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TMI Blog2017 (11) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... 100% disallowance on account of bogus purchase amounting to ₹ 15,93,644. 2. Brief facts of the case are as under:- 2.1 The Assessing Officer in this case made the impugned addition by holding as under: At the outset, it is to mention here that the Maharashtra Sales Tax Department has conducted investigation in the cases of several dealers and beneficiaries and such investigations had unearthed a fraudulent racket involving many hawala dealers and beneficiaries. In this racket, the hawala operators who exist only on paper issue fake bills to the beneficiary concerns and get a commission in return. The beneficiaries, in return, get the input tax credit from Sales Tax Department. On the materials which are not actually purchased except on paper. The Sales Tax Department has investigated this fraudulent input tax credit indulged by the hawala operators. The beneficiaries have claimed such bogus purchases as expenditure in order to fraudulently claim tax deduction thereby reducing their taxable income. The assessee firm is one of such beneficiaries identified by the Sales Tax Department. In the statements recovered by the Sales Tax authorities, these hawala operators ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly considered the submissions of the appellant, the observations of the AO in the assessment order and the facts of the case. ( ii)In this case, notice u/s.148 was issued and the appellant replied that to treat the original return filed on 22.09.2009 as filed in response to notice issued u/s.l48.Thereafter, notice u/s.143(2) was issued on 12.06.2013 and the assessment order was passed on 27,09.2013, In the assessment proceedings, the AO gave three opportunities to file the details in support of the purchases made from bogus parties, but failed to do. In the appellate proceedings, the appellant filed a paper book consisting of documents in support of its claim of purchases, which was not filed before the assessing officer. A remand report was called for from the AO, however, on perusal of the remand report, the aforesaid parties/suppliers did not attend in response to notice u/s.133(6), therefore, the appellant was asked to produce the parties for cross examination, but failed to do so. In view of the above stated facts, the appellant was given opportunity by AO as well as during the appellate proceedings, by remanding the matter to the AO, but the appellant fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant could have produced copy of return filed along with P L a/c and B/S, bank statement of Hawala dealer before Assessing Officer, but failed to do so. By simply issuing cheques for payments and purchase invoices does not mean that the genuineness is proved, but the overall circumstances requires to proof that the expenses are genuine. Therefore, in principle the judgment of Hon'ble SC is relied upon i.e. in the case of Lachminarayan Madan Lal vs. CIT 86 ITR 439(SC), wherein held that even if there is an agreement between assessee and agents for payment, that does not bind Income tax officer to allow the payment was made exclusively and wholly for the purposes of the business. In the case of the appellant, expenditure (purchase) claimed to have been incurred; initial burden is on the appellant to prove that purchases were genuine. Reliance is placed on the decision in the case of CTT vs. Chandra Vilas Hotel (1987) 164 ITR 102(Guj). This onus has not beer; discharged by the appellant. e) It is seen that the appellant has not maintained stock register, therefore, the appellant failed to give the quantitative details with regard to opening stock, purchases, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT(A) in remand proceedings. The assessee has not at all been able to give cogent evidence that the concerned purchase were not bogus. 7. 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 accommodation 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 accounts which was returned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 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). 9. The above discussion and precedent from Apex Court fully justify the validity of reopening in this case. 10. Up on careful consideration of the facts of the case, I find that overwhelming evidence have been referred by the authorities below that the impugned purchases are bogus. There is no evidence of the actual movement of the goods under dispute. In these circumstances learned Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X
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