KESHAVLAL DALPATBHAI ZAVERI & CO, MUMBAI V. ITO WD 6(2)(2), MUMBAI

ITA 1249/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2755 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 27-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 13-02-2013
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN LD
• Assessee Lawyers: ASHI F A KHAN LD
• Keywords: Bogus purchase; Corroborative evidences; Accommodation entries
• Section: 143(3); 133(6); 147; 131; 148

Judgement Text

ITA NO . 1249 /MUM/201 3 - M/S. KESHAVLAL DALPATBHAI ZAVERI & CO. - A - JM 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH: MUMBAI BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SRI RA M IT KOCHAR, AM I.T.A NO . 1249 / MUM/201 3 A.Y 200 6 - 07 M/S. KESHAVLAL DALPATBHAI VS. I.T.O WARD 16(2) (2), MUMBAI ZAVERI & CO. PAN: AADFK 4810D ( APPELLANT / ASSESSEE ) ( RESPONDENT / DEPARTMENT ) FOR THE APPELLANT/ ASSESSEE : MS. ASHI F A KHAN, LD.AR FOR THE RESPONDENT/ DEPARTMENT: SHRI A.RAMACHANDRAN, LD.SR.DR DATE OF HEARING: 30 - 06 - 2016 DATE OF PRONOUNCEMENT : 08 - 0 7 - 2016 ORD ER SHRI MAHAVIR SINGH, JUDICIAL MEMBER : TH IS APPEAL OF THE ASSESSEE IS ARISING OUT OF THE ORDER OF C IT(A) IN A PPEAL NO. CIT(A) 28/ITO 16(2)/436/2009 - 10 DATED 21 - 01 - 2013. ASSESSMENT WAS FRAMED BY ITO - 1 6( 2 )( 2 ) , MUMBAI FOR THE ASSESSMENT YEAR 200 6 - 07 U/ S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 29 - 12 - 20 09 . 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) IN CONFIRMING THE ACTION OF THE AO FOR RE - OPENING OF ASSESSME NT U/S. 147 R.W.S 148 OF THE ACT . 3. AT THE OUTSET, THE LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE STATED THAT SHE HAS INSTRUCTION FROM ASSESSEE NOT TO PRESS THIS ISSUE. ACCORDINGLY, SHE REQUEST ED THE BENCH TO DISMISS THE SAME AS NOT PRESSED. IN VIEW OF ABOVE CONCESSION OF THE LD. COUNSEL FOR THE ASSESSEE , WE DISMISS THIS ISSUE OF ASSESSEES APPEAL AS NOT PRESSED. 4. N EXT ISSUE OF THIS ASSESSEES APPEAL WITH REGARD TO THE ORDER OF THE CIT(A) CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF BOGUS PURCHASE MADE BY THE ASSESSEE FROM M/S. ZALAK IMPEX AMOUNTING TO RS. 29, 2 3,741/ - . ITA NO . 1249 /MUM/201 3 - M/S. KESHAVLAL DALPATBHAI ZAVERI & CO. - A - JM 2 5. BRIEFLY STATED FACTS A R E THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING, MANUFACTURING OF GOLD ORNAMENTS AND ARTICLE S OF GOLD AND SILVER ARTICLES . THE ASSES SEE IS A PARTNERSHIP FIRM. THE AO RECEIVED INFORMATION FROM ITO, 25 (2)(1) , MUMBAI THAT THE ASSESSEE HAS TAKEN BOGUS PURCHASES FROM M/S. . ZALAK IMPEX AMOUNTING TO RS. 29,23,741/ - . ACCORDING TO ITO, 25(2)(1) , MUMBAI SHRI HITEN L. RAWAL PROP OF M/S. ZALAK IMPEX IN HIS STATEMENT RECORDED U/S. 131 BY THE DDIT (INV) , UNIT IV (3), MUMBAI , HAS ADMITTED THAT HE IS PROVIDING ACCOMMODATION ENTR IES IN THE FORM OF SALES AND PURCHASE S . IN VIEW OF THIS STATEMENT, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF PURCHA SES MADE FROM M/S. ZALAK IMPEX ALONG WITH LEDGER ACCOUNT, INVOICES, PURCHASES, SALES, PAYMENTS MADE, CASH BOOK, LEDGER AND OTHER BOOKS OF ACCOUNTS AND SUPPORTING VOUCHERS. THE ASSESSEE PRODUCED COMPLETE DETAILS, BUT THE AO HAS NOT CONSIDERED THE DOCUMENT S AND EXPLANATION OF THE ASSESSEE . HE MADE THE ADDITION BY OBSERVING AS UNDER: - THE ASSESSEE VIDE LETTER DATED 10 - 12 - 2009 HAS FURNISHED AN EXTRACT OF PURCHASE AND SALES REGISTER INDICATING THE ENTRIES FOR PURCHASES MADE FROM M/S. . ZALAK IMPEX W HEREIN THE PURCHASES OF CUT & POLISHED DIAMONDS OF 147.28 CTS ON 27 - 05 - 2005 AND 125.80 CTS ( AS PER LIST) ON 09 - 06 - 2005 ARE SHOWN. SINCE M/S. ZALAK IMPEX DID NOT REPLY TO THE NOTICE ISSUED U/S. 133(6) OF THE I.T ACT , THE CONTENTION OF THE ASSESSEE CANNOT BE FULLY RELIED UPON. HENCE, THE ASSESSEES CONTENTION THAT THEY HAVE PURCHASED CUT & POLISHED DIAMONDS FROM M/S. ZALAK IMPEX IS REJECTED. THEREFORE, THE AMOUNT OF RS. 29,23,741/ - IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. A GGRIEVED, AGAINST THIS ADDITION/DISALLOWANCE OF PURCHASES THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) . 6. THE CIT(A) ALSO CONFIRMED THE ACTION OF THE AO VIDE PARA 12 OF HIS ORDER AS UNDER: - 12. I HAVE CONSIDERED THE FACTS OF THE CASE. IT IS IMPORT ANT TO MENTION OVER HERE THAT SHRI HITEN L. RAVAL IN HIS STATEMENT BEFORE THE DDIT (INV) HAD VERY CLEARLY AND CATEGORICALLY MENTIONED THAT HE WAS NOT DOING ANY BUSINESS OF SALE AND PURCHASE OF DIAMOND AND THAT HE WAS PROVIDED ONLY ACCOMMODATION ENTRIES AND THAT HE WAS ONLY GETTING A SUM OF RS. 2,000/ - PER MONTH IN LIEU OF THE SAME. THE STATEMENT GIVEN BY SHRI HITEN L. RAWAL BEFORE THE DDIT (INV.) HAS BEEN CONFIRMED BY HIM, IN THE CROSS EXAMINATION BY THE ASSESSEE AND THE ASSESSEE DID NOT ASK ANY FUR THER CROSS QUESTION TO HIM. IN VIEW OF THESE FACTS, I AGREE WITH THE AO THAT THE BILLS ISSUED BY M/S. ZALAK IMPEX, PROP: SHRI HITEN L. RAVAL WERE BOGUS BILLS IN NATURE OF ACCOMMODATION ENTRIES AND THEIR TRANSACTION OF PURCHASE OF RS.29,23,741/ - CANNOT BE HELD AS GENUINE. IN RESULT, THE ADDITION OF RS.29,23,741/ - MADE BY THE AO IN ASSESSMENT DOES NOT CALL FOR ANY INTERFERENCE AND THE SAME IS THEREFORE, UPHELD. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. AGGRIEVED, NOW THE ASSESSEE IS IN SECOND APPEAL BE FORE THE TRIBUNAL. ITA NO . 1249 /MUM/201 3 - M/S. KESHAVLAL DALPATBHAI ZAVERI & CO. - A - JM 3 7. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE PURCHASES MADE FROM M/S. JHALAK IMPEX ARE GENUINE PURCHASES AND FOR THIS THE ASSESSEE HAS FILED COMPLETE SUPPORTING EVIDENCES BEFORE THE AO DURING THE COURSE OF ORIGINAL ASSE SSMENT PROCEEDINGS. SHE EXPLAINED THAT THE ASSESSEE HAS PRODUCED STOCK TALLY I.E QUANTITATIVE AND QUALIT ATIVE DETAILS OF STOCK, PAYMENTS MADE TO PARTY M/S. JHALAK IMPEX BY WAY OF CHEQUE FOR THE ENTIRE PURCHASES OF RS. 29,33,741/ - . SHE EXPLAINED THAT AL L THE PURCHASES ARE DULY RECORDED IN THE BOOKS OF ACCOUNT AND PAYMENT IS ALSO DULY RECORDED. SHE ALSO EXPLAINED THAT THE ASSESSEE ALSO PRODUCED THE COPY OF SALES, INVOICES OF ALL THE ITEMS PURCHASED FROM M/S. ZALAK IMPEX ALONG WITH THE CUSTOMERS LEDGER AC COUNT. SHE ALSO EXPLAINED THAT THE COMPLETE VAT RETURN FOR THE RELEVANT QUARTER I.E APRIL 05 TO JUNE 05 AND COPY OF THE VAT ASSESSMENT ORDER FOR THE FY 2006 - 07 WAS ALSO PRODUCED BEFORE THE AO. BUT THE AO HAS NEVER DOUBTED SALES MADE TO PARTIES OUT OF STO CK PURCHASED FROM M/S. ZALAK IMPEX . SHE PRODUCED COMPLETE DOCUMENTS IN THE PAPER BOOK AND ALSO STATED THAT EVEN THE GROSS PROFIT RATE ADOPTED BY THE ASSESSEE IS MUCH HIGHER IN THE SIMILAR CASES OF SIMILAR TRADE. TH E ASSESSEES GROSS PROFIT IS @ 13.74 % . IN V IEW OF THESE FACTS AND CIRCUMSTANCES, SHE ARGUED THAT SIMILAR ADDITION ON ACCOUNT OF BOGUS PURCHASES MADE FROM M/S. ZALAK IMPEX WAS DELETED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 7593/MUM/2011 FOR THE A.Y 2006 - 07 VIDE ORDER DATED 31 - 07 - 2015. IN VIEW OF THIS THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE PURCHASES MADE BY THE ASSESSEE FROM M/S. ZALAK IMPEX ARE GENUINE. HENCE, THE ADDITION ON THIS COUNT IS TO BE DELETED. ON THE OTHER HAND, THE LD. SR.DR HAS RELIED ON THE ORDERS OF THE LOWER AU THORITIES. 8 . WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCE S OF THE CASE. WE FIND FROM THE FACTS OF THE CASE AND ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE AS WELL AS THE LD. SR.DR THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS MADE PURCHASES FROM M/S. JHALAK IMPEX AMOUNTING TO R S. 29,23,741/ - . THE AO ADDED THE SAME FOR THE REASON THAT THE PROPRIETOR OF M/S. JHALAK IMPEX SH HITEN L. RAWAL BEFORE THE DDIT(INV) , MUMBAI ADMITTED THAT HE IS PROVIDING THE BOGUS ENTRI ES OF SALE S AND PURCHASE S . WE HAVE GONE THROUGH THE STATEMENT OF SHRI HITEN L. RAVAL DATED 3 - 11 - 06 , WHICH WAS SHOWN TO U S BY THE LD. COUNSEL FOR THE ASSESSEE , WHICH NEVER NOTED THE NAME OF THE ASSESSEE OR HAS NOT ALLEGED IN THE STATEMENT THAT HE HAS PROVID ED ANY ACCOMMODATION ENTRY TO THE ASSESSEE SPECIFICALLY. WE AL S O FIND THAT THE ASSESSEE PRODUCED COMPLETE BOOKS OF ACCOUNT AND SUPPORTING BILLS AND VOUCHERS OF SALES ITA NO . 1249 /MUM/201 3 - M/S. KESHAVLAL DALPATBHAI ZAVERI & CO. - A - JM 4 AND PURCHASES AND ALSO EXPENSES. THE ASSESSEE PROVIDED THE COMPLETE STOCK TALLY WITH QUAN TITY AND QUALITY BEFORE THE AO . THIS PARTICULAR PURCHASE MADE FROM M/S. ZA LAK IMPEX IS ALSO SOLD TO OTHER PARTY, AMRITA JEWELLERS. THIS FACT WAS PRODUCED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US, WHICH READS AS UNDER: - WORKING OF GROSS PROFIT ON ALLEG ED BOGUS PURCHASE AND SALES THEREOF PURCHASES DATE QTY RS. SALES DATE ZALAK IMPEX 25/05/2005 147.20 1,510,993 M/S.AMRITA JEWELLERS 27/05/2005 ZALAK IMPEX 09/06/2005 125.80 1, 383 , 800 M/S.AMRITA JEWELL ERS 10 /0 6 /2005 1,383,800 M/S.AMRITA JEWELLERS 13/08/2005 2,894,793 QTY RS. GROSS PROFIT GP% 147.20 1,772,979 120.51 1,506,375 5.29 78,292 125.80 1,584,667 3,357,646 462,853 13.79 WE FIND THAT THE SUBSEQUENT SAL E IS NOT DOUBTED AND EVEN THE PAYMENT WAS MADE BY CHEQUE, WHICH IS NEVER D OUBTED BY THE AO. ONCE THE A O ACCEPTED THE SALES MADE BY ASSESSEE AS GENUINE OF THE SAME PURCHASES, THE PURCHASES CANNOT BE HELD TO BE BOGUS IN VIEW OF THE GIVEN FACTS AND CIRCUMSTAN CES. WE ALSO FIND THAT THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF TR ISTAR JEWELLERY EXPORT S P RIVATE LTD (SUPRA) HAS ALLOWED THE ISSUE OF BOGUS PURCHASE IN FAVOUR OF THE ASSESSEE VIDE PARA 10 IN ITA NO.7593/MUM/2011 DATED 31 - 7 - 2015 . 10. FURTHER , EVEN OTHERWISE, BEFORE THE A.O., THE ASSESSEE HAD CONTENDED, BY WRITTEN SUBMISSIONS FILED ON 25 - 11 - 2010, INTER ALIA, THAT DURING THE YEAR, THEY HAD PURCHASED DIAMONDS WORTH RS. 4,09,12,718/ - FROM M/S ZALAK IMPEX; THAT THE ASSESSEE BEING IN AN EXPORT PROM OTION ZONE, THE MOVEMENT OF ITS GOODS IS CONTROLLED AND CUSTOMS APPROVED; THAT THE PURCHASES BEING APPROVED PURCHASES, THERE WAS NO QUESTION OF THEIR BEING BOGUS PURCHASES. THE ASSESSEE ENCLOSED THE CUSTOM APPROVED INVOICES IN RESPECT OF PURCHASES FROM ZAL AK IMPEX. THESE INVOICES HAVE BEEN PRODUCED BEFORE US ALSO, IN THE PAPER BOOK FILED BY THE ASSESSEE. AS PER THESE INVOICES, THE GOODS PURCHASED HAD BEEN VERIFIED AND APPROVED BY THE CUSTOMS AUTHORITY. THIS CLEARLY SHOWS THAT THE GOODS HAD ACTUALLY BEEN PUR CHASED AND RECEIVED BY THE ASSESSEE. AS SUCH, THESE PURCHASES COULD NOT HAVE, BY ANY STRETCH OF IMAGINATION, BEEN TREATED AS BOGUS PURCHASES. IT IS ALSO NOTEWORTHY THAT THE PAYMENTS MADE BY THE ASSESSEE TO ZALAK IMPEX WERE THROUGH ACCOUNT PAYEE CHEQUES ONL Y. NEITHER OF THE TAXING AUTHORITIES, HOWEVER, TOOK THESE INVOICES INTO CONSIDERATION AND WRONGLY HELD THE ASSESSEES PURCHASES FROM ZALAK IMPEX TO BE BOGUS PURCHASES. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THESE INVOICES WERE SELF MADE OR FABRICA TED. MOREOVER, THE COMPARATIVE CHART OF PURCHASES MADE DURING THE YEAR AND THE SELLING PRICE (PAGE 141 - 144), AS FILED BEFORE THE LD. CIT(A) HAS NOT BEEN REFUTED AND THIS ALSO GOES TO PROVE THE THEORY OF BOGUS BILLS AND ACCOMMODATION ENTRIES TO BE WRONG. TH EREFORE, THE ORDER UNDER APPEAL IS A RESULT OF COMPLETE MISREADING AND NON - READING OF COGENT ITA NO . 1249 /MUM/201 3 - M/S. KESHAVLAL DALPATBHAI ZAVERI & CO. - A - JM 5 DOCUMENTARY EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE. FOR THIS REASON ALSO, ALONG WITH THE REASON THAT THE SALES MADE BY THE ASSESSEE WERE NEVER QUESTIONED, THE ADDITION IS DELETED IN TOTO. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE VIEW T HAT THE AO COULD NOT PROVE THE PURCHASES MADE BY THE ASSESSEE FROM M/S. JHALAK IMPEX ARE BOGUS. ACCORDINGLY, WE DELETE THIS ADDITION AND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS STATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 08 .0 7 .2016 DATED: 08 - 07 - 2016 *PP /SR.P.S. SD/ - RAMIT KOCHAR ACCOUNTANT MEMBER SD/ - MAHAVIR SINGH JUDICIAL MEMBER ITA NO . 1249 /MUM/201 3 - M/S. KESHAVLAL DALPATBHAI ZAVERI & CO. - A - JM 6 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT / ASSESS EE : M/S. KESHAVLAL DALPATBHAI ZAVERI & CO. C/O M/S P.R GANDHI & CO 56/57 MITTAL CHAMBERS, 228 NARIMAN POINT, MUMBAI - 400021. 2 RESPONDENT /DEPARTMENT : THE INCOME TAX OFFICER - 16(2), MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 007. 3 . THE CIT, 4 . THE CIT(A), MUMBAI 5 . DR, MUMBAI BENCHES, MUMBAI TRUE COPY, BY ORDER, / ASSTT. REGISTRAR