NAREN GEMS PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER 14(2)(3), MUMBAI

ITA 4424/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3488 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 06-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIKLD
• Assessee Lawyers: ANUJ KUMAR DWIVEDILD
• Keywords: Bogus purchase; Opportunity of being heard; Principle of natural justice; Accommodation entries
• Section: 143(3); 142(1); 143(1); 143(2); 147; 148; 132

Judgement Text

ITA NO.4424/MUM/2018 ASSESSMENT YEAR :2007-08 M/S. NAREN GEMS P.LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4424/MUM/2018 ( / ASSESSMENT YEAR : 2007-08 ) M/S. NAREN GEMS P.LTD. EE-8070, EAST WING 8 TH FLOOR, BHARAT DIAMOND BOURSE, BANDRA KURLA COMPLEX MUMBAI- 400 051. / VS. INCOME TAX OFFICER - 14(2) (3), ROOMNO.431, AAYKAR BHAVAN M.K. ROAD MUMBAI- 400 020. $% ./ ./PAN/GIR NO. AAACN-5028-N ( %' /APPELLANT ) : ( ()%' / RESPONDENT ) ASSESSEE BY : SHRI ANUJ KUMAR DWIVEDI-LD. AR REVENUE BY : MS. KAVITA P. KAUSHIK-LD. DR / DATE OF HEARING : 28/11/2019 / DATE OF PRONOUNCEMENT : 29/11/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2007-08 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-22, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)/22/IT/124/2015-16 DATED 07/05/201 8 ON FOLLOWING GROUNDS OF APPEAL: - ITA NO.4424/MUM/2018 ASSESSMENT YEAR :2007-08 M/S. NAREN GEMS P.LTD. 2 RE-OPENING BAD IN LAW 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE VALIDITY OF THE REOPENING THE ASSESSMENT U/S 147 OF THE ACT AS DONE BY THE ASSESSING OFFICER MERELY ON BASIS OF THE INFORMATIO N RECEIVED FROM THE REPORT OF THE OFFICE OF THE INVESTIGATION WING OF THE DEPARTMENT; WITHOUT CARRYING OUT ANY INDEPENDENT INQUIRY OR INVESTIGATION OF HIS OWN TO COME TO BE SATISFIED THAT THERE WAS AN INCOME ESCAPING ASSESSMENT AS PER SEC. 147 OF TH E INCOME TAX ACT AND HENCE THE REOPENING IS BAD IN LAW. VIOLATION OF PRINCIPLES OF NATURAL JUSTICE 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE VALIDITY OF THE REOPENING THE ASSESSMENT U/S 147 OF THE ACT AS DONE BY THE ASSESSING OFFICER WITHOUT APPRECIATING THAT THE ASS ESSING OFFICER HAD ERRED IN NOT PROVIDING THE APPELLANT A PROPER OPPORTUNITY TO BE HEARD AS THE ASSESSING OFFICER HAS NOT SHOWN ANY COGNIZANCE OF THE LETTER DATED 06 /05/2014 IN WHICH THE APPELLANT REQUESTED THAT THE ORIGINAL RETURN OF INCOME FILED BE TREATED AS RETURN FILED U/S 148 ALONG WITH FURNISHING COPIES OF COMPUTATION OF INCO ME AND AUDITED FINANCIALS TO THE ASSESSING OFFICER. MERITS 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THE GENUINE PURCHASES OF RS. 78,72,000/- MADE BY ASSESSEE FROM VARIOUS PARTIES AS NON- GENUINE DESPITE SUFFICIENT PROOF REGARDING THE GENU INENESS OF THE PURCHASES BEING PRESENTED DURING THE APPELLATE PROCEEDINGS IN THE F ORM OF INVOICES, QUANTITATIVE DETAILS OF PURCHASE AND SALE OF THE ALLEGED NON-GEN UINE PURCHASES, BANK STATEMENTS AND LEDGER CONFIRMATION AND CONFIRMING AN ADDITION OF 12.5% THEREOF. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION ON ACCOUNT OF ALLEGED NON-GENUINE PURCHASE S DESPITE THE ASSESSING OFFICER NOT HAVING MENTIONED THE PROVISION OF LAW / SECTION UNDER WHICH THE SAID PURCHASES WERE BEING DISALLOWED. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION ON ACCOUNT OF ALLEGED NON-GENUINE PURCHASE S AT 12.5% ON AN ESTIMATE BASIS EVEN THOUGH THE BOOKS OF ACCOUNT HAVE NOT BEE N REJECTED BY THE ASSESSING OFFICER. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT GRANTING SET OFF OF THE GROSS PROFIT OF AT 7.12% ALREADY OFFERED UPO N THE SAID ALLEGED BOGUS PURCHASES. 2. WE HAVE CAREFULLY HEARD RIVAL SUBMISSIONS, PERUS ED RELEVANT MATERIAL ON RECORD AND DELIBERATED ON VARIOUS JUDIC IAL PRONOUNCEMENTS BEING RELIED UPON BY BOTH THE REPRESENTATIVES. 3.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED AS DEALER O F DIAMONDS, WAS ASSESSED FOR IMPUGNED AY U/S. 143(3) R.W.S. 147 ON 27/03/2015 WHEREIN ITA NO.4424/MUM/2018 ASSESSMENT YEAR :2007-08 M/S. NAREN GEMS P.LTD. 3 THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.12. 61 LACS, AFTER SOLE ADDITION OF ALLEGED BOGUS PURCHASES FOR RS.9.84 LAC S AS AGAINST RETURNED INCOME OF RS.2.77 LACS E-FILED BY THE ASSE SSEE ON 06/10/2007 WHICH WAS PROCESSED U/S.143(1). 3.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION RECE IVED FROM INVESTIGATION WING OF THE DEPARTMENT, MUMBAI IN THE COURSE OF SEARCH ACTION U/S 132 IN THE CASE OF SHRI RAJENDRA SOHANLA L JAIN ETC., IT TRANSPIRED THAT THE ASSESSEE STOOD BENEFICIARY OF B OGUS / ACCOMMODATION PURCHASES BILLS AGGREGATING TO RS.78. 72 LACS FROM 4 ENTITIES OF THE SAID GROUP. THE DETAILS OF PARTY-WI SE PURCHASES HAVE ALREADY BEEN EXTRACTED IN PARA 2.1 OF THE QUANTUM A SSESSMENT ORDER. ACCORDINGLY, THE CASE WAS REOPENED AS PER DUE PROCE SS OF LAW VIDE ISSUANCE OF NOTICE U/S 148 ON 27/03/2014 WHICH WAS FOLLOWED BY STATUTORY NOTICES U/S 143(2) AND 142(1) WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE PURCHASE TRANSACTIONS AND PRODUCE THE STATED SUPPLIERS TO CONFIRM THE TRANSACTIONS. 3.3 THE ASSESSEE DEFENDED THE PURCHASES BY FURNISHI NG PURCHASE / SALE REGISTER, DATE-WISE STOCK STATEMENT, BANK STAT EMENTS, DETAILS OF PURCHASES MADE FROM THE STATED PARTIES AND CORRESPO NDING SALES, COPIES OF PURCHASE / SALE INVOICES ETC. THE STATED SUPPLIE RS, IN RESPONSE TO NOTICE U/S 133(6), FURNISHED LEDGER CONFIRMATION, C OPIES OF ITR-V AND EXTRACTS OF BANK STATEMENT ETC. AS AN ALTERNATIVE, THE ASSESSEE OFFERED GROSS PROFIT ADDITION OF 7.2% ON SUSPICIOUS PURCHAS ES OF RS.78.72 LACS. 3.4 HOWEVER, NOT FULLY SATISFIED WITH ASSESSEES SU BMISSIONS / EXPLANATIONS, LD. AO ESTIMATED THE ADDITIONS @12.5% AGAINST THESE PURCHASES AND ADDED THE SAME TO THE INCOME OF THE A SSESSEE. THE ITA NO.4424/MUM/2018 ASSESSMENT YEAR :2007-08 M/S. NAREN GEMS P.LTD. 4 STAND OF LD. AO, UPON CONFIRMATION BY FIRST APPELLA TE AUTHORITY, IS UNDER CHALLENGE BEFORE US. 4. AFTER CAREFUL CONSIDERATION OF ORDERS OF LOWER A UTHORITIES AND AFTER APPRECIATING THE ARGUMENTS ADVANCED BY RESPECTIVE R EPRESENTATIVES, WE ARE OF THE CONSIDERED OPINION THAT THERE COULD BE N O SALE WITHOUT ACTUAL PURCHASE OF MATERIAL KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS. UNDISPUTEDLY THE ASSESSEE WAS IN POSSESSION OF PRIM ARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIERS WERE TH ROUGH BANKING CHANNELS. THE ASSESSEE WAS A CORPORATE ENTITY AND I TS BOOKS OF ACCOUNTS WERE SUBJECTED TO AUDIT UNDER VARIOUS STAT UTES. THE ASSESSEE FURNISHED ADEQUATE STOCK DETAILS AND ALSO FURNISHED CORRESPONDING SALES MADE BY HIM AGAINST THESE PURCHASES. HOWEVER, AT TH E SAME TIME, NONE OF THE SUPPLIERS WAS PRODUCED TO CONFIRM THE TRANSA CTIONS. THE INVESTIGATION CARRIED OUT BY THE DEPARTMENT REVEALE D THAT THESE ENTITIES WERE BEING MANAGED BY A COMMON PERSON AND ALL THE E NTITIES WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT CARRYING OUT ANY ACTUAL BUSINESS. 5. THE STATED FACTUAL MATRIX, IN OUR CONSIDERED OPI NION, WOULD MAKE IT A FIT CASE FOR MAKING ESTIMATED ADDITIONS, WHICH LO WER AUTHORITIES HAVE RIGHTLY DONE SO. HOWEVER, KEEPING IN VIEW THE RATE OF GROSS PROFIT ALREADY REFLECTED BY THE ASSESSEE, WE FIND THE ESTIMATION O F 12.5% TO BE ON THE HIGHER SIDE. HENCE, WE REDUCE THE SAME TO 5% OF ALL EGED BOGUS PURCHASES OF RS.78,72,000/- WHICH COMES TO RS.3,93, 600/-. THE BALANCE ADDITION STANDS DELETED. THE ORDERS OF LOWER AUTHOR ITIES STAND MODIFIED TO THAT EXTENT. ITA NO.4424/MUM/2018 ASSESSMENT YEAR :2007-08 M/S. NAREN GEMS P.LTD. 5 6. THE ASSESSEE HAS ALSO ASSAILED REOPENING ON LEGA L GROUNDS. HOWEVER, WE DO NOT FIND MUCH SUBSTANCE IN THE SAME SINCE THE ORIGINAL RETURN OF INCOME WAS PROCESSED U/S 143(1) AND THE R EASSESSMENT PROCEEDINGS WERE TRIGGERED UPON RECEIPT OF SPECIFIC INFORMATION FROM INVESTIGATION WING OF THE DEPARTMENT, WHICH INDICAT ED POSSIBLE ESCAPEMENT OF INCOME IN THE HANDS OF THE ASSESSEE. THESE GROUNDS STAND DISMISSED. 7. RESULTANTLY, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2019. SD/- SD/- (MAHAVIR SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 29/11/2019 SR.PS, JAISY VARGHESE !'! / COPY OF THE ORDER FORWARDED TO : 1. %' / THE APPELLANT 2. ()%' / THE RESPONDENT 3. 0 ( ) / THE CIT(A) 4. 0 / CIT CONCERNED 5. 12(+3 , 3 , / DR, ITAT, MUMBAI 6. 2456 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.