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2021 (2) TMI 473 - AT - Income TaxBogus purchases - accommodation entries of bogus purchase - additional income u/s 69C - HELD THAT - The documents relied upon by parties were not considered. The documents related to M/s. Maniprabha Impex Pvt. Ltd., M/s. Kangan Jewels Pvt. Ltd. and Dharm Impex have been produced and discussed above which were duly corroborated with the bank statement of the assessee. There is no plausible explanation that as to why the statement of Shri Dharmchand S. Jain recorded u/s 131 of the Act dated 28.11.2017 was not properly considered. This statement was specific in connection with the transactions in question. The statement of Shri Dharmchand S. Jain was considered which was general in nature and got recorded in the year of 2013. There should be cogent and convincing evidence on record to make the addition on record. When the person who sold the article have made the statement before the AO in pursuance of notice to the fact that he did not provide any accommodation entry then there should be sufficient evidence on record to decline the evidence adduced by assessee as well as by seller if any - Additions deleted - Decided in favour of assessee.
Issues Involved:
1. Validity of the Assessing Officer's jurisdiction in initiating reassessment proceedings under Section 147 of the Income Tax Act, 1961. 2. Justification of the CIT(A) in restricting the disallowance to 4% of the alleged bogus purchases. 3. Consideration of the principles of natural justice and evidentiary value of statements used in reassessment. 4. Determination of whether the entire amount of alleged bogus purchases should be added to the income of the assessee. Detailed Analysis: Issue 1: Validity of the Assessing Officer's Jurisdiction - The assessee challenged the jurisdiction of the Assessing Officer (AO) in initiating reassessment proceedings under Section 147 of the Income Tax Act, 1961. The assessee argued that the conditions for initiating reassessment were not fulfilled. - The AO reopened the assessment based on information from the DGIT(Inv.), Mumbai, indicating that the assessee had taken accommodation entries for bogus purchases from the Rajendra Jain Group. - The Tribunal found that the reopening of the assessment was justified as credible information was received from the DGIT(Inv.), Mumbai, regarding the assessee's involvement in bogus purchase transactions. Issue 2: Justification of CIT(A) in Restricting Disallowance to 4% - The revenue contested the CIT(A)'s decision to restrict the disallowance to 4% of the alleged bogus purchases amounting to ?3,50,49,136, arguing that the entire amount should be disallowed. - The CIT(A) had restricted the disallowance based on the statement of Shri Dharmchand S. Jain, who retracted his earlier statement admitting to providing accommodation entries. - The Tribunal noted that the CIT(A) relied on the retracted statement and other corroborative evidence provided by the assessee, such as Income Tax Returns (ITR), purchase invoices, account confirmations, and bank statements, which supported the genuineness of the transactions. - The Tribunal concluded that the CIT(A)'s decision to restrict the disallowance to 4% was not justifiable and set aside the CIT(A)'s finding, deleting the entire addition. Issue 3: Principles of Natural Justice and Evidentiary Value - The assessee argued that the principles of natural justice were violated as the AO relied on a general statement with lesser evidentiary value than the specific statement provided during reassessment proceedings. - The Tribunal observed that the AO relied on the statement of Shri Dharmchand S. Jain recorded during the search action on 05.10.2013, which was later retracted. - The Tribunal emphasized that there should be cogent and convincing evidence to make an addition, and the retracted statement alone was insufficient. - The Tribunal found that the AO did not properly consider the specific statement recorded on 28.11.2017, in which Shri Dharmchand S. Jain confirmed genuine business transactions with the assessee. Issue 4: Determination of the Entire Amount as Income - The revenue argued that the entire amount of ?3,50,49,136 should be added to the income of the assessee as bogus purchases. - The assessee contended that no addition was required, supported by documentary evidence and the retraction of the statement by Shri Dharmchand S. Jain. - The Tribunal considered the corroborative evidence provided by the assessee, including bank statements and affidavits, which indicated genuine transactions. - The Tribunal concluded that there was no plausible explanation to disregard the corroborative evidence, and therefore, deleted the entire addition. Conclusion: - The Tribunal dismissed the revenue's appeal and allowed the assessee's cross-objection, setting aside the CIT(A)'s finding and deleting the entire addition of ?3,50,49,136. - The same reasoning and decision were applied to a similar case (ITA. No.3764/M/2019 & C.O. NO.54/M/2020), leading to the dismissal of the revenue's appeal and allowance of the assessee's cross-objection. Order Pronounced: - The order was pronounced in the open court on 11/02/2021.
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