ITO, Ward-2(3)(7), Surat V. M/s Exotic Jewels, Surat

ITA 1162/AHD/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4117 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Search and seizure; Principle of natural justice; Opportunity of cross examination; Question of law; Tangible material; Accommodation entries; Reason to believe; Borrowed satisfaction; Set aside
• Section: 143(3); 73; 13; 153; 22; 147; 131; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA NO. 1162 & 1391/AHD/2017 (AY 2007-08) (H EARING IN VIRTUAL COURT) INCOME TAX OFFICER, WARD-2(3)(7) ROOM NO. 414, 4 TH FLOOR, AAYAKAR BHAVAN, ADAJAN, SURAT-395001 M/S.EXOTIC JEWELS 304, KOHINOOR COMPLEX, CHOWKY SHERI, SAYEDPUR, SURAT-395003 PAN : A A BF E2 8 23Q VS M/S EXOTIC JEWELS 304, KOHINOOR COMPLEX, CHOWKY SHERI, SAYEDPURA, SURAT-395003. PAN : AABFE2823Q INCOME TAX OFFICER WARD-2(3)(7) ROOM NO.414, 4 TH FLOOR, AAYAKAR BHAVAN, ADAJAN, SURAT APPELLANT RESPONDENT ITA NO. 1164 & 1297/AHD/2017 (AY 2009-10) INCOME TAX OFFICER, WARD-2(3)(8) ROOM NO. 407, 4 TH FLOOR, ANVIL BUSINESS CENTRE, HAZIRA ROAD, ADAJAN, SURAT-395001 SHRI SUNILKUMAR P JAIN 407, DEVRATNA APARTMENT, RAMPURA MAIN ROAD, SURAT- 395003 PAN : ABYJ 2281 P VS SHRI SUNILKUMAR P JAIN 407, DEVRATNA APARTMENT, RAMPURA MAIN ROAD, SURAT-395003 INCOME TAX OFFICER WARD-2(3)(8) ROOM NO.407, 4 TH FLOOR, ANVIL BUSINESS CENTRE, HAZIRA ROAD, ADAJAN, SURAT- 395001 APPLICANT RESPONDENT ASSESSEE BY SHRI SUCHEK ANCHALIYA - C.A REVENUE BY MRS. ANUPAMA SINGLA - SR-DR & SHRI RITESH MISHRA - CIT-DR DATE OF HEARING 02 .0 7 .2021 DATE OF PRONOUNCEMENT 28.09.2021 ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 2 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THESE FOUR APPEAL(S)-CROSS APPEAL(S) BY REVENUE & ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, SURAT DATED 16.02.2017 AND 28.02.2017 FOR ASSESSMENT YEAR (AY) 2007-08. IN ALL APPEALS, THE ASSESSEE AS WELL AS REVENUE HAS RAISED CERTAIN COMMON GROUNDS OF APPEAL EXCEPT VARIANCE OF AMOUNT OF ADDITIONS OF BOGUS PURCHASES AND THE VALIDITY OF THE RE-OPENING UNDER SECTION 147, THEREFORE, WITH THE CONSENT OF PARTIES ALL APPEALS WERE CLUBBED AND HEARD ARE DECIDED BY COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. WITH THE CONSENT OF PARTIES, THE FACTS IN EXOTIC JEWELS IN ITA NOS.1162/AHD/2017 FOR AY 2007-08 ARE TREATED AS LEAD CASE . 2. THE REVENUE IN ITA NO.1162/AHD/2017 HAS RAISED IN ITS FOLLOWS APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS.1,87,16,146/- ON ACCOUNT OF BOGUS PURCHASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN ESTIMATING INCOME @ 12.5% OF BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT CONCERNS LIKE, M/S. KOTHARI & CO. WAS NON-EXISTENT ENTITY AND IT WAS USED FOR PROVIDING BOGUS PURCHASE BILLS TO, THE ASSESSEE I.E. M/S.EXOTIC JEWELS. THEREFORE, CIT(A) SHOULD HAVE TREATED WHOLE AMOUNT OF THESE PURCHASES AS INCOME OF THE ASSESSEE AS ASSESSEE REDUCED HIS INCOME TO THIS EXTENT BY INFLATING HIS PURCHASES BY THIS AMOUNT IN HIS P & L ACCOUNT. ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 3 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE PLEA OF THE ASSESSEE TO ESTIMATE THE PROFIT AT 12.5% OF THE BOGUS PURCHASE ON THE BASIS THAT PROPER BOOKS OF ACCOUNTS AND STOCK REGISTER WERE MAINTAINED WITHOUT CONSIDERING THE FACT THAT NO SUCH BOOKS OF ACCOUNTS AND DOCUMENTS WERE PRODUCED BEFORE AO. CIT(A) DID NOT GIVE ANY OPPORTUNITY TO THE AO TO REBUT THE CONTENTION OF ASSESSEE RAISED BEFORE HIM AND RELIED UPON THE JUDICIAL PRONOUNCEMENTS, FACTS OF WHICH ARE DIFFERENT FROM THE INSTANT CASE. 3. THE ASSESSEE IN ITA NO.1391/AHD/2017 HAS RAISED IN ITS FOLLOWS APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT CONSIDERING THAT THE ASSUMPTION OF JURISDICTION BY THE LD. ASSESSING OFFICER IS BAD IN LAW AS THE CONDITIONS LAID DOWN UNDER THE ACT FOR INITIATING REASSESSMENT PROCEEDING HAVE NOT BEEN FULFILLED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ESTIMATING THE PROFIT @ 12.50% ON ALLEGED BOGUS PURCHASE, WITHOUT APPRECIATING HE FACT THAT THE PAYMENT WAS MADE THROUGH CROSS ACCOUNT PAYEE CHEQUE AND THE SAME GOODS WERE SUBSEQUENTLY SOLD ANY QUANTITY IS TALLIED AND THE ADDITION WAS MADE WITHOUT PROVIDING ANY OPPORTUNITY OF CROSS EXAMINATION, WITHOUT ANY CORROBORATIVE EVIDENCE AND WITHOUT PROVIDING COPY OF STATEMENTS RELIED UPON. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ALL OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL. 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN BUSINESS OF IMPORT, EXPORT AND TRADING OF CUTTING AND POLISHING AND ROUGH DIAMOND. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR (AY) 2007-08 ON 02.10.2007, DECLARING INCOME OF RS. 30,407/-. SUBSEQUENTLY THE CASE OF ASSESSEE WAS RE- OPENED UNDER SECTION 147 ON 26.03.2014 ON THE BASIS OF INFORMATION RECEIVED FROM DIT (INV)-II, MUMBAI. THE INFORMATION RECEIVED FROM DIT (INV)-II MUMBAI WHICH WAS INFORMED THAT A SEARCH AND SEIZURE ACTION WAS ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 4 CARRIED OUT BY INVESTIGATION WING ON BHANWARLAL JAIN GROUP & OTHERS IN MUMBAI ON 03.10.2013, WHICH RESULTED IN COLLECTION OF EVIDENCE THAT BHANWARLAL JAIN AND HIS SON WERE OPERATING CERTAIN BENAMI CONCERN IN THE NAME OF THEIR EMPLOYEE AND STAFF FOR PROVIDING ACCOMMODATION ENTRIES OF UNSECURED LOAN, SALE AND PURCHASE OF DIFFERENT KIND OF GOODS AND MATERIAL. THE STATEMENT OF BHANWARLAL JAIN WAS RECORDED UNDER SECTION 132(4), WHEREIN HE HAS ADMITTED AND DISCLOSED THAT HE AND HIS FAMILY MEMBERS WERE MANAGING VARIOUS FIRMS PROPRIETOR CONCERN FOR PROVIDING ACCOMMODATION ENTRIES. ON THE BASIS OF SUCH INFORMATION, IT WAS INFORMED THAT ASSESSEE ONE OF BENEFICIARY OF ACCOMMODATION ENTRIES FOR KOTHARI & CO. OF UNSECURED LOAN OF RS. 1.87 CRORE, WHICH IS ONLY ACCOMMODATION ENTRIES WITHOUT REAL TRANSACTION. ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFFICER HAD REASONED TO BELIEVE THAT INCOME OF ASSESSEE TO THE EXTENT ACCOMMODATION ENTRY OF RS.1.87 CRORES ON ACCOUNT OF BOGUS AND UNSECURED LOAN WAS ESCAPED FROM ASSESSMENT. NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 26.03.2014 WAS SERVED AND ISSUED UPON THE ASSESSEE. IN RESPONSE TO NOTICE U/S 148 OF THE ACT THE ASSESSEE FIELD HIS LETTER DATED 27.02.2015 REQUESTED TO TREAT THE RETURN OF INCOME FILED ON 02.10.2007 AS RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THE ASSESSEE ALSO DEMANDED THE REASONS RECORDED. THE REASONS RECORDED WERE PROVIDED TO ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 5 ASSESSEE BY ASSESSING OFFICER VIDE ALONGWITH HIS LETTER DATRED.10.02.2015. THE ASSESSING OFFICER AFTER STATUTORY NOTICE U/S 142(3) PROCEEDED FOR ASSESSMENT. DURING ASSESSMENT, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE DATED 19.02.2015 AS TO WHY THE BOGUS PURCHASE ENTRY OF RS.1.87 CRORES FROM THE ENTITY MANAGED BY BHANWARLAL JAIN SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE FILED HIS REPLY. THE ASSESSEE IN ITS REPLY CLAIM THAT HE HAS MADE PURCHASES OF DIAMONDS IN NORMAL COURCE OF ITS BUSINESS FROM M/S KOTHARI & CO. IT WAS STATED THAT M/S KOTHARI & CO. IS NOT A CONCERNED MANAGED BY BHANWARLAL JAIN. THE AO MADE REOPENING IN ABSENCE OF TANGIBLE MATERIAL, NO SEPARATE INVESTIGATION IS MADE. THE ASSESSING OFFICER AFTER CONSIDERING THE REPLY OF ASSESSEE HELD THAT ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRY OF UNSECURED LOAN AND THEREBY DISALLOWED THE ENTIRE AMOUNT. 5. ON APPEAL BEFORE LD. CIT(A), THE ASSESSEE FILED DETAILED STATEMENT OF FACT AS WELL AS SUBMISSION. THE ASSESSEE CHALLENGED THE VALIDITY OF RE-OPENING AS WELL AS ADDITION ON ACCOUNT OF UNSECURED LOAN. THE SUBMISSION OF ASSESSEE IS RECORDED IN PARA-21 OF THE ORDER OF LD. CIT(A). IN THE WRITTEN SUBMISSION, THE ASSESSEE EXPLAINED THAT AO HAS NO WHERE THAT HE HAS OBTAINED PRIOR APPROVAL OF HIGHER AUTHORITIES AS REQUIRED UNDER SECTION 151 OF THE ACT. AND IN ABSENCE OF PROPER APPROVAL THE REOPENING IS VOID-AB-INITIO AND NEED TO BE ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 6 QUASHED. NO INDEPENDENT ENQUIRY IS CONDUCTED BY AO BEFORE ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THE AO PURELY ACTED ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING. THE AO WAS REQUIRED TO FORM HIS OWN OPINION THAT INCOME HAS ESCAPED ASSESSMENT. THE AO HAS NOT APPLIED HIS MIND TO THE INFORMATION THE BASIS AND THE MATERIAL OF THE SO-CALLED INFORMATION THE REASONS RECORDED IS ABSOLUTELY INVALID. THE AO ACTED ON VAGUE INFORMATION AND NOT APPLIED HIS MIND. DURING THE ORIGINAL ASSESSMENT, THE ASSESSEE FURNISHED ALL DETAILS RELATED TO THE TRANSACTIONS OF ALL THREE CONCERN. THE AO HAS NO NEW MATERIAL OR INFORMATION FOR REOPENING. THE ASSESSEE DISCLOSED TRUE AND MATERIAL THINGS AND THE RETURN OF INCOME AND THERE IS NO ESCAPEMENT OF INCOME OF THE ASSESSEE. THE RE-OPENING OF THE ASSESSMENT IS BASED ON THIRD PARTY INFORMATION, WHICH WAS RECORDED DURING THE SEARCH ACTION IN THEIR PLACES. THE INITIATION UNDER SECTION 148 OF THE ACT IS BAD IN LAW BEING BASED ON STATEMENT OF THIRD PARTY. THE AO HAS NOT MENTIONED ANY TANGIBLE MATERIAL TO PROVE HIS CONTENTION. ON THE ADDITIONS THE ASSESSEE STATED THAT HE HAS FURNISHED COMPLETE EVIDENTIARY PROOF OF PURCHASE CONSISTING OF ACCOUNT INFORMATION OF KOTHARI & CO. THE COPY OF PURCHASE BILL, ONE TO ONE MAPPING AND SPECIFIC SALE, STOCK REGISTER, BANK STATEMENT AND ITR ACKNOWLEDGMENT OF PARTIES WERE FILED BEFORE AO. THE ASSESSEE REITERATED THAT HE HAS NOT DEALT WITH BHANWARLAL JAI GROUP AND HE ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 7 DOES NOT KNOW HIM AS FAR AS TRANSACTIONS OF PURCHASE OF GOODS ARE CONCERNED. THE ASSESSEE IS NOT AWARE IN WHICH CAPACITY BHANWARLAL JAIN IS CONNECTED WITH KOTHARI & CO AND NOT KNOWS HOW HE WAS AUTHORISED TO GIVE STATEMENT ON THEIR BEHALF. THERE WAS NO CORROBORATIVE EVIDENCE THAT ASSESSEE RECEIVED ACCOMMODATION ENTRY. THE AO SOLELY RELIED UPON THE STATEMENT OF BHANWARLAL JAIN. THE ASSESSEE STATED THAT THE ASSESSEE HAS NOT RECEIVED BACK ANY CASH AGAINST THE PURCHASE, NO CORROBORATIVE EVIDENCE WAS PROVIDED BY THE AO. THE GOODS PURCHASED FROM THE SAID PARTIES HAS BEEN SUBSEQUENTLY SOLD AND QUANTITATIVE TALLY THEREOF GIVEN IN THE TAX AUDIT REPORT WHICH TALLIES WITH THE BOOKS OF ACCOUNTS. ONCE THE SALES ARE ACCEPTED, THE PURCHASE CANNOT BE DOUBTED. THE ASSESSEE IS MAINTAINING PURCHASE REGISTER, SALES REGISTER, STOCK REGISTER, LEDGER, DAY BOOK, BANK BOOK AND NO DEFECTS OR IRREGULARITY WAS FOUND ARE NOTED BY THE AUDITORS. THE STATEMENT OF THIRD PARTY CANNOT BE RELIED. THE AO DISREGARDED THE EVIDENCES PROVIDED BY ASSESSEE. THE ASSESSEE AGAIN FURNISHED ALL THE EVIDENCES AS FURNISHED BEFORE THE AO AND REITERATED THAT HE IS ENGAGED IN THE BUSINESS OF IMPORT, EXPORT, TRADING OF CUT & POLISHED AND ROUGH DIAMOND. THE STATEMENT OF BHANWARLAL JAIN WAS NOT PROVIDED TO THE ASSESSEE. 6. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE UPHELD THE VALIDITY OF RE-OPENING AND HELD THAT THE ASSESSEE IS BENEFICIARY OF ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 8 ACCOMMODATION ENTRY, THE ENTRY OPERATOR ADMITTED BEFORE INVESTIGATION WING ABOUT THE ACCOMMODATION ENTRY THAT HE IS PROVIDING BOGUS ENTRIES TO MANY PERSONS. THE AO, ON THE BASIS OF SUCH REPORT, HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE LD.CIT(A) HELD THAT ON EXAMINATION OF RECORD, HE NOTED THAT AO RELIED ON THE REPORT OF INVESTIGATION WING WITHOUT FURNISHING COPY OF MATERIAL RELIED UPON TO THE ASSESSEE. THE LD.CIT(A) CONCLUDED THAT IN HOLDING ASSESSMENT AS INVALID FOR THE ABOVE REASON WITHOUT GOING INTO MERIT WOULD BE AMOUNT TO GAVE UNDUE BENEFIT TO THE ASSESSEE FOR TECHNICAL MISTAKE OR OMISSION BY AO AND THE PRINCIPLE OF EQUITY DO NOT ALLOW THIS, WITHOUT CONSIDERING THE GROUNDS ON MERIT. ON MERIT THE LD. CIT(A) BY FOLLOWING THE VARIOUS CASE LAWS RESTRICTED DISALLOWANCE @ 12.5% ON ACCOUNT OF BOGUS PURCHASE. THE LD.CIT(A) AFTER REFERRING THE DECISION OF TRIBUNAL IN BHOLANATH POLY FAB PRIVATE LIMITED IN ITA NO.137/AHD/2009 DATED 26.07.2011 WHEREIN THE ADDITION WAS SUSTAINED TO THE EXTENT OF 12%. THE LD CIT(A) BY FOLLOWING THE OBSERVATION OF ORDER OF TRIBUNAL IN BHOLANATH POLY FAB PVT. LTD.(SUPRA), THE LD.CIT(A) HELD 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) AFTER CONSIDERING THE OVERALL FACTS, SUBMISSIONS OF THE ASSESSEE AND EVIDENCES PRODUCED BY ASSESSEE, CONCLUDED THAT THE 100% DISALLOWANCE OF PURCHASE IS ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 9 NOT JUSTIFIED. THE LD.CIT(A) ALSO CONSIDERED THE DECISION OF JURISDICTIONAL HIGH COURT IN MAYANK DIAMONDS PVT. LTD. REPORTED IN [2014] 11 TMI 812 (GUJ) (TAX APPEAL NO.200 OF 2003 DATED 07.11.2014). THE LD.CIT(A) COMPARED THE FACT OF THE PRESENT CASE, WITH THE FACTS IN CASE OF MAYANK DIAMONDS (SUPRA) AND NOTED THAT ASSESSEE IN THAT CASE WAS ALSO ENGAGED IN THE TRADING OF POLISHED DIAMONDS. THE AO IN SAID CASE MADE DISALLOWANCE OF ENTIRE BOGUS PURCHASE. THE LD.CIT(A) DISMISSED THE APPEAL, HOWEVER, THE TRIBUNAL GAVE PARTIAL RELIEF TO THE ASSESSEE DIRECTING AND SUSTAINED THE ADDITION @12%. AND ON FURTHER APPEAL BEFORE HON'BLE HIGH COURT, THE DISALLOWANCE WAS SUSTAINED AT GROSS PROFIT RATE OF 5%, WHICH IS AVERAGE RATE OF PROFIT IN INDUSTRY. THE LD. CIT(A) FURTHER HELD THAT IN SOME OTHER SIMILAR CASES THOUGH HE HAS SUSTAIN 5% OF GROSS PROFIT RATE CONSIDERING THE FACT THAT WHERE GROSS PROFIT SHOWN BY ASSESSEE IS MORE THAN 5%. HOWEVER, IN THE PRESENT CASE, THE ASSESSEE HAS MERELY SHOWN GROSS PROFIT RATE ONLY AT 0.78% OF TURNOVER, ACCORDINGLY, THE LD. CIT(A) WAS OF THE VIEW THAT DISALLOWANCE OF 12.5% OF IMPUGNED PURCHASES/BOGUS PURCHASES WOULD BE REASONABLE TO MEET THE END OF JUSTICE, HENCE THE DISALLOWANCE WAS RESTRICTED TO 12.5% OF THE IMPUGNED PURCHASE. THUS, AGGRIEVED BY THE ADDITIONS SUSTAINED BY LD. CIT(A) THE ASSESSEE HAS CHALLENGED THE VALIDITY OF ASSUMPTION OF JURISDICTION ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 10 AND PART DISALLOWANCE OF BOGUS PURCHASE. SIMILARLY, THE REVENUE HAS CHALLENGED THE PARTIAL CONFIRMATION OF DISALLOWANCE. 7. WE HAVE HEARD THE SUBMISSION OF THE LD. AUTHORIZED REPRESENTATIVE (AR) FOR THE ASSESSEE AND LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE LD. AR FOR ASSESSEE SUBMITS THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING AS WELL AS RESTRICTING THE ADDITION TO THE EXTENT OF 12.50% OF THE ALLEGED BOGUS PURCHASES. ON THE VALIDITY OF REASONS RECORDED, 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 ACCOMMODATION ENTRY BY BHANWARLAL JAIN GROUP. NO SPECIFIC INFORMATION ABOUT THE ACCOMMODATION ENTRY OBTAINED BY ASSESSEE WAS RECEIVED BY AO. THERE IS NO LIVE LINK BETWEEN THE REASONS RECORDED QUA THE ASSESSEE. THEREFORE, THE RE-OPENING IS INVALID AND ALL SUBSEQUENT ACTION IS LIABLE TO BE SET ASIDE. IN THE REASONS RECORDED THAT AO MENTIONED THAT THE ASSESSEE IS ONE OF THE BENEFICIARY AND HAVE RECEIVED ACCOMMODATION ENTRY OF BOGUS UNSECURED LOAN FROM KOTHARI & CO. THE ASSESSEE NEVER RECEIVED ANY SUCH UNSECURED LOAN. THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE, VIDE ITS ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 11 REPLY THE REPLY DATED 27.02.2015 CLEARLY STATED THAT THE SOURCE OF INFORMATION IS VAGUE AND WITHOUT ANY CORROBORATIVE EVIDENCE. THE AO DISREGARDED THE REPLY OF THE ASSESSEE AND INSTEAD OF CLARIFYING THE FACTS MADE ADDITION OF UNSECURED LOAN OF RS. 1.87 CRORE WHILE PASSING THE ASSESSMENT ORDER. THE LD AR FOR THE ASSESSEE SUBMITS THAT HE HAS PLACED ON RECORD THE COPY OF THE REASONS RECORDED DATED 26.03.2014 AND THE REPLY FILED ON 24.02.2014 AND THE REPLY DATED 27.02.2014 FILED IN RESPONSE TO THE SHOW CAUSE NOTICE BY AO. THE LD AR FOR THE ASSESSEE SUBMITS THAT THERE IS NO LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE AND FORMATION OF BELIEF FOR ESCAPEMENT OF INCOME. THE REOPENING IS ITSELF BAD IN LAW. 8. 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. DURING RE-ASSESSMENT, THE ASSESSEE 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 MADE ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 12 ANY COMMENT ON THE EVIDENCES FURNISHED BY THE ASSESSEE. THE AO MADE THE UNSECURED LOAN. THE ASSESSING OFFICER NOT PROVIDED CROSS EXAMINATION OF THE ALLEGED HAWALA DEALERS. THE DISALLOWANCES SUSTAINED BY THE LD. CIT(A) @ 12.5% OF THE IMPUGNED PURCHASES, WITHOUT CONSIDERING THE FACTS THAT THE ASSUMPTION OF JURISDICTION BY AO WAS ITSELF ILLEGAL. TO SUPPORT HIS VARIOUS SUBMISSION, THE LD.AR FOR THE ASSESSEE IS RELIED UPON CASE LAWS: 1 M/S ANDAMAN TIMBER INDUSTRIES VS COMMISSIONER OF CENTRAL EXCISE, CIVIL APPEAL NO. 4228 OF 2006 (SUPREME COURT) 2 CIT VS. INDRAJIT SINGH SURI [2013] 33 TAXMANN.COM 281 (GUJARAT) 3 ALBERS DIAMONDS PVT. LTD. VS ITO 1(1)(1), SURAT I.T.A. NO.776 &1180/AHD/2017 4 THE PCIT-5 VS. M/S. SHODIMAN INVESTMENTS PVT. LTD. TTANO. 1297 OF 2015 (BOMBAY HIGH COURT) 5 SHILPI JEWELLERS PVT. LTD. VS. UNION OF INDIA &ORS. WRIT PETITION NO. 3540 OF 2018 (BOMBAY HIGH COURT) 6 CIT IN VS. MOHMED JUNED DADANI 355 ITR 172 (GUJARAT) 7 MICRO INKS 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 ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 13 9. ON THE OTHER HAND THE LD CIT-DR FOR THE REVENUE SUBMITS THAT THE REVENUE SUBMITS THAT THE AO RECEIVED CREDIBLE INFORMATION ABOUT THE ACCOMMODATION ENTRY PROVIDED BY BHANWARLAL JAIN GROUP. THE ASSESSEE IS ONE OF THE BENEFICIARIES, WHO HAD AVAILED ACCOMMODATION 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. 10. ON THE MERITS OF ADDITIONS OF PARTIAL CONFIRMATIONS ON ACCOUNT OF BOGUS PURCHASES, 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 FABRICATED EVIDENCES ARE ALWAYS MAINTAINED PERFECTLY. THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRY ONLY TO INFLATE THE EXPENSES AND TO REDUCE THE ULTIMATE PROFIT. NO STOCKS OF DIAMONDS WERE FOUND AT THE ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 14 TIME OF SEARCH ON BHANWARLAL JAIN GROUP. THE ASSESSEE HAS SHOWN A VERY MEAGRE GROSS PROFIT (GP) @ 1.85% AND NOT NET PROFIT (NP) AT 0.7%. THE LD. CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% WHICH IS ON THE LOWER SIDE. THE LD. CIT-DR FOR THE REVENUE PRAYED THAT DISALLOWANCE MADE BY THE AO MAY BE UPHELD OR IN ALTERNATIVE SUBMITTED THAT IT MAY RESTRICTED AT LEAST @ 25%, KEEPING IN VIEW THAT THE NP DECLARED BY THE ASSESSEE IS EXTREMELY ON LOWER SIDE. 11. 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). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES. 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 ASSESSEE(S) CONSISTING OF COMPUTATION OF INCOME AND AUDIT REPORT. WE HAVE ALSO GONE THROUGH THE DOCUMENTARY EVIDENCES FURNISHED IN ALL CASES. GROUND NO.1 IN ASSESSEES 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 ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 15 BASIS OF THIRD PARTY INFORMATION, AND WITHOUT MAKING ANY PRELIMINARY INVESTIGATION. THE REASONS RECORDED BY THE AO ARE CONTRARY TO THE FACTS, VAGUE ABOUT THE ALLEGED ACCOMMODATION ENTRY BY BHANWARLAL JAIN GROUP. WE FIND THAT THE AO WHILE RECORDING THE REASONS RECORDED THAT THE ASSESSEE IS ONE OF THE BENEFICIARY AND HAVE RECEIVED ACCOMMODATION ENTRY OF BOGUS UNSECURED LOAN FROM KOTHARI & CO. WE FIND THAT THE ASSESSEE RIGHT FROM THE BEGINNING HAS RAISED ITS PLEA THAT THERE IS NO LOAN TRANSACTION WITH KOTHARI & CO, RATHER THE ASSESSEE HAS MADE GENUINE PURCHASES FROM SUCH PARTY. THE ASSESSEE ALSO FURNISHED THE RELEVANT DOCUMENTARY EVIDENCES TO SUBSTANTIATE ITS CONTENTION. THE AO INSTEAD OF TAKING COGNIZANCE OF THE FACTS, AND CONSIDERING THE SAME REJECTED THE REPLY OF THE ASSESSEE AND PROCEEDED FOR RE-ASSESSMENT. THE AO HAS NOT APPLIED HIS MIND BEFORE ISSUING NOTICE UNDER SECTION 148. BEFORE US THE LD CIT-DR FOR THE REVENUE VEHEMENTLY SUBMITTED THAT AT THE TIME OF RE-OPENING AND RECORDING REASONS, THE MERE SUSPICIOUS ABOUT THE ACCOMMODATION ENTRY IS SUFFICIENT AS HELD BY HON'BLE JURISDICTIONAL HIGH COURT IN VARIOUS CASES. THE LD CIT-DR FOR THE REVENUE MAINLY RELIED ON THE DECISIONS OF HONBLE HIGH COURT IN PUSHPAK BULLION (P) LTD VS DCIT AND PEASS INDUSTRIAL ENGINEERS (P) LTD VS DCIT (SUPRA), WITH UTMOST REGARD TO THE DECISIONS OF THE HIGH COURT, WE FIND THAT THERE IS NO LIVE LINK IN THE REASONS RECORDED THAT THE ADDITIONS MADE IN THE ASSESSMENT ORDER. ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 16 THE HON'BLE JURISDICTIONAL HIGH COURT IN SUBSEQUENT DECISION IN PCIT VS MANZIL DINESHKUMAR SHAH [2018] 95 TAXMANN.COM 46 (GUJARAT) HELD THAT WELL SETTLED THAT THE NOTICE OF REOPENING CAN BE SUPPORTED ON THE BASIS OF REASONS RECORDED BY THE ASSESSING OFFICER. HE CANNOT SUPPLEMENT SUCH REASONS, THE RELEVANT PART OF THE ORDER IS EXTRACTED BELOW; 7. IT IS EQUALLY WELL SETTLED THAT THE NOTICE OF REOPENING CAN BE SUPPORTED ON THE BASIS OF REASONS RECORDED BY THE ASSESSING OFFICER. HE CANNOT SUPPLEMENT SUCH REASONS . THE THIRD PRINCIPLE OF LAW WHICH IS EQUALLY WELL SETTLED AND WHICH WOULD APPLY IN THE PRESENT CASE IS THAT REOPENING OF THE ASSESSMENT WOULD NOT BE PERMITTED FOR A FISHING OR A ROVING INQUIRY. THIS CAN AS WELL BE SEEN AS PART OF THE FIRST REQUIREMENT OF THE ASSESSING OFFICER HAVING REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN OTHER WORDS, NOTICE OF REOPENING WHICH IS ISSUED BARELY FOR MAKING FISHING INQUIRY, WOULD NOT SATISFY THIS REQUIREMENT. 8. WITH THIS BACKGROUND, WE MAY REVERT TO THE REASONS RECORDED BY THE ASSESSING OFFICER. INFORMATION FROM THE VALUE ADDED TAX DEPARTMENT OF MUMBAI WAS PLACED FOR HIS CONSIDERATION. THIS INFORMATION CONTAINED LIST OF ALLEGEDLY BOGUS PURCHASES MADE BY VARIOUS BENEFICIARIES FROM HAWALA DEALERS. ASSESSEE WAS ONE OF THEM. AS PER THIS INFORMATION, HE HAD MADE PURCHASES WORTH RS. 3.21 CRORES (ROUNDED OFF) FROM SUCH HAWALA DEALERS DURING THE FINANCIAL YEAR 2010-11. ACCORDING TO THE ASSESSING OFFICER, THIS INFORMATION ' NEEDED DEEP VERIFICATION'. 9. IF ON THE BASIS OF INFORMATION MADE AVAILABLE TO HIM AND UPON APPLYING HIS MIND TO SUCH INFORMATION, THE ASSESSING OFFICER HAD FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THE COURT WOULD HAVE READILY ALLOW HIM TO REASSESS THE INCOME. IN THE PRESENT CASE HOWEVER, HE RECORDED THAT THE INFORMATION REQUIRED DEEP VERIFICATION. IN PLAIN TERMS THEREFORE, THE NOTICE WAS BEING ISSUED FOR SUCH VERIFICATION. HIS LATER RECITATION OF THE MANDATORY WORDS THAT HE BELIEVED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, WOULD NOT CURE THIS FUNDAMENTAL DEFECT. 10. LEARNED COUNSEL FOR THE REVENUE HOWEVER URGED US TO READ THE REASONS AS A WHOLE AND COME TO THE CONCLUSION THAT THE ASSESSING OFFICER HAD INDEPENDENTLY FORMED A BELIEF ON THE BASIS OF INFORMATION AVAILABLE ON RECORD THAT INCOME IN CASE OF THE ASSESSEE HAD ESCAPED ASSESSMENT. ACCEPTING SUCH A REQUEST WOULD IN PLAIN TERMS REQUIRE US TO IGNORE AN IMPORTANT SENTENCE FROM THE REASONS RECORDED VIZ. ' IT NEEDS DEEP VERIFICATION'. 11. BEFORE CLOSING, WE CAN ONLY LAMENT AT THE POSSIBLE REVENUE LOSS. THE LAW AND THE PRINCIPLES NOTED ABOVE ARE FAR TOO WELL SETTLED TO HAVE ESCAPED THE NOTICE OF THE ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 17 ASSESSING OFFICER DESPITE WHICH IF THE REASONS RECORDED FAIL THE TEST OF VALIDITY ON ACCOUNT OF A SENTENCE CONTAINED, IT WOULD BE FOR THE REVENUE TO EXAMINE REASONS BEHIND IT. 12. BOTH THESE TAX APPEALS ARE DISMISSED. 13. THE HON'BLE BOMBAY HIGH COURT IN PCIT VS SHODIMAN INVESTMENT PVT LIMITED (SUPRA) WHILE CONSIDERING THE QUESTION OF LAW WHETHER ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THAT THE RE-OPENING OF ASSESSMENT IS NOT SUSTAINABLE IN LAW, HELD THAT THAT THERE MUST BE A LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE A.O. AND THE FORMATION OF BELIEF REGARDING ESCAPEMENT OF INCOME. IF THE AFORESAID REQUIREMENT IS NOT MET, THE ASSESSEE IS ENTITLED TO CHALLENGE THE VERY FACT OF REOPENING OF ASSESSMENT AND ASSUMING JURISDICTION BY A.O. THE RELEVANT PART OF DECISION IS REPRODUCED BELOW: 12. THE REOPENING OF AN ASSESSMENT IS AN EXERCISE OF EXTRA ORDINARY POWER ON THE PART OF THE ASSESSING OFFICER, AS IT LEADS TO UNSETTLING THE SETTLED ISSUE/ASSESSMENTS. THEREFORE, THE REASONS TO BELIEVE HAVE TO BE NECESSARILY RECORDED IN TERMS OF SECTION 148 OF THE ACT, BEFORE REOPENING NOTICE, IS ISSUED. THESE REASONS, MUST INDICATE THE MATERIAL (WHATEVER REASONS) WHICH FORM THE BASIS OF REOPENING ASSESSMENT AND ITS REASONS WHICH WOULD EVIDENCE THE LINKAGE/ NEXUS TO THE CONCLUSION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS IS A SETTLED POSITION AS OBSERVED BY THE SUPREME COURT IN S. NARAYANAPPA V/S. CIT 63 ITR 219, THAT IT IS OPEN TO EXAMINE WHETHER THE REASON TO BELIEVE HAS RATIONAL CONNECTION WITH THE FORMATION OF THE BELIEF. TO THE SAME EFFECT, THE APEX COURT IN ITO V/S. LAKHMANI MERWAL DAS 103 ITR 437 HAD LAID DOWN THAT THE REASONS TO BELIEVE MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF BELIEF I.E. THERE MUST BE A LIVE LINK BETWEEN MATERIAL COMING THE NOTICE OF THE ASSESSING OFFICER AND THE FORMATION OF BELIEF REGARDING ESCAPEMENT OF INCOME. IF THE AFORESAID REQUIREMENT ARE NOT MET, THE ASSESSEE IS ENTITLED TO CHALLENGE THE VERY ACT OF REOPENING OF ASSESSMENT AND ASSUMING JURISDICTION ON THE PART OF THE ASSESSING OFFICER. 13. IN THIS CASE, THE REASONS AS MADE AVAILABLE TO THE RESPONDENT ASSESSEE AS PRODUCED BEFORE THE TRIBUNAL MERELY INDICATES INFORMATION RECEIVED FROM THE DIT (INVESTIGATION) ABOUT A PARTICULAR ENTITY, ENTERING INTO SUSPICIOUS ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 18 TRANSACTIONS. HOWEVER, THAT MATERIAL IS NOT FURTHER LINKED BY ANY REASON TO COME TO THE CONCLUSION THAT THE RESPONDENTASSESSEE HAS INDULGED IN ANY ACTIVITY WHICH COULD GIVE RISE TO REASON TO BELIEVE ON THE PART OF THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS FOR THIS REASON THAT THE RECORDED REASONS EVEN DOES NOT INDICATE THE AMOUNT WHICH ACCORDING TO THE ASSESSING OFFICER, HAS ESCAPED ASSESSMENT. THIS IS AN EVIDENCE OF A FISHING ENQUIRY AND NOT A REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 14. FURTHER, THE REASONS CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO THE INFORMATION RECEIVED BY HIM FROM THE DDIT (INV.). THE ASSESSING OFFICER HAS MERELY ISSUED A REOPENING NOTICE ON THE BASIS OF INTIMATION REGARDING REOPENING NOTICE FROM THE DDIT (INV.) THIS IS CLEARLY IN BREACH OF THE SETTLED POSITION IN LAW THAT RE OPENING NOTICE HAS TO BE ISSUED BY THE ASSESSING OFFICE ON HIS OWN SATISFACTION AND NOT ON BORROWED SATISFACTION. 15. THEREFORE, IN THE ABOVE FACTS, THE VIEW TAKEN BY THE IMPUGNED ORDER OF THE TRIBUNAL CANNOT BE FOUND FAULT WITH. THIS VIEW OF THE TRIBUNAL IS IN ACCORDANCE WITH THE SETTLED POSITION IN LAW. 14. NOW ADVERTING TO THE FACTS OF THE PRESENT CASE, WE FIND THAT AT THE STAGE OF ISSUE OF NOTICE, THE A.O. WAS NOT SURE WHETHER THE ASSESSEE AVAILED THE ALLEGED ACCOMMODATION ENTRY OF UNSECURED LOAN OR OF ALLEGED BOGUS PURCHASES. THERE HAS TO BE A REASONABLE MATERIAL BEFORE THE AO ON THE BASIS OF WHICH A REASONABLE PERSON CAN MAKE REQUISITE BELIEF. THE A.O. ISSUED NOTICE UNDER SECTION 148 IN ABSENCE OF REASONABLE MATERIAL TO FORM A REASONABLE BELIEF THAT INCOME HAS ESCAPED TAX. UNDER THE CIRCUMSTANCES, THE ACTION OF THE A.O. OF REOPENING ASSESSMENT IN EXERCISE OF THE POWER UNDER SECTION 148 OF THE ACT CANNOT BE SUSTAINED. ACCORDINGLY, WE QUASH THE RE- ASSESSMENT PROCEEDING INITIATED IN THE CASE OF THE ASSESSEE. AS WE HAVE QUASHED THE REASSESSMENT, THEREFORE, ADJUDICATION ON THE ADDITIONS HAVE ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 19 BECOME ACADEMIC. IN THE RESULT THE GROUND NO. 1 OF ASSESSEES APPEAL IS ALLOWED. 15. CONSIDERING THE FACTS THAT WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE ON GROUND NO.1 AND SET ASIDE THE RE-ASSESSMENT ORDER WHICH IS BASED ON INVALID REASON, THEREFORE, THE ADJUDICATION ON MERIT ON THE PARTIAL DISALLOWANCES OF PURCHASE HAS BECOME ACADEMIC. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. SHRI SUNILKUMAR P JAIN IN ITA NO.1164 & 1297/AHD/2017(AY 2007-08): 17. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS.14,29,90,854/- ON ACCOUNT OF BOGUS PURCHASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN ESTIMATING INCOME @ 12.5% OF BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT CONCERNS LIKE, M/S. MAHALAXMI GEMS P.LTD AND M/S. MAYUR EXPORTS WERE NON-EXISTENT ENTITIES AND THEY WERE USED FOR PROVIDING BOGUS PURCHASE BILLS TO THE ASSESSEE I.E. SHRI SUNIL KUMAR P.JAIN. THEREFORE, CIT(A) SHOULD HAVE TREATED WHOLE AMOUNT OF THESE PURCHASES AS INCOME OF THE ASSESSEE AS ASSESSEE REDUCED HIS INCOME TO THIS EXTENT BY INFLATING HIS PURCHASES BY THIS AMOUNT IN HIS P & L ACCOUNT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE PLEA OF THE ASSESSEE TO ESTIMATE THE PROFIT AT 12.5% OF THE BOGUS PURCHASE ON THE BASIS THAT PROPER BOOKS OF ACCOUNTS AND STOCK REGISTER WERE MAINTAINED WITHOUT CONSIDERING THE FACT THAT NO SUCH BOOKS OF ACCOUNTS AND DOCUMENTS WERE PRODUCED BEFORE AO. CIT(A) DID NOT GIVE ANY ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 20 OPPORTUNITY TO THE AO TO REBUT THE CONTENTION OF THE ASSESSEE RAISED BEFORE HIM AND RELIED UPON THE JUDICIAL PRONOUNCEMENTS, FACTS OF WHICH ARE DIFFERENT FROM THE INSTANT CASE. 18. THE ASSESSEE IN ITS CROSS APPEAL HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (A) HAS GROSSLY ERRED IN RULING OUT THE APPELLANT'S CONTENTIONS OF GROSS ILLEGALITY ON THE GROUND 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 RE-OPENING U/S 147 OF THE ASSESSMENT COMPLETED UNDER 143 (3) IS BAD IN LAW AND ILLEGAL ON GROUNDS INTER-ALIA THAT :- A) THERE IS NO MENTION OF APPROVAL, IF ANY, OBTAINED FROM HIGHER AUTHORITIES FOR REOPENING OF THE CASE AND APPROVAL OBTAINED IF ANY IS NOT COMMUNICATED & MAY NOT BE FROM PROPER AUTHORITY. B) ENTIRE RE-OPENING IS ON THE BASIS OF 'BORROWED SATISFACTION' ONLY. C) THERE IS NO INDEPENDENT ENQUIRY BY THE LEARNED AO TO SATISFY HIMSELF FOR THE REASON TO BELIEVE. D) ALLEGATION OF THE LEARNED AO IN HIS REASONS RECORDED FOR RE- OPENING THE CASE THAT THE APPELLANT HAS OBTAINED 'UNSECURED LOANS' BY BOGUS ENTRY IS FACTUALLY, GROSSLY ERRONEOUS AS THE APPELLANT HAS NOT TAKEN ANY UNSECURED LOANS AS ALLEGED, RENDERING THE VERY FOUNDATION TO BE LACKING. 3. 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 GROUNDS 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 RE-OPENING THE CASE AND FOR MAKING THE RE-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 PERSONS CONCERNED. 4. THE ADDITION BY THE LEARNED AO OF 100% OF IMPUGNED PURCHASES AND THE CONFIRMATION OF 12.5% OF THE SAME BY THE LEARNED CIT(A) ARE GROSSLY UNJUSTIFIED AND UNWARRANTED ON THE GROUNDS INTER-ALIA THAT :- ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 21 A) THE APPELLANT HAS PRODUCED THE EVIDENCES LIKE CONFIRMATION OF ACCOUNTS, INVOICE COPY, BANK STATEMENTS, QUANTITY TALLY ETC. TO ESTABLISH THE GENUINENESS OF THE TRANSACTION. B) THE VERY SAME GOODS HAVE BEEN RESOLD WITHIN SHORT TIME ESTABLISHING BEYOND DOUBT THE FACT OF PURCHASE AS THERE CANT BE ANY SALE WITHOUT PURCHASES. C) NOT A SINGLE EVIDENCE HAS BEEN LED BY THE DEPARTMENT TO PROVE THE IMPUGNED TRANSACTIONS TO BE BOGUS. 5. THE APPELLANT CRAVES TO LEAVE ADD, ALTER, CLASSIFY, RECLASSIFY, DELETE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL AND REQUESTS TO CONSIDER EACH OF THE ABOVE GROUNDS WITHOUT PREJUDICE TO ANOTHER. 19. WE FIND THAT THE REASONS RECORDED IN THE IMPUGNED ASSESSMENT ORDER IN THESE CROSS APPEALS ARE ALSO SIMILAR, BOTH THE PARTIES HAVE MADE SIMILAR SUBMISSIONS, CONSIDERING OUR ABOVE DECISION IN PARA 12 TO 14 (SUPRA) IN EXOTIC JEWELS, WHEREIN WE HAVE QUASHED (SET-ASIDE) THE ASSESSMENT ORDER, THUS, THE IMPUGNED ASSESSMENT ORDER, IN THE PRESENT APPEALS PASSED UNDER SECTION 143(3) READ WITH SECTION 147 DATED 09.03.2015 IS ALSO QUASHED WITH SIMILAR OBSERVATION. 20. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 21. A COPY OF THE INSTANT COMMON ORDER BE PLACED IN THE RESPECTIVE CASE FILE(S). ORDER PRONOUNCED ON 28/09/2021BY PLACING THE RESULT ON THE NOTICE BOARD. SD/- SD/- ( DR ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER SURAT, DATED: 28/09/2021 DKP. OUTSOURCING SR.P.S ITA NOS.1162 & 1391/AHD/2017 AND ITA NOS.1164 & 1297/AHD/2017 (VICE VERSA) M/S EXOTIC JEWELS, & SH. SUNIL KUMAR P JAIN (A.YS. 2007-08) 22 COPY TO: 1. ASSESSEE 2. REVENUE - 3. CIT(A)-3, SURAT 4. CIT 5. DR 6. GUARD FILE BY ORDER / / TRUE COPY / / SR.PRIVATE SECRETARY, ITAT, SURAT