A/S BRO'S, MUMBAI V. ITO - 30(1)(1), MUMBAI

ITA 6041/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7155 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 10-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH S KOTHARI; HEMALI SONI
• Keywords: Cost of acquisition; Corroborative evidences; Accommodation entries
• Section: 142(1); 147; 148

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.6041/MUM/2016 ASSESSMENT YEAR: 2007-08 M/S. A/S BROS, BUSINESS-1, GAUTAM NAGAR, DATTA MANDIR ROAD, MALAD (EAST), MUMBAI-400097 / VS. INCOME TAX OFFICER - 30(1)(1), PRATYAKSHYAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 ( '# $ /ASSESSEE) ( % / REVENUE) P.A. NO. AAGFA5134P '# $ / ASSESSEE BY SHRI RAJESH S. KOTHARI & HEMALI SONI % / REVENUE BY SHRI V. JUSTIN-DR & % ' $ ( / DATE OF HEA RING : 24/05/2018 ' $ ( / DATE OF ORDER: 24/05/2018 M/S. A/S BROS ITA NO.6041/MUM/2016 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 05/07/2016 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, CONFIRMING THE ADDITION OF RS.29,47,973/-, BEING 30 % OF THE PURCHASE COST FROM THE PARTIES/SUPPLIERS TREATING T HE SAME AS BOGUS TRANSACTIONS. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI RAJESH S. KOTHARI ALONG WITH HEMALI SONI, DID NOT PRESS GROUND NO. 3 WITH RESPECT TO REOPENING OF ASSESSMEN T U/S 147 AND ISSUANCE OF NOTICE U/S 148 OF THE INCOME TA X ACT, 1961 (HEREINAFTER THE ACT), MERELY BASED UPON THE INFORMATION RECEIVED FROM DDIT (INV.), WITHOUT FORM ING INDEPENDENT BELIEF. THE LD. DR, SHRI V. JUSTIN, HA S NO OBJECTION TO THE REQUEST OF THE ASSESSEE, THEREFORE , THIS GROUND IS DISMISSED AS NOT PRESSED. 3. SO FAR AS, CONFIRMING THE ADDITION OF RS.29,48,973/-, BEING 30% OF THE PURCHASE COST, FRO M THE SUPPLYING PARTIES, TREATING THE SAME AS BOGUS TRANS ACTION IS M/S. A/S BROS ITA NO.6041/MUM/2016 3 CONCERNED, THE CRUX OF ARGUMENT ON BEHALF OF THE AS SESSEE IS THAT STATEMENT OF SHRI HIREN SHAH WAS RECORDED BY T HE DEPARTMENT AND THE ASSESSEE HAS ALREADY DECLARED GR OSS PROFIT @ 9%, THEREFORE, FURTHER RELIEF SHOULD BE GI VEN TO THE ASSESSEE OR THE PURCHASES MAY BE TREATED AS GENUINE . ON THE OTHER HAND, THE LD. DR, SHRI V. JUSTIN, DEFENDE D THE IMPUGNED ORDER. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE DECLARED TOTAL INCOME OF RS.6 ,82,050/- IN ITS RETURN FILED ON 10/10/2007, WHICH WAS PROCES SED U/S 143(1) OF THE ACT. AN INFORMATION WAS RECEIVED FROM THE DDIT, SURAT, AS HAS BEEN MENTIONED IN THE ASSESSMEN T ORDER THAT THE ACCOUNTS WERE FILED SUSPICIOUS AND P ARTIES MENTIONED AT SERIAL NO.1 TO 6 WERE SELLING DIAMOND TO PARTIES BASED AT MUMBAI AND RECEIVED PAYMENT THROUGH RTGS O N SAME DAY, WHEREAS, THE PARTIES MENTIONED AT SERIAL NO.7 TO 19 WERE CLAIMED TO BE SELLING DIAMOND TO THE PARTIE S MENTIONED AT SERIAL NO. 1 TO 6 WITHOUT ACTUAL PURCH ASE AND SALE. THE ASSESSEE WAS SAID TO BE BENEFICIARY OF SU CH M/S. A/S BROS ITA NO.6041/MUM/2016 4 DIAMONDS FROM PARTIES AT SERIAL NO. 1 TO 6 WHICH HA S BEEN MENTIONED AT PAGE-2 OF THE ASSESSMENT ORDER. THE LD . ASSESSING OFFICER REOPENED THE ASSESSMENT RESORTING TO THE PROVISIONS OF SECTION 147/148 OF THE ACT. IN RESPON SE TO NOTICE U/S 148, THE ASSESSEE VIDE LETTER DATED 09/0 4/2014, REQUESTED THE ASSESSING OFFICER TO TREAT THE ORIGIN AL RETURN FILED ON 02/10/2007 AS BEING FILED IN RESPONSE TO T HE NOTICE U/S 147 OF THE ACT. FURTHER NOTICE U/S 142(1) AND 143(2) OF THE ACT ALONG WITH QUESTIONNAIRE WERE SERVED UPON T HE ASSESSEE. THE REPORT RECEIVED FROM DDIT AND THE MODUS OPERANDI OF THE BUSINESS OF THE ASSESSEE HAS BEEN REPRODUCED/MENTIONED IN PARA-3 ONWARDS OF THE ASSES SMENT ORDER. THE LD. ASSESSING OFFICER NOTICED BELOW MENT IONED FACTS DURING RECORDING OF STATEMENTS:- 1.THE MODUS OPERANDI OF ALL THE PERSONS/CONCERNS W AS FOUND TO BE THE SAME. 2. NO VALUE ADDITIONS WERE MADE TO THE DIAMONDS PURCHASED AND SOLD. 3. NO PROOF OF DELIVERY OF DIAMONDS DURING SALE COU LD BE PRODUCED. 4. ALL THE PERSONS HAVE STATED TO MAKE PURCHASES LO CALLY FROM SURAT. M/S. A/S BROS ITA NO.6041/MUM/2016 5 5. THOUGH MAJOR BUSINESS WAS STATED TO BE DONE FROM SURAT, BANK ACCOUNTS WERE OPENED IN MUMBAI. 6. MOST OF THE ADDRESSES FROM WHERE THE CONCERNS WE RE STATED TO BE OPERATING HAD NO VISIBLE MACHINERY OR SETUP INDICATING CONDUCT OF BUSINESS . 7. THERE WERE HUGE TRANSFER THOUGH RTGS AND BANK TRANSFER AND HUGE AMOUNTS OF CASH WAS WITHDRAWN ON THE SAME DAY FOR MAKING PAYMENTS FOR THE PURCHASES MADE BUT THE AMOUNT OF PAYMENTS 8. WAS DELIBERATELY KEPT BELOW RS. 20000/- TO AVOID CONTRAVENTION OF 40(A)(3) OF THE INCOME TAX ACT. 9. PARTIES MENTIONED AT SR. NOS. 1 TO 6 WERE STATED TO BE SELLING DIAMOND TO PARTIES BASED AT MUMBAI. THEY W ERE ASKED TO EXPLAIN HOW THEY CAME INTO CONTACT WITH T HAT PARTY. IN RESPONSE IT WAS STATED BY ALL THESE PART IES THAT THEY CAME INTO CONTACT THROUGH SOME BROKER, BU T THE SAID BROKERS HAVE NOT BEEN IDENTIFIED BY ANY OF THE PARTY. THUS IT IS NOT PROVED THAT THE PURCHASERS AN D SELLERS ACTUALLY KNEW EACH OTHER. 10.PARTIES MENTIONED AT SR. NOS 1 TO 6 WERE. STATE D TO BE SELLING DIAMOND TO PARTIES BASED AT MUMBAI. THEY WERE ASKED TO EXPLAIN HOW THEY HAD TRANSFERRED THE DIAMONDS AND DELIVERED TO THE PURCHASERS AT MUMBAI, AND WERE ALSO ASKED TO SUBMIT SUPPORTING EVIDENCES. HOWEVER ALL THE PARTIES STATED THAT TRANSFER WERE M ADE THROUGH ANGADIAS NOR FURNISHED ANY EVIDENCE OF TRAN SFER OF DIAMONDS TO MUMBAI. THUS IT IS RIOT PROVED THAT DIAMOND HAVE ACTUALLY BEEN TRANSFERRED TO MUMBAI. 11. PARTIES MENTIONED AT SR., NOS. 7 TO 19 WERE STA TED TO BE SELLING DIAMONDS TO PARTIES AT SR. NOS 1 TO 6, AND THEY HAVE STATED THAT IN TURN THEY HAVE PURCHASED DIAMONDS FROM LOCAL MARKET. MOST OF THE PARTIES AT SR. NOS 7 TO 19 HAVE NOT SUBMITTED BILL RAISED OR EVIDE NCES OF PAYMENT MADE. ONLY TWO PARTIES NAMELY RAJESH DIAMOND AND GIRISH DIAMOND HAVE SUBMITTED EVIDENCES M/S. A/S BROS ITA NO.6041/MUM/2016 6 OF PAYMENT, FORM WHERE IT SEEN THAT PAYMENTS HAVE BEEN MADE BY TAKING SIGNATURE IN COMPUTER PRINT OUT IN SIMILAR FONT AND FORMAT, WHEREIN ONLY NAME OF PERSO NS AND PLACE IS MENTIONED AND PAYMENT BY CASH OF LESS THAN RS.20,000/- PER DAY IS MENTIONED. IT IS FURTHE R SEEN THAT PLACE MENTIONED AGAINST NAMES OF THE PERS ONS ARE FAR OFF LIKE RAJKOT, JAMNAGAR, BHAVNAGAR, PATAN , PALANPUR, MESSANAA, VISNAGAR ETC. IT IS BEYOND PREPONDERANCE OF PROBABILITY THAT PERSONS FROM SUCH DISTANT PLACES WOULD COME AND COLLECT LESS THAN RS.20,000/- PER DAY OR MAKE SALE OF LESS THAN RS. 20,000/ -. SINCE COMPLETE ADDRESS HAS NOT BEEN GIVE N AND PAYMENTS HAVE BEEN STATED TO HAVE BEEN MADE IN CASH, ENQUIRY COULD NOT BE MADE WHETHER THESE PERSO NS PHYSICALLY EXIST, AND WHETHER THEY HAVE ACTUALLY SO LD ANY DIAMONDS AS CLAIMED BY THIS PARTY. THUS IT IS N OT PROVED THAT THE DIAMONDS HAVE ACTUALLY BEEN PURCHAS ED AND PAYMENTS MADE. 3.2. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE THAT THE BUSINESS WAS ACTU ALLY CONDUCTED AND PERSONS AT SERIAL NO. 1 TO 6 COULD NO T IDENTIFY THE SO CALLED BROKERS THROUGH WHOM THEY HAVE CONTRA CTED THE PURCHASES AT MUMBAI AND EVEN NO EVIDENCE WAS PRODUCED WITH RESPECT TO TRANSFER OF DIAMONDS FROM SURAT TO MUMBAI. SIMILARLY, PERSONS AT 7 TO 19 COULD NOT FUR NISH COMPLETE NAMES AND ADDRESSES OF THE PERSONS FROM WH OM THEY HAVE CLAIMED TO HAVE PURCHASED DIAMONDS AND CONSEQUENT PAYMENTS IN CASH NOT EXCEEDING TO RS.20, 000/-. EVEN OTHERWISE, THE DIAMOND IS SUCH A COSTLY THING, IT REQUIRES BIGGER PAYMENTS AND NOT THE PAYMENTS BELOW M/S. A/S BROS ITA NO.6041/MUM/2016 7 RS.20,000/-. THE TOTALITY OF FACTS CLEARLY INDICATE S THAT THERE WERE NO ACTUAL PURCHASE/SALES OF DIAMONDS AND THERE IS LAYERING OF TRANSACTIONS AND THE BENEFICIARIES ARE PERSONS TO WHOM THE PARTIES MENTIONED AT SERIAL NO. 1 TO 6 HAS STATED TO MADE SALES. SINCE, THE PARTIES AT SERIAL NO 7 TO 19 COULD NOT PRODUCE THE GENUINENESS OF PURCHASES, THEREFORE , THE SALES MADE TO PARTIES AT SERIAL NO. 1 TO 6 ARE AUTO MATICALLY CANNOT BE SAID TO BE GENUINE, THEREFORE, IT CAN BE CONCLUDED THAT THE CLAIMED PURCHASES AMOUNTING TO RS.98,29,91 0/- ARE BOGUS BILL ENTRIES/ACCOMMODATION ENTRIES AS NO ACTUAL BUSINESS WAS CARRIED OUT BY THE ASSESSEE. NO SUPPOR TING EVIDENCE REGARDING DISPATCH/TRANSPORTATION OF DIAMO NDS FROM SURAT TO MUMBAI WAS FILED AND THERE IS UNCONTR OVERTED FINDING IN THE IMPUGNED ORDER (PAGE-8) THAT MOST OF THE ADDRESSES FROM WHERE THE CONCERNS WERE CLAIMED TO B E OPERATING HAD NO VISIBLE MACHINERY /SET UP INDICATI NG CONDUCT OF BUSINESS, THUS, THE ASSESSEE DID NOT PRO VE THE GOODS WERE PURCHASED FROM THE AFORESAID PARTIES. H OWEVER, WE ARE IN AGREEMENT WITH THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) THAT AS A CONSE QUENCE M/S. A/S BROS ITA NO.6041/MUM/2016 8 THAT THE PROFIT EMBEDDED IN SUCH TRANSACTION OF PUR CHASE AND SALES WILL BE MUCH HIGHER THAN THE NORMAL GROSS PROFIT RATIO, CONSEQUENTLY, WE FIND TO BE REASONABLE TO ES TIMATE 30% OF PURCHASED DISALLOWANCE IN PLACE OF 100% MADE BY THE ASSESSING OFFICER AS UNLESS IT IS PROVED THAT T HE ENTIRE CASH WAS RETURNED AND CAME TO THE POCKET OF THE ASS ESSEE AND IN THE ABSENCE OF ANY FURTHER ENQUIRY/INVESTIGA TION FROM THE BANK AS TO WHO WITHDREW THE CASH FROM THES E ACCOUNTS, SUCH ESTIMATION OF PROFIT WILL MEET THE E ND OF JUSTICE. THUS, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS AFFIRMED. THIS GROUND OF THE ASSESS EE IS REJECTED. FINALLY, THE APPEAL OF THE ASSESSEE, IS THEREFORE, DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 24/05/2018. SD/- SD/- ( N.K. PRADHAN ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & MUMBAI; * DATED : 24/05/2018 F{X~{T? P.S / +% M/S. A/S BROS ITA NO.6041/MUM/2016 9 %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 0./ / THE RESPONDENT. 3. 1 1 & 2$ ( ,- ) / THE CIT, MUMBAI. 4. 1 1 & 2$ / CIT(A)- , MUMBAI 5. 4%5 $ , 1 ,-( , 6 , & / DR, ITAT, MUMBAI 6. 7' 8 / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , & / ITAT, MUMBAI,