ACIT 13(2)(1), MUMBAI V. SATYANIS THE JEWELLERY STORE P.LTD, MUMBAI

ITA 4950/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9001 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 03-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PURISHOTTAM KUMAR
• Assessee Lawyers: BIRIN GABHEWALA
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3); 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY , JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO . 4 950 /MUM/201 6 ( / ASSESSMENT YEA R : 201 3 - 14 ) ASSTT.COMMISSIONER OF INCOME TAX - CIRCLE 13(2)(1), ROOM NO.164A, 1ST FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 4000 20 / VS. M/S SATYANIS THE JEWELLERY STORE PVT LTD., SAVANNA COURT, GROUND FLO OR, PLOT NO.190, TURNER ROAD, NEXT TO TIME AVENUE / UNION BANK OF INDIA, BANDRA (W), MUMBAI - 4000 50 ( / APPELLANT ) ( / RESPONDENT ) PAN: AA LCS81771J / REVENUE BY : SHRI PURISHOTTAM KUMAR / ASSESSEE BY : SHRI BIRIN GABHEWALA / DATE OF HEARING : 7 .8.2017 / DATE OF PRONOUNCEMENT : 3. 1 1 . 2017 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE REVENUE CHALLENGING THE ORDER DATED 23.5. 2016 PASSED BY THE COMMISSIONER OF INCOME TAX (A) - 21 , MUMBAI FOR THE ASSESSMENT YEAR 2013 - 14, WHEREIN THE REVENUE HAS CHALLENGED THE ORDER OF LD. CIT(A) RESTRICTING THE ADDITION TO 1% ONLY OF THE BOGUS PURCHASES AS 2 I.T.A. NO. 4950/M/2016 AGAINST THE 12.5% AS MADE BY THE AO AND A LSO THAT THE LD.CIT(A) WAS NOT JUSTIFIED BY RELYING ON THE INSTRUCTIONS NO. 2 OF 2008 DATED 22.2.2008 WHICH WAS APPLICABLE TO THE ASSESSMENT YEAR 2008 - 09 ONLY. 2 . FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 2 5.9.2013 DECLARING TOTAL INCOME OF RS. 90,15,840/ - . THE CASE WAS PROCESSED UNDER SECTION 143(1) AND THEREAFTER THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES UNDER SECTION 143(2) AND 142 (1) WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF MANUFACTURING AND TRADING OF GOLD AND DIAMOND JEWELLERY . T HE AO RECEIV ED THE INFORMATION FROM THE DGIT(INV), MUMBAI AND SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE ASSESSEE HAS AVAILED BOGUS BILLS OF RS.5,24,58,930/ - F ROM H AWALA OPERATORS I.E MR. BHAWARLAL JAIN GROUP OF COMPANIES . ACCORDINGLY, THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE SAME. THE AO ALSO ISSUED NOTICES U/S 133(6) OF THE ACT TO THESE PARTIES WHO WERE DULY REPLIED TO THE NOTICES. . HOWEVER, THE ASSESSEE CO ULD NOT PRODUCE THE PARTIES BEFORE THE AO FOR VERIFICATION. FINALLY, THE AO NOT BEING SATISFIED WITH THE REPLY OF THE ASSESSEE TREATED THE PURCHASES AS NON - GENUINE PURCHASES AND ADDED 12.5% OF THE SAID PURCHASES TO THE TOTAL INCOME OF THE ASSESSEE BY FRA MING ASSESSMENT U/S 143(3) OF THE ACT ASSESSING THE TOTAL INCOME AT RS.1,55,73,210/ - VIDE ASSESSMENT ORDER DATED 24.11.2015. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE APPEALED BEFORE THE FAA , 3 I.T.A. NO. 4950/M/2016 WHO IN TURN PARTLY ALLOWED THE APPEAL OF THE ASSESSEE SUST AINING THE ADDITION AT 1% OF THE TOTAL BOGUS PURCHASES BY RELYING ON THE INSTRUCTION NO.2 OF 2008 DATED 22.2.2008 . AGGRIEVED BY THE ABOVE DIRECTION OF THE LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 3 . WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF TH E PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE WAS FOUND TO HAVE AVAILED ACCOMMODATION ENTRIES OF BOGUS PURCHASES FROM MR. BHAWARLAL JAIN GROUP OF COMPANIES TO THE TUNE OF RS.5,24,58,930/ - AND NOTICES SENT U/S 133(6) TO THE PARTIES WERE DULY COMPLIED BY THE PARTIES BY FILING THE NECESSARY DETAILS AS CALLED FOR BY THE AO . HOWEVER, THE ASSESSEE COULD NOT PRO DUCE THE SUPPLIERS BEFORE THE AO . FURTHER T HE AO HAS NOT DOUBTED THE CORRESPONDING SALES WHICH MEANS THAT THE ASSESSEE MIGHT HAVE PURCHASED THE GOODS FROM THE GREY MARKET. THE LD. CIT(A) SUSTAINED THE ADDITION AT 1% WITHOUT GIVING ANY COGENT REASONS OR JUSTIFICATION FOR THE SAME. IN THE CASE OF BOGUS PURCHAS E S , IN OUR OPINION THE GP DECLARED IS NOT RELEVANT BUT THE INTENTION TO BRING THE TAX ON THE SAVINGS WHICH MIGHT HAVE BEEN MADE BY THE ASSESSEE BY PURCHASING THE MATERIAL FROM GRAY MARKET BY NON PAYMENT OF VAT AND OTHER INCIDENTAL LEVIES . THE ITAT IN A NUMBER OF CASES ON IDENTICAL FACTS AND CIRCUMSTANCES, HAVE TAKEN A CONSISTENT VIEW THAT THE ADDITION IN SUCH TYPE CASES WHERE THE ASSESSEE IS ENGAGED IN MANUFACTURING OF GOLD AND DIAMOND 4 I.T.A. NO. 4950/M/2016 JEWELLERY, THE ADDITION RANGING FROM 4 TO 6 % OR A REASONABLE PERCENT AGE SHOULD BE MADE . THEREFORE, IN OUR OPINION MAINTAINING THE CONSISTENCY WITH THE EARLIER DECISIONS OF THE TRIBUNAL, WE DEEM IT FIT AND PROPER IN THE PRESENT CIRCUMSTANCES TO APPLY THE GP RATE AT 6% TO THE BO GUS PURCHASE IN ORDER TO COVER THE VARIOU S TYPES OF SAVINGS WHICH THE ASSESSEE MIGHT HAVE MADE BY PURCHASING THE MATERIAL FROM THE HAWALA OPERATORS . ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AN D DIRECT THE AO TO APPLY 6% TO BOGUS PURCHASES. 4 . IN THE RESULT, THE APPEAL OF THE REVEN UE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3RD NOV, 2017 S D SD ( SAKTIJIT DEY ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 3. 1 1 . 2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPON DENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI