MEHTA EMPORIUM JEWELLERS, MUMBAI V. JOINT COMMISSIONER OF INCOME TAX RANGE -30(2), MUMBAI

ITA 4810/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5416 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 10-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI LAKSHMI NAYAKLD
• Assessee Lawyers: RADHA HALBELD
• Keywords: Bogus purchase; Additional evidence; Accommodation entries; Retraction
• Section: 143(3); 133(6); 250; 132

Judgement Text

ITA NO.4810/MUM/2018 ASSESSMENT YEAR :2013-14 MEHTA EMPORIUM JEWELLERS 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4810/MUM/2018 ( / ASSESSMENT YEAR : 2013-14 ) MEHTA EMPORIUM JEWELLERS 101, HETAL ARCH, S.V. ROAD OPP. NATRAJ MARKET MALAD (WEST), MUMBAI-400 064 / VS. J CIT - 30(2) MUMBAI. %& ./ ./PAN/GIR NO. AALFM-2962-N ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) ASSESSEE BY : MS. RADHA HALBE-LD.AR REVENUE BY : MS. JYOTI LAKSHMI NAYAK-LD. DR / DATE OF HEARING : 05/02/2020 / DATE OF PRONOUNCEMENT : 19/02/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2013-14 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-41, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-41/ IT/477/ 2015-16 DATED 04/05 /2018 ON FOLLOWING GROUNDS OF APPEAL: - ITA NO.4810/MUM/2018 ASSESSMENT YEAR :2013-14 MEHTA EMPORIUM JEWELLERS 2 1. IN THE FACTS AND CIRCUMSTANCES OF CASE AND IN LA W, THE LEARNED CIT(A)-41, MUMBAI ERRED IN CONFIRMING DISALLOWANCE OF RS.16,20,078/- BEING 12.5% OF ALLEGED BOGUS PURCHASES OF RS.1,29,60,626/- FROM M/S RAJAN GEMS, MADE BY ASSESSING OFFICER MERELY ON THE BASIS OF STATEMENT OF THIRD PARTY SHR I DHARMENDRA KUMAR BABEL, DISREGARDING THE FACTS: O THAT HE HAD RETRACTED FROM THE STATEMENT MADE B Y HIM, O THAT HE CONFIRMED THE TRANSACTIONS WITH APPELLA NT IN RESPONSE TO NOTICE U/S 133(6) ISSUED BY AO, O THAT THE APPELLANT WAS NOT PROVIDED WITH THE OP PORTUNITY OF CROSS EXAMINATION OF THE WITNESSES RELIED UPON BY THE ASS ESSING OFFICER AND THUS VIOLATING THE LAW LAID DOWN BY HONORABLE SUPREME CO URT IN THE CASE OF KISHANCHAND CHELLARAM V. CIT (1980) 125 1TR 713 AND ANDAMAN TIMBER INDUSTRIES V. COMMISSIONER OF CENTRAL EXCISE (CIVIL APPEAL NO. 4228 OF 2006.) 2. IN THE FACTS AND CIRCUMSTANCES OF CASE AND IN LA W, THE LEARNED CIT(A)-41, MUMBAI ERRED IN CONFIRMING ADDITION OF RS.8,38,590/- OUT O F RS.24,61,850/- BEING 12.5% OF ALLEGED BOGUS PURCHASES OF RS.1,96,94,796/- MADE FR OM M/S RISHI EXPORTS AND M/S, RIDHI INTERNATIONAL. 3. IN THE FACTS AND CIRCUMSTANCES OF CASE AND IN LA W, THE LEARNED CIT(A)-41, MUMBAI ERRED IN PASSING AN ORDER U/S 250 WITHOUT APPRECIAT ING THE REVISED GROUNDS OF APPEAL SUBMITTED DURING THE COURSE OF HEARING. 4. IN THE FACTS AND CIRCUMSTANCES OF CASE AND IN LA W, THE LEARNED CIT(A)-40, HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER OF DISALLOWING EXPENSES OF RS.2,00,000/- ON ADHOC BASIS. 2. WE HAVE CAREFULLY HEARD THE SUBMISSIONS MADE BY BOTH REPRESENTATIVES. WE HAVE ALSO PERUSED RELEVANT MATE RIAL ON RECORD. OUR ADJUDICATION TO ISSUE RAISED IN THE APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT FIRM STATED TO BE ENGAGED IN MANUFACTURING & TRADING OF GOLD ORNAMENTS / ARTICLES , WAS ASSESSED FOR YEAR UNDER CONSIDERATION 143(3) ON 16/03/2016 WHEREIN THE INCOME OF THE ASSESSEE WAS D ETERMINED AT RS.70.78 LACS AFTER CERTAIN ADDITIONS AS AGAINST RE TURNED INCOME OF RS.27.96 LACS E-FILED BY THE ASSESSEE ON 28/09/2013 . 3.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, PU RSUANT TO INFORMATION RECEIVED FROM SALES TAX DEPARTMENT, MAH ARASHTRA, IT ITA NO.4810/MUM/2018 ASSESSMENT YEAR :2013-14 MEHTA EMPORIUM JEWELLERS 3 TRANSPIRED THAT THE ASSESSEE MADE PURCHASES OF RS.1 29.60 LACS FROM ONE TAINTED ENTITY I.E. M/S RAJAN GEMS WHICH WAS LISTED AS BOGUS BILL ISSUER. THE ASSESSEE FAILED TO PRODUCE THE SAID SUP PLIER FOR CONFIRMATION OF TRANSACTIONS. BUT IT DEFENDED THE PURCHASES BY S UBMITTING STOCK DETAILS AND SUBMITTED THAT THE GOODS WERE ACTUALLY PURCHASE D AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS. 3.3 IN RESPONSE TO NOTICE U/S 133(6), ONE SHRI DHAR MENDRA A. BABEL OF SO-CALLED SELLING ENTITY, ATTACHED COPY OF LEDGER A CCOUNT, BANK STATEMENTS AND TAX INVOICES ALONG WITH RETURN OF IN COME. HOWEVER, A SEARCH ACTION WAS CONDUCTED U/S 132 IN THE CASE OF SHRI DHARMENDRA A.BABEL ON 05/10/2013 WHEREIN IN RECORDED STATEMENT , THE SAID PERSON ADMITTED THAT NO ACTUAL BUSINESS WAS BEING CARRIED OUT BY HIM AND THE FIRMS WERE MERELY ENGAGED IS ISSUING BOGUS SALE BIL LS AGAINST COMMISSION. 3.4 THE SAID STATEMENT WAS CONFRONTED TO THE ASSESS EE WHO, IN TURN, RELIED UPON RETRACTION MADE BY THE SAID PERSON SUBS EQUENTLY. FINALLY, NOT CONVINCED WITH ASSESSEES EXPLANATIONS AND SUBMISSI ONS, LD. AO MADE ESTIMATED ADDITIONS OF 12.5% AGAINST THESE PURCHASE S WHICH CAME TO RS.16.20 LACS. 3.5 IN ORDER TO VERIFY OTHER PURCHASES, NOTICES U/S 133(6) WERE ISSUED TO AS MANY AS 25 DIFFERENT SUPPLIERS. HOWEVER, NOTICES IN 2 CASES COULD NOT BE SERVED AT OLD AS WELL AS NEW ADDRESSES. THE FIEL D INQUIRIES REVEALED THAT THE PARTIES WERE NOT AVAILABLE / OPERATING FRO M THE GIVEN ADDRESSES. THE ASSESSEE COULD NOT FILE REQUISITE DOCUMENTARY E VIDENCE TO ESTABLISH THE GENUINENESS OF PURCHASES MADE FROM THESE TWO PA RTIES. UPON ANALYSIS OF BANK STATEMENT OF ONE OF THE ENTITIES I .E. M/S RISHI EXPORTS, ITA NO.4810/MUM/2018 ASSESSMENT YEAR :2013-14 MEHTA EMPORIUM JEWELLERS 4 AN OPINION WAS FORMED THAT THIS ENTITY WAS ENGAGED IN PROVIDING / TAKING ACCOMMODATION ENTRIES OF BOGUS PURCHASES. THE BANK STATEMENT OF OTHER ENTITY I.E. M/S RIDDHI INTERNATIONAL REMAINED UNFURNISHED. ACCORDINGLY, LD. AO ALSO ESTIMATED ADDITIONS OF 12. 5% AGAINST PURCHASES MADE FROM THESE 2 ENTITIES, WHICH CAME TO RS.24.61 LACS. 3.6 ANOTHER ADDITION WAS ADHOC DISALLOWANCE OF EXPENSES FOR RS.2 LACS FOR WANT OF VERIFICATION OF SELF-MADE VOUCHERS . 4.1 BEFORE LD. CIT(A), THE ADDITIONAL EVIDENCES FIL ED BY THE ASSESSEE WERE SUBJECTED TO REMAND PROCEEDINGS WHEREIN SUMMON S WERE ISSUED TO SUPPLIERS BUT AS PER LD. AO, THE PURCHASE PARTIE S DID NOT COMPLY WITH SUMMONS ISSUED U/S 131. THE LD. CIT(A) AFTER DUE CO NSIDERATION OF REMAND REPORT AND ASSESSEES DEFENSE AS WELL AS SUB MISSIONS, CONFIRMED THE STAND OF LD. AO IN MAKING ESTIMATED A DDITIONS OF RS.16.20 LACS ON ACCOUNT OF ALLEGED BOGUS PURCHASES MADE FRO M M/S RAJAN GEMS. 4.2 HOWEVER, IN CASE OF REMAINING 2 ENTITIES, IT WA S OBSERVED BY LD. CIT(A) THAT THE PROPRIETORS OF THESE ENTITIES APPEA RED IN PERSON BEFORE LD. AO AND THE ASSESSEE DISCHARGED HIS ONUS, IN THI S REGARD. THEREFORE, THE ADDITIONS AGAINST THESE 2 ENTITIES WOULD NOT BE SUSTAINABLE. HOWEVER, SINCE THE ASSESSEE, IN ITS GROUND OF APPEAL, HAD AG ITATED THE ADDITION OF RS.16.23 LACS ONLY, THE RELIEF ONLY TO THAT EXTENT WAS PROVIDED. IN OTHER WORDS, THE ADDITION OF RS.8.38 LACS WAS CONFIRMED. AGGRIEVED, THE ASSESSEE IS UNDER FURTHER APPEAL BEF ORE US. 5. FIRST, WE TAKE UP MATTER OF ADDITION AGAINST PUR CHASES MADE FROM M/S RAJAN GEMS. UPON DUE CONSIDERATION, WE ARE OF T HE OPINION THAT THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF M ATERIAL PARTICULARLY ITA NO.4810/MUM/2018 ASSESSMENT YEAR :2013-14 MEHTA EMPORIUM JEWELLERS 5 WHEN THE ASSESSEE WAS INTO MANUFACTURING AND TRADIN G ACTIVITIES. THE SALES TURNOVER HAS NOT BEEN DISPUTED / DISTURBED BY THE REVENUE. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCU MENTS AND THE PAYMENTS TO THE SUPPLIERS WERE THROUGH BANKING CHAN NELS. HOWEVER, AT THE SAME TIME, THE ASSESSEE FAILED TO SUBSTANTIATE THE PURCHASE TRANSACTIONS CONCLUSIVELY. THE INVESTIGATIONS DURIN G SEARCH OPERATIONS ESTABLISHED THAT THE ENTITY M/S RAJAN GEMS WAS INVO LVED IN ISSUING BOGUS ACCOMMODATION BILLS WITHOUT CARRYING OUT ANY ACTUAL BUSINESS. THE STATED FACTUAL MATRIX, IN OUR CONSIDERED OPINIO N, WOULD MAKE IT A FIT CASE TO MAKE ESTIMATED ADDITIONS TO ACCOUNT FOR PRO FIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZ E FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL I N THE GREY / UNORGANIZED MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LOWER AUTHORITIES HAVE RIGHTLY DON E SO. HOWEVER, KEEPING IN VIEW THE FACT THAT THE ASSESSEE WAS DEAL ING IN COMMODITY LIKE DIAMOND WHICH ATTRACT LOWER RATE OF VAT, THE ESTIMA TION OF 12.5%, IN OUR OPINION, WAS ON HIGHER SIDE. THEREFORE, WE RESTRICT THE SAME TO 8% OF ALLEGED BOGUS PURCHASES OF RS.1,29,60,626/- STATED TO BE MADE FROM THIS ENTITY. THE SAME COMES TO RS.10,36,850/-. THE BALAN CE ADDITION STANDS DELETED. THE ORDERS OF LOWER AUTHORITIES STAND MODI FIED TO THAT EXTENT. THE LD. AO IS DIRECTED TO RECOMPUTE THE INCOME OF T HE ASSESSEE. 6. REGARDING ADDITIONS MADE FROM OTHER TWO ENTITIE S, IT EMERGES THAT THE ASSESSEE WAS SUCCESSFUL IN DISCHARGING THE PRIM ARY ONUS OF SUBSTANTIATING THE PURCHASES MADE FROM THESE 2 PART IES. THIS BEING SO, THERE WAS NO JUSTIFICATION ON THE PART OF LD. AO TO RESTRICT THE SAME TO THE EXTENT OF RS.16.23 LACS, FINDING FACTUAL ERROR IN G ROUNDS RAISED BY THE ITA NO.4810/MUM/2018 ASSESSMENT YEAR :2013-14 MEHTA EMPORIUM JEWELLERS 6 ASSESSEE. THEREFORE, THE ADDITION OF RS.8.38 LACS A S SUSTAINED BY LD. CIT(A) WOULD NOT HAVE ANY LEGS TO STAND, KEEPING IN VIEW THE OBSERVATION MADE IN PARA-14 OF THE IMPUGNED ORDER. WE DELETE TH E SAME. 7. THE ADHOC DISALLOWANCE OF RS.2 LACS AGAINST EXPENDITURE WOULD NOT REQUIRE ANY INTERFERENCE ON OUR PART SINCE THE ADDITION HAS BEEN MADE FOR WANT OF VERIFICATION OF SELF-MADE VOUCHERS . NO NEW MATERIAL IS BEFORE US TO INTERFERE IN THE IMPUGNED ORDER, IN TH IS REGARD. 8. THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH FEBRUARY , 2020. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 19/02/2020 SR.PS, JAISY VARGHESE !'! / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. 1 ( ) / THE CIT(A) 4. 1 / CIT CONCERNED 5. 23),4 , 4 , / DR, ITAT, MUMBAI 6. 3567 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI. ITA NO.4810/MUM/2018 ASSESSMENT YEAR :2013-14 MEHTA EMPORIUM JEWELLERS 7 SR. NO. DETAILS DATE IN ITIALS DESIGNATION 1 DRAFT DICTATION SHEETS ARE ATTACHED DIRECTLY TYPE D ON COMPUTER / LAPTOP SR.PS/PS 2 DRAFT DICTATED ON NOT APPLICABLE/ SR.PS/PS 3 DRAFT PLACED BEFORE AUTHOR NOT APPLICABLE SR.PS/PS 4 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 5 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 6 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 7 ORDER PRONOUNCEMENT ON SR.PS/PS 8 FILE SENT TO THE BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE AR 11 DATE OF DISPATCH OF ORDER