A.B.EXPORTS, MUMBAI V. INCOME TAX OFFICER WARD-19(1)(1), MUMBAI

ITA 1455/MUM/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6969 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 08-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA LD
• Assessee Lawyers: MRUGAKSHI K JOSHI LD
• Keywords: Bogus purchase; Opportunity of cross examination; Accommodation entries; Reassessment proceedings
• Section: 147; 148

Judgement Text

ITA.NO.1455/MUM/2018 A.B EXPORTS ASSESSMENT YEAR- 2010-11 - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.1455/MUM/2018 ( / ASSESSMENT YEAR: 2010-11) A . B . EXPORTS CHITRAKUT BUILDING MALABAR HILL MUMBAI 400 006 / VS. INCOME TAX OFFICER WARD-19(1)(1) 2 ND FLOOR, MATRU MANDIR TARDEO ROAD MUMBAI- 400 007 ! ./ ./PAN/GIR NO. AALFA-8367-R ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : MRUGAKSHI K. JOSHI, LD.AR REVENUE BY : N. HEMALATHA, LD. DR / DATE OF HEARING : 23/05/2018 / DATE OF PRONOUNCEMENT : 23/05/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIONER OF IN COME-TAX (APPEALS)-51 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-51/IT-104/19(1)(1)/17- 18 DATED 01/01/2018 QUA CONFIRMATION OF CERTAIN ADDITIONS ON ACCOUNT OF ALLEGED BOGUS PURCHASES . THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED ITA.NO.1455/MUM/2018 A.B EXPORTS ASSESSMENT YEAR- 2010-11 2 BY LD. INCOME TAX OFFICER 19(1)(1), MUMBAI [AO]U/S 143 (3) READ WITH SECTION 147 OF THE INCOME TAX ACT,1961 ON 21/03/2016 WHEREIN THE INCOME OF THE ASSESSEE HAS BEEN DETERMINED AT RS.46 ,820/- AFTER CERTAIN ADDITIONS AS AGAINST NIL INCOME FILED BY THE ASSESSEE ON 03/01/2012 WHICH WAS PROCESSED U/S 143(1). THE ISSUE UNDER AP PEAL IS QUANTUM ADDITION AGAINST CERTAIN ALLEGED BOGUS PURCHASES. DURING IMPUGNED AY, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXPORT OF DIAMONDS. 2.1 THE REASSESSMENT PROCEEDINGS WERE INITIATED UPO N RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE MADE SUSPICIOUS PURCHASES OF RS.5,85,200/- FROM AN ENTITY NAMELY MANIPRABHA IMPEX PRIVATE LIMITED . THE SAID ENTITY WAS PART OF RAJENDRA JAIN / SANJAY CHOWDARY / DHARMICHAND GROUP , WHO WAS SUBJECTED TO SEARCH / SURVEY OPERATIONS BY THE DEPA RTMENT ON 03/10/2013, WHEREIN IT WAS FOUND THAT THE SAID GROU P, THROUGH WEB OF NUMEROUS ENTITIES, WAS ENGAGED IN PROVIDING ACCOMMO DATION ENTRIES OF BOGUS PURCHASE/SALES/LOANS & ADVANCE S TO MANY PARTIES. CONSEQUENTLY NOTICE U/S 148 DATED 23/03/2015 WAS IS SUED TO THE ASSESSEE WHICH WAS FOLLOWED BY STATUTORY NOTICES U/ S 143 (2) & 142(1). 2.2 THE ASSESSEE, WHILE DEFENDING THE PURCHASES MA DE BY HIM, INTER- ALIA SUBMITTED COPIES OF INVOICES, BANK STATEMENT EVIDEN CING PAYMENT TO THE SAID ENTITY, CONFIRMATION LETTER AND STOCK REGI STER ETC. HOWEVER, NOT CONVINCED, LD. AO NOTED THAT ALL THE CONCERN OF THE SAID GROUP WERE NOT DOING ANY ACTUAL BUSINESS BUT ONLY BEING OPERATED A S CONDUITS FOR ISSUING ACCOMMODATION ENTRIES. THE STATEMENT MADE D URING SEARCH OPERATION WAS ALSO CONSIDERED. THE ASSESSEE FAILED TO PRODUCE THE SAID PARTY FOR CONFIRMATION OF PURCHASES. FINALLY, NOT C ONVINCED WITH ITA.NO.1455/MUM/2018 A.B EXPORTS ASSESSMENT YEAR- 2010-11 3 ASSESSEES SUBMISSIONS, LD.AO ESTIMATED THE ADDITIO NS AGAINST THE ABOVE PURCHASES @8% WHICH RESULTED INTO IMPUGNED AD DITIONS OF RS.46816/- IN THE HANDS OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME ON L EGAL GROUND AS WELL AS ON MERITS WITH PARTIAL SUCCESS BEFORE LD. C IT(A) VIDE IMPUGNED ORDER DATED 01/01/2018 WHEREIN LD. CIT(A) WHILE UPH OLDING THE INVOCATION OF REASSESSMENT PROCEEDINGS, PROVIDED PA RTIAL RELIEF TO THE ASSESSEE IN THE FOLLOWING MANNER:- 6.6. NOW THE ISSUE TO BE ADJUDICATED IS WHAT IS THE REASONABLE PROFIT PERCENTAGE TO BE ADOPTED FOR COMPUTING THE PROFITS ARISING FROM T HE ALLEGED HAWALA PURCHASES. IT IS PERTINENT TO MENTION THAT THE CBDT THROUGH INSTRUCT ION NO.2/08 DATED 22/02/2008 HAS REVISED THE RATE OF PROFIT MARGIN FROM 8% TO 6% IN RESPECT OF GEMS AND JEWELLERY BUSINESS. THUS, IT CAN BE SEEN THAT THE INCOME TAX DEPARTMENT CONSIDER 6% OF PROFIT MARGIN TO BE REASONABLE FOR THE BUSINESS OF GEMS & JEWELLERY. HOWEVER THIS MARGIN OF 6% IS REASONABLE FOR AN ASSESSEE WHICH IS NOT INDULGING IN HAWALA PURCHASES. IT HAS BEEN NOTED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P SHETH (SUPRA) THAT THE MARGINS IN RESPECT OF HAWALA PURCHASES AR E MUCH HIGHER DUE TO SAVINGS ON ACCOUNT OF EVASION OF VARIOUS GOV ERNMENT LEVIES. THEREFORE, IT WILL BE APPROPRIATE IF THE REASONABLE PROFIT MARGIN ARIS ING TO THE ASSESSEE ON ACCOUNT OF THE ALLEGED HAWALA PURCHASES IS ADOPTED OF 8%. HOWE VER, THE AO WHILE MAKING THE ADDITION ON ACCOUNT OF THE ADDITIONAL PROFIT MARGIN S ARISING ON THE HAWALA PURCHASES SHOULD REDUCE THE PROFIT MARGINS ALREADY SHOWN BY T HE ASSESSEE IN ITS BOOKS IN RESPECT OF THE SAID HAWALA PURCHASES FROM THE SAID PROFIT MARGIN COMPUTED BY ADOPTING PROFIT MARGIN OF 8% FOR THE ALLEGED HAWALA PURCHASES. ACCORDINGLY, GROUND NO.2 OF THE APPEAL IS PARTLY ALLOWED. STILL AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE, MS. MRUGAKSHI JOSHI , WHILE DRAWING OUR ATTENTION TO THE DOCUMENTS PLAC ED IN THE PAPER- BOOK CONTESTED THE ADDITIONS AS SUSTAINED BY LOWER AUTH ORITIES WHICH WERE CONTROVERTED BY LD. DEPARTMENTAL REPRESENTATIV E, MS.N.HEMALATHA. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS AND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING CITED CASE LA WS. SO FAR AS THE LEGALITY OF REASSESSMENT PROCEEDINGS ARE CONCERNED, WE FIND THAT ITA.NO.1455/MUM/2018 A.B EXPORTS ASSESSMENT YEAR- 2010-11 4 ORIGINAL RETURN FILED BY THE ASSESSEE HAS BEEN PROC ESSED U/S 143(1) AND THEREFORE, THE ONLY REQUIREMENT TO BE FULFILLED TO INITIATE THE REASSESSMENT PROCEEDINGS WAS THAT LD. AO HAD REASONS TO BELIEVE THAT CERTAIN INCOME HAS ESCAPED ASSESSMENT. IN THE PRESENT CASE, THE REOPENING HAS BEEN INITIATED UPON RECEIPT OF CONCRETE INFORMATION FROM INVESTIGATION WING WHICH SUGGESTED ESCAPEMENT OF INCOME IN THE HANDS O F THE ASSESSEE. THEREFORE, WE CONCUR WITH THE STAND OF LD. FIRST AP PELLATE AUTHORITY IN UPHOLDING THE REASSESSMENT PROCEEDINGS AND DISMISS THIS GROUND OF ASSESSEES APPEAL. 6. SO FAR AS THE MERITS OF THE CASE ARE CONCERNED, THE MAIN STRESS OF LD. ARS ARGUMENT IS THAT THE PURCHASES WERE MADE B Y THE ASSESSEE FROM THE SAID ENTITY AND THE SAME WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND THE SUPPLIER, DULY CONFIRMED THE SAME. IT HAS ALSO BEEN SUBMITTED THAT NO OPPORTUNITY OF CROSS EXAMINATION HAS BEEN PROVIDED TO THE ASSESSEE AND THEREFORE, THE ADDITIONS WERE NOT JUSTIFIED. WE ARE OF THE CONSIDERED OPINION THAT THERE COULD BE NO SALE WITHOUT PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF B USINESS. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISP UTED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANN ELS. THE ASSESSEE RECONCILED QUANTITATIVE DETAILS ALSO TO SO ME EXTENT. HOWEVER, AT THE SAME TIME, THE ASSESSEE REFLECTED PURCHASES FROM AN ENTITY WHICH WAS BEING CONTROLLED BY THE ABOVE STATED TAINTED GROUP. THE SEARCH / SURVEY ACTION ON THE SAID GROUP ON 03/10/2013 BY DGIT (INV.) REVEALED THAT THE SAID GROUP CONSISTING OF NUMEROUS BUSINESS ENTITIES, NUMBERING MORE THAN 70, WAS ENGAGED IN PROVIDING ACCOMMODATION PURCHASES BILLS & ACCOMMODATION LOANS & ADVANCES. IT WAS FOUND OUT THAT THE ITA.NO.1455/MUM/2018 A.B EXPORTS ASSESSMENT YEAR- 2010-11 5 EMPLOYEES / THEIR RELATIVES ETC. OF THE SAID GROUP WERE MERELY NAME LENDING DIRECTORS / PARTNERS / PROPRIETORS OF NUMER OUS CONCERNS WHICH WERE OPERATING UNDER THE CONTROL OF SAID GROUP. THE STATEMENTS OF CONCERNED PERSONS REVEALED THAT THE FIRMS WERE INDU LGING IN ACCOMMODATION BILLS WITHOUT DOING ANY ACTUAL BUSINE SS AND THOSE PERSONS HAD NO KNOWLEDGE ABOUT THE BUSINESS BEING C ARRIED OUT BY THE SAID CONCERNS. IN SUCH A SCENARIO, THE SUBMISSIONS OF THE LD. AR COULD NOT BE ACCEPTED SINCE THE INITIAL ALLOWANCE OF SUBS TANTIATING THE PURCHASES SQUARELY LIE ON THE ASSESSEE AND THE SAME , IN OUR OPINION, HAS REMAIN UN-DISCHARGED. THEREFORE, IN SUCH A SCEN ARIO, THE ACTION OF LD. CIT(A) IN ESTIMATING THE IMPUGNED ADDITIONS @8% WITH BENEFIT OF DECLARED PROFIT WAS QUITE JUSTIFIED AND DO NOT CAL L FOR ANY FURTHER INTERFERENCE FROM OUR SIDE IN ANY MANNER. SO FAR AS THE RELIANCE OF LD. AR ON CERTAIN JUDICIAL PRONOUNCEMENTS IS CONCERNED, WE FIND THAT THE SAME HAVE BEEN RENDERED ON PECULIAR FACTS OF EACH C ASE AND THEREFORE, COULD NOT BE RELIED UPON BLINDLY WITHOUT CONSIDERIN G THE FACTUAL MATRIX OF EACH CASE. THIS GROUND OF ASSESSEES APPEAL STAND D ISMISSED. 7. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE ST AND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2018 SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 23.05.2018 SR.PS:- THIRUMALESH ITA.NO.1455/MUM/2018 A.B EXPORTS ASSESSMENT YEAR- 2010-11 6 ! / 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