B ARVINDKUMAR & CO., MUMBAI V. ACIT 19(1), MUMBAI

ITA 5959/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6973 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIKLD
• Assessee Lawyers: RAHUL SARDA LD
• Keywords: Bogus purchase; Search and seizure; Accommodation entries; Set aside
• Section: 143(3); 133(6); 131; 69; 148; 132

Judgement Text

ITA NOS.5959 & 6326/MUM/2018 M/S. B. ARVINDKUMAR & CO. ASSESSMENT YEAR :2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO 5959/MUM/2018 ( / ASSESSMENT YEAR : 2010-11 ) M/S. B. ARVINDKUMAR & CO. DC-3165, BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX BANDRA EAST, MUMBAI 400051. / VS. A CIT - 19( 1) , MATRU MANDIR, TARDEO ROAD MUMBAI 400 007. %& ./ ./PAN/GIR NO. AAAFB-1069-L ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) & ./ I.T.A. NO 6326/MUM/2018 ( / ASSESSMENT YEAR : 2010-11 ) A CIT - 19( 1) , MATRU MANDIR, TARDEO ROAD MUMBAI 400 007. / VS. M/S. B. ARVINDKUMAR & CO. DC-3165, BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX BANDRA EAST, MUMBAI 400051 %& ./ ./PAN/GIR NO. AAAFB-1069-L ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) ASSESSEE BY : MR. RAHUL SARDA- LD. AR REVENUE BY : MS. KAVITA P. KAUSHIK-LD. DR / DATE OF HEARING : 29/01/2020 / DATE OF PRONOUNCEMENT : 05/02/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 AFORESAID CROSS APPEALS FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX ITA NOS.5959 & 6326/MUM/2018 M/S. B. ARVINDKUMAR & CO. ASSESSMENT YEAR :2010-11 2 (APPEALS)-30, MUMBAI, [IN SHORT REFERRED TO AS CIT (A)], APPEAL NO. CIT(A)-30/19(1)/10342/2017-18 DATED 08/08/2018 ON CERTAIN GROUNDS . 1.2 THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDE R: - THE CIT(APPEALS) HAS ERRED BY TREATING 3% OF THE AL LEGED BOGUS PURCHASES AMOUNTING TO RS. 2,62,05,220/- AND DISALLOWING THE SAME AND ADDING IT TO THE TAXABLE INCOME OF YOUR APPELLANT. 1.3 THE GROUNDS RAISED BY THE REVENUE READ AS UNDER : - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION MA DE BY THE AO ON ACCOUNT OF BOGUS PURCHASES TO 3% OF RS. 2,62,05,220/- NOTWITHSTANDIN G THAT THE ADDITION MADE ON THE BASIS OF CREDIBLE INFORMATION FROM DGIT(INV.) MUMBA I BASED ON THE SEARCH AND SEIZURE ACTION U/S 132 OF THE RAJENDRA JAIN GROUP? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION MA DE BY THE AO ON ACCOUNT OF ACCOMMODATION ENTRIES OF PURCHASES IGNORING THAT TH E ASSESSEE HAD NOT DISCHARGED ITS ONUS OF PROVING THE GENUINENESS OF THE PURCHASE S AND HAD FAILED TO FURNISH CRUCIAL SUBSTANTIATING DOCUMENTS IN THE NATURE OF D ELIVERY CHALLANS, TRANSPORT RECEIPT AND EXIT GAT PASS ETC.? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, IF THE CIT(A) HAS MADE A PRESUMPTION THAT PURCHASES HAVE B EEN MADE FROM UNKNOWN PARTIES, THE LD. CIT(A) HAS NOT CLARIFIED HOE THE P AYMENT WAS MADE AND WHETHER SECTION 69 OF THE INCOME TAX ACT, 1961 WILL BE APPL ICABLE? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT CONSIDERING THE ORDER OF HONBL E SUPREME COURT IN THE CASE OF N.K. PROTEIN LTD. DATED 16.01.2017 WHICH IS ON THE SIMILAR ISSUE OF BOGUS PURCHASES AND WHEN THE APEX COURT WAS ALREADY THE LAW OF THE LAND WHEN THE CIT(A) HAS PRONOUNCED ITS ORDER ON 08.08.2018? 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. AS EVIDENT FROM GROUNDS OF APPEAL, THE SOLE SUBJECT MATTER OF THE APPEAL IS ESTIMATED ADDITIONS ON ACCOUNT OF ALLEGED BOGUS PURCHASES. 2. WE HAVE CAREFULLY HEARD THE SUBMISSIONS MADE BY BOTH THE REPRESENTATIVES. WE HAVE ALSO PERUSED RELEVANT MATE RIAL ON RECORD. OUR ADJUDICATION TO ISSUE RAISED IN THE CROSS-APPEAL WO ULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. ITA NOS.5959 & 6326/MUM/2018 M/S. B. ARVINDKUMAR & CO. ASSESSMENT YEAR :2010-11 3 3.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT FIRM STATED TO BE ENGAGED IN IMPORT-EXPORT OF DIAMONDS , WAS ASSESSED FOR YEAR UNDER CONSIDERATION 143(3) R.W.S. 147 ON 29/12 /2017 WHEREIN THE ASSESSEE WAS SADDLED WITH ADDITIONS OF RS.262.05 LA CS ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 29/09/2010 AT RS.111.60 LACS WHICH WAS PROCESSED U/S 143(1). 3.2 PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM DGIT (INV.) GATHERED DURING THE COURSE OF SEARCH OPERATION U/S 132 IN TH E VASE OF SHRI RAJENDRA JAIN GROUP, IT TRANSPIRED THAT THE ASSESSEE OBTAINED BOGUS ACCOMMODATION PURCHASES BILLS AGGREGATING TO RS.262 .05 LACS FROM 2 ENTITIES OF THE SAID GROUP. THE DETAILS OF THE SAME HAS ALREADY BEEN EXTRACTED AT PARA-4 OF THE QUANTUM ASSESSMENT ORDER . ACCORDINGLY, THE CASE WAS REOPENED AS PER DUE PROCESS OF LAW VIDE IS SUANCE OF NOTICE U/S 148 ON 30/03/2017 WHICH WAS FOLLOWED BY STATUTO RY NOTICES WHEREIN THE ASSESSEE WAS DIRECTED TO SUBSTANTIATE THE PURCH ASE TRANSACTIONS. 3.3 AFTER APPRECIATING THE MODUS OPERANDI ADOPTED B Y THE SAID GROUP FOR ISSUANCE OF FAKE BILLS, THE ASSESSEE WAS SHOW-C AUSED AS TO WHY THE STATED PURCHASES WERE NOT TO BE DISALLOWED. IN DEFE NSE, THE ASSESSEE PRODUCED BOOKS OF ACCOUNTS, SALE PURCHASE REGISTER AND INVOICES AND SUBMITTED THAT THE PAYMENTS WERE THROUGH BANKING CH ANNELS AND THEREFORE, THE PURCHASES WERE GENUINE. HOWEVER, FIN DING THE SUBMISSIONS TO BE NOT PLAUSIBLE, LD. AO DISALLOWED ENTIRE PURCHASES AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE CONTESTED THE ADDITIONS BY WAY OF ELABORATE WRITTEN SUBMISSIONS, WHICH HAVE BEEN EXTR ACTED ON PAGE NOS. ITA NOS.5959 & 6326/MUM/2018 M/S. B. ARVINDKUMAR & CO. ASSESSMENT YEAR :2010-11 4 3 TO 5 OF THE IMPUGNED ORDER. THE ASSESSEE, INTER-ALIA, DISTINGUISHED THE CASE LAWS BEING RELIED UPON BY LD. AO AND SUBMITTED THAT THE PURCHASES WERE GENUINE. AFTER APPRECIATING THE SAME, LD. CIT( A) FORMED AN OPINION THAT LD. AO HAD NOT MADE ANY INDEPENDENT VERIFICATI ONS OF THE TRANSACTIONS. NO NOTICES U/S 133(6) / 131 WERE EVER ISSUED TO THE SUPPLIERS TO TEST THE VERACITY OF THE TRANSACTIONS. HOWEVER, IT WAS ALSO OBSERVED THAT THE PRIMARY ONUS WAS ON ASSESSEE TO P ROVE THE GENUINENESS OF THE PURCHASES PARTICULARLY IN VIEW O F THE FACT THAT SUPPLIERS ADMITTED THAT THEY WERE MERELY NAME LENDE RS AND NEVER CARRIED OUT ANY GENUINE BUSINESS ACTIVITIES. IT WAS FURTHER OBSERVED IN PARA 6.10 THAT THE QUANTITATIVE DETAILS WERE MAINTA INED BY THE APPELLANT AND LD. AO DID NOT DOUBTED THE GENUINENESS OF SALES TURNOVER AND THEREFORE THE ISSUE WOULD BOIL DOWN TO FINDING OUT THE CORRECT ELEMENT OF PROFIT EMBEDDED IN SUCH BOGUS PURCHASES WHICH ASSES SEE WOULD HAVE EARNED BY MAKING PURCHASES FROM UNKNOWN PARTIES. RE LYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN BHOLANATH POLYFAB PVT. LTD. (355 ITR 290), SIMIT P.SHETH (38 TAXMANN.COM 385) AND SANJAY OIL CAKE IND. (316 ITR 274), LD. CIT(A) FINALLY CAME TO A CONCLUSION THAT A REASONABLE ESTIMATION OF PROFIT WAS TO BE MADE AGAI NST THESE PURCHASES. FINDING THAT THE TASK FORCE GROUP FOR DIAMOND INDUS TRY CONSTITUTED BY THE GOVERNMENT OF INDIA, AFTER CONSIDERING THE BAP SCHE ME, HAS RECOMMENDED PRESUMPTIVE TAX OF 3% FOR MANUFACTURING ACTIVITY, LD. CIT(A) ESTIMATED THE ADDITIONS @3% OF TOTAL PURCHAS ES OF RS.262.05 LACS. THE ADJUDICATION BY LD. CIT(A) HAS GIVEN RISE TO CROSS-APPEAL BEFORE US. ITA NOS.5959 & 6326/MUM/2018 M/S. B. ARVINDKUMAR & CO. ASSESSMENT YEAR :2010-11 5 5. AFTER CAREFUL CONSIDERATION OF FACTUAL MATRIX AS ENUMERATED BY US IN THE PRECEDING PARAGRAPHS, WE ARE OF THE CONSIDERED OPINION THAT THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIA L KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS. THE SALE TURNOVER HA S BEEN ACCEPTED BY THE REVENUE. THE ASSESSEE WAS IN POSSESSION OF PRIM ARY PURCHASE DOCUMENTS AND THE PAYMENTS TO THE SUPPLIERS WERE TH ROUGH BANKING CHANNELS. THE ASSESSEE WAS MAINTAINING ITS BOOKS OF ACCOUNTS WITH QUANTITATIVE DETAILS OF SALE AND PURCHASE. HOWEVER, AT THE SAME TIME, THE ASSESSEE MISERABLY FAILED TO SUBSTANTIATE THE PURCH ASES AND FAILED TO PRODUCE ANY OF THE SUPPLIERS TO CONFIRM THE TRANSAC TIONS. THEREFORE, THE PRIMARY ONUS CASTED UPON ASSESSEE, TO PROVE THE TRA NSACTIONS, REMAINED UNDISCHARGED. THE STATED FACTUAL MATRIX, IN OUR CON SIDERED OPINION, WOULD MAKE IT A FIT CASE TO MAKE ESTIMATED ADDITION S TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MAT ERIAL IN THE GREY / UNORGANIZED MARKET AND UNDUE BENEFIT OF VAT AGAINST SUCH BOGUS PURCHASES, WHICH LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY DONE SO. THEREFORE, FINDING THAT LD. CIT(A) HAS CLINCHED THE ISSUE IN CORRECT PERSPECTIVE AND MADE REASONABLE ESTIMATION, WE SEE NO REASON TO INTERFERE WITH THE SAME. 6. RESULTANTLY, BOTH THE APPEALS STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH FEBRUARY, 2020. SD/- SD/- (MAHAVIR SINGH) (MA NOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 05/02/2020 SR.PS. JAISY VARGHESE ITA NOS.5959 & 6326/MUM/2018 M/S. B. ARVINDKUMAR & CO. ASSESSMENT YEAR :2010-11 6 !'! / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. 1 ( ) / THE CIT(A) 4. 1 / CIT CONCERNED 5. 23),4 , 4 , / DR, ITAT, MUMBAI 6. 3567 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.