VISHAL DIAMONDS, MUMBAI V. ASST CIT 19(3), MUMBAI

CO 200/MUM/2017

• Counselvise Citation: [2017] 119 COUNSELVISE.COM (IT) 3489 (ITAT-MUMBAI)
• Duration Of Justice: 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 16-08-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Assessee Lawyers: P V DESAI
• Keywords: Unexplained expenditure; Peak credit; Accommodation entries; Tax effect; Reason to believe
• Section: 69C; 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI RAJENDRA , A M AND SHRI RAM LAL NEGI, J M ./ I.T.A. NO. 4546 / MUM/ 2015 ( / ASSESSMENT YEAR: 2010 - 11 ) ASST. CIT - 19(3), M ATRU MANDIR, 2 ND FLOOR, R. NO. 206, TARDEO ROAD, MUMBAI - 400 007 / VS. M/S. VISHAL DIAMONDS 100A - PANCHRATNA, OPERA HOUSE, MUMBAI - 400 004 ./ ./ PAN/GIR NO. AACFV 0161 D ( REVENUE ) : ( ASSESSEE ) & C.O. NO. 200/MUM/2017 (AR ISING OUT OF ITA NO.4546/MUM/2015) ( / ASSESSMENT YEAR: 2010 - 11 ) M/S. VISHAL DIAMONDS MUMBAI - 400 004 / VS. ASST. CIT - 19(3), MUMBAI - 400 007 ( CROSS OBJECTOR ) : ( REVENUE ) REVENUE BY : SHRI T. A. KHAN ASSESSEE BY : SHRI P. V. DESAI / DATE OF HEARING : 13.09.2017 / DATE OF PRONOUNCEMENT : 13 .09.2017 / O R D E R PER RAM LAL NEGI, JM THESE ARE THE APPEAL AND CROSS OBJECTION FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY AGAINST THE ORDER DATED 29.05.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 29 , MUMBAI, WHERE BY THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S. 143(3) R/W S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). I.T.A. NO. 4546/MUM/2015 2 ITA NO. 4546/MUM/2015 & CO NO. 200/MUM/2017 M/S. VISHAL DIAMONDS 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF GOLD ORNAMENTS AND JEWELLERY, DIAMOND AND PRECIOUS STONES, FILED ITS RETURN OF INCOME FOR THE A.Y. 2010 - 11, DECLA RING THE TOTAL INCOME OF RS.41,68,958/ - . THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. A SEARCH ACTION WAS CONDUCTED ON THE PREMISES OF SHRI BHAWARLAL JAIN G ROUP OF CASES BY DGIT (INVESTIGATION), MUMBAI AND DURING THE COURSE OF SEARCH INCRIMINATING DOCU MENTS WERE RECOVERED AND SEIZED. THE STATEMENT OF SHRI BHAWARLAL JAIN AND OTHER CONCERNED PERSONS WERE RECORDED U/S. 132(4) OF THE ACT . IN THE SAID STATEMENT, IT WAS ADMITTED THAT THEY USE TO PROVIDE ACCOMMODATION ENTRIES. IT WAS REVEALED THAT THE ASSESSEE WAS ONE OF THOSE FIRMS WHICH OBTAINED ACCOMMODATION ENTRIES FROM SHRI BHAWARLAL JAIN GROUP DURING THE FINANCIAL YEAR 2009 - 10. ACCORDINGLY, THE ASSESSMENT WAS REOPENED AFTER ISSUING NOTICE U/S 148 OF THE ACT. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE FURN ISHED COPY OF BILLS FROM M/S. PRIME STAR , COPY OF LEDGER ACCOUNT OF M/S. PRIME STAR AND BANK STATEMENTS TO PROVE THE GENUINENESS OF THE PURCHASES IN QUESTION, H OWEVER , FAILED TO PRODUCE THE PARTY FROM WHOM PURCHASES WERE MADE FOR VERIFICATION. FURTHER, THE ASSESSEE FAILED TO LINK THE PURCHASES OF THESE MATERIALS WITH SALES MADE DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY, A.O. ON THE BASIS OF PEAK CREDIT MADE ADDITION OF RS.26,22,802/ - AS UNEXPLAINED EXPENDITURE U/S. 69C TO THE INCOME OF THE ASSESSEE. 3. IN APPEAL, THE LD. CIT(A) RESTRICTED THE ADDITION TO 12.5% OF THE TOTAL PURCHASES IN QUESTION MADE BY THE ASSESSEE DURING THE RELEVANT YEAR . 4. AGAINST THE SAID ORDER, THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL O N THE FOLLOWING GROUNDS: 1. WHETHER THE LD. CIT(A) HAS ERR E D ON FACTS AND IN LAW IN PARTLY ALLOWING THE APPEAL OF THE ASSESSEE AND BY SUSTAINING THE ADDITION TO THE EXTENT OF 12.5% OF ADDITION MADE BY THE A O. IN SPITE OF CONCLUDING THAT THE PURCHASES ARE UNVERIFIABLE. 3 ITA NO. 4546/MUM/2015 & CO NO. 200/MUM/2017 M/S. VISHAL DIAMONDS 2. WHETHER THE LD. CIT(A) HAS ERR E D ON FACTS AND IN LAW IN PARTLY ALLOWING THE APPEAL OF THE ASSESSEE AND BY SUSTAINING THE ADDITION TO THE EXTENT OF 12.5% IN SPITE OF CONCLUDING THAT THE ASSESSEE DOES NOT MAINTAIN ANY STOCK REGISTER. 3. 'WHETHER THE LD, CIT(A) HAS ERR E D ON FACTS AND IN LAW IN RELAYING ON THE DECISION IN THE CASE OF CIT VS. SIM IT SHETH{2013) [56 ITR 451(GUJ) ] IN VIEW OF THE FACT THAT THE SAID DECISION MAY ONLY BE APPLICABLE IN CASES WHERE THE PARTY HAS MAINTAINED A STOC K REGISTER AND HAS MATCHED ITS SALES VIS - A - VIS ITS PURCHASES, WHICH THE ASSESSEE HAS FAILED TO DO SO. 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TAX EFFECT IN THIS CASE IS BELOW RS.10,00,000/ - HENCE, AS PER THE CBDT CIRCULAR N O. 21 OF 2015, DATED 10/12/2015, THE PRESENT APPEAL IS NOT MAINTAINABLE. 4. THE LD. DR FAIRLY CONCEDED THAT THE TAX EFFECT IN DEPARTMENTS APPEAL IS BELOW RS.10 LAKHS, WE FIND THAT THE ISSUE RAISED IN APPEAL DOES NOT FALL UNDER ANY OF THE EXCEPTIONS SP ECIFIED IN PARA 8 OF THE CIRCULAR. SINCE, IT HAS BEEN SPECIFICALLY CLARIFIED IN THE CIRCULAR AFORESAID THAT THE INSTRUCTION WILL APPLY RETROSPECTIVELY TO ALL THE PENDING APPEALS; THE PRESENT APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE. WE, THEREFORE, DISMISS THE SAME IN LIMINE . CO NO. 200/MUM/2017 5. THE ASSESSEE HAS FILED THE PRESENT CROSS OBJECTION ON THE FOLLOWING GROUNDS: 1.1. THE ED. C1T(A) ERRED IN LAW AND ON F ACTS IN UPHOLDING THE RE - OPENING OF THE ASSESSMENT U/S 147 BY THE ASSESSING OFFICE R. 1.2. THE LD. C1T(A) FAILED TO APPRECIATE THAT HAVING REGARD TO THE FACTS OF THE CASE THE ASSESSING OFFICER DID NOT HAVE ANY REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO LAX HAD ESCAPED ASSESSMENT IN THE CASE OF THE APPELLANT AND HENCE THE RE - OPENING WAS UNJUSTIFIED AND UNWARRANTED. 1.3 THE APPELLANT PRA Y S THAT THE ORDER U/S 143 (3) R.W.S. 147 BY THE ASSESSING OFFICER BE QUASHED. 2.1. THE LD. CIT(A) ERRED IN LA W AND ON FACT IN DIRECTING THE ASSESSING OFFICER TO CALCULATE THE ADDITIONAL GROSS PROFIT OF @ 12.50% ON ALLEGED NON - GENUINE PURCHASES AND ADD THE SAME TO THE DECLARED INCOME OF THE APPELLANT ON UNJUSTIFIABLE AND UNTENABLE GROUNDS. 2.2 THE LD. C1T(A) FAILED TO APPRECIATE THAT HAVING REGARD TO THE FACTS O F THE CASE THE PURCHASES OF RS. 35,45 , 237 / - FROM M/S PRIME STAR WERE PROVED TO BE 4 ITA NO. 4546/MUM/2015 & CO NO. 200/MUM/2017 M/S. VISHAL DIAMONDS GENUINE BY THE APPELLANT AND HENCE THE ADDITION OF 12.50% OF RS. 35,45 , 237 / - TO THE DECLARED INCOME IS TOTAL LY UNJUSTIFIABLE. 6. BEFORE US , THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE LOW TAX EFFE CT, THE ASSESSEE DOES NOT WANT TO PRESS THE PRESENT CROSS OBJECTION . ACCORDINGLY, WE DISMISS THE CROSS OBJECTION FILED BY THE ASSESSEE AS NOT PRESSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE STANDS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH . SEPT.2017 SD/ - SD/ - ( RAJENDRA ) ( RAM LAL NEGI ) / ACCOUNTANT MEMBER / J UDICIAL MEMBER MUMBAI ; DATED : 13.09.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI