ANIL BIHANI,MUMBAI vs. ASST CIT 24(1), MUMBAI

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-51, Mumbai and arises out of the assessment completed u/s 143(3) r.w.s 147 of the Income Tax Act 1961, (the ‘Act’).

by the assessee is against the reopening made by the Assessing Officer (AO) u/s 147 of the Act.

3. Briefly stated, the facts of the case are that the assessee filed his return of income for the AY 2009-10 on 26.09.2009 declaring total income of Rs.1,59,43,597/-. The AO made the assessment u/s 143(3) determining the total income at Rs.1,60,64,520/-. Subsequently, he received information from the Director General of Income Tax (Inv.), Mumbai that the assessee had inflated the purchases by obtaining bogus bills from the hawala parties without delivery of goods. On that basis the AO reopened the assessment by issuing notice u/s 148. In appeal, the Ld. CIT(A) confirmed the reopening made by the AO.

4. Before us, the Ld. counsel of the assessee relies on the judgment of the Hon’ble Delhi High Court in PCIT vs. Meenakshi Overseas Pvt. Ltd. 395 ITR 677 and Signature Hotels Pvt. Ltd. vs. ITO 338 ITR

51. Also he relies on the order of the ITAT, Mumbai in (i) Ajay J Doshi vs. ITO in dated 31.05.2017, (ii) ITO vs. Shapoorji Pallonji & Co. in ITA No. 5766/Mum/2013 and 5567/Mum/2013 dated 10.04.2015.

5. On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A).

6. We have heard the rival submissions and perused the relevant materials on record. We begin with the decisions relied on by the Ld. counsel. In Meenakshi Overseas Pvt. Ltd. (supra), the Hon’ble High Court held:

Anil Bihani “36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment.” 6.1 In Signature Hotels Pvt. Ltd. (supra), the Hon’ble High Court held: “15. The aforesaid reasons do not satisfy the requirements of section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except the annexure, which has been quoted above. The annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. The annexure is not a pointer and does not indicate escapement of income. Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-tax (Investigation) and arrive at a belief whether or not any income had escaped assessment.” 6.2 In Ajay J Doshi (supra), the assessee-HUF earned short term capital gains, long term capital gains and also income from other sources. The AO issued notice u/s 148 for reopening the assessment Anil Bihani after a lapse of more than four years from the end of the relevant assessment year. 6.3 In Shapoorji Pallonji & Co. (supra), the Ld. CIT(A) held the reassessment proceedings initiated by the AO by issuing notice u/s 148 as invalid by opining the same in routine manner on the basis of borrowed satisfaction. The Revenue being aggrieved by the order of the Ld. CIT(A) filed appeal before the Tribunal stating that he failed to appreciate the fact that the initiation was on the basis of statement of Shri Nilesh Thakur and other materials which were contrary to the facts stated by the assessee. The ITAT upheld the order of the Ld. CIT(A).

Anil Bihani Assessing Officer on which basis the impugned notice is issued is specific. There is no ambiguity in the information which would require investigation. The information of accommodation entries has been given by a participant and this is reason enough to believe that income chargeable to tax has escaped assessment. At this stage, the Assessing Officer is not required to conclusively prove that the reasons in support of the impugned notice establish that the petitioner has taken accommodation entries. This is a matter which would be subject of further investigation during the reassessment proceedings. At that stage it would be open to the petitioner to raise all permissible defences and also to insist on cross examination of the persons who have made a statement implicating the petitioner in having participated in taking accommodation entries. However these are subject matters of investigation into adjudicatory facts and this Court would not in the present facts at the very threshold prevent the Assessing Officer from making further enquiry into a prima facie view which has been formed in the reasons indicated in support of the impugned notice ” 7.1 After examining the present factual matrix on the anvil of the aforesaid enunciation of law, we dismiss the 1st ground raised by the assessee against the reopening done by the AO u/s 148 of the Act.

8. The 2nd ground raised by the assessee in this appeal is that the Ld. CIT(A) erred in restricting the disallowance to 12.5% of the purchases of Rs.10,68,83,659/- on an estimate without any supporting evidence as unexplained expenditure u/s 69C.

9. The AO received information from the Director General of Income Tax (Inv.), Mumbai that during the year under consideration the assessee had entered into hawala transactions for purchases of Rs.10,68,83,659/- from the following parties:

Anil Bihani S. No. Name of the supplier TIN Amount (In Rs.) 1. Siddivinayak Trading 27830560491V 40,413,720 Company 2. Manav Impex 27280504194V 63,892,556 3. Savita International 27460654736V 25,77,383 Total 106883659 The AO during the course of assessment proceedings requested the assessee to produce the above parties and also to furnish copy of ledger account, invoice, delivery challan, lorry receipts, bank statement, octroi receipts, goods receipts, note on tally between sales and purchases and note on stocks. In response to it the assessee filed a written submission enclosing invoice of suppliers of goods, ledger account of the parties, proof of payments and particulars of delivery challan. The assessee failed to produce the parties though requested by the AO. The AO then deputed the Inspector of Income Tax to make enquiry and submit a report. The Inspector having carried out the enquiry reported that the above parties were not in existence at the given address and as per information the said parties never carried out business from the said address. In view of the above, the AO made a disallowance by estimating profit @ 25% on such bogus purchases of Rs.10,68,83,659/- u/s 69C. The AO disallowance thus comes to Rs.2,67,20,914/-.