TaxTMI 
TaxTMI 
2024 (7) TMI 1131
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.... This bunch of six appeals by Revenue and six Cross Objections (COs) therein by assessee emanate from the separate orders passed under section 250 of the Income-tax Act, 1961 (in short, 'the Act') by the Ld. Commissioner of Income-tax (Appeals)-4 Surat [in short, "Ld. CIT(A)"] vide dated 19.03.2023, 20.04.2023, 21.04.2024, 24.04.2023 & 28.04.2023 which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) r.w.s 147 for same assessment year i.e., (AY) 2012-13. 2. In all appeals of Revenue and assessee's COs, both parties have raised certain common and identical grounds of appeals, except variation of additions on account of bogus purchases. Facts in all appeals are almost common; therefore, with the consent of parties, all the appeals and COs were clubbed, heard together and are decided by consolidated order for sake of convenience and brevity and to avoid conflicting decisions. For appreciation of facts, the case of M/s Glorious Diamond Pvt. Ltd. in ITA No.439/SRT/2023 for A.Y 2012-13 is treated as "lead" case. The Revenue has raised the following grounds of appeal:- "1) On the facts and in the circumstances of the case a....
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....T(A) erred in not taking any adverse view of the same, even while working out net profit percentage from bogus purchases made by the assessee. 7) Without prejudice to the Ground No.1 & 2, despite holding at para 7.4 that the total value of bills of M/s M.B. Offshore Distributors Pvt. Ltd., amounting of Rs. 2,65,00,000/- pertain to loan given by the assessee, the entity is related entity of Afroz Fatta which are engaged in providing accommodation entries and the given loan was returned back to the assessee on the next date of loan given, the Ld.CIT(A) erred in not takin adverse view of the same as per the provisions of Section 69 of the I.T. Act. 8) Without prejudice to the Ground No.1 & 2, despite holding at para 7.4 that the total value of bills of M/s R.A. Distributers Pvt. Ltd. amounting of Rs. 57,00,000/- pertain to loan given by the assessee, the entity is related entity of Afroz Fatta which are engaged in providing accommodation entries and the given loan was returned back to the assessee on the next date of loan given, the Ld.CIT(A) erred in not taking adverse view of the same as per the provisions of Section 69 of the I.T. Act. 9) On the facts and....
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.... appellant has made sales also to two parties and sales to the two parties had been treated as genuine. In other words sales to one party is treated as genuine whereas purchase from the same party is treated as bogus, which cannot be justified. 4. The CIT(A) has erred in part confirming and Ld.AO has erred in making addition without providing the copy of any statement of said Mr.Afroz Hasan Fata. Further, both Ld.CIT(A) and Ld.AO has erred in not providing the cross-examination of the said Mr.Afroz Hasan Fatta, though the same was asked by the appellant. This violates the principle of natural justice. 5. The Ld.AO has erred in making addition and the Ld.CIT(A) has erred in part confirming the same without providing any cash trail. 6. The Ld.CIT(A) has erred in estimating profit @ 2% of alleged purchase amount is without any base and sales made by the appellant has been treated as genuine." 3. The facts of the case in brief are that the appellant is a private limited company and it filed its return of income on 07.09.2012, declaring total income of Rs. 2,58,360/-. The assessment order u/s 143(3) was passed on 25.03.2015 by making addition of Rs. 84,299/....
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....claring the same returned income of Rs. 2,58,630/-. The Assessing Officer provided reason for reopening to the appellant on 17.05.2019. The objection of the appellant was disposed of by the Assessing Officer by an order dated 28.06.2019. Thereafter, Assessing Officer issued various notices and confronted the assessee about the findings stated above and finally passed assessment order on 21.06.2021 determining total income at Rs. 50,02,00,960/- by making addition of Rs. 49,98,58,018/-. The addition was total of two separate additions of Rs. 36,32,00,000/- and Rs. 13,66,58,018/-. The addition of Rs. 36,32,00,000/- pertained to the transactions of the appellant with "target entities" namely M/s M. B. Offshore Distributor Pvt. Ltd. (Rs. 6.30 Cr.), M/s R. A. Distributors Pvt. Ltd. (Rs. 23.27 Cr.), M/s Ramshyam Exports Pvt. Ltd. (Rs. 5.75 Cr.) and M/s Ridhhi Exim Pvt. Ltd. (Rs. 1 Cr.). "Target entities" are those companies who have made foreign remittances from their bank accounts to Dubai and Hong Kong. The assessee had pleaded before the Assessing Officer that assessment has already been completed on 25.03.2015 and hence further addition cannot be made. The Assessing Officer did not ac....
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....llant and disposed of the objection by passing a speaking order. Hence, the ground was dismissed. Aggrieved by the order of Ld. CIT(A), the Revenue has filed appeal before this Tribunal. The appellant has also filed CO in Form No.36A. 6. Before delving into the merits of addition, let us first discuss and decide the ground raised in the CO of the appellant pertaining to initiation of re-assessment proceedings u/s 147 of the Act. The grounds are reproduced in para-2 of this order. Before us, the Learned Commissioner of Income-tax-Departmental Representative (Ld. CIT-DR) has strongly supported the order of AO. He submitted that credible information was received from the DDIT (Inv.) on 22.03.2019 and 25.03.2019 which was supported by the report from the ED. The report of the ED is based on the information from Customs Department, Surat that some companies opened bank accounts with ICICIC Bank, Surat and used their accounts for making foreign remittances against fake import documents. The ED has filed charge sheet and supplementary charge-sheet after conducting necessary investigation on 18.07.2014. The money laundering scam is known as "Afroz Mohd. Hassanfatta Group Scam". The Asse....
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....y the information of the investigation wing. The Assessing Officer has not made any enquiry for his satisfaction of the amount mentioned in the reasons (para 5). The Assessing Officer was not having any knowledge about the transactions, date and amount of each transaction contained in the figures of the four parties mentioned in the reasons for reopening and therefore the reopening was not based on any adequate and authenticate data. The Ld. AR also submitted that the time period covered in the investigation by the ED was financial year 2013-14 (AY.2014-15) because the current account with ICICI Bank was opened on 13.12.2013. Since the account was opened in December, 2013 (AY 2014-15) and ED made investigation of the particular account, the report of the ED would not help the Assessing Officer to reasonably come to the conclusion that income escaped assessment in AY.2012-13 (FY.2011-12). The Ld. AR further submitted that the statement of the Assessing Officer that Mr. Afroz Hassanfatta used the transactions with the appellant in illegal transfer of money outside India is a general remark and cannot constitute tangible material for reopening the assessment. The Assessing Officer has....
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.... ITO (338 ITR 51)(Del) (x) Chhugamal Rajpal vs. S. P. Chaliha & Ors. (179 ITR 603)(SC) (xi) Deepraj Hospital vs ITO, 65 ITR 663 (Agra - Trib) (xii) ACIT vs. M/s Pankaj Gas Cylinders Ltd. (ITA No.5273/Del/2013) (xiii) PCIT vs. M/s Shodiman Investments Pvt. Ltd. (167 DTR 290)(Bom) (xiv) S. P. Agarwalla Alias Sukhdeo Prasad Agarwalla vs. ITO, (140 ITR 1010) (Cal) (xv) Giggle Infotech Pvt. Ltd. vs ITO (ITA No.1284/Del/2018) etc. 7.2 The Ld. AR stated that ratio of Keshav Diamonds Pvt. Ltd. (supra) is not applicable to the case of the appellant. It is distinguishable and have different set of facts than the case of the appellant. The ED Investigation covered was for account opening on 13.12.2013 and this fact was not brought to the notice of the Hon'ble High Court and therefore the Hon'ble High Court has not expressed its view on the same. However, the appellant has brought this fact to the notice of the Bench during the hearing in the written submission. When the account was opened on 13.12.2013 (AY 2014-15), how the allegation that accommodation entries provided by the appellant has been used for transferring the money out of In....
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....e 4 parties to the extent of Rs. 36.20 Crore. The Assessing Officer did not undertake any further investigation of the bank account of the appellant to see whether actual purchases were made by the assessee from those companies. We find that the Ld. CIT(A) has upheld the reopening by observing that the information gathered relating to these companies by the Investigation Wing with the statements recorded from the concerned persons managing the companies was sufficient information for Assessing Officer to form a reasonable belief that income of the appellant to extent of bogus purchases / sales made by the assessee had escaped assessment. The Assessing Officer also supplied copy of the reasons recorded to the appellant and disposed of the objection by passing a speaking order. Hence, the Ld. CIT(A) upheld the reopening. 8.2 The Ld. AR has argued that decision of the Hon'ble Gujarat High Court in the case of Keshav Diamond (supra) was not applicable to the fact of the present case. His other arguments have already been discussed earlier in this order. He has mainly contended that the Assessing Officer has not applied his mind on the information given by the Investigation Wing. The....
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.... In the said case there were 12 parties of Mr. Afroz Mohd Hassanfatta group which are same parties in the reasons recorded for reopening in case of the appellant. The findings in para 3 of the reasons in Keshav Diamond Pvt. Ltd. (supra) is similar to the facts in the present case. The only difference is quantum of escapement in case of Keshav Diamond Pvt. Ltd. (supra) which was Rs. 10.13 Crore out of which transactions with the target entity (Agni Gems Pvt. Ltd.) was Rs. 4.57 Crore. In case of the appellant, it was stated at Rs. 36.20 Crore. The Ld. AR stated that the Ld. CIT(A) in his appellate order, has deleted such amount by holding that there was no purchase / sale with these concerns. But we find that assessee had transactions of advance with the above concerns which have been pointed out by the Ld.CIT(A). Thus it is not a case where there was absolutely no transaction by assessee with Hassanfatta group. Be that as it may, such findings during the appellate stage cannot be the basis for striking down the reopening made by the Assessing Officer. Such action by the Ld.CIT(A) is at the third stage. The first stage is reopening u/s 147 of the Act, the second stage is assessment p....
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....how that assessee had made bogus purchases through web of entities created by Bhanwarlal Jain initiation of reassessment by Assessing Officer was justified. 8.8 The Hon'ble Gujarat High Court in the case of Pushpak Bullion vs. DCIT, 85 taxmann.com 84 held that where Investigation Wing of the department during course of investigation of a third party found that he was indulged in providing accommodation entries and bogus bills, and assessee had made sizable purchases from him, reopening notice against the assessee was valid. 8.9 The Hon'ble Gujarat High Court in case of Peass Industrial Engineers Pvt. Ltd. vs. DCIT, 73 taxmann.com 185 held that where after scrutiny assessment, Assessing Officer received information from Investigation Wing that two well-known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiaries, Assessing Officer was justified in reopening assessment. 8.10 There is no reason as to why the ratio of the above decisions would not be applicable to the facts of the present appeal. We have again gone through the reasons recorded by the Assessing Officer and having gone through the entire gamut o....
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....ure of fact that transaction at the time of original assessment proceedings, cannot be said to be disclosure of "true" and "false" facts in the case and the ITO would have the jurisdiction to reopen concluded assessment in such a case." It would also be apt to quote the following observations of the Hon'ble Apex Court in the case of Phul Chand Bajrang Lal (supra), which reads as under: "We have to look to the purpose and intent of the provisions. One of the purposes of Section 147 appears to us to be, to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would, be travesty of justice to allow the assessee that latitude." 8.12 A three Judges bench of Hon'ble Apex Court in the case of A.L.A. Firm v. CIT, 189 (1991) ITR 285, after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has, in consequence of specific and relevant information coming into his possession subsequent to the pre....
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....nst the reopening held that the AO has received report from investigation wing Mumbai, which indicate that the assessee is beneficiary of the accommodation entry operators. The accommodation entry provider admitted before investigation wing that he has given such entry to various persons; based on such report the AO has reason to believe that the income of the assessee has escaped assessment and thus the action of AO in reopening is justified. 18. We find that the Hon'ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd Vs DCIT (supra) while considering the validity of similar notice of reopening, which was also issued on the basis of information of investigation wing that they have searched a person who is engaged in providing accommodation entries, held that where after scrutiny assessment the assessing officer received information from the investigation wing that well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified in re-opening assessment. Further similar view was taken by Hon'ble Jurisdictional High Court in Pushpak Bullion (P) Ltd Vs DCIT (su....
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....e 141 of the Constitution. In view of the above facts, and respectfully following the decisions cited (supra), the ground of the appeal raised by appellant is dismissed. 9. Next grounds relate on merits of addition; ground Nos. 1 to 5 of Revenue and ground Nos. 3 to 6 of assessee's CO are inter-related and pertain to the addition made by the AO to the extent of Rs. 49,98,58,018/- and sustained by the Ld.CIT(A) to the extent of Rs. 27,29,810/-. The assessee had purchased goods from four companies of Afroz Hasan Fattra Group totalling to Rs. 36.32 crores. The assessee also made purchase of Rs. 13,66,58,018/- from three other concerns which were assisting Afroz Hasan Fatta to transfer money to UAE and Hong Kong. The assessee has shown these purchase in its books of account but they are actually accommodation entries. In view of the above, the total transactions with Afroz Mohd Hasanfatta Group during the year under consideration was Rs. 49,98,58,018/- (Rs. 36,32,00,000 + Rs. 13,66,58,018). This was added to the total income of the assessee with remarks by the AO "addition on account of transaction with Afroz Hassan Fatta related entities treated as accommodation entries". Aggrieved....
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....hat the goods are checked by the Custom Authority at the time of exporting of goods. Thereafter, the Ld.CIT(A) has stated that many traders / customers of diamond purchase from grey market where invoices are not available. The invoices are, therefore, obtained from accommodation entry providers. The reason is that there was 1% VAT in Maharashtra whereas transaction in diamond was exempt from VAT in Surat. The modus operandi of the trade of diamond is mentioned at para-7.11 of the appellate order. Thereafter the Ld.CIT(A) has relied on various decisions of the Hon'ble jurisdictional High Court and other Hon'ble High Court who have held that once the purchases are made corresponding to sales and bills are obtained from unregistered entities, only the profit embedded in such modus operandi needs to be brought to tax and entire purchases cannot be disallowed. At para-7.14, the Ld.CIT(A) has held that out of purchase of Rs. 49,98,58,018/-, purchase of Rs. 36,33,67,517/- is not bogus purchase because no such purchases are debited by the appellant in its books account. The bogus purchases are to the tune of Rs. 13,64,90,501/- from two entities namely, M/s Metro International and M/s Frank....
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....e Ld.CIT(A), however, found that appellant had made bogus purchases to the tune of Rs. 13,64,95,001/- from M/s Metro International Pvt. Ltd., and M/s Frankin International. He has sustained addition of the profit element being @2% of the above purchase. 9.4 We find that there are several decisions of this Co-ordinate Bench of this Tribunal, wherein on the similar circumstances, the Tribunal has sustained addition @ 6% of the bogus purchase. Reference may be made to the case of Pankaj K. Chaudhary (supra). The Co-ordinate Bench of this Tribunal in the above case decided a bunch of 14 appeals consisting of appeals and COs by Revenue and different assessees. The lead case Pankaj K. Chaudhary (supra). After detailed discussion of the case and the legal position as well as precedents on the subject issue, the Tribunal sustained addition @ 6% of the bogus purchases. The facts of the present appeals are similar and hence it is squarely covered by the order of the Tribunal in the case of Pankaj K. Choudhary (supra) wherein it was held as follows: "19. Ground No. 2 in assessee's appeal and the grounds of appeal raised by the revenue are interconnected, which relates to restricti....
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....ases would be reasonable to meet the end of justice. 21. We have seen that during the financial year under consideration the assessee has shown total turnover of Rs. 66,09,62,458/-. The assessee has shown Gross Profit @ .78% and net Profit @ .02% (page 11 of paper Book). The assessee while filing the return of income has declared taxable income of Rs. 1,81,840/- only. We are conscious of the facts that dispute before us is only with regard of the disputed purchases of Rs. 4.34 Crore, which was shown to have purchased from the entity managed by Bhanwarlal Jain Group. During the search action on Bhanwarlal Jain no stock of goods/ material was found to the investigation party. Bhanwarlal Jain while filing return of income has offered commission income (entry provider). Before us, the ld CIT-DR for the revenue vehemently submitted that 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. We find that in Mayank Diamonds the Hon'ble High Court restricted the additions to 5% of GP. We have seen that in Mayank Diamonds P Ltd (supra), the assessee had declared GP @ 1.03% on turnover of....
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....ed investment, which are not recorded in the books of account maintained by the appellant. In the present case, these are duly recorded in the books of assessee and such finding by the Ld.CIT(A) has not been disproved by Revenue by adducing necessary evidence. Hence, the advances cannot come under the purview of the Section 69 of the Act. We may also refer to the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Ayachi Chandrashekar Narsangji (2014) 42 taxmann.com 251 (Guj) where the Hon'ble court held that where the department has accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. Following the above decisions, the Co-ordinate Bench of this Tribunal, in case of Mega Polymers vs. ITO in ITA No.98/SRT/2024 dated 08.04.2024 has decided the issue in favour of assessee. Following the above decision, we dismiss both the grounds of Revenue. 12. Grounds No. 9 to 11 are general in nature and do not require any adjudication. 13. In the result, appeal of Rev is partly allowed whereas assessee's CO is dismissed. ITA Nos.390, 438, 440 & 441/SRT/2023 (AY.12-13) & assessee's CO Nos.03-05, 07- 08/SRT/202....
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....dition of Rs. 13,09,599/- relating to investment in the scrip of M/s Orissa Mineral Development Co.Ltd. As the appellant failed to make submission regarding the source of investment, the investment made was treated as unexplained investment in the hands of the assessee. 18. Before the Ld.CIT(A) assessee has made detailed submission which is at para-8.2 of the order of Ld.CIT(A) (pages 21 to 24). The Ld.CIT(A) has given his finding at para 8.3 and 8.4 of the order (pages 24 and 25). He stated that appellant had purchased 2,32,947 shares of the Birla Pacific Madspa Ltd. on 09.09.2011 and sold the same on 13.09.2011 and 14.09.2011 and incurred loss of Rs. 1,86,641/-. The scrip was sold within a short time and the Ld.CIT(A) stated that the investment was made in the regular course of trading in which appellant made a loss of Rs. 1,86,641/-. This fact shows that the intention of the appellant was not to earn exempt income. He also held that the investment was from explained sources from the bank account. Hence, he deleted addition of Rs. 51,24,834/-. Regarding scrip of M/s Orissa Mineral Development Co.Ltd., the Ld.CIT(A) observed that it was a Govt. of India Undertaking and assessee....