Asst. Commissioner of Income Tax, Circle-4(1), Hyderabad V. Sri Karni Jewellers, Hyderabad

ITA 1986/Hyd/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6695 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2008-2009
• Appeal Filed On: 02-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Keywords: Bogus purchase
• Section: 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “A”, HYDERABAD (Through Virtual Hearing) BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SRI S.S. GODARA, JUDICIAL MEMBER ITA Nos. 1986 /Hyd/2018 A.Y. 2008-09 ACIT, Circle-4(1), Hyderabad. Vs. Sri Karni Jewellers, Hyderabad. PAN: AAUFS 3135 N (Appellant) (Respondent) Assessee by Sri S. Rama Rao Revenue by Smt. Komali Krishna, DR ITA Nos. 1987/Hyd/2018 A.Y. 2008-09 ACIT, Circle-4(1), Hyderabad. Vs. Karni Jewellers, Hyderabad. PAN: AADFK 5720 G (Appellant) (Respondent) Assessee by Sri S. Rama Rao Revenue by Smt. Komali Krishna, DR Date of hearing: 27/10/2021 Date of pronouncement: 09/12/2021 ORDER PER A. MOHAN ALANKAMONY, A.M: The captioned appeals are filed by the Revenue against the orders of the Ld. CIT(A)-1, Hyderabad in appeal Nos. 0100 & 0102/CIT(A)-1, 2 Hyd/2016-17/2018-19, dated 11/07/2018 passed U/s. 143(3) r.w.s 147 of the Act for the A.Y. 2008-09. 2. The Revenue has raised five identical grounds in both the appeals however, the crux of the issue in both the appeals is that that: “The Ld. CIT (A) has erred in sustaining the addition @ 5% on bogus purchases whereas the Ld. AO had made addition for the entire bogus purchases.” 3. The brief facts of the case are that both the assessee firms ie., M/s. Karni Jewellers and M/s. Sri Karni Jewellers are engaged in the business of manufacture of Gold / Silver ornaments studded with diamonds, responded to the notice issued U/s. 148 of the Act by stating that the return of income filed by them earlier may be treated as return filed in response to the notice U/s. 148 of the Act for the relevant assessment year. In both the assessee’s cases it was observed that they had made bogus purchases from M/s. Sun Diam and Sparsh Exports (P) Ltd and M/s. Moulimani Impex (P) Ltd. The above facts were revealed during the investigation made by the Investigation Wing, Mumbai on 03/10/2013. In the investigation it was also revealed that Sri Rajendra Jain, Sri Sanjay Choudhary and Shri Dharmichand Jain were operating and managing 70 Binami Concerns through which they were providing accommodation entries for extending unsecured loans and towards bogus purchases to various beneficiaries including both the assesses 3 ie., M/s. Karni Jewellers and M/s. Sri Karni Jewellers. Further, in the case of both the assessees it was revealed from the pen drive of the searched parties that the sale considerations were paid through RTGS and the same was received back in cash. These facts were also corroborated from the parallel ledger accounts maintained. Since, the assessees could not controvert to the findings of the Revenue, the Ld. AO made addition in the hands of both the assessees for the entire amount of Rs. 1,70,51,117/- in the case of M/s. Karni Jewellers and Rs. 1,91,99,700/- in the case Sri Karni Jewellers as bogus purchases introduced in the books of accounts. On appeal, the ld. CIT (A) found it appropriate to sustain the addition only to the extent of 5% on the alleged bogus purchases in the case of both the assessees because the Ld.AO had taken a similar stand for the AY 2008-09. 4. At the outset, we find this issue to be squarely covered by the decision rendered by us on the earlier instance in the case of Devaki Nandan Verma in ITA No.1984/Hyd/2018 for the AY 2008-09 order dated 08/07/2021, who are related party to both these assessee’s. The said decision of the Tribunal in the case of assessee’s related party is extracted herein below for reference: “13. The brief facts of the case are that, in the case of the assessee the Ld.AO had received information from Addl. CIT, Central Range, Surat that the assessee Shri Devaki Nandan Verma had obtained bogus purchase bills to the extent of Rs. 1,55,76,364/- during the Financial Year relevant to the assessment year 2008-09 from Sparsh Exports Private Limited, Aadi Impex, Sun Diam and Avi Exports of Rajendra Jain group. Therefore, the case of the assessee was reopened U/s. 148 of the 4 Act and the notice was issued on 27/3/2015. In response, the assessee had filed a letter stating that the return of income filed by him earlier may be adopted as the return filed in response to the notice issued U/s. 148 of the Act. During the course of scrutiny assessment proceedings, the assessee had explained before the Ld.AO that he was maintaining stock register and other records to justify that the diamond purchased by him were genuine. He had also submitted that all the purchase of diamonds were made by way of cheque payment and he had also received invoices for the purchases. However, the Ld. AO rejected the contention of the assessee by observing as under: “The explanations offered by the assessee are not acceptable. In the statements recorded during the course of search operations conducted in Rajendra Jain Group of cases it ws stated that the Group concerns do not have any stock of diamonds and also not sold any diamonds. They have only provided accommodation bills to Sri Devaki Nandan Verma and the sale consideration received through RTGS has been paid in cash as shown in the parallel ledger accounts maintained in the Pen Drive. The accommodation entries claimed to have been provided by Rajendra Grupo are tallying with the purchase bills produced by the assessee. As such the assessee’s contention that he had actually purchased diamonds from Sparsh Exports (P) Ltd., Aadi Impex, Sun Diam and AVI Exports cannot be accepted. The argument that if the purchases are treated as bogus, simultaneously sales are to be treated as bogus is also not correct for the reason that bogus purchases are introduced to reduce the profit. Further, the estimating for the profit on bogus purchases is not applicable to the facts of the case since this is not the case where the purchases as well as sales are suppressed. It may be mentioned that n cognizance need be given to the Assessment Order passed by another Assessing Officer since the facts are different for each case and also it is not a judicial pronouncement which is to be followed. In view of the above, argument of the assessee is rejected and the purchases made from Sparsh Exports (P) Ltd., Aadi Impex, Sun Dia, and AVI Exports to extent of Rs. 1,55,76,364/- is treated as accommodation.” 14. On appeal, the Ld. CIT (A) directed the Ld. AO to adopt the finding of the Ld. AO for the subsequent assessment year 2009-10 wherein he had estimated the income of the assessee towards the bogus purchase of diamonds at 5% of the alleged bogus purchases. Aggrieved by the order of the ld. CIT (A), the Revenue is now on appeal before us. 15. At the outset, we find the issue in the appeal is identical to the case of the assessee for the AY 2007-08 wherein we have held that the entire bogus purchases have to be disallowed as allowable deduction while computing the income of the assessee. This is a case where the assessee has claimed bogus purchases of diamonds to the tune of Rs. 1,55,76,364/- as its expenditure when the diamonds did not exist at all. Further the assessee has neither disclosed the sale of these diamonds in its P & L Account nor shown the unsold diamonds as closing stock. Therefore, the corresponding revenue from sale of diamonds and the stock position is not disclosed in the P & L Account. Moreover, there is evidence received by the Revenue that the entire purchases made by the assessee is bogus i.e., the assessee has not received any diamonds though it has debited the purchase value of diamonds in his books of 5 accounts. This fact is not disproved. When no diamonds are received by the assessee there is no possibility of those diamonds being sold. Hence estimation of profit on sale of diamonds which never existed is not appropriate. For the above stated reasons, we do not find any merit in the order of the Ld. CIT (A) on this issue. Accordingly, we hereby reinstate the order of the Ld. AO. “ 5. It is also pertinent to mention that in the case of assessee M/s. Karni Jewellers also, this Bench of the Tribunal vide order dated 17/12/2020 in ITA No.351/Hyd/2017, AY 2007-08 took a similar view because the facts were identical. 6. Since the facts and issues in the above cited cases are identical to the case of both these assessees, We hereby set-aside the order of the Ld. CIT (A) and reinstate the order of the ld. AO. 7. In the result, both the appeals of the Revenue are allowed. Pronounced in the open Court on the 09 th December, 2021. Sd/- Sd/- (S.S. GODARA) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 09 th December, 2021. OKK Copy to:- 1) (i) Sri Karni Jewellers, 3-5-997/1, Narayanaguda, Hyderabad. (ii) Karni Jewellers, 3-5-997/1, Narayanguda, Hyderabd. 2) ACIT, Circle-4(1), R.No. 742, D-Block, 7 th Floor, IT Towers, AC Guards, Masab Tank, Hyderabad. 3) The CIT (A)-1, Hyderabad. 4) The Principal Commissioner of Income Tax-1, Hyderabad. 5) The DR, ITAT, Hyderabad 6) Guard File