NAVNIDHI STEEL AND ENGG CO. P.LTD,MUMBAI vs. DCIT 5(2)(1), MUMBAI

आदेश / O R D E R

The assessee is aggrieved by the impugned order dated

17/02/2017 of the Ld. First Appellate Authority, Mumbai,

confirming the addition of Rs.25 lakh made u/s 68 and

disallowance of interest paid on the said loan amounting to

Rs.1,00,823/- made u/s 69C of the Income Tax Act, 1961

(hereinafter the Act), without appreciating the evidences and

confirmation made by the Loan creditor including affidavit

furnished before the Ld. Assessing Officer.

Shri Rajkumar Singh, contended that except the statement of

Shri Bhavarlal Jain, there is no incriminating material

brought on record by the Assessing Officer and the impugned

loan was paid subsequently. It was contended that the onus

caste upon the assessee was duly discharged and the

assessee is not to prove the source of source. The Ld. counsel

relied upon the decision in the case of M/s Rushabh

Enterprises vs ACIT (ITA Mp/1580/Mum/2017) order dated

15/11/2017, M/s Reliance Corporation vs Income Tax

Officer (ITA No.1069 to 1071/Mum/2017 and ITA

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No.4946/Mum/2016) order dated 12/04/2017 and another

decision of the SMC Bench in the case of Income Tax Officer

vs Gujarat Construction (ITA No.7040/Mum/2016) order

dated 24/05/2017. On the other hand, Ms. N. Hemalatha,

Ld. DR, strongly defended the addition by explaining that

Shri Bhavarlal Jain floated about companies and merely book

entries are provided and the paper work has been done and

even the initial burden was not discharged. It was contended

that the funds just came in and moved out which are merely

accommodation entries and this group is established bogus

entry provider. The Ld. DR relied upon the decision of the

Tribunal in the case of Shri Suresh L. Satyani vs Income Tax

Officer (ITA No.3452/Mum/2016) order dated 25/04/2017.

2.1. I have considered the rival submissions and

perused the material available on record. The facts, in brief,

are that the assessee company is engaged in the supply of

ferrous and non-ferrous metial, declared income of Rs.14,

27,691/- in its return filed on 24/10/2007, which was

processed u/s 143(1) of the Act. Subsequently, the case was

reopened by issuance of notice u/s 148 dated 26/03/2014,

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after recording the reasons, which was duly served upon the

assessee. The assessee vide letter dated 08/04/2014

claimed that the original return filed on 24/10/2007 may be

treated to be return filed in response to notice u/s 148 of the

Act. Subsequently, notices u/s 143(2) and 142(1) were served

upon the assessee to which the assessee attended the

proceedings and filed the details. During reassessment

proceedings, the assessee was asked to furnish the details of

loans and advances taken from the group companies of Shri

Bhavarlal Jain. The assessee vide reply dated 03/03/2015

claimed that the loan creditor M/s Mahalaxmi Gems Pvt. Ltd.

has informed the assessee that they have received notices

u/s 133(6) of the Act and have filed the relevant details. The

claim of the assessee was not accepted with the following

reasoning:-

(i) M/s. Mahalaxmi Gems Pvt. Ltd. is a group Concern of M/s. Bhanwarlal Jain and who is providing accommodation entries to reduce the profit liablilty. (ii) Further, on perusal of the bank statement period 21/09/2006 to 30/09/2006, it reveals that on 25/09/2006 the closing bank balance of Rs.51912/- only. ON 29/09/2006, there is a deposits of Rs.23,00,000/- and Rs.2,00,000/- and on the same day the advances given to the assessee company.

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(iii) On perusal of the statement further reveals that M/s Mahalaxmi Gems Pvt. Ltd. is receiving commission income on the bogus loan amount. On 25/09/2006, there are deposits of Rs.10,00,000/- & Rs.13,00,000/- and on the same day an amount of Rs.22,57,415/- has been transferred to some other account. (iv) It means that Bhanwarlal Jain Group companies are providing only accommodation entries and no genuine transactions. In the light of the above facts, the Ld. Assessing Officer

treated the amount of Rs.25 lakhs taken as loans/advances

as unexplained cash credit u/s 68 of the Act.

2.2. On appeal before the Ld. Commissioner of Income

Tax (Appeal), the factual matrix was considered and finally

the addition made by the Ld. Assessing Officer was affirmed

on the ground that the creditworthiness of the parties and

the genuineness of the transaction were not satisfactorily

explained.

2.3. The assessee is in appeal before this Tribunal. The

assessee as well as the Revenue has filed certain decisions,

wherein, broadly, Shri Bhanvarlal Jain and its group are

involved. One of such cases is of Shri Suresh L. Satyani, (ITA

NO.3452/Mum/2016) wherein, vide order dated 25/04/2017

by an elaborate discussion, the appeal of the assessee was

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dismissed. The relevant portion from the aforesaid order is

reproduced hereunder:-

“This appeal, filed by the assessee, being ITA No. 3452/Mum/2016, is directed against the appellate order dated 29th April, 2016 passed by the learned Commissioner of Income Tax (Appeals)- 34, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 30.03.2015 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”).

“1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that the learned Assessing Officer had validly issued the notice u/s, 148 I.T. Act, 1961 without appreciating the fact that proceedings u/s 147 of the I.T. Act, were initiated merely on the basis of information from the DGIT (Inv.) and not on based on proper application of mind on the part of the learned Assessing Officer so as to come to an independent conclusion that he has reason to believe that income has escaped assessment during the year. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding the action of the learned Assessing Officer in rejecting the books of account and thereby confirming the addition of Rs.5,44,037/ - being 9% of the purchases of Rs.60,44,860/- which were held to be not genuine by the learned Assessing Officer, though the said purchases and the corresponding sales were duly reflected in books of account and payments for the said purchases were made by account payee cheques and the corresponding sales were also recorded in books of account. 3. Your appellant craves leave to add, alter or amend any of the above grounds of appeal or take up a fresh ground(s) of appeal on or before the date of hearing.”

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2010-11 on 26th September, 2010 which was processed u/s 143(1) of the Act and the income declared was accepted. Later on, the assessment was re-opened u/s 147 of the Act within a period of 4 years from the end of assessment year by issue of notice u/s 148 of the Act dated 26th March, 2014 on the basis of information that the assessee had indulged in showing bogus purchases by taking accommodation/fictitious bills from certain entities from whom the assessee has not purchased any material. The assessee in response to notice u/s 148 of 1961 Act submitted that return of income filed on 26-09-2010 may be treated as return filed in response to notice u/s 148 of 1961 Act. The AO issued notice u/s 143(2) of 1961 Act and reasons recorded for re- opening of the assessment were furnished by the AO to the assessee. The assessee raised objections to the reopening of the assessment and the same was disposed by the AO through a speaking order dated 9th January, 2015.

The A.O. received information from DIT (Inv.), Mumbai vide letter dated 13.03.2014 that a search and seizure action was carried out in the case of Banwarlal Jain group cases by the Investigation Wing of Mumbai on 3rd October, 2013. The search had revealed various incriminating documents in respect of Hawala entries provided by the Banwarlal Jain group by way of issuing bogus bills to various persons. The search further revealed that various entities were created, majority of them belong to native place of Banwarlal Jain and family. While examination on oath, the proprietor, director and partner of these dummy entities accepted that they were merely employees of Banwarlal Jain and family group and they did not have any genuine knowledge of diamond business. It was also revealed that they did not even have basic knowledge about the concern in which they are shown as proprietor, director and partner. It was also established that the owner, director, partners and proprietor were given salary and they were residing in the flat owned by Banwarlal Jain. It was also come to the notice that the business was carried out by these people from the premises owned by Banwarlal Jain situated at 316, Pancharatna, Opera House, 210 Panchratna, 105 Panchratna which was having ownership of Banwarlal Jain group. All these proprietors, directors and partners were kept for the name sake and they were not aware of importers or actual buyers shown in the books of account. Statements were recorded u/s 132 and 131 of 1961 Act , whereby these employees have accepted and admitted that they were dummy proprietor, director and partners of various concerns whose affairs are managed and controlled by Banwarlal Jain group. The statements of these employees were confronted to Banwarlal Jain and in the statement recorded u/s 132(4) of the Act at 16, Mohan Building, Girgaum, Mumbai, Shri Banwarlal Jain admitted that he

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manages and controls the business affairs of all the concerns in which the persons were employees, who were shown as proprietor, director and partners. It was also admitted that all the benami concerns were not in the genuine business and no stock of diamond was found from the premises. The books of accounts of all these persons were not maintained in respective office and were found from back office 16, Mohan building, Girgaum, Mumbai and at Flat No. 233, Ground Floor, Navtara, Girgaim, Mumbai. It was found that the actual importers of rough diamonds import part of the diamonds from benami concerns operated by Banwarlal Jain and family with a view to suppress their turnover and profit. The consignments were sent on credit by the suppliers in the name of benami concerns at the instance of actual importer and on receipt of the consignment by all these benami concerns, the diamonds were handed over to the real importer resulting into bogus and non-existence stock in the books of the benami concerns. These transactions were not recorded in the regular books of benami concerns. Against the bogus non-existence stock, bogus sale bill were issued to various diamond merchants who usually buy rough diamonds from undisclosed parties and requires purchase bills to balance their accounts to circumvent provisions of Section 40A(3) of the Act. By adopting these measures, the purchases were inflated as raw material diamond were available in grey market at much lower price .The diamond merchants issues cheques in favour of benami concerns against purchase bills obtained by them against which they receive cash. The list of such benami companies was found during the course of search and other details found during search in respect of the assessee are reproduced hereunder:-

Purchases made in Individual Capacity by the assessee Sr. Name of the party who has issued bogus Amount of such No. bills to the assessee bogus bill in Rs. 1 Mayur Exports 19,04,240/- 2 Navkar Diamond 26,800/- Total 19,31,040/-

And in the capacity as proprietorship concern “M/s. Satyani Brothers”

Sr. Name of the party who has issued bogus Amount of such No. bills to the assessee bogus bill in Rs. 1 Prime Star 31,06,320/- 2 Mohit Enterprises 10,07,500/- 3 Mayur Export 19,04,240/- 4 Navkar Diamond 26,800/- Total 60,44,860/-

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In his statement recorded , Shri Banwarlal Jain admitted to have Benami concerns as its own concerns.

The assessee was asked to explain the purchases of Rs. 19,31,040/- made in his individual capacity as well purchases of Rs. 60,44,860/- made in proprietorship concern namely M/s Satyani Brothers from said parties as these concerns were accepted by Mr Banwarlal Jain to be his benami concerns and admitted to have issued bogus/accommodation bills to the assessee.

The assessee submitted copy of invoices, copy of account of parties, extract of stock register , copy of bank account from wherein cheques were reflected. Notices u/s 133(6) of the Act were issued to the above referred parties which were Benami of Sh. Banwarlal Jain from whom purchases were claimed to have been made by the assessee to produce the following details:-

“ 1. Your P.A.N and details of Income Tax Assessing Officer. 2. Nature of business activity undertaken by you. 3. Whether any amount is outstanding, if yes, please furnish the same with reference to your return of income filed by you i.e. sundry debtor/creditor highlighting the entries in the same.

In response to notices u/s 133(6) of 1961 Act, only part details were filed by said parties i.e. copy of ledger, copy of sale bill, copy of IT return and bank book. The said parties to whom notices u/s

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133(6) of 1961 Act were issued did not furnish following details despite being asked by the AO to submit the same: “ 1. Whether you have done transaction with Shri Suresh Satyani (Prop of Satyani Brothers), If yes, explain nature of transaction. 2. Please explain from where you had purchased material which in turn was supplied to Shri Suresh Satyani (Prop of Satyani Brothers). Please also produce proof. 3. Please produce copy of your bank account for the months wherein cheques received from above referred assessee is deposited and cheques paid by you for corresponding purchase are debited in your bank account. 4. Please provide details of sales tax assessment completed in your case for AY 2010-11.

Thus, the AO observed that crucial details which were required to prove genuineness of the transaction were not provided by these parties from whom the assessee made purchases and thus notices issued u/s 133(6) of 1961 remained un-complied with. The assessee was confronted by the AO with the fact that these parties did not sent complete information wherein genuineness of purchases could be proved. The AO observed that onus to prove genuineness of transaction shifted back to the assessee. The assessee could not produce the parties before the A.O. It was observed by the AO that the assessee has merely furnished ledger account, invoices, bank statement and extract of stock register. The AO observed that merely payments were made by cheque does not establish that purchases were genuine , more-so when Mr Banwarlal Jain admitted that his benmai concerns were only issuing bogus/accommodation bills without actual supplying any material. . The parties to whom notices u/s 133(6) of 1961 Act were issued did not supplied complete information. Thus, AO concluded that the assessee purchased material from grey market at lower prices and to cover/match for sales actually made by the assessee, the assessee obtained bogus bills from these parties who were benami entities of Mr Bhanwarlal Jain. Books of accounts were rejected by the A.O. u/s 145(3) of 1961 Act. The AO relied on decision of Hon’ble Gujarat High Court in the case of CIT v Chandra Vilas Hotels (1987) 164 ITR 102(Guj.) , CIT v. Navasari Cotton and Silk Mills Limited (1982) 135 ITR 546(Guj) and Karjan Co-operative Cotton Sales Ginning and Pressing Society v. CIT (1993) 109 ITR 17(Guj.) , Hon’ble Delhi High Court in CIT v. Nipun Builders and Developers Private Limited in ITA no. 120/2012 dated 07-01-2013 and CIT v. N R Portfolio Private Limited in ITA no. 1018/1019 of 2011 dated 22.11.2013. The

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A.O. relying on the ratio of the decision of in the case of Sanjay Oilcake Industries v. CIT 316 ITR 274 (Guj), Bholanath Polyfab Pvt Ltd 40 Taxman 494(Guj) and M/s. Vijay Proteins Ltd. (1996) 58 ITD 428 (Ahd) and 25% of such purchases of Rs. 60,44,860/- stood disallowed by the AO treating as element of profit embedded in the transaction , which led to disallowance to the tune of Rs. 15,11,215/- and for the purchases made by the assessee from M/.s. Navkar Diamonds and Mayur Exports aggregating to Rs 19,31,040/- , it was observed by the AO that the same were included twice by error, vide assessment framed by the AO u/s 143(3) r.w.s. 147 of 1961 Act.

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profit margin of various years to arrive at decision and average margin is to be adopted. Thus, the learned CIT(A) restricted the addition to the total income to 9% of the purchases of Rs. 60,44,860/- , which works out to Rs. 5,44,037/- which bring the net margin to 7.22% on total turnover, vide appellate order dated 29-04-2016 passed by ld. CIT(A).

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submitted that the said assessee M/s Satyanis The Jewellery Store Private Limited had accepted the said addition of 3% on alleged bogus purchased as was made by learned CIT(A)-21 for assessment year 2012-13 and no appeal to the tribunal has been filed by the assessee contesting appellate order dated 30-03-2015 passed by learned CIT(A). It was submitted that notices were issued to 4 parties by the AO u/s 133(6) of 1961 Act in the case of the assessee and they could not reply certain questions but later on affidavits were placed on record before the ld. CIT(A) which are placed at paper book page 18-19, 36-37, 50-51,67-68.

We have observed that the assessee is engaged in business of trading in diamonds, gold and jewellery.

A search operation was conducted in the case of Mr Bhanwarlal Jain group by Revenue on 03-10-2013 u/s 132(1) of 1961 Act and statement of Mr Bhanwarlal Jain was recorded u/s 132(4) of the Act wherein he admitted that he was engaged in the issuance of bogus bills and were engaged in providing accommodation entries through various front concerns opened in the name of his employees , after being confronted with the statements of his employees recorded u/s 132 and 131 of 1961 Act. The said Mr.Bhanwarlal Jain admitted that he has opened several benami concerns in the name of his employees who were his banami’s

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and were only paid salary by said Mr Bhanwarlal Jain and these banami concerns were used by Mr Bhanwarlal Jain as his front entities to provide bogus/accommodation entries. The large number of said concerns were operating from 2-3 premises owned by Mr Bhanwarlal Jain as detailed in preceding para’s of this order. During search u/s 132(1) of 1961 Act, neither books of accounts of these benami concerns were recovered from their registered premises nor any stock of diamond was found in the said premises by Revenue. The books of accounts of these benami concerns were recovered by Revenue from some other premises and that too owned by Mr Bhanwarlal Jain, the details are in preceding para’s of this order which are not repeated. The so called proprietor/directors/partners of these banami companies /concerns who were in-fact employees of Mr Bhanwarlal Jain admitted in their statement recorded u/s 132/131 of 1961 Act that they do not have any knowledge of affairs of the said concerns which were held in their names nor they had any knowledge of diamond trade. The modus operandi adopted by said Mr Bhanwarlal Jain was that he through these benami concerns used to import diamonds on behalf of actual importers and the diamonds were handed over without invoices to these actual importers by these benami concerns of Mr Bhanwarlal Jain , and the said importers used to pay cash against supplies of diamond to them made without any invoices. The intention of these importers were to suppress their turnover and consequently profits and hence these front concerns of Mr Bahnwarlal Jain were used to import diamonds. Thereafter, to complete books of accounts, these benami concerns of Mr Bhanwarlal Jain used to issue bogus bills to various concerns / entities who wanted bills to cover their sales in books of account. No material was supplied against these bogus bills which were merely accommodation / hawala entries. These parties issued cheques to benami concerns of Mr Bhanwarlal Jain against which cash was handed back by these benami concerns to the parties who obtained bills from concerns of Bhanwarlal Jain. These concerns who used to obtain bogus bills from Mr Bhanwarlal Jain benami concerns, used to actually purchase diamonds from grey market at low cost and to save taxes etc. were using front companies of Mr Bhanwarlal Jain . The foreign suppliers used to supply diamond to benami concerns of Mr Bhanwarlal Jain on credit basis. The proceeds of cheques so obtained by these benami concerns from these bogus bills issued to various concerns were utilized to make payment for imports.

We find that the assessee filed its return of income with Revenue on 26-09-2010 which was processed by the Revenue u/s 143(1) of the Act. Thus, there was no scrutiny assessment u/s 143(3) r.w.s. 143(2) of 1961 Act framed by Revenue against the assessee.

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The case of the assessee was re-opened by the AO u/s 147 of 1961 Act by issue of notice dated 26.03.2014 u/s 148 of 1961 Act, which was re-opened within four years from the end of the assessment year. The reasons for re-opening were recorded by the AO on 26-03-2014, which were supplied to the assessee vide letter dated 06-06-2014 and the assessee objected to the reasons so recorded vide letter dated 26-06-2014 , which objections were disposed of by Revenue vide orders dated 09-01-2015 . Thereafter, the assessment was framed by the Revenue u/s 143(3) r.w.s. 147 of 1961 Act vide assessment order dated 30-03- 2015. Thus, the genesis of the case is the Information which was received by the A.O. from DIT (Inv.), Mumbai that there were search u/s 132(1) of 1961 Act in the case of Mr Bhanwarlal Jain group on 03-10-2013 and statement of Mr Bhanwarlal Jain was recorded u/s 132(4) of the Act wherein he admitted that he was engaged in the issuance of bogus bills and were engaged in providing accommodation entries through various front concerns opened in the name of his employees , on being confronted with the statement recorded of employees u/s 132 and 131 of 1961 Act . The said Bhanwarlal Jain admitted that he has opened several benami concerns in the name of employees who were his banami’s and were only paid salary by said Mr Bhanwarlal Jain and these banami concerns were used by Mr Bhanwarlal Jain to provide bogus/accommodation entries without supplying any material. The large number of said concerns were operating from 2-3 premises owned by Mr Bhanwarlal Jain as detailed in preceding para’s of this order. During search u/s 132(1) of 1961 Act, neither books of accounts of these benami concerns were recovered from their registered premises nor any stock of diamond was found by Revenue. The books of accounts of these benami concerns were recovered by Revenue from some other premises and that too owned by Mr Bhanwarlal Jain, the details are in preceding para’s of this order which are not repeated. The so called proprietor/directors/partners of these banami companies /concerns admitted in their statement recorded u/s 132/131 of 1961 Act that they do not have any knowledge of affairs of the said concerns nor they had any knowledge of diamond trade. The modus operandi adopted by said Mr Bhanwarlal Jain was that he through these benami concerns used to import diamonds on behalf of actual importers and the diamonds were handed over without invoices to actual importers by these benami concerns of Mr Bhanwarlal Jain , who used to pay cash against these supplies of diamond to them made without any invoices. The intention of these importers was to suppress turnover and consequently profits. Thereafter, to complete books of accounts, these benami concerns of Mr Bhanwarlal Jain used to issue bogus bills to various concerns

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who wanted bills to cover their sales in books of account. No material was supplied against these bogus bills issued by the said benami concerns of Mr Bhanwarlal Jain. These parties issued cheques to benami concerns of Mr Bhanwarlal Jain against which cash was handed back by these concerns to the parties who obtained bills from concerns of Bhanwarlal Jain. These concerns who used to obtain bills from Mr Bhanwarlal Jain benami concerns, used to actually purchase diamonds from grey market at low cost and to save taxes etc. were using front concerns of Mr Bhanwarlal Jain . The foreign suppliers used to supply diamond to benami concerns of Mr Bhanwarlal Jain on credit basis. The proceeds of cheques so obtained by these benami concerns from these bogus bills issued to various concerns were utilized to make payment for imports. There is a list of 2 such parties wherein the assessee is stated to be beneficiary of bogus purchase bills to the tune of Rs.19,31,040 as recorded in reasons recorded by Revenue on 26-03-2014. Thus, tangible and material incriminating information was received by the AO which clearly indicted assessee to be beneficiary of bogus purchase entries to the tune of Rs. 19,31,040/- from 2 bogus entry providers which formed the reasons to believe by the AO in forming an opinion that income has escaped assessment and the information so received by the AO has live link with reasons to believe that income has escaped assessment, wherein the Revenue recorded reasons to believe based on afore-stated incriminating tangible and material information indicting assessee that income of the assessee has escaped assessment and the assessment need to be re-opened u/s 147 of 1961 Act based on such material and tangible incriminating information indicting assessee. At this stage there has to be a prima-facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the hilt. Thus, at this stage , there has to be prima-facie satisfaction of the AO based on tangible and material incriminating information in his possession leading to reasons to believe that income of the assessee has escaped assessment . That is in a subsequent stage when assessment is being framed u/s 143(3) r.w.s. 147 of 1961 where necessary and detailed opportunities are required to be given to the assessee for rebuttal before fastening tax liability as per scheme and mandate of 1961 Act. It is to be noted also that in the instant case no scrutiny assessment u/s 143(3) r.w.s. 143(2) of 1961 Act was framed originally by the Revenue while processing assessee’s return of income filed with Revenue . Return of income of the assessee was originally processed by Revenue u/s 143(1) of the Act only. There was , thus, no formation of opinion as intimation u/s 143(1) of 1961 Act is not an assessment. Thus, there cannot be a change of opinion as no opinion was initially formed by the AO as return was originally processed u/s 143(1) of 1961 Act

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and no scrutiny assessment was framed by Revenue u/s 143(3) r.w.s. 143(2) of 1961 Act. Thus, it could not be said that no tangible and material incriminating material was received by the A.O. , rather it is only after receipt of tangible and material incriminating material by the AO from DIT(Inv) incriminating assessee as detailed above , the assessment was reopened u/s 147 of the Act based on such tangible and material incriminating information , and notices u/s 148 was issued by the AO on 26th March, 2014, which is issued within four years from the end of the assessment year. Thus, it cannot be said that the Revenue has reopened the assessment based upon suspicion rather genesis of re-opening is incriminating information received from DIT(Inv), Mumbai based on information received from DIT(Inv) which in turn was based on search and seizure operation u/s 132(1) of 1961 Act carried out in the case of Mr Bhanwarlal Jain group case, wherein he deposed in statement recorded u/s 132(4) of 1961 Act of being engaged in providing bogus accommodation entries without supplying any material wherein only bogus bills were issued and the cheque amount was returned back to the beneficiaries in cash . The assessee is stated to be beneficiary in the said list of having allegedly received entries from 2 bogus accommodation entry providers who were acting as front and benami concerns of Mr Bhanwarlal Jain to the tune of Rs. 19,31,040/-. The original return was processed u/s 143(1) of the Act, and thus no opinion was formed and hence there is no change of opinion. Reliance is placed on the decision of Hon’ble Supreme Court in the case of ACIT v. Rajesh Jhaveri, (2007) 291 ITR 500 (SC), wherein Hon’ble Supreme Court vide orders dated 23-05-2007 has held as under :

“11. It is to be noted that substantial changes have been made to section 143(1) with effect from June 1, 1999. Up to March 31, 1989, after a return of income was filed the Assessing Officer could make an assessment under section 143(1) without requiring the presence of the assessee or the production by him of any evidence in support of the return. Where the assessee objected to such an assessment or where the officer was of the opinion that the assessment was incorrect or incomplete or the officer did not complete the assessment under section 143(1), but wanted to make an inquiry, a notice under section 143(2) was required to be issued to the assessee requiring him to produce evidence in support of his return. After considering the material and evidence produced and after making necessary inquiries, the officer had power to make assessment under section 143(3). With effect from 1-4-1989, the provisions underwent substantial and material changes. A new scheme was introduced and the new substituted section 143(1) prior to the subsequent substitution with effect from 1-6-1999, in clause

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(a), a provision was made that where a return was filed under section 139 or in response to a notice under section 142(1), and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was to be sent without prejudice to the provisions of section 143(2) to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued under section 156. The first proviso to section 143(1)(a) allowed the Department to make certain adjustments in the income or loss declared in the return. They were as follows :

(a) an arithmetical error in the return, accounts and documents accompanying it were to be rectified; (b) any loss carried forward, deduction, allowance or relief which on the basis of the information available in such return, accounts or documents, was prima facie admissible, but which was not claimed in the return was to be allowed; (c) any loss carried forward, relief claimed in the return which on the basis of the information as available in such returns accounts or documents were prima facie inadmissible was to be disallowed.

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accompanying the return. The Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues. In other words, the Assessing Officer had no power to go behind the return, accounts or documents, either in allowing or in disallowing deductions, allowance or relief.

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places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes "the computation of income", sometimes "the determination of the amount of tax payable" and sometimes "the whole procedure laid down in the Act for imposing liability upon the tax payer". In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(1)(a) as it stood prior to 1-4-1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K. Jain J) in Apogee International Ltd. v. Union of India [1996] 220 ITR 248 (Delhi). It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgement is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any "assessment" is done by them ? The reply is an emphatic "no". The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise.

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and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub- section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." (a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,

(a) where income chargeable to tax has been under assessed; or (b) where such income has been assessed at too low rate; or

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(c) where such income has been made the subject of excessive relief under this Act or under the Indian Income- tax Act, 1922 (11 of 1922); or (d) where excessive loss or depreciation allowance has been computed. Explanation 2.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not neces-sarily amount to disclosure within the meaning of this section."

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Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC).

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Thus, we hold that reopening is valid and legal in the instant case as the ratio of decision of Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra) is directly and squarely applicable to the facts of the instant case, as in the instant case also no assessment was originally framed u/s 143(2) r.ws. 143(3) of 1961 Act while the return of income was originally processed u/s 143(1) of 1961 Act , and hence no opinion was formed by the AO as processing u/s 143(1) of 1961 Act cannot be said to be an assessment and hence there is no question of change of opinion in the instant case. The re-opening was also done within four years from the end of assessment year and first proviso to Section 147 of 1961 Act is not applicable. The AO has received an tangible and material incriminating information from DIT(Inv) , Mumbai which was based on incriminating information emanating from searches in case of Mr Bhanwarlal Jain group which we have detailed in preceding para’s and it was reflected in said incriminating information that the assessee was beneficiary of bogus accommodation entry to the tune of Rs. 19,31,040/- from 2 hawala dealers, which information is a tangible and material information sufficient for the purposes of re-opening of the assessment in the instant case as the said re-opening is done by the AO within four years from the end of the assessment year and no scrutiny assessment u/s 143(3) r.w.s. 143(2) of 1961 Act was framed originally by Revenue, thus, consequently first proviso to Section 147 of 1961 Act was not applicable in the instant case under appeal before the tribunal. The incriminating tangible and material information so received by the AO is with regard to the facts previously disclosed which has comes into possession of the AO which tends to expose the untruthfulness of those facts as were disclosed in the return of income by the assessee, which return of income was incidentally also not scrutinized by the Revenue. The incriminating information so received by the AO in the instant case which became foundation for re-opening of the assessment was sufficient to form reasons to believe by the AO that income has escaped assessment, as the

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assessee was specifically incriminated in the said information having received bogus accommodation entries for purchases to the tune of Rs. 19,31,040/- from 2 bogus entry providers being hawala traders providing accommodation purchase bills without actual delivery of material . In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information exposing un-truthfulness of information furnished in return of income filed with Revenue. We are of the considered view that on the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to re-opening of assessment, which in the instant case the conditions are duly met for re-opening based on factual matrix of the case. The tangible and material incriminating information so received by the AO from DIT(Inv.), Mumbai as detailed above is so obvious that to say that the AO has not applied his mind to reach satisfaction in forming reasons to believe that income of assessee has escaped assessment to initiate re-opening u/s 147 of 1961 , is too far-fetched and such contention of the assessee is out-rightly rejected. There is live link between material and tangible incriminating information received by the assessee and formation of reasons to believe that income of the assesse has escaped assessment in the instant case under appeal before us. Thus, Respectfully following the decision of Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited(supra), we hold that re-opening of the assessment as done in the instant case by the AO u/s 147 of 1961 was valid and legal which is upheld by us , and the contentions of the assessee are , hereby, rejected. No contrary decision of Hon’ble Apex Court is brought to our notice . This ground of the assessee challenging legality and validity of re-opening is hereby dismissed. We order accordingly.

We have observed that notice u/s 133(6) of the Act were issued by the A.O. to four benami concerns of Mr Bhanwarlal Jain from whom the assessee allegedly obtained bogus bills for purchase of diamonds against which they only gave part replies. The assessee failed to produce these four parties before the AO despite being called upon by Revenue to produce them. The assessee also could not prove the movement of material so

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purchased from these alleged entry providers. These are information which are especially in the knowledge of the assessee and the onus is on the assessee to prove that purchases made by him are genuine as these purchases are recorded in the books of accounts of the assessee. Section 106 of Indian Evidence Act ,1872 clearly stipulates as under: “106. Burden of proving fact especially within knowledge When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him.

Illustrations

(a)****

(b) A is charged with traveling on a railway without a ticket. The burden of proving that he had a ticket is on him.”

The assessee was not able to discharge burden cast u/s 106 of 1872 Act as the assessee did not file documents for showing movement of goods from supplier to assessee as evidence nor these parties were produced before the Revenue. The assessee did not submitted documentary evidence to show that there was movement of goods . The assessee filed before the learned CIT(A), affidavits executed by these parties from whom the assessee made purchases wherein these parties have submitted that transactions were genuine. The same parties while deposing before DIT(Inv) in an statement recorded u/s 132/131 of the Act have expressed their lack of knowledge about the state of affairs of these concerns as well admitted that they do not have knowledge of diamond trade. The said Mr Bhanwarlal Jain when confronted with statements u/s 132 and 131 of these persons, admitted while deposing statement u/s 132(4) to be engaged in providing hawala/accommodation entries. The AO relying upon judicial precedents made the disallowance to the tune of 25% of bogus purchases of Rs. 60,44860/-, wherein disallowance worked out to Rs.15,11,215/-which were added to the income of the assessee. The ld. CIT(A) restricted the addition to income by applying average margin of 9% to the said

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bogus purchases of Rs. 60,44,860/- , wherein addition to the income worked out to Rs. 5,44,037/- which brings the net margin to 7.22% as against declared net profit margin of 4.52% of turnover. The learned CIT(A) while computing disallowance has considered the net profit margin of the assessee itself for several years from assessment year 2008-09 to 2012-13 to come to applying net profit margin of 7.22% of total turnover for previous year relevant to the impugned assessment year under appeal which was based on average net margin of the assessee itself for various years. The learned CIT(A) in our considered view has thus adopted fair, reasonable and rational basis which was based on an honest estimation to arrive at disallowance / addition to income to arrive at net profit margin of 7.22% of turnover considering that books of accounts of the assessee were already rejected by Revenue . The assessee is now contemplating that the learned CIT(A)-21,Mumbai in the case of one of the group concern namely ‘Satyanis The Jewellery Store Private Limited’ while adjudicating appeal for assessment year 2012-13 has restricted disallowance to 3% of alleged bogus purchases which is accepted by the said tax-payer and no further appeal is filed by the said tax-payer with the tribunal against appellate orders of learned CIT(A) for assessment year 2012-13. However, it is not known whether Revenue has filed an appeal against the appellate order of learned CIT(A)-21 in the case of The assessee Satyanis The Jewellery Store Private Limited’ before the tribunal against the relief granted to the assessee by learned CIT(A)-21,Mumbai and fate of such appeal , if any is not known. The assessee also could not show that how appellate order of learned CIT(A)- 34,Mumbai in assessee’s own case which has estimated income at net margin @7.22% on total turnover which is based on average net margin of the assessee for assessment year 2008-09 to 2012-13 is perverse or arbitrary not sustainable at law. The facts of each case is different, the assessee is trader in diamond while the said tax-payer ‘M/s Satyanis The Jewellery Store Private Limited’ is manufacturer and trader of diamond, gold and jewellery. Principles of res-judicata is not applicable in the income tax proceedings and every year is a different year although we agree that principles of consistency is to be applied (Ref Radhasoami Satsang v. CIT (1992) 193 ITR 321(SC) ) . The assessee cannot take recourse to estimation done by another learned CIT(A) while adjudicating appeal of another tax-payer whose facts are different and in any case estimation requires some guess

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work based on facts on records which need to be reasonable, realistic, rational and fair estimation based on honest working and should not be arbitrary or perverse estimation which obviously requires some guess work. In such circumstances, profits needs to be estimated which definitely involved some estimation/guess work but the said estimation/guess work should be fair , honest and rational keeping in view factual matrix of the case and cannot be arbitrarily applied at the discretion of authorities . We have gone through the case laws relied upon by the assessee. Reference is drawn to decision of Hon’ble Supreme Court in the case of Kachwala Gems v. JCIT (2007) 288 ITR 10(SC) , wherein Hon’ble Lordships held as under :

“4. The facts of the case are in a short compass. The appellant-assessee deals in precious and semi-precious stones. In the course of assessment, the Assessing Officer noticed the following defects in the books of account of the assessee : "1. The assessee has not maintained and kept any quantitative details/stock register for the goods traded in by the assessee. 2. There is no evidence on record or document to verify the basis of the valuation of the closing stock shown by the assessee. The assessee is not able to prepare such details even with the help of books of account maintained, purchase bills & Sale Invoices. 3. Provisions of section 145(3) are clearly attracted in this case. 4. The genuineness of purchases to the extent of Rs. 42 lakhs (approx.) is not proved without any doubt. 5. The GP rate declared by the assessee at 13.49 per cent during the assessment year is not a match to the result declared by the itself in the previous assessment years. 6. M/s. Gem Plaza, engaged in local sales of similar goods declared voluntarily rate of 35 per cent in its assessment for the assessment year 1997-98. 7. M/s. Dhadda Exports, another assessee dealing in same items, but doing export business declared GP rate of 43.8 per cent (even without considering the value of export incentives) in assessment year 1997-98." 5. Thereafter, the books of account of the assessee were rejected by the Assessing Officer and he resorted to best

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judgment assessment under section 144 of the Income-tax Act. The Assessing Officer in the assessment order mentioned some comparable cases and was of the view that the case of the assessee is more or less having similar facts as that of M/s. Gem Plaza where the Gross Profit has been taken as 35.48 per cent. The Assessing Officer estimated the Gross Profit of the assessee as 40 per cent. 6. The Assessing Officer further held that the assessee has shown bogus purchases in order to reduce the Gross Profits. 7. In appeal, the Commissioner of Income-tax (Appeals) upheld most of the findings of the Assessing Officer, but reduced the Gross Profit from 40 per cent to 35 per cent. 8. In further appeal, the Tribunal had given further relief to the assessee and reduced the Gross Profit rate to 30 per cent. 9. The counsel for the assessee has submitted before us that the income-tax authorities wrongly held that appellant has shown bogus purchases, and the books of account were wrongly rejected. 10. In our opinion, whether there were bogus purchases or not, is a finding of fact, and we cannot interfere with the same in this appeal. As regards the rejection of the books of account, cogent reasons have been given by the income- tax authorities for doing so, and we see no reason to take a different view. 11. It is well-settled that in a best judgment assessment, there is always a certain degree of guess work. No doubt the authorities concerned should try to make an honest and fair estimate of the income even in a best judgment assessment, and should not act totally arbitrarily, but there is necessarily some amount of guess work involved in a best judgment assessment, and it is the assessee himself who is to blame as he did not submit proper accounts. In our opinion, there was no arbitrariness in the present case on the part of the income-tax authorities. Thus, there is no force in this appeal, and it is dismissed accordingly. No costs.”

In our considered view in the instant case learned CIT(A) made an honest attempt to estimate net margin on total turnover by adding to income 9% of bogus purchases which led to net margin of 7.22% on total turnover as against net margin of 4.52% on total turnover declared by the assessee , which net margin arrived at 7.22% on total

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turnover was based on average net margin of the assessee itself for assessment year 2008-09 to 2012-13, which in our considered view was an honest, realistic and rational attempt made by learned CIT(A) and does not fall in the arena of arbitrariness and perversity requiring our interference, and hence we decline to interfere with the well reasoned appellate order of learned CIT(A). The right of cross examination is not absolute. The assessee has to first discharge its primary onus cast under law and if the same stood duly discharged which is not rebutted by authorities , but despite that then also the authorities proceed to put assessee to prejudice solely relying on the basis of incriminating statement recorded of third party at the back of the assessee, then certainly the right to cross examination the said third party whose incriminating statement was recorded at the back of the assessee is relied upon by authorities to prejudice the assessee will become absolute. There was an incriminating tangible and material information with the Revenue against the assessee that the assessee has obtained bogus invoices from benami concerns of Mr Bhanwarlal Jain who were engaged in providing accommodation entries through front companies/concerns opened in the name of his benamis . The said Mr Bhanwarlal Jain during the course of search proceedings u/s 132(1) of 1961 Act while deposing in statement recorded u/s 132(4) of 1961 Act stated that he was engaged in providing bogus accommodation entries through concerns/entities created through various employees when he was confronted with the various statements recorded u/s 132 and 131 of 1961 Act of his benamis. The said employees have stated that they have no knowledge of these concern’s state of business as well they lacked information about diamond trade. The assessee failed to produce these four parties from whom purchases were made by the assessee before Revenue. The entries for purchase are appearing in books of the assessee and it was incumbent on the assessee to bring on record cogent material to substantiate that purchases were genuine. The assessee is in possession of the facts which were especially in the knowledge of the assessee w.r.t. these bogus purchases and burden of proof lay on the assessee to substantiate that purchases are genuine. The assessee could not establish movement of material as well could not produce the parties before Revenue. The books of accounts were rejected by AO u/s 145(3) of 1961 Act. Thus, we are inclined to confirm the appellate order of learned CIT(A) and this appeal filed by the assessee is

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dismissed. It is not brought on record before us that Revenue is in appeal before the tribunal against the part relief given by learned CIT(A) to the assessee. We order accordingly.

2.4. I have also perused some other orders which were

filed by the assessee in its favour. In the case of M/s Rusabh

Enterprises (ITA NO.1580/Mum/2017), the SMC Bench of

the Mumbai Tribunal broadly on technical/legal grounds

decided in favour of the assessee and the Division Bench in

the case of Reliance Corporation (order dated 12/04/2017)

decided in favour of the assessee therein also the assessee

was one of the beneficiary of the said accommodation entries.

The totality of facts, clearly indicates that Mr. Bhanwarlal

Jain & Group are involved in providing accommodation

entries and the paper work has been done very strongly. But

I find that the Division Bench in the case of Suresh L.

Satyani (order dated 25/04/2017) has made an elaborate

discussion on the factual matrix, wherein also, in response to

notices issued u/s 133(6) filed the part details of the parties

and also some of the parties who did not furnished certain

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details. The benami concerns of Shri Bhanwarlal Jain use to

issue bogus bills to various concerns/entities who wanted bill

to cover their sales in books of accounts. The Bench has

already considered the decision from Hon'ble Apex Court in

the case of Shri Rajesh Jhaveri (2007) 291 ITR 500 (SC),

wherein, vide order dated 23/05/2007 held as under:-

“11. It is to be noted that substantial changes have been made to section 143(1) with effect from June 1, 1999. Up to March 31, 1989, after a return of income was filed the Assessing Officer could make an assessment under section 143(1) without requiring the presence of the assessee or the production by him of any evidence in support of the return. Where the assessee objected to such an assessment or where the officer was of the opinion that the assessment was incorrect or incomplete or the officer did not complete the assessment under section 143(1), but wanted to make an inquiry, a notice under section 143(2) was required to be issued to the assessee requiring him to produce evidence in support of his return. After considering the material and evidence produced and after making necessary inquiries, the officer had power to make assessment under section 143(3). With effect from 1-4-1989, the provisions underwent substantial and material changes. A new scheme was introduced and the new substituted section 143(1) prior to the subsequent substitution with effect from 1-6-1999, in clause (a), a provision was made that where a return was filed under section 139 or in response to a notice under section 142(1), and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was to be sent without prejudice to the provisions of section 143(2) to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued under section 156. The first proviso to section 143(1)(a) allowed the Department to make certain adjustments in the income or loss declared in the return. They were as follows :

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(a) an arithmetical error in the return, accounts and documents accompanying it were to be rectified; (b) any loss carried forward, deduction, allowance or relief which on the basis of the information available in such return, accounts or documents, was prima facie admissible, but which was not claimed in the return was to be allowed; (c) any loss carried forward, relief claimed in the return which on the basis of the information as available in such returns accounts or documents were prima facie inadmissible was to be disallowed.

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Between the period from 1-4-1989 to 31-3-1998, the second proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent to the assessee notwithstanding that no tax or refund was due from him after making such adjustments. With effect from 1-4- 1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till 1-6-1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between 1-4- 1998 and 31-5-1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word "intimation" as substituted for "assessment" that two different concepts emerged. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No. 2) Act of 1991 with effect from 1- 10-1991, and subsequently with effect from 1-6-1994, by the Finance Act, 1994, and ultimately omitted with effect from 1-6- 1999, by the Explanation as introduced by the Finance (No. 2) Act of 1991 an intimation sent to the assessee under section 143(1)(a) was deemed to be an order for the purposes of section 246 between 1-6-1994, to 31-5-1999, and under section 264 between 1- 10-1991, and 31-5-1999. It is to be noted that the expressions "intimation" and "assessment order" have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes "the computation of income", sometimes "the determination of the amount of tax payable" and sometimes "the whole procedure laid down in the Act for imposing liability upon the tax payer". In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(1)(a) as it stood prior to 1-4-1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment

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order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K. Jain J) in Apogee International Ltd. v. Union of India [1996] 220 ITR 248 (Delhi). It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgement is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any "assessment" is done by them ? The reply is an emphatic "no". The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise.

(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income

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chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year,

(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." 15. Section 147 prior to its substitution by the Direct Tax Laws (Amendment) Act, 1987, stood as follows : "147. Income escaping assessment.—If— he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanation 1.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:—

(a) where income chargeable to tax has been under assessed; or (b) where such income has been assessed at too low rate; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian Income- tax Act, 1922 (11 of 1922); or (d) where excessive loss or depreciation allowance has been computed. Explanation 2.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by

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the Assessing Officer will not neces-sarily amount to disclosure within the meaning of this section."

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Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted 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.

deal with provisions of section 68 of the Act, the assessee is

expected to offer an explanation with respect to the nature

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and source of cash credits to the satisfaction of the Assessing

Officer. For ready reference section 68 of the Act is

reproduced hereunder:-

“68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.”

2.6. As per section 68 of the Act, onus is upon the

assessee to discharge the burden so cast upon. First burden

is upon the assessee to satisfactorily explain the credit entry

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contained in his books of accounts. The burden has to be

discharged with positive material (Oceanic Products

Exporting Company vs CIT 241 ITR 497 (Kerala.). The

legislature had laid down that in the absence of satisfactory

explanation, the unexplained cash credit may be charged u/s

68 of the Act. My view is fortified by the ratio laid down in

Hon’ble Apex Court in P. Mohankala (2007)(291 ITR 278)(SC).

A close reading of section 68 and 69 of the Act makes it clear

that in the case of section 68, there should be credit entry in

the books of account whereas in the case of 69 there may not

be an entry in such books of account. The law is well settled,

the onus of proving the source of a sum, found to be

received/transacted by the assessee, is on him and where it

is not satisfactorily explained, it is open to the Revenue to

hold that it is income of the assessee and no further burden

lies on the Revenue to show that income is from any other

particular source. Where the assessee failed to prove

satisfactorily the source and nature of such credit, the

Revenue is free to make the addition. The principle laid

down in Ganpati Mudaliar (1964) 53 ITR 623/A. Govinda

Rajulu Mudaliar (34 ITR 807)(SC) and also CIT vs Durga

41 ITA No.3420/Mum/2017 Navnidhi Steel & Engg. Co. Pvt. Ltd.

Prasad More (72 ITR 807)(SC) are the landmark decisions.

The ratio laid down therein are that if the explanation of the

assessee is unsatisfactory, the amount can be treated as

income of the assessee. The ratio laid down in Daulat Ram

Rawatmal 87 ITR 349 (SC) further supports the case of the

assessee. In the case of a cash entry, it is necessary for the

assessee to prove not only the identity of the creditor but also

the capacity of the creditor and genuineness of the

transactions. The onus lies on the assessee, under the facts

available on record. A harmonious construction of section

106 of the evidence Act and section 68 of the Income Tax Act

will be that apart from establishing the identity of the

creditor, the assessee must establish the genuineness of the

transaction as well as the creditworthiness of the creditors.

In CIT vs Korlay Trading Company Ltd. 232 ITR 820 (Cal.), it

was held that mere mention of file number of creditor will not

suffice and each entry has to be explained separately by the

assessee (CIT vs R.S. Rathaore) 212 ITR 390 (Raj.). The

Hon’ble Guwahati High Court in Nemi Chandra Kothari vs

CIT (264 ITR 254)(Gau) held that transaction by cheques may

not be always sacrosanct.

42 ITA No.3420/Mum/2017 Navnidhi Steel & Engg. Co. Pvt. Ltd.

2.7. The ratio laid down in ACIT vs Rajeev Tandon 294

ITR (AT) 219 (Del.), which was confirmed by Hon’ble High

Court , in 294 ITR 488, supports the case of the Revenue.

Identical ratio was laid down in CIT vs Anil Kumar 392 ITR

552 (Del.), wherein it was held that mere identification of the

donor and movement of gift through banking channel is not

sufficient to prove the genuineness of gift. In the light of the

foregoing discussion, I found that the submissions of the

assessee were duly considered by the ld. Assessing Officer as

well as by the Ld. Commissioner of Income Tax (Appeal) and

it was found by the Ld. Assessing Officer that M/s

Mahalaxmi Gems Pvt. Ltd. is a group concern of Bhanwarlal

Jain who is providing accommodation entries to reduce profit

liability and from the bank statement from 21/09/2006 to

30/09/2006, it was found that on 25/09/2006, the closing

balance was merely Rs.51,912/- only and on 29/09/2006

there was deposit of Rs.23 lakh and Rs.2 lakh and on the

same day the advances were given to the assessee company.

From the statement, it was further found that the Mahalaxmi

Gems received commission on bogus loan amount and on

25/09/2006, there are deposits of Rs.10 lakhs and 13 lakhs

43 ITA No.3420/Mum/2017 Navnidhi Steel & Engg. Co. Pvt. Ltd.

and on the same day the amount of Rs.22,57,415 was

transferred to some other account. The totality of facts,

clearly indicates that the companies of Shri Bhanwarlal Jain

Groups are merely providing accommodation entries and no

genuine transaction is made. It is not the case that the

addition was merely made on the basis of statement rather

the bank statement itself reveals so. Therefore, the addition

was rightly treated as unexplained cash credit u/s 68 of the

Act. I find no infirmity in the conclusion drawn by the Ld.

Commissioner of Income Tax (Appeal), resultantly, the appeal

of the assessee is dismissed.

Finally, appeal of the assessee is dismissed.

This order was pronounced in the open court in the

presence of ld. representative from both sides at the

conclusion of the hearing on 04/01/2018.

Sd/- (Joginder Singh) �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 08/01/2018 f{x~{tÜ? P.S /�नजी स�चव आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent.

44 ITA No.3420/Mum/2017 Navnidhi Steel & Engg. Co. Pvt. Ltd.

आदेशानुसार/ BY ORDER, True copy

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai