 INSTANT CASE. THE RE-OPENING WAS ALSO DONE WITHIN F OUR 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 INCRIM INATING INFORMATION FROM DGIT(INV) , MUMBAI WHICH WAS BASED ON INCRIMINATING INFORMATION RECEIVED FROM SALES TAX DEPARTMENT WHICH WE HAVE DETAILED IN PRECEDING PARAS AND IT WAS REFLECTED IN SAID INCRIMINATING INFORMATION THA T THE ASSESSEE WAS BENEFICIARY OF BOGUS ACCOMMODATION ENTRY TO THE TUN E OF RS. 2,39,83,261/- FROM 28 HAWALA DEALERS, WHICH INFORMATION IS A TANG IBLE AND MATERIAL INFORMATION SUFFICIENT FOR THE PURPOSES OF RE-OPENI NG OF THE ASSESSMENT IN THE INSTANT CASE AS THE SAID RE-OPENING IS DONE BY THE AO WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND NO SCRUTINY ASSE SSMENT U/S 143(3) R.W.S. 143(2) OF 1961 ACT WAS FRAMED ORIGINALLY BY REVENUE , THUS, CONSEQUENTLY FIRST PROVISO TO SECTION 147 OF 1961 ACT WAS NOT APPLICAB LE IN THE INSTANT 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 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 INCOME WAS INCIDENTAL LY ALSO NOT SCRUTINIZED BY THE REVENUE. THE INCRIMINATING INFORMATION SO RECEI VED BY THE AO IN THE INSTANT CASE WHICH BECAME FOUNDATION FOR RE-OPENING OF THE ASSESSMENT WAS SUFFICIENT TO FORM REASONS TO BELIEVE BY THE AO THA T INCOME HAS ESCAPED ASSESSMENT, AS THE ASSESSEE WAS SPECIFICALLY INCRIM INATED IN THE SAID INFORMATION HAVING RECEIVED BOGUS ACCOMMODATION ENT RIES FOR PURCHASES TO THE TUNE OF RS. 2,39,83,261/- FROM 28 BOGUS ENTRY P ROVIDERS BEING HAWALA TRADERS PROVIDING ACCOMMODATION PURCHASE BILLS WITH OUT ACTUAL DELIVERY OF MATERIAL . IN SUCH SITUATIONS, IT IS NOT A CASE OF MERE CHANGE OF OPINION OR THE DRAWING OF A DIFFERENT INFERENCE FROM THE SAME FACT S AS WERE EARLIER AVAILABLE BUT ACTING ON FRESH INFORMATION EXPOSING UN-TRUTHFU LNESS 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 IS ITA 4463/MUM/2016 24 SATISFIED THAT REASONABLE GROUND EXISTS TO BELIEVE, THEN IN THAT CASE THE POWER OF THE ASSESSING AUTHORITY EXTENDS TO RE-OPENING OF ASSESSMENT, WHICH IN THE INSTANT CASE THE CONDITIONS ARE DULY MET FOR RE-OPE NING BASED ON FACTUAL MATRIX OF THE CASE. THE TANGIBLE AND MATERIAL INCRI MINATING INFORMATION SO RECEIVED BY THE AO FROM DGIT(INV.), MUMBAI WHICH IN TURN WAS BASED ON INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX AUT HORITIES INCRIMINATING ASSESSEE TO BE BENEFICIARY OF HAWALA TRANSACTIONS B EING RECIPIENT OF BOGUS ACCOMMODATION ENTRIES FROM 28 ENTRY OPERATORS TO TH E TUNE OF RS.2,39,83,261/- WHICH IS BASED ON DEPOSITION AND A DMISSION OF THESE ENTRY PROVIDERS BEFORE OTHER GOVERNMENT AUTHORITY BEING M AHARASHTRA VAT AUTHORITIES IS SO OBVIOUS THAT TO SAY THAT THE AO H AS NOT APPLIED HIS MIND TO REACH SATISFACTION IN FORMING REASONS TO BELIEVE TH AT INCOME OF ASSESSEE HAS ESCAPED ASSESSMENT TO INITIATE RE-OPENING U/S 147 O F 1961 , IS TOO FAR-FETCHED AND SUCH CONTENTION 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 TO BELIEVE THAT I NCOME OF THE ASSESSE HAS ESCAPED ASSESSMENT IN THE INSTANT CASE UNDER APPEAL BEFORE US. THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF VARSHA BEN SANATBHAI PATEL V. ITO (SUPRA) RELIED UPON BY THE ASSESSEE IS DISTINGU ISHABLE WHEREIN THE AO RECORDED REASONS THAT REOPENING WAS DONE BASED ON THE VERIFICATION OF DETAILS AVAILABLE ON RECORDS WHILE IN-FACT INFORMATION WAS RECEIVED FROM DGIT(INV), MUMBAI ABOUT BOGUS PURCHASES WHICH HAD NO RELATION WITH REASONS RECORDED AND THE AO BASED ON MATERIAL ON RECORD COULD NOT HA VE FORMED AN OPINION THAT THE INCOME HAS ESCAPED ASSESSMENT, WHILE IN TH E INSTANT CASE BEFORE THE TRIBUNAL REASONS WERE RECORDED BASED ON INFORMATION RECEIVED FROM DGIT(INV), MUMBAI W.R.T. ASSESSEE UN-HOLY INVOLVEMENT WITH 28 BOGUS ENTRY PROVIDERS WHEREIN THE ASSESSEE IS BENEFICIARY OF BOGUS ENTRIE S OF PURCHASES TO THE TUNE OF RS.2,39,83,261/-. THE COURT IN THE CASE OF VARS HABEN SANATBHAI PATEL( SUPRA) HELD THAT REASONS RECORDED CANNOT BE SUPPLEM ENTED IN THE AFFIDAVIT OR BY THE ORDER REJECTING THE OBJECTIONS , WHICH IS NO T THE CASE IN THE INSTANT ITA 4463/MUM/2016 25 APPEAL. THE OTHER DECISIONS RELIED UPON BY THE ASSE SSEE ARE ALSO NOT APPLICABLE TO THE FACTS OF THIS CASE. IN THE CASE O F SIGNATURES HOTELS PRIVATE LIMITED(SUPRA), THE AO RECEIVED INFORMATION FROM DI T(INV.) THAT THE LOAN OF RS. 5 LACS RECEIVED BY THE ASSESSEE WAS ACCOMMODATION E NTRY BUT IT DID NOT SPECIFY ANY REFERENCE TO DOCUMENT OR STATEMENT ON T HE BASIS OF WHICH SUCH CONCLUSIONS WAS DRAWN THAT INCOME HAS ESCAPED ASSES SMENT , WHILE IN THE INSTANT CASE THERE IS AN INFORMATION RECEIVED FROM DGIT(INV.),MUMBAI WHICH IS BACKED WITH INFORMATION FROM MAHARASHTRA SALES T AX DEPARTMENT THAT THERE ARE 28 ENTITIES THROUGH WHOM ASSESSEE MADE BO GUS PURCHASES OF MATERIAL AS THESE ENTITIES WERE ENGAGED IN PROVIDIN G ACCOMMODATION ENTRIES ONLY WITHOUT SUPPLYING ANY MATERIAL, WHICH IN TURN WAS ALSO SUPPORTED BY DEPOSITIONS BY WAY OF AFFIDAVIT/STATEMENTS OF THES E 28 HAWALA ENTRY PROVIDERS. SIMILARLY , IN THE CASE OF EVEREADY INDU STRIES INDIA LIMITED(SUPRA), THE GENESIS OF THE ADDITIONS ARE THE STATEMENT OF A COMMON DIRECTOR THAT CERTAIN PAYMENTS MADE BY TAX-PAYER WERE ACCOMMODATI ON ENTRIES, WHILE THE RE-OPENING WAS DONE BY AO WHERE THERE WAS NO DEFINI TE OR SPECIFIC MATERIAL BEFORE THE AO TO COME TO CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT , WHILE IN THE INSTANT CASE BEFORE US THERE WERE DEFI NITE TANGIBLE AND MATERIAL INCRIMINATING INFORMATION BEFORE THE AO BASED ON IN FORMATION RECEIVED FROM THE DGIT(INV) , MUMBAI WHICH IS BACKED WITH INFORMA TION FROM MAHARASHTRA SALES TAX DEPARTMENT THAT THERE ARE 28 ENTITIES THR OUGH WHOM ASSESSEE MADE BOGUS PURCHASES OF MATERIAL AS THESE ENTITIES WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES ONLY WITHOUT SUPPLYING ANY MA TERIAL, WHICH IN TURN WAS ALSO SUPPORTED BY DEPOSITIONS BY WAY OF AFFIDA VIT/STATEMENTS OF THESE 28 HAWALA ENTRY PROVIDERS. WHILE, WE ARE CONSCIOUS THAT THE REASSESSMENT NOTIC E SHOULD NOT HAVE BEEN ROUTINELY ISSUED, AT THE SAME TIME, THE NATURE OF POWER IS WIDE ENOUGH THAT WHEN THERE IS AN ESCAPEMENT OF INCOME AND THE REVENUE HAS INFORMATION RULING THAT THIS ESCAPEMENT IS ALSO RELATABLE TO SUPPRESSION OF MATERIAL FACTS (WHICH COULD INCLUDE FALSE CLAIMS ), THE POWER TO REOPEN CONCLUDED ASSESSMENT CAN VALIDLY BE EXERCISED . THI S CONTENTION IS SUPPORTED ITA 4463/MUM/2016 26 BY DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT V. PARAMOUNT COMMUNICATION PRIVATE LIMITED (2017) 79 T AXMANN.COM 409(DELHI) . THUS, RESPECTFULLY FOLLOWING THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P RIVATE LIMITED(SUPRA), WE HOLD THAT RE-OPENING OF THE ASSESSMENT AS DONE IN T HE INSTANT CASE 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, REJECTED. NO CONTRARY DECISION OF HONBLE APEX COURT IS BROUGHT TO OUR NOTICE . THIS GROUND OF THE ASSESSEE CHALLENGING LEGALITY AND VALIDITY OF RE-OPENING IS HEREBY DISMISSED. WE ORDER ACCORDINGLY. 11. NOW, COMING TO THE MERITS OF THE CASE, WE HAVE OBSERVED THAT THE ASSESSEE IS DEALING IN THE BUSINESS AS SUPPLIER IN FERROUS AND NON-FERROUS. THE GENESIS OF THE CASE IS THE INFORMATION WHICH WA S RECEIVED BY THE A.O. FROM DGIT (INV.), MUMBAI THAT THERE ARE SOME PARTIE S WHO ARE ENGAGED IN HAWALA TRANSACTIONS AND ARE INVOLVED IN ISSUING BOG US BILLS FOR SALE OF MATERIAL WITHOUT DELIVERY OF GOODS, WHICH INFORMATI ON WAS BASED ON INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX AUT HORITIES THAT THE ASSESSEE IS BENEFICIARY OF HAWALA/ACCOMMODATION ENT RIES FOR BOGUS PURCHASES FROM 28 ENTRY PROVIDERS TO THE TUNE OF RS. 2,39,83, 261/- FROM THESE ACCOMMODATION ENTRY PROVIDERS . THE ACCOMMODATION ENTRY PROVIDERS HAD DEPOSED AND ADMITTED BEFORE THE MAHARASHTRA SALES T AX AUTHORITIES VIDE THEIR STATEMENT/AFFIDAVITS THAT THEY WERE ENGAGED IN PROV IDING BOGUS ACCOMMODATION ENTRIES WHERE IN BOGUS SALE BILLS WER E ISSUED WITHOUT DELIVERY OF GOODS , IN CONSIDERATION FOR COMMISSION. THESE ACCOMMODATION ENTRY PROVIDERS , ON RECEIPT OF CHEQUES FROM THE PARTIES AGAINST BOGUS BILLS FOR SALE OF MATERIAL , LATER ON WITHDREW CASH FROM THEIR B ANK ACCOUNTS WHICH WAS RETURNED TO BENEFICIARIES OF BOGUS BILLS AFTER DEDU CTION OF THEIR AGREED COMMISSION . THE ASSESSEE WAS STATED TO BE ONE OF T HE BENEFICIARIES OF THESE BOGUS ENTRIES OF SALE OF MATERIAL BY THESE 28 HAWAL A ENTRY OPERATORS IN FAVOUR ITA 4463/MUM/2016 27 OF THE ASSESSEE TO THE TUNE OF RS.2,39,83,261/- , W HEREIN THE ASSESSEE MADE ALLEGED BOGUS PURCHASES TO THE TUNE OF RS.2,39,83,2 61/- THROUGH THESE BOGUS BILLS ISSUED BY HAWALA ENTRY PROVIDERS IN FAVOUR OF THE ASSESSEE. THESE DEALERS WERE SURVEYED BY THE SALES TAX INVESTIGATIO N DEPARTMENT WHEREBY THE DIRECTORS OF THESE DEALERS HAVE ADMITTED IN A DEPOS ITION VIDE STATEMENTS/AFFIDAVITS MADE BEFORE THE SALES TAX DEP ARTMENT THAT THEY WERE INVOLVED IN ISSUING BOGUS PURCHASE BILLS WITHOUT DE LIVERY OF ANY MATERIAL. THERE IS A LIST OF 28 SUCH PARTIES WHEREIN THE ASSE SSEE IS STATED TO BE BENEFICIARY OF BOGUS PURCHASE BILLS TO THE TUNE OF RS.2,39,83,261/-. IT WAS OBSERVED BY AO THAT THESE PARTIES JUST ISSUE BOGUS BILLS IN LIEU FOR EARNING COMMISSION WITHOUT ACTUAL SUPPLY OF GOODS. IN AN SW ORN AFFIDAVIT CUM DECLARATION FILED BEFORE SALES TAX INVESTIGATION BR ANCH, MUMBAI AND IN DEPOSITION BEFORE THE ASSISTANT COMMISSIONER OF SAL ES TAX, INVESTIGATION BRANCH, MUMBAI ,THE DIRECTORS OF THE SAID 28 ENTITI ES HAVE ADMITTED OF ISSUING ONLY INVOICES FOR SAKE OF ENTRY WITHOUT DELIVERY O F GOODS. THE DIRECTORS OF THE SAID 28 ENTITIES STATED IN THEIR SWORN AFFIDAVIT T HAT THEY HAD ONLY SUPPLIED BILLS ON RECEIPT OF CHEQUES AND LATER ON CASH WAS W ITHDRAWN FROM BANKS AND AFTER DEDUCTION OF AGREED COMMISSION, BALANCE MONEY WAS RETURNED IN CASH TO THE ASSESSEE. THE DETAILS OF THE AFORESAID BOGUS PA RTIES FROM WHOM THE ASSESSEE IS STATED TO HAVE PURCHASED MATERIAL ARE A S UNDER:- ASHTAVINAYAK SALES AGENCY AFWPN2169J 2008-09 21,194 STELCO STEEL INDUSTRIES AFYPJ0025K 2008-09 371,948 RELIANT METAL CORPORATION ALAPR6303A 2008-09 468,667 PADMAVATI METAL &ALLOYS AFSPJ4124P 2008-09 556,674 JINESH METAL CORPORATION ARDPK1291P 2008-09 48,140 RATNAJYOTI METAL & TUBES PVT. LTD AADCR3441A 2008-09 135,742 ANIKET STEEL PVT. LTD. AAGCA0417J 2008-09 779,845 ITA 4463/MUM/2016 28 RELIABLE METAL (INDIA) AJNPD6596Q 2008-09 957,436 TYSON STEEL AND TUBES PRIVATE LIMITED AACCT9481B 2008-09 1,131,749 VIGNESHWAR IMPEX ARDPK1294J 2008-09 1,133,295 RISHAB METAL (INDIA) AACPJ6417C 2008-09 115,573 RAMANI METAL CORPORATION AIRPD5688A 2008-09 246,607 POOJA METAL & ALLOYS ACYPC4975E 2008-09 793,199 MAZDA STEEL TRADE PVT. LTD. AAECM1196L 2008-09 49,462 ARIHANT TRADE LINK BDRPS0342C 2008-09 320,881 TAMAS STEEL & ALLOYS PVT. LTD. AACCT1556F 2008-09 1,122,116 KANAK STEEL (INDIA) AFYPB6058G 2008-09 1,351,280 WEL STEEL (INDIA) AHZPD3657L 2008-09 2,651,855 TAKSHIL TRADING PVT. LTD. AABCT5406H 2008-09 112,829 RAJESHWARI TRADING PVT. LTD AACCR7829M 2008-09 2,569,340 RANAKPUR SALES CORPORATION BABPS6817D 2008-09 198,640 ELECON IMPEX PVT LTD AABCE6233E 2008-09 246,395 NAVRATAN METAL IMPEX AAIHM5090A 2008-09 256,513 PRIYA STEEL CORPN AKCPD1838M 2008-09 530,244 VANDNA METAL SYNDICATE AEWPJ3208B 2008-09 833,173 POOJA STEEL & ALLOYS ACSPC2231P 2008-09 1,369,290 NAVODAY TRADE IMPEX PVT LTD AACCN3641F 2008-09 2,024,972 VISHESH STEEL SUPPLIERS AXVPS3398H 2008-09 3,586,202 NOTICES U/S.133(6) OF THE ACT WERE ISSUED BY THE AO TO ALL THE ABOVE 28 PARTIES. ALL THESE NOTICES EXCEPT ONE NOTICE WERE E ITHER RETURNED UN-SERVED OR WERE NOT REPLIED TO. ONLY ONE PARTY NAMELY M/S RANA KPUR SALES CORPORATION, CATEGORICALLY STATED THAT THEY HAVE NOT SUPPLIED AN Y MATERIAL TO THE ASSESSEE CONCERN. THE A.O. ASKED THE ASSESSEE TO PRODUCE THE PARTIES BUT THE ASSESSEE ITA 4463/MUM/2016 29 FAILED TO PRODUCE THE PARTIES. THE PARTIES WERE NOT PRODUCE EVEN BEFORE LEARNED CIT(A) . THE ASSESSEE ALSO FAILED TO PRODUC E SUPPLIERS, TRANSPORTERS OR BROKERS BEFORE THE AO FOR VERIFICATION AND ENQUIRY. THE ASSESSEE DID NOT ASK FOR THE CROSS EXAMINATION OF RANAKPUR SALES CORPORA TION. THE ASSESSEE WAS SPECIFICALLY ASKED TO PRODUCE ORIGINAL BILLS AND VO UCHERS, ALL ORIGINAL DOCUMENTARY EVIDENCE OF MOVEMENT OF GOODS FOR VERIF ICATION, DETAILS AND DOCUMENTARY EVIDENCE OF DELIVERY CHALLANS, VEHICLE NUMBERS, WEIGHMENT SLIPS, DETAILS OF GODOWNS, DETAILS OF OCTROI PAYMENT ETC. . HOWEVER, THE ASSESSEE DID NOT PRODUCE THE ORIGINAL DOCUMENTS BEFORE THE A.O. . THE ASSESSEE ALSO DID NOT FILE DOCUMENTS FOR SHOWING MOVEMENT OF GOOD S FROM SUPPLIER TO ASSESSEE AND FROM ASSESSEE TO CUSTOMER AS EVIDENCE ALTHOUGH IT STATED IN ITS REPLY THAT SAID DOCUMENTS ARE BEING FILED. THE ASSESEE DID NOT SUBMITTED DOCUMENTARY EVIDENCE TO SHOW THAT THERE W AS MOVEMENT OF GOODS. THE AO OBSERVED THAT THE ASSESSEE FILED DELIVERY CH ALLAN IN ONE CASE ONLY AND THAT TOO THERE WAS NO MENTION OF TRANSPORTATION DET AILS. IT WAS OBSERVED THAT THE ASSESSEE HAS NOT SUBMITTED CONFIRMATIONS FROM T HESE PARTIES NOR TRANSPORTATION DETAILS OF THE MATERIAL PURPORTED TO BE PURCHASED FROM THESE SUPPLIERS WERE FURNISHED . STATEMENT OF PURCHASE A ND SALES SHOWING NAME OF THE SUPPLIER AND CUSTOMERS, DATE OF PURCHASE AND SA LES , QUANTITY PURCHASED AND SOLD TO SHOW ONE TO ONE CO-RELATION BETWEEN PUR CHASES AND SALES WERE SUBMITTED BY THE ASSESSEE BEFORE THE AO. THE ASSESS EE ALSO SUBMITTED VAT AUDIT REPORT. IT WAS SUBMITTED THAT SALES ARE FULLY VOUCHED AND WITHOUT PURCHASES, THERE CANNOT BE SALES AND HENCE ALL PURC HASES ARE GENUINE. THE STOCK REGISTER FOR FULL YEAR AND LEDGER COPY OF THE SUPPLIERS WERE ALSO SUBMITTED AND THE ASSESSEE WAS ABLE TO QUANTITATIVE LY RECONCILE THE SALE AND PURCHASE OF MATERIAL. THE ASSESSEE HAS ALSO MADE THE PAYMENTS FOR THESE PURCHASES THROUGH CHEQUE FOR WHICH EVIDENCE HAS BEE N PRODUCED. IT WAS SUBMITTED THAT THERE WAS NO CASH DEPOSIT IN THE BAN K AND THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE TO SELLING PARTIES BY ACC OUNT PAYEE CHEQUES. . IT WAS HELD BY AUTHORITIES BELOW THAT SINCE THE ASSESS EE HAD MADE SALES WHICH ITA 4463/MUM/2016 30 WERE DULY QUANTITATIVELY RECONCILED BY THE ASSESSEE WITH PURCHASES , THE PURCHASES WERE MADE BY THE ASSESSEE BUT THE SAME WE RE MADE AT LOW PRICE FROM GREY MARKET AND TO COVER DEFICIENCIES IN DOCUM ENTS, INVOICES WERE OBTAINED FROM THESE 28 SUPPLIERS WHO ISSUED BOGUS B ILLS TO THE ASSESSEE WITHOUT SUPPLYING ANY MATERIAL. THUS, THE AO HELD T HAT THE ASSESSEE FAILED TO PROVE THE ONUS CAST UPON IT TO PROVE THAT PURCHASES TO THE TUNE OF RS. 2,39,83,261/- MADE BY THE ASSESSEE WERE GENUINE PUR CHASES , WHICH WERE HELD BY THE AUTHORITIES BELOW TO BE BOGUS PURCHASES AS NO MATERIAL WAS SUPPLIED TO THE ASSESSEE BY THESE SUPPLIERS WHICH M ATERIAL IN-FACT WAS PURCHASED FROM GREY MARKET AT LOWER PRICE WHICH LED TO HIGHER MARGIN OF PROFITS WHICH NEED TO BE ESTIMATED AND ADDED TO THE INCOME OF THE ASSESSEE . THE LEARNED CIT(A) CONFIRMED THE ADDITIONS. THESE A RE INFORMATION WHICH ARE ESPECIALLY IN THE KNOWLEDGE OF THE ASSESSEE AND THE ONUS IS ON THE ASSESSEE TO PROVE THAT PURCHASES ARE GENUINE AS THESE PURCHASES ARE RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. SECTION 106 OF I NDIAN EVIDENCE ACT ,1872 CLEARLY STIPULATES 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 HIM. THE ASSESSEE WAS NOT ABLE TO DISCHARGE BURDEN CAST U/S 106 OF 1872 ACT AS THE ASSESSEE DID NOT PRODUCE THE ORIGINAL DOCUMENTS BEFORE THE A.O. . THE ASSESSEE ALSO DID NOT FILE DOCUMENTS FOR SHOWIN G MOVEMENT OF GOODS FROM SUPPLIER TO ASSESSEE AND FROM ASSESSEE TO CUST OM ER AS EVIDENCE ALTHOUGH IT STATED IN ITS REPLY THAT SAID DOCUMENTS ARE BEING FILED. THE ITA 4463/MUM/2016 31 ASSESEE DID NOT SUBMITTED DOCUMENTARY EVIDENCE TO S HOW THAT THERE WAS MOVEMENT OF GOODS. THE ASSESSEE FILED DELIVERY CHAL LAN IN ONE CASE ONLY AND THAT TOO THERE WAS NO MENTION OF TRANSPORTATION DET AILS. THE ASSESSEE DID NOT FILE CONFIRMATIONS FROM THESE PARTIES NOR TRANSPOR TATION DETAILS OF THE MATERIAL PURPORTED TO BE PURCHASED FROM THESE SUPP LIERS WERE FURNISHED . THE PARTIES WERE ALSO NOT PRODUCED BEFORE THE AUTHO RITIES BELOW. THE ONLY PARTY WHO RESPONDED TO NOTICE U/S 133(6) OF 1961 AC T ISSUED BY THE AO NAMELY RANAKPUR SALES CORPORATION DEPOSED AGAINST T HE ASSESSEE. THE ASSESSEE DID NOT ASK FOR CROSS EXAMINATION OF RANAK PUR SALES CORPORATION WHO APPEARED BEFORE THE AO IN RESPONSE TO NOTICE U/ S 133(6) OF 1961 ACT AND DEPOSED AGAINST THE ASSESSEE BY CONFIRMING THAT BOG US BILLS WERE ISSUED BY THEM IN LIEU OF COMMISSION WHILE NO MATERIAL WAS SU PPLIED AGAINST BOGUS INVOICES RAISED BY THEM. THE RIGHT OF CROSS EXAMIN ATION IS NOT 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 AUTHORITIES PROCEED TO PUT ASSES SEE TO PREJUDICE SOLELY RELYING ON THE BASIS OF INCRIMINATING STATEMENT RE CORDED OF THIRD PARTY AT THE BACK OF THE ASSESSEE, THEN CERTAINLY THE RIGHT TO C ROSS EXAMINATION THE SAID THIRD PARTY WHOSE INCRIMINATING STATEMENT RECORDED AT THE BACK OF THE ASSESSEE IS RELIED UPON BY AUTHORITIES TO PREJUDICE THE ASSESSEE WILL BECOME ABSOLUTE. BUT IN THE INSTANT CASE , PRIMARY ONUS CA ST ON THE ASSESSEE ITSELF DID NOT STOOD DISCHARGED BY THE ASSESSEE AS DISCUSS ED ABOVE. THE A.O. MADE GROSS PROFIT ADDITIONS @ 12.5% OVER THE TOTAL BOGUS PURCHASES OF RS. 2,39,83,261/- , WHICH WERE HELD TO BE NON-GENUINE B Y THE AUTHORITIES BELOW, WHICH ADDITION CAME TO RS. 29,97,908/- WHICH ADDITI ON WAS CONFIRMED BY THE LEARNED CIT(A). . IN SUCH CIRCUMSTANCES ,GP RATIO N EEDS 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 ARBITRARILY APPLIED AT THE D ISCRETION OF AUTHORITIES . WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE. REFERENCE IS ITA 4463/MUM/2016 32 DRAWN TO DECISION OF HONBLE SUPREME COURT IN THE C ASE OF KACHWALA GEMS V. JCIT (2007) 288 ITR 10(SC) , WHEREIN HONBLE LORDSH IPS HELD AS UNDER : 4. THE FACTS OF THE CASE ARE IN A SHORT COMPASS. THE APPELLANT-ASSESSEE DEALS IN PRECIOUS AND SEMI-PRECIOUS STONES. IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THE FOLLOWING DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE : '1. THE ASSESSEE HAS NOT MAINTAINED AND KEPT ANY QU ANTITATIVE DETAILS/STOCK REGISTER FOR THE GOODS TRADED IN BY T HE ASSESSEE. 2. THERE IS NO EVIDENCE ON RECORD OR DOCUMENT TO VE RIFY THE BASIS OF THE VALUATION OF THE CLOSING STOCK SHOWN BY THE ASS ESSEE. THE ASSESSEE IS NOT ABLE TO PREPARE SUCH DETAILS EVEN W ITH 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 RESULT DECLAR ED BY THE ITSELF IN THE PREVIOUS ASSESSMENT YEARS. 6. M/S. GEM PLAZA, ENGAGED IN LOCAL SALES OF SIMILA R GOODS DECLARED VOLUNTARILY RATE OF 35 PER CENT IN ITS ASSESSMENT F OR THE ASSESSMENT YEAR 1997-98. 7. M/S. DHADDA EXPORTS, ANOTHER ASSESSEE DEALING IN SAME ITEMS, BUT DOING EXPORT BUSINESS DECLARED GP RATE OF 43.8 PER CENT (EVEN WITHOUT CONSIDERING THE VALUE OF EXPORT INCENTIVES) IN ASSE SSMENT YEAR 1997- 98.' 5. THEREAFTER, THE BOOKS OF ACCOUNT OF THE ASSESSEE W ERE REJECTED BY THE ASSESSING OFFICER AND HE RESORTED TO BEST JUDGMENT ASSESSMENT UNDER SECTION 144 OF THE INCOME-TAX ACT. THE ASSESSING OF FICER IN THE ASSESSMENT ORDER MENTIONED SOME COMPARABLE CASES AN D WAS OF THE VIEW THAT THE CASE OF THE ASSESSEE IS MORE OR LESS HAVING SIMILAR FACTS AS THAT OF M/S. GEM PLAZA WHERE THE GROSS PROFIT HAS B EEN TAKEN 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. ITA 4463/MUM/2016 33 8. IN FURTHER APPEAL, THE TRIBUNAL HAD GIVEN FURTHER RELIEF TO THE ASSESSEE AND REDUCED THE GROSS PROFIT RATE TO 30 PER CENT. 9. THE COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT THE INCOME- TAX AUTHORITIES WRONGLY HELD THAT APPELLANT HAS SHO WN 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 S AME IN THIS APPEAL. AS REGARDS THE REJECTION OF THE BOOKS OF ACCOUNT, COGE NT REASONS HAVE BEEN GIVEN BY THE INCOME-TAX AUTHORITIES FOR DOING SO, A ND 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 AUTHOR ITIES CONCERNED SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF T HE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT, AND SHOULD NOT ACT TOTALL Y ARBITRARILY, BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVO LVED IN A BEST JUDGMENT ASSESSMENT, AND IT IS THE ASSESSEE HIMSELF WHO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS. IN OUR OPINION, THERE WAS NO ARBITRARINESS IN THE PRESENT CASE ON THE PART OF TH E INCOME-TAX AUTHORITIES. THUS, THERE IS NO FORCE IN THIS APPEAL, AND IT IS D ISMISSED ACCORDINGLY. NO COSTS. THE AUTHORITIES BELOW IN THE INSTANT CASE DID NOT M ADE ANY INDUSTRY COMPARISONS TO ARRIVE AT FAIR , HONEST AND RATIONAL ESTIMATION OF GP RATIO , RATHER APPLIED GP RATIO OF 12.5% ON ALLEGED BOGUS P URCHASES WHICH ESTIMATION WAS IN ADDITION TO THE NORMAL GP RATIO D ECLARED BY THE ASSESSEE IN RETURN OF INCOME FILED WITH REVENUE. THE REVENUE MA DE AFORESAID ADDITIONS RELYING ON THE PRESUMPTION THAT THE MATERIAL WAS IN -FACT PURCHASED FROM GREY MARKET AT A LOWER RATE AND TO COVER DEFICIENCIES IN RECORD, THE INVOICES WERE PROCURED FROM THESE ENTRY OPERATORS TO REDUCE THE P ROFIT. IT WAS ALSO CONSIDERED THAT THERE WILL BE SAVINGS ON ACCOUNT OF TAXES WHILE PROCURING MATERIAL FROM GREY MARKET. THE AUTHORITIES BELOW R ELIED UPON DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P S HETH (2013) 356 ITR 451(GUJ. HC) , WHICH HAS ESTIMATED DISALLOWANCE @12 .5% OF THE DISPUTED BOGUS PURCHASES TO MEET THE END OF JUSTICE. THE AU THORITIES BELOW HAS NOT BROUGHT ON RECORD INDUSTRY COMPARABLES NOR ANY RATI ONAL COMPARABILITY VIS-- ITA 4463/MUM/2016 34 VIS PRECEDING YEARS GP RATIO ARE BROUGHT ON RECORD. THERE IS NO ALLEGATION BROUGHT ON RECORD BY LEARNED DR THAT SIMILAR ADDITI ONS WERE ALSO MADE IN THE IMMEDIATELY PRECEDING YEAR . THE ASSESSEE EARNED GP RATIO AS DETAILED HEREUNDER FOR LAST THREE YEARS : FINANCIAL YEAR % GP 2007-08 4.3% 2008-09 5.45% 2009-10 4.9% THE BOOKS OF ACCOUNTS WERE NOT REJECTED U/S 145(3) OF 1961 ACT BY THE REVENUE . IN THE IMMEDIATELY PRECEDING YEAR I.E. AS SESSMENT YEAR 2008-09, THE ASSESSEE EARNED GP RATIO OF 4.3% ON TOTAL TURN OVER , WHILE FOR THE YEAR UNDER CONSIDERATION GP RATIO EARNED WAS 5.45%. IN O UR CONSIDERED VIEW AND BASED ON FACTS AND CIRCUMSTANCES OF THE CASE AS DIS CUSSED BY US IN DETAILS ABOVE, END OF JUSTICE WILL BE MET IN THIS CASE IF G P RATIO OF 12.5% ON ALLEGED BOGUS PURCHASES IS ADDED TO INCOME OF THE ASSESSEE AGAINST WHICH CREDIT FOR THE DECLARED GP RATIO ON THE ALLEGED BOGUS PURCHASE S WILL BE GRANTED BY THE AO AFTER VERIFICATION BY THE AO BECAUSE OF FAILURE OF THE ASSESSEE TO COME FORWARD TO DISCHARGE PRIMARY ONUS CAST UPON HIM AS DETAILED ABOVE FOR WHICH ASSESSEE IS TO BE BLAMED AND IN THE MIDST OF AFORE- STATED UN-REBUTTED ALLEGATION AGAINST THE ASSESSEE AND NON DISCHARGE O F PRIMARY ONUS, THE DECLARED LOWER GP RATIO OF 5.45% IN THE INSTANT PRE VIOUS YEAR UNDER APPEAL CANNOT BE ACCEPTED. THUS, IN NUT-SHELL WE ARE INCLI NED TO ADOPT GP RATIO OF 12.5% ON ALLEGED BOGUS PURCHASES IN THE INSTANT CA SE WHICH IN OUR CONSIDERED VIEW IS FAIR, REASONABLE AND RATIONAL KE EPING IN VIEW FACTUAL MATRIX OF THE CASE , WHILE THE ASSESSEE SHALL BE GRANTED C REDIT OF GP RATIO DECLARED ON THESE BOGUS PURCHASES IN THE RETURN OF INCOME FILED WITH THE REVENUE. THE ASSESSEE GETS PART RELIEF. WE ORDER ACCORDINGLY ITA 4463/MUM/2016 35 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 4463/MUM/2016 FOR ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED AS IN DICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH APRIL, 2017. # $% &' 04-04-2017 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 04-04-2017 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / 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