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TMI Blog2023 (2) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) in confirming the reopening of the case by the A.O. accordingly, Ground No. 1 is dismissed. Bogus purchases - Assessee was unable to establish the authenticity and genuineness of purchase made from M/s Avi Export and Mauli implex Pvt. Ltd. and M/s Vitraj Jewelers, the assessee was also unable to controvert the admission of one Sh. Rajender Jain made during the course of search, wherein it was admitted by Shri Rajendra Jain was engaged in providing accommodation entries to interested parties through a network of concerns including Vitrag Jewellers, Moulimani and Avi Export further the claim that the purchases were reflected in the purchase ledger was not established and the claim of the assessee that purchases were subsequently sold to parties also could not be proved before the Lower Authorities. Therefore, we do not find any error or infirmity in the assessment order and the order of the Ld.CIT(A) in confirming the assessment order. Accordingly, Ground No. 2 and its sub grounds are dismissed. - I.T.A. No. 8561/DEL/2019 - - - Dated:- 10-2-2023 - Shri Anil Chaturvedi, Accountant Member And Shri Yogesh Kumar U.S, Judicial Member For the Assessee : None For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal the submissions made before her, hugely relying upon this statement, but this statement retracted by him subsequently, stating that the statement earlier was given because of the Coercions pressures by search team, the circumstances under which the statement was given by him, but the ld. CIT(A) did not considered the facts upheld the addition. (d) The ld. CIT(A) has also erred in upholding the addition, in spite of the fact that having regards the documents,. it has been mentioned that addition based on the statement of the party, no addition could have been made, had he proved that while recording statement at the time of search, if it is proved that there was coercions pressure on him, the statement of retraction shows that there have been coercions pressures on him, but inspite of the fact, the additions were confirmed. (e) That inspite of the request from the appellant before the Ld.AO and Ld. CIT(A), the opportunity of cross examination of the person, whose statement was relied for making additions, was not provided thereby denying the natural justice to the appellant. 3. Brief facts of the case are that, return of income filed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f search operation carried out on 03.10.2013 by Investigation Wing Mumbai, Shri Rajendra Jain, admitted during the course of a statement recorded on oath that all the concerns controlled and managed by him and his associates are not doing any real trading but indulged in paper transactions only. The AO ascertained that during the relevant assessment year, the assessee was a beneficiary of purchase accommodation entries of Rs 27,62,913/- from M/s Vitrag Jewellers, Rs 3,37,750/- from M/s Moulimani Impex (P) Ltd and Rs 31,11,461/- from Avi Exports (aggregating to Rs 62,12,124/-) by way of purchase of diamonds. The AO also ascertained that no scrutiny had been made in this case. On the basis of the information so received and after ascertaining the extent of purchase made from front companies of Rajendra Jain group, the AO formed a prima facie belief that income to that extent had escaped assessment. The AO accordingly, initiated re-assessment proceedings. The AO recorded reasons for reopening the assessment, and after seeking and being accorded approval by the competent authority, issued and served notice u/s 148 of the Income Tax Act. It is, thus clear that there was failure on the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble Delhi High Court in the case of Indu Lata Ranqwala Vs DCIT 384 ITR 337 (Delhi) wherein the court held that where the initial return is processed u/s 143(1), there is no necessity of even fresh tangible material. The Court held as under: where initial return of income is processed under section 143(1), it is not necessary in such a case for Assessing Officer to come across some fresh tangible material to form 'reasons to believe' that income has escaped assessment It has been similarly held by Gujrat High Court in the case of CIT Vs Kiranbhai Jamnadas Sheth (HUF) [2013] 39 taxmann.com 116 (Gujarat) where Hon'ble Gujarat High Court held that: Assessment without scrutiny would mandate reassessment beyond 4 years even if assessee made true disclosure In the light of the clear enunciation of principles that no tangible material is required for re-opening case if the case has been processed under sectio- 143(1) but no scrutiny assessment has been made, the claim of the appellant in this regard is rejected as having no legal locus standi. That is not to say that there was no targible information-. There was definite and tangible information which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-opening. Here, it would be appropriate to examine the stance of the Apex Court on this issue. In the case of Yogendra kumar Gupta Vs ITO (51 taxmann.com 383) (SC)/[2014] 2.27 Taxman 374 (SC), the Hon'ble Supreme Court held that: where subsequent to completion of original assessment, Assessing Officer, or basis of search carried out in case of another person, came to know that loan transactions of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee. The Hon'ble Gujrat High Court similarly held in the case Ankit Financial Services Ltd. Vs DCIT [2017] 78 taxmann.com 58 (Gujarat) that: where material recovered in search of another person indicated that assessee had received bogus share applications through accommodation entries, since assessee was beneficiary, initiation of re-opening was justified. In the case of PCIT Vs Paramount Communication (P.) Ltd. (2017- TIOL- 253-SC-IT) the Hon'ble Supreme Court dismissed SLP of assessee and held that: Information regarding bogus purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scaped assessment ITAT, New Delhi also held that sufficiency of information cannot be gone into while deciding the issue of validity of reopening. In the case of Jyoti Goya! vs ITO(ITA No. 1259/Del/2010), the Hon'ble ITAT Delhi held that:- As regards the other contentions of the assessee that the reopening was done in a mechanical manner without application of mind, we find there is nothing on record to support such a contention. There is a live link between the information which was available with the Assessing Officer and his formation of belief that income has escaped assessment. Sufficiency of such information cannot be gone into while deciding the issue of validity of reopening. The Assessing Officer can also not make enquiries as no proceedings were pending before him for the relevant assessment year. In the above view of the matter, We are in agreement with finding of the Ld. CIT(A) that the reopening of assessment u/s 147 of the Act, was valid. In the light of the .above detailed discussion I have no hesitation in holding that that there is no infirmity in the reopening of the case by the AO on any count whatsoever and the claim of the appellant that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue. The Ld.CIT(A) has observed as under:- The Ld.CIT(A) observed that the Ld. A.O. has given finding after examination of evidence on record and also found that the Ld. A.O. was not convince about credibility and authenticity of the evidences filed by the assessee during the course of the assessment proceedings hence did not consider them credible enough for the purpose of controverting the evidences marshaled by the Investigating Wing. 11. Further while dealing with the matter on merit, the Ld.CIT(A) has discussed the matter in detail as under:- It is a fact that a search was conducted at the premises of Rajinder Jain, an accommodation entry provider. It is also a fact that during the course of a statement recorded u/ s 132(4) of the Income Tax Act, at the searched premises, Rajinder Jain admitted that he was not conducting any business activity but was in fact providing bogus purchase/sale bills to interested parties. During the course of the search, he gave a detailed submission in this regard and listed out the dummy companies through which he was providing sale/purchase accommodation entries. The modus operandi charted by Rajinder Jain was recorded in the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ex-employee) Partnership firm Name of Partners a. Sun Diam Rajendera S. Jain(myself) Manish Jain Companies a. Kriya Impex Pvt. Ltd Rajendra S Jain (myself) Manish Jain b. Spars Exports Pvt. Ltd Rajendra S Jain (myself) Surendra Jain c. Karnavat Impex Pvt. Ltd. Sachin Pareek and Manish Jain d. Moulimami Pvt. Ltd. Rajendra S Jain (myself) Sachin Pareek Q14. During the survey action undertaken at various office premises of yours; not a single piece of diamond has been found by respective survey teams though there is substantial turnover shown by various concern controlled by you. Please state as to where do you keep your stock in trade. Ans. Sir, in this regard I want to admit that we are engaged in business of bills shopping through all the concerns as named by me in response to your question no. 13 due to which we don't have any physical stock of diamond wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the facts of the case and evidences marshalled against the appellant, the AO gave an unequivocal finding that the appellant was indeed guilty of obtaining bogus accommodation entries from the parties mentioned supra. The finding of the AO is relevant here: After considering the submissions made by the assessee and facts of the case and further keeping in view the findings of the Investigation Wing, it is evident that the assessee has taken accommodation entry by providing cash which has not been shown in the books of accounts of the assessment for that assessment year i.e 2007-08. On account of failure on part of the assessee, income for the A.Y. 2007-08 to the extent of Rs. 59,60,461/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. Penalty proceedings u/s 271(l)(c) has been initiated separately for concealing the true and correct facts of the income. With these remarks, the total income of the assessee is computed as Under: Income as per return filed by the assessee : Rs. 25,82,990/- Add: addition as discussed in Para 2 : Rs. 62,12,142/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in a judgment must be read in the context in which they appear to have been stated. Their lordships of the Supreme Court further held that circumstantial flexibility, one additional or different fact, may make a world of difference between conclusions in two cases. Disposal of case by blindly placing reliance on a decision was held to be not proper. Against this prelude, I hold that the facts of the cases relied upon and principles enunciated therein are different from the facts of the instant case and hence the appellant's plea that this judgement is applicable to the appellant also has no locus standi. It is also observed that the basic flaw in such an argument is that the accommodation entry scam is built on an edifice which is put together with the help of trumped up documents to give it a semblance of credibility so that it can escape the eagle eye of the enforcement agencies. Availability of such documents is a prerequisite for accommodation entry scamsters. This is a case where the assessee has used a sophisticated 'colorable device' in collusion with the accommodation entry operator to circumvent law and escape the keen eye of enforcement agencies by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase ledger showing purported purchase from Vitrag Jewels, Avi Exports and Moulimani Impex (P) Ltd. A sample extract is reproduced as under to authenticate my observation: The AR did not produce details of subsequent sales made. From the detailed discussion above it is evident that the appellant was unable to establish the authenticity and genuineness of purchases made from M/s Avi Exports, Moulimani Impex (P)m Ltd or M./s Vitrag Jewels. The appellant was unable to controvert the admission of Rajendra Jain, made during the course of search wherein he admitted that he was engaged in the providing accommodation entries to interested parties through a network of concerns, including Vitrag Jewels, Moulimani impex (P) Ltd and Avi Exports. The affidavit retracting this admission subsequently has no evidentiary value as discussed at length in subsequent paras. The claim that the purchases were reflected in the purchase ledger was not established as discussed at length in the earlier part of my discussion. Also, the claim that the purchases were subsequently sold to parties could not be proved as discussed ad nauseum above. I therefore, categorically uphold the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against th of threat, inducement or coercion, no good and sufficient reason w differ from it. In the facts and circumstances of the case, having ret materials on record, the appellant had failed to establish that the sta its partner had been recorded in the course of the search by usint threat or inducement. Hence, the contentions advanced by the appeih regard were dismissed and the conclusion of the Tribunal on that i affirmed. [Para 9] From an examination of the principles enunciated above, it is cleat statement recorded on oath has evidentiary value and can be relied i completing assessment. A retracted statement can be said to have no va if the person so retracting it proves it to be incorrect or establishes the f it has been recorded under coercion and pressure. Since this has not bee, it Is clear that retraction is in the nature of a self-serving document ti been used as a tool to bail out Rajendra Jain, as well as the beneficiaries accommodation entry scam. I hold, that in the absence of any proof to es that the statement was recorded under coercion and pressure or was inci the original statement of admission has a very strong evidentiary valued at AO has rightly rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence only and to establish the evasion beyond doubt as in criminal proceedings. In making such an observation I draw strength from a similar enunciation by the Apex Court in the case of Dhakeshwari Cotton Mills Ltd Vs CIT 26 ITR 777 and SS Gadgil V Lai Co 53 ITR 231 as well as the observation of the jurisdictional High Court in the case of CIT Vs Jay Engg Works Ltd 113 ITR 389. Reference may also be made to the case of Jankinath Sarangj v. State of Orissa, wherein Hidayatullah. C.J., observed: there is no doubt that if the principles of natural justice are violated and there is a gross case this Court would interfere by striking down the order of dismissal; but there are cases and cases. We have to look to what actual prejudice has been caused to a person by the supposed denial to him of a particular right. Judged by this principle, in the background of the facts and circumstances mentioned before. I am of the opinion that there has been no real prejudice caused bv infraction of any particular rule of natural justice of which appellant complained in this case. Also, In the case of Union of India Anr. vs. P.K. Rov Othrs it was held that: the doctrine of na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -AHM-IT) where Hon'ble Gujarat High Court held that addition on basis of undisclosed income cannot be restricted to a certain percentage, when the entire transaction was found as bogus. CIT Vs Arun Malhotra 363 ITR 195 where Hon'ble Delhi High Court held that where Assessing Officer having found that transaction of purchase and sale were bogus, made addition under section 69A, Tribunal was not justified in deleting addition without going into evidence on record. Before I sign off, it is extremely important to look at the surrounding circumstances of the case. This observation is without prejudice to my adjudication in the foregoing paras. I am addressing this issue as the appellant has submitted before me time and again that evidences such as confirmations, PANs, bank statements etc were ignored by the AO when making the addition. On a note of resigned acceptance, I perforce have to observe that our country has become a hornet's nest of innumerable financial scams which emanate from the desire of a majority of the citizens of the country to evade tax. So, we have had a slew of scams- the Harshad Mehta Scam, the Jignesh Scam, the co- location scam, the Nirav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it. It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of interpretation, to expose the devices for what they really are and to refuse to give Judicial benediction. 12. It is found from the record that the assessee was unable to establish the authenticity and genuineness of purchase made from M/s Avi Export and Mauli implex Pvt. Ltd. and M/s Vitraj Jewelers, the assessee was also unable to controvert the admission of one Sh. Rajender Jain made during the course of search, wherein it was admitted by Shri Rajendra Jain was engaged in providing accommodation entries to interested part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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