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

ITA 5429/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9879 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 24-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN SR
• Assessee Lawyers: BIREN GABAWALLA
• Keywords: Bogus purchase; Opportunity of cross examination; Third party statement; Accommodation entries
• Section: 143(3); 142(1)

Judgement Text

ITA NO.5429/M/2015 SATYANIS THE JEWELLERY STORE PRIVATE LIMITED ASSESSMENT YEAR 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 5429/MUM/2015 ( / ASSESSMENT YEAR: 2012-13) ASSISTANT COMMISSIONER OF INCOME TAX OFFICER 13(2)(1) 1 ST FLOOR, ROOM NO. 146 AAYKAR BHAWAN M.K.ROAD MUMBAI 400 020 / VS. S ATYANIS THE JEWELLERY STORE PVT.LTD 190, SAVANNA COURT TURNER ROAD BANDRA (W) MUMBAI 400 050 ./ ./PAN/GIR NO. AALCS-8177-J ( /APPELLANT ) : ( !' / RESPONDENT ) A SSESSEE BY : BIREN GABAWALLA RE VENUE BY : V. JUSTIN, SR.AR / DATE OF HEARING : 31/08/2017 / DATE OF PRONOUNCEMENT : 06 /09/2017 ITA NO.5429/M/2015 SATYANIS THE JEWELLERY STORE PRIVATE LIMITED ASSESSMENT YEAR 2012-13 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2012- 13 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-21 [CIT(A)], MUMBAI DATED 18/09/2015 QUA RELIEF PROVIDED TO THE ASSESSEE ON ACCOUNT OF CERTAIN BOGUS PURCHASES. 2.1 BRIEFLY STATED THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN MANUFACTURING & TRADING OF GOLD & DIAMOND JEWELLERY , WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 27/03/2015 AT RS.13,06,81,710/- AS PER NORMAL PROVISIONS AFTER SO LE ADDITION OF BOGUS PURCHASES AMOUNTING TO RS.12,28,88,219/- AS AGAINST RETURNED INCOME OF RS.76,93,486/- E-FILED BY THE ASSESSEE ON 28/09/2012. THE ASSESSEE REFLECTED GROSS PROFIT OF RS.1.64 CRORES AGAINST TU RNOVER OF RS.16.84 WHICH TRANSLATED IN GP RATE OF 9.77%. 2.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM DGIT (INV.), IT WAS NOTED THAT THE ASSESSEE MADE PURCHASES OF RS.12,28, 88,219/- FROM THREE GROUP CONCERNS OF ONE BHAWARLAL JAIN AS PER THE FOLLOWING DETAILS:- THE SEARCH / SURVEY ACTIONS ON THE SAID GROUP REVEA LED THAT THE SAID GROUP CONSISTING OF MORE THAN 70 BUSINESS ENTITIES WAS ENGAGED IN NO. NAME AMOUNT (RS.) 1. PRIME STAR 8,55,22,004/- 2. MAYUR EXPORTS 2,32,85,440/- 3. MOHIT ENTERPRISES 1,40,80,775/- TOTAL 12,28,88219/- ITA NO.5429/M/2015 SATYANIS THE JEWELLERY STORE PRIVATE LIMITED ASSESSMENT YEAR 2012-13 3 PROVIDING ACCOMMODATION PURCHASES BILLS & ACCOMMODATION LOANS & ADVANCES. CONSEQUENTLY, THE ASSESSEE VIDE STATUTORY NOTICES U/S 143(2) & 142(1) WAS CALLED UPON TO SUBSTANTIATE THE PURCHA SE TRANSACTIONS WITH DOCUMENTARY EVIDENCE AND BY PRODUCING THE RESPECTIV E PARTIES FOR CONFIRMATION OF TRANSACTIONS. THE ASSESSEE, VIDE HI S REPLY DATED 18/02/2015 SUBMITTED CONFIRMATION OF ACCOUNTS, PURCHASE BILLS, BANK STATEMENTS EVIDENCING PAYMENTS MADE THROUGH BANKING CHANNELS, CORRESPONDING SALES BILLS, AFFIDAVIT OF SUPPLIERS CONFIRMING THE TRANSACTIONS ETC. TO SUBSTANTIATE THE GENUINENESS O F PURCHASES. FURTHER, THE ASSESSEE CONTENDED THAT THE TRANSACTION COULD N OT BE TREATED AS NON-GENUINE MERELY ON THE BASIS OF THIRD PARTY STATEMENTS TAKE N AT ASSESSEES BACK AND WHICH WERE NEVER CONFRONTED TO THE ASSESSEE. THE ASSESSEE, IN THE ALTERNATIVE, PRAYED FOR SOME ESTIM ATED DISALLOWANCE AGAINST THE SAME TO ACCOUNT FOR PROFIT ELEMENT EMBE DDED IN THE TRANSACTIONS. HOWEVER, NOT CONVINCED, LD. AO REJECT ED THE VARIOUS CONTENTIONS OF THE ASSESSEE AND CONCLUDED THAT THE ASSESSEE FAILED TO DISCHARGE THE PRIMARY ONUS CASTED ON HIM IN THIS RE GARD. FINALLY, ENTIRE PURCHASES WERE DISALLOWED AND ADDED TO THE INCOME O F THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 18/09/2 015 AND REITERATED ITS CONTENTIONS AND PLACED RELIANCE ON SEVERAL JUDI CIAL PRONOUNCEMENTS ON THE MATTER. THE LD.CIT(A) AFTER APPRECIATING THE ASSESSEES CONTENTIONS, JUDICIAL PRONOUNCEMENTS, VAT RATE ON D IAMONDS, AND CBDT CIRCULAR NO. 2/2008 DATED 22/02/2008 RESTRICTED THE SAID ADDITIONS TO 3% OF BOGUS PURCHASES WHICH BROUGHT THE NET MARGIN REFLECTED BY THE ITA NO.5429/M/2015 SATYANIS THE JEWELLERY STORE PRIVATE LIMITED ASSESSMENT YEAR 2012-13 4 ASSESSEE TO 6.79%. AGGRIEVED, THE REVENUE IS IN FUR THER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR], FIRST OF ALL, SUBMITTED THAT THE VERDICT OF THE LD.CIT(A) HAS BEEN ACCEPTED BY THE ASSESSEE AND THE ASSESSEE IS NOT IN FURTHER APPEAL AGAINST THE S AME. PROCEEDING FURTHER, LD. DR CONTENDED THAT THE ASSESSEE COULD N OT PRODUCE ANY OF THE PARTY FOR CONFIRMATION OF TRANSACTION AND THE S EARCH / SURVEY ACTION ON THE CONCERNED GROUP CLEARLY REVEALED THAT THE TR ANSACTIONS WERE MERELY ACCOMMODATION ENTRIES AND THEREFORE, LD. CIT (A) ERRED IN GRANTING SUBSTANTIAL RELIEF TO THE ASSESSEE. 5. PER CONTRA , LD. AR SUPPORTED THE STAND TAKEN BY LD. CIT(A) ON THE PREMISES THAT ENTIRE ADDITION THEREOF COULD NOT MAD E KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS. 6. HEARD AND PERUSED RELEVANT MATERIAL ON RECORD. W E ARE OF THE CONSIDERED OPINION THAT THERE COULD BE NO SALE WITH OUT PURCHASE OF MATERIAL KEEPING IN VIEW THE NATURE OF ASSESSEES B USINESS. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISP UTED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANN ELS. THE ASSESSEE PRODUCED DETAILS OF PURCHASE AND CORRESPON DING SALES MADE AND RECONCILED QUANTITATIVE DETAILS. AT THE SAME TI ME, THE ASSESSEE COULD NOT PRODUCE ANY OF THE SUPPLIERS BEFORE LOWER AUTHORITIES AND THE SEARCH / SURVEY ACTION ON THE GROUP CASTED A SERIOU S DOUBT ON ASSESSEES CLAIM. THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EM BEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEME NT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE ITA NO.5429/M/2015 SATYANIS THE JEWELLERY STORE PRIVATE LIMITED ASSESSMENT YEAR 2012-13 5 BENEFIT OF VAT AGAINST ALLEGED BOGUS PURCHASES, WHICH LD.CIT(A) HAS RIGHTLY DONE. HOWEVER, WE FIND THAT THE ESTIMATED A DDITION @3% TO BE ON THE LOWER SIDE KEEPING IN VIEW THE OVERALL FACTS AN D CIRCUMSTANCES OF THE CASE AND THEREFORE, ENHANCE THE SAME TO 8% OF ALLEG ED BOGUS PURCHASES, WHICH COMES TO RS.98,31,057/-. RESULTANTLY, THE REV ENUES APPEAL STANDS PARTLY ALLOWED. 7. IN NUTSHELL, THE REVENUES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH SEPTEMBER, 2017. SD/- SD/- (MAHAVIR SINGH) (M ANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 06. 09.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. !$- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI