TaxTMI 
TaxTMI 
2023 (3) TMI 670
X X X X Extracts X X X X
X X X X Extracts X X X X
....income of the assessee at Rs.50,69,940/- wherein an amount of Rs.2,51,080/- was added as unvouched expenditure. 2.1 Subsequently, information was received from the Investigation Wing, Hyderabad wherein it has been mentioned that during the financial year 2007-08 relevant to A.Y 2008-09, the assessee has shown purchases to the tune of Rs.25,63,834/- from three entities namely Rajendra Kumar Jain group, Dharmichand Jain Group and Sanjay Chaudhary Group, Surat which happened to be paper entities with no real business activity and provide accommodation entries to interested parties for bogus purchases. In view of the above, the Assessing Officer was of the opinion that the assessee has inflated the expenditure by claiming bogus purchases to the extent of Rs.25,63,834/- which was an accommodation entry and not a real transaction. He, therefore, initiated proceedings u/s 147 with the prior approval of the Jt. Commissioner of Income Tax, Range-8 Hyderabad. Accordingly notice u/s 148 of the Act was issued on 27.3.2015 which was served on the assessee on 30.03.2015. 2.2 The Assessing Officer thereafter issued statutory notices u/s 143(2) and 142(1) of the Act calling for certain informati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es and the assessee could not explain with any satisfactory evidence to support his travelling to Surat. The Assessing Officer further noted that the assessee failed to produce the party-wise sales and could produce only party-wise purchases. He further noted that most of the sales are in cash and in the sale ledger, description of item is "Malkhata" which may include precious stones and diamonds. However, there is no clarity from the ledger whether that assessee sold diamonds with jewellery or loose diamonds. The Assessing Officer further noted that Shri Rajendra Jain had given a statement before the Investigation authorities that his group concern are shopping in bills trading and he had explained the modus operandi followed in this practice of providing accommodation entries. Although he had retracted from his earlier statement that his business was real, however, it was clearly established during the search and seizure operation that not a single piece of diamond was found by the survey team, though there is substantial turnover shown by the above three concerns controlled by him and it was proved beyond doubt that these concerns are engaged in bill shopping. The Assessing Offi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... entries by M/s. Rajender Jain and group was established by the departmental authorities ran contrary to the affidavit filed by the Rajender Jain. 6.2 A perusal of the assessment order reveals that a search & Seizure action in these group of cases - Sri Rajendra Jain, Shri Sanjay Choudary and Sri Dharmichand Jain and it was found that they are some of the entry providers operating in Mumbai indulging in providing accommodation entries in the nature of bogus sales and unsecured loans. A search & Seizure action in these group of cases has been carried out on 03.10.2013 by DCIT, CC-4, Surat. During the course the list of beneficiaries who have benefited from the entries obtained from these the group are collected. During proceedings Unit-I(4), Mumbai a statement on oath of Sri Rajendra Jain was recorded by DDIT(Inv). on 05.10.2013. In response to Q. No. 14, his reply is as under: Q.14 During the survey action undertaken it various office premises of yours; not a single piece of diamond has been found by respective server teams though there is substantial turnover shown by various concerns controlled by you. Please state as to where do you keep your stock in trade? Ans- Sir, in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... addition in respect of the undisclosed income relating to the purchases to 25% of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd. (supra) In the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to Rs. 2,92,93,288/- and taxing only 25% of these bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come to a categorical finding that the amount of Rs. 2,92,93,288/- represented alleged purchases from bogus suppliers it was not incumbent on it to restrict the disallowance to only Rs. 73,23,322/," Above case of N K Proteins Ltd (earlier N.K. Industries Ltd.) Vs CIT has been confirmed by Hon'ble Supreme Court vide SLP(C) No. 769 of 2017. Some courts have taken a different view that sales shown by taxpayers are not possible wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs. We direct the Assessing Office to disallow 25% of the aforesaid amount on account of inflation of purchase price." The above decision was accepted by the department and the assessee. In the case of Vijay Proteins Ltd. v. Assistant Commissioner of Income (Supra) also suggested to disallow reasonable percentage of the alleged bogus purchases for the possibility of inflation of purchases by booking the purchase bills, even though payments are made through bank and the also for the reason that the contrary has not been completely ruled out. Similar view was also expressed in the case of ACIT VS M/s. Kulubi Steel in ITA NO.1568/AHD/2008 dt. 16.12.2010 AND Sumit P. Sheth Vs ITO ITA No. 3238 & 3293/Ahd/2009. 6.6. Further, as Rajendra Jain never appeared before the AO, the above cited purchases and its sources and genuineness remain unexplained. However, in view of the facts and circumstances of the case, and by applying the principle of Lex noncogit ad Impossibilia and by relying upon the decision in the case of Vijay Proteins Ltd. Vs. Assisstant Commissioner of Income-tax 58 ITD 428, the Hon. (1TAT AHMEDABAD BENCH 'C), 25% of bogus purchases Rs.25,63,834 amounting to Rs. 6.40....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ontrary to the facts and evidence on record. 9. The Ld. CIT(A) erred in dismissing the affidavit filed by Mr. Rajender Jain in favour of the Appellant merely because of the latter's inability to attend the proceedings in person, despite stating health concerns. 10. The Ld. CIT(A) failed to note that neither the books of accounts were rejected nor was the genuineness of the purchases questioned and therefore, the addition of Rs. 6,40,960/- is totally contrary to the facts and evidence on record and is to be deleted. 11. The Ld. CIT(A) having allowed 75% of the purchases as genuine erred in disallowing 25% at Rs. 6,40,960/- without any basis and merely relying on the Ahmedabad Tribunal concluded that 25% of the purchases ought to be disallowed. 12. Any other ground(s) that may be urged at the time of hearing." 7. The learned Counsel for the assessee at the outset did not press the grounds relating to validity of reopening of the assessment for which the learned DR has no objection. Accordingly, the grounds raised by the assessee challenging the validity of re-assessment proceedings are dismissed as not pressed. 8. So far as the other grounds that remain for our adjudica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on'ble Bombay High Court 3. Shanthivijay Jewels Ltd Vs. DCIT Rg8(3) Mumbai-ITAT for the AY 2011-12 in ITA No. 1045/Mum/2016-dt. 13.04.2018 4. M/s Fancy Wear Vs. ITO Ward24(3)(1) Mumbai - ITAT for the AY 2010-11 & 2011-12-1TA No.1596 & 1597/Mum/2016-20.09.2017 5. DCIT Central Circle 2(4) Vs. Ronak Gems, Mumbai-AY 2008-09 ITA No.-3118/Mum/2017 & CO 193/Mum/2017-dt.04.10.2017. 6. Nitin Gupta Vs. ITO Ward-47(4), New Delhi - AY 2007- 08-ITA no. 2266/Del/2017-dt. 06.04.2018. 10. The learned DR, on the other hand, while supporting the order of the Assessing Officer, strongly opposed the arguments advanced by the learned Counsel for the assessee. He submitted that the entire purchases are bogus as found by the search & survey party during the course of search in the premises of Rajendra Jain group. He submitted that the learned CIT (A) has already granted substantial relief to the assessee by reducing the addition to 25% of the bogus purchase which is more than sufficient and therefore, no further relief should be granted to the assessee. He accordingly submitted that the order of the CIT (A) be upheld and the grounds raised by the assessee should be dismissed. 11. We have he....