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TMI Blog2019 (6) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... issues are involved in both the years, we shall dispose of both the appeals vide this common order. First we will take up appeal of the assessee in ITA no. 1158/Mum/2018 for AY 2011-12. 2. The grounds of appeal raised by assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") in ITA no. 1158/Mum/2018 for AY 2011-12, read as under:- "Ground No. 1 On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the action of the AO in initiating re-assessment proceedings under section 147 of the Act. The order under section 143(3) r.w.s. 147 of the Act is bad in law and without jurisdiction. Ground No. 2 On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the action of the AO in adding an amount of Rs. 1,21,345/- (14.55% of Rs. 8,33,985/-) being the profit element embedded in the alleged bogus purchase. The appellant craves leave to add, omit or alter grounds of appeal before or during the hearing of the appeal." 3. The brief facts of the case are that the assessee is engaged in the business of manufacturing & sale/export of gold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned as one of the beneficiaries of the bogus accommodation entries for purchases to the tune of Rs. 8,33,985/- from M/s Mani Prabha Impex P. Ltd. during the previous year relevant to impugned assessment year, which led to the reopening of the concluded assessment by the AO u/s 147 of the 1961 Act based on aforesaid fresh incriminating information received by the AO from DDIT(Inv.), Mumbai and DCIT, Surat. The assessee filed objection to reopening of the concluded assessment u/s 147 of the 1961 Act vide its letter dated 21.07.2016 which were disposed off by the AO vide letter dated 25.07.2016. 3.2 During the course of the reassessment proceedings conducted by the AO u/s 147 read with Section 143(3) of the 1961 Act, the assessee submitted copies of purchases invoices, copy of ledger account of the said party M/s Mani Prabha Impex Private Limited in the books of accounts of the assessee for the year under consideration and bank statement of the assessee showing entries reflecting payment to said party being debited in the bank account of the assessee. The assessee also submitted that it has purchased raw material from the said party namely M/s Mani Prabha Impex Private Limited and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... good from this party. The AO also observed that payments to this party M/s Mani Prabha Impex Private Limited was made by the assessee with substantial delays. This led AO to make further addition to income of the assessee by estimating additional G.P. at the rate of 14.55% of these purchases based on the GP of 14.55% already declared by the assessee, vide reassessment order dated 31.10.2016 passed by the AO u/s 143(3) read with Section 147 of the 1961 Act. 4. Aggrieved by an reassessment framed by the AO u/s 143(3) read with Section 147 of the 1961 Act vide assessment order dated 31.10.2016, the assessee filed first appeal before Ld. CIT(A) and submitted that the assessee had made purchases of raw material from this party namely Mani Prabha Impex P. Ltd., and payments were made to this party by account payee cheque. It was submitted that purchase invoices received from the said party, ledger account of said party in books of accounts of the assessee and bank statements were submitted by the assessee before the AO.The assessee also challenged reopening of the concluded assessment by the AO by submitting that reopening of the concluded assessment by invoking provisions of Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... track of these parties. It was submitted by assessee before learned CIT(A) that the turnover of the assessee company was Rs. 140.17 crores. It was claimed that the assessee made purchases to the tune of Rs. 144.49 cores while alleged bogus purchases from M/s Mani Prabha Impex Private Limited were only to the tune of Rs. 8,33,985/- which is a meagre 0.05% of the amount offered to tax. Thus, it was claimed that the assessee has not made any bogus purchases and all its purchases are genuine. It was further submitted that no further enquiry/ investigation was conducted by the AO to find out the genuineness of these alleged bogus transactions. The assessee relied upon following judgements before learned CIT(A) to contend that no additions are warranted, as under: a) Mumbai-tribunal decision in the case of Ramesh Kumar & Co. v. ACIT in ITA no. 2959/Mum/2014 b) Mumbai-tribunal decision in the case of DCIT v. Premsons reported in 139 TTJ 159(Mum-trib.) c) Hon'ble Bombay High Court decision in the case of CIT v. Nikunj Eximp Enterprises Private Limited(2015) 372 ITR 619(Bom.) 5. The learned CIT(A) rejected the contentions of the assessee both on legal ground challenging invocation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.03.2014. Later notice was issued by AO u/s 148 of the 1961 Act on 27.01.2016 which was within four year from the end of the assessment year. It was submitted that information was received by the AO from DGIT(Inv.), Mumbai and DCIT, Surat that Shri Rajendra Jain, Shri Sanjay Chaudhary and Shri Dharmichand Jain are providing bogus accommodation entries. It was submitted that DDIT(Inv.), Mumbai conducted search and seizure operations u/s 132 against Mahendra Brothers Export Private Limited Group, its associated concerns, Directors and related parties on 08.08.2011. The search and seizure operations in the case of Shri Rajendra Jain, Shri Sanjay Chaudhary and Shri Dharmichand Jain were conducted u/s 132 by DGIT(Inv.), Mumbai on 03.10.2013. The learned counsel for assessee submitted that in the information received by AO from DGIT(Inv.), Mumbai and DCIT, Surat, the assessee was listed as one of the beneficiaries of having received accommodation entries for purchases to the tune of Rs. 8,33,985/- from M/s Mani Prabha Impex Private Limited. These persons who were searched by Revenue had admitted of having providing bogus accommodation entries for sale and purchases and for unsecured lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961 Act by the AO to said parties. It was submitted that only ward inspector was deputed by AO to make further enquiries who could not locate the said party namely M/s Mani Prabha Impex Private Limited at given address. It was submitted that even Directors of the company were not examined by the AO. It was submitted by learned counsel for the assessee that even no statements are existing against against the assessee. It was prayed that additions as were made by the AO and which were later affirmed by learned CIT(A) be deleted. Without Prejudice, it was submitted that quantum of additions to income so made at 14.55% of alleged bogus purchases is excessive and prayer is made to uphold the said additions by estimating lower profit embedded in the purchases. The assessee has chosen not to file paper book with tribunal containing evidences on which it wish to rely on. 6.2 The learned DR on the other hand supported the appellate order passed by learned CIT(A) and prayers are made to confirm the same. 7. We have considered rival contentions and perused the material on record including orders of the authorities and case laws cited before us. We have observed that the assessee is engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income filed in response to notice issued u/s 148 of the 1961 Act. The assessee requested AO to furnish reasons recorded u/s 147 of the 1961 Act for reopening of the concluded assessment, which were duly furnished to assessee by the AO on 19.07.2016. The assessee objected to reopening of the assessment u/s 147 of the 1961 Act. The said objections were duly disposed off by the AO. 7.5 The reasons which were recorded by the AO for reopening of concluded assessment u/s 147 of the 1961 Act were that search & seizure action was conducted by DDIT(Inv.) Unit-IX(3),Mumbai u/s. 132 of the 1961 Act in the case of Mahendra Brothers Export Private Ltd. Group, its associated concerns, Directors and related persons on 08.08.2011 and the information was received by AO from learned DCIT, Central Circle-4, Surat vide letter dated 26.11.2015 which was received by AO on 22.12.2015 that Shri Rajendra Jain, Shri Dharmichand Jain and Sanjay Chaudhary group are some of the entry providers operating in Mumbai who are indulging in providing accommodation entries in the nature of bogus sales and unsecured loans. A search and seizure action in these group cases were carried on 03.10.2013 by DGIT(I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this group which was searched by Revenue u/s 132 of the 1961 Act. It is also a matter of record that the assessee did made purchases which stood reflected in its books of accounts being made from said M/s Mani Prabha Impex Private Limited to the tune of Rs. 8,33,985/- which also evidences/corroborates correctness of the information received by the AO from DGIT(Inv), Mumbai and DCIT, Surat. So, in our considered view receipt of this tangible incriminating material by the AO from DGIT(Inv.), Mumbai and DCIT, Surat that the assessee is beneficiary of accommodation entries by way of bogus bill for purchases to the tune of Rs. 8,33,965/- from M/s Mani Prabha Impex Private Limited is sufficient to form a prima facie belief by the AO that the assessee's income had escaped assessment. Thus, we have no hesitation in upholding reopening of the concluded assessment u/s 147 of the 1961 Act by the AO as there is a live link between incriminating tangible information received by the AO as detailed above and formation of belief that income of the assessee has escaped assessment. This is a case where re-opening of the concluded assessment is done within four years from the end of the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns u/s 132, the AO reopened the concluded assessment u/s 147 and we have already held that this information received by the AO from DGIT(inv.), Mumbai and DCIT, Surat to be tangible incriminating information coming into possession of the AO which has live link with formation of prima facie belief that income of the assessee has escaped assessment. 7.8 We reiterate that at this stage of invoking reopening provisions u/s 147 only prima facie belief of the AO is required as to escapement of income rather than having conclusive proof/evidence of escapement of income. Reference is drawn to decision of Hon'ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Limited (2007) 291 ITR 500(SC), wherein Hon'ble Supreme Court held as under: "16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word 'reason' in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to beli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso." 7.9 The assessee also relied upon decision of Hon'ble Supreme Court in the case of ACIT v. Dhariya Construction Co.(supra) wherein Hon'ble Supreme Court held that opinion given by Departmental Valuation Officer(DVO) is not an information as is contemplated u/s 147 of the 1961 Act. It was held that by Hon'ble Supreme Court that the AO has to apply its mind to the information, if any, collected and must form a belief thereof. In the instant case before us, the AO received information from DDIT(Inv.), Mumbai and DCIT, Surat and not from DVO, which we have already held was a tangible incriminating information having live link with formation of belief that income of the assessee has escaped assessment to invoke provisions of Section 147 of the 1961 Act in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that income chargeable to tax had escaped assessment, cannot be stated to have acted mechanically. Further, mere fact that assessee had asked for certain information from the Assessing Officer, which at this stage was not supplied, would not invalidate the reasons recorded by the Assessing Officer in issuing the impugned notice." 7.11 Thus, based on our detailed discussions and reasoning in para 7 to 7.10 above, we uphold the reopening of the assessment by the AO u/s 147 of the 1961 Act in the instant case before us and decide ground number 1 raised by assessee in memo of appeal filed with tribunal against assessee. Thus, ground number 1 stand dismissed. We order accordingly. 8. Coming to merits of the case, the assessee has submitted copies of purchase invoices reflecting purchases made from M/s Mani Prabha Impex Private Limited, copies of ledger account of the said party M/s Mani Prabha Impex Private Limited in the books of accounts of the assessee for the year under consideration and bank statement of the assessee showing bank entries reflecting payment being made to said party being debited in the bank account of the assessee before the authorities below. The assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is accepted by the AO. The authorities below had observed that there cannot be any sales without purchases. The assessee is not coming out with all the facts which are especially in the knowledge of the assessee. The admissions made by key persons of said Mr. Rajendra Jain, Mr Sanjay Chaudhary and Mr Dharmichand Jain group that their group was indulging in the providing of bogus accommodation entries by way of sales and unsecured loan and finding of name of the assessee in list of beneficiaries of these bogus purchases from M/s Mani Prabha Impex Private Limited to the tune of Rs. 8,33,965/- has not yet been demolished by the assessee. The situation got worse with non availaibility of said M/s Mani Prabha Impex Private Limited at the given address on enquiries been made by ward inspector at behest of the AO. The assessee could neither produce said party before the AO nor gave current address of said party to the AO. Even before us, no details of whereabouts of the said party is produced nor current address of the said party is produced. The assessee is contending that onus is not on the assessee to provide current addresses of the said party. These purchases are appearing in book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hwala Gems v. JCIT reported in (2007) 288 ITR 10 (SC). We would also like to refer to decision of Hon'ble Bombay High court in the case of PCIT v. M/s Mohammad Haji Adam & Co. in ITA no. 1004 of 2016, vide judgment dated 11.02.2019, In our considered view keeping in view factual matrix of the case, estimation of additional income @ 10% of the alleged bogus purchases to the tune of Rs. 8,33,985/- made from said M/s Mani Prabha Impex Private Limited will meet end of justice. The AO had itself estimated additions to income @10.33% of alleged bogus purchases in immediately succeeding assessment year viz. AY 2012-13. Thus, we estimate the additional income over and above what was declared in the return of income filed with the revenue being profit embedded in these alleged bogus purchased from M/s Mani Prabha Impex Private Limited @ 10% of the alleged bogus purchases. We order accordingly. 9. In the result, appeal of the assessee in ITA no. 1158/Mum/2018 for AY 2011-12 stand partly allowed. 10. Since the facts in appeal filed by the asessee for AY 2012-13 in ITA no. 1159/Mum/2018 are similar to facts in ITA no. 1158/Mum/2018 for AY 2011-12, our aforesaid decision for AY 2011-12 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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