TMI Blog2023 (9) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short the ld. CIT(A) ], National Faceless Appeal Centre (in short the NFAC ), dated 16.06.2023, which in turn arises out of an assessment order passed by Assessing Officer u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act ), dated 27.03.2015. 2. The grounds of appeal raised by the assessee are as follows: (I) Reopening of Assessment: (1) The learned CIT(A) was not justified in confirming reopening when the necessary conditions for valid reopening were not satisfied. (2) The appellant further submits that reopening is also not justified as the assessment was reopened based on opinion of DDIT the retracted statement. (3) On the facts and circumstances of the case and laws, the reopening is required to be quashed. (II) Addition on Account of Bogus Purchases of Rs. 23,93,599/- (1) The learned CIT(A) was not justified in confirming the addition at 25% of bogus purchase from the Rajendra Jain Group on the basis of statement on Rajendra Jain by relying on the factually inapplicable decision in case of Vijay Proteins Ltd. (58 taxma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Surat Bench of ITAT is upholding the addition in case of bogus purchases, at the rate of 6%, therefore in the assessee s case under consideration, the addition may be sustained at the rate of 6% of the bogus purchases. 7. I have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. I note that Learned Counsel for the assessee submitted that the present appeal is squarely covered by the order of the Tribunal, wherein the Tribunal has sustained the addition at the rate of 6% of bogus purchases. Therefore, I see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in the case of Pankaj K. Chaudhary, in ITA No.1152/Ahd/2017, order dated 27.09.2021.In this order, the Tribunal has inter alia observed as follows: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Bhanwarlal Jain Group. No specific information about the accommodation entry obtained by assessee was received by AO. There is no live link between the reasons recorded qua the assessee. Therefore, the re-opening is invalid and all subsequent action is liable to be set aside. 15. On account of additions of bogus purchases, the ld.AR submits that in the original assessment, the assessee filed its complete details of purchases to prove the genuineness of expenses. The AO accepted the same in the assessment order passed under section 143(3) on 10.03.2009. During re-assessment, the assessee again furnished complete details about the genuineness of purchases. The assessee filed confirmation purchases invoices, accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is not applicable on the facts of the present cases. 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. 17. We have considered the submissions of the parties and have gone through the order of the lower authorities. We have also deliberated on each and every case laws relied by both the parties. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5%. The AO made of 100% of purchases shown from the hawala dealers/ entry provider namely Bhanwarlal Jain. We find that the AO while making additions of 100%, of disputed purchases solely relied on the report of the investigation wing Mumbai. No independent investigation was carried by the AO. The AO has not disputed the sale of the assessee. The AO made no comment on the evidences furnished by the assessee. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.68 Crore. However, in the present case the assessee has declared the GP @ 0.78%. It is settled law that under Income-tax, the tax authorities are not entitled to tax the entire transaction, but only the income component of the disputed transaction, to prevent the possibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @ 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. 22. In the result the appeal of revenue is dismissed and the appeal of the assessee is partly allowed. 8. As the issue is squarely covered by the decision of the Coordinate Bench, in the case of Pankaj K. Chaudhary (supra) wherein Tribunal held that in respect of bogus purchases, the addition @ 6% of bogus purchases is fair and reasonable. There is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra). I find no reason to interf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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