TaxTMI 
TaxTMI 
2023 (2) TMI 463
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.... (b) The reasons recorded for reopening of assessment has been solely on the basis of vague information received from the Investigation Wing i.e. nature of entry whether sales/ unsecured loans. The ld. CIT(A) while passing the order, has grossly erred in ignoring this fact, as well the fact that the AO has acted mechanically & blindly on the report of the Investigation Wing. 2. That the Ld. CIT(A) has erred in confirming the addition of Rs.62,12,124/- ignoring the following vital facts/ submissions of the case those were submitted/produced before ld. AO & also to her during the course of hearing: (a) That the assessee has submitted all the documents VIZ. Copy of Purchase bills, affidavits of the sellers, payment through account payee cheques, with bank statement showing payment made, stock records of the purchases / sale of the goods proving the genuineness of purchases made by the assessee and the Ld. CIT(A) without controverting any of these documents/affidavit, upheld the addition so made. (b) That the ld. CIT(A) failed to appreciate the fact that while framing the assessment by the ld. AO, the ld. AO had issued notices to these suppliers u/s 1....
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....1,461/- from Avi Exports (aggregating to Rs.62,12,124/-) provided by entry operator Sh. Rajender Jain through his aforesaid shell companies. The Ld. A.O. accordingly made addition of Rs. 62, 12,124/- and computed the income of the assessee at Rs.87,95,114/- as against return income of Rs. 25,82,990/-. 4. As against the assessment order, the assessee has preferred an appeal before the CIT(A) and the Ld.CIT(A) has dismissed the appeal vide order dated 14/08/2019. 5. Aggrieved by the order of Ld.CIT (A) dated 14/08/2019, the assessee has preferred the present appeal on the grounds mentioned above. 6. Neither the assessee nor his power of attorney have appeared even after repeated notices were issued to the registered address of the assessee which were returned with and endorsement "Left without address". Therefore, we are compel to decide the appeal on verifying the material on record and on hearing the Ld. DR. 7. We have heard the Ld. DR perused the material available on record and gave our thoughtful consideration. 8. Ground No. 1 and its sub grounds are regarding assumption of jurisdiction for reopening and recording reasons without application of mind and without ma....
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....e income has escaped assessment as in the case of the assessee. Explanation 2 reads as under: For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : {a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;] ....
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....2012] 340 ITR 53/[2011] 197 Taxman 415/10 taxmann.com 2 (Delhi) where the Court held that that the term 'failure' on the part of the assessee is not restricted to the return and the columns of the return or the tax audit report. [Para 42]. It is also pertinent to observe that reopening based on information received from the Investigation wing is a valid basis for initiating proceedings u/s 147 of the Income Tax Act. It is further observed that the Investigation wing is an indispensable arm of the Income Tax department. Information was received, consequent upon a search in the case of entry providers, Rajinder Jain group, that the aforementioned entry provider and his cohorts were operating several dummy companies which provided bogus purchase/sale bills through companies like M/s Avi Exports, Vitrag Jewels, M/s Moulimani Impex (P) Ltd. The AO examined the available records and1 ascertained that the appellant firm had made purchase of Rs 62,12,124/- from the aforementioned companies during the year under consideration. The AO also ascertained that the no scrutiny assessment had been made in this case. The AO on the basis of information received from the Investigatio....
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.... Without prejudice to my adjudication above, it is also expedient to mention that the provisions of section 148 do not require the AO to arrive at a conclusive finding about the escapement of income. At the stage of reopening, the Assessing Officer is only required to form a prima facie belief or opinion that income chargeable to tax has escaped assessment. Sufficiency and correctness of material on the basis of which a case is reopened by the department is not to be considered at the stage of commencement of reassessment proceedings. Here I would like to draw strength from the principles enunciated by the Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO And Others [236 ITR 34] where Hon'ble Supreme Court held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage Similarly, jurisdictional High court in the case of CIT Vs. Nova Promoters & Finalise Private Ltd [ITA No. 342 of 2011] dated ....
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.... 27,62,913/- from M/s Vitrag Jewelers, Rs. 3,37,750/- from M/s Moulimani Impex (P) Ltd and Rs. 31,11,461/- from Avi Exports (aggregating to Rs. 62,12,124/-) by way of purchase of diamonds. Further, the Ld. A.O. had also ascertained that no scrutiny had been made in this case, accordingly, formed a prima facie belief that income to the extent of the said accommodation entries had escaped assessment. Consequently, initiated reassessment proceedings. The Ld. A.O recorded the reasons for reopening the assessment and after seeking and being accorded approval by competent authority, issued and served the notice u/s 148 of the Act. Thus, it is found that there was failure on the part of the assessee to disclose fully and truly all material facts. On the basis of cogent and tangible information received and after ascertaining the fact that no scrutiny assessment had been made and the fact that the purchases had been made from the dummy companies of Rajendra Jain group who during the course of a search unequivocally admitted that he was an entry provider, the A.O. formed a prima facie belief that income to the extent of Rs. 62,12,124/-. Thus, we do not find any error or infirmity in the app....
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.... they do justice with the roles and responsibilities assigned to them by you. Ans. Sir, in fact, the proprietary concerns in the names of our employees are not independent business activity of their own. When I was working for Sh. Ratanlal Jain, besides other concerns, he had been also operating through M/s Minar Gems, a proprietary concern in my name. So, after quitting the job, I took the idea of operating through various concerns including several proprietorship concerns in the names of our employees. In such a case, the effective control of business remains with us and the business income of such proprietorship concern get adjusted against the overall salary payable to such employee on annual basis. Ques.13. Please furnish details of all the business concerns which are directly or indirectly controlled by you along with Sh. Surendra Jain. Ans. Sir, we are operating through a no. of business concerns of all the three nature i.e. proprietorship firm, partnership firm as well as companies in the name of various persons including our employees. But for all practical purposes, myself and Sh. Surendra Jain are handling the entire business network on profit ....
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....ies like the appellant concern who evaded the long arm of the enforcement agencies by obtaining bogus invoices of sales/purchase of diamonds/precious stones. The AO ascertained that the appellant concern had shown a purchase of the diamonds of Rs 27,62,913/- from N/s Vitrag Jewellers, Rs 3,37,750/- from M/s Moulimani Impex (P) Ltd and Rs 31,11,461/- from Avi exports (aggregating to Rs 62,12,124/-) A perusal of the assessment order shows that the AO has marshalled and relied on the following evidences to arrive at a conclusion regarding the culpability of the appellant: > Statement of admission by Sh. Rajendra Jain wherein he has admitted that he along with his associates was using bogus companies to provide purchase/sale accommodation entries to parties seeking the same. > Post-search inquiries were made and it was ascertained that the appellant was one of the beneficiaries and had received bogus purchase bills of Rs 27,62,913/- from M/s Vitrag Jewellers, Rs 3,37,750 from M/s Moulimani Impex (P) Ltd and Rs 31,11,461/- from Avi exports aggregating to Rs 62,12,124/-) > Search 81 seizure proceedings showed that there was no stock on any of the premi....
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....d. This document does not give the specifics of the diamonds purchased except for quantity in carat. Specifics such as size (cents), cut (Hearts & arrows, princess, cushion, marquise, emerald etc), colour (Diamonds graded D, E, and F are colorless while Diamonds graded G, H, and I are considered near-colorless) and purity (FL, IF, VS, VVS, SI etc))which are the basis of the price of the diamond are not mentioned anywhere in the invoices. This is clear from a perusal of the invoices from Vitrag Jewels, Avi Exports and Moulimani Impex (P) Ltd which are reproduced as under: provider Rajinder Jain who admitted that he was not engaged in any business activity but was simply an accommodation entry provider. In the light of such an admission, clearly all other evidences produced are in the nature of self-serving evidences that are clearly trumped up documents to give a semblance of authenticity of the transaction. The AR has relied on various judgements. As the facts are distinct and separate in each case, the principles of one case cannot be applied blindly to another case. In Union of India v. Major Bahadur Singh (2006) 1 SCC 368 (para 9 & 11) Supreme Court held that the observ....
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....he case and further keeping in view the findings of the Investigation Wing, it is evident that the assessee has taken accommodation entry by providing cash which has not been shown in the books of accounts of the assessment for that assessment year i.e 2007-08. On account of failure on part of the assessee, income for the A.Y. 2007-08 to the extent of Rs. 59,60,461/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. Penalty proceedings u/s 271(l)(c) has been initiated separately for concealing the true and correct facts of the income. No stock register is maintained by the appellant. The photocopy of the purchase ledger was produced and examined. This document does not give the specifics of the diamonds purchased either except for quantity in carat. Specifics such as size (cents), cut (Hearts & arrows, princess, cushion, marquise, emerald etc), colour (Diamonds graded D, E, and F are colorless while Diamonds graded G, H, and I are considered near-colorless) and purity (FL, IF, VS, VVS, SI etc))which are the basis of the price of the diamond are not mentioned anywhere in the stock summary or items register. This is clear from a perusal of a cop....
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....ITR 143) where Hon'ble Delhi High Court held that: an addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect. Smt Dayawanti Vs CIT 390 ITR 496 (Delhi) where Hon'ble Delhi High Court held that; where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified Greenview Restaurant Vs ACIT 185 CTR 651 (Gauhati) wherein the Hon'ble Court held that: "From facts, it was dear that there was a delay on the part of the appellant and its partner in retracting the statements recorded. The attention of the Court had also not been drawn to any material on record to establish that any made on behalf of the appellant to prove the allegation of induceme coercion through the witnesses. Having examined the impugned order by the Tribunal ....
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....t of law in the witness box. CIT vs Kuwer Fibres (P.) Ltd 77 taxmann.com 345 (Del). The jurisdictional High Court held as under: As far as the question relating to cross examination is concerned, the court notices that though the documents were furnished to the assessee, it had not sought opportunity of cross-examination: this was made at the fag end... the court finds no justification to reject the statements which merely explain the documents seized; the assessee could well have given a full explanation instead of seeking rejection of documents. GTC Inds Ltd Vs ACIT 65 ITD 380 (Bom). The ITAT Mumbai has held that: The principles of natural justice do not require formal cross-examination. FormaI cross-examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of court. It is a part of legal and statutory justice and not a part of natural justice., therefore, it cannot be laid down as a general proposition of law that the revenue could not rely on any evidence which has not been subjected to cross examination. Before I conclude, I think it expedient to observe that there is no presumption in....
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....ause cross- examination has not been made. As adequate opportunity was accorded to assessee concern, no grievance has been caused to the appellant. I, therefore, hold that there is no violation of natural justice as the addition has been made after due opportunity was accorded to appellant. In the light of the detailed discussion in the foregoing paras, it is clear that the appellant concern was a beneficiary of the accommodation entry scam wherein it obtained bogus purchase bills from entry providers Rajendra Jain. The appellant is attempting to circumvent its culpability by taking refuge in issues like cross-examination, re-opening, retraction of statement etc. However, I have no hesitation in upholding the finding of the AO that the purchases of diamonds were in the nature of bogus purchases. The fact that the purchases have been treated as undisclosed income in the hands of the appellant concern is also guided by the following principles enunciated by the Apex Court and jurisdictional High Court: > N K Proteins Ltd Vs CIT (2017-TIOL-23-SC-IT) where Hon'ble Supreme Court held that entire undisclosed income generated out of bogus transactions, deserves to be....
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.... Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tak. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. It would also be appropriate to refer to the order of the Supreme Court in the case of McDowell & Co (154 ITR 148) wherein the Apex court has held as under: ....