SANGHAVI DIAMONDS PRIVATE LIMITED, MUMBAI V. DCIT 5(1)(3), MUMBAI

ITA 5214/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3801 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 10-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Keywords: Bogus purchase; Opportunity of being heard; Set aside
• Section: 143(3); 250; 201; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI S.RIFAUR REHMAN (ACCOUNTANT MEMBER) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA NOS.5214 & 5215/MUM/2018 (ASSESSMENT YEARS: 2009 - 10 & 2010 - 11) SANGHAVI DIAMONDS PVT. LTD.TOWER - C, BLOCK - E4012013, BHARAT DIAMOND BOURSE, BKC, BANDRA EAST, MUMBAI 400 051 VS. DY. COMMISSIONER OF INCOME TAX - 5(1)(3),ROOM NO.573, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. PAN NO. AAACS9384A APPELLANT RESPONDENT ASSESSEE BY : SHRI. SUCHEK ANCHALIYA REVENUE BY : SHRI. V. VINOD KUMAR DATE OF HEARING : 28/11/2019 DA TE OF PRONOUNCEMENT : 29 /11/2019 ORDER PER BENCH : THE CAPTIONED APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE CONSOLIDATED ORDER PASSED BY THE CIT(A) - 10, MUMBAI, DATED 29.06.2018 FOR A.Y. 2009 - 10 AND A.Y. 2011 - 12. AS A COMMON ISSUE IS INVOLVED IN THE AFORESAID APPEALS, THEREFORE, THE SAME ARE BEING TAKEN UP AND DISPOSED OFF BY WAY OF A CONSOLIDATED ORDER. WE SHALL FIRST ADVERT TO THE APPEAL OF THE ASSESSEE FOR A.Y. 2009 - 10. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER BY RAISING BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW. THE LD . CIT(A) ERRED IN DISMISSING THE APPEAL AGAINST THE ASSESSMENT ORDER ISSUED BY THE LD. AO ON GROUND THAT THE APPEAL HAS BECOME IN FRUCTUOUS AS THE SAME HAS BEEN SET ASIDE BY PRINCIPAL CIT U/S 263 OF THE INCOME TAX ACT. 1961. 2. ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT GIVEN AN OPPORTUNITY TO PRESENT THE CASE BEFORE LD. CIT(A). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISMISSING THE APPEAL AGAINST THE ADDITION OF GROSS PROFIT MADE BY THE LD . AO @ 9.73% OF PURCHASES OF RS.5,62,95,828/ - BY TREATING THE GENUINE PURCHASES AS ACCOMMODATION ENT RY BY LD. AO 4. TH E APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ALL OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF CUT & POLISHED DIAMONDS HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 29 .09.2009, DECLARING ITS TOTAL INCOME AT RS.28,83,110/ - . THE BOOK PROFIT OF THE ASSESSEE COMPANY AS PER THE PROVISIONS OF SEC.115JB WAS COMPUTED AT RS. 29,11,973/ - . ORIGINAL ASSESSMENT WAS FRAMED BY THE A.O, VIDE HIS ORDER PASSED UNDER SEC. 143(3), DATE D 13.12.2011, AND THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 28,83,110/ - UNDER THE NORMAL PROVISIONS. 3. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT, THAT THE ASSESSEE AS A BENEFICIARY HAD OBTAINED BOGUS PURCHASE BILLS FROM CERTAIN HAWALA DEALERS, ITS CASE WAS REOPENED UNDER SEC.147 OF THE ACT. 4. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE A.O OBSERVING THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE IMPUGNED PU RCHASE TRANSACTIONS, THEREFORE, ESTIMATED THE PROFIT ELEMENT EMBEDDED IN MAKING OF THE IMPUGNED PURCHASES BY THE ASSESSEE FROM THE OPEN/GREY MARKET AT 12.50% OF THE AGGREGATE VALUE OF SUCH PURCHASES. OUT OF THE ESTIMATED PROFIT RATE OF 12.5%, THE A.O REDU CED THE G.P RATE OF 2.77% OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND RESULTANTLY MADE AN EFFECTIVE ADDITION OF 9.73% OF THE AGGREGATE VALUE OF THE IMPUGNED PURCHASE TRANSACTIONS. 5. AGGRIEVED, THE ASSESSEE ASSAILED THE ASSESSMENT IN APPEAL BEFOR E THE CIT(A). IN THE MEAN TIME, THE PR. CIT - 5, MUMBAI, CALLED FOR THE RECORDS OF THE ASSESSEE UNDER SEC.263 OF THE ACT. OBSERVING, THAT THE A.O HAD ERRED IN RESTRICTING THE ADDITION IN RESPECT OF THE IMPUGNED PURCHASE TRANSACTIONS ONLY TO THE EXTENT OF THE PROFIT EMBEDDED IN MAKING OF SUCH PURCHASES I.E @ 9.73% , THE PR. CIT WAS OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY HIM WAS THUS RENDERED AS ERRONEOUS, INSOFAR IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, THE PR. CIT VIDE HIS ORDER PASSED UNDER SEC.263, DATED 23.03.2018, THEREIN SET ASIDE THE ORDER OF THE A.O AND DIRECTED HIM TO PASS A FRESH ASSESSMENT ORDER AFTER CONSIDERING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF N.K. PROTEINS LTD. VS. DCIT (2017) 250 TAXMAN 22 (SC). 6. AGGRIEVED, THE ASSESSEE ASSAILED THE ORDER PASSED BY THE PR. CIT UNDER SEC. 263 BEFORE THE TRIBUNAL. IN THE MEAN TIME, THE CIT(A) - 10, MUMBAI, VIDE HIS ORDER DATED 29.06.2018, OBSERVED THAT THE IMPUGNED ASSESSMENT ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 147, DATED 29 .03.2016 WAS SET ASIDE BY THE PR. CIT - 5, MUMBAI, VIDE HIS ORDER PASSED UNDER SEC. 263, DATED 23.03.2018. OBSERVING, THAT THE PURSUANT TO THE ORDER PASSED BY THE PR. CIT UNDER SEC. 263, DATED 23.03.2018, THE IMPUGNED ASSESSMENT O RDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 147, DATED 30.03.2016 HAD BEEN SET ASIDE, THEREFORE, THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AS HAVING BEEN RENDERED AS INFRUCTUOUS. 7. SUBSEQUENTLY, THE TRIBUNAL, VIDE ITS ORDER DATED 30.11.2018, WH ILE DISPOSING OFF THE APPEAL OF THE ASSESSEE AGAINST THE ORDER PASSED BY THE PR. CIT - 5, MUMBAI UNDER SEC. 263, DATED 23.03.2018, THEREIN SET ASIDE THE ORDER PASSED UNDER SEC.263 OF THE ACT. IT WAS OBSERVED BY THE TRIBUNAL, THAT AS THE A.O HAD ADOPTED ONE OF THE POSSIBLE VIEWS, THEREFORE, THE PR. CIT WAS IN ERROR IN EXERCISING HIS REVISIONAL JURISDICTION UNDER SEC.263 OF THE ACT. 8. IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSE SSEE, THAT THE ORDER PASSED BY THE PR. CIT - 5, MUMBAI UNDER SC. 263, DATED 23.03.2018, HAD BEEN QUASHED BY THE TRIBUNAL, VIDE ITS ORDER PASSED IN ITA NO. 3178/MUM/2018, DATED 30.11.2018 FOR THE YEAR UNDER CONSIDERATION I.E A.Y. 2009 - 10. ON THE BASIS OF HIS AFORESAID CONTENTION, IT WAS AVERRED BY THE LD. A.R, THAT AS THE ORDER PASSED BY THE PR. CIT UNDER SEC. 263 HAD BEEN QUASHED, THEREFORE, CONSEQUENTLY THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 147, DATED 29 .03.2016 STANDS RESTORED. ACCORDINGLY, IT WAS SUBMITTED BY THE LD. A.R, THAT IN THE BACKDROP OF THE AFORESAID FACTS, THE DISMISSAL OF THE ASSESSES APPEAL BY THE CIT(A) AS HAVING BEEN RENDERED AS INFRUCTUOUS, FOR THE REASON, THAT THE ASSESSMENT ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 147, DATED 29 .03.2016 HAD BEEN SET ASIDE BY THE PR. CIT - 5, MUMBAI, VIDE HIS ORDER PASSED UNDER SEC. 263, DATED 23.03.2018, COULD NO MORE BE SUSTAINED. IN SUM AND SUBSTANCE, IT WAS THE CLAIM OF THE LD. A.R, THAT AS THE ORDER OF THE PR. CIT - 5, MUMBAI, UNDER SEC .263 HAD BEEN QUASHED BY THE TRIBUNAL, THEREFORE, THE ORIGINAL ASSESSMENT ORDER PASSED BY THE A.O UNDER SEC.143(3) R.W.S 147, DATED 29 .03.2016 STANDS RESTORED. ON THE BASIS OF HIS AFORESAID CONTENTIONS, IT WAS AVERRED BY THE LD. A.R THAT THE ORDER OF THE CIT(A) DISMISSING THE APPEAL OF THE ASSESSEE AS HAVING BEEN RENDERED AS INFRUCTUOUS MAY BE SET ASIDE, WITH A DIRECTION TO HIM TO DISPOSE OFF THE SAME ON THE BASIS OF A SPEAKING ORDER. 9. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 10. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ORDER PASSED BY THE PR.CIT - 5, MUMBAI, UNDER SEC.263, DATED 23.03.2018 HAD BEEN QUASHED BY THE TRIBUNAL, VIDE ITS ORDER PASSED IN ITA NO. 3178/MUM/2018, DATED 30.11.2018. AS IS DISCERNIBLE FROM THE RECORDS, THE CIT(A) - 10, MUMBAI, TAKING COGNIZANCE OF THE FACT THAT THE ASSESSMENT ORDER UNDER SEC . 143(3) R.W.S 147, DATED 29 .03.2016, HAD BEEN SET ASIDE BY THE PR. CIT - 5, MUMBAI, VIDE HIS ORDER PASSED UNDER SEC.263, DATED 23.03.2018, HAD THUS, FOR THE SAID REASON DISMISSED THE APPEAL OF THE ASSESSEE AS HAVING BEEN RENDERED AS INFRUCTUOUS. IN OUR CO NSIDERED VIEW, NOW WHEN THE ORDER PASSED BY THE PR. CIT - 5, MUMBAI, UNDER SEC. 263, DATED 23.03.2018 IN ITSELF HAD BEEN QUASHED BY THE TRIBUNAL, VIDE ITS ORDER DATED 30.11.2018, THEREFORE, THE ORIGINAL ASSESSMENT ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 147, DATED 29 .03.2016 STANDS RESTORED. ACCORDINGLY, IN THE BACKDROP OF THE AFORESAID SHIFT IN FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE DISMISSAL OF THE APPEAL BY THE CIT(A), FOR THE REASON, THAT AS THE ASSESSMENT ORDER UNDER SEC.143(3) R.W.S 147 , DATED 29 .03.2016 HAD BEEN SET ASIDE BY THE PR. CIT IN EXERCISE OF HIS REVISIONAL JURISDICTION, THEREFORE, THE APPEAL OF THE ASSESSEE WAS RENDERED AS INFRUCTUOUS, CANNOT BE SUSTAINED AND IS LIABLE TO BE VACATED. WE THUS RESTORE THE MATTER TO THE FILE OF THE CIT(A), WITH A DIRECTION TO HIM TO DISPOSE OFF THE APPEAL AFTER AFFORDING A SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. RESULTANTLY, IN TERMS OF OUR AFORESAID OBSERVATIONS THE MATTER IS RESTORED TO THE FILE OF THE CIT(A) FOR FRESH ADJU DICATION. 12. RESULTANTLY, THE APPEAL OF THE ASSESSEE FOR A.Y. 2009 - 10 IN ITA NO. 521 4 /MUM/2018 IS ALLOWED FOR STATISTICAL PURPOSES. A.Y. 20 11 - 12 ITA NOS. 521 5 /MUM/2018 13. AS THE FACTS AND THE ISSUE INVOLVED IN THE CAPTIONED APPEAL OF THE ASSESSEE REMAINS THE SAME AS WERE THERE BEFORE US IN ITS APPEAL FOR THE IMMEDIATELY PRECEDING YEAR I.E A.Y. 2009 - 10, IN ITA NO. 521 4 /MUM/2018, THEREFORE, OUR ORDER THEREIN PASSED SHALL APPL Y MUTATIS MUTANDIS FOR THE DISPOSAL OF THE CAPTIONED APPEALS I.E A.Y. 201 1 - 1 2 (ITA NO.521 5 /MUM/2018) . . ACCORDINGLY, THE CAPTIONED APPEAL OF THE ASSESSEE FOR A.Y 2011 - 12 IS RESTORED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION AFTER AFFORDING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 14. RESULTANTLY, THE CAPTIONED APPEALS OF THE ASSESSEE VIZ. A.Y. 2009 - 10 (ITA 521 4 /MUM/2018) AND A.Y 2011 - 12 (ITA NO. 5215/MUM/2018) ARE ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRO NOUNCED IN THE OPEN COURT ON 29 . 11.2019 SD/ - SD/ - ( S.RIFAUR REHMAN ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 29 .11 .2019 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI