M/S SETHIA JEWELLERS, MUMBAI V. DY CIT 23 (3), MUMBAI

ITA 175/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9747 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 06-01-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR MENON
• Assessee Lawyers: RAHUL SUZDA
• Keywords: Search and seizure; Accommodation entries
• Section: 13; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 175 /MUM/2020 ASSESSMENT Y EAR: 2012 - 13 M/S SETHIA JEWELLERS, BC 4012, BHARAT DIAMOND BOURSE, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI - 400051 PAN: ABWFS1004K VS. THE DEPUTY COMMISSIONER OF INCOME TAX 23 (3), MATRU MANDIR, TARDEO, MUMBAI - 400007 (APPELLANT) (RESPONDENT) ITA NO. 7704/MUM/2019 ASSESSMENT Y EA R: 2012 - 13 ASSISTANT COMMISSIONER OF INCOME TAX 23 (3), ROOM NO. 104, 1 ST FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400007 VS. M/S SETHIA JEWELLERS, BC 4012, BHARAT DIAMOND BOURSE, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI - 400051 PAN : ABWFS1004K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAHUL SUZDA (A R) REVENUE BY : SHRI VIJAY KUMAR MENON (D R) DATE OF HEARING : 24/06 /202 1 DATE OF PRONOUNCEMENT: 20 / 0 7 /202 1 O R D E R AFORESAID CROSS APPEALS ARISE OUT OF ORDER DATED 03.09 .2019 OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) - 34 , MUMBAI FOR THE A SSESSMENT YEAR 2012 - 13. 2 ITA NO S . 175 / MUM/2020 & 7704/MUM/2019 ASSESSMENT YEAR: 20 12 - 1 3 2. THE COMMON ISSUE ARI SING IN BOTH THE APPEALS RELATES TO ADDITION MADE ON ACCOUNT OF ALLEGED NON - GENUINE PURCHASES BEING PARTLY DELETED/SUSTAINED BY LEARNED COMMISSIONER (APPEALS). 3 . BRIEFLY THE FACTS ARE, THE ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN SALE, PURCHASE, IMPORT, EXPORT, MANUFACTURING, BR OKERAGE , COMMISSION ETC. OF G EM , D IAMOND , PRECIOUS AND SEMI PRECIOUS STONES AND GOLD JEWELLERY. FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 26.09.2012 DECLARING TOTAL INCOME OF RS. 44,17,730/ - . IN COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER (AO) CALLED UPON THE ASSESSEE TO PROVE PURCHASES WORTH RS. 8,78,84,111/ - CLAIM ED TO HAVE BEEN MADE DURING THE YEAR FROM SIX PARTIES. THOUGH, THE ASSESSEE FURNISHED CERTAIN DOCUMENTARY EVIDENCES TO PROVE THE PURCHASES, HOWEVER, THE AO WAS NOT CONVINCED. HE FOUND THAT AS PER THE INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI, IN COURSE OF SEARCH AND SEIZURE OPERATION CARRIED OUT IN GROUP CASES OF RAJENDRA JAIN, SANJAY CHOWD HARY AND DHARMICHAND JAIN GROUP, I T WAS FOUND THAT CONCERNED PA RTIES AND THEIR GROUP ENTITIES ARE PROVIDING ACCOMMODATION ENTRIES BY WAY OF NON - GENUINE PURCHASES . A FTER DELIBERATING UPO N THE FACTS AVAILABLE ON RECORD, T HE AO ULTIMATELY DISALLOWED 25% OUT OF THE PURCHASES , ALLEGED TO BE NON - GENUINE AND ADDED BACK AN AM OUNT OF RS. 2,19,71,028/ - . BEING AGGRIEVED , ASSESSEE CONTESTED THE DISALLOWANC E BEFORE LEARNED COMMISSIONER (APPEALS). PARTLY ACCEPTING THE SUBMISSIONS OF THE ASSESSEE, LEARNED COMMISSIONER (APPEALS) RESTRICTED THE DISALLOWANCE TO 3% OF THE ALLEGED NON - GEN UINE PURCHASES. 4 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN ADMITTED FACTUAL POSITION, THOUGH , THE AO HAS TREATED CERT AIN PURCHASES TO BE NON - GENUINE, H OWEVER, ULTIMATELY HE HAS RESTRICTED THE DISALLOWANCE TO THE PR OFIT ELEMENT EMBEDDED IN SUCH PURCHAS ES BY ESTIMATING AT 25%. FURTHER , AS COULD B E SEEN FROM THE REASONING OF LEARNED COMMISSIONER (APPEALS) IN PARA GRAPH 5.12 OF THE APPEAL ORDER, H E HAS RELIED UPON CBDT INSTRUCTION NO. 2/2008 DATED 22.02.2008 AS WELL AS T HE REPORT OF THE T ASKFORCE FOR DIAMOND SECTOR UNDER THE AEGIS OF T HE DEPARTMENT OF COMMERCE, 3 ITA NO S . 175 / MUM/2020 & 7704/MUM/2019 ASSESSMENT YEAR: 20 12 - 1 3 GOVERNMENT OF INDIA. UNDI SPUTEDLY, IN THE REPORT OF THE T ASKFORCE REFERRED TO BY LEARNED COMMISSIONER (APPEALS), I T HAS BEEN SUGGESTED THAT THE NET PROFIT RATIO IN DIAMOND MANUFACTURING IS IN THE RANGE OF 1.5% TO 4.5% AND IN D IAMOND TRADING VARIES BETWEEN 1 % TO 3% . AS RIGHTLY OBSERVED BY LEARNED COMMISSIONER (APPEALS) , IN A NUMBER OF C ASES OF SIMILAR NATURE , INVOLVING ALLEGED NON - GENUINE PURCHASE OF DIAMOND, T HE TRI BUNAL HAS RESTRICTED THE DISALLOWANCE TO THE PROFIT ELEMENT ESTIMATED BETWEEN 2 TO 6% . KEEPING IN VIEW THESE FACTS, WE HOLD THAT THE DECISION OF LEARNED COMMISSIONER (APPEALS) IN RESTRICTING THE DISALLOWAN CE TO 3% IS FAIR AND REASONABLE, S INCE , THE DISALLO WANCE MADE AT 25% BY THE AO I S WITHOUT ANY REASONABLE BASIS. ACCORDINGL Y , GROUNDS RAISED , BOTH , BY THE ASSESSEE AND THE REVENUE ARE DISMISSED. 5 . IN THE RESULT, BOTH THE APPEAL S ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JULY , 2021 . SD/ - SD/ - ( RAJESH KUMAR ) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER MUMBAI ; DATED: 20 / 07 /2021 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI