EXIM GEMS, MUMBAI V. ACIT 19(1), MUMBAI

ITA 5314/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0224 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 29-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Bogus purchase; Accommodation entries
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA N O. 531 4 /MUM./2016 (ASSESSMENT YEAR: 2007 - 0 8 ) M/S. EXIM GEMS 102, THE CAPITAL BANDRA KURLA COMPLEX BANDRA (E) MUMBAI 400 051 PAN NO: AAAFE8527G . APPELLANT V/S ACIT 19(1) MUMBAI . RESPONDENT ASSESSEE BY : SHRI. HARI S. RAHEJA REVENUE BY : MS. POOJA SWAROOP DATE OF HEARING 10/08/2017 DATE OF ORDER - 18 .08 .2017 O R D E R PER: SHAMIM YAHYA THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LD. CIT - A DATED 29.07.2016 AND PERTA INS TO ASSESSMENT YEAR 2007 - 08 . TH E ASSESSEE IS AG G RIEVED BY THE ORDER OF THE LEARNED C IT - A FOR 3% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.11,60,307/ - . 2 . IN THIS CASE, AO HAD MADE A DISALLOWANCE OF RS.30,94,152/ - BEING 8% OF THE BOGUS PURCHASES. UPON ASSESSEES APPEAL LD. CIT(A) REDUCED IT TO 3%. 3. AGAINST THIS ORDER ASSESSEE HAS FILED APPEAL BEFORE THE ITAT . ITA NO. 5314/MUM/2016 M/S. EXIM GEMS 2 4. W E HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS . IN THIS REGARD WE MAY GAINFULLY REFER THE FINDING OF AO AS UNDER: - (I) THE INCOME TAX DEPARTMENT HAS CONDUCTED SEARCH & SEIZURE ACTION IN THE CASE OF THE GROUP CONCERNS OF RAJENDRA JAIN, SANJAY CHOUDHARY & DH ARMICHAND JAIN AND CONCLUSIVELY PROVED THAT THESE PARTIES ARE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ONLY, AS CAN BE SEEN FROM THE DISCUSSIONS IN THE PRECEDING PARAGRAPHS. THE PARTIES ARE ISSUING BILLS WITHOUT DELIVERING ANY GOODS AND S ERVICES. (II) EVIDENTLY, THE ASSESSEE HAD ADOPTED A MODUS OPERAND! TO REDUCE ITS TRUE PROFITS BY INFLATING ITS EXPENSES INCLUDING PURCHASE EXPENSES BY TAKING ACCOMMODATION ENTRIES FROM SUCH PARTIES. (III) THUS, IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE PURCHASES TO THE EXTENT MADE FROM THE ABOVE SAID PARTIES REMAINED UNVERIFIABLE AND HENCE I ARRIVE AT A CONCLUSION THAT THE PURCHASES SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS ARE INFLATED AND BOGUS PURCHASES ARE DEBITED TO TRADING ACCOUNT TO SUPPR ESS THE TRUE PROFITS TO BE DISCLOSED TO THE DEPARTMENT. (IV) THE ONUS WAS UPON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF PURCHASES MADE BY THE ASSESSEE. (V) MERE FILING OF EVIDENCES IN SUPPORT OF PURCHASES AND PAYMENT THROUGH ACCOUNT PAYEE CHEQUE CANNOT BE CONCLUSIVE IN A CASE WHERE GENUINENESS OF TRANSACTION IS IN DOUBT. PAYMENT BY ACCOUNT PAYEE CHEQUES ARE NOT SACROSANCT. (VI) IF ALL THE EVIDENCES POINT TO THE FACT THAT NO ACTUAL GOODS WERE SUPPLIED BY THE ABOVE PARTIES, THE N THE ARGUMENT OF ASSESSEE THAT IT PURCHASED GOODS IN GOOD FAITH IS NOT TENABLE. THUS, FROM THE ABOVE ANALYSIS OF THE FACTS, IT IS CRYSTAL CLEAR THAT THE PURCHASES MADE BY THE ASSESSEE FROM THE ABOVE PARTIES AND CLAIMED AS EXPENSES IN HIS PROFIT AND LOSS ACCOUNT ARE NOT GENUINE. SINCE THE PURCHASES TO THAT EXTENT REMAIN UNVERIFIABLE AND CANNOT BE ACCEPTED, THE BOOKS OF ACCOUNTS ARE REJECTED AS PROVIDED IN SECTION 145(3) OF THE IT ACT. 5. CIT(A) IN HIS APPELLATE ORDER HAS GIVEN FOLLOWING FINDING: - ITA NO. 5314/MUM/2016 M/S. EXIM GEMS 3 6.3 / ON PERUSAL OF THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, I HAVE FOUND THAT IN THE APPELLANT'S CASE, LD. AO, NEITHER MADE INDEPENDENT VERIFICATIONS NOR HAS ATTEMPTED TO ISSUE NOTICE U/S. 133(6)/ 131 OF THE IT. ACT, BUT THE FACT REMAINS THAT THERE WAS A N OVERWHELMING EVIDENCE IN THE FORM OF SWORN STATEMENTS RECORDED FROM THE ALLEGED SUPPLIERS GIVEN BEFORE THE INVESTIGATION WING, MUMBAI THAT THEY ARE ONLY NAME SAKE PROPRIETORS/ PARTNERS / DIRECTORS OF THE CONCERNS AND THE ACTUAL MANAGEMENT & CONTROL IS BY SHRI RAJENDRA JAIN & SHRI SURENDRA JAIN. SHRI RAJENDRA JAIN, DURING THE COURSE OF SEARCH ADMITTED IN THE SWORN STATEMENT GIVEN ON OATH THAT THEY ARE ONLY GIVING ACCOMMODATION ENTRIES TO SEVERAL PARTIES. THOUGH, IT IS STATED IN THE SUBMISSIONS OF THE APPEL LANT THAT SHRI RAJENDRA JAIN RETRACTED THE STATEMENT GIVEN THE APPELLANT COULD NOT FURNISH ANY EVIDENCE IN SUPPORT OF SUCH CLAIM. 6.4 AFTER WEIGHING THE EVIDENCE PRO AND CON, I AM OF THE OPINION THAT ONUS IS ALWAYS ON THE APPELLANT TO PROVE AS TO HOW THE MATERIAL PURCHASED WAS OBTAINED FIRST, WHEN THE SUPPLIERS THEMSELVES ADMITTED THAT THEY NEVER DID THE BUSINESS AND ARE MERELY NAME LENDERS FOR THE BUSINESS CONCERNS OF SHRI RAJENDRA JAIN, WHO HAS ALSO ADMITTED THAT ONLY ACCOMMODATION ENTRIES WERE GIVEN AND NO ACTUAL SALE TO THOSE PARTIES. IN VIEW OF THE SAME, I AM IN AGREEMENT WITH THE FINDINGS OF THE AO THAT THE PURCHASES ARE NOT MADE FROM THESE PARTIES BUT FROM THE GREY MARKET BY PAYING CASH AND AS THE BILLS ARE NOT AVAILABLE FOR SUCH TRANSACTIONS, OBTAIN ED BILLS FROM THIRD PARTIES, WHO AFTER RECEIPT OF CHEQUES RETURNED THE CASH AFTER DEDUCTING ITS COMMISSION. A PERSON WHO PROCURES THE MATERIAL FROM THE GREY MARKET AND EXPORTS SAME AND RECEIVES THE SALE PROCEEDS THROU GH PROPER BANKING CHANNELS, TO COMPLETE THE CHAIN OF TRANSACTION I.E. TO BOOK THE PURCHASES AGAINST THE SALE PROCEEDS RECEIVED, OBTAINS THE BILLS FROM ENTRY PROVIDERS, - LIKE SHRI RAJENDRA JAIN ENTITIES IN THE PRESENT CASE - ISSUES CHEQUE TO THEM AND RECEIVES THE AMOUNT BACK IN CASH. IN THIS BACK GROUND ONLY MOST OF THE CHEQUES WERE ISSUED TO RAJENDRA JAIN GROUP ENTITIES AND THE APPELLANT HAS NO OTHER OPTION BUT TO TAKE BILLS FROM THE ENTRY PROVIDERS AS THEY NEEDS TO COMPLETE THE TRADING ACTIVITY IN RESPECT OF THE 'DIAMONDS SOLD IN THE BOOKS OF ACCOUNTS. FROM THESE FINDINGS IT CAN THUS BE SAFELY ASSUMED THAT THE APPELLANT HAS GROSSLY FAILED IN ITS DUTY TO MITIGATE THE BURDEN CAST UPON IT IN SO FAR AS PROVING THE GENUINENESS OF THE TRANSACTION, FROM THE SAID PARTIES ARE CONCERNED. 6. UPON CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, WE FIND THAT OVERWHELMING EVIDENCE HAVE BEEN REFERRED BY THE AUTHORITIES BELOW THAT THE IMPUGNED PURCHASES ARE BOGUS. THERE IS NO EVIDENCE OF THE ACTUAL MOVEMENT OF THE GOODS UNDER DISPUTE. IN THESE CIRCUMSTANCES LEARNED ITA NO. 5314/MUM/2016 M/S. EXIM GEMS 4 DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONOURABLE GUJARAT HIGH COURT DECISION IN THE CASE OF TAX APPEAL NO 240 OF 2003 IN THE CASE OF N K INDUSTRIES VS DY CIT, ORDER DT 20/06.2016, WHEREIN HUNDRED PERCENT OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONGWITH OTHERS HAS BEEN DISMISSED BY THE HONOURA BLE APEX COURT VIDE ORDER DT 16.1 . 2017 . 7. LEARNED COUNSEL OF THE ASSESSEE ON THE OTHER HAND SUBMITS THAT IN THIS LI N E OF BUSINESS ONLY 2% IS RATE OF GROSS PROFIT . H ENCE ADDITION SHOULD BE MADE ONLY 2%. 8. UPON CAREFUL CONSIDERATION, WE DO NOT FIND ANY SUBSTANCE IN THE ARGUMENT OF LEARNED COUNSEL OF THE ASSESSEE. WE FURTHER F IND THAT THIS IS NOT AN APPEAL BY THE REVENUE. IN SUCH CIRCUMSTANCES IT WILL NOT BE A PPROPRIATE TO TAKE AWAY THE RELIEF ALREADY GRANTED BY THE LEARNED CIT - A. ACCORDINGLY , WE UP HOLD THE ORDER OF LEARNED CIT - A WHEREIN HE HAS SUSTAINED 3 % AS DISALLOWANCE OUT OF THE BOGUS PURCHASE. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON 18 .0 8 .2017 SD/ - SD/ - SANDEEP GOSAIN SHAMIM YAHYA JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 18 .0 8 .2017 ITA NO. 5314/MUM/2016 M/S. EXIM GEMS 5 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. BY ORDER KARUNA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI