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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI MAHAVIR PRASAD & SHRI O. P. MEENA
PER MAHAVIR PRASAD, JUDICIAL MEMBER
This appeal by the Assessee is directed against the order of the Ld. CIT(A)-II, Surat dated 03.06.2016 pertaining to A.Y. 2007-08 and following grounds have been taken:
ITA No. 2273/Ahd/2016 2 . A.Y. 2007-08 1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of assessing officer in reopening assessment u/s 148 of the I. T. Act, 1961. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of assessing officer in disallowing purchase of Rs. 9,95,625/-. 3. It is therefore prayed that above the assessment order may kindly be quashed or in the alternative, additions made by assessing officer and confirmed by Commissioner of Income-tax (Appeals) may please be deleted. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.
Out of two effective ground, ground no. 1 is not pressed by the assessee, hence same is dismissed. Therefore, effective ground remaining no. 2 with regard to that ld. CIT(A) has erred in confirming the action of Assessing Officer in disallowing purchase of Rs.9,95,625/-.
The facts of the case are that, a search and seizure action was carried out by the Investigation wing, Mumbai in "Shri Rajendra Jain, Shri Sanjay Choudhary & Shri Dharmichand Jam" group of cases on 03.10.2013, which resulted in collection of evidences and other findings, which conclusively proved that the said Shri Rajendra Jain and Others had, through a web of 70 benami concerns, run and operated by them in the names of their employees, provided accommodation entries to various parties in respect of bogus unsecured loans and bogus purchases. Various evidences found and seized from the premises of the said Shri Rajendra Jain and his son proved the above facts. The evidences having details of calendar year wise (Jan to Dec) accounts of these benami entities right from F.Y. 2004-05 onwards.
ITA No. 2273/Ahd/2016 3 . A.Y. 2007-08
This group has indulged in giving such accommodation entries of about Rs. 25,000 crores. Shri Rajendra Jam & Others has admitted the entire nature of bogus transactions in his statement recorded u/s. 132(4) of the Income Tax Act, 1961. It was also stated by the dummy partners/ Directors/ proprietors of the entities of this group that they are closely known and associated with Shri Rajendra Jain and that they belong to the native place of Shri Rajendra Jain and that they were made partners/ Directors/ proprietors of the entities of this group at the direction of Shri Rajendra Jain & his family but the entities were managed and controlled by the latter. It was further admitted by the dummy partners/ Directors/ proprietors of the entities of this group that they were merely employees of Shri Rajendra Jain & his family and that they were looking after miscellaneous office work like depositing cheques in banks, handing over parcels to clients, making data entry, etc. On being asked about various aspects of the business of this group, the dummy partners/ Directors/ proprietors of the entities of this group, they expressed their ignorance arid Stated that they are not involved in any such activities and that they are paid lump sum salary in cash. During the course of search, blank cheque books; signed by the dummy partners/ Directors/ proprietors of the entities of this group were also found, which were seized, Similarly, books of account in the name of the dummy partners/ Directors/ proprietors of the entities of this group were also found, which were also seized.
On verification of the assessment records, it is seen that the assessee has filed its return of income for the year under consideration on 31.03.2008, disclosing a total income of Rs.1,00,628/-. Since the evidential and material facts found during the course of search and survey in the case of Shri Rajendra Jain group
ITA No. 2273/Ahd/2016 4 . A.Y. 2007-08 proves that bogus purchase bills of Rs.9,95,625/- to the instant assessee, it is prima facie apparent that the assessee has utilized such bogus entries to introduce funds in the name of 'purchase of goods' for the year to that extent. There is no other prudent use of bogus purchases.
In view of the above, the Assessing Officer had reason to believe that an income of Rs.9,95,625/- as stated above, has escaped assessment in the hands of the assessee for the year under consideration. Therefore, the case was reopened and Notice U/s.148 of the I.T. Act was issued on 30.03.2014 and served upon the assessee. In response to notice, the assessee has filed a written submission on 20.8.2014 and enclosed copy of return filed for A.Y, 2007-08. Thereafter, various opportunities were granted to the assessee from time to time. Reasons recorded for reopening the assessment was also provided to the assessee. Notice u/s 142(1) of the Act was also issued, to requiring the assessee to submit his books of account and supporting. Thereafter a show cause vide order sheet entry dated 05.03.2015 was issued and discussed with A.R, of the assessee. The contents of the show cause is reproduced as under:- In your case for A.Y. 2007-08 this office is in possession of certain specific information. The information is received from the Investigation wing, Mumbai. It is the finding of investigation wing, Mumbai that you have obtained bogus purchase bills from assessee concern managed by Shri Rajendra Jain group, Sanjay choudhary group and Dharam chand Jain group These bogus bills, amounting in total to Rs.9,95,625/- are not real business transaction but merely paper entries. On the basis of information in my possession, I propose to treat your financial transaction of purchase of goods from A.Y. 2007-08 amounting in total to Rs.9,95,625/- as unexplained and bogus in nature. In. the Conclusion, you are
ITA No. 2273/Ahd/2016 5 . A.Y. 2007-08 show caused as to why an amount of Rs.9, 95,625/- should not be added in your total income. Furnish your written submission before the undersigned on or before 09.03.2015. Next date of hearing is fixed on 09/03/2015 at 1 1.00 am.
In response to the above, the assessee has filed a submission dated submission of the assessee is reproduced below :- " with, reference to above, 1 have to state that- 1. My above mentioned assessee has purchased polished diamonds weighing 225.00 ct. amounting to Rs. 995625/- from M/s Avi Exports. Copy of bill is already filed with your honour and sold same goods to kamlesh R.Shah HUP. Sale bill is already submitted to your honour. 2. Copy of Bank passbook showing payments of sale and payments of purchase is already submitted to your honour. 3. Assessee has no opening or closing stock for year under consideration. 4. If your honour will treat the said purchase as bogus then sale of same packet of diamonds will automatically be bogus. 5. Assessee has not purchased the said diamonds to inflate his purchase and this not case of any tax evasion. Hence it is not stand, to reason that your honour should treat purchase as bogus and add, the amount of purchase to total income because it means assessee has to pay tax on total sales and. not on total income. Considering the all facts, If your honour add. the amount of purchase to total income, you have to deduct amount of sales."
ITA No. 2273/Ahd/2016 6 . A.Y. 2007-08 8. I have gone through the submission of the assessee. The contentions raised by the assessee is not acceptable for the following reasons:- (i) It may be mentioned that from the details and evidences found during the search make it clear that the above entities of Shri. Rajendra Jain group have given accommodation entries of bogus purchases to the assessee during the year. (ii) As far as the transaction of bogus purchase is concerned, it may be mentioned that M/s. Avi Exports was the bogus concerns of Rajendra Jam group as discussed above. (iii) The group floated by Shri Rajendra Jain & Others had indulged in giving such accommodation entries. Shri Rajendra Jain & Others has admitted the entire nature of bogus, transactions in his statement recorded u/s. 132(4) of the Income Tax Act, 1961. (iv) It was further admitted by the dummy partners/ Directors/ proprietors of the entities of Shri Rajendra Jain 86 Others group that they were merely employees of Shri Rajendra Jain 86 Others and their family and that they were looking after miscellaneous office work like depositing cheques in banks, handing over parcels to clients, making data entry, etc. On being asked about various aspects of the business of this group, the dummy partners/ Directors/ proprietors of the entities of this group, they expressed their ignorance and stated that they are not involved in any such activities and that they are paid lump sum salary in cash. During the course of search, blank cheque books signed by the dummy partners/ Directors/ proprietors of the entities of this group were also found and seized. Similarly, books of account in the name of the dummy partners/ Directors/ proprietors of the entities of this group were also found and seized. (v) The investigations made by the investigation wing revealed that actual importers of rough diamonds import part of their diamond requirement through benami entities operated by Shri Rajendra Jain & Others & their family, which ensures benefit of suppression of turnover, profits and capital requirement of the former. The
ITA No. 2273/Ahd/2016 7 . A.Y. 2007-08 consignments are sent on credit by the suppliers in the names of these benami entities at the instance of the actual importers and on receipt of the imported consignments from Customs, through CHA, the consignment is handed over to the actual importer and the bogus stock is entered in the books of the benami entities and the same is not recorded in the books of the actual importer. These benami entities of Shri. Shri Rajendra Jain & Others group thereafter issue bogus sale bilis against bogus stock. (vi) The decision of Hon'ble ITAT, Ahmedabad Bench, in the case of "Kamalchand Nathmal Lunia" also need mention wherein accommodation entries provided by M/s. Mahasagar Securities Pvt. Ltd. and group concerns have been held to be bogus and affirmed. Decision of Hon'ble ITAT is re-produced below:- (vii) The issue of the Mukesh Choksi group of companies being an entry provider has been settled by jurisdictional ITAT, Ahmadabad in the case of KAMALCHAND NATHMAL LUNIA in the ITA No. 436/Ahd/2013, 514 Taxpundit 33 (2014); 40 CCH 199 AhdTnb; wherein it has held that these companies of Mukesh Choksi group are entry providers and therefore, the transactions with these companies are fictitious. The Hon'ble Bench held that "After hearing both sides and considering the totality of the facts and circumstances of the case, we are also of the opinion that the purchase as well as the sale transactions of the scrips in question was not genuine. The reason for taking this view is that the purchase rate had not tailed with the rate as per BSE website and that the purchases have also been made in cash. Only paper transactions have been made because there was no evidence of physical delivery of the shares, The AO was right in asking the details of the dividend if any received during the holding period. But no such information was provided at any stage of proceeding. Even, the entries in the Demat Account were not sacrosanct because the AO had found on investigation that those were all "off market" transactions, It was also noted by the AO that Hon'ble ITAT Mumbai Bench had held that those companies were nothing buit entry providers. Rather, it
ITA No. 2273/Ahd/2016 8 . A.Y. 2007-08 was proved beyond doubt that Mahasagar Group was engaged in the business of issuances of fraudulent bills. We, therefore, affirm the finding of the Revenue Authorities and dismiss the ground of the assessee."
As discussed in the foregoing paras, the evidential and materials facts found during the course of search and survey in the case Shri Rajendra Jain 85 Others group proves that they have provided accommodation bogus purchases entries of Rs.9,95,625/- to the assessee, This group deliberately conducted transactions in such a manner which leads to misleading picture and a colour of genuineness is given to the entire transaction. Accordingly, the amount of Rs,9,95,625/- as bogus purchases from M/s. Avi Exports, a benami concern run by Shri Rajendra Jain & Others Group, is added to the total income for the year under consideration.
Against the addition of Rs. 9,95,625/-, assessee preferred first statutory appeal before the ld. CIT(A) who confirmed the action of Assessing Officer.
Now by way of second appeal, assessee has come before us.
We have gone through the relevant record and impugned order. On the basis of information received from Investigation Wing, Mumbai, the A.O. found that the appellant had taken accommodation entry of bogus purchase bills from M/s AVI Exports of Rs. 9,95,265/-. But assessee refused for bogus allegation and in order to avoid the further litigation. Ld. A.R. cited an order of the Bench in ITA No. 1396/Ahd/2017 for Assessment Year 2007-08 wherein similar circumstances, matter was partly allowed by the Tribunal.
ITA No. 2273/Ahd/2016 9 . A.Y. 2007-08 13. Therefore, in parity with the above said order, we restrict the addition of 5% of total so called bogus purchase of Rs. 9,95,625/-. And Assessing Officer is directed to disallow 5% of total bogus purchase of Rs. 9,95,625/-.
In the result, appeal filed by the Assessee is partly allowed.
The order is pronounced by listing the case on the Notice Board under Rule 34(4) of Income Tax Appellate Tribunal Rules, 1963.
Sd/- Sd/- (O. P. MEENA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated : 15/07/2019 Rajesh Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER
/ / TRUE COPY / / Deputy/Asstt.Registrar ITAT,Surat