NAREN GEMS PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER 14(2)(3), MUMBAI

ITA 1009/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2897 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA S ANJARIA LD
• Assessee Lawyers: AKASH KUMAR LD
• Keywords: Bogus purchase; Additional evidence; Tangible material; Onus to prove; Reassessment proceedings
• Section: 147; 148; 144

Judgement Text

ITA.NOS.1009,1010 & 1011/MUM/2018 NAREN GEMS PRIVATE LIMITED ASSESSMENT YEARS-2008-09,2009-10 & 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.1009/MUM/2018 ( / ASSESSMENT YEAR: 2008-09) NAREN GEMS PRIVATE LIMITED EE-8070, EAST WING, 8 TH FLOOR BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX MUMBAI-400 051 / VS. INCOME TAX OFFICER - 14(2)(3) ROOM NO.431, M.K. ROAD AAYKAR BHAVAN MUMBAI-400 020 ./ ./PAN/GIR NO. AAACN-5028-N ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) & ./I.T.A. NO.1010/MUM/2018 ( / ASSESSMENT YEAR: 2009-10) NAREN GEMS PRIVATE LIMITED EE-8070, EAST WING, 8 TH FLOOR BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX MUMBAI-400 051 / VS. INCOME TAX OFFICER - 14(2)(3) ROOM NO.431, M.K. ROAD AAYKAR BHAVAN MUMBAI-400 020 ./ ./PAN/GIR NO. AAACN-5028-N ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) & ./I.T.A. NO.1011/MUM/2018 ( / ASSESSMENT YEAR: 2010-11) NAREN GEMS PRIVATE LIMITED EE-8070, EAST WING, 8 TH FLOOR BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX MUMBAI-400 051 / VS. INCOME TAX OFFICER - 14(2)(3) ROOM NO.431, M.K. ROAD AAYKAR BHAVAN MUMBAI-400 020 ./ ./PAN/GIR NO. AAACN-5028-N ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) ITA.NOS.1009,1010 & 1011/MUM/2018 NAREN GEMS PRIVATE LIMITED ASSESSMENT YEARS-2008-09,2009-10 & 2010-11 2 ASSESSEE BY : AKASH KUMAR, LD. AR REVENUE BY : CHAITANYA S. ANJARIA, LD. DR / DATE OF HEARING : 17/10/2018 / DATE OF PRONOUNCEMENT : 02/11/2018 / O R D E R PER BENCH 1. AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YEA RS [AY] 2008- 09, 2009-10 & 2010-11 CONTEST SEPARATE ORDER OF FIR ST APPELLATE AUTHORITY. SINCE COMMON ISSUES ARE INVOLVED, WE DISPOSE-OFF TH E SAME BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND B REVITY. FIRST WE TAKE UP ITA.NO.1009/MUM/2018 FOR AY 2008-09 WHICH CONTES T THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-22 [CIT(A) ], MUMBAI, APPEAL NO.CIT(A)-22/IT/496/2015-16 DATED 22/11/2017 QUA CONFIRMATION OF CERTAIN ADDITIONS ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE ASSESSEE HAS ALSO CHALLENGED THE RE-OPENING ON LEGAL GROUNDS . 2. THE FACTS ON RECORD REVEAL THAT DURING IMPUGNED AY, THE ASSESSEE BEING RESIDENT CORPORATE ENTITY WAS ENGAGED AS DEALERS IN DIAMONDS . THE ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSE SSEE ON 27/09/2008 AT RS.2.88 LACS WHICH WAS PROCESSED U/S 143(1). PURSUA NT TO RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING, IT WAS FOUND THAT THE ASSESSEE OBTAINED ALLEGED BOGUS PURCHASE BILLS AGGREGATING TO RS.176.55 LACS FROM TWO PARTIES, THE DETAILS OF WHI CH ARE EXTRACTED BELOW:- NO. NAME OF THE PARTY AMOUNT OF PURCHASES (RS.) ITA.NOS.1009,1010 & 1011/MUM/2018 NAREN GEMS PRIVATE LIMITED ASSESSMENT YEARS-2008-09,2009-10 & 2010-11 3 THE ABOVE FIRMS WERE REPORTED TO BE OPERATED BY ONE RAJENDRA JAIN GROUP WHICH WAS ALLEGEDLY ENGAGED IN HAWALA OPERATIONS. ACCORDINGLY, THE ASSESSEE WAS SUBJECTED TO REASSESSMENT PROCEEDI NGS VIDE NOTICE U/S 148 DATED 19/03/2015. THE FAILURE OF THE ASSESS EE TO RESPOND TO REASSESSMENT PROCEEDINGS RESULTED INTO AN ASSESSMEN T ON BEST JUDGMENT BASIS U/S 144 READ WITH SECTION 147 WHEREIN THE STATED ALLEGED BOGUS PURCHASES OF RS.176.55 LACS WERE ADDED TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE FIRST APPELLATE AUTHORITY VIDE IMPUGNED ORDE R DATED 22/11/2017 WHEREIN THE LEGAL GROUNDS AS TO JURISDICTION U/S 14 7 WAS DISMISSED BY LD.CIT(A). THE ASSESSEE, IN SUPPORT OF PURCHASE TRA NSACTIONS SUBMITTED ADDITIONAL EVIDENCES, WHICH WERE CONFRONTED TO LD. AO VIDE REMAND REPORT DATED 27/02/2017. THE LD. AO, INTER-ALIA, SUBMITTED THAT THE SIMILAR ADDITIONS IN ASSESSEES OWN CASE FOR AY 200 7-08 HAVE BEEN ESTIMATED @12.5% BY ASSESSING OFFICER AND THEREFORE , SIMILAR ADDITIONS MAY BE SUSTAINED AGAINST THE SAME. AFTER APPRECIATI NG THE REMAND REPORT, ASSESSEES SUBMISSIONS AND FACTUAL MATRIX, LD. CIT( A) RESTRICTED THE ADDITIONS TO 12.5% OF ALLEGED BOGUS PURCHASES. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE ONLY PLEA URGED BY LD. AUHTORIZED REPRESENTA TIVE FOR ASSESSEE [AR], SHRI AAKASH KUMAR, IS THE FACT THE KEEPING IN VIEW ASSESSEES NATURE OF BUSINESS, THE ESTIMATED ADDITI ONS WERE ON THE 1. AVI EXPORTS 83,59,817/- 2. MOULTIMANI IMPEX PVT. LTD. 92,95,867/- TOTAL 1,76,55,684/- ITA.NOS.1009,1010 & 1011/MUM/2018 NAREN GEMS PRIVATE LIMITED ASSESSMENT YEARS-2008-09,2009-10 & 2010-11 4 HIGHER SIDE. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], CHAITANYA S. ANJARIA SUBMITTED THAT NO FURTHER RELIEF COULD BE ALLOWED T O THE ASSESSEE. 5. SO FAR AS THE REASSESSMENT ACQUIRED BY LD. AO IS CONCERNED, WE FIND THAT THE ORIGINAL RETURN WAS PROCESSED U/S 143 (1) AND THE LD. AO WAS CLINCHED WITH TANGIBLE MATERIAL IN THE SHAPE OF INFORMATION FROM INVESTIGATION WING WHICH SUGGESTED POSSIBLE ESCAPEMENT OF INCOME AND THEREFORE, THE SAME, IN OUR OPINION, WAS PERFECTLY VALID. RESULTANTLY, NO INFIRMITY IS FOUND IN THE STAND OF FIRST APPELLATE AUTHORITY, IN THIS REGARD. THE GROUNDS RAISED BY THE ASSESSEE STAND DISMISSED. 6. SO FAR AS THE QUANTUM OF ADDITIONS ARE CONCERNED , WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES, WHICH COULD NOT BE CARRIED OUT WITHOUT ACTUAL PURCH ASE OF MATERIAL. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISP UTED OR DISTURBED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKIN G CHANNELS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCU MENTS. HOWEVER, AT THE SAME TIME, THE STATED PURCHASES WERE UNDER G RAVE DOUBT SINCE THE ASSESSEE COULD NOT PRODUCE ANY OF THE PARTY TO CONFIRM THE TRANSACTIONS. THE COMPLETE ONUS TO PROVE THE PURCHA SES BEYOND DOUBT WAS ON ASSESSEE, WHICH HE HAS FAILED TO DISCHARGE. IT IS WORTH NOTING THAT THE ASSESSEE REFLECTED PURCHASES FROM TWO ENTITIES, BOTH OF WHICH WERE BEING CONTROLLED BY SHRI RAJENDRA JAIN GROUP. THE SEARCH / SURVEY ACTION ON THE SAID GROUP BY DGIT (INV.) REVEALED THAT THE SAID GROUP CONSISTING OF NUMEROUS BUSINESS ENTITIES WAS ENGAGED IN PROVID ING ACCOMMODATION BILLS OF VARIED NATURE WITHOUT CARRYING OUT ANY ACT UAL BUSINESS ACTIVITIES. IN SUCH A SCENARIO, THE ADDITION, WHICH COULD BE MA DE, WAS TO ACCOUNT ITA.NOS.1009,1010 & 1011/MUM/2018 NAREN GEMS PRIVATE LIMITED ASSESSMENT YEARS-2008-09,2009-10 & 2010-11 5 FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANS ACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSI BLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VA T AGAINST ALLEGED BOGUS PURCHASES, WHICH LOWER AUTHORITIES HAVE RIGHT LY DONE. HOWEVER, CONSIDERING GP RATE ALREADY DECLARED BY THE ASSESSEE AND THE NATURE OF ASSESSEES BUSINESS, WE FIND THAT THE ESTIMATION OF 12.5% IS ON THE HIGHER SIDE AND THEREFORE, WE RESTRICT THE SAME TO 5% OF ALLEGED BOGUS PURCHASES OF RS.1,76,55,684/- . THE SAME COMES TO RS.8,82,784/-. THE ORDER OF LD. FIRST APPELLATE AUTHORITY STAND MODIFI ED TO THAT EXTENT. THIS GROUND AS WELL AS THE APPEAL STAND PARTLY ALLOWED. ITA NOS. 1010-1011/MUM/2018, AY 2009-10 TO 2010-11 7. IN AY 2009-10, THE ASSESSEE HAS BEEN SIMILARLY A SSESSED WITH SIMILAR ADDITIONS OF RS.1,63,36,055/- IN THE QUANTU M ASSESSMENT ORDER. THE FIRST APPELLATE AUTHORITY HAS RESTRICTED THE AD DITIONS TO 12.5%. THE FACTUAL MATRIX BROADLY THE SAME, OUR OBSERVATION, A DJUDICATION & CONCLUSION AS IN AY 2008-09 MUTATIS MUTANDIS APPLY TO THIS AY ALSO. HENCE, TAKING THE SAME VIEW, WE RESTRICT THE IMPUGN ED ADDITIONS TO 5% OF ALLEGED BOGUS PURCHASES WHICH COMES TO RS.8,16,803/-. THE APPEAL STAND PARTLY ALLOWED. 8. THE QUANTUM OF ADDITIONS FOR AY 2010-11 IS RS.96 ,49,600/- WHICH HAS BEEN RESTRICTED TO 12.5% BY FIRST APPELLATE AUT HORITY. TAKING THE CONSISTENT VIEW, WE ESTIMATE THE SAME @5% WHICH COM ES TO RS.4,82,480/-. THE APPEAL STAND PARTLY ALLOWED. CONCLUSION 9. ALL THE APPEALS STAND PARTLY ALLOWED. ITA.NOS.1009,1010 & 1011/MUM/2018 NAREN GEMS PRIVATE LIMITED ASSESSMENT YEARS-2008-09,2009-10 & 2010-11 6 ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND NOVEMBER, 2018. SD/- SD/- (MAHAVIR SINGH) (M ANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02/11/2018 SR.PS:-THIRUMALESH/JV, 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. ,./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI