The ITO, Ward-1(1)(3), Surat V. M/s. Kapil Gems Pvt. Ltd., Surat

ITA 257/AHD/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2261 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 01-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K
• Assessee Lawyers: T R MODY
• Keywords: Bogus purchase

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.257/AHD/2017/SRT / ASSESSMENT YEAR: 2012-13 INCOME TAX OFFICER, WARD-1(1)(3), SURAT. VS. M/S. KAPIL GEMS PVT. LTD., OFFICE NO. C-3, ANTWERP PARK, KANSARA SHERI, MAHIDHARPURA, SURAT 395 003. [PAN: AAECK 1120C] ( ' / APPELLANT) ( #$' /RESPONDENT) / ASSESSEE BY : SHRI T.R. MODY. C.A /REVENUE BY : SHRI B.P.K PANDA, SR. D.R /DATE OF HEARING : 26-06-2018 / DATE OF PRONOUNCEMENT : 03-08-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, SURAT (CIT (A) FOR SHORT) DATED 11.11.2016 FOR THE ASSESSMENT YEAR (A.Y) 2012-13. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS FOLLO WS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION ON ACCOUN T OF BOGUS PURCHASES AT THE RATE OF 5% OF THE ALLEGED PURCHASE S OF RS. 50,00,050/- WHEN HE HIMSELF HAS DOUBTED THE GENUINE NESS OF PURCHASE TRANSACTIONS. 2 ITA NO.257/AHD/2017/SRT (A.Y: 2012-13) M/S. KAPIL PVT. LTD. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE T RIBUNAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES AT THE RATE OF 5% OF THE ALLEGED PURCHASES OF RS. 50,00,05 0/- WHEN HE HIMSELF HAS DOUBTED THE GENUINENESS OF PURCHASE TRANSACTION S. THE LD. DR SUPPORTING THE ASSESSMENT ORDER SUBMITTED THAT THE ASSESSEE HAS MADE BOGUS PURCHASES FROM VARIOUS PARTIES DURING THE YEA R AND THEREFORE, THE AO WAS RIGHT IN MAKING ADDITION OF ENTIRE AMOUNT OF BOGUS PURCHASES TOTAL TAXABLE INCOME OF THE ASSESSEE. THE LD. DR SUBMITT ED THAT THE LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY BASI S THEREFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 4. REPLYING TO THE ABOVE, THE LD. ASSESSEES REPRES ENTATIVE (AR) SUPPORTED THE FIRST APPELLATE ORDER AND SUBMITTED T HAT THE LD. CIT(A) WAS RIGHT IN RESTRICTING TO THE DISALLOWANCE TO THE EXT ENT OF 5% OF TOTAL ALLEGED PURCHASES BY FOLLOWING DECISION OF HONBLE JURISDIC TIONAL HIGH COURT OF GUJARAT IN THE CASE OF MAYANK DIAMOND PVT. LTD. [2014] 11 (TMI) 812 (GUJ.). 5. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, WE ARE OF THE VIEW THAT THE ASSESSEE PRODUCED ALL RELEVANT PURCHA SE AND SALE BILLS, 3 ITA NO.257/AHD/2017/SRT (A.Y: 2012-13) M/S. KAPIL PVT. LTD. STOCK TALLY/REGISTER BEFORE THE AUTHORITIES BELOW A ND SHOWN THAT THE PAYMENTS TOWARDS ALLEGED PURCHASES HAVE BEEN MADE T HROUGH ACCOUNT PAYEE CHEQUES THEREFORE, IT WOULD BE UNFAIR AND UNR EASONABLE TO TREAT AMOUNT OF ENTIRE PURCHASES AS INCOME OF THE ASSESSE E BECAUSE WHEN THE CORRESPONDING SALES HAVE NOT BEEN DOUBTED BY THE AO THEN, ENTIRE AMOUNT OF BOGUS PURCHASES CANNOT BE AN INCOME OF TH E ASSESSEE. IT IS ALSO NOTED THAT THE ASSESSEE GOT AUDITED HIS BOOKS OF ACCOUNTS AND THERE IS NO COMMENTS THEREON BY THE AUDITOR REGARDING QUA NTUM OF PURCHASES AND CORRESPONDING SALES THEREFORE, THE ENTIRE AMOUN T PURCHASES CANNOT BE TREATED AS INCOME OF THE ASSESSEE ON THE ALLEGAT ION OF BOGUS PURCHASES. 6. FROM PARA 6.5 OF THE IMPUGNED FIRST APPELLATE OR DER, WE OBSERVE THAT THE LD. CIT(A) HAS FOLLOWED RATIO OF THE DECIS ION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAYANK DIAMOND PVT. LTD. (SUPRA), WHEREIN THEIR LORDSHIP HELD THAT THE ADDIT ION ON ALLEGATION OF BOGUS PURCHASES HAS TO BE MADE BASED ON GP RATE OF 5% OF TOTAL ALLEGED AND DISPUTED PURCHASES. ON CAREFUL CONSIDERATION O F ABOVE RIVAL SUBMISSIONS, WE ARE ALSO OF THE VIEW THAT THE ENTIR E CARATS/STOCK OF DIAMONDS CLAIMED TO HAVE PURCHASED FROM ALLEGED TWO PARTIES HAVE BEEN SOLD DURING THE YEAR AND THIS FACT HAS NOT BEEN DIS PUTED BY THE AO THUS, AMOUNT OF ENTIRE PURCHASES CANNOT BE DISALLOWED AND BE TAKEN FOR MAKING 4 ITA NO.257/AHD/2017/SRT (A.Y: 2012-13) M/S. KAPIL PVT. LTD. ADDITION TO THE TAXABLE INCOME OF THE ASSESSEE. IN OUR HUMBLE UNDERSTANDING OF PROVISION OF THE ACT AND COMMERCIA L TRANSACTIONS ONLY THE ELEMENT OF PROFIT IN ALLEGED PURCHASES MAY BE T AXED TO COVER UP ALL POSSIBLE LEAKAGE OF REVENUE AND THE SAME ALSO SERVE PURPOSE OF ENTIRE EXERCISE UNDERTAKEN BY THE TAX AUTHORITIES. THEREF ORE, WE ARE INCLINED TO HOLD THAT THE ACTION OF THE AO MAKING DISALLOWANCE ON ENTIRE ALLEGED PURCHASES FROM SAID TWO PARTIES BY TREATING THE SAM E AS BOGUS INCOME OF THE ASSESSEE IS NOT CORRECT, JUSTIFIED AND SUSTAINA BLE AND LD. CIT(A) WAS RIGHT IN DISMISSING THE SAME AND ESTIMATING GP RATE @ 5% OF TOTAL ALLEGED PURCHASES AND UPHOLDING THE ADDITION TO THE EXTENT OF RS. 2,50,003/- BEING 5% OF TOTAL ALLEGED BOGUS PURCHASES. THEREFO RE, WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE SAME AND THUS, WE UPHOLD THE SAME. CONSEQUENTLY, SOLE GROUND OF REVENUE BEING D EVOID OF MERITS IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 0 3 RD AUGUST, 2018. / SURAT ; DATED : 03 RD AUGUST, 2018 / EDN # & / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. $ ( ) / THE CIT(A)-1, SURAT; 4. PRL. CIT-I, SURAT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER