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TMI Blog2023 (1) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... thority to reopen the assessment. Therefore, based on these facts and circumstances, we do not find any infirmity in the reasons recorded by Assessing Officer, hence, we dismiss ground nos.1 and 3 raised by the assessee. - ITA No. 440/SRT/2019 ITA No.441 & 461/ SRT/2019 - - - Dated:- 22-8-2022 - SHRI PAWAN SINGH , JM And DR. A. L. SAINI , AM Assessee by : None Respondent by : Shri H. P. Meena CIT - DR Shri Vinod Kumar , Sr - DR ORDER PER DR. A. L. SAINI , ACCOUNTANT MEMBER : Captioned cross-appeals filed by the assessee as well as Revenue, pertaining to assessment year 2013-14, and an another appeal filed by assessee pertaining to assessment year 2008-09 are directed against the common order passed by the Learned Commissioner of Income Tax (Appeals)-2, Surat, [ CIT(A) for short], 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 (in short the Act ). 2.None appeared on behalf of the assessee, despite service of notice through registered post with acknowledgement (RPAD) on more than one occasion, therefore, we do not have any option except to hear the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties from whom diamonds have been purchased during the yar under consideration. On verification of the same, it is found that the following concerns are belongs to Shri Gautam Jain Group and the concerns are found fictitious. The details of concerns are as under: Sr. No. Name of entry provider Amount in Rs. For AY 08-09 Amount in Rs. For A.Y 13-141 1 M/s Rajan Gems [ADVPJ5757F] 47,77,994/- 2,07,72,000/- 2 M/s Khushi Gems Pvt. Ltd. -- 3,71,20,000/- Total 47,77,994/- 5,78,92,000/- Since the purchase of diamonds from above mentioned concerns was found to be non-genuine, therefore Assessing Officer made addition to the tune of Rs.5,78,92,000/-. 6.Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before Ld. CIT(A) who has restricted the addition to 5% of bogus purchases, observing as follows: 7.3 In the instant appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein the Tribunal has disallowed @ 6% of bogus purchases, therefore, grounds of appeal raised by the Assessee as well as Revenue are covered by the Decision of the Co-ordinate Bench of this Tribunal, in the case of Pankaj K. Choudhary others (supra), wherein the Co-ordinate Bench has held as follows: 9. On merit, the ld.CIT(A) after discussing the submission of assessee held that AO has not discussed about any details of books of accounts, documents, stock register produced by assessee during the assessment. The AO neither examined nor found any defect in the document to discredit the same. The assessee has produced day to day stock register, details of purchase and sale. The purchases made during the year are sold during the year as seen from the trading account. If the impugned purchases are treated as bogus, then the stock in hand will become negative from 26.06.2006 onwards and no sale is possible in absence of purchases. The AO relied on the statement of Bhanwarlal Jain recorded by Investigation Wing against, copy of purchase bill, copy of bank statement, showing payment, day to day stock register, incoming and outgoing diamonds and daily stock tally, confirmation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t shown by assessee is 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, hence the disallowance was restricted to 12.5% of the impugned purchase. 11. Aggrieved by the order of ld. CIT(A), both the parties have filed cross appeals. The assessee has challenged the validity of reopening as well as sustaining the addition to the extent of 12.5% only. Likewise, the Revenue has assailed the order for sustaining addition to the extent of 12.5% only. We have noticed that there is typing mistake in the ground no. 2 of revenue s appeal wherein the assessing officer has mentioned the additions of 5% instead of 12.5% . 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, Mumbai made a search on Bhanwarlal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases. 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. 1 M/s Andaman Timber industries Vs Commissioner 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 Shilpi Jewellers Pvt. Ltd. vs. Union of India Ors. WRIT PETITION NO. 3540 OF 2018 (Bombay High Court) 6 CIT in Vs. Mohmed Juned Dadani 355 ITR 172 (Gujarat) 7 Micro Inks Pvt. Ltd. Vs. ACIT [2017] 79 taxmann.com 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) 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 before ld CIT(A) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions 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 case with ..... 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. 11.As, the issue is squarely covered by the decision of the Coordinate Bench, in the case of Pankaj Choudhary (supra), and there is no change in facts and law hence respectfully following the binding precedent, we dismiss assessee`s appeal and allow Revenue`s appeal partly. 12. In the result, appeal of the Revenue (in ITA No.461/SRT/2019, for A.Y. 2013- 14) is partly allowed and appeal filed by assessee (in ITA No.441/SRT/2019 for A.Y. 2013-14) is dismissed. 13. Now we shall take assessee s appeal in ITA No.440/SRT/2019 for A.Y. 2008- 09, wherein the grounds of appeal raised by the assessee are as follows: 1. On the facts and circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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