TMI Blog2020 (1) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... has scaled down profit estimated by the AO to 3% on alleged bogus purchases. CIT(A) has rightly scaled down addition made by the AO from 12.50% to 3% profit on alleged bogus purchases. Hence, we are inclined to uphold order of the ld. CIT(A) and dismiss appeal filed by the assessee. - ITA No.6154, 6155, 6156, 6157 & 6158/Mum/2016 (Assessment Years: 2009-10, 2010-11, 2011-12, 2012-13 & 2013-14) - - - Dated:- 3-10-2019 - SHRI G. MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER Assessee by: K.A. Vaidyalingan Revenue by: V. Vinod Kumar ORDER PER G. MANJUNATHA (A.M): This bunch of five appeals filed by the assessee are directed against consolidated order of the CIT(A)-10, Mumbai, dated 17/08/2016 and they pertains to Assessment Years(AY) 2009- 10,2010-11,2011-12,2012-13 2013-14. Since, the facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed off by this consolidated order. 2. The assessee has more or less raised common grounds of appeal for all assessment years. Therefore, for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f facts of the case are that the assessee Company is engaged in the business of Manufacturer, Exporter Trader of studded jewellery and loose diamonds filed its return of income for AY 2009-10 on 22/09/2009 and said return was processed under section 143(1) of the Income Tax Act, 1961. Thereafter, the assessment has been reopened u/s 147 of the IT Act, 1961, for reasons recorded as per which a search and seizer action conducted in the case of Bhanwarlal Jain group on 3-10-2013 reveled that Shri. Bhanwarlal Jain was involved in providing accommodation entries of bogus purchase bills to various parties and as per list of beneficiaries, the assessee is one of the beneficiary, who had taken accommodation bills of bogus purchases from M/s Mayur Exports amounting to ₹ 87,00,600/-. The case was selected for scrutiny and the assessment has been completed u/s. 143(3) r.w.s. 147 of the I.T. Act, 1961 on 1/03/2016 and determined total income of ₹ 25,57,930/-, after making additions towards alleged bogus purchase @ 12.50% of total purchases from said party and made additions of ₹ 10,87,575/-. 4. Aggrieved by the assessment order, the assessee preferred an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn process u/s 143(1) within a period of four years based on such external information, I hold that the reassessment proceedings are valid. The reopening beyond four years from the end of the relevant A.Y with regard to A.Y. 2009-10 is also held valid in view of the decision of the Hon ble Bombay High Court in the case of Hitesh R.Shah (2013) 35 taxmann.com 474. The reassessment is also held valid in view of the following decisions:- (i) The Hon ble Gujarath High Court in the case of Rhythm Chemicals P Ltd V. ACIT, 33 taxman.com 426 has held that since intimation u/s 143(1) is not an assessment order there is no change of opinion and reopening is valid beyond four years. (ii) The Hon ble Delhi High Court in the case of OPG Metals and Finsec Ltd v. CIT, 358 ITR 144 has held that reassessment is valid if the issue is not a subject matter of earlier assessment. Same view was also taken by High Court of Bombay in the case of Export Credit Guarantee Corporation of India Ltd v. Addl.CIT (30 taxmann.com 211) (2013) that reopening of an assessment is permissible even in the case of scrutiny u/s 143(3) originally when the original assessment order pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t did not uncover, is not a good reason for striking down reopening. (viii) The Hon ble High court of Mumbai in the case of Export Credit Guarantee Corporation of India Ltd v. Addl.CIT(30 taxmann.com 211) (2013) has held that there is no failure on the part of assessee to disclose material facts but there is complete failure on the part of the AO to apply his mind during original assessment to points on which assessment is reopened, reopening was treated as valid. It is further to be understood that when it is the question of non application of mind whether it is for four years or more makes no difference. (ix) Notwithstanding anything stated above, it is the prerogative of the AO/Revenue to reopen the assessment if the AO has found in the course of time that certain amounts which should have been brought to tax have escaped assessment. The powers were clearly enacted u/s 149 r.w.s. 151 of the Act. As per these provisions what the AO is supposed to see is whether there is an escapement of income and whether it is within four years or beyond four years and whether it is a case of 143(1) or 143(3) so as to take approval from his appropriate senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such there is no change of opinion. The reopening proceedings are, therefore, upheld and the ground is dismissed. 5.2 I have carefully considered the facts of the case and submissions of the Ld. AR I have also gone through the decisions relied on by the Ld. AR. As seen from the facts of the case the AO has reopened the assessment based on the information received from the DIT(Inv.), Mumbai on the basis of search and seizure action conducted by the investigation wing during the course of which Bhanwarlal Jain and his staff members have given categorical statements clearly stating the modus operandi followed by them in providing the accommodation bills. They have also admitted unequivocally before the investigation wing that they were not involved in any real trading of diamonds except giving bogus bills to those who need them for certain commission. Having observed that those parties are non-existent sellers and they have not made any sales except the bogus invoices issued in their name, the AO has brought to tax the entire bogus purchases standing in the names of the so-called sellers, u/s 69C of the Act as the explanation given by the appellant was not satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee] . (emphasis supplied). 5.2.1 With regard to the information received from DIT(Inv.), Mumbai the summary of the communication was already passed on to the appellant while communicating reasons for reopening. The AO could not have also passed on a copy of such statement since it is a comprehensive statement detailing the names of several bogus concerns flated by them and the modus operandi of their activities, including that of the concerns in whose names accommodation bills were given to the appellant company. Even though Bhanwarlal Jain group has not mentioned the names of the appellant in their statements, they have given the names of various concerns in whose names the invoices were given as mentioned elsewhere in this order and those names are appearing in the books of the appellant. Therefore, the link between the bogus concerns flated by the appellant in the names of the said bogus concerns, is established. Even though the AO could not prove substantively that the amounts given to the sellers in cheque form have come back to the appellant, the activities of accommodation entries in the trading community is not unheard of . Further, the disturbing f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd such a restraint advised by the Hon ble Gujarat High court in the case of Simit P Seth (supra) without which avoiding payment of levies will continue unabated. Keeping in view the above instruction of the Board on the one hand and the saving gained by the assessee by involving in accommodation entries to the extent of levies on the other, I find it appropriate to take 3% of the reported bogus purchases for adding u/s 69C instead of adding 12.5% as the rate of 12.5% suggested in the case of Simit P sheth was in the context of a different business. The AO is directed accordingly. In view of this the ground is partly allowed. 5. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that the Ld. AO has made additions towards alleged bogus purchases @ 12.50% of such purchases, on the ground that the assessee is one of the beneficiary of accommodation entries of bogus purchase bills issued by Bhanwarlal Jain Group through web of companies. According to the Ld. AO, although the assesee has filed certain basic evidences, including purchase bill and payment proof against said purchase through ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% on total alleged bogus purchases. In this case, the assessee is into the business of diamond trading. The profit element in diamond trading is around 2 to 3% depending upon nature of trade. Even, the BEP had recommended profit percentage of 2% in case of trading and 3% for manufacturers. The ld. AO, considering the nature of business of the assessee had estimated 12.50% profit, whereas the Ld.CIT(A) has scaled down estimation of profit to 3% on total alleged bogus purchase. Although, both authorities have taken different rate of profit for estimation of income from alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases. On the other hand, the assessee had also failed to file any comparable cases to support its arguments for lessor gross profit rate. Therefore, considering facts and circumstances of this case and consistent with view taken by the Coordinate Bench in number of cases, we are of the considered opinion that the ld. CIT(A) has taken one of the possible method for estimation of profit to settle dispute between the parties and also considering nature of industry and BEP rate has scaled down profit esti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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