FANCY DIAMONDS INDIA P.LTD, MUMBAI V. DCIT 5(1)(2), MUMBAI

ITA 167/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7905 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 06-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVLD
• Assessee Lawyers: REEPAL G TRALSHAWALA LD
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

ITA.NOS.47/MUM/2017 & 167/MUM/2017 FANCY DIAMONDS INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.47/MUM/2017 ( / ASSESSMENT YEAR: 2013-14) ASSISTANT COMMISSIONER OF INCOME TAX 5(1)(2) R.NO.568,5 TH FLOOR AAYKAR BHAVAN M.K.ROAD MUMBAI-400 020 / VS. FANCY DIAMONDS INDIA PRIVATE LT D 111, PRASAD CHAMBERS TATA ROAD NO.2 OPERA HOUSE MUMBAI-400 004 ./ ./PAN/GIR NO. AAACF-3325-J ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) & ./I.T.A. NO.167/MUM/2017 ( / ASSESSMENT YEAR: 2013-14) FANCY DIAMONDS INDIA PRIVATE LTD 111, PRASAD CHAMBERS TATA ROAD NO.2 OPERA HOUSE MUMBAI-400 004 / VS. ASSISTANT COMMISSIONER OF INCOME TAX 5(1)(2) R.NO.568,5 TH FLOOR AAYKAR BHAVAN M.K.ROAD MUMBAI-400 020 ./ ./PAN/GIR NO. AAACF-3325-J ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) A SSESSEE BY : REEPAL G.TRALSHAWALA , LD.AR RE VENUE BY : RAJESH KUMAR YADAV, LD. SR. DR / DATE OF HEARING : 03/11/2017 / DATE OF PRONOUNCEMENT : 13/12 /2017 ITA.NOS.47/MUM/2017 & 167/MUM/2017 FANCY DIAMONDS INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THESE ARE CROSS APPEALS BY ASSESSEE AS WELL AS R EVENUE FOR ASSESSMENT YEAR [AY] 2013-14 WHICH CONTEST THE ORDE R OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-10 [CIT(A)], M UMBAI, APPEAL NO. CIT(A)-10/DCIT 5(1)(2)/558/2015-16 ORDER DATED 30/09/2016 QUA CONFIRMATION OF CERTAIN ADDITIONS ON ACCOUNT OF BOGUS PURCHASES. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX-5(1)(2) , MUMBAI ON 23/03/2016 U/S 143(3) OF THE INCOME TAX ACT,1961. THE REGISTRY HAS NOTED THAT THE APPEA L OF THE REVENUE IS DELAYED BY 226 DAYS. HOWEVER, UPON PERUSAL OF AUTHORIZATION MEMO DATED 06/12/2016 AS PLACED ON RECORD, IT IS NOTED T HAT CORRECT DATE OF COMMUNICATION OF THE IMPUGNED ORDER IS 09/11/2016 W HICH IS INADVERTENTLY WRITTEN AS 23/03/2016 IN FORM NO.36 A ND THEREFORE, PRIMA FACIE, THE APPEAL IS IN ORDER AND MOREOVER, THE ASSESSEE H AS NOT RAISED ANY OBJECTION AGAINST THE SAME. 2.1 FACTS LEADING TO THE SAME ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED AS MANUFACTURER & EXPORTER OF DIAMOND STUDDED JEWELLERY WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 23/03/2016 AT RS.2,24,76,960/- AFTER SOLE ADDITION OF CERTAIN ALLEGED BOGUS PURCHASES FOR RS.73,42,508/-. THE ORIGINAL RETURN WAS E-FILED BY THE ASSESSEE ON 30/09/2013 AT RS.1,51,34,450/-. ITA.NOS.47/MUM/2017 & 167/MUM/2017 FANCY DIAMONDS INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 3 2.2 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T THE ASSESSEE MADE SUSPICIOUS PURCHASES OF RS.5,87,40,062/- FROM SEVEN CONCERNS, WHO, AS PER INFORMATION RECEIVED FROM DGIT (INVESTIGATION), MUMBAI WERE ENGAGED IN PROVIDING ACCOMMODATION / BOGUS BILLS. ALL THE SEVEN ENTITIES WERE BEING CONTROLLED BY A PERSON / GROUP NAMELY BHANWARLAL JAIN. THE PARTY-WISE DETAILS OF PURCHASES MADE FROM THESE SEVEN CONCERNS HAVE BEEN EXTRACTED BY LD. AO AT PAGE NO.- 2 OF THE QUANTUM ASSESSMENT ORDER. 2.3 THE SEARCH / SURVEY ACTION ON BHANWARLAL JAIN GROUP ON 03/10/2013 BY DGIT (INV.) REVEALED THAT THE SAID GROUP CONSISTING OF NUMEROUS BUSINESS ENTITIES, NUMBERING MORE THAN 70, WAS ENGA GED IN PROVIDING ACCOMMODATION PURCHASES BILLS & ACCOMMODATION LOANS & ADVANCES. IT WAS FOUND OUT THAT THE EMPLOYEES / THEIR RELATIVES ETC. OF THE SAID GROUP WERE MERELY NAME LENDING DIRECTORS / PARTNERS / PRO PRIETORS OF NUMEROUS CONCERNS WHICH WERE OPERATING UNDER THE CONTROL OF SAID GROUP. THE STATEMENTS OF CONCERNED PERSONS REVEALED THAT THE F IRMS WERE INDULGING IN ACCOMMODATION BILLS WITHOUT DOING ANY ACTUAL BUS INESS AND THOSE PERSONS HAD NO KNOWLEDGE ABOUT THE BUSINESS BEING C ARRIED OUT BY THE SAID CONCERNS. 2.4 CONSEQUENTLY, THE ASSESSEE WAS CALLED UPON TO S UBSTANTIATE THE PURCHASE TRANSACTIONS. THE ASSESSEE DEFENDED THE PU RCHASES MADE BY HIM BUT COULD NOT PRODUCE ANY PARTY FOR CONFIRMATIO N OF THE TRANSACTIONS WHICH LED THE LD. AO TO DISBELIEVE THE SAID TRANSAC TIONS. FINALLY, NOT CONVINCED WITH ASSESSEES SUBMISSIONS, LD. AO ESTIM ATED THE ADDITIONS @12.5% OF ALLEGED BOGUS PURCHASES WHICH CAME TO RS.73,42,508/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ITA.NOS.47/MUM/2017 & 167/MUM/2017 FANCY DIAMONDS INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 4 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 30/09/2 016 WHERE THE ASSESSEE REITERATE THE SAID CONTENTIONS. THE LD. CI T(A) AFTER CONSIDERING ASSESSEES SUBMISSION & SEVERAL JUDICIAL PRONOUNCEM ENTS, ESTIMATED THE SAME TO 3%. AGGRIEVED, THE ASSESSEE AS WELL AS REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] DREW OU R ATTENTION TO THAT FACT THAT THE ASSESSEE MADE HEAVY PURCHASES FR OM SEVEN ENTITIES, ALL OF WHICH WERE CONTROLLED BY THE SAME GROUP AND HENCE, THE NATURE OF TRANSACTIONS BEING MADE BY THE ASSESSEE WITH THESE ENTITIES WAS WELL WITHIN HIS KNOWLEDGE. THE LD. DR FURTHER CONTENDED THAT THE ASSESSEE WAS WELL AWARE OF THE OPERATIONS OF THE GROUP AND P ROCURED ACCOMMODATION BILLS TO SUPPRESS THE PROFITS & TO TA KE ADVANTAGE OF VAT ETC. AND FURTHER THE SAID GROUP, DURING SEARCH / SU RVEY OPERATIONS, IN CLEAR TERMS, ADMITTED TO BE ENGAGED IN SOLE ACTIVIT Y OF PROVIDING ACCOMMODATION BILLS WITH A VIEW TO DEFRAUD THE REVE NUE. THE LD. DR PLEADED FOR RESTORATION OF THE VIEW TAKEN BY LD. AO . 5. PER CONTRA, LD. COUNSEL FOR ASSESSEE [AR] DREW ATTENTION TO THE FACT THAT THE ASSESSEE WAS IN POSSESSION OF SUFFICI ENT DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE SAID TRANSACTIONS AND ALL THE PAYMENTS WERE THROUGH BANKING CHANNELS AND GOODS PURCHASED B Y ASSESSEE WERE DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND ADDI TIONS WERE NOT JUSTIFIED. OUR ATTENTION IS DRAWN TO THE HIGHER GRO SS PROFIT BEING REFLECTED BY THE ASSESSEE AGAINST THESE PURCHASES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. WE ARE OF THE CONSIDERED OPINION THAT TH ERE COULD BE NO SALE ITA.NOS.47/MUM/2017 & 167/MUM/2017 FANCY DIAMONDS INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 5 WITHOUT PURCHASE OF MATERIAL KEEPING IN VIEW THE AS SESSEES NATURE OF BUSINESS. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKIN G CHANNELS. THE ASSESSEE RECONCILED QUANTITATIVE DETAILS ALSO. HOWE VER, AT THE SAME TIME, THE ASSESSEE REFLECTED PURCHASES FROM SEVEN E NTITIES, ALL OF WHICH WERE CONTROLLED BY THE SAME GROUP AND THE ASSESSEE COULD NOT PRODUCE ANY OF THE PARTY FOR CONFIRMATION OF THE TRANSACTIO N. THE SEARCH / SURVEY ACTION ON THE GROUP REVEALED THAT THE SAID GROUP CO NTROLLED MORE THAN 70 ENTITIES WITH THE SOLE OBJECTIVE OF PROVIDING ACCOM MODATION BILLS TO THE INTERESTED PERSON THROUGH NETWORK OF AGENTS. THE EN TITIES WERE BEING MANAGED BY THE EMPLOYEES / RELATIVES OF THE SAID GR OUP WHO WERE MERELY NAME LENDER AND HAD NO KNOWLEDGE ABOUT THE B USINESS BEING CARRIED OUT BY THESE ENTITIES. ALL THESE FACTORS CA ST A SERIOUS DOUBT ON ASSESSEES CLAIM. THEREFORE, IN SUCH A SITUATION, T HE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EM BEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEME NT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST ALLEGED BOGUS PURCHASES, WHICH LD.CIT(A) HAS RIGHTLY DONE. THE ASSESSEE HAS PLACED RELIANCE ON S EVERAL JUDICIAL PRONOUNCEMENTS BUT WE FIND THE MATTER TO BE A FACTU AL ONE WHICH REQUIRES ESTIMATION OF INCOME. THEREFORE, ON TOTALI TY OF FACTS, WE FIND THE ESTIMATION MADE BY LD. CIT(A) TO BE ON THE LOWER SI DE AND HENCE, WE ENHANCE THE SAME TO 6% OF ALLEGED BOGUS PURCHASES OF RS.5,87,40,062/- WHICH COMES TO RS.35,24,404/-. THE ORDER OF LD. CIT(A) STANDS MODIFIED TO THAT EXTENT. ITA.NOS.47/MUM/2017 & 167/MUM/2017 FANCY DIAMONDS INDIA PRIVATE LIMITED ASSESSMENT YEAR-2013-14 6 7. RESULTANTLY, THE REVENUES APPEAL STANDS PARTLY ALLOWED WHEREAS THE ASSESSEES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DECEMBER, 2017. SD/- SD/- (D.T.GARASIA) (MAN OJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 13.12 .2017 SR.PS:- THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. #&. , . , / DR, ITAT, MUMBAI 6. / / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI