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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 ..... DR and decide these appeals, on the basis of material available on record. 3.Since the issue involved in all the appeals are common and identical except variance of amount, therefore these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The grounds as well as facts narrated in ITA No.461/SRT/2019 for assessment year 2013-14, have been taken into consideration for deciding the above appeals en masse. The ground of appeal raised by the Revenue in ITA No.461/SRT/2019 are as follows: "(i) On the facts and circumstances of the assessee 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.5,78,92,000/- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble ITAT Mumbai, Delhi and Kolkata wherein, an identical circumstances & 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 27.9.2017, Fancy Wear ITA No.1596/M/2016 dtd. 20.09.2017, Suraj Jewells Co. ITA No.1581/Kol/2016 dtd 05.05.2017). The AR also furnished copies of order of CIT(A) Valsad in the case of (1) Sahajanand Export IT(A)/vls/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 no. above; the above decisions of ITAT Mumbai/Kolkata are not followed. 7.4 In view of above discussion the disallowance is restricted to 5% of the impugned purchases as under: A.Y Unverified purchases Disallowance confirmed 2008-09 Rs.47,77,994/- Rs.2,38,899/- 2013-14 Rs.5,78,92,000/- Rs.28,94,600/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enying circumstances under which statement were made by Bhanwarlal Jain and the elaborate modus-operandi unearthed by Investigation Wing, Mumbai, which has created sufficient suspicion regarding the purchase made by the assessee. The said parties are assessed with Central Circle, Mumbai where they are treated as "entry provider" and assessed accordingly. 10. The ld.CIT(A) after referring 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness 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 entire purchases shown by assessee are genuine. In without prejudice and alternative submissions, the Ld. AR for the assessee submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh 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 Hon'ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd clearly held that when assessing officer received information fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(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 Rs. 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 Rs. 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 the investigation party. Bhanwarlal Jain while filing return of income has offered commission income (entry provider). Before us, the ld CIT-DR for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer may please be deleted." 14. We have heard Ld DR for the Revenue. At the outset, we note that ground No.1 and 3 raised by assessee relate to re-opening of assessment u/s 147 of the Act. We note that Assessing Officer re-opened the assessment by issuing Notice u/s 148 of the Act. We note that function of the Assessing Authority at the stage of recording reasons is to administer the statute and what is required is a reason to believe and not to establish fact of escapement of income and therefore, looking to the scope of section 147 as also sections 148 to 152 of the Act, even if scrutiny assessment has been undertaken, if substantial new material is found in the form of information on the basis of which the assessing authority can form a belief that the income of the assessee has escaped assessment, it is always open for the Assessing Authority 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. 15. In ground No.2, the Ld. CIT(A) restricted the addition to Rs.2,38,899/- being 5% of bogus purchases. We note ..... X X X X Extracts X X X X X X X X Extracts X X X X
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