Gujarat High Court
Gyanchand S. Jain, Prop. Of Sanjana ... vs Income Tax Officer, Ward 3(3)(1) on 3 October, 2023
Author: Biren Vaishnav
Bench: Biren Vaishnav, Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/131/2023 ORDER DATED: 03/10/2023
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 131 of 2023
With
R/TAX APPEAL NO. 151 of 2022
With
R/TAX APPEAL NO. 153 of 2022
With
R/TAX APPEAL NO. 154 of 2022
With
R/TAX APPEAL NO. 157 of 2022
With
R/TAX APPEAL NO. 161 of 2022
==========================================================
GYANCHAND S. JAIN, PROP. OF SANJANA EXPORTS
Versus
INCOME TAX OFFICER, WARD 3(3)(1)
==========================================================
Appearance:
MR KETAN H SHAH(2705) for the Appellant(s) No. 1
MR. AMAN K SHAH(9992) for the Appellant(s) No. 1
for the Opponent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 03/10/2023
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV) 1 Draft amendment is granted, to be carried out forthwith.
2 Since common questions of law are involved in these tax appeals, substantial questions of law raised in Tax Appeal No. 131 of 2023 are taken into consideration which read as under:
Page 1 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined "(i) Whether on facts and / or in law the ITAT has erred in confirming the validity of reopening u/s 148 as per finding given at page 16 para 17 of the order?
(ii) Whether on the facts and in the circumstances of the case as well as on law the Tribunal was right in law in sustaining the 6% GP rate on purchase made at Rs.19,53,98,343/-?
(iii) Whether on the facts and in the circumstances of the case as well as on law the Tribunal was right in law in confirming the addition of 6% in absence of rejection of books of audited books of accounts?
(iv) Whether on facts as well as law, the Tribunal was right in law to confirm the addition since the appellant proved that all the disputed parties are assessed to tax and stock tally has also been provided?
(v) Whether on facts as well as law, the Tribunal was right in law to confirm the addition since no such statement of Mr.Bhanwarlal and cross examination has been provided and therefore, the Tribunal has erred in applying 6% GP rate to the disputed purchase?"
3 Facts in brief are as under:
3.1 The petitioner - assessee is engaged in trading of diamonds. The assessee filed its return of income for Assessment Year 2007-08 declaring total income at Rs.1,03,375/- on 23.10.2007. The case of assessee was reopened under section 147 of the Income Tax Act, 1961 Page 2 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined (in short "the Act"). Notice under sec.148 of the Act was issued on 29.03.2014 and served on the assessee.
3.2 The case of the petitioner- assessee was reopened on the basis of information received from DGIT (Investigation) Mumbai. In the information received from Investigation Wing, Mumbai, it was informed that a search and seizure action was carried out by Investigation Wing, Mumbai, on Bhanwarlal Jain Group on 03.10.2013, which resulted in collection of evidence that Bhanwarlal Jain, his son Rajesh were operating 70 benami concerns in the name of their employees and staff for providing bogus accommodation entries of unsecured loans, sale and purchse of different kinds of material.
3.3 The statement of Bhanwarlal Jain was recorded under section 132(4) of the Act, wherein he had admitted that his family members are managing various entities which are providing accommodation entries. During the course of search, blank cheque book signed by dummy partners / directors proprietor of entities were found and Page 3 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined seized. It was informed that assessee is one of the beneficiaries of bogus purchase form three following entities managed by Bhanwarlal Jain Group.
3.4 On the basis of such information, the Assessing Officer (AO) formed opinion that income of the assesse has escaped from assessment and that he was satisfied that it is a fit case for reopening under section 147 of the Act. Notice under section 148 dated 29.03.2014 after recording reasons of reopening was served on the assessee. The assessee in response to notice under Sec.148, vide letter dated 28.04.2014 has stated that the original return of income filed on 23.10.2007 may be treated as return of income filed in response to notice under section 148 of the Act. The reasons of reopening was asked by the assessee. The assessee filed his objections against the reopening. The objection of the assessee was rejected in detailed and speaking order by the assessing officer.
3.5 During the course of assessment, the Assessing Page 4 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined Officer has noted that the assessee has shown purchase from the entities managed by Bhanwarlal Jain Group.
Bhanwarlal Jain Group is engaged in providing accommodation entry by various bogus concern. The assessee has shown bogus purchase of Rs.25,29,70,993/-
from various companies / firms and proprietorship concern which were managed by Sh. Bhanwarlal Jain Group. The Assessing Officer issued a show cause notice narrating fact that DGIT (Investigation) Mumbai, informed that there was a search action under section132 of the Act on the group of Shri Bhanwarlal Jain on 03.10.2013, which resulted in collection of evidences and other findings, which conclusively proved that the said Shri Bhanwarlal Jain was providing accommodation entries. The investigation team also provided the list of beneficiary of such accommodation entry. From the list of purchase provided to the Assessing Officer, the Assessing Officer identified such three bogus entities from which the assessee has shown purchase of 25,29,70,993/-. On the above observation the Assessing Officer issued show Page 5 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined cause notice as to why the purchased should not be disallowed and added to the income of the assessee.
3.6 The assessee filed its reply dated 18.03.2015 to the said show cause notice. In the reply, the assessee submitted that he is not aware that in which capacity Bhanwarlal Jain is connected with the parties. The assessee is a commission agent. There is no purchase and sale in assessee's. The bills were issued in the name of assessee for sales of goods by the principal but the goods were sold at the same price and the assessee charged commission which was credited to the profit and loss account. TDS was deducted on the commission by principal. There is no corroborative evidence to prove that the assessee has taken accommodation entry from such concerns. Teh assessee also filed copy of audited accounts, profits and loss account, balance sheet, copy of contract note of purchse / sale of goods, debit and credit note of alleged commission and the statement of commission received. The assessee demanded copy of the statement of Bhanwarlal Jain, cross examination of Page 6 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined Bhanwarlal Jain.
3.7 The reply of the assessee was not accepted by Assessing Officer. The Assessing Officer without making specific reference of various evidences filed by the assessee, solely relied upon the information received from DGIT (Investigation) Mumbai and recorded that search and seizure action was carried on Bhanwarlal jain Group on 03rd Oct, 2013 which resulted in collection of evidences, which conclusive prove that Bhanwarlal Jain Group provided entries of Rs.25,000/- crore through their 70 benami entities. The Assessing Officer noted that Bhanwarlal Jain Group, in search action, it was conclusively proved that said group was indulging in providing accommodation entry without actual delivery of goods. No stock of diamonds were found at the time of search except books of account of entries and the blank cheques book signed by the dummy partners, directors of proprietors. The Assessing Officer by relying upon report of investigation wing treated the transaction of 25,29,70,993/- The Assessing Officer worked out Page 7 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined disallowance of Rs.6,32,42,748/-.
3.8 Aggrieved by the addition as well as on reopening under section 147, the assessee filed appeal before CIT(A). Before ld.CIT(A), the assessee reiterated the similar submission on the additions of purchase as made before Assessing Officer. The Assessing Officer has not disclosed that he obtained permission of Commissioner for reopening. The assessee also requested for cross examination of third party, on the basis of which the additions / disallowance of purchase were made by Assessing Officer. The assessee also relied on certain case laws.
3.9 On the merit the Ld. CIT(A) held that the Assessing Officer has not discussed about the details of evidences furnished by the assessee to prove the purchase. The assessee fled books of accounts, other documents viz;
stock register and sale register. During the assessment proceedings, the Assessing Officer has neither examined nor pointed out any defect to discard such evidences. The Page 8 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined assessee also produced day to day stock register of purchase and sale. There is nil opening and closing stock.
This means the purchase made during the year are sold during the year itself. If salres are treated as genuine and impugned purchases are treated as bogus then the stock will go into negative to the extent of impugned purchases.
The day to day stock register shows the receipts and issue of diamonds and stock in hand along with the name of party to whom purchase and sales is made. The Assessing Officer whilemaking addition relied on the statement of Bhanwarlal jain and report of investigation wing. No comments on the purchase bills, copy of bank statement and day to day registers was made. No deficiency or irregularity in the stock or sale is pointed out. The Ld. CIT(A) further observed that from the statement of Bhanwarlal Jain and from modus operandi recorded by the investigation wing, Mumbai has created sufficient suspicion regarding the purchase made by the assessee. It is also observed that the said suppliers are assessed with Central Circle, Mumbai, wherein they are Page 9 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined being treated as entry providers and assessed accordingly.
3.10 The Ld.CIT(A) by referring the decision of Tribunal in Bholanath Polyfab Pvt Ltd in ITA No. 137/Ahd/2009/ dated 26.07.2011 wherein it was held that in case of bogus purchases disallowance of 100% of purchase is not justified and only a reasonable percentage of purchases to avoid the possibility revenue leakage, may be made.
The Ld. CIT(A) further referring the decision of jurisdictional High Court in case of M/s. Mayank Diamond Pvt Ltd. Reported in 2014(11) TMI 812 (Gujarat) wherein average rate of gross profit in industry was considered at 5% and disallowance of suspicious purposes was upheld at 5% in the said cases. The Ld. CIT(A) after considering the fat that wherein the Gross Profit(GP) shown by similar cases of more than 5% the Ld.CIT(A) confirmed the addition to the extent of 5%. However, in the present case, the assessee has not provided exact Gross Profit (GP) shown by assessee of his turnover. Accordingly, the ld.CIT(A) restricted the disallowance to the extent of Page 10 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined 12.5% impugned purchase / disputed purchase.
Aggrieved by the addition restricted to 12.5% of the disputed purchase, the assessee as well as revenue both have filed their respective appeal before us. The assessee has challenged the addition of 12.5%, on the other hand the revenue has challenged the order in restricting the addition to the extent of 12.5% and to make it 25% as held by assessing officer.
4 The Income Tax Appellate Tribunal, on hearing the appeals of the assessee and the revenue, held as under:
"18. Ground No.2 in assessee's and ground No.1 & 2 in revenues appeal are interconnected relates to the additions on account of bogus purchases. Thus, being considered together. The ld. AR of the assessee submits that Assessing Officer made addition on the basis of third party information. The Assessing Officer solely relied upon the report of investigation wing, Mumbai. The report of investigation, Mumbai was not provided to the assessee. The assessee demanded the copy of statement of Bhanwarlal jain and his cross examination. The Assessing Officer, nowhere rejected the demand of assessee. The assessee filed detailed evidence to prove that the purchases of assessee are genujine and the assessee was mere commission agent. The assessee provided complete details of purchase in the form of contact notes and sales of goods, ledgers account of expenses, details of commissions received, audited profit and loss Page 11 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined account. No comment was made by Assessing Officer on the documentary evidence furnished by assessee. The sales of assessee was not disputed. The books of accounts of assessee was not rejected. The Assessing Officer made disallowance of 25% purchases without rejecting books of accounts. The ld.CIT(A) restricted to addition to the extent of 12.5% of the total purchase shown from said disputed parties. The transaction of assessee from all the parties are genuine. The ld.AR prayed for deleting the entire addition. In the alternative submission, the ld.AR of the assessee would submit that to avoid protracted litigation some token disallowance may be made. To support his various submission, the ld. AR for the assessee is relied upon case laws:
1 M/s. Andaman Timber Industries Vs. Commissioner of Central Exicse, CIVIL Appeal No. 4228 of 2006 (Supreme Court) 2 CIT vs. Indrajit Singh Suri [2013] 33 taxmann.com 281 (Gujarat) 3 Albers Diamonds Pvt Ltd Vs. ITO 1(1)(1), Surat I.T.A. No. 776 & 1180/AHD/2017 4 The PCIT-5 vs. M/s. Shodiman Investments Pvt Ltd. TTANO 1297 of 2015 (Bombay High Court) 5 Shilpi Jewellers Pvt Ltd vs. Union of India & Ors., Writ Petition No. 3540 of 2018 (Bombay High Court) 6 CIT Vs. Mohmed Juned Dadani 355 ITR 172 (Gujarat) 7 Micro Inks Pvt Ltd vs. ACIT [2017] 79 taxmann.com 153 (Gujarat) 8 Shakti Karnawat Vs. ITO - 2(3)(8), Surat ITA 1504/Ahd/2017 and 1381/Ahd/2017 9 Asian Paints Ltd Vs. DCIT, [2008] 296 ITR 90 (Bombay) 10 PCIT, Surat 1 Vs Tejua Rohitkumar Kapadia [2018] 94 taxmann.com 325 (SC) 11 The PCIT-17 vs. M/s. Mohommad Haji Adam & Co. ITA No. 1004 of 2016 (Bombay High Court) 12 Pankaj Kanwarlal Jain HUF Vs. ITO 2(3)(8) Surat, ITA No. 269/SRT/ 2017 19 On the other hand, ld. CIT-DR for the revenue Page 12 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined supported the order of Assessing Officer. The ld.
CIT-DR for revenue submits that investigation wing of the department has made full fledged investigation during the search action on Bhanwarlal Jain and its group. The investigation wing investigated about the beneficiary of accommodation entry provided by Bhanwarlal Jain. The assessee is one of the beneficiaries of such purchases / accommodation entry. No stock of any goods / diamonds was found at the premises of Bhanwarlal Jain. The entire purchases shown by assessee from Bhanwarlal Jain are bogus and liable to disallow to the extent it was disallowed by assessing officer. The ld. CIT-DR for the revenue submits that no evidence is filed by the assessee to substantiate that he was merely commission agent. No detail of TDS on account is place on record. No confirmation of the principal on whose behalf the assessee was allegedly made sale is filed on record. The ld CIT-DR for the revenue prayed to restore the order of assessing officer.
20. We have considered the submission of both the parties and have gone through the order of lower authorities. No documentary evidences is furnished either by the assessee or by revenue in the form of paper books. We have also deliberated on various case laws relied by Ld. CIT(A) as well as by Ld. AR for the assessee at the time of making his submissions. We find that the Assessing Officer made addition solely on the basis of third party information / report of investigation wing, Mumbai. The report of investigation, Mumbai was not provided to the assessee. During the assessment, the assessee demanded the copy of statement of Bhanwarlal Jain and his cross examination, copy of such statement was not provided to the assessee. The Assessing Officer nowhere rejected the demand of assessee. We find that the assessee filed certain evidence to claim that the assessee acted as Page 13 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined commission agent. No comment was made by Assessing Officer on the documentary evidence furnished by assessee. The sale of assessee was not disputed. No sale is possible in absence of purchase. The Assessing Officer estimated addition on account of purchases without rejecting books of accounts of assessee to the extent of 25% shown from the various bogus entity / business concern managed by Bhanwar Lal Jain and his group. The ld. CIT(A) restricted to addition to the extent of 12.5% of the total purchase shown from all parties on the basis of magnitude of benefits derived by the assessee.
21. In our view the profit margin in the trade and business of assessee is ranging from 5% to 7% and the disallowances restricted by the assessing officer are at 12.5% of the disputed / impugned purchase shown from the entry provider. Considering overall facts and circumstances of the case, we are of the view the disallowance restricted by Ld. CIT(A) is on higher side, keeping in view of the profit margin in the industry. It is settled law that in case of disputed purchases shown from such hawala dealers only the profit element embedded in such transaction, to avoid the possibility of revenue leakage, is to be disallowed, and not the substantial part of the transaction. No doubt the assessee has shown extremely low G.P yet the disallowance at rate of 12.5% is on higher side. This combination in similar cases, wherein the purchases are shown from Bhanwarlal Jain, have restricted or enhanced the addition to the extent of 6% of impugned or disputed purchases. Therefore, taking the consistent the disallowance of purchase in the present case is also restricted to 6% of the disputed purchases. IN the result, the grounds of appeal raised by assessee are partly allowed and the ground No.1 & 2 of the appeal of the revenue is dismissed.
22. In the result, appeal of the assessee is partly Page 14 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined allowed and the appeal of the revenue is dismissed."
5 On an identical question of law, by an order dated 16.01.2023, Division Bench of this Court has considered the same issue in Tax Appeal No. 674 of 2022 and held as under:
" 9. We have given it the due consideration and also noticed that a detailed order passed by the CIT (Appeals), where it has noticed two aspects; (i) that the opportunity to cross-examination was not provided, and (ii) there had been no independent inquiries made by the Assessing Officer. It relied on the report of the Investigation Wing, Mumbai. The CIT (Appeals) was of the opinion that the Assessing Officer has not discussed any of the details, books of accounts, documents, etc.; and that he is not even examined or found any defects in the stock registers, books of accounts, as also other documents. The appellant has also produced day-to- day stock registers, details of purchases and sales, the trading account and the stock registers has shown that there is NIL opening and closing stock, which means that the purchases made during the year are all sold during the year. Also reasoned out that if the sales are treated as genuine and the impugned purchases are treated as bogus then the stock will go into negative to the extent of impugned purchases. The day-to-day stock register shows the receipts and issue of diamonds and stock in hand along with name of party to whom purchase and sale is made. The stock register is both for rough diamonds and polished diamonds. The statement of Shri Bhanwarlal Jain and the report of the Investigation Wing was much relied upon. As against that, the CIT (Appeals) noticed the copies of Page 15 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined purchase bills, copy of bank statements showing the payment, day to day stock registers showing incoming and outgoing diamonds and the daily stock tally, confirmation of the party from whom the said purchases were made. Thus, having noticed that all payments were made from bank accounts and all these evidences had not been discussed by the Assessing Officer, with no word as to why these documentary evidences were not acceptable by the Assessing Officer, the CIT (Appeals) chose to follow the cases of beneficiaries of accommodation entries of said Bhanwarlal Group cases, where the Assessing Officer (ACIT / ITOs) have not made 100% disallowances, but the disallowances ranging from 3% to 5% of the impugned purchases. The relevant observations made by the CIT (Appeals), Surat in relation to the same in paragraph 0.7 to 0.9 as under
:
"0.7 The AR has brough to my notice that on identical facts, there is a binding decision of Hon'ble Gujarat High Court in the case of M/s. Mayank Diamond Pvt. Ltd., reported in 2014 (11) TMI 812 (Guj) in Tax Appeal No.200 of 2003 dated 07.11.2014. In that case, the appellant was engaged in trading of polished diamonds. The learned Assessing Officer came to the conclusion that purchases amounting to Rs.1,86,36,447/- are bogus and disallowed the same. The learned CIT (Appeals) dismissed the appeal, however, the Hon'ble ITAT gave partial relief to the assessee by directing the learned Assessing Officer to make addition @12.5%. On appeal, the Hon'ble High Court of Gujarat has held that '....Gross Profit rate of 5% is the average rate of the industry and we think it fit to make addition on account of % gross profit rate. ...' 0.8 Also, the AR brought to my notice the Page 16 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined decision of the Commissioner of Income Tax, Mahidharpura, (AT 2007-08) dated 21.03.2016, wherein on identical facts and after considering the above legal positions, the learned CIT (Appeals), has taken a view that the decision of the Hon'ble High Court of Gujarat in the case of M/s. Mayank Diamond P Ltd., (supra) is binding and hence, confirmed the disallowance of 5% of the impugned purchases.
0.9 During the appeal proceedings, the AR has produced before me the copies of assessments done by many learned Aos at Mumbai, in the case of beneficiaries of accommodation entries of the same Bhanwarlal Group cases. In cases identical to the appellant, the learned AO (ACIT / ITOs) have not made 100% disallowances even if they have held that purchases are bogus. They have made disallowances ranging from 3% to 5% of the impugned purchases. A chart showing the details of those assessments is annexed as Annexure 'A'. Similarly, the learned Commissioners of Income Tax (Appeals) in Mumbai have confirmed disallowance @ 3% in different cases. A table showing details is annexed as Annexure 'B'. The annexures may be treated as integral part of this order. From the above, it is clear that the learned Aos and learned CsIT (Appeals) are of the view that the beneficiaries of accommodation entries have made a benefit of 3% to 5% of the impugned purchases."
10. This is dealt with again in extenso by the Tribunal as under :
"19. We find that the Assessing Officer made addition solely on the basis of third party information / report of investigation wing, Mumbai. The report of investigation, Mumbai Page 17 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023 NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined was not provided to the assessee. During the assessment, the assessee demanded the copy of statement of Bhanwarlal Jain and his cross examination, copy of such statement was not provided to the assessee. The Assessing Offcier, nowhere rejected the demand of assessee. We find that the assessee filed detailed evidence consisting details of purchase, PAN and addresses of parties, purchase invoice, stock register, day to day register and sales register. No comment was made by Assessing Officer on the documentary evidence furnished by assessee. The sales of assessee was not disputed. No sale is possible in absence of purchase. The Assessing Officer estimated addition on account of purchases without rejecting books of accounts of assessee. The learned CIT(A) restricted to addition to the extent of 12.5% of the total purchased shown by taking view that the assessee shown G.P of less than 1.15%. In our view the disallowance restricted by Ld. CIT(A) is on higher side. The profit margine in the industry is 5% to 7%. It is settled law in case of disputed purchases shown from such hawala dealers on the profit element embedded to avoid the possibility of revenue leakage is to be disallowed. No doubt made the assessee has shown extremely low G.P i.e. 1.15% only, yet the disallowance at rate of 12.5% is on higher side. This combination is similar cases, wherein the purchases are shown from Bhanwarlal Jain for providing accommodation entry, have restricted or enhanced the addition to the extent of 6% of impugned or disputed purchases. Therefore, taking the consistent the disallowance of purchases in the present case is also restricted to 6% of the disputed purchases. In the result, the grounds of appeal raised by assessee is partly allowed."Page 18 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023
NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined
11. Having found that the Assessing Officer has chosen not to reject the books of accounts of the assessee and had made the estimated additions of the pieces of the purchases. Both, the CIT (Appeals) and the Tribunal, have concurrently and rightly held to make the additions, which the CIT (Appeals) had done @ 12.5% of the impugned purchases, which have been reduced and restricted to 6%. It will not be out of place to make a mention that the Assessing Officer's inquiry was based on the report of the Investigation Wing, Mumbai, the copy of the statement of Shri Bhanwarlal Jain and others had been asked for by the assessee, which also had not been provided nor was he allowed a cross- examination. This, of course, could have been a reason for the Authority concerned to restore the matter back to the Assessing Officer, however, noticing the elaborate evidence consisting the details of purchase, PAN, etc., coupled with the Assessing Officer and the CIT (Appeals) dealing with the case of Shri Bhanwarlal Jain and others involved therein, if addition directed of 6% of the disputed purchases by noting that the profit margin in the said industry is 5% to 7% without even going by the estimation of the possible profit margin in the industry, suffice to note that in all cases relating to Shri Bhanwarlal Jain, both, the Assessing Officer and the CIT (Appeals), Mumbai, have chosen to make addition @ 3% to 5% of the bogus purchases. That view of the matter, no purpose is going to be served in interference. There are concurrent findings with sound reasons. We have also given an opportunity on 03.01.2023. An explicit order noting that there is a reference of group of cases of Shri Bhanwarlal Jain and others. The Revenue is not in a position to bring before this Court as to what had happened to all those cases that whether they travelled to the High Court or to the Hon'ble Apex Court.
Page 19 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023NEUTRAL CITATION C/TAXAP/131/2023 ORDER DATED: 03/10/2023 undefined
12. This Court in Tax Appeal No.200 of 2003 in case of Mayank Diamonds Pvt. Ltd. (supra) was required to decide the estimation of the gross profit @ 12.5% against the gross profit of 1.03% shown by the assessee. The Court allowed the gross profit rate of 5% holding that 12.5% is drastically higher. In N.K. Industries Pvt. Ltd., (supra), where the Court had considered the addition of entire amount on the ground that the fictitious purchases is a factually different than what was already held at M/s. Mayank Diamonds Pvt. Ltd., (supra). In the other cases of Shri Bhanwarlal Jain also, addition rates are 3% to 5% where no further challenge possibly is there or it has not been processed further. This Court finds that no question of law, much less any substantial question of law arises for consideration of this Court."
6 In light of this, this Court finds that no question of law, much less any substantial question of law arises for consideration of this Court. Thus, since these Tax Appeals does not have any substantial question of law involved, the same are dismissed.
(BIREN VAISHNAV, J) (BHARGAV D. KARIA, J) BIMAL Page 20 of 20 Downloaded on : Fri Oct 06 20:36:49 IST 2023