TaxTMI 
TaxTMI 
2022 (9) TMI 1651
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....to consideration for deciding the above appeals en masse. 3. The Grounds of appeal raised by the assessee in the lead case (in ITA No.424/SRT/2019) are as follows: "On the facts and circumstances of the case and the law on the subject: 1. The learned CIT(A) has grossly erred in ruling out the Appellant's contentions of Gross illegality in the Assessment Order on the excuse of "undue advantage", even after having reached the conclusion of the re-assessment order suffering from serious irregularities, being fatal to the proceedings. 2. The reassessment order is in gross violation of principles of natural justice and equity and is liable to be quashed as bad in law and illegal on the ground inter-alia that in spite of specifically and categorically requested for by the Appellant:- a) The learned AO has miserably failed to furnish the Appellant copies of the documents and evidences relied upon by him for making the additions in Assessment. b) The learned AO has also failed to exercise his power u/s 131 and /or 133(6) of the Act. c) The learned AO has also failed to permit the cross-examination of the person concerned. 3. The addition by the learned AO of 100% of im....
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....g accommodation entries in the form of unsecured loans to the interested parties, issuing of bogus sale / purchase bills to various parties etc. During the course of search and seizure action in the case of Shri Rajendra Jain Group of cases on 03.10.2013 by the DGIT(Inv). Mumbai, it was found that there are namesake dummy directors / partners / proprietors / brokers, etc. These concerns were being actually managed by Shri Rajendra Jain & others. These group concerns were believed to be concerns actively involved in providing non-genuine purchase bills and also unsecured loan accommodation entries to various interested parties. As a result of the search and seizure action, it was conclusively proved that these diamond concerns are only on paper base with no real business activities. Findings of the search action on Shri Rajendra Jain & Others reveals that Shri Rajendra Jain and associates manage, control and operate numerous concerns in the name of various persons who are shown as name-sake directors, partners and proprietors through which they provide accommodation entries of loans and advances, purchase and sale & unsecured loans to various parties / beneficiaries. The name-sake /....
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.... a given point of time would at least have some stock of diamond available. However, the fact that none of the group concerns had any stock of diamonds as on 03.10.2013 i.e. the day when search commenced raises a suspicion with regard to genuineness of business activity of these group concerns. (ii) Books of accounts not maintained at the respective registered offices: The registered offices and residential premises of the said group concerns and the Rajendra Jain and others in Mumbai and Surat were covered during the search action. However, the team of the Income Tax Authorities did not find any books of account of the said group benami concerns at any of the premises. 6. During the course of search, evidences were found; persons were examined on oath which established that Rajendra Jain and others have been using group benami concerns to give accommodation entries in the nature of bogus purchase and bogus unsecured loans to various beneficiaries. Therefore, based on these facts, the Assessing Officer held that that the assessee had only obtained the bogus bills from the concerns of Shri Rajendra Jain; i.e. M/s. Kangan Jewels Pvt. Ltd. amounting to Rs.15,88,30,265/-, M/s. Manipr....
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....round for both the above years is partly allowed." 8. Aggrieved by the order of the ld. CIT(A), the assessee as well as Revenue, both are in appeal before us. 9. The Assessing Officer made addition @ 100% of bogus purchases and on appeal the ld. CIT(A) restricted the addition to 5% of the bogus purchase, therefore the assessee is in appeal before us that 5% addition sustained by the ld. CIT(A) should also be deleted. On the other hand, the Revenue is in appeal before us that 100% addition sustained by the Assessing Officer must be upheld. 10. Shri Rasesh Shah, Ld. Counsel for the assessee argued that assessee submitted bills, vouchers and all transactions were through banking channel, therefore, addition made by the Assessing Officer may be deleted. He further stated that even 5% of addition sustained by Ld. CIT(A) should be deleted, as the assessee is doing genuine business. 11. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 12. We have heard both the parties and carefully gone through the submissions put forth o....
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....on entries from such hawala trader. At the time of recording reasons, the mere suspicious about the accommodation entry is sufficient as held by Hon'ble jurisdictional High Court in various cases. To support his submissions, the ld.CIT-DR relied upon the decision; * Pushpak Bullion (P) Ltd Vs DCIT [2017] 85 taxmann.com 84(Gujarat High Court), * Peass Industrial Engineers (P) Ltd Vs DCIT [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 ....
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....ks Pvt. Ltd. Vs. ACIT [2017] 79 taxmann.com 153 (Gujarat) 8 Shakti Karnawat Vs. ITO - 2(3)(8), Surat ITA 1504/Ahd/2017 and 1381 /Ahd/2017 9 Asian Paints Ltd. Vs. DCIT, [2008] 296 ITR 90 (Bombay) 10 PCIT, Surat 1 Vs. Tejua Rohit kumar Kapadia [2018] 94 taxmann.com 325 (SC) 11 The PCIT-17 vs. M/s Mohommad Haji Adam & Co. ITA NO. 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. CIT-DR 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 assesse....
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....g Mumbai. So far as other submissions of the ld AR for the assessee that there is no live link of the reasons recorded, we find that the Hon'ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd clearly held that when assessing officer received information from the investigation wing that two well known 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 submiss....
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....ty 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 Rs. 1.86 Crore. The disputed transaction in the said case was Rs. 1.68 Crore. However, in the present case the assessee has declared the GP @ 0.78%. It is settled law that under Income-tax, the tax authorities are not entitled to tax the entire transaction, but only the income component of the disputed transaction, to prevent the possibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @ 6% of impugned purchases / disputed purchases would be sufficien....