TMI Blog2020 (7) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion as to the nature of the assessment order after perusal of the assessment order and assessment record, and consequently cannot it be said that the action was taken by the learned PCIT was on the borrowed satisfaction. We expressed our opinion that the assessment order does not indicate that AO had examined the genuineness of the purchase transaction in the light of the audited accounts of the assessee. More particularly the fact that out of the alleged purchasers of ₹ 69,75,369/- , there was payment to the suppliers only to the extent of ₹ 14 lakhs and the balance amount of rupees. 55,75,369/- was shown to have been outstanding goes unverified and the assessment order is silent on this aspect. Order passed under section 263 of the Act clearly shows that the learned PCIT had examined the record and reached a reasonable conclusion that this non-examination of the genuineness of the purchases to apply the law laid down by the Hon ble Gujarat High Court in the case of NK Proteins 2016 (6) TMI 1139 - GUJARAT HIGH COURT renders the impugned assessment order as erroneous insofar as it is prejudicial to the interest of revenue. It cannot, therefore, be said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai. learned Assessing Officer says that the said persons are entry providers operating in Mumbai, indulging in providing accommodation entries in the nature of bogus sales and unsecured loans. In his statement recorded under section 132 (4) on 5/10/2013 and 5/12/2013, Mr Rajendra Jain admitted to have been engaged in the business of bills shopping to all the concerns and were merely lending names of their various concerns to the real importers of diamonds who takes the actual delivery of diamonds. Such a statement of Rajendra Jain was corroborated by Mr Anup Jain also. 3. Consequently, notice under section 148 of the Act, was issued. By way of letter dated 6/12/2017 the assessee stated that the return filed showing the income of ₹ 30,81,760/- on 6/12/2017 may be treated as the return in response to the notice under section 148 of the Act. Notices under section 143 (2) and 142 (1) of the Act were issued. Having considered the submissions made by the assessee, learned Assessing Officer recorded that, the assessee offered to treat the transaction with the above persons, in terms of the decision of the Income Tax Appellate Tribunal in the case of Vishal diamonds dated 24/9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases or the entire purchases are to be disallowed and added back in terms of the decision of the Hon ble Gujarat High Court in the case of NK Proteins Ltd VS.DCIT, in appeal number 240 of 2003 vide order dated 20/6/2016. According to the ld. PCIT, the learned Assessing Officer made a pure presumption without any evidence that the purchases would have been actually made from grey/cash market without realising the fact that in that case also, the entire cash investment in such purchases remain unexplained and thus needs to be added fully under section 68 and 69C of the Act. 8. According to the PCIT, in the absence of any evidence to show that such purchases were actually made from some other source, the entire purchases have to be disallowed. He, therefore, recorded that not considering the latest decision on the aspect in the case of NK Proteins Ltd(supra) by the Hon ble Gujarat High Court and the dismissal of SLP against the judgement by the on Hon ble Supreme Court renders the assessment order erroneous and levying only 14.35% of the bogus purchases instead of disallowing the entire expenditure in that respect, makes it prejudicial to the interest of revenue. He, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading, wherein it is stated that if an assessee has shown a sum equal to higher than 6% of the total turnover from such business as his income under the head Profit and Gains of Business or Profession for a particular assessment year, the learned Assessing Officer shall accept the trading result. 10. Per contra, Ld. DR placed reliance on the Explanation that has been inserted in section 263 of the Act by Finance Act, 2015 with effect from 1/6/2015 and also the decisions of the Hon ble Supreme Court in the case of Daniel Merchant Private Limited VS.ITO dated 29/11/2017, Raj Mondir Private Limited VS.PCIT (2017) Taxman.com 285 (SC), Manjunatheswara Packing Products and Camphor Works VS.CIT (1998) to 31 ITR 53 (SC) and other High Court in support of his contention that where the learned Assessing Officer did not make any proper enquiry while making the assessment and accepted the explanation of the assessee, the direction given to the learned Assessing Officer under section 263 of the Act to carry out the detailed enquiry is sustainable. 11. He also placed reliance on the decision of the Hon ble Gujarat High Court in the case of NK Proteins Ltd (supra) and submitted that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment order dated, 21/12/2017 by the JCIT is the sole basis for exercise of jurisdiction under section 263 of the Act by the ld. PCIT. Forward of the case by the JCIT is only triggered the process of the ld. PCIT perusing the assessment order and assessment records to reach a conclusion that the order passed under section 147/143(3) of the Act was erroneous, insofar as it is prejudicial to the interest of the revenue. It is, therefore, clear that the learned PCIT reached an independent conclusion as to the nature of the assessment order after perusal of the assessment order and assessment record, and consequently cannot it be said that the action was taken by the learned PCIT was on the borrowed satisfaction. We therefore reject the first contention of the Ld. AR. 14. Now adverting to the next contention of the assessee that during the original assessment proceedings she had produced the relevant material, including confirmation from the suppliers along with the bank statement and had also offered explanation; whereas in the case of NK Proteins search was conducted at the premises of the company during which various incriminating material was found and seized his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases was not bogus, but the assessee actually made purchases, though not from the parties from whom such purchases were claimed to have been made, but purchased from grey market without proper billing or documentation so that only the profit element involved in such purchase transaction has to be brought to tax. Without making any further enquiry, as could be established from the record, learned Assessing Officer, even before posing such a question as to the quantum of the addition, recorded that the assessee has inflated the purchases by taking accommodation entry to reduce the profit element. 17. As a matter of fact, when the learned Assessing Officer reached a conclusion that the assessee took accommodation entries in respect of purchases, it is incumbent upon the learned Assessing Officer to refer to the audited accounts of the assessee and also the closing stock register to say that the entire transaction is not a bogus one, but only the bills work purchased from grey market, whereas the purchase was a genuine one. It is only when the learned Assessing Officer records the fact with reference to the accounts of the assessee that in fact the purchases took place correspon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omeone else at obtained the purchase bills by way of accommodation entries only to inflate the purchases by way of such accommodation entries, and therefore, only the profit element involved in such process has to be brought to tax. For these reasons, we are unable to accept that having considered the audited accounts of the assessee the learned Assessing Officer returned any finding as to the acceptability of the purchases or the genuineness of the purchase as a whole and in the absence of any reasons recorded by the ld. Assessing Officer, it is difficult for us to believe that the purchases are genuine, but only the purchase bills were obtained by way of accommodation entries, so that not the entire amount covered by the purchases, but only the element of profit involved therein, is liable to be taxed. 20. Learned PCIT recorded that it is not a case of two possible views as it was admitted by both the learned Assessing Officer and the assessee that the purchases were bogus, as the parties from whom the bills were taken, were accommodation entry providers and in such case, in the absence of any proof that the purchases were actually made from some other source, but the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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