ITO 19 (2)(5), MUMBAI V. PRINCESS DIAM, MUMBAI

ITA 4590/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6743 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 05-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bogus purchase; Set aside
• Section: 143(3); 143(1); 207; 147

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI VIKAS AWASTHY , JM & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 4590 & 4591 /MUM/2019 ( / ASSESSMENT YEAR: 2007 - 08 & 2008 - 09 ) ITO - 19(2 )(5), R. NO. 207 , 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 007 / VS. M/S PRINCESS DIAM 16, POPULAR ARCADE, TATA RPAD NO. 1, OPERA HOUSE, MUMBAI - 400 004 ./ ./ PAN NO. A A FFP0673F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SANJAY J. SETHI , DR / RESPONDENTBY : NONE / DATE OF HEARING : 12 .01 .202 1 / DATE OF PRONOUNCEMENT : 18.01.2021 / O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) - 6 IN SHORT REFERRED AS LD. CIT(A) , MUMBAI, DATED 15 .04.19 & 18.04.19 FOR A SSESSMENT YEAR (IN SHORT A Y ) 2007 - 08 & 2008 - 09 RESPECTIVELY. 2 I.T.A. NO. 4590 & 4591 /MUM/201 9 M/S PRINCESS DIAM 2. AT THE OUTSET, IT IS NOTICED T HAT NO NE APPEARED ON BEHALF OF ASSESSEE IN SPITE OF CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED. ON THE OTHER HAND, L D. DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. 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 THE ISSUES RAISED IN BOTH THE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, BOTH APPEALS ARE CL UBBED, HEARD AND DISPOSED OFF BY THIS CONSOLIDATED ORDER. FIRST OF ALL, WE ARE TAKING ITA NO. 4590/MUM/2019 FOR ASSESSMENT YEAR 2007 - 08. 4 . T HE BRIEF FACTS OF THE C ASE ARE, ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND EXPORTING OF DIAMONDS. ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 07.09.2007 DECLARING TOTAL INCOME AT RS. 7,39,820/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. LATER ON, BASED ON THE INFORMATION RECEIVED FROM THE DGIT(INV) AND MAHARASHTRA SALES TAX DE PARTMENT ABOUT THE ACCOMMODATION EN TRIES OBTAINED BY THE ASSESSEE, ASSESSMENT WAS REOPENED U/S 147 OF THE ACT . 3 I.T.A. NO. 4590 & 4591 /MUM/201 9 M/S PRINCESS DIAM S UBSEQUENTLY , ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S 147 OF THE ACT BY THE AO THEREBY MAKING ADDITION OF 8 % ON ACCOUNT OF BOGUS PURCHASES. 5 . AGGRIEVED BY THE ABOVE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE, LD. CIT(A) AGREED WITH THE AO THAT THIS PURCHASES WERE NOT GENUINE AND DOES NOT MEAN THAT PURCHASES MADE FROM THES E PARTIES ARE GENUINE. THE COURTS HAVE HELD THAT PAYMENT MADE BY CHEQUE ITSELF IS NOT SACROSANCT SO AS TO PROVE THE GENUINENESS OF THE PURCHASES WHEN THE SURROUNDING CIRCUMSTANCES ARE SUSPECT. HOWEVER, THE ASSESSEE HAS SHOWN ONWARDS SALES WHICH HAS NOT BEE N DOUBTED BY THE AO. BY RELYING ON VARIOUS CASE LAW, HE REDUCED THE DISALLOWANCE @ 3 % OF BOGUS PURCHASES AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6 . NOW BEFORE US, THE REVENUE HAS PREFERRED APPEAL BY RAISING THE GROUNDS OF APPEAL AS UNDER: - 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION @ 3% AS AGAINST 8% MADE BY 4 I.T.A. NO. 4590 & 4591 /MUM/201 9 M/S PRINCESS DIAM AO ON BOGUS PURCHASES DESPITE THE FACT THAT THE ADDITION WAS MADE ON THE BASIS OF CREDIBLE INFORMAT ION RECEIVED FROM DGIT (INV) BASED ON INFORMATION SUPPLIED FROM SALES - TAX AUTHORITIES?' 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE RESTORED'. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS WHICH MAY BE NECESSARY'. 7 . CONSIDERED THE SUBMISSION OF LD. DR A ND MATERIAL PLACED ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT NO DOUBT THE PURCHASES MADE FROM THE SUSPECTED PARTIES ARE NOT GENUINE. HOWEVER, THE PURCHASES ITSELF CANNOT BE DOUBTED AS RIGHTLY ADJUDICATED BY LD. CIT(A) THAT AO HAS NOT DOUBTED SALES DECL ARED BY THE ASSESSEE, ONLY HE SUSPECTS THE PURCHASES. BY RESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VRS. SMITH P. SHETH 356 ITR 451 (GUJ) AND WE NOTICE THAT LD. CIT(A) HAS CONSIDERED THE GUIDELINES GIVEN BY THE TASK FORCE OF THE MINISTRY OF COMMERCE AND INDUSTRY. AS PER WHICH, IN THE LINE OF BUSINESS OF THE ASSESSEE, IT IS PRESCRIBED AT 1 - 3%. LD. CIT(A) HAS ADOPTED THE HIGHEST RATE I.E. 3%. HENCE, WE 5 I.T.A. NO. 4590 & 4591 /MUM/201 9 M/S PRINCESS DIAM ARE INCLINED TO AGREE WITH THE FINDINGS OF LD. CIT(A). THEREFORE, G ROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. SINCE THE OTHER APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2008 - 09 IS SIMILAR TO THE APPEAL FOR ASSESSMENT YEAR 2007 - 08, THEREFORE WE ALSO DISMISS THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL FOR TH E PARITY OF REASONS. 7 . IN THE NET RESULT, BOTH THE APPEAL S FILED BY THE REVENUE STANDS DISMISSED. ORDER S PRONOUNCED IN THE OPEN COURT ON 18.01. 2021. SD/ - SD/ - ( VIKAS AWASTHY ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 18.01 .2021 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, MUMBA I