ITO, Ward 2(3)(8), Surat V. Shri Pawan Satyanarayan Chhipa, Surat

ITA 63/SRT/2019

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9278 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 16-10-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 03-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 37; 143(3); 44AB

Judgement Text

आयकर अपीलȣय अͬधकरण, स ु रत Ûयायपीठ, स ु रत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr ARJUN LAL SAINI, ACCOUNTANT MEMBER आ.अ.सं./ITA No.63/SRT/2019 (AY 2013-14) (Hearing in Virtual Court) Income Tax Officer, Ward- 2(3)(8), Room No.407, 4 th Floor, Anavil Business Centre, Adajan-Hajira Road, Adajan, Surat- 395009 Vs Shri Pawan Satyanarayan Chhipa, 5/1108-A, 1167- 68-B, Office No.305, Santok Diamond Building, Gujjar Faliya, Haripura, Surat- 395003 PAN : AIEPC 2450 N अपीलाथȸ/Appellant Ĥ×यथȸ /Respondent Ǔनधा[ǐरती कȧ ओर से /Assessee by None राजèव कȧ ओर से /Revenue by Shri Ashok B Koli, CIT-DR सुनवाई की तारीख/Date of hearing 17.10.2022 उɮघोषणा कȧ तारȣख/Date of pronouncement 31.10.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income-tax (Appeals)-1, Surat [for short to as “Ld. CIT(A)”] dated 29.11.2018, which in turn arises out of an assessment order passed under section 143(3) of Income-Tax Act (Act) dated 23.03.2016 for assessment year (AY) 2013-14. The Revenue has raised the following grounds of appeal: - ITA No.63/SRT/2019 (A.Y 13-14) Sh. Pawan S. Chhipa 2 “(i) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in restricted the addition of Rs.6,17,02,781/- on account of bogus purchases to 5%. (ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has failed to appreciate the fact that the entire purchase from alleged concerns were bogus and was only to suppress the profit of the beneficiaries which is sustained by the statement on oath given by the entry provider. (iii) On the facts and circumstances of the case and in law, the Ld. CIT(A), Surat ought to have upheld the order of the Assessing Officer. It is, therefore, prayed that the order of the LD. CIT(A)-1 Surat maybe set-aside and that of the Assessing Officer’s order maybe restored.” 2. Brief facts of the case are that assessee is a proprietary concern, namely Euro Traders and engaged in the business of import, export trading in all kinds of diamonds. The assessee has filed his return of income declaring total income of Rs.5,11,120/-on 19.09.2013. The case was selected for scrutiny. During the assessment proceedings, Assessing Officer got information that assessee is one of the beneficiaries of accommodation entry in the form of purchase from Shri Gautam Jain Group, wherein Investigation Wing, Mumbai made a search on 03.10.2013. during search action huge incriminating materials were found which proves that Gautam Jain Group and his was indulging ITA No.63/SRT/2019 (A.Y 13-14) Sh. Pawan S. Chhipa 3 and providing accommodation entry without actual delivery of goods. The statement of Gautam Jain Group under section 132(4) of the Act was recorded, wherein he has admitted the entire nature of bogus transactions by his various business concerns. The assessee is one of the beneficiary who has shown purchase from Rajan Gems and Rajat Diamond Exim Pvt. Ltd., of aggregating of Rs.6.170 crores. On the basis of such information, the Assessing Officer issued show cause notice as to why the addition of aggregate purchase of Rs.6.170 crores shown from entities managed by Gautam Jain Group should not be treated as bogus purchase and added back to the income of assessee. The assessee furnished his reply on 18.03.2014. in the reply the assessee claimed that the purchase made by the assessee are genuine and are supported with purchases invoices, stock register and the payment was made through cheque. The Assessing Officer after considering the reply of assessee held that acceptable to him. The Assessing Officer on the basis of information provided by investigation wing Mumbai about the modus operandi adopted Gautam Jain Group rejected the books of account of assessee and treated the entire ITA No.63/SRT/2019 (A.Y 13-14) Sh. Pawan S. Chhipa 4 aggregate received of purchase received from Shri Gautam Jain Group was treated as bogus purchases and added back of Rs.6.170 crores to the income of assessee. 3. Aggrieved the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee filed written statement which is recorded in para-5 of the order of Ld. CIT(A). On the additions of bogus purchases, the assessee submitted that he made purchase of cut and polished diamond from Rajan Gems and Rajat Diamond Exim Pvt. Ltd. The assessee produced copies of invoices and ledger accounts. The assessee also enclosed copy of confirmation, books of account and quantitative details of sales. The assessee submitted that books of accounts of assessee are duly audited and all documentary evidence were furnished before the Assessing Officer. The entire (100%) diamond purchases were sold during the trading activities which resulted into nil closing stock of the year. The sale of assessee was accepted by the Department. Thus, the corresponding purchase should also be accepted as genuine. The Assessing Officer has not rejected the sales of assessee. The payments made to the ITA No.63/SRT/2019 (A.Y 13-14) Sh. Pawan S. Chhipa 5 suppliers through account payee cheques. The assessee also relied on certain case law. The assessee M/s Euro Traders, Prop. Pwan Chippadeals in all type of diamonds gold & jewellery and having turnover of Rs.112,79,73,501/- in assessment year 2013-14. The business of assessee was carried out from Surat and Mumbai and return of income filed by the assessee accompanied with audit report under section 44AB of the Act. The assessee maintains complete set of books of account includes cash book, bank book, ledger, sales purchase register, stock book showing complete movement of diamonds at Head office and branch office. Assessee is also registered under Sales Tax/VAT Act Gujarat & Maharashtra also. 4. The Ld. CIT(A) after considering the submission of assessee held that on similar set of fact, he has passed order in case of Gagnani Impex A.Y 2013-14, in Appeal No. CAS-3/5112/2015- 16 date of order 24.11.2016, wherein by following the decision of Tribunal in the case of Bholanath Polyfab Private Limited in ITA No.137/AHD/2009 dated 26.07.2011, wherein the addition was restricted to the extent of profit element embedded in such ITA No.63/SRT/2019 (A.Y 13-14) Sh. Pawan S. Chhipa 6 similar disputed / bogus purchases. The Ld. CIT(A) also examined the gross profit and net profit ratio of assessee and held that where the assessee has shown abnormal low gross profit, similar addition was restricted either 5% or 12.5% based on the gross profit / net profit disclosed by the respective assessee depending on the nature of trade etc. The ld. CIT(A) also relied on the decisions of Hon'ble jurisdictional High Court in the case of CIT-III Vs Satyanarayan P. Rathi (2013) 38 taxmann.com 402 (Guj); CIT Vs President Industries (2002)/ 124 TAXMAN 654 (Guj); CIT vs. Summit P Seth (2013) 38 taxmann.com 385 (Guj); CIT vs. Bholanath Poly Fab (P.) Ltd. (2013) 40 taxmann.com 498 (Guj) and Mayank Diamonds ITA No. 200 of 2003 dated 07.11.2011, wherein the High Court held only profit element embedded in the bogus/ unverifiable purchases may be taxed. Accordingly, Ld. CIT(A) after considering all facts and circumstances of the case, restricted the disallowance to the extent of 5% of purchases from the entities managed by Praveen Kumar Jain Group. Aggrieved by the order of Ld. CIT(A) the Revenue has filed present appeal before the Tribunal. ITA No.63/SRT/2019 (A.Y 13-14) Sh. Pawan S. Chhipa 7 5. None appeared on behalf of assessee despite service of notice of hearing on more than two occasions. Initially the assessee was represented through Authorized Representative (AR), who later on withdraw his authority letter from this case on last date of hearing i.e., 23.08.2022 and informed the assessee. Such letter sent by ld AR is on record. Today none appeared on behalf of assessee nor filing any adjournment application, therefore, we left no option, but to decide the appeal on the basis of material available on record and after hearing Ld. Commissioner of Income-tax-Departmental Representative (Ld. CIT-DR) for the Revenue. 6. We have heard the submission of Ld. CIT-DR for the Revenue and have gone through the orders of lower authorities carefully. The ld. CIT-DR for the Revenue submits that assessee is a beneficiary of bogus purchase as the assessee has obtained bogus entries from the entities managed by Shri Gautam Jain Group, who was well known hawala operator and was indulging in providing accommodation entry without actual delivery of goods. The Investigation Wing of Mumbai made a full-fledged enquiry and came to the conclusion on the basis of search ITA No.63/SRT/2019 (A.Y 13-14) Sh. Pawan S. Chhipa 8 material and the statement of Shri Gautam Jain Group recorded under section 132, that they were not doing actual or real business except accommodating entries. The assessee is a beneficiary of such bogus accommodation entry of purchases. Before Assessing Officer, the assessee failed to discharge his onus in proving the genuineness of such purchases. The Ld. CIT(A) granted substantial relief to assessee only on the basis of other case law. Each and every case has to be judged on the basis of its fact, in the present case, the assessee miserable failed to prove the genuineness of the purchases. The Ld. CIT- DR submits that order of Assessing Officer may be restored by setting aside the order of Ld. CIT(A. To support his submissions, the ld CIT-DR for the revenue relied on the decision in Urmila & Co Vs Dy CIT (2013) 35 taxmann.com 589(Mum-Trib). 7. We have considered the submissions of ld DR for the revenue and have gone through the orders of the lower authorities carefully. We find that during assessment the Assessing Officer made addition of 100% of the purchases shown from the entity managed by Gautam Jain and his group. We find that no finding was given by the assessing officer on various evidences ITA No.63/SRT/2019 (A.Y 13-14) Sh. Pawan S. Chhipa 9 furnished by the assessee. The sales of the assessee was not rejected by assessing officer. It is a fact of common knowledge that sale cannot be affected without having purchases. Before, ld CIT(A) the assessee filed certain details as we have recorded above. The ld CIT(A) restricted the addition of bogus purchases to the extent of 5% by following various his earlier decisions on bogus purchases. The ld CIT(A) also relied on various case laws of Jurisdictional High Court. It is matter of common knowledge that Shri Gautam Jain was well known bogus entry provider, who has provided entry of several thousand crores of rupees. During the search action on Shri Gautam Jain Group no stock of any goods was found by search team. In the statement he admitted that he is mere entry provider. The assessee has not disputed that he has not transacted with the entity of Shri Gautam Jain Group. 8. We find that the ld CIT(A) restricted the addition to the extent of 5% of aggregate of purchases shown from the entity of Shri Gautam Jain Group. In our view the disallowance to the extent of 5% is on lower side particularly when the assessee has shown negligible net profit. The assessee has shown return income of ITA No.63/SRT/2019 (A.Y 13-14) Sh. Pawan S. Chhipa 10 Rs.5,11,120/-only on the turnover of more than Rs.113.00 Crore (Aprox). Thus, in order to meet out the possibility of revenue leakage 6% of the addition of aggregate of disputed purchase will meet the end of justice. We may refer that this combination, where the assessee is beneficiary of similar disputed purchases, either from Rajender Jain, Bhanwar Lal Jain, Gautam Jain or PK Jain, we have consistently restricted or increased the similar addition to 6% of such purchases. Therefore, taking the consistent view, the disallowance restricted by ld CIT(A) @ 5% are increased to 6% of the total aggregate of impugned / bogus purchase. So far as reliance on case law by ld CIT-DR for revenue in in Urmila & Co Vs Dy CIT (supra) is concerned, the facts of the said case are entirely different. In the said case, the expenses were claimed on payment made to fisherman as protection money, which is prohibited under the provisions of Indian Penal Code (IPC), thus, the deduction of such expenses were hit by the proviso of section 37 of the Act. In the result, the grounds of appeal raised by the revenue is partly allowed. ITA No.63/SRT/2019 (A.Y 13-14) Sh. Pawan S. Chhipa 11 9. In the result, appeal of the Revenue is partly allowed. Order pronounced in the open court on 31/10/2022 and the result was also placed on the Notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) [लेखा सद᭭य/ACCOUNTANT MEMBER] [᭠याियक सद᭭य JUDICIAL MEMBER] Surat, Dated: 31/10/2022 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat