TMI Blog2022 (7) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... 14-15, are directed against the common order passed by the Learned Commissioner of Income Tax(Appeals)-1, Surat, [ CIT(A) for short] dated 11.12.2019, which in turn arise out of common assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short the Act ), dated 28.12.2016. 2. First, we shall take Revenue s appeal (in ITA No.60/SRT/2020). The grounds of appeal raised by the Revenue are as follows: (i) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in amending assessment order of the AO holding net unverifiable purchases from the impugned parties to the extent of Rs.22,98,65,125/- only whereas the assessee was engaged in bogus purchase from six concerns controlled by the entry providers to the extent of Rs.27,93,74,602/-. (ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has failed to appreciate the fact that the entire purchase from alleged concerns to the extent of Rs.27,93,74,602/- were bogus and was only to suppress the profit of the beneficiaries which is substantiated by the statement on oath given by the entry provider. (iii). Without prejudice to Grounds No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 27,93,74,602/- During the search proceedings in the case of Shri Rajendra Jain Group statement on oath were recorded of Shri Rajendra Jain and in his statement he admitted that above mentioned concerns are run and operated by him and the concerns are paper concerns with no actual business of any kind in diamond trading. The purchases of diamonds from above mentioned concerns were found to be non-genuine, therefore a show cause notice dated 02.12.2016 was issued to the assessee- firm as to why the bogus purchases of Rs.27,93,74,602/- should not be added to total income for the A.Y 2014-15. In response to the show cause notice, the assessee firm has replied vide letter dated 22.12.2016. After considering the submission of assessee, the assessing officer has observed (finding were given in para 7.5 to 7.7 of the assessment order), as follows: (i) Evidently, the assessee had adopted a modus operandi to reduce its true profits by inflating its expenses including purchase expenses by taking accommodation entries from such parties. The Income Tax Department has conducted search seizure action in the case of Group co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons to factorize for profit earned by assessee against possible purchases in grey market. The Hon ITAT has relied upon the decision of Hon Bom HC in the case of Moammed Hajai Adam ITA No.10004 of 2016 dtd 11/02/2019 where in the Hon HC distinguished the decision of Hon Guj HC in NK Industries Supra. 8.2.10 In the instant appeal, there is no such adverse findings as in the case of N K Proteins (supra). The facts in instant appeal are identical to Gangani Impex (supra) and the cases decided by the jurisdictional ITAT (supra).In view of this, respectfully following jurisdictional ITAT, the disallowance is restricted to 5%. The AR has furnished orders Hon'ble ITAT Mumbai, Delhi and Kolkata wherein an identical circumstances factual matrix involving the same accommodation entry providers th9e entire disallowance made by Ld. AO was deleted (Sanghvi Export International Ltd. ITA No.3305, 3375/Mum/2017 dt.21.08.2018, Kareamchandra Rubber Industries ITA No.6599/Del/2014 12.02.2018 M/s Vaman International Pvt. ITA 1040 1041/M/2017 dtd 27.09.2017, Fancy Wear ITA No.1596/M/2016 dtd. 20.09.2017, Suraj Jewells Co. ITA No.1581/Kol/2016/ dtd.05.05.2017). The AR also furnished copies o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year are sold during the year as seen from the trading account. If the impugned purchases are treated as bogus, then the stock in hand will become negative from 26.06.2006 onwards and no sale is possible in absence of purchases. The AO relied on the statement of Bhanwarlal Jain recorded by Investigation Wing against, copy of purchase bill, copy of bank statement, showing payment, day to day stock register, incoming and outgoing diamonds and daily stock tally, confirmation of the impugned parties from whom the said purchases has been made, thus, the assessee practically furnished all possible evidences in support of his claim for purchases. Moreover all the payment are made by bank account. The AO has made no comments about these documentary evidences. On the aforesaid observation, the ld.CIT(A) concluded that assessment order suffer from incomplete investigation, lack of marshalling of all relevant facts and procedural loopholes. Similarly, the ld. CIT(A) also observed that there is no denying circumstances under which statement were made by Bhanwarlal Jain and the elaborate modus-operandi unearthed by Investigation Wing, Mumbai, which has created sufficient suspicion r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... typing mistake in the ground no. 2 of revenue s appeal wherein the assessing officer has mentioned the additions of 5% instead of 12.5% . 12. We have heard the submission of ld.CIT-DR for the Revenue and the ld. Authorised Representative (AR) of the assessee. We have also gone through the various documentary evidences furnished by assessee. The ld. CIT-DR for the Revenue supported the order of AO. The ld. CIT-DR submits that Investigation Wing, Mumbai made a search on Bhanwarlal Jain Group. During the search and after search, the Investigation Wing made a thorough investigation and concluded that Bhanwarlal Jain Group and his associates including his sons were indulging in managing about 70 benami concerns. The benami concerns were engaged in providing accommodation entries. The assessee is one of the beneficiaries of such accommodation entries. In the transaction of accommodation entries, the documentary evidences are created in such a way, so that the bogus transaction is looks like genuine transaction. In bogus transaction, the fabricated evidences are always maintained perfectly. The assessee has obtained accommodation entry only to inflate the expenses and to reduce th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. 4228 OF 2006 (Supreme 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 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. TejuaRohitkumar Kapadia [2018] 94 taxmann.com 325 (SC) 11 The PCIT-17 vs. M/s Mohommad Haji Adam Co. ITA NO. 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have also examined the financial statement of all the assessee(s) consisting of computation of income and audit report. We have also gone through the documentary evidences furnished in all cases. Ground No.1 in assessee s appeal relates to the validity of reopening. The ld AR for the assessee vehemently argued that the AO reopened the case of the assessee on the basis of third party information, and without making any preliminary investigation, which was vague about the alleged accommodation entry by Bhanwarlal Jain Group. And that there was no specific information about the accommodation entry availed by the assessee. There is no live link between the reasons recorded qua the assessee. We find that the assessee has raised objection against the validity of the reopening before the AO. The objections of the assessee was duly disposed by AO in his order dated 09.02.2015. The assessee raised ground of appeal before ld CIT(A) while assailing the order of AO on reopening. The ld CIT(A) while considering the ground of appeal against the reopening held that the AO has received report from investigation wing Mumbai, which indicate that the assessee is beneficiary of the accommodation en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. 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 Books of the assessee was not rejected by the AO. The ld CIT(A) on further examination of the facts and various legal submissions find that Ahmedabad Tribunal in Bholanath Poly Fab Private Limited (supra) held that in the such cases the addition of bogus purchases was sustained to the extent of 12%, on the observation that the assessee may have made purchases from elsewhere and obtained the bills from impugned supplier to inflate Gross Profit Rate. The ld CIT(A) by considering the overall facts, concluded that the 100% disallowance of purchase is not justified. We also find that the ld.CIT(A) also considered the decision of jurisdictional High Court in Mayank Diamonds Pvt. Ltd. (supra) and compared the fact of the present case with the facts in Mayank Diamonds Pvt Ltd (supra) and noted that assessee in that case was also engaged in the trading of polished diamonds. The ld CIT(A) noted that in that case the AO made disallowance of entire bogus purchase and on first appeal before CIT(A) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owances @ 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 grounds of appeal raised by revenue are dismissed. 9.As the issue is squarely covered by the decision of the Coordinate Bench, in the case of Pankaj Choudhary(supra), and there is no change in facts and law and the ld DR for the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench(supra), hence respectfully following the binding precedent, we allow Revenue`s appeal partly. 10. Before parting, we would like to make it clear that assessing officer made addition at Rs. 27,93,74,602/-. On appeal, ld CIT(A) restricted addition to 5% at Rs.1,14,93,256/- ( 5% of Rs.22,98,65,125). The ld CIT(A) ought to have restricted to 5% at Rs.1,39,68,730/- (5% of Rs.27, 93,74,602/-). This is typographical error, therefore we direct the assessing officer to consider correct figure while giving appeal effect of this order. 11. In the result, appeal of the Revenue is partly allowed in above terms. 12. Now we shall take assessee s appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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