TaxTMI 
TaxTMI 
2023 (2) TMI 463
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....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 133(6) of the Act. The ld. AO had also received the replies thereof, but while framing t....
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....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 making proper enquiry etc. While dealing with the said issue the Ld.CIT(A) has observed as under:- "In the instant case,....
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....n, 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;] From a perusal of Explantion2, it is clear that the case of the appellant falls within the ambit of the provisions of clause (b) of Explanation 2 to section 147 which clearly mandates tha....
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..... 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 Investigation wing (consequent upon search) and after independently ascertaining that the appellant had indeed made purchases from the entry providers and that no scrutiny assessment had been completed, formed a prima facie belief that income to the extent of Rs 62....
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....e 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 15-02- 2012, held that as long as there is a 'live link' between the document/information which was placed before the Assessing Officer at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The Court also held- We are aware of the legal position that at the stage of issuing the notice u/s14....
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....on 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 approach of Ld. A.O. in reopening the case of the assessee for Assessment Year 2007-08 and also the order of the Ld. CIT(A) in affirming the approach of the Ld. A.O. Thus, we do not find any error committed by the Ld.CIT(A) in confirming the reopening of the case by the A.O. accordingly, Ground No. 1 is dismissed. 10. The Ground No. 2 and its sub grounds are regardin....
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....erns 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 sharing basis. The name wise detail of all business concerns of ours is as follows:- Proorietorshio firm Name of Proprietor a. AVI Exports Rajendra S Jain (myself) b. Kalash Enterprises Manish Jain c. Aadi Imp Anoop Jain d. Arihant Exports Sachin Pareek e. Vitrag Jewels Mudit Karnawat (Ex-employee) f. Super Jewels Ashok Jain (Ex-employee) Partnership firm Name of Partners a. Sun Diam Rajendera S. Jain(myself) & Manish Jain &....
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....ty 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 premises searched of the front companies of Rajinder Jain and his associates including M/s Avi exports, M/s Vitrag Jewels and Molumani impex (P) Ltd. After considering the facts of the case and evidences marshalled against the appellant, the AO gave an unequivocal finding that the appellant was indeed guilty of obtaining bogus accommodation entries from the parties mentioned supra. The finding of the AO is relevant here: After considering the submissions made by the assessee and facts of the case and further keeping in view the findings of the Investigation Wing, it is evident th....
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.... 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 observations made in a judgment must be read in the context in which they appear to have been stated. Their lordships of the Supreme Court further held that circumstantial flexibility, one additional or different fact, may make a world of difference between conclusions in two cases. Disposal of case by blindly placing reliance on a decision was held to be not proper. Against this prelude, I hold that the facts of the cases relied upon and principles enunciated therein are different from the facts of the instant case and hence the appellant's plea that this judgement is applicable to the appellant also has no locus standi. It is also obser....
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....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 copy of the purchase ledger showing purported purchase from Vitrag Jewels, Avi Exports and Moulimani Impex (P) Ltd. A sample extract is reproduced as under to authenticate my observation: The AR did not produce details of subsequent sales made. From the detailed discussion above it is evident that the appellant was unable to establish the authenticity and genuineness of purchases made from M/s Avi Exports, Moulimani Impex (P)m Ltd or M./s Vitrag Jewels. The appellant was unable to controvert the admission of Rajendra Jain, made during the course of search wherein he admitted that he was engaged in the providing accommodation entries to interested parties thr....
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....T 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 with the reasonings in support of its finding against th of threat, inducement or coercion, no good and sufficient reason w< differ from it. In the facts and circumstances of the case, having ret materials on record, the appellant had failed to establish that the sta its partner had been recorded in the course of the search by usint threat or inducement. Hence, the contentions advanced by the appeih regard were dismissed and the conclusion of the Tribunal on that i affirmed. " [Para 9] From an examination of the principles enunciated above, it is cleat statement recorded on oath has evidentiary value and can be relied i completing assessment. A retracted statement can be said to have no va if the person so retracting it proves it to be inc....
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.... 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 law to discharge an impossible burden to assess the tax liabilities by direct evidence only and to establish the evasion beyond doubt as in criminal proceedings. In making such an observation I draw strength from a similar enunciation by the Apex Court in the case of Dhakeshwari Cotton Mills Ltd Vs CIT 26 ITR 777 and SS Gadgil V Lai & Co 53 ITR 231 as well as the observation of the jurisdictional High Court in the case of CIT Vs Jay Engg Works Ltd 113 ITR 389. Reference may also be made to the case of Jankinath Sarangj v. State of Orissa, wherein Hidayatullah. C.J., observed: there is no doubt that if the principles of natural justice are violated and there is a gross case this Court would interfere by striking down the order of dismissal; but there are cases and cases. We have to look to what actu....
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....s 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 added to total income upholding the judgement of Gujrat High Court in N K Proteins Ltd Vs CIT (2016-TIOL- 3165-HC-AHM-IT) where Hon'ble Gujarat High Court held that addition on basis of undisclosed income cannot be restricted to a certain percentage, when the entire transaction was found as bogus. > CIT Vs Arun Malhotra 363 ITR 195 where Hon'ble Delhi High Court held that where Assessing Officer having found that transaction of purchase and sale were bogus, made addition under section 69A, Tribunal was not justified in deleting addition without going into evidence on record. Before I sign off, it is extremely important to look at the surrounding circumstances of the case. This observation is without prejudice to my adjudication in the foregoing paras. I am addressing this issue as the appellant has submitted before me time and again that evidenc....