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TMI Blog2017 (12) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... ole of the amount cannot be made. Therefore we direct the ld Assessing Officer to restrict the addition @25% of the total purchases of ₹ 5247565/- from these tainted parties. Accordingly, the addition is restricted to ₹ 1311891/- and balance addition of ₹ 3935673/- is deleted. Enhancement made on account of commission paid for the alleged bogus purchases - Held that:- As the purchases made by the assessee from the above two parties is conclusively proved to be bogus, naturally assessee has paid commission to them for arranging the purchase bills. The estimate made by the ld CIT(A) is also reasonable and therefore, confirmed. Hence, ground No. 8 of the appeal is dismissed. Addition of 20% being additional GP earned by the assessee - Held that:- As perused the reasons for making such enhancement by the ld CIT(A), however, as no evidence is available with respect to earning of such higher income by the assessee and further, the profit arising on the sale of the goods has already been offered for taxation by the assessee, there is no justification in making further addition on this count. - ITA No. 2721/Del/2016 - - - Dated:- 13-12-2017 - SHRI H.S.SIDHU, JUDI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entory in respect of the material being purchased by the assessee was found, which confirms the fact that these firms were doing actual business. (ii) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting that the inference drawn by the AO merely on the basis of a statement that these firms are not in actual business is baseless and contrary to the facts on record. 6. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee in ignoring the fact that the quantity purchased and sold being completely tallying, the allegation that the assessee has not made purchases cannot be sustained. 7. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the addition on account of bogus purchases, rejecting the material and evidences brought on record by the assessee to show that the purchases and sales were-made in the regular course of business. 8. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in enhancing the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sanjay Metal Udyog is also appearing. The ld Assessing Officer examined the above information and also pin pointed the exact amount of purchases made by the proprietary concern of the assessee and tabulated it. Therefore, notice u/s 148 of the Act was issued on 30.03.2013. In response to that notice assessee did not file any return of income. However, after several notices the assessee himself appeared on 30.08.2013 and requested the copy of the reasons recorded for reopening of the assessment. Such reasons were provided to him. Assessee filed objections and same were rejected by ld AO. Subsequently, a final show cause notice on 19.03.2014 was issued to the assessee to which assessee submitted that it has purchased material from the above two parties who are having PAN, sales tax no and further, to substantiate the purchases he submitted the confirmation, copy of purchase bills, ledger account of freight and labour charges, copy of the sales tax details of the assessee, copy of the stock register, copy of the bank account of the assessee where the payment have been made by cheque to these two parties and affidavit of the assessee himself that purchases are genuine. Assessee furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed, wherein, Hon'ble High Court held that information regarding bogus purchases by assessee received by DRI from Central Excise Commissioner which was passed on to the Revenue authorities was tangible material to initiate valid reassessment proceedings. He further relied upon the decision of the Hon'ble Supreme Court in NK Proteins Ltd Vs. DCIT 25% of undisclosed income generated out of bogus transactions was added to the total income. He further referred to the decision of the Hon'ble Gujarat High Court in NK Industries Ltd Vs. DCIT dated 20.06.2016 wherein, Hon'ble High Court held that addition of undisclosed income is required to be made when the entire transaction was found to be bogus. In view of the above decision he submitted that decisions relied upon by the ld AR are not relevant as the Hon'ble Supreme Court and Hon'ble High Court relied upon by the Revenue. He therefore, submitted that complete addition deserves to be upheld. 7. We have carefully considered the rival contentions and also perused the orders of the lower authorities. In this appeal following two issues emerge for our consideration:- a. Whether reopening on the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , merely because the assessee disclosed such entries in the return filed and also showed such purchases in the books of accounts would hardly be sufficient to advance the arguments of full and true disclosure. 9. The question of sufficiency of material available with the Assessing Officer to form a belief that income chargeable to tax had escaped assessment must be seen in light of limited jurisdiction, review and the self restraint imposed by the courts at the threshold stage. In a writ petition, the court would be primarily concerned with the question whether the Assessing Officer had information enabling him to form a bonafide belief that income chargeable to tax had escaped assessment. The court would not evaluate the evidence at that stage nor is the Assessing Officer expected to demonstrate with certainty that the addition will certainly be sustained in the reassessment proceedings. What is required at this stage to enable the Assessing Officer to issue the notice for reopening the assessment is the tangible material on record upon consideration of which he can form a reasonable belief that income chargeable to tax had escaped assessment. Such belief has to be one which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n based upon the Commissioner of Central Excise's investigations. To require the Revenue to disclose further details regarding the nature of documents or contents thereof would be virtually rewriting the conditions in section 147. After all, Section 147 merely authorises the issuance of notice to reopen with conditions. If the Court were to dictate the manner and contents of what is to be written, the statutory conditions would be added as it were. In this context, it needs to be emphasized that the court would interpret the statute as they stand in their own terms, but at the same time being conscious of the rights of the citizens. So viewed, Kelvinator of India (supra) strikes just balance. To add further conditions to the nature of discussion/reasons that the officer authorising the notice would have to discuss in the note or decision would be beyond the purview of the Courts and would not be justified. For the above reasons, this Court is of the opinion that the impugned order - and the consequential order of 05.01.17 cannot be sustained. They are accordingly set aside. The question of law urged by the Revenue is answered in its favour. The parties are directed to be presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the following judicial pronouncement:- a. PCIT Vs. Paramount Communication (P) Ltd 2017-TIOL-253-H.C IT) b. PCIT Vs. Paramount Communication (P) Ltd 292 ITR 444 c. CIT Vs. Arun Malhotra 363 ITR 195 d. NK Proteins Vs. CIT 2017-TIOL-23-HC IT) e. Vijay Proteins Ltd Vs. ACIt 58 ITD 428 (Ahmadabad) f. CIT Vs. La Medica 117 Taxmann 628 ( Delhi) 14. The various decisions cited by the ld CIT DR as well as the contention of the assessee before the lower authorities were considered. The Hon'ble Supreme Court in case of NK Proteins Ltd Vs. DCIT in 2017-TIOL-23-S.C.-IT has confirmed on the similar circumstances addition to the extent of 25% of the bogus purchases. Similar view has been taken by the Hon ble Gujarat High Court in NK Industries Ltd Vs. DCIT 2016 TIOL-3165-H.C.-AHM-IT dated 20.06.2016 and Vijay Proteins Ltd Vs. CIT 58 Taxmann.com 44. Therefore, the addition made by the ld Assessing Officer in the present case of whole of the purchase consideration cannot be sustained. The various judicial precedents cited before us also suggest that addition should be restricted to the extent of 25% of the purchases. Further, the decision relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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