DCIT, CENTRAL CIRCLE-1(1), MUMBAI, MUMBAI V. SKY GEM, MUMBAI

ITA 2865/MUM/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3115 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 19-03-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 15-08-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Revision of order; Accommodation entries; Set aside
• Section: 263; 143(3); 133(6); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.2865/Mum./2023 (Assessment Year : 2014–15) Dy. Commissioner of Income Tax Circle–1(1), Mumbai ................ Appellant v/s Sky Gem CC–2081,, G–Block Bharat Diamond Bourse Bandra Kurla Complex, Bandra (East) Mumbai 400 051 PAN – AAYFS8765J ................ Respondent Assessee by : Shri Suchek Anchaliya Revenue by : Shri Manoj Kumar Singh Date of Hearing – 20/03/2024 Date of Order – 05/04/2024 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the Revenue challenging the impugned order dated 09/06/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals)-47, Mumbai, [“learned CIT(A)”], for the assessment year 2014–15, which in turn arose from the order dated 26/12/2019 passed under section 143(3) read with section 263 of the Act. 2. In this appeal, the Revenue has raised the following grounds:- Sky Gem ITA no.2865/Mum./2023 Page | 2 "1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is justified in deleting the addition made by the A.O. without appreciating the fact that assessee is one of the beneficiary of accommodation entry provided by Bhanwarlal Jain & Group concerns exclusively engaged in the business of issuing non-genuine purchase bills ? 2. Whether on the facts and in law, the Ld.CIT(A) has failed to uphold the decision of Hon'ble Apex Court in the case of N.K.Proteins Ltd. Vs. DCIT in SLP(Civil) No.769/2017 dated 16.01.2017 where 100% of addition was confirmed by the Apex Court. 3. Whether on the facts and circumstance of the case and in law, the Ld.CIT(A) is right in allowing the appeal filed by the assessee by relying on the decision of the Hon'ble ITAT in the assessee's own case, ignoring the fact that the decision of the Hon'ble ITAT was not accepted by the revenue and further appeal has been filed before the Hon'ble Bombay High Court which has not attained finality. 4. The appellant craves leave to add, alter, amend, delete and/or vary any of the above grounds of appeal/relief claimed at any time before the decision of the appeal.” 3. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee is a firm and for the year under consideration filed its return of income on 26/11/2014 declaring a total income of Rs.3,87,22,580. The return filed by the assessee was selected for scrutiny and vide order dated 21/12/2016 passed under section 143(3) of the Act the total income of the assessee was assessed at Rs.3,94,73,517 after making addition of Rs.7,40,941 being 3% of the total bogus purchases of Rs.2,46,98,049. Subsequently, the learned PCIT- 33, Mumbai vide revision order dated 29/03/2019 passed under section 263 set aside the aforesaid assessment order passed under section 143(3) of the Act on the basis that the same is contrary to the decision of the Hon’ble Supreme Court in NK Proteins Ltd, SLP No. 769 of 2017. Accordingly, the learned PCIT directed the Assessing Officer (“AO”) to pass a fresh order after considering the genuineness of purchases and also sales. Pursuant to the Sky Gem ITA no.2865/Mum./2023 Page | 3 aforesaid directions issued by the learned PCIT, the AO passed the order dated 26/12/2019 under section 143(3) read with section 263 of the Act computing the total income of the assessee at Rs.6,34,30,630 after treating the entire purchase value of Rs.2,46,98,049 as non-genuine. The learned CIT(A), vide impugned order, directed the AO to delete the addition on the basis that the coordinate bench of the Tribunal has quashed the revision order passed under section 263 of the Act pursuant to which the impugned addition was made. 4. We find that in the appeal by the assessee against the aforesaid order dated 29/03/2019 passed under section 263 of the Act, the coordinate bench of the Tribunal in Sky Gem v/s PCIT, in ITA no. 2308/Mum/2019, for the assessment year 2014-15, vide order dated 13/01/2021 quashed the order passed under section 263 of the Act. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as under:- “2. We have carefully heard the rival submissions and perused relevant material on record including submissions made by assessee during assessment proceedings as well as during revisional proceedings. The judicial precedents as cited during the course of hearing have duly been deliberated upon. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. 3.1 The material facts are that the assessee being resident firm stated to be engaged in diamond manufacturing & trading, was assessed u/s. 143(3) on 21/12/2016 wherein it has been saddled with addition of Rs.7.40 Lacs on account of estimated addition of 3% on alleged bogus purchases. During assessment proceedings, pursuant to receipt of information as received from Sales Tax Department, it transpired that the assessee made aggregate purchases of Rs.246.98 Lacs from an entity namely M/s Prime Star, an alleged entry provider belonging to Bhanwarlal Jain Group. Accordingly, the assessee was directed to substantiate these transactions. 3.2 In defense of purchase transactions, the assessee submitted purchase invoices, ledger confirmations, copy of ITR-V of the supplier, its audited financial statements, bank statements highlighting payment through banking Sky Gem ITA no.2865/Mum./2023 Page | 4 channels. It was submitted that goods purchased from this party was one to one identified and sold locally as well as exported outside India. The assessee also pleaded that only the profit margins embedded in these transactions could be taxed. 3.3 The Ld. AO, after perusal of documentary evidences as well as assessee's submissions in the light of ledger confirmation received from the supplier in response to notice u/s 133(6), estimated addition of 3% against these purchases and added the same to the income of the assessee. 4.1 Subsequently, learned Pr.CIT, upon perusal of case records and invoking the provisions of Sec.263 opined that the order was passed without making proper enquiry on certain points and therefore the same would require exercise of revisional jurisdiction u/s. 263. It was opined by Ld. Pr.CIT that Ld. AO wrongly estimated the additions @3% without any justification. The Ld. AO did not carry out sufficient investigation, movement of stock as well as quantitative details were not verified. Hence, the order was erroneous as well as prejudicial to the interest of the revenue which would require invocation of revisional jurisdiction u/s 263. 4.2 Accordingly, a show-cause notice was issued to the assessee on 02/08/2017. The assessee defended the assessment order, Inter-alia, by submitting that Gross profit reflected on suspicious purchases was more than normal Gross profit and therefore, the estimation of 3% was justified. However, rejecting the same, Ld. Pr. CIT directed Ld. AO to pass fresh assessment order after considering the genuineness of the purchases as well as sales since the entities controlled by Bhanwarlal Jain group were merely engaged in the business of providing accommodation entries. Aggrieved as aforesaid, the assessee is in further appeal before us challenging the validity of revisional jurisdiction as exercised by Ld. Pr.CIT u/s 263. 5. Upon perusal of assessment order, we find that issue of suspicious purchases was under due consideration of Ld.AO. The requisite purchase details as to purchases made from M/s Prime Star were called-for by Ld. AO from the assessee during the course of assessment proceedings. The notice u/s 133(6) was issued to confirm the transactions. The assessee submitted various details as well as documentary evidences in the shape of purchase invoices, ledger confirmations, copy of ITR-V of the supplier, its audited financial statements, bank statements highlighting payment through banking channels. It was also submitted that goods purchased from this party was one to one identified and sold locally as well as exported outside India. The audited financial statements were placed on record which contained quantitative details of the goods being dealt with by the assessee. The goods purchased from this party were correlated with the sales made by the assessee. 6. After considering all these evidences as well as submissions, Ld. AO estimated an addition against the same @3%. It is notable that the sales were not doubted and there could be no sale without actual purchase of material. Therefore, there was no option but to estimate the additions to account for unaccounted profit which may have generated by the assessee in these suspicious transactions. The action of Ld. AO in estimating the addition could not be said to be arbitrary or perverse, in any manner. There was due Sky Gem ITA no.2865/Mum./2023 Page | 5 application of mind by Ld. AO on the stated issue. Merely because, Ld. Pr.CIT did not agree with the aforesaid estimation, the same could not be sole ground to invoke revisional jurisdiction u/s 263 particularly when there is due application of mind to the issue by Ld. AO. Once a possible view has been taken by Ld. AO, the revisional jurisdiction u/s 263 would not be valid. Merely because the inquiries were not done in a particular manner, the same would not make assessment order expose to revisional jurisdiction u/s 263. 7. Therefore, on the facts and circumstances, we are inclined to quash the revisional order dated 29/03/2019. We order so.” 5. Since the revision order dated 29/03/2019 passed under section 263 has been set aside by the coordinate bench, the order dated 26/12/2019 passed under section 143(3) read with section 263 pursuant to the directions of the learned PCIT under section 263 of the Act has no legal basis to be sustained. Accordingly, we find no infirmity in the findings of the learned CIT(A). As a result, the grounds raised by the Revenue are dismissed. 6. In the result, the appeal by the Revenue is dismissed. Order pronounced in the open Court on 05/04/2024 Sd/- PRASHANT MAHARISHI ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 05/04/2024 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai