TMI Blog2022 (12) TMI 1439X X X X Extracts X X X X X X X X Extracts X X X X ..... Year (AY) 201314, filed by the different assessees and Revenue, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals), Surat which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. At the outset, Learned Counsel for the assessee, informs the Bench that appeal filed by the Revenue in ITA No. 65/SRT/2019 for AY. 2013-14, in the case of Shri Parag Nareshbhai Mehta, is not maintainable in the eye of law as the tax effect involved in this appeal of the Revenue is Rs. 48,68,030/-, which is below the monetary limit prescribed by Central Board of Direct Tax (in short the CBDT ) in Circular No. 17/2019, dated 08.08.2019. Therefore, Ld. Counsel contended that said appeal of the Revenue should be dismissed on account of low tax effect. 3. Learned DR for the Revenue has fairly agreed that appeal filed by the Revenue in ITA No. 65/SRT/2019 for AY. 2013-14, is covered by tax effect. 4. We have heard both the parties. We note that CBDT has issued Circular No. 17/2019 dated 08.08.2019, whereby the monetary limits for fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Thakar. (vi) ITA No. 170/SRT/2021, AY. 2013-14, Assessee s appeal Mayur Asheshbhai Joshi 9. In these above remaining cross appeals, the issue involved is that assessing officer made 100% addition of bogus purchases holding that assessee made purchases from Shri Gautam Jain/Dharmichand Jain Group concerns, without actually getting the material, therefore bill issued by these said group concerns are nothing but accommodation entry. On appeal by assessee, the Ld. CIT(A), by following the judgment of jurisdictional High Court in the case of M/s. Mayank Diamond Pvt. Ltd., 11 TMI 812 (Guj.), has restricted the addition at the rate of 5% of bogus purchases. While restricting the addition at the rate of 5% of bogus purchases, the Ld. CIT(A) also relied on the judgment of jurisdictional ITAT, Surat and Ahmedabad. 10. Aggrieved by the order of Ld. CIT(A), the assessee as well as Revenue are in appeal before us. 11. The Ld. Counsel for the assessee states before the Bench that in the case of M/s. Sonu Dharmichand Bafna (in ITA No. 167/SRT/2021 for AY. 2013-14), Vajendra Jagjivandas Thakkar, in ITA No. 168/SRT/2021 for AY. 2013-14 and Mayur Asheshbhai Joshi, in ITA No. 170/SRT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder medical treatment due to liver cirrhosis problem critically about 5 to 6 years, and due to this, I internally disturbed and also my business was almost stopped. Hence, I have shifted to Mumbai for my medical treatment. Hence, I was unaware about the CIT(A) order, when the hearing date was fixed on board and My 'AR' had requested for the details and inform me about department appeal, thereafter, inquired and file my Appeal before the Hon'ble ITAT, Surat against the CIT(A) Order. Hence, necessary arrangement could not be made for filing of appeal before Hon'ble ITAT, Surat in time. Copies of my medical papers are herewith. In view of the above facts, it is clear that is the delay in submission of the appeal is due to good and sufficient reasons, therefore, I pray that the delay in filling the appeal should be condoned and the appeal should be treated as filled within the allowed time. 13. The contents to the petition filed by the assessee in the case of Mayur Asheshbhai Joshi, in ITA No. 170/SRT/2021, is reproduced below: I have filed an appeal under section 253(1) of the Income Tax Act, 1961 on 01.10.2021 vide ITA No. 170/SRT/2021 against the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue argued that these assessees have not explained the sufficient cause for delay in filling these appeals and the reasons mentioned by these assessees in their respective petition for condonation of delay, do not show sufficient cause. None of the assessee has explained the delay in a satisfactory manner, therefore delay should not be condoned and appeals of these assessees should be dismissed. 16. We have heard both the parties on this preliminary issue. We note that Shri Vrajendra Jagjivandas Thakkar, who was the main person to handle taxation matter, has been in continuous ill situation for 6 years. Shri Vrajendra Jagjivandas Thakkar, is also co-director in many private limited companies therefore other assessee`s appeals also could not be filed, as he was the main person who was handling income tax matters of the group companies. Since Shri Vrajendra Jagjivandas Thakkar, was under medical treatment due to liver cirrhosis problem critically about 5 to 6 years and for medical treatment he has shifted to Mumbai, hence these appeals could not be filed on time. Before us Ld. Counsel submitted medical reports and medical certificates relating to Shri Vrajendra Jagjivandas T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case as well as law on the subject, the learned commissioner of the income Tax (Appeals) has erred in confirming the addition of Rs. 1,43,44,171/- on account of disallowance of purchases restricted to 5% out of alleged unverified purchases. 3. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in estimating of 5% disallowance of purchase out of alleged unverified purchases. 4. It is therefore prayed that the above addition may please be deleted as learned members of the Tribunal may deem it proper. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal. 21. Succinct facts are that during the course of assessment proceedings, it was noticed by Assessing Officer that the assessee has made transactions with the entities of Gautam Jain Group. The Assessing Officer was in possession of information that a search and seizure action has been carried out by the Investigation Wing, Mumbai on the Gautam Jain Group which was indulged in providing of accommodation entries in the form of unsecured loans, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed as expenses in its profit and loss account are not genuine. In view of the above discussion and the defects pointed out, the books of accounts of the assessee were rejected u/s 145(3) of the Act. In the facts and circumstances, it is clear that the assessee had only obtained the bill from M/s Rajan Gems (Prop. Dhamendra Babel) amounting to Rs. 18,97,69,219/- and M/s Rajat Diamond Pvt. Ltd. amounting to Rs. 9,71,14,206/- totaling to the tune of Rs. 28,68,83,424/- which were Shri Gautarn Jain group concerns without actually getting the material. Thus, the bill issued by the said group concern is nothing but accommodation entry. Hence, the accommodation entry received from totaling to the tune of Rs. 28,68,83,424/- was treated as bogus purchases and added to the total income of the assessee. 23. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has restricted the addition at the rate of 5% of the bogus purchases, observing as follows: 7.4.4 It is further seen that the Honourable Gujarat High Court in the cases decided subsequent to N K Proteins Ltd (supra) has not followed it, viz in the cases of Jagdis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of M/s. Mayank Diamond Pvt. Ltd. (supra) does not apply to the assessee under consideration, as in the case of M/s. Mayank Diamond Pvt. Ltd. (supra), the addition was made at the rate of 5% of profit and it was not the addition on bogus purchases at the rate of 5%. Therefore, the judgment of the Hon`ble Gujarat High Court in the case of Mayank Diamond Pvt. Ltd. (supra) is distinguishable on facts and it does not apply to the assessee under consideration, as in the case of the assessee, there is an issue of bogus purchases which is a different issue altogether. Therefore, Ld. DR prayed the Bench that disallowance should be restricted at the rate of 100% of bogus purchases. 26. On the other hand, Shri P. M. Jagasheth, Ld. Counsel for the assessee pleaded that assessee has submitted each and every documents to substantiate its case. The transactions were through banking channel and the assessee has submitted ledger account, bills and vouchers, and the assessee also maintains stock details, therefore there should be no addition in the hands of the assessee. The Ld. Counsel further stated that some of the assessees may be engaged in bogus purchases, however these assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding 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 the ultimate profit. No stocks of diamonds were found at the time of search on Bhanwarlal Jain Group. The assessee has shown a very meagre gross profit (GP) @ 0.78% and not net profit (NP) at 0.02%. The ld. CIT(A) restricted the addition to the extent of 12.5% which is on the lower side. The ld. CIT-DR for the revenue prayed that disallowance made by the AO may be upheld or in alternative submitted that it may restricted at least @ 25%, keeping in view that the NP declared by the assessee is extremely on lower side. 13. On the validity of reopening, the ld.CIT-DR for the revenue submits that the AO received credible information about the accommo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. The AO has not disputed the sales of assessee. No sale is possible in absence of purchase. The books of accounts were not rejected. The AO made the disallowance of entire purchases. The assessing officer not provided cross examination of the alleged hawala dealers. The disallowances sustained by the Ld. CIT(A) @ 12.5% of the impugned purchases, is on higher side and deserve to be deleted in total. The ld.AR of the assessee submits that entire purchases shown by assessee are genuine. In without prejudice and alternative submissions, the Ld. AR for the assessee submits that in alternative submission, the disallowance may be sustained on reasonable basis. To support his various submission, the ld.AR for the assessee is relied upon case laws: 1 M/s Andaman Timber industries Vs Commissioner of Central Excise, CIVIL APPEAL NO. 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. TTA NO. 1297 OF 2015 (Bombay High Court) 5 Shilpi Jewellers Pvt. Ltd. vs. Union of India Ors. WRIT PETITION ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is beneficiary of the accommodation entry operators. The accommodation entry provider admitted before investigation wing that he has 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. 18. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on first appeal before CIT(A) the disallowances were maintained. However, the Tribunal gave partial relief to the assessee directing to sustain the addition @12% of such bogus purchases. And on further appeal, the Hon'ble High Court sustained Gross Profit Rate @ 5% being average rate of profit in industry. 20. Now adverting to the facts of the present case, the ld.CIT(A) held that in some other similar cases; though he had sustain 5% of Gross Profit Rate, considering the fact that where Gross Profit shown by those assessee s are more than 5%. However, in the present case, the assessee has merely shown Gross Profit Rate only at 0.78% of turnover, accordingly, the ld. CIT(A) was of the view that disallowance of 12.5% of impugned purchases/bogus purchases would be reasonable to meet the end of justice. 21. We have seen 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 onl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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