EXIM GEMS, MUMBAI V. ITO 19(1)(3), MUMBAI

ITA 346/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9731 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 16-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HEMALATHA
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO.346/M/2017(A.Y.2008-09) M/S. EXIM GEMS 102,1 ST FLOOR, B WING, THE CAPITAL BUILDING, BANDRA (EAST), MUMBAI 400051 PAN:AAAFE 8527G ...... APPELLAN T VS. THE INCOME-TAX OFFICER -19(1)(3), MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI HARI S. RAHEJ A RESPONDENT BY : MS. HEMALATHA DATE OF HEARING : 26/07/2017 DATE OF PRONOUNCEMENT : 31 /07/2017 ORDER THE CAPTIONED APPEAL FILED BY THE ASSESSEE PER TAINING TO ASSESSMENT YEAR 2008-09 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-29, MUMBAI DATED 26/12/2016, WHICH IN TURN, ARISES OUT OF OR DER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30/12/2015. 2. IN THIS APPEAL, ALTHOUGH ASSESSEE HAS RAISED MU LTIPLE GROUNDS OF APPEAL, BUT THE SOLITARY DISPUTE IS WITH REGARD TO THE LEVEL OF ADDITION SUSTAINED BY THE CIT(A) BY ESTIMATING THE PROFIT @3 % OF BOGUS PURCHASES. 2 ITA NO.346/M/2017(A.Y.2008-09) 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT ASSESSE E IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE, EX PORT AND DEALINGS IN PRECIOUS, SEMI-PRECIOUS AND GEM STONES. IN THE ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT PURCHASES OF RS.2,97,7 8,860/- MADE BY THE ASSESSEE FROM FOUR DIFFERENT PARTIES WERE NOT GENU INE. HOWEVER, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD SHOWN COR RESPONDING SALES AGAINST THE SAID PURCHASES DEBITED IN THE ACCOUNT BOOKS. C ONSIDERING THE ENTIRETY, THE ASSESSING OFFICER REFERRED TO THE BENIGN ASSESS MENT PROCEDURE (BAP) SCHEME FOR ASSESSEES WHO ARE INTO MANUFACTURING AND /OR TRADING OF DIAMONDS AND MADE AN ADDITION OF RS.23,82,309/-, BE ING 8% OF THE NON- GENUINE PURCHASES OF RS.2,97,78,860/-. THOUGH THE ASSESSEE ASSAILED THE ACTION OF THE ASSESSING OFFICER IN TOTALITY, SO HOW EVER, THE CIT(A) MERELY SCALED DOWN THE ADDITION TO 3% OF THE NON-GENUINE P URCHASES. 4. BEFORE THE TRIBUNAL, THE ONLY PLEA RAISED BY THE ASSESSEE IS THAT THE ESTIMATION OF ADDITION AT 3% IS EXCESSIVE, INASMUCH AS, THE TASK FORCE GROUP FOR DIAMOND INDUSTRY CONSTITUTED BY THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, AFTER CONSIDERING THE BAP SC HEME HAD RECOMMENCED PRESUMPTIVE TAX FOR NET PROFIT CALCULA TED @2% FOR TRADING ACTIVITY AND 3% FOR MANUFACTURING ACTIVITY OR @ 2. 5% ACROSS THE BOARD. THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THA T EVEN IF, ONE HAS TO GO BY THE AFORESAID NORMS, IT WOULD BE IN THE FITNESS O F THINGS THAT PROFIT FROM UNSUBSTANTIATED PURCHASES BE ESTIMATED AT 2% AND NO T 3%, AS DONE BY THE CIT(A). 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE POINTED OUT THAT IN CASE OF UNSUBSTANTIATED PURCHASES THE PROFI T ELEMENT IS GENERALLY, 3 ITA NO.346/M/2017(A.Y.2008-09) ESTIMATED AT MUCH HIGHER THAN 3% ADOPTED BY THE CI T(A), AND THUS THE ESTIMATION MADE BY THE CIT(A) AT 3% MAY NOT BE DIS TURBED AND BE UPHELD. 6. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. THE SHORT POINT FOR MY CONSIDERATION IS THE PROFIT TO BE ESTIMATED WITH RESPECT TO THE UNSUBSTANTIATED PURCHASES. THE PLEA OF THE LD. DEP ARTMENTAL REPRESENTATIVE THAT IN SUCH CASES THE ESTIMATE OF PROFITS IS DONE GENERALLY HIGHER THAN 3%, IS NOT RELEVANT BECAUSE IN OTHER CASES, WHICH HAVE ALR EADY BEEN NOTED BY THE CIT(A), THE PRODUCTS ARE QUITE DIFFERENT. THE CASE BEFORE ME RELATES TO THE PURCHASES OF PRECIOUS, SEMI-PRECIOUS DIAMONDS AND G EM STONES AND IN THIS CONTEXT THE ASSESSING OFFICER AS WELL AS CIT(A) HAV E NOT ESTIMATED THE PROFIT AT THE LEVEL WHICH IS NORMALLY DONE IN SIMILAR CASE S INVOLVING PRODUCTS LIKE METALS, FERROALLOYS, ETC. IN SO FAR AS THE REASONA BLENESS OF THE ESTIMATION BY THE CIT(A) IS CONCERNED, IT IS SEEN THOUGH SHE HAS RECOGNIZED THE PRESUMPTIVE RATES RECOMMENDED BY THE TASK FORCE SET UP BY THE CENTRAL GOVERNMENT FOR BUSINESS OF MANUFACTURING AND/OR TRA DING OF DIAMONDS, BUT HAS NOT BEEN FULLY GUIDED BY IT. CONSIDERING THE RECOMMENDATIONS AND THE FACT THAT THERE IS A MIX OF TRADING AS WELL AS MANU FACTURING IN THE CASE OF THE ASSESSEE, A RATE OF 2.5%, AS RECOMMENDED BY THE TAS K FORCE WOULD BE MORE APPROPRIATE AND JUSTIFIED TO ASCERTAIN THE PROFIT O N THE UNSUBSTANTIATED PURCHASES. IN THE RESULT, THE APPEAL OF THE ASSESS EE PARTLY ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 3 1/07/2017 SD/- (G.S. PANNU) ACCOCUNTANT MEMBER MUMBAI, DATED 31/07/2017 4 ITA NO.346/M/2017(A.Y.2008-09) VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI