DCIT - 13(2)(1), MUMBAI V. SATYANIS THE JEWELLERY STORE PVT. LTD., MUMBAI

ITA 3611/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8911 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 25-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N PADMANABAN
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 143(3); 133(6); 143(2)

Judgement Text

ITA NO. 3611/MUM/2018 A.Y. 2014 - 15 THE DCIT - 13(2)(1) VS. M/S SATYANIS THE JEWELLERY STORE PVT. LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 3611/MUM/2018 (ASSESSMENT YEAR: 2014 - 15 ) THE DCIT - 13(2)(1) ROOM NO. 146, 1 ST FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S SATYANIS THE JEWELLERY STORE PVT. LTD. PLOT NO. 190, SAVANA COURT, TURNER ROAD, BANDRA (W), MUMBAI - 400050 PAN AALCS8177J (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI N. PADMANABAN, SR. D .R RESPONDENT BY: SHRI HITEN VASANT , A.R DATE OF HEARING: 08.01.2020 DATE OF PRONOUNCEMENT: 10 .01.2020 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 21, MUMBAI, DATED 28.02.2018, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 27.12.2016 . THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO THE EXTENT OF 6% ONLY OF THE BOGUS PURCHASES INSTEAD OF UPHOLDING THE SAME TO THE EXTENT OF 12.5% OF SUCH PURCHASES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF TRANSACTION OF THE PURCHASES. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GR OUNDS BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURI NG AND SELLING OF JEWELLERY HAD FILED ITS RETURN OF INCOME FOR A.Y. 2014 - 15 ON 29.09.2014, DECLARING ITS TOTAL INCOME AT RS. 1, 35, 35,090/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. ITA NO. 3611/MUM/2018 A.Y. 2014 - 15 THE DCIT - 13(2)(1) VS. M/S SATYANIS THE JEWELLERY STORE PVT. LTD. 2 3. INFORM ATION WAS RECEIVED BY THE A.O FROM THE INVESTIGATION WING OF THE INCOME - TAX DEPARTMENT THAT SEARCH PROCEEDINGS CONDUCTED ON AN INFAMOUS ENTRY PROVIDER VIZ. SHRI BHANWARLAL JAIN, THEREIN REVEALED THAT THE ASSESSEE AS A BENEFICIARY HAD OBTAINED BOGUS PURCHASE BILLS WITHOUT ANY ACTUAL SUPPLY OF MATERIAL. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD CLAIMED T O HAVE MADE PURCHASES FROM THE FOLLOWING THREE TAINTED PARTIES: NAME OF THE ENTITIES AMOUNT AS PER ASSESSEE AMOUNT AS PER SUPPLIES PRIME STAR 18120828 18320156 MAYUR EXPORTS 13103292 13247429 MOHIT ENTERPRISES 44923782 45417943 TOTAL 7,61,47,902 7,69,85,528 ON BEING CALLED UPON TO SUBSTANTIATE THE GENUINENESS OF THE AFORESAID PURCHASE TRANSACTIONS, THE ASSESSEE FURNISHED CERTAIN SUPPORTING DOCUMENTARY EVIDENCE VIZ. (I) COPY OF THE LEDGER ACCOUNTS ; (II) STATEMENT OF DISPOSAL OF DIAMOND S ; (III) COPIES OF INVOICES; (IV) COPIES OF TAX INVOICES OF CORRESPONDING SALES; (V) SUMMARY OF STOCK OF DIAMONDS; (VI) CONFIRMATION OF ACCOUNTS OF THE PARTIES; (VII) COPIES OF THE RELEVANT EXTRACT OF BANK STATEMENT; (VI II) COPIES OF BALANCE SHEET; (IX) RET URN OF INCOME AND PAN ; (X) STATEMENTS OF PAYMENTS MADE TO THE PARTIES IN THE CURRENT AND THE SUBSEQUENT YEAR; AND (XI) AFFIDAVIT OF THE PARTIES CONFIRM ING THE SALES MADE BY THEM. IN ORDER TO VERIFY THE GENUINENESS OF THE AFORESAID PURCHASE TRANSACTIONS, TH E A.O ISSUED LETTER UNDER SEC. 133(6) TO THE AFOREMENTIONED PARTIES. IN REPLY, THE AFORESAID PARTIES DULY ADMITTED THAT THEY HAD SOLD GOLD MATERIAL OF A WORTH RS.7,69,85,528/ - TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE ASSESSEE FAILE D TO PRODUCE THE DELIVERY CHALLANS IN ORDER TO SUBSTANTIATE THAT THE GOODS WERE ACTUALLY RECEIVED FROM THE AFOREMENTIONED PARTIES. ALSO, THE ASSESSEE DESPITE SPECIFIC DIRECTIONS BY THE A.O FAILED TO PRODUCE THE AFORESAID PARTIES FOR NECESSARY EXAMINATION B EFORE HIM. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O WAS NOT PERSUADED TO ACCEPT THE CLAIM OF THE ASSESSEE THAT IT HAD MADE GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES. AFTER DELIBERATING AT LENGTH ON THE MODUS OPERANDI ADOPTED BY THE HAWALA ENTRY OPERATORS, THE A.O HELD A CONVICTION THAT THE ASSESSEE HAD ONLY OBTAINED ACCOMMODATION BILLS FROM THE AFOREMENTIONED PARTIES AND HAD NOT MADE ANY GENUINE PURCHASES FROM THEM. ACCORDINGLY, THE A.O R ELYING ON THE JUDGMENT S OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. BHOLANATH POLYFAB (P) LTD. (2013) 355 ITR 290 (GUJ) AND CIT VS. SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) , THEREIN MADE AN ADDITION OF 12.5% OF THE AGGREGATE VALUE OF THE IMPUGNED PURCHASES. AS SUCH, THE A.O BEING OF THE VIEW THAT THE ASSESSEE HAD NOT MADE ANY GENUINE PURCHASES FROM THE AFOREMENTIONED THREE PARTIES, THEREIN MADE AN ADDITION OF RS.96,23,191/ - (12.5% OF RS.7,69,85,528/ - ) IN THE HANDS OF THE ASSESSEE COMPANY. ITA NO. 3611/MUM/2018 A.Y. 2014 - 15 THE DCIT - 13(2)(1) VS. M/S SATYANIS THE JEWELLERY STORE PVT. LTD. 3 4. AGGRIEVED, THE ASSESSEE ASSAILED THE ASSESSMENT FRA MED BY THE A.O BEFORE THE CIT(A). IT WAS OBSERVED BY THE CIT(A) THAT THE TRIBUNAL IN THE ASSESSES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y. 2013 - 14 WHEREIN IDENTICAL FACTS WERE INVOLVED HAD RESTRICTED THE ADDITION TO 6% OF THE AGGREGATE VALUE O F THE IMPUGNED BOGUS PURCHASES. AS SUCH, THE CIT(A) RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL RESTRICTED THE ADDITION IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION VIZ. A.Y. 2014 - 15 TO 6% OF THE AGGREGATE VALUE OF THE IMPUGNED PU RCHASES OF RS.7,61,47,902/ - . ACCORDINGLY, ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT( A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. IT WAS SUBMITTED BY THE LD. D.R. THAT THE CIT(A) WAS IN ERROR IN DISLODGING THE ADDITION OF 12.5% OF THE BOGUS PURCHASES AS WAS MADE BY THE A.O. HOWEVER, THE LD. D.R, COULD NOT CONTROVERT THE FACT THAT INVOLVI NG IDENTICAL FACTS THE TRIBUNAL IN THE ASSESSES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y. 2013 - 14 HAD RESTRICTED THE ADDITION TO 6% OF THE AGGREGATE VALUE OF THE UNPROVED PURCHASES. 6. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). IT WAS SUBMITTED BY THE LD. A.R THAT AS THE CIT(A) HAD FOLLOWED THE VIEW TAKEN BY THE TRIBUNAL IN THE ASS ESSES OWN CASE FOR A.Y. 2013 - 14 WHEREIN IDENTICAL FACTS WERE INVOLVED, THEREFORE, NO INFIRMI TY DID EMERGE FROM HIS ORDER. 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD , AS WELL AS THE JUDICIAL PRONOUNCEMENT S RELIED UPON BY THEM. ADMITTEDLY, WE FIND THAT THE ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS HAD FAILED TO PROVE TO THE HILT THE AUTHENTICITY OF THE PURCHASES WHICH WERE CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED THREE PARTIES . AS SUCH, WE ARE IN AGREEMENT WITH THE VIEW T AKEN BY THE LOWER AUTHORITIES THAT IT COULD SAFELY BE CONCLUDED THAT THE ASSESSEE HAD PURCHASE D THE GOODS NOT FROM THE AFOREMENTIONED PARTIES BUT AT A DISCOUNTED VALUE FROM THE UNIDENTIFIED DEALERS OPERATING IN THE OPEN/GREY MARKET. AS A MATTER OF FACT, THE CONTROVERSY IN THE PRESENT APPEAL HINGES AROUND THE ASPECT AS REGARDS THE QUANTIFICATION OF THE PROFIT WHICH THE ASSESSEE WOULD HAVE MADE BY PROCURING THE GOODS AT A DISCOUNTED VALUE FROM THE UNDISCLOSED PARTIES OPERATING IN THE UNORGANISED SECTOR. WE FIND THAT INVOLVING IDENTICAL FACTS AN ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURC HASE WAS MADE BY THE A.O IN THE ASSESSE S OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y. 2013 - 14 . ON APPEAL, THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL OF THE REVENUE VIZ. ACIT, CIRCLE 13(2)(1), MUMBAI VS. M/S SATYANIS THE JEWELLERY PVT. LTD. [ITA NO.4950/MUM/2016, DATED 03.11.2017] FOR A.Y.2013 - 14 HAD ITA NO. 3611/MUM/2018 A.Y. 2014 - 15 THE DCIT - 13(2)(1) VS. M/S SATYANIS THE JEWELLERY STORE PVT. LTD. 4 RESTRICTED THE AFORESAID ADDITION TO 6% OF THE AGGREGATE VALUE OF THE IMPUGNED PU RCHASES, OBSERVING AS UNDER : 3. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE WAS FOUND TO HAVE AVAILED ACCOMMODATION ENTRIES OF BOGUS PURCHASES FROM MR. BHAWARLAL JAIN GROUP OF COMPANIES TO THE TUNE OF RS.5,24,58,930/ - AND NOTICES SENT U/S 133(6) TO THE PARTIES WERE DULY COMPLIED BY THE PARTIES BY FILING THE NECESSARY DETAILS AS C ALLED FOR BY THE AO. HOWEVER, THE ASSESSEE COULD NOT PRODUCE THE SUPPLIERS BEFORE THE AO. FURTHER THE AO HAS NOT DOUBTED THE CORRESPONDING SALES WHICH MEANS THAT THE ASSESSEE MIGHT HAVE PURCHASED THE GOODS FROM THE GREY MARKET. THE LD. CIT(A) SUSTAINED THE ADDITION AT 1% WITHOUT GIVING ANY COGENT REASONS OR JUSTIFICATION FOR THE SAME. IN THE CASE OF BOGUS PURCHASES, IN OUR OPINION THE GP DECLARED IS NOT RELEVANT BUT THE INTENTION TO BRING THE TAX ON THE SAVINGS WHICH MIGHT HAVE BEEN MADE BY THE ASSESSEE BY PURCHASING THE MATERIAL FROM GRAY MARKET BY NON PAYMENT OF VAT AND OTHER INCIDENTAL LEVIES. THE ITAT IN A NUMBER OF CASES ON IDENTICAL FACTS AND CIRCUMSTANCES, HAVE TAKEN A CONSISTENT VIEW THAT THE ADDITION IN SUCH TYPE CASES WHERE THE ASSESSEE IS ENGAGED IN MANUFACTURING OF GOLD AND DIAMOND JEWELLERY, THE ADDITION RANGING FROM 4 TO 6% OR A REASONABLE PERCENTAGE SHOULD BE MADE. THEREFORE, IN OUR OPINION MAINTAINING THE CONSISTENCY WITH THE EARLIER DECISIONS OF THE TRIBUNAL, WE DEEM IT FIT AND PROPER IN THE PRESENT CIRCUMSTANCES TO APPLY THE GP RATE AT 6% TO THE BOGUS PURCHASE IN ORDER TO COVER THE VARIOUS TYPES OF SAVINGS WHICH THE ASSESSEE MIGHT HAVE MADE BY PURCHASING THE MATERIAL FROM THE HAWALA OPERATORS. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CI T(A) AND DIRECT THE AO TO APPLY 6% TO BOGUS PURCHASES. WE FIND THAT THE CIT(A) WHILE DISPOSING OFF THE APPEAL OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION VIZ. A.Y. 2014 - 15 HAD FOLLOWED THE VIEW THAT WAS TAKEN BY THE TRIBUNAL IN THE ASSESSE S OWN CAS E FOR A.Y.2013 - 14. IT IS NOT THE CASE OF THE REVENUE THAT THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WERE IN ANY WAY DISTINGUISHABLE FROM THOSE INVOLVED IN ITS CASE FOR THE IMMEDIATELY P RECEDING YEAR I.E A.Y. 2013 - 14. I N FACT, THE LD. D.R ON BEING CONFRONTED WITH THE AFORESAID ORDER OF THE TRIBUNAL FOR THE IMMEDIATELY PRECEDING YEAR HAD NOT REBUTTED THE CLAIM OF THE ASSESSEE THAT THE FACTS INVOLVED IN THE PRESENT APPEAL WERE IDENTICAL AS IN COMPARISON TO THOSE FOR THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y 2013 - 14. ON THE BASIS OF THE AFORESAID FACTS , WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) WHO BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSE S OWN CASE FOR A.Y. 2013 - 14 HAD RESTRICTED THE ADDITION IN THE CASE OF THE ASSESSEE TO 6% OF THE AGGREGATE VALUE OF THE IMPUGNED PURCHASES. WE THUS IN TERM S OF OUR AFORESAID OBSERVATIONS UPHOLD THE ORDER PASSED BY THE CIT(A). 8. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COUR T ON 10. 01.2020 SD/ - SD/ - (MANOJ KUMAR AGGARWAL) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 10 /01/2020 PS. ROHIT ITA NO. 3611/MUM/2018 A.Y. 2014 - 15 THE DCIT - 13(2)(1) VS. M/S SATYANIS THE JEWELLERY STORE PVT. LTD. 5 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// (SR. PRIVATE SECRETARY) ITAT, MUMBAI