RAMESH KUMAR SAVALCHAND JAIN, MUMBAI V. ITO - 19 (3)(1), MUMBAI

ITA 5679/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0352 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS JYOTHILAKSHMI NAYAK SR AR
• Assessee Lawyers: PRAFUL L VORA
• Keywords: Reopening of assessment; Bogus purchase; Search and seizure; Principle of natural justice; Question of law; Accommodation entries; Tax effect; Onus to prove; Reason to believe; Set aside
• Section: 142(1); 133(6); 143(1); 143(2); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUM BAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.5679/MUM/2018 ( ASSESSMENT YEAR: 2009-10 ) RAMESH KUMAR SAVALCHAND JAIN PROP: M/S. MAHALAXMI STEEL INDUSTREIS 53/57, BHANDARI STREET, SHOP NO.4, 1 ST KUMBHARWADA LANE MUMBAI-400 004 VS. ITO-19(3)(1) ROOM NO.202, MATRU MANDIR, 2 ND FLOOR TARDEO MUMBAI-400 007 PAN/GIR NO. AA CPJ0692D ( APPELLANT ) .. ( RESPONDENT ) & ITA NO.5263 & 5264/MUM/2019 ( ASSESSMENT YEAR: 2010-11 & 2011-12 ) RAMESH KUMAR SAVALCHAND JAIN PROP: M/S. MAHALAXMI STEEL INDUSTREIS 53/57, BHANDARI STREET, SHOP NO.4, 1 ST KUMBHARWADA LANE MUMBAI-400 004 VS. ITO-19(3)(1) ROOM NO.202, MATRU MANDIR, 2 ND FLOOR TARDEO MUMBAI-400 007 PAN/GIR NO. AACPJ0692D ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY MRS.JYOTHILAKSHMI NAYAK, SR.AR (ADDL, CIT) ASSESSEE BY SHRI PRAFUL L.VORA, AR DATE OF HEARING 1 2 /12 / 2019 DATE OF PRONOUNCEME NT 12 /12 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIRE CTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE LD. COMMISSIO NER OF INCOME RAMESH KUMAR SAVALACHAND JAIN 2 TAX (APPEALS)30, MUMBAI, DATED 24/07/2018 FOR AY 2 009-10 AND ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)04, MUMBAI, DATED 14/06/2019 FOR AYS 2010-11 AND 2011-1 2. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED- OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS, MORE OR LESS RAISED COMMON GROUND OF APPEAL FOR ALL THREE AYS. THEREFORE, FOR THE SAKE OF BREVITY GROUNDS OF APPEAL FILED FOR AY 2009-10 IN ITA NO.5679/MUM/2 018 IS REPRODUCED AS UNDER:- 1. LD. A.O. 15(3)(1), MUMBAI HAS NOT MAINTAINED DATE W ISE PROCEEDING SHEET, HAS NOT RECORDED THE REASONING FOR REOPENING OF THE CASE BEFORE ISSUE OF NOTICE U/S, 147/148 OF THE ACT. LD, A.O. H AS MERELY RELIED ON DIGT(I) MUMBAI AND SALES TAX DEPARTMENT OPINIONS AN D INFORMATIONS AND AS PER SATISFACTION OF CIT AND CBDT AS PER LETT ER DATED 02.07.2014 HAS NOT MADE INQUIRIES IN THAT RESPECT, RELIED ON B ORROWED INFORMATIONS AND SATISFACTION AND OPINIONS OF OTHER AUTHORITIES, ARE ALSO NOT ALLOWED FOR REOPENING OF THE ASSESSMENT PROCEEDINGS. THEREFORE, NOTICE U.'S, 147/148 IS LIABLE TO BE QUASHED AND ALL COLLATERAL PROCEEDINGS ARE ALSO LIABLE TO BE ANNULLED AND / OR SET ASIDE. LD. A.O. 19(3)(1), MUMBAI, WHO HAS PASSED THE ORDER HAS NOT RECORDED REASONS FOR R EOPENING NOR HAS ISSUED NOTICE U/S. 147/ 148 OF THE ACT THOUGH HE HA S ISSUED FRESH NOTICES U/S. 142(1) AND 143(2) OF THE ACT DUE TO CHANGE OF JURISDICTION THEREFORE, ORDER PASSED BY HIM IS WIT >OUT JURISDICTION AS HE HAS TO FORM HIS OWN OPINION AND CANNOT RELY ON THE REASONS RECORDED BY HIS PREDECESSOR TO REOPEN THE CASE AND TO PASS REASSESSMENT ORDER LD-C IT(A) DID NOT DECIDE THE GROUND IN CLEAR VERDICT. 2. LD, A.O. HAS NOT BROUGHT ANY DOCUMENTS AND EVIDENCE IN RESPECT OF INFORMATION IN RESPECT OF VENDORS IN DISPUTE, NO MA TERIALS ARE AVAILABLE ON RECORD AND IF AVAILABLE NOT GIVEN TO THE APPELLANT AT ANY STAGE OF PROCEEDINGS THOUGH ASKED FOR, THEREFORE, THERE IS A CLEAR VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BY LD, A.O. AND FOR T HE REASONS REASSESSMENT ORDER PASSED IS LIABLE TO BE SET-ASIDE ON THIS COUN T ALSO WITH IMPUGNED APPEAL ORDER. LD. CIT(A) DID NOT DECIDE THESE GROUN DS IN APPEAL THOUGH RAISED IN FIRST APPEAL, AS IT GOES TO THE ROOT OF T HE JURISDICTION MATTER OF LD. A.O. TO REOPEN THE ASSESSMENT AND TO MAKE ANY ADDIT ION IN DECLARED INCOME. 3. ADDITIONS MADE BY LD. A.O- AND SUSTAINED BY LD. CIT (A) ARE BASED ON SUSPICION, CONJECTURES, SURMISES, BASED ON THIRD PA RTIES OPINIONS RELIED ON STATEMENTS OF VENDORS TAKEN BY SALES TAX AUTHORI TY U/S.-14 OF THE RAMESH KUMAR SAVALACHAND JAIN 3 MVAT ACT, 2002 WHICH HAVE NO VALUE AS EVIDENCE UNDE R THE EVIDENCE ACT AS NO ORDER 19 RULE 1 AND 2 OF CIVIL PROCEDURE CODE ARC PASSED BY THE AUTHORITIES BEFORE OBTAINING THE SAID STATEMENT S, HENCE, NOT TO BE CONSIDERED IN THE MATTER OF THE APPELLANT AS STATED IN LETTER OF A,R. DATED 02.03.2015. APPELLANT HAS DISCLOSED AND ADDUCED HIS INITIAL BURDEN BY PRODUCING DETAILS ASKED FOR AND THEREFORE, FURTHER BURDEN IS ON AUTHORITIES TO BRING SUFFICIENT COGENT AND CORROBORATIVE EVIDEN CES TO DISCARD THE EVIDENCE AND DETAILS SUBMITTED WITH LD. A.O. AND LD , CIT(A) WHICH HAVE NOT BEEN DONE BY THE LOWER AUTHORITIES. LD. A.O. FA ILED TO PROVE THAT APPELLANT HAS INFLATED PURCHASES AND PURCHASE PRICE EVEN IN SINGLE TRANSACTION OUT OF 3 VENDORS. THEREFORE, BOTH THE O RDERS PASSED BY THEM MAY BE SET ASIDE, ADDITION MADE ORDER AND SUSTAINED IN APPEAL MAY BE DELETED OR MAY BE REDUCED TO TOKEN AMOUNT IN THE INTEREST OF JUSTICE. 4. THE LD. AO. ERRED IN REJECTING THE BOOKS RESULT U/S . CIT(A) OF THE ACT AND LD SO ERRED IN HOLDING THE SAME AS CORRECT. 5. AS LD. A.O. DID NOT ATTEND IN THE APPEAL PROCEEDING S INSPITE OF NOTICE GIVEN TO HIM U/S. 250(1) OF THE ACT, ON ADVERSE INF ERENCE MAY BE DRAWN AGAINST HIM U/S, 114(G) OF THE EVIDENCE ACT FOR WIT HHOLDING OF EVIDENCES DOCUMENTS ETC. REGARDING AVAILABILITY OF EVIDENCES, DOCUMENTS, MATERIALS, INFORMATIONS ETC. USE AGAINST THE APPELLANT FOR REO PENING OF THE CASE AS WELL AS FOR MAKING ADDITIONS LD, CIT(A) ALSO ERRED AS HE DID NOT CALLED FOR THE RECORD OF ASSESSMENT AT THE TIME OF HEARING NOR REFERRED THE SAME WHILE PASSING THE APPEAL AIDER AND ALSO FAILED TO D ECIDE THE GROUNDS OF JURISDICTION OF LD. A.O, FOR REOPENING OF THE CASE AND SUSTAINING OF ADDITION, THEREFORE, THERE IS FRAGANT VIOLENCE OF P RINCIPLES OF NATURED JUSTICE AND BOTH THE ORDERS MAY BE SET ASIDE ON THI S GROUND WITH DELETION OF ADDITION SUSTAINED BY LD. CIT(A), RESPONDENT MAY BE DIRECTED TO FILE AFFIDAVIT IN SUPPORT OF THIS SUBMISSION. 6. IT IS PRAYED THAT THE FOLLOWING CIRCULAR DATED 12TH JULY, 2018 MAY BE CONSIDERS D IN THIS APPEAL. 'THE CBDT HAS ISSUED CIRCULAR NO. 03/2018 DATED 11T H JULY, 2018 BY WHICH THE MONETARY LIMITS FOR MAINTAINABILITY OF APPEALS FILED BY DEPARTMENT HAVE BEEN ENHANCED SIGNIFICANTLY. THE CB DT HAS STATED THAT ALL APPEALS AND CROSS OBJECTIONS FILED BY THE DEPARTMENT BEFORE THE TRIBUNAL WHERE THE TAX EFFECT IS LESS TH AN RS. 20/- LAKHS SHOULD BE WITHDRAWN / TREATED AS NOT PRESSED. THE CBPT HAS ALSO MADE IT CLEAR THAT THE CIRCULAR W ILL APPLY TO APPEALS AND CROSS OBJECTIONS TO BE FILED HENCEFORTH AND IT SHALL ALSO APPLY RETROSPECTIVELY TO PENDING APPEALS AND C ROSS OBJECTIONS. THUS HIGHEST AUTHORITY IS NOT INTEREST IN PURS UING OF SUCH APPEALS HAVING TAX LIABILITY LESS THAN RS. 20'- LAKH, THIS APPEAL MAY BE ALLOWED IN ALL RESPECT AND ADDITION SUSTAINED IN AP PEAL MAY BE DELETED. 7. JUDGMENT OF GUJARAT HIGH COURT REFERRED AND RELIED BY FAA CANNOT BE O THE CASE OF THE APPELLANT AS IN THOSE CASES IT WAS ACCEPTED THAT HAS RAMESH KUMAR SAVALACHAND JAIN 4 PURCHASED THE GOODS FROM OTHER PANICS AND RECORDED THE PURCHASES IN THE NAME OF VENDORS IN THE BOOKS OF ACCOUNTS. THE J UDGMENTS CITED OF HONORABLE BOMBAY HIGH COURT AND 1TAT, MUMBAI ARE NO T CONSIDERED AT ALL, THERE IS NO IOTA OF WORD IN APPEAL ORDER, WHIC H ARE BINDING TO ALL THE LOWER AUTHORITIES. 8. APPELLANT SAYS AN SUBMIT THAT WHEN THE APPEAL IS PA RTLY ALLOWED LD. CIT(A) OUGHT TO HAVE DECIDED ALL THE GROUNDS OF APP EAL AND TO PASS REASONED AND SPEAKING ORDER WHICH HAS NOT BEEN DONE BY LD- CIT(A) IN THE CASE OF APPELLANT 9. THE INTEREST LEVIED U/S. 274A, B, C AND D LEVIED ON AMOUNT OF TAX OF ADDITIONS MALE AND SUSTAINED IN APPEAL MAY BE DELET ED OR MAY BE REDUCED TO TOKEN AMOUNT CONSIDERING THE FACTS OF THE CASE, 10. IF A DELAY CAUSED IN FILING OF THIS APPEAL MAY BE CONDONED. 11. APPELLANT CRAVES THE LIBERTY WITH PRAYER TO A LLOW TO ADD OR TO ALTER OR TO AMEND OR TO CHANGE ANY GROUNDS OF APPEAL ON OR BEFO RE THE HEARING OF APPEAL. 12. APPELLANT MAY BE ALLOWED TO SUBMIT AN APPLICAT ION FOR DELAY CONDONATION ISSUING OF AN AD INTERIM STAY ORDER AND AN ABSOLUTE STAY ORDER AND PAPER BOOK AFTER FILING OF THIS APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADER IN STEEL AND OTHER METALS IN THE NAME AND STYLE OF M/S. MAHALAXMI STEEL INDUSTRIES, FILED HIS RETURN OF INCOME FOR AY 2009-10 ON 28/09/2009, DECLARING TOTAL INCOM E OF RS.4,07,510/-. THE RETURN FILED BY THE ASSESSE WAS PROCESSED U/S 143(1) OF THE I.T.ACT, 1961. THEREAFTER, THE CASE HAS BEEN REOPENED U/S 147, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT, INVESTIGATION, MUMBAI, AS PER WHICH, SALES TAX AUTH ORITIES OF GOVERNMENT OF MAHARASHTRA HAD TAKEN ACTIONS AGAINST NUMBER OF HAWALA DEALERS, WHO HAD ISSUED BOGUS PURCHASE BILLS TO VARIOUS PARTIES. AS PER LIST OF BENEFICIARIES, THE ASSESSE E IS ONE OF THE BENEFICIARY, WHO HAD TAKEN ACCOMMODATION BILLS OF B OGUS PURCHASES BILLS FROM VARIOUS PARTIES AS LISTED BY THE AO IN P ARA 2 OF HIS ASSESSMENT ORDER AMOUNTING TO RS. 1,02,92,636/-. TH E CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN C OMPLETED U/S. 143(3).R.W.S. 147 OF THE I.T.ACT, 1961 ON 13/03/201 5 AND DETERMINED TOTAL INCOME OF RS. 29,80,670/-, AFTER MAKING ADDIT ION OF 25% GROSS RAMESH KUMAR SAVALACHAND JAIN 5 PROFIT ON ALLEGED BOGUS PURCHASE FROM THOSE PARTIES AND MADE ADDITIONS OF RS. 25,73,159/- TO TOTAL INCOME DECLAR ED FOR THE YEAR. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSE HAS FILED ELABORATE WRITTEN SUBMISSIONS, ON THE ISSUE, WHICH HAS BEEN REPRODUCED AT PARA 4 ON PAGES 3 TO 5 OF LD. CIT(A) ORDER. THE SUM AND SUBSTANCE OF THE ARGUMENTS OF THE ASSESSEE BEFO RE THE LD.CIT(A) ARE THAT PURCHASE FROM THE ABOVE PARTY IS GENUINE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THEREFORE, NO ADDITIONS COULD BE MADE ON THE BASIS OF INFORMATION RECEIVED FROM T HIRD PARTY. THE ASSESSEE HAD ALSO CHALLENGED REOPEING ASSESSMENT. T HE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSION REJECTED LEGA L GROUND TAKEN BY THE ASSESSEE CHALLENING REOPENING ASSESSMENT. INSOF AR AS ADDITION TOWARDS ALLEGED BOGUS PURCHASES AFTER CONSIDERING A RGUMENTS OF THE ASSESSEE AND ALSO, BY FOLLOWING THE DECISION OF HON BLE GUJARAT HIGH COURT, IN THE CASE OF CIT VS. SIMITH P. SHETH (356 ITR 451) SCALED DOWN ADDITION MADE BY THE AO TO 12.50% GROSS PROFIT ON ALLEGED BOGUS PURCHASES/-. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDER:- 5. CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF TH E CASE AS WELL AS THE APPLICABLE LEGAL POSITION BEFORE ARRIVING THE FOLLO WING CONCLUSION/DECISION. 6.1 THE GROUND NO- 1 TO 4, DEALS WITH THE ESTIMATED ADDITION MADE BY THE 1,02,92,6367-, 6.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS ON THE ISSUE ON HAND. ON PERUSAL OF THE ASSESSMENT ORDER, FT IS NOTICED T HAT, IN THE APPELLANT'S CASE, LD. AO HAS MADE INDEPENDENT VERIFICATIONS, AP ART FROM THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT NOTICE WAS ISSUED U/S 142(1) OF THE ACT, CALLING FOR SEVERAL DETAILS WITH REGARD TO THE PURCHASES AND SALES SUPPORTED BY BILLS AND VOUCHERS . THE APPELLANT FAILED TO FURNISH ALL THE DETAILS AND REQUESTED THE AO TO COMPLETE THE ASSESSMENT AFTER MAKING A REASONABLE ADDITION. IN T HE PRESENT CASE, THERE IS OVERWHELMING EVIDENCE IN THE FORM OF STATE MENT OF SUPPLIER GIVEN RAMESH KUMAR SAVALACHAND JAIN 6 BEFORE THE SAFES TAX AUTHORITIES THAT IT WAS ENGAGE D ONLY IN ISSUING HAWALA BILLS AND NO GOODS WERE EVER SUPPLIED BY THE M. 6.3 AFTER WEIGHING THE EVIDENCE PROS AND CONS, I FIND THAT THE APPELLANT HAS NOT RECONCILED THE PURCHASES WITH THE ITEMS SOL D DESPITE GIVING AN OPPORTUNITY TO DO SO, BY THE AO DURING THE ASSESSME NT PROCEEDINGS. ONUS IS ALWAYS ON THE APPELLANT TO PROVE AS TO HOW THE MATERIAL PURCHASED WAS FIRSTLY OBTAINED. THE ASSESSEE COULD NOT SUBMIT THE DETAILS CALLED FOR BY THE A.O. AND FAILED TO LINK P URCHASES WITH CORRESPONDING SALES. THUS, IT CAN BE SAFELY PRESUME D THAT EITHER THEY ARE NON-EXISTENT OR EVEN IF THEY DID EXIST, THEY WERE N OT BACKED BY SUFFICIENT EVIDENCE TO UNDERGO THE TEST OF SCRUTINY. 6.4 THE SUPPLIER WAS IN FACT THE APPELLANT'S WITNES S AND THE LD. AO WAS NOT REQUIRED TO FORCE THEIR ATTENDANCE. IT WAS FOR THE APPELLANT TO PRODUCE THEM AS PER CIVIL PROCEDURE CODE, WHICH APPLIES ON ALL FOURS TO THE INCOME-TAX PROCEEDINGS. IT IS TRITE THAT ONCE A TRA NSACTION IS SHOWN TO BE OF THE NATURE OF INCOME, THE ONUS SHIFTS TO THE ASS ESSEE TO SHOW THAT THE SAME IS NOT TAXABLE. IT CAN THUS BE SAFELY ASSUMED THAT THE APPELLANT HAS GROSSLY FAILED IN ITS DUTY TO MITIGATE THE BURDEN C AST UPON IT IN SO FAR AS PROVING THE GENUINENESS OF THE TRANSACTION FROM THE SAID PARTY IS CONCERNED. 6.5 AR IN THE WRITTEN SUBMISSIONS ALSO STATED THAT THE AO NOT ISSUED 133(6) NOTICES, NOT SUMMONED THE PARTIES ETC., TO V ERIFY THE GENUINENESS OF THE PURCHASES. IN THIS REGARD IT IS PERTINENT TO MENTION THAT WHILE DEALING WITH THE CONCEPT OF BURDEN OF PROOF, ONUS O F PROVING IS ALWAYS ON THE PERSON WHO MAKES THE CLAIM AND NOT ON THE REVEN UE. WHILE DEALING WITH THE ISSUE OF DECIDING THE BURDEN OF PROOF, HON 'BLE SUPREME COURT IN THE CASES OF CIT VS. DURGAPRASAD MORE 82 ITR 540 AN D SUMATI DAYAL VS. CU 214 ITR 801 HAS HELD THAT THE APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT REAL AND THAT TAXING AUTHORITIES ARE ENTITLED TO LO OK INTO SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTE R HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. THE HO NBLE COURT ALSO HELD THAT, IT IS NO DOUBT, TRUE THAT IN ALL CASES IN WHI CH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN TO PROVE THAT IT IS NOT TAXABLE BECAUSE IT F ALLS WITHIN EXEMPTION PROVIDED BY THE ACT, LIES UPON THE ASSESSES. IN THE CASE OF DURGAPRASAD MORE (SUPRA), THE HONBLE COURT WENT ON TO ADD THAT A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF T HIS RECITAL, OTHERWISE IT WILL BE VERY EASY TO MAKE SELF SERVING STATEMENTS IN DOC UMENTS EITHER EXECUTED OR TAKEN BY A PARTY WHO RELIED ON THOSE RE CITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX HAS TO HAVE L SOME RECITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. THE HONBLE CO URT FURTHER HELD THAT THE TAXING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLIN KERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM. THEY WERE ENTIT LED TO LOOK IN TO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY O F THE RECITALS MADE IN THOSE DOCUMENTS. RAMESH KUMAR SAVALACHAND JAIN 7 6.6 ' IT IS ALSO A SETTLED LEGAL PROPOSITION THAT I F NO EVIDENCE IS GIVEN BY THE PARTY ON WHOM THE BURDEN IS CAST, THE ISSUE MUST BE FOUND AGAINST HIM. THEREFORE, ONUS IS ALWAYS ON A PERSON WHO ASSERTS A PROPOSITION OR FACT, WHICH IS NOT SELF-EVIDENT. THE ONUS, AS A DETERMINI NG FACTOR OF THE WHOLE CASE CAN ONLY ARISE IF THE TRIBUNAL WHICH IS VESTED WITH THE AUTHORITY TO DETERMINE FINALLY ALL QUESTIONS OF FACT, FINDS THE EVIDENCE PRO & CON, SO EVENLY BALANCED THAT IT CAN COME TO NO CONCLUSION, THEN THE ONUS WILL DETERMINE THE MATTER. HOWEVER, IN THE INSTANT CASE, THE APPELLANT HAS MISERABLY FAILED TO LEAD EVIDENCE AND HENCE, ONUS I S A DETERMINING FACTOR. 6.7 LD. AO ADDED AN AMOUNT RS, 25,73,159/-, BEING 25% OF THE TOTAL NON-GENUINE PURCHASES TO THE TOTAL INCOME OF THE AS SESSEE. THUS, THE ISSUE WOULD BOIL DOWN WHETHER THE ELEMENT OF PROFIT ADOPTED BY THE AO @25% TREATING THE SAME AS THE PROFIT ELEMENT EMBEDD ED IN SUCH BOGUS PURCHASES, WHICH THE APPELLANT WOULD HAVE MADE FROM SOME UNKNOWN ENTITIES IS CORRECT OR NOT. 6.8 HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. SIMIT SHETH (2013) 356 ITR 451 (GUJ), HONBLE COURT WAS SEIZED WITH TH E SIMILAR ISSUE WHERE THE A.O. HAD FOUND THAT SOME OF THE ALLEGED SUPPLIE RS OF STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PR OVIDED SALE BILLS AND HENCE, PURCHASES FROM THE SAID PARTIES WERE HEL D TO BE BOGUS. THE AO, IN THAT CASE ADDED THE ENTIRE AMOUNT OF PURCHAS ES TO GROSS PROFIT OF THE ASSESSEE. LD. CIT (A) HAVING FOUND THAT THE ASS ESSEE HAD INDEED PURCHASED THOUGH NOT FROM NAMED PARTY OUT OTHER PAR TIES FROM GREY MARKET, PARTIALLY SUSTAINED THE ADDITION AS PROBABL E PROFIT OF THE ASSESSEE. THE TRIBUNAL HOWEVER, SUSTAINED THE ADDIT ION TO THE EXTENT OF 12.5%. TAKING INTO ACCOUNT THE ABOVE FACTS, THE HON 'BLE GUJARAT HIGH COURT HELD THAT SINCE THE PURCHASES WERE NOT BOGUS, BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCO UNTS, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED T O THE ASSESSEE'S INCOME AND AS SUCH NO QUESTION OF LAW AROSE IN SUCH ESTIMATION. WHILE ARRIVING AT THE ABOVE CONCLUSION, THE HONBLE COURT ALSO RELIED ON THE DECISION IN THE CASE OF VIJAY M. MISTRY CONSTRUCTIO N LTD. 355 ITR 498 (GUJ) AND FURTHER APPROVED THE DECISION OF AHMEDABA D BENCH, P'AT IN THE CASE OF VIJAY PROTEINS 58 ITD 428. 6.9 HON'BLE GUJARAT HIGH COURT IN THE CASE OF CFT V S. SIMIT P. SHETH 356 ITR 451 (GUJ), UPHELD THE DECISION OF THE ITAT, WHI CH CONFIRMED THE ADDITION @12.5% OF THE TOTAL BOGUS PURCHASE. TAKING INTO ACCOUNT THE FACTS OF THE CASE, THE HON'BLE GUJARAT HIGH COURT H ELD THAT SINCE THE PURCHASES WERE NOT BOGUS, BUT WERE MADE FROM PARTIE S OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNTS, ONLY THE PROFIT ELE MENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INC OME AND AS SUCH NO QUESTION OF LAW AROSE IN SUCH ESTIMATION. 6.10 THE APPELLANT MADE PURCHASES FROM PARTIES WHO ARE SAID TO BE HAWALA OPERATORS, WHO IS INDULGED IN PROVIDING BOGU S BILLS WITHOUT SUPPLY OF ANY MATERIAL. INDEPENDENT INQUIRIES CONDUCTED RE VEALED THAT NO SUCH PARTY IS EXISTING IN THE GIVEN ADDRESS. WHEN ASKED TO PRODUCE THE PARTY DURING THE ASSESSMENT PROCEEDINGS BY THE AO, APPELL ANT EXPRESSED HIS RAMESH KUMAR SAVALACHAND JAIN 8 INABILITY TO DO SO. IN THE PRESENT CASE, A.O ESTIMA TED THE PROFIT PERCENTAGE ON BOGUS PURCHASES AS 25%. THE SIMPLE ISSUE TO BE D ECIDED IS WHETHER THE PERCENTAGE ADOPTED BY THE AO IS CORRECT IN THE LINE OF BUSINESS I.E. TRADING IN FERROUS AND NON-FERROUS METALS. AS NOTIC ED ABOVE, IN THE SIMILAR CIRCUMSTANCES OF BOGUS PURCHASES, HON'BLE GUJARAT H IGH COURT ESTIMATED THE ADDITIONAL ADVANTAGE TOWARDS TAX BENEFIT. IN VI EW OF THE ABOVE, IN MY CONSIDERED OPINION, IF THE PROFIT PERCENTAGE EMBEDD ED ON SUCH PURCHASES IS RESTRICTED TO 12.5% THAT WILL MEET THE ENDS OF T HE JUSTICE. TAKING ALL THE FACTS INTO CONSIDERATION AND APPLYING THE LOGIC OF SIMIT P. SHETH CASE, THE A.O. IS DIRECTED TO RESTRICT THE ESTIMATION @ 12,5% ON THE NON GENUINE PURCHASES OF RS, 1, 02,92, 636/-. APPEAL ON GROUND NO. 1 TO 4 IS TREATED AS 'PARTLY ALLOWED'. 7. IN GROUND NO. 6 OF THE APPEAL IS AGAINST REOPENI NG OF THE ASSESSMENT. IT IS STATED IN THE GROUND THAT A.O. ERRED IN ISSU ING NOTICE U/S 148 OF THE ACT. 7.1 : THE SUBMISSIONS MADE IN THE GROUND AND THE STATEME NT OF FACTS BY THE APPELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTS OF THE CASE AND MATERIAL PLACED ON RECORD. IT IS SETTLED L EGAL POSITION THAT IN A CASE WHERE THERE WAS NO ASSESSMENT OR RE-ASSESSMENT PRIOR TO REOPENING OF ASSESSMENT, EVEN IF ALL THE MATERIAL F ACTS ARE DISCLOSED IN THE RETURN OF INCOME ALREADY FILED, REOPENING CAN B E INITIATED, IF THE ASSESSING OFFICER HAS 'REASON TO BELIEVE' THAT THE INCOME HAS ESCAPED ASSESSMENT. THE ASSESSEE IN SUCH CASES CANNOT ASSAI L THE REOPENING ON THE GROUND THAT THE FACTS WERE ALREADY PLACED ON RE CORD AND THAT THE ASSESSING OFFICER OUGHT TO HAVE CONSIDERED THE FACT S. HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERR STOCK BROKERS (P) LTD. (291 ITR 500} OBSERVED THAT THE WORD 'REASON' IN THE EXP RESSION REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION AND IF T HE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASONS TO BELIE VE THAT INCOME HAD ESCAPED ASSESSMENT. IT IS FURTHER OBSERVED BY THE S UPREME COURT THAT THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSE SSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON TO BE LIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE ST AGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MAT ERIAL ON WHICH A REASONABLE PERSON COULD IT IS EVIDENT FROM THE REAS ONS RECORDED AS REPRODUCED IN THE STATEMENT OF FACTS BY THE APPELLA NT THAT THE AO HAS RECEIVED SPECIFIC AND CREDIBLE INFORMATION FROM THE DGIT(LNV.), MUMBAI THAT THE ASSESSES WAS INVOLVED IN MAKING BOGUS PURC HASES THROUGH HAWALA DEALERS TO THE EXTENT OF RS, 1,02,92,636/-. THE INFORMATION PRIMA FACIE REVEALED THAT THE APPELLANT HAS CLAIMED PURCH ASES FOR THE A.Y. 2009-10 IN THEIR BOOKS. BASED ON THIS PRECISE INFOR MATION, THE AO ISSUED NOTICE U/S. 148 OF THE I,T. ACT AS HE HAD PRIMA-FAC IE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMEN T WITHIN THE MEANING OF SEC. 147 OF THE I,T. ACT. THUS, THERE WA S CAUSE OR JUSTIFICATION FOR THE AO TO INVOKE PROVISIONS OF SEC. 147 AND ISS UE NOTICE U/S. 148. AS ALREADY MENTIONED, AT THE INITIATION STAGE, WHAT IS REQUIRED TO BE SEEN IS WHETHER THERE ARE PRIMA-FACIE 'REASONS TO BELIEVE' BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME- THE AO ALSO RECORDED PROPER REASONS FOR RAMESH KUMAR SAVALACHAND JAIN 9 FORMATION OF THE BELIEF THAT INCOME HAS ESCAPED ASS ESSMENT. IT IS ALSO IMPORTANT TO NOTE THAT THE INFORMATION RELATING TO HAWALA OPERATORS WAS ALSO MADE AVAILABLE IN PUBLIC DOMAIN I.E. IN THE OF FICIAL WEBSITE OF THE MAHARASHTRA SAFES TAX DEPARTMENT AND THEREFORE THE REASONS FOR REOPENING THE ASSESSMENT ARE NOT BASED ON MERE SUSP ICION. THUS, ALL THE CONDITIONS NECESSARY FOR REOPENING OF THE ASSESSMEN T UNDER THE PROVISIONS OF SEC. 147 AND FOR ISSUE OF NOTICE U/S. 148 ARE SATISFIED IN THE CASE OF THE APPELLANT FOR THE YEAR UNDER APPEAL. FO R THE FOREGOING REASONS, IT IS HELD THAT REOPENING OF THE ASSESSMEN T UNDER SECTION 147 OF THE ACT WAS DONE PROPERLY FOLLOWING THE DUE PROCEDU RES RAID DOWN BY THE LAW AND THERE IS NO INFIRMITY OR ILLEGALITY IN REOP ENING THE ASSESSMENT AND THE NOTICE ISSUED U/S, 148 FOR THE YEAR UNDER CONSI DERATION IS PERFECTLY LEGAL AND VALID. RESULTANTLY, GROUND NO- 6 RELATING TO THE REOPENING IS 'DISMISSED'. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE LD. AO HAS MADE ADDITION OF 25% GROSS PROF IT TOWARDS ALLEGED BOGUS PURCHASES, ON THE GROUND THAT THE ASS ESSEE ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS P URCHASE BILLS ISSUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAIL ED TO FILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDING BY THE SA LES TAX DEPARTMENT, MAHARASHTRA THAT THOSE PARTIES ARE INVO LVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GO ODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIGATION CONDU CTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTI CE ISSUED U/S 133(6) TO THE PARTY WERE RETURNED UN-SERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCLUSION THAT PURCHASE FROM THE SAID PARTY IS BOGUS IN NATURE. IT IS THE CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT A PURCHASE FROM THE ABOV E PARTY IS SUPPORTED BY NECESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAI LS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHA SES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. RAMESH KUMAR SAVALACHAND JAIN 10 6 HAVING CONSIDERED ARGUMENTS OF BOTH PARTIES AND A LSO, CONSIDERED MATERIALS AVAILABLE ON RECORD, WE FIND T HAT BOTH THE SIDES FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECES SARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BASIC EVIDENCE S, BUT FAILED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PROVE PURCHA SES TO SATISFACTIONS OF THE LD.AO. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A LOGICAL CONCL USION BY CARRY OUT NECESSARY ENQUIRES, BUT HE SOLELY RELIED UPON INFO RMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTE D BY INFORMATION RECEIVED FROM MAHARASHTRA SALES TAX DEPARTMENT. UN DER THESE CIRCUMSTANCES, IT IS DIFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN CASES INVLOVED ALLEGED BOGUS PURCHASES, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONSIDERED AN IDENTICAL IS SUE IN LIGHT OF INVESTIGATION CARRIED OUT BY THE SALES TAX DEPARTME NT AND HELD THAT IN CASE PURCHASES CLAIMS TO HAVE MADE FROM ALLEGED HAWALA DEALERS , ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES N EEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. T HE HONBLE GUJARAT HIGH COURT, IN THE CASE OF CIT VS SIMITH P.SHETH 35 6 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIM E OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARD STICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. TH E ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSU E AND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTI MATE PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THI S CASE, CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS ESTIMATED 25% GROSS PROFIT, WHEREAS THE LD.CIT(A) H AS SCALED DOWN ADDITION TO 12.50% GROSS PROFIT ON TOTAL ALLEGED BO GUS PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RAT E OF GROSS PROFIT FOR ESTIMATION OF INCOME FROM ALLEGED BOGUS PURCHASE, B UT NO ONE COULD RAMESH KUMAR SAVALACHAND JAIN 11 SUPPORT SAID RATE OF GROSS PROFIT WITH NECESSARY EV IDENCES OR ANY COMPARABLE CASES. IN THIS CASE, THE ASSESSEE IS INT O THE BUSINESS OF TRADING IN IRON AND STEEL MATERIALS. THE VAT RATE A PPLICABLE TO SAID GOODS IS 4%. THE ASSESSEE MAY HAVE SAVED 4% VAT COM PONENT AND FURTHER 2% TO 3% IN PRICE REDUCTION BY INDULGIN G IN OBTAINING ACCOMADATION ENTRIES FROM ENTRY PROVIDERS. THEREFOR E, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCHS IN NUMBER OF CASES, WE DI RECT THE LD. AO TO ADOPT 6.50% (PROBABLE SAVINGS IN 4% VAT + 2.5% M ARGIN ON PURCHASES) GROSS PROFIT ON ALLEGED BOGUS PURCHASES AMOUNTING TO RS. 1,02,92,636/- FROM THOSE TWO PARTIES. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR AY 2009-10 IS PARTLY ALLOWED. ITA NO.5263/MUM/2019 FOR AY 2011-12 & ITA NO.5264/MUM/2019 FOR AY 2010-11:- 8. THE FACTS AND ISSUES INVOLVED IN THESE TWO APPEA LS FILED BY THE ASSESSE ARE IDENTICAL TO THE FACTS AND ISSUES, WHIC H WE HAD CONSIDERED IN ITA NO.5679/MUM/2018 FOR AY 2009-10. THE REASONS GIVEN BY US IN PRECEDING PARAGRAPHS IN ITA NO.5679/ MUM/2018 SHALL MUTATIS MUTANDIS APPLY TO THIS APPEAL, AS WELL. THE REFORE, FOR SIMILAR REASONS RECORDED IN ITA NO.5679/MUM/2018, WE DIREC T THE LD.AO TO ESTIMATE 6.50% GROSS PROFIT ON TOTAL ALLEGED BOG US PURCHASES FROM SUSPICIOUS/HAWALA DEALERS. 9. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FOR AY 2010-11 AND 2011-12 ARE PARTLY ALLOWED. RAMESH KUMAR SAVALACHAND JAIN 12 10. AS A RESULT, ALL APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 /12 /2019 SD/- (RAVISH SOOD) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 12 /12/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//