MAXELL DIAMOND P. LTD, MUMBAI V. ITO 5(2)(3), ITO 5(2)(3)

ITA 2649/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3757 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 12-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIYA
• Keywords: Bogus purchase; Gift; Search and seizure; Cost of acquisition; Accommodation entries; Retraction; TDS
• Section: 145; 132; 69C; 143(3); 115JB; 133(6)

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE SH. SHAMIM YAHYA , AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 2649/MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13 ) MAXELL DIAMOND PVT. LTD. 320 - A, PANCHRATNA, OPERA HOUSE, MUMBAI - 400 004 / VS. ITO 5(2)(3) MUMBAI PIN - ./ ./ PAN NO. A AECM8362J ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENTBY : SHRI CHAITANYA ANJARIYA , D R / DATE OF HEARING : 06 .12 .2018 / DATE OF PRONOUNCEMENT : 11.02.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 10 , MUMBAI DATED 20.01.17 F OR AY 2012 - 13 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. 1. THE LD CIT (A) - 10, MUMBAI HAS ERRED IN TREATING THE GENUINE PURCHASES OF RS. RS.4,94,35,647/ - AS AN ACCOMMODATION ENTRIES INSPITE OF PROPER JUSTIFICATION, DOCUMENTARY EVIDE NCES AND EXPLANATIONS SUBMITTED BY THE APPELLANT. 2. THE LD CIT (A) - 10, MUMBAI HAS ERRED IN REDUCING THE ADDITION MADE BY THE LD AO @ 9% I.E. RS. 44,49,209/ - TO @ 3% I.E. RS. 14,83,070/ - ON THE ALLEGED PURCHASED OF RS. 4,94,35,647/ - INSPITE OF PROPER JUST IFICATION, DOCUMENTARY EVIDENCES AND EXPLANATIONS SUBMITTED BY THE APPELLANT. 3. THE LD CIT (A) - 10, MUMBAI HAS ERRED IN CONFIRMING THE ADHOC DISALLOWANCE MADE BY THE LD AO @ 10% ON THE CONVEYANCE, TELEPHONE AND TRAVELLING CHARGES AMOUNTING TO RS.47,753/ - BEING 10% OF RS. 4,77,526/ - INSPITE OF PROPER EXPLANATIONS AND/OR DOCUMENTS SUBMITTED BY THE APPELLANT. 4. THE APPELLANT CRAVES LEAVE TO ADD/ALTER ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF FINAL HEARING. 2. AT THE VERY OUTSET, IT IS NOTICED THAT NONE HAS APPEARED ON BEHALF OF ASSESSEE IN SPITE OF CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED. FROM THE RECORDS, WE NOTICED THAT THE 3 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. NOTICE WAS ISSUED ON THE ADDRESS SUPPLIED BY THE ASSESSEE THROUGH RPAD , BUT THE SAME WAS RETURNED BACK WITH THE REMARKS LEFT BY THE POSTAL AUTHORITY. ASSESSEE WAS UNDER OBLIGATION TO SUPPLY THE CORRECT ADDRESS BUT THE SAME HAS NOT BEEN DONE. THEREFORE IN SUCH CIRCUMSTANCES, WE ARE LEFT NO OTHER OPTION TO PROCEED THE ASSESSEE EX - PARTE. ON THE OTHER HAND L D . DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. THEREFORE WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PA RTE WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING IN DIAMONDS. IT FURNISHED ITS RETURN OF INCOME FOR A.Y.2012 - 13 ON 29/09/2012 DECLARING TOTAL INCOME OF RS.6,97,570/ - . NOTICE U/S 143(2) WAS ISSUED ON 06/08/2013 BY ERSTWHILE AO AND SAME WAS DULY SERVED ON THE ASSESSEE. THE AO HAS COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT DETERMINING THE TOTAL INCOME OF RS.53,58,090/ - UNDER NORMAL PROVISION AND BOOK PROFIT OF RS.53,07,017/ - U/S 115JB ON 31/03/2015 BY MAKING THE ADDITIONS/DISALLOWANCES . 4 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. AGGRIEVED BY THE ORD ER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESS EE . NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE PRESENT APP EAL BY RAISING THE ABOVE GROUND . GROUND NO. 1 & 2 4 . THE SE GROUND S RAISED BY THE ASSESSEE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHA LLENGING THE ORDER OF LD. CIT(A) IN TREATING THE GENUINE PURCHASES OF RS. RS.4,94,35,647/ - AS AN ACCOMMODATION ENTRIES INSPITE OF PROPER JUSTIFICATION, DOCUMENTARY EVIDENCES AND EXPLANA TIONS SUBMITTED BY THE ASSESSEE , THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 5 . WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS 5 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. DEALT WITH THE ABOVE GROUND RAISED BY THE ASSESSEE IN PARA NO. 4.2 TO 4.2.4 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE ID.AR. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED ON BY THE ID.AR. AS SEEN FROM THE FACTS OF THE CASE THE AO WAS IN RECEIPT OF INFORMAT ION FROM THE DGIT(LNV.), MUMBAI ON THE BASIS OF SEARCH AND SEIZURE ACTION CONDUCTED BY THE INVESTIGATION WING OF MUMBAI OFFICE U/S 132 DURING THE COURSE OF WHICH BHANWARLA! JAIN AND HIS APPOINTED DIRECTORS/PARTNERS HAVE GIVEN CATEGORICAL STATEMENTS CLEARLY STATING THE MODUS OPERAND! FOLLOWED BY THEM IN PROVIDING THE ACCOMMODATION BILLS FOR PURCHASE OF DIAMONDS TO VARIOUS BUYER CONCERNS INCLUDING THE APPELLANT COMPANY. THEY HAVE ALSO ADMITTED UNEQUIVOCALLY BEFORE THE SEARCH PARTY THAT THEY WERE NOT INVOLVED IN ANY REAL TRADING OF DIAMONDS EXCEPT GIVING BOGUS BILLS TO THOSE WHO NEED THEM, FOR CERTAIN COMMISSION. HAVING OBSERVED THAT THOSE PARTIES APPEARING IN THE BOOKS OF THE APPELLANT ARE NON - EXISTENT SELLERS AND THEY HAVE NOT MADE ANY SALES EXCEPT THE BOGUS INVOICES ISSUED IN THE NAMES OF THE COMPANIES/FIRMS FLOATED BY BHANWARLAL GROUP (AS MANY AS 70 CONCERNS), THE AO HAS BROUGHT TO TAX 9 % OF BOGUS PURCHASES STANDING IN THE NAMES OF THE SO - CALLED SELLERS, U/S 69C OF THE ACT AS 6 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. THE EXPLANATION GIVEN BY THE AP PELLANT WAS NOT SATISFACTORY TO HIM. THE ARGUMENT OF THE APPELLANT WAS THAT UNLESS THE AO PROVES POSITIVELY THAT THE MATERIAL WAS NOT DELIVERED TO THE ASSESSEE AND THE PAYMENT MADE THROUGH THE BANK CHANNELS ARE BOGUS OR THE AMOUNTS PAID IN THE NAMES OF THE SUPPLIERS HAVE COME BACK TO THE PURCHASER - ASSESSEE, THE AO CANNOT MAKE ANY ADDITION U/S.69C. FURTHER, AS THE AO HAS NOT DOUBTED THE SALES DISCLOSED BY THE APPELLANT HE HAS TO ALLOW THE PURCHASES SINCE THERE CANNOT BE ANY SALES WITHOUT THE PURCHASE OF THE MATERIAL. AS WAS RIGHTLY POINTED OUT BY THE ID.AR, WHEN T HE QUANTITY DETAILS OF STOCK IS TALLYING WITH THE STOCK REGISTER, THE PURCHASES CANNOT BE DOUBTED. HE FURTHER ARGUED THAT ADDITION CANNOT BE MADE BASED ON THE STATEMENTS GIVEN BY A THIRD - PARTY I.E. BHANWARLAL JAIN AND HIS TEAM THAT TOO WITHOUT GIVING THE A SSESSEE AN OPPORTUNITY TO CROSS - EXAMINING THEM. 4.2.1. THERE IS SOME FORCE IN THE ARGUMENTS OF BOTH THE PARTIES. THE ONLY POSSIBILITY IS THAT THE APPELLANT MIGHT HAVE INFLATED ITS PURCHASES BY TAKING INTO ACCOUNT THE INVOICES IN THE NAMES OF THE BOGUS SUPP LIERS, BY PURCHASING THE GOODS IN A GREY MARKET AT A LOWER RATE AND MADE GOOD THE ENTRIES WITH BOGUS BILLS TO REDUCE THE PROFITS. UNDER SIMILAR CIRCUMSTANCE S THE HON'BLE HIGH COURT OF GUJ RAT IN THE CASE OF SIMIT P SETH, 2013 7 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. (356 ITR 451) HAD AN OCCASION T O DELIVER ITS JUDGMENT BY CONFIRMING THE DECISION OF THE ITAT WHICH HAS ESTIMATED THE DISALLOWANCE AT 12.5% OF THE DISPUTED BOGUS PURCHASES TO MEET THE ENDS OF JUSTICE. THE HEAD - NOTE OF THE DECISION IS REPRODUCED AS UNDER - 'SECTION 145 OF THE INCOME - TAX AC T, 1961 - METHOD OF ACCOUNTING - ESTIMATION OF PROFITS [BOGUS PURCHASES] - ASSESSMENT YEAR 2006 - 07 - ASSESSEE WAS ENGAGED IN BUSINESS OF TRADING IN STEEL ON WHOLESALE BASIS - ASSESSING OFFICER HAVING FOUND THAT SOME OF ALLEGED SUPPLIERS OF STEEL TO ASSESSE E HAD NOT SUPPLIED STEEL TO ASSESSEE BUT HAD ONLY PROVIDED SALE BILLS, HE/D THAT PURCHASES MADE FROM SAID PARTIES WERE BOGUS - HE, ACCORDINGLY, ADDED ENTIRE AMOUNT OF PURCHASES TO GROSS PROFIT OF ASSESSEE - COMMISSIONER (APPEALS) HAVING FOUND THAT ASSESSEE HAD INDEED MADE PURCHASES, THOUGH NOT FROM NAMED PARTIES BUT OTHER PARTIES FROM GREY MARKET, SUSTAINED ADDITION TO EXTENT OF 30 PER CENT OF PURCHASE COST AS PROBABLE PROFIT OF ASSESSEE - TRIBUNAL HOWEVER, SUSTAINED ADDITION TO EXTENT OF 12.5 PER CENT - WH ETHER SINCE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNT, ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES, COULD BE_ 8 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. ADDED TO ASSESSEE'S INCOME - HELD, YES - WHETHER HENCE, ORDER OF TRIBUNAL NEEDED NO IN TERFERENCE - HELD, YES [PARAS 6,7 & 9J {IN FAVOUR OF ASSESSEE]'. (EMPHASIS SUPPLIED). 4.2.1. IN THE INSTANT CASE, WHEN INDEPENDENT ENQUIRY WAS CONDUCTED BY THE AO BY ISSUE OF NOTICES U/S 133(6) ONLY ONE PARTY HAS RESPONDED BUT THE OTHER NOT. THE APPELL ANT ALSO HAS EXPRESSED ITS INABILITY TO PRODUCE THE PARTY BEFORE THE AO. THE AO HAS LIBERALLY QUOTED THE RELEVANT PARTS OF THE STATEMENT RECORDED FROM THE KEY PERSONS OF BHANWARLAL JAIN GROUP AND THE MODUS OPERAND! OF THE TRANSACTION BY THE GROUP IN TH E ASSESSMENT ORDER. EVEN THOUGH BHANWARLAL JAIN GROUP HAS NOT MENTIONED THE NAME OF THE APPELLANT IN THEIR STATEMENTS, THEY HAVE GIVEN THE NAMES OF VARIOUS CONCERNS (70 CONCERNS) IN WHOSE NAMES THE INVOICES WERE GIVEN (2 CONCERNS) THOSE NAMES ARE DULY APPEARING IN THE BOOKS OF THE APPELLANT, THEREFORE, THE LIVE LINK BETWEEN THE BOGUS CONCERNS FLOATED BY THE ENTRY OPERATORS ON THE ONE HAND AND THE APPELLANT COMPANY WHO ACCOUNTED THE PURCHASES IN THE NAMES OF SUCH BOGUS CONCERNS ON THE OTHER, IS ESTABLIS HED. FURTHER, THE ARGUMENT OF THE ID.AR THAT THE ADDITION WAS MADE BASED ON THE STATEMENT GIVEN BY A THIRD - PARTY IS NOT ACCEPTABLE FOR THE SIMPLE REASON THAT THE FACT OF PROVIDING 9 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. ACCOMMODATION ENTRIES WAS ADMITTED BY THE VERY AUTHORS OF THE SO - CALLED BOGU S COMPANIES/FIRMS. THE STORY OF RETRACTION BY BHANWARLAL JAIN IS ALSO NOT ACCEPTABLE TO THE REVENUE SINCE THE ENTRY OPERATORS COULD NOT SUBSTANTIATE WITH EVIDENCE THAT THE STATEMENTS WERE TAKEN FROM THEM BY EXERTING FORCE, THREAT OR COERCION. THE ARGUMENT THAT THE APPELLANT WAS NOT SUPPLIED WITH STATEMENT RECORDED FROM BHANWARLAL JAIN GROUP, A THIRD - PARTY, DOES NOT SPORT MERIT SINCE THE FACTS OF THE INVESTIGATION WERE ALREADY BROUGHT TO THE NOTICE OF THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE APPELLANT IS AWARE OF THE ENTIRE GAMUT OF THE FACTS. ANOTHER ARGUMENT THAT THE NAME OF THE APPELLANT COMPANY NOT MENTIONED IN THE STATEMENT GIVEN BY BHANWARLAL JAIN, I'M OF THE OPINION THAT WHEN THE VERY AUTHORS OF THE BOGUS CONCERNS HAVE GIVEN A STATEMENT THAT ALL THE CONCERNS ARE ONLY PAPER ENTITIES AND SUCH NAMES ARE APPEARING IN THE BOOKS OF THE APPELLANT COMPANY AND IN THE BOOKS OF ENTRY OPERATORS, A LIVE LINK HAS BEEN ESTABLISHED AND THERE IS NO NEED TO MENTION THE NAME OF THE APPELLANT I N HIS STATEMENT SEPARATELY. SOME HAVE ALSO ARGUED THAT THE AO HAS NOT PRODUCED THE PARTIES BEFORE THEM FOR CROSS - EXAMINATION. THIS LINE OF ARGUMENT IS ALSO NOT CORRECT SINCE THE ASSESSEE IS THE PERSON WHO FIRST APPROACHED BHANWARLAL JAIN GROUP OR THE PARTI ES FROM WHOM IT HAS CLAIMED TO HAVE BOUGHT 10 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. THE MATERIAL (DIAMONDS). THEREFORE, IT IS THE APPELLANT WHO EASE AWARE OF THE PARTIES AT THE FIRST INSTANCE AND IT IS THE DUTY OF THE APPELLANT TO PRODUCE THE PARTIES BEFORE THE AO FOR GIVING EVIDENCE AND NOT THE OTHER WAY ROUND. ASSESSEE'S ARGUMENT THAT THE AO SHOULD ALLOW THEM TO CROSS - EXAMINE THE PARTIES WOULD AMOUNT TO PUTTING THE CART BEFORE THE HORSE INSTEAD OF PUTTING THE HORSE BEFORE THE CART. 4.2.3. EVEN THOUGH THE AO COULD NOT PROVE SUBSTANTIVELY THAT THE AMOUNTS GIVEN TO THE SELLERS IN CHEQUE FORM HAVE COME BACK TO THE APPELLANT IN CASH FORM, THE ACTIVITIES OF ACCOMMODATION ENTRIES IN THE TRADING COMMUNITY IS NOT UNHEARD OF. FURTHER, THE DISTURBING FACTS REVEALED BY BHANWARLAI JAIN GROUP DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS CONDUCTED BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT ITSELF, CANNOT BE LOST SIGHT OF. FURTHERMORE, ONE SHOULD NOT BE CARRIED AWAY BY THE MYTH THAT ANY AMOUNT ROOTING THROUGH BANK CHANNELS WOULD DEFINITELY ESTA BLISH THE GENUINENESS OF THE TRANSACTION AS HELD BY THE HONORABLE BOMBAY HIGH COURT IN THE CASE OF NARESH K PAHUJA (2015) 54 TAXMANN.COM 258. IT WAS HELD IN THIS CASE THAT 'MERE ROOTING OF A GIFT THROUGH A BANKING CHANNEL WOULD NOT BY ITSELF ESTABLISH THAT GIFT WAS GENUINE'. SIMILAR VIEWS WERE ALSO EXPRESSED BY ITAT JAIPUR IN THE CASE OF KACHWALA 11 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. GEMS, IN ITA NO. 134/JP/2002 DATED 10/12/2003 WHICH WAS CONFIRMED BY THE HONORABLE SUPREME COURT IN THE SAME CASE REPORTED IN 288 ITR 10 (SC). EVEN THOUGH THERE AR E CATENA OF CASES, INCLUDING SOME OF THEM DELIVERED BY THE JURISDICTIONAL ITAT, WHICH HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, THEY ARE NOT UNIFORM IN ALL THE CASES AS THEY WERE DECIDED AS PER THE FACTS AND CIRCUMSTANCES OF THAT PARTICULAR CASE BEFORE THEM. I ARN OF THE CONSIDERED OPINION THAT THE THEORY LAID DOWN BY THE HON'BLE GUJ'RAT HIGH COURT IN THE CASE OF SIMIT P SETH (SUPRA.) SHOULD BE APPLIED IN THE INSTANT CASE. THE DECISION RENDERED BY GUJARAT HIGH COURT IN THE ABOVE CASE IS ON THE BA SIS OF VAT BENEFIT THE APPELLANT MIGHT HAVE SAVED BY TAKING ACCOMMODATION ENTRIES. WHILE DECIDING THIS CASE THE HONORABLE HIGH COURT HAS DRAWN STRENGTH FROM ITS EARLIER DECISION IN THE CASE OF VIJAY PROTEINS P LTD., 58 ITAT 428. IN SIMIT P SETH'S CASE THE HONORABLE HIGH COURT HAS ORDERED THE DISALLOWANCE AT 12.5% SINCE THE VAT RATES ARE HIGHER (10%) IN THE TYPE OF GOODS DEALT BY SIMIT P SETH, IRON &STEEL, (WHERE THE AVERAGE GP IN SUCH TRADE WAS 2.5%). IN THE CASE OF DIAMOND BUSINESS, WHICH THE APPELLANT IS DEALING, THE VAT CHARGES ARE ONLY 1% AND THE CUSTOMS DUTY, WHEN IMPORTED, IS ABOUT 2%. KEEPING IN VIEW THE ABOVE TAX RATES, THE INTENTION OF THE ASSESSEE TO SAVE FROM THE TRANSACTION SHOULD BE VIEWED ONLY TO THE EXTENT OF SAVING FROM THE ABOVE 12 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. TAXES/LEVIES BY INDULGING IN TAKING ACCOMMODATION ENTRIES. IT IS ALSO PERTINENT TO MENTION HERE THE RELEVANCE OF THE BOARD'S INSTRUCTION NO - 2/2008 DATED FEBRUARY 22, 2008 WHEREIN IT HAS LAID DOWN A GUIDELINE IN THE FORM OF BENIGN ASSESSMENT PROCEDURE FOR ASSESSEE'S EN GAGED IN DIAMOND MANUFACTURING AND/OR TRACKING, WHEREIN IT HAS STATED THAT - 'A. THE PROCEDURE WILL APPLY TO ASSESSES IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND/OR TRADING OF DIAMONDS, B. IF AN ASSESSES HAS SHOWN A SUM EQUAL TO OR HIGHER THAN 6% OF ITS TOTAL TURNOVER FROM SUCH BUSINESS AS HIS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR A PARTICULAR ASSESSMENT YEAR, THE ASSESSING OFFICER SHALL ACCEPT THE TRADING RESULTS.' 4.2.4. SINCE THE ISSUE OF ACCOMMODATION ENTRIES IS A REAL ITY, AS WAS FOUND OUT IN A SERIES OF SEARCH AND SEIZURE OPERATIONS CONDUCTED BY THE INVESTIGATION WING OF THE DEPARTMENT, TO ARREST SUCH RAMPANT MALPRACTICES, A RESTRAINT IS ALWAYS INEVITABLE AS WE CANNOT ENCOURAGE SUCH MALPRACTICE OF OBTAINING ACCOMMODATI ON ENTRIES TO AVOID THE IMPACT OF LEVIES AND DEFRAUDING REVENUE. WE CAN FIND SUCH A RESTRAINT ADVISED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE 13 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. OF SIMIT P SETH (SUPRA) WITHOUT WHICH AVOIDING PAYMENT OF LEVIES AND DEFRAUDING REVENUE WOULD HAVE CONTINUED UNABATED. HOWEVER, IN THE PRESENT CASE THE DECISION OF SIMIT P SETH IS NOT APPLICABLE IN A CAST - IRON STRAIGHT - JACKET WAY EXCEPT THE THEORY OF RESTRAINT LAID DOWN BY THEM SINCE THE NATURE OF BUSINESS IN THE CASE BEFORE THEM WAS DIFFERENT FROM THE PRESENT C ASE. KEEPING IN VIEW THE ABOVE INSTRUCTION OF THE BOARD ON THE ONE HAND AND THE SAVING GAINED BY THE ASSESSEE BY INVOLVING IN ACCOMMODATION ENTRIES TO THE EXTENT OF LEVIES ON THE OTHER, I FIND IT APPROPRIATE TO TAKE 3% OF THE REPORTED BOGUS PURCHASES FOR A DDING U/S 69C OVER AND ABOVE THE REGULAR PROFITS DISCLOSED BY THE APPELLANT INSTEAD OF ADDING 9% AS WAS DONE BY THE AO. THE GROUND IS PARTLY ALLOWED. 6. AFTER HAVING GONE THROUGH THE ORDERS PASSED BY REVENUE AUTHORITIES AND CONSIDERING THE FACTS AS DISCUS SED ABOVE, WE FIND THAT LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE HAD GRANTED RELIEF TO THE ASSESSEE BY RESTRICTING THE ADDITIONS U/S 69C @ 3% OVER AND ABOVE REGULAR PROFIT DISCLOSED BY THE ASSESSEE. 7. EVEN BEFORE US, N O NEW FACTS O R CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT 14 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED . GROUND NO. 3. 8 . THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE ADHOC DISALLOWANCE MADE BY AO @ 10% ON THE CONVEYANCE, TELEPHONE AND TRAVELLING CHARGES AMOUNTING TO RS.47,753/ - BEING 10% OF RS. 4,77,526/ - . 9 . WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS 15 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. DEALT WITH THE ABOVE GROUND RAISED BY THE ASSESSEE IN PARA NO. 5 .3 & 5.3.1 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS AND SUBMISSIONS MADE BY THE ID. AR, IT IS SEEN FROM THE DETAILS FILED DURING THE COURSE OF APPEL LATE PROCEEDINGS THAT THE APPELLANT HAS PAID THE ASSORTMENT CHARGES OF RS. 16, 35, 588 TO VARIOUS PARTIES AFTER SUBJECTING THE AMOUNT TO TDS, THEREFORE, THE EXPENDITURE NEEDS TO BE ALLOWED. THE AO IS DIRECTED TO ALLOW THE CLAIM. HOWEVER, WITH REGARD TO OTH ER EXPENSES LIKE CONVEYANCE, TELEPHONE AND TRAVELLING , I HOLD THAT THE DISALLOWANCE MADE BY THE AO IS IN ORDER SINCE THE NATURE OF EXPENSES ARE SUCH THAT THE ELEMENT OF PERSONAL USE IS NOT RULED OUT AND THE ID.AR COULD NOT PROVE WITH ANY CONCRETE EVIDENCE THAT THERE WAS NO PERSONAL ELEMENT INVOLVED. SINCE THE AO HAS APPLIED HIS DISCRETION AND MADE THE DISALLOWANCE AT THE RATE OF 10% I DO NOT WISH TO INTERFERE AND CONFORM THE DISALLOWANCE MADE WITH REGARD TO CONVEYANCE, TELEPHONE AND TRAVELLING EXPENSES. IN THE RESULT GROUND IS PARTLY ALLOWED. 10 . AFTER HAVING GONE THROUGH THE ORDERS PASSED BY REVENUE AUTHORITIES AND CONSIDERING THE FACTS AS DISCUSSED ABOVE, WE FIND THAT LD. CIT(A) AFTER APPRECIATING THE FACTS OF THE CASE HAD 16 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. GRANTED PARTIAL RELIEF TO THE ASSESSEE BY RESTRICTING THE ADDITIONS. SINCE THE ASSESSEE COULD NOT PROVE THE ABSENCE OF PERSONAL ELEMENT INVOLVED IN THE EXPENSES CLAIMED, THEREFORE, LD. CIT(A) HAD RIGHTLY UPHELD THE REMAINING ADDITIONS. 11 . EVEN BEFORE US , N O NEW FACTS O R CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.C IT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED . GROUND NO. 4 12. THIS GROUND RAISED BY THE ASSESSEE IS GEN ERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 13 . IN THE NET RESULT , THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED WITH NO ORDER AS TO COST. 17 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH FEB , 2019. SD/ - SD/ - ( SHAMIM YAHYA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 11 . 02 .201 9 SR.PS . DHANANJAY 18 I.T.A. NO. 2649 /MUM/201 7 MAXELL DIAMOND PVT. LTD. / 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 F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI