SHREE CHEMTECH MARKETING P.LTD, MUMBAI V. ITO 15(3)(3), MUMBAI

ITA 895/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9153 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HEMALATHA
• Keywords: Reopening of assessment; Bogus purchase; Principle of natural justice; Tangible material; Accommodation entries; Reason to believe
• Section: 143(3); 147; 148

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO.895/MUM/2017 ( / ASSESSMENT YEAR: 2009 - 10 ) SHREE CHEMTECH MARKETING PVT. LTD. F - 3, GANESH DHAM, GAWAN PADA, MULUND (E), MUMBAI - 400 081 / VS. ITO - 15(3)(3), AAYKAR BHAVAN, 4 TH FLOOR, ROOM NO. 452, M. K. ROAD, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AADCS 9 864 N ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI BHUPENDRA KARKHANIS / RESPONDENT BY : MS. HEMALATHA / DATE OF HEARING : 28.08.2017 / DATE OF PRONOUNCEMENT : 16.10. 2017 / O R D E R PER SHAMIM YAHYA , A. M.: THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 24 , MUMBAI (CIT(A) FOR SHORT) DATED 30.11.2016 AND PERTAINS TO THE ASSESSM ENT YEAR (A.Y.) 2009 - 10. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [THE ID. CIT (A)] ERRED IN UPHOLDING REOPENING OF THE ASSESSMENT PROCEEDING S U/S. 147 OF THE INCOME TAX ACT, 1961 AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS AND 2 ITA NO. 895/MUM/2017 (A.Y. 2009 - 10) SHREE CHEMTECH MARKETING PVT. LTD. VS. ITO CIRCUMSTANCES OF THE CASE, THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THEREUNDER. 2. (A) ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE ID. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS.26,04,077/ - BY TREATING 12.5% OF THE AGGREGATE PURCHASES OF RS.2,08,32,618/ - FROM RAMEX TRADING, VN ENTERPRISES, AZAD LIGHT HOUSE, P. S. TRADING AND JAGDISH TRADING AS NON - GENUINE PURCHASES AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961 AND THE RULES MADE THEREUNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AS SESSING OFFICER [LD. AO.J ERRED IN MAKING THE ADDITION WITHOUT PROVIDING THE COPIES OF STATEMENT OF THE PERSONS ON WHICH THE RELIANCE WAS PLACED BY HIM AND WITHOUT PROVIDING OPPORTUNITY TO CROSS EXAMINE THOSE PARTIES WHICH IS TOTALLY WRONG AND AGAINST THE PRINCIPLE OF NATURAL JUSTICE. (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW FAILED TO APPRECIATE, (I) THAT THE APPELLANT HAS MADE PURCHASES FROM THE THESE PARTIES, WHO HAD SUPPLIED MATERIALS AS PER THEIR BILLS . (II) THAT THE PAYMENT TOWARDS THESES INVOICES WERE MADE BY ACCOUNT PAYEE CHEQUES ONLY. (III) THAT THE SOURCES OF SUCH PAYMENTS ARE RECORDED /REFLECTED AND DISCLOSED IN BOOKS OF ACCOUNTS. (IV) THAT THE GOODS PURCHASED HAVE BEEN SOLD BY THE APPEL LANT AND REFLECTED IN THE BOOKS OF ACCOUNTS AND THE QUANTITATIVE RECONCILIATION WAS ALSO PROVIDED WHICH HAVE NOT BEEN DOUBTED BY THE LEARNED ASSESSING OFFICER. (V) THAT THE LD. AO. HAS MADE ADDITION MERELY ON THE BASIS OF STATEMENTS GIVEN BY THIRD PART IES BEFORE THE SALES TAX AUTHORITIES AND WITHOUT ANY INDEPENDENT ENQUIRY BY HIM. 3. W ITH OUT PREJUDICE TO ABOVE GROUNDS OF APPEAL NO.2, THE LD. AUTHORITIES BELOW FAILED TO APPRECIATE THAT GROSS PROFIT [G.P.] MARGIN ALREADY OFFERED ON THE ITEMS S.S. SHEET/ C OIL IS 8.60% AND THERE IS NO BASIS FOR MAKING FURTHER ADDITION OF G.P. @ 12.5% AND MAKING SUCH A HUGE ADDITION IS WRONG AND CONTRARY TO THE FACTS OF THE CASE AND PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THEREUNDER. 3. BRIEF FACTS OF THE C ASE ARE AS UNDER: THE ASSESSEE C OMPANY IS A DEALER OF L & T PRODUCTS, REPRESENTATIVE OF AMARA RAJA BATTERIES LTD., TRADERS / SERVICE PROVIDERS ETC. THE RETURN OF INCOME FOR THE YEAR UNDER APPEAL WAS FILED ON 28.09.2009 DECLARING TOTAL INCOME OF RS.9,00,311 / - . ASSESSMENT U/S. 143(3) R.W.S 147 OF THE ACT WAS COMPLETED BY THE LD. ASSESSING OFFICER ON 23.03.2015 DETERMINING INCOME AT RS.35,04,630/ - . LD. ASSESSING OFFICER 3 ITA NO. 895/MUM/2017 (A.Y. 2009 - 10) SHREE CHEMTECH MARKETING PVT. LTD. VS. ITO OBSERVED THAT THE ASSESSEE HAD DEBITED PURCHASES FROM RAMEX TRADE IMPEX PVT. LTD. RS. 50 , 4 3,839/ - AND M/S. V. N. ENTERPRISES RS. 1,0 0 , 47 , 452/ - TOTAL AMOUNTING TO RS.1,50,91, 291 / - WHOSE TIN MATCHED WITH THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT REGARDING BOGUS PARTIES WITH WHOM THE ASSESSEE HAD MADE PURCHASES. ON THE BASIS OF INFORMA TION RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT, MUMBAI, IT WAS FOUND THAT THE ASSESSEE HAD OBTAINED BOGUS P URCHASE BILLS TOTAL AMOUN TING TO RS.1,50,91,291 / - FROM M/S RAMEX TRADE IMPEX PVT. LTD. WHICH WERE S ETTLED TO BE HAWALA OPERATOR S. ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT, MUMBAI, IT WAS FOUND THAT THE ASSESSEE COMPANY HAD TAKEN ACCOMMODATION ENTRIES FROM SANGLI (WEST) HAWALA OPERATORS. ALONG WITH THE LETTER, THE ADIT ALSO FORWARD ED STATEMENT RECORDED OF SHRI DINESH AMRITLAL PAREKH, SUSHANT RAJENDRA LADDA, SURESH AMRITLAL PAREKH, THE ENTRY PROVIDERS AND A LIST OF BENEFICIARIES OF THE ACCOMMODATION ENTRIES PROVIDED BY THE PERSONS THROUGH DIFFERENT CONCERNS. ON PERUSAL OF TH E PURCHASE LIST OF THE ASSESSEE COMPANY, IT WAS FOUND THAT ASSESSEE COMPANY HAD SHOWN PURCHASES FROM THE COMPANIES VIZ. M/S. JAGDISH TRADING CO, M/S. AZAD LIGHT HOUSE & M/S. P.S. TRADING CO . AMOUNTING TO RS. 57,41,327/ - . THE COMPANIES ARE REFLECTED AMONG THE LIST OF CONCERNS RUN THE SANGLI HAWALA. THE SANGLI (W) HAWALA OPERATORS I.E. THE KEY PERSONS, SHRI SURESH PAREKH, SHRI DINESH PAREKH AND SHRI SUSHANT LADDA WITH THE HELP OF THEIR ALLIES AT DIFFERENT FAKE ENTITIES PROVIDED ACCOMMODATIO N ENTRIES TO VARIOUS PERSONS. TWO OF THE ABOVE COMPANIES I.E. M/S. JAGDISH TRADING & M/S. P.S. TRADING DO. MENTIONED IN THE ABOVE LIST REFLECTS AMONG THE LIST OF HAWALA ENTRY PROVIDERS OF SANGLI AND M/S. AZAD LIGHT HOUR WAS OPERATING FROM THE SAME PLACE TH AT IS FORM THE PLACE M/S. P.S. TRADING COMPANY IS OPERATING. THEREFORE, THE ASSESSEE WAS ASKED TO JUSTIFY THE PURCHASES MADE FROM THE ABOVE PARTIES. REGARDING ACCOMMODATION ENTRIES TAKEN FROM VARIOUS PARTIES, THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DE TAILS OF PURCHASES MADE AND ALSO SHOW CAUSE AS TO WHY THE AMOUNT SHOWN AS PURCHASE FROM HAWALA PARTIES SHOULD TO BE DISALLOWED AND ADDED TO THE TOTAL INCOME. THE ASSESSING OFFICER NOTED THAT D URING THE COURSE OF ENQUIRIES MADE BY THE 4 ITA NO. 895/MUM/2017 (A.Y. 2009 - 10) SHREE CHEMTECH MARKETING PVT. LTD. VS. ITO SALES TAX DEPARTMENT, THE HAWALA OPERATORS HAVE NARRATED THEIR MODUS OPERAND I AND HAD CONFIRMED THAT THEY ISSUE ONLY BILLS TO THE CUSTOMERS AS PER THE REQUIREMENTS AND NO GOODS WERE DELIVERED TO THESE CUSTOMERS. TH AT TH EY ALSO STATED THAT THE PAYMENTS RECEIVED IN CHEQUE ARE RETURNED BY CASH AFTER R ETAINING A SMALL PORTION AS COMMISSION. THAT A CCORDINGLY THE NAME OF THE ASSESSEE COMPANY IS ALSO FOUND TO BE IN THE LIST OF BENEFICIARIES FROM THE HAWALA OPERATORS. THAT H OWEVER THE ASSESSEE COMPANY HAS FAILED TO BRING ON RECORD TH E RELEVANT DOCUMENTARY EVIDENCE IN THE FORM OF GOODS RECEIPT NOTE (GRN), LORRY RECEIPT(S) ETC. WITH SUPPORTING DOCUMENTARY EVIDENCE, DETAILS OF TRANSPORTATION OF GOODS AND DOCUMENTARY EVIDENCE TO ESTABLISH THE DELIVERY AND/OR RECEIPT OF THE GOODS PURPORTED TO HAVE BEEN PURCHASED FROM THE AFOREMENTIONED PARTIES. 4. F URTHER, T HE ASSESSING OFFICER ON GOING THROUGH THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE , CONCLUDED THAT THE ASSESSEE FAILED TO PROVE WITH SUPPORTING DOCUMENTARY EVIDENCES THAT THE MATERI AL WAS ACTUALLY DELIVERED IN ITS PREMISES AND ALSO FAILED TO FILE EVIDENCES OF DELIVERIES TO ESTABLISH THAT THE MATERIAL WAS CONSUMED FOR BUSINESS ACTIVITIES. ALSO THE ASSESSEE FAILED TO FURNISH THE CONFIRMATION FROM THE PARTY THAT IT HAD ACTUALLY SOLD AND DELIVERED MATERIAL TO THE ASSESSEE COMPANY AND HENCE, AN AMOUNT OF RS.26,04,077 / - , BEING 12.5% OF THE TOT AL NON - GENUINE PURCHASES OF RS. 2,08,32,619 / - . ACCORDINGLY, RS. 26,04,077/ - , WAS TREATED AS BOGUS PURCHASES AND ADDED TO THE RETURNED INCOME OF THE ASS ESSEE . 5. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) DISMISSED THE ISSUE RAISED REGARDING THE REOPENING. HE WAS OF THE OPINION THAT THE NOTICE U/S. 148 OF THE ACT WAS ISSUED VALIDLY BASED ON THE VALID INFORMATION RECEIVED FROM THE INVESTIGATION WING OF T HE INCOME TAX DEPARTMENT AND THE REOPENING WAS DONE FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE LD. CIT(A) FURTHER OBSERVED THAT THE REOPENING OF THE ASSESSMENT ON THE BASIS OF BOGUS PURCHASE WAS AFFIRMED BY THE HON'BLE BOMBAY HIGH COURT D ECISION IN THE CASE OF HITESH R. SHAH [2013] 35 TAXMANN.COM 474 (BOM) , 5 ITA NO. 895/MUM/2017 (A.Y. 2009 - 10) SHREE CHEMTECH MARKETING PVT. LTD. VS. ITO E VEN THOUGH THE ORIGINAL ASSESSMENT WAS CONCLUDED U/S. 143(3) AND EVEN BEYOND THE FOUR YEAR S. HE FURTHER OBSERVED THAT IN THE INSTANT CASE THERE WAS NO SCRUTINY INITIALLY AND THE RETURN WAS ONLY PROCESSED U/S. 143(1) AND ASSESSMENT WAS REOPENED U/S. 147 WITHIN FOUR YEAR. HENCE, HE OBSERVED THAT T HE ASSESSING OFFICER HAS ALSO FOLLOWED DUE PROCEDURE OF RECORDING OF REASONS AND SUPPLYING SUCH REASONS TO THE ASSESSEE ON R E QUEST. IN VIEW OF T HE ABOVE, THE REASSESSMENT MADE IS HELD INVALID. 6. THE LD. CIT(A) REFERRED TO SEVERAL CASE LAWS AND INTER ALIA CONCLUDED AS UNDER: 2.4.3. (IX) NOTWITHSTANDING ANYTHING STATED ABOVE, IT IS THE PREROGATIVE OF THE AO / REVENUE TO REOPEN THE ASSESSMENT IF T HE AO HAS FOUND IN THE COURSE OF TIME THAT CERTAIN AMOUNTS WHICH SHOULD HAVE BEEN BROUGHT TO TAX HAVE ESCAPED ASSESSMENT. THE POWERS WERE CLEARLY ENACTED U/S 149 R.W.S. 151 OF THE ACT. AS PER THESE PROVISIONS WHAT THE AO IS SUPPOSED TO SEE IS WHETHER THERE IS AN ESCAPEMENT OF INCOME AND WHETHER IT IS WITHIN FOUR YEARS OR BEYOND FOUR YEARS AND WHETHER IT IS A CASE OF 143(1) OR 143(3) SO AS TO TAKE APPROVAL FROM COMPETENT AUTHORITIES AS PER THE PROVISIONS. ONCE THE AO ENSURES THESE REQUIREMENTS THEN HE CAN RE OPEN THE ASSESSMENT BY RECORDING THE REASONS. THE AO WILL BE WITHIN HIS JURISDICTION TO REOPEN THE ASSESSMENT AND HIS JURISDICTION CANNOT BE CHALLENGED PER SE. FURTHER IT IS TO BE UNDERSTOOD THAT MERE REOPENING DOES NOT MEAN THAT THE AO HAS COME TO THE CON CLUSION THAT INCOME HAS ESCAPED. 2.4.4 IN VIEW OF THE ABOVE DISCUSSION THE REOPENING OF ASSESSMENT IS HELD VALID SINCE THERE WAS TANGIBLE MATERIAL AVAILABLE WITH THE A.O. AT THE TIME OF DIT INVESTIGATION. FURTHER, AS THE ASSESSMENT IS REOPENED BASED ON THE TAX DEPARTMENTS INVESTIGATION OF BOGUS SELLERS, THE A.O. HAS A REASON TO OPINION. THE REOPENING PROCEEDINGS ARE, THEREFORE, UPHELD AND THE GROUND IS DISMISSED. 7. AS REGARDS THE MERITS OF THE CASE, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. BY HOLDING THAT THE PURCHASES WERE BOGUS. FURTHER, HOLDING THAT THE SALES HAVE NOT BEEN DOUBTED, HE FOLLOWED THE HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF COMMISSIONER OF INCOME TAX - I V S SIMIT P SHETH 356 ITR 451 AND CONFIRMED THE DISALLOWANCE TO 12.5% OF THE BOGUS PURCHASES. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 8. I HAVE HEARD BOTH THE LD. COUNSEL AND PERUSED THE RECORDS. 6 ITA NO. 895/MUM/2017 (A.Y. 2009 - 10) SHREE CHEMTECH MARKETING PVT. LTD. VS. ITO 9. AS REGARDS THE REOPENING OF THE ASSESSEE, ON A CAREFUL CONSIDERATION, I NOTE THAT IN THIS CASE INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER FROM DGIT INVESTIGATION (MUMBAI) THERE ARE SOME PARTIES WHO ARE ENGAGED IN THE HAWALA TRANSACTIONS AND ARE ALSO INVOLVED IN ISSUING BOGUS PURCHASE BILLS FOR SALE OF MATERIAL WITHOUT DELIVERY OF GOODS, WHICH INFORMATION WAS BASED ON INFORMATION RECEIVED BY REVENUE FROM MAHARASHTRA SALES TAX AUTHORITY. INFORMATION WAS RECEIVED THAT THE ASSESSEE WAS BENEFICIARY OF HAWALA ACCOMMODATION ENTRIES FROM ENTRY PROVIDERS BY WAY OF BOGUS PURCHASE. THE ACCOMMODATIO N ENTRY PROVIDER HAS DEPOSED AND ADMITTED BEFORE THE MAHARASHTRA SALES TAX AUTHORITY VIDE STATEMENT/ AFFIDAVIT THAT THEY WERE ENGAGED IN PROVIDING BOGUS ACCOMMODATION ENTRIES WHEREIN BOGUS SALE BILLS WERE ISSUED WITHOUT DELIVERY OF GOODS, IN CONSIDERATION FOR COMMISSION. THESE, ACCOMMODATION ENTRY PROVIDERS, ON RECEIPT OF CHEQUES FROM PARTIES AGAINST BOGUS BILLS FOR SALE OF MATERIAL, LATER ON WITHDREW CASH FROM THEIR BANK ACCOUNT, WHICH WAS RETURNED TO BENEFICIARIES OF BOGUS BILLS AFTER DEDUCTION OF THEIR A GREED COMMISSION. THE ASSESSEE WAS STATED TO BE ONE OF THE BENEFICIARIES OF THESE BOGUS ENTRIES OF SALE OF MATERIAL FROM HAWALA ENTRY OPERATORS IN FAVOUR OF THE ASSESSEE WHEREIN THE ASSESSEE MADE ALLEGED BOGUS PURCHASES THROUGH THESE BOGUS BILLS ISSUED BY HAWALA ENTRY PROVIDERS IN FAVOUR OF THE ASSESSEE. THESE DEALERS WERE SURVEYED BY THE SALES TAX INVESTIGATION DEPARTMENT WHEREBY THE DIRECTORS OF THESE DEALERS HAVE ADMITTED IN A DEPOSITION VIDE STATEMENTS/AFFIDAVIT MADE BEFORE THE SALES TAX DEPARTMENT THAT THEY WERE INVOLVED IN. ISSUING BOGUS PURCHASE BILLS WITHOUT DELIVERY OF ANY MATERIAL. THERE IS A LIST OF SUCH PARTIES WHEREIN THE ASSESSEE IS STATED TO BE BENEFICIARY OF BOGUS PURCHASE BILLS. 1 0 . FROM THE ABOVE, I FIND THAT TANGIBLE AND COGENT INCRIMI NATING MATERIAL WERE RECEIVED BY THE AO WHICH CLEARLY SHOWED THAT THE ASSESSEE WAS BENEFICIARY OF BOGUS PURCHASE ENTRIES FROM BOGUS ENTRY PROVIDERS WHICH FORMED THE REASON TO BELIEVE BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THE INFORMATION SO RECEIVED BY THE AO HAS LIVE LINK WITH REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. ON THESE 7 ITA NO. 895/MUM/2017 (A.Y. 2009 - 10) SHREE CHEMTECH MARKETING PVT. LTD. VS. ITO INCRIMINATING TANGIBLE MATERIAL INFORMATION, ASSESSMENT WAS REOPENED. AT THIS STAGE THERE HAS TO BE PRIMA FACIE BELIEF BASED ON SOME TANGIBLE AND MATERIAL INFORMAT ION ABOUT ESCAPEMENT OF INCOME AND THE SAME IS NOT REQUIRED TO BE PROVED TO THE GUILT. IN THIS REGARD, I REFER TO THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT(A) VS. RAJESH JHAVERI STOCK BROKERS P. LTD, 291 ITR 500: - 'SECTION 147 AUTHORISES A ND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO LAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. I F THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE (HAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANAGNESE ORE CO, LTD. V. ITO(1991) 191 ITR 662, FOR INITIATION OF ACTION UNDER SECTION 147 (A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REA SON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF WHETHER THE MATERIALS WOULD C ONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE AO IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO, (P.) LTD. (1996) 217 ITR 597 (SUPREME COURT): RAYMOND WOOLLEN MILLS LTD. V. ITO (1999) 236 ITR 34 (SUPREME COURT). 1 1 . THE ABOVE DISCUSSION AND PRECEDENT FROM APEX COURT FULLY JUSTIFY THE VALIDITY OF REOPENING IN THIS CASE. FURTHER I FIND THAT THE LD. CIT(A) HAS CAREFULLY EXAMINED THE ISSUE AND HAS PROPERL Y APPRECIATED THE ISSUE. HENCE, I DO NOT FIND ANY INFIRMITY IN THE SAME. ACCORDINGLY, I UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE OF REOPENING. SINCE, THE ISSUE HAS BEEN DECIDED ON THE BASIS OF THE HONBLE APEX COURT DECISION, THE OTHER CASE LAWS REF ERRED BY ASSESSEE ARE NOT SUPPORTING THE ASSESSEES CASE. 8 ITA NO. 895/MUM/2017 (A.Y. 2009 - 10) SHREE CHEMTECH MARKETING PVT. LTD. VS. ITO 12. AS REGARDS THE MERITS OF THE CASE, I FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS CASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOGUS BILLS. ASSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION ASSESSMENT WAS REOPENED. THE CREDIBIL ITY OF INFORMATION RELATING TO REOPENING REMAINS UN - ASSAILED. IN SUCH FACTUAL SCENARIO , THE ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NECESSARY EVIDENCE RELATING TO TRANSPORTATION OF TH E GOODS WAS ALSO NOT ON RECORD. THE ASSESSING OFFICER HAD NOTED THAT THE ASSESSEE COMPANY HAS FAILED TO BRING ON RECORD THE RELEVANT DOCUMENTARY EVIDENCE IN THE FORM OF GOODS RECEIPT NOTE (GRN), LORRY RECEIPT(S) ETC. WITH SUPPORTING DOCUMENTARY EVIDENCE, D ETAILS OF TRANSPORTATION OF GOODS AND DOCUMENTARY EVIDENCE TO ESTABLISH THE DELIVERY AND/OR RECEIPT OF THE GOODS PURPORTED TO HAVE BEEN PURCHASED FROM THE AFOREMENTIONED PARTIES. IN THIS FACTUAL SCENARIO IT IS AMPLY CLEAR THAT ASSESSEE HAS OBTAINED BOGUS P URCHASE BILLS. MERE PREPARATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS ARE BOGUS AND NON - EXISTENT. 13. THE S ALES T AX DEPARTMENT IN ITS ENQUIRY HAVE FOUND THE PARTIES TO BE PROVIDING BOGUS ACCO MMODATION ENTRIES. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. IN SUCH CIRCUMSTANCE THERE IS NO DO UBT THAT THESE PARTIES ARE NON - EXISTENT. I FIND IT FURTHER STRANGE THAT ASSESSEE WANTS THE REVENUE TO PRODUCE ASSESSEES OWN VENDORS, WHOM THE ASSESSEE COULD NOT PRODUCE. THE PURCHASE BILLS FROM THESE NON - EXISTENT/BOGUS PARTIES CANNOT BE TAKEN A S COGENT EV IDENCE OF PURCHASES. IN LIGHT OF THE OVERWHELMING EVIDENCE , THE R EVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL 214 ITR 801 AN D DURGA PRASAD MORE 82 ITR 540. IN THE 9 ITA NO. 895/MUM/2017 (A.Y. 2009 - 10) SHREE CHEMTECH MARKETING PVT. LTD. VS. ITO PRESENT CASE , THE ASSESSEE WANTS THAT THE UNASSAILABLE FACT THAT THE SUPPLIERS ARE NONEXISTENT AND THUS BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY U NSUSTAINABLE IN LIGHT OF ABOVE APEX COURT DECISIONS. 14. I FURTHER FIND THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIM ENTERPRISES (IN WRIT PETITION NO 2860 ,ORDER DT 18.6.2014) HAS UPHELD 100% ALLO WANCE FOR THE PURCHASES SAID TO BE BO GUS WHEN THE SALES HAVE NOT BEEN DOUBTED. HOWEVER , THE FACTS OF THAT CASE WERE DIFFERENT. FURTHERMORE , THE SALES IN THAT CASE WERE BASICALLY TO GOVERNMENT DEPARTMENTS. HENCE , THE RATIO FROM THIS DECISION IS NOT APPLICABLE ON THE FACTS OF THE CASE. 15. IN THESE CIRCUMSTANCES , THE LD. DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF T AX A PPEAL N O . 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS DY CIT , ORDER DT 20/06.2016, WHEREIN 100% OF THE BOGUS PURCHASES WAS HEL D TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS EXPOUNDED THAT WHEN PURCHASE BILLS HAVE BEEN FOUND TO BE BOGUS , 100% DISALLOWANCE WAS REQUIRED. THE SPECIAL LEAVE PETIT ION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DT 16 .1 2017 . 16. I FURTHER NOTE THAT HONBLE RAJASTHAN HIGH COURT HAS SIMILARLY TAKEN NOTE OF DECISIONS OF THE APEX COURT ON THE ISSUE OF BOGUS PURCHASES IN THE CASE OF CIT JAIPUR VS SHRUTI GEMS IN ITA NO. 658 OF 2009. THE HONBLE HIGH COURT HAS REFERRED TO THE DECISION OF CIT JAIPUR VS. ADITYA GEMS, D. B . IN ITA NO. 234 OF 2008 DATED 0 2 . 11 . 2016, WHEREIN THE HONBLE COURT HAD INTER ALIA HELD AS UNDER: ' CONSI DERING T HE LAW DECLARED BY THE SUPREME CO URT IN THE CA SE OF VIJAY PROTEINS LTD. VS. COMMISSIONER OF INCOME TAX, SPECIAL LEAVE TO APP EAL (C) NO.8956/2015 DECIDED ON 06.04.2015 WH EREBY THE SUPREME COURT HAS DISMISSED THE SLP CONFIRMED THE ORDER DATED 09.12.2 014 PASSED BY THE GUJARAT HIGH COURT AND OTHER DECISIONS OF THE HIGH COURT OF GUJARAT IN THE CASE OF 10 ITA NO. 895/MUM/2017 (A.Y. 2009 - 10) SHREE CHEMTECH MARKETING PVT. LTD. VS. ITO SANJAY OILCAKE INDUSTRIES VS. COMMISSIONER OF INCOME TAX (2009) 316 ITR 274 (GUJ) AND N.K. INDUSTRIES LTD. VS. DY. C.I.T., TAX APPEAL NO.240/2003 DECIDED O N 20.06.2016, THE PARTIES ARE BOUND BY THE PRINCIPLE OF LAW PRONOUNCED IN THE AFORESAID THREE JUDGMENTS. 17. HOWEVER , I NOTE THAT THIS IS NOT AN APPEAL BY THE REVENUE. HENCE IT WILL NOT BE APPROPRIATE TO TAKE AWAY THE RELIEF ALREADY GRANTED BY THE REVEN UE TO THE ASSESSEE. HENCE I CONFIRM THE ORDER OF LD. CIT(A). 18. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 16.10.2017 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 16.10.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI