Dhirajlal Popatlal Shah, Surat V. Income tax Officer. Ward-2(2)_(1), Surat

ITA 444/SRT/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3161 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 15-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: ANIL K SHAH
• Keywords: Bogus purchase; Accommodation entries; Reason to believe
• Section: 143(3); 142(1); 143(2); 147; 69; 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.444/SRT/2018 (AY 2009-10) (H EARING IN VIRTUAL COURT) SHRI DHIRAJLAL POPATLAL SHAH, 202, SATYAM APARTMENT, ATHWAGATE, SURAT 395001. PAN: ACQPS 9711 C VS THE INCOME TAX OFFICER, WARD-2(2)(1), SURAT. ASSESSEE / APPELLANT REVENUE /RESPONDENT ASSESSEE BY SHRI ANIL K. SHAH ADVOCATE REVENUE BY MS. ANUPAMA SINGLA SR. DR DATE OF HEARING 05 . 10 .2021 DATE OF PRONOUNCEMENT 05.10.2021 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, SURAT UNDER SECTION 143(3) R.W.S147 OF THE INCOME TAX ACT, 1961 DATED 17.05.2018 FOR ASSESSMENT YEAR (AY) 2009-10. THE ASSESSEE RAISED FOLLOWING GROUNDS OF APPEAL: 1). THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3,50,000/- ON ACCOUNT OF BOGUS PURCHASE UNDER SEC 69 OF THE INCOME TAX ACT, 1961. 2) THE A CRAVES LEAVE TO ALTER, AMEND, DELETE, ALL OR ANY GROUND OF THE APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS PROPRIETOR OF M/S AYUSH IMPEX, ENGAGED IN THE BUSINESS OF PURCHASE AND EXPORT OF DIAMONDS. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR(AY) 2009-10 ON ITA NO.444/SRT/2018 FOR A.Y. 2009-10 SHRI DHIRAJLAL POPATLAL SHAH, SURAT 2 07.08.2009 DECLARING INCOME OF RS.1,72,069/-. INITIALLY THE CASE WAS PROCESSED UNDER SECTION 143(1). SUBSEQUENTLY, THE CASE WAS REOPENED UNDER SECTION 147 OF THE ACT. A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 30.03.2016. IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT, THE ASSESSEE FILED HIS REPLY ON 07.04.2016 AND STATED THEREIN THAT RETURN FILED ON 07.08.2009 BE TREATED AS RETURN IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. THE REASONS RECORDED WERE PROVIDED TO THE ASSESSEE. THE CASE OF ASSESSEE WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING, MUMBAI, THAT A SEARCH ACTION WAS CARRIED OUT ON RAJINDER JAIN, SANJAY CHOUDHARY AND DHARMICHAND JAIN GROUP ON 03.10.2013, WHICH RESULTED IN COLLECTION OF EVIDENCE THAT THE SAID GROUP WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES OF SALE & PURCHASES, BOGUS UNSECURED LOAN ETC., THE SAID GROUP WAS MANAGING A NUMBER OF COMPANIES, FIRMS PROPRIETORSHIP, ENTITIES WHICH WERE MANAGED BY DUMMY PARTNER/DIRECTOR AND PROPRIETORS OF THE ASSESSEE GROUP. IN THE ACTION, IT WAS REVEALED THAT ASSESSEE IS ONE OF THE BENEFICIARIES WHO HAS SHOWN PURCHASE OF RS.3,50,000/- FROM NAZAR IMPEX PVT. LTD. NAZAR IMPEX PVT. LTD WAS MANAGED BY THE SAID GROUP AND PROVIDED BOGUS ENTRY TO THE ASSESSEE. THUS, ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFFICER (AO) HAS REASON TO BELIEVE THAT INCOME OF ASSESSEE TO THAT ITA NO.444/SRT/2018 FOR A.Y. 2009-10 SHRI DHIRAJLAL POPATLAL SHAH, SURAT 3 EXTENT OF PURCHASES OF RS. 3.50 LAKHS HAS ESCAPED ASSESSMENT. THE AO AFTER SERVING STATUTORY NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT, PROCEEDED FOR ASSESSMENT. DURING THE ASSESSMENT A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE ON 10.11.2016 AS TO WHY AMOUNT OF RS.3.50 LAKHS AGAINST THE BOGUS BILL BEING ACCOMMODATION ENTRY SHOULD NOT BE DISALLOWED. THE ASSESSEE FILED ITS REPLY ON 21.11.2016. IN THE REPLY, THE ASSESSEE STATED THAT HE HAS PURCHASED GENUINE AND PHYSICAL DIAMONDS. THE ASSESSEE EXPORTED THE SAME TO ABROAD. THE ASSESSEE IS MAINTAINING BOOKS OF ACCOUNTS AND DAY TO DAY STOCK REGISTER. 3. THE REPLY FURNISHED BY ASSESSEE WAS NOT ACCEPTED BY AO ON THE BASIS INFORMATION RECEIVED FROM INVESTIGATION WING HELD THAT THE INVESTIGATION AUTHORITIES HAVE CONFIRMED THAT RECEIVED ACCOMMODATION ENTRIES. THE INVESTIGATION WING FURTHER CONFIRMED THAT THE ENTRY PROVIDER, IN THE NAME OF NUMEROUS CONCERNS IMPORTED ROUGH AND CUT AND POLISHED DIAMONDS FOR OTHER CLIENTS, WHO DO NOT WANT TO SHOW IMPORT IN THEIR BOOKS. SO THE ENTRY PROVIDERS ISSUED ACCOMMODATION BILL FOR A COMMISSION OF VARIOUS PARTIES WHO NORMALLY PURCHASE DIAMOND IN CASH FROM UNDISCLOSED PARTIES AND NEED BILLS TO SHOW SUCH PARTIES AGAINST THE SALE IN THEIR ACCOUNT. ON THE BASIS OF SUCH MODUS- OPERANDI OF BOGUS ENTRY PROVIDER, THE AO HELD THAT THE PURCHASES WERE MADE ITA NO.444/SRT/2018 FOR A.Y. 2009-10 SHRI DHIRAJLAL POPATLAL SHAH, SURAT 4 WITH A VIEW TO SUPPRESSED TURNOVER, PROFIT AND CAPITAL REQUIREMENT. THE AO FURTHER HELD THAT ASSESSEE DID NOT PURCHASE THE GOODS FROM THE PARTIES MENTIONED IN THE BILL. AT THE SAME TIME, IT PURCHASES THE GOODS FROM SOME OTHER SUPPLIER MAY BE WITHOUT BILL OR FROM THE OPEN MARKET. THE AO DISALLOWED THE ENTIRE PURCHASES SHOWN FROM NAZAR IMPEX PVT. LTD., 4. ON APPEAL BEFORE THE LD.CIT(A), THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS AS RECORDED IN PARA 5 OF THE IMPUGNED ORDER. THE ASSESSEE STATED THAT THE PARTY CONFIRMED THE SALE TO THE ASSESSEE IN A CONFIRMATION, THE SAID PARTY IS INCOME TAX ASSESSEE AND FILED THEIR RETURN OF INCOME. PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUE. THE PURCHASES HAVE BEEN EXPORTED IN THE YEAR OR IN THE NEXT YEAR. SUCH EXPORT SALE ARE ACCOUNTED IN PROFIT AND LOSS ACCOUNT AND PROFIT THEREON HAS BEEN DISCLOSED IN THE RETURN OF INCOME. THERE IS NO EVIDENCE THAT MONEY PAID TO THE SUPPLIER HAS COME BACK TO THE ASSESSEE. THE ASSESSEE ALSO RELIED ON SOME OTHER CASE LAWS. THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, CONFIRMED THE ACTION OF THE AO IN HOLDING THE 100% DISALLOWANCE OF ALLEGED BOGUS PURCHASE BY TAKING VIEW THAT CIRCUMSTANTIAL EVIDENCE SHOWS THAT PURCHASES ARE NOT GENUINE. FURTHER AGGRIEVED, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THIS TRIBUNAL. ITA NO.444/SRT/2018 FOR A.Y. 2009-10 SHRI DHIRAJLAL POPATLAL SHAH, SURAT 5 5. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORISED REPRESENTATIVE (LD.AR) OF THE ASSESSEE AND THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE (LD.SR.DR) FOR THE REVENUE AND HAVE GONE THROUGH HE ORDER OF AUTHORITIES BELOW. THE LD.AR OF THE ASSESSEE SUBMITS THAT HE HAS FURNISHED THE COMPLETE DETAILS OF PURCHASES. THE ASSESSEE FILED CONFIRMATION OF ACCOUNT DETAILS OF SUPPLIER AND STOCK REGISTER, SALE, PURCHASE REGISTER, BUT THE AO WAS NOT SATISFIED AND MADE ADDITION OF 100% OF PURCHASES SHOWN FROM THE NAZAR IMPEX PVT. LTD., THE LD.CIT(A) ALSO CONFIRMED THE ADDITION. THE LD.AR FOR THE ASSESSEE SUBMITS THAT PURCHASED SHOWN BY ASSESSEE ARE GENUINE. THE ASSESSEES TOTAL TURNOVER DURING THE RELEVANT FINANCIAL YEAR WAS OF RS.32 LAKHS AND THE PURCHASES DISPUTED BY AO WAS OF ONLY RS.3.5 LAKHS. THE ASSESSEE HAS SHOWN ONE TO ONE CO-RELATION OF PURCHASE AND SALE. THE SALE / EXPORT IS NOT POSSIBLE IN ABSENCE OF PURCHASES. THE AO MADE ADDITION WITHOUT MAKING ANY INDEPENDENT ENQUIRY. THE AO SOLELY RELIED UPON THE REPORT OF INVESTIGATION AGENCY. THE ASSESSEE HAS SHOWN GROSS PROFIT (GP) @6.3% AND THE NET PROFIT (NP) OF ASSESSEE WAS AT 4.69%. THE ASSESSEE HAS SHOWN A REASONABLE PROFIT IN THE TRADE OF BUSINESS OF DIAMOND. THE LD. AR OF THE ASSESSEE PRAYED THAT PURCHASES ARE GENUINE AND ENTIRE ADDITION MAY BE DELETED. ITA NO.444/SRT/2018 FOR A.Y. 2009-10 SHRI DHIRAJLAL POPATLAL SHAH, SURAT 6 6. IN THE ALTERNATIVE SUBMISSION, THE LD.AR FOR THE ASSESSEE SUBMITS THAT TO AVID THE FUTURE LITIGATION, A TOKEN DISALLOWANCE MAY BE SUSTAINED. TO SUPPORT HIS PRIMARY SUBMISSION, THE LD.AR RELIED UPON THE DECISION OF TRIBUNAL IN M/S. DELUXE DIAMONDS VS. ITO IN ITA NO.1396/AHD/2017 DATED 11.04.2018 AND THE DECISION OF JURISDICTIONAL HIGH COURT IN PCIT VS. TEJUA ROHITKUMAR KAPADIA IN TAX APPEAL NO.691 OF 2017. 7. ON THE OTHER HAND, THE LD.SR.DR FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. THE LD.SR.DR SUBMITS THAT INVESTIGATION WING, MUMBAI, HAS MADE A FULL-FLEDGED ENQUIRY AFTER MAKING SEARCH FOR SHRI RAJINDER JAIN GROUP. IN THE SEARCH AS WELL AS IN POST SEARCH INVESTIGATION, IT WAS ESTABLISHED THAT RAJINDER JAIN GROUP WAS MANAGING THE NUMBER OF PAPER COMPANIES, PROPRIETORSHIP FORM AND PARTNERSHIP FIRMS WHICH WERE MANAGED BY HIS OWN PERSONS. THE SAID GROUP WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OF GOODS. IN THE ACCOMMODATION ENTRIES, THE DOCUMENTARY EVIDENCES ARE PREPARED IN SUCH A WAY THAT THE ACCOMMODATION BILLS AND OTHER DOCUMENTS ARE SEEN AS A GENUINE ENTRIES. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. THERE IS NO DISPUTE THAT ASSESSEE HAVE SHOWN PURCHASES OF RS.3,50,000/- FROM NAZAR IMPEX PVT. LTD., THE ITA NO.444/SRT/2018 FOR A.Y. 2009-10 SHRI DHIRAJLAL POPATLAL SHAH, SURAT 7 ASSESSEE FILED CONFIRMATION INVOICES AND BANK STATEMENT TO SUBSTANTIATE THAT PURCHASES ARE GENUINE. SIMILARLY IT IS ALSO UNDISPUTED FACT THAT THE SAID NAZAR IMPEX IS MANAGED BY RAJINDER JAIN GROUP. THE SAID GROUP HAS SHOWN THEIR INCOME AS COMMISSION INCOME. NO STOCK OF ANY KIND OF MATERIAL WAS FOUND AT THE PREMISES AT THE TIME OF SEARCH. THE CASES OF RAJINDER JAIN AND COMPANY ARE ALSO PENDING BEFORE THIS BENCH, WHEREIN THEY THEMSELVES HAVE SHOWN THEIR BUSINESS OF COMMISSION. 9. WE FIND THAT THE AO MADE ADDITION OF 100% OF PURCHASE WITHOUT MAKING ANY INDEPENDENT INVESTIGATION. THE AO SOLELY RELIED UPON THE REPORT OF THE INVESTIGATION WING. THE LD.CIT(A) ALSO UPHELD THE ORDER OF AO BY TAKING VIEW THAT CIRCUMSTANTIAL EVIDENCE SHOWS THAT PURCHASES ARE NOT GENUINE. BEFORE US, THE LD.AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT TOTAL TURNOVER OF ASSESSEE DURING THE FINANCIAL YEAR WAS ONLY RS.32 LAKHS. THE ASSESSEE HAS SHOWN GROSS PROFIT @ 6.3% AND NET PROFIT @ 4.69%, WHICH IS IN LINE IN THE BUSINESS OF DIAMONDS. WE FIND THAT THE IMPUGNED PURCHASES ARE LESS THAN 10% OF THE TOTAL TRANSACTIONS OF THE ASSESSEE. CONSIDERING HE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT EVEN IN CASE, THE ASSESSEE HAS NOT FULLY SUBSTANTIATED PURCHASES, THE REVENUE AUTHORITIES ARE NOT ENTITLED TO MAKE ADDITION @ 100% OF THE TRANSACTION RATHER TO TAX THE INCOME ITA NO.444/SRT/2018 FOR A.Y. 2009-10 SHRI DHIRAJLAL POPATLAL SHAH, SURAT 8 COMPONENT IN THE SAID TRANSACTION. AT THE COST OF REPETITION, WE MAY NOTE THAT THE LOWER AUTHORITIES HAS NOT DISCARDED THE DOCUMENTARY EVIDENCE FURNISHED BY ASSESSEE. THE LOWER AUTHORITIES BASICALLY RELIED UPON THE REPORT OF INVESTIGATION WING. THEREFORE, CONSIDERING THE PECULIARITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF VIEW THAT TO AVOID THE POSSIBILITY OF REVENUE LEAKAGE, THE DISALLOWANCE OF TOKEN AMOUNT OF RS.20,000/- WILL MEET THE END OF JUSTICE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER ANNOUNCED ON 05 TH OCTOBER, 2021 AT THE TIME OF HEARING IN VIRTUAL COURT HEARING. SD/- SD/- (DR ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER SURAT, DATED: 05/10/2021 / SGR* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR 6. GUARD FILE BY ORDER / / TRUE COPY / / SR. PVT. SECRETARY, ITAT, SURAT