ASST CIT 14(1), MUMBAI V. KANTILAL C JAIN, MUMBAI

ITA 6924/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9263 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 13-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: PARAS RAKESH
• Keywords: Reopening of assessment; Bogus purchase; Gift; Business income; Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Question of law; Cost of acquisition; Difference of opinion; Competent authority; Onus to prove; Retraction; Reason to believe; Documents seized; Change of opinion; Reassessment proceedings
• Section: 44AD; 143(3); 142(1); 133A; 147; 131; 148; 139

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, A MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.6924/MUM/2014 ASSESSMENT YEAR: 2010-11 ASST. CIT-14(1), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI-400 021 / VS. SHRI KANTILAL C. JAIN M/S. SHAILESH JEWELLERS SHOP NO. 4, 2 ND FLOOR, 108/112, USTAD BUILDING, ZAVERI BAZAR, OPP. KHARA KUWA, MUMBAI-400 002 ( ! /ASSESSEE) PAN. NO . AADPJ 9583 E ITA NOS.6504 & 6505/MUM/2014 ASSESSMENT YEARS: 2009-10 & 2010-11 SHRI KANTILAL C. JAIN THROUGH BIPIN JAIN L/H MUMBAI-400 002 / VS. ASST. CIT-14(1), MUMBAI-400 021 ( ! /ASSESSEE) ( ' / REVENUE) PAN. NO . AADPJ 9583 E # '$%! & / DATE OF HEARING: 18/09/2017 %! & / DATE OF ORDER: 25/09/2017 ' ! / REVENUE BY SHRI RAJESH KUMAR YADAV - DR ! ! / ASSESSEE BY SHRI PARAS RAKESH ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER): THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 14/08/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI FOR A.Y. 2010-11 (ITA NO. 6924/MUM/2014), WHEREAS, THE ASSESSEE HAS ALSO PREFERRED CROSS APPEAL (ITA NOS.6505/MUM/2014). THE ASSESSEE HAS ALSO FILED APP EAL, THROUGH LEGAL HEIR, FOR A.Y. 2009-10 (ITA NO. 6504/MUM/2014). 2. IN THE APPEAL OF THE ASSESSEE FOR A.Y. 2009-10, THE ASSESSEE HAS CHALLENGED REOPENING OF ASSESSMENT U/S . 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) AS B AD IN LAW. DURING HEARING THE LD. COUNSEL FOR THE ASSESSEE ADV ANCED ARGUMENT MERELY CONTENDING THAT THE REOPENING IS BA D. ON THE OTHER HAND, THE LD. DR DEFENDED THE REOPENING AS VA LID BY SUPPORTING THE ORDER OF THE LD. COMMISSIONER OF INC OME TAX (APPEAL). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE FA CTS IN BRIEF ARE THAT THE ASSESSEE DECLARED INCOME OF RS.9 ,57,870/- ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 3 IN HIS RETURN FILED ON 19.09.2009 WHICH WAS PROCESS ED U/S. 143(3) OF THE ACT. SUBSEQUENTLY, THE CASE WAS REOPE NED ON THE BASIS OF THE INFORMATION RECEIVED FROM SALES TAX DE PARTMENT, THROUGH INVESTIGATION WING, WHEREIN CERTAIN BOGUS B ILL PROVIDER/ACCOMMODATION ENTRY PROVIDERS WERE IDENTIF IED AND THERE STATEMENTS WERE RECORDED. AS PER THE INFORMAT ION, THE ASSESSEE IS ONE OF THE BENEFICIARIES WHO UTILIZE TH E SERVICES OF THIS BOGUS BILLERS BY TAKING ACCOMMODATION ENTRY OF BOGUS PURCHASES FROM M/S. SAILEELA TRADING P. LTD. TO THE TUNE OF RS.28,30,184/-. NOTICE U/S. 148 OF THE ACT WAS SERV ED UPON THE ASSESSEE AND THEREAFTER NOTICES U/S. 143(2) AND 142(1) WERE ALSO SERVED UPON. ASSESSMENT WAS COMPLETED U/S . 143(3) R.W.S. 147 ON 28.01.2014 MAKING THE ADDITION ON ACC OUNT OF ACCOMMODATION ENTRY. 3.1. IT IS OUR BOUNDED DUTY TO EXAMINE THE VALIDIT Y OF REOPENING U/S 147 R.W.S 148 OF THE ACT. BEFORE ADVE RTING FURTHER WE ARE REPRODUCING HEREUNDER THE RELEVANT P ROVISION OF SECTION 147 OF THE ACT FOR READY REFERENCE AND ANAL YSIS:- . IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 4 REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FO R THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT, FOR THAT ASSESSMENT YEAR: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, H AS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR: PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVI NG MATTERS WHICH ARE THE SUBJECT MATTERS OF ANY APPEAL , REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX A ND HAS ESCAPED ASSESSMENT. EXPLANATION 1.PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATER IAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVE RED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUN T TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROV ISO. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY : ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 5 (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INC OME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSAB LE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED TH E MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TA X ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOS S, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN ; (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REP ORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE W AS SO REQUIRED UNDER SECTION 92E; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESS ED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RA TE ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED; (D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INC LUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE I NDIA. EXPLANATION 3.FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFI CER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF T HE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THA T THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN TH E REASONS RECORDED UNDER SUB-SECTION (2) OF SECTION 1 48. EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION, AS A MENDED BY THE FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012. 3.2. IF THE AFORESAID PROVISION OF THE ACT IS ANAL YZED, WE FIND THAT AFTER INSERTION OF EXPLANATION -3 TO SECT ION 147 OF THE ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 6 ACT BY THE FINANCE (NO.2) ACT OF 2009 WITH EFFECT F ROM 01/04/1989 SECTION 147 HAS AN EFFECT THAT ASSESSING OFFICER HAS TO ASSESS OR REASSESS INCOME (SUCH INCOME) WHIC H HAS ESCAPED ASSESSMENT AND WHICH WAS BASIS OF FORMATION OF BELIEF AND, IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH CAME TO THE NOTICE DURING THE COURSE OF PROCEEDINGS. IDENTICAL RATIO WAS LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN C IT VS JET AIRWAYS INDIA PVT. LTD. (2010) 195 TAXMAN 117 (MUM. ) AND THE FULL BENCH DECISION FROM HONBLE KERALA HIGH COURT IN CIT VS BEST WOOD INDUSTRIES AND SAW MILLS (2011) 11 TAXMAN .COM 278 (KERALA)(FB). A PLAIN READING OF EXPLANATION-3 TO SECTION 147 CLEARLY DEPICTS THAT THE ASSESSING OFFICER HAS POWER TO MAKE ADDITION, WHERE HE ARRIVED TO A CONCLUSION THA T INCOME HAS ESCAPED ASSESSMENT WHICH CAME TO HIS NOTICE DUR ING THE COURSE OF PROCEEDINGS OF REASSESSMENT U/S 148. OUR VIEW IS FORTIFIED BY THE DECISION IN MAJINDER SINGH KANG VS CIT (2012) 25 TAXMAN.COM 124/344 ITR 358 (P & H) AND JAY BHARA T MARUTI LTD. VS CIT (2010) TAX LR 476 (DEL.) AND V. LAKSHMI REDDY VS ITO (2011) 196 TAXMAN 78 (MAD.). THE PROV ISION OF ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 7 THE ACT IS VERY MUCH CLEAR AS WITH EFFECT FROM 01/0 4/1989, THE ASSESSING OFFICER HAS WIDE POWERS TO INITIATE PROCE EDINGS OF REOPENING. THE HONBLE KERALA HIGH COURT IN CIT VS ABDUL KHADAR AHMAD (2006) 156 TAXMAN 206 (KERALA) EVEN WE NT TO THE EXTENT SO LONG AS THE AO HAS INDEPENDENTLY APPL IED HIS MIND TO ALL THE RELEVANT ASPECT AND HAS ARRIVED TO A BELIEF THE REOPENING CANNOT BE SAID TO BE INVALID. 3.3. WE ARE AWARE THAT MERE CHANGE OF OPINION CA NNOT FORM THE BASIS OF REOPENING WHEN THE NECESSARY FACT S WERE FULLY AND TRULY DISCLOSED BY THE ASSESSEE IN THAT S ITUATION, THE ITO IS NOT ENTITLED TO REOPEN THE ASSESSMENT MERELY ON THE BASIS OF CHANGE OF OPINION. HOWEVER, POWERS UNDER AMENDED PROVISION ARE WIDE ENOUGH WHERE THERE IS A REASONAB LE BELIEF WITH THE ASSESSING OFFICER, THAT INCOME HAS ESCAPED ASSESSMENT, BECAUSE THE POWERS WITH EFFECT FROM 01/ 04/1989 ARE CONTEXTUALLY DIFFERENT AND THE CUMULATIVE CONDI TIONS SPELT OUT IN CLAUSES (A) AND (B) OF SECTION 147, PRIOR TO ITS AMENDMENT ARE NOT PRESENT IN THE AMENDED PROVISION. THE ONLY CONDITION FOR ACTION IS THAT THE ASSESSING OFF ICER SHOULD HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO T AX HAS ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 8 ESCAPED ASSESSMENT. SUCH BELIEF CAN BE REACHED IN ANY MANNER AND IS NOT QUALIFIED BY A PRE-CONDITION OF F AITH AND TRUE DISCLOSURE OF MATERIAL FACTS BY AN ASSESSEE AS CONTEMPLATED IN PRE-AMENDED SECTION 147. VIEWED IN THAT ANGLE, POWER TO REOPEN ASSESSMENT IS MUCH WIDER UND ER THE AMENDED PROVISION. OUR VIEW IS FORTIFIED BY THE DE CISION FROM HONBLE DELHI HIGH COURT IN BAWA ABHAI SINGH VS DCI T (2001) 117 TAXMAN 12 AND RAKESH AGARWAL VS ACIT (1996) 87 TAXMAN 306 (DEL.). THE HONBLE APEX COURT IN CIT V S SUN ENGINEERING WORKS PVT. LTD. 198 ITR 297 (SC) CLEARL Y HELD THAT PROCEEDINGS U/S 147 ARE FOR THE BENEFIT FOR THE REV ENUE, WHICH ARE AIMED AT GATHERING THE ESCAPED INCOME. AT TH E SAME TIME, WE ARE AWARE THAT POWERS U/S 147 AND 148 OF T HE ACT ARE NOT UNBRIDLED ONE AS IT IS HEDGED WITH SEVERAL SAFE GUARDS CONCEIVED IN THE INTEREST OF ELIMINATING ROOM FOR A BUSE OF THIS POWER BY THE AO. HOWEVER, THE MATERIAL AVAILABLE O N RECORD, CLEARLY INDICATES THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, THEREFORE, THE LD. ASSESSING OFFICER W AS WITHIN HIS JURISDICTION TO REOPEN THE ASSESSMENT. THE HON BLE APEX COURT IN ESS ESS KAY ENGINEERING CO. PVT. LTD. (20 01) 247 ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 9 ITR 818 (SC) HELD THAT MERELY BECAUSE THE CASE OF T HE ASSESSEE WAS CORRECT IN ORIGINAL ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR, IT DOES NOT PRECLUDE THE ITO TO REOPEN THE AS SESSMENT OF AN EARLIER YEAR ON THE BASIS OF FINDING OF HIS FACT THAT FRESH MATERIAL CAME TO HIS KNOWLEDGE. 3.4. UNDER SECTION 147, AS SUBSTITUTED WITH EFFECT FROM 01/04/1989, THE SCOPE OF REASSESSMENT HAS BEEN WIDE NED. AFTER SUCH SUBSTITUTION, THE ONLY RESTRICTION, PUT IN THAT SECTION IS THAT REASON TO BELIEVE. THAT REASON HA S TO BE A REASON OF A PRUDENT PERSON WHICH SHOULD BE FAIR AND NOT NECESSARILY DUE TO FAILURE OF THE ASSESSEE TO DISCL OSE FULLY AND PARTIALLY SOME MATERIAL FACTS RELEVANT FOR ASSESSME NT (DR. AMINS PATHOLOGY LABORATORY VS JCIT (2001) 252 ITR 673, 682 (BOM.) IDENTICAL RATIO WAS LAID DOWN BY HONBLE DE LHI HIGH COURT IN UNITED ELECTRICAL COMPANY PVT. LTD. VS CIT (2002) 258 ITR 317, 322 (DEL.) AND PRAFULL CHUNNILAL PATEL VS ACIT 236 ITR 832, 838 (GUJ.). THE ESSENTIAL REQUIREMENT FOR INITIATING REASSESSMENT PROCEEDING U/S 147 R.W.S 148 OF THE AC T IS THAT THE LD. ASSESSING OFFICER MUST HAVE REASON TO BELIE VE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 10 ASSESSMENT YEAR. THE HONBLE GUJARA HIGH COURT IN P RAFULL CHUNNILAL PATEL VS ACIT (SUPRA) EVEN WENT TO THE EX TENT THAT AT THE INITIATION STAGE FORMATION OF REASONABLE BELIEF IS NEEDED AND NOT A CONCLUSIVE FINDING OF FACTS. IDENTICAL RA TIO WAS LAID DOWN IN BRIJMOHAN AGRAWAL VS ACIT (2004) 268 ITR 4 00, 405 (ALL.) AND RATNACHUDAMANI S. UTNAL VS ITO (2004) 26 9 ITR 272, 277 (KARNATAKA) APPLYING SOWDAGAR AHMED KHAN V S ITO (1968) 70 ITR 79(SC). 3.5. SO FAR AS, THE MEANING OF EXPRESSION, REASON TO BELIEVE IS CONCERNED, IT REFERS TO BELIEF WHICH PR OMPTS THE ASSESSING OFFICER TO APPLY SECTION 147 TO A PARTICU LAR CASE. IT DEPEND UPON THE FACTS OF EACH CASE. THE BELIEF MUST BE OF AN HONEST AND REASONABLE PERSON BASED ON REASONABLE GR OUNDS. THE ASSESSING OFFICER IS REQUIRED TO ACT, NOT ON ME RE SUSPICION, BUT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE . OUR VIEW FIND SUPPORT FROM THE RATIO LAID DOWN IN FOLLOWING CASES:- I. EPICA LABORATORIES LTD. VS DCIT 251 ITR 420, 425-42 6 (BOM.), II. VISHNU BOREWELL VS ITO (2002) 257 ITR 512 (ORISSA), III. CENTRAL INDIA ELECTRIC SUPPLY COMPANY LTD. VS ITO (2011) 333 ITR 237 (DEL.), ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 11 IV. V.J. SERVICES COMPANY MIDDLE EAST LTD. VS DCIT (201 1) 339 ITR 169 (UTTRAKHAND), V. CIT VS ABHYUDAYA BUILDERS (P. ) LTD. (2012) 340 ITR 310 (ALL.), VI. CIT VS DR. DEVENDRA GUPTA (2011) 336 ITR 59 (RAJ.), VII. EMIRATES SHIPPING LINE FZE VS ASST. DIT (2012) 349 ITR 493 (DEL.). VIII. REFERENCE MAY ALSO MADE TO FOLLOWING JUDICIAL DECIS IONS:- IX. SAFETAG INTERNATIONAL INDIA P. LTD. (2011) 332 ITR 622 (DEL.), X. CIT VS ORIENT CRAFT LTD. (2013) 354 ITR 536 (DEL.) XI. ACORUS UNITECH WIRELSS PVT. LTD. VS ACIT (2014) 362 ITR 417 (DEL.). XII. PRAFUL CHUNILAL PATEL: VASANT CHUNILAL PATEL VS ASS T. CIT (1999) 832, 843-44, 844-45 (GUJ.), XIII. VENUS INDUSTRIAL CORPORATION VS ASST. CIT (1999) 23 6 ITR 742, 746 (PUNJ.), XIV. SRICHAND LALCHAND TALREJA VS ASST. CIT (1998) 98 TA XMAN 14, 19 (BOM.), XV. USHA BELTRON LTD. VS JCIT (1999) 240 ITR 728, 736-3 7, 739 (PAT.) XVI. KAPOOR BROTHERS VS UNION OF INDIA (2001) 247 ITR 32 4, 331, 332-33 XVII. VIPPY PROCESSORS PVT. LTD. VS CIT (2001) 249 ITR 7, 8 (MP) ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 12 3.6. IN DILIP S. DAHANUKAR VS ASST. CIT (2001) 248 ITR 147, 150-51 (BOM.). THE HONBLE JURISDICTIONAL HIGH COURT HELD AS UNDER:- HELD, THAT THERE WAS MATERIAL ON RECORD ON THE BASIS OF SURVEY AND STATEMENT OF PERSON TO SHOW THAT THE ASSESSEE HAD WRONGFULLY CLAIM DEDUCTION U/S 80IA. THEREFORE, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 1994-95. IDENTICALLY IN THE CASE OF SRICHAND LALCHAND TALREJ A V. ASST. CIT, (1998) 98 TAXMAN 14, 19 (BOM), WHERE THE INFORMATION REGARDING ACQUISITION OF THE ASSET WAS NOT AVAILABLE WITH THE ASSESSING OFFICER DURING THE REL EVANT ASSESSMENT YEAR 1992-93 AND SUCH INFORMATION WAS DISCLOSED IN THE RETURN FOR THE ASSESSMENT YEAR 199 5-96, THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT THE ASSESSING OFFICER CAN FORM A BONA FIDE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME IN RELATION TO ASSESSMENT YEAR 1992-93 . 3.7. THE HONBLE JURISDICTIONAL HIGH COURT IN EXP ORT CREDIT GUARANTEE CORPORATION OF INDIA LTD. V. ADDL. CIT, (2013) 350 ITR 651 (BOM), WHERE THERE HAD BEEN NO APPLICAT ION OF MIND TO THE RELEVANT FACTS DURING THE COURSE OF THE ASSESSMENT ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 13 PROCEEDINGS BY THE ASSESSING OFFICER, THE REOPENING OF THE ASSESSMENT WAS HELD TO BE VALID. 3.8. THE HONBLE JURISDICTIONAL HIGH COURT IN GIRI LAL & CO. V. S.L. MEENA, ITO, (2008) 300 ITR 432 (BOM), HELD THAT IN ORDER TO INVOKE THE EXTRAORDINARY JURISDICT ION OF THE COURT THE PETITIONER MUST ALSO MAKE OUT A CASE THAT NO PART OF THE RELEVANT MATERIAL HAD BEEN KEPT OUT FRO M THE ASSESSING OFFICER). THE INFORMATION WAS IN THE ANNE XURES AND CONSEQUENTLY EXPLANATION 2(C)(IV) OF SECTION 14 7 WOULD APPLY. THE REASSESSMENT PROCEEDINGS AFTER FOUR YEAR S WERE VALID. 3.9. IN THE CASE OF DEPUTY CIT V. GOPAL RAMNARAYAN KASAT, (2010) 328 ITR 556 (BOM), IT WAS NOT THE CAS E OF THE ASSESSEE THAT THE NOTICE ISSUED WAS AFTER THE EXPIR Y OF THE TIME LIMIT PROVIDED IN SECTION 153(2). THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN INDIAN HUME PIPE CO. LTD . V. ASST. CIT, (2012) 348 ITR 439 (BOM), BOTH IN THE COMPUTAT ION OF TAXABLE LONG-TERM CAPITAL GAINS IN THE ORIGINAL RET URN OF INCOME AND IN THE COMPUTATION THAT WAS SUBMITTED IN RESPON SE TO THE QUERY OF THE ASSESSING OFFICER THERE WAS A COMPLETE SILENCE IN REGARD TO THE DATES ON WHICH THE AMOUNTS WERE INVES TED, AS ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 14 SUCH THERE BEING A FAILURE TO DISCLOSE FULLY AND TR ULY MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE REASSESSMENT PR OCEEDINGS WERE HELD TO BE VALID. THIS VIEW WAS ALSO CONFIRMED IN FOLLOWING CASES:- A. DALMIA P. LTD. V. CIT, (2012) 348 ITR 469 (DEL); B. CIT V. K. MOHAN & CO. (EXPORTS), (2012) 349 ITR 653 (BOM); C. REMFRY & SAGAR V. CIT, (2013) 351 ITR 75 (DEL); D. OPG METALS & FINSEC LTD. V. CIT, (2013) 358 ITR 144 (DEL). 3.10. IN THE CASE OF VENUS INDUSTRIAL CORPORATION V. ASST. CIT, (1999) 236 ITR 742, 746 (P & H) [WHERE INITIAT ION WAS STARTED WITHIN FOUR YEARS FOR RE-EXAMINING THE DEDU CTION UNDER SECTION 80HHC, WAS HELD TO BE WRONGLY ALLOWED IN TH E ORIGINAL ASSESSMENT. IDENTICALLY, IN THE CASE OF HAPPY FOR GING LTD. V. CIT, (2002) 253 ITR 413,416-17 (P & H), WHERE EXCIS E DUTY PAID IN ADVANCE WAS SHOWN AS AN ASSET IN THE BALANC E SHEET AND WAS ALLOWED AS A DEDUCTION, REASSESSMENT NOTICE ON THE GROUND THAT EXCISE DUTY WAS SHOWN AS AN ASSET IN TH E BALANCE SHEET AND WAS NOT ROUTED THROUGH THE PROFIT AND LOS S ACCOUNT. THE REOPENING AT THIS STAGE WAS HELD TO BE VALID. IN THE ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 15 CASE OF VIPAN KHANNA V. CIT, (2002) 255 ITR 220, 2 30 (P & H), WHERE FROM THE FACTS IT WAS CLEAR THAT THE ASSESSEE HAD CLAIMED DEPRECIATION IN THE RETURN AT THE RATE OF 5 0 PER CENT AND HE HAD NOWHERE DISPUTED THE FACT THAT THE ADMIS SIBLE RATE OF DEPRECIATION TO HIM WAS 40 PER CENT., SUCH FACT ALONE WAS SUFFICIENT TO INITIATE REASSESSMENT PROCEEDINGS UND ER SECTION 147 AND, THEREFORE, SUCH INITIATION WAS SUSTAINED. THE HONBLE PUNJAB & HARYANA HIGH COURT IN MRS. RAMA SINHA V. C IT, (2002) 256 ITR 481, 483, 486, WHERE THE REASSESSMEN T NOTICE HAS BEEN ISSUED ON THE BASIS OF DEFINITE INFORMATIO N FROM CBI REGARDING INVESTMENTS BY THE ASSESSEE WHICH HAD NOT BEEN DISCLOSED DURING THE ORIGINAL ASSESSMENT PROCEEDING S, SUCH INITIATION HAS BEEN UPHELD. 3.11. IN THE CASE OF PAL JAIN V. ITO, (2004) 267 I TR 540, 544-45, 548, 549 (P & H), APPLYING PHOOL CHAND BAJR ANG LAL V. ITO, (1993) 203 ITR 456 (SC), ALTHOUGH THE TRANSACT ION OF SALE OF SHARES WAS DISCLOSED AND ACCEPTED IN THE ORIGINA L ASSESSMENT, BUT THE SUBSEQUENT DISCOVERY BY THE DDI (INVESTIGATION) REVEALED THAT THE TRANSACTION WAS N OT GENUINE, A REASSESSMENT NOTICE AFTER FOUR YEARS HAS BEEN HELD TO BE VALID ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 16 BECAUSE THERE WAS NO TRUE DISCLOSURE OF THE MATERIA L FACTS. IN THIS REGARD, THE PETITIONER-ASSESSEE CANNOT DRAW AN Y SUPPORT FROM THE STATEMENT FOR CHALLENGING THE VALIDITY OF THE NOTICE FOR REASSESSMENT. IT GOES WITHOUT SAYING THAT FOR THE P URPOSE OF MAKING THE ASSESSMENT, THE ASSESSING OFFICER SHALL HAVE TO CONFRONT THE PETITIONER WITH THE ENTIRE MATERIAL IN HIS POSSESSION ON THE BASIS OF WHICH HE PROPOSES TO MAK E THE ADDITIONS. IN PUNJAB LEASING PVT. LTD. V. ASST. CIT , (2004) 267 ITR 779, 781-82 (P & H), WHERE DEPRECIATION WAS ALL OWED TO THE ASSESSEE, WHO WAS ENGAGED IN THE BUSINESS OF FI NANCING OF VEHICLES AND CONSUMER DURABLES ON 'HIRE-PURCHASE BA SIS' AS WELL AS ON 'LEASE/RENT BASIS', A REASSESSMENT NOTIC E ISSUED AFTER FOUR YEARS HAS BEEN HELD NOT TO SUFFER FROM A NY ILLEGALITY AS THE SAME WAS BASED ON THE BONA FIDE ACTION OF TH E COMPETENT AUTHORITY TO DETERMINE WHETHER OR NOT THE VEHICLES IN RESPECT OF WHICH THE PETITIONER HAD BEEN CLAIMIN G DEPRECIATION, WERE ACTUALLY OWNED BY IT. 3.12. IN JAWAND SONS V. CIT(A), (2010) 326 ITR 39 (P & H), IN THE INITIAL ASSESSMENT, THE BENEFIT OF DEDUC TION OF THE DUTY DRAWBACK AND DEPB UNDER SECTION 80-IB WAS WRON GLY ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 17 GRANTED TO THE ASSESSEE, FOR WHICH IT WAS NOT ENTIT LED. THEREFORE, REASSESSMENT PROCEEDINGS TO WITHDRAW THE DEDUCTION WERE HELD TO BE VALID. LIKEWISE, IN CIT V. HINDUSTAN TOOLS & FORGINGS P. LTD., (2008) 306 ITR 209 (P & H ), WHERE, THE ASSESSEE IN THE REGULAR ASSESSMENT HAD BEEN ALL OWED DEDUCTION MORE THAN ACTUALLY ALLOWABLE UNDER SECTIO N 80HHC. THEREFORE, THE ACTION INITIATED BY THE AO FOR REASS ESSMENT UNDER SECTION 147(B) COULD NOT BE HELD TO BE INVALI D. 3.13. IN THE CASE OF MARKANDA VANASPATI MILLS LTD. V. CIT, (2006) 280 ITR 503 (P & H), WHEREIN, THE INFORMATIO N FURNISHED BY THE ASSESSEE GAVE NO CLUE TO THE PAYME NT OF LIABILITY IN REGARD OF THE SALES TAX COLLECTED IN E XCESS. THE ASSESSING OFFICER WAS HELD TO BE VALIDLY INITIATED THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 FOR BOTH THE YEARS UNDER CONSIDERATION. IN THE CASE OF SAT NAR AIN V. CIT, (2010) 320 ITR 448 (P & H), THE DOCUMENT DID NOT FO RM THE SOLE BASIS FOR THE ASSESSING OFFICER TO INITIATE R EASSESSMENT PROCEEDING BUT HE ALSO TOOK INTO CONSIDERATION THE LETTER WRITTEN BY THE ASSISTANT COMMISSIONER AS WELL AS TH E FACT THAT NO RETURN HAD BEEN FILED BY THE ASSESSEE FOR ASSESS MENT YEAR ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 18 1995-96. THUS, IT WAS HELD THAT THE ASSESSING OFFIC ER HAD RIGHTLY INVOKED THE JURISDICTION TO INITIATE THE RE ASSESSMENT PROCEEDINGS UNDER SECTION 147. IN THE CASE OF CIT V. HUKAM SINGH, (2005) 276 ITR 347 (P & H), IT WAS HEL D THAT THE RESPONDENTS DID NOT HAVE THE LOCUS STANDI TO QUESTI ON THE ORDERS OF REASSESSMENT ON THE GROUND OF LACK OF NOT ICE. NON- ISSUANCE OF NOTICE TO SOME OF THE LEGAL HEIRS OF TH E LATE P WAS MERELY AN IRREGULARITY AND THE SAME DID NOT AFFECT THE VALIDITY OF THE REASSESSMENT ORDERS. LIKEWISE, IN TILAK RAJ BEDI V. JOINT CIT, (2009) 319 ITR 385 (P & H), WHEREIN, FAC TS COMING TO LIGHT IN A SUBSEQUENT ASSESSMENT YEAR COULD VALI DLY FORM THE BASIS FOR INITIATING REASSESSMENT PROCEEDINGS, IN VIEW OF EXPLANATION 2 TO SECTION 147. THE ACTION OF THE INC OME TAX AUTHORITIES IN REOPENING THE ASSESSMENT OF THE ASSE SSEE AND RESTRICTING THE DEDUCTION UNDER SECTION 80-IB WAS H ELD TO BE VALID. 3.14. IN THE CASE OF SMT. USHA RANI V. CIT, (2008) 301 ITR 121 (P & H), THERE WAS NOTHING ON RECORD TO SHOW TH E RELATIONSHIP BETWEEN THE DONOR AND THE DONEE, CAPAC ITY OF THE DONOR TO MAKE GIFTS AND THE OCCASION THEREFORE. THE ASSESSEE ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 19 HAD FAILED TO DISCHARGE THE ONUS TO PROVE THE GIFTS . THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN THE CASE OF USHA BELTRON LTD. V. JOINT CIT, (1999) 240 ITR 728, 736-37, 739 (PAT), WHERE THE INVESTIGATION REPORT INDICATED THAT THE OFFICER HAD REASON TO BELIEVE THAT ON ACCOUNT OF FA ILURE ON THE PART OF THE PETITIONER-ASSESSEE TO DISCLOSE TRUE AN D FULL FACTS, INCOME HAD BEEN GROSSLY UNDER ASSESSED, REASSESSMEN T PROCEEDINGS WERE HELD VALIDLY INITIATED. 3.15. IN THE CASE OF KAPOOR BROTHERS V. UNION OF I NDIA, (2001) 247 ITR 324, 331, 332-33 (PAT), WHERE THE MA TERIAL EVIDENCE FOR THE PURPOSE OF REOPENING OF THE ASSESS MENT ALREADY COMPLETED HAS BEEN BROUGHT TO THE NOTICE OF THE AUTHORITY DURING THE COURSE OF ENQUIRY. THE NOTICE WAS HELD TO BE VALID BY THE HONBLE HIGH COURT. IN THE CASE OF VIPPY PROCESSORS PVT. LTD. V. CIT, (2001) 249 ITR 7, 8 (M P), WHERE THE NEED TO ISSUE NOTICE AROSE DUE TO NOTICING OF VAST DIFFERENCE IN VALUE OF PROPERTIES DISCLOSED BY THE ASSESSEE AND T HAT OF THE REPORT OF THE VALUATION OFFICER AND THE REASONS THA T LED TO THE ISSUE OF THE NOTICE WERE DULY RECORDED AND THE SAME WERE ALSO ADEQUATE AND BASED ON RELEVANT FACTS AND MATERIAL, INITIATION ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 20 WAS UPHELD. IN TRIPLE A TRADING & INVESTMENT PVT. LTD. V. ASST. CIT, (2001) 249 ITR 109, 110-11 (MP), WHERE T HE NOTICE WAS ISSUED AFTER RECORDING REASONS IN THAT REGARD, INITIATION WAS UPHELD. 3.16. LIKEWISE, HONBLE GUJARAT HIGH COURT IN GARD EN FINANCE LTD. V. ADD/. CIT, (2002) 257 ITR 481, 489, 494-95, SPECIAL LEAVE PETITION DISMISSED BY THE SUPREME COU RT: (2002) 255 ITR (ST.) 7-8 (SC), WHERE THE ASSESSEE WAS HOLD ING SHARES IN AN AMALGAMATING COMPANY AND HE WAS ALLOTTED SHAR ES IN THE AMALGAMATED COMPANY AND SUCH SHARES WERE SOLD B Y HIM AND HE HAS DISCLOSED THE MARKET PRICE OF SUCH SHARE S AS ON THE DATE OF AMALGAMATION AS THE COST OF ACQUISITION OF SUCH SHARES AND HAS NOT DISCLOSED THE COST OF ACQUISITIO N OF SHARES IN THE AMALGAMATING COMPANY IN ACCORDANCE WITH SECT ION 49(2) READ WITH SECTION 47(VII), INITIATION OF REAS SESSMENT PROCEEDINGS AFTER FOUR YEARS HAS BEEN SUSTAINED BEC AUSE THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS NECESSARY FOR ASSESSMENT. LIKEWISE, IN SUMAN STEELS V. UNION OF INDIA, (2004) 269 ITR 412,418-19 (RAJ), WHERE THE RETURN OF THE ASSESSEE FOR ASSESSMENT YEAR 1995-96 WAS ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 21 PROCESSED UNDER SECTION 143(1)(A) ACCEPTING THE NET PROFIT RATE DECLARED BY THE ASSESSEE, WHO CARRIED ON CON- TRACT BUSINESS, INITIATION OF REASSESSMENT PROCEEDINGS BY ISSUING A NOTICE DATED 15-5-2001 PROPOSING TO REASSESS PETITIONER-AS SESSEE AT HIGHER RATE IN VIEW OF THE PRESUMPTIVE RATE PRESCRI BED UNDER SECTION 44AD HAS BEEN SUSTAINED. IN THE CASE OF D R. SAHIB RAM GIRI V. ITO, (2008) 301 ITR 294 (RAJ), THE REAS SESSMENT PROCEEDINGS WERE INITIATED AFTER RECORDING REASONS IN WRITING BY THE AO. THE NON-AVAILABILITY OF A FEW DOCUMENTS DEM ANDED BY THE ASSESSEE WOULD NOT MAKE THE REASSESSMENT PROCEE DINGS INITIATED FOR THE REASONS RECORDED IN DETAIL ILLEGA L. 3.17. IN THE CASE OF DESH RAJ UDYOG : CHAMAN UDYOG V. ITO, (2009) 318 ITR 6 (ALL), IN THE ASSESSMENT YEAR S IN QUESTION, THE MATTER WAS STILL TO BE DECIDED FINALL Y BY THE ASSESSING AUTHORITY WHETHER THE INCOME SHOULD BE TR EATED UNDER THE HEAD 'BUSINESS INCOME' OR 'PROPERTY INCOM E'. THE ASSESSEE WOULD GET OPPORTUNITY TO SHOW SUFFICIENT C AUSE TO THE ASSESSING AUTHORITY DURING THE COURSE OF ASSESSMENT . THUS, IT COULD NOT BE SAID THAT THERE WAS NO RELEVANT MATERI AL TO INITIATE PROCEEDINGS UNDER SECTION 147. IN THE CAS E OF ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 22 KARTIKEYA INTERNATIONAL V. CIT, (2010) 329 ITR 539 (ALL), IN VIEW OF THE MATTER, THE PETITIONER WAS NOT ENTITLED FOR THE DEDUCTION ON THE DUTY DRAWBACK AMOUNT UNDER SECTION 80-IB AND SINCE IT HAD BEEN ALLOWED IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(1), IT HAD ESCAPED ASSESSMENT. ON THESE FACTS THE INITIATION OF THE PROCEEDINGS UNDER SECTION 147 REA D WITH SECTION 148 FOR ASSESSMENT YEARS 2005-06 AND 2006-0 7 WAS LEGAL AND IN ACCORDANCE WITH LAW. 3.18. LIKEWISE, IN THE CASE OF SUNIL KUMAR LAIN: S URESH CHANDRA LAIN V. ITO, (2006) 284 ITR 626 (ALL), NOTW ITHSTANDING THE FACT THAT THE AMOUNT HAD BEEN ASSESSED TO TAX I N THE HANDS OF P, HE HAD TAKEN A STAND THAT THE AMOUNT DI D NOT BELONG TO HIM AND INSTEAD BELONGED TO S. THUS, IT W AS NOT CLEAR AS TO IN WHOSE HANDS THE AMOUNT IN QUESTION H AD TO BE ASSESSED. THE ITO WAS JUSTIFIED IN TAKING PROCEEDIN GS UNDER SECTION 147 FOR ASSESSING THE AMOUNTS IN THE HANDS OF THE PETITIONERS ACCORDING TO THE CLAIM MADE BY THE PETI TIONERS. LIKEWISE, HONBLE KERALA HIGH COURT IN CIT V. DR. S ADIQUE UMMER, (2010) 322 ITR 602 (KER), WHERE, THE ASSESSI NG OFFICER COLLECTED FURTHER INFORMATION TO COMPLETE THE REASS ESSMENTS ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 23 WHICH WAS ALSO PERMISSIBLE UNDER THE ACT. THE FINDI NG OF THE FIRST APPELLATE AUTHORITY AS WELL AS THE TRIBUNAL, THAT THE ASSESSING OFFICER HAD NO MATERIAL TO BELIEVE THAT T HE INCOME HAD ESCAPED ASSESSMENT WAS WRONG AND CONTRARY TO FA CTS. THE ASSESSEE HAD NOT MAINTAINED ANY BOOKS OF ACCOUNT. T HEREFORE, THE REOPENING OF ASSESSMENTS WAS HELD TO BE VALID A ND WITHIN TIME. IN THE CASE OF CIT V. UTTAM CHAND NAHAR, (2 007) 295 ITR 403 (RAJ), THE NOTICE REQUIRING THE ASSESSEE TO FILE THE RETURN WITHIN 30 DAYS WAS IN ACCORDANCE WITH SECTIO N 148 AS IT MUST BE DEEMED TO BE IN FORCE WITH EFFECT FROM 1-4- 1989, AND IN FORCE AS ON THE DATE NOTICE WAS ISSUED. THERE WA S NO VIOLATION OF SECTION 148 IN RESPECT OF THE SPECIFIE D PERIOD WITHIN WHICH THE RETURN IS TO BE SUBMITTED. THE REASSESSME NT PROCEEDINGS WERE HELD TO BE VALID. 3.19. IN THE CASE OF CIT V. C. V. LAYACHANDRAN, (2 010) 322 ITR 520 (KER), WHERE, THE ASSESSEE DID NOT CONCEDE THE INCOME ON CAPITAL GAIN EITHER UNDER THE UN-AMENDED PROVISI ON OR UN-DER THE AMENDED PROVISION, THE RECOURSE OPEN TO THE DEPARTMENT WAS TO BRING TO TAX INCOME ESCAPING ASSE SSMENT UNDER SECTION 147 WHICH WAS NOT TIME BARRED OR OTHE RWISE ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 24 INVALID. LIKEWISE, IN ATUL TRADERS V. ITO, (2006) 282 ITR 536 (ALL), THE ACCOUNT BOOKS OR RECORD AND OTHER MATERI AL WERE ALL COMMON WHICH WERE BEING CONSIDERED BY THE CIT(A) IN THE PROCEEDINGS RELATING TO THREE APPEALS. THE PETITION ER HAD NOTICE AND OPPORTUNITY OF BEING HEARD. THE REASSESS MENT PROCEEDINGS WERE HELD TO BE VALIDLY INITIATED. IN THE CASE OF INDUCTOTHERM (INDIA) P. LTD. V. LAMES KURIAN, ASST. CIT, (2007) 294 ITR 341 (GUJ), THE ASSESSING OFFICER HAD FOUND THAT THERE WERE ERRORS IN THE COMPUTATION OF ALLOWANCES. THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN THE CASE OF PAPAYA FARMS PVT. LTD. VS. DCIT, (2010) 323 ITR 60 (MAD), WHERE THE ASSESSEE HAD FURNISHED INCORRECT PARTICUL ARS AND THEREFORE, THE REOPENING OF THE ASSESSMENT WAS HELD TO BE JUSTIFIED. 3.20. IN THE CASE OF CIT V. KERALA STATE CASHEW DEVELOPMENT CORPORATION LTD., (2006) 286 ITR 553 (K ER), WHEREIN, THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING SHOULD NOT HAVE CLAIMED DEDUCTION OF PEN AL INTEREST WHICH HAD ACCRUED NOT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR BUT IN EARLIER YEARS. THIS THE ASSESSEE ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 25 HAD NOT DISCLOSED. THE REASSESSMENT WAS HELD TO BE VALID. LIKEWISE, IN KUSUM INDUSTRIES P. LTD. V. CIT, (200 8) 296 ITR 242 (ALL), AS THE AWARD HAD BECOME FINAL IT WOULD B E TAKEN THAT THE DIRECTORS OF THE ASSESSEE HAD ACCEPTED THE FACT UM OF EARNING OF SECRET PROFIT NOT REFLECTED IN THE BOOKS OF ACCOUNT, WHICH WAS ALSO BINDING ON THE COMPANY. THE NON-APPE ARANCE OF ONE OF THE ARBITRATORS AND ONE OF THE DIRECTORS IN RESPECT OF THE SUMMON ISSUED UNDER SECTION 131 WOULD NOT MAKE THE REASSESSMENT INVALID. THE HONBLE KERALA HIGH COURT IN CIT V. INDO MARINE AGENCIES (KERALA) P. LTD., (2005) 279 I TR 372 (KER), HELD THAT THE ENTRY WOULD AMOUNT TO AN ORDER UNDER SECTION 144. THE MERE FACT THAT IT WAS NOT COMMUNIC ATED TO THE ASSESSEE WOULD NOT MAKE SUCH AN ASSESSMENT RECO RDED IN THE ORDER SHEET ILLEGAL AND THAT WOULD NOT BAR FURT HER PROCEEDINGS UNDER SECTION 147. THUS, THE ASSESSMENT WAS HELD TO BE VALIDLY REOPENED UNDER EXPLANATION 2(C) TO SECTION 147. LIKEWISE, IN CIT V. N. JAYAPRAKASH, (2006) 28 5 ITR 369 (KER), WHERE, THE ASSESSEE COULD NOT, AFTER HAVING PERSUADED THE ASSESSING AUTHORITY TO WITHDRAW THE NOTICE DATE D 1-10- 1993, POINTING OUT THAT IT WAS NOT IN CONFORMITY WI TH LAW, BE ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 26 ALLOWED TO CONTEND THAT THE NOTICE WAS VALID DUE TO THE OMISSION OF THE TIME-LIMIT BY THE FINANCE (NO.2) AC T, 1996, WITH EFFECT FROM 1-4-1989. IN THE ABSENCE OF SPECIF IC PROVISION IN THE FINANCE (NO. 2) ACT, 1996, INVALIDATING PROC EEDINGS INITIATED BY THE INCOME-TAX OFFICER, THE ACTION TAK EN BY HIM APPLYING THE THEN EXISTING LAW COULD NOT BE SAID TO BE INVALID. 3.21. LIKEWISE, IN CIT V. S.R. TALWAR, (2008) 305 ITR 286 (ALL), THE FACTUM OF TAKING ADVANCES OR LOAN FROM T AND K, IN WHICH THE ASSESSEE WAS ONE OF THE DIRECTORS HAD NOT BEEN DISCLOSED NOR A COPY OF THE LEDGER ACCOUNT OF THE A SSESSEE MAINTAINED BY THE COMPANY FILED. IN VIEW OF THE ABS ENCE OF THESE DETAILS, THE ASSESSING OFFICER COULD NOT EXAM INE THE TAXABILITY OF ADVANCES OR LOAN RAISED BY THE ASSESS EE. THERE WAS FAILURE TO DISCLOSE MATERIAL FACTS NECESSARY FO R ASSESSMENT. THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN ANOTHER CASE, THE HONBLE ALLAHABAD HIGH COURT IN C HANDRA PRAKASH AGRAWAL V. ASST. CIT, (2006) 287 ITR 172 (A LL), WHEREIN, THE INCOME-TAX DEPARTMENT HAD SENT A REQUI SITION ON 27-3-2002, UNDER SECTION 132A REQUISITIONING THE BO OKS OF ACCOUNT AND OTHER DOCUMENTS SEIZED BY THE CENTRAL E XCISE ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 27 DEPARTMENT. THE RECORD OF THE PROCEEDING DATED 18-4 -2002, SHOWED THAT THE REQUISITION WAS NOT FULLY EXECUTED AS ALL THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS HAD NOT BEEN D ELIVERED TO THE REQUISITIONING AUTHORITY. THE PROCEEDINGS IN ITIATED UNDER SECTION 147 WAS HELD TO BE VALID. 3.22. IN RAMILABEN RATILAL SHAH V. CIT, (2006) 282 ITR 176 (GUJ), HELD THAT THE NOTING IN THE DIARY CONSTI TUTED SUFFICIENT INFORMATION FOR THE ESCAPEMENT OF INCOME BY EITHER NON-DECLARATION OF CORRECT SALE CONSIDERATIO N OR FURNISHING OF INACCURATE PARTICULARS AS REGARDS SAL E CONSIDERATION. THUS, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THE RELEVANT ASSESSMENT YEAR. THE REASSESSMENT PROCEEDINGS HAD B EEN VALIDLY INITIATED. LIKEWISE, IN CIT V. ABDUL KHADER AHAMED, (2006) 28 5 ITR 57 (KER), IT WAS CLEAR FROM THE REASONS RECORDE D BY THE DEPUTY CIT THAT HE PRIMA FACIE HAD REASON TO BELIEV E THAT THE ASSESSEE HAD OMITTED TO DISCLOSE FULLY AND TRULY TH E MATERIAL ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 28 FACTS AND THAT AS A CONSEQUENCE INCOME HAD ESCAPED ASSESSMENT. THE REASSESSMENT WAS HELD TO BE VALID. IN THE CASE OF U.P. STATE BRASSWARE CORPORATION LTD. V. CI T, (2005) 277 ITR 40 (ALL), THE PRINCIPLES LAID DOWN BY THE C ALCUTTA HIGH COURT IN CIT V. NEW CENTRAL JUTE MILLS CO. LTD. : ( 1979) 118 ITR 1005 (CAL) DID CONSTITUTE INFORMATION ON A POIN T OF LAW WHICH SHOULD BE TAKEN INTO CONSIDERATION BY THE ITO IN FORMING HIS BELIEF THAT THE INCOME TO THAT EXTENT H AD ESCAPED ASSESSMENT TO TAX AND, THE REASSESSMENT WAS HELD TO BE VALID. IN SUNDER CARPET INDUSTRIES V. ITO, (2010) 324 ITR 417 (ALL), HELD THAT THE DEPARTMENTAL VALUER'S REPORT CONSTITU TED MATERIAL FOR ENTERTAINING A BELIEF OF ESCAPED INCOM E IN THE YEARS UNDER CONSIDERATION. THE REASSESSMENT PROCEED ING WAS HELD TO BE VALID. 3.23. IN AUROBINDO SANITARY STORES V. CIT, (2005) 276 ITR 549 (ORI), THERE BEING A SUBSTANTIAL DIFFERENCE BET WEEN THE FIGURES OF LIABILITIES TOWARDS SUNDRY CREDITORS IN THE PARTY LEDGERS OF THE ASSESSEE-FIRM AND THE FIGURES OF LIA BILITIES TOWARDS SUNDRY CREDITORS IN THE BALANCE-SHEET OF TH E ASSESSEE- FIRM FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSME NT YEAR ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 29 1989-90. THESE MATERIALS HAD A DIRECT LINK AND NEXU S FOR FORMATION OF A BELIEF BY THE ASSESSING OFFICER THAT INCOME OF THE ASSESSEE-FIRM HAD ESCAPED ASSESSMENT BECAUSE OF FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR THE ASSESSMENT. IN THE CASE OF CIT V . BEST WOOD INDUSTRIES & SAW MILLS, (2011) 331 ITR 63 (KER), TH E ASSESSEE CHALLENGED THE VALIDITY OF THE REASSESSMENT ON THE GROUND THAT THE AO HAD EXCEEDED HIS JURISDICTION UNDER SECTION 147 AND BOTH THE FIRST APPELLATE AUTHORITY AS WELL AS THE T RIBUNAL ACCEPTED THE CONTENTION OF THE ASSESSEE HOLDING THA T SO FAR AS THE REASSESSMENTS RELATED TO ASSESSMENT OF UNEXPLAI NED TRADE CREDITS, THEY WERE INVALID. ON APPEAL, IT HAS BEEN HELD THAT THE REASSESSMENTS WERE TO BE VALID. IN HONDA SIEL POWE R PRODUCTS LTD. V. DEPUTY CIT, (2012) 340 ITR 53 (DEL), THERE BEING OMISSION AND FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS THUS REASSESSMENT PR OCEEDINGS WERE HELD TO BE VALID. IN ATMA RAM PROPERTIES PRIVATE LTD. V. DEPUTY CIT, (2012) 343 ITR 141 (DEL), AS THE BOOKS OF ACCOUNT A ND OTHER MATERIAL WERE NOT PRODUCED AND NO LETTER WAS FILED, THE ORDER ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 30 PASSED BY THE COMMISSIONER (APPEALS) IN THE ASSESSM ENT YEAR 2001-02 WOULD CONSTITUTE 'INFORMATION' OR MATERIAL FROM ANY EXTERNAL SOURCE AND, AS SUCH, THE REASSESSMENT PROC EEDINGS FOR THE ASSESSMENT YEAR 2000-01 WERE HELD TO BE VAL ID. LIKEWISE, IN THE CASE OF CIT V. SMT. R. SUNANDA BA I, (2012) 344 ITR 271 (KER), THE REASSESSMENT IN QUESTION WER E HELD TO BE VALID ON THE FACT THAT THE ASSESSEE CLAIMED AND WAS GIVEN RELIEF UNDER SECTION 80HHA FOR THE THREE PRECEDING YEAR WHICH DISENTITLED HER FOR DEDUCTION UNDER SECTION 80HH FO R THE ASSESSMENT YEARS 1992-93 AND 1993-94. 3.24. IN THE CASE OF AQUAGEL CHEMICALS P. LTD. V. ASST. CIT, (2013) 353 ITR 131 (GUJ), SINCE THERE BEING SU FFICIENT MATERIAL ON RECORD FOR THE ASSESSING OFFICER TO FOR M A BELIEF AS REGARDS THE ESCAPEMENT OF INCOME IN RELATION TO THE CLAIM OF DEPRECIATION IN RESPECT OF THE BUILDING OF COAL FIR E BOILER, THE REASSESSMENT WAS HELD TO BE VALID. IN THE CASE OF CONVERGYS CUSTOMER MANAGEMENT V. ASST. DIT, (2013) 357 ITR 17 7 (DEL), WHERE THERE BEING PRIMA FACIE MATERIAL IN THE POSSE SSION OF THE ASSESSING OFFICER TO FORM A TENTATIVE BELIEF THAT S ECTION 9(1)(I) ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 31 HELD ATTRACTED, SAID REASON BY ITSELF CONSTITUTED A RELEVANT GROUND TO REOPEN THE ASSESSMENT OF THE ASSESSEE. REFERENCE CAN ALSO BE MADE TO FOLLOWING CASES AND T HE RATIO LAID DOWN THEREIN:- I. AJAI VERMA V. CIT [(2008) 304 ITR 30 (ALL)]; II. ASHOK ARORA V. CIT [(2010) 321 ITR 171 (DEL)]; III. CIT V. CHANDRASEKHAR BALAGOPAL [(2010) 328 ITR 619 (KER)]; IV. JAYARAM PAPER MILLS LTD. V. CIT [(2010) 321 ITR 56 (MAD)]; V. KERALA FINANCIAL CORPORATION V. JOINT CIT [(2009) 3 08 ITR 434 (KER)]; VI. MAVIS SATCOM LTD. V. DEPUTY CIT [(2010) 325 ITR 428 (MAD)]; VII. CIT V. MADHYA BHARAT ENERGY CORPORATION LTD. [(2011 ) 337 ITR 389 (DEL)]; VIII. KONE ELEVATOR INDIA P. LTD. V. ITO [(2012) 340 ITR 454 (MAD)]; IX. VIJAY KUMAR SABOO V. ASST. CIT [(2012) 340 ITR 382 (KARN)]; X. SIEMENS INFORMATION SYSTEMS LTD. V. ASST. CIT [(201 2) 343 ITR 188 (BOM)]; XI. I.P. PATEL & CO. V. DEPUTY CIT [(2012) 346 ITR 207 (GUJ)]; XII. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. V. DEPUTY CIT [(2012) 346 ITR 228 (GUJ)]; ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 32 XIII. VIDEO ELECTRONICS LTD. V. JOINT CIT [(2013) 353 ITR 73 (DEL)]; XIV. A G GROUP CORPORATION V. HARSH PRAKASH [(2013) 353 ITR 158 (GUJ)]; XV. INDUCTOTHERM (INDIA) P. LTD. V. M. GOPALAN, DEPUTY CIT [(2013) 356 ITR 481 (GUJ)]; CIT V. DHANALEKSHMI BAN K LTD. [(2013) 357 ITR 448 (KER)]; XVI. SITARA DIAMOND PVT. LTD. V. ITO [(2013) 358 ITR 424 (BOM)]; XVII. RAYALA CORPORATION P. LTD. V. ASST. CIT [(2014) 363 ITR 630 (MAD)]. 3.25. SO FAR AS, THE DECISION IN THE CASE OF CIT V S KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC) IS CONCERNED, THE HONBLE APEX COURT, WHILE COMING TO A PARTICULA R CONCLUSION, ONLY IN A SITUATION, WHEN NOT A SINGLE PIECE OF PAPER OR DOCUMENT WAS RECOVERED, THEREFORE, THE HON BLE COURT HELD THAT SINCE THERE WAS NO TANGIBLE MATERIA L FOUND AND THE ADDITION WAS MERELY ON THE BASIS OF STATEME NT ONLY THEN REOPENING OF ASSESSMENT U/S 147 OF THE ACT WAS NOT PERMISSIBLE. IT IS FURTHER NOTED THAT RETRACTION WA S MADE BY THE ASSESSEE, MERELY AFTER A LONG GAP OF MORE THAN TWO YEARS AND NOT AT THE EARLIEST POSSIBLE TIME. IT WAS MEREL Y AS AFTERTHOUGHT. THERE IS A POSSIBILITY THAT THE STAT EMENT, IF, ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 33 RECORDED UNDER DURESS AND THREAT (WHICH IS NOT THE CASE IN THE PRESENT APPEALS) IN THAT SITUATION, THERE IS A LESS POSSIBILITY OF RETRACTION DURING THAT PERIOD, HOWEVER, IF THE RETR ACTION IS MADE WITHIN SHORT SPAN OF TIME THEN RETRACTION CARR IES MORE WEIGHT. THE ASSESSEE NEVER ALLEGED THAT THE STATEM ENT WAS RECORDED UNDER DURESS AND THREAT. LIKEWISE, IN THE CASE OF CIT VS S. KHADER KHAN SON (2012) 254 CTR 228 (SC), AFFI RMING THE DECISION OF MADRAS HIGH COURT IN (2008) 300 ITR 157 (MAD.), THE WHOLE ADDITION WAS MADE SOLELY ON THE BASIS OF STATEMENT U/S 133A AND NO OTHER MATERIAL WAS FOUND, IN THAT S ITUATION, IT WAS HELD THAT THE SUCH STATEMENT HAS NO EVIDENTI ARY VALUE, THUS, UNDER THE PECULIAR FACTS IN THE PRESENT APPEA L, THE CASES RELIED UPON BY THE ASSESSEE ARE NOT OF MUCH HELP AS IS CLEARLY OOZING OUT FROM THE CONTENTS OF THE STATEMENT TENDE RED BY THE ASSESSEE WITHOUT DURESS OR THREAT, CONNECTING THE A SSESSEE OF NON-RECORDING OF PURCHASE AND SALE IN THE REGULAR B OOKS OF ACCOUNTS. IF THE MATERIAL AVAILABLE ON RECORD AND THE JUDICI AL PRONOUNCEMENTS DISCUSSED HEREINABOVE ARE KEPT IN JUXTAPOSITION WITH THE FACTS OF THE PRESENT APPEAL, WE FIND THAT ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 34 THERE WAS REASONABLE BELIEF WITH THE LD. ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AS THE LD. ASSESSING OFFICER MADE PAYMENT TO THE NON-RESIDENT FILM DISTRIBUTOR WITHOUT DEDUCTING TDS, THEREFORE, WE AR E OF THE OPINION THAT, SO FAR AS, INITIATION OF PROCEEDINGS U/S 147 R.W.S. 148 OF THE ACT ARE CONCERNED, THE LD. ASSESSING OFF ICER WAS JUSTIFIABLY WITHIN THE PARAMETER OF THE LAW TO REOP EN THE ASSESSMENT, THEREFORE, WE AFFIRM THE STAND OF THE L D. FIRST APPELLATE AUTHORITY, RESULTING INTO DISMISSAL OF TH E IMPUGNED GROUND RAISED BY THE ASSESSEE. 4. SO FAR AS THE MERITS OF THE APPEAL IS CONCERNED, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.3,53,773 /- BEING 12.5% OF THE ALLEGED BOGUS PURCHASES FROM HAWALA DE ALERS OUT OF THE TOTAL ADDITION OF RS.28,30,184/-. THE ONLY C ONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE BENEFI T OF THE NET PROFIT RATIO ALREADY DECLARED BY THE ASSESSEE WHICH IS IN THE RANGE OF 2.5 TO 3% MAY BE GIVEN AS THE ASSESSEE HAS PROVED CONSUMPTION. ON THE OTHER HAND, THE LD. DR DEFENDED THE ADDITION RETAINED BY THE LD. FIRST APPELLATE AUTHOR ITY. THE LD. COUNSEL FOR THE ASSESSEE AS WELL AS THE LD. DR RELI ED UPON ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 35 CERTAIN DECISIONS WHICH WE WILL DISCUSS WHILE DISPO SING OF THE IMPUGNED GROUND. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IF THE OB SERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION M ADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDE R, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY TH E LD. DR, IF KEPT IN JUXTAPOSITION AND ANALYZED, BEFORE ADVERTI NG FURTHER, THE FACTS OF THE PRESENT APPEALS BEFORE US, WE DEEM IT APPROPRIATE TO CONSIDER VARIOUS DECISIONS FROM HON' BLE HIGH COURTS/HON'BLE APEX COURT, SO THAT WE CAN REACH TO A PROPER CONCLUSION. THE HON'BLE GUJARAT HIGH COURT IN SANJA Y OILCAKES INDUSTRIES VS CIT (2009) 316 ITR 274 (GUJ. ) HELD AS UNDER:- 11. HAVING HEARD THE LEARNED ADVOCATES APPEARING F OR THE RESPECTIVE PARTIES, IT IS APPARENT THAT NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER OF THE TRIBUNAL DATED APRIL 29, 1994, READ WITH THE ORDER DATED SEPTEMBER 29, 1994, MADE IN MISCELLANEOUS APPLICATION. IN THE PRINCIPAL ORDER THE TRIBUNAL HA S RECORDED THE FOLLOWING FINDINGS : '8.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE FACTS ON RECORD. IN OUR OPINION, ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 36 THE ACTION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) CONFIRMING 25 PER CENT. OF THE AMOUNTS CLAIMED IS FAIR AND REASONABLE AND NO INTERFERENCE IS CALLED FOR. THE COMMIS SIONER OF INCOME-TAX (APPEALS) HAS GONE THROUGH THE PURCHASE PRICES OF THE RAW MATERIAL PREVALENT AT THE TIME AND RIGHTLY CAME TO THE CON CLUSION THAT THE DISALLOWANCE TO THE EXTENT OF 25 PER CENT. WAS CALLED FOR. IT IS ESTABLISHED THAT THE PARTIES WERE NOT TRACEABLE ; THEY OPENED THE BANK ACCOUNTS IN WHICH THE CHEQUES WERE CREDITED BUT SOON THEREAFTER THE AMOUNTS WERE WITHDRAWN BY BEARER CHEQUES. THAT FAIRLY LEADS TO THE CONCLUSION THAT THESE PARTIES WERE PERHAPS CREATION OF THE ASSESSEE ITSELF FOR THE PURPOSE OF BANKING PURCHASES INTO BOOKS OF ACCOUNT BECAUSE THE PURCHASES WITH BILLS WERE NOT FEASIBLE. THUS, THE ABOVENOTED PARTIES BECOME CONDUIT PIPES BETWEEN THE ASSESSEE- FIRM AND THE SELLERS OF THE RAW MATERIALS. UNDER THE CIRCUMSTANCES, IT WAS NOT IMPOSSIBLE FOR THE ASSESSEE TO INFLATE THE PRICES OF RAW MATERIALS. ACCORDINGLY, AN ADDITION AT THE RATE OF 25 PER CENT. FOR EXTRA PRICE PAID BY THE ASSESSEE THAN OVER AND ABOVE THE PREVALENT PRICE IS FAIR AND REASONABLE AND WE ACCORDINGLY CONFIRM THE FINDING OF THE COMMIS SIONER OF INCOME-TAX (APPEALS).' 12. THUS, IT IS APPARENT THAT BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE CONCURRENTLY ACCEPTED THE FINDING OF THE ASSESSING OFFICER THAT THE APPARENT SELLERS WHO HAD ISSUED SALE BILLS WERE NOT TRACEABLE. THAT GOODS WERE RECEIVED FROM THE PARTIES OTHER THAN THE PERSONS WHO HAD ISSUED BILLS FOR SUCH GOODS. THOUGH THE PURCHASES ARE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENT THEREOF BY ACCOUNT PAYEE CHEQUES, THE CHEQUES HAVE BEEN DEPOSITED IN BANK ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 37 ACCOUNTS OSTENSIBLY IN THE NAME OF THE APPARENT SELLERS, THEREAFTER THE ENTIRE AMOUNTS HAVE BEEN WITHDRAWN BY BEARER CHEQUES AND THERE IS NO TRACE OR IDENTITY OF THE PERSON WITHDRAWING THE AMOUNT FROM THE BANK ACCOUNTS. IN THE LIGHT OF THE AFORESAID NATURE OF EVIDENCE IT IS NOT POSSIBLE TO RECORD A DIFFERENT CONCLUSION, DIFFERENT FROM THE O NE RECORDED BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL CONCURRENTLY HOLDING THAT THE APPARENT SELLERS WERE NOT GENUINE, OR WERE ACTING AS CONDUIT BETWEEN THE ASSESSEE-FIRM AND THE ACTUAL SELLERS OF THE RAW MATERIALS. BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE, THEREFORE, COME TO THE CONCLUSION THAT IN SUCH CIRCUMSTANCES, THE LIKELIHOOD OF THE PURCHASE PRICE BEING INFLATED CANNOT BE RULED OUT AND THERE IS NO MATERIAL TO DISLODGE SUCH FINDING. THE ISSUE IS NOT WHETHER THE PURCHASE PRICE REFLECTED IN THE BOOKS OF ACCOUNT MATCHES THE PURCHASE PRICE STATED TO HAVE BEEN PAID TO OTHER PERSONS. THE ISSUE IS WHETHER THE PURCHASE PRICE PAID BY THE ASSESSEE IS REFLECTED AS RECEIPTS BY THE RECIPIENTS. THE ASSESSEE HAS, BY SE T OF EVIDENCE AVAILABLE ON RECORD, MADE IT POSSIBLE F OR THE RECIPIENTS NOT BEING TRACEABLE FOR THE PURPOSE OF INQUIRY AS TO WHETHER THE PAYMENTS MADE BY THE ASSESSEE HAVE BEEN ACTUALLY RECEIVED BY THE APPARENT SELLERS. HENCE, THE ESTIMATE MADE BY THE TWO APPELLATE AUTHORITIES DOES NOT WARRANT INTERFERENCE. EVEN OTHERWISE, WHETHER THE ESTIMATE SHOULD BE AT A PARTICULAR SUM OR AT A DIFFERENT SUM , CAN NEVER BE AN ISSUE OF LAW. IN THE AFORESAID CASE, THE HON'BLE HIGH COURT ACCEP TED THAT THE APPARENT SELLERS, WHO ISSUED THE SAID BILL S WERE NOT ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 38 TRACEABLE AND THE GOODS RECEIVED FROM PARTIES OTHER THAN THE PERSONS, WHO HAD ISSUED THE BILLS FOR SUCH GOODS. T HE PURCHASES WERE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENTS, THROUGH BANKING CHANNEL AND THUS THE APPA RENT SELLERS WERE NOT GENUINE OR WERE ACTING AS CONDUIT BETWEEN THE ASSESSEE AND THE ACTUAL SELLER. IN SUCH A SITUATION , THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AS WELL AS BY THE TRIBUNAL WAS AFFIRMED. HON'BLE APEX COURT IN KACHWALA GEMS VS JCIT (2007) 158 TAXMAN 71 OBSERVED THAT AN ELEMENT OF GUESSWORK IS INEVITABLE IN CASES, WHERE ESTIMATION OF INCOME IS WARRANTED. 5.2 THE HON'BLE GUJARAT HIGH COURT IN CIT VS BHOLA NATH POLY FAB. PVT. LTD. (2013) 355 ITR 290 (GUJ.) HELD/ OBSERVED AS UNDER:- 5. HAVING COME TO SUCH A CONCLUSION, HOWEVER, THE TRIBUNAL WAS OF THE OPINION THAT THE PURCHASES MAY HAVE BEEN MADE FROM BOGUS PARTIES, NEVERTHELESS, TH E PURCHASES THEMSELVES WERE NOT BOGUS. THE TRIBUNAL ADVERTED TO THE FACTS AND DATA ON RECORD AND CAME T O THE CONCLUSION THAT THE ENTIRE QUANTITY OF OPENING STOCK, PURCHASES AND THE QUANTITY MANUFACTURED DURING THE YEAR UNDER CONSIDERATION WERE SOLD BY TH E ASSESSEE. THEREFORE, THE PURCHASES OF THE ENTIRE 1,02,514 METRES OF CLOTH WERE SOLD DURING THE YEAR ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 39 UNDER CONSIDERATION. THE TRIBUNAL, THEREFORE, ACCEP TED THE ASSESSEE'S CONTENTION THAT THE FINISHED GOODS W ERE PURCHASED BY THE ASSESSEE, MAY BE NOT FROM THE PARTIES SHOWN IN THE ACCOUNTS, BUT FROM OTHER SOURC ES. IN THAT VIEW OF THE MATTER, THE TRIBUNAL WAS OF THE OPINION THAT NOT THE ENTIRE AMOUNT, BUT THE PROFIT MARGIN EMBEDDED IN SUCH AMOUNT WOULD BE SUBJECTED TO TAX. THE TRIBUNAL RELIED ON ITS EARLIER DECISION IN THE CASE OF SANKET STEEL TRADERS AND ALSO MADE REFERENC E TO THE TRIBUNAL'S DECISION IN THE CASE OF VIJAY PRO TEINS LTD. V. ASST. CIT [1996] 58 ITD 428 (AHD). 6. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTE D NO ERROR. WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS IS ESSENTIALLY A QUESTION OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE THE CLOTH AND SELL THE FINISHED GOODS. IN THAT VIEW OF THE MA TTER, AS NATURAL COROLLARY, NOT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDE D THEREIN WOULD BE SUBJECT TO TAX. THIS WAS THE VIEW OF THIS COURT IN THE CASE OF SANJAY OILCAKE INDUSTRIES V. CIT [2009] 316 ITR 274 (GUJ). SUCH DECISION IS ALSO FOLLOWED BY THIS COURT IN A JUDGMENT DATED AUGUST 1 6, 2011, IN TAX APPEAL NO. 679 OF 2010 IN THE CASE OF CIT V. KISHOR AMRUTLAL PATEL. IN THE RESULT, TAX APPEAL IS DISMISSED. 5.3. LIKEWISE, THE HON'BLE GUJARAT HIGH COURT IN C IT VS VIJAY M. MISTRY CONSTRUCTION LTD. (2013) 355 ITR 49 8 (GUJ.) HELD/OBSERVED AS UNDER:- ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 40 6. AS IS APPARENT FROM THE FACTS NOTED HEREINABOVE , THE COMMISSIONER (APPEALS) AFTER APPRECIATING THE EVIDENCE ON RECORD HAS FOUND THAT THE ASSESSEE HAD IN FACT MADE THE PURCHASES AND, HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE AMOUNT. HE, HOWEVER, WAS OF THE VIEW THAT THE ASSESSEE HAD INFLATED THE PURCHASES AND, ACCORDINGL Y, BY PLACING RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF VIJAY PROTEINS (SUPRA) RESTRICTED THE DISALLOWANCE TO 20 PER CENT. THE TRIBUNAL IN THE IMPUGNED ORDER HAS FOLLOWED ITS EARLIER ORDER IN TH E CASE OF VIJAY PROTEINS TO THE LETTER AND ENHANCED T HE DISALLOWANCE TO 25 PER CENT. THUS, IN BOTH CASES, T HE DECISION OF THE COMMISSIONER (APPEALS) AS WELL AS T HAT OF THE TRIBUNAL IS BASED ON ESTIMATE. THIS HIGH COU RT IN THE CASE OF SANJAY OIL CAKE [2009] 316 ITR 274 (GUJ) HAS HELD THAT WHETHER AN ESTIMATE SHOULD BE A T A PARTICULAR SUM OR AT A DIFFERENT SUM CAN NEVER BE A QUESTION OF LAW. 7. THE APEX COURT IN THE CASE OF KACHWALA GEMS [2007] 288 ITR 10 (SC) HAS HELD THAT IN A BEST JUDGMENT ASSESSMENT THERE IS ALWAYS A CERTAIN DEGRE E OF GUESS WORK. NO DOUBT, THE AUTHORITIES SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT AND SHOULD NOT ACT TOTALLY ARBITRARILY BUT THERE IS NECESSARILY SOME A MOUNT OF GUESS WORK INVOLVED IN A BEST JUDGMENT ASSESSMENT. 8. EXAMINING THE FACTS OF THE PRESENT CASE IN THE L IGHT OF THE AFORESAID DECISIONS, THE DECISION OF THE TRI BUNAL, BEING BASED ON AN ESTIMATE, DOES NOT GIVE RISE TO A NY QUESTION OF LAW SO AS TO WARRANT INTERFERENCE. 9. IN SO FAR AS THE PROPOSED QUESTIONS (C), (D) AND (E) ARE CONCERNED, THE SAME ARE SIMILAR TO THE PROPOSED QUESTION (A) WHEREIN THE TRIBUNAL HAS RESTRICTED TH E ADDITION TO 25 PER CENT. ON SIMILAR FACTS. IN THE CIRCUMSTANCES, FOR THE REASONS STATED HEREINABOVE, THE ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 41 SAID GROUNDS OF APPEAL DO NOT GIVE RISE TO ANY QUES TION OF LAW. 10. AS REGARDS THE PROPOSED QUESTION (B) WHICH PERTAINS TO THE DELETION OF ADDITION OF RS. 7,88,59 0 MADE ON ACCOUNT OF INFLATION OF EXPENSES PAID TO ME TAL AND MACHINE TRADING CO. (MMTC), THE ASSESSING OFFICER HAS FOUND THAT MMTC WAS A PARTNERSHIP FIRM OF SHRI NITIN GAJJAR ALONG WITH HIS FATHER AND BROT HER OPERATING FROM BHAVNAGAR. A PERUSAL OF THEIR TRANSACTIONS WITH THE ASSESSEE INDICATED THAT THERE IS SOME INFLATION OF EXPENSES AS DETAILED IN PARAGRAPH 6.1 OF THE ASSESSMENT ORDER. AFTER CONSIDERING THE EVIDENCE ON RECORD, THE ASSESSING OFFICER DISALLOWE D THE AMOUNT RS. 7,88,590 ON ACCOUNT OF PAYMENT MADE TO MMTC. 11. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER (APPEALS), WHO UPON APPRECIATION OF TH E EVIDENCE ON RECORD FOUND THAT THE ASSESSING OFFICER HAD NOT REJECTED THE GENUINENESS OF THE PURCHASES MADE FROM MMTC WHILE MAKING THE DISALLOWANCE. HIS OBSERVATIONS WERE BASED ON INFLATION OF RATES WHICH WERE BEING CHARGED FROM THE ASSESSEE. ACCORDING TO THE COMMISSIONER (APPEALS), THOUGH MMTC IN SOME RESPECT COULD BE ATTRIBUTED TO BE ASSOCIATED WITH T HE ASSESSEE-COMPANY, STILL IT COULD NOT BE EXPECTED TH AT MMTC WAS CARRYING OUT ITS BUSINESS WITHOUT ANY MOTIVE OR PROFIT. ACCORDING TO THE COMMISSIONER (APPEALS), IT WAS PROVED BY THE ASSESSEE THAT THE R ATES CHARGED BY MMTC WERE COMPARABLE WITH THE PREVAILING MARKET RATES, NO SUCH ADDITION CAN STAND . THE COMMISSIONER (APPEALS) TOOK NOTE OF THE FACT TH AT IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT T HE PURCHASES HAD BEEN DIRECTLY EFFECTED FROM THIRD PAR TIES AND NOT DIRECTLY FROM MMTC ; THE DIFFERENCE COULD N OT BE THE NET PROFIT IN THE HANDS OF MMTC ; AND THAT W HILE CONDUCTING THE ENTIRE EXERCISE MMTC WOULD HAVE TO INCUR CERTAIN EXPENDITURE IN TRANSPORTATION, IN ENGAGING PERSONNEL IN THE OFFICE AND OTHER OPERATIO NS AND WAS ACCORDINGLY OF THE VIEW THAT THERE WAS NO ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 42 CASE OF ACTUAL INFLATION OF RATES AND DELETED THE ADDITION. 12. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS CONCURRED WITH THE FINDINGS RECORDED BY THE COMMISSIONER (APPEALS) AND HAS FOUND THAT THE ASSESSEE HAD MADE PURCHASES FROM MMTC AT THE PREVAILING MARKET RATES AND THAT MMTC HAD INCURRED CERTAIN EXPENDITURE IN ENGAGING PERSONNEL IN THE OF FICE AND OTHER OPERATIONS AND WOULD MAKE SOME INCOME FROM THE ENTIRE EXERCISE. IN THE CIRCUMSTANCES, THE PURCHASES MADE BY THE ASSESSEE FROM MMTC WOULD NOT BE HIT BY THE PROVISIONS OF SECTION 40A(2) OF T HE ACT. 13. THUS, THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS BASED ON CONCURRENT FINDINGS OF FACT RECORDED BY TH E COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL. IT IS NOT THE CASE OF THE REVENUE THAT THE TRIBUNAL HAS TAKEN INTO ACCOUNT ANY IRRELEVANT MATERIAL OR THAT ANY RELEVANT MATERIAL HAS NOT BEEN TAKEN INTO CONSIDERATION. IN THE ABSENCE OF ANY MATERIAL TO TH E CONTRARY BEING POINTED OUT ON BEHALF OF THE REVENUE , THE IMPUGNED ORDER BEING BASED ON CONCURRENT FINDINGS OF FACT RECORDED BY THE TRIBUNAL UPON APPRECIATION OF THE EVIDENCE ON RECORD, DOES NOT GI VE RISE TO ANY QUESTION OF LAW IN SO FAR AS THE PRESEN T GROUND OF APPEAL IS CONCERNED. 14. IN RELATION TO THE PROPOSED QUESTION (F) WHICH RELATES TO THE DELETION OF ADDITION OF RS. 44,54,42 6 MADE ON ACCOUNT OF PURCHASE OF CRANE AND ALLOWING DEPRECIATION ON THE SAME, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PURCHASED A CRAWLER CRANE FOR AN AMOUNT OF RS. 24,61,000 EXCLUDING THE COST OF SPARE PARTS OF RS. 14,98,490. THE ASSESSING OFFICER AFTER EXAMINING THE EVIDENCE ON RECORD AND CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE, MADE ADDITION OF RS. 44,54,426, RS. 39,59,490 BEING THE PURCHASE PRICE OF THE CRANE ALONG WITH ITS SPAR E PARTS AND RS. 4,94,936 BEING DEPRECIATION CLAIMED B Y THE ASSESSEE. THE COMMISSIONER (APPEALS), UPON ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 43 APPRECIATION OF EVIDENCE ON RECORD, WAS OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACTS OF THE CASE PROPERLY AND HAD MADE DISALLOWANC E WHICH WAS NOT PERMITTED BY THE INCOME-TAX ACT. IT W AS HELD THAT DISALLOWANCE COULD ONLY HAVE BEEN MADE IN RESPECT OF EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT WHEREAS IN THE PRESENT CASE THE PURCHASE OF CRANE AND SPARE PARTS OF THE CRANE AND OTHER MACHINERIES WERE IN THE NATURE OF ACQUISITION OF CA PITAL ASSET. ACCORDING TO THE COMMISSIONER (APPEALS), THE DISALLOWANCE COULD HAVE BEEN MADE ON DEPRECIATION ONLY IF AT ALL THE ASSESSING OFFICER CONCLUSIVELY P ROVED THAT THE PURCHASES OF CRANE AND OTHER PARTS ARE BOG US. UPON APPRECIATION OF THE MATERIAL ON RECORD THE COMMISSIONER (APPEALS) FOUND THAT THE ASSESSING OFFICER HAS SIMPLY BRUSHED ASIDE ALL THE EVIDENCE O N ACCOUNT OF TECHNICAL INFIRMITIES AND THAT THE EVIDE NCE SUCH AS OCTROI RECEIPT ; HYPOTHECATION OF THE CRANE TO THE BANK; EXISTENCE OF THE CRANE EVEN TILL DATE WIT H THE ASSESSEE CONCLUSIVELY PROVED THAT THE CRANE WAS PURCHASED AND IT WAS IN USE EVEN AS ON DATE WITH TH E ASSESSEE. THE COMMISSIONER (APPEALS) ACCORDINGLY FOUND THAT THERE WAS NO SCOPE FOR ANY DISALLOWANCE AND ACCORDINGLY DELETED THE DISALLOWANCE MADE ON ACCOUNT OF PURCHASE OF CRANE AND ALLOWED THE DEPRECIATION AS CLAIMED BY THE ASSESSEE. 15. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS NOTED THAT THE COST OF CRANE WAS NEVER CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. BEFORE THE TRIBUN AL, THE ASSESSEE PRODUCED THE EVIDENCE THAT THE CRANE I N QUESTION WAS REGISTERED WITH THE RTO AND THE SAME WAS WHOLLY AND EXCLUSIVELY USED FOR THE PURPOSES OF ITS BUSINESS. THE TRIBUNAL, THEREFORE, HELD THAT TH E COMMISSIONER (APPEALS) WAS LEGALLY AND FACTUALLY CORRECT IN DELETING THE DISALLOWANCE OF COST OF CRA NE AS WELL AS DEPRECIATION THEREON. 16. FROM THE FACTS EMERGING FROM THE RECORD, IT IS APPARENT THAT THE ASSESSEE HAD NEVER CLAIMED THE CO ST OF THE CRANE IN THE RETURN NOR HAD IT DEBITED THE ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 44 EXPENSES TO THE PROFIT AND LOSS ACCOUNT, AND AS SUC H THE QUESTION OF DISALLOWING THE SAME AND ADDING THE SAME TO THE INCOME WOULD NOT ARISE. MOREOVER, IN TH E ABSENCE OF ANY EVIDENCE TO INDICATE THAT THE PURCHA SE WAS BOGUS OR THAT THE CRANE IN FACT DID NOT EXIST, THE QUESTION OF DISALLOWING THE DEPRECATION IN RESPECT OF THE SAME ALSO WOULD NOT ARISE. WHEN THE ASSESSEE HAD CONCLUSIVELY PROVED THE PURCHASE AND EXISTENCE OF THE CRANE, AND HAD NOT DEBITED THE EXPENSES TO THE PROFIT AND LOSS ACCOUNT, NO ADDITION COULD HAVE BEE N MADE IN RESPECT OF THE PURCHASE PRICE NOR COULD HAV E DEPRECIATION BEEN DISALLOWED IN RESPECT THEREOF. TH E TRIBUNAL WAS, THEREFORE, JUSTIFIED IN DELETING THE ADDITION AS WELL AS DISALLOWANCE OF DEPRECIATION. 17. IN THE LIGHT OF THE AFORESAID DISCUSSION, IT IS NOT POSSIBLE TO STATE THAT THERE IS ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER MADE BY THE TRIBUNAL SO AS TO WARRANT INTERFERENCE. IN THE ABSENCE OF ANY QUESTIO N OF LAW, MUCH LESS, A SUBSTANTIAL QUESTION OF LAW, THE APPEAL IS DISMISSED. 5.4. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ASHISH INTERNATIONAL LTD. (ITA NO.4299/2009) ORDER DATED 22/02/2011, OBSERVED/HELD AS UNDER:- THE QUESTION RAISED IN THIS APPEAL IS, WHETHER THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES ALLEGEDLY MADE BY THE ASSESSEE FROM M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. ACCORDING TO THE REVENUE, THE DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. IN HIS STATEMENT HAD STATED THAT THERE WERE NO SALES / PURCHASES BUT THE TRANSACTIONS WERE ONLY ACCOMMODATION BILLS NOT INVOLVING ANY TRANSACTIONS. THE TRIBUNAL HAS RECORDED A FINDING OF FACT THAT THE ASSESSEE HAD DISPUTED THE CORRECTNESS OF THE ABOVE STATEMENT ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 45 AND ADMITTEDLY THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE CONCERNED DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. WHO HAD MADE THE ABOVE STATEMENT. THE APPELLATE AUTHORITY HAD SOUGHT REMAND REPORT AND EVEN AT THAT STAGE THE GENUINENESS OF THE STATEMENT HAS NOT BEEN ESTABLISHED BY ALLOWING CROSS EXAMINATION OF THE PERSON WHOSE STATEMENT WAS RELIED UPON BY THE REVENUE. IN THESE CIRCUMSTANCES, THE DECISION OF THE TRIBUNAL BEING BASED ON THE FAC T, NO SUBSTANTIAL QUESTION OF LAW CAN BE SAID TO ARISE FROM THE ORDER OF THE TRIBUNAL. THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 5.5. THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS NIKUNJ EXIM ENTERPRISES PVT. LTD. (2015) 372 ITR 61 9 (BOM.) HELD/OBSERVED AS UNDER:- 7. WE HAVE CONSIDERED THE SUBMISSION ON BEHALF OF THE REVENUE. HOWEVER, FROM THE ORDER OF THE TRIBUNA L DATED APRIL 30, 2010, WE FIND THAT THE TRIBUNAL HAS DELETED THE ADDITIONS ON ACCOUNT OF BOGUS PURCHASES NOT ONLY ON THE BASIS OF STOCK STATEMENT, I.E., RECONCILIATION STATEMENT BUT ALSO IN VIEW OF THE OT HER FACTS. THE TRIBUNAL RECORDS THAT THE BOOKS OF ACCOU NT OF THE RESPONDENT-ASSESSEE HAVE NOT BEEN REJECTED. SIMILARLY, THE SALES HAVE NOT BEEN DOUBTED AND IT I S AN ADMITTED POSITION THAT SUBSTANTIAL AMOUNT OF SALES HAVE BEEN MADE TO THE GOVERNMENT DEPARTMENT, I.E., DEFENCE RESEARCH AND DEVELOPMENT LABORATORY, HYDERABAD. FURTHER, THERE WERE CONFIRMATION LETTERS FILED BY THE SUPPLIERS, COPIES OF INVOICES FOR PURC HASES AS WELL AS COPIES OF BANK STATEMENT ALL OF WHICH WO ULD INDICATE THAT THE PURCHASES WERE IN FACT MADE. IN O UR VIEW, MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARE D BEFORE THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME-TAX (APPEALS), ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT- ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 46 ASSESSEE. THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF INCOME-TAX (APPEALS) HAVE DISALLOWED THE DEDUCTION OF RS. 1.33 CRORES ON ACCO UNT OF PURCHASES MERELY ON THE BASIS OF SUSPICION BECAU SE THE SELLERS AND THE CANVASSING AGENTS HAVE NOT BEEN PRODUCED BEFORE THEM. WE FIND THAT THE ORDER OF THE TRIBUNAL IS WELL A REASONED ORDER TAKING INTO ACCOU NT ALL THE FACTS BEFORE CONCLUDING THAT THE PURCHASES OF RS. 1.33 CRORES WAS NOT BOGUS. NO FAULT CAN BE FOUN D WITH THE ORDER DATED APRIL 30, 2010, OF THE TRIBUNA L. 5.6. THE HON'BLE GUJARAT HIGH COURT IN CIT VS M.K. BROTHERS (163 ITR 249) HELD/OBSERVED AS UNDER:- BEING AGGRIEVED BY THE AFORESAID ORDER, THE ASSESS EE WENT IN SECOND APPEAL BEFORE THE TRIBUNAL. IT WAS U RGED ON BEHALF OF THE ASSESSEE THAT THE TRANSACTIONS IN QUESTION WERE NORMAL BUSINESS TRANSACTIONS AND THE ASSESSEE HAD MADE PAYMENTS BY CHEQUES. THE PARTIES DID NOT COME FORWARD AND IF THEY DID NOT COME, THE ASSESSEE SHOULD NOT SUFFER. HOWEVER, ON BEHALF OF T HE REVENUE, IT WAS URGED THAT DETAILED INQUIRIES WERE MADE AND THEREAFTER THE CONCLUSION WAS REACHED. THE TRIB UNAL FOUND THAT THERE WAS NO EVIDENCE ANYWHERE THAT THES E CONCERNS GAVE BOGUS VOUCHERS TO THE ASSESSEE. NO DOUBT, THERE WERE CERTAIN DOUBTFUL FEATURES, BUT TH E EVIDENCE WAS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE BY THE ASSESSEE FROM THE SAID PARTIE S WERE BOGUS. THE TRIBUNAL ACCORDINGLY, DID NOT SUSTA IN THE ADDITION RETAINED BY THE APPELLATE ASSISTANT COMMISSIONER. HENCE, AT THE INSTANCE OF THE REVENUE , THE AFORESAID QUESTION HAS BEEN REFERRED TO THIS CO URT FOR OPINION. ON A PERUSAL OF THE ORDER OF THE TRIBUNAL, IT CLEAR LY APPEARS THAT WHETHER THE SAID TRANSACTIONS WERE BOG US OR NOT WAS A QUESTION OF FACT. THE TRIBUNAL HAS ALS O POINTED OUT THAT NOTHING IS SHOWN TO INDICATE THAT ANY PART OF THE FUND GIVEN BY THE ASSESSEE TO THESE PAR TIES ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 47 CAME BACK TO THE ASSESSEE IN ANY FORM. IT IS FURTHE R OBSERVED BY THE TRIBUNAL THAT THERE IS NO EVIDENCE ANYWHERE THAT THESE CONCERNS GAVE VOUCHERS TO THE ASSESSEE. EVEN THE TWO STATEMENTS DO NOT IMPLICATE THE TRANSACTIONS WITH THE ASSESSEE IN ANY WAY. WITH THE SE OBSERVATIONS, THE TRIBUNAL ULTIMATELY HAS OBSERVED THAT THERE ARE CERTAIN DOUBTFUL FEATURES, BUT THE EVIDEN CE IS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE PARTIES WERE BOGUS. IT MAY BE STATED THAT THE ASSESSEE WAS GIVEN CREDIT FACILITIE S FOR A SHORT DURATION AND THE PAYMENTS WERE GIVEN BY CHEQU ES. WHEN THAT IS SO, IT CANNOT BE SAID THAT THE ENTRIES FOR THE PURCHASES OF THE GOODS MADE IN THE BOOKS OF ACCOUNT WERE BOGUS ENTRIES. WE, THEREFORE, DO NOT FIND THAT THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS AGAINST TH E WEIGHT OF EVIDENCE. IN THAT VIEW OF THE MATTER, WE ANSWER THE QUESTION IN THE AFFIRMATIVE, THAT IS, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGL Y, THE REFERENCE STANDS DISPOSED OF WITH NO ORDER AS T O COSTS. 5.7. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS RAJEEV G. KALATHIL (2015) 67 SOT 52 (MUM. TRIB.)(URO), IDENTICALLY, HELD AS UNDER:- 2.2.AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS ARGUED THAT ASSESS EE HAD FILED COPIES OF BILLS OF PURCHASE FROM DKE AND NBE, THAT BOTH THE SUPPLIERS WERE REGISTERED DEALERS AND WERE CARRYING PROPER VAT AND REGISTRATION NO.S, THAT LED GER ACCOUNTS OF THE PARTIES IN ASSESSEE'S BOOKS SHOWED BILLS ACCOUNTED FOR, THAT PAYMENT WAS MADE BY CHEQUES, TH AT A CERTIFICATE FROM THE BANKER GIVING DETAILS OF CHE QUE PAYMENT TO THE SAID PARTIES WAS ALSO FURNISHED. COP IES ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 48 OF THE CONSIGNMENT, RECEIVED FROM THE GOVERNMENT APPROVED TRANSPORT CONTRACTORS SHOWING THAT MATERIA L PURCHASED WAS ACTUALLY DELIVERED AT THE SITE WAS FURNISHED BEFORE THE AO. IT WAS ALSO ARGUED THAT SO ME OF THE MATERIAL PURCHASED FROM THE SAID PARTIES WERE L YING PART OF CLOSING STOCK AS ON 31.03.2009 AS PER THE STATEMENT SUBMITTED ON RECORD. AFTER CONSIDERING TH E ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE ASSESSEE, FAA HELD THAT THE TRANSACTIONS WERE SUPPORTED BY PROPER DOCUMENTARY EVIDENCES, THAT THE PAYMENTS MADE TO THE PARTIES BY THE ASSESSEE WERE I N CONFIRMATION WITH BANK CERTIFICATE,T HAT THE SUPPLI ERS WAS SHOWN AS DEFAULT UNDER THE MAHARASHTRA VAT ACT COULD NOT BE SUFFICIENT EVIDENCES TO HOLD THAT THE PURCHASES WERE NON-GENUINE, THAT THE AO HAD NOT BROUGHT ANY INDEPENDENT AND RELIABLE EVIDENCES AGAI NST THE ASSESSEE TO PROVE THE NON-GENUINENESS OF THE PURCHASES, THAT THERE WAS NO EVIDENCE REGARDING CAS H RECEIVED BACK FROM THE SUPPLIERS. FINALLY, HE DELET ED THE ADDITION MADE BY THE AO . 2.3.BEFORE US, DEPARTMENTAL REPRESENTATIVE ARGUED THAT BOTH THE SUPPLIERS WERE NOT PRODUCED BEFORE TH E AO BY THE ASSESSEE, THAT ONE OF THEM WAS DECLARED HAWALA DEALER BY VAT DEPARTMENT, THAT BECAUSE OF CHEQUE PAYMENT MADE TO THE SUPPLIER TRANSACTION CANNOT BE TAKEN AS GENUINE. HE RELIED UPON THE ORDE R OF THE G BENCH OF MUMBAI TRIBUNAL DELIVERED IN THE CAS E OF WESTERN EXTRUSION INDUSTRIES. (ITA/6579/MUM/2010-DATED 13.11.2013). AUTHRORISED REPRESENTATIVE (AR) CONTENDED THAT PAYMENTS MADE BY THE ASSESSEE WERE SUPPORTED BY THE BANKERS STATEMENT, THAT GOODS RECEIVED BY THE ASSESSEE FROM THE SUPPLIE WAS PART OF CLOSING STOCK,THAT THE TRANSPORTER HAD ADMITTED THE TRANSPORTATION OF GOOD S TO THE SITE.HE RELIED UPON THE CASE OF BABULA BORANA ( 282 ITR251), NIKUNJ EXIMP ENTERPRISES (P) LTD. (216TAXMAN171)DELIVERED BY THE HONBLE BOMBAY HIGH COURT. 2.4.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AO HAD MADE TH E ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 49 ADDITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWA LA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATIO N AND TAKE IT TO LOGICAL END. BUT, HE LEFT THE JOB AT INI TIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLA CE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DETAILS OF T HE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETH ER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. WE FIND THAT NO SUCH EXERCISE WAS DONE. TRANSPORTATION OF GOOD TO THE SITE IS ONE OF THE DE CIDING FACTOR TO BE CONSIDERED FOR RESOLVING THE ISSUE. TH E FAA HAS GIVEN A FINDING OF FACT THAT PART OF THE GOODS RECEIVED BY THE ASSESSEE WAS FORMING PART OF CLOSIN G STOCK. AS FAR AS THE CASE OF WESTERN EXTRUSION INDUSTRIES. (SUPRA)IS CONCERNED, WE FIND THAT IN TH AT MATTER CASH WAS IMMEDIATELY WITHDRAWN BY THE SUPPLIER AND THERE WAS NO EVIDENCE OF MOVEMENT OF GOODS. BUT, IN THE CASE BEFORE US, THERE IS NOTHING , IN THE ORDER OF THE AO, ABOUT THE CASH TRAIAL. SECONDL Y, PROOF OF MOVEMENT OF GOODS IS NOT IN DOUBT. THERERF ORE, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL, WE ARE OF THE OPINION THAT THE O RDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY AND THERE ARE NOT SUFFICIENT EVIDENCE ON FILE TO ENDORS E THE VIEW TAKEN BY THE AO. SO, CONFIRMING THE ORDER OF T HE FAA, WE DECIDE GROUND NO.1 AGAINST THE AO . 5.8. THE RATIO LAID DOWN IN THE CASE OF M/S NEETA TEXTILES VS INCOME TAX OFFICER 6138/MUM/2013, ORDER DATED 27/05/2013, SHRI JIGAR V. SHAH VS INCOME TAX OFFICE R (ITA NO.1223/M/2014) ORDER DATED 22/01/2016, M/S IMPERIA L IMP. & EXP. VS INCOME TAX OFFICER ITA NO.5427/MUM/2 015, ORDER DATED 18/03/2016 SUPPORTS THE CASE OF THE ASS ESSEE AND THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. HOW EVER, AS ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 50 RELIED BY THE LD. DR, THE HON'BLE GUJARAT HIGH COUR T IN THE CASE OF N.K. INDUSTRIES LTD.,ETC VS DCIT (SUPRA) CO NSIDERING VARIOUS DECISIONS DECIDED THE ISSUE IN FAVOUR OF TH E REVENUE AND THE HON'BLE APEX COURT DISMISSED THE SLP VIDE O RDER DATED 16/01/2017 (SLP NO.(C) 769 OF 2017). WE FIND THAT IN THAT CASE, DURING SEARCH PROCEEDINGS, CERTAIN BLANK SIGNED CHEQUE BOOKS AND VOUCHERS WERE FOUND AND THUS THE PURCHASES MADE FROM THESE CONCERNS, WERE TREATED AS BOGUS BY THE ASSESSING OFFICER. 5.9. THE HON'BLE GUJARAT HIGH COURT IN N.K. INDUST RIES LTD. VS DCIT (IT APPEAL NO.240, 261, 242, 260 AND 2 41 OF 2003), VIDE ORDER DATED 20/06/2016 CONSIDERED THE D ECISION OF THE TRIBUNAL AND VARIOUS JUDICIAL DECISIONS INCLUDI NG THE CASE OF VIJAY PROTEINS AND SANJAY OILCAKES INDUSTRIES LT D., M/S WOOLEN CARPET FACTORY VS ITAT (2002) 178 CTR 420 (R AJ.), THE TRIBUNAL WAS HELD TO BE JUSTIFIED IN DECIDING THE C ASE AGAINST THE ASSESSEE. THE HON'BLE APEX COURT CONFIRMED THE DECISION OF THE HIGH COURT FOR ADDING THE ENTIRE INCOME ON A CCOUNT OF BOGUS PURCHASES (SLP (C) NO.S 769 OF 2017, ORDER DA TED 16/01/2017. ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 51 5.10. IN SUCH TYPE OF CASES, BROADLY, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AS WELL AS THIS TRIBUNAL HAS FOLLOWED THE DECISIONS FROM HON'BLE GUJARAT HIG H COURT IN THE CASE OF SIMIT P. SETH (2013) 356 ITR 451 (GUJ.) , CIT VS VIJAY M. MISTRY CONSTRUCTION LTD. (2013) 355 ITR 49 8 (GUJ.), CIT VS BHOLA NATH POLY FAB. (P.) LTD. (2013) 355 IT R 290 (GUJ.) AND VARIOUS OTHER DECISIONS OF THE TRIBUNAL AND THE DECISION OF M/S NIKUNJ EXIMP(SUPRA) FROM HON'BLE JURISDICTIONAL HIGH COURT, WHEREIN, THE AGGREGATE DISALLOWANCE WAS REST RICTED TO 12.5%. ADMITTEDLY, THERE CANNOT BE SALE WITHOUT PUR CHASES. THE CASE OF THE REVENUE IS THAT THERE IS BOGUS NATU RE OF PURCHASES MADE FROM SUPPLIERS AND THE PARTIES WERE NOT FOUND EXISTING AT THE GIVEN ADDRESSES. 5.11. ADMITTEDLY, IN SUCH TYPE OF CASES, THERE IS NO OPTION BUT TO ESTIMATE THE PROFIT WHICH DEPENDS UPON THE S UBJECTIVE APPROACH OF AN INDIVIDUAL AND THE MATERIAL FACTS AV AILABLE ON RECORD. IN THE PRESENT APPEAL, THE ASSESSEE PRODUC ED THE PURCHASE BILLS, SALE INVOICES, LEDGER ACCOUNT, STOC K STATEMENT ETC. AND ALSO THE PAYMENT WAS MADE THROUGH BANKING CHANNEL. THE ASSESSEE MADE PART PURCHASES FROM CERT AIN ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 52 BOGUS BILL PROVIDERS, THUS, THE POSSIBILITY OF REVE NUE LEAKAGE CANNOT BE IGNORED. THE ADDITION WAS MADE BY THE LD. ASSESSING OFFICER ON THE BASIS OF THE INFORMATION RECEIVED FR OM SALES TAX DEPARTMENT THROUGH INVESTIGATION WING AND THE PARTI ES HAVE NOT DIRECTLY NAMED THE ASSESSEE BEFORE THE SALES TA X AUTHORITIES. IT IS ALSO NOTICED THAT THE LD. ASSESS ING OFFICER MERELY RELIED UPON THE INFORMATION AND DID NOT MADE ANY SERIOUS ATTEMPT TO EXAMINE WHETHER THE ASSESSEE ACT UALLY GOT THE BENEFIT OF BOGUS BILLING. AT THE SAME TIME, THE INFORMATION WAS NEVER PROVED TO BE FALSE BY THE ASSESSEE. WE HA VE ALSO OBSERVED FROM THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) THAT ASSESSEE HAS EARNED GP OF 11.81% IN THE ASSESSMENT YEAR 2009-10 AND 14.69% IN THE ASSESSMEN T YEAR 2010-11. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, BY TAKING A PRAGMATIC VIEW AND TO PUT AN END TO THE LI TIGATION, IN PRINCIPAL WE AFFIRM THE STAND OF THE LD. COMMISSION ER OF INCOME TAX (APPEAL) BY CONFIRMING THE ADDITION TO T HE EXTENT OF 12.5% OF THE GROSS BOGUS PURCHASES. HOWEVER, CONSID ERING THE TOTALITY OF THE FACT, THE BENEFIT OF NET PROFIT RAT IO ALREADY DECLARED BY THE ASSESSEE HAS TO BE GIVEN WHICH IS C LAIMED TO BE ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 53 IN THE RANGE OF 2.5 TO 3%. THUS, THE LD. ASSESSING OFFICER IS DIRECTED TO ADOPT THE ADDITION @9% (NINE PERCENTILE ONLY) OF THE AMOUNT OF SAID BOGUS PURCHASES AS THE ASSESSEE HAS ALREADY PROVED THE CONSUMPTION. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 6. OUR AFORE-SAID DECISION WILL BE APPLICABLE TO TH E CROSS APPEALS OF THE ASSESSEE/DEPARTMENT FOR A.Y. 2010-11 ON IDENTICAL ISSUE. 7. THE REMAINING GROUND RAISED BY THE ASSESSEE PERT AINS TO THE ADHOC DISALLOWANCE ON TRAVELLING, TELEPHONE, MO BILE, EXPENDITURE, ETC. TO THE EXTENT OF 10% OF THE EXPEN DITURE INSTEAD OF DELETING THE SAME. WE HAVE CONSIDERED TH E RIVAL SUBMISSIONS AND ARE SATISFIED WITH THE CONCLUSION O F THE LD. FIRST APPELLATE AUTHORITY IN WHICH NO INFIRMITY WAS POINTED OUT BY THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS, TH EREFORE, DISMISSED. 8. OTHER GROUNDS RAISED BY THE ASSESSEE IN HIS APPE AL ARE NOT PRESSED BEFORE US BY THE ASSESSEE AND ARE HEREB Y DISMISSED AS NOT PRESSED. ITA NO. 6924, 6504 & 6505/MUM/2014 SHRI KANTILAL C. JAIN 54 9. FINALLY, THE APPEALS OF THE ASSESSEE AS WELL AS OF THE REVENUE ARE DISPOSED OF IN TERMS INDICATED HEREINAB OVE. ORDER PRONOUNCED IN THE OPEN COURT ON 25/09/2017. SD/- SD/- ( RAMIT KOCHAR ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER # $ MUMBAI; ( DATED : 25/09/2017 ROSHANI, SR. PS %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. )*+, / THE APPELLANT (RESPECTIVE ASSESSEE) 2. -.+, / THE RESPONDENT. 3. / / # 0! ( )* ) / THE CIT, MUMBAI. 4. / / # 0! / CIT(A)- , MUMBAI, 5. 2'3-! , / )*&) 4 , # $ / DR, ITAT, MUMBAI 6. 56$ / GUARD FILE. ! / BY ORDER, .2*!-! //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI