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TMI Blog2022 (3) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... addition @ 6% of impugned purchases. - ITA No.293/SRT/2018 - - - Dated:- 10-3-2022 - Shri Pawan Singh, JM And Dr. A.L.Saini, AM For the Assessee : Shri Himanshu Gandhi, CA For the Revenue : Shri H. P. Meena, CIT(DR) ORDER PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to the Assessment Year (AY) 2008-09, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-3, Surat [in short the ld. CIT(A) ], in Appeal No. CAS/3/28/2016-17, dated 13.03.2018, which in turn arises out of an order passed by the Assessing Officer (AO) u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 [hereinafter referred to as the Act ], dated 11.03.2016. 2. Grounds of the appeal raised by the assessee are as follows: 1. On the facts and circumstances of the case and law, the Id. CIT(A) erred in confirming validity of reopening under section 147 of Income Tax Act, 1961 even when the Ld CIT(A) agreed to facts that various laps are on part of the Ld. AO. 2. On the facts and circumstances of the case and law, the Id. CIT(A) failed to consider that :- a) Without issuing notice in name of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne and required to be reduced. If the Ld. AO CIT(A) accepts that assessee sales to those parties are genuine, then the contention of AO CIT(A) that Rajendra Jain concerns are providing bills only will be invalid because they have accepted their purchases genuine by accepting assessee sales. 7. On the facts and circumstances of the case and law, the ld.CIT(A) erred in initiating penalty proceeding u/s 271(1)(c) of Income Tax Act, 1961. 8. Assessee craves leave to reserve right to add to, alter or amend any of the aforesaid grounds of appeal at or before the time of hearing and to produce such further evidence, documents and papers in support of claim. 3.Brief facts qua the issue are that assessee had filed its original return of income for assessment year 2008-09 on 01.07.2008 declaring total income at ₹ 1,56,390/-. On the basis of information received from the DGIT (Inv.), Mumbai, the case was reopened by issuing anotice u/s.148 dated 27.03.2015, after getting prior approval from the Addl.CIT, Range-3(3), Surat. 4. In response to notice under section 148 of the Act, the assessee, vide his letter dated 24/04/2015, informed the AO that return filed on 01.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act, 1961. It was also stated by the dummy partners/ Directors/ proprietors of the entities of this group that they are closely known and associated with the above group persons and that they were made partners/ Directors/ 'proprietors of the entities of this group at the direction of Shri Rajendra Jain /Shri Sanjay Jain / Shri Dharmichand Jain his family but the entities were managed and controlled by the latter. It was further admitted by the dummy partners/ Directors/ proprietors of the entities of this group that they were merely employees of the above groups their family and that they were looking after miscellaneous office work like depositing cheques in banks, handing over parcels to clients, making data entry, etc. On being asked about various aspects of the business of this group, the dummy partners/ Directors/ proprietors of the entities of this group, they expressed their ignorance and stated that they are engaged in the business of bill shopping through all the concerns and they do not maintain any physical stock of diamonds and that they are paid lump sum salary in cash. During the course of search, blank cheque books signed by the dummy partners / Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of concerns PAN Amount Rs. 1 AADI AHOPJ3837B 12,24,86,657/- TOTAL 12,24,86,657/- 9. The assessing officer noted that assessee was having business transaction with the various concerns are certain that the assessee had taken accommodation entries of sales shown for ₹ 12,24,86,657/- to earn unaccounted profit. These entries were over and above the regular business transaction shown by the assessee with various concerns. The only motive behind taking these entries would have been to earn higher profits which he must have earn through out of the books sales made.As the assessee has claimed that he is not engaged in any non-genuine transaction with the various concerns shown above. Thus it can be concluded that the assessee must have not shown the sales and purchases related with these non-genuine transactions in his regular books of account. Therefore, assessing officer observed that goods shown to be sold through non genuine transaction must have been purchased by some other parties to earn higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2002] 178 CTR (Raj) wherein it has been held that addition under section 68 or 69 of the Act is tenable in the case of peak credit in the accounts of bogus suppliers. He submitted that the quantum of such peak credit and retention of the addition has been decided by the Tribunal at 25% of the total bogus purchases on the basis of its earlier decision in the case of Vijay Proteins Ltd. The Tribunal in the case of Vijay Proteins Ltd. vs. CIT has observed that it would be just and proper to direct the assessing officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25% of the total purchases. The said decision was confirmed by this court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s Indian Woollen Carpet Factory (supra) or M/s Vijay Proteins Ltd. In the present case the Tribunals has categorically observed that the assessee had shown bogus purchases amounting to ₹ 2,92,93,288/- and taxing only 25% of these bogus claim goes against the principles of Section 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons are recorded as per the provisions of section 147 of the Act and there is no infirmity of the reasons recorded by the Assessing Officer, therefore reassessment proceedings initiated by the Assessing Officer should be upheld. On merits, ld DR submits that evidences made available by the Director General of Income Tax (Investigation), Mumbai, prove that entities of Shri Rajendra Jain Group, Shri Sanjay Choudhary Group and Dharmichand Jain group of Mumbai have given accommodation entries of bogus sales, during F.Y. 2007-08 to the assessee. The assessee had furnished fabricated bills, invoices and stock details, therefore these evidences should not be relied and addition sustained by ld CIT(A) may be confirmed. 14.We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld CIT(A) and other materials brought on record. We have gone through the reasons recorded by the assessing officer and observe that the issue of notice u/s148 and assumption of jurisdiction for assessment by the AO was perfectly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the decision of Tribunal in Bholanath Poly Fab Private Limited in ITA No.137/AHD/2009 dated 26.07.2011 wherein the addition was sustained to the extent of 12%. The ld CIT(A) by following the observation of order of Tribunal in Bholanath Poly fab Pvt. Ltd.(supra), the ld.CIT(A) held 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) after considering the overall facts, submissions of the assessee and evidences produced by assessee, concluded that the 100% disallowance of purchase is not justified. The ld.CIT(A) also considered the decision of jurisdictional High Court in Mayank Diamonds Pvt. Ltd. reported in [2014] 11 TMI 812 (Guj) (Tax Appeal No.200 of 2003 dated 07.11.2014). The ld.CIT(A) compared the fact of the present case, with the facts in case of Mayank Diamonds (supra) and noted that assessee in that case was also engaged in the trading of polished diamonds. The AO in said case made disallowance of entire bogus purchase. The ld.CIT(A) dismissed the appeal, however, the Tribunal gave partial relief to the assessee directing and sustained the addition @12%. And on further appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) restricted the addition to the extent of 12.5% which is on the lower side. The ld. CIT-DR for the revenue prayed that disallowance made by the AO may be upheld or in alternative submitted that it may restricted at least @ 25%, keeping in view that the NP declared by the assessee is extremely on lower side. 13. On the validity of reopening, the ld.CIT-DR for the revenue submits that the AO received credible information about the accommodation entry provided by Bhanwarlal Jain Group. The assessee is one of the beneficiaries, who had availed accommodation entries from such hawala trader. At the time of recording reasons, the mere suspicious about the accommodation entry is sufficient as held by Hon'ble jurisdictional High Court in various cases. To support his submissions, the ld.CIT-DR relied upon the decision; Pushpak Bullion (P) Ltd Vs DCIT [2017] 85 taxmann.com 84 (Gujarat High Court), Peass Industrial Engineers (P) Ltd Vs DCIT [2016] 73 taxmann.com 185 (Gujarat High Court), ITO Vs Purushttom Dass Bangur [1997} 90 Taxman 541 (SC) and Mayank Diamond Private Limited (2014) (11) TMI 812 (Gujarat High Court). AGR Investment Vs Additional Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases, 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 any comment on the documentary evidence furnished by assessee. The AO solely relied upon the statement of third party and the report of Investigation Wing. The report of wing and the statement of Bhanwarlal Jain were not provided to the assessee. The AO has not disputed the sales of assessee. No sale is possible in absence of purchase. The books of accounts were not rejected. The AO made the disallowance of entire purchases. The assessing officer not provided cross examination of the alleged hawala dealers. The disallowances sustained by the Ld. CIT(A) @ 12.5% of the impugned purchases, is on higher side and deserve to be deleted in total. The ld.AR of the assessee submits that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has escaped assessment and thus the action of AO in reopening is justified. 18. We find that the Hon ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd Vs DCIT (supra) while considering the validity of similar notice of reopening, which was also issued on the basis of information of investigation wing that they have searched a person who is engaged in providing accommodation entries, held that where after scrutiny assessment the assessing officer received information from the investigation wing that well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified in re-opening assessment. Further similar view was taken by Hon ble Jurisdictional High Court in Pushpak Bullion (P) Ltd Vs DCIT (supra). Therefore, respectfully following the order of Hon ble High Court, we find that the assessing officer validly assumed the jurisdiction for making re-opening under section 147 on the basis of information of investigation wing Mumbai. So far as other submissions of the ld AR for the assessee that there is no live link of the reasons recorded, we find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustained Gross Profit Rate @ 5% being average rate of profit in industry. 20. Now adverting to the facts of the present case, the ld.CIT(A) held that in some other similar cases; though he had sustain 5% of Gross Profit Rate, considering the fact that where Gross Profit shown by those assessee s are more than 5%. However, in the present case, the assessee has merely shown Gross Profit Rate only at 0.78% of turnover, accordingly, the ld. CIT(A) was of the view that disallowance of 12.5% of impugned purchases/bogus purchases would be reasonable to meet the end of justice. 21. We have seen that during the financial year under consideration the assessee has shown total turnover of ₹ 66,09,62,458/-. The assessee has shown Gross Profit @ .78% and net Profit @ .02% (page 11 of paper Book). The assessee while filing the return of income has declared taxable income of ₹ 1,81,840/- only. We are conscious of the facts that dispute before us is only with regard of the disputed purchases of Rs, 4.34 Crore, which was shown to have purchased from the entity managed by Bhanwarlal Jain Group. During the search action on Bhanwarlal Jain no stock of goods/ material was found to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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