PRINCIPAL COMMISSIONER INCOME TAX, SURAT-2 V. PANKAJ KANWARLAL JAIN HUF

R/TAX APPEAL NO. 574 of 2022

AI Insights

The case revolves around a dispute concerning alleged bogus purchases amounting to Rs. 8,01,93,887 made by Pankaj Kanwarlal Jain HUF during the Assessment Year 2013-2014. The Income Tax Department, following search and survey operations on entities controlled by Rajendra Jain and Sanjay Chaudhary, claimed that the assessee received bogus bills from these entities. The Assessing Officer added this amount to the assessee's income, which was upheld by the Commissioner of Income Tax (Appeals) but later reversed by the Income Tax Appellate Tribunal. The Tribunal found that the material used against the assessee was collected from unrelated cases and that the assessee had provided sufficient documentary evidence to substantiate the genuineness of the purchases. The High Court, in dismissing the appeal, noted the similarity of this case with a precedent involving the same group and similar facts, where the court had ruled in favor of the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 368911 (HC-GUJARAT)
• Appeal Type: High Court cases
• Pronouncement Date: 07-03-2023
• Appeal Filed By: Department
• Assessment Year: 2013-2014
• Other Referred Cases: M/s Bhatia Diamonds Pvt. Ltd. V/S ITO, Wd. 4(4), New Delhi, M/s Shantai Exim Ltd., Surat, M/s. M.K.Proteins Limited, M/s. Surya Impex
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: NIKUNT RAVAL; KALPANA RAVAL
• Keywords: Accommodation entries; Bogus purchases; Income tax appellate tribunal; Search and survey operations
• Section: 143(3); 145(3); 260A

Judgement Text

"C/TAXAP/574/2022 ORDER DATED: 07/03/2023 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 574 of 2022 ========================================================== PRINCIPAL COMMISSIONER INCOME TAX-2, SURAT Versus PANKAJ KANWARLAL JAIN HUF ========================================================== Appearance: MR. NIKUNT RAVAL WITH MRS KALPANAK RAVAL(1046) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE NIRAL R. MEHTA Date : 07/03/2023 ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned advocate Mr. Nikunt Raval with learned advocate Ms. Kalpana Raval for the appellant. 2. The present Tax Appeal filed under section 260A of the Income Tax Act, 1961, arises out of order dated 27.8.2019 of the Income Tax Appellate Tribunal, Surat in Income Tax Appeal No. 269 of 2017 in respect of Assessment Year 2013-2014. 3. Noticing the relevant facts, Rajendra Jain, Sanjay Chaudhary and his group were subjected to search and survey operations by the investigation wing, Mumbai on 1.3.2013. According to the department, evidences were collected during the search and operation. It was suggested that said parties were engaged in providing accommodation entries to various persons. It came to notice, as per the case of the Page 1 of 6 Downloaded on : Wed Jun 05 12:36:06 IST 2024 2023:GUJHC:33240-DB NEUTRAL CITATION C/TAXAP/574/2022 ORDER DATED: 07/03/2023 department, that during the period under consideration, the respondent assessee had received bogus bills to the tune of Rs. 8,01,93,887/- in aggregate from M/s. Mayank Impex and M/s. Parshwanath Gems Pvt. Ltd. They were the entities controlled by the said Rajendra Jain and Sanjay Chaudhary group. The assessee found to have been indulged in bogus purchases by providing accommodation entries of Rs. 8,01,93,887/-. 3.1 The Assessing Officer made additions of the said amount in the total income of the assessee for the year under consideration after rejecting the books of account under section 145(3) of the Act adding the aforesaid amount in the total income by order dated 23.3.2016 passed under section 143(3) of the Act. 3.2 The assessee preferred appeal before the Commissioner of Income Tax (Appeals), which was dismissed. Thereafter, the assessee approached the Income Tax Appellate Tribunal against the conformation of addition by the appellate Commissioner. The appeal of the assessee was allowed by the Tribunal. 4. In this appeal preferred against the order of the appellate Tribunal the department proposed the following questions, claiming to be arising as substantial questions of law, “1. Whether on the facts and in law, the ITAT was justified in allowing the appeal of the Assessee and deleting the additions so made on account of bogus purchases despite of the fact that the Assessing Officer has made the addition of Rs. 8,01,93,887/- on account of bogus purchases after proper verification and on the basis of incriminating evidences available with the Department as a result of the Search Action? Page 2 of 6 Downloaded on : Wed Jun 05 12:36:06 IST 2024 2023:GUJHC:33240-DB NEUTRAL CITATION C/TAXAP/574/2022 ORDER DATED: 07/03/2023 2. Whether on the facts, the ITAT was justified on relying upon the case of M/s Bhatia Diamonds Pvt. Ltd. V/S ITO, Wd. 4(4), New Delhi which is different and also where department has not accepted the decision, though no further appeal filed on account of low tax effect? 3. Whether on the facts, the Hon'ble ITAT was justified on relying upon the case of M/s Shantai Exim Ltd., Surat as the facts of the case of the Assessee are different and that in the case of the Assessee, the Department had incriminating evidences as a result of the Search Action and Shri Rajendra Jain, Sanjay Chaudhary Group has admitted to provide accommodation bills to the beneficiaries and the Assessee is one of them? 4. Whether on the facts, the ITAT has erred in observing that the Assessee has transacted with Shri Bhanwarlal Jain Group whereas, the Assessee has entered into transactions with Shri Rajendra Jain, Sanjay Chaudhary Group and has availed accommodation entry?” 5. Various contentions were raised and canvassed before this court by learned advocate for the appellant inter alia that the bogus purchases to the extent aforesaid was made using accommodation entries provided by said Rajendra Jain and Sanjay Chaudhary group. It was submitted that the Tribunal committed error in deleting the addition. It was submitted that the findings by the Tribunal relating to the alleged transactions with the said group was erroneous. 5.1 The addition made by the Assessing Officer which were interfered by the appellate commissioner, was found to be erroneous on facts and in law by the Tribunal. It noted that the Mayank Impex with whom the transaction to the tune of Rs. 5,46,89,807/- and Parshwanath Gems Pvt. Ltd. with whom the transaction of Rs. 2,55,04,000/- were made, were the concerns associated with the Bhanwarlal Jain group. The Tribunal expressed its view by making the following observations and recording findings, Page 3 of 6 Downloaded on : Wed Jun 05 12:36:06 IST 2024 2023:GUJHC:33240-DB NEUTRAL CITATION C/TAXAP/574/2022 ORDER DATED: 07/03/2023 “……. In the instant case, the A.O. simply relied upon the material collected during the course of search in the case of Shri Bhanwarlal Jain Group of cases for providing bogus entries to different persons/concerns including the assessee. The material collected during the course of search in their cases and statements recorded by Investigation Wing have been relied upon against the assessee for making the addition against the assessee. However, it is a fact that all the statements recorded by Investigation Wing at Mumbai and material collected in the entities of Shri Bhanwarlal Jain Group of cases have not been provided to assessee for rebuttal and no right of cross-examination have been given to assessee to cross-examine such statements. It is well settled Law that if any material is collected at the back of the assessee or statement is recorded, such material or statement cannot be read in evidence against the assessee unless these adverse material is supplied to assessee and right of cross-examination have been given to the assessee.” 5.2 It was further observed by the Tribunal, “…... such material found during the course of search in the entities of Shri Bhanwarlal Jain Group of cases cannot be used in evidence against the assessee. The reliance of the authorities below of such material is of no use and basis. The other material available on record are the documentary evidences filed by assessee which are copies of the purchase invoices, stock register reflecting purchase and sales, bank statements highlighting payments made by assessee to these parties through banking channel, copy of bank statements of both seller parties along with their balance-sheet confirmations and copy of acknowledgment of filing of the income tax returns.” 5.3 The Tribunal further analysed to observe that the Assessing Officer did not make any inquiry in respect of the documentary evidences filed by the assessee and did not consider the explanation furnished by the assessee. As the evidences filed by the assessee were not doubted by the Assessing Officer, it was observed, the Assessing Officer could not have recorded the adverse findings to treat the purchases as bogus. Page 4 of 6 Downloaded on : Wed Jun 05 12:36:06 IST 2024 2023:GUJHC:33240-DB NEUTRAL CITATION C/TAXAP/574/2022 ORDER DATED: 07/03/2023 5.4 The assessee produced complete details before the authorities in which no deficiency was pointed out. The Tribunal took correct view that the assessee need not prove the source of the source. It was also noted by the Tribunal that the Assessing Officer analysed KYC documents, all the bank statement of Damor family and their bank statements and nothing adverse was found against them or against the assessee. 5.5 The Tribunal proceeded to record following findings, “….The assessee also established common practice in Textile Sector in Surat for supply of goods at door step of consumer. Thus, the initial burden upon assessee to prove the genuine purchases have been discharged by the assessee. The assessee has fully discharged its onus of providing the purchases by giving names, addresses, confirmation, PAN, bills and invoices, details of payment by account payee cheques, ITRs and Audit reports of its suppliers. Merely because further suppliers to Damor family did not respond to the notice of the assessing officer is no ground to reject the explanation of asessee. Since in the case of the assessee no incriminating material was found to prove bogus purchases, therefore, the decision in the case of M/s. M.K.Proteins Limited (supra)n would not apply.” 5.6 Finally the Tribunal took the view that entire addition was entirely unjustified and it was not a fit cacse where the gross profit @ 5% can be applied for sustaining the part addition. Order passed by the subordinate income tax authorities, the findings recorded by the income tax appellate tribunal and the consequential setting aside of the order of the authorities were based on proper analysis of facts and material before it and could be said to be eminently reasonable and legal. They do not warrant interference. . 6. The another weighing aspect is that the Tax Appeal No. 674 of Page 5 of 6 Downloaded on : Wed Jun 05 12:36:06 IST 2024 2023:GUJHC:33240-DB NEUTRAL CITATION C/TAXAP/574/2022 ORDER DATED: 07/03/2023 2022 in Principal Commissioner of Income Tax 1, Surat vs. M/s. Surya Impex which came to be decided by the co-ordinate Bench on 16.1.2023 dealt with the very issue of accommodation entries provided by Bhanwarlal Jain Group. The group involved in the said case is the same group who is saddled with allegations of providing accommodation entry to the assesse. In M/s. Surya Impex (supra) the court held in favour of the assessee. The questions of law involved in the said case were of the same nature and were in the context of similar facts involving the same group. 7. For all the above reasons, substantial questions of law proposed by the appellant in this appeal stands already answered. No question of law much less any substantial questions of law arise in the facts of the present case. No other substantial question of law arises. The appeal is meritless. It is summarily dismissed. (N.V.ANJARIA, J) (NIRAL R. MEHTA,J) C.M. JOSHI Page 6 of 6 Downloaded on : Wed Jun 05 12:36:06 IST 2024 2023:GUJHC:33240-DB NEUTRAL CITATION "