SHREE BHOMIYA GEMS, MUMBAI V. ITO 33(3)(4), MUMBAI

ITA 2031/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9148 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-08-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 22-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: V G GINDE
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.2031/M/2017 ASSESSMENT YEAR: 2007-08 M/S. SHREE BHOMIYA GEMS, C-1102, PANCHSHEEL HEIGHTS, MAHAVIR NAGAR, KANDIVALI (WEST), MUMBAI-400 067 PAN: AANFS0230M VS. INCOME TAX OFFICER-33(3)(4), C-11, 3 RD FLOOR, PRATYAKSHAKAR BHAWAN, BKC, BANDRA (E), MUMBAI 400 051 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI V.G. GINDE, A.R. REVENUE BY : MISS N. HEMALATHA, D.R. DATE OF HEARING : 01.08.2017 DATE OF PRONOUNCEMENT : 03.10.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 02.01.2017 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2007-08. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN BUSINESS OF TRADING AND EXPORTS IN DIAMOND. DURING THE YEAR THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) FOUND THAT ASSESSEE HAD MADE PURCHASES FROM FOLLOWING PARTY: SR. NO. NAME OF THE CONCERN CONTROLLED AND MANAGED BY SHRI PRAVIN KUMAR JAIN NAME OF THE BENEFICIARY AMOUNT OF PURCHASE (RS) 1. MOHIT INTERNATIONAL M/S. BHOMIYA 12,40,344/- ITA NO.2031/M/2017 M/S. SHREE BHOMIYA GEMS 2 GEMS 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.12,40,344/-. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: IN VIEW OF THE ABOVE DISCUSSION, IT IS SEEN THAT T HE ADDITION MADE BY THE AO ON ACCOUNT OF ALLEGED BOGUS PURCHASE CANNOT BE SUST AINED FULLY IN APPEAL. HAVING REGARD TO FACTS OF THE CASE AND SUBMISSIONS MADE, I T WOULD BE FAIR AND REASONABLE IF THE ADDITION MADE BY THE AO IS RESTRI CTED TO 50% ON THE ALLEGED BOGUS PURCHASE OF RS.12,40,344/- WHICH COMES TO RS.6,20,172/-. ACCORDINGLY, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AND GA NESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRES ENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM GO ODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WERE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEALING OF GOOD S. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUA NTITATIVE DETAILS OF STOCK WITH RESPECT OF THE SALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMIT TED THE DETAIL OF CORRESPONDING SALES IN RESPECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HAS NEVER DISPUTED OR EXA MINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY T HE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED T HE SALES RECEIPTS ITA NO.2031/M/2017 M/S. SHREE BHOMIYA GEMS 3 OF THE ASSESSEE AS IT IS, THEREFORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE AND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE IS THE PURCHASES FROM T HE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AND CHEQUES HAVE BEEN IS SUED TO THEM. PURCHASES ARE NOT IN DISPUTE BUT THE PARTIES FROM W HOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPUTED AND SUSPICIOUS . THE AO HAD MADE THE ADDITION AS SOME OF THE SUPPLIERS WERE DEC LARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD R EASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAK E ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT O N SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE A ND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS A NY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED, THERE WAS NO DETAILED INVESTIGAT ION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN TH E BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAU SE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION L ETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THAT THE PURCHASES W ERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE DECISIO N OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TAXMAN 171 (BOM). TO THIS E XTENT, I AM OF THE VIEW THAT IF THE ASSESSEE HAS FULFILLED ITS ONU S OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN ITA NO.2031/M/2017 M/S. SHREE BHOMIYA GEMS 4 IT CANNOT BE PRESUMED THAT SUPPLIER WERE BOGUS SIMP LY BECAUSE THE SELLERS WERE NOT FOUND AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN THE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEEDINGS. THE AO HAS NOT BROUGHT ANY MA TERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSION OF SALES. IT IS B ASIC RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PUR CHASE FROM SALES. ESTIMATION OF PROFIT RANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S SIMIT P SHETH 356 ITR 451 (GUJ.). RESPECTFULLY FOLLOWING THE DEC ISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), I DIRECT THE AO TO TAKE THE GP @ 12.5%. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.10.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 03.10.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.