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TMI Blog2018 (4) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and there is no cogent evidence of transportation of goods. The sales tax Department in its enquiry have 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. The assessing officer has noted that there is no cogent evidence of the provision of goods. Neither the assessee has been able to produce any confirmation from these parties. In such circumstances, there is no doubt that these parties are non-existent. Hence purchase bills from these non-existent the/bogus 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. - Decided against assessee. - I.T.A. No. 6739/Mum/2017 - - - Dated:- 7-3-2018 - Shri Shamim Yahya, AM Appellant by : None Respondent by : Shri Saurabh Deshpande ORDER Per Shamim Yahya, A. M. This is an appeal by the assessee directed the against order of the ld. Commissioner of Income Tax (Appeals) dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned from purchases shown to have been made from the two parties and estimated the profit @ 12.5% of the total non-genuine purchases of ₹ 24,53,390/- which worked out to ₹ 3,06,674/-, and added to the total income of the assessee. 5. Against the above order, the assessee appealed before the ld. Commissioner of Income Tax (Appeals) challenging both the reopening as well as merits of addition. 6. The ld. Commissioner of Income Tax (Appeals) confirmed the reopening as well as merits of the addition. 7. Against the above order, the assessee is in appeal before the ITAT. 8. I have heard the learned departmental representative and perused the records. None appeared on behalf of the assessee despite notice. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason to believe would mean cause or justification. If 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y confirmation from these parties. In such circumstances, there is no doubt that these parties are non-existent. 13. Hence purchase bills from these non-existent the/bogus 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 Hon ble Apex Court decision in the case of Sumati Dayal 214 ITR 801 and Durga Prasad More 82 ITR 540. In the present case the assessee wants that the unassailable fact that the suppliers are non-existent and thus bogus should be ignored and only the documents being produced should be considered. This proposition is totally unsustainable in light of above apex court decisions. 14. In these circumstances learned departmental representative has referred to Hon ble Gujarat High Court decision in the case of Apex Appeal No. 240 of 2003 in the case of N K Industries vs Dy CIT, order dated 20.06.2016, wherein hundred percent of 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 expounde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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