TaxTMI 
TaxTMI 
2022 (11) TMI 817
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....of appeal raised by the Revenue in lead case in ITA No.536/SRT/2019 for AY.2008-09, are as follows: "1. Whether on facts and in law the ld. CIT(A) was justified in partly allowing the appeal of the assessee and estimating disallowance at Rs.65,96,755/- being @ 5% of Rs.13,19,35,109/-, despite of the fact the AO has made the addition of Rs.13,19,35,109/-, where the purchases made by the assessee of Rs.13,19,35,109/- were proved to be unverifiable and bogus? 2. Whether on the facts and in law the Ld. CIT(A) was justified on relying upon the case of M/s Mayank Diamonds Pvt. Ltd. which is different and distinct from the facts of the case of the present assessee. 3. On the facts and circumstances of the case and in Law, the Ld. CIT(A) ought to have upheld the order of the A.O. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the A.O. may be restored." 4. Brief facts qua the issue are that assessee firm has filed its return of income for AY.2008-09 on 26.09.2008 declaring total income of Rs.2,93,10,645/-. The assessment under section 143(3) of the Act was finalized on 29.12.2010 determining total income at Rs.4,01,92,610/-. The assessee prefer....
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....se of search it was found that all name sake/dummy directors/ partners/ proprietors of various concerns belong to the native place of Bhanwarlal Jain & family in Rajasthan and have either known Bhanwarlal Jain personally or through their families. In their respective statements recorded, they have admitted that they were made directors, partners and proprietors of various concerns at the direction of Bhanwarlal Jain & Family which were eventually being managed and controlled by the later. All the concerns in which these employees are shown as directors/partners/ proprietors are operating either from 316 Panchratna, Opera House, 210 Panchratna, Opera House and 105, Panchratna, Opera House which is in the name of Bhanwarlal Jain, Rajesh Bhanwarlal Jain, Manish Bhanwarlal Jain, other family members of Bhanwarlal Jain, Rajesh Bhanwarlal Jain, Manish Bhanwarlal Jain or concerns in which Bhanwarlal Jain and his family members are proprietor/ partner/ director. Certain documents were also seized which contain names of different concerns along with the names of the directors, partners and proprietors shown in these concerns, PAN No's, bank account No's and Jotting made in same hand....
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....ures 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 consignment 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 actual importer. These benami entities of Shri Bhanwarlal Jain group thereafter issue bogus sale bills against the bogus stock. From the details and evidences made available through the above referred letter dated 13.03.2014 of the Director of Income tax (Investigation), Mumbai, it was noted that the following entities of Shri Bhanwarlal Jain Group have given accommodation entries of bogus sales to the assessee as under during F.Y.2007- 08 relevant to A.Y.2008-09. Sr.No. Name of the party PAN Amount (Rs.) 1 Impex Gems AHNPJ4936G 4,01,06,535/- 2 Jewel Diam ABUPV3494J 3,89,94,773/- 3 Jewel Diam ABUPV3494J 1,52,23,021/- 4 Little Diam AABFL1469R 2,26,10,000/- 5 Meridian Gems AAQFM7140P 1,50,00,780/....
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....rs, without actually conducting any business of purchase for which such bill was given by the said entry providers since they have themselves as well as by Shri Bhanwarlal Jain Group have accepted that they have only provided such accommodation entries through bills of sales. 8. Though the case of the assessee was completed u/s. 143(3) of the Act on 29.12.2010 on the basis material facts available before him at the time of completion of assessment proceedings, and the information that the bills of purchases have also included such bogus bills of purchases was not available with the A.O. at that point of time, since the search and survey operation in the case of Shri Bhanwarlal Jain Group has also commenced on 03.12.2013 at the report of the Investigation Wing, Mumbai on such bogus entry providers after completing their investigation has been received by AO on 25.03.2014 i.e. after more than 3 years of completion of the assessment proceedings. As such, the information provided by the investigation Wing, is a new piece of information which was not available before the A.O., at the time of completion of assessment proceedings. In the view of the above findings of Investigation Wing, ....
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.... made from the concern of Bhanwarlal Jain and others was a make believe arrangement through a series of transfers of unaccounted funds through multi layering to give it a look of a genuine transaction. The very facts remains that the whole arrangement of providing the bogus accommodation entries were established beyond doubt during the search proceedings as no evidence of any sales purchase of diamonds was found neither any stocks of the diamonds was found. These evidences when confronted were admitted u/s 132(4) of the Act by Bhanwarlal Jain and others himself. The Income Tax proceedings are not governed by the strict rules of evidences and are not required to prove the impossible. In the decision of the Hon'ble ITAT Bench, Surat in the case of Deputy Commissioner of Income Tax Circle 2(2) vs J. B. Brothers, Surat vide ITA No. 3661/Ahd/2015 & Co. No. 22/Ahd/2016 AY 2007-08 date of order 06.04.2018 and M/s Delux Diamonds, Surat Vs. Income Tax Officer, Ward 1(3)(1), Surat vide ITA No. 1396/Ahd/2017 AY 2007-08 date of order 11.4.2018, restricted the addition to 5% of bogus purchases. Therefore, in the light of above facts and circumstances and considering the gross profit rate of....
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.... done, even from any other party. Therefore, ld DR prays, the Bench that addition made by the assessing officer may be upheld. 13. Shri Rasesh Shah, Learned Counsel for the assessee, pleads that report of the DDIT (Inv.) cannot constitute a reason to believe within the meaning of section 147 of the Act. The ld Counsel further submitted that reopening of assessment is bad in law. He took us through the paper book page no.48 wherein the reasons recorded, were placed and contended that the reopening is bad in law, therefore, the same may be quashed. 14. On merits, ld Counsel argued that restricting the disallowance to 5% of the impugned purchases, by ld CIT(A), is not acceptable, as the assessee provided bills, vouchers, stock details etc., therefore entire addition made by AO may be deleted. 15. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. We have also gone through the reasons recorded by the assessing officer and having gone through the entire gamut of facts and circumstances, we are of considered opinion that not only there existed new information with the AO from the cred....
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.... assessment would not be conclusive. Nor, absence of any such statement would be fatal if on the basis of reasons recorded, it can be culled out that there were sufficient grounds for the Assessing Officer to hold such beliefs." 17. A three Judges bench of Hon'ble Gujarat High Court in the case of A.L.A. Firm v. CIT, 189 (1991) ITR 285, after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe, that income chargeable to tax and had escaped assessment. It was held that even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied. As observed earlier not only there existed new information with the AO from the credible sources, but also he had appli....
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....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), * 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....
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....297 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. 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 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 ....
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....lly 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 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....
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....able 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. 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 ....