Rakesh M Mehta Mumbai v. Ito 19 3 1 Mumbai

In The Income Tax Appellate Tribunal H Bench Mumbai Before Shri Shamim Yahya A M And Shri Pawan Singh Jm I T A No S 2920 2921 Mum 2017 Assessment Year 2010 11 2011 1 2 A Nd C O No 223 Mum 2017 Arising Out Of Ita No 3325 Mum 2017 Assessment Year 2011 12 Rakesh M Mehta 18 5 Vijay Apartment 12 Th Khetwadi Lane Mumbai 400 004 Vs Income Tax Officer 19 3 1 Mumbai Pan Gir No Agipm 6445 K Assessee R Evenue I T A No S 3325 Mum 2017 Assessment Year 2011 12 Income Tax Officer 19 3 1 Mumbai Vs Rakesh M Mehta 18 5 Vijay Apartment 12 Th Khetwadi Lane Mumbai 400 004 Pan Gir No Agipm 6445 K Revenue Assessee Assessee By Shri Rahul R Sarda Re Venue By Shri T A Khan Date Of Hearing 21 09 2017 Date Of Pronouncement 11 12 2017 2 Ita No S 2920 2921 3325 Mum 2017 C O No 223 Mum 2017 O R D E R Per Shamim Yahya A M These Are Appeals By The Assessee For The Assessment Years 2010 11 And 2011 12 Against The Respective Orders Of The Ld Commissioner Of Income Tax Appeals For Assessme Nt Year 2011 12 The Revenue Has Also Filed Cross Appeal And For The Same Year The Assessee Has Also Filed Cross Objection The Assessee Has Also Filed Additional Ground For Assessment Year 2010 11 Ita No 2920 Mum 201 7 A Y 2010 11 2 The Issue Raised Is That The Ld Commissioner Of Income Tax Appeals Erred In Sustaining Disallowance Of 6 5 Of Bogus Purchase In This C Ase The Assessee Filed His Return Of Income For Assessment Year 2010 11 On 19 9 2010 Declaring Total Income Of Rs 9 15 521 The Re Turn Was Processed U S 143 1 Of The I T Act Subsequently The Assessing Officer Received Information From The Dgit Inv Who In Turn Received Information From The Sales Tax Department About Some Accommodation Entry Providers The Information In Posses Sion Of The Assessing Officer Was That The Assessee Has Received Accommodation Entries For Purchases To The Tune Of Rs 3 74 86 467 From 9 Parties As Under Sr No Name Of The Party Amount 1 Harshil Ferromet Pvt Ltd 87 03 345 2 Kotsons Impex Pvt L Td 2 44 352 3 Hans Enterprises 72 26 481 4 Mahaveer Metal Corporation 5 93 403 5 Khushal Mercantile Pvt Ltd 11 00 299 6 Aman Impex 36 84 764 3 Ita No S 2920 2921 3325 Mum 2017 C O No 223 Mum 2017 7 S K Engineering Co 50 16 073 8 Chair Impex Trading Pt Ltd 54 04 209 9 Kank Guru Tube S Metals Pvt Ltd 57 86 541 Total 3 74 86 467 3 On The Basis Of This Information The Assessing Officer Issued Notice U S 148 And Reopened The Case 4 During The Course Of Assessment Proceedings The Assessing Officer Asked The Assessee To Furnish The Supporting Documents For Purchases Made From The Above Non Genuine Parties And Also The Supporting Documents For Corresponding Sales Affected The Assessee Could Only Furnish The Addresses Of The Above Mentioned Parties The Assessing Officer In Order To Verify The Genuineness Of The Purchases Issued Notices U S 133 6 To The Purchase Parties But The Same Were Returned Unserved By The Postal Authorities With The Remarks Not Known Or Left The Assessing Officer Held That The Onus Is On The As Sessee To Substantiate And Prove The Genuineness Of The Claim Which The Assessee Failed To Do The Assessee Could Not File The Vital Documents Such As Delivery Challans Transport Receipt Octroi Receipts Goods Inward Register Etc In View Of This The A Ssessing Officer Felt That The Purchases Shown By The Assessee Were Not Genuine And After Rejecting The Books Of Accounts U S 145 3 He Made An Addition Of 12 5 Of The Total Alleged Bogus Purchases I E Rs 46 85 809 5 Against The Above Order Th E Assessee Appealed Before The Ld Commissioner Of Income Tax Appeals Challenging Both The Validity Of The Re Opening And Merits Of Addition Confirmed The Reopening By Holding As Under 4 Ita No S 2920 2921 3325 Mum 2017 C O No 223 Mum 2017 4 3 Section 147 For The Purpose Is Reproduced As Under If The Ass Essing Officer Has Reason To Believe That Any Income Chargeable To Tax Has Escaped Assessment For Any Assessment Year He May Subject To The Provisions Of Section 148 To 153 Assess Or Reassess Such Income And Also Any Other Income Chargeable To Tax Whic H Has Escaped Assessment And Which Comes To His Notice Subsequently In The Course Of The Proceedings Under This Section Or Recomputed The Loss Or The Depreciation Allowance Or Any Other Allowance As The Case May Be For The Assessment Year Concerned He Reafter In This Section And In Tions 148 To 153 Referred To As The Relevant Assessment Year 4 3 The Section Merely Says That The Ao Has To Have Reason To Believe That Any Income Chargeable To Tax Has Escaped Assessment Reason To Believe Can Be On The Basis Of Any Information Which Comes To His Possession Or Knowledge This Information Is More Than Enough For Any Reasonable Person To Form A Reason To Believe That Income Has Escaped Assessment Further The Information Is Not Anonymous Information But Au Thenticated Information Received From The Investigation Wing Of The Same Department The Ao Or Any Reasonable Person In His Place Would Not Ignore Or Over Look This Kind Of Information If The Ao Is Not Satisfied With The Reason He Would Not Have Issued N Otice U S 148 The Very Fact That Reasons Are Recorded And Notice U S 148 Is Issued Goes To Show That The Ao Has Applied His Mind And Satisfied Himself About The Reopening Of The Case The Reasons Recorded Are Not Vague And Scanty But Precise And Concrete In This Case The Information Has Come From The Investigation Wing Of The Same Department With Supporting Statements And Modus Operandi There Is No Reason Or Occasion To Disbelieve This Information Besides What The Act Envisages Is That The Ao Should O Nly Have A Reason To Believe To Reopen A Case He Need Not Establish Beyond Doubt That There Is Escapement Before Issuing The Notice This Can Be Done At The Time Of Assessment But Not At The Time Of Issue Of Notice Reliance Is Placed On The Following Jud Gements 1 Rohilkhand Educational Charitable Trust Vs Ccit And Others 365 Itr 233 A Ll Wherein The Honble High Court Held Ao Should Have Relevant And Credible Material With Him To Form Requisite Reason To Believe That Income Of Assessee Has Escaped Assessment Material Available On Record Has Rational Connection And Relevant Bearing On Such Formation Of Belief For Issuing Valid Notices For Re Assessment Sufficiency Or Correctness Of Material Was Not To Be Considered At This Stage 2 Sun Pharmaceut Icals Industries Ltd Vs Dcit 353 Itr 474 Guj Where The Honble High Court Held Formation By Belief By Ao Is Essentially Within His Subjective Satisfaction At The Stage Of Issue Of Notice Only Question 5 Ita No S 2920 2921 3325 Mum 2017 C O No 223 Mum 2017 Is Whether T Here Was Relevant Material On Which Reasonable Person Could Have Formed R Equisite Belief 3 Indu Stries Ltd Vs Ito 362 Itr 542 Guj Where The Honble Hc Held If A Particular Issue I S Brought To The Notice Of The Ao By Audit Party And Ao Of His Her Application Of Mind Finds This Groun D As Valid Reopening Of Assessment Cannot Be Quashed Merely Because Such Ground Was Brought To The No Tice Of Ao By The Audit Party 4 3 1 The Ld Counsel For The Appellant Also Relied On The Judgment In The Case Of Cit Vs Kelvinator Of India Ltd 320 Itr 561 5 C And Cit Vs Amitabh Bachchan Ita No 4646 Of 2010 In This Case The Return Of Income Was Processed U S 143 1 And No Scrutiny Assessment Was Completed Before The Issue Of Notice U S 148 So There Is No Question Of Change Of Opinion By The Ao 4 3 2 The Honble Supreme Court In The Case Of Acit Vs Rajesh Jhaveri Stock Brokers Pvt Ltd 291 Itr 500 Held That If The Ao For Whatever Reason Has Reason To Believe That Income Has Escaped Assessment It Confers Jurisdiction To Re Open The Assess Ment Where The Case Is Not Covered By Proviso To Section 147 Intimation U S 143 1 Cannot Be Treated To Be An Order Of Assessment And There Being No Assessment Order U S 143 1 The Question Of Change Of Opinion Does Not Arise The Honble Supreme Court Further Held That The Word L Reason In The Phrase Reason To Believe Would Mean Cause Or Justification If The Ao Has Cause Or Justification To Know Or Suppose That Income Had Escaped Assessment If Can Be Said To Have Reason To Believe That The Income Had Escaped Assessment The Expression Cannot Be Read To Mean That Ao Should Finally Ascertain The Fact With Legal Evidence Or Conclusion 4 3 3 In View Of The Above The Assessment Proceedings Initiated U S 147 Of The I T Act Are Held To Be Perfectl Y Legal And Valid 6 As Regards The Merits Of The Case The Ld Commissioner Of Income Tax Appeals Referred To The Decision Of Honble Gujarat High Court In The Case Of Cit Vs Simit P Sheth 2013 356 Itr 451 Guj Wherein 12 5 Additional Bogus Pu Rchased Were Confirmed However The Ld Commissioner Of Income Tax Appeals Concluded By Directing The Assessing Officer To Restrict The Addition To 6 5 Of The Alleged Bogus Purchases 6 Ita No S 2920 2921 3325 Mum 2017 C O No 223 Mum 2017 7 Against This Order The Assessee Is In Appeal Before Us 8 We Have Heard Both The Counsel And Perused The Records We 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 Bo Gus Bills The 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 Credibility Of Information Relating To Reopening Remains Un Assailed In Such Factual Scenario The Assessing Officer Has Made The Necessary Enquiry The Issue Of Notice To All The Parties Have Returned Unserved Assessee Has Not Been Able To Provide Any Confirmation From Any Of The Party Assessee Has A Lso Not Been Able To Produce Any Of The Parties Necessary Evidence Relating To Transportation Of The Goods Was Also Not On Record In This Factual Scenario It Is Amply Clear That The Assessee Has Obtained Bogus Purchase Bills Mere Preparation Of Documen Ts For Purchases Cannot Controvert Overwhelming Evidence That The Provider Of These Bills Is Bogus And Non Existent 9 The Sales Tax Department In Its Enquiry Has Found The Parties To Be Providing Bogus Accommodation 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 Neither The Assessee Has Been Able To Produce Any Confirmation From These Parties In Such 7 Ita No S 2920 2921 3325 Mum 2017 C O No 223 Mum 2017 Circumstances There Is No Doubt That These Parties Are Non Existent We 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 Bo Gus Parties Cannot Be Taken As Cogent Evidence Of Purchases In Light Of The Overwhelming Evidence The Revenue Authorities Cannot Put Upon Blinkers And Accept These Purchases As Genuine This Proposition Is Duly Supported By Honble Apex Court Decision I N The Case Of Sumati Dayal Vs Cit 1995 214 Itr 801 Sc And Cit Vs Durga Prasad More 1971 82 Itr 540 Sc In The Present Case The Assessee Wants That The Unassailable Fact That The Suppliers Are Non Existent And Thus Bogus Should Be Ignored And O Nly The Documents Being Produced Should Be Considered This Proposition Is Totally Unsustainable In Light Of Honble Apex Court Decisions 10 We Further Find That Honble Jurisdictional High Court In The Case Of Nikunj Eximp Enterprises In Writ Petition No 2860 Order Dt 18 6 2014 Has Upheld 100 Allowance For The Purchases Said To Be Bogus 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 Fully Applicable On The Facts Of The Case 11 In These Circumstances The Learned Departmental Representative Has Referred To Honble Gujarat High Court Decision In The Case Of Tax Appeal No 240 Of 2003 In Th E Case Of N K Industries Vs Dy Cit Vide Order Dated 20 06 2016 Wherein 100 Of 8 Ita No S 2920 2921 3325 Mum 2017 C O No 223 Mum 2017 The Bogus Purchases Was Held 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 Petition Against This Order Along With Others Has Been Dismissed By The Honble Apex Court Vide Order Dated 16 1 2017 12 We Further Note That Honbl E 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 Gem S D B In Ita No 234 Of 2008 Dated 02 11 2016 Wherein The Honble Court Had Inter Alia Held As Under Considering The Law Declared By The Supreme Court In The Case Of Vijay Proteins Ltd Vs Commissioner Of Income Tax Special Leave To Appeal C No 8956 2015 Decided On 06 04 2015 Whereby The Supreme Court Has Dismissed The Slp Confirmed The Order Dated 09 12 2014 Passed By The Gujarat High Court And Other Decisions Of The High Court Of Gujarat In The Case Of Sanjay Oilcake Industries Vs Commissione R Of Income Tax 2009 316 Itr 274 Guj And N K Industries Ltd Vs Dy C I T Tax Appeal No 240 2003 Decided On 20 06 2016 The Parties Are Bound By The Principle Of Law Pronounced In The Aforesaid Three Judgments 13 However We 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 Revenue To The Assessee Hence We Confirm The Order Of Ld Commissioner Of Income Tax Appeals 14 In The Result This Appeal Filed By The Ass Essee Stands Dismissed 9 Ita No S 2920 2921 3325 Mum 2017 C O No 223 Mum 2017 Ita No 292 1 3325 Mum 2017 And Co No 223 Mum 2017 A Y 201 1 1 2 15 These Are Cross Appeals By The Assessee And The Revenue And Cross Objection By The Assessee Directed Against The Order Of The Ld Commissioner Of Income Tax Appeals Pertaining To The Assessment Year 2011 12 16 The Issue Raised In The Assessees Appeal Is That The Ld Commissioner Of Income Tax Appeals Erred In Sustaining 6 5 Addition For Bogus Purchase In The Cross Appeal For The Same Year The Reven Ue Has Raised The Ground That The Ld Commissioner Of Income Tax Appeals Has Erred In Sustaining 6 5 Of The Bogus Purchase In Place Of 12 5 Done By The Assessing Officer In The Cross Objection The Assessee Has Urged That Since The Revenue Has Not Fil Ed Appeal For Assessment Year S 2010 11 And 2007 08 For Identical Facts This Appeal Could Not Have Been File D And Is Not Maintainable Further It Has Been Urged That In Similar Case Itat Had Upheld Only 2 Additions In Ita No 647 Mum 2017 Vide Order Dat Ed 12 5 2010 Hence The Addition Should Be Restricted To 2 Of The Alleged Bogus Purchase 17 We Find That Facts For Assessment Year 2011 12 Are Similar With That Of Assessment Year 2010 11 Dealt With Above By Us In The Above Order For Assessment Year 2010 11 We Have Referred To The Honble High Court Decision Against Which Slp Has Also Been Dismissed By The Honble Apex Court Wherein 100 Disallowance For Bogus Purchase Was Confirmed As Against 25 Done By The Assessing Officer However In The Afore Said Appeal We Have Confirmed The Order Of The Ld 10 Ita No S 2920 2921 3325 Mum 2017 C O No 223 Mum 2017 Commissioner Of Income Tax Appeals Wherein 6 5 Of Bogus Purchase Addition Was Sustained As That Was Only An Appeal By The Assessee And Not The Appeal By The Revenue Had Been Preferred Though In The Present Assessment Year The Revenue Has Preferred An Appeal Agitating That The Ld Commissioner Of Income Tax Appeals Should Have Confirmed 12 5 Addition For Bogus Purchase Done By The Assessing Officer In Our Considered Opinion Since The Revenue Has Not Filed Appeal Against The Ld Commissioner Of Income Tax Appeals Order For Assessment Year 2010 11 We Have Upheld His Order For Assessment Year 2010 11 In The Present Assessment Year Also Accordingly Following The Same We Direct That 6 5 Disallo Wance For Bogus Purchase By The Ld Commissioner Of Income Tax Appeals Serves The Interest Of Justice The Honble Jurisdictional High Court In The Case Of Nikunj Eximp Enterprises Supra Has Also Expounded That When Sales Are Not Doubted 100 Disallow Ance O F Purchase Is Not Feasible Although F Act Of The Case Were A Litt Le Different As Referred Above 18 As Regards The Ground Raised By The Assessee That Only 2 Disallowance Should Be Done Following The Tribunals Decision We Are Of The Considered Opi Nion That I N Our Order We Have Followed Honble High Court Decision I N The Hierarchy Of Judicial Precedence The Decision Of The Higher Cour T Prevail Over The Tribunal Decision Hence We Dismiss These Grounds Raised By The Assessee 11 Ita No S 2920 2921 3325 Mum 2017 C O No 223 Mum 2017 19 In The R Esult All The Appeals Cross Objection And Ad Ditional Ground Stand Dismissed Order Pronounced In The Open Court On 11 12 2017 Sd Sd Pawan Singh S Hamim Yahya J Udicial Member A Ccountant Member Mumbai Dated 11 12 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