VBC Jewellery, CHENNAI V. ACIT Non Corporate Circle 2, CHENNAI

ITA 2305/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5338 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 06-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: N ARJUN RAJ C A SHRI S SRIDHAR
• Keywords: Bogus purchase; Rejection of books of accounts; Unexplained expenditure; Search and seizure; Accommodation entries; Reason to believe
• Section: 69C; 69; 145; 148; 144

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NOS.2304 AND 2305/CHNY/2018 / ASSESSMENT YEARS: 2013-14 & 2014-15 M/S. VBC JEWELLERY, 78, G N CHETTY ROAD, T. NAGAR, CHENNAI 600 017. [PAN: AAAFV5601N] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 2, # 121, M.G. ROAD, NUNGAMBAKKAM, CHENNAI 600 034. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI N. ARJUN RAJ, CA FOR SHRI S. SRIDHAR, ADVOCATE / RESPONDENT BY : SHRI B. SAGADEVAN, JCIT / DATE OF HEARING : 08.01.2019 /DATE OF PRONOUNCEMENT : 29.01.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 2, CHENNAI, BOTH DATED 30.05.2018 RELEVANT TO THE ASSESSMENT YEARS 2013-14 AND 2014-15. BESIDES CHALLENGING THE CONFIRMATION OF ADDITION ON THE APPLICATION OF SECTION 69 OF THE INCOME TAX ACT, 1961 [ACT IN SHORT] FOR THE ASSESSMENT YEAR 2014-15, THE ASSESSEE ALSO CHALLENGED CONFIRMATION OF DISALLOWANCE OF BOGUS PURCHASES FOR BOTH THE ASSESSMENT YEARS. I.T.A. NOS. 2304 & 2305/CHNY/18 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN JEWELLERY BUSINESS AND HAD FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 ON 28.09.2013 ADMITTING A TOTAL INCOME OF .39,70,140/-. SUBSEQUENTLY, THERE WAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR THIS ASSESSMENT YEAR. THEREFORE, THE CASE WAS REOPENED BY ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT DATED 25.01.2017 WHICH WAS DULY SERVED ON THE ASSESSEE. IN RESPONSE TO THE SAME, THE ASSESSEE FILED THE RETURN ON 01.12.2017 AND ALSO REQUESTED TO PROVIDE THE REASONS FOR REOPENING ASSESSMENT WHICH WAS DULY COMMUNICATED TO THE ASSESSEE. LATER, NOTICE UNDER SECTION 143(2) OF THE ACT DATED 19.12.2017 WAS ISSUED TO THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSMENT UNDER SECTION 144 R.W.S. 145A R.W.S. 147 OF THE ACT WAS COMPLETED BY ASSESSING THE TOTAL TAXABLE INCOME AT .41,03,890/- BY MAKING DISALLOWANCE OF 25% OF PURCHASE MADE FROM ARIHANT EXPORTS TREATING IT AS BOGUS PURCHASE TO THE EXTENT OF .1,33,664/- [25% OF .5,34,656/-]. 2.1 SIMILARLY, THE PURCHASES MADE FROM M/S. SUN DIAM AT .75,789/- HAS BEEN TREATED AS BOGUS PURCHASE AND BROUGHT TO TAX IN THE ASSESSMENT YEAR 2014-15. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE MATERIALS AVAILABLE ON RECORD AND IN THE ABSENCE OF MATERIAL I.T.A. NOS. 2304 & 2305/CHNY/18 3 EVIDENCE TOWARDS PURCHASE MADE FROM M/S. ARIHANT EXPORT IN THE ASSESSMENT YEAR 2013-14, THE LD. CIT(A) CONFIRMED THE ADDITION. SIMILAR ADDITION TOWARDS PURCHASE MADE FROM M/S. SUN DIAM WAS ALSO CONFIRMED BY THE LD. CIT(A) BEING UNVERIFIABLE PURCHASE, WHICH IS NOTHING BUT ACCOMMODATION ENTRY FROM THE ACCOMMODATION PROVIDERS. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL FOR BOTH THE ASSESSMENT YEARS. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THE AUTHORITIES BELOW HAVE ERRONEOUSLY REJECTED THE BOOKS OF ACCOUNTS AND PRESUMED THE PURCHASES MADE FROM M/S. ARIHANT EXPORT IN THE ASSESSMENT YEAR 2013-14 AND M/S. SUN DIAM IN THE ASSESSMENT YEAR 2014-15 WITHOUT HAVING ANY DIRECT EVIDENCE, WHICH RESULTED ADDITION IN BOTH THE ASSESSMENT YEARS AND PRAYED FOR DELETING THE SAME. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE COURSE OF SEARCH AND SEIZURE ACTION CONDUCTED ON 03.10.2013 BY THE OFFICE OF THE DDLT (INVESTIGATION), UNIT-I, MUMBAI IN THE CASE OF SHRI RAJENDRA JAIN GROUP, SHRI SANJAY CHOUDHARY GROUP AND SHRI DHARMICHAND JAIN GROUP, IT HAD COME TO LIGHT THAT THEY WERE OPERATING AND MANAGING BENAMI CONCERNS IN THE NAMES OF THEIR EMPLOYEES THROUGH WHICH, THEY PROVIDED ACCOMMODATION I.T.A. NOS. 2304 & 2305/CHNY/18 4 ENTRIES OF UNSECURED LOANS AND BOGUS PURCHASES TO VARIOUS BENEFICIARIES. THE LIST OF SUCH BENEFICIARIES WHO HAD OBTAINED SUCH ACCOMMODATION ENTRIES OF BOGUS PURCHASES ALSO CONTAINED THE DETAILS OF SUCH ACCOMMODATION ENTRIES AVAILED OF BY THE ASSESSEE. THE ASSESSEE HAD MADE 'BOGUS PURCHASES' FROM M/S. ARIHANT EXPORTS, SURAT FOR A SUM OF .5,34,056/-. ON BEING CONFRONTED ABOUT THE BOGUS PURCHASES, THE ASSESSEE SUBMITTED THAT THE IMPUGNED PURCHASES WERE MADE AND THE CORRESPONDING SALES WERE ALSO EFFECTED AND FURTHER SUBMITTED THAT IF PURCHASES WERE BOGUS THEN THE SALES OF THE SAME COULD NOT HAVE BEEN MADE. SINCE THE ASSESSE COULD NOT PRODUCE THE INTERMEDIARY FROM WHOM THE PURCHASE FROM M/S ARIHANT EXPORTS WAS MADE IN THE ASSESSMENT YEAR 2013-14. FROM THE FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER OBSERVED THAT M/S. ARIHANT EXPORTS HAD ONLY PROVIDED ACCOMMODATION BILLS TO THE ASSESSEE AND WAS NOT DOING ANY ACTUAL SALE AND PURCHASE OF GEMS AND JEWELLERY. THEREFORE, IN THE ABSENCE OF SUCH MATERIAL EVIDENCE, THE IMPUGNED PURCHASE OF .5,34,656/-WAS TREATED AS AN UNVERIFIABLE PURCHASE THE ASSESSEE HAD PROCURED IMPUGNED PURCHASES FROM UNDISCLOSED SOURCES OR FROM UNKNOWN PARTIES WITH THE SPECIAL AND EXCLUSIVE KNOWLEDGE OF THE ASSESSEE ONLY. THEREFORE, SINCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE UNRELIABLE BY REJECTING THE SAME AND INVOKING THE PROVISIONS OF SECTION 145 (2) OF THE ACT, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT IN THE MANNER PROVIDED UNDER SECTION 144 OF THE ACT BY RELYING I.T.A. NOS. 2304 & 2305/CHNY/18 5 UPON THE DECISION IN THE CASE OF M/S SANJAY OIL CAKE INDUSTRIES VS. CIT 316 ITR 274 (GUJ) WHERE UNDER IDENTICAL FACTS, 25% DISALLOWANCE ON BOGUS/UNVERIFIABLE PURCHASE WAS HELD AS REASONABLE AND DISALLOWED 25% OF UNVERIFIABLE PURCHASE OF .5,34,656/- MADE FROM M/S ARIHANT EXPORTS. THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE THE LD. CIT(A) IN RESPECT OF THE DISALLOWANCE OF .1,33,664/-, WHICH WAS CONFIRMED BEING UNVERIFIABLE PURCHASE. EVEN BEFORE THE TRIBUNAL ALSO, THE ASSESSEE COULD NOT PRODUCE ANY MATERIAL EVIDENCE OF THE PARTIES/ INTERMEDIARIES FROM WHOM THE PURCHASE FROM M/S ARIHANT EXPORTS WAS MADE WHICH COULD BE VERIFIABLE. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE AUTHORITIES BELOW. THUS THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 6. SIMILARLY, FOR THE ASSESSMENT YEAR 2014-15 ALSO, UPON THE POST SEARCH AND SEIZURE ACTION CONDUCTED ON 03.10.2013 REVEALED THAT THE ASSESSEE MADE 'BOGUS PURCHASES' FROM M/S. SUN DIAM. SURAT, A COMPANY CONTROLLED BY SHRI RAJENDRA JAIN GROUP BY TAKING ACCOMMODATION ENTRIES FOR A SUM OF RS.75.789/-. THE ASSESSEE COULD NOT PRODUCE THE PARTIES/INTERMEDIARIES FOR VERIFICATION. MOREOVER, THE ASSESSEE COULD NOT PRODUCE SUFFICIENT EVIDENCE TO PROVE THE GENUINENESS OF PURCHASES MADE FROM M/S. SUN DIAM. EVEN THE PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES WERE NOT FOUND SACROSANCT. FURTHER, IT HAD BEEN ADMITTED IN THE STATEMENTS RECORDED BY THE INVESTIGATION I.T.A. NOS. 2304 & 2305/CHNY/18 6 WING, MUMBAI THAT CHEQUES WERE ISSUED BY THE BENEFICIARY PARTIES AGAINST THE BOGUS SALE BILLS ISSUED BY THE BENAMI CONCERNS OF BHANWARLAL JAIN AND RAJESH BHANWARLAL JAIN. SUBSEQUENTLY, CASH WAS RETURNED BACK TO THESE BENEFICIARY PARTIES THROUGH ANGADIAS AFTER DEDUCTING COMMISSION OF THE SAME BY BHANWARLAL JAIN AND RAJESH BHANWARLAL JAIN. SINCE THE ONUS IN THE INSTANT CASE, SQUARELY LAY ON THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASE OF DIAMONDS SAID TO HAVE BEEN MADE FROM M/S. SUN DIAM WHICH WAS NOT PROVED, THE UNVERIFIABLE PURCHASE OF .75,789/- WAS BROUGHT TO TAX. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION. EVEN BEFORE THE TRIBUNAL ALSO, THE ASSESSEE COULD NOT PRODUCE ANY MATERIAL EVIDENCE OF THE PARTIES/ INTERMEDIARIES FROM WHOM THE PURCHASE FROM M/S SUN DIAM WAS MADE WHICH COULD BE VERIFIABLE. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE AUTHORITIES BELOW. THUS THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 7. WITH REGARD TO THE ADDITION TOWARDS UNEXPLAINED EXPENDITURE OF .10,000/- IN THE ASSESSMENT YEAR 2014-15, IN ORDER TO OBTAIN SUCH ACCOMMODATION ENTRIES, THE ASSESSEE HAD ALSO INCURRED COMMISSION EXPENDITURE. SUCH PAYMENT OF COMMISSION IN ORDER TO PROCURE ACCOMMODATION ENTRIES HAD BEEN MET OUT BY THE ASSESSEE OUT OF CASH LYING OUTSIDE THE BOOKS OF ACCOUNTS. THEREFORE, THE ASSESSING OFFICER TREATED THE I.T.A. NOS. 2304 & 2305/CHNY/18 7 SAME AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT AND DISALLOWED THE SAME. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION. 8. WE HAVE HEARD RIVAL CONTENTIONS. THE ASSESSEE HAD OBTAINED ACCOMMODATION ENTRIES OF .75,789/- FROM M/S. SUN DIAM, SURAT FOR WHICH COMMISSION WAS PAID TO THE ACCOMMODATION PROVIDER. SINCE THE VERY NATURE OF BUSINESS OF THE ACCOMMODATION ENTRY PROVIDER WAS TO EARN COMMISSION INCOME FROM THE BENEFICIARIES, WHO HAD OBTAINED ACCOMMODATION ENTRIES FROM THEM, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS REASONABLY ESTIMATED THE COMMISSION OF .10,000/- FOR TWO BOGUS BILLS OBTAINED BY THE ASSESSEE @ .5,000/- PER BILL, WHICH WAS RIGHTLY CONFIRMED BY THE LD. CIT(A). THUS, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A). 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 29 TH JANUARY, 2019 IN CHENNAI. SD/ - SD/ - (A.MOHAN ALANKAMONY) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 29.01.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.