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TMI Blog2022 (10) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... to consideration for deciding these appeals en masse. The grounds of appeal raised by the Revenue as per lead case in ITA No. 462/SRT/2020 are as follows: "(i) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in restricting the addition made by the AO to the extent of 5% of entire purchase i.e. Rs.87,92,67,245/- on account of bogus purchase. (ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has failed to appreciate the fact that the entire purchase from alleged concerns was bogus and it was only to suppress the profit of the beneficiaries which has been duly substantiated by the statement on oath given by the entry provider. (iii) On the facts and circumstances of the case and in Law, the Ld. CIT(A), Surat ought to have upheld the order f the Assessing Officer. It is, therefore, prayed that the order of the Ld. CIT(A)-1, Surat may be set-aside and that of the Assessing Officer's order may be restored." 4. Brief facts qua the issue are that during the year under consideration, the assessee was engaged in the business of Import, export, trading in all kinds of diamonds in the name and style of his proprietary concern viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the search and seizure action, it was conclusively proved that these diamond concerns are only on paper base with no real business activities. Findings of the search action on Shri Rajendra Jain reveals that Shri Rajendra Jain and associates manage, control and operate numerous concerns in the name of various persons who are shown as name-sake directors, partners and proprietors through which they provide accommodation entries of loans and advances, purchase and sale & unsecured loans to various parties / beneficiaries. The name-sake / dummy Directors / proprietors / Partner of all these concerns admitted on oath that they were merely employees of Shri Rajendra Jain, looking after miscellaneous office work like depositing cheques in banks, handling over parcels to clients, making data entry. All the concerns are shown to be engaged in import of diamonds. However, when these namesake directors / Partners/ Proprietors were specifically asked to explain as to how they contacted the parties from whom the imports have been made in the respective concerns, they were unable to comment on the same. They all admitted not having any personal contact with any of the importers either throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted search & seizure action in the case of Group concerns of Shri Rajendra Jain and conclusively proved that these parties are engaged in the business of providing accommodation entries only, as can be clearly seen from the discussions in the above paragraphs. The parties are issuing bills without delivering any goods and services. (ii) Evidently, the assessee had adopted a modus operandi to reduce its true profits by inflating its expenses including purchase expenses by taking accommodation entries from such parties. (iii) Thus, in the books of accounts of the assessee, the purchases to the extent made from the above said parties remained unverifiable and hence undersigned arrived at a conclusion that the purchases shown by the assessee in the books of accounts are initiated and bogus purchases are debited to trading account to suppress the true profits to be disclosed to the Department. (iv) The onus was upon the assessee to establish the genuineness of purchases made by the assessee. 6. Thus, from the above analysis of the facts, the Assessing Officer noted that it is crystal clear that the purchases made by the assessee from the above parties and claimed as expenses i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ITAT Mumbai/ Kolkata are not followed. 8.3 In view of above discussion the disallowance, is restricted to 5% of the impugned purchases as under: A.Y. Unverified purchases Disallowance confirmed 2013-14 Rs.87,92,67,245/- Rs.4,39,63,362/- 2014-15 Rs.7,70,75,906/- Rs.38,53,795/- 2015-16 Rs.7,43,20,222/- Rs.37,16,010/- Hence, this ground for both the above years is partly allowed." 8. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us and assessee also filed cross appeals before us. 9. The Learned Departmental Representative (Ld. DR) for the Revenue submitted that it is a case of Rajendra Jain companies which is involved in bogus purchases. Since, all the purchases are bogus, therefore, additions made by the Assessing Officer should be upheld. 10. On the other hand, Ld. Counsel for the assessee submitted bills, vouchers, stock statements and transactions were through banking channels, therefore, the additions sustained by the ld. CIT(A), at the rate of 5% of bogus purchase which should also be deleted. 11. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Commissioner 197 Taxman 177 (Delhi) and * Chuharmal Vs CIT [1998] 38 Taxman 190 (SC). 14. On the other hand, the ld.AR of the assessee submits that he has challenged the validity of reopening as well as restricting the addition to the 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 provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. Vs. ACIT [2017] 79 taxmann.com 153 (Gujarat) 8 Shakti Karnawat Vs. ITO - 2(3)(8), Surat ITA 1504/Ahd/2017 and 1381/Ahd/2017 9 Asian Paints Ltd. Vs. DCIT, [2008] 296 ITR 90 (Bombay) 10 PCIT, Surat 1 Vs. Tejua Rohit kumar Kapadia [2018] 94 taxmann.com 325 (SC) 11 The PCIT-17 vs. M/s Mohommad Haji Adam & Co. ITA NO. 1004 OF 2016(Bombay High Court) 12 Pankaj Kanwarlal Jain HUF Vs. ITO 2(3)(8) Surat ITA.No.269/SRT/2017 16. In the rejoinder submissions the ld. CIT-DR for the revenue submits that that rigour of the rules of evidence contained in the Evidence Act is not applicable before the tax authorities. It was submitted that the ratio of various case laws relied by the ld. AR for the assessee is not applicable on the facts of the present cases. The ratio of decision of Hon'ble 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) consis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 Hon'ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd clearly held that when assessing officer received information from the investigation wing that two well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified. Hence, the ground No. 1 in assessee's appeal is dismissed. 19. Ground No. 2 in assessee's appeal and the grounds of appeal raised by the revenue are interconnected, which relates to restricting the disallowance of bogus purchases to the extent of 12.5%. The AO made of 100% of purchases shown from the hawala dealers/ entry provider 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhanwarlal Jain Group. During the search action on Bhanwarlal Jain no stock of goods/ material was found to the investigation party. Bhanwarlal Jain while filing return of income has offered commission income (entry provider). Before us, the ld CIT-DR for the revenue vehemently submitted that the ratio of decision of Hon'ble Gujarat High Court in Mayank Diamond Private Limited (supra) is directly applicable on the facts of the present case. We find that in Mayank Diamonds the Hon'ble High Court restricted the additions to 5% of GP. We have seen that in Mayank Diamonds P Ltd (supra), the assessee had declared GP @ 1.03% on turnover of Rs. 1.86 Crore. The disputed transaction in the said case was Rs. 1.68 Crore. However, in the present case the assessee has declared 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 ..... 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