KALARIKAL MATHAEW JOHN, MUMBAI V. ITO 31(2)(2), MUMBAI

ITA 504/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0293 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JANANRDHANAN
• Keywords: Bogus purchase; Additional evidence; Tangible material; Difference of opinion; Accommodation entries; Reason to believe; Change of opinion; Borrowed satisfaction
• Section: 142(1); 133(6); 148

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO S . 504 & 505/MUM/2017 ( / ASSESSMENT YEAR S : 2008 - 09 & 2009 - 10 ) SHRI KALARIKAL MATHEW JOHN 24/96, YESHWANT NAGAR, OPP. MUNICIPAL SCHOOL, GOREGAON (W), MUMBAI - 400 063 / VS. ITO, WARD - 31(2)(2), MUMBAI ./ ./ PAN/GIR NO. AABPK 9211 C ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI BHUPENDRA SHAH / RESPONDENT BY : SHRI V. JANANRDHANAN / DATE OF HEARING : 29.06.2017 / DATE OF PRONOUNCEMENT : 17. 0 8.2017 / O R D E R PER SHAMIM YAHYA , A. M.: TH ESE ARE APPEALS BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 42 , MUMBAI (CIT(A) FOR SHORT) DATED 19.09.2016 FOR THE CONCERNED ASSESSMENT YEARS. 2. THE FIRST COMMON ISSUE RAISED READS AS UNDER: 2 ITA NOS. 504 & 505/M/17(A.YS. 08 - 09 & 09 - 10) SHRI KALARIKAL MATHEW JOHN VS. ITO 1. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRED IN PASSING THE ORDER U/S. 143 R.W.S. 147 AND THEREFORE RENDERING THE WHOLE ASSESSMENT BAD IN LAW, THAT TOO AFTER A GAP OF FOUR YEARS AND ALSO ON THE BASIS OF BORROWED SATISFACTION. 3. THE SECOND COMMON ISSUE RAISED IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF 25% OF THE ALLEGED BOGUS PURCHASES. 4. SINCE THE FACTS ARE IDENTICAL, THESE APPEALS HAVE BEEN ADJ UDICATED WITH REFERENCE TO FACTS AND FIGURES FROM A.Y. 2008 - 09. THE RETURN OF INCOME FOR THIS YEAR WAS FILED BY THE ASSESSEE ON 10.09.2008 DECLARING A TOTAL INCOME OF RS.1,78,429/ - . THE SAME WAS MERELY PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY THE A.O . RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT AND ALSO FROM THE OFFICE OF THE DGIT(INV), MUMBAI THAT THE ASSESSEE IS A BENEFICIARY OF ACCOMMODATION BILL OF PURCHASES FROM CERTAIN BOGUS HAWALA DEALERS. THE INFORMATION WAS THAT THE CONCERNED DEALERS H AD NOT SOLD ANY ACTUAL GOODS BUT HAD GIVEN ACCOMMODATION ENTRIES OF SALES MADE TO THE ASSESSEE. THE A.O. NOTED THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES FROM M/S. ARUN PAPER & IRON TRADERS, A HAWALA DEALER. ACCORDINGLY THE A.O. INITIATED ACTION SEC TION 147 OF THE ACT. 5. THE A.O.S OBSERVATION REGARDING THE ENQUIRY MADE IN THIS REGARD IS AS UNDER: 4. THE ASSESSEE WAS ASKED TO SUBMIT THE RELEVANT BILLS, DELIVERY CHALLANS, BANK PAYMENT DETAILS, TRANSPORTATION DETAILS, STOCK REGISTER ENTRY DETAILS AND ANY OTHER SUPPORTING DOCUMENTS TO SU BSTANTIATE THE PURCHASES FROM M/ S . ARUN PAPER & IRON TRADERS. LEDGER ACCOUNT ALONG WITH THE COPIES OF THE PURCHASE BILLS, DELIVERY CHALLAN AND PAYMENT MADE TO SUCH PARTY REFLECTED IN THE BANK 3 ITA NOS. 504 & 505/M/17(A.YS. 08 - 09 & 09 - 10) SHRI KALARIKAL MATHEW JOHN VS. ITO STATEMENT WERE FILED BY THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, NOTICES U/S 133(6) WAS ISSUED TO PURCHASE PARTY AS UNDER: SR. NO. NAME OF THE CONCERN AMOUNT 1 M / S ARUN PAPER & IRON TRADERS RS.551165/ - TOTAL RS.551165/ - IN REPLY, M/ S . ARUN PAPER & IRON TRAD ERS SUBMITTED THE DETAILS CALLED FOR ALONG WITH THE COPIES OF BILLS, DELIVERY CHALLAN AND BANK STATEMENT EVIDENCING THE PAYMENT MADE. THE DETAILS SUBMITTED BY THE ASSESSEE AND THE PURCHASE PARTY WERE PERUSED. I T WAS FOUND THAT ASSESSEE AND M/ S . ARUN PAPER & IRON TRADERS HAD FILED THE COPY OF BILLS AND DELIVERY CHALLAN, BUT WERE FOUND TO BE IN DIFFERENT FORMAT AND IN DIFFERENT WRITING AND UNDER DIFFERENT SIGNATURE. THIS GOES TO PROVE THAT THE BILLS, DELI VERY CHALLANS WERE NON - GENUINE/ BOGUS. IF THE BILLS, DEL IVERY CHALLAN WERE ORIGINAL, THEN THE SAME SHOULD HAVE BEEN IN THE SAME FORMAT, SAME HANDWRITING AND UNDER SAME SIGNATURE. ONE SUCH COPY OF BILL & DELIVERY CHALLAN SUBMITTED BY ASSESSEE IS MARKED AS ANNEXURE AL AND A2 AND THAT FILED BY M /S. ARUN PAPER & IR ON TRADERS IS MARKED AS ANNEXURE B1 & B2 WHICH FORMS PART OF THI S ORDER. 4.1 TH E ASSESSEE WAS ISSUED NOTICES U/ S 142(1) DATED 28.04.2014, 12.06.2014, 02.01.2015 BUT ASSESSEE DID NOT RESPOND TO THE SAME. PARTIAL SUBMISSION WAS MADE BY THE ASSESSEE ON 25.0 8.2014 AND 4.02.2015 WHICH WAS FILED IN TAPAL . 6. FURTHER THE OBSERVATION OF THE A.O. ARE AS UNDER: THE ASSESSEE HAS SUBMITTED COPY OF LEDGER ACCOUNT ALONG WITH THE COPIES OF THE PURCHASE BILLS, DELIVERY CHALLAN AND PAYMENT MADE TO SUCH PARTIES REFLECTED IN THE BANK STATEMENT WERE FILED BY THE ASSESSEE. HOWEVER, IT WAS OBSERVED THAT THE FORMAT OF THE BILLS, DELIVERY CHALLANS AS WELL AS SIGNING AUTHORITY WERE DIFFERENT - IN THE SUBMISSIONS MADE BY THE ASSESSEE AND THE SUBMISSIONS MADE BY M/ S. A RUN PAPER & I RON TRADERS IN RESPONSE TO NOTICE U/S 133(6). 4.4 ON FAILURE OF THE ASSESSEE TO ATTEND IN RESPONSE TO NOTICES U/S 142(1), A FINAL SHOW - CAUSE NOTICE WAS ISSUED ON 13.02.2015 TO SUBMIT ADDITIONAL PROOF OF PURCHASES MADE FAILING WHICH THE TRANSACTION WOULD BE TERMED AS NON - GENUINE AND ADDED BACK. ASSESSEE'S REPRESENTATIVE ATTENDED ON 16.02.2015 BUT WITHOUT ANY DETAILS. HE WAS AGAIN ASKED TO FURNISH THE DETAILS SUCH AS STOCK REGISTER, TRANSPORT DETAILS, L/R COPIES, OR ANY OTHER ADDITIONAL DOCUMENT TO PROVE THE GENUINENESS OF PURCHASES MADE FROM THE SAID PARTY FIXING HEARING ON 23.02.2014. NONE ATTENDED 011 THE SAID DATE N OR WAS ANY REPLY FILED IN RESPECT 4 ITA NOS. 504 & 505/M/17(A.YS. 08 - 09 & 09 - 10) SHRI KALARIKAL MATHEW JOHN VS. ITO OF THE BOGUS PURCHASE S. 4.5 THE SUBMISSION MADE BY THE ASSESSEE HAS BEEN CAREFULLY PURSUED ALONG WITH MATERIAL ON RECORDS. IN THE INSTANT CASE, ASSESSEE HAS NOT BEEN ABLE TO FURNISH ADDITIONAL RELEVANT DOCUMENTS CALLED FOR TO PROVE THE GENUINENESS OF PURCHASES MADE FROM THE ABOVE REFERRED PARTIES. THE ONUS IS ON THE ASSESSEE TO PROVE THE VARIOUS ENTRIES I N HIS BOOKS OF ACCOUNTS TO CORROBORATIVE DETAILS AND DOCUMENTS. IT IS ALSO A FACT THAT THE BILLS AND DELIVERY CHALLAN SUBMITTED BY THE ASSESSEE AND M /S ARUN PAPER & IRON TRADERS WERE NOT IDENTICAL THOUGH FOR SAME QUANTITY OF GOODS: AS BOTH THE BILLS ARE NO T IDENTICAL, IT CLEARLY PROVES THAT THE SAME ARE ONLY ACCOMMODATION BILLS ISSUED AND GENERATED AS AND WHEN REQUIRED WIT HO UT ANY TRANSACTION. THIS GOES TO PROVE THAT THE BILLS ARE REALLY NON - GENUINE AND ONLY ACCOMMODATION ENTRIES AS PER THE INFORMATION MADE AVAILABLE BY THE SALES TAX DEPARTMENT. IN VIEW OF THE DIFFERENCES POINTED ABOVE, I AM CONSTRAINED TO DRAW A NEGATIVE CONCLUSION AGAINST THE ASSESSEE AND HOLD THAT THESE PARTIES FROM WHOM, PURCHASES HAVE BEEN SHOWN, ARE TO BE TREATED AS BOGUS ARID THERE IS NOTHING ON RECORD TO ARRIVE AT ANY OTHER INFERENCE A ND ASSESSEE HAS NOT BEEN ABLE T O DISCHARGE HIS ONUS I N THIS RESPECT, EVEN BY PREPONDERANCE OF PROBABILITIES. FURTHER, THE ASSESSEE FAILED TO FILE PROPER DETAILS TO SUPPORT HIS CLAIM DESPITE REMINDER AND THEREFORE, THE PURCHASES S HOWN BY THE ASSESSEE FROM THESE PARTIES ARE NOT VERIFIABLE. 4.6 IN VIEW OF THE DISCUSSION MADE ABOVE, THE ENTIRE AMOUNT OF RS.5,51,165/ - , BEING THE AMOUNT OF PURCHASES SHOWN FROM M/S ARUN PAPER & IRON IS ADDED BACK TO THE TOTAL INCOME VI] S 69C, AS THE BILLS/ DELIVERY CHALLAN SUBMITTED BY BOTH THE PARTIES DIFFERED AND THAT ASSESSEE FAILED TO SUBMIT AND ADDITIONAL EVIDENCE TO PROVE THE GENUINENESS OF THE SAID PURCHASES. THIS ALSO GOES TO PROVE THAT THE BILLS PROCURED BY THE ASSESS EE IN RESPECT OF SAID PURCHASES WERE FORGED/ NON - GENUINE AND WERE INTRODUCED TO INFLATE THE PURCHASES. 7. AGAINST THE ABOVE ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). ON THE ISSUE OF REOPENING, THE LD. CIT(A) AFFIRMED THE CORRECTNESS OF REOPENING BY OBSERVING AS UNDER: FIRSTLY IN THE CASE OF THE ASSESSEE THE ORIGINAL RETURN OF INCOME HAD ONLY BEEN PROCESSED U/S. 143(1) OF THE ACT AND NO OPINION HAD BEEN FORMED BY THE AO. IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P.) LTD 29 1 ITR 500 (SC) AND IN THE CASE OF DCIT VS. ZUARI ESTATE DEVELOPMENT & INVESTMENT CO. LTD 5 ITA NOS. 504 & 505/M/17(A.YS. 08 - 09 & 09 - 10) SHRI KALARIKAL MATHEW JOHN VS. ITO [2015) 373 ITR 661 (SC)(MAG.) THE SUPREME COURT HAS HELD THA T SINCE NO ASSESSMENT IS MADE U/ S 143(L)(A) OF THE ACT, THE QUESTION OF CHANGE OF OPINION DOES NOT ARISE AN D REASSESSMENT CAN BE RESORTED TO THE A.O. 11.2 SECONDLY THE AO CAN FORM HIS REASONS TO BELIEVE ON THE BASIS OF INFORMATION OR MATERIAL IN HIS POSSESSION WHICH INDICATES AN ESCAPEMENT OF INCOME. IN THE PRESENT CASE THE AO HAD INFORMATION THAT THE SUSPECT HAWALA DEALER HAD GIVEN STATEMENTS TO THE SALES TAX DEPARTMENT THAT IT IS ONLY PROVIDING ACCOMMODATION ENTRIES OF BILLS OF PURCHASE AND IS NOT GENUINELY DEALING WITH ANY ITEM OF TRADE. THE SUBSEQUENT ENQUIRIES BY THE OFFICE OF THE DGIT(INV) ALSO INFORMED T HE AO THAT THE SUPPLIER COULD PRODUCE NO EVIDENCE TO SUBSTANTIATE ITS SALES TO THE ASSESSEE. IN VIEW OF THIS THE ARGUMENT OF THE ASSESSEE THAT THE INFORMATION FROM DGIT(LNV) IS NOT A BASIS FOR RE - ASSESSMENT IS WITHOUT ANY BASIS. THE REASONS RECORDED BY THE AO IN THIS CASE BEFORE ISSUE OF THE NOTICE U/S 148 ARE VERY SPECIFIC AND THE SOURCE OF THE INFORMATION IS CLEARLY SPELT OUT THEREIN. 11.3 THE GUJARAT HIGH COURT IN THE RECENT CASE OF PEASS INDUSTRIAL ENGINEERS PVT LTD VS. DCIT IN SLA NO. 3249 OF 2016 DA TED 05/08/2016 HAS APPROVED THE ACTION OF THE AO TAKEN ON THE BASIS OF THE INFORMATION RECEIVED FROM THE OFFICE OF DGIT(INV). IN THIS CASE THE FACTS WERE SIMILAR TO THE CASE OF THE PRES E NT ASSESSEE. THE HIGH COURT AFTER CONSIDERING THE VARIOUS CASE LAWS ON THE SUBJECT HAS UPHELD THE ISSUANCE OF NOTICE U/S 148 OF THE ACT WITH T H E FOLLOWING DECISION: 'WE ARE OF THE OPINION THAT WHEN THE AUTHORITY IS ARMED WITH THE TANGIBLE MATERIAL IN THE FORM OF SPECIFIC INFORMATION RECEIVED BY THE INVESTIGATION WING, AHME DABAD IS THROUGH/Y JUSTIFIED IN ISSUING A NOTICE FOR REASSESSMENT. IT IS REVEALED FROM THE SAID ADDITIONAL MATERIAL AVAILABLE ON HAND A REASONABLE BELIEF IS FORMED BY THE ASSESSING AUTHORITY THAT INCOME OF THE PETITIONER HAS ESCAPED ASSESSMENT AND THEREFOR E, ONCE THE R EASONABLE BELIEF IS FORMULATED BY THE AUTHORITY ON THE BASIS OF COGENT TANGIBLE MATERIAL, T H E AUTHORITY IS NOT EXPECTED TO CONCLUDE AT THIS STAGE THE ISSUE FINALLY OR TO ASCERTAIN THE FACT BY EVIDENCE OR CONCLUSION, WE ARE OF THE OPINION THAT FUNCTION OF THE ASSESSING AUTHORITY AT THIS STAGE IS TO ADMINISTER THE STATUTE AND WHAT IS REQUIRED AT THIS STAGE IS A REASON TO BELIEVE AND NOT ESTABLISH FACT OF ESCAPEMENT OF INCOME AND THEREFORE, LOOKING TO THE SCOPE OF SECTION 147 AS ALSO SECTIONS 148T O 152 OF THE ACT, EVEN I F SCRUTINY ASSESSMENT HAS BEEN UNDERTAKEN, IF SUBSTANTIAL NEW MATERIAL IS FOUND IN THE FORM OF INFORMATION ON THE BASIS OF WHICH THE ASSESSING AUTHORITY CAN FORM A BELIEF THAT THE INCOME OF THE PETITIONER HAS ESCAPED ASSESSMENT, IT IS A/WAYS OPEN FOR THE ASSESSING AUTHORITY TO 6 ITA NOS. 504 & 505/M/17(A.YS. 08 - 09 & 09 - 10) SHRI KALARIKAL MATHEW JOHN VS. ITO REOPEN ASSESSMENT. FROM THE REASONS WHICH ARE RECORDED, IT CLEARLY EMERGES THAT THE PETITIONER IS THE BENEFICIARY OF THOSE ENTRIES BY KAYAN BROTHERS, WHO ARE WELL KNOWN ENTRY OPERATORS ACROSS THE COUNTRY AND TH IS FACT HAS BEEN UNEARTHED ON ACCOUNT OF THE INFORMATION RECEIVED BY DGIT INVESTIGATION BRANCH AND THEREFORE, IT CANNOT BE SAID IN ANY WAY THAT EVEN IF FOUR YEARS HAVE BEEN PASSED, IT IS NOT OPEN FOR THE AUTHORITY TO REOPEN THE ASSESSMENT. IN THE PRESENT C ASE, THERE WAS INDEPENDENT APPLICATION OF MIND ON BEHALF OF THE ASSESSING AUTHORITY IN ARRIVING AT THE CONCLUSION THAT INCOME HAD ESCAPED ASSESSMENT AND THEREFORE, THE CONTENTIONS RAISED BY THE PETITIONER ARE DEVOID OF MERITS. DEALING WITH THE CONTENTIONS OF THE PETITIONER THAT THE INFORMATION RECEIVED FROM DGIT, INVESTIGATION BRANCH, AHMEDABAD, CAN NEVER BE SAID TO BE ADDITIONAL INFORMATION. WE ARE OF THE OPINION THAT THE INFORMATION WHICH HAS BEEN RECEIVED IS ON 26.3.2015 FROM THE DGIT, INVESTIGATION BRAN CH, AHMEDABAD, WHEREBY IT HAS BEEN REVEALED THAT PRESENT PETITIONER IS ALSO THE BENEFICIARIES OF THOSE KAYAN BROTHERS, WHO ARE IN THE ACTIVITY OF ENTRY OPERATION THROUGHOUT THE COUNTRY AND THEREFORE, IT CANNOT BE SAID THAT THIS IS NOT JUSTIFIABLE MATERIAL TO FORM A REASON TO BELIEF BY TH E AUTHORITY AND THEREFORE, THIS BEING A CASE, THE AUTHORITY IS JUSTIFIED IN ISSUING NOTICE UNDER SECTION 148 OF THE ACT 10 REOPEN THE ASSESSMENT AND THEREFORE, THE CHALLENGE CONTAINED IN THE PETITION BEING DEVOID OF MERITS, SAME DESERVES TO BE DISMISSED. ' 11.4 IN VIEW OF THE ABOVE JUDGMENT IN PEASS CASE (SUPRA) AND ALSO IN VIEW OF THE FACTS AND OTHER CASE LAWS THE ASSESSEE'S CHALLENGE TO THE RE - OPENING OF THE ASSESSMENT ON THE GROUND OF BORROWED SATISFACTION IS REJECTED. I N ANY CASE THE TERM' BORROWED SATISFACTION' IS USED BY THE COURTS TO DENOTE PROCEEDINGS WHERE THE REASONS TO BELIEVE ARE RECORDED BY A DIFFERENT OFFICER THAN THE ONE WHO ACTUALLY ISSUES THE NOTICE U/S 148 OF THE ACT. THIS IS NOT THE CASE IN THESE PROCEEDIN GS. THIS GROUND OF APPEAL IS, THEREFORE, DISMISSED. 8. ON MERITS OF THE CASE, THE LD. CIT(A) HELD THAT SINCE THE SALES ARE NOT DOUBTED BY THE A.O., THE ASSESSEE MUST HAVE MADE HIS PURCHASES FROM SOME OTHER SOURCES IN THE GREY MARKET. THEREFORE, KEEPING IN MIND THE HONBLE GUJARAT HIGH COURTS DECISION, THE LD. CIT(A) DIRECTED THAT DISALLOWANCE BE RESTRICTED TO 25% OF THE BOGUS PURCHASES. 7 ITA NOS. 504 & 505/M/17(A.YS. 08 - 09 & 09 - 10) SHRI KALARIKAL MATHEW JOHN VS. ITO 9. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 10. I HAVE HEARD THE LEARNED COUNSEL AND PERUSED THE RECORDS. AS REGARDS THE REOPENING OF THE ASSESSEE, ON A CAREFUL CONSIDERATION, I NOTE THAT IN THIS CASE INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER FROM DGIT INVESTIGATION (MUMBAI) THERE ARE SOME PARTIES WHO ARE ENGAGED IN THE HAWALA TRANSACTION S AND ARE ALSO INVOLVED IN ISSUING BOGUS PURCHASE BILLS FOR SALE OF MATERIAL WITHOUT DELIVERY OF GOODS, WHICH INFORMATION WAS BASED ON INFORMATION RECEIVED BY REVENUE FROM MAHARASHTRA SALES TAX AUTHORITY. INFORMATION WAS RECEIVED THAT THE ASSESSEE WAS BENE FICIARY OF HAWALA ACCOMMODATION ENTRIES FROM ENTRY PROVIDERS BY WAY OF BOGUS PURCHASE. THE ACCOMMODATION ENTRY PROVIDER HAS DEPOSED AND ADMITTED BEFORE THE MAHARASHTRA SALES TAX AUTHORITY VIDE STATEMENT/ AFFIDAVIT THAT THEY WERE ENGAGED IN PROVIDING BOGUS ACCOMMODATION ENTRIES WHEREIN BOGUS SALE BILLS WERE ISSUED WITHOUT DELIVERY OF GOODS, IN CONSIDERATION FOR COMMISSION. THESE, ACCOMMODATION ENTRY PROVIDERS, ON RECEIPT OF CHEQUES FROM PARTIES AGAINST BOGUS BILLS FOR SALE OF MATERIAL, LATER ON WITHDREW CAS H FROM THEIR BANK ACCOUNTS WHICH WAS RETURNED TO BENEFICIARIES OF BOGUS BILLS AFTER DEDUCTION OF THEIR AGREED COMMISSION. THE ASSESSEE WAS STATED TO BE ONE OF THE BENEFICIARIES OF THESE BOGUS ENTRIES OF SALE OF MATERIAL FROM HAWALA ENTRY OPERATORS IN FAVOU R OF THE ASSESSEE WHEREIN THE ASSESSEE MADE ALLEGED BOGUS PURCHASES THROUGH THESE BOGUS BILLS ISSUED BY HAWALA ENTRY PROVIDERS IN FAVOUR OF THE ASSESSEE. THESE DEALERS WERE SURVEYED BY THE SALES TAX 8 ITA NOS. 504 & 505/M/17(A.YS. 08 - 09 & 09 - 10) SHRI KALARIKAL MATHEW JOHN VS. ITO INVESTIGATION DEPARTMENT WHEREBY THE DIRECTORS OF THESE D EALERS HAVE ADMITTED IN A DEPOSITION VIDE STATEMENTS/AFFIDAVIT 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 SUCH PARTIES WHEREIN THE ASSESSEE IS STATED T O BE BENEFICIARY OF BOGUS PURCHASE BILLS. 11 . FROM THE ABOVE, I FIND THAT TANGIBLE AND COGENT INCRIMINATING MATERIAL WERE RECEIVED BY THE AO WHICH CLEARLY SHOWED THAT THE ASSESSEE WAS BENEFICIARY OF BOGUS PURCHASE ENTRIES FROM BOGUS ENTRY PROVIDERS WHICH FORMED THE REASON TO BELIEVE BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THE INFORMATION SO RECEIVED BY THE AO HAS LIVE LINK WITH REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. ON THESE INCRIMINATING TANGIBLE MATERIAL INFORMATION, ASSESSMENT WAS REOPENED. AT THIS STAGE THERE HAS TO BE PRIMA FACIE BELIEF BASED ON SOME TANGIBLE AND MATERIAL INFORMATION ABOUT ESCAPEMENT OF INCOME AND THE SAME IS NOT REQUIRED TO BE PROVED TO THE H ILT. IN THIS REGARD, I REFER TO THE DECISION OF THE HON'BLE APEX COURT I N THE CASE OF CIT(A) VS. RAJESH JHAVERI STOCK BROKERS P. TD, 291 ITR 500: - 'SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO LAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCA PED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE (HAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME H AD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGA/ STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANAGNESE ORE CO, ITD. V. ITO(1991) 191 ITR 662, FOR INITIATION OF ACTION UNDER SECTION 147(A) (AS THE PROVISION STOOD AT THE 9 ITA NOS. 504 & 505/M/17(A.YS. 08 - 09 & 09 - 10) SHRI KALARIKAL MATHEW JOHN VS. ITO RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, TH E FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THER E WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE AO IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO, (P.) LTD. (1996) 217 ITR 597 (SUPREME COURT): RAYMOND WOOLLEN MILLS LTD. V. ITO (1999) 236 ITR 34 (SUPREME COURT). 12. THE ABOVE DISCUSSION AND PRECEDENT FROM APEX COURT FULLY JUSTI FY THE VALIDITY OF REOPENING IN THIS CASE. FURTHER I FIND THAT THE LD. CIT(A) HAS CAREFULLY EXAMINED THE ISSUE AND HAS PROPERLY APPRECIATED THE ISSUE. HENCE, I DO NOT FIND ANY INFIRMITY IN THE SAME. ACCORDINGLY, I UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE OF REOPENING. SINCE, THE ISSUE HAS BEEN DECIDED ON THE BASIS OF THE HON'BLE APEX COURT DECISION, THE OTHER CA E LAWS REFERRED BY ASSESSEE ARE NOT SUPPORTING THE ASSESSEE'S CASE. 13. AS REGARDS, MERITS OF THE ADDITION UPON CONSIDERATION OF THE FACTS OF THE CASE, I FIND THAT OVERWHELMING EVIDENCE HAVE BEEN REFERRED BY THE AUTHORITIES BELOW THAT THE IMPUGNED PURCHASES ARE BOGUS. THAT DOCUMENT S SUBMITTED REGARDING ACTUAL MOVEMENT OF THE GOODS HA VE BEEN FOUND TO BE DUBIOUS. IN THESE CIRCUMSTANCES LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARA T HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO. 240 OF 2003 IN THE CASE OF N. K. INDUSTRIES VS. DY. CIT, ORDER DATED 20.06.2016, WHEREIN HUNDRED PERCENT OF THE BOGUS PURCHASES WAS HELD TO BE AD DED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% 10 ITA NOS. 504 & 505/M/17(A.YS. 08 - 09 & 09 - 10) SHRI KALARIKAL MATHEW JOHN VS. ITO OF THE BOGUS PURCHASES WAS SET ASIDE. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONGWITH OTHERS HAS BEEN DISMISSED BY THE HONOURABLE APEX COURT VIDE ORDER DT. 16.1.2017. 14. HOWEVER, I FIND THAT THIS IS NOT AN APPEAL BY THE REVENUE. IN SUCH CIRCUMSTANCES IT WILL NOT BE APPROPRIATE TO TAKE AWAY THE RELIEF ALREADY GRANTED BY THE LEARNED CIT(A). FURTHER , I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED IT IS SETTLE D LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES. HOWEVER THE FACTS OF THE PRESEN T CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE S AVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSES OF THE EXCHEQUER. IN SUCH SITUATION IN MY CONSIDERED OPINI ON ON THE FACTS AND CIRCUMSTANCES OF THE CASE A 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES WOULD MEET THE END OF JUSTICE, F OLLOWING THE HONBLE GUJARAT HIGH COURTS DECISION IN THE CASE OF SIMIT P. SETH T HIS HAS BEEN FOLLOWED AT ITAT, MUMBAI BENCH IN A NUMBER OF CASES. ACCORDINGLY, I DIRECT THAT THE DISALLOWANCE IN THIS CASE SHOULD BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASES. 15 . IN THE RESULT, THE SE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/08/2017 SD/ - (S HAMIM YAHYA ) 11 ITA NOS. 504 & 505/M/17(A.YS. 08 - 09 & 09 - 10) SHRI KALARIKAL MATHEW JOHN VS. ITO / A CCOUNTANT MEMBER MUMBAI ; DATED : 17.08.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI