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

ITA 2016/Hyd/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5995 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-05-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 05-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GEETENDER MANN
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Bogus purchase; Search and seizure; Opportunity of cross examination; Accommodation entries
• Section: 143(3); 131; 132

Judgement Text

ITA NO 2016 OF 20 17 MEENA JEWELLERS P LTD HYDERABAD. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.2016/HYD/2017 (ASSESSMENT YEAR: 2013-14) M/S. MEENA JEWELLERS PRIVATE LIMITED HYDERABAD PAN: AAFCM1756R VS ASST. COMMISSIONER OF INCOME TAX, CIRCLE 16(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALI MOHAN RAO FOR REVENUE : SMT. GEETENDER MANN, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2013-14 AGAIN ST THE ORDER OF THE LEARNED CIT (A)-4, HYDERABAD, DATE D 26.09.2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF TRADING IN BULLION, GOLD AND DIAMOND ORNAMENTS AND DIAMONDS ETC., FILED ITS RETURN OF IN COME FOR THE A.Y 2013-14 ON 29.9.2012 ADMITTING A TAXABLE INCOME OF RS.1,30,43,040. DURING THE ASSESSMENT PROCEEDINGS U /S 143(3) OF THE ACT, THE AO CALLED FOR VARIOUS INFORMATION WHIC H WAS FILED BY THE ASSESSEE. AO VERIFIED THE SAME AND OBSERVED THA T THE INFORMATION WAS RECEIVED BY HIS OFFICE FROM THE OFF ICE OF THE DGIT DATE OF HEARING: 22.05 . 201 8 DATE OF PRONOUNCEMENT: 25.05.2018 ITA NO 2016 OF 20 17 MEENA JEWELLERS P LTD HYDERABAD. PAGE 2 OF 6 (INV.), MUMBAI STATING THAT A SEARCH AND SEIZURE OP ERATION WAS CONDUCTED U/S 132 OF THE I.T. ACT IN THE CASE OF RA JENDRA JAIN GROUP WHICH IS A LEADING ENTRY PROVIDER OF MUMBAI O N 3.10.2013, AND SEVERAL INCRIMINATING DOCUMENTARY EVIDENCE WAS FOUND AND SEIZED WHICH CONCLUSIVELY PROVED THAT THE ASSOCIATE D COMPANIES/PERSONS OF THE ABOVE GROUP, THROUGH A WEB OF CONCERNS RUN AND OPERATED BY THEM, ARE ENGAGED IN P ROVIDING ACCOMMODATION ENTRIES IN THE NATURE OF BOGUS UNSECU RED LOANS AND BOGUS SALES AND THAT THIS INFORMATION ALSO CONT AINED THE LIST OF BENEFICIARIES WHO MADE PURCHASES FROM THE ABOVE GROUP. HE VERIFIED THE DETAILS AND FOUND THAT DURING THE FINA NCIAL YEAR 2012- 13 RELEVANT TO THE A.Y 2013-14, THE ASSESSEE COMPAN Y HAD MADE PURCHASES FROM TWO COMPANIES I.E. KARNAVAT IMPEX PV T. LTD FOR AN AMOUNT OF RS.13,56,150 AND SUN DIAM FOR AN AMOUNT O F RS.11,35,000. HE OBSERVED THAT THESE TWO COMPANIES ARE OPERATED AND MANAGED BY RAJENDRA JAIN GROUP AND THAT THE STA TEMENT RECORDED FROM THE KEY PERSONS OF THE SAID GROUP ALS O CONFIRMED THAT THE ABOVE COMPANIES WERE CONTROLLED AND MANAGE D BY THEM AND THAT THEY ARE NOT DOING ANY REAL TRADING IN DIA MONDS BUT ONLY INDULGED IN PAPER TRANSACTIONS. THE AO AFFORDED AN OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE BEFORE US. SUMMON S U/S 131 WAS ALSO ISSUED BY THE AO TO THE DIRECTOR OF THE CO MPANY. ONE OF THE DIRECTOR OF THE COMPANY, IN RESPONSE TO THE SAI D NOTICE, APPEARED AND STATED THAT THE TRANSACTIONS ARE ALL G ENUINE AND RECORDED IN THE BOOKS AND STOCK REGISTER AND THAT A LL THE PAYMENTS ARE MADE BY RTGS. HE THUS DENIED THE ALLEG ATION OF THE AO THAT THE PURCHASES ARE BOGUS. HOWEVER, THE AO WA S NOT CONVINCED WITH THE REPLY OF THE DIRECTOR AND HELD T HAT THE PURCHASES ARE BOGUS AND DISALLOWED THE SAME AND BRO UGHT IT TO ITA NO 2016 OF 20 17 MEENA JEWELLERS P LTD HYDERABAD. PAGE 3 OF 6 TAX. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BE FORE THE CIT (A), WHO CONFIRMED THE ORDER OF THE AO AND THE ASSE SSEE IS IN SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GR OUNDS OF APPEAL: 1. THE ORDER OF THE LD. CIT (A) IS BAD BOTH IN LAW AND ON FACTS TO THE EXTENT IT IS PREJUDICIAL TO THE INTERE ST OF THE ASSESSEE. 2. THE LD. CIT (A) ERRED IN DISMISSING THE APPEAL W ITHOUT EVEN DISCUSSING THE SUBMISSIONS MADE BY THE APPELLA NT AND WITHOUT CONSIDERING FAULTS OF THE CASE. 3. THE LD. CIT (A) ERRED IN CONFIRMING ADDITIONS MA DE BY THE ASSESSING OFFICER TOWARDS DISALLOWANCE OF THE PURCHASES. 4. THE LD. CIT (A) ERRED IN UPHOLDING THE DISALLOWA NCE OF THE ALLEGED BOGUS PURCHASES AMOUNTING TO RS. 24,91,1501- WITHOUT CONSIDERING THE FACTS OF THE CA SE AND THE SUBMISSION MADE BY THE ASSESSEE AND WITHOUT EVEN REFERRING THE MATTER TO THE A.O FOR CONDUCTING ENQUIRIES AND OBTAINING REMAND REPORT. 5. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE ADDITION WAS MADE BY THE A.O MERELY BASED ON INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI AND WITHOUT CONDUCTING ANY INDEPENDENT ENQUIRIES, WHICH IS NOT JUSTIFIED. 6. THE CIT (A) OUGHT TO HAVE APPRECIATED THE FACT T HAT THE DIRECTOR OF THE ASSESSEE COMPANY HAS ALREADY SUBMIT TED ORIGINAL PURCHASE INVOICES, STOCK REGISTERS AND BAN K STATEMENTS BEFORE THE A.O IN SUPPORT OF PURCHASES. 7. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERATION DOES NOT BELONG TO THE APPELLANT AND THE SAME IS DUMB MATERIAL WHICH CANNOT BE RELIED UP ON 8. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE A.O HAD NOT DOUBTED GENUINENESS OF SALES AND SU CH SALES CANNOT BE MADE WITHOUT PURCHASES WHICH WERE WRONGLY HELD TO BE BOGUS. 9. THE LD. CIT (A) OUGHT TO HAVE CONSIDERED THE FAC T THAT THE ASSESSEE HAS ALREADY SUBMITTED ALL THE DETAILS PERTAINING TO THE TWO SUPPLIERS IN QUESTION I.E., P AN, ADDRESSES, CONTACT NUMBERS, INVOICES, BANK STATEMEN TS ITA NO 2016 OF 20 17 MEENA JEWELLERS P LTD HYDERABAD. PAGE 4 OF 6 REFLECTING THE PAYMENTS MADE TO SUPPLIERS ETC., BY WHICH THE APPELLANT DISCHARGED ONUS OF PROVIDING GENUINEN ESS OF PURCHASES MADE BY IT. 10. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE F ACT THAT DISALLOWANCE OF PURCHASES MADE BY THE A.O BASE D ON THE STATEMENT RECORDED AT THE TIME OF SURVEY DOE S NOT HAVE SANCTITY WITHOUT ANY CORROBORATIVE EVIDENCE AN D THUS THE ADDITION MADE IS NOT JUSTIFIED. CBDT CIRCULAR VIA F.NO.286/2/2003- IT (INV.) 11. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE F ACT THAT THE A.O PROCEEDED TO MAKE ADDITION TOWARDS DISALLOWANCE OF PURCHASES EVEN WITHOUT AFFORDING TH E APPELLANT OF THE OPPORTUNITY TO CROSS EXAMINE THE W ITNESS SUPPLIERS ON WHOSE STATEMENTS THE A.O RELIED UPON. 12. THE CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT EVEN IF THE ACTION OF A.O IS CONSIDERED TO BE CORRE CT, THE A.O ERRED IN DISALLOWING ENTIRE PURCHASES OF RS. 24,91,1501/- WHILE ONLY PROFIT ELEMENT OF SUCH PURC HASES CAN BE DISALLOWED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITE RATING THE SUBMISSIONS MADE BY IT BEFORE THE AUTHORITIES B ELOW SUBMITTED THAT THE ASSESSEE HAS NOT ONLY RECORDED T HE PURCHASES IN ITS BOOKS OF ACCOUNT BUT ALSO RECORDED THE SAME IN THE STOCK REGISTER AND HAS OFFERED THE NET PROFIT TO TAX AFTE R SALE, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. HE SUBMITTED THAT THE DEPARTMENT CANNOT DISALLOW THE PURCHASE AND ALSO BR ING TO TAX THE PROFIT ON SALE. HE HAS DRAWN OUR ATTENTION TO T HE PURCHASE INVOICES FROM KARNAVAT IMPEX PRIVATE LTD AND ALSO F ROM SUN DIAM WHICH ARE PLACED AT PAGES 77 TO 80 OF THE PAPER BOO K AND ALSO THE BANK STATEMENT REFLECTING THE PAYMENTS MADE TO THES E COMPANIES BY RTGS. HE HAS ALSO DRAWN OUR ATTENTION TO THE SAL ES INVOICES REGARDING THESE GOODS. HE SUBMITTED THAT ALL THESE DETAILS WERE SUBMITTED BOTH BEFORE THE AO AS WELL AS THE CIT (A) , WHO FAILED TO VERIFY THESE DOCUMENTS BUT HAVE MADE THE ADDITIONS AND ITA NO 2016 OF 20 17 MEENA JEWELLERS P LTD HYDERABAD. PAGE 5 OF 6 CONFIRMED THE ADDITION MERELY ON SUSPICION AND SURM ISES. IN SUPPORT OF HIS CONTENTION THAT SUCH DISALLOWANCES C ANNOT BE MADE, HE PLACED RELIANCE UPON THE FOLLOWING DECISIO NS: I) HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. BHOLANATH POLY FAB (P) LTD REPORTED IN 40 TAXMANN.C OM 494 II) HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. NIKUNG EXIMP ENTERPRISES (P) LTD REPORTED IN 35 TAXMANN.COM 384 III) ITAT MUMBAI IN THE CASE OF M/S STEEL LINE INDI A VS. ASSTT. CIT IN ITA NO.880/MUM/2016. 4. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT FROM THE STATEMENT OF RAJENDRA JAIN GROUP, IT WAS CLEAR THAT THESE TWO COMPANIES ARE ONLY ISSUING ACCOMMODATING ENTRIES WI THOUT THERE BEING ACTUAL SALE AND THEREFORE, THE AO WAS JUSTIFI ED IN DISALLOWING THE BOGUS PURCHASES. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS MADE THE P AYMENTS TO THE PARTIES THROUGH BANKING CHANNELS AND THEREFORE, THE PARTY WAS RIGHTLY IDENTIFIED. FURTHER, THE ASSESSEE HAS M ADE THE SALES OF THESE ITEMS AND OFFERED THE INCOME THEREFROM TO TAX . ONCE THE DEPARTMENT ACCEPTS THE SALE, IT CANNOT DISALLOW THE CORRESPONDING PURCHASES. WHEN ALL THE DOCUMENTS WERE ON THE FILE OF THE AO, HE OUGHT TO HAVE VERIFIED THE GENUINENESS OF THE SALE INSTEAD OF DEPENDING SOLELY ON THE STATEMENT OF THE RAJENDRA J AIN GROUP. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMI T THE ISSUE TO THE FILE OF THE AO FOR VERIFICATION OF THE DOCUMENT S FILED BY THE ASSESSEE AND IF IT IS FOUND THAT THE PAYMENT HAS BE EN MADE BY THE ITA NO 2016 OF 20 17 MEENA JEWELLERS P LTD HYDERABAD. PAGE 6 OF 6 ASSESSEE THROUGH BANKING CHANNELS AND THE PURCHASES AND SALES HAVE ALSO BEEN RECORDED IN THE BOOKS AND THE NET PR OFIT HAS BEEN OFFERED TO TAX, THEN THERE CANNOT BE ANY DISALLOWAN CE OF THE PURCHASES. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MAY, 2018. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 25 TH MAY 2018. VINODAN/SPS COPY TO: 1 P. MURALI & CO. CAS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500082 2 ASSTT. CIT, CIRCLE 16(2), HYDERABAD 3 CIT (A) - 4, HYDERABAD 4 PR. CIT 4, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER