TaxTMI 
TaxTMI 
2023 (11) TMI 1188
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....t, 1961 which was challenged before him on the reason of issuing notice u/s 148 on borrowed satisfaction of another wing of the department. 3. That under the facts and circumstances of the case, the ld. CIT(A) has erred seriously on facts in sustaining the action of the Ld. AO in considering purchases of a sum of Rs. 35,09,770/- made from 3 parties as bogus by rejecting the pleas of the appellant that (1) No statement of the parties on which reliance had been placed by ld. AO were provided to the assessee, (2) No Material/records found during the course of search in the case of Bhanwar Lal Jain group which was considered as against the assessee was provided to the assessee and (3) No cross examination of the parties was allowed to the assessee." 3. The fact as culled out from the records is that the assessee filed its e-return of income for A.Y. 2012-13 on 24.09.2012 declaring total income of Rs. 52,71,470/-. As per Information available with this office, it was noticed that a search and seizure action in the cases of Shri Bhanwarlal Jain Group had been conducted by the DGIT (Inv.), Mumbai Charge on 03.10.2013 and these are entry providers operating in Mumbai, indulging in provi....
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.... evidence were found and seized. During the course of search, it was found that this group was indulging in providing accommodation entries to various parties through benami concerns operated and managed by Sh. Bhanwarlal Jain and his son. Sh. Bhanwarlal Jain also admitted the same in his statement on oath recorded during search operation u/s 132(4). The statement of various persons connected with this group and engaged in providing accommodation entries through benami concerns to the beneficiaries were recorded. As per the information received by AO, the appellant M/s Khandelwal Diamonds Pvt. Ltd. was one of the beneficiaries and had obtained accommodation entries in the form of bogus purchases to the tune of Rs. 35,09,770/- from the following 3 parties during the FY 2011-12: Name of the Bill Provider Amount in Rs. Pankaj Exports 15,58,560/- Malhar Exports 15,56,010/- Ankita Exports 3,95,200/- Total Rs. 35,09,770/- 5.4 The AO after detailed discussion rejected the books of account u/s 145(3) and disallowed 25% of the said purchases making an addition of Rs. 8,77,442/-. The conclusion was reached based on the following facts: (i) A search and seizure action under sect....
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....he genuineness of the purchases made from those parties. Merely filing bills, confirmation of account & payments by cheque does not tantamount to discharge of the onus cast on the appellant especially when the department had received specific material/information from the Investigation wing, wherein Sh. Bhanwarlal Jain/ the suppliers operating the benami concerns, on oath had admitted the fact that they have merely provided entry / issued bills without physically selling/delivering any goods. Further, it was the duty of the appellant to establish the existence of aforesaid suppliers. It is observed that the purchases made by the appellant from the concerned parties remained unverifiable due to non-production of the parties. Production of suppliers assumes importance in view of specific information with the Department that the concerned parties from whom the appellant claimed to have purchased the goods have actually admitted of providing accommodation entries & bogus purchase bills. Therefore, onus was on the appellant to satisfactorily prove that entire purchases are genuine by producing the alleged suppliers for verification. But the appellant failed to do so. 5.7 It has been h....
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....e note of the decision of the High Court of Delhi in Suman Poddar Vs ITO which was affirmed by the Hon'ble Supreme Court in (2019) 112 taxman.com 330: The first, issue which has been raised by the assessee that it has not been confronted with the statements of various parties relied upon by the Assessing Officer. The assessee has also contended that opportunity of cross-examining those parties/persons was not provided to the assessee. According to the assessee, this resulted in the violation of the principles of natural justice and thus assessment should be held void ab intio. However, in our opinion, not providing opportunity of cross-examination may be in the nature of irregularity which is curable but not an illegality leading to annulling of the assessment In this case, information has been provided by the DGIT(Inv), Mumbai after crystallization and in-depth investigation. It is observed that the AO has issued notices under sections 143(2), 142(1) of the Act, show cause and the appellant has been directed to furnish the documents. The appellant has complied with the directions, appeared before the assessing officer and submissions have been made consequent to which the ....
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....ired to be made known to the appellant has been informed by issuance of a notice to which to the appellant has responded by submitting replies. Therefore, in the absence of any prejudice caused to the assessee on account of non-furnishing of the report or giving opportunity for cross examination, the appellant cannot claim that there has been violation of principles of natural justice and the right to defend itself was in any manner affected. 5.10 As held by several courts, the department is not required to lead clinching evidence to prove that purchases are bogus. The onus of proof at all relevant times rests upon the assessee. It is for the assessee to establish by evidence that a particular allowance is justified. The law does not prescribe any quantitative test to find out whether the onus in a particular case has been duly discharged. It all depends on the facts and circumstances / situations of the case as held by the Hon'ble Gauhati High Court in the case of Assam Pesticides & Agro Chemicals V. CIT (1997) 227 ITR 846, 851, 852 (Gauh). In the case of CIT Vis Golcha Properties (Pvt.) Ltd. 227 ITR 391 (Raj), the Hon'ble Rajasthan High Court has held that the genuinene....
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....ent appeal as per grounds so raised and reiterated in para 2 above. The ld. AR of the assessee in support of the grounds so raised, filed a detailed submission which is reproduced here in below:- "Before making detailed arguments the appellant would like to submit that present case of the appellant is covered case with the decision of the Hon`ble Bench in ITA No. 245/JPR/2023 vide order dated 18.07.2023 of the appellant which relates to AY 2014-15 containing exactly similar facts and hence the appellant relies completely on the submissions given in that case and the order of the Hon`ble Bench for this instant appeal. The only difference between both the cases is that in the cited case the assessment was framed u/s 143(3) whereas in the instant appeal the order was passed consequent to notice u/s 148. In this instant appeal the appellant has also challenged action of the ld. AO in issuing notice u/s 148 in ground no. 2. Brief facts of the case :- Assessment proceedings : The appellant company was incorporated during the previous year 2011-12 and hence this was the first year of business. It has been engaged into trading of diamond, gold jewellery, coloured stones etc. For th....
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....ith the judgement of the Hon`ble Supreme Court in the case of NTPC Ltd. (229 ITR 383). The said new ground is as under :- Ground No. 4 : That the ld. AO has erred seriously on facts in applying the provisions of section 145(3) of the Income Tax Act, 1961 without proving any mistake on the part of the appellant. Such illegal action of the ld. AO may kindly be quashed. The ld. AO states in her concluding para of the order at second last page of the order that since the assessee is engaged into sales of diamond and hence the only possibility is of purchases being made from a different concern other than the three parties listed above and consequently purchases made from above 3 parties are treated as bogus purchases and the assessee`s books are therefore rejected u/s 145(3) for the same reason. The ld. AO has stated above facts without :- - Confronting the appellant with the material in her possession which has been considered by her as adverse. - Confronting the appellant with the statements of parties recorded during the course of search and which have been relied upon by her. - Allowing any opportunity of cross examination of persons whose statements have been relied ....
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....ched and even failed to produce all such parties before the appellant for cross examination. She even did not share the outcome of independent enquiries conducted by her about such alleged bogus parties. The ld. AO did not have any thing in her possession to prove such purchases as bogus. Further the ld. CIT (A) has also erred seriously in sustaining the action of the ld. AO without caring for the evidences submitted by the appellant during assessment and appellate proceedings. Therefore then action of the ld. CIOT (A) is not in accordance with law and deserves to be quashed. The ld. AO has relied on the judgment of the Hon`ble Gujarat High Court in the case of Sanjay Oil Cake Industries v/s CIT (2008) (10 DTR 153) for making an addition @ 25% of the purchases from 3 parties which have been alleged to be bogus. Such action of the ld. AO is without any basis or any evidence in her possession to make an upfront disallowance of 25%. She forgot to take into consideration the following facts :- - The appellant has dealt with diamond, diamond jewellery and precious and semi precious stones during the year under consideration. Out of total turnover of Rs. 5.57 Crores it has declared t....
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....he ld. AO made 12.50% addition on the amount of purchases from the concerns controlled by Bhanwar Lal Jain in the AY 2012-13 and 2013-14 and in case of AY 2011-12 made 100% addition in the returned income. In first appeal the ld. CIT (A) sustained the findings of the ld. AO but restricted the addition in all the three years @ 12.50% of the amount of purchases made from such concerns. On further appeal the Hon`ble ITAT deleted the whole addition by observing that the assessee has already declared an overall GP of 6.04% which is more than the reasonable GP. In the case in hand also the GP declared by the appellant is on very good footings and no disallowance was required to be made. iii. Rajendra Prasad Chaudhary v/s ACIT (Jaipur ITAT) (Case law APB 29- 39) : The assessee is into diamond trade and 148 proceedings were initiated by ld. AO (same ASO as that of the appellant) on the basis of information received from investigation wing of Mumbai. The ld. AO made addition @ 25% on purchases made from concerns of Bhanwar Lal Jain group as per their routine exercise. However the ld. CIT(A) restricted the GP rate to 8.50% (without confirming any addition made on estimated by ld. AO) and o....
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....ing quantitative stock etc. which have not been doubted by the ld. AO and hence her action in making addition @ 25% of such alleged bogus purchases is wrong and unjustified. The appellant has enclosed copies of its Balance Sheet and Profit & Loss Account for the year under consideration for your kind verification (APB 38-39). Ground No. 2 : That the ld. CIT (A) has erred seriously in law and on facts in sustaining the validity of notice issued by ld. AO u/s 148 of the Income Tax Act, 1961 which was challenged before him on the reason of issuing notice u//s 148 on borrowed satisfaction of another wing of the department. In this ground the appellant wishes to challenge the action of the ld. AO in initiating action u/s 147, for which notice u./s 148 has been issued without satisfying the conditions stipulated therein. The reasons for initiating this action is enclosed herewith for your kind verification (APB 1). As per these reasons it is apparent that the ld. AO had received information from DGIT (Inv.), Mumbai about search in the case of Bhanwar Lal Jain group of cases. After receiving the information the ld. AO did not take any step further and issued notice u/s 148 of the Inco....
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....wed satisfaction. 15 Therefore, in the above facts, the view taken by the impugned order of the Tribunal cannot be found fault with. This view of the Tribunal is in accordance with the settled position in law." Further reliance is also placed on the case of Commissioner of Incometax v. Smt. Sohan Devi Sodani decided by the Hon`ble Rajasthan High Court (2008) 303 ITR 342 wherein the following was held :- "The Tribunal found that merely on the basis of DVO's report the reassessment proceedings could not have been initiated in the absence of Assessing Officer's own satisfaction about escapement of income from tax. The Tribunal found that the opinion about the escapement of income from tax ought to be of the Assessing Officer himself and not of a borrowed opinion of the DVO. The principle cannot be accepted in abstract inasmuch as though the DVO's opinion in respect of cost investment may not be final, but prima facie in some cases circumstances if otherwise relevant can provide some material, like an audit report on the basis of which Assessing Officer could have framed his own opinion. It is, however, true that opinion about escapement of income from tax must be of Assessing Of....
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....ld as under :- "36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law.". The facts of the present case are exactly similar to above cited four cases and hence it is sincerely requested that the whole proceedings u/s 147 may kindly be declared void ab initio and the order so passed may be annulle....
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.... various decision relied upon hereinabove. Therefore there is no requirement to reject the books result declared by the assessee. The ld. AR of the assessee in support of the additional ground so raised in this appeal as ground No. 3 that while rejecting the books of accounts, the ld. AO has not pointed out any single defect in the book result and has simply relied upon the material or the information received from the search which was carried out in Bhanwar Lal Jain Group in Mumbai. The ld. AR of the assessee also submitted that relied upon the material or the statement is not enough, and he has not ever said with the name of the assessee and without sharing that the information and without pointing out any single defects in the books of accounts, the rejection of books of account are not in accordance with law. The ld. AR of the assessee further submitted that even the books of account is to be rejected, the ld. AO bound to issue the show cause notice and should also demonstrate as to why he wanted to apply the GP rate and thereby intend to estimate the income of the assessee. As it is seen that there is no such show cause notice of estimation has ever been given to the assessee.....
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....ers whereas in this case for the year under consideration the assessee has disclosed GP @ 5.96%. The findings of the ld. CIT(A) that this instruction is not applicable is against the facts on record. Therefore on these issues, the ld. CIT(A) has erred in holding that the case of the assessee falls in the exception criteria. Based on these arguments, the ld. AR of the assessee submitted that the appeal of the assessee should be decided on technical grounds. Even on merits there is sufficient material on record by the lower authorities and thereby he has supported his arguments. 6. Per contra, the ld. DR relied on the case laws cited here in below and submitted that the assessee is involved in bogus purchase for which the findings of the lower authorities were relied upon by the ld. DR. The ld. DR submitted that there is specific information that the assessee has made purchases from three concerns of Shri Bhanwarlal Jain Group. The issue of notice u/s. 148 is not from the borrowed satisfaction but based on the sufficient information so ground of assessee challenging the reopening is not maintainable. The ld. AO has considering the aspect of the matter and considering the judicial pr....
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...... [2001] 117 Taxman 628 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. La Medica 127-130 13 [2000] 111 TAXMAN 46 (KER.) HIGH COURT OF KERALA Beena Metals v. Commissioner of Income-tax 131-132 14 [2009] 316 ITR 274 (Gujarat)[04-03-2008] [2009] 316 ITR 274 (Gujarat) HIGH COURT OF GUJARAT SanjayOilcakeIndustries v. Commissioner of Income-tax 133-138 15 [2002] 125 TAXMAN 763 (RAJ.) HIGH COURT OF RAJASTHAN, JAIPUR BENCH Indian Woollen Carpet Factory v. Income-tax Appellate Tribunal 139-141 16 [2003] 132 TAXMAN 629 (RAJ.) HIGH COURT OF RAJASTHAN Rameshwar Lal Mali v. Commissioner of Income-tax 142-143 17. [2017] 79 taxmann.com 409 (Delhi) HIGH COURT OF DELHI Principal Commissioner of Income-tax-7 v.Paramount ommunication (P.) Ltd. 144-148 18. [2016] 76 taxmann.com 106 (Gujarat) HIGH COURT OF GUJARAT Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income-tax 149-160 19. [2018] 91 taxmann.com 119 (Gujarat) HIGH COURT OF GUJARAT Aradhna Estate (P.) Ltd. v. Deputy Commissioner of Income-tax, Circle-(1) 161-175 20 [2017] 85 taxmann.com 84 (Gujarat HIGH COURT OF GUJARAT Pushpak Bullion (P.) Ltd. v. Deputy Commissioner of Income-tax - Circle-3(....
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....orded u/s.131 of IT ACT, 1961 on 06.10.2013, Lunkaran Parasmal Kothari has stated that import of Diamond in the concerns managed and controlled by you, is made on behalf of certain local parties who do not wish to show such imports in their books of accounts. On receiving the consignment, the material is handed over to real importer out of books. However, in the books of the concerns managed and controlled by you, the said consignment still appear as stock since the material has been sold to the real importer out of books. To show sale against the bogus stock outstanding in your books, bogus sale bill are issued to parties against their purchase made in cash. These partics who take accommodation entries from your concerns make payment through RTGS. This RTGS is in turn used to make payment to the foreign parties from whom import has been made. The parties who have been given accommodation e4ntries by you in form of bogus bill and who had made payment for such bogus purchase through RTGS want their cash back. In the meantime, the real importer on whose behalf import has been made makes the payment for the said import through Aangaria (Cash transaction). The cash thus received from t....
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....idering that aspect of the matter receipt of the goods is not disputed [ quantitative details filed at page 66 (APB) which is not disputed ] but the only dispute is as to real cost of purchase. The bench further noted that the assessee has accounted the bills for purchase of diamonds from M/s. Pankaj Exports, M/s. Malhar Export and M/s. Ankita Export. Considering the nature of business of the assessee whether the same are at inflated or are at prevalent market rate. The sales and quantity records are not disputed. The only dispute here in this case is estimating the profit @ 25 % based on the facts that the purchase is tainted. So far as the decision relied upon for estimate of the profit @ 25 % we note that there were issues as to quality of the goods and in fact in some cases observed that the goods in fact not been delivered or denied to have purchased. Not only that, the rate @ 25 estimated is related to the food and oil industries where the prices are very low and always in demand. The case of the assessee relates to the costlier jewellery items where the profit margins are very thin and thought cut competition exist and profit margin are very low. Even this issue is examined ....