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TMI Blog2022 (12) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... imit prescribed by the CBDT Circular No.17/2019 dated 08.08.2019. Therefore, due to low tax effect, the appeal of the Revenue should be dismissed. 4. On the other hand, Learned Departmental Representative (Ld. DR) for the Revenue fairly agreed that due to low tax effect, the appeal of the Revenue may be dismissed. 5. The CBDT has issued Circular No. 17/2019 dated 08.08.2019, whereby the monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal and High Courts and SLP before Supreme Court have been increased as measure for reducing Litigation. The revised monetary limits laid down in para-2 of this Circular are as follows: 1. Before Appellate Tribunal Rs.50,00,000/- 2. Before High Court Rs.1,00,00,000/- 3. Before Supreme Court Rs.2,00,00,000/- 6. In the present case, that is, the tax effect in the Revenue's appeal is less than Rs.50,00,000/-. Though this appeal had been filed by the Revenue on 28/02/2019 and was within the monetary limit in the form of tax effect for filing appeals before Tribunal, however, in view of the recent Circular of CBDT, even such appeals will be governed by the new monetary limits laid down in the CBDT Circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before us that addition restricted by the ld CIT(A) at the rate of 5% of bogus purchases at Rs.4,27,264/- should also be deleted. We have dismissed the Revenue`s appeal for the same assessment year 2008-09 on account of low tax effect. However, assessee is in appeal before us against the addition sustained by ld CIT(A) at the rate of 5% of bogus purchases at Rs.4,27,264/-. Therefore, first we shall adjudicate ground no. 1, raised by the assessee, wherein the assessee has challenged the validity of reopening of assessment under section 147 of the Act. 11. Brief facts qua the issue are that the assessee has filed original return of income for AY.2008-09 declaring total income at Rs.2,32,590/- on 26.09.2008 The assessment was finalized u/s. 143(3) on 24.08.2010 determining the total income at Rs 2,99,980/-. In this case, an information was received by the office of the undersigned from the DIT (Inv). Mumbai that assessee was one of the beneficiaries of bogus purchase bills provided by Shri Rajendra Jam, Shri Sanjay Chaudhary and Dharmichand Jain Group during the previous year relevant to assessment year under consideration. Accordingly, it was construed that the income to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, operating solely with the purpose of facilitation of fraudulent financial transactions which includes providing accommodation entries in the form of unsecured loans to the interested parties, issuing of bogus sale / purchase bills to various parties etc. During the course of search and seizure action in the case of Shri Rajendra Jam, Shri Sanjay Chaudhary and Dharmichand 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, Shri Sanjay Chaudhary and Dharmichand Jain & 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, Shri Sanjay Chaudhary and Dharmichand Jain & Others reveals that Shri Rajendra Jain, Shri Sanjay Chaudhary and Dharmichand Jain and associates manage, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup concerns operated and managed by Shri Rajendra Jain, Shri Sanjay Chaudhary and Dharmichand Jain & others was obtained from him. It must be mentioned at the outset, that all these group concerns were shown to be in the business of import and export of diamonds. All of them have license which make them eligible for importing diamonds. Further, data collected from customs department had revealed that all the said group concerns have genuinely been importing diamonds for last many years. The imported diamonds were also getting cleared by the CHAs. It prima facie gives an impression that all the group benami concerns were indeed in the business of import of diamond and its subsequent exports (which is a miniscule amount; and local sale. However, many evidences were found during the course of search which proved that these concerns were not into any genuine business. Such findings are enumerated below: (i) No Stock of diamond found: During the course of search, all the registered offices, business premises, business and residential premises of various dummy directors, partners and proprietors including that of Pravin Kumar Jain, and were covered. At none of these premises, any stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized above clearly established the bogus nature of the transactions entered into by the Shri Rajendra Jain, Shri Sanjay Chaudhary and Dharmichand Jain Group, it also establishes that forming of basis for reopening of the case was substantive and not based on mere belief. The Investigation Wing has carried out thorough Investigation and established beyond doubt that the transactions arc bogus. 15. In response to the notice issue by the Assessing Officer, the assessee submitted its reply before the assessing officer, vide letter dated 01.07.2015, wherein assessee requested to treat the original return of income filed on 23.03.2008, as return of income filed in response to notice u/s 148 of the Act. The notice u/s 143(2) of the Act, dated 15.12.2015 was issued and served upon the assessee. The notice u/s 142(1) was also issued by AO along with the detailed questionnaire to the assessee calling for various details clarifications etc. 16. In response to the notices issued, the assessee has filed the details and submissions before the assessing officer. However, assessing officer has rejected the contention of the assessee and held that assessee had obtained the bogus bill to the tune ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission of the parties and perusing the judicial decisions relied upon by the Ld. Counsel. We have gone through the reasons recorded by the assessing officer and noted that not only there existed new information with the AO from the credible sources, but also that he has applied has mind and recorded the conclusion that the purchases claimed were nongenuine and therefore bogus, (clearly meaning that what was disclosed was false and untruthful). The Hon'ble Supreme Court in the case of Phul Chand BajrangLal and another vs. ITO 203 ITR 456, was considering the question of reassessment beyond the period of four years in the case of an assessee firm; and had held that in case of acquiring fresh information specific in nature and reliable, relating to the concluded assessment, which went to falsify the statement made by the assessee at the time of original assessment and, therefore, he would be permitted under the law to draw fresh inference from such facts and material. The Court also went to an extent of saying that there are two distinct and different situations where the transaction itself, on the basis of subsequent information is found to be bogus transaction and in such eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied. As observed earlier not only there existed new information with the AO from the credible sources, but also he had applied his mind and recorded the conclusion that the purchases claimed were non-genuine and therefore bogus, (clearly meaning that what was disclosed was false and untruthful). The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening is held justified and legal. Therefore, we dismiss ground no.1 and 3 raised by the assessee. 23. Coming to ground no. 2 raised by the assessee, which is on merit, we note that Co-ordinate Bench of this Tribunal has taken a view in the case of Pankaj K. Chaudhary, in ITA No.1152/AHD/2047, dated 27.09.2021 that addition at the rate of 6% on bogus purchases is fair and sufficient. The findings of the Coordinate Bench are given below: "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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate 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 09.02.2015. The assessee raised ground of appeal befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king 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 Pvt. Ltd. (supra) and compared the fact of the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 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." 24. We notice that the issue is squarely covered by the decision of the Coordinate Bench of Surat in the case of Pankaj K. Choudhary (supra) and there is no change in facts and law, therefore respectfully following the binding precedent, we direct the Assessing Officer to sustain the addition at the rate of 6% of bogus purchases. 25. In the result, appeal filed by the Revenue (ITA No. 121/SRT/2019) is dismissed, and appeal filed by the Assessee (ITA No. 107/SRT/2019) is dismissed. Registry is directed to place one copy of this order in all appeals folder / ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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