PARESH H. SHAH,MUMBAI vs. INCOME TAX OFFICER 32(2)(5), MUMBAI

Assessee by: Shri. Bhupendra Shah Revenue by : Shri. Rajat Mittal सुनवाई की तारीख /Date of Hearing : 23.01.2018 घोषणा की तारीख /Date of Pronouncement : 09.02.2018 आदेश / O R D E R PER RAMIT KOCHAR, Accountant Member These three appeals, filed by the assessee, being & I.T.A. No. 5837/Mum/2017 for assessment year 2009-10, 2010-11 & 2011- 12 respectively are directed against the separate appellate orders all dated 15.06.2017 passed by learned Commissioner of Income-tax (Appeals)- 44, Mumbai (hereinafter called “the CIT(A)”) for assessment year 2009-10, 2010-11 & 2011-12 respectively , appellate proceedings had arisen before learned CIT(A) from the separate assessment orders all dated 02.03.2015 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter called “the Act”). I.T.A. No. 5837/Mum/2017

2. To delete the addition of Rs.21,89,946/- being 12.5% of total purchases of Rs.1,74,43,835/- on account of alleged bogus purchases and against decided cases of Mumbai ITAT. [Cl General: • The appellant reserve rights to add alter or delete any portion of this appeal before its conclusion. • A Detailed paper book along with case laws will be submitted at the time of hearing. • This appeal has been filed on time and may please be allowed in full.”

TIN NAME OF THE PARTY AMOUNT , 27660591188V SAILEELA TRADING PVT LTD 63,16,422 27280504194V MANAV IMPEX 52,803 27520270001V REKHA TRADING CO 2,36,366 27060103705V ANKIT ENTERPRISES 5,98,234 27030198345V KLYAN KIRTl lNTERNATIONAl 6,82,571 27840097650V PRAKASH ENTERPRISES .. 9,53,680 27870S43397V RUMGGT ENTERPRISES 4,65,660 27430616389V NAVPAD EXPORTS PVT LTD 8,23,940 27630606579V PAWAN ENTERPRISES 23,86,S70 I.T.A. No. 5837/Mum/2017 2712037226SV TOP SHOP TRADING COMPANY PVT LTD 22,500 27020257763V DARSHANA CORPORATION 2,62,504 27340554213V YASH ENTERPRIE 3,05,151 27210283!l!l4V l P TRADEflS 4,40,073 27240227766V ElEGANT TRADING CO 10,30,797 27610637339V RIYA ENTERPRISE 12,83.790 27270583788V S P CORPORATION 15,82,774 Total 1.74.43,835 Based on the above incriminating material being received by the AO, the AO had reasons to believe that income has escaped assessment which led to reopening of the concluded assessment u/s. 147 by issuance of notice dated 16-01-2014 by the AO u/s. 148 after recording the reasons for reopening as is required under provision of section 148 of the Act. The reasons for reopening of the assessment were communicated to the assessee. The assessee filed objections to the reopening of the assessment which was disposed of by the AO . These parties have admitted on oath before sales tax authorities that they were only issuing bogus bills without supplying any material and no business was carried on by them. In order to verify transactions with these parties, the AO issued notices u/s. 133(6) to these parties which returned un-served or no replies were received by the AO from these parties. The assessee also could not produce these parties before the AO and hence genuineness of the transaction could not be proved by the assessee. The AO observed that the onus is on the assessee to prove that the purchases are genuine. As per the AO , these purchases remained unverifiable and there is possibility of leakages . The AO rejected the books of accounts u/s. 145(3) and estimated income at the rate of 12.5% of the alleged bogus purchases to the tune of Rs. 1,75,19,573/- from the alleged hawala dealers on the grounds that the assessee has arranged accommodation bills from these parties to suppress its true profits, vide assessment order dated 02-03-2015 passed by the AO u/s 143(3) r.w.s. 147 of the 1961 Act. While passing the assessment orders, the AO , inter-alia, relied upon the decision of Hon’ble Supreme Court in the case of Kachwala Gems v. JCIT reported in (2007) 288 ITR 10(SC) and Hon’ble Gujarat High Court decision in the case of Simit P Sheth (2013) 356 ITR 451(Guj).

I.T.A. No. 5836/Mum/2017

I.T.A. No. 5836/Mum/2017 order. Further the rate of profit taken by the AO on the disputed purchases seems to be reasonable considering the nature and scale of the business of the appellant. Since the A.O. has himself given substantial relief to the assessee by a speaking order I do not see any reason to interfere in the order of the A.O. The grounds of appeal nos. 2, 4, 5& 6 are dismissed and accordingly addition of Rs. 21,89,946/- is confirmed.

6. In the result , the appeal is dismissed” The learned CIT(A) also upheld the legality and validity of reopening of the assessment u/s 147 of the 1961 as the AO reopened the concluded assessment based on material evidences being received from sales tax department as well DGIT(Inv), Mumbai that income has escaped assessment, vide appellate order dated 15-06-2017 passed by learned CIT(A).

5. Aggrieved by the appellate order dated 15-06-2017 passed by learned CIT(A), the assessee has come in an appeal before the tribunal and at the outset Ld. Counsel for the assessee submitted that the grounds of appeal related to challenging legality and validity of invocation of provisions of Section 148 for reopening of the concluded assessment are not pressed and the same may be dismissed as not pressed. The Ld. DR submitted that Revenue has no objection for the dismissal of the grounds related to the challenge to the legality and validity of reopening of the assessment u/s. 148 is concerned and the same may be dismissed . After hearing both the parties we are of the considered view that the grounds of appeal being ground no 1 and 2 related to challenging the legality and validity of invocation of provisions of Section 147/148 concerning reopening of the concluded assessment be dismissed as not being pressed. The ground no 1 and 2 stand accordingly dismissed. We order accordingly.

6. On merits the Ld. Counsel for the assessee submitted that the AO has made an addition to the tune of 12.5% of the alleged bogus purchases which was confirmed by the Ld. CIT-A and prayer was made by learned counsel for the assessee for reducing the additions so made. The Ld. DR submitted that incriminating information was received by the AO from sales tax department as well DGIT(Inv) , Mumbai that the assessee is beneficiary of obtaining bogus accommodation bills from 16 hawala dealers wherein only bogus bills were issued by these hawala dealers and no material was physically supplied by these dealers. The learned DR submitted that the assessee has thus 6 I.T.A. No. 5837/Mum/2017 purchased material from grey market at lower rates and to justify the books of accounts the bogus bills were obtained from these 16 hawala dealers. The learned DR submitted that notices u/s. 133(6) were issued by the AO to these parties which returned un-served or were not replied with. It is also submitted that the assessee could not produce these parties before the authorities below and these parties have confessed to have issued bogus accommodation bills without supplying any material and it is admitted by them that they were not engaged in doing genuine business. It was submitted by learned DR that the AO has rightly rejected books of accounts u/s 145(3) and profits were estimated which was an reasonable estimate as was done by the AO by making additions to the tune of 12.5% of the alleged bogus purchases which were rightly confirmed by learned CIT(A). Thus learned DR submitted that orders of the authorities below be confirmed.

TIN NAME OF THE PARTY AMOUNT , 27660591188V SAILEELA TRADING PVT LTD 63,16,422 27280504194V MANAV IMPEX 52,803 27520270001V REKHA TRADING CO 2,36,366 27060103705V ANKIT ENTERPRISES 5,98,234 27030198345V KLYAN KIRTl lNTERNATIONAl 6,82,571 27840097650V PRAKASH ENTERPRISES .. 9,53,680 27870S43397V RUMGGT ENTERPRISES 4,65,660 27430616389V NAVPAD EXPORTS PVT LTD 8,23,940 27630606579V PAWAN ENTERPRISES 23,86,S70 2712037226SV TOP SHOP TRADING COMPANY PVT LTD 22,500 27020257763V DARSHANA CORPORATION 2,62,504 27340554213V YASH ENTERPRIE 3,05,151 27210283!l!l4V l P TRADEflS 4,40,073 I.T.A. No. 5837/Mum/2017 27240227766V ElEGANT TRADING CO 10,30,797 27610637339V RIYA ENTERPRISE 12,83.790 27270583788V S P CORPORATION 15,82,774 Total 1.74.43,835 Based on the above information , the Revenue reopened the concluded assessment by invoking provisions of Section 147/148 of the 1961 Act after recording reasons for reopening which were duly furnished to the assessee. The assessee objected to reopening of the concluded assessment u/s 147/148 and the AO disposed of the objections vide orders dated 13-10- 2014. The reopening of the assessment u/s 147 of the 1961 Act was done within four years from the end of the assessment by issuance of notice dated 16-01-2014 u/s 148 of the 1961 Act. The assessee has already conceded before the tribunal that the assessee did not want to press the grounds raised by him in memo of appeal related to challenge to legality and validity of invocation of Section 147/148 of the 1961 Act by the Revenue. These parties have admitted on oath before sales tax authorities that they were only issuing bogus bills without supplying any material and no business was carried on by them. In order to verify transactions with these parties, the AO issued notices u/s. 133(6) to these parties which returned unserved or no replies were received by the AO from these parties. The assessee also could not produce these parties before the AO and hence genuineness of the transaction could not be proved by the assessee. The AO observed that the onus is on the assessee to prove that the purchases are genuine. As per the AO , these purchases remained unverifiable and there is possibility of leakages . The AO rejected the books of accounts u/s. 145(3) and estimated income at the rate of 12.5% of the alleged bogus purchases to the tune of Rs. 1,75,19,573/- from the alleged hawala dealers on the grounds that the assessee has arranged accommodation bills from these parties to suppress its true profits. The learned CIT(A) confirmed the assessment order of the AO by upholding the additions, Before us the only prayer has been made by the learned counsel for assessee for reducing the Income estimated by the AO from these alleged bogus purchases to the tune of 12.5% . Thus, from the pleadings of the assessee it is clear that factum of obtaining bogus bills from these parties stood accepted and since sales are accepted , the only foregone I.T.A. No. 5836/Mum/2017 conclusion is that the assessee has obtained the material from grey market at lower prices without bill and hence made undisclosed savings on prices and underlying taxes. Under these circumstances as held by the Hon’ble Supreme Court in the case of Kachwala Gems v. JCIT reported in (2007) 288 ITR 10(SC), income embedded in such purchases need to be estimated by way of purchase at lower rates from grey market without bills as well savings in taxes made by the assessee by obtaining actual material from grey market which was not disclosed in books of accounts , as the assessee could have purchase material from grey market at a lower rate without bills and thereafter invoices at higher rate from bogus accommodation entry providers were obtain to reconcile books of accounts and stocks, thus leading to savings on lower rates in prices as well saving on taxes etc. which income is not reflected in the books of accounts . The estimation of profits to the tune of 12.5% of the alleged bogus purchases to bring to tax said undisclosed income as was done by the AO in our considered view is a reasonable and fair estimate as was made by the AO which stood confirmed by learned CIT(A) keeping in view factual matrix of the case and we are not inclined to interfere with the orders of both the authorities below who have taken an concurrent view, which we considered to be a reasonable and fair view keeping in view factual matrix of the case. Thus , we dismiss the appeal of the assessee. The assessee fails in this appeal. We order accordingly.