DCIT 15(1)(1), MUMBAI V. A.J. BUILDCON P.LTD, MUMBAI

ITA 6204/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6700 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 21-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Depreciation; Period of limitation; Difference of opinion; Assessment record; Sham transactions; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 6204 / MUM/ 201 6 ( / ASSESSMENT YEAR: 20 09 - 10 ) THE DY. CIT 15(1)(1), MUMBAI ROOM NO. 470, 4 TH FLOOR, AAYAKA R BHAVAN, MAHARSHI KARVE ROAD, MUMBAI - 400020. / VS. M/S. A. J. BUILDCON PVT. LTD. 514, MARATHON MAX, OPP, NIRMAL LIFE STYLE, LBS ROAD, MULUND (W), MUMBAI - 400080. ./ ./ PAN/GIR NO. : AAGCA 6548 Q ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 01 . 0 6 .201 8 / DATE OF PRONOUNCEMENT : 29 . 06 . 201 8 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 22 .0 7 .2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 24 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 09 - 10 . 2 . THE REVENUE HAS RAI SED THE FOLLOWING GROUNDS: - 1. 'ON THE FARTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN TAW, THE LD. C1T(A) ERRED DIRECTING THE ASSESSING OFFICER TO DELETE THE ENTIRE DISALLOWANCE OF RS.67,99 H L3Q/ - MAD ACCOUNT OF ALLEGED BOGUS PURCHASES, WITHOUT APPREC IATING THE FACT THAT THE SAID SELLER PA WERE FOUND TO BE HAWALA OPERATORS/ BOGUS BILLERS?, AS PER FINDINGS GIVEN BY (HE SALES REVENUE BY : SHRI M. V. RAJGURU (DR) ASSESSEE BY: SHRI DR. P. DANIEL ITA NO. 6204 /M/2016 A.Y.20 09 - 10 2 DEPARTMENT, GOVT. OF MAHARASHTRA, AND THE INVESTIGATION WING, INCOME TAX DEPARTS MUMBAI. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED DIRECTING THE ASSESSING OFFICER TO DELETE THE ENTIRE DISALLOWANCE MADE ON ACCOUNT OF ALL BOGUS PURCHASES, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NEITHER CONFIRMATION FOR PURCHASES NOR PRODUCED ANY EVIDENCES IN THE SHAPE OF STOCK REGISTER THE COURSE OF ASSESSMENT PROCEEDINGS, TO SUBSTANTIATE ITS CLAIM THAT THE GOODS CLAIMS HAVE BEEN PURCHASED FROM ALLEGED PARTIES WERE ACTUALLY CONSUMED/ SOLD. 3 'ON THE FACTS AND IN THE CIRCUMSTANCE 5 OF THE CASE AND IN LAW;, THE LD. C1T(A} DIRECTING THE ASSESSING OFFICER TO DELETE THE ENTIRE DISALLOWANCE MADE ON ACCOUNT OF ALL BOGUS PURCHASES, EVEN THOUGH THE HONBLE ITAT IN THE CASE OF VIJAY PROTIENS 58 ]TD 428 CONFIRMED ADDITION OF 25% OF THE AMOUNT OF SUCH PURCHASE S .' 4. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C1T(A) ERRED IN CONSIDERING THE DECISIONS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF LA MEDICA 250 575 (2001), WHEREIN IT IS HELD THAT THE PURCHASES FROM UNPROVEN PARTIES IS BOG US, AND DECISION OF THE HON'BLE GUJARAT HIGH COURT IN HYNOUP FOODS & OIL INDUSTRIES PVT. LTD. 1TR 702 (GUJ], WHEREIN IT IS HELD THAT PROVISIONS OF SECTION 40A (3) OF THE INCOME 'FAX ANT APPLICABLE TO THE CASE OF BOGUS PURCHASE.' 5 R THE APPELLANT CRAVES L EAVE TO ADD, AMEND OR ALTER ANY OF THE AFORESAID GROUNDS OR AD NEW GROUND OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL.' 6. THE APPELLANT PRAYS THAT THE ORDER OF THE C1T(A) P MUMBAI ON THE ABOVE DIRECTIONS BE ASIDE AND THAT OF THE ASS ESSING OFFICER BE RESTORED,' 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 .0 9 .20 09 DECLARING TOTA L INCOME TO THE TUNE OF RS.64,28,450 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT ACCEPTING THE RETURNED IN CO ME. THEREAFTER AN INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT, MUMBAI CONVEYING THAT THE ASSESSEE OBTAINED THE BOGUS PURCHASE BILLS AMOUNTING TO RS.67,99,130/ - FROM VARIOUS PARTIES. THEREFORE THE CASE WAS REOPENED U/S 148 OF THE ACT AND THE BOGUS PURCHASE FROM VARIOUS PARTIES TO THE TUNE OF RS.67,99,130/ - WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE WAS NOT SATISFIED, THEREFORE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ITA NO. 6204 /M/2016 A.Y.20 09 - 10 3 ASSESSEE. A GGRIEVED BY SAID ORDER , THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NOS. 1 TO 4: - 4. WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. UNDER THIS ISSUE THE REVENUE HAS CHALLENGED THE DELETI ON OF ADDITION RAISED ON ACCOUNT OF BOGUS PURCHASE TO THE TUNE OF RS.67,99,130/ - BY THE CIT( A). BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - DECISION : 2,4 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF [HE CASE AS ALSO THE LEGAL POSITION. GROUND NO. 1 IS GENERAL IN NATURE AND NEED NO! BE ADJUDICATED. 24.2 GROUND NO.2 DEALS WITH THE MERITS OF THE DISALLOWANCE OF BOGUS PU RCHASE TOWARDS MVAT DEALERS WHOSE NAMES APPEARED ON THE WEB SITE OF SALES TAX AUTHORITIES HOWEVER, GROUND NOS 3 & 4 NEED TO BE ADJUDICATED FIRST AS THEY ARE IN RESPECT OF THE RE - OPENING OF THE ASSESSMENT. 2.4.3 GROUND NOS. 3 & 4 - ARE AGAINST THE RE - OPENING OF ASSESSMENT U/S 147 OF THE ACT. IT IS SEEN THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(1). FURTHER, ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING IT WAS FOUND BY LD. AO THAT THE APPELLANT HAD OBTAINED BOGUS PURCHASE BILFS AMOUN TING TO RS.67,99,130/ - FROM 14 PARTIES. LD. AO FOUND THAT THE APPELLANT HAD PROCURED THE ABOVE BILLS WITHOUT TAKING THE ACTUAL DELIVERY OF MATERIAL RESULTING IN INFLATION OF CLAIM OF EXPENSES. THE SAME WAS CORROBORATED BY THE INFORMATION FROM SALES TAX AUTH ORITIES AND HENCE, AFTER TAKING INTO CONSIDERATION THE ABOVE ADDITIONAL INFORMATION, LD. AO PROCEEDED TO ISSUE A NOTICE U/S 148 OF THE ACT DATED 13.03.2014 AFTER RECORDING THE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. 2.4.4 PER CONTRA, LD. AR FOR THE APPELLANT HAS STATED THAT THE CASE WAS RE OPENED MERELY ON THE OPINION OF A THIRD PARTY AND HENCE, THE SAID RE - OPENING WAS BAD - IN - LAW. ITA NO. 6204 /M/2016 A.Y.20 09 - 10 4 2.4.5 AS POINTED OUT EARLIER, THE ASSESSMENT HAS BEEN RE - OPENED ON THE BASIS OF A FRESH INFORMATION RECEIVED FROM THE INVESTIGATION WING REGARDING OBTAINING OF BOGUS PURCHASE B ILLS AND THE APPELLANT HAS MEREL Y TRIED TO BRUSH IT ASIDE BY STALING THAT LD. AO ACTED ON THE OPINION OF A THIRD PARTY , I T IS A TRITE L AW THAT AT THE STAGE OF INITIATION OF RE - ASSESSMENT PROCE EDINGS, IT IS NOT REQUIRED OF THE AO TO COME TO A DEFINITE CONCLUSION ABOUT THE QUANTUM OF INCOME ESCAPING ASSESSMENT AND IT IS SUFFICIENT IF HIS ACTION IS BASED ON A TANGIBLE EVIDENCE WHICH HAS A LIVE NEXUS TO THE . - FAC TS OF THE APPELLANT'S CASE BASED ON WHICH A MAN OF COMMON PRUDENCE CAN FORM A ' X ' 'REASONABLE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT I DO NOT FIND THAT THE SAME IS LACKING IN THIS CASE AS THE INFORMATION RECEIVED FROM THE INVESTIGATION WING WAS CORROBORATED BY THE SALES TAX AUTHORITI ES AND LD. AO AFTER DUE APPLICATION OF MIND AND AFTER FOLLOWING THE PROCEDURE AS LAID DOWN UNDER LAW INITIATED THE RE - ASSESSME NT PROCEEDINGS. NEVERTHELESS, IT MAY BE IMPORTANT TO ALSO EXAMINE WHAT THE VARIOUS COURTS HAVE HELD IN SO FAR AS RE - OPENING OF ASS ESSMENT IS CONCERNED. 2 4 6 IT IS THE DUTY OF THE ASSESSEE TO DISCLOSE FULL AND TRUE MATERIALS TO THE A.O, BUT FOR WHICH THE A.O. COULD INITIATE THE REASSESSMENT PROCEEDINGS. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN SHRI KRISHNA P. LTD, 221 1TR 538 , 549 THAT EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE A TRUE AND FULL DISCLOSURE. A DISCLOSURE MAY BE A FALSE ONE OR A TRUE ONE. IT MAY BE A FU LL DISCLOSURE OR IT MAY RIOT BE . THE HON'BLE SUPREME COURT HELD THAT A PARTIAL DISCLOSURE MAY VERY OFTEN BE A MISLEADING ONE. THEREFORE, WHAT IS REQUIRED IS A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR MAKING ASSESSMENT FOR THAT YEAR. I FIND FROM THE REASONS RECORDED BY THE LD A.O. THAT THE CORRECT NATURE OF THESE TRANSACTIONS WERE NOT DISC LOSED BY THE APPELLANT AND THEREFORE, PRIMA FACIE HE HAD VALID GROUNDS TO REOPEN THE CASE, 2.4 1 IT HAS BEEN HELD IN A NUMBER OF CASES THAT ONCE THE A.O. RECORDS THE MANDATORY REASONS BEFORE INITIATING REASSESSMENT PROCEEDINGS ON THE BASIS OF EVIDENCE BROU GHT TO HIS KNOWLEDGE, THE COURTS CANNOT STEP INTO HIS SHOES AS REGARDS THE SUFFICIENCY OF THE REASONS RECORDED. THE BELIEF MUST BE HONEST AND OF REASONABLE PERSON BASED ON REASONABLE GROUNDS. THE A.O. MAY ACT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE; BUT HIS B ELIEF MUST NOT BE BASED ON MERE SUSPICION, GOSSIP OR RUMOUR I FIND FROM THE FACTS OF THE CASE THAT THE REASON IS BASED ON SPECIFIC FACTS. THE HON'BLE APEX COURT ITA NO. 6204 /M/2016 A.Y.20 09 - 10 5 HAS HELD THAT THE COURT CAN ALWAYS EXAMINE THIS ASPECT T LE, FORMATION OF BELIEF) THOUGH THE DE CLARATION OR SUFFICIENCY OF THE REASONS FOR THE BELIEF CANNOT BE INVESTIGATED BY THE COURT. { {SHEO MATH SINGH 82 ITR 147)(SC) : BHAGWAN INDUSTRIAL P.LTD. 31STC 293 (SC):J 2.4.8 HON'BLE SUPREME COURT IN THE CASE OF RAYMOND WOOLLEN MILLS LTD. VS. ITO 236 ITR 34, 35 (SC) HAS HELD THAT FOR DETERMINING WHETHER INITIATION OF REASSESSMENT PROCEEDINGS WAS VALID, IT HAS ONLY TO BE SEE N WHETHER THERE WAS PRIMA FACIE ME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. IT FURTHER HELD THAT THE SUFFI CIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THIS STAGE THE HON'BLE APEX COURT IN THE CASE OF SHRI KRISHNA P. LID. (SUPRA) HAS ALSO HELD THAT THE ENQUIRY AT THE STAGE OF EXAMINING THE VALIDITY OF REASSESSMENT NOTICE IS ONLY TO S EE WHETHER THERE ARE REASONABLE GROUNDS FOR THE A.O. AND NOT WHETHER THE OMISSIONS/FAILURES AND THE ESCAPEMENT OF THE IS ESTABLISHED. THE HON'BLE COURT THEREFORE, CAUTIONED THAT IT WAS NECESSARY TO KEEP THIS DISTINCTION IN MIND. 2,4,9 AT THIS JUNCTURE IT W OULD BE APPROPRIATE TO REPRODUCE THE EXPLANATION TO SEC.147 WHICH READS AS UNDER: - ' EXPLN 2 - FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL AL SO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY . FA) WHER E NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO I NCOME - TAX; (B) WHERE G RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AN D IT IS NOTICED BY THE AC THAT T HE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN !H& R ETURN, (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT - (I) INCOME CHARGEABLE O TAX HAS BEEN UNDER ASSESSED, ;OR FT) SUCH INCOME HAS BEEN ASS ESSED AT TOO L AW A RATE . OR (HI) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE UNDER T HIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED ' 2.4.10 INTERPRETING AND HIGHLIGHTING THE SIGNIFICANCE OF THE SAID EXPLANATION IN CONSOLIDATED PHOTO & FINVEST LTD VS. ASSTT. CIT (2006 ) 200 CTR (DEL) 433 : (2006)281 ITR 394 (DEL) IT HAS BEEN HELD. ITA NO. 6204 /M/2016 A.Y.20 09 - 10 6 '9. THE ABOVE WOULD SHOW THAT ESSES TAILING IN CT.(C) OF EXPLN. 2 IN WHICH INCOME CHARGSABLE TO TAN HAS BEEN UNDERASSESSED OR ASSESSED AT TOO TOW A RATE OR CASES IN WHICH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THE ACT OR WHERE EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OF ANY OTHER ALLOWANCE UNDER THE ACT HAS BEEN COMPUTED, WOULD CONSTITUTE CASES OF INCOME ESCAPING ASSESSEE. THERE IS CONSIDERABLE AUTHORITY FOR THE PROPOSITION THAT THE JURISDICTION OF THE AO TO INITIATE PROCEEDINGS WOULD DEPEND UPON WHETHER HE HAS REASONS TO BELIEVE THAT ANY INCOME CHARGEABLE TO FAX HAS ESCAPED ASSESSMENT. A LONG STRING OF DECISIONS RENDERED BY THE SUPREME COURT HAVE EMPHASIZED THAT THE BELIEF O F THE AO RWST BE .IN GOOD FAITH AND MUST NOT BE A MERE PRETENCE. THE APEX COURT HAS FURTHER HELD THAT THERE MUST BE A NEXUS BETWEEN THE MATERIAL BEFORE THE AO AND THE BELIEF WHICH HE FORMS REGARDING THE ESCAPEMENT OF THE ASSESSEE'S INCOME. A WRIT COURT, TH EREFORE, IS ENTITLED TO EXAMINE WHETHER THE AO'S BELIEF WAS IN GOOD FAITH AND WHETHER SUCH REASONS HAD A NEXUS WITH THE ACTION PROPOSED TO BE TAKE N. 2.4.11 THE PRESENT CASE IS NOT ONE OF CHANGE OF OPINION AS ALLEGED BY THE APPELLANT. QUESTION OF CHANGE OF OPINION ARISES WHEN THE A.Q, FORMS AN OPINION AND DECIDES NOT TO MAKE AN ADDITION AND HOLDS THAT THE APPELLANT WAS CORRECT IN HIS STAND. IN THE PRESENT CASE, NO FACTS REGARDING THE SHAM TRANSACTIONS WITH BOGUS ENTITY HAS BEEN DELIBERATED OR THE SAID PARTY WAS EVER PRODUCED BY THE APPELLANT AS ORIGINAL ASSESSMENT WAS FRAMED U/S 143(1) AND THEREFORE, FOR THE SAKE OF FORMING A PRIMA FACIE BELIEF, THE INFORMATION IN THE POSSESSION OF THE LD. A.Q. ON THE BASIS OF INVESTIGATIONS MADE, WAS SUFFICIENT TO INITIATE R EASSESSMENT PROCEEDINGS IT WILL BE APPROPRIATE IN THIS REGARD TO REFER TO EXPLANATION 1 TO SEC. 147 OF THE ACT WHICH READS AS UNDER: - 'EXPL.1 PRODUCTION BEFO RE THE AO OF ACCOUNT BOOKS OR OT HER EVIDENCE FROM WHICH M ATERIAL EVIDENCE COULD WITH DILIGENCE HAV E BEEN DISCOVERED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. ' 2.4.12 REFERRING TO THE SAID EXPLANATION IN CONSOLIDATED PHOTO & FRNVEST LTD (SUPRA) IT HAS BEEN HELD. '3. IT IS FROM THE ABOVE THAT THE TWO CRITICAL ASPECTS WHICH NEED TO BE ADDRESSED IN ARTY ACTION TINDERS. 147 ARE WHETHER THE AQ HAS 'REASON TO BELIEVE' THAT P ARTY INCOME CHARGEABLE TO FAX HAS ESCAPADE ASSESSMENT AND WHETHER THE PROPOSED REASSESSMENT IS WITHIN THE PERIOD OF LIMITATION PR ESCRIBED UNDER THE PROVISO TO S. 147. EXPLN 1 TO THE SAID PROVISION MAKES IL DEAR THAT PRODUCTION OF ITA NO. 6204 /M/2016 A.Y.20 09 - 10 7 ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH THE AO COULD WITH DUE DILIGENCE DISCOVER MATERIAL EVIDENCE WOULD NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO THAT STIPULATES AN EXTENDED PERIOD OF LIMITATION FOR ACTION IN CASES WHERE THE ESCAPEMENT ARISES OUT OF THE FAILURE ON THE PART OF THE ASSESSES TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS NECESSARY LAW ASSESSMENT.' 24 13 IN KANTA MANI VENKATA NARYANA & SONS VS. ADDL. ITO (1967 ) 63 ITR 638 (SC), THE APEX COURT HELD THAT IN PROCEEDINGS UNDER ART 226 OF THE CONSTITUTION OF INDIA CHALLENGING THE JURISDICTION OF THE ITO TO ISSUE A NOTICE FOR REOPENING THE ASSESSMENT, THE HIGH COURT WAS ONLY CONCERNED WITH EXAMINING WHETHER THE CONDITIONS WHICH INVESTED THE ITO WITH THE POWERS TO REOPEN THE ASSESSMENT EXISTED. IT IS NOT, OBSERVED THE COURT, WITHIN THE PROVINCE OF THE HIGH COURT TO RECORD A FINAL DECISION ABOUT THE FAILURE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS BEARING ON THE ASSESSMENT AND CONSEQUENT ESCAPEMENT OF INCOME FROM ASSESSMENT AND TAX. THE COURT ALSO HELD THAT FROM A MERE PRODUCTION OF THE BOOKS OF ACCOUNT, IT COULD NOT BE INFERRED THAT THERE HAD BEEN FUTL DISCLOSURE OF THE MATERIAL FACTS NECESSARY FOR THE PURPOSES OF ASSESSMENT. THE TERMS OF THE EXPLANATION, DECLARED THE COURT, WERE TOO PLAIN TO PERMIT AN ARGUMENT THAI THE DUTY OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS WOULD STAND DISCHARGED WHEN HE PRODUCES THE BOOKS OF ACCOUNT OR EVIDENCE WHICH HAS A MATERIAL BEARING ON THE ASSESSMENT. THE COURT OBSERVED (P.644)' 'IT IS THE DUTY OF THE ASSESSEE TO BRING TO THE NOTICE OF THE ITO PARTICULAR ITEMS IN THE BOOKS OF ACCOUNT OR PORTIONS OF DOCUMENTS WHICH ARE RELEVANT. EVEN IF IT BE ASSUMED THAT FROM THE BOOKS PRODUCED, THE ITO MAY NOT ON THAT ACCOUNT BE PRODUCED FROM EXERCISING THE POWER TO ASSESS INCOME WHICH HAD ESCAPED ASSESSMENT' 2.4.14 TO THE SAME EFFECT IS THE DECISION OF THE SUPREME COURT IN MALEGAO N ELECTRICITY CO. (P) LTD. VS. CIT (1970) 73 ITR 466 (SC) WHERE THE COURT OBSERVED IS TRUE THAT IF THE ITO HAD MADE SOME INVESTIGATION, PARTICULARLY IF HE HAD LOOKED INTO THE PREVIOUS ASSESSMENT RECORDS, HE WOULD HAVE BEEN ABLE TO FIND OUT WHAT THE WRITTEN DOWN VALUE OF THE ASSETS SOLD WAS END CONSEQUENTLY HE WOULD HAVE BEEN ABLEO FIND OUT THE PNCE IN EXCESS OF THEIR WRITTEN DOWN VALUE REALIZED BY THE ASSESSEE. IT CAN BE SAID THAT THE ITQ IF HE HAD BEEN DILIGENT COULD HAVE GOT THE NECESSARY INFORMAT ION FROM HIS RECORDS BUT THAT IS NOT THE SAME THING AS SAYING THAT THE ASSESSES HAD PLACED BEFORE THE ITO TRULY AND FULLY ALL MATERIAL ! ITA NO. 6204 /M/2016 A.Y.20 09 - 10 8 FACTS NECESSARY FOR IHE PURPOSE OF ASSESSMENT. THE LAW CASTS A DUTY ON THE ASSESSEE TO 'DISCLOSE FULLY AND TRULY AFT MATERIAL FA CTS NECESSARY F OR HIS ASSESSMENT FOR THAT YEAR 2.4.15 (SUPRA): IT HAS BEEN FURTHER OBSERVED IN CONSOLIDATED PHOTO & FINVESL LTD. ~19.......THE ARGUMENT THAT TFIE PROPOSED REOPENING OF ASSESSMENT WAS BASED UPON A CHANGE OF OPINION HAS NOT IMPRESSED US. THE ASSESSMENT ORDER NOT ADMITTEDLY ADDRESS ITSELF TO THE QUESTION WHICH THE AO PROPOSES TO EXAMINE IN SHE COURSE OF REASSESSMENT PROCEEDINGS THE SUBMISSION OF MR. VOHRA THAT EVEN WHEN THE ORDER OF ASSESSMENT DID NOT RECORD ANY EXPLICIT OPINION ON THE ASPECTS NOW SOUGHT TO BE EXAMINED. IT MUST BE PRESUMED THAT THOSE ASPECTS WORE PRESENT TO THE MIND OF THE AO AND HAD BEEN HETD IN FAVOUR OF THE ASSESSEE IS TOO FAR - FETCHED A PROPOSITION TO MERIT ACCEPTANCE. THERE MAY INDEED BE A PRESUMPTION THAT THE ASSESSMENT PRO CEEDINGS HAVE BEEN REGULARLY CONDUCTED, BUT WERE CAN BE NO PRESUMPTION THAT EVEN WHEN THE OR DER OF ASSESSMENT IS SILENT, ALL POSSIBLE ANGLES AND ASPECTS OF A CONTROVERSY HAD BEEN EXAMINED AND DETERMINED BY THE AO . ' 2.4.16 IT IS WELL SETTLED THAT EVEN AN A UDIT OBJECTION ON THE POINT OF FACT CAN BE A VALID GROUND FOR REOPENING OF ASSESS MEN T . IN THE CASE OF NEW LIGHT TRADING CO. VS. CJT (2001) 170 CTR (DEL)L38: (2002J 256 ITR 391 (DEL), A DIVISION BENCH OF THE COURT AFTER REFERRING TO THE DECISION OF SUPREME COURT IN CIT VS P.V.S. BEEDIES FP) LTD. (1999) 155 CTR (SC) 538 : (1999) 237 JTR 13 (SC) HAS HELD AS UNDER (AT P. 393): 'IN THE CASE OF C!T VS. P.V.S BEEDIES (P) LTD. (199$) 155 CTR (SC) 538; (1999) 237 ITR 13 {SC) THE APEX COURT HELD THAT T HE AUDIT PATTY CAN POINT OUT A FACT, WH ICH HAS BEEN OVERLOOKED BY THE I TO IN THE ASSESSMENT THOUGH THERE CANNOT BE ANY INTERPRETATION OF LAW BY THE AUDIT PARTY, IT IS ENTITLED TO POINT OUT A FACTUAL ERROR OR OMISSION IN THE ASSESSMENT AND REOPENING OF A CASE ON THE BASI S OF FACTUAL ERROR OR OMISSION POINTED OUT BY THE AUDIT PARTY ITS PERMISSIBLE UNDER LAW. AS THE TRIBUNAL HAS B ; RIGHTY NOTI CED, THIS WAS NOT A CASE FOR THE AO MERELY ACTING AT THE BEHEST OF THE AUDIT - PARTY OR ON ITS REPORT HAS INDEPENDENTLY EXAMINED TH E MATERIAL COLLECTED BY THE AUDIT PARTY IN ITS REPORT AND HAS COME TO AN INDEPENDENT CONCLUSION THAT THERE WAS E SCAPEMENT OF INCOME. THE ANSWER TO THE QUESTION, THE REFORE, IN THE AFFIRMATIVE, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE.' ITA NO. 6204 /M/2016 A.Y.20 09 - 10 9 2.4,17 WHE N THERE IS NO DISCUSSION ON THE ISSUE IN THE ASSESSMENT ORDER AND NO DETAILS WERE CALLED FOR BY THE A.O. OR FILED BY THE ASSESSEE ON THE ISSUE, NO FINDING EITHER POSITIVE OR NEGATIVE CAN BE SAID TO HAVE BEEN ARRIVED AT DURING THE COURSE OF ORIGINAL ASSESSM ENT PROCEEDINGS. HENCE, THERE IS NO QUESTION OF CHANGE OF OPINION AS HELD IN THE FOLLOWING JUDGMENTS. 1. KALYANJI MAVJI & CO. VS. CJT 102 JTR 287 (SC) 2. ESSKAY ENGINEERING P. LTD, VS, CIT247ITRB18 3. ITO VS, PURUSHOTTAM DAS BANGUR & ANR. 224 ITR 36 2 (SC) IN THE LIGHT OF THE ABOVE DISCUSSION, THE CONTENTION OF THE ASSESSEE THAT THE PRESENT CASE IS OF CHANGE OF OPINION HAS TO BE REJECTED. 2.4.18 THE SECOND QUESTION ARISES FOR CONSIDERATION IS WHETHER THE APPELLANT HAD MADE FULL AND TRUE DISCLOSURE OF MATERIAL FACTS. I HAVE ALREADY REPRODUCED ABOVE T HE CONTENTIONS OF THE APPELLANT IN THIS REGARD AND THE OBJECTIONS RAISED. THERE IS NOTHING ON RECORD AND NOT EVEN THE STAND OF THE APPELLANT THAT THE BOGUS PARTIES AS RECORDED IN THE 'REASON TO BELIEVE' WERE EITHER CALLED OR EXAMINED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AS NO SCRUTINY ASSESSMENT WAS ORIGIN A L FRAMED. 2.4.19 IN WRIT PETN. NO.9036 OF 2007, HONDA SIEL POWER PRODUCTS LTD. VS. DYCIT& ANR. DECISION DT. 14 RH FEB. 2011 (REPORTED AT (20 11) 52 DTR (DEL] 353 - ED.) IT WAS HELD: '70...... THE TERM 'FAILURE' ON THE PART OF THE ASSESSEE IS NOT RESTRICTED ONLY TO THE IT RETURN AND THE COLUMNS OF THE IT RETURN OR THE TAX AUDIT REPORT. THIS IS THE FIRST STAGS. THE SAID EXPRESSION 'FAILURE TO FULL Y AND TRULY DISCLOSE MATERIAL FACTS' ALSO RELATE TO THE STAGE OF THE ASSESSMENT PROCEEDING, THE SECOND STAGE. THERE CAN BE OMISSION AND FAILURE ON THE PART OF THE ASSESSES TO DISCLOSE FULLY AND TRULY MATERIAL FACTS DURING THE COURSE OF THE ASSESSMENT PROCE EDINGS. THIS CAN HAPPEN WHEN THE ASSESSEE DOES NOT DISCLOSE OR FURNISH TO THE AQ COMPLETE AND CORRECT INFORMATION AND DETAILS IT IS REQUIRED AND UNDER AN OBLIGATIO N TO DISCLOSE. BURDEN IS ON THE ASSESSEE TO MAKE FULL ARID THE TRUE DISCLOSURE'. 2 4 20 FORMA TION OF OPINION OF THE A O. HAS TO BO CONSIDERED ON THE TOUCH STONE WHETHER THERE WAS REASONABLE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT AND FOR THAT PURPOSE RELIANCE IS PLACED ON THE JUDGEMENT OF HONBLE SUPREME COURT IN RAYMOND WOOLEN MILLS LTD. VS ITO (SUPRA). CONSIDERING THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE ABOVE CASE, THE QUESTION IS WHETHER THE A.O. HAD PRIMA FACIE REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT. I HAVE EARLIER REPRODUCED EXPLANATION 2(C) OF ITA NO. 6204 /M/2016 A.Y.20 09 - 10 10 SEC.147. IN V IEW OF THE FACTUAL AND LEGAL MATRIX NARRATED EARLIER, AS THERE WAS NO TRUE DISCLOSURE OF THE MATERIAL FACTS DURING THE COURSE OF ORIGINAL PROCEEDINGS, IT PRIMA FACIE CANNOT BE STATED THA T THERE WAS NO REASON TO BELIEVE . THE VARIOUS JUDGEMENTS RELIED UPON O N BEHALF OF THE APPELLANT ARE DISTINGUISHABLE IN AS MUCH AS EITHER THERE WAS NO FAILURE TO DISCLOSE THE FULL AND TRUE RELEVANT INFORMATION AND/OR IT WAS MERELY A CHANGE OF OPINION IN THOSE CASES. THE APPELLANT COULD NOT MAKE OUT THE CASE THAT NO PART OF TH E RELEVANT MATERIAL HAS BEEN KEPT OUT FROM THE A.O. AND THAT IT WOULD NOT BE UNREASONABLE FOR THE A.O. NOT TO DRAW INFERENCE FROM THE ACCOUNTS PRODUCED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. SUSTENANCE IN THIS REGARD IS ALSO DRAWN FROM THE JUDGEMENT O F HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S, GIRILAL & CO. VS. I TO 300 ITR 432 (BOM). 2.4.21 ANY FRESH INFORMATION RECEIVED BY THE A.O. CAN ENTITLE HIM TO ISSUE NOTICE U/S.148, IF ON THE BASIS OF SUCH INFORMATION HE HAS PRIMA FACIE REASON TO BEL IEVE THAT INCOME HAS ESCAPED ASSESSMENT. SO MUCH SO THAT IT WAS HELD BY THE HON'BLE SUPREME COURT IN CLAGGETT BRACHI CO. LD, VS CIT 177 ITR 409 (SC) THAT AN INFORMATION OBTAINED DURING ASSESSMENT PROCEEDINGS OF A SUBSEQUENT YEAR CAN ALSO VALIDATE THE PROCE EDINGS INITIATED U/S.147 FOR EARLIER YEAR. SIMILARLY, HON'BLE BOMBAY HIGH COURT IN THE CASE OF ANUSANDHAN INVESTMENTS LTD. VS. M.R. SINGH, DCJT, 287 ITR 482 HELD THAT A NOTICE ISSUED U/S.148 BASED ON ASSESSMENT OF SUBSEQUENT ASSESSMENT YEAR IS VALID EVEN I F THE APPEAL IS PENDING FOR SUCH ASSESSMENT. FURTHER, IN THE CASE OF PIAGGIO VEHICLES P, LTD. VS. DCIT 290 ITR 377 (BOM), THE HON'BLE JURISDICTIONS! HIGH COURT HELD THAT IN A CASE OF REOPENING AFTER 4 YEARS SUBSEQUENT TO SCRUTINY ASSESSMENTS, CONTRADICTION WAS DISCOVERED BETWEEN TAX AUDIT REPORT AND RETURN OF INCOME, IT WAS A CASE OF OMISSION AND/OR ON T HE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AFL FACTS FOR COMPUTATION HELD BY HON'BLE SUPREME COURT IN THE FOLLOWING CASES THAT FADS WHICH COULD HA VE BEEN FOUND BY THE ITO BY FURTHER PROBING ARE COVERED UNDER FAILURE TO DISCLOSE FULLY AND TRULY HAS MATERIAL FACTS: - I NDO - ADEN SALT MFG, AND TRADING CO. P. LTD. VS.CLT 159 ITR 624 (SC) R.B,BANSILAL ABIRCHAND FIRM VS. CIT 70 ITR 74 (SC) 2.4.22 IN SUCH CIRCUMSTANCES, IT CANNOT BE HELD THAT THERE WAS FULL AND TRUE DISCLOSURE BY THE APPELLANT. ACCORDINGLY, THE SECOND CONTENTION OF THE APPELLANT FAILS. 2 4 23 IN VIEW OF THE ABOVE BINDING PRECEDENTS OF THE HON'BLE SUPREME COURT, I AM OF THE VIEW THAT THE LD. A.O. HAD VALID ITA NO. 6204 /M/2016 A.Y.20 09 - 10 11 REASONS TO INITIATE REASSESSMENT PROCEEDINGS WHICH WERE DULY RECORDED AND COMMUNICATED TO THE APPELLANT AND THEREFORE, THERE IS NO MERIT IN THE ARGUMENTS ADVANCED BY THE LD.AR ON THIS GROUND. ACCORDINGLY, GROUND NOS.3 & 4 ARE DISMISSED. 2.4 .24 COMING TO THE MERITS OF THE ADDITION VIDE GROUND NO.2, IT IS SEEN THAT THE LD. AO ON THE BASIS OF INFORMATION RECEIVED FROM THE DG!T(LNV.) MUMBA I HELD THAT THE PURCHASES MADE FROM THE ALLEGED 14 PARTIES AMOUNTING TO RS.67,99 ,130/ - WAS BOGUS. WHILE COMI NG T O THE ABOVE CONCLUSION, HE BRUSHED ASIDE THE APPELLANT'S CONTENTION THAT THE TRANSACTIONS WERE MADE THROUGH BANKING CHANNEL AND THE MATERIALS WERE PURCHASED FOR APPELLANT'S BUSINESS OF CONSTRUCTION OF BUILDING MATERIAL IT APPEARS THAT LD. AO HAS BASED HIS FINDING ON THE ENQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT. 2 4.25 PER CONTRA, LD AR HAS VEHEMENTLY OPPOSED THE ACTION OF THE LD. AO AND AT THE OUTSET IT HAS BEEN STATED THAT THIS CASE IS DIFFERENT FROM OTHER CASES OF BOGUS PURCHASE AS THE LD. AO D ID NOT EVEN I SSUE A NOTICE U/S 133(6) TO ANY OF THE PURCHASERS TO VERIFY THE CO RRECTNESS OF THE TRANSACTION THE HAS FURTHER BEEN STATED THAT NO OTHER ENQUIRIES WERE CONDUCTED BY THE LD AO INCLUDING DEPUTING AN INSPECT OR TO THE SUPPLIER'S PREMISES. I T HAS A LSO BEEN PLEADED THAT FROM THE COPIES OF THE BILLS PRODUCED IT WAS APPARENT THAT THE PURCHASES WERE FOR MATERIALS SUCH AS ALUMINIUM SCREWS, PRINTED WALL TILES, CUDDAPPA STONES, KOTA STONES, BRICKS, MARBLES ETC. AND APPEILANT WAS REGULARLY PURCHASING THESE MATERIALS FROM THE DEAL ERS IN THE MARKET, USED TO SUPPL Y THE MATERIAL THROUGH THEIR LORRIES ALONG WI TH INVOICES AND DELIVERY CHALLANS AND AT THE SITE OFFICE, THE APPE LLANT'S STAFF USED TO RECEIVE TH E MATERIAL AND THE ENGINEERS OF THE CONTRACTEE ALSO INSPEC TED THE SPECIFICATIONS AND QUALITY OF THE MATERIALS. ULTIMATELY, ALL THE AMOUNTS WERE PAID THROUGH CROSSED A/C PAYE E CHEQUES. IT HAS THUS BEEN STAT ED THAT LD. AO HAS MERELY BASED HIS DECISION ON THE ENQUIRY CONDUCTED BY SALES TAX AUTHORITIES AND WITHOUT MA KING ANY INDEPENDENT ENQUIRY, HE HAS MERELY COPIED AND PASTED THE DECISION AS IN OTHER CASES WHERE NOTICE U/S 133(6) WERE ISSUED AND OTHER ENQUIRIE S WERE CONDUCTED BY THE LD. AO I N THIS REGARD, THE LD. AR HAS RELIED ON A HOST OF DECISIONS INCLUDING THE FOL LOWING 1. C.IT. V NIKUNJ EXIMP ENTERPRISES PVT. LTD. (2015) 372 ITR 619 (BOM) 2. SHRI RAJEEV G KALATHILV. DCIT 25(3). MUMBAI ITA/6727/MUM/2012 ITA NO. 6204 /M/2016 A.Y.20 09 - 10 12 3. SHRI GANPATRAJA. SANGHAVI V. ACIT ITA/2826/MUM/2G13 (BOM) 4. RAMESH KUMAR & CO. V. ACFT ITA/2959/MUM/2014 (BOM ) 5. I.T.O. V R SHRI DEEPAK POPATJAL GALA ITA/5920/MUM/2013 (BOM) 2.4 . 26 HAVING CONSIDERED THE PROS AND CONS AND THE MATERIALS AVAILABLE ON RECORD, I DO FIND THAT IN THIS CASE, LD. AO HAS FAILED LO CARRY OUT ANY ENQUIRY AND EVEN A NOTICE U/S 133(6) WAS NOT ISSUED TO JHE SUPPLIERS. FROM THE ASSESSMENT ORDER IT IS ALSO THAT THE APPELLANT WAS NOT REQUIRED TO PRODUCE THE SAID PARTIES. FURTHER, WHEREAS THE LD. AO HAS NOT TOUCHED THE SALES PART OF THE APPELLANT'S PROFIT AND LOSS ACCOUNT, HE HAS MERELY MADE A DISAL LOWANCE ON ACCOUNT OF PURCHASES WITHOUT CARRYING OUT ANY ENQUIRIES. AS RIGHTLY HELD BY THE HON'BLE MUMBAI BENCH OF ITAT IN THE CASE OF M/S IMPERIAL IMPORT AND EXPORT IN ITA NO - 5427/MUM/2015 DAT ED 18 - 03.2016, NO ADDITION COULD HAVE BEEN MADE WITHOUT MAKING INDEPENDENT ENQUIRIES BY [HE LD. AO HON'BLE TRIBUNAL FURTHER OBSERVED THAT MERELY ON THE BASIS OF INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT, NO ADDITION COULD BE SUSTAINED WITHOUT ANY IN DEPENDENT ENQUIRES BY THE LD. AO . 5 . WE HAVE HEARD THE P AR TIES AND PERUSED THE RECORD. W E NOTICED THAT THE ASSESSEE HAS PURCHASED THE BUILDING MATERIAL S FROM VARIOUS PE RSONS AND THE SAME HAS BEEN CONSUMED BY ASSESSEE IN THE CONSTRUCTION . THOUGH THE ASSESSEE HAS FURNIS HED COPIES OF PURCHASE INVOICES , COPY OF BANK STATEMENT ETC , YET T HE ASSESSEE HAS FAILED TO PROVE TRANSPORTATION OF MATERIALS FROM THE PREMISES OF THE DEALER TO THE S ITE OF THE ASSESSEE. THE ASSESSEE ALSO FAILED TO OBTAIN CONFIRMATION LETTER FROM THE ALLEGED BOGUS DEALERS. THE AO HAS RECORDED THAT THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE TO SHOW CONSUMPTION OF TH ESE GOODS IN THE BUSINESS ACTIVITIES OF THE ASSESSEE. WE NOTICED FROM THE FINANCIAL STATEMENT THAT THE ASSESSEE HAS PURCHASED WITH THE MATERIALS DURING THE YEAR TO THE TUNE OF RS.769.32 LACS HENCE THE ALLEGED BOGUS PURCHASES OF RS.63 .99 LACS CONSTITUTED SMALL PORTION OF THE TOTAL VALUE OF THE PURCHASES. IT IS THE CONTENTION OF THE LD. AR THAT THE WORK ITA NO. 6204 /M/2016 A.Y.20 09 - 10 13 COULD NOT HAVE BEEN COMPLETED WITHOUT CON SUMING THE MATERIALS. T HERE IS A MERIT IN THE S AID SUBMISSION OF THE ASSESSEE. SINCE, THE ASSESSEE HAS FAILED TO OBTAIN THE CONFIRMATION LETTER FROM THE SUPPLIER AND ALSO FAILED TO PRODUCE THEM BEFORE THE AO, THE POSSIBILITY IS THAT THE ASSESSEE SHOULD HAVE PURCHASED THE MATERIAL FROM GREY MARKET AND O BTAINED ACCOMMODATION BILLS FROM THE IMPUGNED DEALERS . IN THIS CASE , THERE IS A POSSIBILITY OF ASSESSEE SAVING MONEY BY WAY OF TAXES AND ALSO BY WAY OF LOWER RATES . H ENCE CONSIDERING TOTALITY OF THE FA CTS, WE ARE OF THE VIEW THAT A SUM OF 8% OF VALUE OF AL LEGES BOGUS PURCHASES SHOULD BE CONSIDERED AS THE INCOME OF THE ASSESSEE IN ORDER TO TAKE CARE OF REVENU E LEAKAGES. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO SUSTAIN THE ADDITION TO THE EXTENT OF 8% OF THE VALUE OF ALLEGES BOGUS PURCHASES. 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 29. 06 . 2018 . SD/ - SD/ ( B. R. BASKARAN ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 29. 06. 2018 . VIJAY ITA NO. 6204 /M/2016 A.Y.20 09 - 10 14 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3 . ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI