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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 ..... e by the AO from Rs. 10,73,43,555/- to 6% of the bogus purchase (Rs. 64,40,613/-) without appreciating the facts that the assessee had failed to prove the genuineness of the transaction made with the concerns which was identified as bogus entities completely run by Shri Bhanwerlal Jain. 2. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs. 10,73,43,555/- made by the AO on account of bogus purchase without appreciating the findings that Shri Bhanwarlal Jain is engaged in the business of accommodation entries and hence AO was correct in concluding that the assessee was a beneficiary of the accommodation entry in guise of purchase. 3. On the facts and in the circumstances of the case in law, the Ld. CIT(A) has erred in restricting the addition to 6% without considering the judgment of Gujarat High Court in the case of N.K. Industries Ltd. vs. DCIT in ITA No. 240 to 242 of 2003 which has been upheld by the Hon'ble Apex Court in Special Leave to Appeal @ No.769 of 2017 dated 16.01.2017, wherein the Hon'ble High Court decided that 100% of purchase from bogus parties was liable to be added in the hands of the assessee, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asked for and therefore, the present proceeding is liable to be quashed. 4. The Learned AO has erred in not appreciating the fact that the assessee' books of accounts are not rejected and therefore, there is no justification for making any addition. 5 The Learned AO has erred in not appreciating the fact that all the disputed parties are assessed to tax and duly maintaining the books of accounts and in any case, there is no justification for disputing the purchase as made by banking channel and there is no evidence that the appellant has received the cash bank and therefore, the addition is required to be deleted. 6. The Learned AO has erred in not appreciating the fact that the assessee has provided complete confirmation of all the disputed parties for the purchase value of Rs. 10,73,43,555/- and the payment had been made through the banking channel and therefore, the assessee has discharged the onus and as such there is no question of making any addition. 7. The Learned AO has erred in not appreciating the fact that there cannot be sales without purchase and therefore, the addition made is required to be deleted. 8. It is further prayed that the gross profit has also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grounds raised by the assessee challenging the reopening of assessment u/s 147 of the Act. The grounds on reopening is at para-6, submission of appellant is at para-6.1 and findings of the Ld.CIT(A) are at para- 6.2 of the order u/s 250 of the Act dated 13.09.2023. He has relied upon the decisions in case of Pankaj K. Choudhary, in ITA No.1152/AHD/2017 dated 27.09.2021 (Surat) and Mr. Khangaram K. Dewari vs. DCCIT in ITA No.2806/MUM/2018 (AY 2008-09) & ITA No.2807/MUM/2018 (AY 2009-10) & ITA No.2805/MUM/2018 (AY 2010-11) dated 05.08.2022. In these decisions, actions of AO in reopening assessment u/s 147 of the Act has been justified by following the judgment of Hon'ble jurisdictional High Court in Pushpak Bullion Pvt. Ltd. Vs. DCIT 85 taxmann.com 84 (Guj) and some other decisions. On merits, ld CIT(A) restricted the addition at the rate of 6% of bogus purchases by observing as follows: "7.7. I find that the appellant has not been able to disprove the finding of the search in the Bhanwarlal Group case. However, the AO while making additions of 100% alleged bogus purchases solely relied on the report of the Investigation Wing Mumbai. I find that the AO has not disputed the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that reopening of assessment is bad in law because notice u/s 148 was issued without any approval u/s 151 of the Act. He further submitted that since notice u/s 148 and approval are both dated 22.03.2016, there is no appreciation of mind. Therefore reopening u/s 147 of the Act may be quashed. 9. On merits, ld Counsel argued that the disallowance to the extent of 6% of the impugned purchases, by ld CIT(A), is not acceptable, as the assessee provided bills, vouchers, stock details etc. He also submitted that books of accounts have been properly maintained and they were audited. The AO has also not rejected the books of account u/s 145(3) of the Act. The Ld. AR further submitted that confirmations of all the disputed parties for purchase value of Rs. 10,.73,43,555/- have been given and all payments were through the banking channel. Therefore, entire addition made by AO as well as disallowed of 6% of disputed purchases by Ld. CIT(A) may be deleted. 10. Let us first decide validity of reassessment u/s 147 of the Act. The original assessment u/s 143(3) of the Act for AY 2010-11 was completed on 06.07.2013. Notice u/s 148 was issued on 29.03.2016 and order u/s 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to allow the assessee that latitude." 10.3 A three Judges bench of Hon'ble Apex Court in the case of A.L.A. Firm v. CIT, 189 (1991) ITR 285, after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has, in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe that income chargeable to tax had escaped assessment. It was held that even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act 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 of Rs. 10,73,43,555/- claimed were non-genuine and therefore bogus, clearly meaning that what was disclosed was not true and false. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer 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 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. Hence, the ground No. 1 in assessee's appeal is dismissed." 10.4 The facts of the present case are similar to the facts of the above case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the facts in Mayank Diamonds Pvt Ltd (supra) and noted that assessee in that case was also engaged in the trading of polished diamonds. The ld CIT(A) noted that in that case the AO made disallowance of entire bogus purchase and on first appeal before CIT(A) the disallowances were maintained. However, the Tribunal gave partial relief to the assessee directing to sustain the addition @12% of such bogus purchases. And on further appeal, t he Hon'ble High Court sustained Gross Profit Rate @ 5% being average rate of profit in industry. 20. Now adverting to the facts of the present case, the ld.CIT(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%. How ..... 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