Dinesh Jain Prop. of Surya Diam, Surat V. Assessing Officer, Income Tax Officer , Ward - 2(3)(7), Surat

ITA 879/SRT/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2322 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 30-04-2024
• Assessment Year: 2008-2009
• Appeal Filed On: 18-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMAN K SHAH
• Keywords: Bogus purchase; Capital asset converted into stock in trade; Search and seizure; Rule of consistency; Accommodation entries; Competent authority; Reason to believe; Reassessment proceedings
• Section: 147; 145; 132; 271(1)(c); 69C; 143(3); 250

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.878 & 879/SRT/2023 AYs: (2007-08 & 2008-09) (Hybrid Hearing) Dinesh Jain Prop. of Surya Diam 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)(7), Surat, èथायीलेखासं./जीआइआरसं./PAN/GIR No: AEHPJ 9359 Q (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 Ritesh Mishra, CIT(DR) & Shri Vinod Kumar, Sr-DR सुनवाई की तारीख/Date of Hearing 01/05/2024 उद्घोषणा की तारीख/Date of Pronouncement 16/05/2024 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) (in short, “CIT(A) / National Faceless Appeal Centre, Delhi (in short, ‘CIT(A), vide separate orders both dated 29.08.2023 for assessment years (AYs) 2007-08 & 2008-09. 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 2 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain consolidated order for sake of convenience and brevity. Grounds of appeals raised by the assessee in ITA No.878/SRT/2023 for AY.2007-08, 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 copy of the reason recorded is dated 03-06-2014 whereas, the 148 notice is dated 28-03- 2014 and therefore, there is clear violation of the provision of section 148(2) and such the same is liable to be quashed. 3. The Learned AO has erred in not appreciating the fact that the so-called notice u/s 148 has not been issued on 28-03-2014 for the AY 2007-08 and therefore, the same has not been served within time-limit and as such the proceeding is bad in law. 4. The Learned AO has erred in not appreciating the fact that there is no such copy of the approval of u/s 151 has been provided and therefore, the present proceeding is bad in law and void. 5. The Learned AO has also erred in not appreciating the fact that the appellant’s books are duly audited and no such Section 145 has been applied nor the books have been rejected and therefore, there is no question of making any addition. 6. The Learned AO has erred in not appreciating the fact that the Assessing Office 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 sked for and therefore, the present proceeding is liable to be quashed. 7. 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. 8. The Learned AO has erred in not appreciating the fact that the assessee has provided complete confirmation of all the disputed parties for the purchase value of Rs.38,50,63,500/- 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. 3 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain 9. The Learned AO has erred in not appreciating the fact that the total purchase is for the amount of Rs.1,62,28,59,597/- and the sales is Rs.1,63,90,63,097/- and there cannot be any sales without purchase and therefore, the present addition is liable to be deleted. 10. 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. 11. The Learned NFAC / CIT(A) has also erred in not considering complete submission, uploaded on 14-04-2021 along with the complete paper book placed on record and therefore, there is clear non-application of mind to the document placed on record and therefore, the addition made is required to be deleted. 12 The Learned NFAC / CIT(A) has also erred in not passing speaking order finding as per his order page 34-35 and therefore, the addition is required to be deleted.” 2. Perusal of record shows that there is delay of 5 days each in filing appeal before Tribunal. The assessee has filed an affidavit giving reasons for delay in filing of appeal before the Tribunal. In the affidavit, it has been stated that the local advocate / CA was drafting the matter on behalf of the assessee. The assessee wanted to engage Chartered Accountant for filling appeal either from Surat or from Ahmedabad. As discussion with the concerned CA was going-on there was a delay in filing in all the appeals. The Ld. Authorized Representative (Ld.AR) has requested to condone the delay in filing both appeals in the interest of justice. The Ld.AR submitted that delay is only 5 days each and it was neither deliberate nor intentional. 3. On the other hand, Learned Commissioner of Income-Tax – Departmental Representative (Ld.CIT-DR) for the Revenue opposed the prayer of the assessee for condonation of delay. 4 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain 4. We have considered the reasons given by the Ld. AR and perused the accompanied documents along with the affidavit. We find that the delay of 5 days each in filing both appeals were not deliberate and intentional on the part of assesse. Therefore, considering the fact that assessee is not going to benefitted by filing appeal belatedly and further considering the fact that when technical consideration and cause of substantial justice are pitted against each other, the cause of substantial justice may be preferred, the delay in filing the appeal is condoned. Since we have condoned the delay in filing “lead” appeal, similar delay in filing remaining appeal is condoned. 5. The facts of the case in brief are that the assessee is engaged in the business of import, export and trading of cut polished and rough diamonds. The appellant filed its return of income for AY.2007-08 on 15.10.2007 declaring total income of Rs.1,60,474/-. On the basis of information received from Investigation Wing, Mumbai, the case was reopened u/s 147 of the Act. The fact leading to the reopening was that search and seizure action was carried out by the Investigation Wing, Mumbai in the case of Bhanwarlal Jain group on 03.10.2013 as a result of which various evidences were found which conclusively proved that Bhanwarlal Jain group were 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.38,50,63,500/- from three parties 5 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain of Bhanwarlal Jain group. The AO has issued notice u/s 148 with prior approval from higher authorities. He had also handed over copies of the reasons for reopening to the assessee. The objection against re-assessment proceedings was disposed of by order dated 16.02.2015, which was duly served upon the assessee. In view of the above, show-cause notice was issued to the assessee on 19.02.2015 to explain the bogus purchase of Rs.38,50,63,500/-. The assessee replied vide letter dated 24.02.2015, which was not found acceptable by the AO. The assessee also did not furnish any reply before the date of the order passed by the AO u/s 143(3) r.w.s. 147 dated 26.02.2015. Therefore, the impugned amount Rs.38,50,63,500/- was added to the total income of the assessee. The AO was also initiated penalty proceedings u/s 271(1)(c) of the Act. 6. Aggrieved by this order of the AO, the assessee filed appeal before Ld.CIT(A). The Ld.CIT(A) has decided both the validity of re-assessment as well as the merits 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 AO initiated the re-assessment proceedings after following the due procedure and he has also obtained approval from the concerned authority. Hence, grounds of assessee was dismissed. 7. Regarding merits of addition, the Ld.CIT(A) has summarised the reasons of reopening at page-10 of his order passed u/s 250 of the Act. The objection of the appellant has also been incorporated in his order. The Ld.CIT(A) has 6 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain dismissed the grounds of appeal on merit of the addition by observing that he fully agreed with the observation and decision of the AO inasmuch as the AO is able to establish and draw a legal inference of bogus purchases depending on the circumstantial evidence. He further held that the appellant was not able to establish the purchase transaction as genuine despite adequate opportunity given to him. The Ld. CIT(A) further held that the contention of the appellant that the decision of the AO is based on surmises only is not acceptable. He upheld the decision of the AO to treat bogus purchase as unexplained expenditure u/s 69C of the Act. 8. Grounds No.1 to 4 are interconnected 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 28.03.2014 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 03.06.2014 whereas notice u/s 148 of the Act is dated on 28.03.2014. 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 28.03.2014. He further stated that copy of approval u/s 151 of the Act has not been provided to the appellant. 9. 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. He has followed the due 7 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain 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. 10. We have heard the rival submissions and perused the materials on record. The reasons for reopening are at pages 24 to 26 of the paper book filed by appellant. It is noted that the date of reopening was 26.03.2014 as per page-24 of the paper book. Pages 25 and 26 are continuation of the reasons recorded by the AO. Therefore absence of date at page-26 of the paper book is not fatal because in the first page, (i.e., page 24 of paper book) date has been duly written by the AO. Even the reply u/s 7(1) of the Right to Information Act also mentioned about the same reasons which are at pages 24 to 26 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. The satisfaction of the supervisory authority u/s 151 of the Act at page 26E of the paper book. 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: “Reg: Shri Diniesh Tarachand Jain[PAN:AEHPJ9359Q] A.Y.2007-08 Reference to Sr.No.12 of form for recording reasons for initiating proceedings under section 147 of the Income Tax Act, 1961 1 Whether the Addl. CIT is satisfied on the reasons recorded by the AO that is a fit case for issuance of notice u/s 148 of the IT Act. Yes, after perusal, I am satisfied on the reasons recorded by the AO that it is a fit case for issuance of notice u/s 148 of the IT Act. 8 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain Therefore, sanction u/s 151 of the IT Act for issuance of notice u/s 148 of the Act is given. Date: 27.03.2014 Sd/- D.V.Singh [D.V.SINGH] Addl. Commissioner of Income-Tax, Range-6, Surat” 10.1 It is clear from the facts narrated above that reasons for reopening was recorded on 26.03.2014 whereas the sanction was subsequently given by the Addl.CIT, Range-6, Surat on 27.03.2014. 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 26.03.2014, which is prior to the sanction u/s 151 of the Act dated 27.03.2014. Therefore, grounds Nos.1 to 4 raised by the assessee are dismissed. The AO has also mentioned in his assessment order that notice u/s 148 with prior approval was issued and served upon the assessee through RPAD and through Inspector of his charge. This issue was also agitated before the Ld.CIT(A) and the Ld.CIT(A) has dismissed the grounds which is at page-9 of his order. 10.2 Regarding the merits of 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 9 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain 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 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 10 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain 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 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) 11 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain 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). Hence, following the reasons given above and the decision cited supra, the grounds at Sl. No. 1 to 4 are dismissed. 11. 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.38,50,63,500/- have been furnished and payment for these purchases were made through banking channel. He also stated that as against sales of Rs.1,63,90,59,597/-, the total purchases were of Rs.1,62,28,59,597/- . 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 detailed submission uploaded on 14.04.2021 along with complete paper books placed on record before him. Hence, there is non-application of mind by the Ld.CIT(A). Therefore, the addition deserves to be deleted. 12 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain 12. 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 by the Bhanwarlal Group and its associates concerns have been clearly established. Therefore, the Ld.CIT(A) has rightly confirmed the entire addition of Rs.38,50,63,500/- made by the AO as bogus purchases. 13. We have considered rival submission of the 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 books have actually been rejected by AO u/s 145(2) of the Act before making the addition. 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. 13 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain 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: “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 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 14 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain 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.” 13.1 It is thus clear that facts are similar in both cases. Moreover, since there is no change in facts and law and since Revenue is unable to produce any material to controvert the aforesaid findings of the Co-ordinate Bench (supra), we find no reason to deviate from the findings 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.38,50,63,500/-. The grounds are partly allowed. 14. In the result, appeal filed by the assessee in ITA No.878/SRT/2023) is partly allowed. Coming to ITA No.879/SRT/2023 (AY.08-09) 15. As recorded above, the assessee in this appeal has raised similar grounds of appeal as raised in the appeal for AY 2007-08, 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 15 ITA No.878- 879/SRT/2023 /AYs.07-08 & 08-09 Dinesh Jain No.878/SRT/2023 for assessment year 2007-08. Hence, this appeal of assessee are also partly allowed. 16. 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 16/05/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER स ू रत /Surat Ǒदनांक/ Date: 16/05/2024 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