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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 ..... der section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. Since, the issue involved in all these appeals, are common and identical, therefore, these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 3. The facts as well as grounds of appeals raised by the Revenue in ITA No. 462/SRT/2020 for AY.2013-14 have been taken into 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shri Rajendra Jain Group of cases on 03.10.2013 by the DGIT (Inv.), Mumbai, it was found that there are name-sake dummy directors / partners / proprietors /brokers, etc. These concerns were being actually managed by Shri Rajendra Jain Group others. These group concerns were believed to be concerns actively involved in providing non-genuine purchase bills and also unsecured loan accommodation entries to various interested parties. As a result 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 ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Kangan Jewels Pvt. Ltd. 45,17,47,666/- 3,91,71,6451- 7,43,20,222/- 3. Maniprabha Impex Pvt. Ltd. 41,97,27,766/- 3,69,10,261/- -- Total 87,92,67,245/- 7,70,75,906/- 7,43,20,222/- In view of the above findings that the assessee received accommodation entries from the Shri Rajendra Jain Group, a show cause notice was issued. The assessee has furnished the reply but not found to be forceful and convincing by Assessing Officer. The material available on record have been carefully perused and considered. From the above discussions, the following facts emerge: (i) The Income Tax Department has conducted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances 85 factual matrix involving the same accommodation entry providers the entire disallowance made by Ld. AO was deleted (Sanghvi Export International Ltd. ITA No. 3305, 3375/Mum/2017 dt 21.08.2018, Karamchandra Rubber Industries ITA No.6599/Del/2014 12.02.2018 M/s Vaman International Pvt. ITA 1040 1041/M/2017 dtd 27.09.2017, Fancy wear ITA No. 1596/M/2016 dtd. 20.09.2017, Suraj Jewells Co. ITA No. 1581/Ko/2016 dtd 05.05.2017). The AR also furnished copies of order of CIT(A) Valsad in the case of (1) Sahjanand Export CIT(A)/vls/236/2016-17dtd. 24.08.2017, (2) Rushabh International No. CIT(A)/vis/102/2016-17 dt. 14.02.2018, which in the disallowances is restricted to 2% of impugned purchases. However, since I have already taken a view of disallowing 5% of purchases and since it is confirmed by Hon'ble jurisdictional ITAT, Surat Bench as discussed in para above; the above decisions of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is one of the beneficiaries of such accommodation entries. In the transaction of accommodation entries, the documentary evidences are created in such a way, so that the bogus transaction is looks like genuine transaction. In bogus transaction, the fabricated evidences are always maintained perfectly. The assessee has obtained accommodation entry only to inflate the expenses and to reduce the ultimate profit. No stocks of diamonds were found at the time of search on Bhanwarlal Jain Group. The assessee has shown a very meagre gross profit (GP) @ 0.78% and not net profit (NP) at 0.02%. The ld. CIT(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 hawal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 entire purchases shown by assessee are genuine. In without prejudice and alternative submissions, the Ld. AR for the assessee submits that in alternative submission, the disallowance may be sustained on reasonable basis. To support his various submission, the ld.AR for the assessee is relied upon case laws: 1 M/s Andaman Timber industries VsCommissioner of Central Excise, CIVIL APPEAL NO. 4228 OF 2006 (Supreme Court) 2 CIT vs. Indrajit Singh Suri [2013] 33 taxmann.com 281 (Gujarat) 3 Albers Diamonds Pvt. Ltd. Vs ITO 1(1)(1), Surat I.T.A. No.776 1180/AHD/2017 4 The PCIT-5 vs. M/s. Shodiman Investments Pvt. Ltd. TTANO. 1297 OF 2015 (Bombay High Court) 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The objections of the assessee was duly disposed by AO in his order dated 09.02.2015. The assessee raised ground of appeal before ld CIT(A) while assailing the order of AO on reopening. The ld CIT(A) while considering the ground of appeal against the reopening held that the AO has received report from investigation wing Mumbai, which indicate that the assessee is beneficiary of the accommodation entry operators. The accommodation entry provider admitted before investigation wing that he has given such entry to various persons; based on such report the AO has reason to believe that the income of the 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o considered the decision of jurisdictional High Court in Mayank Diamonds Pvt. Ltd. (supra) and compared the fact of the present case with the facts in Mayank Diamonds Pvt Ltd (supra) and noted that assessee in that case was also engaged in the trading of polished diamonds. The ld CIT(A) noted that in that case the AO made disallowance of entire bogus purchase and on first appeal before CIT(A) the disallowances were maintained. However, the Tribunal gave partial relief to the assessee directing to sustain the addition @12% of such bogus purchases. And on further appeal, the Hon'ble High Court sustained 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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