VEGA JEWELDIAM PVT. LTD., Mumbai V. A.C.I.T. - 13(3)(2), Mumbai

ITA 1050/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7151 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 23-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: VIJAY KUMAR BIYANI
• Keywords: Bogus purchase; Transfer pricing; Cost of acquisition; Accommodation entries

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL F BENCH MUMB AI BEFORE HRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO. 1050/MUM/2018 (ASSESSMENT YEAR 2014-15 ) VEGA JEWELDIAM PVT. LTD . UNIT NO.1108, II FLOOR, A WING, THE CAPITAL, G BLOCK PLOT, 70, BHARAT NAGAR, BANDRA (EAST),MUMBAI- 400051. PAN: AAACD9989Q VS. DCIT, CIRCLE-13(3)(2), AAYAKAR BHAVAN, CHURCHGATE, MUMBAI-400021. APPELLANT RESPONDE NT APPELLANT BY : SHRI VIJAY KUMAR BIYANI (AR) RESPONDENT BY : SHRI RAJEEV GUBGOTRA (DR) DATE OF HEARING : 03.04.2019 DATE OF PRONOUNCEMEN T : 03.04.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME -TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME-TAX (APPEALS)- 21, MUMBAI [HEREINAFTER REFERRED AS LD. CIT(A)] DAT ED 24.10.2017 FOR ASSESSMENT YEAR 2014-15. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: (I) (A) THE LEARNED CIT(A) HAS ERRED IN TREATING PURCHA SES TO THE EXTENT OF RS. 2,96,26,086/- AS BEING MADE FROM PARTIES ALLEGEDLY PROVIDING BILLS WITHOUT SUPPLYING GOODS. (B) THUS, THE LD. CIT(A) ERRED IN CONFIRMING ADDITI ONS OF RS. 11,85,043/- COMPUTED @ 4% ON PURCHASES OF RS. 2,96,26,086/- FRO M PARTIES ALLEGEDLY PROVIDING BILLS INSTEAD OF DELETING SUCH ADDITION. 2. AT THE OUTSET OF HEARING, THE LD. DR FOR THE REVENU E SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE COVERED AG AINST THE ASSESSEE BY ITA NO. 1050/MU M/2018-VEGA JEWELDIAM PVT. LTD. 2 THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2010- 11 TO 2012-13 IN ITA NO. 5799, 5800 & 5801/MUM/2016 DATED 28.09.2017. THE LD. DR ALSO FURNISHED THE COPY OF D ECISION OF TRIBUNAL REFERRED ABOVE. THE LD. AR OF THE ASSESSEE FAIRLY C ONCEDED THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE COVERED AG AINST THE ASSESSEE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 TO 2012-13. 3. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND GONE THROUGH THE ORDER OF AUTHORITIES BELOW. THE ASSESSEE HAS RA ISED THE GROUND OF APPEAL THAT LD. CIT(A) ERRED IN DISALLOWING/MAKING ADDITION @ 4% OF PURCHASES MADE FROM THE PARTIES WHO WERE ALLEGEDLY PROVIDING BILLS WITHOUT SUPPLY OF GOODS. 4. WE HAVE NOTED THAT ON SIMILAR GROUND OF APPEAL, THE CO-ORDINATE BENCH OF TRIBUNAL IN APPEAL FOR ASSESSMENT YEAR 2010-11 TO 2 012-13 PASSED THE FOLLOWING ORDER: 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE THE ASSESSMENTS WER E REOPENED BASED ON THE INFORMATION FROM THE DGIT(INVESTIGATIONS), MUMB AI THAT ASSESSEE IS A BENEFICIARY FROM THE ENTITIES OPERATED BY SHRI BHAN WARLAL JAIN/SHRI PRAVEEN KUMAR JAIN WHEREIN THE SEARCH TOOK PLACE AN D IT WAS FOUND THAT SHRI BHANWARLAL JAIN/SHRI PRAVEEN KUMAR JAIN WERE P ROVIDING ONLY ACCOMMODATION ENTRIES AND THERE WERE NO ACTUAL SALE TRANSACTIONS AND THE ASSESSEE COULD NOT PROVE THE MOVEMENT OF GOODS FROM THE SUPPLIERS TO THE ASSESSEE. IN THE ABSENCE OF DELIVERY CHALLANS, PROP ER STOCK RECORDS AND BASED ON THE DEPOSITIONS OF THE SUPPLIERS THAT THEY HAVE PROVIDED ONLY ACCOMMODATION BILLS, THE ASSESSING OFFICER HAS RIGH TLY CONCLUDED THAT THE ASSESSEE HAS OBTAINED ONLY BOGUS BILLS AND ASSESSEE MIGHT HAVE PURCHASED GOODS IN GRAY MARKET. THE ASSESSING OFFICER ESTIMAT ED THE GROSS PROFIT MARGIN ON SUCH PURCHASES AT 8% WHICH THE LD.CIT(A) REDUCED TO 4% ITA NO. 1050/MU M/2018-VEGA JEWELDIAM PVT. LTD. 3 TAKING NOTE OF THE REPORT OF THE TASK GROUP FOR DIA MOND SECTOR SUBMITTED TO THE DEPARTMENT OF COMMERCE OBSERVING AS UNDER: - '4.2. THE A.O CALLED UPON THE APPELLANT TO ESTABLIS H THE GENUINENESS OF THE PURCHASES. THE AO NOTED THAT THE CONCERNS FROM WHOM PURCHASES WERE SHOWN DID NOT HAVE DOCUMENTS TO PROVE THE DELI VERY OF GOODS OF THE APPELLANT. THE CONCERNS FROM WHOM PURCHASES WER E CLAIMED TO BE MADE WERE OPERATING FROM PREMISES WHICH WERE IN THE NAME OF BHANWARLAL JAIN & FAMILY. THE SUPPLIERS/ BOGUS PART IES COULD NOT BE PRODUCED BEFORE THE A.O FOR EXAMINATION. THE A.O TH EREFORE CONCLUDED THAT THE APPELLANT HAD MERELY RECEIVED BI LLS BUT NOT THE MATERIAL/GOODS FROM THESE PARTIES. THOUGH THE APPEL LANT HAD SHOWN CORRESPONDING SALES AGAINST THE PURCHASES CLAIMED, PURCHASES WERE MOST LIKELY MADE FROM GREY MARKET. WITHOUT BILL AND TO ADJUST THESE TRANSACTIONS, BOGUS BILLS WERE OBTAINED FROM BHANWA RLAL JAIN GROUP. THE A.O CONCLUDED THAT THE DIAMONDS PURCHASED FROM THE GREY MARKET ARE CHEAPER THAN THE DIAMONDS SOURCED FROM GENUINE DEALERS. SUBSEQUENTLY THERE IS AN ELEMENT OF DISCOUNT IN THE CASE OF CASH PURCHASED IN THE GREY MARKET. THE A.O. THEREFORE CO MPUTED THE ADDITIONAL G.P EARNED BY THE APPELLANT HAS 8% OF TH E PURCHASE COST. ACCORDINGLY, DISALLOWANCE/ ADDITION OF RS..63,90,74 2/- WAS MADE TO THE RETURNED INCOME. 4.3. IN THE APPELLATE PROCEEDINGS THE LD.AR SUBMIT TED THAT THE APPELLANT WAS ENGAGED IN THE BUSINESS OF TRADING IN POLISHED DIAMONDS AND MANUFACTURING OF JEWELLERY. THE APPELLANT HAD R EQUESTED THE A.O. TO FURNISH THE COPIES OF DOCUMENTS RELIED UPON BY H IM FOR TREATING THE PURCHASES AS BOGUS AND TO ALSO ALLOW CROSS EXAMINAT ION OF THE ALLEGED PARTIES. NEITHER OF THE REQUEST WERE GRANTED BY THE A.O. THE APPELLANT HAD FURNISHED DETAILED CHART SHOWING NAME OF PARTIE S, DATE OF PURCHASE, QUANTITY IN CARATS, AMOUNT IN RUPEES AND DETAILS OF EXPORTS MADE AGAINST EACH PURCHASES. STOCK BOOK REFLECTING THE PURCHASES WERE ALSO PRODUCED. LEDGER ACCOUNTS IN RESPECT OF T HE PURCHASES AND COPY OF INVOICES FOR THE PURCHASE AND CORRESPONDING SALES WERE ALSO FURNISHED. IT WAS CONTENDED THAT THE INITIAL BURDEN ON THE APPELLANT TO PROVE THE GENUINENESS OF THE PURCHASES WAS FULFILLE D. THE A.O HAS NOT CONDUCTED ANY ENQUIRY AS REGARDS THE ALLEGED BOGUS TRANSACTIONS OF THE APPELLANT. NO DEFECTS HAVE BEEN FOUND IN THE BO OKS. THE COPIES OF THE MATERIAL BASED ON WHICH THE A.O. CONCLUDED THAT THE PURCHASES ARE NOT GENUINE WAS NOT PROVIDED TO THE APPELLANT. ONCE THE SALES (PRIMARILY EXPORTS) ARE NOT DOUBTED, NO ADDITION CA N BE MADE BY DOUBTING THE PURCHASES. AS REGARDS THE ABSENCE OF D ELIVERY CHALLAN, IT WAS SUBMITTED THAT THE A.O COMPLETELY IGNORED CONFI RMATION ON THE PURCHASE BILLS BY THE APPELLANT BY SIGNING ON THE F ACE OF THE BILL AS IS THE PRACTICE IN DIAMOND TRADE. THE ALLEGATION THAT THE PURCHASE IS FROM ITA NO. 1050/MU M/2018-VEGA JEWELDIAM PVT. LTD. 4 GREY MARKET IS BASED ON PRESUMPTIONS AND SURMISES. IT WAS ALSO CONTENDED THAT THE ESTIMATION OF GROSS PROFITS @8% WAS QUITE HIGH REFERENCE WAS MADE TO ITS OWN TRANSFER PRICING STUD Y REPORT AND THE REPORT OF TASK GROUP SUBMITTED IN FEBRUARY 2013 PRE SENTED TO THE COMMERCE AND INDUSTRY MINISTRY. IT WAS ALSO SUBMITT ED THAT ALL THE IMPUGNED PURCHASES ARE EXPORTED. POLISHED DIAMONDS ARE PURCHASED LOCALLY AND EXPORTED. FURTHER, THAT WHERE H FORM IS SUBMITTED, THERE IS NO LEVY OF VAT AND IN THE CASES WHERE VAT IS LEVIED , THE SAME IS REFUNDED SUBSEQUENTLY AFTER EXPORT OF DIAMONDS. THE APPELLANT RELIED ON THE DECISION OF THE HON'BLE ITAT IN THE CASE OF SAY INDIA JEWELLERS IN ITA NO.6735/MUM/2010 STATING THAT NO ADDITION SH OULD BE MADE. 4.4. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT CAREFULLY. IN THE FACE OF CATEGORICAL DENIAL BY THE ALLEGED SUPPLIERS OF DIAMONDS OF ANY REAL SUPPLY OF GOODS, AND THE APPELLANT'S INABILITY TO ESTABLISH THE FACTS TO BE OTHERWISE, THE DISALLOWANCE OF PURCHASES IS C LEARLY IN ORDER. THE ACTION OF THE ASSESSING OFFICER OF DISALLOWING A PE RCENTAGE OF IMPUGNED PURCHASES IS IN LINE WITH THE VIEW EXPRESSED IN THE DECISIONS SUCH AS IN THE CASE OF CIT VS. BHOLANATH POLYFAB PVT. LTD . (2013) 355 ITR 290 AND THEREAFTER IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 219 TAXMAN 85 (GU]. 4.5. IT IS NOTED THAT THERE IS NOTHING DISTINGUISHA BLE TO IDENTIFY THE SALES AS CORRESPONDING TO THE PURCHASES. HOWEVER, THE SUB MISSION THAT THE MARGIN ON TRADING IN POLISHED DIAMONDS IS LOW IS SU PPORTED BY THE REPORT OF THE TASK GROUP FOR DIAMOND SECTOR SUBMITT ED TO DEPARTMENT OF COMMERCE IN WHICH IT WAS REPORTED THAT NET PROFI T IN DIAMOND MANUFACTURING IS IN THE RANGE OF 1.5 TO 4.5% AND IN TRADING IN THE RANGE OF 1 TO 3%. THE APPELLANTS BUSINESS IS OF TRA DING IN POLISHED DIAMONDS IN RESPECT OF THE IMPUGNED PURCHASES. THUS , A MARGIN OF 4% IS CONSIDERED TO BE APPROPRIATE. 10. ON A CAREFUL CONSIDERATION OF THE TOTALITY OF F ACTS AND CIRCUMSTANCES AND THE FINDINGS OF THE LD.CIT(A), WE DO NOT SEE AN Y VALID REASON TO INTERFERE WITH THE FINDINGS AND THE DECISION ARRIVE D AT BY THE LD.CIT(A) IN ESTIMATING THE GROSS PROFIT AT 4% OF THE BOGUS PURCHASES AS AGAINST 8% ESTIMATED BY THE ASSESSING OFFICER. THUS, WE UPHOLD THE ORDER OF THE LD.CIT(A) FOR ALL THESE ASSESSMENT YEARS I.E. 2010- 11, 2011-12 AND 2012-13. 11. IN THE RESULT, APPEALS OF THE ASSESSEE ARE DISM ISSED. ITA NO. 1050/MU M/2018-VEGA JEWELDIAM PVT. LTD. 5 5. CONSIDERING THE DECISION OF TRIBUNAL ON IDENTICAL G ROUNDS OF APPEAL FOR EARLIER YEARS, WE DO NOT FIND ANY MERIT IN THE GROU NDS OF APPEAL RAISED BY REVENUE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/04/2019. SD/- SD /- RAMIT KOCHAR PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 03.04.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI