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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM &DR. A.L.SAINI, AM
सुनवाईकीतारीख/ Date of Hearing : 24/01/2022 घोषणाकीतारीख/Date of Pronouncement : 12/04/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to assessment year 2008- 09, is directed against the order passed by the Learned Commissioner of Income Tax(Appeals)-1, Surat [‘CIT(A)’ in short], dated 13.09.2017, which in turn arises out of an assessment order passed by the Assessing Officer (‘AO’ for short) under section 144 r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), vide order dated 30.09.2015.
The appeal filed for Assessment Year 2008-09, is barred by limitation by 444 days. The assessee has moved a petition requesting the Bench to condone the delay. The assessee also filed an affidavit, wherein the assessee has explained the reasons for delay, which is reproduced below:- “1. That, I am the director of M/s Manav Trading (India) Pvt Ltd which is presently assessed to Income Tax under the jurisdiction of income tax officer,Ward- 1(1)(4),Mumbai on holding PAN-AADCM 2991 E. 2. That, the 1st appeal order related to AY 2008-09 of M/s Manav Trading (India) Pvt. Ltd. dated 13/09/2017 is stated to have been served on 11/10/2017 and 2nd appeal before Hon'ble ITAT ought to have been filed on/or before 10/12/2017. However, the said 2nd appeal could only be filed on 27/02/2019 which is late by 444 days.
3. That, the delay in filing of the 2nd appeal had occurred under the bona fide reasons and compelling circumstances beyond my control stated as under: a) The 1st appeal order was not served to me due to closure of business and office of my company situated at 12, Shakti Chambers, Raghunathpura, main Road, Surat. I had shifted my office permanently at Mumbai. The change in my office address from Surat to Mumbai was intimated and incorporated on record of Registrar of Companies. Also, both directors had shifted their place of residence permanently at Mumbai. In 1st appeal memo (Form 35), the address for sending the notice of hearing was disclosed of Mr. Pawan Jagetia, Chartered Accountant situated at 508, 21st Century, Business Center, Near Udhana Darwaja, Ring Road, Surat 39502. However, the 1st appeal order seems to have been dispatched at my old Surat office which remained unserved due to closure of my Surat office. During course of recovery action, I was made aware that my 1st appeal had been dismissed by Ld. CIT(A). Accordingly, I obtained a copy of the appeal order and filed the 2nd appeal with a prayer of condonation of delay. b) Upon enquiry with the Income Tax Department, I was informed that the 1st appeal order, was dispatched/served on 11/10/2017. However, due to closure of my Surat office, the said appeal order was not delivered to me. Thereafter, on receipt of the appeal order on 15/02/2019, I appointed a new chartered accountant, Mr.Prakash Jhunjhunwala, FCA of Mumbai who immediately filed the 2nd appeal before Hon'ble ITAT with a prayer of condonation of delay. c) The delay in filing of the appeal is unwilful and there is no gross negligence on my part, however the unintentional delay in filing of 2nd appeal had occurred due to closure of my business and office situated at Surat, Gujarat.
I humbly make a prayer before the Hon'ble Income Tax Appellate Tribunal, Surat to adopt a liberal approach and condone the delay in filing of the 2nd appeal.”
Shri Prakash Jhunjhunwala, Learned Counsel for the assessee, submits that due to closure of assessee`s business, and due to shifting of assessee`s office permanently at Mumbai, the delay in filing the appeal occurred. The ld CIT(A) had dispatched the order on old business address which was closed, therefore assessee could not get the order on time. Besides, both directors of assessee company had shifted their place of residence permanently at Mumbai, hence there was change in address. Due to change in address, there was communication gap between assessee and his legal Counsel. Therefore, ld Counsel prays the Bench that delay in filing the appeal may be condoned.
4. On the other hand, Ms. Anupama Singla, Ld. Senior Departmental Representative (Sr.DR) for the Revenue has strongly objected to the prayer for condonation of delay and submitted that delay should not be condoned merely because there was change in address and closure of assessee’s business. Therefore, she prays the Bench that delay may not be condoned.
We have heard both the parties and perused the materials available on record. The power to condone the delay is a discretionary one. This discretion to condone delay, is subject to the assessee forth coming with a 'sufficient cause'. The 'sufficient cause' must be bona fide and cogent and not flimsy. It is settled law that the court and quasi judicial bodies are empowered to condone the delay, if the litigant satisfies the court that there were sufficient reasons for availing the remedy after the expiry of limitation. We note that reasons given in the affidavit for delay are convincing and these reasons would constitute reasonable and sufficient cause for delay in filing the appeal. We note that delay in filing the appeal before Tribunal is not intentional and there is no gross negligence on the part of the assessee. The Hon’ble Supreme Court in the case of Collector of Land Acquisition vs Mst. Katiji and others , reported in 167 ITR 471, (1988 SC 897) (7) has observed as follows:
“4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay.”
Considering these facts, we note that there is no negligence or mala fide on the part of assessee, therefore the delay in filing appeal should be condoned. Therefore, having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing.
Grounds of appeal raised by the assessee are as follows:
1.On facts and in circumstances of the case and law, Ld. CIT(A) erred in confirming the validity of notice u/s 148 issued by Ld.AO without any fresh tangible material and in absence of independent application of mind and without having valid reasons to believe of escapement of income, thereby the reassessment order passed u/s 147 is bad in law. 2.On facts and circumstances of the case and in law, the notice u/s 148 issued beyond 4 years is bad in law since Ld.AO has not pointed out any failure on part of the assessee to disclose fully and truly all material facts necessary for assessment, thereby the re- assessment order u/s 147 is bad in law. 3.On facts and circumstances of the case and in law, Ld CIT(A) erred in confirming the addition of entire alleged non-genuine purchase of traded goods made from M/s Casper Enterprises Pvt. Ltd. of Rs.50,00,082/-. 4.The Ld. CIT(A), before making the disallowance of entire purchase of Rs.50,00,082/- ought to have considered the understated vital facts, being: a) The disputed purchase is supported with documentary evidences, being purchase bills, confirmations, bank statements, corresponding sale bills, stock register and other documents. b) The entire payments had been made through banking channel by A/c payee cheques. c) The disputed purchases are supported with corresponding sales. d) The Ld. AO had not brought any contrary documentary evidence on record and made the addition on the basis of information received from Investigation wing. e) The statement of 3rd party recorded at back of the assessee is general in nature and copies of such statements had not been provided to the assessee for confrontation and also an opportunity of cross examination had not been allowed to the assessee. 5.Without prejudice, an alternate prayer is made to adopt the concept of real income and restrict the addition @ 1% of alleged non-genuine purchase at Rs.50,008/- @ 1% of Rs.50,00,082/- since normal profits corresponding to disputed purchase had already been offered to tax in audited balance sheet filed on record;”
At the outset, Ld. Counsel for the assessee, informs the Bench that assessee does not wish to press ground nos.1 and 2, therefore we dismiss the ground nos.1 and 2, as not pressed.
Now, we shall adjudicate the ground nos. 3 to 5 raised by the assessee on merits. Succinct facts are that on the basis of the information received from DIT(Investigation), Ahmedabad, the assessing officer (AO) found that the assessee has received accommodation entries in the nature of bogus purchases of Rs.50,00,082/- from M/s. Casper Enterprises Pvt. Ltd. This company is controlled and managed by Shri Praveen Kumar Jain. The case reopened u/s 147 of the Act and the notice u/s 148 of the Act was issued. The assessee did not file any return of income in response to the notice u/s 148 within the statutory period of 30 days.
The AO issued notice u/s 133(6) to the seller company (M/s Ostwal Trading (I) Pvt. Ltd.) on 10.09.2015 but notice was returned back with postal remarks “not available”. Further, the AO conducted enquiry and found that the said seller company is only a paper company and is not traceable at the given address. The AO, during the assessment stage, provided several opportunities to the assessee but no compliance was made and no details were furnished. The AO made the addition as bogus purchases of Rs.50,00,082/- to the income of the assessee. On appeal, ld CIT(A) confirmed the action of the assessing officer.
We have heard both the parties and perused the materials available on record. We note that the issue under consideration is covered by the judgment of the Co- ordinate Bench of this Tribunal in the group cases of ITO Wd-3(1)(5) vs. Pankaj K Choudhary & others in dated 27.09.2021, wherein the Co-ordinate Bench held as follows:- “17.We have considered the submissions of the parties and have gone through the order of the lower authorities. We have also deliberated on each and every case laws relied by both the parties. We have also examined the financial statement of all the assessee(s) consisting of computation of income and audit report. We have also gone through the documentary evidences furnished in all cases. Ground No.1 in assessee’s appeal relates to the validity of reopening. The ld AR for the assessee vehemently argued that the AO reopened the case of the assessee on the basis of third party information, and without making any preliminary investigation, which was vague about the alleged accommodation entry by Bhanwarlal Jain Group. And that there was no specific information about the accommodation entry availed by the assessee. There is no live link between the reasons recorded qua the assessee. We find that the assessee has raised objection against the validity of the reopening before the AO. The objections of the assessee was duly disposed by AO in his order dated 09.02.2015. The assessee raised ground of appeal before ld CIT(A) while assailing the order of AO on reopening. The ld CIT(A) while considering the ground of appeal against the reopening held that the AO has received report from investigation wing Mumbai, which indicate that the assessee is beneficiary of the accommodation entry operators. The accommodation entry provider admitted before investigation wing that he has given such entry to various persons; based on such report the AO has reason to believe that the income of the assessee has escaped assessment and thus the action of AO in reopening is justified. 18.We find that the Hon’ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd Vs DCIT (supra) while considering the validity of similar notice of reopening, which was also issued on the basis of information of investigation wing that they have searched a person who is engaged in providing accommodation entries, held that where after scrutiny assessment the assessing officer received information from the investigation wing that well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified in re-opening assessment. Further similar view was taken by Hon’ble Jurisdictional High Court in Pushpak Bullion (P) Ltd Vs DCIT (supra). Therefore, respectfully following the order of Hon’ble High Court, we find that the assessing officer validly assumed the jurisdiction for making re-opening under section 147 on the basis of information of investigation wing Mumbai. So far as other submissions of the ld AR for the assessee that there is no live link of the reasons recorded, we find that the Hon’ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd clearly held that when assessing officer received information from the investigation wing that two well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified. Hence, the ground No. 1 in assessee’s appeal is dismissed.
Ground No. 2 in assessee’s appeal and the grounds of appeal
raised by the revenue are interconnected, which relates to restricting the disallowance of bogus purchases to the extent of 12.5%. The AO made of 100% of purchases shown from the hawala dealers/ entry provider namely Bhanwarlal Jain. We find that the AO while making additions of 100%, of disputed purchases solely relied on the report of the investigation wing Mumbai. No independent investigation was carried by the AO. The AO has not disputed the sale of the assessee. The AO made no comment on the evidences furnished by the assessee. We further find that ld CIT(A), while considering the submissions of the assessee accepted the lapses on the part of the AO and noted that no sale is possible in absence of purchases. The Books of the assessee was not rejected by the AO. The ld CIT(A) on further examination of the facts and various legal submissions find that Ahmedabad Tribunal in Bholanath Poly Fab Private Limited (supra) held that in the such cases the addition of bogus purchases was sustained to the extent of 12%, on the observation that the assessee may have made purchases from elsewhere and obtained the bills from impugned supplier to inflate Gross Profit Rate. The ld CIT(A) by considering the overall facts, concluded that the 100% disallowance of purchase is not justified. We also find that the ld.CIT(A) also considered the decision of jurisdictional High Court in Mayank Diamonds Pvt. Ltd. (supra) and compared the fact of the present case with the facts in Mayank Diamonds Pvt Ltd (supra) and noted that assessee in that case was also engaged in the trading of polished diamonds. The ld CIT(A) noted that in that case the AO made disallowance of entire bogus purchase and on first appeal before CIT(A) the disallowances were maintained. However, the Tribunal gave partial relief to the assessee directing to sustain the addition @12% of such bogus purchases. And on further appeal, the Hon'ble High Court sustained Gross Profit Rate @ 5% being average rate of profit in industry.
20. Now adverting to the facts of the present case, the ld.CIT(A) held that in some other similar cases; though he had sustain 5% of Gross Profit Rate, considering the fact that where Gross Profit shown by those assessee’s are more than 5%. However, in the present case, the assessee has merely shown Gross Profit Rate only at 0.78% of turnover, accordingly, the ld.CIT(A) was of the view that disallowance of 12.5% of impugned purchases/bogus purchases would be reasonable to meet the end of justice.
We have seen that during the financial year under consideration the assessee has shown total turnover of Rs. 66,09,62,458/-. The assessee has shown Gross Profit @ .78% and net Profit @ .02% (page 11 of paper Book). The assessee while filing the return of income has declared taxable income of Rs.1,81,840/- only. We are conscious of the facts that dispute before us is only with regard of the disputed purchases of Rs, 4.34 Crore, which was shown to have purchased from the entity managed by Bhanwarlal Jain Group. During the search action on Bhanwarlal Jain no stock of goods/ material was found to the investigation party. Bhanwarlal Jain while filing return of income has offered commission income (entry provider). Before us, the ld CIT-DR for the revenue vehemently submitted that the ratio of decision of Hon’ble Gujarat High Court in Mayank Diamond Private Limited (supra) is directly applicable on the facts of the present case. We find that in Mayank Diamonds the Hon’ble High Court restricted the additions to 5% of GP. We have seen that in Mayank Diamonds P Ltd (supra), the assessee had declared GP @ 1.03% on turnover of Rs.1.86 Crore. The disputed transaction in the said case was Rs. 1.68 Crore. However, in the present case the assessee has declared the GP @ 0.78%. It is settled law that under Income-tax, the tax authorities are not entitled to tax the entire transaction, but only the income component of the disputed transaction, to prevent the possibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @ 6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage. In the result the ground No. 2 of appeal raised by the assessee is partly allowed and the grounds of appeal
raised by revenue are dismissed.
22. In the result the appeal of revenue is dismissed and the appeal of the assessee is partly allowed.”
As the issue is squarely covered by the decision of the Coordinate Bench, in the case of Pankaj K Choudhary & others (supra) and there is no change in facts and law and the ld Counsel is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra). We find no reason to interfere in the said order of the Coordinate Bench, therefore, respectfully following the binding judgment of the Coordinate Bench (supra), we allow the appeal of the assessee partly.
In the result, appeal of the assessee, is partly allowed. Order pronounced on 12/04/2022 by placing the result on the notice board.