INCOME TAX OFFICER 25(3)(1), MUMBAI V. SHEETAL EXPORTS , MUMBAI

ITA 2987/MUM/2022

AI Insights

The case involves an appeal by the Revenue against the decision of the Ld. Commissioner of Income Tax (Appeals) which modified the assessment order of the Assessing Officer (AO). The AO had initially added the entire amount of Rs. 2,67,00,986, representing bogus purchases, to the assessee's income. However, the CIT(A) reduced this addition to 3%, acknowledging that although the purchases were likely supported by bogus bills, the corresponding sales were not disputed. The Tribunal upheld the CIT(A)'s decision, emphasizing that without purchases, sales could not occur, and thus only the profit from these purchases should be subject to tax.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299343 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-01-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 22-11-2022
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT C. ZAVERI; DHARMIL
• Keywords: Bogus purchase; Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI OM PRAKASH KANT, AM आयकर अपील सं/ I.T.A. No.2987/Mum/2022 (निर्धारण वर्ा / Assessment Years: 2009-10) Income Tax Officer-25(3)(1), 2 nd Floor, Room No. 233, Kautilya Bhavan G. Block, Bandra Kurla Complex, Bandra (E) Mumbai- 400051 बिधम/ Vs. Sheetal Exports 202 Triveni 21 Lajpatrai Road, Vile Parle (W) Mumbai-400056 स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : ABGFS0869L (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 23/01/2023 घोषणा की तारीख /Date of Pronouncement: 31/01/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the Revenue against the action of the Ld. Commissioner of Income Tax directing the AO to restrict addition made u/s 68 of the Income Tax Act 1961, (hereinafter “the Act”) to the tune of Rs. 2,67,00,986/- from 100% to 3% of the bogus purchases made of Rs. 2,67,00,986/-. 2. Brief facts as noted by the AO is that he has framed the assessment order on the direction of this Tribunal vide order dated 18.02.2017 wherein the AO was directed to pass fresh assessment order after providing sufficient opportunity to the assessee. The AO noted that he got information from DGIT investigation Mumbai about beneficiaries who obtained accommodation entries provided by Bhawarlal Jain Group. According to AO, on examination of the said Assessee by: Shri Amit C. Zaveri & Dharmil Zaveri Revenue by: Shri Sanjeev Ranjan (Sr. AR) ITA No.2987/Mum/2022 A.Y. 2009-10 Sheetal Exports 2 information it was found that the assessee was one of the beneficiary of accommodation entries given by Bhawarlal Jain Group. According to the AO, Bharwarlal Jain is controlling 70 benami concerns through his son and his employees and two such concerns are M/s Daksh diamonds and M/s Impex Gems. According to the AO, in the assessment year under consideration (AY 2009-10) assessee had transactions with M/s Daksh diamonds and M/s Impex Gems to the tune of Rs. 2,67,00,986/- (Rs. 1,40,54,756/- and Rs. 1,26,46,230/- respectively). According to the AO, these were bogus purchases and therefore the entire purchase was added to the returned income of Rs. 10,82,160/-. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) wherein the Ld.CIT(A) was of the opinion that even though the transaction may be bogus, but still the entire purchases cannot be brought to tax because AO has not doubted the sales booked by assessee and therefore he restricted the addition to 3% of the purchases made from both the concerns (profit embedded in the sales). 3. Aggrieved, the Revenue is before us. 4. We have heard both the parties and perused the records. We note that the assessee is into the business of trading in diamonds; and in the year under consideration assessee had purchased goods from M/s Daksh Diamonds and M/s Impex Gems to the tune of Rs. 1,40,54,756/- and Rs. 1,26,46,230/- respectively (Rs. 2,67,00,986/-). It was pointed out by the Ld.AR that the AO has not doubted the sales (turn-over of assessee). And it is common knowledge that without ITA No.2987/Mum/2022 A.Y. 2009-10 Sheetal Exports 3 purchases, no sale can take place and therefore according to the Ld.AR, the Ld.CIT(A) has rightly only taxed the profit embedded in the purchases. We note from the action of the Ld.CIT(A) that he has impliedly accepted that even though the purchase bills given by the both concerns of Bhawarlal Jain may be bogus/accommodation entries, but since the AO has accepted the sales (turn-over) of trading shown by the assessee, the entire purchases shown by assessee to the tune of Rs.2,67,00,986/- cannot be disallowed because without purchases, there cannot be sales. So the Ld. CIT(A) has presumed that the assessee would have purchased the goods from the grey market and thereafter sold the goods and shown it in its Profit & Loss account as sales figure and to support the purchases might have took the bills from accommodation providers. Therefore the Ld CIT(A) was of the opinion that the action of the AO to tax the entire amount of such purchases was erroneous and instead only taxed the profit embedded on such bogus purchases, which action of Ld. CIT(A) according to us was just and proper in the facts of the case; and therefore, we confirm the action of Ld.CIT(A) wherein he has rightly restricted the addition at 3% of the bogus purchases of Rs. 2,67,00,986/- which comes to Rs.18,83,190/-. In respect of estimation of income at 3% of the bogus purchases, we note that the assessee’s total trading account shows GP of 1.70%; and on account of the bogus purchases from Bharwarlal Jain of Rs.2,67,00,986/,- the assessee has shown sales to the tune of Rs. 2,73,12,757/- which comes to 2.24% (GP). Therefore, the adoption of 3% by the Ld.CIT(A) to estimate the profit on the bogus purchases is just and reasonable which is supported by various judicial precedents ITA No.2987/Mum/2022 A.Y. 2009-10 Sheetal Exports 4 in similar cases. Therefore, we are inclined to uphold that action of the Ld.CIT(A) and dismiss the grounds of appeal of the Revenue. 5. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on this 31/01/2023. d/- Sd/- Sd/- (OM PRAKASH KANT) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 31/01/2023. Shubham Lohar, (Stenographer) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file.