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TMI Blog2022 (9) TMI 1651X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income Tax (Appeals)-1, Surat [in short the ld. CIT(A) ] which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. Since, the issues involved in all the appeals and Cross objections are common and identical; therefore, these appeals have been clubbed and heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No.424/SRT/2019, for AY.2013-14, have been taken into consideration for deciding the above appeals en masse. 3. The Grounds of appeal raised by the assessee in the lead case (in ITA No.424/SRT/2019) are as follows: On the facts and circumstances of the case and the law on the subject: 1. The learned CIT(A) has grossly erred in ruling out the Appellant s contentions of Gross illegality in the Assessment Order on the excuse of undue advantage , even after having reached the conclusion of the re-assessment order suffering from serious irregularities, being fatal to the proceedings. 2. The reassessment order is in gross violation of principles of natural justic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les to the interest parties. During the course of search action, it was revealed that the said group is exclusively engaged in the business of issuing non genuine purchase bills and also unsecured loan accommodation entries to various parties. It is thus established from the search and seizure action that the alleged concerns of Rajendra Jain Group are all paper companies / proprietorships and with no real business activities, operating solely with the purpose of facilitation of fraudulent financial transactions which includes providing accommodation entries in the form of unsecured loans to the interested parties, issuing of bogus sale / purchase bills to various parties etc. During the course of search and seizure action in the case of Shri Rajendra Jain Group of cases on 03.10.2013 by the DGIT(Inv). Mumbai, it was found that there are namesake dummy directors / partners / proprietors / brokers, etc. These concerns were being actually managed by Shri Rajendra Jain others. These group concerns were believed to be concerns actively involved in providing non-genuine purchase bills and also unsecured loan accommodation entries to various interested parties. As a result of the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s subsequent exports (which is a miniscule amount) and local sale. However, many evidences were found during the course of search which proved that these concerns were not into any genuine business. Such findings are enumerated below: (i) No Stock of diamond found: During the course of search, all the registered offices, business premises, business and residential premises of various dummy directors, partners and proprietors including that of Rajendra Jain, were covered. At none of these premises, any stock of diamond trade, at a given point of time would at least have some stock of diamond available. However, the fact that none of the group concerns had any stock of diamonds as on 03.10.2013 i.e. the day when search commenced raises a suspicion with regard to genuineness of business activity of these group concerns. (ii) Books of accounts not maintained at the respective registered offices: The registered offices and residential premises of the said group concerns and the Rajendra Jain and others in Mumbai and Surat were covered during the search action. However, the team of the Income Tax Authorities did not find any books of account of the said group benami concerns at any of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a view of disallowing 5% of purchases and since it is confirmed by Hon'ble jurisdictional ITAT, Surat Bench as discussed in para above; the above decisions of ITAT Mumbai/ Kolkata are not followed. 8.3 In view of above discussion the disallowance is restricted to 5% of the impugned purchases as under: A.Y. Unverified purchases Disallowance confirmed 2013-14 Rs.40,38,11,156/- Rs.2,01,90,557/- 2014-15 Rs.7,10,69,545/- Rs.35,53,477/ 2015-16 Rs. 12,88,47,024/- Rs.64,42,351/- Hence, this ground for both the above years is partly allowed. 8. Aggrieved by the order of the ld. CIT(A), the assessee as well as Revenue, both are in appeal before us. 9. The Assessing Officer made addition @ 100% of bogus purchases and on appeal the ld. CIT(A) restricted the addition to 5% of the bogus purchase, therefore the assessee is in appeal before us that 5% addition sustained by the ld. CIT(A) should also be deleted. On the other hand, the Revenue is in appeal before us that 100% addition sustained by the Assessing Officer must be upheld. 10. Shri Rasesh Shah, Ld. Counsel for the assessee argued that assessee submitted bills, vouchers and all transactions were through banking channel, therefore, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. CIT-DR for the revenue prayed that disallowance made by the AO may be upheld or in alternative submitted that it may restricted at least @ 25%, keeping in view that the NP declared by the assessee is extremely on lower side. 13. On the validity of reopening, the ld.CIT-DR for the revenue submits that the AO received credible information about the accommodation entry provided by Bhanwarlal Jain Group. The assessee is one of the beneficiaries, who had availed accommodation entries from such hawala trader. At the time of recording reasons, the mere suspicious about the accommodation entry is sufficient as held by Hon'ble jurisdictional High Court in various cases. To support his submissions, the ld.CIT-DR relied upon the decision; Pushpak Bullion (P) Ltd Vs DCIT [2017] 85 taxmann.com 84(Gujarat High Court), Peass Industrial Engineers (P) Ltd Vs DCIT [2016] 73 taxmann.com 185 (Gujarat High Court), ITO Vs Purushttom Dass Bangur [1997} 90 Taxman 541 (SC) and Mayank Diamond Private Limited (2014) (11) TMI 812 (Gujarat High Court). AGR Investment Vs Additional Commissioner 197 Taxman 177 (Delhi) and Chuharmal Vs CIT [1998] 38 Taxman 190 (SC). 14. On the other hand, the ld.AR o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court) 2 CIT vs. Indrajit Singh Suri [2013] 33 taxmann.com 281 (Gujarat) 3 Albers Diamonds Pvt. Ltd. Vs ITO 1(1)(1), Surat I.T.A. No.776 1180/AHD/2017 4 The PCIT-5 vs. M/s. Shodiman Investments Pvt. Ltd. TTANO. 1297 OF 2015 (Bombay High Court) 5 ShilpiJewellers Pvt. Ltd. vs. Union of India Ors. WRIT PETITION NO. 3540 OF 2018 (Bombay High Court) 6 CIT in Vs. Mohmed Juned Dadani 355 ITR 172 (Gujarat) 7 Micro Inks Pvt. Ltd. Vs. ACIT [2017] 79 taxmann.com 153 (Gujarat) 8 Shakti Karnawat Vs. ITO - 2(3)(8), Surat ITA 1504/Ahd/2017 and 1381 /Ahd/2017 9 Asian Paints Ltd. Vs. DCIT, [2008] 296 ITR 90 (Bombay) 10 PCIT, Surat 1 Vs. Tejua Rohit kumar Kapadia [2018] 94 taxmann.com 325 (SC) 11 The PCIT-17 vs. M/s Mohommad Haji Adam Co. ITA NO. 1004 OF 2016(Bombay High Court) 12 Pankaj Kanwarlal Jain HUF Vs. ITO 2(3)(8) Surat ITA.No.269/SRT/2017 16. In the rejoinder submissions the ld. CIT-DR for the revenue submits that that rigour of the rules of evidence contained in the Evidence Act is not applicable before the tax authorities. It was submitted that the ratio of various case laws relied by the ld. AR for the assessee is not applicable on the facts of the present cases. The ratio of decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng officer was justified in reopening 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. 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 B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, in the present case the assessee has declared the GP @ 0.78%. It is settled law t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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