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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” : HYDERABAD
Before: SHRI S.S.GODARA & SHRI LAXMI PRASAD SAHU
These three assessee’s appeals for AYs.2007-08, 2008-09 & 2009-10 arise from the CIT(A)-6, Hyderabad’s order(s) dated 10-02-2017 passed in case Nos.0040, 0039 & 0037/2015-16/ CIT(A)-6/2016-17, involving proceedings u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case files perused.
The assessee has raised the following substantive grounds in its first and foremost appeal :
:- 2 -: 756 & 757/Hyd/2017
1.The Order of the Commissioner of Income Tax (Appeals) - VI, Hyderabad dt.10.02.2017 to the extent to which it upheld the addition of Rs.9,04,500/- is contrary to law and facts. 2.The Commissioner of Income Tax (Appeals) should have accepted the contention that reopening of the assessment is illegal and that the said assessment is reopened without the mandatory conditions being satisfied as such the appellant contends that the notice issued u/s 147 and also the consequential assessment order are illegal and bad in law. 3.The appellant contends that no bogus purchases were made by it and the allegation that it has showed bogus purchases to the extent of Rs.9,04,500/- is erroneous and is hereby denied. 4.The appellant contends that the disallowance of purchases of Rs.9,04,500/- from Prime Star treating it as bogus is unsupportable in law and is without any basis. 5.It is contended that the statements stated to have been made by one Bhanwarlal Jain (alias Ratanlal Manakchand Jain) and Shreyansh Labchand Jain do not in any way support the contention of the assessing officer that the appellant made any bogus purchases. 6.The appellant contends that in any event the statements of these two persons cannot be looked into as the appellant did not get an opportunity to cross examine these witness which was requested by the appellant. 7.The learned Commissioner failed to notice that the appellant filed affidavits dt.19-02-2015 from Shreyansh Labchand Jain, the contents of which substantiate the appellant's plea that the purchases are genuine and no bogus purchases were made by it. It is therefore, contended that the addition of sum of Rs.9,04,500/- is erroneous and deserves to be deleted. 8.Without prejudice it is contended that even if any addition is called for it cannot exceed the profit margin of 8% on the alleged bogus purchases. 9.The appellant craves leave to add to, amend or alter any of the aforesaid grounds as the occasion may require. 10.For these and other grounds that will be submitted at the time of hearing of appeal, it is prayed that the reopening of assessment may be cancelled as illegal and the addition of Rs.9,04,500/- made be deleted
It further emerges that the assessee which appellant’s pleadings are no different in latter twin appeals &
:- 3 -: 756 & 757/Hyd/2017 757/Hyd/2017 as well the only distinction therein is that all the alleged bogus purchases amounts involved are of Rs.20,05,500/- and Rs.25,48,900/-; respectively. We therefore propose to decide all the instant appeals vide instant common adjudication.
Relevant identical facts involved in all the three instant appeals are in a very narrow compress. The assessing authority(ies) herein had received information from the department’s Investigation Wing, Mumbai that the assessee had sourced its purchases involving varying sums (supra) from M/s.Bhanwarlal Jain group concerns namely M/s.Prime Star in these three assessment years. And that the department had carried out a search and seizure operation in the said group on 03-10-2013 wherein its authorised person(s) had admitted to have been providing bogus sales entries. This made the Assessing Officer to take recourse to Section 148 and 147 mechanism culminating in the impugned bogus purchases disallowances affirmed upto the CIT(A)’s order(s) under challenge.
Learned counsel’s first and foremost vehement contention seeks to quash the impugned reopening without recording the reasons based on tangible material which could even indicate assessee’s taxable income to have declared assessment. We find no merit in the instant argument in view of the Assessing Officer’s as well as the CIT(A)’s respective detailed discussions justifying the impugned re-opening(s) based on the Investigation Wing, Mumbai’s information pinpointing the specific inputs in search proceedings including
:- 4 -: 756 & 757/Hyd/2017 M/s.Bhanwarlal Jain group authorised persons statement(s) to have been providing bogus accommodation entries. We therefore hold that the Assessing Officer had rightly initiated the impugned re-opening process in all these three cases. The assessee fails in its identical first and foremost ground therefore.
Next comes equally important aspect of quantification of the impugned bogus purchases disallowances/additions of Rs.9,04,500/-, 20,05,500/- and Rs.25,48,900/-; respectively. The assessee’s argument before us is that once its corresponding sales have been assessed as ‘business income’, disallowance of the impugned purchases would result in abnormally high profit rate which is not possible in the regular course of business in jewellery, gold, silver ornaments and some precious stones. This clinching aspect has gone un- rebutted from the departmental side which has primarily relied on the Investigation Wing information furnished to the Assessing Officer herein.
We have considered the foregoing rival submissions and find no reason to delete the impugned bogus purchases disallowance/addition in entirety in all these three assessment years. This is for the precise reason that going by the circumstances before us, it can be safely inferred that the assessee obtained bogus purchase invoices from M/s.Bhanwarlal Jain group and further sourced its purchases from other suppliers. We next note that this tribunal’s co- ordinate bench in & 3454/Mum/2017 ITO Vs. M.Shailesh and Co. dt.22-01-2019 (in case of the very search)
:- 5 -: 756 & 757/Hyd/2017 as well as various other similar orders hold that only a percentage of such purchases than the entire amount(s) thereof has to be disallowed. The fact also remains that such an estimation depends on facts of each and every case than involving any legal interpretation which could be treated as a valid precedent as per the hon'ble jurisdictional high court’s decision in CIT Vs. B.R.Constructions (1993) 202 ITR 222 (AP). Faced with this situation, we deem it appropriate in larger interest of justice that the impugned bogus purchases in all these three year(s) deserve to be restricted to disallowance @8% only in the given facts and circumstances with a rider that the same shall not be taken as a precedent in any other case. Necessary computation shall follow as per law.
These three assessee’s appeals are partly allowed in above terms. A copy of this common order be placed in the respective case files.
Order pronounced in the open court on 18th August, 2021