Gujarat High Court
The Pr. Commissioner Of Income Tax 1, ... vs Amit Tarachand Jain on 24 January, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/80/2024 ORDER DATED: 24/01/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 80 of 2024
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THE PR. COMMISSIONER OF INCOME TAX 1, SURAT
Versus
AMIT TARACHAND JAIN
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Appearance:
MR RUDRAM TRIVEDI ADVOCATE FOR MRS KALPANA K RAVAL(1046)
for the Appellant(s) No. 1
for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 24/01/2024
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
[1] Heard learned advocate Mr. Rudram Trivedi for learned
advocate Mrs. Kalpana K. Raval for the appellant.
[2] This Tax Appeal is filed under Section 260A of the Income
Tax Act, 1961 (for short 'the Act') raising following substantial
questions of law arising out of the judgment and order dated 22 nd
February 2022 passed by the Income Tax Appellate Tribunal, Surat
(for short 'the Tribunal') in ITA No.295/SRT/2018 for the
Assessment Year 2013-2014:-
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"(i) Whether on the facts and in the circumstances of the case and
in law, the Ld. Tribunal was justified in estimating the addition in
respect of bogus purchases at rate of 6% of such purchases as
against disallowance made by the AO at the rate of 100% of such
purchases amounting to Rs.3,65,00,000/- ignoring the facts that
these purchases are sham transactions fabricated through bogus
paper concerns of Shri Gautam Jain Group entities which were
engaged in providing accommodation entries?"
(ii) "Whether on the facts and in the circumstances of the case and
in law, the Ld. Tribunal was justified in estimating the addition in
respect of bogus purchases at the rate of 6% of such purchases
relying on the decision of Hon'ble High Court in the case of
Mayank Diamonds Pvt. Ltd. 2014 (11) TMI 812 as against the
direction of the Hon'ble High Court in that case to make addition
at the rate of 5% of the total turnover?"
[3.1] The respondent-assessee is engaged in business of trading
activities of diamonds. Return of income for Assessment Year 2013-
14 was filed on 30th September 2013 declaring total income at
Rs.3,94,380/-. Assessment under Section 143(3) of the Act was
completed on 23rd March 2016 at total income of Rs.3,68,94,380/-.
[3.2] On the basis of the information received from DGIT (Inv.),
Mumbai that during search proceedings in case of Gautam Jain
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Group it was found that the said group was engaged in the business
of issuing non-genuine purchase bills, unsecured loans and
accommodation entries to various parties and the assessee was
found to have obtained non-genuine purchase bills from the said
group amounting to Rs.3,65,00,000/-.
[3.3] The case of the assessee was therefore reopened and the
assessment proceedings under Section 143(3) read with Section
147 of the Act was completed on 23 rd March 2016 determining the
total assessed income at Rs.3,68,94,380/- by making addition of
the aforesaid amount on account of unexplained purchases being
accommodation entries.
[3.4] Being aggrieved, the assessee preferred an appeal before the
CIT (Appeals), Surat who vide order dated 20th February 2018
dismissed the appeal of the assessee and confirmed the addition
made by the Assessing Officer.
[3.5] Feeling aggrieved, the assessee preferred an appeal before
the Tribunal. The Tribunal by the impugned order dated 22 nd
February 2022 allowed the appeal and accordingly, restricted the
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addition to 6% of disputed purchases.
[4.1] At the outset, learned advocate Mr. Rudram Trivedi for the
appellant-Revenue submitted that the Tribunal has relied upon the
judgment of the Co-ordinate Bench of this Court (Coram: Hon'ble
Mr. Justice N. V. Anjaria and Hon'ble Mr. Justice Niral R. Mehta) in
case of Principal Commissioner of Income Tax Versus Pankaj K.
Choudhary Income rendered in Tax Appeal No.617 of 2022 for
partly allowing the appeal of the Revenue wherein it was held that
in respect of bogus purchases, the addition at the rate of 6% of
bogus purchases is fair and reasonable.
[4.2] Learned advocate Mr. Rudram Trivedi submitted that this
Court has dismissed the Tax Appeal No.617 of 2022 in case of
Pankaj K. Choudhary (Supra) wherein similar questions of law
raised by the Revenue.
[5] Considering relevant the extract above from the submissions,
order of the the Tribunal is reproduced herein below:
"16. Since the issue raised in these appeals of assessor as well as
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Revenue and CO filed by assessee have been adjudicated by the
order of Co-ordinate Bench of this Tribunal in the case of Pankaj K
Choudhary (supra). There is no change in facts and law and the
Revenue as well as assessee are unable to produce any documents
and evidences to controvert the aforesaid findings of the Co-
ordinate Bench, in the case of Pankaj K Choudhary (supra). We
find no reason to interfere in the said order of Co-ordinate Bench
in the case of Pankaj K. Choudhary (supra). Therefore respectfully
following the order of the Coordinate Bench (supra), We allow
assessee's appeals in ITA Nos.294 to 296/SRT/2018 partly, and
dismiss assessee's appeal in ITA No.272/SRT/2019 for A.Y 2013-
14. We allow Revenue's appeal in ITA No.763/SRT/2018 partly
and dismiss assessee's Co No.18/SRT/2021."
[6] This Court in case of Pankaj K. Choudhary (Supra) while
dismissing the Tax Appeal No.617 of 2022 has held as under:
"5. The Assessing Officer noticed the contentions of the assessee
that confirmation, purchase bills, bank statement, stock register,
copy of ITR were already filed. The Assessing Officer was,
however, of the view that transactions were bogus and merely
that it routed through the banking channel, was not sufficient to
conclude that they were the genuine transactions. The contention
of the assessee that he had not dealt with the Bhanvarlal Jain
group was also negatived. The appellate Commissioner took the
view that disallowance was required to be sustained at 12.5% of
the purchase. The Assessing Officer was directed accordingly to
workout disallowance. In para 10.6, the Commissioner of Income
Tax (Appeals), recorded thus,
"As held above, it is clear that the appellants have made
purchases from elsewhere, but have obtained bills from the
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impugned suppliers. From the Trading & P & L account and
Audit report it can be seen that the GP rate shown by
appellant is 1.85% oil sales. In such circumstances the
disallowance of 100% of purchases cannot be justified. Also
as held above, the appellant would nave indulged in above
practice in order to get some benefit. And it is this benefit
derived by the appellant that need to be taxed. What would
be the magnitude of benefit derived by the appellant is the
mute question. In the appellant's case, it is seen that GP
rate shown is 0.78%".
5.1 The final view was expressed in para 10.10,
"Following the above judicial pronouncements and views
taken by Ld. CIT(A) & AOS in a few identical cases. In a
couple of identical cases, where the GP shown by the
appellants is more than 5%, I have confirmed the
disallowance of the impugned purchases to the extent of
5% of the impugned purchases. However in the instant case
the appellant is showing measly G.P. of only 0.78% on
turnover. In view of this I am of the considered opinion that
disallowance of 12.5% of the impugned purchases would be
reasonable and would meet the ends of justice. Hence, the
disallowance is restricted to 12.5% of the impugned
purchases for the assessment year in appeal."
5.2 The disallowance at 100% was made in the assessment order
for the year under consideration to the tune of Rs. 4,34,00,343/-,
which was reduced to 12.5% at Rs. 54,25,040/-. Thereafter, the
issue was dealt with by the appellate Tribunal. The appellate
Tribunal endorsed to the view taken by the appellate
Commissioner. It was observed that Assessing Officer failed to
consider the evidence furnished by the assessee.
5.3 Considering the facts and relevant aspect, the Income Tax
Appellate Tribunal partially allowed the appeal of the assessee to
further reduce the disallowance at 6%. In so concluding, the
Tribunal observed in paragraph No.21 as under,
".......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
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@ 0.02% (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."
6. The view taken and the conclusion arrived at by the appellant
Tribunal are based on material before it and after analysing the
facts and figure available before it. When the Tribunal has
thought it fit to reduce the disallowance at 6% from 12.5%, the
Tribunal had before it the facts which were duly analysed by it.
No interference is called for in the said conclusion and findings of
the Tribunal in the present appeal by this court.
6.1 The another weighing aspect is that the Tax Appeal No. 674 of
2022 in Principal Commissioner of Income Tax 1, Surat vs. M/s.
Surya Impex which came to be decided by the co-ordinate Bench
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on 16.1.2023 dealt with the very issue of accommodation entries
provided by Bhanwarlal Jain Group. The group involved in the
said case is the same group who is saddled with allegations of
providing accommodation entry to the assesse. In M/s. Surya
Impex (supra) the court held in favour of the assessee. The
questions of law involved in the said case were of the same nature
and were in the context of similar facts involving the same group.
7. For all the above reasons, substantial questions of law proposed
by the appellant in this appeal stands already answered. No
question of law much less any substantial questions of law arise in
the facts of the present case. No other substantial question of law
arises. The appeal is meritless. It is summarily dismissed."
[7] In view of the above, the substantial questions of law
proposed by the appellant in this appeal stands already answered
and therefore, no question of law much less any substantial
questions of law can be said to have a arisen in the facts of the
present case. The appeal is accordingly dismissed. No orders as to
cost.
(BHARGAV D. KARIA, J)
(NIRAL R. MEHTA,J)
CHANDRESH
