TaxTMI 
TaxTMI 
2023 (1) TMI 1082
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....ccommodation entry pertaining to bogus purchases. ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in estimating income @ 5% of total unverifiable purchase of Rs. 17,41,74,472/- without appreciating the fact that a search and seizure action was carried out by the Investigation Wing, Mumbai in the case of Sh. Pravin Kumar Jain and Gautam Kumar Jain and other Groups of Mumbai on 01.10.2013 which resulted in collection of evidences and other findings, which conclusively proved that said groups of Mumbai had through Benami concerns, run and operated by them, provided accommodation entries to various parties, the assessee being one of them, in respect of bogus unsecured loans, bogus purchases and bogus sales. Therefore, the Ld. CIT(A) should have treated the whole amount of these purchases as income of the assessee as assessee reduced his income to this extent by inflating his purchases by this amount in his P&L account. iii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in accepting the plea of the assessee that proper books of accounts and stock register was maintained without considering the fact t....
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....h additional ground should not be admitted, as the assessee has not raised this issue during the appellate proceedings before the ld CIT(A). 7. We have heard both the parties. We note that assessee has raised the additional ground on the legal issue challenging the validity of reassessment proceedings under section 147/148 of the Act. During the assessment stage assessee did not file return of income in response to notice issued u/s 148 of the Act but he filed reply in the course of assessment proceedings stating to treat original return of income filed under section 139(1) of the Act, as the return of income field in response to notice u/s 148 of the Act. Therefore, the facts relating to reopening the assessment under section 147/148 were there before the assessing officer. 8. We note that it is purely a legal issue and all facts are already on record which goes to the root of the matter and no further inquiry is required for deciding the same as all facts are already on record. Therefore, in the light of ratio laid down by the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd., vs. CIT (1998) 229 ITR 382 (SC), we admit the additional ground raised ....
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....tion of the competent authority. The notice u/s. 148 of the Act was issued on 31.03.2015 and served upon the assessee firm. In response to notice u/s. 148, the assessee vide its letter dated 28.04.2015 has requested to treat the original return of income filed on 25.09.2008 as the return of income filed of the Act for A.Y. 2008-09, and also requested for copy of reasons recorded, which was provided to the assessee in view of the Hon'ble Supreme Court judgment in the case of GKN Driveshafts (India) Ltd. (259 ITR 19). 12. Subsequently, Notices 142(1) & 143(2) of the Act were issued to the assessee on 17.12.2015, 11.01.2016 and 26.02.2016. The assessee attended the office of AO and furnished submission/explanation. The details called for were examined. The AO noted that during the year under consideration, the assessee company was engaged in the business of diamond trading. During the reassessment proceedings, the assessee had furnished details of parties from diamonds have been purchased during the year under consideration. On verification of the same it is found that the following concerns are fictitious and belongs to Shri Pravinkumar Jain and Shri. Gautam Jain Group. The de....
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.... are appearing in my books as sock in the names of other interested parties/concerns, which is again arranged by these brokers. For this, I get commission. I also give bogus sale bills when there is no stock available in my books, by arranging bogus purchase bills from the local market from various concerns through various brokers. For this type of transaction, I get profit of differential commission received and paid by me. Also, in case some person required entry for unsecured loan, I give the entry by giving them cheque and in return I receive cash for the same. But most of the times it so happens that I have to pay this cash back to some parties to get cheque entry in my books again so as to maintain the balance in bank accounts. Normally, there is no surplus cash which remains available with me at any point of time. All the local purchases, local sales and loan entries appearing in my books of accounts of the above 2 concerns controlled by me are totally bogus entries which were done against cash taken/given against such entries. None of these entries reflect any genuine transaction at all." (iii) Shri Gyanchand Bhanwarlal Jain director of M/s. Karishma Diamond Pvt. Ltd., M....
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....of diamonds from the Clearing Housing Agents (CHA) on the basis of my authority letter and declaration from. The payments are settled through a process of adjustment and understanding between the supplier and the real importers which I am not aware of. The payments for the imports are shown as outstanding creditors in my books as I have an understanding with the facilitating brokers that the payments can be sent to supplier through cheque as per my convenience. The payment made by me by cheque is returned to me in cash by the broker in India. There are certain parties in the market who want accommodation entries for the purchase of diamonds in their books. Such parties either approach me or my network of brokers for an accommodation entry in the nature of bogus purchase of diamonds. The payment received from the party for accommodation entry of bogus purchase is used to give entries of unsecured loans and investments to builder, jewelers, and businessmen and corporate for which I earn an interest of about 0.15% to 0.20% per month. The cash is received back from the builder/real estate company who takes an accommodation entry for unsecured loan/advance. The cash received from the bu....
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....isters, stock registers, ledger account of purchase parties, movement of goods and copy of the bank statement etc. the CA of the assessee has also furnished additional information to prove genuineness of purchases made. The information furnished are like PAN Card copy of the parties, Copy of Relevant Bank Statements of the supplier parties reflecting the genuineness of the transactions, Copy of Income Tax Return Acknowledgment of the referred parties/ suppliers, Declaration from the referred parties/ suppliers regarding genuineness of their business transactions. Reply: I have carefully gone through all the materials in the Party wise purchase and sales purchase registers stock registers, ledger account of purchase parties, movement of goods and copy of the bank statement etc., have been carefully considered by me. This documentary evidences and proof are sufficient and acceptable if it is a matter of normal scrutiny assessment. The most important aspects should not be lost sight of that but for the search and seizure and unearthing of incriminating evidences, the nature of bogus accommodation entry, bills against the cash would not have come to the lime light. The search ....
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.... facts of the case, and circumstances are hereby rejected under provision of section 145(2) and the assessment is completed under section 143(3) r.w.s. 147 of the IT Act For the reason discussed above, assessee's contention is rejected and as the assessee failed to explained that the purchase worth Rs.17,41,74,472/- are the genuine purchases therefore appropriate addition on account of bogus purchase of Rs.17,41,74,472/- u/s. 69C of the Act is required to be made over and above the net profit declared in the return of income filed. Accordingly, Rs.17,41,74,472/- on account of unexplained source of Purchase u/s. 69C of the Act, added to the total income of the assessee for the year under consideration." 14. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has partly allowed the appeal of the assessee, observing as follows: "7.8 In this factual background, the question arises as to what should be the profit estimation. On one side, the assessee is showing GP/NP at the rate of 2% (maximum) approximately in various years which I have found quite low in comparison to industry average. On after hand Ld AR ha....
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....re is failure on the part of the assessee to disclose fully and truly all material facts necessary for making assessment, therefore the reopening proceedings initiated by Assessing Officer is bad in law. 18. On the other hand, Learned Departmental Representative (ld. DR) for the revenue submitted before us the copy of reasons recorded, dated 28.03.2015, (Copy of the reasons recorded was supplied to the AR of the assessee) wherein it was stated by the Assessing Officer, that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for making assessment. The ld DR pointed out that in assessee`s case the original assessment was framed under section 143(3) of the Act, wherein the assessing officer had never discussed the issue of bogus purchases. The issue relating to bogus purchases, is a fresh issue, and such fresh information was not there with the assessing officer at the time of making original assessment for A.Y. 2008-09, under section 143(3) of the Act dated 24.10.2010, hence the AO was right in reopening the assessment. 19. The ld DR also stated that there is no bar to record the reasons three times in case of the assessee. I....
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....llowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year. Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the....
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....Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012." 21. From the above section 147 of the Act, it is vivid that assessing officer may reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section. Thus, it is abundantly clear that Assessing Officer may reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub....
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....onse to notice u/s 148, the assessee company vide its letter dated 28.04.2015 has requested to treat the original return of income filed on 25.09.2008 as the return of income filed for A.Y. 2008-09, and also requested for copy of reasons recorded, which was provided to the assessee in view of the Hon'ble Supreme Court judgment in the case of GKN Driveshafts (India) Ltd. (259 ITR 19).The Hon'ble Supreme Court in the case of Phul Chand Bajrang Lal and another vs. ITO 203 ITR 456, was considering the question of reassessment beyond the period of four years in the case of an assessee firm; and had held that in case of acquiring fresh information specific in nature and reliable, relating to the concluded assessment, which went to falsify the statement made by the assessee at the time of original assessment and, therefore, he would be permitted under the law to draw fresh inference from such facts and material. The Court also went to an extent of saying that there are two distinct and different situations where the transaction itself on the basis of subsequent information is found to be bogus transaction and in such event, mere disclosure of the transaction cannot be said to be t....
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....r Section 147 of the Act are satisfied. 27. In fact, in three recent judgments; the Hon'ble Gujarat High Court has upheld the reopening on similar facts. The case is squarely covered against the assessee by these judgments which are: * Yogendrakumar Gupta vs. ITO 366 ITR 186 (Guj) * Peass Industrial Engineers (P) Ltd. 73 taxmann.com 185 (2016) * Order dated March 25, 2014 in the case of Lalita Ashwin Jain vs. ITO, Special Civil Application No. 1626 and 1627 of 2014. 28. As observed earlier not only there existed new information with the Assessing Officer from the credible sources, but also he had applied his mind and recorded the conclusion that the purchases claimed were non-genuine and therefore bogus, (clearly meaning that what was disclosed was false and untruthful). The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening is held justified and legal. Therefore, we dismiss the additional ground raised by the assessee. 29. On merit, we note that Revenue's appeal in ITA No.89/SRT/2017 for AY.2008-09 and Assessee`s CO.No.10/SRT/2021, are squarely covered by the judgment of Co-ordinate Bench of ITAT, Surat in the ca....
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....rat 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 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 th....
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....(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 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 w....
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.... 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 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)....