M/s. Priya Impex, Surat V. Income Tax Officer, Ward -3(3)(5), Surat

ITA 262/SRT/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1761 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 28-07-2022
• Assessment Year: 2008-2009
• Appeal Filed On: 08-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Search and seizure; Opportunity of being heard; Opportunity of cross examination; Rule of consistency
• Section: 147; 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 262/Srt/2018 (Assessment Year: 2008-09) (Physical hearing) M/s Priya Impex, 407, Princess Plaza, Mini Bazar, Varachha Road, Surat-395006. PAN No. AAHFP 9640 E Vs. I.T.O., Ward-3(3)(5), Surat. Appellant/ assessee Respondent/ revenue Appellant represented by None Respondent represented by Shri Shaurya Shashwat Shukla, Sr.DR Date of hearing 29/07/2022 Date of pronouncement 18/08/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-3, Surat (in short, the ld. CIT(A) dated 22/01/2018 for the Assessment year 2008-09. The assessee has raised following grounds of appeal: “1. The learned AO has wrongly made addition of Rs. 1,31,800/- on account of bogus purchase based on information provided by ACIT, Central Circle-4, Surat. 2. AO has ignored the basic fact of the transaction that the assessee is genuine and have purchased goods from them and copy of purchase bill bearing the VAT and PAN of the seller as well as payment made thereof have been provided (copy of bank statement) during the assessment. ITA No.262/Srt/2018 M/s Priya Impex Vs ITO 2 3. The assessee has replied all the notices and furnished information and explanation required to justify our stand to AO on timely basis. 4. The AO has not issued speaking order against timely objection filed by the assessee. 5. The AO has not given opportunity of being heard to cross examination of the fact based which addition was made. 6. The AO has not applied his independent of mind. 7. Waiver of interest U/s 234A/B/C.” 2. Brief facts of the case are that the assessee is in the business of gems and jewellery, filed its return of income for the Assessment year (AY) 2008-09 on 18/08/2008 declaring total income of R. 2,01,610/-. The case of assessee was reopened on the basis of information received from ACIT, Central Circle-4, Surat. As per information, a search and seizure action was carried out by the Investigation Wing, Mumbai on Rajendra Jain Group, Sanjay Chaudhary Group and Dharmichand Jain group of Mumbai on 03/10/2013 which resulted in collection of huge incriminating material which shows that Rajendra Jain Group, Sanjay Chaudhary Group and Dharmichand Jain group were indulged in providing accommodation entries of purchases and sales of rough and polished diamonds, without actual delivery of goods. The assessee was one of the beneficiary of accommodation entry from Rajendra Jain group. On the basis of such information, the Assessing Officer made his belief that the income of the assessee has escaped assessment. Thus, the case of assessee was ITA No.262/Srt/2018 M/s Priya Impex Vs ITO 3 reopened under Section 147 of the Income Tax Act, 1961 (in short, the Act). Notice under Section 148 dated 25/3/2015 was served upon the assessee. In response to notice under Section 148, the assessee filed its reply dated 24/4/2015 contending that the original return filed on 18/8/2008 be treated as return in response to notice under Section 148 of the Act. The Assessing Officer after serving statutory notices proceeded for assessment. The Assessing Officer recorded the modus operandi of entry provider in para 4.1 of the assessment order. On the basis of modus operandi of Rajendra Jain group, the Assessing Officer noted Sun Diam, one of the entity of Rajendra Jain has given accommodation entry of bogus sales of Rs. 5,27,201/- to the assessee. The Assessing Officer issued show cause notice to the assessee to produce the party namely Sun Diam and the relevant document to prove the genuineness of business transaction with Sun Diam. The assessee filed its reply dated 04/3/2016. In the reply, the assessee contended that their purchases are genuine, the assessee furnished copy of ledger and bank statement showing the payment. The reply of assessee was not accepted by the Assessing officer by taking a view that the transaction with Sun Diam is not genuine as Rajendra Jain group was indulged in providing accommodation entry and the assessee is beneficiary of such entry. The Assessing Officer disallowed 25% of aggregate of purchases of Rs. 5,27,201/-. The Assessing Officer ITA No.262/Srt/2018 M/s Priya Impex Vs ITO 4 worked out the disallowance of Rs. 1,31,800/- while passing the assessment order on 11/3/2016/- under Section 143(3) r.w.s. 147 of the Act. 3. Aggrieved by the addition, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee besides making similar as made before the Assessing Officer also contended that the assessing officer has not provided opportunity of cross examination to the assessee. The ld. CIT(A) after considering the submission of assessee, upheld the addition made by Assessing Officer. The ld. CIT(A) while confirming the addition held that the assessee has not made any effort for establishing the purchases by furnishing stock register, inventory tally etc. Further aggrieved, the assessee has filed the present appeal before this Tribunal. 4. None, has appeared on behalf of assessee despite service of notice. Perusal of record reveals that adjournment was sought on 21/06/2022 by Shri Rakesh Shah, C.A. and the matter was adjourned to 13/07/2022. On 13/07/2022 and again on 29/07/2022, none appeared on behalf of assessee nor is any written submission or any documentary evidence filed despite the fact that this appeal is pending adjudication from 2018. Therefore, we left no option except to decide the appeal on the basis of material available on record and after hearing the submission of ld. Sr. DR for the revenue. The ld. Sr. DR for the revenue submits that the assessee ITA No.262/Srt/2018 M/s Priya Impex Vs ITO 5 has failed to prove the genuineness of purchases. The assessee is beneficiary of the bogus purchases in the form of accommodation entry. The assessee obtained mere entry without actual delivery of goods. The ld. CIT(A) clearly held that the assessee has not furnished copy of stock register or inventory tally. The assessee merely submitted that payments were made through cheques. The ld. Sr. DR for the revenue submitted that mere payment by cheque is not sufficient in absence of other corroborative material like stock of goods or proof of delivery to the assessee. 5. We have considered the submission of ld. Sr. DR for the revenue and perused the orders of lower authorities carefully. We find that during the assessment, the Assessing Officer noted that the assessee is beneficiary of purchases from Sun Diam, which was managed and controlled by Rajendra Jain and his group. The assessee was asked to produce the party to substantiate the purchases. The assessee failed to produce the party for verification and contended that the payments of purchases were made through banking channel. The Assessing officer not accepted the contention of assessee and disallowed 25% of the aggregate of purchases shown from Sun Diam. The Assessing officer while making addition solely relied on the report of Investigation Wing, Mumbai. We find that neither the sales of assessee was disputed nor the profit element embedded in the ITA No.262/Srt/2018 M/s Priya Impex Vs ITO 6 purchases was examined by seeking the detail of gross profit and net profit of previous and subsequent years. The ld. CIT(A) also confirmed the addition by taking a view that the assessee has not furnished copy of stock register and inventory tally. We find that no finding was given on the evidences for payment of goods purchased. No independent investigation was carried out by the Assessing Officer before making addition. In our view, the addition of 25% of the aggregate purchases is on higher side. The combination this Bench, in a number of similar cases wherein those assessee were also beneficiary of purchases shown from Rajendra Jain and his group, has restricted the similar additions/ disallowance of purchases to the extent of 6% of such disputed/impugned purchases, therefore, following the principle of consistency, the Assessing Officer is directed to restrict the disallowance of purchase shown from Sun Diam to the extent of 6% only. In the result, the grounds of appeal are partly allowed. 6. In the result, this appeal of assessee is allowed partly. Order pronounced in the open court on 18 th August, 2022 in open court and result was also placed on notice board. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 18/08/2022 *Ranjan ITA No.262/Srt/2018 M/s Priya Impex Vs ITO 7 Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr.Private Secretary, ITAT, Surat