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TMI Blog2021 (8) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... k credit. It was incumbent upon Ld.CIT(A) to examine this aspect and in our considered opinion, the Ld.CIT(A) has erred in over looking these aspects. In our considered opinion, the interest of the justice demands that the issue be remitted to the file of Ld.CIT(A) to examine the issue, we note that in light our observations hereinabove. Accordingly, the issue is remitted to Ld.CIT(A). Needless to add, assessee should be granted adequate opportunities. Reopening of assessment u/s 147 - HELD THAT:- We have heard both the parties and perused the record. No separate argument was placed orally by Ld. Counsel of the assessee on this issue. We note Ld.CIT(A) has taken a correct view of the matter. On the facts and circumstances, it cannot be said that reassessment is a change of opinion here. It is trite that there has to be an opinion first only then there can be issue of change of opinion. Moreover it is also settled law that at the time of notice escapement need not be proved to the hilt. We agree with Ld.CIT(A) that AO had valid reason for reopening. The case laws referred by Ld.CIT(A) also germane. Appeals are allowed for statistical purpose. - ITA Nos.3968 & 3969/Mum/2016 An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Stainless Steel finished products, fiat products and rolled products i.e. Round Bar, coils, sheets, plates, bright bars, wire rods, billets, etc. From the details of purchases made by the assessee, AO noted that, the assessee has-made purchases from the following parties which are declared as hawala dealers by the Sales Tax Department: 1. Aakash Ferromet Pvt. Ltd. 2. Adhunik Steel Corporation 3. Arihant Trading Co. 4. New Steel (India) 5. Moksh Trading Co. During the course of assessment proceeding, the Ld. AR of the assessee company was issued a show cause and asked to prove the genuineness of the transactions, on account of purchases made, during the year under consideration along with the documentary evidence such as Ledger Confirmation, Bills, Lorry Receipts, Delivery Challans, Weighing Bridge Receipts, etc. The AO further noted that in the meanwhile, a survey action was conducted on the assessee company on 26.12.2012 by the Investigation Team, Mumbai. During the course of survey action, it was found that, the assessee has made purchases from the alleged parties (who have provided accommodation entries without actual delivery of goods). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed parties from open market but they have obtained accommodations entries from these alleged parties. d. As the assessee company was unable to substantiate the purchases made from alleged 4 concerns as mentioned in para 7.3, hence, the purchases made from these parties are proved to be not genuine. Moreover, the actual purchases must have been done from undisclosed parties in the market in cash and the total amount in each year represents a cash purchases made by the assessee company. e. Looking to the facts of the assessee company's case, it is seen that, the assessee has made cash purchases from open market and to absorb these types of transactions, the assessee has taken only bills from the above mentioned hawala dealers without taking actually delivery of goods. By doing this, the assessee has incorporated SHAM transactions in the books of accounts as purchases. To conceal the illegality of these types of transactions, the assessee has converted these transactions into the valid / genuine transactions by making payment to hawala dealers through proper banking channels. However, it is a common sense, one can pay to another upto the extent of cash available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition as under:- From the statements of various bogus purchase billers as mentioned above, it is seen that, the assessee company has made bogus purchases from / with the help of these persons and their concerns. In return of which, the assessee company has paid certain amount to them as commission / fees. This fact has been confessed by the above mentioned bogus billers/ mediators in their respective statements. The assessee company has made total bogus purchases of ₹ 18,01,04,399/- . 8.2. Generally, as per the market practices the billers / mediators are charging commission /fees ranging between 0.50% to 2% of the transaction value as commission / fees to give bogus bills / accommodation entries. Looking to the prevailing market rate for this and, as the peak credit is worked out in the year under consideration, I am satisfied that the assessee company has paid commission / fees at the rate 1 % on the bogus purchases as unaccounted commission expenses. Considering to this, in the case of assessee company, ₹ 18,01,043/- (1% of ₹ 18,01,04,399/- /-) is added to the income for the year under the consideration as the expenses incurred out of the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to be bogus, the addition on account of estimated commission expenses is consequently deleted. 9. Against this order, assessee and revenue appeals are in before us. We have heard both parties and perused the record. Ld. Counsel of the assessee submitted that without doubting the sales purchases cannot be held to be bogus. He further submitted that this ITAT in the case of group party i.e an individual Kamlesh Manohar Kanurngo in ITA No.3242,3243 3244/Mum/2016 and others has on similar facts directed that addition should be restricted to 2% of the purchases. Hence, he submitted that similar order should be passed in this case. 10. Upon careful consideration, we note that AO has noted that assesee has been showing huge amount of bogus purchases. He also referred to various finding in the search and survey action. The AO has noted that assessee failed to produce the supporting documents i.e proper deliver challans, transport receipt, GRNs, storekeeper register etc. He also noted that payment pattern shows that there is delay payment to these bogus parties when compared to the payment to other parties. AO has found that assessee has indulged in sham transactions, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s below and remit the matter with or without direction, unless prohibited by law. Here, we note that even after noting that the payments are in multiple of large amounts with no relationship whatsoever with the invoice value, Ld.CIT(A) has not made any further investigation. Moreover, the examination of the bank statement and the concerned party ledger account shows that payments have a pattern of huge payments periodically and AO also has noted that time lag between payment is not in accordance with what is there in other account. Moreover, the examination of the financials of the assessee shows that against an issued capital of ₹ 5 crores, there is share premium account of 57.6 crores. The assessee company also has received ₹ 35.48 crores share premium during the year also. There are loan and advances without detail of ₹ 25.36 crores and sundry debtor of ₹ 24.45 crores. Ld.CIT(A) has all these documents before him. The circular movement needed to be examined, when the addition made by the AO was in term of peak credit. It was incumbent upon Ld.CIT(A) to examine this aspect and in our considered opinion, the Ld.CIT(A) has erred in over looking these as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8443V AVLPP4843Q 1.71 Cr. TOTAL 12.11 Cr 8.3 A perusal of the above tabular data reveals that the appellant had taken accommodation entries to the tune of ₹ 12.11 Crores, during the year under consideration. I have also noted that the AO has duly recorded the reason before reopening the case u/s 148 of the Act, which have been duly reproduced on page 2 of the assessment order. 8.4 The appellant has been duly provided with the reasons for reopening the assessment by the AO, vide letter dated 11.02.2015. The objections filed by the AR vide letter dated 26.03.15 has been disposed of by the AO, vide a speaking order dated 30.06.15. 8.5 The Section 147 authorizes 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 believe that an income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a true and full disclosure. A disclosure may be a false one or a true one. It may be a full disclosure or it may not be. The Hon'ble Supreme Court held that a partial disclosure may very often be a misleading one. Therefore, what is required is a full and true disclosure of all material facts necessary for making assessment for that year. 8.10 The Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd. VS. ITO 236 ITR 34, 35 (SC) has held that for determining whether initiation of reassessment proceedings was valid, it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. It further held that the sufficiency or correctness of the material is not a thing to be considered at this stage. 8.11 The present case is not one of change of opinion as alleged by the appellant. Question of change of opinion arises when the AO forms an opinion and decides not to make an addition and holds that the appellant was correct in his stand. 8.12 The Supreme Court in Malegaon Electricity Co. (P) Ltd. vs. CIT (1970) 78 ITR 466 (SC) has observed, as under : It is true that if the ITO had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was discovered between Tax Audit report and Return of income, it was a case of omission and/or failure on the part of the assessee to disclose fully and truly all facts for computation of its income. It is also held by Hon'ble Supreme Court in the following cases that facts which could have been found by the ITO by further probing are covered under failure to disclose fully and truly all material facts. 8.16 In the case of Coca Cola India Vs. ACIT Ors. (2009) 221 CTR 0225 : (2009) 1 7 DTR 0066 : (2009) 309 ITR 0194 : (2009) 1 77 TAXMAN 0103, the Hon'ble Punjab Haryana High Court has held that notice u/s 147 should be held as bad in law, only if extraneous or absurd reasons are recorded by the AO. It was further held by the Hon'ble Court that whether or not the material should be finally taken into account for reassessment is a separate matter, which has to be dealt with during the course of reassessment proceedings. The relevant portion of the judgment in this regard is reproduced as under: - Objection of counsel for petitioner is two fold :- (a) Reference to inapplicable provision ofs. 92 as it stood prior to amendment w.e.f. 1st April, 2002 and (b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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