Appeal details
Counselvise Citation
[2024] 100 COUNSELVISE.COM (IT) 1271 (ITAT-SURAT)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
01-07-2024
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
DB
Next Hearing Date
04-06-2024
Assessment Year
2011-2012
Appeal Filed On
10-12-2023
Judgement Text
IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.853 & 854/SRT/2023 AYs: (2011-12 & 2012-13) (Hybrid process) Rohit Lodha C/o Ketan H. Shah, Advocate, 512, Times Squre-1, Opp. Ram Baug Bungalow, Thaltej Shilaj Road, Thaltej, Ahmedabad- 398059 Vs. Income Tax Officer Ward-2(3)(8), Surat, èथायीलेखासं./जीआइआरसं./PAN/GIR No: ADAPL 2300 H (अपीलाथŎ/Appellant) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Assessee by Shri Ketan Shah, AR & Shri Aman K Shah, AR राजˢ की ओर से /Revenue by Shri Ravi Kant Gupta, CIT(DR) सुनवाई की तारीख/Date of Hearing 05/06/2024 उद्घोषणा की तारीख/Date of Pronouncement 02/07/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: These two appeals by the assessee emanate from the orders passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) by the Learned Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’], vide separate orders, both dated 23.09.2023, for assessment years (AYs) 2011-12 & 2012-13. In both appeals, the facts are common and grounds of appeals raised by the assessee are similar except variance of amount. Hence, with the consent of the parties, all the appeals are clubbed and heard together and are decided by the consolidated order for 2 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha sake of convenience and brevity. Grounds of appeals raised by the assessee in ITA No.853/SRT/2023 for AY.2011-12, treated as “lead” case are as under: “1. The Learned AO has erred in not appreciating the fact that the notice u/s 148 dated 28-03-2014 was issued without getting any approval u/s 151 and therefore, the same is bad in law and void. 2. The Learned AO has erred in not appreciating the fact that, the notice u/s 148 has not served / issued within time limit of 6 years and therefore, the proceeding is bad in law and void. 3. The Learned AO has erred in not appreciating the fact that the copy of the reason recorded is dated 01-06-2018 whereas, the 148 notices is dated 28.03.2018 and it is further said that there is no such copy of the approval u/s. 151 provided and therefore, the proceeding is bad in law and void. 4. The Learned AO has also erred in not appreciating the fact that the appellant’s books are duly audited and no such Section145 has been applied nor the books have been rejected and therefore, there is no question of making any addition. 5. The Learned AO has also erred in not appreciating the fact that the Assessing Officer has grossly erred in providing complete statement of Bhanwarlal Jain as well as the inquiry made with the disputed parties and no cross-examination has been allowed even though asked for and therefore, the present proceeding is liable to be quashed. 6. The Learned AO has erred in not appreciating the fact that the assessee’s books of accounts are duly audited and the disputed party’s books are also duly audited and assessed to tax and therefore, in any case, there is no justification for making any addition in the case of present assessee. 7. The Learned AO has erred in not appreciating the fact that the assessee has provided complete confirmation of all disputed parties for the purchase value of Rs.8,28,40,884/- and the payment had been made through the banking channel and therefore, the assessee has discharged the onus and as such there is no question of making any addition. 8. The Learned AO has erred in not appreciating the fact that there cannot be sales without purchase and therefore, the addition made is required to be deleted. 9. It is further prayed that the gross profit has also been accepted and therefore, there is no question of making any addition towards disputed purchase and therefore, the same is required to be deleted.” 3 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha 2. The facts of the case in brief are that the assessee is engaged in the business of trading of diamond in proprietary concern, in the name and style of M/s Rahul Exports. The appellant filed his return of income for AY.2011-12 on 23.09.2011 declaring total income of Rs.2,16,350/-. Subsequently, notice u/s 148 was issued on 27.03.2018 after getting due approval of appropriate authority. In response to the notice u/s 148, appellant filed his return on 25.04.2018. The AO issued various notices but none attended before AO and details were not submitted. The AO issued a show-cause letter dated 09.12.2018 requesting appellant to show-cause as to why assessment should not be finalized ex parte u/s. 144 of the Act and to submit reply by 17.12.2018. In response thereto, appellant has not filed requisite details of sale, purchase, expenses, unsecured loan etc. During the course of assessment proceedings, it was noticed that assessee has made transactions with business concerns of Shri Bhanwarlal Jain Group which was subjected to search and seizure operation u/s 132 of the Act on 03.10.2013, as a result of which various evidences were found which conclusively proved that Bhanwarlal Jain group was operating and managing large number of benami concerns (around 70 fictitious concerns) in the names of their employees through which they provided accommodation entries for bogus purchases and bogus unsecured loans to various beneficiaries. In the case of assessee, the total purchases was Rs.8,28,40,884/- i.e., (i) Meridian Jewellery Pvt. Ltd. Rs.1,46,11,740/-; (ii) Pushpak Gems Rs.27,14,724/- & (iii) Meridian Gems Rs.6,55,14,420/- all from 4 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha Bhanwarlal Jain group. The AO issued notice u/s 148 with prior approval from higher authorities. He had also handed over copy of the reasons for reopening to the assessee. The objection against re-assessment proceedings was disposed of by order dated 19.12.2018. As stated earlier, there was non- compliance to various notices issued by AO. In view of the above, show-cause notice was issued to the assessee on 09.12.2018 to explain the bogus purchase of Rs.8,28,40,884/- and why it should not be added to total income. In absence of any compliance, the impugned purchase of Rs.8,28,40,884/- was treated as bogus and added to the total income of the assessee. The AO has also initiated penalty proceedings u/s 271(1)(c) of the Act. 3. Aggrieved by this order of the AO, the assessee filed appeal before Ld.CIT(A). The Ld.CIT(A) issued three notices but assessee did not file any written submissions or documentary evidence. The Ld.CIT(A) has decided both the validity of re-assessment as well as the merits of addition of the case. Regarding assumption of jurisdiction by the AO for initiating re-assessment proceedings u/s 148 of the Act, the Ld.CIT(A) has observed that the case was not selected for regular scrutiny. After receiving information from Investigation Wing, Mumbai that assessee has taken accommodation entries, the AO initiated the re-assessment proceedings. He has followed the due procedure as per the Act and as laid down by Hon’ble Supreme Court in case of GKN Driveshafts (I) Ltd. vs. ITO CA No.7731/2002 dated 25.11.2002. He also observed that tangible material was in possession of AO before recording 5 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha reason to believe that income chargeable to tax escaped assessment. The findings of Ld.CIT(A) are at page-18 of his order. Hence, grounds of assessee was dismissed. 4. Regarding merits of addition, the Ld.CIT(A) has reproduced assessment order at pages 19 to 21 of his order dated 23.09.2023. The Ld.CIT(A) has dismissed the grounds of appeal on merit of the addition by observing that assessee failed to produce documentary evidence to disprove the additions made by AO. He held that AO was justified in rejecting the books of account and making addition of Rs.8,28,40,884/-. 5. Grounds No.1 to 3 are inter-connected and pertain to validity of reopening the assessment u/s 147 of the Act. In the grounds of appeal, Ld. AR of the assessee has submitted that notice u/s 148 of the Act was issued on 27.03.2018 without getting any approval u/s 151 of the Act and hence, it is invalid. It is also submitted that the reason was recorded on 01.06.2018 whereas notice u/s 148 of the Act is dated on 27.03.2018. Therefore, there is violation of provisions of Section 148(2) of the Act. He stated that notice u/s 148 has not been issued on 27.03.2018. He further stated that copy of approval u/s 151 of the Act has not been provided to the appellant. 6. On the other hand, Learned CIT-DR for the Revenue relied on the order of Ld.CIT(A) and argued that the AO has initiated the reassessment proceedings based on credible information. The reasons were recorded on 19.03.2018 which is clear from page-7 of the paper book. Approval was 6 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha granted on 23.03.2018 by the Ld.CIT-2, Surat. The AO has followed the due procedure of law and issued the notice u/s 148 of the Act after receiving sanction u/s 151 of the Act from the Competent Authority under the Act. The AO has also passed order disposing off objections against re-opening of assessment vide order dated 19.12.2018. 7. We have heard the rival submissions and perused the materials on record. We have also called for the original records from the AO and carefully gone through it. The reasons for reopening are at pages 5 to 7 of the paper book filed by appellant. The AO, Shri Anil V. Viramama, ITO-2(3)(8), Surat has signed it on 19.03.2018. It is noted that the “date of providing the reasons” for reopening to the assessee by AO was on 01.06.2018 as per page-53 of the paper book. The date of recording reasons was 19.03.2018. Pages 54 is continuation of the reasons recorded by the AO. Therefore, absence of date at page-53 of the paper book is not fatal because in the 2 nd page, (i.e., page 7 of paper book) date has been duly written by the AO. The same is also clear from the original assessment record of AO i.e., the date was 19.03.2018. Even the reply u/s 7(1) of the Right to Information Act also mentioned about the same reasons which are at pages 5 to 7 of the paper book. During the course of hearing, the Bench had asked the Ld.CIT-DR to submit letters of approval issued by the Ld.PCIT or the Competent Authority for reopening u/s 147 of the Act. He has submitted the same and forwarded copies to the assessee. We have perused the same and relevant pages of the paper book. We have also 7 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha verified it from the original record of AO. The satisfaction of the supervisory authority u/s 151 of the Act is at page 5 of the paper book and page 4 of the assessment record. It is seen from papers given by Ld.CIT-DR that the Addl.CIT has sanctioned issuance of notice u/s 148 of the Act by stating as under: Form for recording the reasons for initiating proceedings u/s 148 of the Income tax Act, 1961 and obtaining the approval of the Pr.Commissioner of Income Tax, Surat-2, u/s 151(1) of the Income Tax Act. 1 Name & address of the assessee Sh.Rohit Lodha 315-New DTC, Hat Faliya, Haripura, Surat 2 Permanent Account Number ADAPL2300H 3 Status Ind. 4 District/Circle/Rang Ward-2(3)(8), Surat 5 Assessment year in respect of which it is proposed to issue notice u/s 148 2011-12 6 The quantum of income which has escaped assessment Rs.8,28,40,884/- 7 Whether the provisions of sec.147(a), or 147(b) or 147(c) are applicable or both the sections are applicable Explanation 2(b) to section 147 of the I.T.Act, 1961 8 Whether the assessment is proposed to be made for first time. If the reply is in the affirmative, pleas state: (a) whether any voluntary return has already been filed; and (b) If so, the date of filing the said return Yes. a. Yes 30.09.2011 9 If the answer to item 8 is in the negative, please state: (a) The income originally assessed (b) Whether it is a case of under assessment, assessment at too low rate, assessment which has been made the subject of excessive relief or allowing of excessive loss or depreciation. a. N/A b. N/A 10 Whether the provisions of sec.150(1) are applicable. If the reply is in the affirmative, the relevant facts may be stated against item No11 and it may also be brought out that the provision of sec.150(2) would not stand in the way of initiating proceedings u/s 147 of the I.T Act, 1961 N/A 11 Reasons for the belief that income has escaped assessment As per Annexure-B Date 19.03.2019 Yours faithfully, Sd/- Anil V Viramgama 19.3.18 (Anil V.Viramgama) Income Tax Officer Ward-2(3)(8), Surat 12 Whether the Additional Commissioner of Income Tax, Range-2(3), Surat is satisfied with the reasons recorded by the ITO,Ward-2(3)(8), Surat that it is a fit case for issue of notice u/s 148 of the I.T.Act, 1961 I have examined material on records in view of merits of the facts, I am satisfied with the reasons recorded by AO for issuance of notice u/s 148 of the Act. Date: Sd/-S.R.Meena Joint.Commissioner of Income Tax, Range-2(3), Surat 13 Whether the Pr. Commissioner of Income Tax is satisfied on the reasons recorded by the 8 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha Assessing Office that it is a fit case for issue of notice. Yes, I am satisfied with the reasons recorded by the AO that it is a fit case for the issue of notice u/s 148 of the I.T.Act. Sd/- Anand Kumar (Anand Kumar) Pr.Commissioner of Income-tax-2, SURAT Annexure-B Reason for Reopening – where no regular assessment made 1 Name of the Assessee: : Sh. Rohit Lodha, Prop. Mother exports 315-New DTC, Hat Faliya, Haripura, Surat 2 PAN of the Assessee: : ADAPL2300H 3 Assessment Year: 2012-13 4 Details of the Assessing Officer having jurisdiction over the : Ward-2(3)(8), Surat Reasons for reopening of the assessment in case of Sh. Rohit Lodha, for A.Y 2012-13 u/s 147 of the Act. 1. Brief details of the assessee: (a) Nature of business activity: The assessee filed his return of income for AY 2012-13 on 25.11.2012. The assessee was engaged in the business of import, export, trading in all kinds of diamonds. (b) Details of previous filing of ROI/processing and scrutiny: Sr.No A.Y. Date of filing ROI Date of processing Whether selected for scrutiny/re-open 1 2012-13 09.09.2012 25.11.2012 No 2 2011-12 30.09.2011 09.11.2011 No 3 2010-11 12.05.2011 20.01.2012 No 2. Brief details of information collected / received by the AO: As per information was received from the DIT(Inv.)-II, Mumbai, a search & seizure action under sectin132 of the I T Act, 1961 was conducted on 03.10.2013 by DDIT(Inv.) Unit IX(2), Mumbai on the group concerns of Shri Bhanwarlal Jain. During the course of search proceedings as well as post search investigation, it was found that Shri Bhanwarlal Jain along with his sons Shri Rajesh Bhanwarlal Jain and Shri Manish Bhanwarlal Jain were operating and managing 70 Benami concerns in the name of their employees through which they provided accommodation entries of unsecured loans and bogus purchase to various beneficiaries. As a result of search and post search investigation, it was found the assessee was one of the beneficiaries of non- genuine transactions and found to have made bogus entries to the tune of Rs.4,10,30,197/- with the group concerns of Bhanwarlal Jain during the FY 2011-12. 3 & 4 Analysis of information collected / received & Enquiries made by the AO as sequel to information collected / received: 9 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha Information has been analysed and consciously considered. The database of this office/available case records has also been perused. At the same time, the information so received is also found to be from a reliable source, specific and directly relevant to assessee’s case. It comes to surface that impugned assessee has obtained accommodation entries of Rs.4,10,30,197/- from Merredian Jwellery Pvt. Ltd., identified as paper concerns by Shri Bhanwarlal Jain and Shri Manish Bhanwarlal in their sworn on statement. No actual delivery or movement of goods has taken place. In view of such specific and pointing discovery of investigation, there is a clear case of escapement of income in the hands of the assessee. 5 & 6. Findings of the AO & basis of forming reason to believe and details of escapement of income:- In this case, specific information was received from Investigation Wing, Mumbai which is the internal part of the Department that search operation was carried out in the case of Shri Bhanwarlal Jain Group on 03.10.2013. the key person of the group, Shri Bhanwarlal Jain in the statement recorded u/s 132(4) of the Act, explained the modus operandi of the group. Shri Bhanwarlal Jain, Key person of the group, has admitted, in his sworn statement recorded during the course of search operation that he and his group were engaged in fraudulent billing activities of bogus purchase and in giving accommodation entries to various parties. The entire bogus nature of the transaction has been admitted by Bhanwarlal Jain in his statement recorded under section 132(4) of the I.T. Act. In the statement, Shri Bhanwarlal Jain has also submitted list of 70 benami concerns of Bhanwarlal Jain and Family. According to the evidence gathered, it has been ascertained that, the assessee has taken accommodation entries to the tune of Rs.4,10,30,197/- from M/s Merredian Jwellery Pvt. Ltd. a paper concern managed and controlled by the Shri Bhanwarlall Jain or his associates. Therefore, I have reason to believe that an amount / income of Rs.4,10,30,197/- has escaped assessment for AY 2012-13 within the meaning of section 147 of the IT Act, 1961. It is therefore, necessary to initiate action u/s 147 of the I.T Act, 1961. Accordingly, it is a fit case for reopening under clause (b) of Explanation 2 to Section 147 of the Income Tax Act and for issuance of notice u/s 148 of the IT Act. 7. Escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India: Not applicable 8. Applicability of the provisions of section 147 / 151 to the facts of the case: In this case a return of income was filed for the year under consideration but no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above (refer paragraphs 5 & 6) 10 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha It is pertinent to mentioned here that in this case the assessee has filed return of income for the year under consideration. In view of the above, the provisions of clause (b) of Explanation 2 to Section 17 are applicable to fact of this case and the assessment year under consideration in deemed to be case where income chargeable to tax has escapement. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 is being obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act. Sd/- Anil V. Viramgama Anil V.Viramgama Income Tax Officer, Ward-2(3)(8), Surat Telephone No.:(0261)2780434 Email:surat.ito2.3.8@icometax.gov.in” 7.1 It is clear from the facts narrated above that reasons for reopening was recorded on 19.03.2018 whereas the sanction was subsequently given by the PCIT, Surat-2 on 23.03.2018. Therefore, the reliance placed by the Ld. AR for the appellant in the case of Rajoo Engineers Ltd. vs. DCIT in Special Civil Application NO.5773 of 1999 is not applicable in the present case. In that case, the mandatory requirement of recording reasons u/s 148(2) of the Act before issuance of notice had not been complied with. However, in the present case, the AO has recorded reasons for reopening the assessment on 19.03.2018, which is prior to the sanction u/s 151 of the Act dated 23.03.2018. Notice u/s 148 of the Act was issued on 27.03.2018. The last date for issue of notice for AY 2011-12 was 31.03.2018. Hence, the issue of notice was well within the time. The AO has also mentioned in his assessment order that notice u/s 148 with prior approval was issued on 27.03.2018. This issue was also agitated before the Ld.CIT(A) and the Ld.CIT(A) after detailed discussion has dismissed 11 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha the grounds, which is at page-18 of his order. The same is reproduced for ready reference: “6.2.2 Ground No.2: Re-opening is bad in law: The appellant challenged the assumption of jurisdiction u/s 148 of the Act. Further, the appellant stated that the assessing office re opened the case solely on the basis of information received from the Investigation Wing without causing any independent enquiry by himself and hence he had no reason to believe himself that income chargeable to ta has escaped assessment. It has to be decided whether the notice issued u/s 148 of the Act was issued as per the section 148 of the Income tax act or not? The appellant filed his return of income for AY 2011-12 on 23.09.2011 declaring total income of Rs.216350 and the same was processed u/s 143(1) on 09.11.2011. The case was not selected for regular scrutiny. On receipt of information from the Investigation Wing, Mumbai that the appellant had taken accommodation entry from entry operators, the assessing officer issued notice u/s 148 after recording the reasons. In response to noticed u/s 148 dated 2903.2018, the appellant filed return of income on 25.04.2018 and filed objections for reopening on 12.06.2018 and asked for the reasons of reopening. The assessing officer sent a copy of the same to the appellant on 01.07.2018. On objections raised by the appellant, the assessing officer disposed such objections against reopening by passing as an order. These facts shows that the AO was fair and just in his approach and the assessing office has rightly followed the procedure as per the income act and procedures laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Limited. The assessing officer received the copy of statements recorded u/s 132(4) of the Act from the deponent, who is the entry operator and the entry operator admitted that bills were issued without the actual movements of goods, along with details of beneficiaries from the Investigation Wing, Mumba. Such material proves that the appellant also one among the beneficiaries. Hence, the tangible material in possession of the Assessing Office, before recording reason, was sufficient and valid enough to believe that income chargeable to ta had escaped income. The i9ncrimianting materials seized by the Investigation Wing, implicating the appellant, 12 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha was a prime facie proof to form the satisfaction by Assessing Officer and it need not be a conclusive proof. Hence, the arguments of appellant dos not have force to conclude that the issue of notice u/s 148 of the Act was bad in law particularly in view of the fact that the assessing office has followed the procedures laid down by the Hon’ble Supreme Court in reopening of cases. Hence this ground is dismissed.” After carefully considering facts of the case, rival submissions including paper book filed by Ld.AR of the assessee and the original assessment records of the AO, we find that the AO has duly followed the procedure mandated in the Income-tax Act, 1961 and the procedure laid down by Hon’ble Supreme Court in case of GKN Driveshofts (India) Ltd. (supra) and hence, we do not find any infirmity in the order of Ld.CIT(A). 7.2 Regarding the merits of the reasons for reopening, it may be stated that similar addition had come up for consideration before this Tribunal in the case of Sunilkumar Parasmai Jain in ITA Nos. 750 & 874/SRT/2023 for A.Y 2010- 11 dated 06.05.2024. In the said case, the grounds of appellant were dismissed by holding as under: “10.1 We have heard the submission of both parties, perused the material on record and duly considered facts of the case in the light of the applicable legal position. We have also carefully deliberated on all the decisions relied upon by both the sides. We have also gone through the reasons recorded by the AO and having gone through the entire gamut of facts and circumstances, we are of considered opinion that not only there existed new information with the AO from the credible sources, but also that he has applied has mind and recorded the conclusion that the purchases claimed were non-genuine and therefore bogus, clearly meaning that what was disclosed was not true and false. The Hon'ble Supreme Court in the case of Phul Chand Bajrang Lal and another vs. ITO 203 ITR 456, was considering the question of reassessment beyond the period of four years in the case of an assessee firm; and had held as under: “Acquiring fresh information specific in nature and reliable in character, relating to the concluded assessment which goes to expose the falsity of the statement made by the assessee at the time of original assessment is different from declaring fresh 13 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha inference from the same facts and materials which were available with the ITO at the time of original assessment proceedings. The two situations are distinct and different. Thus, where the transaction itself on the basis of subsequent information, is found to be a bogus transaction, the mere disclosure of fact that transaction at the time of original assessment proceedings, cannot be said to be disclosure of “true” and “false” facts in the case and the ITO would have the jurisdiction to reopen concluded assessment in such a case.” 10.2 It would also be apt to quote the following observations of the Hon’ble Apex Court in the case of Phul Chand Bajrang Lal (supra), which reads as under: " We have to look to the purpose and intent of the provisions. One of the purposes of Section 147 appears to us to be, to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would, be travesty of justice to allow the assessee that latitude." 10.3 A three Judges bench of Hon'ble Apex Court in the case of A.L.A. Firm v. CIT, 189 (1991) ITR 285, after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has, in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe that income chargeable to tax had escaped assessment. It was held that even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied. As observed earlier by us, not only there existed new information with the AO from the credible sources, but also he had applied his mind and recorded the conclusion that the purchases of Rs.10,73,43,555/- claimed were non-genuine and therefore bogus, clearly meaning that what was disclosed was not true and false. The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening was validly initiated. We also find that the assessee’s appeal is squarely covered by the order of this Tribunal in the case of Pankaj K. Choudhary, in ITA No.1152/AHD/2017 for AY 2007-08 dated 27.09.2021, wherein the Tribunal held as follows: “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 14 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha 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 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.” 10.4 The facts of the present case are similar to the facts of the above case. There is no reason as to why the decision of the above case should not be applicable to the case of the appellant. In above case, the Co-ordinate Bench of this Tribunal relied upon the decisions of Hon’ble jurisdictional High Court in the case of Peass Industrial Engineers (P) Ltd vs. DCIT and Pushpak Bullion (P) Ltd. vs. DCIT (supra). Therefore, we dismiss the ground Nos.1 & 2 raised by the assessee in ITA No.874/SRT/2023 (assessee`s appeal).” The facts of the present case are similar to the facts of the above case(supra). The Tribunal dismissed the grounds of assessee by relying upon the decisions of Hon’ble jurisdictional High Court in cases of Peass Industrial Engineers (P) Ltd. vs. DCIT (supra) and Pushpak Bullion (P) Ltd. vs. DCIT (supra) Hence, following the reasons given above and the decision cited supra, the grounds at Sl. No. 1 to 3 are dismissed. 15 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha 8. Regarding merits of the addition, the Ld. AR of the assessee has stated that the books of account have not been rejected and therefore there is no question of making any addition. He also submitted that the AO did not provide complete statement of Bhanwarlal Jain as well as the enquiry made with the disputed parties and no cross-examination whatsoever was allowed even though request was made by the assessee. The Ld. AR also submitted that the conformation of all disputed parties for purchase value of Rs.8,28,40,884/- have been furnished and payment for these purchases were made through banking channel. There cannot be any sales without purchases and hence the impugned addition is liable to be deleted. He also submitted that Ld.CIT(A) erred in not considering the facts of the case and mechanically sustained addition made by AO. Therefore, the addition deserves to be deleted. 9. On the other hand, ld CIT-DR strongly relied on the orders of lower authorities. He submitted that the AO has received credible information from the Investigation Wing, Mumbai regarding elaborate and systematic scheme adopted by Shri Bhanwarlal Jain group to provide accommodation entries in respect of bogus purchases and unsecured loans. Subsequent to search and seizure operation carried out u/s 132 of the Act, the factum of bogus purchases from the Bhanwarlal Group and its associate concerns have been clearly established. Therefore, the Ld.CIT(A) has rightly confirmed the entire addition of Rs.8,28,40,884/- made by the AO as bogus purchases. 16 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha 10. We have considered submission of both parties and have gone through the orders of lower authorities. We have also deliberated on the case laws relied upon by the parties. We find that adequate opportunity of hearing was given to assessee by the AO and Ld.CIT(A); however, there was no response from the assessee. We find that similar issues were before the Co-ordinate Bench of this Tribunal in the case of Pankaj K. Choudhary and others (supra). The Tribunal decided a bunch of 14 appeals consisting of appeals and cross- appeals by Revenue as well as different assessees by a consolidated order dated 27.09.2021. The “lead” case in these appeals and cross-appeals was the case of Pankaj K. Choudhary vs. ITO(3)(1)(5), Surat in ITA No.1379/AHD/2017 (AY 2007-08). After detailed discussion of the case and the legal position as well as precedents on the subject issue, the Tribunal sustained addition @ 6% of the bogus purchases. The facts of the present appeal are similar and hence, it is squarely covered by the order of the Tribunal in the case of Pankaj K. Choudhary (supra). The relevant part of the order is reproduced hereunder for ready reference and appreciation: “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 17 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha 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 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.” 10.1 It is thus clear from above that facts are similar in both cases. Moreover, since there is no change in facts and law and since Revenue is unable to 18 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha produce any material to controvert the aforesaid findings of the Co-ordinate Bench (supra), we find no reason to deviate from the decision of Co-ordinate Bench. Therefore, following the order of Co-ordinate Bench in the case of Pankaj K. Chaudhary (supra), we restrict the disallowance to 6% of the disputed bogus purchase of Rs.8,28,40,884/-. The grounds are partly allowed. 11. In the result, appeal filed by the assessee in ITA No.853/SRT/2023) is partly allowed. Coming to ITA No.854/SRT/2023 (AY.12-13) 12. As recorded above, the assessee in this appeal has raised similar grounds of appeal as raised in the appeal for AY 2011-12, which we have partly allowed. Thus, following the principle of consistency, assessee’s appeal is also partly allowed with similar observation as in assessee’s appeal ITA No.853/SRT/2023 for assessment year 2011-12. In other words, grounds relating to validity of reassessment u/s 147 of the Act is dismissed and grounds on merit of addition are partly allowed. Hence, this appeal of assessee is partly allowed. 13. In combined result, both appeals of the assessee are partly allowed. Registry is directed to place one copy of this order in all appeals folder / case file(s). Order is pronounced on 02/07/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER स ू रत /Surat Ǒदनांक/ Date: 02/07/2024 19 ITA No.853- 854/SRT/2023 /AYs.11-12 & 12-13 Rohit Lodha Dkp Outsourcing Sr.PS 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
