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TMI Blog2022 (1) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... f from the examination he makes or from any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he has reason to believe that such income had escaped assessment. The justification for his belief is not to be judged from the standards of proof required for coming to a final decision. A belief though justified for the purpose of initiation of the proceedings under section 147, may ultimately stand altered after the hearing and while reaching the conclusion on the basis of the intervening enquiry. At the stage where he finds a cause or justification to believe that such income has escaped assessment, the Assessing Officer is not required to base his belief on any final adjudication of the matter. Therefore, we find merit in the submission of the Ld. D.R. that there is no any infirmity in the reasons recorded by the Assessing Officer. In assessee s case, the reassessment proceedings under section 147 of the Act were initiated after four years from the end of the assessment year 2007-08; and the assessee has disclosed fully and truly all material facts during the original assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Captioned six appeals filed by the Assessee and Revenue pertaining to assessment years 2007-08, 2008-09 and 2013-14, are directed against the order passed by the Learned Commissioner of Income Tax (Appeals) [in short ld.CIT(A) ], which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961, (hereinafter referred to as the Act ). 2. Since, the issues involved in all the appeals of Assessee and Revenue are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 1239/Ahd/2017 for assessment Year 2007-08, have been taken into consideration for deciding the above appeals en masse. 3. The grounds of appeal raised by the assessee in lead case in ITA No. 1239/Ahd/2017 for AY.2007-08 are as follows: 1. On the facts and in the circumstances of the case as well as on the subject, the ld. Commissioner of income Tax (Appeals) has erred in confirming the action of assessing officer in reopening assessment by issuing notice u/s 148 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be stated quite shortly are as follows: The assessee-firm had field its return of income for assessment year 2007-08 on 27.10.2007, declaring total income to the tune of ₹ 3,56,16,407/-. The case of assessee-firm was not scrutinized earlier years. Therefore, assessing officer reopened the assessment under section 147 of the Act. After recording reasons for initiating proceeding under section 147 of the Act, a notice under section 148 of the Act has been issued on 28.03.2014 and served upon the assessee. Further notices under section 143(2) was issued on 12.06.2014 and duly served upon the assessee. The reasons so recorded were communicated to the assessee, vide assessing officer letter no.F. No. SRT/ACIT/CIR-0/AE/2014-15 dated 02.06.2014. 6. In response to the notices issued under sections 148/143(2)/142(1), the assessee, vide his letter darted 08.04.2014, stated that the return of income filed under section 139(1) of the Act, by the assessee-firm, may be treated as return of income filed in response to notice under section 148 of the Act for assessment year 2007-08. In this case, a letter bearing No. DGIT(Inv)- II/Information/Diamond/2013-14 dated 14.03.2014, alongwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , blank cheque books signed by the dummy partners/ Directors/ proprietors of the entities of this group were also found, which were seized. Similarly, books of account in the name of the dummy partners/ Directors/ proprietors of the entities of this group were also found, which were also seized. 7. According to the regular books of accounts and the returns of income filed by different entities of the group, the business of these entities are disclosed to be trading of rough and finished diamonds and manufacturing of diamond jewellery. However, no stock of diamond was found from any of the premises searched or surveyed. The statements of all the persons recorded during the course of search revealed that this group was engaged in giving accommodation entries and this fact has also been admitted by the employees, the dummy partners/dummy directors/dummy proprietors of the entities of this group as also by Shri. Rajendra Jain Group, Shri Sanjay Choudhari Group and Dharmichand Jain Group of Mumbai. The investigations made by the investigation wing revealed that actual importers of rough diamonds import part of their diamond requirement through benami entities operated by Shri Rajen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,86,565/- 89,99,328/- 2013-14 7,80,47,828/- 39,02,390/- 10. Learned DR for the Revenue pointed out that there is a typographical error in the order of the Ld. CIT(A) in the A.Y. 2007-08. The ld CIT(A) has upheld the addition @ 5% of ₹ 2,11,90,740/- which is wrong, and it should be 5% of ₹ 8,47,62,961/-. Besides, for assessment year 2008-09, the ld CIT(A) corrected the figure of unverifiable purchases from ₹ 25,24,67,233/- to ₹ 17,99,86,565/-. The findings of ld CIT(A) are as follows: 10.9 Another matter of dispute is the quantum of purchases from the suspicious parties in the A 2008-09.The ld. AO has given the figure at ₹ 25,24,67,233/- whereas the assessee pointed out before the ld. AO that the purchases from the parties is ₹ 17,99,86,565/-. The assessee filed account confirmations alongwith copies of bills and affidavits of parties. The ld. AO has not examined this issue. Without any finding and without any discussion, the ld. AO adopted the purchases figure of ₹ 25,24,67,233/-. I have examined the details and I find the purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l manner. Besides, during the assessment stage, purchase bills and sales bills were submitted and assessing officer did not doubt the sales therefore purchases made by the assessee should be accepted, and hence the addition sustained by the ld CIT(A) should be deleted. 15. On the other hand, Shri H.P. Meena, CIT- DR and Ms. Anupama Singla, Sr. DR for the Revenue, vehemently argued stating that order passed by the assessing officer is just and proper and the same should be upheld. They further argued that decision of Ld. CIT(A) is not acceptable because of the following reasons. Their arguments are summarised as follows: (a) Shri Rajendra Jain Group, Shri Sanjay Chaudhary Group and Shri Dharmichand Jain Group person during the course of search and seizure have accepted that they are indulged in providing bogus entry of loan/advances/purchase through paper entities actually having no business activity. (b) The facts of the case law mentioned by the CIT(A) i.e.M/s Mayank Diamonds Pvt.Ltd., is different from the facts of the assessee as the issue involved in the case of the assessee is of disallowance whereas in the case of M/s Mayank Diamonds Pvt.Ltd., the issue is esti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of the assessee exceeding ₹ 1,00,000/- has escaped assessment within the meaning of section 147 of the income-tax act, due to the failure on the part of the assessee to disclosed truly all material facts necessary for his assessment. Sd/- (SWAPNIL S. PATIL) Asst. Commissioner of Income-tax Circle-9, Surat 18. After going through the reasons recorded, we note that there is no infirmity in the reasons recorded by the assessing officer, the assessing officer after getting the information from the Investigation Wing, Mumbai has applied his mind and recorded the reasons. Section 147 of the Act authorizes and permits an Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that the said income for any assessment year has escaped assessment. The expression 'escaped assessment' clearly connotes a very basic postulate that the income for a particular assessment year went unnoticed by the Assessing Officer and because of it not being noticed by him for any reason, it escaped assessment. The meaning of the expression 'escaped assessment' is so simple and straight that it does not leave anyone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee did not submit books of accounts and other documents. We have gone through the paper book submitted by Ld. Counsel and observed that assessee has submitted only confirmation, ITR and bank statement; however books of accounts were not submitted before Assessing Officer. Moreover, the reasons recorded by the Assessing Officer are in accordance with law. Therefore, assessee cannot take the benefit of first proviso to section 147 of the Act. Hence, we dismiss the grounds raised by the assessee challenging the reopening of assessment under section 147 of the Act for both assessment years, 2007-08 and 2008-09. 19. We note that so far merit is concerned, the issue is squarely covered by the judgment of the Coordinate Bench in the case of Pankaj K. Choudhary, in ITA No.1152/AHD/2017 (AY 2007-08), order dated 27.09.2021, wherein the Coordinate Bench held as follows: 12. We have heard the submission of ld.CIT-DR for the Revenue and the ld. Authorised Representative (AR) of the assessee. We have also gone through the various documentary evidences furnished by assessee. The ld. CIT-DR for the Revenue supported the order of AO. The ld. CIT-DR submits that Investigation Wing, Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of 12.50% of the alleged bogus purchases. The ld.AR of the assessee submits during the assessment, the AO has not made any independent investigation. The AO reopened the case of the assessee on the basis of third party information without making any preliminary investigation. The AO received vague information about providing accommodation entry by Bhanwarlal Jain Group. No specific information about the accommodation entry obtained by assessee was received by AO. There is no live link between the reasons recorded qua the assessee. Therefore, the re-opening is invalid and all subsequent action is liable to be set aside. 15. On account of additions of bogus purchases, the ld.AR submits that in the original assessment, the assessee filed its complete details of purchases to prove the genuineness of expenses. The AO accepted the same in the assessment order passed under section 143(3) on 10.03.2009. During re-assessment, the assessee again furnished complete details about the genuineness of purchases. The assessee filed confirmation purchases invoices, accounts of the parties, bank statement of assessee showing transaction to the banking channel. The AO has not made an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Gujarat High Court in Mayank Diamond Private Limited (supra) is directly applicable on the facts of the present case. 17. We have considered the submissions of the parties and have gone through the order of the lower authorities. We have also deliberated on each and every case laws relied by both the parties. We have also examined the financial statement of all the assessee(s) consisting of computation of income and audit report. We have also gone through the documentary evidences furnished in all cases. Ground No.1 in assessee s appeal relates to the validity of reopening. The ld AR for the assessee vehemently argued that the AO reopened the case of the assessee on the basis of third party information, and without making any preliminary investigation, which was vague about the alleged accommodation entry by Bhanwarlal Jain Group. And that there was no specific information about the accommodation entry availed by the assessee. There is no live link between the reasons recorded qua the assessee. We find that the assessee has raised objection against the validity of the reopening before the AO. The objections of the assessee was duly disposed by AO in his order dated 09.02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der namely Bhanwarlal Jain. We find that the AO while making additions of 100%, of disputed purchases solely relied on the report of the investigation wing Mumbai. No independent investigation was carried by the AO. The AO has not disputed the sale of the assessee. The AO made no comment on the evidences furnished by the assessee. We further find that ld CIT(A), while considering the submissions of the assessee accepted the lapses on the part of the AO and noted that no sale is possible in absence of purchases. The Books of the assessee was not rejected by the AO. The ld CIT(A) on further examination of the facts and various legal submissions find that Ahmedabad Tribunal in Bholanath Poly Fab Private Limited (supra) held that in the such cases the addition of bogus purchases was sustained to the extent of 12%, on the observation that the assessee may have made purchases from elsewhere and obtained the bills from impugned supplier to inflate Gross Profit Rate. The ld CIT(A) by considering the overall facts, concluded that the 100% disallowance of purchase is not justified. We also find that the ld.CIT(A) also considered the decision of jurisdictional High Court in Mayank Diamonds Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclared the GP @ 0.78%. It is settled law that under Income-tax, the tax authorities are not entitled to tax the entire transaction, but only the income component of the disputed transaction, to prevent the possibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @ 6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage. In the result the ground No. 2 of appeal raised by the assessee is partly allowed and the grounds of appeal raised by revenue are dismissed. 22. In the result the appeal of revenue is dismissed and the appeal of the assessee is partly allowed. 20. We see no reasons to take any other view of the matter than the view so taken by the Coordinate Bench of this Tribunal in the case Pankaj K. Choudhary (supra), vide order dated 27.09.2021. As the issue is squarely covered by the decision of the coordinate bench, and there is no change in facts and law and the Ld. Counsel is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra). We find no reason to interfere in the said ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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