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TMI Blog2024 (5) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... are satisfied. As observed earlier by us, 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 not true and false. The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening was validly initiated. See Pankaj K. Choudhary [ 2021 (10) TMI 653 - ITAT SURAT] as clearly held that when assessing officer received information from the investigation wing that two well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified. Decided against assessee. Estimation of income - Bogus purchases - As decided in Pankaj K. Choudhary [ 2021 (10) TMI 653 - ITAT SURAT] it is settled law that under Income-tax, the tax authorities 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 disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the judgment of Calcutta High Court in the case of PCIT vs. Premlata Tekriwal (143 taxmann.com 173) involving similar issue of purchase of bogus concern to suppress profits wherein the court held that since it was established that expenditure was unexplained / bogus entire amount of bogus expenditure was to be added to income of assessee. 5. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition made by the AO on account of bogus purchase even though in the case of Mayank Diamonds Pvt. Ltd. [2014(11) TMI 812], the Hon ble High Court has directed to make addition at the rate of 5% of the total turnover. 6. On the facts and circumstances of the case and in law, the CIT(A) has erred in holding that the AO has not rejected the books of account of the assessee however it is clear from the para No.8 of the assessment order that the AO has duly reject ed the books of account of the assessee. Hence, order is perverse on this account. 7. On the basis of the fact and circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 8. It is, therefore, prayed that the order of the Ld. CIT(A) m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import, export and trading of cut polished and rough diamonds. The assessee filed his return of income for AY. 2010-11 on 21.09.2010 declaring total income of Rs. 1,61,270/-. Assessment order passed u/s 143(3) of the Act was passed on 06.07.2013 determining total income at Rs. 2,90,870/-. A search and seizure action u/s 132 of the Act was conducted in the cases of Bhanwarlal Jain group on 03.10.2013 by Investigation Wing, Mumbai. During the course of search action, it came to notice that Shri Bhanwarlal Jain and his group were operating and managing large number of benami concerns (around 70 fictitious concerns) in the names of their employees through which they provided accommodation entries for bogus purchases to various beneficiaries. On verification of the documents provided by the Investigation Wing, it was noticed that assessee had obtained accommodation entries in the form of bogus purchase of Rs. 10,73,43,555/- from the benami concerns controlled by Bhanwarlal Jain group during the year under consideration. The AO has discussed the facts of the case and modus operandi of business of Bhanwarlal Jain group in para-3 and 4 of the assessment order. In view of above facts, AO is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions including the jurisdictional ITAT as discussed above, I find that the disallowance @ 6% of the purchases of Rs. 10,73,43,555 is reasonable and direct the AO to restrict the disallowance to Rs. 64,40,613.3 i.e. 6% of Rs. 10,73,43,555. The appeal on this grounds are treated as partly allowed. 5. Aggrieved by the order of ld. CIT(A), the Revenue is in appeal before us. 6. The Learned CIT. DR for the Revenue argued that objection raised by the assessee regarding the assumption of jurisdiction of AO by issuance of notice u/s 148 of the Act, is devoid of merits. Section 147 of the Act authorizes and permits an AO to assess or reassess income chargeable to tax if he has reasons to believe that the said income for any assessment year has escaped assessment. The expression 'escaped assessment' clearly connotes a very basic postulate that the income for a particular assessment year went unnoticed by the AO and because of it not being noticed by him for any reason, it escaped assessment. In the present case, bogus purchase from Bhanwarlal Jain group was not in the knowledge of the AO during the original assessment proceedings. Thus, ld CIT-DR stated that reasons recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicable legal position. We have also carefully deliberated on all the decisions relied upon by both the sides. We have also gone through the reasons recorded by the AO and having gone through the entire gamut of facts and circumstances, we are of considered opinion 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 non-genuine and therefore bogus, clearly meaning that what was disclosed was not true and false. The Hon'ble Supreme Court in the case of Phul Chand Bajrang Lal 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 as under: Acquiring fresh information specific in nature and reliable in character, relating to the concluded assessment which goes to expose the falsity of the statement made by the assessee at the time of original assessment is different from declaring fresh inference from the same facts and materials which were available with the ITO at the time of original assessment proceedings. The two situations are distinct and di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -08 dated 27.09.2021, wherein the Tribunal held as follows: 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) while as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P) Ltd vs. DCIT and Pushpak Bullion (P) Ltd. vs. DCIT (supra). Therefore, we dismiss the ground Nos.1 2 raised by the assessee in ITA No.874/SRT/2023 (assessee`s appeal). 11. Now, coming to the merits of the case, we find that similar issues were before the Co-ordinate Bench of this Tribunal in the case of Pankaj K. Choudhary and others (supra). The Tribunal decided a bunch of 14 appeals consisting of appeals and cross-appeals by Revenue as well as different assessee s by a consolidated order dated 27.09.2021. The lead case in these appeals and cross-appeals was the case of Pankaj K. Choudhary vs. ITO(3)(1)(5), Surat in ITA No.1379/AHD/2017 (AY 2007-08). After detailed discussion of the case and the legal position as well as precedents on the subject issue, the Tribunal sustained addition @ 6% of the bogus purchases. The facts of the present appeals are similar and hence it is squarely covered by the order of the Tribunal in the case of Pankaj K. Choudhary (supra) held as follows: 19. Ground No. 2 in assessee s appeal and the grounds of appeal raised by the revenue are interconnected, which relates to restricting the disallowance of bogus purchases to the extent of 12.5%. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 the revenue vehemently submitted that the ratio of decision of Hon ble Gujarat High Court in Mayank Diamond Private Limited (supra) is directly applicable on the facts of the present case. We find that in Mayank Diamonds the Hon ble High Court restricted the additions to 5% of GP. We have seen that in Mayank Diamonds P Ltd (supra), the assessee had declared GP @ 1.03% on turnover of Rs. 1.86 Crore. The disputed transaction in the said case was Rs. 1.68 Crore. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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