SHANTIVIJAY JEWELS LTD., MUMBAI V. ITO - 11(2)(2), MUMBAI

ITA 4190/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4059 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2017
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH & SHRI M.BALAGANESH, AM ITA NO. 4190 / MUM/20 1 7 ( ASSESSMENT YEAR : 2008 - 09 ) M/S. SHANTIVIJAY JEWELS LTD., G - 37, GEMS & JEWELLERY COMPLEX - III, SEEPZ, ANDHERI (E) MUMBAI 400 096 VS. INCOME TAX OFFICER 11(2)(2) AAYAKAR BHAVAN, M.K.ROAD MUMBAI 400 020 PAN/GIR NO. AAFCS8914F ( APPELLANT ) .. ( RESPONDENT ) ITA NO. 6138 /MUM/201 7 ( ASSESSMENT YEAR : 2008 - 09 ) INCOME TAX OFFICER 11(2)(2) AAYAKAR BHAVAN, M. K.ROAD MUMBAI 400 020 VS. M/S. SHANTIVIJAY JEWELS LTD., G - 37, GEMS & JEWELLERY COMPLEX - III, SEEPZ, ANDHERI (E) MUMBAI 400 096 PAN/GIR NO. AAFCS8914F (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI R. MURLIDHAR REVENUE BY SHRI CHAUDHARY ARUNKUMAR S INGH DATE OF HEARING 06 / 03 /201 9 DATE OF PRONOUNCEMENT 08 / 03 /201 9 / O R D E R PER M. BALAGANESH (A.M) : THESE CROSS APPEALS FILED BY ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX - 18 [HEREINAFTER ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 2 R EFERRED TO AS THE LD CITA] , MUMBAI DATED 09/05/2017 FOR A.Y.2008 - 09 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961. 2. THE ONLY ISSUE TO BE DECIDED IN THE ASSESSEES APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE TOWARDS BOGUS PURCHASES OF RS.31,09,487/ - BASED ON AD HOC DISALLOWANCE OF 3% OF THE TOTAL VALUE OF THE PURCHASES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE REVENUE IS AGGRIEVED AGAINST THE ORDER OF THE LD. CIT(A) FOR RESTRICTING THE DISALLOWANCE TO 3% OF THE TOTAL VALUE OF THE PURCHASES. HEN CE, BOTH THE APPEALS ARE TAKEN TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF TRADING IN DIAMONDS AND IN THE MAN UFACTURE AND SALE OF DIAMOND STUDDED JEWELLERY. IT HAS A UNIT LOCATED IN SPECIAL ECONOMIC ZONE AND A SELLING STORE AT H OTEL OBEROI. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y.2008 - 09 ON 25/09/2008 DECLARING TOTAL INCOME OF RS.1,77,93,630/ - AND ASS ESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 01/02/2010 DETERMINING TOTAL INCOME OF RS.1,78,01,131/ - . LATER THE ASSESSMENT WAS SOUGHT TO BE REOPENED BY ISSUANCE OF NOTICE U/S.148 OF THE ACT DATED 25/02/2015 ON THE BASIS OF INFORMATION RECEIVED FROM OFFIC E OF DGIT INVESTIGATION, MUMBAI IN RESPECT OF CERTAIN ACCOMMODATION ENTRIES OBTAINED BY THE ASSESSEE FOR PURCHASE ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 3 OF DIAMONDS FROM RAJENDRA JAIN GROUP AND BOGUS COMPANIES CONTROLLED BY THIS GROUP. 3.1. THE ASSESSEE FILED A REPLY IN RESPONSE TO NOTICE U/S. 148 OF THE ACT STATING THAT THE RETURN ALREADY FILED MAY BE TREATED AS RETURN IN RESPONSE TO 148 NOTICE AND SOUGHT FOR REASONS RECORDED FOR REOPENING THE ASSESSMENT. THE REASONS WERE DULY FURNISHED TO THE ASSESSEE AND ASSESSEE FILED OBJECTIONS FOR THE SAID REASONS VIDE LETTER DATED 02/11/2015 AND ASSESSING OFFICER DULY CONSIDERED THE SAME IN ACCORDANCE WITH LAW. THE MAIN ISSUE INVOLVED IN THIS CASE IS THAT ASSESSEE HAD OBTAINED CERTAIN BOGUS PURCHASES FROM THE FOLLOWING PARTIES ACCORDING TO THE LD. AO. BOG US FIRM PAN BOGUS FIRM OF NAME AY BENEFICIARY PAN AMOUNT ABIPJ5587A AVI EXPORTS 2008 - 09 AAFCS8914F 88,87,359/ - ABAFS0852K SUNDIAM 2008 - 09 AAFCS8914F 3,43,93,905/ - ABAFS0852K MANIPRABHA IMPEK 2008 - 09 AAFCS8914F 5,74,04,993 AOVPK0047C VITRAG 2008 - 09 AAFC S8914F 29,63,800/ - TOTAL 10,36,49,557/ - 3.2. ALL THE DETAILS OF PURCHASES MADE FROM THE AFORESAID PARTIES TOGETHER WITH THE RELEVANT DOCUMENTS WERE FURNISHED BY THE ASSESSEE. BUT THE SAME WERE NOT APPRECIATED BY THE LD. AO ON THE GROUND THAT THE ASSE SSEE HAD INDEED MADE BOGUS PURCHASES FROM THE AFORESAID PARTIES. ACCORDINGLY, THE LD. AO PROCEEDED TO MAKE AN ADDITION TOWARDS BOGUS PURCHASES @12.5% OF PURCHASES OF RS.10,36,49,557/ - AND ARRIVED AT THE ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 4 ADDITION FIGURE OF RS.1,29,56,195/ - AND COMPLETED REA SSESSMENT ACCORDINGLY. THE LD. CIT(A) RESTRICTED THE SAID ADDITION TO 3% OF TOTAL VALUE OF PURCHASES. 4. AGGRIEVED, BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE OUTSET, THE LD. AR PLACED ON RECORD COPY OF THE ORDER OF THIS TRIBUNAL PASSED IN ASSESSEES OWN CASE FOR THE A.Y.2009 - 10, 2010 - 11, 2012 - 13 & 2013 - 14 IN ITA NOS. 4393,4568,4620,4671/MUM/2017 DATED 24.9.2018 WHEREIN , THE ASPECT OF PURCHASES MADE FROM SUPPLIERS BELONGING TO RAJENDRA J AIN GROUP HAVE BEEN THE SUBJECT MATTER OF ADJUDICATION. THE OPERATIVE PORTION OF THE SAID ORDER IS REPRODUCED HEREINBELOW: - 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICED THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN A.Y. 2011 - 12, WHICH YEAR IS THE BASIS FOR REOPENING OF THE ASSESSMENT YEARS UNDER CONSIDERATION. WE NOTICED THAT THE COORDINATE BENCH HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER WITH FOLLOWING OBSERVATIONS: - 6.WE HAVE H EARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STUDDED GOLD JEWELLERY AND PLAIN GOLD JEWELLERY, THAT DURING THE YEAR UNDER CONSIDERATION IT HAD EXPORTED ITS MANUFACTUR ED GOODS, THAT IT DID NOT SELL GOODS LOCALLY, THAT THE AO HAD NOT DOUBTED THE SALES, THAT THE SUPPLIERS HAD APPEARED BEFORE THE AO AND ADMITTED THAT THEY HAD SOLD THE GOODS TO THE ASSESSEE, THAT THEY HAD FILED AFFIDAVITS IN THAT REGARD. WE FIND THAT DJ HAD ADMITTED OF ISSUING BOGUS BILLS. BUT, NOWHERE HE HAD ADMITTED THAT HE HAD ISSUED ACCOMMODATION BILLS TO THE ASSESSEE. IN OUR OPINION, THERE IS SUBTLE BUT VERY IMPORTANT DIFFERENCE IN ISSUING BOGUS BILLS AND ISSUING ACCOMMODATION BILLS TO A PARTICULAR PART Y. THE DIFFERENCE BECOMES VERY IMPORTANT WHEN A SUPPLIER IN HIS AFFIDAVIT ADMITS SUPPLY OF GOODS. IN THIS MATTER, THE ASSESSEE HAD MADE NO LOCAL SALES AND GOODS WERE EXPORTED, AS STATED EARLIER. SO, AS FAR AS SALES ARE ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 5 CONCERNED THERE IS NO DOUBT ABOUT THE GENUINENESS OF SUCH SALES. IT IS ALSO A FACT THAT SUPPLIERS WERE PAYING VAT AND WERE FILING THEIR RETURNS OF INCOME. IN RESPONSE TO THE NOTICES ISSUED BY THE AO, UNDER SECTION 133(6) OF THE ACT, THE SUPPLIER HAD ADMITTED THE GENUINENESS OF THE TRANSACTION . HERE, WE WOULD LIKE TO REFER TO ORDER OF THE TRIBUNAL IN THE CASE OF ROMILA M. NAGPAL (SUPRA),WHEREIN IN THE SIMILAR CIRCUMSTANCES, ADDITION CONFIRMED BY THE FAA WERE DELETED. IN THAT ORDER, THE TRIBUNAL HAD REFERRED TO THE CASE OF M/S. IMPERIAL IMP & EX P.(ITA NO.5427/MUM/2015 A.Y.2009 - 10). IN IMPERIAL IMP & EXP. MATTER, THE ASSESSEE WAS EXPORTING GOODS. THE RELEVANT PORTION OF THE ORDER OF READS AS UNDER: '2.EFFECTIVE GROUND OF APPEAL IS ABOUT ADDITION MADE TO HER INCOME WITH REGARD TO PURCHASES. THE A O RECEIVED AN INFORMATION FROM THE INVESTIGATION WING THAT THE SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA HAD MADE ENQUIRIES ABOUT BOGUS PURCHASES/HAWALA TRANSACTIONS. THE SALES TAX AUTHORITIES HAD FORWARDED THE LIST OF BENEFICIARIES WHO HAD TAKEN BILLS FR OM THE HAWALA DEALERS. THE AO OBSERVED THAT ASSESSEE HAD PURCHASED GOODS WORTH RS.1.35CRORES FROM THREE PARTIES NAMELY SHRI GANESH TRADING (RS.27.73 LAKHS); KISHNA CHEMICAL WORKS (RS.27.85 LAKHS) AND SHREYAS MARKETING AGENCY (RS.80.40 LAKHS). THE AO ISSUED A NOTICE U/S.148 OF THE ACT .IN RESPONSE TO THE NOTICE THE ASSESSEE STATED THAT RETURN FILED ON 24/9/2009 SHOULD BE TREATED AS RETURN FILED IN RESPONSE TO RE - ASSESSMENT NOTICE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE VARIOUS DETAILS FILED BY HER THE AO ISSUED NOTICES U/S. 133 (6) OF THE ACT TO ABOVE MENTIONED THREE PARTIES. AS PER THE AO, NOTICES WERE RETURNED BACK BY POSTAL AUTHORITIES AS SAME COULD NOT BE SERVED. HE HELD THAT IN ABSENCE OF AUTHENTIC CONFIRMATION FROM THE PARTIES THE GENU INENESS OF THE TRANSACTION WAS NOT VERIFIABLE. HE DIRECTED THE ASSESSEE TO PRODUCE THE PARTIES. THE ASSESSEE, VIDE HER LETTER DT.12.11.2014, STATED THAT PARTIES WERE NOT AVAILABLE AS ON DATE. THE AO HELD THAT PURCHASES MADE BY HER WERE NOT VERIFIABLE IN AB SENCE OF PROPER AND LEGITIMATE CONFIRMATIONS, THAT THE ASSESSEE HAD NOT PRODUCED THE SUPPLIERS, THAT THE ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES, THAT THE PROFIT ELEMENT EMBEDDED IN THE PURCHASES HAD TO BE BROUGHT TO TAX. ESTIMAT ING THE GROSS PROFIT @ 12.5% OF THE UNPROVED PURCHASES OF RS.1.35CRORES, HE MADE AN ADDITION OF RS.16.99 LAKHS TO THE INCOME OF THE ASSESSEE. 3 . AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HI M, THE ASSESSEE MADE ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 6 ELABORATE SUBMISSIONS AND RELIED UPON SEVERAL CASE LAWS. BEFORE HIM, IT WAS ARGUED THAT THE ASSESSEE HAD FILED LEDGER COPIES OF THE PARTIES, SALES DETAILS, THAT THE PURCHASES WERE FULLY BACKED BY AUTHENTICATED INVOICES, THAT SHE HAD MA DE PAYMENT THROUGH BANKING CHANNELS, THAT THE STOCK REGISTER AND THE CONSUMPTION CHART SHOWED THE NEXUS BETWEEN THE PURCHASES AND THE SALES MADE BY THE ASSESSEE, THAT DETAILS OF CLOSING STOCK WERE AVAILABLE ON RECORD, THAT THERE WAS NO EVIDENCE TO PROVE TH AT ASSESSEE HAD RECEIVED BACK THE MONEY IN CASH, THAT THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE, THAT THE ASSESSEE WAS MAINTAINING QUANTITATIVE DETAILS OF PURCHASE AND SALES, THAT THE AO HAD NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BO OKS MAINTAINED BY HER. AFTER CONSIDERING AVAILABLE MATERIAL, THE FAA HELD THAT THE AO HAD MADE EFFORTS BEYOND GETTING INFORMATION FROM THE INVESTIGATION WING, THAT HE HAD DIRECTED THE AO TO PRODUCE THE PARTIES, THAT THE SUPPLIER WERE NOT FOUND AT THE GIVEN ADDRESSES, THAT IT WAS A CASE OF PURCHASES MADE FORM BOGUS PARTIES RATHER THAN A CASE OF BOGUS PURCHASES, THAT WITHOUT MAKING PURCHASES IT WAS NOT POSSIBLE FOR ASSESSEE TO COMPLETE THE SALES, THAT THE AO HAD RIGHTLY INVOKED THE PROVISIONS OF SECTION 147 , THAT HE WAS JUSTIFIED IN MAKING THE DISALLOWANCE OF RS.16.99 LAKHS. FINALLY, HE DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4.DURING THE COURSE OF HEARING BEFORE US THE AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT THE ASSESSEE HAD FILED ALL NECESSARY D ETAILS BEFORE THE AO, THAT STOCK REGISTER AND QUANTITATIVE DETAILS WERE MADE AVAILABLE TO THE AO, THAT PAYMENTS WERE MADE THROUGH BANKING CHANNELS. HE REFERRED TO THE CASES OF SHRI MAHESH SHAH (ITA NO.5194/MUM/2014 A.Y.2010 - 11); M/S. IMPERIAL IMP & EXP. (I TA NO.5427/MUM/2015 A.Y.2009 - 10); SHRI RAMILA PRAVIN SHAH (ITA NO.5246/M/2013 A.Y.10 - 11); SHRI DEEPAK POPATLAL GALA (ITA NO.5920/MUM/2013 A.Y.2010 - 11,DATED 27/3/2015); RAMESH KUMAR AND CO.(ITA NO.2959/MUM/2014 A.Y.2010 - 11 DATED 28/11/2014); SHRI RAJEEV G. KALATHIL (ITA NO. 6727/MUM/2012 A.Y.2009 - 10 DATED 20/08/2014);SHRI GANPATRAJ A. SANGHAVI (ITA NO.2826/ MUM/ 2013 A.Y. 2009 - 10 DT.5/11/2 014 AND SHRI HIRALAL CHUNILAL JAIN (ITA NO.4547/MUM/2014 DATED 01/01/2016. THE DR SUPPORTED THE ORDER OF THE FAA. ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 7 5.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT IN THE CASE OF IMPERIAL IMP.& EXP.(SUPRA) IDENTICAL ISSUE HAS BEEN DELIBERATED UPON AND HAS BEEN DECIDED BY THE TRIBUNAL .WE ARE REPRODUCING THE RELEVANT PORTION CONSISTING T HE FACTS OF THE CASE, ORDER OF THE FAA, ARGUMENTS ADVANCED BY AR AND DR BEFORE THE TRIBUNAL AND THE OPERATIVE PART OF THE ORDER OF THE TRIBUNAL WHICH READS AS UNDER : - 2.IN THIS APPEAL, ALTHOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE SUBSTANTIVE GRIEVANCE IS AGAINST THE ACTION OF THE CIT(APPEALS) IN CONFIRMING AN ADDITION OF RS.4,19,356/ - BEING ESTIMATED PROFIT ON UNEXPLAINED PURCHASES. 3 . IN BRIEF, THE RELEVANT FACTS ARE THAT THE APPELLANT IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OF CONSUMER CLOTHING. THE RETURN OF INCOME FOR ASSESSMENT YEAR 2009 - 10 WAS FILED BY THE ASSESSEE DECLARING A TOTAL INCOME OF RS.3,49,320/ - , WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT, WHEREBY THE TOTAL INC OME WAS ASSESSED AT RS.3,66,344/ - . SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 06/03/2014 REOPENING THE ASSESSMENT ON THE GROUND THAT CERTAIN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, IN AS MUCH AS, ASSESSEE HAD TAKEN ACCOMMODATION PURCHASE BILLS FROM FOUR PARTIES, TOTALLING TO RS.77,51,496/ - . IN THE ENSURING ASSESSMENT, THE ASSESSING OFFICER HAS HELD THAT PURCHASES DECLARED BY THE ASSESSEE OF RS.77,51,496/ - FROM FOUR PARTIES, DETAILED IN PARA - 1 OF THE ASSESSMENT ORDER ARE BOGUS PURCHASES. ACCORDING TO THE ASSESSING OFFICER, ASSESSEE DID NOT MAKE ACTUAL PURCHASES FROM SUCH FOUR PARTIES BECAUSE AS PER THE INFORMATION RECEIVED FROM THE INVESTMENT WING, THE FOUR PARTIES IN QUESTION WERE FOUND TO HAVE BEEN VAT DODGERS BY THE MAHRASHTRA VAT DEPARTMENT. THE ASSESSING OFFICER NOTED THAT SINCE SALES HAVE BEEN EFFECTED BY THE ASSESSEE, WHICH SHOWED THAT ASSESSEE WAS ACTUALLY IN POSSESSION OF GOODS, THE MATERIAL WOULD HAVE BEEN PROCURED FROM GREY MARKET WITHOUT BILLS IN ORDE R TO COVER UP THE PURCHASES, AND THUS ASSESSEE WOULD HAVE TAKEN ACCOMMODATION BILLS FOR PURCHASES FROM THE SAID FOUR PARTIES AMOUNTING TO ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 8 RS.77,51,496/ - . ACCORDINGLY, THE ASSESSING OFFICER BROUGHT TO TAX THE PROFIT MARGIN IN RELATION TO SUCH NON - GENUINE PU RCHASES, WHICH HE COMPUTED BY APPLYING THE RATE OF 12.5% ON THE TOTAL AMOUNT OF RS.77,51,496/ - , WHICH CAME TO RS.9,68,937/ - . 3.1 THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(APPEALS) WAS THAT THE PURCHASES IN QUESTION WE RE DULY SUPPORTED BY THE BILLS OF PURCHASE. MOREOVER, THE ASSESSEE POINTED OUT THAT ALL ITS SALES WERE BY WAY OF EXPORTS AND THAT THERE WAS NO EVIDENCE TO SAY THAT THE PURCHASES IN QUESTION WERE BOGUS. THE ASSESSEE ALSO REFERRED TO HIS BANK STATEMENT TO PR OVE PAYMENTS TO SUCH PARTIES. THE DETAILS OF GOODS SOLD BY THE ASSESSEE WAS ALSO FURNISHED, WHICH CORRESPONDED TO THE PURCHASES EFFECTED FROM SUCH FOUR PARTIES. THE CIT(APPEALS) HAS PRIMARILY AFFIRMED THE STAND OF THE ASSESSING OFFICER BASED ON THE INFORMA TION STATED TO HAVE BEEN RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT RELATING TO THE FINDING OF THE MAHARASHTRA VAT DEPARTMENT. ADDITIONALLY, THE CIT(APPEALS) ALSO NOTICED THAT ASSESSEE COULD NOT PROVE THE EXISTENCE OF THE SUPPLIERS AND, THEREFO RE, THE CIRCUMSTANTIAL EVIDENCE ALSO SUGGESTED THAT THE ENTIRE PURCHASES FROM THE FOUR PARTIES WAS UNVERIFIABLE. HOWEVER, HE RESTRICTED THE ADDITION TO 5.41% OF THE AMOUNT OF SUCH UNEXPLAINED PURCHASES, INSTEAD OF 12.5% ADOPTED BY THE ASSESSING OFFICER. TH E CIT(APPEALS) HAS APPLIED THE RATE OF 5.41% BEING THE GROSS PROFIT RATE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY, OUT OF AN ADDITION OF RS.9,68,937/ - MADE BY THE ASSESSING OFFICER, THE CIT(APPEALS) RETAINED AN ADDITION OF RS.4,19,356/ - AND DELETED THE BALANCE. 4.BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS VEHEMENTLY POINTED OUT THAT THE ENTIRE SALES OF THE ASSESSEE ARE BY WAY OF EXPORTS AND, THEREFORE, THERE WAS NO LIABILITY TOWARDS SALES TAX ON THE PURCHASES EFFECTED BY IT . IT WAS ALSO CONTENDED THAT THOUGH THE ASSESSING OFFICER HAS REFERRED TO THE FOUR PARTIES HAVING BEEN LISTED AS 'HAWALA OPERATORS' BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA, BUT THERE IS NO CLEAR EVIDENCE TO SUGGEST THAT THE TRANSACTION WITH THE ASSESSEE ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 9 WERE BOGUS. IT IS POINTED OUT THAT IN THE CASES OF SOME OTHER ASSESSEES, UNDER IDENTICAL CIRCUMSTANCES, THE COORDINATE BENCHES OF THE TRIBUNAL HAVE DELETED THE ADDITIONS. IN THIS CONNECTION, RELIANCES HAVE BEEN PLACED ON THE FOLLOWING DE CISIONS: - ( 1 ) ITO VS. SHRI DEEPAK POPATLAL GALA IN I TANO.5920/MUM/ 2013 (A.Y 2010 - 11) DATED 27/03/2015; 2)RAMESH KUMAR AND CO. V/S. ACIT IN ITA NO.2959/MUM/ 2014 (A.Y. 2010 - 11) DATED 28/11/2014; (3)DCIT V/S. SHRI RAJEEV G. KALATHIL IN ITA NO.6727/MUM/ 2012 (A.Y.2009 - 10) DATED 20/08/2014; (4)SHRI GANPATRAJ A. SANGHAVI V/S. ACIT IN ITA NO.2826/MUM/2013 (A.Y.2009 - 10) DATED 5/11/2014; AND ( 5 ) SHRI HIRALAL CHUNILAL JAIN VS. INCOME TA X OFFICER IN NO.4547/MUM/2014 DATED 01/01/2016. ON THIS BASIS, THE PLEA OF THE A SSESSEE IS THAT THE ENTIRE ADDITION IS LIABLE TO BE DELETED. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BY POINTING OUT THAT THE ADDITION HAS BEEN MADE ON ACCOUNT OF THE ENQUIRIES CONDUCTED BY TH E SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA AND NO EFFORT HAS BEEN MADE BY THE ASSESSEE TO CONTROVERT SUCH INFORMATION. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE ENTIRE DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT PURCHASES FR OM FOUR PARTIES NAMELY DHRUV SALES CORPORATION - RS.13,67,640/ - ; SUBHLAXMI SALES CORP. - RS.20,20,800/ - ; DHARSHAN SALES CORPORATION - RS.9,64,656/ - ; AND PARAS (INDIA) - RS.33,98,400, TOTALLING TO RS.77,51,496/ - HAVE BEEN TREATED TO BE BOGUS BASED ON THE PUR PORTED ENQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA. OSTENSIBLY, THE ASSESSING OFFICER OUGHT TO HAVE BROUGHT ON RECORD MATERIAL WHICH IS RELEVANT TO THE TRANSACTIONS OF THE ASSESSEE WITH THE AFORESAID ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 10 FOUR PARTIES INSTEA D OF MAKING A GENERAL OBSERVATION ABOUT THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA. QUITE CLEARLY, THE ASSESSING OFFICER AS WELL AS CIT(APPEALS) HAVE TAKEN NOTE OF THE FACT THAT NO SALES COULD HAVE BEEN EFFECTED BY THE ASSESSEE WITHOUT PURCHASES. IN THE PRESENT CASE, ASSESSEE HAS EXPLAINED THAT ALL ITS SALES ARE BY WAY OF EXPORTS. THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE SHOW PAYMENT FOR EFFECTING SUCH PURCHASES BY ACCOUNT PAYEE CHEQUES AND ALSO THE VOUCHE RS FOR SALE AND PURCHASE OF GOODS, ETC. NOTABLY, NO INDEPENDENT ENQUIRIES HAVE BEEN CONDUCTED BY THE ASSESSING OFFICER. UNDER IDENTICAL CIRCUMSTANCES, OUR CO - ORDINATE BENCHES IN THE CASES OF DEEPAK POPATWALA GAL (SUPRA), SHRI RAJEEV G. KALATHIL(SUPRA)AND R AMESH KUMAR AND CO.(SUPRA) HAVE HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITIONS MERELY ON THE BASIS OF INFORMATION OBTAINED FROM THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA WITHOUT CONDUCTING ANY INDEPENDENT ENQUIRIES. B EFORE THE CIT(APPEALS), ONE OF THE POINTS RAISED BY THE ASSESSEE WAS WITH RESPECT TO AN OPPORTUNITY TO CROSS EXAMINE THE FOUR (ASSESSMENT YEAR : 2009 - 10) PARTIES, BUT WE FIND THAT NO SUCH OPPORTUNITY HAVE BEEN ALLOWED. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE AFORESAID PRECEDENTS, WHICH HAVE BEEN RENDERED UNDER IDENTICAL CIRCUMSTANCES, IN OUR VIEW, THE CIT(APPEALS) ERRED IN SUSTAINING THE ADDITION TO THE EXTENT OF RS.4,19,356/ - INSTEAD OF DELETING THE ENTIRE ADDITION OF RS.9,6 8,937/ - MADE BY THE ASSESSING OFFICER. WE DIRECT ACCORDINGLY.' RESPECTFULLY, FOLLOWING THE ABOVE ORDER AND THE OTHER ORDERS RELIED UPON BY THE AR DURING THE COURSE OF HEARING BEFORE US, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE FAA WAS NOT JUSTIFIED IN PARTIALLY CONFIRMING THE ADDITION. THE ASSESSEE HAS PROVED THE GENUINENESS OF THE TRANSACTIONS AND THE PARTIES SUPPLIERS HAD NOT ONLY APPEARED BEFORE THE AO BUT THEY HAD ALSO FI LED AFFIDAVITS CONFIRMING THE SALE OF GOODS. THEREFORE, REVERSING HIS ORDER, WE DECIDE FIRST EFFECTIVE GROUND OF APPEAL (GOA) IN FAVOUR OF THE ASSESSEE. 12 . THE ASSESSING OFFICER IN THE INSTANT CASE HAS STATED THAT MR. RAJENDRA JAIN, MR. DHARMICHAND JAIN AND MR. ANOOP JAIN HAVE ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 11 APPEARED BEFORE HIM. HOWEVER, IT IS NOT MADE CLEAR AS TO WHETHER THE ABOVE SAID THREE PERSONS WERE PARTNERS/DIRECTORS, ALL THE SUPPLIERS BELONGING TO RAJENDRA JAIN. THE PURCHASES MADE FROM COMPANIES, WHERE THESE THREE PERSONS ARE EITHE R PARTNER/DIRECTOR, SHALL BE AWARE BY THE ABOVE SAID DECISION RENDERED BY COORDINATE BENCH. THE PURCHASES MADE FROM OTHER COMPANIES, HOWEVER REQUIRES FRESH EXAMINATION. ACCORDINGLY, WE RESTORE THE ISSUE RELATING TO ADDITION ON ACCOUNT OF BOGUS PURCHASES MA DE IN ALL THE YEARS UNDER CONSIDERATION TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO DELETE THE ADDITION RELATING TO PURCHASES MADE FROM COMPANIES, IN WHICH ABOVE SAID THREE PERSONS ARE PARTNER/DIRECTOR. IN THE RESPECT OF PURCHASES MADE FROM OTHER CONCERNS BELONG TO MR. RAJENDRA JAIN THE ASSESSING OFFICER MAY EXAMINE IT AFRESH. 5.1. THE AFORESAID DECISIONS RENDERED WOULD APPLY MUTATIS MUTANDIS TO THE CASE BEFORE US. ACCORDINGLY, WE RESTORE THE ISSUE RELATING TO ADDITION ON ACCOUNT OF BOGUS PU RCHASES MADE DURING THE YEAR UNDER CONSIDERATION TO THE FILE OF THE LD. AO WITH A DIRECTION TO DELETE THE ADDITION RELATING TO PURCHASES MADE FROM COMPANIES, IN WHICH ABOVE SAID THREE PERSONS ARE PARTNERS / DIRECTORS. IN RESPECT OF PURCHASES MADE FROM OTHE R CONCERNS BELONGING TO MR. RAJENDRA JAIN, THE LD. AO IS DIRECTED TO EXAMINE IT AFRESH IN ACCORDANCE WITH LAW. 6. IN THE RESULT, APPEALS OF THE ASSESSEE AS WELL AS THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES SUBJECT TO DIRECTIONS CONTAINED HEREINABOV E. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08 / 03 /201 9 SD/ - ( MAHAVIR SINGH) SD/ - ( M.BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 08 / 03 / 201 9 KARUNA SR. PS ITA NO. 4190/MUM/2017 & 6138/MUM/2017 M/S. SHANTIV IJAY JEWELS LTD., 12 COPY OF THE ORDER 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//