M/S ASHNIHI, MUMBAI V. ITO WARD 19 (1)(2), MUMBAI

ITA 40/MUM/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0127 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 02-01-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR
• Keywords: Search and seizure; Corroborative evidences; Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , A BENCH MUMBAI BEFORE : SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA NO. 40 /MUM/ 20 20 ( ASSESSMENT YEAR : 2007 - 08 ) M/S. ASHINIHI 702, SATYAPRASAD CHSL PLOT NO.192 , DIXIT CROSS ROAD VILE PARLE EAST MUMBAI - 400 057 VS. ITO WARD 19(1)(2) 219, 2 ND MATRU MANDIR MUMBAI 400 007 PAN/GIR NO. AAGFA0866N (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY MS. DINKLE HARIYA REVENUE BY SHRI BRAJENDRA KUMAR DATE OF HEARING 20 / 07 /202 1 DATE OF PRONOUNCEMENT 23 / 07 /202 1 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 40/MUM/2020 FOR A.Y. 2007 - 08 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 30, MUMBAI IN APPEAL NO. CI T(A) - 30/19(1)(2)/13153/2015 - 16 DATED 26/09/2016 (LD. CIT(A) IN S HORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 30/03/2015 BY THE LD. ITO, 19(1)(2), MUMBAI (HEREINAFTER R EFERRED TO AS LD. AO). ITA NO . 40/MUM/2020 M/S. ASHINI 2 2. AT THE OUTSET, THERE IS A DELAY IN FILING OF APPEAL BY THE ASSESSEE BY 33 DAYS. CONSIDERING THE REASONS STATED IN THE AFFIDAVIT FOR THE CONDONATION OF DELAY, WE ARE INCLINED TO CONDONE THE DELAY OF 33 DAYS AND ADMIT THE APPEAL FO R ADJUDICATION. 3. THE GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE WERE STATED TO BE NOT PRESSED BY THE LD. AR AT THE TIME OF HEARING. THE SAME IS RECKONED AS A STATEMENT MADE FROM BAR AND ACCORDINGLY, THE GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE ARE DISMISS ED AS NOT PRESSED. 4. THE GROUND NO.3 RAISED BY THE ASSESSEE IS CHALLENGING THE DISALLOWANCE MADE ON ACCOUNT OF NON - GENUINE PURCHASES IN THE SUM OF RS. 90,31,869/ - . 4.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FI ND THAT ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF CUT AND POLISHED DIAMONDS. THE RETURN OF INCOME FOR THE A.Y.2007 - 08 WAS ORIGINALLY FILED BY THE ASSESSEE FIRM ON 26/10/2007 DECLARING TOTAL INCOME OF RS.8,87,580/ - WHICH WAS DULY PROCESSED U/S.143(1) OF THE ACT AND SCRUTINY ASSESSMENT WAS COMPLETED U/S.143( 3 ) OF THE ACT ON 11/12/2009 DETERMINING TOTAL INCOME AT RS.9,03,840/ - . THIS ASSESSMENT WAS SOUGHT TO BE REOPENED BY ISSUANCE OF NOTICE U/S.148 OF THE ACT A FTER R ECORDING THE REASONS FOR REOPENING WITH THE PRIOR APPROVAL OF LD. COMMISSIONER OF INCOME TAX, RANGE - 16, MUMBAI. IN THE RE - ASSESSMENT PROCEEDINGS, THE LD. AO OBSERVED THAT PURSUANT TO THE SEARCH AND SEIZURE ACTION CONDUCTED IN THE CASE OF BANWARLAL JAIN AND HIS GROUP ON 03/10/2013 , I T WAS ESTABLISHED THAT GROUP CONCERNS OF THE GROUP ARE ALL PAPER COMPANIES / ITA NO . 40/MUM/2020 M/S. ASHINI 3 FIRMS / PROPRIETORSHIP CONCERNS WITH NO REAL BUSINESS ACTIVITIES AND WHICH ARE OPERATING SOLELY WITH THE PURPOSE OF FACILIT ATION OF FRAUDULENT FINANCIAL TRANSACTIONS WHICH INCLUDES , AMONG OTHERS, PROVIDING OF ACCOMMODATION ENTRIES IN THE FORM OF UNSECURED LOANS TO INTERESTED PARTIES, ISSUING OF BOGUS SALE BILLS TO VARIOUS PARTIES AND PROVIDING THE BOGUS FRONT OF CONCERNS WHICH DO NOT WANT TO IMPORT DIAMON DS IN THEIR OWN HANDS / BOOKS OF ACCOUNTS. IT IS NOT IN DISPUTE THAT ASSESSEE MADE PURCHASES FROM THE FOLLOWING PARTIES: - 4.2. THE AFORESAID TWO C ONCERNS WERE STATED TO BE BELONGING TO BANWARLAL JAIN AND OTHERS. ACCORDINGLY, THE LD. AO SOUGHT TO SHOW - CAUSE THE ASSESSEE AS TO WHY THE SAME SHOULD NOT BE CONSTRUED AS ACCOMMODATION ENTRIES AND ACCORDINGLY, THE PURCHASES OF RS.90,31,869/ - SHOULD NOT BE D ISALLOWED. IN RESPONSE TO THE SAID SHOW - CAUSE NOTICE, ASSESSEE FILED THE REQUISITE DETAILS BY PROVIDING THE BANK STATEMENTS EVIDENCING THE PAYMENTS MADE TO THOSE SUPPLIE R S BY ACCOUNT PAYEE CHEQUE TOGETHER WITH THE DETAILS OF CORRESPONDING SALES MADE OUT OF THE DISPUTED PURCHASES. THE LD. AO DID NOT DISPUTE THE DETAILS OF CORRESPONDING SALES PROVIDED BY THE ASSESSEE. NO INDEPENDENT ENQUIRIES IN ANY MANNER WHATSOEVER W ERE CARRIED OUT BY THE LD. AO ON THE DOCUMENTS WITH SUPPORTING EVIDENCES FURNISHED BY THE AS SESSEE. WE FIND THAT THE LD. AO WITHOUT RESORTING TO SUCH VERIFICATION, PROCEEDED TO DISALLOW THE ENTIRE VALUE OF DISPUTED PURCHASES OF RS.90,31,869/ - IN THE ASSESSMENT MERELY ON THE PREMISE THAT THE PARTIES FROM WHOM THE ASSESSEE HAD MADE PURCHASES ARE BE LONGING TO BANWARLAL JAIN GROUP BY NAME OF THE PARTY AMOUNT(RS.) PRIMER SRAR 39,71,367/ - ANKITA EXPORTS 50,60,502/ - TOTAL 90,31,869/ - ITA NO . 40/MUM/2020 M/S. ASHINI 4 EXPLAINING THE ENTIRE MODUS OPERANDI OPERATED BY BANWARLAL JAIN GROUP. THIS ACTION OF THE LD. AO WAS UPHELD BY THE LD. CIT(A). 4.3. WE FIND THAT ASSESSEE HAD PROVIDED THE DETAILS OF CORRESPONDING SALES MADE OUT OF THE DISPUTED PURCHASES, WHICH HAS NOT BEEN DOUBTED BY THE REVENUE IN THE INSTANT CASE. HENCE, IT WOULD BE JUST AND FAIR TO BRING TO TAX ONLY THE PROFIT ELEMENT EMBEDDED IN THE VALUE OF SUCH DISPUTED PURCHASES. IT COULD BE SAFELY CONCLUDED THAT ASSESSEE COULD H AVE MADE PURCHASES FROM THE GREY MARKET IN ORDER TO HAVE SOME SAVINGS IN THE INDIRECT TAXES AND INCIDENTAL PROFIT ELEMENT THEREON FOR MAKING PURCHASES IN CASH. WE FIND THAT BASED ON THE REPORT OF THE TASK GROUP FOR DIAMOND SECTOR PUBLISHED BY THE GOVERNMEN T OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, IN THIS REGARD, WHEREIN THE BENIGN / PRESUMPTIVE TAX ATION THRESHOLD WAS SET AT 2.5%, WE HOLD THAT PROFIT PERCENTAGE EMBEDDED IN THE VALUE OF DISPUTED PURCHASES ESTIMATED AT 3% THEREON, WOULD MEET THE ENDS OF J USTICE. HENCE, IN THESE PECULIAR FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, WE DEEM IT FIT TO FIX THE PROFIT PERCENTAGE AT 3% AS AGREED BY THE LD. AR AT THE TIME OF HEARING. WE FIND THAT LD. DR PLACED RELIANCE ON THE CO - ORDINATE BENCH DECISION OF DELHI T RIBUNAL IN THE CASE OF DCIT VS SMT PHOOLWATI DEVI REPORTED IN 122 TTJ 502 (DELHI). WE FIND THAT THIS WAS THE CASE OF AN ADDITION MADE U/S 68 OF THE ACT WHEREIN THE ADDITION WAS SUSTAINED IN THE LIGHT OF SURROUNDING CIRCUMSTANCES AND APPLYING TEST OF HUMA N PROBABILITIES, WHICH WAS RENDERED IN THE PECULIAR FACTS OF THAT CASE. IN OUR CONSIDERED OPINION, THE SAME CANNOT BE APPLIED UNIVERSALLY. EACH DECISION NEED TO BE LOOKED INTO IN THE LIGHT OF FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE. 4.4. PER CON TRA, THE LD. AR PLACED RELIANCE ON THE CO - ORDINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF ROSY BLUE INDIA PVT LTD VS DCIT IN ITA NO. ITA NO . 40/MUM/2020 M/S. ASHINI 5 1724/MUM/2019 FOR A.Y. 2014 - 15 DATED 16.2.2021 WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE PROFIT PERCENTAGE WAS FI XED AT 3%. THE LD AR ALSO PLACED RELIANCE ON THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF M/S SEJAL GEMS PVT LTD VS DCIT IN ITA NO. 3872/MUM/2017 DATED 22.3.2019 WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES, THIS TRIBUNAL HAD RESTRICTED THE PROFIT ELEME NT AT 2% OF VALUE OF PURCHASES. BUT SINCE ASSESSEE IN THE INSTANT CASE HAD ALREADY ACCEPTED FOR ADOPTION OF 3% AS PROFIT PERCENTAGE, R ESPECTFULLY FOLLOWING THE AFORESAID DECISION S OF MUMBAI TRIBUNAL, WE HOLD THAT PROFIT ELEMENT EMBEDDED IN THE VALUE OF D ISPUTED PURCHASES THAT NEEDS TO BE BROUGHT TO TAX IN THE INSTANT CASE SHOULD BE 3%. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 23 / 07 /202 1 BY W AY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( SAKTIJIT DEY ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 23 / 07 / 2021 KARUNA , SR.PS ITA NO . 40/MUM/2020 M/S. ASHINI 6 COPY OF THE ORDE R FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//