INDO WEST EXPORTS, MUMBAI V. ACIT 21(1), MUMBAI

ITA 4962/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1206 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 03-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO . 4962 / M/ 20 1 6 ( ASSESSMENT YEAR : 2007 - 08 ) INDO WEST EXPORTS 408, SHAH & NAHAR A/2 INDL. EST, DHANRAJ MILL COMPOUND, LOWER PAREL W, MUMBAI - 400013 . VS. ACIT 21(1) MUMBAI ./ ./ PAN/GIR NO. : AAAF 17523 E ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 05 . 10 .2018 DATE OF PRONOUNCEMENT : 27. 11 .201 8 O R D E R PER AMARJIT SINGH, JM: THE PRESENT APPEA L HA S BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 17 . 06 .201 6 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 33 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2007 - 08 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE LD. CIT(A) HAS ERRED IN ADDING 25% OF ALLEGED BOGUS PURCHASES OF RS. 86,10,618/ - I.E. RS.21,52,655/ - AS INCOME OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. ASSESSEE BY: SHRI HARI RAHEJA DEPARTMENT BY: SHRI V. JUSTIN (DR) ITA. NO. 4962 /M/201 6 A.Y. 2007 - 08 2 2. THE LD. CIT(A) HAS ERRED IN NOT CORRECTLY FOLLOWING THE RATIO IN THE CASE OF CIT - 1 VS. SIMIT P SHETH TAX APPEAL NO. 553 OF 2012 AND NOT DISTINGUISHING THE FACTS OF THE AP PELLANT WITH THE FACTS IN THE CASE OF SIMIT P. SHETH AND WRONGLY APPLIED THE RATE OF 25% AS BEING THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. 3 . A. THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE AND ERRED IN HOLDING THAT THE FLAW IN THE TRANSACTIONS WITH AVI EXPORTS, MOULIMANI, SUN DIAM AND VITRAG JEWELS IS THE UNVERIFIABLE NATURE OF THESE PURCHASES FROM THE PARTIES IN QUESTION, AS THEY WERE NOT FOUND AVAILABLE A T THE GIVEN ADDRESSES AT PRESENT COUPLED WITH THE STATEMENT OF SHRI RAJENDRA JAIN. 3.B. THE LD, CIT(A) HAS ERRED IN NOT CONSIDERING THE GROSS PROFIT RATE OF THE ASSESSEE AND HOLDING THAT EITHER THE PURCHASES FROM AVI EXPORTS, MOULIMANI, SUN DIAM AND V ITRAG JEWELS ARE OVER INVOICED OR THE PURCHASES WEN; ACTUALLY MADE BUT NOT FROM THE SAID PARTIES AND INSTEAD MAY HAVE BEEN PURCHASED FROM GREY MARKET WITHOUT PROPER BILLING OR DOCUMENTATION. 3.C. THE LD, C1T(A) HAS FAILED TO APPRECIATE THE FACTS AN D CIRCUMSTANCES OF THE CASE AND ERRED IN HOLDING THAT THE PARTIES I.E. AVI EXPORTS, MOULIMANI, SUN DIAM AND VITRAG JEWELS ARE NONEXISTENT SINCE THEY WERE NOT AVAILABLE AT THE GIVEN ADDRESSES. 3.D THE LD. CIT(A) HAS ERRED IN HOLDING THAT OPPORTUNITY TO CROSS EXAMINE WAS GIVEN ON THE GROUND THAT THE AO ASKED THE ASSESSEE TO PRODUCE THE SAID PARTIES FOR EXAMINATION. HOWEVER, THOSE PARTIES WERE WITNESS OF THE LD . ASSESSING OFFICER ITA. NO. 4962 /M/201 6 A.Y. 2007 - 08 3 AND THE ID. ASSESSING OFFICER HAS T O PRODUCE THEM FOR CROSS EXAMINATION BY THE APPELLANT. THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, ALTER OR MODIFY ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.41,07,31 0/ - ON 18.05.2009 FOR THE A.Y.2006 - 07 U/S 143(3) OF THE ACT. THEREAFTER, ON RECEIPT OF THE INTIMATION FROM DGIT(INV.), MUMBAI IN WHICH IT WAS CONVEYED THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES OF PURCHASES FROM RAJENDRA JAIN GROUP COMPANIES IN SUM OF RS.86,1 0,618/ - . THE ASSESSEE WAS IN THE BUSINESS OF DIAMOND EXPORTS. THE CASE OF THE ASSESSEE WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 OF THE ACT DATED 24.03.2014. AFTER PROVIDING THE REASONS TO THE ASSESSEE, THE AO RAISED THE ADDITION TO THE EXTENT OF 100% OF THE ALLEGED BOGUS PURCHASE TO THE TUNE OF RS.86,10,618/ - AND ASSESSED THE TOTAL INCOME TO THE TUNE OF RS.1,26,76,980/ - . IN THE APPEAL, THE CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF 25% OF THE BOGUS PURCHASE. THE ASSESSEE WAS NOT SATISFIED, THEREFORE, THE ASSESS EE FILED THE PRESENT APPEAL BEFORE US. ISSUE N O S . 1 TO 3 : - 4 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE CASE OF THE ASSESSEE WAS REOPENED UPON THE INFORMATION RECEIVED FROM THE ITA. NO. 4962 /M/201 6 A.Y. 2007 - 08 4 DGIT(INV.), MUMBAI IN WHICH IT WAS CONVEYED THAT THE ASSESSEE HAS TAKEN THE ACCOMMODATION ENTRY WITHOUT ACTUAL DELIVERY FRO M 4 PARTIES TO THE EXTENT OF RS.86,10,618/ - . THE ASSESSING OFFICER RESTRICT ED THE ADDITION TO THE EXTENT OF 100% OF THE BOGUS PURCHASE . I N APPEAL BEFOR E THE CIT(A) , THE CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF 25% OF BOGUS PURCHASES . THE LD. REPRESENTATIVE OF T HE ASSESSEE HAS ARGUED THAT THE ASSESSEE IS IN THE BUSINESS OF CLOTH AND IN THE SAID BUSINESS THE PROFIT MARGIN IS VERY MUCH LESS AND A SSESSING THE PROFIT RATIO @ 25% OF THE TOTAL PURCHASE IS VERY HIGH, THEREFORE, THE SAME IS LIABLE TO BE REDUCED IN ACCORDANCE WITH LAW. IN SUPPORT OF THIS CONTENTION, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE LAW SETTLED IN CIT VS . SIMIT P. SHETH (2013) 356 ITR 451 (GUJ) (HIGH COURT) AND THE CIT VS.NIKUNJ EXIMPT ENTERPRISES (P) LTD. (2013) 216 TAXMAN 171 (BOM) AND OTHER CASES AND ALSO PLACED RELIANCE UPON THE LAW IN THE CASE OF M/S. GEOLIFE ORGANICS VS. ACIT IN ITA. NO.3699/M/2016 DATED 05.05.2017 & M/S. EXIM GEMS . HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT (A) IN QUESTION. IN THE INSTANT CASE , NO DOUBT AFTER THE RECEIPT OF THE INTIMATION FROM DGIT(INV.) , MUMBAI , THE AO ISSUED THE NOTICES TO THE RELEVANT PARTIES WHICH WERE NOT SERVED TO THEM. AFTER INTIMATION TO THE ASSESSEE, THE ASSESSEE HAS FAILED TO PRODUCE THE SAME BEFORE THE ASSESSING OFFICER. T HE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMI T P. SHETH (2013) 356 ITR 451 (GUJ) (HIGH COURT) HAS ITA. NO. 4962 /M/201 6 A.Y. 2007 - 08 5 SPECIFICALLY HELD THAT THE PROFIT RATIO UPON THE BOGUS PURCHASE IS REQUIRED TO BE CONSIDERED FOR THE ADDITION IN THE INCOME OF THE ASSESSEE . WE ALSO OBSERVED THAT THE PROFIT RATIO IN THE BUSINESS OF CLOT H IS VERY LOW. RESTRICTING THE ADDITION TO THE EXTENT OF 25% OF THE BOGUS PURCHASE SEEMS TO BE VERY HIGH. IN THE INTEREST OF JUSTICE, WE FIND JUSTIFIABLE IF THE ADDITION OF BOGUS PURCHASE BE RESTRICTED TO THE EXTENT OF 3% UPON THE BOGUS PURCHASE TO THE TUN E OF RS. 86,10,618 / - . THE AO IS DIRECTED TO RAISE THE ADDITION ACCORDINGLY. ACCORDINGLY, THESE ISSUE S ARE DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 5 . IN RESULT, APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER P RONOUNCED IN THE OPEN COURT ON 27. 11 . 2018 . SD/ - SD/ - ( R. C. SHARMA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 27. 11 . 2018 VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI ITA. NO. 4962 /M/201 6 A.Y. 2007 - 08 6 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI