TaxTMI 
TaxTMI 
2022 (2) TMI 1510
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....e appeals and CO filed by assessee and Revenue are directed against the separate orders passed by Learned Commissioner of Income-tax (Appeals), Surat ['CIT(A)' for short], which in turn arise out of separate assessment orders passed by the Assessing Officer (AO in short). 2. Since, the issues involved in all the appeals and cross objection are common and identical; therefore, these appeals and cross objection have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 296/SRT/2018 in case of Shri Diniesh J. Suthar, for assessment Year 2013-14, have been taken into consideration for deciding the above appeals en masse. 3. The grounds of appeal raised by assessee in lead casein ITA No. 296/SRT/2018 are as follows: "1. The Hon'ble CIT(Appeals)-1, Surat was not justified in confirming the disallowance of Rs. 37,92,27,342/- being 100% of alleged bogus purchase. 2. The Hon'ble CIT(Appeals)-I Surat was not justified in confirming the interest charged u/s 234A/234B/234C of the income Tax Act, 1961." 4. Further, vide assessee`s application dated 21.06.....
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....Dharemendra Babel has explained the modus operandi, which is reproduced as under: "various brokers of the diamond market approach me regularly and they give direction from time to time to import diamonds in my books of a/c. Once the diamonds are received they are taken away by these brokers at whose direction these imports were made. For doing these activities, I get a commission. As a result of above, stock of diamonds are reflected in my books without any physical stock being there. Thereafter, at a certain commission, I issue bogus sale bills of such diamonds which are appearing in my books as stock in the names of other interested parties/concerns, which is again arranged by these brokers. For this, I get commission. I also give bogus sale bills when there is no stock available in my books, by arranging bogus purchase bills from the local market from various concerns through various brokers. For this type of transaction, I get profit of differential commission received and paid by me. Also in case some person required entry for unsecured loan, I give the entry by giving them cheque and in return I receive cash for the same. But most of the times it so happens that I ha....
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....y me to create a base for my bogus loans and advances. There are several brokers and traders in the market who want to import a part of their rough diamonds through people like me with a view to suppress their turnover and profit. The consignments are sent on credit by the suppliers (usually from Hong Kong and Dubai) in the name of companies at the instance of the actual importer. On receipt of consignments in the name of my company, the real importer gets the actual delivery of diamonds from the Clearing Housing Agents (CHA) on the basis of my authority letter and declaration from. The payments are settled through a process of adjustment and understanding between the supplier and the real importers which I am not aware of. The payments for the imports are shown as outstanding creditors in my books as I have an understanding with the facilitating brokers that the payments can be sent to supplier through cheque as per my convenience. The payment made by me by cheque is returned to me in cash by the broker in India. There are certain parties in the market who want accommodation entries for the purchase of diamonds in their books. Such parties either approach me or my network....
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.... of purchase of diamonds are also taken by the diamond processing companies or traders who tend to inflate purchases and to defraud revenue by showing low profit. The processing houses/traders issue cheques to benami concerns against the bogus purchase bill taken. Since there is no genuine transaction of material hence the amount paid by cheque requires to be received back in cash. At this juncture, persons who want to plough back the undisclosed cash generated from their businesses, generally builders/real estate developers etc., approach these benami concerns for issue of cheqaue (as loan) against cash. These benami concerns issue cheques to them received from the processing houses/traders. Cash received from builders/person dealing in real estate is passed on to the diamond processors/traders. The settlement of cash takes place through angadias. (iii). The last leg of the whole process is the return of loan by persons who have taken accommodation entry of loans and advances generally builders/real estate developer through banking channel to these benami concerns who consequently make payment to the exporter in Europe who were appearing in the books of the benami concern....
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....is claim. 12. On the other hand, ld. DR for the Revenue argues that ld. CIT (A) has passed the speaking order narrating all facts. Therefore, ld. DR relied on the following findings of ld. CIT(A), which is reproduced below: "6.1.2. The assessee submitted that the appellant had made purchases from the 5 concerns namely (i) M/s Duke Business Pvt. of Rs. 1,50,00,043/-, (ii) M/s. Frontline Diamond Pvt. Ltd. of Rs. 25,25,11,503/-, (iii) M/s. Olive Oversea Pvt. Ltd. of Rs. 2,75,00,107/-, (iv) M/s. Rajat Diamond Exim Pvt. Ltd. of Rs. 3,72,22,531/- and (v) M/s. Rajan Gems of Rs. 4,69,93,158/-. The purchases have been duly incorporated in the stock register and had been sold to various parties as per the books of accounts. It was also contended that the AO has not pointed out any defects in the books of accounts, has made no independent inquiries. He relied on various judgments in support of his claim. The main thrust of the appellant's submission is on the fact that the transactions have been made through banking channels by account payee cheques, the parties have filed confirmations along with the return of income, bank statements, copy of bills/re....
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....ll taken. Since there is no genuine transaction of material hence the amount paid by cheque requires to be received back in cash. At this juncture, persons who want to plough back the undisclosed cash generated from their businesses, generally builders/real estate developers etc., approach these benami concerns for issue of cheque (as loan) against cash. These benami concerns issue cheques to them received from the processing houses/traders. Cash received from builders/ persons dealing in real estate are passed on to the diamonds processors/ traders. The settlement of cash takes place through angadias. 6.1.5. The last leg of the whole process is the return of loan by person who have taken accommodation entry of loans and advances, generally builders/real estate developer through banking channel to these benami concerns who consequently make payment to the exporter in Europe who were appearing in the books of the benami concerns as 'creditors'. At this stage, cash is received by these name lending concerns from the real importer at whose instance rough diamonds were imported in the first place is passed on to the person who had returned/repaid the loan through banki....
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.... 6.1.8. As already discussed in the preceding paragraphs, that accommodation entries for bogus purchases and loans and advances are given in form of cheque/RTGS issued from the respective bank accounts of various benami concerns operated by Shri Pravinkumar Jain and Shri Gautam Jain Group against cash received from the beneficiary parties in the Angadias account. Thus, one leg of every accommodation entry given by Shri Pravinkumar Jain and Shri Gautam Jain Group to various beneficiary parties is necessarily routed through banks. This leg of transaction which is in the nature of "banking transaction" is recorded and reflected in the regular books of account of both the benami concern operated by Shri Pravinkumar Jain and Shri Gautam Jain Group which has been used as a conduit for providing the said accommodation entry and the beneficiary party who as availed the accommodation entry (the other leg of the transaction is the movement of equivalent amount of cash through the Angadias which never get recorded in the regular books of account of either the benami concerns or the beneficiary party). The modus operandi operated in the instant case was no different. 6.1.9. In h....
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....s of Diamond. ❖ The search and survey teams also found that each of these concerns had email Ids and the backup of these e-mail messages also corroborates this modus operand! of the group in respect of giving entries of bogus purchases and unsecured loans. ❖ Evidences of actual importers who used to procure diamonds through these concerns of the Group was also found from the e-mail correspondences. ❖ This fact remain to be of great importance that during the entire search and survey wherein all the known/declared premises of the Group were covered, were found to be with not even a single piece of diamond. Means no stock was found with any of the company/entity at any of the premises. ❖ Further, the investigations carried out by the Investigation wing Mumbai revealed that the actual importers of rough Diamonds import part of their requirement through these namesake concerns of the Shri Pravinkumar Jain and Shri Goutam Jain Group so that they can suppress their Turnover and profits. ❖ The imported stock is entered into the books of the accounts of these bogus concerns despite of the vital fact that the ac....
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....ri Gautam Jain Group on their behalf in cash. 6.1.14. The contention of the assessee that apart from the said statement no other evidence was found but this argument has no force as also no legal support because the statement recorded under section 132(4) was an evidence by itself. The question of evidentiary value of a statement recorded under section 132(4) is no more 'res integra'. When an assessee had made a statement of facts, he can have no grievance if he is taxed in accordance with that statement. The reasonableness of the Assessing Officer's approach is that he had not made any enhancement or substitution in the amounts as offered/disclosed in the said statement. It was a statement pertaining to certain facts which were in the exclusive knowledge of the assessee. Those facts were disclosed to the Income Tax Department and thereupon those were accepted by the department. Those facts were of such nature that there was no scope of existence of any other evidence. Affirmation of facts at best can only be done by the assessee in his own volition. If Shri Pravinkumar Jain and Shri Gautam Jain Group wanted to correct the said statement, then it was open for t....
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....dence can be made on the basis of such admissions. The legislature in its wisdom has provided that such statement can be used in evidence and the assessment can be made on the basis of such statement. The sanctity of such provision would be lost if the assessee is allowed to contend that no addition can be made on the basis of such admission. However, such admission can be retracted by the assessee only if the circumstances such as threat, coercion, undue pressure etc. is established by the assessee of exist. But in the instant case no such evidence could be produced. Similar view has been expressed by in the case of Hotel Kiran 82 ITD 453(Pune)." 13. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld. CIT(A) and other materials brought on record. We note that in assessee's appeals in ITA Nos. 294 to 296/SRT/2018, the Assessing officer made 100% disallowances of the bogus purchases belonging to Gautam Jain group and Pravinkumar Jain Group. On appeal, Ld. CIT (A) has confirmed the 100% di....
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....ITA No. 294 to 296/SRT/2018, 763/SRT/2018, 272/SRT/2019, and CO. No. 18/SRT/2021 are covered by the order of the Coordinate Bench of this Tribunal in the case of Pankaj K Choudhary (supra), wherein the Co-ordinate Bench of this Tribunal has inter alia observed as follows: "12. We have heard the submission of ld. CIT-DR for the Revenue and the ld. Authorised Representative(AR) of the assessee. We have also gone through the various documentary evidences furnished by assessee. The ld .CIT-DR for the Revenue supported the order of AO. The ld. CIT-DR submits that Investigation Wing, Mumbai made a search on Bhanwarlal Jain Group. During the search and after search, the Investigation Wing made a thorough investigation and concluded that Bhanwarlal Jain Group and his associates including his sons were indulging in managing about 70 benami concerns. The benami concerns were engaged in providing accommodation entries. The assessee is one of the beneficiaries of such accommodation entries. In the transaction of accommodation entries, the documentary evidences are created in such a way, so that the bogus transaction is looks like genuine transaction. In bogus transaction, the fabricat....
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....ssessee. 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 assessee filed its complete details of purchases to prove the genuineness of expenses. The AO accepted the same in the assessment order passed under section 143(3) on 10.03.2009. During re-assessment, the assessee again furnished complete details about the genuineness of purchases. The assessee filed confirmation purchases invoices, accounts of the parties, bank statement of assessee showing transaction to the banking channel. The AO has not made any comment on the documentary evidence furnished by assessee. The AO solely relied upon the statement of third party and the report of Investigation Wing. The report of wing and the statement of Bhanwarlal Jain were not provided to the assessee. The AO has not disputed the sales of assessee. No sale is possible in absence of purchase. The books of accounts were not rejected. The AO made the disallowance of entire purchases. The assessing officer not provided cross examination of the alleged hawala dealers. The disallowances sustain....
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....sessee'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 information, and without making any preliminary investigation, which was vague about the alleged accommodation entry by Bhanwarlal Jain Group. And that there was no specific information about the accommodation entry availed by the assessee. There is no live link between the reasons recorded qua the assessee. We find that the assessee has raised objection against the validity of the reopening before the AO. The objections of the assessee was duly disposed by AO in his order dated 09.02.2015. The assessee raised ground of appeal before ld. CIT(A) while assailing the order of AO on reopening. The ld. CIT(A) while considering the ground of appeal against 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....
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....f 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 Private Limited (supra) held that in the such cases the addition of bogus purchases was sustained to the extent of 12%, on the observation that the assessee may have made purchases from elsewhere and obtained the bills from impugned supplier to inflate Gross Profit Rate. The ld. CIT(A) by considering the overall facts, concluded that the 100% disallowance of purchase is not justified. We also find that the ld. CIT(A) also considered the decision of jurisdictional High Court in Mayank Diamonds Pvt. Ltd. (supra) and compared the fact of the present case with the facts in Mayank Diamonds Pvt Ltd (supra) and noted that assessee in that case was also engaged in the trading of polished diamonds. The ld. CIT (A) noted that in that case the AO made disallowance of entire bogus purchase and on first appeal before CIT (A) the disallowances were maintained. However, the Tribunal gave partial relief to the assessee directing to sustain the addition @12% of such bogus purchases. And on further appeal, the Hon'ble High ....