TaxTMI 
TaxTMI 
TaxTMI 
2022 (3) TMI 665
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....A) failed to consider that :- a) Without issuing notice in name of assessee reassessment proceeding cannot be initiated. b) Reassessment proceeding cannot be initiate after four years when assessee has disclosed all the particulars fully and truly. c) Case cannot reopen merely because Ld. AO was directed by another officer. d) For reopening personal belief of AO is must which is absent in assessee case. e) Reassessment order cannot be passed without passing SPEAKING ORDER on objection raised by the assessee. f) Addition cannot be made on any other ground during reassessment proceeding if no addition was made on ground which was mentioned in reason recorded for reopening under section 148. 3. On the facts and circumstances of the case and law, the Id. CIT(A) erred in confirming and enhancing the disallowance of so called purchases amount Rs. 12,26,43,063/- without considering the facts that assessee is a commission agent and had not claimed any purchases in books of account. 4. On the facts and circumstances of the case and law, the Id. CIT(A) failed to consider that addition cannot be made due to following factors with CIT(A) also agreed :- a) Material/ statements....
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....07.2008 shall be treated as return filed in response to notice u/s 148 of the Act. Further, notice u/s 142(1) &143(2) of the Act was issued on 15/05/2015 and duly served to the assessee. The reason for reopening was provided to the assessee on 13.07.2015. Further, a notice u/s 143(2) of the Act was issued on 14/07/2015. A notice u/s 142(1) cum questionnaire of the Act was issued on 03.09.2015 & served on assessee on 04.11.2015. 5. Thereafter, the assessee, vide his letter dated 28.12.2015 raised an objection stating that the reopening was bad in law. The assessing officer, vide order passed on 04.01.2016, over ruled the objection. The assessee has not preferred further appeal against this order. 6. In response to the notices issued u/s 148 and 142(1) of the Act, the assessee furnished submission and explanation, vide its letter dated 05/01/2016, which is reproduced below: "I submit that I have purchased rough & polished diamonds of Rs. 12,24,86,657/- on commission basis which was sold to various cutters on behalf of M/s Aadi Impex. Similarly, I have also sold diamonds of Rs. 12,23,78,766/- to M/s Aadi Impex which have been procured from various cutters on behalf of M/s Aadi Imp....
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....ors of the entities of this group were also found, which were seized. Similarly, books of account in the name of the dummy partners / Directors / proprietors of the entities of this group were also found, which were also seized. According, to the regular books of accounts and the returns of income filed by different entities of the group, the business of these entities are disclosed to be trading of rough and finished diamonds and manufacturing of diamond jewellery. However, no stock of diamond was found from any of the premises searched or surveyed. The statements 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 Choudhary 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 ....
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....h bogus sales/inflation of sales prices or through sale at higher rate. Therefore, AO made an addition of Rs. 3,06,21,664/- (25% of Rs. 12,24,86,657/-) to the total income of the assessee. 10. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has enhanced the addition made by the assessing officer, observing as follows: "10.5 In my earlier decisions in cases of similar beneficiaries of accommodation entry operator & in similar facts and circumstances I have respectfully followed the above decisions of Hon. Gujarat High Court, and further followed the decision of Hon Gujarat High court in Mayank Diamonds 2014 (11) TMI 812 (Guj) and also relied on decisions of Id CIT Appeals at Surat such as (1) CAS-1/10810/2016-17 dated 03/07/201, Shri Vrajendra Thakkar, (2) CAS-1/279/15-16 dated 05/05/2016, Creative Diamond Pvt. Ltd (3)CAS 2/743/15-16 dated 10.02.2017, Albers Diamonds Private Limited, It also weighed on my mind that the Id. AOs in Mumbai have made disallowance of 2% to 5% of bogus purchases in case of beneficiaries of the same accommodation entry providers such as shri Rajendra Jain, Bhawarlal Jain, etc. Same vi....
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....n it to restrict the disallowance to only Rs. 73,73,322/- " 10.7 In view of the above decision, the addition made by the AO @ 25% of bogus purchases is incorrect. Accordingly, as already stated enhancement notice u/s 251(1) r.w.s. 251(2) of the Act dated 19.02.2018 was issued to the address mentioned in form No. 35 and there has been no compliance by appellant/AR. In the absence of any judicial decision/ decision of jurisdictional ITAT, which draws out the distinction or differentiates on facts the above decision of the Hon High Court is binding. 10.8 In view of the discussion, the entire purchases of Rs. 12,24,86,657 is liable to be added to the income of the appellant. The addition made by the AO in the assessment order of Rs. 3,06,21,664/- on account of 25% of total purchases is hereby enhanced by Rs. 9,18,64,992/- under the provisions of section 251(1) r.w.s. 251(2) of the Act. The total income of the appellant is assessed at Rs. 12,26,43,063/-In the facts and circumstances of the case, it is clear that the appellant has indulged in a elaborate scheme of taking accommodation entry of bogus purchases to reduce his taxable income. Hence I am satisfied that the appellant has f....
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....al of the assessee is dismissed. 15. On merit, we note that issue involved in assessee's appeal, is covered by the judgment of the Co-ordinate Bench in the case of Pankaj Choudhary in ITA No. 1152/AHD/2017, for AY.2007-08, order dated 27.09.2009, wherein the Coordinate Bench held as follows: "9. On merit, the ld.CIT(A) after discussing the submission of assessee held that AO has not discussed about any details of books of accounts, documents, stock register produced by assessee during the assessment. The AO neither examined nor found any defect in the document to discredit the same. The assessee has produced day to day stock register, details of purchase and sale. The purchases made 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 p....
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....ssee is 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, hence the disallowance was restricted to 12.5% of the impugned purchase. 11. Aggrieved by the order of ld. CIT(A), both the parties have filed cross appeals. The assessee has challenged the validity of reopening as well as sustaining the addition to the extent of 12.5% only. Likewise, the Revenue has assailed the order for sustaining addition to the extent of 12.5% only. We have noticed that there is 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....
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....uring 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. 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. 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 ....
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.... 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 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 o....
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....ai. 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) 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 engage....