Musaddilals Jewellers (India) Private Limited., Hyderabad. V. Asst. Commissioner of Income Tax, Circle-16(2)., Hyderabad

ITA 1499/Hyd/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6570 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-06-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 23-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K VISHNU PRIYA
• Keywords: Bogus purchase; Search and seizure; Accommodation entries
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1499/HYD/2017 ASSESSMENT YEAR: 2012-13 MUSADDILALS JEWELLERS (INDIA) PVT. LTD., HYDERABAD. PAN AAFCM 4841 H VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 16(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.C. DEVDAS REVENUE BY : SMT. B.K. VISHNU PRIYA DATE OF HEARING 27/06/2018 DATE OF PRONOUNCEMENT 11/07/2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 16/06/2017 OF CIT(A) 4, HYDERABAD FOR AY 20 12-13. 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE COMP ANY, ENGAGED IN JEWELLERY BUSINESS, FILED ITS RETURN OF INCOME FOR THE AY 2012-13 ON 15/09/2012 ADMITTING INCOME OF RS. 2,00,34,421/-, W HICH WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT). SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS. ACCORDINGLY, STATUTORY NOTICES WERE ISSUED AND SERV ED ON THE ASSESSEE. 2.1 A SEARCH AND SEIZURE OPERATION U/S.132 OF THE I NCOME TAX ACT, 1961 IN THE CASE OF BANWARLAL JAIN GROUP, A LEADING ENTRY PROVIDER OF MUMBAI, WAS CARRIED OUT BY THE INVESTIGATING WING, MUMBAI ON 03/10/2013. AS PER THE SWORN STATEMENT GIVEN REGARD ING BENEFICIARIES 2 ITA NO. 1499/HYD/17 MUSADDILALS JEWELLERS (INDIA) PVT. LTD. OF ACCOMMODATION ENTRIES PERTAINING TO BOGUS PURCHA SES BY MS. BANWARLAL JAIN GROUP, WHICH IS COMMUNICATED TO AO V IDE DIT(1NV)-LI, HYDERABAD. IT WAS NOTED FROM THE INFORMATION RECEIV ED THAT, THE ASSESSEE-COMPANY MADE BOGUS PURCHASES AMOUNTING TO RS.15,72,350/- FROM M/S. EURO DIAM AND RS. 1,17,810 /- FROM M/S. MEGHA GEMS, BEING BENAMI CONCERNS OPERATED AND MANA GED BY BHANWARLAL JAIN, DURING THE FY 2011-12 RELEVANT TO THE AY UNDER CONSIDERATION. IN ORDER TO KNOW THE GENUINENESS OF ABOVE TRANSACTIONS AND OPPORTUNITY TO THE ASSESSEE-COMPAN Y, THE AO ISSUED SUMMONS U/S. 131 OF THE ACT, 1961, AND DULY SERVED ON THE ASSESSEE. A SWORN STATEMENT OF SRI ANANTH GUPTA, DI RECTOR OF THE ASSESSEE COMPANY WAS RECORDED UNDER OATH ON 12.03.2 015, THE CONTENTS OF WHICH WERE EXTRACTED BY THE AO IN HIS O RDER AT PAGE 2 & 3. ACCORDING TO AO, ASSESSEE FAILED TO SUBSTANTIATE THE SAID PURCHASE TRANSACTIONS TO BE GENUINE, HE, THEREFORE, TREATED THE SAME AS BOGUS PURCHASES AND MADE ADDITION OF RS. 16,90,160/- (15 ,72,350 + 1,17,810 PURCHASED FROM EURO DIAM AND MEGHA GEMS RE SPECTIVELY.) 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE STATED THAT THE DIAMONDS WERE PURCHASED FROM M/ S. EURO DIAM AT RS.15,72,350/ - A ND FROM M/S. MEGHA GEMS AT RS.1,17,810/-. IN THIS CONNECTION THE ASSESSEE SUBMITTED THE COPY OF MONTH WISE PURCHASE REGISTER OF DIAMONDS FOR THE PERIOD 01.04.2011 TO 31.03.2012, COPY OF PURCHA SE REGISTER FOR THE MONTH OF DECEMBER, 2011 AND FEBRUARY, 2012 COMP UTATION OF TOTAL INCOME, ANNUAL REPORT FOR FY 2011-12, COPY OF AUDITED FINANCIAL STATEMENTS I.E. BALANCE SHEET, PROFIT & LOSS ACCOUN T ALONG WITH COMPLETE SCHEDULES, COPY OF TAX AUDIT REPORT IN FOR M-3CA/3CD, COPY OF FORM-26AS, DETAILS OF TDS DEDUCTED PARTY WI SE, COPY OF BANK STATEMENT REFLECTING PURCHASE TRANSACTIONS AND PROO F OF RTGS 3 ITA NO. 1499/HYD/17 MUSADDILALS JEWELLERS (INDIA) PVT. LTD. PAYMENTS. IN THIS REGARD, ASSESSEE PLACED RELIANCE ON THE FOLLOWING ITAT ORDERS: (I) ITO VS. SRI DEEPAK POPATTAL GALA, IN ITA NO. 5920/MUM/2013, DATED 27.03.2015. (II) ACIT-21(1) VS. RAMESH KUMAR & CO, IN ITA NO. 2959/MUM/2014, DATED 28.11.2014. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1) THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS)-4, HYDERABAD IN CONFIRMING THE ADDITION OF RS.16,90,16 0 IS WHOLLY UNSUSTAINABLE BOTH ON LAW AND IN FACTS. 2) THE LEARNED CIT (A) HAVING FOUND AS A MATTER OF FACT THAT THE PURCHASE OF DIAMONDS WERE DULY ACCOUNTED FOR IN THE PURCHASE REGISTER AND WERE ALL PAID BY RTGS MODE OF PAYMENT ERRED IN CONFIRMING THE ADDITION WHICH IS TOTALLY CONTRARY T O THE FACTS AND EVIDENCE ON RECORD. 3) THE LEARNED CIT(A) FAILED TO NOTE THAT THE PURCH ASE OF DIAMONDS FROM M/S EURO DIAM AND M/S MEGHA GEMS AT RS.15,72,350 AND RS. 1,17,810 RESPECTIVELY WERE GEN UINE PURCHASES AND THEREFORE ERRED IN COMING TO A CONTRA RY CONCLUSION RESPECTIVELY WHILE CONFIRMING THE ADDITI ON. 4) ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 5. LD. AR SUBMITTED THAT AO DISALLOWED THE PURCHASE S BASED ON THE INFORMATION FROM INVESTIGATION WING WITHOUT PRO PERLY VERIFYING THE PURCHASES OR MAKING FURTHER INVESTIGATION. HE SUBMI TTED THAT ALL THE PURCHASES ARE GENUINE AND PROPERLY RECORDED IN THE FINANCIAL STATEMENT. HE BROUGHT TO OUR NOTICE THE FINANCIAL S TATEMENTS TO DEMONSTRATE THAT THE RESULTS DECLARED BY THE ASSESS EE ARE CONSISTENT OVER THE YEARS AND ALL THE QUANTITY DETAILS ARE MAT CHED WITH THE FINANCIAL RESULTS. HE FURTHER SUBMITTED THAT ASSESS EE WAS NOT PROVIDED 4 ITA NO. 1499/HYD/17 MUSADDILALS JEWELLERS (INDIA) PVT. LTD. OPPORTUNITY TO CROSS EXAMINE THE ENTRY PROVIDER. MO REOVER, THE MD HAS CATEGORICALLY DENIED KNOWING THE ENTRY PROVIDER PERSONALLY AND THE STATEMENTS WERE RECORDED AFTER TWO YEARS. IN T HIS PROCESS, HE RELIED ON THE FOLLOWING CASE LAW: 1. ACIT VS. M/S LARSCO ENTERTAINMENT PVT. LTD., 24 9/HYD/2014 2. ITO VS. PREMANAND, 25 SOT 11 ( ITAT, JODH.) 3. JAGADAMBA TRADING CO. VS. ITO, 16 SOT 66 (JODH. ) 4. MULTITEX FILTRATION ENGINEERS (P) LTD. VS. DCIT, 13 SOT 208 (DEL.) 5. CIT VS. NIKUNJ EXIMP ENTERPRISES (P) LTD., 372 I TR 619 6. MOHANLAL R. DAGA VS. ITO, 147 TAXMAN 28 7. CIT VS. BHOLANATH POLY FAB PVT. LTD., 355 ITR 29 0 (GUJ) 8. PRAKASH CHAND NATHA VS. CIT, 301 ITR 134 (MP) 9. CIT VS. MK BROTHERS, 163 ITR 249 (GUJ.) 10. CIT VS. SUNRISE TOOLING SYSTEM P. LTD., 361 ITR 206 (GUJ.) 11. CIT VS. PRADEEP KUMAR GUPTA AND VIJAY GUPTA, 30 3 ITR 95 (DEL.) 12. RAMLILA PRAVIN SHAH, ITA NO. 5246/MUM/2013. DT. 05/03/2015. 6. LD. DR RELIED ON THE ORDER OF CIT(A) AND SUBMITT ED THAT AO HAS ELABORATELY DISCUSSED THE ISSUE IN HIS REPORT. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT AO HAS DISALLOWED THE PURCHA SES MERELY BASED ON THE INFORMATION FROM INVESTIGATION WING WI THOUT MAKING FURTHER ENQUIRY. EVEN ASSESSEE WAS NOT GIVEN OPPORT UNITY TO CROSS EXAMINE THE ENTRY PROVIDER. THERE IS NO MATERIAL BR OUGHT BY THE AO ON RECORD TO SHOW THAT THE ASSESSEE HAS MADE BOGUS PUR CHASES. IN THIS CONNECTION, WE REFER TO THE FOLLOWING JUDGEMENTS OF THE HONBLE HIGH COURTS: 7.1 IN THE CASE OF CIT VS. NIKUNJ EXIMP ENTERPRISES (P) LTD., [2013] 216 TAXMAN 171 (BOM), THE HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSION ON BEHALF OF THE REVENUE. HOWEVER, FROM THE ORDER OF THE TRIBUNAL DA TED 30-04- 2010, WE FIND THAT THE TRIBUNAL HAS DELETED THE ADD ITIONS ON 5 ITA NO. 1499/HYD/17 MUSADDILALS JEWELLERS (INDIA) PVT. LTD. ACCOUNT OF BOGUS PURCHASES NOT ONLY ON THE BASIS OF STOCK STATEMENT I.E. RECONCILIATION STATEMENT, BUT ALSO I N VIEW OF THE OTHER FACTS. THE TRIBUNAL RECORDS THAT THE BOOKS OF ACCOUNTS OF THE RESPONDENT-ASSESSEE HAVE NOT BEEN REJECTED. SIM ILARLY, THE SALES HAVE NOT BEEN DOUBTED AND IT IS AN ADMITTED P OSITION THAT SUBSTANTIAL AMOUNT OF SALES HAVE BEEN MADE TO THE G OVERNMENT DEPARTMENT I.E. DEFENCE RESEARCH AND DEVELOPMENT LABORATORY, HYDERABAD. FURTHER, THERE WERE CONFIRMA TION LETTERS FILED BY THE SUPPLIERS, COPIES OF INVOICES FOR PURC HASES AS WELL AS COPIES OF BANK STATEMENT ALL OF WHICH WOULD INDI CATE THAT THE PURCHASES WERE IN FACT MADE. IN OUR VIEW, MERELY BE CAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE ASSESSING OF FICER OR THE CIT(A), ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT-ASSESSEE. THE ASSESSING OFFICER A S WELL AS CIT(A) HAVE DISALLOWED THE DEDUCTION OF RS.1.33 CRO RES ON ACCOUNT OF PURCHASES MERELY ON THE BASIS OF SUSPICI ON BECAUSE THE SELLERS AND THE CANVASSING AGENTS HAVE NOT BEEN PRODUCED BEFORE THEM. WE FIND THAT THE ORDER OF THE TRIBUNAL IS WELL A REASONED ORDER TAKING INTO ACCOUNT ALL THE FACTS BE FORE CONCLUDING THAT THE PURCHASES OF RS.1.33 CRORES WAS NOT BOGUS. NO FAULT CAN BE FOUND WITH THE ORDER DATED 30-04-20 10 OF THE TRIBUNAL. 7.2 IN THE CASE OF CIT VS. BHOLANATH POLY FAB PVT. LTD., [2013] 355 ITR 290 (GUJ.), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS WAS ESSENTIALLY A QUESTION OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE THE CLOTH AND SELL THE FINISHED FABRICS. T HEREFORE, AS A NATURAL COROLLARY, NOT THE ENTIRE AMOUNT COVERED UN DER SUCH PURCHASES, BUT THE PROFIT ELEMENT EMBEDDED THEREIN WOULD BE SUBJECT TO TAX. 7.3 IN THE CASE OF PRAKASH CHAND NAHTA VS. CIT, [20 08] 301 ITR 134 (MP), THE HONBLE MP HIGH COURT HELD THAT AS TH E AO HAD NOT SUMMONED R IN SPITE OF THE REQUEST UNDER SECTION 13 1 OF THE ACT, THE EVIDENCE OF R COULD NOT HAVE BEEN USED AGAINST THE ASSESSEE AND IN THE ABSENCE OF AFFORDING A REASONABLE OPPORTUNITY O F BEING HEARD BY SUMMONING THE SAID WITNESS THE ASSESSMENT ORDER WAS VITIATED. 6 ITA NO. 1499/HYD/17 MUSADDILALS JEWELLERS (INDIA) PVT. LTD. 7.4 WE ARE OF THE VIEW THAT THE AO FAILED TO ESTABL ISH THAT THE ASSESSEE HAS MADE BOGUS PURCHASES BY BRINGING DOCUM ENTARY EVIDENCE ON RECORD AND, ALSO, ASSESSEE WAS NOT GIV EN OPPORTUNITY TO CROSS-EXAMINE THE ENTRY PROVIDER. THEREFORE, FOLLOW ING THE RATIO LAID DOWN IN THE AFORESAID CASES, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 16,90,1 60/- MADE ON ACCOUNT OF PURCHASES. ACCORDINGLY, THE GROUNDS RAI SED BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 11 TH JULY, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 11 TH JULY, 2018 KV COPY TO:- 1) M/S MUSADDILALS JEWELLERS (INDIA) PVT. LTD., 5- 9-57/5, 6 & 7, BASHEERBAG X ROADS, HYDERABAD 500 063 2) ACIT, CIRCLE 16(2), HYDERABAD. 3) CIT(A) 4, HYDERABAD. 4) PR. CIT - 4, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE