Ward-3(2)(6), Surat, Adajan ,Surat V. Manish Agarwal, Surat

ITA 136/SRT/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2096 (ITAT-SURAT)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-05-2024
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMAN SHAH
• Assessee Lawyers: S. K. KESHKAMAT
• Keywords: Bogus purchase; Search and seizure; Accommodation entries
• Section: 147; 69C; 250

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.136/SRT/2024 Assessment Year: (2009-10) (Hybrid Hearing) The ITO, Ward -3(2)(6), Surat Vs. Manish Agarwal, 204, Vaibhav Chamber Main Road, Surat – 395009, Gujarat èथायीलेखासं./जीआइआरसं./PAN/GIR No: AFWPA2629A (Appellant) (Respondent) Appellant by Shri Ketan Shah & Shri Aman Shah, AR Respondent by Shri S. K. Keshkamat, CIT-DR Date of Hearing 27/05/2024 Date of Pronouncement 29/05/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the Revenue emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 08.12.2023 by the Learned Commissioner of Income Tax (Appeals), [in short, ‘Ld. CIT(A)’] National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year (AY) 2009-10. 2. The grounds of appeal raised by the Revenue are as under: “1. On the On the facts and circumstances of the also and in Iaw, the Ld. CIT(A) has erred in restricting the addition made by the AO from Rs.4,32,12,386/- to Rs.1,03,70,972/- being 6% of the bogus purchase without appreciating the facts that the assessee had failed to prove the genuineness of the transaction made with the concerns which was identified as bogus entities completely run by Shri Bhanwerlal Jain. 2. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred in restricting the addition from 25% to 6% made by the AO on account of 2 136/SRT/2024/AY.2009-10 Manish Agarwal bogus purchase without appreciating the findings that Shri Bhanwerlal Jain is engaged in the business of accommodation entries and hence AO was correct in concluding that the assessee was a beneficiary of the accommodation entry in guise of purchase. 3. On the facts and circumstances of the case in law, the Ld. CIT(A) has erred in restricting the addition to 6% without considering the judgment of Gujarat High Court in the case of N.K. Industries Ltd. vs. DCIT in TA No. 240 to 242 of 2003 which has been upheld by the Hon'ble Apex Court in Special Leave to Appeal (C) No. 769 of 2017 dated 16.01.2017, wherein the Hon'ble High Court decided that 100% of purchases from bogus parties was liable to be added in the hands of the Assessee, reversing the decision of Hon'ble ITAT to restrict the addition to 25%. 4. On the facts and circumstances of the case in law, the Ld. CIT(A) has erred in restricting the addition to 6% without considering the judgment of Calcutta High Court of in the case of PCIT vs. Premlata Tekriwal (143 taxmann.com 173) involving similar issue of purchase of bogus concern to suppress profits wherein the court held that since it was established that expenditure was unexplained/bogus, entire amount of bogus expenditure was to be added to income of Assessee. 5. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition made by the AO on account of bogus purchase even though in the case of Mayank Diamonds Pvt Ltd. [2014(ll) TMI 812], the Hon'ble High Court has directed to make addition at the rate of 5% of the total turnover. 6. On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 7. It is, therefore, prayed that the order of the Ld. CIT(A) may kindly be set aside and that of the Assessing Officer be restored.” 3. The facts of the case in brief are that the assessee is engaged in the business of import, export, trading and manufacturing and rough polished diamonds under the name of ‘M/s Laxmi Diamonds’. The assessee has filed his return of income for AY.2009-10 on 01.08.2009, declaring total income of Rs.2,17,400/-. The assessee’s case was reopened u/s 147 of the Act. A notice u/s 148 of the Act was issued on 29.03.2016 and the same was duly served upon the assessee on 30.03.2016. A search and seizure action was conducted 3 136/SRT/2024/AY.2009-10 Manish Agarwal u/s 132 of the Act on 03.10.2013 by the Investigation Wing, Mumbai in case of Shri Bhanwarlal Jain group. During the course of search action, the Assessing Officer noticed that Shri Bhanwarlal Jain and group were operating and managing large number of benami concerns in the names of their employees through which they provided accommodation entries for bogus purchases to various beneficiaries. On verification of the documents provided by the Investigation Wing, Mumbai, it was noticed by the Assessing Officer that Shri Manish Agarwal has obtained accommodation entries in the form of bogus purchase from the benami concern controlled by Shri Bhanwarlal Jain group during the year under consideration. Shri Banwarlal Jain group are all paper companies/proprietorships with no real business activities, operating solely with the purpose of facilitation of fraudulent financial transactions which includes providing accommodation entries in the form of unsecured loans, bogus sales/purchase bills etc. The Assessing Officer asked the assessee as to why the entire purchases should not be treated as bogus purchases and not added to the income of the assessee for the year under consideration. In response to the show-cause notice, the assessee submitted that the entire purchases were made through banking channel and details of tax invoice of purchase, copies of stock register and bank statements were furnished to claim that the transactions are genuine. The reply of the assessee was not accepted by the Assessing Officer. The Assessing Officer has completed assessment u/s 143(3) r.w.s. 147 of the Act on 27.10.2016 by making addition of 4 136/SRT/2024/AY.2009-10 Manish Agarwal Rs.4,32,12,386/- being 25% of the total purchase of Rs.17,28,49,544/- u/s 69C of the Act. 4. Aggrieved by the addition, the assessee filed appeal before Ld. CIT(A). The Ld. CIT(A) observed that the entire addition has been made solely on the statement of Shri Bhanwarlal Jain group. The Ld. CIT(A) also observed that several scrutiny assessments have already completed and additions were made on account of bogus purchases. However, the Ld. CIT(A) has restricted the addition to 12.5% of the bogus purchases instead of 25% of bogus purchases by the Assessing Officer. The Ld. CIT(A) found that the ITAT, Surat in the case of ITO vs. Pankaj K. Chaudhary, in ITA Nos.1160 & 1386/Ahd/2017, dated 27.09.2021 restricted the addition to 6% of the bogus purchases. As the issue was decided in assessee’s own case by the ITAT, Surat, the Ld. CIT(A) has restricted the disallowance to 6%. 5. The learned Commissioner of the Income Tax – Departmental Representative (Ld. CIT-DR) for the Revenue supported the order of Assessing Officer. He submitted that the Assessing Officer has rightly made disallowance of the 25% of the bogus purchases which was sustained only to the extent of the 6% of the bogus purchases by the Ld. CIT(A). The decision of the Ld. CIT(A) is not acceptable as the onus lies with assessee to prove the genuineness of purchase. The assessee was required to submit documentary evidences in support of his claim to establish the genuineness of transaction. Moreover, just because the assessee had made payments through banking channels to the various parties and recorded the purchases in the books of account, it does not 5 136/SRT/2024/AY.2009-10 Manish Agarwal make the transactions genuine. There is every possibility for the assessee to make payment through banking channel and received same back by way of cash. He relied on the order of the Assessing Officer. The Ld. CIT-DR relied upon the various decisions viz: (i) M/s. Kachwala Gems vs. JCIT (ITA No.134/JP/2002), (ii) M/s. Kachwala Gems vs. JCIT, (2006) 206 CTR (SC) 585, 288 ITR 10 (SC), (iii) PCIT vs. Mrs Premlata Tekriwal, 143 taxamann.com 173 (Cal. – HC). 6. On the other hand, Learned Authorized Representative (Ld. AR) of the assessee has strongly relied from the order of the Ld. CIT(A). He argued that the AO disallowed 25% of the bogus purchase, which was subsequently reduced to 6% by the Ld. CIT(A) following the order of the ITAT, Surat. 7. We have heard both the parties and perused the material available on record. We find that issue under consideration is covered by the decision of the Co-ordinate Bench, ITAT, Surat in the case of Pankaj K. Chaudhary (supra) wherein the Tribunal has sustained the addition @ 6% of bogus purchases. 14 appeals were decided by ITAT in this order where the lead case was Pankaj K. Chaudhary (supra). The case of the assessee was also decided in the same bunch of appeals vide ITA Nos. 1159 & 1160/Ahd/2017 for AYs.2007-08 and 2012-13. Following decision in case of Pankaj K. Chaudhary (supra), the Tribunal sustained disallowance @ 6% of disputed /bogus purchases in case of the assessee. Since the issue is squarely covered by the decision of Pankaj K. Choudhary (supra) and assessee’s own case (supra) and since there is no change in facts; therefore, respectfully following above decisions, we confirm 6 136/SRT/2024/AY.2009-10 Manish Agarwal the addition @ 6% of bogus purchases. Hence, we dismiss the appeal of the Revenue. 10. In the result, appeal of the Revenue is dismissed. Order is pronounced on 29/05/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 29/05/2024 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat