VINODKUMAR SUJANMAL CHAWAT JAIN, SURAT,SURAT V. INCOME TAX OFFICER, WARD-1(3)(9), SURAT, SURAT

ITA 841/SRT/2023

AI Insights

The case involves Vinodkumar Sujanmal Chawat Jain, the appellant, contesting the orders of the Commissioner of Income Tax (Appeals)-2, Surat, which confirmed the Assessing Officer's decision to reopen the assessment under Section 147 and make additions of Rs. 17,40,000 on account of alleged bogus purchases for the Assessment Year 2007-08. The appellant argued that the delay in filing the appeal was due to the negligence of his former consultant, who was embroiled in criminal cases and failed to inform the appellant about the appeal's outcome. The Tribunal found sufficient cause for the delay and condoned it, also noting that the lower authorities had not conducted independent investigations and had disallowed 100% of the purchases without disputing the sales.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 33944 (ITAT-SURAT)
• Duration Of Justice: 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-10-2024
• Assessment Year: 2007-2008
• Appeal Filed On: 04-12-2023
• Other Referred Cases: Anita Kushwaha Vs Pushpa Sudan and Oth, Mool Chandra Vs Union of India & Anr, Pathapati Subba Reddy (Died) by L.R.s and Ors. Vs Special Deputy Collector (LA), M. Papanna J Grid Co. of Orissa Vs NTPC Ltd., Rajeev Kumar Damodarprasad Bhadani & Ors. Vs. Executive Engineer and Ors., Jayvantsinh Vaghela Vs ITO, Vijay Vishin Meghani Vs DCIT, Concord of India Insurance Co. Ltd. Vs Smt. Nirmala Devi, Collector, Land Acquisition Vs Mst. Katiji, Sesh Nath Singh & Anr Vs Baidyabati Sheoraphuli Co-op Bank Ltd. & Anr, Vidya Devi Vs. State of Himachal Pradesh & Ors., Radha Krishna rai Vs Allahabad Bank & Ors., Mukesh Jesangbhai Patel Vs ITO, G.M. Geri & Sons Vs Fifth ITO, CIT(A) Vs Williamson Tea (Assam) Ltd., Vasantbhai Soni Vs State of Gujarat, CIT(A) Vs Sanmac. Motor finance Ltd., Prafulchandra Bhaichandbhai Patel Vs ITO, Pr.CIT-1, Vs M/s Surya Impex, Mayank Diamonds Pvt. Ltd. Vs ITO, ITO Vs Pankaj K Chaudhary, ITO Vs Mukesh Lalchand Jain, ITO Vs Sonu Dharmichand Bafna
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Condonation of delay; Reasonable cause; Bogus purchase; Accommodation entries; Bogus
• Section: 147; 148; 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No. 841/Srt/2023 (Assessment Year 2007-08) (Physical hearing) Vinodkumar Sujanmal Chawat Jain, D-5, Dharam Palace, Anand Mahal Road, Adajan, Surat PAN No. AEBPJ 2989 N Vs. I.T.O, Ward 1(3)(9), Surat, Room No. 509, Aayakar Bhavan, Majura Gate, Surat. Appellant/ Assessee Respondent/ Revenue Assessee represented by Shri P M Jagasheth, C.A. Department represented by Shri Mukesh Jain, Sr. DR Appeal instituted on 04/12/2023 Date of hearing 08/10/2024 Date of pronouncement 30/10/2024 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-2, Surat [in short, the ld. CIT(A)] dated 02/01/2017 for the Assessment Year (AY) 2007-08, wherein the assessee has raised following grounds of appeal: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of Assessing Officer in reopening the assessment u/s 147 of the Income Tax Act and issuing notice u/s 148 of the Income Tax Act,1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of Assessing Officer in making addition of Rs. 17,40,000/- on account of alleged bogus purchases. 3. It is therefore prayed that the above addition may please be deleted as learned Members of the Tribunal may deem it proper. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” ITA No. 841/Srt/2023 Vinodkumar Sujanmal Chawat Jain Vs ITO 2 2. At the outset of hearing, the learned Authorised Representative (ld. AR) of the assessee submits that there is delay of 2467 days in filing appeal before the Tribunal. The assessee has filed application for condonation of delay with affidavit of assessee. The ld. AR of the assessee submits that the income tax case of assessee was handled by Shri Jagdish Somani, Chartered Accountant, who appeared before the Assessing Officer as well as filed submissions before the ld. CIT(A). Shri Jagdish Somani was arrested by the Central Bureau of Investigation (CBI) on some criminal complaint filed by the Canara Bank and other Banks on the allegation of several thousand crores fraud. On the complaint of Bank, a criminal case under various sections of Indian Penal code (IPC) was registered against the Directors of various companies including of Surat best company namely Nakoda Limited. Director of said company, Jagdish Somani CA and other related person were arrested. Later on, the proceedings of Enforcement Directorate (ED) was also initiated. The said Jagdish Somani filed certain written submission against various grounds of appeal raised by the assessee. However, neither he informed the assessee about disposal of appeal nor advised for taking other action or for making further compliance before the ld. CIT(A). Physical copy of order of ld. CIT(A) dated 02/01/2017 was not received by the assessee. In the month of August, 2023, a notice of recovery dated 25/08/2023 was served upon the assessee. Copy of demand notice is filed on record. On service of demand notice, the assessee alongwith his son visited the office of said Jagdish Somani and on searching case record of assessee in his officer, copy of order of ld. CIT(A) dated 02/01/2017 was found with the said Chartered Accountant. The assessee collected case record from ITA No. 841/Srt/2023 Vinodkumar Sujanmal Chawat Jain Vs ITO 3 Jagdish Somani and contacted the present Authorised Representative in the month of November, 2023 and immediately filed appeal before the Tribunal. The ld. AR of the assessee submits that majority of time period is covered by the decision of Hon'ble Supreme Court in Suo Moto writ petition NO. 03/2020 wherein the time limit for filing appeal or taking recourse of law was extended up to 28/02/2022 and further 90 days period was also allowed. The ld. AR of the assessee submits that even if such relaxation is not allowed to the assessee, there was no intentional or deliberate delay in foiling appeal before the Tribunal. In fact, the assessee was not aware about passing of such order. It is settled law that a tax payer should not suffer due to negligence of consultant. Even in the present case, it cannot be said that consultant of assessee was negligent rather the said professional/consultant was facing criminal action and remained in jail for several years and still facing several criminal cases as well as cases of ED and other enforcement agencies. With regard to negligence of consultant, the ld. AR of the assessee relied on the following case laws:  Anita Kushwaha Vs Pushpa Sudan and Oth. Transfer Petition (C) No. 1343 of 2008 (SC)  Mool Chandra Vs Union of India & Anr Civil Appeal No. 8435-8436 of 2024 (SC)  Pathapati Subba Reddy (Died) by L.R.s and Ors. Vs Special Deputy Collector (LA) S.L.P (Civil) No. 31248 of 2018 (SC)  M. Papanna J Grid Co. of Orissa Vs NTPC Ltd. FAO No. 71 of 2002 (SC) 3. The ld. AR of the assessee by referring the decision of Hon'ble Bombay High Court in Civil Writ Petition No. 1430/2022 dated 05/01/2024 in case of Rajeev Kumar Damodarprasad Bhadani & Ors. Vs. Executive Engineer and Ors., submits that in the said case, the Hon'ble High Court has condoned the delay ITA No. 841/Srt/2023 Vinodkumar Sujanmal Chawat Jain Vs ITO 4 of 28 years on considering reasonable and plausible explanation on delay in approaching the Court for taking recourse of law. The ld. AR of the assessee submits that it is settled law that while condoning the delay, the length of delay is no material rather the reasonable explanation and bonafide is to be seen; whether there was any intentional or deliberate delay in taking recourse of law. Further when technical consideration and cause of substantial justice are kept against each other, the cause of substantial justice may be preferred. The ld. AR of the assessee submits that he is conscious of the fact that condonation of delay is a matter of judicial discretion which may be exercised judiciously and reasonably on the basis of facts and circumstances of the case. There is no limitation prescribed for exercising the judicial discretion, however, such discretion can always be exercised for doing justice with tax payer. The tax can be levied or be collected by the authorities of law. To support his submission, the ld. AR of the assessee relied upon the following case laws:  Collector, Land Acquisition Vs Mst. Katiji 1987 taxmann.com 1072 (SC)  Sesh Nath Singh & Anr Vs Baidyabati Sheoraphuli Co-op Bank Ltd. & Anr. Civil Appeal No. 9189 of 2019 (SC)  Vidya Devi Vs. State of Himachal Pradesh & Ors. Civil Appeal No. 60-61 of 2020.  Radha Krishna rai Vs Allahabad Bank & Ors. Civil appeal No. 4683 of 1999 dated 23/08/1999  Mukesh Jesangbhai Patel Vs ITO (2013) 29 taxmann.com 389 (Guj)  G.M. Geri & Sons Vs Fifth ITO (1998) 96 Taxman 19 (Mum Trib)  CIT(A) Vs Williamson Tea (Assam) Ltd. (2013) 30 taxmann.com 70 (Gauhati)  Vasantbhai Soni Vs State of Gujarat, Criminal Revision Application No. 285 of 2016 (Guj)  CIT(A) Vs Sanmac. Motor finance Ltd. (2010) 322 ITR 309 (Madras)  Prafulchandra Bhaichandbhai Patel Vs ITO ITA No. 104/Srt/2021 (Surat Trib)  Pr.CIT-1, Vs M/s Surya Impex (2023) 148 taxmann.com 154 (Guj) ITA No. 841/Srt/2023 Vinodkumar Sujanmal Chawat Jain Vs ITO 5  Mayank Diamonds Pvt. Ltd. Vs ITO Tax Appeal No. 200 of 2003 (Guj)  ITO Vs Pankaj K Chaudhary ITA No. 1152/Ahd/2017 (Surat Trib)  ITO Vs Mukesh Lalchand Jain ITA No. 452/Srt/2019 (Surat Trib)  ITO Vs Sonu Dharmichand Bafna ITA No. 48/Srt/2019 (Surat Trib) 4. The ld. AR of the assessee submits that the assessee has good case on merit and is likely to succeed if the case of assessee is heard and considered on merit. On merit, the ld. AR of the assessee submits that the assessee is engaged in the business of diamond trading. The Assessing Officer while passing the assessment order under Section 143(3) r.w.s. 147 of the Act on 27/03/2015 made addition by disallowing purchases shown from Rajendra Jain and group by taking view that Rajendra Jain and his group were indulged in providing accommodation entry. The assessee is in the business of cut and polished diamonds. The assessee has shown purchases from Sun Diam which was allegedly owned and controlled by Rajendra Jain and group. The Assessing Officer disallowed 100% purchases shown from such seller. The ld. CIT(A) confirmed the order of Assessing Officer. Thus, the lower authorities disallowed 100% of purchases without disputing the sales of assessee. The lower authorities have not carried out any independent investigation and disallowed entire purchases. Surat Bench of Tribunal in a series of decisions on similar type of purchases from similar persons i.e. from various entities which were also allegedly managed by Rajendra Jain and his associates has either restricted the addition to the extent of 6% of such disputed purchases or wherein the ld. CIT(A) has granted more relief than 6%, such disallowance was enhanced to 6%. The ld. AR of the assessee, though, the assessee has shown genuine ITA No. 841/Srt/2023 Vinodkumar Sujanmal Chawat Jain Vs ITO 6 purchases yet to avoid long drawn process of limitation, only 6% of such purchases may be sustained. 5. On the other hand, the learned Senior Departmental Representative (ld. Sr.DR) for the revenue submits that the assessee has not shown reasonable and plausible cause for condonation of delay. The delay in filing appeal is of several years. The assessee has made self-serving story rather explaining each and every day delay. The ld. Sr. DR for the revenue submits that in a series of recent decisions, various Hon'ble High Courts and Supreme Court have held that where there is no genuine hardship or reasonable cause for late filing of appeal, application of delay in filing such appeal are liable to be rejected. To support his submission, the ld. Sr.DR for the revenue relied upon the following decisions:  Majji Sannemma Vs Reddy Sridevi & Ors. Civil Appeal No. 7696 of 2021 (SC)  Royal Stiches Pvt. Ltd. Vs DCIT (2023) 156 taxmann.com 361  Puneet Rastogi Vs PCUT (2023) 148 taxmann.com 363 6. On merit, the ld. Sr. DR for the revenue submits that the Assessing Officer as well as ld. CIT(A) has considered all the contention of assessee on merit and has categorically held that the purchases shown by assessee are nothing but an accommodation entry. Such accommodation entries are availed by the parties to inflate the expenses and to reduce the taxable income. Thus, the assessee is not entitled for any relief and the appeal is also liable to be dismissed on merit. 7. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We have also deliberated ITA No. 841/Srt/2023 Vinodkumar Sujanmal Chawat Jain Vs ITO 7 on various case laws relied upon by both the parties. Firstly we are dealing with condonation of delay. We find that there is no dispute that the impugned order was passed by the ld. CIT(A) on 02/01/2017, however, the present appeal is filed on 05/02/2023. Thus, the Registry of this Bench has calculated the delay of 2467 days in filing appeal. The plea of ld. AR of the assessee is that when the assessee came to know about dismissal of appeal when demand notice dated 25/08/2023 was served upon the assessee, copy of such demand notice is placed on record. The ld. AR of the assessee vehemently argued that the assessee has appointed Shri Jagdish Somani, Chartered Accountant as his consultant. We find that attendance/representation of Jagdish Somani is duly mentioned in the assessment order as well as on order of ld. CIT(A). Thus, there is no dispute that the assessee was represented through Shri Jagdish Somani, C.A. Further on perusal of various evidences in the form of newspaper report and order of various law enforcement agencies find that consultant of assessee was facing various crimination investigations and was ultimately arrested and remained behind the bar/ in Judicial custody. Thus, on considering such evidence and the fact that the assessee was represented by such a person who was ultimately arrested by the law enforcement agency and that the impugned order was not came in the notice of assessee, we find that the assessee has shown a reasonable cause for seeking condonation of delay in filing appeal before the Tribunal. 8. The Hon'ble Jurisdictional High Court in Jayvantsinh Vaghela Vs ITO (2013) 40 taxmann.com 491 (Guj) held that unless there is a gross negligence or malafide intention, delay in filing appeal to be condoned. We further find that the Hon'ble ITA No. 841/Srt/2023 Vinodkumar Sujanmal Chawat Jain Vs ITO 8 Bombay High Court in the case of Vijay Vishin Meghani Vs DCIT (2017) 86 taxmann.com 98 (Bom) while considering the contention of wrong advice by consultant on condonation of delay in filing appeal, held that wrong advice by Chartered Accountant not to file appeal, the Tribunal was not justified in refusing the condonation of delay in filing appeal. Further, the Hon'ble Apex Court in the case of Concord of India Insurance Co. Ltd. Vs Smt. Nirmala Devi AIR 1979 SC 1666 held that legal advice tendered by a professional and the litigant acting upon it one way or the other could be a sufficient cause to seek condonation of delay and coupled with the other circumstances and factors for applying liberal principles and then said delay can be condoned. It was further held that an overall view in the larger interest of justice has to be taken. None should be deprived of an adjudication on merits unless the Court of law or the Tribunal/Appellate Authority finds that the litigant has deliberately and intentionally delayed in filing of the appeal. Considering the aforesaid ratio of decisions quoted above, we find that the assessee in the present appeal also took the plea that he was depending upon consultant about the outcome of his appeal. Thus, we find that there is a reasonable and sufficient cause for condonation of delay in filing appeal before Tribunal. 9. So far reliance placed by the ld. Sr. DR for the revenue on decision of Hon’ble Supreme Court in Civil Appeal No.7696 of 2021 in the case of Majji Sannemma @ Sanyasirao Vs Reddy Sridevi & Ors., with utmost regard to the said decision, we find that facts of the present appeal are at variance. In Majji Sannemma @ Sanyasirao Vs Reddy Sridevi & Ors (supra) the High Court has not recorded that there was any sufficient cause in explaining delay. The Hon’ble Apex Court ITA No. 841/Srt/2023 Vinodkumar Sujanmal Chawat Jain Vs ITO 9 held that there was a gross negligence for the want of due diligence on the part of applicant. In Royal Stiches (P) Ltd Vs DCIT, it was held by High Court that assessee has not given “sufficient cause” for condoning delay. In Puneet Rastoogi Vs PCIT (supra) it was clearly held that there was no genuine hardship or reasonable cause for late filing return of income. However, in the case in hand the assessee appointed his consultant and the assessee was totally dependent on him, who was arrested and remained in judicial custody. Therefore, considering the overall facts and circumstances of the case, we condone the delay in filing appeal before the Tribunal. Now adverting to the merit of the case. 10. We find that no submission was made against ground No. 1 of appeal which relates to validity of reopening, therefore, such ground of appeal is treated as not pressed. With regard to ground No. 2 of appeal which relates to confirming the addition of Rs. 17,40,000/- on account of bogus purchases, we find that the Assessing Officer while passing the assessment order has made addition on account of alleged bogus purchase which were shown from Sun Diam, an entity allegedly managed by Rajendra Jain and his group. The Assessing Officer disallowed the entire purchases without disputing the sale of assessee. Sale is not possible in absence of purchases. The book result of assessee was not disputed. No independent investigation was carried out by the Assessing Officer. The Assessing Officer made addition solely on the basis of report of Investigation Wing. The ld. CIT(A) also confirmed the action of Assessing Officer. We find that the lower authorities disallowed 100% of purchases from Sun Diam. We find that in a series of decisions, the Surat Tribunal has ITA No. 841/Srt/2023 Vinodkumar Sujanmal Chawat Jain Vs ITO 10 consistently taken a view that only profit element in such transaction may be disallowed only to avoid the possibility of revenue leakage. A number of decisions of the Surat Tribunal has been affirmed by the Hon'ble Jurisdictional High Court in confirming/enhancing the addition to the extent of 6% of similar purchases. Thus, taking a consistent view, the Assessing Officer is directed to restrict the disallowance of impugned purchases to the extent of 6%. In the result, ground No. 2 of appeal is partly allowed. 11. In the result, this appeal of assessee is partly allowed. Order announced in open court on 30th October, 2024. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 30/10/2024 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR 5. Guard File By Order // True Copy // Sr. Private Secretary, ITAT, Surat "