9911796707
TMI Blog2024 (7) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... s (India) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT] and hence, we do not find any infirmity in the order of Ld.CIT(A). Reasons to believe - Similar addition had come up for consideration before this Tribunal in the case of Sunilkumar Parasmai Jain [ 2024 (5) TMI 582 - ITAT SURAT] as held AO validly assumed the jurisdiction for making re-opening u/s 147 on the basis of information of investigation wing Mumbai. 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 in initiating reopening proceedings. Estimation of income - bogus purchases - assessee has stated that the books of account have not been rejected and therefore there is no question of making any addition - HELD THAT:- As following the case of Pankaj K. Chaudhary [ 2021 (10) TMI 653 - ITAT SURAT] we restrict the disallowance to 6% of the disputed bogus purchase. - Shri Pawan Singh, Judicial Member And Shri Bijayananda Pruseth, Accountant Member For the Assessee : Shri Ketan Shah, AR And Shri Aman K Shah, AR For the Revenue : Shri Ravi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that the assessee has provided complete confirmation of all disputed parties for the purchase value of Rs. 8,28,40,884/- 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. 8. 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. 9. It is further prayed that the gross profit has also been accepted and therefore, there is no question of making any addition towards disputed purchase and therefore, the same is required to be deleted. 2. The facts of the case in brief are that the assessee is engaged in the business of trading of diamond in proprietary concern, in the name and style of M/s Rahul Exports. The appellant filed his return of income for AY.2011-12 on 23.09.2011 declaring total income of Rs. 2,16,350/-. Subsequently, notice u/s 148 was issued on 27.03.2018 after getting due approval of appropriate authority. In response to the notice u/s 148, appellant filed his return on 25.04.2018. The AO issued various notices but none attended before AO and details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at assessee has taken accommodation entries, the AO initiated the re-assessment proceedings. He has followed the due procedure as per the Act and as laid down by Hon ble Supreme Court in case of GKN Driveshafts (I) Ltd. vs. ITO CA No.7731/2002 dated 25.11.2002. He also observed that tangible material was in possession of AO before recording reason to believe that income chargeable to tax escaped assessment. The findings of Ld.CIT(A) are at page-18 of his order. Hence, grounds of assessee was dismissed. 4. Regarding merits of addition, the Ld.CIT(A) has reproduced assessment order at pages 19 to 21 of his order dated 23.09.2023. The Ld.CIT(A) has dismissed the grounds of appeal on merit of the addition by observing that assessee failed to produce documentary evidence to disprove the additions made by AO. He held that AO was justified in rejecting the books of account and making addition of Rs. 8,28,40,884/-. 5. Grounds No.1 to 3 are inter-connected and pertain to validity of reopening the assessment u/s 147 of the Act. In the grounds of appeal, Ld. AR of the assessee has submitted that notice u/s 148 of the Act was issued on 27.03.2018 without getting any approval u/s 151 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s at page 5 of the paper book and page 4 of the assessment record. It is seen from papers given by Ld.CIT-DR that the Addl.CIT has sanctioned issuance of notice u/s 148 of the Act by stating as under: Form for recording the reasons for initiating proceedings u/s 148 of the Income tax Act, 1961 and obtaining the approval of the Pr.Commissioner of Income Tax, Surat-2, u/s 151(1) of the Income Tax Act. 1 Name address of the assessee Sh.Rohit Lodha 315-New DTC, Hat Faliya, Haripura, Surat 2 Permanent Account Number ADAPL2300H 3 Status Ind. 4 District/Circle/Rang Ward-2(3)(8), Surat 5 Assessment year in respect of which it is proposed to issue notice u/s 148 2011-12 6 The quantum of income which has escaped assessment Rs. 8,28,40,884/- 7 Whether the provisions of sec.147(a), or 147(b) or 147(c) are applicable or both the sections are applicable Explanation 2(b) to section 147 of the I.T.Act, 1961 8 Whether the assessment is proposed to be made for first time. If the reply is in the affirmative, pleas state: (a) whether any voluntary return has already been filed; and (b) If so, the date of filing the said return Yes. a. Yes 30.09.2011 9 If the answer to item 8 is in the negative, please ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-11 12.05.2011 20.01.2012 No 2. Brief details of information collected / received by the AO: As per information was received from the DIT(Inv.)-II, Mumbai, a search seizure action under section 132 of the I T Act, 1961 was conducted on 03.10.2013 by DDIT(Inv.) Unit IX(2), Mumbai on the group concerns of Shri Bhanwarlal Jain. During the course of search proceedings as well as post search investigation, it was found that Shri Bhanwarlal Jain along with his sons Shri Rajesh Bhanwarlal Jain and Shri Manish Bhanwarlal Jain were operating and managing 70 Benami concerns in the name of their employees through which they provided accommodation entries of unsecured loans and bogus purchase to various beneficiaries. As a result of search and post search investigation, it was found the assessee was one of the beneficiaries of nongenuine transactions and found to have made bogus entries to the tune of Rs. 4,10,30,197/- with the group concerns of Bhanwarlal Jain during the FY 2011-12. 3 4 Analysis of information collected / received Enquiries made by the AO as sequel to information collected / received: Information has be en analysed and consciously considered. The database of this office/a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in any entity) located outside India: Not applicable 8. Applicability of the provisions of section 147 / 151 to the facts of the case: In this case a return of income was filed for the year under consideration but no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above (refer paragraphs 5 6) It is pertinent to mentioned here that in this case the assessee has filed return of income for the year under consideration. In view of the above, the provisions of clause (b) of Explanation 2 to Section 17 are applicable to fact of this case and the assessment year under consideration in deemed to be case where income chargeable to tax has escapement. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 is being obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act. Sd/- Anil V. Viramgama Anil V.Viramgama Income Tax Officer, Ward-2(3)(8), Surat Telephone No.:(0261)2780434 Email:[email protected] 7.1 It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised by the appellant, the assessing officer disposed such objections against reopening by passing as an order. These facts shows that the AO was fair and just in his approach and the assessing office has rightly followed the procedure as per the income act and procedures laid down by the Hon ble Supreme Court in the case of GKN Driveshafts (India) Limited. The assessing officer received the copy of statements recorded u/s 132(4) of the Act from the deponent, who is the entry operator and the entry operator admitted that bills were issued without the actual movements of goods, along with details of beneficiaries from the Investigation Wing, Mumba. Such material proves that the appellant also one among the beneficiaries. Hence, the tangible material in possession of the Assessing Office, before recording reason, was sufficient and valid enough to believe that income chargeable to ta had escaped income. The incriminating materials seized by the Investigation Wing, implicating the appellant, was a prime facie proof to form the satisfaction by Assessing Officer and it need not be a conclusive proof. Hence, the arguments of appellant dos not have force to conclude that the issue of not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a bogus transaction, the mere disclosure of fact that transaction at the time of original assessment proceedings, cannot be said to be disclosure of true and false facts in the case and the ITO would have the jurisdiction to reopen concluded assessment in such a case. 10.2 It would also be apt to quote the following observations of the Hon ble Apex Court in the case of Phul Chand Bajrang Lal (supra), which reads as under: We have to look to the purpose and intent of the provisions. One of the purposes of Section 147 appears to us to be, to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would, be travesty of justice 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 possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the reopening held that the AO has received report from investigation wing Mumbai, which indicate that the assessee is beneficiary of the accommodation entry operators. The accommodation entry provider admitted before investigation wing that he has given such entry to various persons; based on such report the AO has reason to believe that the income of the assessee has escaped assessment and thus the action of AO in reopening is justified. 18. We find that the Hon ble Jurisdictional High 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). Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be deleted. He also submitted that Ld.CIT(A) erred in not considering the facts of the case and mechanically sustained addition made by AO. Therefore, the addition deserves to be deleted. 9. On the other hand, ld CIT-DR strongly relied on the orders of lower authorities. He submitted that the AO has received credible information from the Investigation Wing, Mumbai regarding elaborate and systematic scheme adopted by Shri Bhanwarlal Jain group to provide accommodation entries in respect of bogus purchases and unsecured loans. Subsequent to search and seizure operation carried out u/s 132 of the Act, the factum of bogus purchases from the Bhanwarlal Group and its associate concerns have been clearly established. Therefore, the Ld.CIT(A) has rightly confirmed the entire addition of Rs. 8,28,40,884/- made by the AO as bogus purchases. 10. We have considered submission of both parties and have gone through the orders of lower authorities. We have also deliberated on the case laws relied upon by the parties. We find that adequate opportunity of hearing was given to assessee by the AO and Ld.CIT(A); however, there was no response from the assessee. We find that similar issues were befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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, the 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%. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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