REMY DIAMONDS PRIVATE LIMITED, MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX - 5, MUMBAI

ITA 3898/MUM/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5256 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 01-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYEN
• Keywords: Bogus purchase
• Section: 40A(3); 250; 147; 263; 132

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL D BENCH , MUMBAI BEFORE HONBLE SHRI R. C. SHARMA , AM & HONBLE SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO . 3898, 3899 & 3900 / MUM /201 8 ( / ASSESSMENT YEAR: 2008 - 09 , 2009 - 10 & 2010 - 11 ) REMY DIAMONDS PVT. LTD. GW - 1060, G - BLOCK, BHARAT DIAMOND BOURSE, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI - 400 051 / VS. PR.CIT RANGE - 5 , AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 . ./ ./ PAN/GIR NO. AA DCR2159R / APPELLANT BY : NONE / RESPONDENTBY : SHRI ABI RAMA KARTIKEYEN , DR / DATE OF HEARING : 05/10 /201 8 / DATE OF PRONOUNCEMENT : 10/10/2018 / O R D E R PER SANDEEP GOSAIND (JUDICIAL MEMBER) : THE SE THREE A PPE AL S FILED BY THE ASSESSEE ARE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 5 , MUMBAI, DATED 23.03.18 FOR AY : 2008 - 09 , 2009 - 10 & 2010 - 11 RESPECTIVELY . 2 ITA NO. 3898 - 3900/MUM/2018 REMY DIAMONDS PVT. LTD 2 . AT THE VERY OUTSET, IT IS NOTICED THAT NONE HAS APPEARED ON BEHALF OF ASSESSEE IN SPITE OF SEVERAL CALLS . ON PERUSAL OF ORDERSHEET, WE NOTED THAT NOTICE OF HEARING WAS SEND TO THE ASSESSEE ON 20.06.18 FOR APPEARANCE ON 30.07.18. ON 30.07.18, THE MATTER WAS HEARD AND THEREAFTER, IT WAS AGAIN FIXED FOR CLARIFICATION ON 07.09.18 FOR TH AT NOTICE WAS AGAIN ISSUED AND THE MATTER WAS AGAIN ADJOURNED TO 05.10.18. E VEN ON 05.10.18, NONE APPEARED ON BEHALF OF ASSESSEE AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED. ON THE OTHER HAND L D. DR WAS PRESENT IN THE COURT AND WAS READY WITH ARGUMEN TS. THEREFORE WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PA RTE WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD. 3. SINCE ALL THE ISSUES INVOLVED IN THESE THREE APPEALS ARE COMMON, THEREFORE, THEY HAVE BEEN CLUBBED , HEAR D TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 3 ITA NO. 3898 - 3900/MUM/2018 REMY DIAMONDS PVT. LTD ITA NO. 3898/MUM/2018 (AY 20 08 - 09 ) 4 . FIRST OF ALL WE TAKE UP ASSESSEE S APPEAL IN ITA NO. 3898 / MUM/2018 FOR ASSESSMENT YEAR 2008 - 09 AS LEAD CASE . THE GROUND S OF APPEAL ARE MENTIONED HEREIN BELOW: - (1) THE PRINCIPAL COMMISSIONER OF INCOME - TAX WAS NOT JUSTIFIED IN ASSUMING JURISDICTION ULS.263 WITHOUT SATISFYING CONDITIONS. (2) THE APPELLANT SUBMITS THAT THE PRINCIPAL COMMISSIONER OF INCOME - TAX OUGHT NOT TO HAVE INVOKED PROVISIONS OF SECTION 263 ON THE VERY SAME POINT ON WHICH THE ASSESSING OFFICER HAD MADE INQUIRY AND TAKEN POSITION. (3) THE APPELLANT FURTHER SUBMITS THAT THE PRINCIPAL COMMISSIONER OF INCOME - TAX DID NOT APPRECIATE THE SETTLED POSITION OF LAW WHE RE PROCEEDINGS ULS.263 DO NOT STAND TO SUSTAIN IF PRINCIPAL COMMISSIONER OF INCOME - TAX OPTS TO TAKE DIFFERENT VIEW IN THE SAME MATTER. (4) THE PRINCIPAL COMMISSIONER OF INCOME - TAX FURTHER ERRED IN ASSUMING JURISDICTION PARTICULARLY IN THE MATTER FOR WHICH 263 PROCEEDINGS WERE INITIATED WAS PENDING BEFORE THE CIT(A) AND THAT ON THE SAME ISSUE, 4 ITA NO. 3898 - 3900/MUM/2018 REMY DIAMONDS PVT. LTD JURISDICTION OF THE CIT(A) AND THE PRINCIPAL COMMISSIONER OF INCOME - TAX CANNOT CO - EXIST. (5) ON MERITS, THE APPELLANT SUBMITS THAT THE LEARNED PR. CIT WAS NOT JUSTIFIE D ON THE FACTS TO HOLD THAT THE APPELLANT INDULGED INTO BOGUS PURCHASES AND PAID CASH FOR THE PURCHASES, PARTICULARLY AND DEMONSTRABLY THE APPELLANT COULD SHOW THAT IT HAD PAID RS.2,79,33,584 ONLY THROUGH ACCOUNT PAYEE CHEQUE. (6) THE LEARNED PR. CIT WAS D RIVEN BY EXTRANEOUS CONSIDERATION IN NOT DROPPING THE PROCEEDINGS U/S.263. (7) THE APPELLANT CRAVES LEAVE TO ADD ALTER OR VARY ANY OF THE GROUNDS OF APPEAL. 5 . ALL THE GROUND S RAISED BY THE ASSESSEE ARE INTER - CONNECTED AND INTER - RELATED AND RELATES TO CHALLENGING THE O RDER OF LD. CIT IN ASSUMING JURISDICTION U/S 263 OF THE I.T. ACT AND HOLDING THAT ASSESSEE WAS INDULGED INTO BOGUS PURCHASES , THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 6. WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. 5 ITA NO. 3898 - 3900/MUM/2018 REMY DIAMONDS PVT. LTD FROM THE RECORDS, WE FIND T HAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN DIAMONDS AND FILED ITS RETUR N OF RS.57,97,965/ - AND BOOK PROFIT AS PER THE PROVISIONS OF SECTION 115JB(2) . THEREAFTER, SEARCH & SEIZURE OPERATION U/S 132 IN THE CASE OF BHANWARLAL JAIN GROUP WAS CONDUCTED ON 03 - 10 - 2013 YIELDED MATERIAL INDICATING THAT THE ASSESSEE HAD DURING THE RELE VANT YEAR OBTAINED BOGUS PURCHASE BILLS FROM DIFFERENT CONCERNS MANAGED AND CONTROLLED BY THE SAID BHANWARLAL JAIN GROUP AND T HE CASE WAS THEREFORE REOPENED U/S 147 AND THE ASSESSMENT U/S 147 WAS MADE ON 21 - 03 - 2016 BY CONCLUDING THAT THE PURCHASES MADE F ROM THE CONCERNS OF BHANWARLAL JAIN GROUP WERE BOGUS. WE ALSO FIND THAT S INCE THE AO HAD NOT DISALLOW ED THE ENTIRE BOGUS PURCHASES BUT RESTRICTED THE ADDITIONS BY TAKING INTO CONSIDERATION THE PROFIT EMBEDDED IN SUCH BOGUS PURCHASES BY APPLYING PROFIT RAT E OF 12.5% . ON THIS FACTUAL BACKGROUND , PROCEEDINGS U/S 263 OF THE I.T. ACT WERE INITIATED BY LD. CIT AND AFTER PROVIDING OPPORTUNITY OF HEARING, ORDER U/S 263 OF THE I.T. ACT WAS PASSED ON 23.03.18 THEREBY HOLDING THAT SINCE AO WAS OF THE OPINION THAT THE PURCHASES MADE BY THE ASSESSEE WERE FROM 6 ITA NO. 3898 - 3900/MUM/2018 REMY DIAMONDS PVT. LTD GREY MARKET , HENCE HE SHOULD HAVE MADE INQUIRY TO FIND OUT THE SOURCE OF SUCH PURCHASES. LD. CIT ALSO HELD THAT AO ALSO MISSED OUT ON THE APPLICABILITY OF SECTION 40A(3) AS CASH PURCHASES MADE IN THE GREY MARKET SHALL ATTRACT THE PROVISIONS OF THAT SECTION AND MORE PARTICULARLY WHEN THE AO ALLOWED THE BENEFIT OF GREY MARKET PURCHASES TO THE ASSESSEE, HE SHOULD HAVE SIMULTANEOUSLY EXAMINED THE APPLICABILITY OF SECTION 40A(3) OF THE I.T. ACT. AFTER METICULOUSLY GOI NG THROUGH THE ORDER PASSED BY LD. CIT, WE FIND THAT LD. CIT WAS OF THE VIE W THAT THERE ARE SERIES OF JUDICIAL DECISIONS IN FAVOUR OF REVENUE WHEREIN THE DISALLOWANCE OF THE ENTIRE PURCHASES MADE FROM NON - EXISTENT CONCERNS WERE UPHELD AND THEREFORE WHILE RELYING UPON DIFFERENT JUDICIAL DECISIONS AND DECISION IN THE CASE OF N. K. PROTEINS LTD. VRS. DCIT(2017) 250 TAXMAN 0022 , WHEREIN THE HONBLE APEX COURT HAD HELD THAT ADDITION ON THE BASIS OF UNDISCLOSED INCOME COULD NOT BE RESTRICTED TO CERTAIN PERCENTA GE WHEN THE ENTIRE TRANSACTION WAS FOUND AS BOGUS . THEREFORE, KEEPING IN VIEW THE LATEST DECISION, LD. CIT WAS OF THE VIEW THAT THE IMPUGNED ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN THE MEANING OF SECTION 263 OF T HE I.T. ACT. 7 ITA NO. 3898 - 3900/MUM/2018 REMY DIAMONDS PVT. LTD SINCE LD. CIT HAD CONCLUDED THAT AO HAD NOT MADE INQUIRIES WHICH SHOULD HAVE BEEN MADE IN ACCORDANCE WITH THE PROVISIONS OF CLAUSE A OF EXPLANATION 2 TO SECTION 263(1) OF THE I.T. ACT, THEREFORE THE IMPUGNED ORDER WAS ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF REVENUE . THEREFORE KEEPING IN VIEW OUR ABOVE DISCUSSION AS WELL AS CONSIDERING THE FACTS OF THE PRESENT CASE AND JUDICIAL PRONOUNCEMENTS, WE FIND THE LD. CIT HAD PASSED JUDICIOUS ORDER U/S 263 OF THE I.T. ACT. MOREOVER , N O NEW FACTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT. THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT. HENCE , WE ARE OF THE CONSI DERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THIS GROUND RAISED BY THE ASSESSEE STANDS DISMISSED . 7 . SINCE THE ISSUE RAISED IN OTHER TWO APPEALS FILED BY T HE ASSESSEE IN ITA NO. 3898 & 3900 / MUM/ 2018 FOR AY 2009 - 10 & 2010 - 11 ARE SIMILAR, THEREFORE FOLLOWING THE DECISION IN ITA NO. 8 ITA NO. 3898 - 3900/MUM/2018 REMY DIAMONDS PVT. LTD 3898/MUM/2018 FOR AY 2008 - 09 AS MENTIONED A BOVE, WE DISMISSED THES E APPEALS FILED BY THE ASSESSEE. 8 . IN THE NET RESULT, ALL THE APPEAL S FILED BY THE ASSESSEE STANDS DISMISSED WITH NO ORDERS AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH O CTOBER , 2018. SD/ - SD/ - (R .C. SHARMA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 10 . 10 .201 8 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI