SRK GEMS AND GIFTS PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER-5(3)(4), MUMBAI

ITA 5099/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8246 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: PIRAMAL M PARIKH
• Keywords: Bogus purchase; Unexplained expenditure; Gift; Search and seizure; Accommodation entries
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NOS.5099, 5100 & 5101/M/2017 ASSESSMENT YEARS: 2009-10, 2012-13 & 2013-14 M/S. SRK GEMS AND GIFTS PVT. LTD., C/2 ND FLOOR, MANSOORALI MANSION, 2 ND BHATTWADI, GIRGAUM, MUMBAI-400 004 PAN: AABCC6699P VS. ITO 5(3)(4), 565, AAYAKAR BHAVAN, M.K. ROAD, MARINE LINES, MUMBAI 400 004 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PIRAMAL M. PARIKH, A.R. REVENUE BY : SMT. N. HEMALATHA, D.R. DATE OF HEARING : 07.11.2017 DATE OF PRONOUNCEMENT : 30.11.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 12.05.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A )] RELEVANT TO ASSESSMENT YEARS 2009-10, 2012-13 & 2013-14. SINC E THE FACTS AND ISSUES INVOLVED IN ALL THE THREE APPEALS ARE IDENTI CAL IN NATURE, HENCE THE SAME ARE TAKEN TOGETHER FOR DISPOSAL BY THIS CO MMON ORDER. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING IN CUT AND POLISHED DIAMONDS. IT FILED ITS RETURN O F INCOME FOR A.YS.2009-10, 2012-13 & 2013-14 DECLARING INCOME OF RS.18,990/- FOR A.Y 2009-10, RS.8,270/- FOR A.Y.2012-13 AND LOS S OF (-) ITA NOS.5099, 5100 & 5101/M/2017 M/S. SRK GEMS AND GIFTS PVT. LTD. 2 RS.18,015/- FOR AY 2013-14. SUBSEQUENTLY, BASED ON THE INFORMATION FROM DIT(LNV) THAT THE ASSESSEE WAS BEN EFITED FROM ACCOMMODATION ENTRIES FROM -THE BHANWARLAL JAIN GRO UP, THE CASES WERE REOPENED BY ISSUE OF NOTICES U/S 148 ON 27/03/ 2015, 24/03/2015 AND 24/03/2015 FOR A.YRS. 2009-10, 2012-13 AND 2013 -14 RESPECTIVELY. THE ASSESSMENTS WERE COMPLETED U/S 14 3(3) R.W.S 147 ON 15/02/2016 FOR ALL THE ABOVE THREE YEARS DETERMI NING THE TOTAL INCOME AT RS.69,070/-, RS.4,80,160/- AND RS 1,91,60 0/- RESPECTIVELY BY MAKING THE ADDITIONS. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING A S UNDER: 4. THE SOLITARY ISSUE RAISED IS WITH REGARD TO ADD ITION OF 8% GP OF THE ALLEGED NON-GENUINE TRANSACTION AND ADDITION OF 2% BROKERAGE ON THE PURCHASE VALUE. THE DETAILS OF THE TRANSACTION ARE AS UNDER:- A.Y. NAME OF THE PARTY AMOUNT 2009 - 10 MAYUR EXPORTS 5,00,75 0/ - 2012-13 KANGAN JEWELS PVT.LTD. 47,18,886/- 201 3-14 MARIIPRABHALMPEX PVT,LTD. 20,96,150/- A SEARCH AND SEIZURE ACTION HAS TAKEN PLACE IN THE CASE OF SHRI RAJENDRA JIAN, SHRI SANJAY CHOUDHARY AND SHRI DHAMICHAND JAI N BY THE DGIT(LNV.), MUMBAI. IT WAS FOUND THAT THE APPELLANT COMPANY HAD TAKEN ACCOMMODATION ENTRIES FROM THE ABOVE GROUP WHO ARE THE HAWALA OPERATORS, ISSUING BOGUS BILLS AND GIVING ACCOMMODA TION ENTRIES WITHOUT GIVING ACTUAL DELIVERY OF GOODS. DURING THE COURSE OF POST SEARCH INQUIRIES SHRI RAJENDRA JAIN ADMITTED THE FA CT THAT THEY ARE ENGAGED IN PAPER TRANSACTIONS ONLY WITHOUT SALE OF ANY PHYSICAL STOCK OF THE GOODS (DIAMONDS). CONSIDERING THE ABOVE FACTS, THE ADDITIONAL INCOME IS CALCULATED AT 8% BEING THE POSSIBLE PROFI T OUT OF THE PURCHASES MADE THROUGH NON-GENUINE PARTIES AND ADDE D TO THE TOTAL INCOME OF THE ASSESSEE. ITA NOS.5099, 5100 & 5101/M/2017 M/S. SRK GEMS AND GIFTS PVT. LTD. 3 4.0.1 THE ASSESSEE COMPANY HAS ALSO ADMITTED THAT T HE TRANSACTION OF TAKING ACCOMMODATION ENTRIES IS THROUGH THE PAYMENT OF BROKERAGE. BUT IT HAS FAILED TO PRODUCE THE DETAILS OF SUCH BR OKERAGE. IN THE CIRCUMSTANCES, 2% OF SUCH BOGUS PURCHASES WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE F OR ALL THE ABOVE 3 YEARS. 4. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. IT IS NOT THAT ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) HAS DISALLOWED THE PURCHASES ON THE GROUND THAT THEY WE RE NOT VERIFIED BUT HOLDING THEM AS NON GENUINE PARTIES. I FIND TH AT THE LD. CIT(A) HAS DISMISSED THE APPEAL ON THE GROUND THAT ASSESSE E IN THIS CASE COULD NOT PRODUCE SO CALLED SUPPLIER. I FIND THAT IN THIS CASE ASSESSEE FAILED TO PRODUCE ANY INDEPENDENT EVIDENCE TO PROVE THE PURCHASES INCLUDING PRODUCTION OF SELLERS FOR EXAMINATION OF AO. THE ASSESSEE ADMITTED BEFORE THE AO THAT THE PRESENT WHEREABOUTS OF THE SO-CALLED SUPPLIERS IS NOT KNOWN TO THEM. EVEN THOUGH THE AO COULD NOT PROVE SUBSTANTIVELY THAT THE AMOUNTS GIVEN TO THE SELLERS IN CHEQUE FORM HAVE COME BACK TO THE ASSESSEE, THE ACTIVITIES OF A CCOMMODATION ENTRIES IN THE TRADING COMMUNITY IS NOT UNHEARD OF. FURTHER, THE INVESTIGATION CARRIED OUT BY THE DEPARTMENT CANNOT BE LOST SIGHT OF. WHEN THE NAMES OF THE PARTIES ARE APPEARING IN THE B OOKS OF THE ASSESSEE COMPANY, IT IS TO BE TAKEN THAT A LIVE LIN K HAS BEEN ESTABLISHED BETWEEN THE BOGUS TRADERS AND THE ASSES SEE COMPANY. FURTHER, ONE SHOULD NOT BE CARRIED AWAY BY THE MYTH THAT ANY AMOUNT ROUTING THROUGH BANK CHANNELS WOULD ESTABLISH THE G ENUINENESS OF TRANSACTION AS HELD BY THE HONBLE BOMBAY HIGH COUR T IN THE CASE OF NARESH K. PAHUJA (2015) 54 TAXMANN.COM 258. IN SUC H SIMILAR CASES, I FIND THAT ASSESSEE HAS AVOIDED THE PAYMENT OF TAX AND PROFIT ITA NOS.5099, 5100 & 5101/M/2017 M/S. SRK GEMS AND GIFTS PVT. LTD. 4 MARGIN IN THE INDUSTRY. KEEPING IN VIEW OF THE NAT URE AND BUSINESS AND THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT SIMILAR ISSUE HAD COME UP BEFORE MUMBAI TRIBUNAL IN ITA NO.6178/M /2007 WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 5. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE F ACTS ON RECORD. IT IS NOTICED THAT THE ASSESSING OFFICER DISALLOWED THE E NTIRE PURCHASES FROM 35 PARTIES FOR THE REASON THAT THEY ARE NOT VERIFIA BLE HOLDING THEM AS NON-GENUINE PARTIES IN THIS ASSESSMENT YEAR, WHEREA S PURCHASES FROM SIMILAR PARTIES/SAME PARTIES IN EARLIER YEARS AND L ATER YEAR WERE NOT DISALLOWED BUT, GP WAS ASSESSED ON THE ENTIRE TURNO VER AT 4.5%. THE CIT (A) WHILE DELETING THE ENTIRE PURCHASES DISALLOWED THIS YEAR. IN OTHER YEARS GP WAS RESTRICTED TO 3% OF THE TAINTED PURCHA SES. THIS ISSUE WAS CONSIDERED BY THE ITAT IN A BATCH OF APPEALS IN ITA NOS.3024 TO 3028/MUM/2008 VIDE PARA 7 AS UNDER: '7. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE FA CTS OF THE CASE, RIVAL SUBMISSIONS AND RELEVANT RECORD. THE ASSESSING OFFI CER APPLIED THE G.P.@ 4.5% ON THE ENTIRE SALES TURNOVER INCLUDING T HE ALLEGED BOGUS SALES AND CONSEQUENTLY, MADE ADDITION TO THE TOTAL INCOME OF THE AS, OVER AND ABOVE THE NET PROFIT SHOWN, IN THE P&L ACCOUNT, FOR THE RESPECTIVE ASSESSMENT YEARS. SUCH ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF GP RATE APPLIED TO THE ENTI RE SALES IS NOT LEGALLY AND FACTUALLY TENABLE. THE ELEMENT OF INFLA TION IN PURCHASES CAN BE POSSIBLE ONLY IN RESPECT OF SUCH BOGUS PURCH ASES. THE ESTIMATION AND APPLICATION OF UNIFORM G.P @ 4.5% ON THE ENTIRE SALES OF THE ASSESSEE IS NOT REASONABLE AND NOT IN CONSONANCE WI TH THE FACTS OF THE PRESENT CASE, AS THE ENTIRE PURCHASES AND ENTIRE SA LES WERE NOT NON- GENUINE. THE SAID G.P RATE MAY NOT BE APPLICAB LE, IN RESPECT OF EXPORT BUSINESS. THE ASSESSING OFFICER HAS TREATED THE PURCHASES FROM THE ALLEGED 16 PARTIES AS BOGUS PURCHASES. NO ADVERSE FINDING HAS BEEN GIVEN BY THE ASSESSING OFFICER IN RESPECT OF REMAINING PURCHASES. THEREFORE, UNIFORM ESTIMATION AND APPLICATION OF GP @ 4.5% IS NOT SUSTAINABLE. IN VIEW OF THIS, WE ARE OF THE CONSIDE RED OPINION THAT THE GP RATE APPLIED BY THE LEARNED CIT (A) AT 3% IN RES PECT OF TAINTED PURCHASES IS FAIR AND REASONABLE. THEREFORE, THE FI NDINGS OF THE LEARNED CIT (A) IN RESPECT OF ALL THE ASSESSMENT IN VOLVED IN THE PRESENT APPEALS ARE UPHELD AND THE APPEALS OF THE REVENUE F OR ALL THE ASSESSMENT YEARS ARE DISMISSED.' 5. RESPECTFULLY FOLLOWING THE SAME, I FIND THAT IN THIS YEAR THE 3% OF TAINTED PURCHASES IS ACCEPTED BY THE AO. I, THE REFORE, MODIFY THE ORDER OF THE LD. CIT(A) AND RESTRICT THE ADDITION U P TO 3% OF TAINTED PURCHASES. ITA NOS.5099, 5100 & 5101/M/2017 M/S. SRK GEMS AND GIFTS PVT. LTD. 5 6. IN THE RESULT, ALL THE THREES APPEALS OF THE ASS ESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 30.11.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.