M/S LIPIN EXPORTS PVT LTD., MUMBAI V. ACIT 12 (3)(2), MUMBAI

CO 58/MUM/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8312 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-08-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR
• Keywords: Reopening of assessment; Accommodation entries
• Section: 147; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI M. BALAGANESH , ACCOUNTANT MEMBER ITA NO. 7772 / MUM/2019 ASSESSMENT Y EAR: 2007 - 08 ACIT - 12(3)(2), ROOM NO. 128H, 1 ST FLOOR, AAYAKAR BHAVAN, M .K. ROAD, MUMBAI - 400020 VS. M/S LIPIN EXPORTS PVT. LTD., 2 - 303, RAM ASHIRWAD INDL. PREMISES, RAM MANDIR ROAD, GOREGAON (WEST), MUMBAI - 400104 PAN: AAACL0712H (APPELLANT) (RESPONDENT) CO NO. 58/MUM/2021 ARISING OUT OF ITA NO. 7772/MUM/2019) ASS ESSMENT Y EAR: 2007 - 08 M/S LIPIN EXPORTS PVT. LTD., 2 - 303, RAM ASHIRWAD INDL. PREMISES, RAM MANDIR ROAD, GOREGAON (WEST), MUMBAI - 400104 PAN: AAACL0712H VS. ACIT - 12(3)(2), 1 ST FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDE NT) REVENUE BY : SHRI BRAJENDRA KUMAR (D R) ASSESSEE BY : SHRI AJAY SINGH (A R) DATE OF HEARING: 20/07 /20 21 DATE OF PRONOUNCEMENT: 06 / 08 /202 1 O R D E R PER SAKTIJIT DEY , JM CAPTIONED APPEAL AND CR O SS OBJECTION ARISE OUT OF ORDER DATED 20.09.2019 OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 21 , MUMBAI FOR THE AS SESSMENT YEAR 2007 - 08 . 2 ITA NO. 7772 / MUM/2019 & CO NO. 58/MUM/2021 ASSESSMENT YEAR: 20 07 - 08 2. WHILE THE REVENUE IS AGGRIEVED WITH THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN RESTRICTING THE D ISALLOWANCE ON ACCOUNT OF ALLEGED NON GENUINE PURCHASES TO 12.5%, T HE ASSESSEE IN ITS CROSS OBJECTION HAS CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT , 1961 . 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A RESIDEN T COMPANY AND ENGAGED IN THE BUSINESS AS A TRADER AND COMMISSION AGENT IN DIAMOND POWDER. FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 39,89,666/ - . ASSESSMENT IN CASE OF THE ASSES SEE WAS ORIGINALL Y COMPLETED UNDER SECTION 143 (3) OF THE ACT VIDE ORDER DATED 23.10.2009 DETERMINING THE TOTAL INCOME AT RS. 40,46,370/ - . SUBSEQUENTLY, BASED ON INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI THAT THE ASSESSEE IS A BENEFICIARY OF ACCOMMODATION ENTRIES PROVID ED BY VARIOUS PARTIES BY WAY OF NON - G ENUINE PURCHASES, T HE ASSESSING OFFICER (AO) REOPEN ED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IN COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED UPON THE ASSESSEE TO PROVE THE PURCHASES WORTH RS. 20, 02,000 / - MADE F ROM M/S VITRAG JEWELS. IN RESPONSE TO THE QUERY RAISED, THE ASSESSEE FURNISHED LEDGER COPY OF M/S VITRAG JEWELS APPEARING IN ASSESSEES BOOKS, COPY OF PURCHASE BILLS, COPY OF BANK STATEMENT SHOWING PAYMENT MADE TOWARDS PURCHASES AND INCOME TAX RETURN COPY OF M/S VITRAG JEWELS. FURTHER, THE ASSESSEE ALSO FURNISHED THE ADDRESS OF SHRI MUDIT KARNAWAT, PROPRIETOR OF M/S VITRAG JEWELS . A FTER VERIFYING THE EVIDENCES FURNISHED BY THE ASSESSEE, THE AO WAS NOT CONVINCED. FURTHER, HE OBSERVED , I N RESPONSE TO SUMMONS ISSUED UNDER SECTION 131 OF THE ACT, THE PROPRIETOR OF M/S VITRAG JEWELS DID NOT APPEAR. THEREAFTER, THE AO REFERRED TO THE STATEMENT S RECORDED FROM ONE SHRI RAJENDRA SOHAN JAIN AND SHRI MUDIT KARNAWAT, WHEREIN SHRI KARNAWAT ADMITTED OF BEING USED AS DUMMY FOR VARIOUS CONCERN S CREATED BY SHRI SURENDRA JAIN AND SHRI RAJENDRA JAIN . BASED ON ON SUCH STATEMENT, T HE AO DISALLOWED THE PURCHASES OF RS. 20,02,000/ - ALLEGEDLY MADE FROM M/S VITRAG JEWELS. ASSESSEE CONTESTED THE A FORESAID DISALLOWANCE BEFORE LEARNED 3 ITA NO. 7772 / MUM/2019 & CO NO. 58/MUM/2021 ASSESSMENT YEAR: 20 07 - 08 C OMMISSIONER (APPEALS). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, LEARNED COMMISSIONER (APPEALS) DIRECTED THE AO TO RESTRICT THE DISALLOWANCE TO 12.5% , BEING THE PROFIT ELEMENT EMBEDDED IN THE PURCHAS ES ALLEGED TO BE NON - GENUINE. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS EVIDENT , THE AO PRIMARILY RELYING UPON THE STATEMENTS RECORDED FROM THE PROPRIETOR M/S VITRAG JEWELS AND THIRD PARTIES HAS TREATED THE PURCHA SES AS NON - GENUINE. HOWEVER, IT IS A FACT ON RECORD THAT IN COURSE OF PROCEEDINGS B EFORE THE DEPARTMENTAL AUTHORITIES T HE ASSESSEE HAS FURNISHED VARIOUS DOCUMENTARY EVIDENCES , SUCH AS , BANK STATEMENT SHOWING PAYMENT MADE TOWARDS PURCHASE, LEDGER ACCOUNT OF M/S VITRAG JEWELS APPEARING IN ASSESSEES BOOK, CERTIFIED COPY OF PAN CARD OF PROPRIETOR OF M/S VITRAG JEWELS, COPY OF INCOME TAX RETURN FILED BY PROPRIETOR OF VITRAG JEWELS, ACCOUNT CONFIRMATION OF THE PURCHASES, BANK STATEMENT OF VITRAG JEWELS SHOWING RECEIPT OF THE AMOUNT PAID BY THE ASSESSEE ETC. IT IS ALSO A FACT THAT THE ASSESSEE HAS CO - RELATED THE PURCHASES WITH THE SALES MADE BY FURNISHING THE SALE INVOICES. T HE AO HAS NOT DOUBTED THE SALES AFFECTED BY THE ASSESSEE. IT IS RELEVANT TO OBSERVE , VARI OUS EVIDENCES FURNISHED BY THE ASSESSEE BEFORE FIRST APPELLATE AUTHORITY WERE FORWARD ED TO THE AO FOR VERIFICATION. B E THAT AS IT MAY , THE FACT THAT THE ASSESSEE HAD PURCHASED THE GOODS , THOUGH , MAY NOT BE FROM THE DECLARED SOURCE IS BEYOND DOUBT. IN SUCH CIRCUMSTANCES, THE ENTIRE PURCHASES MADE BY THE ASSESSEE CANNOT BE DISALLOW ED. O NLY THE PROFIT ELEMENT EMBEDDED FOR SUCH PURCHASES CAN BE CONSIDERED FOR DISALLOWANCE TO TAKE CARE OF THE REVENUE LEAKAGE WHICH MIGHT HAVE OCCURRE D DUE TO SUPPRESSION OF ACTUAL PROFIT. THAT BEING THE CASE, W E AGREE WITH THE DECISION OF LEARNED COMMISSIONER (APPEALS) IN RESTRICTING THE DISALLOWANCE TO THE PROFIT ELEMENT EMBEDDED IN THE ALLEGED NON GENUINE PURCHASES. FURTHER, IN OUR VIEW, THE DISALLOWANCE MADE AT 12.5% IS MORE THA N REASONABLE CONSIDERING THE DISALLOWANCE MADE/SUSTAINED BY THE TRIBUNAL IN SIMILAR NATURE OF CASES. THEREFORE, WE DO NOT FIND ANY REASON 4 ITA NO. 7772 / MUM/2019 & CO NO. 58/MUM/2021 ASSESSMENT YEAR: 20 07 - 08 TO IN TERFERE WITH THE DECISION OF LEARNED COMMISSIONER (APPEALS). THUS, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSE D. 5. IN SO FAR AS THE CROSS OBJECTION OF THE ASSESSEE IS CONCERNED , THE GROUNDS RAISED ARE ONLY ON THE ISSUE OF VALIDIT Y OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. WHEREAS , THE ASSESSEE HAS NOT CHALLENGED THE ISSUE ON MERITS . A T THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE , ON INSTRUCTION S, DID NOT PRESS THE CROSS OBJECTION. ACCORDINGLY, THE CROSS OBJECTION IS DISMISSED. 6 . IN THE RESULT, BOTH THE APPEAL AND CROSS OBJECTION ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 6 TH AUGUST , 2021 . SD/ - SD/ - ( M. BALAGANESH ) ACCOUNTANT MEMBER ( SAKTIJIT DEY ) JUDICIAL MEMBER MUMBAI ; DATED: 06 / 08 /2021 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUAR D FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI