INCOME TAX OFFICER, MUMBAI vs. DAHYABHAI PURSHOTAMDAS CHAUHAN, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER;

“1. Whether on the facts and in the circumstances of the case and in law, the Ed. CITA) has erred in restricting the addition uptoRs. 28,889/ being 1% of total addition of Rs. 28,88,935/-and deleted the balance addition of Rs. 28,60,046/ made by the AO on account of accommodation entries of bogus purchases?"

2 Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) has erred in ignoring the fact that the action of the Assessing Officer was based on the report from the DDIT(Inv) Unit-7(4), Mumbai post search and seizure action conducted u/s 132 of the I.T. Act, on Mr. VipulVidur Bhatt, who was admitted in his recorded statement that, he was an entry operator and all the entities/concerns as well as directors were bogus and these companies are controlled and managed by him only and were used only for providing bogus accommodation entries to the various beneficiaries and the assessee was found to be one of the beneficiary who has availed benefit of bogus accommodation entries to the extent of Rs. 28,88,935/-?"

3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIF(A) has erred in ignoring the fact that in such cases, when the onus to prove the allegations was entirely on assessee, but he has not responded or submitted any reply or submissions to the notices issued on 07.07.2017, 12.10.2017 & 16.11.2027, and also has not made compliance to the final show cause notice Dated. 27.11.2017, włuch attracts the Assessing Officer to complete the assessment u/s 144 r.ws 147 of the Act, on the basis of available materials and evidences before him on the date of order?

5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition uptoRs. 28,889/-being 1% of total addition of Rs. 28,88,935/-and deleted the balance addition of Rs 28,60,046/ by ignoring the fact that that the assessee has availed accommodation entries from bogus entities, however has failed to prove the genuineness of the alleged transactions as well as creditworthiness of the parties from whom the alleged purchases were purportedly made ?"

6 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that the assessee's role as one of the many conduits in the accommodation entry business does not absolve it from the responsibility of providing accurate and legitimate Income details, therefore the original assessment was rightly made and the assessing office was well within nights to make an addition based on the total value of accommodation entries especially considering the assessee's involvement in the facilitation of such fraudulent transactions ?"

7 Whether on the facts and in the circumstances of the case and in law, the Ld. CITTA) has erred in restricting the addition uptoRs. 28,889/-being 1% of total addition of Rs. 28,88,935/- and deleted the balance addition of Rs. 28,60,046/- without appreciating the fact that the nature of transactions by accepting the documentation presented by the assessee ut face value without adequately considering the underlying fraudulent intent and the orchestrated steps taken to present these transactions as genuine. The assessment of the true character and intent behind these transactions was crucial and has been overlooked?"

9. Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) has erred in restricting the addition uptoRs. 28,889/-being 1% of total addition of Rs. 28,88,935/-and deleted the balance addition of Rs. 28,60,046/ made by the AO, without appreciating the decision of the Hon'ble Supreme Court in the case of M/s. N. K. Proteina Ltd. Va. Dy. CIT (2016) 292 CTR (Gul) 354, Dated. 16.01.2017, wherein the Hon'ble Court has held that when the purchases mode are from bogus suppliers or concerns, the entire purchases are liable to disallowed ?

12 Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) has erred in not appreciating the ratio of the decision of the Hon'ble Bombay High Court in case of PCIT VS S. V. Jiwani [2022) 145 taxmann.com (Bombay) and Hon'ble Gujarat High Court in case of CIT Vs Simit Sheth, wherein the Court upheld the decision of the Hon'ble ITAT. Mumbai and Ahmadabad respectively, which had held that entire purchases made by the assessee could not be added back as income, but only as profit element embedded therein and had restricted the addition to 12.5% of the purchases ?"

294 ITR 316 (All), wherein the entire amount of bogus purchases from bogus entities was disallowed and same was also upheld?”

“7. At the time of conclusion of submissions of both the parties, I directed both the learned representative to file the list of various entities of Vipul Vidur Bhatt and his statement if any. In compliance of my direction, the ld. Sr. DR for the revenue as well as ld AR of the assessee filed the list of 347 various entities allegedly managed by Vipul Vidur Bhatt on record.

8. I have considered the rival submissions of both the parties, order of lower authorities and the material placed before me. I find that assessing officer while making addition of Rs. 46,76,800/- has not specified the nature of transaction whether it was in the form of sales of any goods or against purchase of any material or in the name of loan secured or unsecured. The assessing officer simply in the reasons recorded mentioned that assessee availed accommodation entry from Vipul Vidur Bhatt. It is also an admitted fact that during assessment, the assessee except filing return of income has not filing any explanation to substantiate or explain the transaction. I find that before ld. CIT(A), the assessee relied on the statement of Vipul Vidur Bhatt.

beneficiaries, control of entire activities of income tax related the matter, accounting matter, bank account transaction and share transaction etc. of assessee was managed for bogus accommodation entries. I find that at the time of recording statement no specific question was asked by Authorised Officer about the nature of specific entry whether in the form of sale, purchase or loan or share application etc. Thus, from the record of revenue it is an admitted fact that assessee-HUF is also a part of a conduit of Vipul Vidur Bhatt and cannot be treated independently. I find that even before ld. CIT(A), the assessee has not explained the nature of transaction. The assessee is a conduit of Vipul Bhatt and entire transaction cannot be added his income. Similarly, making addition @ 1.00 % of transaction of commission income is not justified unless the nature of transaction is explained. Thus following the decision of SMC Bench in Amisha Sudhir Bhatt (supra), the order of ld. CIT(A) is modified and the reasonable percentage of income of assessee is estimated @ 5.00 % in place of 1.00% as estimated by ld. CIT(A). Thus, the revenue is allowed part relief. In the result, the grounds of appeal raised by the revenue are partly allowed.”

4. Considering the decision in case of Narendra K Rawal (HUF) (supra) and following principle of consistency, the order of ld. CIT(A) is modified and estimation of commission income is increased to 5.00% in place of 1.00% estimated by ld. CIT(A). In the result, the grounds of appeal of the revenue is partly allowed.