M/S KUNDALI JEWEL (INDIA) PRIVATE LIMITED, MUMBAI V. ITO - 12(3)(1), MUMBAI

ITA 3511/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3584 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 23-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained cash credit; Depreciation; Transfer pricing; Opportunity of being heard; Bonafide belief; Source of fund; Question of law; Accommodation entries; Capital expenditure; TDS; Set aside
• Section: 143(3); 142(1); 40(a)(ia); 133(6); 37(1); 201(1); 143(1); 195; 201; 143(2); 264; 13; 32; 148; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI M. BALAGANESH , AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO. 3511/ MUM/201 9 ( / ASSESSMENT YEAR: 2012 - 13 ) M/S. KUNDALI JEWELS (INDIA) PVT. LTD. 1/1705, CHALLENGER TOWER, THAKUR VILLAGE, KANDIVALI (E), MUMBAI . / VS. THE INCOME TAX OFFICER 12 (3)(1) ROOM NO.147 A, 1 ST FLOOR, AAYAKAR BHAVAN, M. K. MARG, MUMBAI - 400020. / I.T.A. NO. 4337 /M UM/201 9 ( / ASSESSMENT YEAR: 2012 - 13 ) THE INCOME TAX OFFICER 12 (3)(1) ROOM NO.147 A, 1 ST FLOOR, AAYAKAR BHAVAN, M. K. MARG, MUMBAI - 400020 . / VS. M/S. KUNDALI JEWELS (INDIA) PVT. LTD. 1/1705, CHALLENGER TOWER, THAKUR VILLAGE, KANDIVALI (E), MUMBAI . ./ ./ PAN/GIR NO. : PNEK10340B ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 04/02 / 202 1 /DATE OF PRONOUNCEMENT: 23 / 0 2 / 20 21 / O R D E R PER AMARJIT SINGH (JM) THE ASSESSEE AS WELL AS RE VENUE HA VE FILED THE ABOVE MENTIONED APPEAL S AGAINST THE ORDER DATED 29.03.2019 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 21 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 201 2 - 1 3 . ITA. NO.3511 /MUM/201 9 ASSESSEE BY : SHRI RASHMIKANT C. MODI MS. KETKI RA JESHIRKE REVENUE BY: SHRI GURBINDER SINGH (DR) ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 2 2 . THE ASSESSEE HA S FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 29 . 0 3 .201 9 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 21 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 201 2 - 1 3 . 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON F ACTS AND IN THE CIRCUMSTANCES OF THE EASE, THE APPELLANT SUBMIT THAT THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE NOTICE ISSUED U/S 148 OF THE INCOME TAX ACT, 1961 BY THE LEARNED ASSESSING OFFICER FOR THE AFORESAID YEAR AS VAL ID. THE APPELLANT SUBMITS THAT NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 ISSUED BY THE LEARNED ASSESSING OFFICER FOR RE - OPENING OF THE ASSESSMENT PROCEEDINGS IS BAD IN LAW AND THEREFORE IT IS FURTHER SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE LEARN ED ASSESSING OFFICER U/S 143(3) R.W.S. 147 FOR THE AFORESAID YEAR IS BAD IN LAW AND BE QUASHED. 2. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). MUMBAI ERRED IN UPHOLDING THE DIS ALLOWANCE OF ADVERTISEMENT EXPENDITURE OF RS. 10,36,872/ - MADE BY THE LEARNED ASSESSING OFFICER U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 FOR NON - DEDUCTION OF TDS. THE APPELLANT SUBMITS THAT THE DISALLOWANCE OF ADVERTISEMENT EXPENDITURE OF RS.10,36,872/ - BE DELETED. 3. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI ERRED IN UPHOLDING THE DISALLOWA NCE OF OTHER EXPENDITURE OF RS. 11,87,074/ - MADE BY THE LEARNED ASSESSING OFFIC ER. THE APPELLANT SUBMITS THAT THE DISALLOWANCE OF OTHER EXPENDITURE OF RS. 11,78,074/ - BE DELETED. 4. WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL NUMBERED 2. 1. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS THAT THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS), MUMBAI ERRED IN NOT GRANTING DEPRECIATION U/S 32 OF THE INCOME TAX ACT,1961 ON EXPENDITURE OF RS.3,43,029/ - OUT OF THE TOTAL DISALLOWANCE OTHER EXPENSES OF RS.11,78,074/, DISALLOWED BY TREATING IT AS CAPITAL EXPENDITURE BY THE LEARNED ASSESSING OFFICER AND UPHELD BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI. THE APPELLANT SUBMITS THAT THE DEPRECIATION U/S 32 OF THE INC OME TAX ACT, 1961 BE ALLOWED ON THE CAPITAL EXPENDITURE OF RS.3,43,029/ - . ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 3 5. EACH GROUND OF A PPEAL HEREINABOVE IS INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER 6. THE APPELLANT CRAVES LEAVE TO RESERVE TO ITSELF THE RIGHT TO ADD, AFTER, AMEND OR ANNUAL ANY OF THE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING AND TO PRODUCE SUCH FURTHER EVIDE NCE, DOCUMENTS AND PAPERS AS MAY BE NECESSARY. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 27 . 09 .201 2 DECLARING TOTAL INCOME TO THE TUNE OF RS.2,67,990 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I. T. ACT, 1961. T HEREAFTER, THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 OF THE I. T. ACT, 1961 AFTER RECORDING THE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. NOTIC E U/S 148 OF THE I. T. ACT, 1961 WAS ISSUED AND SERVED UPON THE ASSESSEE. THER EAFTER, NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE REASONS FOR REOPENING THE ASSESSMENT WERE ALSO SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DESIGNING, MANUFACTURING AND MARKETING OF JEWELLERY. THE ASSESSEE COMPANY CLAIM ED ADVERTISEMENT EXPENDITURE IN SUM OF RS.11,38,657/ - . THE NOTICE WAS ISSUED TO PROVE THE GENUINENESS OF THE CLAIM. THE ASSESSEE ALSO FAILED TO DEDUCT THE TDS. THE DETAILS ARE HEREBY MENTIONED AS UNDER.: - SR. NO. NAM E PAN AMOUNT TDS 1 4 COLOUR GRAPHICS N. DIGITAL - 80,057 - 2 A AD AGENCY - 84,000 - 3 ADEA ADVERTISING AARFA5592L 1,58,065 - 4 APPOLO ADVERTISING THEMES - 3,61750 - 5 CORPORATION BANK/SAVTI PUBLICATION - 50,000 - 6 ICICI BANK LTD./A AD AGENCY - 50,00 0 - 7 SARASWATI ADVERTISING SERVICE AACPP8500A 1,00,000 - 8 THE BEGINING - 1,53,000 - TOTAL 10,36,872 ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 4 5. THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE CLAIM, THEREFORE, THE ADVERTISEMENT EXPENDITURE IN SUM OF RS.10,36,872/ - WAS DISALLOWED U/S 40(A)(IA) OF THE I. T. ACT, 1961 AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE ALSO CLAIM ED THE OTHER EXPENSES IN SUM OF RS.20,51,244/ - IN THE PROFIT & LOSS ACCOUNT. THE NOTICE WAS ISSUED TO PROVE THE GENUINENESS OF THE CLAIM. THE ASSESSEE FAILED TO PROVE THE CLAIM TO THE EXTENT OF RS. 11,87,074/ - , THEREFORE, THE SAME WAS DISALLOWED U/S 37(1) OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. AN INFORMATION WAS RECEIVED FROM THE INFORMATION OF THE DI T(INV.) MUMBAI, IN WHICH IT WAS CONVEYED THA T THE ASSESSEE COMPANY WAS INVOLVED FOR TAKING THE ACCOMMODATION ENTRY FROM PRAVEEN KUMAR JAIN AND HIS GROUP. THE ASSESSEE HAS RECEIVED THE SHARE APPLICATION MONEY FROM THE FOLLOWING PARTIES TO THE TUNE OF RS.5,02,01,480/ - WHICH IS HEREBY REPRODUCED AS UND ER.: - SR. NO. NAME TRANSACTIONS AMOUNT 1 JOSH TRADING CO. PVT. LTD. 1,02,01,480 2 NAKSHATRA BUSINESS PVT. LTD. (HEMA TRADING CO. PVT. LTD.) 1,00,00,000 3 OLIVE OVERSEAS PVT. LTD. (REALGOLD TRADING CO. PVT. LTD) 1,00,00,000 4 RANGOLI COMMERCE PVT. LTD. 500,000 5 KAVYA SHARE & SECURITIES PVT. LTD. 50,00,000 6 ARAWALI STOCK BROKING PVT. LTD. 1,00,00,000 TOTAL 5,02,01,480 6. AFTER THE REPLY OF THE ASSESSEE , THE SHARE APPLICATION MONEY IN SUM OF RS.4,00,00,000/ - U/S 68 OF THE ACT WAS ADDED TO THE INCO ME OF THE ASSESSEE. THE ASSESSEE HAS ALSO TAKEN THE BOGUS PURCHASE ENTRY IN SUM OF RS.5,02,01,480/ - FROM M/S. NAKSHATRA BUSINESS PVT. LTD. O N ACCOUNT OF ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 5 NON - PROVING TH E SALE, T HE AO DISALLOWED THE SAID BOGUS PURCHASE IN SUM OF RS.5,02,01,480/ - AND ADDED TO THE INCOME OF THE ASSESSEE. THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 5,26,93,420/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO PARTLY ALLOWED THE CLAIM OF THE ASSESSEE BUT THE ASSESSEE WAS NOT SATISFIED ON THE GROUNDS MENTIONED ABOVE , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSU E NO. 1 7. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE NOTICE ISSUED U/S 148 OF THE I. T. ACT, 1961 . THE ASSESSEE DID NOT PRESS THIS ISSUE, THEREFORE, T HIS ISSUE IS BEING DECIDED IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE BEING NOT PRESSED. ISSUE NO. 2 8. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF ADVERTISEMENT EXPENDITURE OF RS.10,36,872/ - U/S 40(A)(IA) OF THE I. T. ACT, 1961 FO R NON - DEDUCTION OF TDS. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE AO DECLINED THE CLAIM OF RS.10,36,872/ - ON ACCOUNT OF NON - DEDUCTION OF TDS WRONGLY AND ILLEGALLY WHICH IS NOT JUSTIFIABLE, HENCE, THE CLAIM OF THE ASSESSEE IS LIABLE TO BE A LLOWED IN THE INTEREST OF JUSTICE . IT IS ALSO ARGUED THAT THE CASE OF THE ASSESSEE FALLS WITH THE SECOND PROVISO OF SECTION 40(A)(IA) OF THE ACT R.W. SECTION 201(1) AS I NSERTED BY THE FINANCE ACT, 2012 DATED 01.04.2013 IN WHICH IT HAS BEEN SPECIFIED THAT T HE TDS HAS NOT BEEN DEDUCTED BUT PAYEE HAS FILED THE RETURN AND OFFERED S UM RE CEIVED FROM THE ASSESSEE TO TAX, THEREFORE, THE CLAIM OF THE ASSESSEE WAS LIABLE TO BE ALLOWED. IN SUPPORT OF THESE CONTENTIONS, THE LD. REPRESENTATIVE OF THE ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 6 ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF HONBLE ITAT MUMBAI BENCH IN THE CASE OF MAHINDRA & MAHINDRA LTD. VS. DCIT, RANGE - 2(2) DATED 14.05.2019, CIT VS. ANSAL LAND MARK TOWNSHIP PVT. LTD. (2015) 61 TAXMANN.COM 45 (DELHI HIGH COURT) AND M/S. HINDUSTAN COCA COLA BEVE RAGE VS. CIT DATED 16.08.2007. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE FINDING OF THE CIT(A). THE BASIC CONTENTION OF THE ASSESSEE IS THAT THE PAYEE HAS PAID THE TAX. IT IS NOT IN DISPUTE THAT THE S ECOND PROVISO OF SECTION 40(A)(IA) OF THE ACT R.W. SECTION 201(1) AS INSERTED BY THE FINANCE ACT, 2012 DATED 01.04.2013 ALLOWS THE CLAIM OF THE NON - DEDUCTION OF TDS WHERE THE PAYEE HAS FILED THE RETURN OF INCOME AND OFFERED S UM RECEIVED FROM THE ASSESSEE T O TAX. THE SAID AMENDMENT WAS EFFECTED RETROSPECTIVELY W.E.F. A.Y. 2005 - 06. THE ISSUE IN QUESTION HAS BEEN DEALT WITH BY THE HONBLE ITAT MUMBAI D BENCH IN THE CASE OF MAHINDRA & MAHINDRA LTD. VS. DCIT, RANGE - 2(2) (SUPRA). THE RELEVANT FINDING IS HEREBY REPRODUCED AS UNDER.: - 12. WE SHALL NOW DELIBERATE ON THE ASPECT THAT NOW WHEN THE ASSESSEE HAS NOT BEEN HELD TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB - SECTION (1) OF SEC.201, THEN, AS TO WHETHER THE DISALLOWANCE UNDER SEC. 40(A)(IA) CAN BE MADE IN ITS CASE, OR NOT. WE FIND THAT AS PER THE SECOND PROVISO OF SEC. 40(A)(IA), WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII - B ON ANY SUCH SUM, BUT IS NOT DEEMED TO BE AN ASSES SEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB - SECTION (1) OF SEC.201, THEN, FOR THE PURPOSE OF SEC. 40(A)(IA) IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE , SUBJECT TO THE CONDITION THAT THE SAID RESIDENT PAYEE SATISFIES CERTAIN CONDITIONS VIZ. (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SEC.139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX D UE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME. FURTHER, THE ASSESSEE SHALL FURNISH A CERTIFICATE TO THE SAID EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. AS A MATTER OF FACT, THE SECOND PROVISO TO SEC. 40(A)(IA) PROVIDES FOR AN EXCEPTION WHEREIN THE AMOUNT ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 7 ON WHICH THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE WOULD NOT CALL FOR ANY DISALLOWANCE UNDER SEC.40(A)(IA). IN OUR CONSIDERED VIEW, THE AFORESAID SECOND PROVISO HAD BEEN MADE AVAILABLE ON THE STATUTE TO GIVE EFFECT TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE PVT. LTD. VS. CIT (2007) 293 ITR 226 (SC). IN THE AFORESAID JUDGMENT, IT WAS OBSERVED BY THE HONBLE APEX COURT THAT WHERE THE PAYEE HAS ALREADY PAID THE TAX, THE SAME WOULD DISCHARGE THE ASSESSEE FROM THE OBLIGATION TO DEDUCT THE SAME. AT THIS STAGE, WE MAY HEREIN OBSERVE THAT THOUGH THE SECOND PROVISO HAD BEEN MADE AVAILABLE ON THE STATUTE VIDE THE FINANCE ACT, 2012 W.E.F 01.04.2013, HOWEVER, THE SAME AS HELD BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD. (2015) 377 ITR 635 (DEL) SHALL BE APPLICABLE RETROSPECTIVELY, I.E EVEN FOR THE YEARS PRIOR TO A.Y 2013 - 14. FURTHER, WE FIND THAT A SIMILAR VIEW HAD ALSO RECENTLY BEEN TAKEN BY TH E HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF PCIT VS. MOBISOFT TELESOLUTIONS PVT. LTD. (2019) 411 ITR 607 (P&H) WHILE DISPOSING OFF THE APPEAL OF THE ASSESSEE BEFORE THEM FOR A.Y 2011 - 12. BE THAT AS IT MAY, WE ARE OF THE CONSIDERED VIEW THAT IN CASE THE ASSESSEE SATISFIES THE CONDITIONS ENVISAGED IN SUB - SECTION (1) OF SEC.201, THEN IT CANNOT BE HELD TO BE AN ASSESSEE IN DEFAULT, AND AS PER THE SECOND PROVISO OF SEC. 40(A)(IA) NO DISALLOWANCE WOULD BE CALLED FOR IN ITS HANDS. WE THUS FOR THE SAID LIMITED PURPOSE RESTORE THE MATTER TO THE FILE OF THE A.O FOR MAKING NECESSARY VERIFICATIONS. IN CASE THE ASSESSEE IS ABLE TO DEMONSTRATE BEFORE THE A.O THAT IT HAD DULY COMPLIED WITH THE CONDITIONS ENVISAGED IN THE SECOND PROVISO OF SEC.40(A)(IA) R.W.S 20 1(1) OF THE I.T ACT, THEN THE DISALLOWANCE TO THE SAID EXTENT MADE UNDER SEC. 40(A)(IA) IN ITS HANDS SHALL STAND VACATED. 13. INSOFAR THE RELIANCE PLACED BY THE LD. A.R ON THE JUDGMENT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. (2012) 340 ITR 333 (BOM) IS CONCERNED, WE FIND THAT THE SAME IS FOUND TO BE DISTINGUISHABLE ON FACTS. IN THE AFORESAID CASE, AS BOTH THE REVENUE AND THE ASSESSEE WERE UNDER A BONAFIDE BELIEF AS REGARDS THE LIABILITY TO DEDUCT TDS ON TRANSACTION CHARGES PAID TO THE BOMBAY STOCK EXC HANGE RIGHT FROM THE YEAR 1995 I.E. COMING INTO EFFECT OF SECTION 194J, TILL THE ASSESSMENT YEAR IN QUESTION, THEREFORE, IT WAS IN THE BACKDROP OF THE SAID PECULIAR FACTS OF THE CASE, IT WAS CONCLUDED BY THE HONBLE HIGH COURT THAT NO DISALLOWANCE U/S 40(A )(IA) WAS CALLED FOR IN THE HANDS OF THE ASSESSEE. IN FACT, THE HONBLE HIGH COURT WHILE CONCLUDING AS HEREINABOVE HAD SPECIFICALLY OBSERVED THAT THE AFORESAID VIEW WAS BEING TAKEN IN THE BACKDROP OF THE PECULIAR FACTS OF THE CASE AS WERE THERE BEFORE THEM . WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE AFORESAID ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 8 JUDICIAL PRONOUNCEMENT RELIED UPON BY THE LD. A.R BEING DISTINGUISHABLE ON FACTS WOULD THUS NOT ASSIST THE CASE OF THE ASSESSEE BEFORE US. 14. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. 9. THE FACTS AND THE CIRCUMSTANCES ARE QUITE SIMILAR TO THE FACTS OF THE PRESENT CASE. T HE LAW RELIED BY THE ASSESSEE I.E. CIT VS. ANSAL LAND MARK TOWNSHIP PVT. L TD. (2015) 61 TAXMANN.COM 45 (DELHI HIGH COURT) AND M/S. HINDUSTAN COCA COLA BEVERAGE VS. CIT DATED 16.08.2007 ALSO SPEAKS THE SAME THING IN SAME SENSE. IN VIEW OF THE ABOVE MENTIONED DECISION, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND RESTO RE THE ISSUE BEFORE THE AO FOR MAKING THE NECESSARY VERIFICATION TO THE EFFECT THAT THE PAYEE HAD PAID THE TAX OR NOT . ACCORDINGLY, THE CLAIM OF THE ASSESSEE WOULD BE LIABLE TO BE ALLOWED. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINS T THE REVENUE FOR STATISTICAL PURPOSES. ISSUE NO. 3 10. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE DISALLOWANCE OF EXPENSES OF RS. 11,78,074/ - . THE DETAILS OF EXPENSES HAVE BEEN FILED AT PAGE NO. 2 00 OF THE PAPER BOOK . THE ASSESSEE HAS FURNISHED THE DETAIL OF EXPENSES OF RS.23,00,000/ - . SOME EXPENSES HAVE BEEN INCURRED WITH THE NAME OF ERSTWHILE COMPANY I.E. THE EARLIER NAME OF THE ASSESSEE . THE CONTENTION OF LD. REPRESENTATIVE OF THE ASSESSEE IS THAT THE CLAIM WAS NOT PROPERLY EXAM INED BY THE AO AND THE EXPENSES INCURRED WITH THE NAME OF THE ERSTWHILE COMPANY WERE ACTUALLY THE EXPENSES OF THE ASSESSEE WHICH SHOULD BE ALLOWABLE . ACTUALLY FACTS NEED TO BE VERIFIED AT THE END OF THE AO BEFORE THE ALLOWANCE OF THE CLAIM OF THE ASSESSE , THEREFORE, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND RESTORE THE ISSUE BEFORE THE AO TO DECIDE THE MATTER OF CONTROVERSY AFRESH AFTER GOING THROUGH THE RELEVANT ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 9 RECORD/VERIFICATION OF THE EVIDENCE PRODUCED IN THIS REGARD. NEEDLESS TO SAY THA T AN OPPORTUNITY OF BEING HEARD IS REQUIRED TO BE GIVEN TO THE ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY, T HIS ISSUE IS BEING DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE FOR STATISTICAL PURPOSES. ISSUE NO. 4 11. UNDER THIS ISSUE THE ASSESSEE H AS CHALLENGED NON - GRANTING OF DEPRECIATION ON CAPITAL EXPENSES. SINCE THE ISSUE NO. 3 HAS BEEN RESTORED BEFORE THE AO TO VERIFY THE CLAIM OF THE ASSESSEE, THEREFORE, CAPITAL EXPENSES ARE IN QUESTION AND YET TO BE DECIDED IN ACCORDANCE WITH LAW . ANYHOW UPON THE CAPITAL EXPENSES , THE DEPRECIATION IS REQUIRED TO BE ALLOWABLE U/S 32 OF THE ACT. ACCORDINGLY, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND RESTORE THE ISSUE BEFORE THE AO TO VERIFY THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW. NEEDLES S TO SAY THAT AN OPPORTUNITY OF BEING HEARD IS LIABLE TO BE GIVEN TO THE ASSESSEE IN ACCORDANCE WITH LAW . ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO. 5 12. ISSUE NO. 5 IS FORMAL IN NATURE WHICH IS NOWHERE REQ UIRED FOR ADJUDICATION. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED. ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 10 ITA. NO. 4337 /M UM /201 9 THE REVENUE HA S FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 29 . 0 3 .201 9 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 21 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2012 - 1 3 . 13 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS.: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.4,00,0 0,000/ - MADE BY THE AO U/S 68 OF THE I T ACT WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES IN THE FORM OF SHARE PREMIUM MONEY FROM THE COMPANIES OPERATED AND MANAGED BY KNOWN HAWALA OPERATOR SHRI PRAVIN KUMAR JAIN' 2. ' WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES AT 5% OF RS.2,02,01,480/ - AS AGAINST 100% MADE BY THE AO WITHOUT APPRECIATING THE FACT THAT ASSESSEE FA ILED TO ESTABLISH THE GENUINENESS OF THE PURCHASES.' 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN RESTRICTING THE ADDITION TO 5% OF BOGUS PURCHASES WITHOUT TAKING INTO CONSIDERATION THE DECISION OF T HE HON'BLE SUPREME COURT IN THE CASE OF M/S N.K. PROTEINS LTD. V/S DY. CIT NO. 769 OF 2027 DATED 26.02.2017 (SC) WHEREIN IT WAS HELD THAT ADDITION ON THE BASIS OF UNDISCLOSED INCOME COULD NOT BE RESTRICTED TO CERTAIN PERCENTAGE WHEN THE ENTIRE TRANSACTION WAS FOUND TO BE BOGUS?' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN TREATING DIFFERENTLY THE SUM RECEIVED IN THE FORM OF SHARE PREMIUM MONEY AND EXPENSES CLAIMED AS BOGUS PURCHASES WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES WHETHER IN THE FORM OF SHARE PREMIUM MONEY OR BOGUS PURCHASES BOTH FROM THE COMPANIES OPERATED AND MANAGED BY KNOWN HAWALA OPERATOR SHRI PRAVIN KUMAR JAIN AND WITH RESPECT TO SHARE APPLICATION MONEY THE LD CIT(A) TREATED IT GENUINE AND ON PURCHASES THE LD CIT(A) TREATED THE SAME AS BOGUS.' ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 11 5. 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED'. 6. 'THE APPELLANT CRAVES LEAVE TO AM END OR ALTER ANY GROUNDS OR ADD GROUND WHICH MAY BE NECESSARY'. 14 . THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THE FACTS OF THE CASE AS NARRATED ABOVE BEARING ITA. NO.3511 /M UM /201 9 , THEREFORE, THERE IS NO NEED TO REPEAT THE SAME. ISSUE NO. 1 15 . U NDER THIS ISSUE THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS.4,00,00,000/ - MADE BY AO U/S 68 OF THE I. T. ACT, 1961. THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE CIT(A) HAS WRONGLY DELETED THE ADDITION, THEREFORE, THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE, HENCE IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD. : - 10. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION OF THE APPELLANT AND FINDINGS BY THE AO. ON THE MERITS, THE ISSUE IS OF UNEXPLAINED CREDITS U/S 68, TO WHICH MY FINDINGS ARE AS UNDER. THE LEGAL POSITION IS VER Y WELL SETTLED I.E. WHERE ANY CREDITS ARE FOUND IN THE BOOKS OF THE ASSESSEE, THE ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE SAME AND ON FAILURE OF THE ASSESSEE, THE PRESUMPTION U/S 68 BECOMES ABSOLUTE AND THE CREDITS ARE TREATED AS INCOME OF THE ASSESSEE. THE ASSESSEE CAN DISCHARGE THE ONUS BY PRODUCING CONFIRMATION FROM THE SHARE APPLICANTS, AND PROVING THE SOURCE OF THE CREDITS. IT IS SUBMITTED BY THE AR THAT, WHEN THE SHARE APPLICANTS ACCEPT/OWN THE SHARE APPLICATION MONEY PAID THE ASSESSEE IS DEEMED TO HAVE DISCHARGED HIS ONUS AND NO FURTHER RESPONSIBILITY LIES ON THE ASSESSEE TO PROVE THE SOURCE FROM WHERE THE SHARE APPLICANTS HAVE ACQUIRED THE AMOUNTS ADVANCED TO THE ASSESSEE AND IN THIS REGARD, THE AR PLACED RELIANCE UPON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ORIENT TRADING CO. LTD. V/S. (1963) 49 ITR 723 (BOM). ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 12 10.2 WHEN SHARE APPLICATION MONEY IS RECEIVED THROUGH NORMAL BANKING CHANNELS, THE IDENTITY OF THE SHARE APPLICANT STANDS PROVED. HOWEVER, IT IS TO BE MENTI ONED THAT MERELY BECAUSE AMOUNTS HAVE BEEN RECEIVED THROUGH BANKING CHANNELS, IT IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE CREDITS. BUT THE EXISTENCE OF A BANK ACCOUNT OF THE SHARE APPLICANT ITSELF PROVES THE EXISTENCE OF THE SHARE APPLICANTS. FOR THIS PROPOSITION, THE APPELLANT REFERRED TO THE DECISION OF THE HONBLE PATNA HIGH COURT IN THE CASE OF SAROGI CREDIT CORPORATION V/S. CIT{1976 }103 ITR 344 (PAT). THE AR FURTHER REFERRED TO THESE FOLLOWING DECISIONS IN SUPPORT OF ITS CONTENTION. IN THE CA SE OF SHANTILAL JAIN ITXA/687/2004 DECIDED ON31.7.2007, THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT MERELY BECAUSE THE CREDITORS ARE NOT ASSESSED TO TAX, IT DOES NOT FOLLOW THAT THE AMOUNTS SHOULD BE ASSESSED AS ASSESSEE'S INCOME. WHERE THE AMOUNTS ARE OWNED BY THE CREDITORS, THEN EVEN IF IT BE PRESUMED THAT THE CREDITORS HAD ADVANCED THE AMOUNTS FROM HIS UNDISCLOSED SOURCES, STILL IT WOULD BECOME THE INCOME OF THE SAID CREDITOR AND NOT THAT OF THE DEBTOR (THE ASSESSEE). IN THE CASE OF NEMI CHAND KOTHAR I V/S. CIT (2003) 264 ITR 254 (GAU.). THE HON'BLE GAUHATI HIGH COURT HELD THAT THE ASSESSEE CANNOT BE CALLED UPON TO PROVE THE SOURCE - OF - SOURCE. IN CIT V/S. ARUNANDA TEXTILES P. LTD. {2011} 333 ITR 116 (KAR.). THE HON'BLE KARNATAKA HIGH COURT HELD THAT WHE RE THE ASSESSEE HAS SUBMITTED CONFIRMATIONS & AFFIDAVITS FROM THE CREDITORS, THE ONUS IS NOT ON THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE CREDITORS. 10.3 A FURTHER CUE FOR THIS PROPOSITION CAN BE HAD FROM THE PROVISO INSERTED IN SEC 68 BY FINANCE A CT, 2012 FROM A.Y. 2013 - 14. UNDER THIS PROVISO, WHERE THE ASSESSEE RECEIVES SHARE APPLICATION MONIES/PREMIUM, THE ASSESSEE IS EXPECTED TO PROVE SOURCE - OF - SOURCE AS WELL. FIRSTLY, IN THE CASE IN HAND, THE AMOUNTS RECEIVED WERE IN THE F.Y. I.E. A.Y.2012 - 13 A ND FURTHER THIS PROVISO WOULD APPLY ONLY FROM AN. 2013 - 14. {REF: DECISION OF THE BOMBAY HIGH COURT IN GANGADEEP INFRASTRUCTURE 394 ITR 680 (BORN.)). THE HONBLE JURISDICTIONAL HIGH COURT REITERATED THE SAID POSITION IN PCIT V/S. VEEDHATA TOWER PVT. LTD. IT XA/819 OF 2015 DATED 17TH APRIL 2018. HOWEVER, THE SAID PROVISO WAS INSERTED BECAUSE, SEC.68 (UNAMENDED) WAS INCAPABLE OF OBLIGING THE ASSESSEE TO PROVE THE SOURCE - OF - SOURCE AND HENCE THE PROVISO WAS REQUIRED TO INSERTED. IT FOLLOWS THAT WHERE THE PROVISO DOESNT APPLY, THE SEC.68 DOES NOT PUT THE BURDEN ON THE ASSESSEE TO PROVE THE SOURCE - OF - SOURCE. 10.4 FROM THE ABOVE, AS SUBMITTED BY THE AR, IT FOLLOWS THAT IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OF THE MONEY OF HIS CREDITORS {CIT V /S. DAULAT RAM RAWALTMULL 87 ITR 349 (SC). REFERENCE CAN ALSO BE MADE TO THE DECISION OF THE APEX COURT IN CIT VS ORISSA CORPORATION PVT LTD. 158 ITR 78 (SC). IT IS ALSO POSSIBLE THAT A CREDITOR MAY HAVE ADVANCED FUNDS FROM OUT OF HIS EXEMPTED INCOME. FOR EG. IF THE CREDITOR HAS AGRICULTURAL INCOME WHICH IS EXEMPT, THEN MERELY BECAUSE THE CREDITOR IS NOT ASSESSED TO TAX, IT DOES NOT FOLLOW THAT THE CREDITS ARE ASSESSEE'S INCOME. ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 13 10.5 I HAVE CONSIDERED THE ABOVE CONTENTIONS RAISED AND IT IS SEEN FROM THE REC ORD THAT, THE ASSESSEE HAS PRODUCED BEFORE THE AO AS WELL AS BEFORE ME THE FOLLOWING DOCUMENTS: 1. PAN 2. COMPLETE NAME AND ADDRESS OF THE APPLICANTS 3. COPY OF BOARD RESOLUTION FOR MAKING SHARE APPLICATION 4. COPY OF BOARD RESOLUTION FOR MAKING SHARE APPL ICATION IN THE APPELLANT COMPANY. 5. COPY OF BANK STATEMENT OF THE APPLICANT REFLECTING PAYMENT OF SHARE APPLICATION MONEY AND SOURCE THEREOF. 6. COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME FILED BY THE APPELLANT COMPANIES FOR THE YEAR UNDER CONSIDERATION. 7. AUDITED FINANCIAL STATEMENTS OF THE APPLICANTS FOR THE YEAR UNDER CONSIDERATION. FOR THE FOLLOWING SHARE APPLICANTS 1. NAKSHATRA BUSINESS PVT. LTD. (HEMA TRADING CO. PVT. LTD) 2. OLIVE OVERSEAS PVT. LTD. (REAL GOLD TRADING PVT. LTD) 3. RANGOLI COMMERC E PVT. LTD. 4. KAVYA SHARES AND SECURITIES PVT. LTD. 5. ARAWALI STOCK BRAKING PVT. LTD. 10.6 AS IS EVIDENT, THE ASSESSEE HAS PRODUCED ALL EVIDENCES TO PROVE THE IDENTITY, SOURCE AND THE GENUINENESS AND CREDIT WORTHINESS. IT IS SUBMITTED THAT THE ASSESSEE H AS DONE EVERYTHING IN ITS CONTROL TO ESTABLISH THE BONAFIDES. IT IS ALSO SUBMITTED THAT, EVEN IF IT PROVED THAT THE CREDITOR HAS ADVANCED FUNDS FROM UNDISCLOSED SOURCES, STILL IT WOULD BE THE INCOME OF THE CREDITOR. 10.7 THE ASSESSEE HAS PRODUCED ALL THE D ETAILS, CONFIRMATION WITH PAN, EVEN THE RETURN OF INCOME OF THE SHARE APPLICANTS. WHEN SUCH MATERIAL IS PRODUCED THE ASSESSEE CAN BE SAID TO HAVE DISCHARGED HIS ONUS AND THE ONUS WOULD SHIFT TO THE AO TO BRING SOME MATERIAL ON RECORD WHICH WOULD PROVE THAT THE MATERIAL'S PRODUCED BY THE ASSESSEE IS EITHER NOT GENUINE OR ARE INSUFFICIENT. THE AO'S RESPONSE TO THE ASSESSEE'S MATERIAL IS SIMPLY THAT THE ASSESSEE HAS NOT PROVED THE SOURCE OF FUNDS IN THE HANDS OF THE SHARE APPLICANTS VIZ. 1] NAKSHATRA BUSINESS PVT. LTD. (HEMA TRADING CO. PVT. LTD), 2] OLIVE OVERSEAS PVT. LTD. (REAL GOLD TRADING PVT LTD), 3 RANGOLI COMMERCE PVT. LTD., 4] KAVYA SHARES AND SECURITIES ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 14 PVT. LTD. & 5) ARAWALI STOCK BRAKING PVT. LTD. THE AR ALSO SUBMITTED AND REFERRED THAT, IN THE CASE OF CIT V/S. U.M. SHAH, PROPRIETOR, SHRENIK TRADING CO. 90 ITR 396 (BOM.)). THE HON'BLE JURISDICTIONAL HIGH COURT HELD THAT ONCE CREDIBLE MATERIAL IS PRODUCED BEFORE THE AO, THE AO IS EXPECTED TO MAKE EFFORTS TO DISLODGE THE EXPLANATION GIVEN BY THE ASSESS EE. NO SUCH THING HAS BEEN DONE BY THE AO. THE AO CANNOT SIMPLY REJECT EXPLANATION/MATERIALS PRODUCED BY THE ASSESSEE WITHOUT BRINGING ANY CONTRARY FINDINGS ON RECORD. IN THIS REGARD. I FIND THAT THE DECISION REFERRED BY THE APPELLANT'S AR ON THE ISSUE OF COMPANY IS MANAGED AND CONTROLLED BY PRAVEEN KUMAR JAIN/BHAWARLAL JAIN AND ALSO OTHER JURISDICTIONAL ITAT/HIGH COURT CASES DECIDED ON SIMILAR FACTS IN FAVOUR OF THE ASSESSEE WHICH ARE BINDING ON THE UNDERSIGNED, THE CASE LAWS ARE AS UNDER: 1 ITO - 4(3)(1) MU MBAI VS. NITYANAND INDUSTRIES PVT. LTD. ITA. NO.4277 & 4278/M/2017 2 KOMAL AGROTECH PVT. LTD. HYDERABAD VS. THE ITO, WARD 2(1) HYDERABAD ITA. NO.437/HYD/2016 3 ARCELI REALTY LTD. VS. ITO 15(1)(1), MUMBIA 4 SHRI NARESH HIRAN VS. ITO 30(2)(4), MUMBAI ITA 1236/M/2017, ITAT MUMBAI 5 ITO 25(3)(5), MUMBAI VS. M/S. VIKRAM KUKTILAL VORA, ITA. 842/MUM/2017 6 M/S. RELIANCE CORPORATION VS. ITO IRA. NO.1069 TO 1071/M/2017 7 SANGHVI REALTY P. LTD. V DCIT CIRLCE 5(3)(1) 3018/M/2017, 3019/M/2017, 3020/M/2017 8 ITO 32(1)(5) VS. GUJARAT CONSTRUCTION 9 ACIT VS. M/S. GUJARAT ESTATE ITA.6990/M/2016 ORDER DATED 18.05.2018 10 SUNSHINE METALS & ALLOYS INDUSTRIES PVT. LTD. VS. ITO 4(3)(4 ITA. 3213/M/2014 11 DCIT VS. M/S. ROHINI BUILDERS (2002) 256 ITR GUJARAT HC 12 CIT VS. M/S. ORCHID INDUSTRIES P. LTD. ITA. 1433 OF 2014 13 ROHINI BUILDERS VS. DCIT ITAT AHMEDABAD (2001) 117 TAXMANN.25 14 CIT VS. M/S. GAGANDEEP INFRASTRUCTURE PVT. LTD. 15 DCIT, SURAT VS. M/S. ROHINI BUILDERS SLP 16 CIT VS. LOVELY EXPORTS 2016 CTR 195 10.8 IN VIEW OF THE ABOVE, FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO IN VIEW OF THE DECISION OF THE HON'BLE ITAT IN THE CASES OF M/S. NITYANAND INDUSTRIES (P) LTD. AND KOMAL AGROTECH (P) LTD. AND ARCELI REALTY LTD. WHEREIN THE INVESTOR COMPANIES A RE CONTROLLED BY PRAVEEN KUMAR JAIN. ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 15 SIMILAR TO THE APPELLANT'S CASE AND THE HON'BLE ITAT AFTER APPRECIATING THE FACTS ON RECORD, ACCEPTED THAT THE TRANSACTION WITH THESE INVESTOR COMPANIES ARE GENUINE. THUS, THE ADDITION OF RS 4,00,00.000/ - U/S. 68 IS NOT JU STIFIED. THE AO IS. THEREFORE, DIRECTED TO DELETE THE SAID ADDITION OF RS.4,00,00,000/ - . ACCORDINGLY, THIS GROUND IS ALLOWED. 16 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE CIT(A) HAS EXAMINED ALL THE NECESSARY INGREDIENTS TO PROVE T HE TRANSACTIONS SUCH AS IDENTITY, CREDITWORTHINESS, GENUINENESS OF THE CLAIM . THE DETAILS OF THE NECESSARY DOCUMENTS HAVE BEEN MENTIONED BY CIT(A) IN HIS ORDER. THE CIT(A) HAS ALSO RELIED UPON THE NUMBER OF DECISIONS WHICH HAS BEEN SPECIFICALLY MENTIONED I N THE ORDER WHICH IS NOT REPEATED HEREIN FOR THE SAKE OF BREVITY. INITIALLY, THE AO HAS NOT VERIFIED THE CLAIM OF THE ASSESSEE AND WAS NOT HAVING PROPER MATERIAL TO DECLINE THE CLAIM OF THE ASSESSEE . THE DOCUMENTS RELIED BY THE ASSESSEE NOWHERE DISCREDITED WITH THE SUFFICIENT EVIDENCE ON RECORD. ADMITTEDLY, ALL THE NECESSARY DOCUMENTS WERE FILED BY THE ASSESSEE BEFORE THE AO AND NO ADVERSE INFERENCE WAS DRAWN BY THE AO ON THE SAID DOCUMENTS EXCEPT MERELY STATING THAT THE SHARE SUBSCRIBERS HAVE NEGATIVE RESE RVES IN THEIR BALANCE SHEET THEREBY DOUBTING THEIR CREDITWORTHINESS. IT IS PERTINENT TO NOTE THAT THE AO REMAINED SILENT AFTER THIS. HE DID NOT EVEN RESORT TO ISSUE NOTICE U/S 133(6) OF THE ACT TO THE SHARE SUBSCRIBERS AND SEEK THEIR REPLIES BEFORE ARRIVI NG AT A CONCLUSION THAT THE RECEIPT OF SHARE CAPITAL BY THE ASSESSEE IS TO BE ADDED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. IN THESE CIRCUMSTANCES, THE CIT(A) WENT THROUGH EACH AND EVERY DOCUMENT FILED BY THE ASSESSEE BEFORE THE AO AND CON CLUDED THAT THE ASSESSEE HAD DULY PROVED ALL THE THREE NECESSARY INGREDIENTS VIZ IDENTITY AND CREDITWORTHINESS OF SHARE SUBSCRIBERS TOGETHER WITH THE GENUINENESS OF TRANSACTIONS, APART FROM PLACING RELIANCE ON VARIOUS DECISIONS. WE FIND THAT THE SAME PARTI ES FROM WHOM SHARE SUBSCRIPTION ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 16 MONEY IS RECEIVED BY THE ASSESSEE HAS BEEN THE SUBJECT MATTER OF ADJUDICATION AND THIS TRIBUNAL IN VARIOUS DECISIONS AS LISTED BY THE CIT(A) HAD CONSIDERED THEM TO BE GENUINE AND HAVING SUFFICIENT CREDITWORTHINESS APART FROM PROVING THEIR IDENTITY BEYOND DOUBT. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS GAGANDEEP INFRASTRUCTURE PVT LTD IN INCOME TAX APPEAL NO. 1613 OF 2014 DATED 20.3. 2017 IN SUPPORT OF HIS CONTENTIONS AND IN SUPPORT OF THE ORDER OF CIT(A). NO CONTRARY DECISION HAS BEEN PRODUCED BEFORE US BY REVENUE. ON APPRAISAL OF THE FINDING OF THE CIT( A), WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDI CIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. T HEREFORE, WE AFFIRM THE FINDING OF THE CIT(A) ON THIS ISSUE AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NOS. 2 TO 4 17 . ISSUE NOS. 2 TO 4 ARE IN CONNECTION WITH THE RESTRICTION OF THE ADDITION TO THE EXTENT OF 5% OF THE BOGUS PURCHASE. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 4. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION OF TH E APPELLANT AND FINDINGS BY A.O. IT IS SEEN FROM THE DETAILS AVAILABLE ON RECORD THAT THE FOLLOWING DETAILS HAVE BEEN PRODUCED BEFORE THE AO AS WELL AS BEFORE ME, TO SUBSTANTIATE THE PURCHASE MADE FROM JOSH TRADING PVT. LTD: 1. COPY OF INVOICE CUM DELIVERY CHALLAN OF JOSH TRADING PRIVATE LIMITED. 2. BANK STATEMENT OF JOSH TRADING PRIVATE LIMITED REFLECTING THE AMOUNT RECEIVED FROM KUNDALI JEWELS PRIVATE LIMITED THE APPELLANT OF RS.1,02,01,480/ - . 3. COPY OF BANK STATEMENT OF KUNDALI JEWELS PRIVATE LIMITED RE FLECTING PAYMENT OF RS.1,02,01,4801 - TO JOSH TRADING PRIVATE LIMITED. ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 17 4. COPY OF LEDGER ACCOUNT OF THE APPELLANT IN THE BOOKS OF ACCOUNTS OF JOSH TRADING PRIVATE LIMITED 14.2 THE FACTS AND CIRCUMSTANCES OUTLINED ABOVE LEADS TO THE CONCLUSION THAT ALL THE A BOVE REFERRED EVIDENCES SUCH AS INVOICES/BILLS, LEDGER ACCOUNTS, DETAILS OF PAYMENTS MADE THROUGH BANKING CHANNEL PLACED ON RECORD BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS CANNOT BE SET ASIDE SUMMARILY BY THE A.O. WITHOUT MAKING FURTHER INVESTIGATIONS IN THE MATTER TO PROVE THAT THESE ARE NOT GENUINE PURCHASES. HOWEVER, AT THE SAME TIME IT IS DIFFICULT TO ACCEPT THAT THE PURCHASES SHOWN ON THE INVOICES/BILLS ISSUED BY THESE PARTIES ARE AS PER THE PREVAILING MARKET PRICE OF THOSE MATERIALS OR HAVE ACTUALLY BEEN MADE FROM SUCH PARTIES AND MIGHT HAVE BEEN PURCHASED IN THE GREY MARKET. AS THE APPELLANT HAS NOT PLACED ANY EVIDENCE ON RECORD THAT THE GOODS WERE PURCHASED FROM THE ABOVE PARTIES AT ARMS LENGTH PRICE, THIS WOULD INDICATE THAT THE PURCHASES WERE MADE FROM THE OPEN MARKET WITHOUT INSISTING FOR GENUINE BILLS AND IN SUCH CASES THE SUPPLIERS WOULD BE WILLING TO SELL AT A MUCH LESS RATE AS COMPARED TO THE RATE THAT THEY WOULD HAVE CHARGED OTHERWISE, CERTAINLY GOODS MUST HAVE BEEN PURCHAS ED FROM THE GREY MARKET THEREFORE THE PROFIT MADE BY THE ASSESSEE WOULD BE EQUAL TO THE DIFFERENCE IN PRICE OF BOGUS PURCHASES AND THE RATE AT WHICH GOODS ARE OBTAINED FROM THE GREY MARKETS. AT THE SAME TIME, IT IS AN UNDISPUTED FACT THAT THE ASSESSEE FAIL ED TO PROVE THE DELIVERY OF MATERIAL BY PRODUCING TRANSPORT RECEIPTS ETC. AND FAILED TO PRODUCE ANY SUPPLIERS BEFORE THE AO TO PROVE THE TRANSACTIONS. IT IS PERTINENT TO VISIT THE DECISIONS OF HON'BLE ITAT, AHMEDABAD AND HON'BLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS SIMIT P SHETH (2013) ON THE ISSUE. HON'BLE ITAT HELD THE FOLLOWING IN THE REFERRED CASE.: 'HAVING HEARD THE SUBMISSIONS OF BOTH SIDES, WE HAVE BEEN INFORMED THAT THE MALPRACTICE OF BOGUS PURCHASE IS MAINLY TO SAVE 10% SALES TAX ETC. IT HAS AL SO BEEN INFORMED THAT IN THIS INDUSTRY ABOUT 2.5% IS THE PROFIT MARGIN. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO - ORDINATE BENCH PRONOUNCED ON IDENTICAL CIRCUMSTANCES, WE HEREBY DIRECT THAT THE ITA NO 3238 & 3293/AHD/2009 A. Y. 2006 - 07 SH. SIMIT P SHETH V ITO WD - 2(2), BRD PAGE 6 DISALLOWANCE IS REQUIRED TO BE SUSTAINED AT 12.5% OF THE PURCHASES FROM THOSE PARTIES. WITH THESE DIRECTIONS, WE HEREBY DECIDE THE GROUNDS OF THE RIVAL PARTIES WHICH ARE PARTLY ALLOWED.' 14.3 THE HON'BLE GUJARAT HIG H COURT HELD THE FOLLOWING IN THE CASE: 'THIS BEING THE POSITION THE ONLY QUESTION THAT SURVIVES IS WHAT SHOULD BE THE FAIR PROFIT RATE OUT OF THE BOGUS PURCHASES WHICH SHOULD BE ADDED BACK TO THE INCOME OF THE ASSESSEE. THE COMMISSIONER ADOPTED RATIO OF 3 0% OF SUCH TOTAL SALES. THE TRIBUNAL, HOWEVER, SCALED DOWN TO 12.5%. WE MAY NOTICE THAT IN THE IMMEDIATELY PRECEDING YEAR TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARED GROSS PROFIT @ 3.56% OF THE TOTAL TURNOVER. IF THE YARDSTICK OF 3 0%, AS ADOPTED BY THE COMMISSIONER, IS ACCEPTED GP RATE WILL BE MUCH HIGHER. IN ESSENCE, THE ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 18 TRIBUNAL ONLY ESTIMATED THE POSSIBLE PROFIT OUT OF PURCHASES MADE THROUGH NON - GENUINE PARTIES. NO QUESTION OF LAW IN SUCH ESTIMATION WOULD ARISE. THE ESTIMATION OF RATE OF PROFIT RETURN MUST NECESSARILY VARY WITH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK CAN BE ADOPTED.' 14.4 FURTHER, THE AR SUBMITTED, WITH RESPECT TO THE SIMILAR TRADE IN DIAMONDS IN THE CASE OF M/S. HAR - GOBIND AND SONS, HON'BLE ITAT NO.1108/M UM12017, AY.2007 - 08, THE HON'BLE ITAT HAD RESTRICTED THE ADDITION @ 5% OF THE VALUE OF ALLEGED BOGUS PURCHASES. RESPECTFULLY FOLLOWING THE JUDGEMENTS AND CONSIDERING THE TOTALITY OF FACTS, THE ADDITION @ 100/0 OF PURCHASE AMOUNT IS CONSIDERED EXCESSIVE AN D ESTIMATION OF PROFIT AT 5% WOULD MEET THE ENDS OF JUSTICE. THUS, THE A.O. IS DIRECTED TO RESTRICT THE ADDITION TO 5% OF THE ALLEGED BOGUS PURCHASE AMOUNT. THEREFORE, THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 18 . ON APPRAISAL OF THE ABOVE MENTIONED F IN DING, WE FIND THAT THE CIT(A) HAS DECIDED THE ISSUE BY CONSIDERING THE EACH AND EVERY FACTS OF THE CASE. THE CIT(A) HAS RELIED UPON THE VARIOUS DECISION S MENTIONED IN THE ORDER. IN THE TRADE OF DIAMONDS, T HE ADDITION HAS BEEN RESTRICTED BY THE DECISION OF HONBLE ITAT DELHI BENCH BEARING ITA. NO.1108/MUM/2017 FOR THE A.Y. 2007 - 08 @ 5% OF THE BOGUS PURCHASE . THE CIT(A) HAS ALSO TOOK INTO NOTICE OF GROSS PROFIT OF THE ASSESSEE IN THE RELEVANT YEAR . TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES AND CONS IDERING THE FACT THAT THE ASSESSEE IS NOT IN APPEAL AGAINST THIS ISSUE AND ALSO CONSIDERING THE TASK FORCE REPORT OF GEMS AND JEWELLERY INDUSTRY , WE ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) IS NOT LIABLE TO BE INTERFERE D WITH AT THIS APPELLATE STAGE IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE INSTANT CASE . THEREFORE, W E AFFIRM THE FINDING OF THE CIT(A) ON THIS ISSUE AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ITA NO. 3511 /M UM /201 9 4337/MUM /201 9 A.Y . 2012 - 13 19 ISSUE NOS. 5 & 6 19 . ISSUE NOS. 5 & 6 ARE FORMAL IN NATURE WH ICH IS NOT REQUIRED TO BE ADJUDICATION. 20 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 / 02 /20 2 1 SD/ - SD/ - ( M. BALAGANESH ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL M EMBER MUMBAI; DATED : 23 /0 2 /20 21 V IJAY PAL SINGH / SR. P.S. / 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// ( ASSISTANT REGISTRAR ) , / ITA T, MUMBAI