Shri Sunil Modi Prop. Siddhant Export, Jaipur V. Income Tax Officer Ward-2(2) , Jaipur

ITA 1010/JPR/2019

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 7774 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RUNI PAUL JCIT DR DHK
• Keywords: Reopening of assessment; Bogus purchase; Rejection of books of accounts; Rectification of order; Search and seizure; Tangible material; Wrong claim; Accommodation entries; Reason to believe; Reassessment proceedings; Borrowed satisfaction; Set aside
• Section: 143(3); 143(1); 139(1); 13; 147; 148; 144; 154

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B , JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE : SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 1010/JP/2019, 412 TO 416/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10, 2010-11 TO 2014-15 SHRI SUNIL MODI PROP: SIDDHANT EXPORT,11-B, DADU MARG, GOPAL BARI, JAIPUR CUKE VS. THE ITO WARD- 2 (2)/ 2(5) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ P AN/GIR NO .: ACSPM 9483 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SIDDHARTH RANKA, ADVOCATE & SHRI SAURABH HARSH, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY : SMT. RUNI PAUL, JCIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 29/11/2019 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 31 /12/2019 VKNS'K@ ORDER PER BENCH THESE SIX APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST SIX SEPARATE ORDERS OF LD. CIT(A) -1, JAIPUR DATED 9-05-2019 A ND 12-02-2019 FOR THE ASSESSMENT YEARS 2009-10 TO 2014-15 RESPECTIVELY. THE ASSESSEE HAS RAISED COMMON GROUNDS IN THESE APPEALS. FOR THE PUR POSE OF RECORDING THE FACTS, THE ASSESSEE'S APPEAL FOR THE ASSESSMENT YEA R 2010-11 IN ITA NO. ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 2 412/JP/2019 IS TAKEN AS LEAD CASE WHEREIN THE ASSES SEE HAS RAISED THE FOLLOWING GROUNDS. 1. THAT IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LOWER AUTHORITIES GROSSLY ERRED IN ISSUIN G NOTICE U/S 148 OF THE I.T. ACT, 1961 WHICH IS ISSUED WITHOUT ANY REASON T O BELIEVE AND THE ENTIRE PROCEEDINGS OF REASSESSMENT DESERVES TO BE Q UASHED. 2. THAT IN LAW AND IN THE FACTS AND IN CIRCUMSTANCE S OF THE CASE THE LOWER AUTHORITIES GROSSLY ERRED IN APPLYIN G PROVISIONS OF SECTION 145(3) OF THE I.T. ACT, 1961 IN REJECTING T HE SAME BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT. T HE ASSESSEE HAS MAINTAINED COMPLETE DETAILS SUPPORTED BY REGULARLY MAINTAINED BOOKS OF ACCOUNTS, QUANTITATIVE DETAILS ARE AVAILABLE BAC KED BY STOCK REGISTER AND THE ACCOUNTS ARE AUDITED. 2.1 THAT IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) GROSSLY ERRED IN UPHOLDING THE TRADING ADDITION AMOUNTING TO RS.4,07,743/- WHILE ESTIMATING THE GRO SS PROFIT AT THE RATE OF 10% AGAINST 7.25% DECLARED BY THE ASSESSEE. 3. THE IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE AO GROSSLY ERRED IN MAKING ADDITION OF RS. 19,843/- ON ACCOUNT OF COMMISSION PAID FOR SO CALLED ACCOMMODAT ION ENTRIES. 2.1 THE GROUND NO. 1 OF THE ASSESSEE IS REGARDING V ALIDITY OF REOPENING OF THE ASSESSMENT. 2.2 THE ASSESSEE IS AN INDIVIDUAL AND PROP. OF M/S. SIDDHANT EXPORTS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORT A ND EXPORT OF DIAMONDS. THE ASSESSEE FILES ITS RETURN OF INCOME F OR THE ASSESSMENT YEAR 2010-11 ON 11-10-2010 DECLARING TOTAL INCOME AT RS. 9,54,570/-. THE SAME WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961 ON 21-06-2011. SUBSEQUENTLY, THE AO RECEIVED THE INFORMATION FROM INVESTIGATION WING, ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 3 MUMBAI REGARDING THE ACCOMMODATION ENTRIES BEING PR OVIDED BY SHRI RAJENDRA KUMAR JAIN GROUP, SANJAY CHOUDHARY GROUP A ND DHARAMCHAND JAIN IN RESPECT OF BOGUS SALES AND UNSECURED LOANS ETC. AS FOUND DURING THE SEARCH AND SEIZURE ACTION CONDUCTED BY THE INVESTIG ATION WING, MUMBAI ON 03-10-2013. ON THE BASIS OF SAID INFORMATION AND IN VIEW OF THE TRANSACTIONS OF THE PURCHASES MADE BY THE ASSESSEE FROM SOME OF CONCERNS ALLEGEDLY BELONGED TO SHRI RAJENDRA KUMAR JAIN GROU P, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT ON 27-03-2017. THE ASSESSEE FILED A LETTER AND STATED THAT THE RETURN OF INCOME FILED U/S 139(1) OF THE ACT MAY BE TREATED AS RETURN IN RESPONSE TO THIS NOTICE U/S 148 OF THE ACT. THE AO ALSO PROVIDED THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT VIDE LETTER DATED 28-04-2017. THEREAFTER THE ASSESSMENT WAS COMPLETED U/S 143(3) READ WITH SECTION 147 OF THE A CT ON 27-12-2017 WHEREBY THE AO AFTER REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT HAS MADE THE ADDITION OF 25% OF THE PURCHASES MADE FROM THESE THREE CONCERNS BY TREATING THE SAME AS NON-GENUINE AND CO NSEQUENTLY ADDITION OF RS. 24,80,402/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) AND ALSO CHALLENGED THE VALIDITY OF REOPENING OF THE ASSESSM ENT. THE LD. CIT(A) ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 4 HAS REJECTED THE GROUND OF APPEAL OF THE ASSESSEE C HALLENGING THE VALIDITY OF REOPENING OF THE ASSESSMENT. 2.3 BEFORE US, THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE REASONS RECORDED BY THE AO REVEALS THAT THE AO HAS REOPENED THE ASSESSMENT ON THE BASIS OF THE INFORMATION RECEIVED FROM INVESTIG ATION WING, MUMBAI AND THEREFORE, THE REOPENING IS BASED ON BORROWED S ATISFACTION AND WITHOUT ANY APPLICATION OF MIND. THE AO HAS TREATED THE PURCHASES AS BOGUS ONLY ON SUSPICION AND NOT ON THE BASIS OF ANY MATERIAL TO SHOW THAT PURCHASES MADE BY THE ASSESSEE ARE ACTUALLY BOGUS. IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE OR MATERIAL WITH THE AO TO R EOPEN THE ASSESSMENT, THE FORMATION OF BELIEF BY THE AO IS BASED ON SUSPI CION AS PER INFORMATION RECEIVED FROM INVESTIGATION WING, MUMBA I. THEREFORE, THE REOPENING OF THE ASSESSMENT BASED ON BORROWED SATI SFACTION IS NOT SUSTAINABLE IN LAW. IN SUPPORT OF HIS CONTENTIONS, THE LD.AR OF THE ASSESSEE RELIED ON THE DECISION OF COORDINATE BENCH DATED 11 -04-2018 IN THE CASE OF NIRMALA AGARWAL VS ACIT (ITA NO. 995 & 996/JP/20 16 FOR THE ASSESSMENT YEAR 2007-08 & 2008-09). THE LD.AR ALSO RELIED ON THE DECISION OF COORDINATE BENCH DATED 12-06-2018 IN TH E CASE OF SHRI RAJENDRA PRASAD CHOUDHARY VS ACIT (ITA NO. 1495 & 1496/JP/2018 FOR THE ASSESSMENT YEAR 2012-13- AND 2013-14) AND SUBMI TTED THAT AN ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 5 IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNA L AND TAKEN A CONSISTENT VIEW THAT REOPENING OF ASSESSMENT BASED ON THE INF ORMATION WITHOUT CONDUCTING ANY INDEPENDENT ENQUIRY IS NOT VALID AS THE SAME IS ON BORROWED SATISFACTION AND NOT THE AO HAS HIS OWN IN DEPENDENT SATISFACTION. THUS THE LD.AR OF THE ASSESSEE SUBMIT TED THAT REOPENING OF ASSESSMENT IS LIABLE TO BE QUASHED. 2.4 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE AO HAS DULY CONSIDERED THE INFORMATION RECEIVED FROM INVESTIGAT ION WING, MUMBAI AS WELL AS THE FACTS OF THE CASE OF THE ASSESSEE AN D ONLY AFTER ANALYZING THE FACTS REGARDING THE PURCHASES MADE BY THE ASSES SEE FROM THE CONCERNS OF SHRI RAJENDRA KUMAR JAIN GROUP, HE HAS FORMED TH E BELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO THE REASONS OF BOGUS CLAIM OF PURCHASES. THEREFORE, THE INFORMATION RECE IVED FROM INVESTIGATION WING COUPLED WITH THE FACTS ANALYZED BY THE AO IS A TANGIBLE MATERIAL TO FORM THE BELIEF THAT INCOME AS SESSABLE TO TAX HAS ESCAPED ASSESSMENT. THE LD. DR HAS RELIED ON THE OR DER OF THE LD. CIT(A) ON THIS ISSUE. 2.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS CHALLENGED TH E VALIDITY OF REOPENING OF THE ASSESSMENT ON THE GROUND OF BORROWED SATISF ACTION AND WITHOUT ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 6 APPLICATION OF MIND BY THE AO. THERE IS NO QUARREL ON THE POINT THAT IF THE AO HAS REOPENED THE ASSESSMENT BASED ON INFORMATION RECEIVED FROM INVESTIGATION WING, MUMBAI WHICH IS A GENERAL INFOR MATION WITHOUT GIVING THE SPECIFIC FACTS REGARDING THE TRANSACTION S OF THE ASSESSEE THEN SUCH REOPENING OF ASSESSMENT WOULD BE TREATED AS BA SED ON BORROWED SATISFACTION, WITHOUT APPLICATION OF MIND AND CONSE QUENTLY NOT SUSTAINABLE IN LAW. IN THE CASE IN HAND, THE AO HAS REOPENED TH E ASSESSMENT BY RECORDING THE REASONS AS UNDER:- THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE A .Y. 2010- 11 ON 11.10.2010 DECLARING TOTAL INCOME AT 9,54,570 / -. THE SAME WAS PROCESSED U/S 143(1) OF THE I.T. ACT, ON 21.06.2011. 2 INFORMATION HAS BEEN RECEIVED FROM THE ADDL. COMMISSIONER OF INCOME-TAX, CENTRAL RANGE, SURAT TH ROUGH THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-2, JAIP UR. AS PER INFORMATION IT HAS BEEN FOUND THAT SHRI RAJENDR A KUMAR JAIN GROUP, SANJAY CHOUDHARY GROUP AND DHARAMCHAND JAIN ARE SOME OF THE ENTRY PROVIDERS OPERATING IN M UMBAI, INDULGING IN PROVIDING ACCOMMODATION ENTRIES IN THE NATURE OF BOGUS SALES AND UNSECURED LOANS ETC. AND THIS FA CT HAD ADMITTEDLY BEEN AFFIRMED BY THE SAID JAIN GROUP IN SEARCH 86 SEIZURE ACTION, CONDUCTED BY THE INVESTIGATION WING OF THE DEPARTMENT, MUMBAI ON 03.10.2013. DURING THE COURSE OF SEARCH AND SEIZURE ACTION STATEMENTS OF SHRI RAJEND RA JAIN AND SHRI SURENDRA JAIN, WERE RECORDED ON OATH WHERE IN THEY ADMITTED THAT ALL THE CONCERNS CONTROLLED AND MANAG ED BY THEM ARE NOT DOING ANY REAL TRADING IN DIAMONDS BUT INDULGED IN PAPER TRANSACTIONS ONLY. RELEVANT EXTRACT OF QUE STION AND ANSWERS ARE AS UNDER:- 'Q. 14 DURING THE SURVEY ACTION UNDERTAKEN AT VARIO US OFFICE PREMISES OF YOURS, NOT A SINGLE PIECE OF DIAMOND HA S BEEN FOUND BY RESPECTIVE SURVEY TEAMS THOUGH THERE IS SUBSTANTIAL TURNOVER SHOWN ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 7 BY VARIOUS CONCERNS CONTROLLED BY YOU. PLEASE STATE AS TO WHERE DO YOU KEEP YOUR STOCK IN TRADE? ANS. SIR, IN THIS REGARD, I WANT TO ADMIT THAT WE A RE ENAGED IN BUSINESS OF BILL SHOPPING THROUGH ALL THE CONCERNS, DUE TO WHICH WE DON'T HAVE ANY PHYSICAL STOCK OF DIAMOND WITH US AT ANY OF OUR PLACE AT ANY POINT OF TIME. I WOULD LIKE TO FURTHER ADD THAT WE ARE MERELY LENDING NAMES OF OUR VARIOUS CONCERNS TO THE REAL IMPORTER OF DIAMONDS WHO TAKES THE ACTUAL DELIVERY OF DIAMONDS.' THE ASSESSEE WAS ALSO INVOLVED IN PURCHASE TRANSACT IONS DURING THE F.Y. 2009-10., I.E. AS PER DETAILS BELOW:- PAN OF BILL PROVIDER NAME OF BILL PROVIDER A.Y. NATURE OF TRANSACTION BENEFICIARY NAME ' TOTAL VALUE OF TRANSACTION REAL VALUE OF TRASACTION AADCK1926B KRIYA 2010 - 11 SALE SIDDHANT EXPORTS 4665801 3394437 AADCK1927A KARNAWAT 2010 - 11 SALE SIDDHANT EXPORTS 5255806 3995487 TOTAL 9921607 7389924 IT IS SEEN THAT THE ASSESSEE HAS OBTAINED PURCHASE BILL(S) FROM THESE CONCERNS WHICH ARE RUN AND FLOATED ON PA PER BY SHRI RAJENDRA KUMAR JAIN 8S GROUP. THUS IT IS DERIV ED THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASES BILL(S) W ITHOUT ANY TRANSACTION(S) IN REAL GOODS. THE ASSESSEE HAS SHOWN BOGUS PURCHASES OF RS.99,21,607/ FROM PAPER CONCERNS WITHOUT OBTAINING PHYSICAL DELIVERY OF GOODS. THUS THE AMOUNT OF RS. 99,21,607 /- IS ESCAPED ASSESSMENT. I HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS. 99,21,607/- HAS ESCAPED ASSESSMENT WITHIN THE MEANI NG OF SECTION 147 OF I.T. ACT. SD/- (RAM NIWAS YADAV) INCOME TAX OFFICER, WARD 2(2), JAIPUR ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 8 THE AO HAS NARRATED THE FACTS REGARDING THE RETURN OF INCOME FILED BY THE ASSESSEE DECLARING TOTAL INCOME AND SUCH RETURN WAS PROCESSED U/S 143(1) ON 21-06-2011. SUBSEQUENTLY THE AO RECEIVED THE INF ORMATION AS GATHERED BY THE DEPARTMENT IN A SEARCH AND SEIZURE ACTION CONDUCTED BY THE INVESTIGATION WING, MUMBAI IN THE CASE OF SHRI RAJENDRA KUMAR JAIN, SANJAY CHOUDHARY AND DHARAMCHAND JAIN ON 03-1 0-2013. THE INFORMATION RECEIVED BY THE AO FROM INVESTIGATION W ING, MUMBAI REVEALS THAT DURING THE SEARCH AND SEIZURE ACTION, IT WAS DETECTED THAT THESE PARTIES WERE INDULGED IN PROVIDING ACCOMMODATION EN TRIES IN RESPECT OF BOGUS SALES AND UNSECURED LOANS ETC. THE AO HAS ALS O REPRODUCED THE QUESTION NO. 14 AND ANSWER THERETO IN THE REASONS R ECORDED WHEREIN SHRI RAJENDRA KUMAR JAIN HAS ADMITTED THAT THEY WERE EN GAGED IN THE BUSINESS OF BILL SHOPPING THROUGH ALL THE CONCERNS DUE TO WHICH THEY DO NOT HAVE ANY PHYSICAL STOCK OF DIAMOND WITH THEM AT ANY POINT OF TIME. THEY WERE MERELY LENDING THE NAMES OF THEIR CONCERN S TO THE REAL IMPORTER OF DIAMONDS WHO TAKES THE ACTUAL DELIVERY OF DIAMONDS. THIS MODUS OPERANDI WAS DETECTED DURING SEARCH AND SEIZU RE ACTION. THE AO THEN GAVE THE DETAILS OF THE PURCHASES MADE BY THE ASSESSEE FROM THE CONCERNS OF RAJENDRA KUMAR JAIN GROUP. THE ASSESSEE HAS NOT DISPUTED THE FACT THAT THE PURCHASES WERE MADE FROM THESE CO NCERNS WHICH ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 9 BELONGED TO SHRI RAJENDRA KUMAR JAIN GROUP. THEREFO RE, ALL THESE DETAILS GIVEN BY THE AO IN THE REASONS RECORDED CLEARLY MAN IFEST THE APPLICATION OF MIND ON THE PART OF THE AO AT THE TIME OF RECORD ING THE REASONS FOR REOPENING OF THE ASSESSMENT. AS REGARDS THE DECISIO N RELIED ON BY THE LD. COUNSEL FOR ASSESSEE , WE FIND THAT IN THOSE DECISI ONS THE AO HAS RECORDED THE REASONS MERELY REFERRING THE INFORMATION RECEIV ED FROM INVESTIGATION WING, MUMBAI WITHOUT ANALYZING THE FACTS AND TRANSA CTIONS DONE BY THE ASSESSEE WHICH HAD DIRECT NEXUS WITH THE INFORMATIO N RECEIVED FROM INVESTIGATION WING, MUMBAI. THEREFORE, THOSE DECISI ONS RELIED BY THE LD.AR CANNOT BE APPLIED IN THE FACTS OF THE PRESENT CASE. IN THE CASE OF SHRI RAJENDRA PRASAD CHOUDHARY V ACIT (SUPRA), THE TRIBUNAL HAS REPRODUCED THE REASONS RECORDED BY THE AO IN PARA 8 AS UNDER:- 08.ON THE BASIS OF THE INFORMATION AVAILABLE ON RECORD, I HAVE REASONS TO BELIEVE THAT INCOME OF RS. 39,32,50 0/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AS PER CLAUSE (B) OF EXPLANATION 2 OF SECTION 147 OF THE I.T. ACT, 1961. THEREFORE, IT IS A FIT CASE TO ISSU E NOTICE U/S 148 OF THE I.T. ACT, 1961. THE BARE READING OF THESE REASONS AS REPRODUCED BY THE TRIBUNAL IN THE SAID CASE, IT IS CLEAR THAT THE AO DID NOT APPLY IT S OWN MIND BUT REOPENED THE ASSESSMENT MERELY BY REFERRING THE INFORMATION WHICH IS VERY VAGUE. THEREFORE, THE DECISION IS NOT APPLICABLE ON THE FA CTS OF THE CASE WHERE THE AO HAS GIVEN FULL DETAILS OF THE TRANSACTIONS OF TH E ASSESSEE AND ALSO ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 10 PRIMA FACIE SHOWN THE NEXUS WITH THESE TRANSACTIONS THAT THE INFORMATION IS RECEIVED FROM INVESTIGATION WING, MUMBAI. THE LD . CIT(A) HAS DECIDED THIS ISSUE IN PARA 3.1.2 AS UNDER:- 3.1.2 DETERMINATION: (I) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. THE APPELLANT HAS CHALLENGED THE REOPENING OF THE CASE U/S 148 OF THE ACT. THE APPELLANT CONTENDED TH AT THE REOPENING WAS BASED ON THE STATEMENT OF SHRI RAJEND RA KUMAR JAIN WHICH CANNOT BE THE BASIS FOR REOPENING OF THE CASE. FROM THE ASSESSMENT ORDER, IT IS NOTED THAT T HE AO REOPENED THE CASE ON THE BASIS OF INFORMATION COUPL ED WITH FOLLOW UP INVESTIGATION. THE APPELLANT WAS CLAIMING PURCHASE FROM PARTIES WHICH WERE ONLY ISSUING ACCOMMODATION BILLS AND WERE NOT HAVING ANY STOCKS AVAILABLE WITH THEM. THE REOPENING WAS DONE AFTER PROPERLY RECORDING THE REA SONS AND FOLLOWING THE DUE PROCEDURE OF LAW. THE APPELLANT I S CHALLENGING THE SUFFICIENCY OF THE REASONS RECORDED WHICH CANNOT BE ENTERTAINED. (II) IT MAY BE MENTIONED THAT THE COURTS CANNOT LOO K INTO THE SUFFICIENCY OF THE REASONS RECORDED BY THE AO F OR REOPENING THE ASSESSMENT U/S 147 OF THE ACT. RELIANCE IS PLAC ED ON THE DECISION OF HON' BLE APEX COURT IN THE CASE OF RAYM OND WOOLLEN MILLS LTD. VS ITO [1999] 236 ITR 34 (SC), WHEREIN I T WAS HELD BY THEIR LORDSHIP THAT: 'IN THIS CASE, WE DO NOT HAVE TO GIVE A FINAL DECISION AS TO WHETHER THERE IS SUPPRESSION OF MATE RIAL FACTS BY THE ASSESSEE OR NOT. WE HAVE ONLY TO SEE W HETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIEN CY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CO NSIDERED AT THIS STAGE.WE ARE OF THE VIEW THAT THE COURT CAN NOT STRIKE DOWN THE REOPENING OF THE CASE IN THE FACTS OF THIS CASE. IT WILL BE OPEN TO THE ASSESSEE TO PROVE THAT THE ASSU MPTION OF FACTS MADE IN THE NOTICE WAS ERRONEOUS. THE ASSESSE E MAY ALSO PROVE THAT NO NEW FACTS CAME TO THE KNOWLEDGE OF THE INCOME-TAX OFFICER AFTER COMPLETION OF THE ASSESSME NT PROCEEDING. WE ARE NOT EXPRESSING ANY OPINION ON TH E ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 11 MERITS OF THE CASE. THE QUESTIONS OF FACT AND LAW A RE LEFT OPEN TO BE INVESTIGATED AND DECIDED BY THE ASSESSIN G AUTHORITY. THE APPELLANT WILL BE ENTITLED TO TAKE A LL THE POINTS BEFORE THE ASSESSING AUTHORITY. THE APPEALS ARE DISMISSED.' (III) IN THE CASE OF M/S AMIT POLYPRINTS (P.) LTD. VS DCIT 94 TAXMANN.COM 393 [2018] (GUJARAT), IT WAS HELD BY THE HON'BLE HIGH COURT OF GUJARAT THAT: 'WHERE REASSESSMENT PROCEEDINGS WERE INITIATED ON BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING THAT ASSESSEE HAD RECEIVED CERTAIN AMOUNT FROM SHELL COMPANIES WORKING AS AN ACCOMMODATION ENTRY PROVIDER, REASSESSMENT COULD NOT BE HELD UNJUSTIFIED' (IV) IN THE CASE OF M/S JAYANT SECURITY & FINAN CE LTD 91 TAXMANN.COM 181 [2018] (GUJARAT), IT WAS HELD BY THE ), IT WAS HELD BY THE HON'BLE HIGH COURT OF GUJ ARAT THAT: 'INITIATION OF REASSESSMENT PROCEEDINGS ON BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING THAT ASSESSEE HAD RECEIVED CERTAIN AMOUNT AS A LOAN FROM A COMPANY, WORKING AS ENTRY OPERATOR AND EARNING BOGUS FUNDS TO PROVIDE ADVANCES TO VARIOUS PERSON, WAS JUSTIFIED' (V) IN THE CASE OF RAKESH GUPTA VS CIT 93 TAXMANN.COM 271 [2018] (PUNJAB & HARYANA), IT WAS HELD BY THE HON'BLE HIGH COURT OF PUNJAB & HARYANA THAT: 'WHERE ASSESSING OFFICER RECEIVED INFORMATION FROM PRINCIPLE DIRECTOR OF INCOME TAX (INVESTIGATIO N) THAT ASSESSEE HAD RECEIVED BOGUS LOSS FROM HIS BROK ER BY CLIENT CODE MODIFICATION, REASSESSMENT ON BASIS OF SAID INFORMATION WAS JUSTIFIED' (VI) IN THE CASE OF ACIT VS RAJESH JHAVERI STOC K BROKERS (P.) LTD [2007] 161 TAXMAN 316 (SC) /291 IT R 500 (SC)/ [2007] 210 CTR 30 (SC),IT WAS HELD BY THE HON 'BLE APEX COURT THAT: 'SO LONG AS THE CONDITIONS OF SECTION 147 ARE FULFILLED, THE ASSESSING OFFICER IS FREE TO INITIAT E ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 12 PROCEEDINGS UNDER SECTION 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMEN T PROCEEDINGS, EVEN WHEN INTIMATION UNDER SECTION 143(1) HAS BEEN ISSUED ADAM EXPORTS V. DCIT[1999] 240 ITR 224 (GUJ) DISTINGUISHED.' (VII) IN THE CASE OF R.K. MALHOTRA ITO VS KASTU RBHAI LALBHAI [1977] 109 ITR 537 (SC), IT WAS HELD BY THE HON'BLE APEX COURT THAT: 'THE INTIMATION WHICH THE INCOME-TAX OFFICER RECEIVED FROM THE AUDIT DEPARTMENT WOULD CONSTITUTE 'INFORMATION' WITHIN THE MEANING OF SECTION 147(B)' (VIII) THEREFORE, IN VIEW OF THE ABOVE DISCUSSION , IT IS HELD THAT THE AO WAS JUSTIFIED IN REOPENING THE CAS E OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION U/S 147 OF THE ACT AND WAS HAVING REASON TO BELIEVE THAT INCOME HAD ES CAPED ASSESSMENT. HENCE, THIS GROUND OF APPEAL IS HEREBY REJECTED. IN VIEW OF THE ABOVE FACTS AS WELL AS DISCUSSIONS I N FOREGOING PARAS, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN T HE IN THE IMPUGNED ORDER OF THE LD. CIT(A) QUA THIS ISSUE. TH US THE GROUND NO. 1 OF THE ASSESSEE IS DISMISSED. 3.1 THE GROUND NO. 2 OF THE ASSESSEE IS REGARDING C HALLENGING THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. 3.2 WE HAVE HEARD THE LD.AR AS WELL AS LD. DR AND C AREFULLY PERUSED THE RELEVANT RECORDS. AS WE HAVE DISCUSSED THE FACTS OF THE CASE WHILE DECIDING THE ISSUE OF VALIDITY OF RE OPENING THE ASSESSMENT THAT THE AO HAS RECEIVED INFORMATION REG ARDING THE ACCOMMODATION ENTRIES PROVIDED BY SHRI RAJENDRA KUM AR JAIN ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 13 GROUP AND OTHERS FOR BOGUS SALES AS WELL AS UNSECUR ED LOANS ETC. THE ASSESSEE HAS MADE VARIOUS PURCHASES FROM THE CO NCERNS WHICH BELONGS TO SHRI RAJENDRA KUMAR JAIN GROUP AND THEREFORE, THE AO WAS OF THE VIEW THAT BOOKS OF ACC OUNTS OF THE ASSESSEE ARE NOT GIVING THE CORRECT AND TRUE PICTUR E OF THE BUSINESS AFFAIRS OF THE ASSESSEE. ONCE THE TRANSACT IONS OF PURCHASES ARE DOUBTED BY THE AO THEN THE BOOK RESU LTS CANNOT BE ACCEPTED. THE LD.AR OF THE ASSESSEE HAS NOT SERI OUSLY CONTROVERTED THE FINDINGS GIVEN BY THE AUTHORITIES BELOW. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE IN PARA 3.2.2 OF H IS ORDER AS UNDER:- 3.2.2 DETERMINATION: (I) IT IS NOTED THAT THE PROCEEDINGS U/S 147 OF THE ACT WERE INITIATED ON THE BASIS OF INFORMATION RECEIVED FROM THE INVES TIGATION WING OF THE DEPARTMENT THAT THE APPELLANT HAS TAKEN ACCOMMODATION ENTRY AMOUNTING TO RS. 99,21,607/- FR OM A NUMBER OF ENTITIES CONTROLLED AND MANAGED BY SHRI R AJENDRA JAIN GROUP & OTHERS, ENTRY OPERATORS AT MUMBAI, IN WHOSE CASE A SEARCH WAS CONDUCTED BY THE INCOME TAX DEPAR TMENT, WIEREIN, IT WAS ADMITTED BY HIM THAT HE WAS IN TO U SINESS OF PROVIDING ACCOMMODATION ENTRIES. IN THE ASSESSMENT ORDER, IT WAS CONCLUDED BY THE AO THAT THE APPELLANT HAS TRIE D TO DEFLATE ITS PROFITS BY ARRANGING BOGUS PURCHASE BILLS WITHO UT ACTUAL DELIVERY OF GOODS AND CONSEQUENTLY, THE AO HAS MADE TRADING ADDITION OF RS. 24,80,402/- TO THE INCOME OF THE AP PELLANT, BEING 25% OF BOGUS PURCHASES OF RS. 99,21,607/-. (II) IT IS NOTED FROM THE MATERIAL PLACED ON RECORD THAT DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS DECLARED TOTAL TURNOVER OF RS. 1,82,87,898/- AND TH E AO HAS ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 14 NOT DISPUTED THE SALES MADE BY THE APPELLANT AND TH US, THE PURCHASES MUST HAVE BEEN MADE FOR MAKING THE SALES. THE AO HAS DOUBTED THE GENUINENESS OF THE PURCHASES ON THE GROUND THAT THE SUPPLIERS WERE FOUND TO BE ACCOMMODATION ENTRIE S PROVIDERS AND THE PURCHASES FROM ENTITIES CONTROLLED BY SHRI RAJENDRA KUMAR JAIN COULD NOT BE VERIFIED DURING THE ASSESSM ENT PROCEEDINGS. (III) IT IS NOTED THAT THE BOOKS OF ACCOUNTS OF T HE APPELLANT HAVE BEEN REJECTED BY THE AO U/S 145(3) OF THE ACT AS THE APPELLANT COULD NOT SUBSTANTIATE THE REAL DELIVERY OF GOODS FROM THE ENTITIES CONTROLLED BY ENTRY PROVIDERS PRO VIDING ACCOMMODATION PURCHASE BILLS AND THUS, THE TRADING RESULTS OF THE APPELLANT WERE NOT VERIFIABLE. THUS, THE REJECT ION OF BOOKS OF ACCOUNTS BY THE AO IS HEREBY UPHELD. IN THE ABSENCE OF ANY CONTRARY FACTS BROUGHT ON REC ORD BEFORE US, THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSE E COULD NOT SUBSTANTIATE THE REAL DELIVERY OF THE GOODS FROM TH E ENTITIES CONTROLLED BY THE ENTRY PROVIDERS BEING ACCOMMODATI ON PURCHASES. THE TRADING RESULTS OF THE ASSESSEE CANN OT BE ACCEPTED. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A) QUA THIS ISSUE. THUS GR OUND NO. 2 OF THE ASSESSEE IS DISMISSED. 4.1 THE GROUND NO. 2.1 OF THE ASSESSEE IS REGARDING TRADING ADDITION UPHELD BY THE LD. CIT(A) BY ADOPTING THE G .P. RATE AT 10% AS AGAINST G.P.R. RATE AT 7.25% DECLARED BY THE ASSESSEE. ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 15 4.2 THE AO HAS MADE THE ADDITION OF 25% OF THE ALLE GED BOGUS PURCHASES WHEREAS THE LD. CIT(A) HAS RESTRICTED THE ADDITION BY ESTIMATING THE G.P. AT 10%. 4.3 BEFORE US, THE LD.AR OF THE ASSESSEE SUBMITTED THAT ADOPTION OF 10% G.P. RATE BY THE LD. CIT(A) IS WITH OUT ANY BASIS. THE ASSESSEE HAS DECLARED THE G.P. RATE AT 7 .25% WHICH IS REASONABLE AND IN LINE WITH G.P. RATE PREVAILING IN THE SAID TRADE OF DIAMOND. THEREFORE, THE ESTIMATION MADE BY THE L D. CIT(A) AND CONSEQUENTIAL ADDITION IS ARBITRARY AND NOT JUS TIFIED. THE LD.AR OF THE ASSESSEE FURTHER SUBMITTED THAT THERE IS A MISTAKE IN THE CALCULATION OF PROFIT WHICH HAS BEEN POINTED OUT BY THE ASSESSEE BY FILING THE PETITION U/S 154 OF THE ACT. HOWEVER, THE LD. CIT(A) HAS NOT DECIDED THE SAID APPLICATION FIL ED BY THE ASSESSEE FOR RECTIFICATION OF MISTAKE. SINCE THE LD . CIT(A) HAS QUANTIFIED THE RESULTANT ADDITION WHICH IS NOT CORR ECT AND THERE IS A MISTAKE IN THE CALCULATION, THEREFORE, THE ASS ESSEE HAS FILED THE APPLICATION FOR RECTIFICATION OF MISTAKE WHICH IS STILL PENDING BEFORE THE LD. CIT(A). 4.4 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE LD. CIT(A) HAS ALREADY GRANTED THE SUBSTANTIAL RELIEF A ND ADOPTED ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 16 THE G.P. AT 10% WHICH IS VERY REASONABLE IN THIS LI NE OF BUSINESS. THE LD. DR HAS RELIED ON THE ORDER OF THE LD. CIT(A). 4.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIALS AVAILABLE ON RECORD. ONCE THE AO HAS REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT , THE INCOME OF THE ASSESSEE IS REQUIRED TO BE ESTIMATED IN TERM S OF SECTION 144 OF THE ACT. SINCE THE AO HAS TO PASS THE BEST J UDGEMENT AND TO ESTIMATE THE INCOME OF THE ASSESSEE THEN SUCH ES TIMATION OF THE INCOME SHOULD BE BASED ON SOME REASONABLE AND P ROPER CRITERIA. GENERALLY, THE PAST HISTORY OF THE GROSS PROFIT DECLARED BY THE ASSESSEE IS TAKEN AS PROPER AND REASONABLE C RITERIA FOR ESTIMATION OF THE INCOME AFTER REJECTION OF BOOKS O F ACCOUNTS. HOWEVER, IN THE CASE IN HAND, SINCE THERE ARE SIX A SSESSMENT YEARS INVOLVED AND IN ALL SIX ASSESSMENT YEARS, THE LD. CIT(A) HAS ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYIN G THE G.P. AT 10%. WE FIND THAT THE LD. CIT(A) THOUGH HAS TAKEN A RIGHT APPROACH OF ESTIMATING THE INCOME OF THE ASSESSEE A FTER UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS. HOWEV ER, THE BASIS OF APPLYING THE G.P. AT 10% HAS NOT BEEN SUBS TANTIATED EITHER BY ANY COMPARABLE CASE BEING PREVAILING G.P. IN THE SAID ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 17 LINE OF BUSINESS OR BY TAKING THE AVERAGE OF G.P. D ECLARED BY THE ASSESSEE IN PRECEDING YEARS WHICH ARE NOT IN DISPUT E OR HAS ATTAINED FINALITY. THEREFORE, THE ADOPTION OF G.P. AT 10% IS WITHOUT ANY BASIS AND HENCE NOT PROPER FOR ESTIMATI ON OF INCOME OF THE ASSESSEE. THE ASSESSEE HAS ALSO FILED AN APP LICATION U/S 154 OF THE ACT ON 23-09-2019 FOR RECTIFICATION OF M ISTAKE IN THE IMPUGNED ORDER REGARDING CALCULATION OF THE ADDITIO N SUSTAINED BY THE LD. CIT(A). THE SAID APPLICATION OF THE ASSE SSEE IS STILL PENDING FOR ADJUDICATION BEFORE THE LD. CIT(A). ACC ORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ISSUE OF ESTIMATION OF INCOME RAISED BY ASSESSEE IS SET ASIDE TO THE R ECORD OF THE LD. CIT(A) FOR RE-ADJUDICATION AFTER CONSIDERING THE MI STAKE AS POINTED OUT BY THE ASSESSEE IN THE APPLICATION FILE D U/S 154 OF THE ACT. THUS GROUND NO. 2.1 OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. 5.1 THE GROUND NO. 3 OF THE ASSESSEE IS REGARDING T HE ADDITION MADE BY THE AO AMOUNTING TO RS. 19,843/- ON ACCOUNT OF COMMISSION PAID FOR SO CALLED ACCOMMODATION ENTRIES . ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 18 5.2 WE HAVE HEARD THE LD.AR AS WELL AS LD. DR AND G ONE THROUGH THE RELEVANT MATERIALS AVAILABLE ON RECORD. ONCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED AND INCOME WAS TO BE ESTIMATED ON SOME REASONABLE AND PROPER BASIS THEN THE QUANTUM OF PURCHASES DOUBTED BY THE AO BECOMES IRRE LEVANT. THEREFORE, THIS ISSUE IS CONSEQUENTIAL TO THE ISSUE OF ADDITION MADE BY THE AO OF THE ALLEGED UNVERIFIABLE PURCHASE S WHICH WAS NO MORE RELEVANT WHEN THE LD. CIT(A) HAS ESTIMA TED THE INCOME BY APPLYING THE GROSS PROFIT RATE. THEREFORE , ONLY THE TURNOVER OF THE ASSESSEE IS RELEVANT WHILE THE INCO ME OF THE ASSESSEE IS ESTIMATED ON THE BASIS OF SOME REASONAB LE G.P. RATE. HENCE, THE ADDITION ON ACCOUNT OF NOTIONAL COMMISSI ON IS NOT JUSTIFIED AND THE SAME IS DELETED. THUS GROUND NO. 3 OF THE ASSESSEE IS ALLOWED. 6.1 EXCEPT THE APPEAL FOR THE ASSESSMENT YEAR 2009- 10, ALL OTHER APPEALS ARE HAVING COMMON ISSUES. FOR THE ASS ESSMENT YEAR 2009-10, THERE IS NO ISSUE OF VALIDITY OF REOP ENING OF ASSESSMENT. IN VIEW OF OUR FINDINGS ON THE ADDITION MADE BY THE AO WHICH WAS RESTRICTED BY THE LD. CIT(A) BY APPLYI NG G.P.RATE AT 10%, THE APPEAL OF THE ASSESSEE FOR THE ASSESSME NT YEAR ITA NO.1010/JP/2019 SHRI SUNIL MODI VS ITO, WARD- 2(2), JAIPUR 19 2009-10 STANDS ALLOWED FOR STATISTICAL PURPOSES. TH E OTHER APPEALS FOR THE ASSESSMENT YEAR 2010-11 TO 2014-15 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEALS FOR THE ASSESSMENT YEAR 2010-11 TO 2014-15 ARE PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 /12/201 9. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31 /12/ 2019 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SUNIL MODI, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 2(2) / 2/5, JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A), 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.1010/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR