The ITO, Ward-2(3)(8), Surat V. Shri Vrajendra Jagjivandas Thakkar, Surat

ITA 62/SRT/2019

AI Insights

This case involves a series of appeals by both the Revenue and various assessees against the orders of the Commissioner of Income Tax (Appeals), Surat, which arose from separate assessment orders under section 143(3) of the Income Tax Act, 1961. The primary issue was the addition of bogus purchases made by the assessees from entities linked to the Gautam Jain Group, which were deemed to be accommodation entries. The CIT(A) had restricted the addition to 5% of the bogus purchases, a decision challenged by both the Revenue and the assessees. The Tribunal's decision was influenced by the monetary limits for filing appeals set by the CBDT and the precedents from the jurisdictional High Court and other ITAT decisions.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 301663 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 03-02-2019
• Other Referred Cases: Commissioner of Customs vs Indian Oil Corporation Ltd., M/s. Mayank Diamond Pvt. Ltd., Pushpak Bullion (P) Ltd Vs DCIT, Peass Industrial Engineers (P) Ltd Vs DCIT, ITO Vs Purushttom Dass Bangur, Mayank Diamond Private Limited, AGR Investment Vs Additional Commissioner, Chuharmal Vs CIT, Collector, Land Acquisition vs Mst. Katiji and others, M/s Andaman Timber industries Vs Commissioner of Central Excise, CIT vs. Indrajit Singh Suri, Albers Diamonds Pvt. Ltd. Vs ITO, The PCIT-5 vs. M/s. Shodiman Investments Pvt. Ltd., Shilpi Jewellers Pvt. Ltd. vs. Union of India & Ors., CIT in Vs. Mohmed Juned Dadani, Micro Inks Pvt. Ltd. Vs. ACIT, Shakti Karnawat Vs. ITO - 2(3)(8), Surat, Asian Paints Ltd. Vs. DCIT, PCIT, Surat 1 Vs. Tejua Rohit kumar Kapadia, The PCIT-17 vs. M/s Mohommad Haji Adam & Co., Pankaj Kanwarlal Jain HUF Vs. ITO 2(3)(8) Surat
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Search and seizure; Reasonable cause; Accommodation entries; Tax effect; Condonation of delay; Set aside
• Section: 147; 143(3); 73; 13; 153; 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, HON'BLE JUDICIAL MEMBER AND DR. A. L. SAINI, HON'BLE ACCOUNTNAT MEMBER (Physical Court Hearing) Sl. No. ITA No. Asst. Year Name of Appellant Name of Respondent 1. 48/SRT/2019 2013-14 The ITO, Ward-2(3)(8), Surat. Sonu Dharmichand Bafna, Prop. of Bright Diamonds, 6/2060-61-A, 205, Vedant Building, Bhohabhai ni Sheri, mahidharpura, Surat -395003. PAN: AJTPB4073C 2. 62/SRT/2019 2013-14 The ITO, Ward-2(3)(8), Surat. Vajendra Jagjivandas Thakkar, Prop. of Aditi Exports, 6/2060-61-A, Office No.107, Vedant Building, Bhojabhai ni Sheri, Mahidharpura, Surat- 395003. PAN: AABPT5930B 3. 65/SRT/2019 2013-14 The ITO, Ward-2(3)(8), Surat. Parag Nareshbhai Mehta, Prop. of Deeksha Trading, 6/2060-61-A, Office No.206, Vedant Building, Bhojabhai ni Sheri, Mahidharpura, Surat- 395003. PAN: AZWPM4632R 4. 66/SRT/2019 2013-14 The ITO, Ward-2(3)(8), Surat. Mayur Asheshbhai Joshi, Prop. of Shrushti Enterprises, H. No.6/1854, Shop No.4, Navkar Chambers, Mahidharpura, Surat-395003. PAN: ATHPJ0961H 5. 167/SRT/2021 2013-14 Sonu Dharmichand Bafna, Prop. of Bright Diamonds, 6/2060-61-A, 205, Vedant Building, Bhohabhai ni Sheri, mahidharpura, Surat - 395003. PAN: AJTPB4073C The ITO, Ward-2(3)(8), Surat. 6. 168/SRT/2021 2013-14 Vajendra Jagjivandas Thakkar, Prop. of Aditi Exports, 6/2060-61-A, Office No.107, Vedant Building, Bhojabhai ni Sheri, Mahidharpura, Surat-395003. PAN: AABPT5930B The ITO, Ward-2(3)(8), Surat. 7. 169/SRT/2021 2013-14 Parag Nareshbhai Mehta, Prop. of Deeksha Trading, 6/2060-61-A, Office No.206, Vedant Building, Bhojabhai ni Sheri, Mahidharpura, Surat-395003. PAN: AZWPM4632R The ITO, Ward-2(3)(8), Surat. ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 2 8. 170/SRT/2021 2013-14 Mayur Asheshbhai Joshi, Prop. of Shrushti Enterprises, H. No.6/1854, Shop No.4, Navkar Chambers, Mahidharpura, Surat-395003. PAN: ATHPJ0961H The ITO, Ward-2(3)(8), Surat. आदेश / O R D E R PER DR. A. L. SAINI, AM: This is bunch of eight appeals, pertaining to Assessment Year (AY) 2013- 14, filed by the different assessees and Revenue, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals), Surat which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. At the outset, Learned Counsel for the assessee, informs the Bench that appeal filed by the Revenue in ITA No.65/SRT/2019 for AY.2013-14, in the case of Shri Parag Nareshbhai Mehta, is not maintainable in the eye of law as the tax effect involved in this appeal of the Revenue is Rs.48,68,030/-, which is below the monetary limit prescribed by Central Board of Direct Tax (in short ‘the CBDT’) in Circular No.17/2019, dated 08.08.2019. Therefore, Ld. Counsel contended that said appeal of the Revenue should be dismissed on account of low tax effect. 3. Learned DR for the Revenue has fairly agreed that appeal filed by the Revenue in ITA No.65/SRT/2019 for AY.2013-14, is covered by tax effect. 4. We have heard both the parties. We note that CBDT has issued Circular No. 17/2019 dated 08.08.2019, whereby the monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal and High Courts and SLP Date of Hearing: 08/12/2022 Date of Pronouncement: 30/12/2022 Appellant by: Shri P. M. Jagasheth, CA Respondent by: Shri Ashish Pophare, CIT(DR) ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 3 before Supreme Court have been increased as measure for reducing Litigation. The revised monetary limits laid down in para-2 of this Circular are as follows: 1. Before Appellate Tribunal Rs. 50,00,000/- 2. Before High Court Rs.1,00,00,000/- 3. Before Supreme Court Rs. 2,00,00,000/- 5. In the present case, the tax effect is less than Rs.50,00,000/-. It is a settled law that the Circulars issued by CBDT are binding on the Revenue. This position was confirmed by the Apex Court in the case of Commissioner of Customs vs Indian Oil Corporation Ltd., reported in 267 ITR 272, wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circular and laid down that when a circular issued by the Board remains in operation then the Revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute. The appeal under consideration has certainly been filed contrary to the Circular issued by the CBDT Circular No.17 dated 08.08.2019. In view of the above, we hold that the appeal filed by the Department, against the impugned order of the Ld. CIT(A), is contrary to the policy decision of the Department and as such the appeal filed by the Department in ITA No. 65/SRT/2019 is dismissed in limine. 6. In the result, the appeal of Revenue in ITA No.65/SRT/2019, is dismissed. 7. The Ld. Counsel also stated that assessee wants to withdraw appeal, in ITA No. 169/SRT/2021 for AY.2013-14. That is, assessee does not wish to press this appeal, therefore, after hearing ld DR for the Revenue, the assessee’s appeal in ITA No. 169/SRT/2021 is dismissed, as not pressed. 8. Now remaining six appeals of Revenue and assessee are as follows: (i) ITA No.48/SRT/2019, AY.2013-14, Revenue appeal – Sonu Dharmichand Bafna. (ii) ITA No.62/SRT/2019, AY.2013-14, Revenue appeal – Vajendra Jagjivandas Thakkar. (iii) ITA No.66/SRT/2019, AY.2013-14, Revenue appeal – Mayur Asheshbhai Joshi (iv) ITA No.167/SRT/2021, AY.2013-14, Assessee’s-appeal– Sonu Dharmichand Bafna ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 4 (v) ITA No.168/SRT/2021, AY.2013-14, Assessee’s appeal – Vajendra Jagjivandas Thakar. (vi) ITA No.170/SRT/2021, AY.2013-14, Assessee’s appeal – Mayur Asheshbhai Joshi 9. In these above remaining cross appeals, the issue involved is that assessing officer made 100% addition of bogus purchases holding that assessee made purchases from Shri Gautam Jain/Dharmichand Jain Group concerns, without actually getting the material, therefore bill issued by these said group concerns are nothing but accommodation entry. On appeal by assessee, the Ld. CIT(A), by following the judgment of jurisdictional High Court in the case of M/s. Mayank Diamond Pvt. Ltd., 11 TMI 812 (Guj.), has restricted the addition at the rate of 5% of bogus purchases. While restricting the addition at the rate of 5% of bogus purchases, the Ld. CIT(A) also relied on the judgment of jurisdictional ITAT, Surat and Ahmedabad. 10. Aggrieved by the order of Ld. CIT(A), the assessee as well as Revenue are in appeal before us. 11. The Ld. Counsel for the assessee states before the Bench that in the case of M/s. Sonu Dharmichand Bafna (in ITA No.167/SRT/2021 for AY.2013-14), Vajendra Jagjivandas Thakkar, in ITA No.168/SRT/2021 for AY.2013-14 and Mayur Asheshbhai Joshi, in ITA No.170/SRT/2021 for AY.2013-14, these all appeals filed by the assessee are barred by limitation by nine hundred seventy seven (977) days. The assessee moved a petition for condonation of delay along with affidavit in case of ITA Nos. 167, 168 & 170/SRT/2021 for AY.2013-14. The contents of petition of condonation of delay in case of ITA No.167/SRT/2021 in the case of Sonu Dharmichand Bafna (supra) is as follows: “I have filed an appeal under section 253(1) of the Income Tax Act, 1961 on 01.10.2021 vide ITA No.167/SRT/2021 against the order of the Commissioner (Appeals) relating to A.Y.2013-14 made on the 29.11.2018, Though this appeal should have been filed in the office of the Tribunal on or before the counting the period of sixty days from the date of communication of the order but it could not be so filed because Shri Vrajendra Jagjivadas Thakkar, who is co-director with me in many private limited companies and. who was also a handling legal and Income Tax matters. He was under medical treatment due to liver cirrhosis problem critically about 5 to 6 years and he had shifted to Mumbai for his medical treatment ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 5 Hence, I was unaware about the CIT(A) order. When the hearing date was fixed on board and had requested for the details and inform me about department appeal, thereafter, I Inquired and filed my appeal before the Hon'ble I.TAT, Surat against the CIT(A)'s Order. Hence, necessary arrangement could not be made for filing of appeal before Hon'ble ITAT, Surat in time. Copies of medical papers of Vrajendra Thakkar are submitted herewith. In view of the above facts, it is clear that is the delay in submission of the appeal is due to good and sufficient reasons, therefore, I pray that the delay in filling the appeal should be condoned and the appeal should be treated as filled within the allowed time.” 12. The contents of the petition filed in ITA No.168/SRT/2021, in case of Vajendra Jagjivandas Thakkar, is reproduced below: “I have filed an appeal under section 253(1) of the Income Tax Act, 1961 on 01.10.2021 vide IT A N0.168/SRT/2021 against the order of the Commissioner (Appeals) relating to A.Y.2013-14 made on the 29.11.2018. Though this appeal should have been filed in the office of the Tribunal on or before the counting the period of sixty days from the date of communication of the order but it could not be so filed because I was under medical treatment due to liver cirrhosis problem critically about 5 to 6 years, and due to this, I internally disturbed and also my business was almost stopped. Hence, I have shifted to Mumbai for my medical treatment. Hence, I was unaware about the CIT(A) order, when the hearing date was fixed on board and My 'AR' had requested for the details and inform me about department appeal, thereafter, inquired and file my Appeal before the Hon'ble ITAT, Surat against the CIT(A) Order. Hence, necessary arrangement could not be made for filing of appeal before Hon'ble ITAT, Surat in time. Copies of my medical papers are herewith. In view of the above facts, it is clear that is the delay in submission of the appeal is due to good and sufficient reasons, therefore, I pray that the delay in filling the appeal should be condoned and the appeal should be treated as filled within the allowed time.” 13. The contents to the petition filed by the assessee in the case of Mayur Asheshbhai Joshi, in ITA No.170/SRT/2021, is reproduced below: “I have filed an appeal under section 253(1) of the Income Tax Act, 1961 on 01.10.2021 vide ITA No.170/SRT/2021 against the order of the Commissioner (Appeals) relating to A.Y.2013-14 made on the 29.11.2018. Though this appeal should have been filed in the office of the Tribunal on or before the counting the period of sixty days from the date of communication of the order but it could not be so filed because Shri Vrajendra Jagjivadas Thakkar, who is co-director with me in many private limited companies and who was also a handling legal issues and Income Tax matters. He was under medical treatment due to liver cirrhosis problem critically about 5 to 6 years and he had shifted to Mumbai for his medical treatment. Hence, I was unaware about the CIT(A) order. When the hearing date was fixed on board any My ‘AR’ had requested for the details and ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 6 inform me about department appeal, thereafter, I inquired and filed my appeal before the Hon'ble ITAT, Surat against the CIT(A)’s order. Hence, necessary arrangement could not be made for filling of appeal before Hon'ble ITAT, Surat in time. Copies of medical papers of Vrajendra Thakkar are submitted herewith. In view of the above facts, it is clear that is the delay in submission of the appeal is due to good and sufficient reasons, therefore, I pray that the delay in filling the appeal should be condoned and the appeal should be treated as filled within the allowed time.” 14. Shri P. M. Jagasheth, Ld. Counsel argued that Shri Vrajendra Jagjivandas Thakkar, who is co-director in many private limited companies and who was handling income tax matters, was under medical treatment due to liver cirrohosis problem critically about 5 to 6 years. Moreover, Shri Vajendra Jagjivandas Thakkar has shifted to Mumbai for his liver disease; therefore, these appeals could not be filed on time. To prove this, Ld. Counsel submitted medical reports and medical certificates relating to Shri Vajendra Jagjivandas Thakkar and contended that due to continuous treatment of disease, and severe tension and anxiety environment, these appeals could not be filed on time. The Ld. Counsel for the assessee submitted that due to circumstances behind their control, these assessees could not file these appeals on time and therefore Ld. Counsel prayed the Bench that these assessees have demonstrated reasonable cause and sufficient reasons for the delay and therefore such delay should be condoned. 15. On the other hand, Learned Departmental Representative (Ld. DR) for the Revenue argued that these assessees have not explained the sufficient cause for delay in filling these appeals and the reasons mentioned by these assessees in their respective petition for condonation of delay, do not show sufficient cause. None of the assessee has explained the delay in a satisfactory manner, therefore delay should not be condoned and appeals of these assessees should be dismissed. 16. We have heard both the parties on this preliminary issue. We note that Shri Vrajendra Jagjivandas Thakkar, who was the main person to handle taxation matter, has been in continuous ill situation for 6 years. Shri Vrajendra Jagjivandas Thakkar, is also co-director in many private limited companies therefore other assessee`s appeals also could not be filed, as he was the main person who was ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 7 handling income tax matters of the group companies. Since Shri Vrajendra Jagjivandas Thakkar, was under medical treatment due to liver cirrhosis problem critically about 5 to 6 years and for medical treatment he has shifted to Mumbai, hence these appeals could not be filed on time. Before us Ld. Counsel submitted medical reports and medical certificates relating to Shri Vrajendra Jagjivandas Thakkar, which shows that Shri Vrajendra Jagjivandas, had been suffering for liver cirrhosis problem since a long time. We note that reasons given in the respective affidavits filed by these assessees` for condonation of delay, were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing these appeals. We also note that there was no deliberateness or negligence or mala fides on the part of these assessees. Therefore, the delay in filing these appeals deserved to be condoned. 17. We are of the view that provisions of law have to be adhered strictly and that one cannot be allowed to act in leisure and make a mockery of enacted law, because law and provisions are laid down to benefit both sides of litigation. Be that as it may, we have to do justice and the Hon’ble Supreme Court in the case of Collector, Land Acquisition vs Mst. Katiji and others, reported in 167 ITR 471, (1988 SC 897) (7) has observed as follows: “4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay.” 18. When we weigh these two aspects then the side of justice becomes heavier and casts a duty on us to deliver justice. The reasons given in the affidavit for condonation of delay were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing these appeals. We, therefore, condone the delay in these three appeals and admit these three appeals for hearing on merit. 19. Since, the issue involved in these remaining six cross-appeals are common and identical, therefore these appeals have been clubbed and heard together and a ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 8 consolidated order is being passed for the sake of convenience and brevity. The facts as well as the grounds of appeal, narrated in ITA No. 167/SRT/2021 for AY.2013-14 have been taken into consideration for deciding these appeals en masse. 20. The grounds of appeal raised by assessee in lead case in ITA No.167/SRT/2021 for AY.2013-14, are as follows: “1. On the facts and in the circumstances of the case as well as law on the subject, the learned Assessing Officer has erred in reflecting books of account u/s 145(3) of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the income Tax (Appeals) has erred in confirming the addition of Rs.1,43,44,171/- on account of disallowance of purchases restricted to 5% out of alleged unverified purchases. 3. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in estimating of 5% disallowance of purchase out of alleged unverified purchases. 4. It is therefore prayed that the above addition may please be deleted as learned members of the Tribunal may deem it proper. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 21. Succinct facts are that during the course of assessment proceedings, it was noticed by Assessing Officer that the assessee has made transactions with the entities of Gautam Jain Group. The Assessing Officer was in possession of information that a search and seizure action has been carried out by the Investigation Wing, Mumbai on the Gautam Jain Group which was indulged in providing of accommodation entries in the form of unsecured loans, bogus purchases / sales to the interest parties. During the course of search action, it was revealed that the said group is exclusively engaged in the business of issuing non genuine purchase bills and also unsecured loan accommodation entries to various parties. It is thus established from the search and seizure action that alleged concerns of Gautam Jain Group are all paper companies / proprietorships and with no real business activities, operating solely with the purpose of facilitation of fraudulent financial transactions which includes providing accommodation entries ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 9 in the form of unsecured loans to the interest parties, issuing of bogus sale / purchase bills to various parties etc. During the course of search and seizure action in the case of Shri Gautam Jain Group of cases on 03.10.2013 by the DGIT(Inv), Mumbai, it was found that there are namesake dummy directors / partners / proprietors / brokers, etc. These concerns were being actually managed by Shri Gautam Jain. These group concerns were believed to be concerns actively involved in providing non-genuine purchase bills and also unsecured loan accommodation entries to various interested parties. As a result of the search and seizure action, it was conclusively proved that these diamond concerns are only on paper base with no real business activities. 22. The assessing officer observed that Income Tax Department has conducted search and seizure action in the case of Group concerns of Shri Gautam Jain and conclusively proved that these parties are engaged in the business of providing accommodation entries only. The parties are issuing bills without delivering any goods and services. Evidently, the assessee had adopted a modus operandi to reduce its true profits by inflating its expenses including purchase expenses by taking accommodation entries from such parties. Thus, in the books of accounts of the assessee, the purchases to the extent made from these parties remained unverifiable. Therefore, assessing officer arrived at a conclusion that the purchases shown by the assessee in the books of accounts are inflated and bogus purchases are debited to trading account to suppress the true profits to be disclosed to the Department. The onus was upon the assessee to establish the genuineness of purchases made by the assessee. Thus, AO noted that the purchases made by the assessee from the parties and claimed as expenses in its profit and loss account are not genuine. In view of the above discussion and the defects pointed out, the books of accounts of the assessee were rejected u/s 145(3) of the Act. In the facts and circumstances, it is clear that the assessee had only obtained the bill from M/s Rajan Gems (Prop. Dhamendra Babel) amounting to Rs.18,97,69,219/- and M/s Rajat Diamond Pvt. Ltd. amounting to Rs.9,71,14,206/- totaling to the tune of Rs.28,68,83,424/- which were Shri Gautarn Jain & group concerns without ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 10 actually getting the material. Thus, the bill issued by the said group concern is nothing but accommodation entry. Hence, the accommodation entry received from totaling to the tune of Rs.28,68,83,424/- was treated as bogus purchases and added to the total income of the assessee. 23. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has restricted the addition at the rate of 5% of the bogus purchases, observing as follows: “7.4.4 It is further seen that the Honourable Gujarat High Court in the cases decided subsequent to N K Proteins Ltd (supra) has not followed it, viz in the cases of Jagdish H. Patel, TA No. 411 of 2017 dtd 01/08/2017 (8% disallowance) and TEJUA ROHITKUMAR KAPADIA, Surat in TA No.691/2017 dated 18-09- 2017 (0% disallowance). It is further seen that the Hon., Supreme Court has confirmed the decision of Hon Guj HC in Tejua R. Kapadia in SLP (C) Diary No(s). 12670/2018 dtd: 04-05-2018. This goes to show that the decision of Gujarat High Court in the case of N K Proteins (Industries) Ltd (supra) is specific to the facts of that case. 7.4 In the instant appeal, there is no such adverse finding as in the case of N K Proteins (supra). The facts in instant appeal are identical to Gangani Impex (supra) and the cases decided by the jurisdictional ITAT (supra). In view of this, respectfully following jurisdictional ITAT, the disallowance is restricted to 5%. The AR has furnished orders Hon'ble ITAT Mumbai and Kolkata wherein, on identical circumstances & factual matrix involving the same operators the entire disallowance made by Ld. AO was deleted (Sanghvi Export International Ltd. ITA No.3305,3375/Mum/2017 dt 21.08.2018). However, since I have already taken a view of disallowing 5% of purchases and since it is confirmed by Hon'ble jurisdictional ITAT, Surat Bench the decisions of ITAT Mumbai / Kolkata are not followed. 7.5 In view of above discussion the disallowance is restricted to 5% of the impugned purchases as under: A.Y. Unverified purchases Disallowance confirmed 2013-14 Rs.28,68,83,424/- Rs.1,43,44,171/- 9. In the result the assessee appeal is Partly allowed.” 24. Aggrieved by the order of the ld. CIT(A), the Revenue as well as assessee are in appeal before us. The main grievance of these assessees is that 5% addition of bogus purchases, sustained by the Ld. CIT(A), should be deleted. However, the main grievance of the Revenue is that the addition made by the Assessing Officer at the rate of 100% of bogus purchases should be confirmed. ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 11 25. The Ld. DR for the Revenue submitted before us that ld. CIT(A) has restricted the addition at the rate of 5% of bogus purchases by following the judgment of Honourable Gujarat High Court in the case of M/s Mayank Diamond Private Limited, reported in (2014) 11 TMI 812 (Guj.). The Ld. DR pointed out that the judgment of Honourable Gujarat High Court in the case of M/s. Mayank Diamond Pvt. Ltd. (supra) does not apply to the assessee under consideration, as in the case of M/s. Mayank Diamond Pvt. Ltd. (supra), the addition was made at the rate of 5% of profit and it was not the addition on bogus purchases at the rate of 5%. Therefore, the judgment of the Hon`ble Gujarat High Court in the case of Mayank Diamond Pvt. Ltd. (supra) is distinguishable on facts and it does not apply to the assessee under consideration, as in the case of the assessee, there is an issue of bogus purchases which is a different issue altogether. Therefore, Ld. DR prayed the Bench that disallowance should be restricted at the rate of 100% of bogus purchases. 26. On the other hand, Shri P. M. Jagasheth, Ld. Counsel for the assessee pleaded that assessee has submitted each and every documents to substantiate its case. The transactions were through banking channel and the assessee has submitted ledger account, bills and vouchers, and the assessee also maintains stock details, therefore there should be no addition in the hands of the assessee. The Ld. Counsel further stated that some of the assessees may be engaged in bogus purchases, however these assessees under consideration, never took the bogus entries. These all assessees are engaged in genuine business. The Ld. Counsel also stated that assessees` sales were accepted, therefore corresponding purchases should be accepted as genuine, as there is no sale without purchase. The Ld. Counsel also contended that there is different facts and circumstances in each case, and just because these assessees have done the transactions with Gautam Jain Group, does not mean that entire transactions of these assessees are bogus. Therefore, Ld. Counsel contended that the addition sustained by the ld. CIT(A) at the rate of 5% of bogus purchases should also be deleted. ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 12 27. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that main grievance of the assessees in these appeals is that since assessee has submitted bills, vouchers, stock register and transactions were through banking channels, therefore, addition at the rate of 5% sustained by Ld.CIT(A) should also be deleted, whereas main grievance of Revenue is that since all purchases made by assessees were bogus and in the nature of accommodation entry, hence addition made by the Assessing Officer should be sustained. We note that the issue under consideration is squarely covered by the judgement of the Co-ordinate Bench in the case of Pankaj K. Chaudhary (in ITA No.1152/AHD/2017), dated 27.09.2021, wherein the Co-ordinate Bench of Surat has sustained the addition at the rate of 6% of bogus purchases. Therefore, we note that these cross-appeals are squarely covered by the judgment of this Tribunal in the case of Pankaj K. Choudhary (supra) wherein the Tribunal held as follows: “12. We have heard the submission of ld.CIT-DR for the Revenue and the ld. Authorised Representative (AR) of the assessee. We have also gone through the various documentary evidences furnished by assessee. The ld. CIT-DR for the Revenue supported the order of AO. The ld. CIT-DR submits that Investigation Wing, Mumbai made a search on Bhanwarlal Jain Group. During the search and after search, the Investigation Wing made a thorough investigation and concluded that Bhanwarlal Jain Group and his associates including his sons were indulging in managing about 70 benami concerns. The benami concerns were engaged in providing accommodation entries. The assessee is one of the beneficiaries of such accommodation entries. In the transaction of accommodation entries, the documentary evidences are created in such a way, so that the bogus transaction is looks like genuine transaction. In bogus transaction, the 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 time of search on Bhanwarlal Jain Group. The assessee has shown a very meagre gross profit (GP) @ 0.78% and not net profit (NP) at 0.02%. 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. 13. On the validity of reopening, the ld.CIT-DR for the revenue submits that the AO received credible information about the accommodation entry provided by ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 13 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. 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). 14. On the other hand, the ld.AR of the assessee submits that he has challenged the validity of reopening as well as restricting the addition to the extent of 12.50% of the alleged bogus purchases. 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. 15. On account of additions of bogus purchases, the ld.AR submits that in the original assessment, the assessee filed its complete details of purchases to prove the genuineness of expenses. The AO accepted the same in the assessment order passed under section 143(3) on 10.03.2009. During re-assessment, the assessee again furnished complete details about the genuineness of purchases. The assessee filed confirmation purchases invoices, accounts of the parties, bank statement of assessee showing transaction to the banking channel. The AO has not made any comment on the documentary evidence furnished by assessee. The AO solely relied upon the statement of third party and the report of Investigation Wing. The report of wing and the statement of Bhanwarlal Jain were not provided to the assessee. The AO has not disputed the sales of assessee. No sale is possible in absence of purchase. The books of accounts were not rejected. The AO made the disallowance of entire purchases. The assessing officer not provided cross examination of the alleged hawala dealers. The disallowances sustained by the Ld. CIT(A) @ 12.5% of the impugned purchases, is on higher side and deserve to be deleted in total. The ld.AR of the assessee submits that entire purchases shown by assessee are genuine. In without prejudice and alternative submissions, the Ld. AR for the assessee submits that in alternative submission, the disallowance may be sustained on reasonable basis. To support his various submission, the ld.AR for the assessee is relied upon case laws: ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 14 1 M/s Andaman Timber industries VsCommissioner 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 ShilpiJewellers 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 16. In the rejoinder submissions the ld. CIT-DR for the revenue submits that that rigour of the rules of evidence contained in the Evidence Act is not applicable before the tax authorities. It was submitted that the ratio of various case laws relied by the ld. AR for the assessee is not applicable on the facts of the present cases. The ratio of decision of Hon’ble Gujarat High Court in Mayank Diamond Private Limited (supra) is directly applicable on the facts of the present case. 17. We have considered the submissions of the parties and have gone through the order of the lower authorities. 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 assessee’s appeal relates to the validity of reopening. The ld AR for the assessee vehemently argued that the AO reopened the case of the assessee on the basis of third party information, and without making any preliminary investigation, which was vague about the alleged accommodation entry by Bhanwarlal Jain Group. And that there was no specific information about the accommodation entry availed by the assessee. There is no live link between the reasons recorded qua the assessee. We find that the assessee has raised objection against the validity of the reopening before the AO. The objections of the assessee was duly disposed by AO in his order dated 09.02.2015. The assessee raised ground of appeal before ld CIT(A) while assailing the order of AO on reopening. The ld CIT(A) while considering the ground of appeal against the reopening held that the AO has received report from investigation wing Mumbai, which indicate that the assessee is beneficiary of the accommodation entry operators. The ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 15 accommodation entry provider admitted before investigation wing that he has given such entry to various persons; based on such report the AO has reason to believe that the income of the assessee has escaped assessment and thus the action of AO in reopening is justified. 18. We find that the Hon’ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd Vs DCIT (supra) while considering the validity of similar notice of reopening, which was also issued on the basis of information of investigation wing that they have searched a person who is engaged in providing accommodation entries, held that where after scrutiny assessment the assessing officer received information from the investigation wing that well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified in re-opening assessment. Further similar view was taken by Hon’ble Jurisdictional High Court in Pushpak Bullion (P) Ltd Vs DCIT (supra). Therefore, respectfully following the order of Hon’ble High Court, we find that the assessing officer validly assumed the jurisdiction for making re-opening under section 147 on the basis of information of investigation wing Mumbai. So far as other submissions of the ld AR for the assessee that there is no live link of the reasons recorded, we find that the Hon’ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd clearly held that when assessing officer received information from the investigation wing that two well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified. Hence, the ground No. 1 in assessee’s appeal is dismissed. 19. Ground No. 2 in assessee’s appeal and the grounds of appeal raised by the revenue are interconnected, which relates to restricting the disallowance of bogus purchases to the extent of 12.5%. The AO made of 100% of purchases shown from the hawala dealers/ entry provider namely Bhanwarlal Jain. We find that the AO while making additions of 100%, of disputed purchases solely relied on the report of the investigation wing Mumbai. No independent investigation was carried by the AO. The AO has not disputed the sale of the assessee. The AO made no comment on the evidences furnished by the assessee. We further find that ld CIT(A), while considering the submissions of the assessee accepted the lapses on the part of the AO and noted that no sale is possible in absence of purchases. The Books of the assessee was not rejected by the AO. The ld CIT(A) on further examination of the facts and various legal submissions find that Ahmedabad Tribunal in Bholanath Poly Fab Private Limited (supra) held that in the such cases the addition of bogus purchases was sustained to the extent of 12%, on the observation that the assessee may have made purchases from elsewhere and obtained the bills from impugned supplier to inflate Gross Profit Rate. The ld CIT(A) by considering the overall facts, concluded that the 100% disallowance of purchase is not justified. We also find that the ld.CIT(A) also considered the decision of jurisdictional High Court in Mayank Diamonds Pvt. Ltd. (supra) and compared the fact of the present case with the facts in Mayank Diamonds Pvt Ltd (supra) and noted that assessee in that case was also engaged in the trading of polished diamonds. The ld CIT(A) noted that in that case the AO made disallowance of entire bogus purchase and on first appeal before CIT(A) the disallowances were maintained. However, the Tribunal gave partial relief to the ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 16 assessee directing to sustain the addition @12% of such bogus purchases. And on further appeal, the Hon'ble High Court sustained Gross Profit Rate @ 5% being average rate of profit in industry. 20. Now adverting to the facts of the present case, the ld.CIT(A) held that in some other similar cases; though he had sustain 5% of Gross Profit Rate, considering the fact that where Gross Profit shown by those assessee’s are 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. 21. We have seen that during the financial year under consideration the assessee has shown total turnover of Rs. 66,09,62,458/-. The assessee has shown Gross Profit @ .78% and net Profit @ .02% (page 11 of paper Book). The assessee while filing the return of income has declared taxable income of Rs.1,81,840/- only. We are conscious of the facts that dispute before us is only with regard of the disputed purchases of Rs, 4.34 Crore, which was shown to have purchased from the entity managed by Bhanwarlal Jain Group. During the search action on Bhanwarlal Jain no stock of goods/ material was found to the investigation party. Bhanwarlal Jain while filing return of income has offered commission income (entry provider). Before us, the ld CIT-DR for the revenue vehemently submitted that the ratio of decision of Hon’ble Gujarat High Court in Mayank Diamond Private Limited (supra) is directly applicable on the facts of the present case. We find that in Mayank Diamonds the Hon’ble High Court restricted the additions to 5% of GP. We have seen that in Mayank Diamonds P Ltd (supra), the assessee had declared GP @ 1.03% on turnover of Rs. 1.86 Crore. The disputed transaction in the said case was Rs. 1.68 Crore. However, in the present case the assessee has declared the GP @ 0.78%. It is settled law that under Income-tax, the tax authorities are not entitled to tax the entire transaction, but only the income component of the disputed transaction, to prevent the possibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @ 6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage. In the result the ground No. 2 of appeal raised by the assessee is partly allowed and the grounds of appeal raised by revenue are dismissed. 22. In the result the appeal of revenue is dismissed and the appeal of the assessee is partly allowed.” 28. Since the issue is squarely covered by the decision of the Co-ordinate Bench in the case of Pankaj K. Choudhary (supra) and there is no change in facts and law and Revenue is unable to produce any material to controvert the aforesaid findings of the Co-ordinate Bench (supra). We find no reason to interfere in the above said order of Co-ordinate Bench, therefore respectfully following the binding judgment of Co-ordinate Bench in the case of Pankaj K. Choudhary ITA Nos. 48, 62, 65 & 66/SRT/2019 &167 to 170/SRT/2021/AY.2013-14 Sonu Dharmichand Bafna & Others 17 (supra), we dismiss the appeals of the assessees and we allow the appeals of the Revenue partly. 29. In the result, appeals filed by the assessees (in ITA Nos. 167, 168 and 170/SRT/2021) are dismissed whereas the appeals filed by Revenue (in ITA Nos. 48/SRT/2019, 62/SRT/2019 & 66/SRT/2019) are partly allowed. Registry is directed to place one copy of this order in all appeals folder / case file(s). Order is pronounced in the open court on 30/12/2022 by placing the result on the Notice Board. Sd/- Sd/- (PAWAN SINGH) (Dr. A. L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat / Ǒदनांक/ Date: 30/12/2022 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat