ACIT 19(2), MUMBAI V. L.S. DIAMONDS (INDIA), MUMBAI

ITA 2453/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9885 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 06-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR LD
• Assessee Lawyers: VIPUL J SHAH LD
• Keywords: Bogus purchase
• Section: 143(3); 147; 148

Judgement Text

ITA NO.2453 & 2454/M/2017 CO. NO.219 & 220/M/2017 L.S.DIAMONDS (INDIA) ASSESSMENT YEARS-2007-08 & 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.2453 & 2454/MUM/2017 & CO. NO. 219 & 220/M/2017 ( / ASSESSMENT YEARS: 2007-08 & 2009-10) L.S. DIAMONDS (INDIA) 4, DHARAM PALACE HUGES ROAD GAMDEVI MUMBAI 400 007 / VS. ASSISTANT COMMISSIONER OF INCOME TAX 19(2) R.NO.207 MATRU MANDIR MUMBAI 400 007 ./ ./PAN/GIR NO. AABFL-0358-D ( ! /APPELLANT ) : ( '#! / RESPONDENT ) A SSESSEE BY : VIPUL J. SHAH, LD.AR RE VENUE BY : SUMAN KUMAR, LD. DR / DATE OF HEARING : 06/09/2017 / DATE OF PRONOUNCEMENT : 08/09/2017 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEALS BY REVENUE FOR ASSESSMENT YEAR [AY] 2007-08 & 2009-10 ASSAILS THE COMMON ORDER OF LD. C OMMISSIONER OF ITA NO.2453 & 2454/M/2017 CO. NO.219 & 220/M/2017 L.S.DIAMONDS (INDIA) ASSESSMENT YEARS-2007-08 & 2009-10 2 INCOME TAX (APPEALS)-30 [CIT(A)], MUMBAI DATED 19/0 1/2017 QUA RELIEF PROVIDED TO ASSESSEE AGAINST CERTAIN BOGUS PURCHASES. THE ASSESSEE, IN THE CROSS-OBJECTIONS, ASSAILED THE ADDITIONS SUS TAINED BY LD. CIT(A). FIRST WE TAKE UP REVENUES APPEAL ITA NO. 2453/MUM/ 2017 AND ASSESSEES CROSS OBJECTIONS CO. 219/M/2017 FOR AY 2 007-08. 2.1 FACTS LEADING TO THE SAME ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN THE BUSINESS OF DIAMONDS & JEWELLERY, WAS SUBJECTED TO AN ASSESSMENT U/S 143(3) READ WITH SECTION 147 FOR IMPUGNED AY ON 27/03/2015 AT RS.2,73,59,910/- AFTER ADDITION OF CERTAIN BOGUS PURCHASES FOR RS.1,76,22,050/-. THE ORIGINAL RETURN WAS FILED ON 24/10/2007 AT RS.97,37,864/- WHICH WAS ASSESSED AT SAME FIGURES U/S 143(3) ON 25/06/2009. THE SOLITARY ADDITION OF BOGUS PURCHASES OF RS.1,76,22,050/- IS THE SUBJECT MATTER OF THIS APPE AL. NOTICE U/S 148 DATED 27/03/2014 WAS ISSUED TO THE ASSESSEE WHICH W AS FOLLOWED BY STATUTORY NOTICES U/S 143(2) & 142(1). 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM DGIT (INV.), IT WAS NOTED THAT THE ASSESSEE MADE IMPUGNED PURCHASES FRO M THREE GROUP CONCERNS OF ONE BHAWARLAL JAIN AS PER THE FOLLOWING DETAILS:- THE SEARCH / SURVEY ACTIONS ON THE SAID GROUP REVEA LED THAT THE SAID GROUP CONSISTING OF NUMEROUS BUSINESS ENTITIES WAS ENGAGED IN PROVIDING ACCOMMODATION PURCHASES BILLS & ACCOMMODATION LOANS & ADVANCES. CONSEQUENTLY, THE ASSESSEE WAS CALLED UPON TO SUBS TANTIATE NO. NAME AMOUNT (RS.) 1. LITTLE DIAM 85,80,040/- 2. DAKSH DIAMONDS 7,00,500/- 3. A2JEWELS 83,41,510/- TOTAL 1,76,22,050/ - ITA NO.2453 & 2454/M/2017 CO. NO.219 & 220/M/2017 L.S.DIAMONDS (INDIA) ASSESSMENT YEARS-2007-08 & 2009-10 3 THE PURCHASE TRANSACTIONS WITH DOCUMENTARY EVIDENCE S AND BY PRODUCING THE RESPECTIVE PARTIES FOR CONFIRMATION O F TRANSACTIONS. IN REPLY, THE ASSESSEE CONTENDED THAT THE PURCHASES WE RE GENUINE SINCE THE PAYMENTS WERE MADE THOUGH BANKING CHANNELS. HOW EVER, NOT CONVINCED, LD. AO REJECTED THE VARIOUS CONTENTIONS OF THE ASSESSEE AND CONCLUDED THAT THE ASSESSEE FAILED TO DISCHARGE THE PRIMARY ONUS CASTED ON HIM IN THIS REGARD. FINALLY, THE BOOKS WERE REJE CTED AND ENTIRE PURCHASES WERE DISALLOWED AND ADDED TO THE INCOME O F THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME ON LE GAL GROUNDS AS WELL AS ON MERITS WITH PARTIAL SUCCESS BEFORE LD. C IT(A) VIDE IMPUGNED ORDER DATED 19/01/2017 AND REITERATED ITS CONTENTIO NS AND PLACED RELIANCE ON SEVERAL JUDICIAL PRONOUNCEMENTS ON THE MATTER. THE LD.CIT(A) AFTER APPRECIATING THE SAME NOTED THAT TH E ASSESSEE MADE SIMILAR PURCHASES IN AY 2008-09 & 2010-11 WHERE LD. AO HIMSELF ESTIMATED THE ADDITIONS AGAINST THE SAME @3% WHERE ONE TO ONE CORRELATION WAS PROVIDED BETWEEN ALLEGED BOGUS PURCHASES & SALES AND @5% WHERE THE CORRELATION WAS NOT PROVIDED BY THE A SSESSEE. RELYING ON THE SAME, LD. CIT(A) RESTRICTED THE IMPUGNED ADD ITIONS TO THE EXTENT OF 3% ON RS.1,29,80,200/- AND 5% ON BALANCE RS.46,4 1,830/-. AGGRIEVED THE REVENUE IS IN FURTHER APPEAL BEFORE U S. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] PLACED RELIANCE ON THE STAND OF LD. AO AND CONTENDED THAT THE ASSESSEE COU LD NOT PRODUCE ANY DELIVERY CHALLANS ETC. AND ALSO COULD NOT PRODUCE A NY OF THE PARTY FOR CONFIRMATION. FURTHER, THE SEARCH / SURVEY ACTION O N THE CONCERNED GROUP CLEARLY REVEALED THAT THE TRANSACTIONS WERE MERELY ACCOMMODATION ITA NO.2453 & 2454/M/2017 CO. NO.219 & 220/M/2017 L.S.DIAMONDS (INDIA) ASSESSMENT YEARS-2007-08 & 2009-10 4 ENTRIES AND THEREFORE, LD. CIT(A) ERRED IN GRANTING SUBSTANTIAL RELIEF TO THE ASSESSEE. 5. PER CONTRA , LD. AR CONTENDED THAT NO ADDITIONS WERE WARRANTED SINCE THE ASSESSEE WAS IN POSSESSION OF PURCHASE IN VOICES AND THE PAYMENTS WERE THROUGH BANKING CHANNELS. OUR ATTENTI ON IS DRAWN TO HIGH GP RATE REFLECTED BY THE ASSESSEE. 6. HEARD AND PERUSED RELEVANT MATERIAL ON RECORD. W E ARE OF THE CONSIDERED OPINION THAT THERE COULD BE NO SALE WITH OUT PURCHASE OF MATERIAL KEEPING IN VIEW THE NATURE OF ASSESSEES B USINESS. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISP UTED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANN ELS. THE ASSESSEE, TO SOME EXTENT, PRODUCED DETAILS OF PURCH ASE AND CORRESPONDING SALES BEFORE LD. CIT(A). AT THE SAME TIME, THE ASSESSEE COULD NOT PRODUCE ANY OF THE SUPPLIERS BEFORE LOWER AUTHORITIES AND THE SEARCH / SURVEY ACTION ON THE GROUP CASTED A SERIOU S DOUBT ON ASSESSEES CLAIM. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EM BEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEME NT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST ALLEGED BOGUS PURCHASES, WHICH LD.CIT(A) HAS RIGHTLY DONE. WE ALSO NOTE THAT THE SAID ESTIMATION IS IN TUNE WITH ESTIMATED ADDITION MADE BY LD. AO IN AY 2008-09 & 2 010-11, WHICH ASSESSEE HAS ACCEPTED. THEREFORE, SINCE ESTIMATED A DDITION HAS ALREADY BEEN ACCEPTED BY THE REVENUE AS WELL AS ASSESSEE IN AY 2008-09 & 2010-11, WE SEE NO REASON TO INTERFERE WITH THE STA ND OF LD. CIT(A). ITA NO.2453 & 2454/M/2017 CO. NO.219 & 220/M/2017 L.S.DIAMONDS (INDIA) ASSESSMENT YEARS-2007-08 & 2009-10 5 RESULTANTLY, THE REVENUES APPEAL AS WELL ASSESSEE S CROSS OBJECTION STANDS DISMISSED. 7. THE ASSESSEE, IN SIMILAR CIRCUMSTANCES, SUFFERED ADDITION OF RS.1,57,02,777/- IN AY 2009-10 WHICH HAS BEEN RESTR ICTED BY LD. CIT(A) TO 3%. THE ORDER OF LD. CIT(A) IS COMMON ORDER FOR AY 2007-08 & 2009- 10. THEREFORE, THERE BEING NO CHANGE IN FACTS OR CI RCUMSTANCES, TAKING THE SAME STAND, WE DISMISS REVENUES APPEAL ITA NO. 2454/M/2017 AS WELL AS ASSESSEES CROSS OBJECTIONS CO. 220/M/2017. 8. RESULTANTLY, THE REVENUES APPEALS AS WELL AS AS SESSEES CROSS OBJECTIONS STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH SEPTEMBER, 2017. SD/- SD/- (MAHAVIR SINGH) (M ANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 08. 09.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. '%- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI