TMI Blog2023 (1) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to the Assessment Year (AY) 2012-13, are directed against the common order passed by the Learned Commissioner of Income Tax (Appeals), [in short the ld. CIT(A) ], National Faceless Appeal Centre (in short the NFAC ), Delhi, which in turn arise out of an assessment order passed by the Assessing Officer under section 143(3) r.w.s 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act ), dated 16.12.2019. 2. Grounds of appeal raised by the Revenue (in ITA No.38/SRT/2022) are as follows: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition made on account of bogus purchases of Rs.2,50,25,283/- to Rs.62,56,320/- (25% of Rs.2,50,25,283/-). 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the fact that the assessee could not prove the genuineness of the purchase transactions during the assessment proceedings. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance of bogus purchase at 25% of total purchases instead of 100 % disallowance when the total purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department, Mumbai on 03.10.2013 From various incriminating documentary evidences collected and the statement recorded of Shri Bhanwarlal Jain, during the course of search, it is found that this group was in the activity of providing accommodation entries pertaining to bogus sales to various patties. As per list of details of bogus sales available with assessing officer, it was found that the assessee has received accommodation entries from concerns, namely, from Mark Gems, Mimixa Diam, Mother Exports, Naman Exports, Rahul Exports and Dax Diamonds to the tune of Rs.2,50,25,283/-. 6. Thus, there was reason to believe that income to the tune of Rs.2,50,25,203/- has escaped the assessment for A.Y.2012-13. With prior permission from Pr.CIT-2, Surat vides his letter no. SRT/Pr.CIT/HQ/147/ward 2(3)(7)/2018-19 dated 28/03/2019, notice u/s.148 of the IT., Act was issued on 29/03/2019 and duly issued on the assessee. In response to the notice, assessee filled return of income on 29.04.2019 of Rs 20,13,260/-. Reason for reopening was provided to the assessee. The following notices were issued upon the assessee through his registered email: Sr. No. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding entries found in the assessee's books. The chain is fully established leaving no doubt whatsoever. Shri Bhanwarlal Jain, in his statement recorded admitted that he used to only issue bogus bills of diamonds to the persons who approached him. Shri Bhanwarlal Jain also admitted in his statement recorded that whatever cheques received by him against those bills were deposited in his respective concerns of the bank account and after clearing equivalent amount of cash withdrawn and also after deducting his commission from the cash withdrawn, the remaining amount of cash was paid back to the persons. Here in the case of the assessee, it had allegedly purchases of diamonds to the tune of Rs.2,50,25,283/- from abovesaid concerns, which is controlled by Shri Bhanwarlal Jain. In this back drop of the case, the assessee has taken the plea that its purchases from the above parties were genuine as had made payment through account payee cheques. In this regard, it would be necessary to note that this argument of the assessee cannot be taken into believe since in various case laws it has been held that mere payment by account payee cheque is not sacrosanct nor can it make non-genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itative test to find out whether the onus in a particular case has been duly discharged. It all depends on facts and circumstances of the case as laid down in the decision of Guwahati High Court in the case of Assam Pesticides and Agro Chemicals vs. CIT reported In 227 ITR 384. 10. Therefore, the assessing officer concluded that assessee has failed to discharge its onus to prove that it had purchased diamonds. In view of the facts discussed above, it is very clear that the assessee had not actually made purchases of diamonds from the above mentioned concern but merely obtained bills from this concern to inflate its purchases by paying commission as stated by Shri Bhanwarlal M. Jain, in their statements recorded. Accordingly, an addition of Rs.2,50,25,283/- was made by the assessing officer and added to the total income of the assessee. 11. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has partly allowed the appeal of the assessee, observing as follows: .It is well known that if purchases are made from open market without insisting for the genuine bills, the suppliers may be willing to sell those pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or the assessee should have been held to be eligible for grant of deduction of a reasonable amount of purchase price of the oil cakes in question in view of the fact that receipts of the materials in question by the assessee were supported by various registers and books of account maintained by the assessee, which the Revenue has not disputed. The Revenue has also not disputed the genuineness of said documents. 14. On the basis of the entries recorded in the books of account of the assessee, the provisions of Section 40A(3) of the Act would not be applicable as such payments were shown to have been made by crossed cheques . If these entries are ignored, the books of account stand rejected u/s.145(2) and then the income will have to be estimated on the basis of best judgment. 15. It is by now well settled that in order to decide as to whether a particular payment for expenditure would be covered under the exceptions provided in Rule 6DD(j) or not will depend on the peculiar facts and circumstances of each case. In the present case, for reasons recorded herein above, the provisions of Section 40A(3) would not be applicable and even if they are held to be applicable, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amination of statement of Bhanwarlal Jain, was not provided to the assessee during the assessment stage, hence it is violation of principle of natural justice. Therefore, ld Counsel contended that based on these facts narrated above, the entire addition made by the assessing officer may be deleted. 14. On the other hand, Learned Departmental Representative (Ld. DR) for the Revenue submitted that first of all the assessee has not demanded before the assessing officer for opportunity of cross examination, hence there is no violation of principle of natural justice. Besides, ld DR pointed out that assessee`s case relates to Bhanwarlal Jain group cases, wherein the Tribunal has taken consistent stand and make the addition at the rate of 6% of bogus purchases. Further, Ld. DR also submitted that considering the facts of the assessee s case, the 100% of bogus purchases should be added in the hands of the assessee, therefore, Ld. DR reiterated the stand taken by the Assessing Officer and prays the Bench that addition should be made at the rate of 100% of bogus purchases. 15. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the assessee submits that he has challenged the validity of reopening as well as restricting the addition to the extent of 12.50% of the alleged bogus purchases. The ld.AR of the assessee submits during the assessment, the AO has not made any independent investigation. 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 Bhanw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellers 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 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that during the financial year under consideration the assessee has shown total turnover 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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