9911796707
TMI Blog2024 (7) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... ng based companies on strength of fake documents. Assessee had purchased from four of these companies. The assessee had also purchased from other three concerns of Hassanfatta group. Such details are given in the assessment order and have also been briefly discussed in the facts of the case of this order. Even, CIT(A) has found that assessee had transaction with the Hasanfatta group. Therefore, the Assessing Officer had credible information which had live link with the reason to believe . The decisions relied upon by the Ld. AR are distinguishable on facts and in any case are of non-jurisdictional Tribunals and Hon ble Courts. On the other hand, we have direct decisions i.e., Keshav Diamonds Pvt. Ltd. [ 2021 (4) TMI 224 - GUJARAT HIGH COURT] Pushpak Bullion [ 2017 (8) TMI 961 - GUJARAT HIGH COURT] , Peass Industrial Engineers Pvt. Ltd. [ 2016 (8) TMI 277 - GUJARAT HIGH COURT] and Sajani Jewels [ 2016 (6) TMI 741 - GUJARAT HIGH COURT] supporting case of Revenue. Revenue is further supported by the decisions of the Hon ble Supreme Court Raymand Woolan Mills Ltd., [ 1997 (12) TMI 12 - SUPREME COURT] which is the law of land in view of Article 141 of the Constitution. In view of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 250 of the Income-tax Act, 1961 (in short, the Act ) by the Ld. Commissioner of Income-tax (Appeals)-4 Surat [in short, Ld. CIT(A) ] vide dated 19.03.2023, 20.04.2023, 21.04.2024, 24.04.2023 28.04.2023 which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) r.w.s 147 for same assessment year i.e., (AY) 2012-13. 2. In all appeals of Revenue and assessee s COs, both parties have raised certain common and identical grounds of appeals, except variation of additions on account of bogus purchases. Facts in all appeals are almost common; therefore, with the consent of parties, all the appeals and COs were clubbed, heard together and are decided by consolidated order for sake of convenience and brevity and to avoid conflicting decisions. For appreciation of facts, the case of M/s Glorious Diamond Pvt. Ltd. in ITA No.439/SRT/2023 for A.Y 2012-13 is treated as lead case. The Revenue has raised the following grounds of appeal:- 1) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in restricting the addition to Rs. 27,29,810/- as against addition of Rs. 49,98,58,018/- made by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 7.4 that the total value of bills of M/s M.B. Offshore Distributors Pvt. Ltd., amounting of Rs. 2,65,00,000/- pertain to loan given by the assessee, the entity is related entity of Afroz Fatta which are engaged in providing accommodation entries and the given loan was returned back to the assessee on the next date of loan given, the Ld.CIT(A) erred in not takin adverse view of the same as per the provisions of Section 69 of the I.T. Act. 8) Without prejudice to the Ground No.1 2, despite holding at para 7.4 that the total value of bills of M/s R.A. Distributers Pvt. Ltd. amounting of Rs. 57,00,000/- pertain to loan given by the assessee, the entity is related entity of Afroz Fatta which are engaged in providing accommodation entries and the given loan was returned back to the assessee on the next date of loan given, the Ld.CIT(A) erred in not taking adverse view of the same as per the provisions of Section 69 of the I.T. Act. 9) On the facts and in the circumstances of the case and in law, the Ld.CIT(A)- 4, Surat ought to have upheld the order of the Assessing Officer. 10) It is, therefore, prayed that the order of the Ld.CIT(A) may be set aside and that the AO may be restored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition without providing the copy of any statement of said Mr.Afroz Hasan Fata. Further, both Ld.CIT(A) and Ld.AO has erred in not providing the cross-examination of the said Mr.Afroz Hasan Fatta, though the same was asked by the appellant. This violates the principle of natural justice. 5. The Ld.AO has erred in making addition and the Ld.CIT(A) has erred in part confirming the same without providing any cash trail. 6. The Ld.CIT(A) has erred in estimating profit @ 2% of alleged purchase amount is without any base and sales made by the appellant has been treated as genuine. 3. The facts of the case in brief are that the appellant is a private limited company and it filed its return of income on 07.09.2012, declaring total income of Rs. 2,58,360/-. The assessment order u/s 143(3) was passed on 25.03.2015 by making addition of Rs. 84,299/-. Subsequently, the Assessing Officer received information from DDIT (Inv.) Unit II, Surat on 22.03.2019 along with enquiry report in case of Mr. Afroz Mohd Hassanfatta. In that case, the Customs Department and Enforcement Directorate had conducted investigation relating to foreign remittances against fake import documents. The Enforcement Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finally passed assessment order on 21.06.2021 determining total income at Rs. 50,02,00,960/- by making addition of Rs. 49,98,58,018/-. The addition was total of two separate additions of Rs. 36,32,00,000/- and Rs. 13,66,58,018/-. The addition of Rs. 36,32,00,000/- pertained to the transactions of the appellant with target entities namely M/s M. B. Offshore Distributor Pvt. Ltd. (Rs. 6.30 Cr.), M/s R. A. Distributors Pvt. Ltd. (Rs. 23.27 Cr.), M/s Ramshyam Exports Pvt. Ltd. (Rs. 5.75 Cr.) and M/s Ridhhi Exim Pvt. Ltd. (Rs. 1 Cr.). Target entities are those companies who have made foreign remittances from their bank accounts to Dubai and Hong Kong. The assessee had pleaded before the Assessing Officer that assessment has already been completed on 25.03.2015 and hence further addition cannot be made. The Assessing Officer did not accept the contention of the assessee and stated that the information regarding Mr. Afroz Hassanfatta was not available during the original assessment proceedings. The Assessing Officer has also stated that statement of Mr. Afroz Hassanfatta was recorded under PMLA who has explained the entire modus operandi of money laundering scam. The second addition of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to initiation of re-assessment proceedings u/s 147 of the Act. The grounds are reproduced in para-2 of this order. Before us, the Learned Commissioner of Income-tax-Departmental Representative (Ld. CIT-DR) has strongly supported the order of AO. He submitted that credible information was received from the DDIT (Inv.) on 22.03.2019 and 25.03.2019 which was supported by the report from the ED. The report of the ED is based on the information from Customs Department, Surat that some companies opened bank accounts with ICICIC Bank, Surat and used their accounts for making foreign remittances against fake import documents. The ED has filed charge sheet and supplementary charge-sheet after conducting necessary investigation on 18.07.2014. The money laundering scam is known as Afroz Mohd. Hassanfatta Group Scam . The Assessing Officer has duly verified the case records of the assessee and found that assessee had made various transactions with the entities of the aforesaid group. The Ld. CIT-DR relied on the decision of the Hon ble Gujarat High Court in the case of Keshav Diamonds Pvt. Ltd. vs. ITO, 434 ITR 700 (Guj.) and submitted that facts are exactly same in both cases and hence, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reopening was not based on any adequate and authenticate data. The Ld. AR also submitted that the time period covered in the investigation by the ED was financial year 2013-14 (AY.2014-15) because the current account with ICICI Bank was opened on 13.12.2013. Since the account was opened in December, 2013 (AY 2014-15) and ED made investigation of the particular account, the report of the ED would not help the Assessing Officer to reasonably come to the conclusion that income escaped assessment in AY.2012-13 (FY.2011-12). The Ld. AR further submitted that the statement of the Assessing Officer that Mr. Afroz Hassanfatta used the transactions with the appellant in illegal transfer of money outside India is a general remark and cannot constitute tangible material for reopening the assessment. The Assessing Officer has also not mentioned the nature of transaction so as to categorize it as representing escaped income. The Assessing Officer has also not mentioned in his table whether it was a single transaction or a set of various transactions and the date on which such transactions were carried out. The Ld. AR supported his submission by relying on the decision of the Ld. CIT(A) that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Keshav Diamonds Pvt. Ltd. (supra) is not applicable to the case of the appellant. It is distinguishable and have different set of facts than the case of the appellant. The ED Investigation covered was for account opening on 13.12.2013 and this fact was not brought to the notice of the Hon ble High Court and therefore the Hon ble High Court has not expressed its view on the same. However, the appellant has brought this fact to the notice of the Bench during the hearing in the written submission. When the account was opened on 13.12.2013 (AY 2014-15), how the allegation that accommodation entries provided by the appellant has been used for transferring the money out of India by fake transaction in FY.2011-12 relevant to present AY.2012-13. The Ld. AR further submitted that in case of Keshav Diamonds (supra), the escaped income of Rs. 10,13,00,000/- included transaction of purchase of Rs. 4,57,48,000/- with Nisha Diamonds Pvt. Ltd., therefore, there was live link of bogus purchase of Rs. 4,57,48,000/- with escaped income. However, in case of appellant the escapement of Rs. 36.32 Crore mentioned by the Assessing Officer in the reasons for reopening has been deleted by the Ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e belief that income of the appellant to extent of bogus purchases / sales made by the assessee had escaped assessment. The Assessing Officer also supplied copy of the reasons recorded to the appellant and disposed of the objection by passing a speaking order. Hence, the Ld. CIT(A) upheld the reopening. 8.2 The Ld. AR has argued that decision of the Hon ble Gujarat High Court in the case of Keshav Diamond (supra) was not applicable to the fact of the present case. His other arguments have already been discussed earlier in this order. He has mainly contended that the Assessing Officer has not applied his mind on the information given by the Investigation Wing. The income escaped as recorded by the Assessing Officer is not supported by any material and the Assessing Officer himself does not know about the nature of transactions, details of each transaction with amount, date of transactions etc. He stated that the Ld. CIT(A) has held that there were no purchase / sale transactions undertaken by the appellant with the four companies for total transaction of Rs. 36.32 Crore. There were only transactions of loans given and repaid with these companies. 8.3 We have again perused the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36.20 Crore. The Ld. AR stated that the Ld. CIT(A) in his appellate order, has deleted such amount by holding that there was no purchase / sale with these concerns. But we find that assessee had transactions of advance with the above concerns which have been pointed out by the Ld.CIT(A). Thus it is not a case where there was absolutely no transaction by assessee with Hassanfatta group. Be that as it may, such findings during the appellate stage cannot be the basis for striking down the reopening made by the Assessing Officer. Such action by the Ld.CIT(A) is at the third stage. The first stage is reopening u/s 147 of the Act, the second stage is assessment proceedings including passing of the assessment order u/s 143(3) r.w.s. 147 of the Act. The role of Ld.CIT(A) is only in the third stage. What we are concerned at the moment is the first stage, i.e., assumption of jurisdiction to reopen assessment u/s 147 of the Act. 8.5 It has been held in a number of cases that there should be prima facie reason at the initial stage of reopening. The sufficiency or correctness of the reason cannot be examined at the threshold. The conclusion or conclusive establishment of escaped income is not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in case of Peass Industrial Engineers Pvt. Ltd. vs. DCIT, 73 taxmann.com 185 held that where after scrutiny assessment, Assessing Officer received information from Investigation Wing that two well-known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiaries, Assessing Officer was justified in reopening assessment. 8.10 There is no reason as to why the ratio of the above decisions would not be applicable to the facts of the present appeal. We have again gone through the reasons recorded by the Assessing Officer 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 Assessing Officer 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. We have only to see whether there was prima facie same material on the basis of which Assessing Officer could reopen the case. Such condition is eminently visible in the present case, as discussed earlier. As per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 8.12 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich 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 from the investigation wing that two well known entry operators of the country provided bogus entries to various beneficiaries, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns which were assisting Afroz Hasan Fatta to transfer money to UAE and Hong Kong. The assessee has shown these purchase in its books of account but they are actually accommodation entries. In view of the above, the total transactions with Afroz Mohd Hasanfatta Group during the year under consideration was Rs. 49,98,58,018/- (Rs. 36,32,00,000 + Rs. 13,66,58,018). This was added to the total income of the assessee with remarks by the AO addition on account of transaction with Afroz Hassan Fatta related entities treated as accommodation entries . Aggrieved, the appellant filed appeal before Ld.CIT(A). The Ld.CIT(A) has discussed the issue at para-7.1 to 7.14 in appellate order. He observed that Assessing Officer has purely relied upon the report of the Investigation Wing that the seven companies / concerns with whom the assessee had transactions were operated by Afroz Hasan Fatta group who were providing accommodation entries and were not supplying any goods. The appellant submitted before Ld.CIT(A) that there were no purchase or sale made from M/s MB Offshore Distributors Pvt. Ltd., and appellant had given lump sum advance of Rs. 2,65,00,000/- on 12.08.2011, which was received back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that once the purchases are made corresponding to sales and bills are obtained from unregistered entities, only the profit embedded in such modus operandi needs to be brought to tax and entire purchases cannot be disallowed. At para-7.14, the Ld.CIT(A) has held that out of purchase of Rs. 49,98,58,018/-, purchase of Rs. 36,33,67,517/- is not bogus purchase because no such purchases are debited by the appellant in its books account. The bogus purchases are to the tune of Rs. 13,64,90,501/- from two entities namely, M/s Metro International and M/s Franklin International. The profit element from such purchases were @2% and accordingly Ld.CIT(A) sustained addition of Rs. 27,29,810/-. Aggrieved by the order of Ld.CIT(A), Revenue has filed present appeal before the Tribunal. 9.1 Before us Ld.CIT-DR for the Revenue stated that the fact of bogus transaction were unearth during the investigation made by Custom Department and the ED relating to foreign remittance against fake import documents. The Ld.CIT-DR relied on the order of Assessing Officer and requested that the findings of Ld.CIT(A) should be set aside and addition made by Assessing Officer may be sustained. 9.2 On the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent assessees. The lead case Pankaj K. Chaudhary (supra). 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) wherein it was 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 made of 100% of purchases shown from the hawala dealers/ entry provider namely Bhanwarlal Jain. We find that the AO while making additions of 100%, of disputed purchases solely relied on the report of the investigation wing Mumbai. No independent investigation was carried by the AO. The AO has not disputed the sale of the assessee. The AO made no comment on the evidences furnished by the assessee. We further find that ld CIT(A), while considering the submissions of the assessee accepted the lapses on the part of the AO and noted that no sale is possible in absence of purchases. The Boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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, in the present case the assessee has declared the GP @ 0.78%. 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 disallowances @ 6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage. In the result the ground No. 2 of appeal raised by the assessee is partly allowed and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, the Co-ordinate Bench of this Tribunal, in case of Mega Polymers vs. ITO in ITA No.98/SRT/2024 dated 08.04.2024 has decided the issue in favour of assessee. Following the above decision, we dismiss both the grounds of Revenue. 12. Grounds No. 9 to 11 are general in nature and do not require any adjudication. 13. In the result, appeal of Rev is partly allowed whereas assessee s CO is dismissed. ITA Nos.390, 438, 440 441/SRT/2023 (AY.12-13) assessee s CO Nos.03-05, 07- 08/SRT/2024. 14. As recorded above, the Revenue in these appeals have raised similar grounds of appeal as raised in the appeal (ITA No.439/SRT/2023 for AY 2012-13, which we have partly allowed and sustained addition @ 6% of bogus purchases of the appellant. Thus, following the principle of consistency Revenue s appeals are also partly allowed with similar observation as in Revenue s appeal ITA No.439/SRT/2023 for AY 2012-13. Hence, these five appeals of Revenue are also partly allowed whereas assessee s COs are dismissed. Revenue s appeal ITA No.437/SRT/2023 15. In this case, apart from the common grounds discussed above, the Revenue has taken two more grounds of appeal, which are as under: 10) On the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment was made in the regular course of trading in which appellant made a loss of Rs. 1,86,641/-. This fact shows that the intention of the appellant was not to earn exempt income. He also held that the investment was from explained sources from the bank account. Hence, he deleted addition of Rs. 51,24,834/-. Regarding scrip of M/s Orissa Mineral Development Co.Ltd., the Ld.CIT(A) observed that it was a Govt. of India Undertaking and assessee has incurred loss of Rs. 35,11,427/-. The addition of Rs. 13,09,599/- as unexplained share transaction is not proved from the brokers note and bank account of the appellant. Hence, the addition was deleted by Ld.CIT(A). 19. Aggrieved, Revenue has filed present appeal before the Tribunal. Before us Ld.CITDR has relied on the order of AO. He has not been able to furnish any evidence or explanation as to how the findings of Ld.CIT(A) is incorrect. 20. On the other hand, Ld.AR of the assessee has submitted that the AO has made the addition without any basis or proper inquiry. The entire investment of Birla Pacific Madspa Ltd. and M/s Orissa Mineral Development Co.Ltd. has been added though payment was made from disclosed bank account. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
