ASST CIT 18(2), MUMBAI V. KANTILAL CHUNILAL JAIN, MUMBAI

ITA 2104/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7942 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 10-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: PARAS B JAIN
• Keywords: Bogus purchase; Accommodation entries
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.2104/M/2015 ASSESSMENT YEAR: 2010-11 ASSISTANT COMMISSIONER OF INCOME TAX-18(2), EARNEST HOUSE, ROOM NO.302, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400 021 VS. SHRI KANTILAL CHUNILAL JAIN, M/S. SHAILESH JEWELLERS, SHOP NO.4, 2 ND FLOOR, 108/112, USTAD BUILDING, ZAVERI BAZAR, OPP. KHARA KUWA, MUMBAI-02 PAN: AADPJ9583E (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PARAS B. JAIN, A.R. REVENUE BY : SMT. N. HEMALATHA, D.R. DATE OF HEARING : 06.11.2017 DATE OF PRONOUNCEMENT : 13.12.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 29.01.2015 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN BUSINESS OF DEALING IN MANUFACTURING & T RADING IN GOLD ORNAMENTS AND SILVER ORNAMENTS/BAR. THE ASSESSEE H AS CLAIMED THAT HE HAS MADE PURCHASE FROM M/S. SAILEELA TRADING PVT . LTD. OF RS.43,28,702/- AND THE STATEMENT WAS RECORDED BY SA LES TAX DEPARTMENT REGARDING THIS PURCHASE. THE ASSESSEE D ID NOT PROVE THAT ASSESSEE HAS MADE PURCHASE FROM ABOVE PARTY. THERE FORE, ADDITION OF RS.44,55,225/- WAS MADE UNDER SECTION 69C OF THE AC T AND THE ITA NO.2104/M/2015 SHRI KANTILAL CHUNILAL JAIN 2 PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS INIT IATED. SHOW CAUSE NOTICE WAS GIVEN. ASSESSEE DID NOT REMAIN PRESENT. THEREFORE, PENALTY OF RS.13,76,665/- WAS IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 3. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT(A) HAS DELETED THE PENALTY BY OBSERVING AS UNDER: 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSION MADE. THE FACTS ARE NOT IN DISPUTE. CERTAIN PURCHAS E SHOWN BY THE APPELLANT COULD NOT BE SUBSTANTIATED BEFORE THE AO. FURTHER, THE SALES CORRESPONDING TO SUCH PURCHASES WERE EXPLAINED. IT IS SETTLED POSITION THAT WITHOUT PURCHASES THERE CAN BE NO SALES. CIT(A ) IN THE QUANTUM APPEAL HAS REDUCED THE DISALLOWANCE TO 12.5% OF TOT AL PURCHASE ON ESTIMATE BASIS APPLYING THE REAL INCOME THEORY. HOW EVER, NO SUBMISSION/DETAILS FURNISHED BY THE APPELLANT HAS B EEN FOUND TO BE FALSE ON VERIFICATION THOUGH THE APPELLANT COULD NOT SUBSTANTIATE THE SUPPLIES AND ALSO THE SUPPLIERS HAVE DECLARED B EFORE THE SALES TAX AUTHORITIES THAT THEY HAVE GIVEN ONLY ACCOMMODATION BILLS . BUT SUCH SUPPLIERS HAVE NOT BEEN EXAMINED BY THE AO IN FRONT OF THE APPELLANT AND APPELLANT HAS NOT BEEN ALLOWED TO CROSS EXAMINE THEM. HAT, MUMBAI IN THE CASE OF G.V. SONS, IN ORDER DT.5.12.2 014 IN ITA NO.2240/ MUM/2012 , REGARDING THE QUANTUM ADDITION ON SUCH FACTS HAS HELD AS UNDER:- '17. WE HAVE HEARD THE ARGUMENTS AND HAVE PURSUED T HE MATERIAL ON RECORD AND THE ORDER OF THE REVENUE AUTHORITIES. IT IS NOT IN DISPUTE THAT THE SURVEY ACTION WAS CONDUCTED ON A T HIRD PARTY. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD BUSINE SS RELATION WITH MODXIAN GROUP, LIKE SO MANY OTHER PARTIES. IT IS AL SO A FACT THAT THERE IS NOT EVEN AN IOTA OF EVIDENCE WITH THE AO, TO PRO VE THAT THE ASSESSEE DID NOT HAVE STRAIGHT DEALINGS WITH THE MO XDIAN GROUP. IT IS ALSO A FACT THAT, THAT THE ASSESSEE ENTERED EACH OF ITS TRANSACTION IN ITS PRIMARY BOOKS, COMPRISING OF LEDGER AND STOCK R EGISTER. FROM THE ORDER OF THE AO, THE DR COULD NO ESTABLISH BEFORE U S THAT THE TRANSACTION AS RECORDED IN THE BOOKS WAS SHAM. WE C ANNOT ACCEPT A BALD STATEMENT MADE BY THE AO THAT ANY TRANSACTION/ BUSINESS DONE WITH A PARTY WOULD BE SHAM, SIMPLY BECAUSE THE OPPOSITE PARTY BESIDES DOING REGULAR BUSINESS WAS ALSO INDUL GING IN PROVIDING ACCOMMODATION ENTRIES. SIMPLY ON THE BASIS OF STATE MENT GIVEN BY THE THIRD PARTY, THAT THEY WERE ALSO PROVI DING ACCOMMODATION ENTRIES AS WELL, THE CONDUCT OF THE ASSESSEE CANNOT BE DOUBTED AND HELD TO BE SHAM. 18. THE ASSESSEE HAD CONDUCTED BUSINESS, THIS IS PR OVED BY VARIOUS BOOKS OF ACCOUNT PRODUCED BEFORE THE AO WHICH WE RE ORIGINAL AND PRIMARY ITA NO.2104/M/2015 SHRI KANTILAL CHUNILAL JAIN 3 BOOKS AND NOT EVEN THE AFTER THOUGHT OF THE ASSESSE E, WHICH HAS BEEN ACKNOWLEDGED BY THE AO. 19. IN SUCH A CIRCUMSTANCE, WE CANNOT SUSTAIN THE A DDITION AS MADE BY THE AO. WE, THEREFORE, SUSTAIN THE ORDER OF THE CIT (A), DELETING THE ADDITION MADE, CONSEQUENTIALLY, THE GROUNDS AS RAISED BY THE DEPARTMENT ARE REJECTED.' 3.3.1 MOREOVER, SUCH CASE OF BOGUS PURCHASES HAVE T RAVELLED UPTO HIGH COURTS IN SEVERAL CASES SUCH AS M. K. BROTHERS 163 ITR 249(GU J.), NIKUNJ EXIM ENTERPRISES PVT. LTD., ITA NO.5604 OF 2011 DT.17.12.2012, DIAGNOSTIC S 334 ITR 111(CAL) ETC. THE FACTS IN THIS CASE ARE ALSO NO DIFFERENT. THEREFORE, CONS IDERING THE FACTS IN TOTALITY, IT IS HEREBY HELD THAT PENALTY U/S.271(1)(C) CANNOT BE LE VIED. ACCORDINGLY, AO IS DIRECTED TO DELETE THE PENALTY LEVIED IN RESPECT OF DISALLOW ANCES ON PURCHASES. 4. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. I FIND THAT THE LD. CIT(A) HAS DELETED THE PENALTY ON THE GROUN D THAT THE ADDITION WAS MADE ON THE BASIS OF SURVEY CONDUCTED BY THIRD PARTY. THE ASSESSEE WAS HAVING BUSINESS RELATION WITH THIS PARTY. THEREFORE, RELYING UPON THE DECISION OF VARIOUS DECISIONS OF H IGH COURTS AND THE JURISDICTIONAL HIGH COURT IN THE CASE NIKUNJ EXIMP ENTERPRISES (P) LTD. IN ITA NO.5604 OF 2011 HAS REDUCED THE ADDITIO N TO THE EXTENT OF 12.5% OF TOTAL PURCHASE ON THE ESTIMATE BASIS AP PLYING THE RULE OF INCOME THEORY. THEREFORE, IN SUCH CASE PENALTY CAN NOT BE LEVIED. I FIND THAT PENALTY CANNOT BE LEVIED ON ESTIMATED BAS IS. THEREFORE, THE LD. CIT(A) IS JUSTIFIED IN HIS ACTION AND MY INTERF ERENCE IS NOT REQUIRED. 5. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.12.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 13.12.2017. * KISHORE, SR. P.S. ITA NO.2104/M/2015 SHRI KANTILAL CHUNILAL JAIN 4 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.