TaxTMI 
TaxTMI 
2026 (9) TMI 981
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....f the grounds of appeal arise from identical set of facts. Besides, these appeals have been heard together. Therefore, they are being adjudicated in this composite order for the sake of brevity. We take up the appeals of the assessee first which is taken as „Lead Case‟. The decision rendered herein would apply mutatis mutandis to other appeals as well. 2. The grounds of appeal are as under: ITA No. 2582/MUM/2023 (A.Y. 2008-09) 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition to the extent of Rs. 2,67,071/- on account of alleged bogus purchases merely on the basis of bald statement given by Shri Rajesh Doshi during the course of search proceedings. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in appreciating that: * Shri Rajesh Doshi is an unknown third party. Shri Rajesh Doshi was not even the owner of the concerns from whom the appellant-company had made purchases. His services were never utilized by the appellant-company in any purchases made during the year. * The appellant-company was not given an opportunity to cross examine Shri Raje....
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....from certain other information and replies. However, the assessee, on being confronted completely denied any relationship with Sri Parmar claiming him to be blackmailer who tied to extract money from the director Sri Nilesh Tank. It was claimed that the assessee had already made an application before ITSC on 18.02.2013 for AYs 2010-11 to 2012-13 u/s 245D(1) of the Act i.e. before the search, in which the Hon'ble Settlement Commission in the order dated 20.08.2014 u/s 245D(4) of the Act inter alia concluded that the documents found with Sri Daxesh Parmar were prima facie ambiguous and discarded the same. The order was accepted by the Department and was not challenged before the competent court. The AO based on the material seized from Sri Parmar as also statements of certain other persons went on to complete the assessments making various additions including bogus purchases. 4. Common submissions were made by the assessee before the ld.CIT(A) in support of various grounds of appeal challenging the additions inter alia claiming that the AO made the addition without appreciating that the issues were already concluded by the Settlement Commission and were binding on the AO. The ld.C....
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....d not succeed and a police report was filed on 12.02.2014 The police had called Shri Daxesh Parmar and his statement was recorded on 17.02.2014 wherein he admitted that with a view to extract money, had fabricated dummy document and approached the assessee for extortion of money. On the intervention by the police, he apologized and promised not to harass Mr Nilesh Tank in future. In spite of this, he went on to prepare dummy records and connived with the Investigation Wing to conduct search and survey on the members of the assessee group. Once again on 01.04.2014 FIR was lodged by Shri Nilesh Tank against him. The assessee-company further submitted that reliance on the statement of Shri Daxesh Parmar by the A.O. was wholly misplaced. However, the A.O. overlooked these facts and made various additions in the hands of the assessee company solely based on the unreliable material seized from the premises of Shri Daxesh Parmar. 5.1 It is further submitted that the AO consciously chose not to follow the findings and observations of the Hon'ble Income Tax Settlement Commission (ITSC) in their order dated 20.08.2014 passed u/s 245D(4) of the Act in the appellant's own case for A....
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....hri Daxesh Parmar are unreliable. Department on the basis of the statement/documents seized from Shri Daxesh Parmar had reopened assessment u/s 148 of the Act for the assessment year 2007-08 in the cases of M/s Akshar Shanti Realtors Pvt Ltd and Shri Bharat Shah. However, no addition was made in the respective cases and the reassessment proceedings were dropped. 5.4 In so far as the statement of Shri Nilesh Tank is concerned, it is submitted that the Assessing Officer has relied on his statement recorded u/s. 131 of the Act. It is contended that the said statement was retracted by Shri Nilesh Tank through an affidavit dated 10.03.2014. He was continuously threatened and tortured throughout the search proceedings for giving details about on-money and purchase of material. He was pressurized to admit about transfer of money to Shri Bharat Shah generated through on-money. He was harassed and was forced to sign the statement prepared by the income tax officials in the middle of the night of 05.03.2014.He also filed police compliant against the Income tax authority due to such illegal abuse of power. It is apparent that the confession was obtained by coercion and use of force and no ....
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....hout providing any kind of evidence to that effect. He himself admitted to that fact that he kept a record of the genuine transactions and did not have any record of the alleged accommodation entries and alleged commission payment received by him in relation to those entries. Therefore, it is clear beyond any shadow of doubt that the statement given by Shri Rajesh Doshi was not backed by any tangible and independent evidence and was merely a story concocted by him to push the blame on the assessee for the reasons best known to him. Moreover, he provided a list of parties from whom he allegedly arranged accommodation entries. After providing the list, he makes a completely contradictory statement that these parties are genuine and doing proper business of steel. The above story narrated by Shri Rajesh Doshi is flawed on many levels which is explained as there is no clarity whether the goods were actually supplied or not or whether only bills were taken by him from the parties. Therefore, the statement given by him was nothing but a bald, baseless and contradictory statement not supported by any shred of evidence and thus could not be relied upon to make any addition in the hands of ....
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....arch and seizure operation and the addition is based on seized materials and the statement of the entry provider. Mere submission of certain bills etc. did not prove the genuineness of the purchases. He relied on the decision of Hon'ble Bombay High Court in Kanak Impex P.Ltd.172 taxmann.com 283(Bom) wherein it was held that entire bogus purchases are liable to be taxed. Also, reliance has been placed on the decision in the case of N.K.Proteins Ltd 72 taxmann.com 289(Guj). The learned CIT(DR) has also placed reliance upon the following judicial pronouncements to contend that the entire amount of purchases is liable to be treated as bogus. 8. In rejoinder, the ld.AR has made a written submission claiming that no addition is justified in respect of this allegation of bogus purchase because the material seized from Mr. Daxesh Parmar was discarded by Settlement Commission and for statement of Mr. Rajesh Doshi, opportunity of cross examination was not provided to the assessee. It is further submitted that the cited decisions were distinguishable on facts and, therefore, have no application to the present case. The assessee actively participated in the assessment proceedings and furnis....
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....tional High Court. The assessment order is self-explicit as the statement of the entry provider has been reproduced wherein he has categorically admitted that these entities under his control were formed for providing bogus entries. The statements were also supplied to the assessee for comments and the assessee has not been able to rebut the admission of the entry provider. The ld.CIT(A) has adopted 12.5% claiming it to be profit element embedded in the said purchases without any basis other than placing reliance on a Gujarat High Court order and without citing any commonality of the facts. He has not taken due cognizance of the case that the instant case involved search and seizure operation and statements recorded during such operation. Therefore, significance of such statements cannot be underestimated. 9.1 In view of recent decisions of Hon'ble jurisdictional High Court in several cases concerning similar issue of bogus purchases through entry providers, such purchases if not proved by the assessee are liable to be treated as non-genuine or bogus and there is no question of application of estimated profit vis-à-vis the bogus purchases. In this regard, we refer to the ....
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....he profit, when the basis of addition was not low profit. 21. In our view, both the Appellate Authorities ought to have appreciated that the issue before them was whether the respondent-assessee had proved the purchases of which the claim for deduction was made. The respondent-assessee, having failed to discharge its onus on this issue before all three authorities, in our view, the additions made in the assessment order by the AO was justified. 22. If the approach of the Appellate Authorities of estimating the profit on such purchases is to be accepted, then, in effect, the consequence would be that even if respondent-assessee has failed to prove its claim of deduction of purchases, still by estimating profit, impliedly deduction of purchases is given. For example, if the purchases by accommodation entries are Rs. 100/- and a profit of 10% is estimated, then to the extent of Rs. 90/- deduction on account of purchases is deemed to have been given by the Appellate Authorities. This approach would not be correct since it is nobody's case that the respondent-assessee has made sales out of books by purchasing the goods out of books. 23. If the approach of ....
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....in case where the purchases are not proved, the entire purchases should have been added and not certain percentage of such purchases. In our view, in the instant case also, the respondent-assessee as observed above has failed to prove the purchases and therefore there was no justification for CIT(A) and the Tribunal to confirm the additions only to the extent of 12.5%. In our view, both the Appellate Authorities ought to have confirmed the entire purchases in line with the decision of this (2018) 98 taxmann.com. 34. We may observe that CIT(A) in paragraph 5.2.1 has given a clear finding of fact that the respondent-assessee was involved in getting bogus bills. This finding has not been challenged by the respondent-assessee before the Tribunal, and only submission made before the Tribunal was on the estimation of gross profit by relying upon the decision in the case of Mohammad Haji Adam & Co. (supra). 38. In our view, in the instant case, the respondent-assessee has offered no explanation of the source of the expenditure incurred on account of purchases of Rs. 20,06,80,150/- and, therefore, the AO was justified in making an addition of the said amount and the Appel....
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.... and, therefore, the logical conclusion that both the Appellate Authorities ought to have adopted was to confirm the total additions of purchases from these two parties. The issue before both the Appellate Authorities was whether the purchases made from these two parties has passed the test of proving the genuineness. By accepting the additions of 12.5% of the purchases from these two parties, the respondent- assessee has accepted that these transactions of purchases are unproved and consequently, there was no justification, therefore, to restrict the addition to 12.5% only. 21. The Co-ordinate Bench of this Court in the case Shoreline Hotel (P.) Ltd. Vs. Commissioner of Income-tax, Central-I13 had an occasion to adjudicate a very similar issue. In that case, the Officer made an addition of 15% of the purchases which were not proved. The CIT (A), while exercising his jurisdiction under Section 263 of the Act held that in such a case, the total purchases should have been added and not only 15%. The matter was carried unsuccessfully before the Tribunal and thereafter before this Court. This Court observed that once certain percentages of the purchases which are admitted has ....
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....ssee has made sales out of books by purchasing the goods out of books." 9.4 In view of the above discussion, we do not approve of the ld.CIT(A) applying certain profit percentage and restricting the addition made by the AO at 100% to a mere 12.5 percent, in complete contrast to his own findings and also defying the ratio of the decision in the case of N.K. Protein(supra) also in the light of decisions of the jurisdictional High Court(supra).As regards the reliance placed by the ld.AR on coordinate benches of ITAT claimed to be distinguishing the decisions of Kanak Impex etc. is concerned, we do not find much merits in view of the clear cut findings and decisions of the aforesaid decisions of Hon'ble jurisdictional High Court which have binding effect on all subordinate authorities. It needs to be emphasised the findings of the ld.CIT(A) wherein he has categorically concurred with the AO that the genuineness of the alleged purchases could not be established by the assessee which is also similar to the cases of Kanak Impex as discussed in para 6.4 and Shree Ganesh Constructions in para 6.6 above. In such a scenario, there is no basis for restricting the addition on estimate basis ....
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....ase transactions. 2 On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the AO was not correct in taking a different view than that taken by Hon'ble Settlement Commission and deleting various additions made by the Assessing Officer without considering the fact that orders of the Hon'ble Settlement Commission are for the particular year and particular issue only. 3 On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the various additions made by the Assessing Officer without realizing the fact that retraction statement filed by Shri Nilesh Tank and others are self-serving and afterthought documents. 4 On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the various additions made by the Assessing Officer without realizing the fact that the statement recorded from Shri Rajesh Doshi was used by the Hon'ble Settlement Commission itself in estimating the income of the assessee. ITA No. 3136/MUM/2023 (A.Y. 2013-14) 1 On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in restricting the addit....
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....h 1000000 On account of on money on sale of flats 169332380 On account of sales of shops 3757419 Grand total 4,60,97,901 58,50,84,759 17. The facts of the case are reiterated that a Search and Seizure operation u/s 132 of the Act was conducted on 03.03.2014 on the Tank Group and Bharat Shah Group and other related entities. Pursuant to the search action, notice u/s 153A of the Act was issued by the A.O. During assessment proceedings, the AO issued notice u/s 142(1) of the Act requiring the assessee to provide certain details. It is further noticed that the AO proceeded to make additions of above sums with the observations that it did not submit any detail as sought by him in this regard. In para 13 of the assessment order on page-4 of the order concluded that the assessee failed to discharge the onus in this regard in AY 2013-14 with similar observations and conclusion in para 17/18 on page-6/7 of the assessment orders. 18. In the subsequent appeal before the ld.CIT(A), the assessee agitated the impugned additions claiming that they were based on the seizure made from one Daxesh Patel, denying any relation or connection wi....
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....e remand proceedings initiated by this office and refused to file any details before the AO. The primary contention of the appellant with regard to the validity of the remand directions was that the Hon'ble Settlement Commission had discarded the evidentiary value of the statement recorded and material seized from the possession of Mr. Daxesh Parmar and that the order of the Hon'ble Settlement Commission had become final and conclusive with respect to the matters contained therein. The ld.CIT(A) observed that it was evident from the assessment order that the additions made by the AO are completely based on the materials seized from the premises of Mr. Daxesh Parmar. 18.3 The ld.CIT(A) further observed that all the above-mentioned facts were placed before the AO during the course of assessment proceedings. Further, it is also appropriate to mention here that M/s. Strawberry Constructions Pvt. Ltd., in which the appellant was a Director, was before the Hon'ble Income Tax Settlement Commission (ITSC) for settlement of its case for A.Y. 2010-11 to 2012-13 vide application filed on 18.02.2013. The Hon'ble ITSC after taking cognizance of all the facts of the case, the evidence produce....
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....e same. The applicant has not made any surrender of unaccounted income during the course of the search in their case. Neither any valuable assets in the form of cash, gold/diamond jewellery, bullion, undisclosed assets, unexplained investments and unexplained expenses etc. had been found and seized in this case. Neither the Department has established confirmation of on-money payment by the buyers/investors to the applicant by making independent enquiries in this regard. The very fact that the department had extensively founded its case on the evidence seized from the residence of Shri Daxesh Parmar and his statement, apart from relying upon the statements of Shri Ajaykumar Trivedi and Shri Tarun Shah, who are not employees of the applicant, gave credence to the applicant's allegation that the hostile and inimical attitude of Shri Daxesh Parmar has been instrumental in the conduct of search and seizure and survey action against the assessee. 18.6 It may also be mentioned here that department had not at all verified the authenticity of the statement made by Shri Daxesh Bhika bhai Parmar under section 132(4) of the Act on 03.03.2014 that he had been working as an assistant for PNK ....
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.... to matters stated therein." 18.9 Further, once the material seized during the course of search and seizure proceedings in case of the appellant has been thoroughly considered and discarded by the Hon'ble Settlement Commission, being a higher authority, it cannot be again used by the department in other proceedings to make additions as the matter is no longer untouched. This is further fortified by the fact that the department had not challenged the order of Hon'ble Settlement Commission before a competent court. 19. The ld.CIT(A) stated that in light of the contentions placed by the assessee a clarification was sought i.e. whether any Writ Petition was filed by the Department against the order passed on 20.08.2014 and 07.03.2017 u/s. 245D(4) of the Act by the Hon'ble Settlement Commission. The Assessing Officer in response submitted that no Writ Petition had been filed against the relevant orders of the Hon'ble ITSC Therefore, he concluded that it could be safely concluded that the matter which is already decided upon and put to rest by a higher authority cannot be tampered with and the decision rendered therein cannot be ignored by the lower authorities. The department coul....
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....d application before the Settlement commission for AY 2011-12 and 2012-13 and the order passed by it were not applicable to the impugned assessment years. The order passed was therefore, specific to the issues involved in those particular years and could not be considered applicable to these years. It was further stated that the ld.CIT(A) did not take due cognizance of the statements of various persons including the director during search operation though the same carried profound significance and could not be set aside by superficial and self serving retractions. Reliance has been placed on the decision of Hon'ble Supreme Court in Bannala Jat Constructions P.LTd 106 taxmann.com 128 inter alia held that retraction of the statement latercould not make the statement unacceptable. The burden lay on the assessee to show that the admission was made by him in the earlier statement was wrong. He also relied on the decision in the case of Thiru A.J. Ramesh Kumar 139 taxmann.com 190(Mad) wherein it was inter alia held that once a statement is made u/s 132(4) of the Act, it is open for the AO to rely and proceed on the basis of such statement. Statement u/s 132(4) of the Act has a strong evi....
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....it is evident that the case was re-opened by relying on the same material seized from the premises/custody of Shri Daxesh Parmar, which constituted the foundation of the proceedings before the Settlement Commission. No fresh incriminating material, independent enquiry, corroborative evidence or new information pertaining specifically to Assessment Year 2013-14 and 2014-15 had been brought on record. Thus, the very basis on which the belief of escapement of income has been formed is the identical material whose credibility and evidentiary worth already stood examined by the Hon'ble Settlement Commission. Therefore, even the reopening in both these years is not as per law. Significantly, the Hon'ble Settlement Commission, after a detailed examination of the search material, recorded the following findings in the order dated 20.08.2014 passed u/s 2450 (4) in case of M/s Strawberry Construction P Ltd: i. The interpretation placed by the Department on the documents seized from the residence of Shri Daxesh Parmar was prima facie ambiguous and unsupported by corroborative evidence; ii. The Department failed to establish alleged receipt of on-money through independent enq....
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....that the Revenue has also sought to rely upon the statement of Shri Rajesh Doshi. Such reliance is wholly misconceived. Shri Rajesh Doshi is an unrelated third party whose statement was recorded without affording the appellant any opportunity to cross-examine him. More importantly, he had not identified or referred to any specific transaction involving the appellant. A general and untested statement of a third party cannot constitute corroborative evidence for making additions in the hands of the appellant. 21.4 Likewise, the seized digital data, by itself, does not establish the receipt of any on-money. Unless the Revenue is able to decode and substantiate the alleged entries through independent evidence, such as statements of purchasers, banking records, cash trails, or other contemporaneous material, the digital data remains unverified and incapable of forming the sole basis for an addition. The judicial decisions relied upon by the Learned CIT(DR), namely Bannalal Jat Constructions (P.) Ltd. and Thiru A.J. Ramesh Kumar, are clearly distinguishable on facts. In those cases, the statements were supported by independent corroborative evidence, and the assessee involved in that ....
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.... 6. The ld.CIT(A) did admit that certain enquiries were not conducted by the AO. However, he being an authority with co-terminus powers of the AO, neither made any enquiries nor got it done through the him. 7. The ld.CIT(A) deleted the additions mainly on the ground that the Department did not contest the order of the Settlement Commission which achieved finality without making any effort to examine the issues involved independently. The ld.CIT(A) erred in holding that the Commission gave a blanket immunity to the entire group in subsequent years as well. 8. Further, the ld.CIT(A) himself admitted in the order that the authorities are not stopped from independently examining the seized materials vis-a-vis the books of account. Thus, his action in deleting the addition based on the report of ITSC is self contradictory. 9. It is also noted that the assessee requested the Assessing Officer to provide copies of all the material as referred to in the notice u/s 142(1) of the Act vide letter 22.03.2016 and 23.03.2016. However, the Assessing Officer had not provided the appellant with the copies of the material relied upon by him for making the assessment, ....