TaxTMI 
TaxTMI 
2022 (1) TMI 585
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....s consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 1239/Ahd/2017 for assessment Year 2007-08, have been taken into consideration for deciding the above appeals en masse. 3. The grounds of appeal raised by the assessee in lead case in ITA No. 1239/Ahd/2017 for AY.2007-08 are as follows: "1. On the facts and in the circumstances of the case as well as on the subject, the ld. Commissioner of income Tax (Appeals) has erred in confirming the action of assessing officer in reopening assessment by issuing notice u/s 148 of the I.T. Act,1961. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of income Tax (Appeals) has erred in partly confirming the action of assessing officer in disallowing purchases by sustaining addition to the extent of 5% of unverifiable purchases. 3. It is therefore prayed that above additions made by assessing officer and confirmed by Commissioner of Income-tax (Appeals) may please be deleted." 4. The grounds of appeal raised by the Revenue for AY.2007-08 are as follows: "1. On the facts and circumstances of the case and ....
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....ded were communicated to the assessee, vide assessing officer letter no.F. No. SRT/ACIT/CIR-0/AE/2014-15 dated 02.06.2014. 6. In response to the notices issued under sections 148/143(2)/142(1), the assessee, vide his letter darted 08.04.2014, stated that the return of income filed under section 139(1) of the Act, by the assessee-firm, may be treated as return of income filed in response to notice under section 148 of the Act for assessment year 2007-08. In this case, a letter bearing No. DGIT(Inv)- II/Information/Diamond/2013-14 dated 14.03.2014, alongwith enclosures was received by assessing officer from the Director of Income Tax (Investigation)-II, Mumbai, through the Commissioner of income Tax-III, Surat and the Addl. Commissioner of Income Tax, Range-9, Surat. The said letter contained details of accommodation entries of bogus purchase, sales, unsecured loan, share capital etc., given by Shri Rajendra Jain Group, Shri Sanjay Choudhari Group and Shri Dharmichand Jain Group of Mumbai, a leading entry provider. A search and seizure action was carried out by the Investigation Wing, Mumbai in the Shri Rajendra Jain group cases on 03.10.2013, which resulted in collection of evide....
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....tements of all the persons recorded during the course of search revealed that this group was engaged in giving accommodation entries and this fact has also been admitted by the employees, the dummy partners/dummy directors/dummy proprietors of the entities of this group as also by Shri. Rajendra Jain Group, Shri Sanjay Choudhari Group and Dharmichand Jain Group of Mumbai. The investigations made by the investigation wing revealed that actual importers of rough diamonds import part of their diamond requirement through benami entities operated by Shri Rajendra Jain Group, Shri Sanjay Choudhary Group and Dharmichand Jain Group of Mumbai and their benami concerns Group, which ensures benefit of suppression of turnover, profits and capital requirement of the former. The consignments are sent on credit by the suppliers in the names of these benami entities at the instance of the actual importers and on receipt of the imported consignments from Customs, through CHA, the consignment is handed over to the actual importer and the bogus stock is entered in the books of the benami entities and the same is not recorded in the books of the actual importer. These benami entities of Shri Rajendra ....
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....ase amount to Rs. 17,99,86,565/- as per ledger accounts confirmations. Hence unverifiable purchases for a 2008-09 is to be adopted Rs. 17,99,86,565/-.The disallowance is restricted to 5% of the impugned purchases for the assessment years in appeal as per table below: Assessment Year Unverifiable purchases Disallowance confirmed 2007-08 2,11,90,740/- 10,59,540/- 2008-09 17,99,86,565/- 89,99,328/- 2013-14 7,80,47,828/- 39,02,390/- 11. After correcting these typographical errors, the disallowance confirmed by ld CIT(A) should be read as follows: Assessment Year Unverifiable purchases Disallowance confirmed 2007-08 8,47,62,961/- 42,38,148/- 2008-09 17,99,86,565/- 89,99,328/- 2013-14 7,80,47,828/- 39,02,390/- 12. Aggrieved by these additions, both Assessee and Revenue, are in appeal before us. The Solitary grievance of the assessee in these appeals are that additions sustained by ld CIT(A) at the rate of 5% of unverifiable purchases should be deleted. However, the Solitary grievance of the Revenue is that additions made by the assessing officer should be upheld. 13. Shri Sapnesh Sheth, Learned Counsel for t....
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....o have been rejected and GP estimated. 16. They also submitted before the Bench that assessing officer has recorded the reasons as per the provisions of section 147 of the Act therefore, order passed by the assessing officer should be upheld. 17. We have heard both the parties and perused the material available on record. We note that assessee has challenged the validity of reopening of assessment u/s 147/148 of the Act. Therefore, first of all, let us examine the reasons recorded by the Assessing Officer which is placed at page no. 91 of the assessee`s paper book, which is reproduced below: "Name of the assessee: M/S. AMRUT EXPORTS A.Y.: 2007-08 Reason recorded under section 148(2) of the Income -Tax Act Search action was carried out by the investigation wing, Mumbai on various groups which are involved in providing accommodation entries by way of issuing non-genuine bills/loans. On examination of the above information, I have reason to believe that my above named assessee is a beneficiary of non-genuine transaction of Rs. 84262961/- from following parties during the year under consideration: Sr. No. Name of the party Total transaction ....
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.... the examination he makes or from any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he has reason to believe that such income had escaped assessment. The justification for his belief is not to be judged from the standards of proof required for coming to a final decision. A belief though justified for the purpose of initiation of the proceedings under section 147, may ultimately stand altered after the hearing and while reaching the conclusion on the basis of the intervening enquiry. At the stage where he finds a cause or justification to believe that such income has escaped assessment, the Assessing Officer is not required to base his belief on any final adjudication of the matter. Therefore, we find merit in the submission of the Ld. D.R. that there is no any infirmity in the reasons recorded by the Assessing Officer. Learned Counsel also submitted that in assessee's case, the reassessment proceedings under section 147 of the Act were initiated after four years from the end of the assessment year 2007-08; and the assessee has disclosed fully and truly all material facts ....
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....d 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 accommodation entry provided by Bhanwarlal Jain Group. The assessee is one of the beneficiaries, who had availed accommodation entries from such hawala trader. 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), ....
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....t 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 VsCommissioner 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. TTANO. 1297 OF 2015 (Bombay High Court) 5 ShilpiJewellers 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. 1....
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....s 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 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 ent....
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....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 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 ....