9911796707
TMI Blog2017 (4) TMI 1103X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited (2007 (5) TMI 197 - SUPREME Court) we hold that reopening of the assessment as done in the instant case by the AO u/s 147 of 1961 was valid and legal which is upheld by us , and the contentions of the assessee are , hereby, rejected. We have observed that notice u/s 133(6) of the Act were issued by the A.O. to four benami concerns of Mr Bhanwarlal Jain from whom the assessee allegedly obtained bogus bills for purchase of diamonds against which they only gave part replies. The assessee failed to produce these four parties before the AO despite being called upon by Revenue to produce them. The assessee also could not prove the movement of material so purchased from these alleged entry providers. These are information which are especially in the knowledge of the assessee and the onus is on the assessee to prove that purchases made by him are genuine as these purchases are recorded in the books of accounts of the assessee. In the instant case learned CIT(A) made an honest attempt to estimate net margin on total turnover by adding to income 9% of bogus purchases which led to net mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 30.03.2015 passed by learned Assessing Officer (Hereinafter called the AO ) u/s 143(3) r.w.s. 147 of the Income-tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) read as under:- 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that the learned Assessing Officer had validly issued the notice u/s, 148 I.T. Act, 1961 without appreciating the fact that proceedings u/s 147 of the I.T. Act, were initiated merely on the basis of information from the DGIT (Inv.) and not on based on proper application of mind on the part of the learned Assessing Officer so as to come to an independent conclusion that he has reason to believe that income has escaped assessment during the year. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding the action of the learned Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities accepted that they were merely employees of Banwarlal Jain and family group and they did not have any genuine knowledge of diamond business. It was also revealed that they did not even have basic knowledge about the concern in which they are shown as proprietor, director and partner. It was also established that the owner, director, partners and proprietor were given salary and they were residing in the flat owned by Banwarlal Jain. It was also come to the notice that the business was carried out by these people from the premises owned by Banwarlal Jain situated at 316, Pancharatna, Opera House, 210 Panchratna, 105 Panchratna which was having ownership of Banwarlal Jain group. All these proprietors, directors and partners were kept for the name sake and they were not aware of importers or actual buyers shown in the books of account. Statements were recorded u/s 132 and 131 of 1961 Act , whereby these employees have accepted and admitted that they were dummy proprietor, director and partners of various concerns whose affairs are managed and controlled by Banwarlal Jain group. The statements of these employees were confronted to Banwarlal Jain and in the statement recorded u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yani Brothers Sr. No. Name of the party who has issued bogus bills to the assessee Amount of such bogus bill in Rs. 1 Prime Star 31,06,320/- 2 Mohit Enterprises 10,07,500/- 3 Mayur Export 19,04,240/- 4 Navkar Diamond 26,800/- Total 60,44,860/- In his statement recorded , Shri Banwarlal Jain admitted to have Benami concerns as its own concerns. The assessee was asked to explain the purchases of ₹ 19,31,040/- made in his individual capacity as well purchases of ₹ 60,44,860/- made in proprietorship concern namely M/s Satyani Brothers from said parties as these concerns were accepted by Mr Banwarlal Jain to be his benami concerns and admitted to have issued bogus/accommodation bills to the assessee. The assessee submitted copy of invoices, copy of account of parties, extract of stock register , copy of bank account from wherein cheque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by these parties from whom the assessee made purchases and thus notices issued u/s 133(6) of 1961 remained un-complied with. The assessee was confronted by the AO with the fact that these parties did not sent complete information wherein genuineness of purchases could be proved. The AO observed that onus to prove genuineness of transaction shifted back to the assessee. The assessee could not produce the parties before the A.O. It was observed by the AO that the assessee has merely furnished ledger account, invoices, bank statement and extract of stock register. The AO observed that merely payments were made by cheque does not establish that purchases were genuine , more-so when Mr Banwarlal Jain admitted that his benmai concerns were only issuing bogus/accommodation bills without actual supplying any material. . The parties to whom notices u/s 133(6) of 1961 Act were issued did not supplied complete information. Thus, AO concluded that the assessee purchased material from grey market at lower prices and to cover/match for sales actually made by the assessee, the assessee obtained bogus bills from these parties who were benami entities of Mr Bhanwarlal Jain. Books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if the income declared by tax-payer is higher than 6% of total turnover provided separate books of accounts are maintained . These cases however exclude cases , inter-alia, where there is information regarding escapment of income. The learned CIT(A) observed that the assessee has shown income @4.52% of turnover. The ld. CIT(A) after considering the facts of the case, held that fair and reasonable margin is considered to be 9% of the purchases cost of ₹ 60,44,860/- . The said percentage is also based on the facts and figures for assessment year 2008-09, 2009-10, 2011-12 and 2012-13. The learned CIT(A) observed that the assessee is arguing in alternative to accept the margin @3% as was based on appellate order passed for assessment year 2012-13 by learned CIT(A)-21, Mumbai , while the assessee appellate proceedings were with learned CIT(A)-34, Mumbai. The learned CIT(A) observed that said margin is based on figure of total sales, net profit and quantum of bogus purchase for that assessment year but as per learned CIT(A), one has to look at profit margin of various years to arrive at decision and average margin is to be adopted. Thus, the learned CIT(A) restricted the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restricted the additions to 3% of alleged bogus purchases for the assessment year 2012-13 in the case of one of the group concern of the assessee namely M/s Satyanis The Jeweller Store Private Limited , for which appellate order dated 30-03-2015 passed by learned CIT(A)-21 is placed on record which is placed in file. It was submitted that the said assessee M/s Satyanis The Jewellery Store Private Limited had accepted the said addition of 3% on alleged bogus purchased as was made by learned CIT(A)-21 for assessment year 2012-13 and no appeal to the tribunal has been filed by the assessee contesting appellate order dated 30-03-2015 passed by learned CIT(A). It was submitted that notices were issued to 4 parties by the AO u/s 133(6) of 1961 Act in the case of the assessee and they could not reply certain questions but later on affidavits were placed on record before the ld. CIT(A) which are placed at paper book page 18-19, 36-37, 50-51,67-68. 5. The ld. D.R. referred to the ld. CIT(A) s order vide para 32 submitted that the ld. CIT(A) is quite right in applying addition to income to the tune of 9% of the purchase of ₹ 60,44,860/- which is fair and reasonable . It is submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue from some other premises and that too owned by Mr Bhanwarlal Jain, the details are in preceding para s of this order which are not repeated. The so called proprietor/directors/partners of these banami companies /concerns who were in-fact employees of Mr Bhanwarlal Jain admitted in their statement recorded u/s 132/131 of 1961 Act that they do not have any knowledge of affairs of the said concerns which were held in their names nor they had any knowledge of diamond trade. The modus operandi adopted by said Mr Bhanwarlal Jain was that he through these benami concerns used to import diamonds on behalf of actual importers and the diamonds were handed over without invoices to these actual importers by these benami concerns of Mr Bhanwarlal Jain , and the said importers used to pay cash against supplies of diamond to them made without any invoices. The intention of these importers were to suppress their turnover and consequently profits and hence these front concerns of Mr Bahnwarlal Jain were used to import diamonds. Thereafter, to complete books of accounts, these benami concerns of Mr Bhanwarlal Jain used to issue bogus bills to various concerns / entities who wanted bills to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lary by said Mr Bhanwarlal Jain and these banami concerns were used by Mr Bhanwarlal Jain to provide bogus/accommodation entries without supplying any material. The large number of said concerns were operating from 2-3 premises owned by Mr Bhanwarlal Jain as detailed in preceding para s of this order. During search u/s 132(1) of 1961 Act, neither books of accounts of these benami concerns were recovered from their registered premises nor any stock of diamond was found by Revenue. The books of accounts of these benami concerns were recovered by Revenue from some other premises and that too owned by Mr Bhanwarlal Jain, the details are in preceding para s of this order which are not repeated. The so called proprietor/directors/partners of these banami companies /concerns admitted in their statement recorded u/s 132/131 of 1961 Act that they do not have any knowledge of affairs of the said concerns nor they had any knowledge of diamond trade. The modus operandi adopted by said Mr Bhanwarlal Jain was that he through these benami concerns used to import diamonds on behalf of actual importers and the diamonds were handed over without invoices to actual importers by these benami concerns o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and material incriminating information in his possession leading to reasons to believe that income of the assessee has escaped assessment . That is in a subsequent stage when assessment is being framed u/s 143(3) r.w.s. 147 of 1961 where necessary and detailed opportunities are required to be given to the assessee for rebuttal before fastening tax liability as per scheme and mandate of 1961 Act. It is to be noted also that in the instant case no scrutiny assessment u/s 143(3) r.w.s. 143(2) of 1961 Act was framed originally by the Revenue while processing assessee s return of income filed with Revenue . Return of income of the assessee was originally processed by Revenue u/s 143(1) of the Act only. There was , thus, no formation of opinion as intimation u/s 143(1) of 1961 Act is not an assessment. Thus, there cannot be a change of opinion as no opinion was initially formed by the AO as return was originally processed u/s 143(1) of 1961 Act and no scrutiny assessment was framed by Revenue u/s 143(3) r.w.s. 143(2) of 1961 Act. Thus, it could not be said that no tangible and material incriminating material was received by the A.O. , rather it is only after receipt of tangible and mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143(3). With effect from 1-4-1989, the provisions underwent substantial and material changes. A new scheme was introduced and the new substituted section 143(1) prior to the subsequent substitution with effect from 1-6-1999, in clause (a), a provision was made that where a return was filed under section 139 or in response to a notice under section 142(1), and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was to be sent without prejudice to the provisions of section 143(2) to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued under section 156. The first proviso to section 143(1)(a) allowed the Department to make certain adjustments in the income or loss declared in the return. They were as follows : (a) an arithmetical error in the return, accounts and documents accompanying it were to be rectified; (b) any loss carried forward, deduction, allowance or relief which on the basis of the information available in such return, accounts or documents, was prima facie admissible, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very clear from the use of the word intimation as substituted for assessment that two different concepts emerged. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No. 2) Act of 1991 with effect from 1-10-1991, and subsequently with effect from 1-6-1994, by the Finance Act, 1994, and ultimately omitted with effect from 1-6-1999, by the Explanation as introduced by the Finance (No. 2) Act of 1991 an intimation sent to the assessee under section 143(1)(a) was deemed to be an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment under section 143(1)(a), the question of change of opinion, as contended, does not arise. 14. Additionally, section 148 as presently stands is differently couched in language from what was earlier the position. Prior to the substitution by the Direct Tax Laws (Amendment) Act, 1987, the provision read as follows : 148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. 15. Section 147 prior to its substitution by the Direct Tax Laws (Amendment) Act, 1987, stood as follows : 147. Income escaping assessment.-If- (a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Central Provinces Manganese 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) fulfilment 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 reason 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 conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC) ; Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC) . 17. The scope and effect of section 147 as substituted with effect from 1-4-1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment was originally framed u/s 143(2) r.ws. 143(3) of 1961 Act while the return of income was originally processed u/s 143(1) of 1961 Act , and hence no opinion was formed by the AO as processing u/s 143(1) of 1961 Act cannot be said to be an assessment and hence there is no question of change of opinion in the instant case. The re-opening was also done within four years from the end of assessment year and first proviso to Section 147 of 1961 Act is not applicable. The AO has received an tangible and material incriminating information from DIT(Inv) , Mumbai which was based on incriminating information emanating from searches in case of Mr Bhanwarlal Jain group which we have detailed in preceding para s and it was reflected in said incriminating information that the assessee was beneficiary of bogus accommodation entry to the tune of ₹ 19,31,040/- from 2 hawala dealers, which information is a tangible and material information sufficient for the purposes of re-opening of the assessment in the instant case as the said re-opening is done by the AO within four years from the end of the assessment year and no scrutiny assessment u/s 143(3) r.w.s. 143(2) of 1961 Act was framed or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a), we hold that reopening of the assessment as done in the instant case by the AO u/s 147 of 1961 was valid and legal which is upheld by us , and the contentions of the assessee are , hereby, rejected. No contrary decision of Hon ble Apex Court is brought to our notice . This ground of the assessee challenging legality and validity of reopening is hereby dismissed. We order accordingly. We have observed that notice u/s 133(6) of the Act were issued by the A.O. to four benami concerns of Mr Bhanwarlal Jain from whom the assessee allegedly obtained bogus bills for purchase of diamonds against which they only gave part replies. The assessee failed to produce these four parties before the AO despite being called upon by Revenue to produce them. The assessee also could not prove the movement of material so purchased from these alleged entry providers. These are information which are especially in the knowledge of the assessee and the onus is on the assessee to prove that purchases made by him are genuine as these purchases are recorded in the books of accounts of the assessee. Section 106 of Indian Evidence Act ,1872 clearly stipulates as under: 106. Burden of proving fact espec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of accounts of the assessee were already rejected by Revenue . The assessee is now contemplating that the learned CIT(A)-21,Mumbai in the case of one of the group concern namely Satyanis The Jewellery Store Private Limited while adjudicating appeal for assessment year 2012-13 has restricted disallowance to 3% of alleged bogus purchases which is accepted by the said tax-payer and no further appeal is filed by the said tax-payer with the tribunal against appellate orders of learned CIT(A) for assessment year 2012-13. However, it is not known whether Revenue has filed an appeal against the appellate order of learned CIT(A)-21 in the case of The assessee Satyanis The Jewellery Store Private Limited before the tribunal against the relief granted to the assessee by learned CIT(A)-21,Mumbai and fate of such appeal , if any is not known. The assessee also could not show that how appellate order of learned CIT(A)-34,Mumbai in assessee s own case which has estimated income at net margin @7.22% on total turnover which is based on average net margin of the assessee for assessment year 2008-09 to 2012-13 is perverse or arbitrary not sustainable at law. The facts of each case is different, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods declared voluntarily rate of 35 per cent in its assessment for the assessment year 1997-98. 7. M/s. Dhadda Exports, another assessee dealing in same items, but doing export business declared GP rate of 43.8 per cent (even without considering the value of export incentives) in assessment year 1997-98. 5. Thereafter, the books of account of the assessee were rejected by the Assessing Officer and he resorted to best judgment assessment under section 144 of the Income-tax Act. The Assessing Officer in the assessment order mentioned some comparable cases and was of the view that the case of the assessee is more or less having similar facts as that of M/s. Gem Plaza where the Gross Profit has been taken as 35.48 per cent. The Assessing Officer estimated the Gross Profit of the assessee as 40 per cent. 6. The Assessing Officer further held that the assessee has shown bogus purchases in order to reduce the Gross Profits. 7. In appeal, the Commissioner of Income-tax (Appeals) upheld most of the findings of the Assessing Officer, but reduced the Gross Profit from 40 per cent to 35 per cent. 8. In further appeal, the Tribunal had given further relief to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incriminating statement was recorded at the back of the assessee is relied upon by authorities to prejudice the assessee will become absolute. There was an incriminating tangible and material information with the Revenue against the assessee that the assessee has obtained bogus invoices from benami concerns of Mr Bhanwarlal Jain who were engaged in providing accommodation entries through front companies/concerns opened in the name of his benamis . The said Mr Bhanwarlal Jain during the course of search proceedings u/s 132(1) of 1961 Act while deposing in statement recorded u/s 132(4) of 1961 Act stated that he was engaged in providing bogus accommodation entries through concerns/entities created through various employees when he was confronted with the various statements recorded u/s 132 and 131 of 1961 Act of his benamis. The said employees have stated that they have no knowledge of these concern s state of business as well they lacked information about diamond trade. The assessee failed to produce these four parties from whom purchases were made by the assessee before Revenue. The entries for purchase are appearing in books of the assessee and it was incumbent on the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
