DHAVAL EXIM PVT. LTD., MUMBAI V. ITO 5(1)(3), MUMBAI

ITA 6159/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0831 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 18-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDE
• Assessee Lawyers: K A VAIDYALINGAN
• Keywords: Bogus purchase; Search and seizure; Accommodation entries; Tax effect
• Section: 69C; 147; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.6711/MUM/2016 ASSESSMENT YEAR : 2010-11 ITO 5 ( 1 )( 3 ) MUMBAI VS. DHAVAL EXIM P. LTD., 117-A, 1 ST FLOOR, PANCHRATNA, MAMA PANDURANG MARG, OPERA HOUSE, MUMBAI 400 004. PAN AADCD0472B (APPELLANT) (RESPONDENT) ITA NO.6159/MUM/2016 ASSESSMENT YEAR : 2010-11 DHAVAL EXIM P. LTD., MUMBAI 400 004. PAN AADCD0472B VS. ITO 5(1)(3) MUMBAI (APPELLANT) (RESPONDENT) FOR THE REVENUE : SHRI SAURABH DESHPANDE FOR THE ASSESSEE : SHRI K A VAIDYALINGAN DATE OF HEARING : 22 . 11 .201 8 DATE OF PRONOUNCEMENT : 30 .11 .201 8 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER THESE CROSS-APPEALS ARISE OUT OF THE ORDER, DATED 17.08.2016, OF LEARNED CIT(A)-10, MUMBAI, FOR A.Y. 2010-11. ITA NOS.6711 & 6159/MUM/2016 DHAVAL EXIM PVT. LTD. 2 2. ITA NO.6711/MUM/2016 THIS APPEAL IS BY THE DEPARTMENT. AT THE OUTSET, LEARNED COUNSELS APPEARING FOR THE RIVAL PARTIES SUBMITTED THAT THE TAX EFFECT ON THE AMOUNT DISPUTED BY THE REVENUE IS BELOW THE MONETARY LIMIT OF ` 20 LACS AS FIXED IN CIRCULAR NO.3/2018 DATED 11.07.2018 OF CENTRAL BOAR D OF DIRECT TAXES (CBDT). IN VIEW OF THE AFORESAID SUBMISSIONS OF TH E LEARNED COUNSELS APPEARING FOR THE PARTIES, THE APPEAL IS DISMISSED AS WITHDRAWN. HOWEVER, THE DEPARTMENT IS GIVEN LIBERTY TO SEEK RESTORATION OF APPEAL, IN CASE, IT IS FOUND TO BE COVERED UNDER ANY OF THE EXCEPTIONS PRO VIDED UNDER THE ABOVE REFERRED CIRCULAR. IN THE RESULT, THE DEPARTMENTS APPEAL IS DISMISSE D. 3. ITA NO.6159/MUM/2016 IN THIS APPEAL THE ASSESSEE HAS RAISED FOUR GROUND S. GROUND NO.1 IS AGAINST THE VALIDITY OF RE-OPENING OF ASSESSMENT U/ S. 147 OF THE ACT. AT THE OUTSET, THE LEARNED AR APPEARING FOR THE ASSESSEE E XPRESSED HIS INTENTION NOT TO PRESS THIS GROUND. IN VIEW OF THE AFORESAID SUB MISSIONS OF THE LEARNED AR, THIS GROUND IS DISMISSED. 4. THE COMMON ISSUE RAISED IN GROUND NOS. 2 TO 4 IS AGAINST THE DECISION OF THE LEARNED CIT(A) IN SUSTAINING THE ADDITION U/ S. 69C OF THE ACT TO 3% OF THE ALLEGED BOGUS PURCHASES. ITA NOS.6711 & 6159/MUM/2016 DHAVAL EXIM PVT. LTD. 3 5. BRIEFLY, FACTS ARE THE ASSESSEE A COMPANY IS E NGAGED IN THE BUSINESS OF TRADING IN DIAMOND. FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED ITS RETURN OF INCOME ON 23.09.2010 DECLARING TOTAL INCOME OF ` 6,23,440/-. THOUGH, INITIALLY THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED U/S. 143(1) OF THE ACT, SUBSEQUENTLY, THE ASSESSING OFFICER RE-OPENED THE ASSESSMENT U/S. 147 OF THE ACT ON THE BASIS OF INFO RMATION RECEIVED FROM DGIT (INV) REVEALING THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM CERTAIN PARTIES. IN THE COURSE OF ASSESSMENT PROCEEDINGS WHEN THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE PURCHASES MADE OF ` 6,02,93,139/- FROM SIX PARTIES BY PRODUCING EVIDEN CES, AS ALLEGED BY THE ASSESSING OFFICER, THE ASSESSEE EXCEPT FURNISHING T HE ADDRESSES OF THE PARTIES COULD NOT PRODUCE COPIES OF PURCHASE BILLS, PROOF O F PAYMENTS MADE TO THE PARTIES OR THE DETAILS OF DELIVERY OF GOODS AT ITS PREMISES. OF COURSE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FURNIS HED DETAILS OF CORRESPONDING SALES. FURTHER THE ASSESSING OFFICER OBSERVED THAT IN THE COURSE OF SEARCH AND SEIZURE OPERATION CONDUCTED IN CASE OF MR. PRAVIN KUMAR JAIN, WHO IS IN CONTROL OF VARIOUS COMPANIES, FROM SOME OF WHOM THE ASSESSEE HAD SHOWN PURCHASES OF DIAMOND, HAS IN COU RSE OF STATEMENT RECORDED U/S. 131 OF THE ACT ADMITTED THAT THE CONC ERNS CONTROLLED BY HIM WERE ONLY PROVIDING ACCOMMODATION ENTRIES WITHOUT A CTUAL DELIVERY OF GOODS. THUS, ULTIMATELY, THE ASSESSING OFFICER CONCLUDED T HAT THOUGH THE ASSESSEE HAS FAILED TO PROVE THE PURCHASES OF DIAMOND FROM T HE CONCERNED PARTIES, ITA NOS.6711 & 6159/MUM/2016 DHAVAL EXIM PVT. LTD. 4 HOWEVER, HE AGREED THAT THE ASSESSEE COULD PROVE CO RRESPONDING SALES. THUS, THE ASSESSING OFFICER CONCLUDED THAT THE ASSE SSEE MUST HAVE PURCHASED GOODS FROM THIRD PARTIES/GREY MARKET. ON THE BASIS OF THE AFORESAID CONCLUSION, THE ASSESSING OFFICER ESTIMATED THE PRO FIT @12.5% OF THE ALLEGED BOGUS PURCHASES, WHICH WORKED OUT TO ` 75,36,642/-, AND ADDED IT TO THE INCOME OF THE ASSESSEE. AGGRIEVED OF THE SAID ADDI TION, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A). THE LE ARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, THOUGH, AGREED WITH THE ASSESSI NG OFFICER THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE PURCHASES MADE, HOWEVER, HE REDUCED THE ADDITION TO 3% OF THE ALLEG ED BOGUS PURCHASES. 6. THE LEARNED AR CONTESTING THE ADDITION SUSTAINED BY THE LEARNED CIT(A) SUBMITTED THAT THE GROSS PROFIT SHOWN BY THE ASSESS EE IN THE PRECEDING YEARS IS MUCH LESS THAN 3% ESTIMATED BY THE LEARNED CIT(A ). THUS, HE SUBMITTED, THE ESTIMATION OF PROFIT ON ACCOUNT OF BOGUS PURCHA SES SHOULD BE RESTRICTED TO THE AVERAGE GROSS PROFIT RATE DECLARED BY THE ASSES SEE IN THE SUBSEQUENT ASSESSMENT YEARS. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE ORDERS OF THE DEPARTMENTAL AUTHOR ITIES, IT IS EVIDENT THAT THE ASSESSING OFFICER WAS HAVING SPECIFIC INFORMATION/M ATERIAL IN HIS POSSESSION REVEALING THAT THE ASSESSEE FOR REGULARIZING THE PU RCHASES MADE FROM ITA NOS.6711 & 6159/MUM/2016 DHAVAL EXIM PVT. LTD. 5 UNKNOWN SOURCES/GREY MARKET HAS AVAILED ACCOMMODATI ON ENTRIES TO REGULARIZE THE PURCHASES. EVEN, BEFORE US THE ASSE SSEE HAS NOT PRODUCED ANY EVIDENCE TO DEMONSTRATE THAT THE PURCHASES MADE FRO M THE DECLARED SOURCES ARE GENUINE. THE ONLY SUBMISSION MADE BY THE LEARN ED AR BEFORE US IS, THE ESTIMATED PROFIT ON ACCOUNT OF ALLEGED BOGUS PURCHA SES SHOULD BE REDUCED TO THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE IN S UBSEQUENT ASSESSMENT YEARS. IN OUR VIEW, THE AFORESAID SUBMISSION OF TH E LEARNED AR IS NOT ACCEPTABLE. IT IS A FACT ON RECORD THAT THE ASSESS EE HAS FAILED TO PROVE THE PURCHASES FROM THE DECLARED SOURCES, WHICH IN OTHER WORDS DEMONSTRATES THAT THE ASSESSEE HAS PURCHASED THE GOODS/DIAMONDS FROM UNKNOWN SOURCES/GREY MARKET, THEREBY, AVOIDING PAYMENTS OF VAT AND OTHER TAXES, AS MAY BE APPLICABLE TO SUCH TRANSACTIONS. THUS, TO THAT EXT ENT THE ASSESSEE HAS SUPPRESSED HIS ACTUAL PROFITS. IN THESE CIRCUMSTAN CES, THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE UNDER NORMAL CIRCUMSTANCES CANNOT BE APPLIED TO UNPROVED PURCHASES. AFTER CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT LEA RNED CIT(A) IS MORE THAN REASONABLE IN ESTIMATING THE PROFIT ON THE BOGUS PU RCHASES @3%. THEREFORE, WE ARE NOT INCLINED TO INTERFERE WITH THE AFORESAID DECISION OF THE LEARNED CIT(A). ACCORDINGLY, THE GROUNDS RAISED ARE DISMIS SED. IN THE RESULT, APPEALS IS DISMISSED ITA NOS.6711 & 6159/MUM/2016 DHAVAL EXIM PVT. LTD. 6 9. TO SUM UP, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0 TH NOVEMBER, 2018. SD/- SD/- (SHAMIM YAHYA) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED : 30 TH NOVEMBER, 2018. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, K BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI