DCIT 5(1)(2), MUMBAI V. DIASQUA INDIA P.LTD, MUMBAI

ITA 3234/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9065 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 06-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Bogus purchase; Search and seizure; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.3234/M/2016 ASSESSMENT YEAR: 2007-08 DY. CIT-5(1)(2), ROOM NO.568, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400020 VS. M/S. DIASQUA INDIA PVT. LTD., CW-6061, 6062, 6063, 6071, BHARAT DIAMOND BOURSE, BKC, BANDRA (EAST), MUMBAI-400 051 PAN: AACCD 3418N (APPELLANT) (RESPONDENT) ITA NO.2283/M/2016 ASSESSMENT YEAR: 2007-08 M/S. DIASQUA INDIA PVT. LTD., CW-6061, 6062, 6063, 6071, BHARAT DIAMOND BOURSE, BKC, BANDRA (EAST), MUMBAI-400 051 PAN: AACCD 3418N VS. DY. CIT-5(1)(2), AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SUCHEK ANCHALIYA, A.R. REVENUE BY : SHRI RAJESH KUMAR YADAV, D.R. DATE OF HEARING : 02.08.2017 DATE OF PRONOUNCEMENT : 13.10.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS ONE BY THE REVENUE AND TH E OTHER BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER DATED 28.01.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREIN AFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2007- 08. ITA NO.3234/M/2016 & ITA NO.2283/M/2016 M/S. DIASQUA INDIA PVT. LTD. 2 ITA NO.3234/M/2016 (REVENUES APPEAL) 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF DEALING IN DIAMONDS. DURING THE YE AR THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) FOUND T HAT ASSESSEE HAD MADE BOGUS PURCHASES FROM THE FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT (RS) 1. AVI EXPORTS 30,35,551/- 2. MOULIMANI IMPEX P. LTD. 79,29,739/- 3. SUN DIAM 38,90,580/- 4. VITRAG JEWELS 33,13,544/- TOTAL 1,81,69,414/- 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.1,81,69,414/-/-. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 5.2.1. WITH REGARD TO THE INFORMATION RECEIVED FR OM DGIT(LNV.), MUMBAI THE SUMMARY OF THE COMMUNICATION WAS ALREADY PASSED ON TO THE APPELLANT WHILE COMMUNICATING REAS ONS FOR REOPENING. EVEN THOUGH THE AG COULD NOT PROVE SUBST ANTIVELY THAT THE AMOUNTS GIVEN TO THE SELLERS IN CHEQUE FORM HAVE CO ME BACK TO THE APPELLANT, THE ACTIVITIES OF ACCOMMODATION ENTRIES IN THE TRADING COMMUNITY IS NOT UNHEARD OF. FURTHER, THE RESULT OF SEARCH AN D SEIZURE CARRIED OUT BY INVESTIGATION WING AND THE EXPRESS STATEMENTS GIVEN BY SRI RAJENDRA JAIN CANNOT BE LOST SIGHT OF. FURTHER MORE, IT SHOULD BE NOTED THAT SRI RAJENDRA JAIN HAS GIVEN ONE STATEMENT ON 3. 10. 2010 DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS WHICH HAS BEEN RETRACTED BUT THE STATEMENT RECORDED ON 5.12. 2013 FROM SRI RAJENDRA JAIN DURIN G POST SEARCH OPERATIONS, WHO HAS ADMITTED THE FACT THAT THEY ARE ENGAGED ONLY IN PAPER TRANSACTION WITHOUT ANY PHYSICAL DELIVERY/MOVEMENT O F STOCK, DOESN'T ITA NO.3234/M/2016 & ITA NO.2283/M/2016 M/S. DIASQUA INDIA PVT. LTD. 3 APPEAR TO HAVE BEEN RETRACTED SO FAR. EVEN THOUGH T HE LEARNED AR HAS RELIED ON SEVERAL DECISIONS THEY DIFFER FROM THE PEC ULIAR FACTS OF THE PRESENT CASE. HOWEVER, KEEPING IN VIEW THE FACT THAT THE SA LES WERE NOT DOUBTED BY THE AO AND SALES WITHOUT PURCHASES CANNOT BE POSSIBLE AND KEEPING IN VIEW, AT THE SAME TIME THE RAMPANT PREVALENCE OF BOG US PURCHASES/SALES IN THE DIAMOND TRADING, I AM OF THE OPINION THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE MORE AKIN TO T HE CASE DECIDED BY THE HON'BLE GUJRAT HIGH COURT IN THE CASE OF SIMIT P SET H (SUPRA.). RESPECTFULLY FOLLOWING THIS DECISION, I HEREBY DIRECT THE AO TO WO RK OUT 12.5% OF THE SO- CALLED BOGUS PURCHASES FROM THE SAID FOUR PARTIES, AND ADD BACK THE SAME TO THE TAXABLE INCOME IN PLACE OF THE ADDITION MADE U/S.69C OF THE ACT BY WORKING BIG BALANCE ON THE ENTIRE PURCHASES FROM TH OSE THREE PARTIES. THE GROUND IS PARTLY ALLOWED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHME DABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AN D GANESH RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FR OM WHOM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WE RE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEAL ING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESP ECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HA S NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREF ORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE A ND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE I S THE PURCHASES ITA NO.3234/M/2016 & ITA NO.2283/M/2016 M/S. DIASQUA INDIA PVT. LTD. 4 FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AN D CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE B UT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPU TED AND SUSPICIOUS. THE AO HAD MADE THE ADDITION AS SOME O F THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECO RD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETH ER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SU CH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAIL ED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE P AYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY RE FLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENC E TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORT ED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TA XMAN 171 (BOM). TO THIS EXTENT, WE ARE OF THE VIEW THAT IF T HE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRES UMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUN D AT THE GIVEN ITA NO.3234/M/2016 & ITA NO.2283/M/2016 M/S. DIASQUA INDIA PVT. LTD. 5 ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEED INGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL A S OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WIT HOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT R ANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH 356 ITR 451 (GUJ.). R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), WE DISM ISS THE DEPARTMENTAL APPEAL. 6. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ITA NO. 2283/M/2016 (ASSESSEES APPEAL) 7. DURING THE COURSE OF HEARING, THE LD. A.R. SUBMI TTED THAT SINCE THE DEPARTMENTAL APPEAL IS DISMISSED, ASSESSEE IS N OT PRESSING HIS APPEAL. HENCE, THE APPEAL OF THE ASSESSEE IS DISMI SSED AS NOT PRESSED. 8. IN THE RESULT, REVENUES APPEAL AS WELL AS ASSES SEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.10.2017. SD/- SD/- (G. MANJUNATHA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13.10.2017. * KISHORE, SR. P.S. ITA NO.3234/M/2016 & ITA NO.2283/M/2016 M/S. DIASQUA INDIA PVT. LTD. 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.