TMI Blog2022 (3) TMI 1338X X X X Extracts X X X X X X X X Extracts X X X X ..... ished by assessee. The sales of assessee was not disputed. No sale is possible in absence of purchases. The Assessing Officer estimated addition on account of purchases without rejecting books of accounts of assessee. CIT(A) restricted to addition to the extent of 12.5% of the total purchase shown by taking view that the assessee shown G.P of less than 1.15% .In our view the disallowance restricted by Ld. CIT(A) is on higher side. The profit margin in the industry is 5% to 7%. It is settled law in case of disputed purchases shown from such hawala dealers on the profit element embedded to avoid the possibility of revenue leakage is to be disallowed. No doubt made the assessee has shown extremely low G.P i.e. 1.15% only, yet the disallowance at rate of 12.5% is on higher side. This combination is similar cases, wherein the purchases are shown from Bhawarlal Jain for providing accommodation entry, have restricted or enhanced the addition to the extent of 6% of impugned or disputed purchases. Therefore, taking the consistent the disallowance of purchases in the present case is also restricted to 6% of the disputed purchases. In the result, the grounds of appeal raised by assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases as income of the assessee as assessee reduced his income to this extent by inflating his purchases by this amount in his P L account. 3. On the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has erred in accepting the plea of the assessee to estimate the profit at 12.5% of the bogus purchase on the basis that proper books of accounts and stock register were maintained without considering the fact that no such books of accounts and documents were produced before Assessing Officer. CIT(A) did not give any opportunity to the Assessing Officer to rebut the contention of the assessee raised before him and relied upon the judicial pronouncements, facts of which are different from the instant case. 3. Brief facts of the case are that the assessee is engaged in the business of import, export and trading of cut and polish and rough diamonds. The assessee filed his return of income for Assessment Year 2009-10 declaring total income at ₹ 1,17,752/- on 29.08.2009. The case was selected for scrutiny. The case was reopened on the basis of information received from DGIT (Investigation) Mumbai. In the information received from Investigation Wing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on entries. The investigation team also provided the list of beneficiary of such accommodation entry. From the list of purchase provided to the Assessing Officer, the assessing officer identified entities i.e Rose Gems Pvt Ltd from which the assessee has shown purchase of ₹ 8,10,56,469/-. 6. On the above observation the assessing officer issued show cause notice as to why the purchased should not be disallowed and added to the income of the assessee. The assessee filed its reply to the said show cause notice vide his reply dated 24.02.2015. In the reply, the assessee submitted that he has not dealt with Sh. Bhawarlal Jain Group and he don t even known him as far as the transaction of purchases of goods are concerned. The assessee has purchased the goods from the parties shown in the show cause notice, during the year under scrutiny, from their respective partner/proprietor. There is no corroborative evidence to prove that the assessee has taken accommodation entry from such concerns. The copy of the statement of Sh. Bhawarlal Jain is not provided to the assessee. No cross examination of Sh. Bhawarlal Jain is allowed. The assessee stated that the Assessing Officer is merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,56,469/- at bogus purchases. 8. Aggrieved by the addition, as well as against the validity of reopening the assessee filed appeal before CIT(A). Before ld. CIT(A), the assessee reiterated the similar submission as made before Assessing Officer. Before ld. CIT(A), the assessee reiterated the similar submission on the additions of purchases as made before Assessing Officer. On the validity of reopening, the assessee specifically stated that the purchases made by the assessee are genuine and that the information to the assessing office was vague. The assessing officer has not disclosed that he obtained permission of Commissioner for reopening. The assessee also requested for cross examination of third party, on the basis of which the additions/disallowance of purchase were made by Assessing Officer. The assessee also relied on certain case laws. 9. The ld. CIT(A) after considering the submission on the validity of reopening held that AO relied on the report of Investigation Wing without furnishing copy of material relied upon to the assessee. The ld.CIT(A) concluded that in holding assessment as invalid for the above reason without going into merit would be amount to give und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein the Gross Profit (G.P) shown by similar cases of more than 5%, the ld. CIT(A) confirmed the addition to the extent of 5%. However in the present case, the assessee has shown GP rate of 1.15% of turnover. Accordingly, the ld. CIT(A) restricted the disallowance to the extent of 12.5% impugned purchase/disputed purchase. Aggrieved by the restricted addition of 12.5%, the assessee has filed present appeal before us. Similarly, the revenue has also challenged the action of Ld. CIT(A) in sustain the addition to the extent of 12.5%. 12. We have heard the submissions of Learned Authorized Representative (ld. AR) for the assessee and Learned Departmental Representative (ld. CIT-DR) for the Revenue and have gone through the order of lower authorities. Ground No.1 relates to validity of reopening under section 147/148. The Ld. AR for the assessee submits that the AO reopened the case of the assessee on the basis of third party information without making any preliminary investigation. The AO received vague information about providing accommodation entry by Bhanwarlal Jain Group. No specific information about the accommodation entry obtained by assessee was received by AO. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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. 15. 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). 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AHD/2017 4 The PCIT-5 vs. M/s. Shodiman Investments Pvt. Ltd. TTANO. 1297 OF 2015 (Bombay High Court) 5 Shilpi Jewellers 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 17. On the other hand, ld. CIT-DR for the revenue supported the order of Assessing Officer. The ld. CIT-DR for revenue submits that investigation wing of the department has made full-fledged investigation during the search action on Bhawarlal Jain and its group. The investigation wing investigated about the beneficiary of accommodation entry provided by Sh. Bhawarlal Jain. The assessee is one of the beneficiary of such purchases/accommodation entry. No stock of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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