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TMI Blog2019 (10) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... an be taken to the view canvassed by the AO(s) in initiating the reassessment on this score. The ground(s) taken by the assessee in challenging the initiation of reassessment proceedings in general way are thus dismissed. Bogus purchase bills received by the assessee(s) as accommodation entries from hawala dealers. It is seen that the issue of bogus purchases has recently come up for consideration before the Hon ble Bombay High Court in Pr.CIT Vs. Mohommad Haji Adam Co [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] and others, the Hon ble jurisdictional High Court has held that no ad hoc addition for bogus purchases should be made. It laid down that the addition should be made to the extent of difference between the gross profit rate on genuine purchases and gross profit rate on hawala purchases. Such case specific details are not readily available with the respective ld. ARs or the ld. DRs for facilitating the calculation of gross profit rates of genuine and hawala purchases. Under these circumstances, we set-aside the impugned orders and remit the matter to the file of the respective AOs for reconsideration. Going by the ratio laid down in the case of M/s. Chhabi Electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts giving reasons leading to the delayed filing of the appeals. We are satisfied with such reasons. The delay in such cases is, therefore, condoned and the appeals are admitted for disposal on merits. 3. A common issue has been raised in all the appeals in respect of confirmation/reduction of addition on account of bogus purchases. Material facts for all the appeals on merits are mutatis mutandis common. In some of the appeals, there are grounds challenging the initiation of reassessment proceedings. Out of the above, the ld. AR did not press such grounds at the time of hearing in some of the appeals. We have recorded such non-pressing in the respective appeal file after obtaining signature of the concerned ld. AR. Such grounds are therefore, dismissed as not pressed. In so far as the cases in which such a ground has been pressed, those can be further sub-divided into two parts, viz., one where the challenge to the reassessment has been laid generally and two where there is specific challenge to the reassessment depending upon the peculiar facts of the case. In so far as the general challenge to the initiation of reassessment proceedings is concerned, we will dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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 evidence or conclusion . Explaining the position further, it laid down that: `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. 8. At this stage, it is relevant to take note of the judgment of the Hon ble Supreme Court in Phoolchand Bajrang Lal and Anr vs. ITO and Anr (1993) 203 ITR 456 (SC), in which the AO s jurisdiction to initiate reassessment was challenged. Repelling the assessee s arguments, the Hon ble Supreme Court held that an ITO acquires jurisdiction to reopen assessment under s. 147(a) r/w s. 148 only if on the basis of speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer about the escapement of income of the assessee for the year(s) under consideration. Such information was specific, not general or vague. Thus, it is abundantly clear that receipt of such an information was sufficient enough for the Assessing Officer to initiate the reassessment. In our considered opinion, no exception can be taken to the view canvassed by the Assessing Officer(s) in initiating the reassessment on this score. The ground(s) taken by the assessees in challenging the initiation of reassessment proceedings in general way are thus dismissed. 11. Now we turn to the merits of the cases. The assail is to the making of addition(s) on the basis of bogus purchase bills received by the assessee(s) as accommodation entries from hawala dealers. It is seen that the issue of bogus purchases has recently come up for consideration before the Hon ble Bombay High Court in Pr.CIT Vs. Mohommad Haji Adam Co. Vide its judgment dated 11-02-2019 in ITA No.1004 of 2016 and others, the Hon ble jurisdictional High Court has held that no ad hoc addition for bogus purchases should be made. It laid down that the addition should be made to the extent of diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contending that despite the specific request made by the assessee for supply of reasons, the AO failed to furnish the same. Relevant discussion has been made on pages 3 onwards of the impugned order. The ld. CIT(A) called for a report from the AO on the written submissions filed by the assessee assailing non-supply of reasons to believe. The AO vide his report dated 29-03-2017, as discussed on page 5 of the impugned order, relied on some mentioning in his notice about the contents of the reasons. The crux of the matter is that the reasons were not supplied to the assessee. Based on this factual position, the ld. CIT(A) held the initiation of assessment order to be bad in law. 16. Having heard the rival submissions and perused the relevant material on record, it is found as an admitted position that the assessee was not supplied the reasons which led to the issuance of notice u/s.148 of the Act. The Hon ble Bombay High Court in Bayer Material Science Pvt. Ltd. Vs. DCIT (2016) 382 ITR 333 (Bom.) has quashed the initiation of reassessment in the absence of the AO supplying the reasons to the assessee despite specific request. Recently, the Hon ble jurisdictional Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adam Co. (supra) cannot be applied to the facts of the instant case. 21. In this regard, it is relevant to note that the Pune Benches of the Tribunal has disposed off a group of cases on such an issue before the afore referred verdict of the Hon ble High Court. Vide the lead order in the case of M/s. Chhabi Electricals Pvt. Ltd. and others Vs. DCIT dated 28-04-2017 in ITA No.795/PUN/2014 and others, the Tribunal has made certain categories. Findings in respect of category No. IV of the said order, which is germane to the instant appeal, are as under: IV. The next instance is the case of goods which have been admittedly sold by the hawala dealer and has been received by the assessee, who in turn had maintained quantitative details and also evidence of its movement i.e. transportation details and quality control details of consumption of the said material or exact details of sale of the same consignment through same transporter directly to the party, then the total purchases cannot be added in the hands of assessee. However, since the purchases are made from the grey market, some estimation needs to be made in the hands of assessee. The Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 28. We have gone through this judgment. The factual position of the case rendered in the content of Central Excise is that some of the products manufactured were sold to dealers against which the assessee filed declaration showing the particulars of the goods at which those were sold ex-factory. The Revenue found that there was price difference between the goods sold at ex-factory and delivery basis in comparison to the goods which were sold to the buyers from their depots. Investigation was carried out. Statements of two buyers were recorded. The assessee was called upon to explain as to why the price at which the goods were sold to the customers from the depots may not be the basis for determining the value for the purpose of Excise duty. It was submitted that on the same ground proceedings were taken earlier which resulted in favour of the assessee by the decision of the Tribunal. The assessee also questioned the correctness of the two witnesses and demanded right to cross-examine them. The adjudicating authority passed the order confirming the demand in the show cause notice. The Tribunal rejected the assessee s ground of not allowing cross-examination. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble High Court by holding that : `In the circumstances, we are of the view that the High Court should not have quashed the assessment proceedings vide impugned order and accordingly remitted the matter to lower authorities for disposal on merits. 31. The Hon ble Delhi High Court in CIT Vs. P. C. Chemicals (2013) 359 ITR 129 (Delhi), following M. Pirai Choodi (supra), has restored the matter in the absence of the AO granting opportunity to crossexamine the witnesses, which formed the basis for addition. 32. The Hon ble Madras High Court in CIT Vs. S.V. Sreenivasan (2018) 404 ITR 433 (Madras) considered both the judgments of Hon ble Supreme Court, namely, Andaman Timber Industries (supra) and M. Pirai Choodi (supra) and decided similar issue raised through question no.2 in favour of the Revenue by holding that the Tribunal was not right in deleting additions made in the block assessment on the ground that no opportunity to cross-examine was granted, when no such opportunity was ever sought at any time. 33. In the case of G. Mahesh Babu, the Tribunal deleted the addition for not allowing cross-examination. The H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case of making the addition on the basis of relevant evidence but simply using the same without granting opportunity to cross examine. Thus it is an irregularity coming in the otherwise valid and lawful proceedings. Such an irregularity in not allowing an opportunity to cross examine the witnesses, who deposed against the assessee, can be regularized if the assessment proceedings are brought back to the stage at which the irregularity stepped it. Similar view has been taken by the Pune Benches of the tribunal in the case of Thermax Ltd. vs. DCIT (ITA No. 512/PN/2014) vide its order dated 13.09.2019. We, therefore, set aside the impugned order to this extent and remit the matter to the file of the AO with a direction to first confront the assessee with the adverse material and allow an opportunity to cross examine, if desired, before deciding the issue on merits. 38. In the result, the appeal is allowed for statistical purposes. M/s. Viraj Steels - ITA Nos. 2307 2308/PUN/2017 - A.Y. 2009-10 : ITA Nos. 2989 2591/PUN/2017 A.Y. 2010-11 A.Y. 2009-10 : 39. The facts and circumstances on merits are similar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ala entry operators to the tune of ₹ 22.25 crores. It is on the basis of such tangible information coming to the AO after the completion of the original assessment that he initiated reassessment proceedings. In our considered opinion, the factual panomora as obtaining during the course of original assessment proceedings and the information coming into existence after the completion of assessment proceedings leading to initiation of reassessment proceedings, is quite different. In the course of the original assessment proceedings, the AO examined the genuineness of all expenses and purchases recorded in the books of account in a general manner. It was only pursuant to the specific information received from the Sales Tax Department unearthing the racket of hawala dealers, who had issued fake purchase bills to various traders including the assessee, that the reassessment was taken up. In our considered opinion, the assessee cannot claim quashing of reassessment by contending that it was a case of change of opinion from the one formed at the stage of completion of original assessment proceedings. We, therefore, reject the contention on this ground. 44. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed fake purchase bills to various traders including the assessee. The assessee wrote a letter dated 28-02-2014 to the AO, whose copy has been placed at page 18 of the paper book, submitting that the original return filed by it may be taken as return filed in response to notice u/s.148. Such a letter was received by the AO on 3.3.2014. It was further requested vide the same letter to provide a copy of reasons for issuing notice u/s.148 so as to enable it to file objections. The AO supplied the reasons on 02-03-2015 as has been recorded in his letter dated 23-03-2015, a copy of which has been placed on page 77 of the paper book. On receipt of such reasons, the assessee filed a letter raising objections against the initiation of reassessment, which was filed with the AO on 09-03-2015. The AO disposed of such objections by means of his order passed on 23-03-2015. Then, the assessment order was passed on 27-03-2015 making addition on account of bogus purchases. The view point of the assessee is that the AO did not afford opportunity to the assessee for filing writ petition against his order disposing of the objections and hurriedly completed the assessment within a peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), which is squarely applicable in the facts and circumstances of the instant case, we quash the resultant reassessment order. Similar view has been taken by the Pune Benches of the Tribunal in ITO Vs. Gagandeep Amarpal Maan Vs. in ITA No.656/PUN/2017 vide its order dated 23-05-2018 . 52. In the result, the appeal of the assessee is allowed on this legal issue and the Departmental appeal is dismissed. Rajesh U. Pardeshi - ITA No.2932/PUN/2017 53. The ground challenging the initiation of reassessment proceedings was not pressed by the ld. AR, which is hereby dismissed. 54. The only issue raised on merits is against the confirmation of addition on account of bogus purchases. 55. The facts of the instant case are mutatis mutandis similar to M/s. Prima Pvt. Ltd. (ITA No.1951/PUN/2017) disposed off supra . Here also, the assessee did not directly sell the goods purchased through hawala transactions. These were consumed as raw material in manufacturing. Following our view taken in M/s. Prima Pvt. Ltd., (supra) , we set aside the impugned order and remit the matter to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Bombay High Court in the case of Pr.CIT Vs. Mohommad Haji Adam Co. (supra) , we set-aside the impugned order and remit the matter to the file of the AO for applying the ratio laid down by the Hon ble jurisdictional High Court in the above noted case and recompute the amount of additions, if any, after allowing a reasonable opportunity of hearing to the assessee. 65. In the result, the appeal is partly allowed for statistical purposes. Renuka Auto Components India Pvt. Ltd. - ITA Nos.1659 1660/PUN/2018 66. In these appeals, the grounds challenging the initiation of reassessment proceedings were not pressed. The same are, therefore, dismissed as such. 67. On merits, the AO made addition @100% of bogus purchases which was confirmed by the ld. CIT(A) as such. The assessee is aggrieved by the confirmation of addition to this extent. 68. We have heard both the sides and gone through the relevant material on record. The ld. AR submitted that the entries recorded in the books of account which have been treated by the Revenue as accommodation entries are in the nature of purchase of raw mat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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