The ITO, Ward-6(4), Surat V. Shri Sunil Kumar Jain, Surat

ITA 2636/AHD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67509 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 23-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D S KALYAN
• Keywords: Bogus purchase; Additional evidence; Accommodation entries
• Section: 143(3); 133(6); 10

Judgement Text

ITA NO 2636/AHD/2012 . A.Y. 2008 - 09 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 2636 /AHD/2012 (ASSESSMENT YEAR: 2008-09) THE INCOME TAX OFFICER WARD 6(4), SURAT (APPELLANT) VS. SHRI SUNIL KUMAR JAIN, PROP. SHUBHLAXMI DIAMONDS, 9, PARVAT PATIA, HARIPURA, SURAT (RESPONDENT) PAN: ADGPJ7414C APPELLANT BY : SHRI D.S. KALYAN, CIT D.R . RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 16-07-201 3 DATE OF PRONOUNCEMENT : 02-08-2013 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A)-1, SURAT DATED 26.09.2012 FOR ASSESSMENT YEAR 2008-09. 2. ON THE DATE OF HEARING NONE APPEARED ON BEHALF OF A SSESSEE NOR AN APPLICATION FOR ADJOURNMENT WAS MOVED ON HIS BEHALF . WE THUS PROCEED TO DECIDE THE APPEAL EX-PARTE QUA THE ASSESSEE. 3. THE FACTS AS CULLED OUT FROM THE ORDER OF LOWER AUT HORITIES ARE AS UNDER. ITA NO 2636/AHD/2012 . A.Y. 2008 - 09 2 4. ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE TRADING BU SINESS OF ROUGH AND POLISHED DIAMONDS UNDER THE NAME AND STYLE OF M/S. SHUBHLAXMI DIAMONDS, THE PROPRIETARY CONCERN OF THE ASSESSEE. ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 2008-09 ON 30.09.2008 DEC LARING TOTAL INCOME OF RS. 2,23,797/-. THE CASE WAS SELECTED FOR SCRUT INY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORD ER DATED 30.12.2010 AND THE TOTAL INCOME WAS DETERMINED AT RS. 4,84,36, 610/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED TH E MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 26.09.2012 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT( A) THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWIN G GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO RS.1,13,37,578/-FROM RS.4,82,12,808/- MADE ON ACCOUNT OF UNVERIFIABLE PU RCHASES MADE BY THE ASSESSING OFFICER. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD.CIT(A) HAS ERRED IN APPRECIATING THE FACT FOUND BY THE AO AND IGNORED EVIDENCES COLLECTED BY THE -AO FOR MAKING ADDITION OF RS.4,82 ,12,808/- ON ACCOUNT OF UNVERIFIABLE PURCHASES . 5. SINCE BOTH THE GROUNDS RAISED BY THE REVENUE ARE INTERCONNECTED BOTH ARE CONSIDERED TOGETHER. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS ING OFFICER NOTICED THAT ASSESSEE HAS PURCHASED DIAMONDS FROM 10 PARTIE S, THE NAMES AND THE AMOUNT ARE LISTED AT PARA 4.1 OF THE ASSESSMENT ORD ER. THE ASSESSEE WAS ITA NO 2636/AHD/2012 . A.Y. 2008 - 09 3 ASKED TO FURNISH NAME AND ADDRESS OF THE PARTIES FR OM WHOM THE PURCHASES WERE MADE. THE ASSESSING OFFICER ALSO IS SUED NOTICE UNDER SECTION 133(6) TO ALL THE 10 PARTIES. EXCEPT IN CA SE OF THREE PARTIES NAMELY M/S MBB EXPORTS, M/S. SHREE BALAJI INTERNATI ONAL AND M/S. NAVPAD EXPORTS, THE NOTICES FOR OTHER PARTIES REMAI NED UNSERVED WITH THE REMARKS NOT KNOWN OR LEFT. THE ASSESSEE WAS TH EREFORE ASKED TO JUSTIFY THE CLAIM OF PURCHASES. ASSESSEE FILED COP IES OF CONFIRMATION IN RESPECT OF MBB EXPORTS, SHREE BALAJI INTERNATIONAL AND NAVPAD EXPORTS. WITH RESPECT TO THE OTHER SEVEN PARTIES, THE ASSESS EE COULD NOT PROVE THE GENUINENESS OF TRANSACTION WITH PROPER SUPPORTING E VIDENCES. ASSESSEE ONLY FURNISHED LEDGERS AS PER BOOKS OF R.S.BULLION, ROHIT TRADING COMPANY, BALAJI BULLION BAZAR. HE COULD NOT FURNIS H BANK ACCOUNT OR RETURN OF INCOME OR PAN CARD OR ANY OTHER IDENTIFIC ATION PROOF TO SHOW THE GENUINENESS OF PURCHASES. IN RESPECT OF JORS B ULLION, THOUGH THE ASSESSEE FURNISHED COPY OF RETURN OF SHRI RAKESH BH AGWANDAS PATEL BUT COULD NOT CO-RELATE HIS IDENTITY VIS--VIS JORS BUI LLION. SIMILARLY IN THE CASE OF R.S. BULLION, ASSESSEE COULD NOT CO-RELATE THE IDENTITY OF THE PROPRIETOR MR. YOGESH PATEL. IN THE CASE OF PINKEY ENTERPRISE, ASSESSEE FURNISHED THE CONFIRMATION WITH SIGNATURE AND PAN N UMBER BUT COULD NOT FURNISH ANY PROOF TO SUBSTATNTIATE THE GENUINENESS OF TRANSACTION. AO ALSO NOTED THAT PURCHASES OF RS. 7,10,62,929/- WERE OUTSTANDING AS CREDITORS IN THE BALANCE SHEET AND ASSESSEE COULD N OT PROVE THE GENUINENESS OF ITS PURCHASES OF RS. 19,28,51,231/-. THUS THE ASSESSING OFFICER, APPLYING THE DECISION OF AHMEDABAD TRIBUNA L IN THE CASE OF VIJAY PROTEINS LTD. (ITA NO. 5998/AHD/1994 DATED 18 .01.2006) CONCLUDED THAT THE ASSESSEE COULD NOT PROVE THE PUR CHASES AND THEREFORE 25% OF THE PURCHASES AMOUNTING TO RS. 4,82,12,808/- WAS ADDED AS ITA NO 2636/AHD/2012 . A.Y. 2008 - 09 4 UNVERIFIABLE PURCHASES. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) ESTIMATED THE INCOME AT 5% OF THE SALES BY HOLDING AS UNDER: 9. DURING THE COURSE OF APPELLANT PROCEEDINGS, THE SUB MISSION MADE AT THE ASSESSMENT STAGE WERE REITERATED. THE APPELLANT ALS O INFORMED THAT THE BUSINESS OF THE APPELLANT HAS BEEN CLOSED AND THE D IRECTOR IS STAYING AT HIS RESIDENTIAL ADDRESS AT 704/B, RAHUL DREAM, NEAR MOTHER MARY SCHOOL, RAHUL PARK, BHAYANDER (EAST) , THANE. 10. THE APPELLANT WAS ALSO ASKED TO FURNISH FRESH AFFID AVITS FROM THESE PARTIES WITH THE PRESENT CONTACT ADDRESS AND PURCHA SE DETAILS WITH EVIDENCE OF DELIVERY. THE APPELLANT COULD NOT FURNI SH AFFIDAVITS OR PRESENT ADDRESSES OF FIVE PARTIES. IN THE CASE OF ROHIT TRA DING CO, FILED ONLY AN AFFIDAVIT IN WHICH THE OLD ADDRESS IS MENTIONED WHI CH IS STRANGE AS THE POSTAL AUTHORITY RETURNED THE LETTER SENT AT THIS A DDRESS. AS REGARDS AMOL - ENTERPRISE, NEW ADDRESS WAS FURNISHED BUT NO EVIDEN CE OF DELIVERY WAS FURNISHED. 11. IN SOME CASES, BOTH THE PURCHASE AND SALES HAVE BEE N MADE FROM THE SAME PARTIES. IT IS CLAIMED THAT FOR BOTH THE P URCHASE AND SALES, IT IS THE OTHER PARTY WHICH TRAVELLED TO SURAT FOR TAKING DELIVERY AND GIVING DELIVERY OF DIAMONDS. THIS IS AGAIN A VERY UNREASON ABLE PROPOSITION THAT BOTH THE PURCHASE/ SALE PARTIES HAVE TRAVELLED TO S URAT EVERY TIME. MOREOVER, IN NP AND GP SHOWN ARE NEGLIGIBLE AND TUR NOVER TO THE EXTENT SHOWN CANNOT BE ACHIEVED WITH THE NEGLIGIBLE ESTABL ISHMENT EXPENSES. THEREFORE, IT MAY BE A CASE OF ENTRY PROVIDER OR HA WAIA OPERATOR WITH NO REAL PURCHASES OR SALES. 12. IN FACT HAWALA OPERATORS NOT ONLY THEMSELVES INDULG E IN TAX EVASION BUT ALSO HELP SEVERAL OTHER TAX PAYERS TO EVADE THE TAX. THESE ARE THE CASES IN WHICH BOTH THE PURCHASES AND SALES ARE BOG US AND APPROPRIATE LEGAL COURSE OF ACTION AVAILABLE WITH THE ASSESSING OFFICER IS TO INITIATE PROSECUTION PROCEEDINGS RATHER THAN MAKING ADDITION OUT OF PURCHASES. AS REGARDS ASSESSMENT OF TAXABLE INCOME, IT REQUIRES A N ESTIMATE OF APPROPRIATE PERCENTAGE AS COMMISSION FOR GIVING ACC OMMODATION ENTRIES. 13. HOWEVER, CONSIDERING THE FACT THAT SUCH ENQUIRY WAS NOT CONDUCTED AT THE ASSESSMENT STAGE AND THAT BUSINESS OF THE AP PELLANT HAS CLOSED DOWN AND NO CONCLUSIVE EVIDENCE OF TRADE TRANSACTIO NS HAS BEEN FURNISHED, IT CANNOT BE CONCLUSIVELY DETERMINED WHE THER IT IS ACTUALLY A CASE OF HAWALA OPERATOR OR A CASE OF BOGUS PURCHASE S. ITA NO 2636/AHD/2012 . A.Y. 2008 - 09 5 14. THEREFORE, ESTIMATE OF TAXABLE INCOME HAS TO BE MID WAY BETWEEN THAT FOR ENTRY PROVIDER AND THAT FOR THE CASES OF I NFLATED PURCHASES . CONSIDERING THE SAME, APPELLANTS TAXABLE INCOME I S ESTIMATED @ 5 % OF THE SALES SHOWN AT RS. 22. 68 CRORES, WHICH COMES T O RS. 1.134 CRORES. THEREFORE, THE ADDITION IS SUSTAINED TO THE EXTENT OF RS. 1.134 CRORES. 7. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US. 8. BEFORE US, THE LEARNED D.R. SUBMITTED THAT THE ASSE SSEE HAD SUBMITTED AFFIDAVITS OF FEW OF THE PARTIES BEFORE CIT(A) AND FURTHER CIT(A) DID NOT CALL FOR ANY REMAND REPORT FROM ASSESSING OFFICER. HE THUS SUBMITTED THAT THE ADMISSION OF ADDITIONAL EVIDENCE IN THE FO RM OF AFFIDAVITS WAS IN VIOLATION OF RULE 46A OF I.T RULES. HE FURTHER SU BMITTED THAT CIT(A) HAS ASSUMED THE CASE OF THE ASSESSEE TO BE OF AN E NTRY PROVIDER OR HAWALA OPERATOR WITH NO REAL PURCHASES OR SALES A ND ACCORDING TO HIM IN SUCH CASES, THE TAXABLE INCOME HAS TO BE ESTIMAT ED AS PERCENTAGE OF COMMISSION FOR GIVING ACCOMMODATION ENTRIES. HE FU RTHER SUBMITTED THAT CIT(A) HAS NOT GIVEN ANY FINDING AS TO WHETHER THE CASE OF THE ASSESSEE WAS THE CASE OF HAWALA OPERATOR OR WAS A CASE OF BO GUS PURCHASES. HE POINTED OUT TO PARA 11 AND 13 OF CIT(A)S ORDER. TH E LEARNED D.R. THEREFORE SUBMITTED THAT IN VIEW OF THE AFORESAID F ACTS, THE ORDER OF ASSESSING OFFICER BE UPHELD. 9. WE HAVE HEARD THE LEARNED D.R. AND PERUSED THE MATE RIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAD SHOWN PURCHASE S AGGREGATING TO RS. 19,28,51,231/- FROM VARIOUS PARTIES BUT COULD NOT E STABLISH THE GENUINENESS OF THE TRANSACTION BEFORE ASSESSING OFF ICER. ASSESSING ITA NO 2636/AHD/2012 . A.Y. 2008 - 09 6 OFFICER HAD ESTIMATED 25% OF THE PURCHASES TO BE UN VERIFIABLE. BEFORE CIT(A), ASSESSEE HAD FILED ADDITIONAL EVIDENCE BUT CIT(A) WITHOUT SEEKING A REMAND REPORT FROM ASSESSING OFFICER OR H IS COMMENTS ACCEPTED THE ADDITIONAL EVIDENCE. RULE 46A(1) STIPU LATES THE GROUNDS ON WHICH THE APPELLATE AUTHORITY CAN ALLOW ADDITIONAL EVIDENCE. SUB RULE (2) PROVIDES THAT THE APPELLATE AUTHORITY WHILE ADMITTI NG SUCH EVIDENCE MUST RECORD ITS REASONING IN WRITING. SUB RULE (3) PROV IDES THAT NO EVIDENCE PRODUCED UNDER SUB RULE(1) SHALL BE TAKEN INTO ACCO UNT UNLESS THE ASSESSING OFFICER HAS BEEN GIVEN A REASONABLE OPPOR TUNITY OF EXAMINING THE EVIDENCE OR DOCUMENTS PRODUCED OR PERMITTED TO CROSS EXAMINE THE WITNESSES EXAMINED OR PERMITTED TO PRODUCE ANY EVID ENCE OR DOCUMENT IN REBUTTAL TO THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. IN THE PRESENT CASE SINCE CIT(A) HAS RELIED ON ADDITIONAL EVIDENCE WITHOUT GIVING AN OPPORTUNITY TO ASSESSING OFFICER TO EXAMI NE THE SAME OR REBUT THE ADDITIONAL EVIDENCE WE ARE OF THE VIEW THAT THE RE WAS VIOLATION OF RULE 46A OF I.T. RULES. FURTHER FROM THE ORDER OF CIT(A), IT IS SEEN THAT HE HAS PRESUMED THE CASE OF THE ASSESSEE TO BE AN ENTRY PROVIDER OR A HAWALA OPERATOR BUT FOR WHICH HE HAS NOT GIVEN AN Y FINDING. HE HAS THEREAFTER PROCEEDED TO ESTIMATE THE COMMISSION FOR GIVING ACCOMMODATION ENTRIES TO BE 5% OF SALES. NOTHING H AS BEEN BROUGHT BY CIT(A) TO SUPPORT HIS CONTENTIONS. CONSIDERING THE TOTALITY OF FACTS WE ARE OF THE VIEW THAT TO MEET THE ENDS OF JUSTICE, T HE MATTER BE REMANDED TO CIT(A). WE THEREFORE REMAND THE MATTER BACK TO CIT( A) FOR HIM TO DECIDE THE ISSUE AFRESH AFTER GIVING AN OPPORTUNIT Y TO ASSESSING OFFICER TO EXAMINE THE ADDITIONAL EVIDENCE AND AFTER CALLIN G A REMAND REPORT FROM ASSESSING OFFICER. NEEDLESS TO STATE THAT CIT( A) SHALL GRANT REASONABLE OPPORTUNITY OF HEARING TO BOTH THE PARTI ES AND THEREAFTER PASS A ITA NO 2636/AHD/2012 . A.Y. 2008 - 09 7 SPEAKING ORDER. THUS THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT THE APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 02 -08 - 2013. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD