The Income Tax Officer, Ward-1(3)(1), Surat V. M/s. Delux Diamonds, Surat

ITA 380/SRT/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3184 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 02-08-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANDIP VAN
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA NO. 380/SRT/2019 (AY: 2008-09) ( VIRTUAL COURT) INCOME TAX OFFICER, WARD - 3, NAVSARI. VS . M/S. DELUX DIAMOND, U-49, POOJA ABHISHEK, OPP. LAL BUNGALOW, ATHWALINES, SURAT. PAN : AABFD8354M REVENUE ASSESSEE REVENUE BY SHRI RITESH MISHRA, CIT - DR APPELLANT BY SHRI SANDIP VAN, CA DATE OF HEARING 06 / 10 / 2021 DATE OF PRONOUNCEMENT 11 / 10 / 2021 ORDER PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, SURAT [IN SHORT THE LD. CIT(A)] DATED 22.05.2019 FOR ASSESSMENT YEAR (AY) 2008-09. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING LITE DISALLOWANCE TO 5% OF THE BOGUS PURCHASES OF RS.3,80,19,941/- WITHOUT APPRECIATING THE FACTS THAT THE ALLEGED PURCHASES MADE BY THE ASSESSEE HAS BEEN FOUND BOGUS IN SHAPE OF BOGUS BILLING BY THE SAID BILLING PARTIES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN GIVING RELIEF TO THE ASSESSEE WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE GOODS PURCHASED FROM MAYANK IMPEX AND NAZAR IMPEX PVT. LTD. AND THE SAME WERE SOLD TO SOME OTHER CONCERN ALONG WITH DOCUMENTARY EVIDENCES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS IGNORED THE FACTS THAT SHRI SANJAY CHOUDHARY HAS CATEGORICALLY ADMITTED THE FACTS THAT ALL CONCERNS RUN BY HIM WERE INDULGED IN PROVIDING ACCOMMODATION ENTRIES OF BOGUS PURCHASES, SALES, 2 ITA NO.380/SRT/2019 ASSESSMENT YEAR.2008-09 M/S. DELUX DIAMOND UNSECURED LOANS ETC. BY ISSUING BOGUS BILLS WHICH WERE JUST PAPER TRANSACTIONS AND NO PHYSICAL TRANSACTIONS OF GOODS WERE DONE. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND(S) OF APPEAL EITHER BEFORE OR CURING THE COURSE OF HEARING OF THE APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF TRADING OF POLISHED DIAMOND AND JEWELLERY. THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY.2008-09 ON 29.09.2008 DECLARING TOTAL INCOME OF RS.2,48,600/-. SUBSEQUENTLY, ON RECEIPT OF INFORMATION FROM INVESTIGATION WING, MUMBAI THAT A SEARCH ACTION WAS CARRIED OUT ON RAJENDRA JAIN, SANJAY CHAUDHARY AND DHARMI CHAND JAIN GROUP, WHO WERE PROVIDING BOGUS ENTRIES OF SALE PURCHASE OF DIAMOND, LONG TERM CAPITAL GAIN (LTCG) AND LOSS ETC. THE STATEMENT OF RAJENDRA JAIN WAS RECORDED BY INVESTIGATION WING UNDER SECTION 132. THE SAID RAJENDRA JAIN CONFIRMED THAT HE IS MANAGING VARIOUS BOGUS ENTRIES FOR PROVIDING ACCOMMODATION OF ENTRY WITHOUT DELIVERY OF ACTUAL GOODS. ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFFICER NOTED THAT ASSESSEE IS ONE OF THE BENEFICIARIES OF PURCHASES S SHOWN FROM MAYANK IMPEX (HUF) AND NAZAR IMPEX PVT. LTD. MANAGED BY RAJENDRA JAIN, SANJAY CHAUDHARY AND DHARMI CHAND JAIN GROUP. ON THE BASIS OF SUCH INFORMATION OF INVESTIGATION GROUP THAT THE ASSESSEE HAS SHOWN PURCHASES OF RS.3.80 CRORE FROM MAYANK IMPEX (HUF) AND NAZAR IMPEX PVT. LTD. MANAGED BY RAJENDRA JAIN, THE ASSESSING OFFICER RECORDED THE REASONS FOR REOPENING UNDER SECTION 147 OF THE ACT. THE NOTICE UNDER SECTION 148 DATED 3 ITA NO.380/SRT/2019 ASSESSMENT YEAR.2008-09 M/S. DELUX DIAMOND 23.03.2015 WAS SERVED ON THE ASSESSEE. IN RESPONSE TO THE NOTICE UNDER SECTION 148 THE ASSESSEE FILED ITS REPLY DATED 28.04.2015 AND STATED THAT THE RETURN FILED ON 29.09.2008 BE TREATED AS RETURN IN RESPONSE TO SAID NOTICE. THE ASSESSING OFFICER ALSO SUPPLIED THE REASONS RECORDED; THE ASSESSEE FILED ITS OBJECTION AGAINST THE REOPENING. THE OBJECTION WAS DISPOSED OFF VIDE ORDER DATED 14.09.2015. AFTER DISPOSAL OF OBJECTION, THE ASSESSING OFFICER PROCEEDED FOR REASSESSMENT. 3. DURING THE RE-ASSESSMENT, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE ON 25.01.2016. THE CONTENTS OF SHOW CAUSE NOTICE IS RECORDED IN PARA 10 OF THE ASSESSMENT ORDER. IN THE SHOW CAUSE NOTICE, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PURCHASES SHOWN FROM MAYANK IMPEX (HUF) AND NAZAR IMPEX PVT. LTD., WHICH IS MANAGED BY SANJAY CHAUDHARY OF RAJINDER JAIN GROUP SHOULD NOT BE TREATED AS NON- GENUINE. THE ASSESSEE FILED ITS REPLY. THE CONTENT OF REPLY IS RECORDED IN PARA NO.11 OF THE ASSESSMENT ORDER. IN THE REPLY, ASSESSEE STATED THAT HE IS ENGAGED IN THE BUSINESS OF TRADING OF POLISHED DIAMOND, THE ASSESSEE HAS PURCHASED POLISHED DIAMOND OF RS.81,28,825/- FROM MAYANK IMPEX AND OF RS.2,98,91,016/- FROM NAZAR IMPEX. DURING THE YEAR THE ASSESSEE WAS MADE EXPORT OF RS.5.52 CRORE OUT OF TOTAL SALE OF RS.6.53 CRORE WHICH CONSTITUTE 84.5% OF TOTAL TURNOVER. THE ASSESSEE ALSO STATED THAT THE PURCHASE MADE FROM MAYANK IMPEX AND NAZAR IMPEX ARE SHOWN IN THE STOCK REGISTER. THE ASSESSEE ALSO FILED CONFIRMATION OF SELLER. THE DIAMOND PURCHASED FROM PURCHASERS WAS EXPORTED, WHICH WAS VERIFIED BY CUSTOM AUTHORITIES. THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE 4 ITA NO.380/SRT/2019 ASSESSMENT YEAR.2008-09 M/S. DELUX DIAMOND CHEQUE. THE GROSS PROFIT (GP) AND NET PROFIT (NP) DECLARED BY THE ASSESSEE FOR THE CURRENT FINANCIAL YEAR IS AT REASONABLE AND IN LINE OF INDUSTRIES BUSSINESS. THERE IS NO EVIDENCE REGARDING THAT THE MONEY PAID BY THE ASSESSEE THROUGH CHEQUES IS RECEIVED BACK. ASSESSEE ALSO RELIED ON VARIOUS CASE LAWS. 4. THE REPLY FURNISHED BY ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICER HELD THAT DURING THE COURSE OF SEARCH AND POST- SEARCH INQUIRY AND RAJENDRA JAIN AND SANJAY CHAUDHARY ADMITTED THE FACT THAT THEY WERE ENGAGED IN PAPER TRANSACTIONS ONLY WITHOUT ANY PHYSICAL STOCK OF THE GOODS. THIS CONCERN ISSUED BILLS/GIVE ACCOMMODATION ENTRIES FOR A COMMISSION TO VARIOUS PARTIES, WHO NORMALLY PURCHASE AGAINST SALES IN THE ACCOUNT. ON THE BASIS OF MODUS OPERANDI OF PRACTICE OF RAJENDRA JAIN AND ITS GROUP, THE ASSESSING OFFICER TREATED THE ENTIRE PURCHASE FROM MAYANK IMPEX AND NAZAR IMPEX AS BOGUS AND DISALLOWED THE SAME IN THE ASSESSMENT ORDER DATED 22.03.2016 PASSED UNDER SECTION 143(3) READ WITH SECTION 147. 5. ON APPEAL BEFORE LD. CIT(A), THE ASSESSEE FILED DETAIL WRITTEN SUBMISSIONS. THE SUBMISSION OF THE ASSESSEE IS RECORDED IN PARA NO.5 OF ORDER OF LD. CIT(A). IN THE SUBMISSION, THE ASSESSEE CONTENDED THAT THE ASSESSEE MAINTAINED COMPLETE BOOKS OF ACCOUNTS WITH PURCHASE AND SALES, BANK BOOK, LEDGER, PURCHASE REGISTER, SALE REGISTER, STOCK REGISTER, VALUATION OF STOCK AND ALL THE EVIDENCES WERE FURNISHED TO THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT CONSIDERED THE AUDITED BOOKS OF ACCOUNT. THE ASSESSEE HAS MAINTAINED COMPLETE QUANTITY STOCK REGISTER 5 ITA NO.380/SRT/2019 ASSESSMENT YEAR.2008-09 M/S. DELUX DIAMOND BOOKS OF ACCOUNTS AND BOOKS OF ACCOUNT NEEDS TO BE ACCEPTED AND THAT NO EVIDENCE WAS BROUGHT BY ASSESSING OFFICER ON RECORD THAT PAYMENTS MADE BY ASSESSEE THROUGH ACCOUNT PAYEE CHEQUE CAME BACK TO ASSESSEE. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE AND THAT ASSESSING OFFICER ASSESSEE HAS NOT DISPUTED THE PURCHASE AND AS SUCH DISALLOWED ON ACCOUNT OF ISSUE OF ACCOMMODATION ENTRY FROM SANJAY CHAUDHARY. THE LD. CIT(A) REFERRED THE DECISION OF GUJARAT HIGH COURT IN MAYANK DIAMOND IN ITA NO. 200/AHD/2003, WHEREIN THE ADDITIONS WERE UPHELD TO THE EXTENT OF 5% OF GP. THE LD CIT(A) ALSO REFERRED THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE WAS FOR AY.2007-08 IN ITA NO.1396/AHD/2017 DATED 11.04.2018, WHEREIN THE SIMILAR ADDITION ON ACCOUNT OF SIMILAR BOGUS PURCHASES WAS SUSTAINED TO THE EXTENT OF 5% OF THE DISPUTED/ IMPUGNED PURCHASE. THE LD. CIT(A) BY FOLLOWING THE ORDER OF TRIBUNAL ASSESSEES OWN CASE RESTRICTED THE ADDITION TO THE 5% OF THE DISPUTED/ IMPUGNED PURCHASES SHOWN FROM MAYANK IMPEX AND NAZAR IMPEX. AGGRIEVED BY THE ORDER OF LD. CIT(A) IN RESTRICTING THE ADDITION TO THE EXTENT OF 5% OF PURPOSE, THE REVENUE HAS FILED PRESENT APPEAL BEFORE TRIBUNAL. 6. WE HAVE HEARD THE SUBMISSION OF LD. COMMISSIONER OF INCOME-TAX DEPARTMENTAL REPRESENTATIVE (LD. CIT-DR) FOR REVENUE AND THE LD. AUTHORISED REPRESENTATIVE (LD.AR) OF THE ASSESSEE. THE LD. CIT- DR FOR THE REVENUE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. THE LD. CIT- DR SUBMITS THAT INVESTIGATION WING OF REVENUE MADE FULL FLEDGE INQUIRY IN CASE OF RAJENDRA JAIN AND SANJAY CHAUDHARY GROUP. THE RAJENDRA JAIN 6 ITA NO.380/SRT/2019 ASSESSMENT YEAR.2008-09 M/S. DELUX DIAMOND AND SANJAY CHAUDHARY DURING THE SEARCH OPERATION AS WELL AS IN POST- SEARCH OPERATION ADMITTED THAT THEY WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES THAT ACTUAL BOOK OF ACCOUNTS. NO STOCK DIAMONDS WERE FOUND DURING THE SEARCH ON RAJENDRA JAIN AND SANJAY CHAUDHARY. THE LD. CIT-DR FURTHER SUBMITS THAT RAJENDRA JAIN AND SANJAY CHAUDHARY WHILE FILING RETURN OF INCOME HAS OFFERED THAT THEIR INCOME AS COMMISSION AGENT (ENTRY PROVIDER). FURTHER, THE APPEAL OF THOSE ENTRIES PROVIDER RAJENDRA JAIN AND SANJAY CHAUDHARY ARE PENDING BEFORE THE TRIBUNAL AND THE HON'BLE BENCH MAY TAKE JUDICIAL NOTICE OF ALL THOSE FACTS WHILE DECIDING THE PRESENT APPEAL. DISALLOWANCES RESTRICTED BY LD. CIT(A) @5% IS ON A VERY LOWER SIDE. 7. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMITS THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES CASE FOR AY.2007-08 IN ITA NO.1369/AHD/2017 DATED 11.04.2018. 8. DURING THE HEARING OF SUBMISSION, THE LD. AR FOR THE ASSESSEE WAS ASKED TO FURNISH THE DETAIL OF GROSS PROFIT (GP) AND NET PROFIT (NP) FOR EARLIER ASSESSMENT YEAR SHOWN AS WELL AS FOR THE SUBJECT ASSESSMENT YEAR 2008-09 SHOWN BY ASSESSEE. THE LD. AR SUBMITS THAT ASSESSEE DECLARED GP @ 9.18% AND NP @2.24% IN AY.2007-08, HOWEVER, THE GP IN THE ASSESSMENT YEAR UNDER CONSIDERATION (AY 2008-09) IS 5.18% AND NP IS 1.51%. 7 ITA NO.380/SRT/2019 ASSESSMENT YEAR.2008-09 M/S. DELUX DIAMOND 9. IN THE REJOINDER SUBMISSION, THE LD. CIT-DR SUBMITS THAT ASSESSEE HAS SHOWN LESS GP & NP COMPARATIVE TO EARLIER YEARS AND THAT THE PRINCIPLE OF RES-JUDICATA IS NOT APPLICABLE IN THE INCOME TAX PROCEEDINGS. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. WE FIND THAT ASSESSING OFFICER WHILE MAKING ADDITION ON ACCOUNT OF DISALLOWANCE OF 100% OF PURCHASES SHOWN FROM MAYANK IMPEX AND NAZAR IMPEX; SOLELY RELIED UPON THE REPORT OF INVESTIGATION WING WITHOUT GIVING ANY FINDING ON THE DOCUMENTARY EVIDENCE FURNISHED BY ASSESSEE OR MAKING ANY INDEPENDENT INVESTIGATION. THE ASSESSING OFFICER HAS NOT DISPUTED THE SALES OF THE ASSESSEE. NO SALE IS POSSIBLE WITHOUT PURCHASES. THE STATEMENT OF ACCOUNTS OF THE ASSESSEE WAS NOT REJECTED BY THE ASSESSING OFFICER. THE LD. CIT(A) CONFIRMED THE ADDITION @5% OF THE BOGUS PURCHASES BY FOLLOWING THE ORDER OF FOR AY.2007-08. WE ARE OF THE CONSIDERED VIEW, EVEN IF THE PARTIES ARE FAILED TO PROVE THE GENUINENESS OF ENTIRE TRANSACTION OF SUCH TAINTED PURCHASES, THE REVENUE AUTHORITIES ARE NOT ENTITLED TO BRING THE ENTIRE TRANSACTION TO TAX, RATHER TO TAX THE INCOME COMPONENT IN SUCH TAINTED TRANSACTIONS TO AVOID THE POSSIBILITY OF REVENUE LEAKAGE. 11. AFTER CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEAR AND THE GP AND NP RATIO DECLARED BY ASSESSEE FOR THE YEAR UNDER CONSIDERATION. WE FIND THAT ASSESSEE HAS DECLARED GP @5.18%, NP @1.51% AND IN PROCEEDING ASSESSMENT YEAR, THE ASSESSEE HAS SHOWN GP @ 9.18%, NP @ 2.24%. IT IS A SETTLED LAW THAT PRINCIPLES OF RES JUDICATA IS NOT APPLICABLE IN THE INCOME TAX PROCEEDING, SIMILARLY IT IS ALSO SETTLED 8 ITA NO.380/SRT/2019 ASSESSMENT YEAR.2008-09 M/S. DELUX DIAMOND LEGAL VIEW THAT CONSISTENCY MUST BE FOLLOWED IF THERE IS NO VARIATION IN THE FACTS QUA EARLIER OR SUBSEQUENT YEARS. WE FIND THAT THERE IS VARIATION IN FACT FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS SHOWN LESS NP AND GP DURING THE YEAR UNDER CONSIDERATION, THEREFORE, IN ORDER TO AVOID THE POSSIBILITY OF REVENUES CASE, DISALLOWANCE OF 6%, INSTEAD OF 5% WOULD MEET THE END OF JUSTICE. SIMILAR VIEW WAS ADOPTED BY THIS COMBINATION, WHEREIN THE BENEFICIARY OF SUCH PURCHASES HAS SHOWN VERY MEAGRE NP. THEREFORE, WE MODIFY THE ORDER OF LD. CIT(A) AND RESTRICT THE ADDITION OF IMPUGNED/BOGUS PURCHASES TO THE EXTENT OF 6%. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. IN THE RESULT, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE PARTLY ALLOWED. 12. IN THE RESULT, APPEAL OF REVENUE IS PARTLY ALLOWED. ORDER ANNOUNCED IN COURT ON 11/10/2021AT THE TIME OF HEARING THE APPEAL. SD/- SD/- (DR. A. L. SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER SURAT, DATED: 11/10/2021 SAMANTA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. PR.CIT 5. DR BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT