2023 (10) TMI 211

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....xports. 2.3 Search and seizure action was carried out by Investigation wing, Mumbai in Shri Gautam Kumar Jain group of Mumbai on 03.10.2013 during which, it was alleged that evidences were found about the racket operated through benami concerns run by these groups which provided accommodation entries in form of bogus unsecured loans, bogus purchases and sales, etc. The same was also accepted by them in statements recorded u/s 132(4) of the Act. 2.4 As per the information, assessee was one of the beneficiaries and hence, notice u/s 143(2) of I.T. act was issued on 04.09.2014. Subsequently notices u/s 142(1) of the act was issued on 20.08.2015. 2.5 Further, show cause notice was issued on 10.03.2016 asking to show cause as to why books of accounts of the appellant should not be rejected and the purchases amounting to Rs. 4,44,44,172/- should not be treated as bogus purchases. 2.6 In response to the show cause notice, appellant filed detailed submission on 18.03.2016 mainly contending that his proprietorship deals in all types of diamonds, precious and semi-precious stones and has turnover of Rs. 57,42,96,644/- and the business is carried out from Surat and Mumbai. He has ....

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....to other parties. However, Assessing Officer without considering the fact that assessee has submitted all the documentary evidences, passed the order disallowing purchases amounting to Rs. 4,44,44,172/-. 5.1 He would further submit that there is no dispute that the assessee has made payments by account payee cheques which have been cleared through the normal banking channels, Assessee had furnished the bills, delivery challans and ledger confirmations and copies of their return of income and the transactions appear to have been duly accounted for in the books of Assessee. Appellant has also provided stock register showing one-to-one correlation of purchase and sales transaction. Hence, on furnishing all the documentary evidences, appellant has reasonably discharged his primary onus to substantiate the genuineness of purchases. 5.2 Further, there is no evidence or material brought on record by the Assessing Officer that the purchases made were for cash or that the purchasers had returned the cash corresponding to the cheque payments received from the Assessee. There is no evidence of money flowing back to the Assessee and hence, the Assessing Officer had made the addition mere....

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....t genuine. The CIT(A) partly allowed the appeal restricting the disallowance to 5% of the impugned purchases. The Tribunal held as under: "27. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that main grievance of the assessees in these appeals is that since assessee has submitted bills, vouchers, stock register and transactions were through banking channels, therefore, addition at the rate of 5% sustained by Ld.CIT(A) should also be deleted, whereas main grievance of Revenue is that since all purchases made by assessees were bogus and in the nature of accommodation entry, hence addition made by the Assessing Officer should be sustained. We note that the issue under consideration is squarely covered by the judgement of the Co-ordinate Bench in the case of Pankaj K. Chaudhary (in ITA No.1152/AHD/2017), dated 27.09.2021, wherein the Co-ordinate Bench of Surat has sustained the addition at the rate of 6% of bogus purchases. Therefo....

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....T [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 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 the original assessment, the ass....

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..... 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. CITDR 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 i....

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....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 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 Priva....