DCIT11(1)(1), MUMBAI V. RENAISSANCE JEWELLERY LTD, MUMBAI

ITA 6306/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2204 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 18-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6306/M/2017 ASSESSMENT YEAR: 2012-13 DY. CIT 11(1)(1), ROOM NO.204, AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400020 VS. M/S. RENAISSANCE JEWELLERY LTD., PLOT NO.36A & 37, MIDC, MAROL, SEEPZ, ANDHERI (EAST), MUMBAI 400 096 PAN: AACCR2148B (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SANJAY R. PARIKH, A.R. REVENUE BY : SHRI D.G. PANSARI, D.R. DATE OF HEARING : 13.06.2019 DATE OF PRONOUNCEMENT : 26.06.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 13.07.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THE VARI OUS GROUNDS OF APPEAL IS AGAINST THE DELETION OF ADDITI ON OF RS.1,08,33,441/- AS MADE BY THE AO TOWARDS BOGUS PU RCHASES. 3. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT ASSESSEE IS BENEF ICIARY OF ACCOMMODATION ENTRIES IN THE NATURE OF BOGUS PURCHA SES FROM ITA NO.6306/M/2017 M/S. RENAISSANCE JEWELLERY LTD. 2 M/S. AADI IMPEX. DURING THE YEAR, THE AO FOUND THA T ASSESSEE HAS MADE PURCHASES FROM M/S. AADI IMPEX, A FIRM EN GAGED IN SUPPLYING BOGUS PURCHASE BILLS AND IS CONNECTED TO SHRI RAJENDRA JAIN, SHRI SANJAY CHOUDHARY, AND SHRI DHAR MICHAND JAIN WHO WERE HAWALA OPERATORS AS ADMITTED BY THEM DURING THE COURSE OF SEARCH THAT THEY AND THEIR ASSOCIATED CONCERNS WERE ENGAGED IN PROVIDING BOGUS PURCHASE ENTRIES AN D BOGUS UNSECURED LOANS. DURING THE COURSE OF THE ASSESSME NT, THE ASSESSEE SUBMITTED COPY OF LEDGER ACCOUNT OF M/S. A ADI IMPEX ,INVOICES OF PURCHASES AND BANK STATEMENT ETC TO PR OVE THE GENUINENESS OF THE PURCHASES. ACCORDING TO THE AO THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF PURCHASES BY FUR NISHING STOCK REGISTER, DELIVERY CHALLANS, NAME AND IDENTITY OF T HE PERSON DELIVERING THE GOODS AND OCTROI RECEIPTS ETC. THE AO ALSO ISSUED NOTICED UNDER SECTION 133(6) OF THE ACT IN ORDER TO VERIFY THE GENUINENESS OF THE PURCH ASES WHICH WAS NOT RESPONDED AND FINALLY THE AO TREATED THE SA ID PURCHASES AS NON GENUINE AND MADE ADDITION TO INCOME OF THE A SSESSEE EQUAL TO 100% OF THE PURCHASES VIDE ASSESSMENT ORDE R DATED 22.03.2016 PASSED UNDER SECTION 143(3) OF THE ACT. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE AFTER TAKING INTO ACCOUNT TH E CONTENTIONS OF THE ASSESSEE BY HOLDING THAT THOUGH THE PURCHASE S MADE BY THE ASSESSEE WERE BOGUS PURCHASES WITHOUT TAKING TH E DELIVERY OF THE GOODS BUT THE ENTIRE PURCHASES CAN NOT BE TR EATED AS INCOME AND THUS CAME TO THE CONCLUSION ON THE BASI S OF DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. SIMIT P. SHETH 356 ITR 451 ONLY PROFIT ELEMENT ON T HE SAID PURCHASES COULD BE ASSESSED. THE LD. CIT(A) FURTHE R OBSERVED ITA NO.6306/M/2017 M/S. RENAISSANCE JEWELLERY LTD. 3 THAT THE ASSESSEE IS IN THE BUSINESS OF DIAMOND JEW ELLERY IN WHICH THE VAT RATE IS ONLY 1% AND CUSTOM DUTY IS AB OUT 2% AND THUS PARTLY SUSTAINED THE ADDITION AT 3% OF THE SAI D PURCHASES BY DIRECTING THE AO TO ASSESS THE INCOME OF BOGUS P URCHASE AT 3%. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE ASSESSEE I S UNDISPUTEDLY A BENEFICIARY OF HAWALA PURCHASE ENTRIES WHERE THER E IS A POSSIBILITY THAT ASSESSEE MIGHT HAVE MADE SAVING IN THE FORM OF NON PAYMENT OF VAT , CUSTOM DUTY AND OTHER INCIDENTA L CHARGES WHICH COME TO AROUND 3%. THE ONLY PRESUMPTION IN T HE CASE IS THAT THE ASSESSEE MIGHT HAVE PURCHASED THE GOODS FR OM THE GREY MARKET AND THEREFORE WHEN THE SALES ARE NOT DISPUTE D, THE 100% DISALLOWANCE CAN NOT BE JUSTIFIED. WE ARE THEREFOR E IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) ON THIS ISSUE. HOWEVER, IN OUR VIEW, SAVINGS AS MADE BY THE ASSESS EE BY PURCHASING THE GOODS FROM GREY MARKET PLUS REASONAB LE PROFIT SHOULD BE ASSESSED ON THE ALLEGED BOGUS PURCHASES. ACCORDINGLY, WE HOLD THAT IT WOULD BE REASONABLE IF THE BOGUS PURCHASES ARE BROUGHT TO TAX AT THE RATE OF 4%. AC CORDINGLY, THE ORDER OF LD. CIT(A) IS SET ASIDE AND WE DIRECT THE AO TO ASSESS THE BOGUS PURCHASES AT 4%. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.06.2019. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 26.06.2019. * KISHORE, SR. P.S. ITA NO.6306/M/2017 M/S. RENAISSANCE JEWELLERY LTD. 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.