DCIT 8(3), MUMBAI V. TRISTAR JEWELLERY EXPORTS P.LTD, MUMBAI

ITA 6435/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0918 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA VIJAY
• Keywords: Bogus purchase; Accommodation entries
• Section: 131

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI A.D. JAIN, JM AND SHRI RAJENDRA, AM .. , , ./ I.T.A. NO. 7593 /MUM/2011 ( / ASSESSMENT YEARS : 2006-07 THE ASSTT. COMMISSIONER OF INCOME TAX -8(3), ROOM NO. 217, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. / VS. TRISTAR JEWELLERY EXPORTS PRIVATE LIMITED, PLOT NO. 1 & 2 (PART), GROUND FLOOR, SEEPZ-SEZ, ANDHERI (EAST) MUMBAI 400 096. ./ PAN : AABCT0755H ( / APPELLANT ) .. ( ! / RESPONDENT ) ./ I.T.A. NO. 6435 /MUM/2013 ( / ASSESSMENT YEARS : 2006-07 THE DY. COMMISSIONER OF INCOME TAX -8(3), ROOM NO. 217, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. / VS. TRISTAR JEWELLERY EXPORTS PRIVATE LIMITED, PLOT NO. 1 & 2 (PART), GROUND FLOOR, SEEPZ-SEZ, ANDHERI (EAST) MUMBAI 400 096. ./ PAN : AABCT0755H ( / APPELLANT ) .. ( ! / RESPONDENT ) ITA 7593/M/11,ITA 6435/M/13 & ITA 8292/M/11 2 ./ I.T.A. NO. 8292 /MUM/2011 ( / ASSESSMENT YEARS : 2006-07 TRISTAR JEWELLERY EXPORTS PRIVATE LIMITED, PLOT NO. 1 & 2 (PART), GROUND FLOOR, SEEPZ-SEZ, ANDHERI (EAST) MUMBAI 400 096. / VS. THE DY. COMMISSIONER OF INCOME TAX -8(3), ROOM NO. 217, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. ./ PAN : AABCT0755H ( / APPELLANT ) .. ( ! / RESPONDENT ) DEPARTMENT BY SHRI CHANDRA VIJAY ASSESSEE BY : SHRI PRAKASH K. JOTWANI ' # $ % & ' / DATE OF HEARING : 23-07-2015 ()*+ % & ' / DATE OF PRONOUNCEMENT : 31-7-2015 [ , / O R D E R PER A.D. JAIN, J.M . : .. , ITA NO. 7593/MUM/2011, FOR A.Y. 2006-07 HAS BEEN FI LED BY THE DEPARTMENT WHEREAS ITA NO. 8292/MUM/2011, FOR A.Y. 2006-07 STANDS FILED BY THE ASSESSEE, AGAINST THE ACTION OF THE LD. CIT( A) IN RESTRICTING THE DISALLOWANCE OF 25% OF PURCHASES MADE BY THE A.O. T O 7%. THE DEPARTMENTS CONTENTION IS THAT THE DISALLOWANCE HAD TO BE CONFI RMED IN TOTO, WHEREAS ACCORDING TO THE ASSESSEE, THE DISALLOWANCE REQUIRE S TO BE DELETED IN FULL. 2. AS PER THE REGISTRY, THERE IS A DELAY OF 10 DAYS IN THE FILING OF THE ASSESSEES APPEAL. AS PER THE AFFIDAVIT FILED BY T HE DIRECTOR OF THE COMPANY, HE WAS TRAVELLING FROM 11-11-2011 TO 7-12-2011 AND WAS NOT AVAILABLE IN INDIA FOR FILING THE APPEAL AND IT WAS, THEREFORE, THAT THE APPEAL, WHICH OUGHT TO HAVE BEEN FILED ON 27-11-2011, GOT TO BE FILED O N 8-12-2011, INCURRING A ITA 7593/M/11,ITA 6435/M/13 & ITA 8292/M/11 3 DELAY OF 10 DAYS. IN VIEW OF THE CONTENTS OF THE A FFIDAVIT, FINDING IT TO BE A CASE OF SUFFICIENT CAUSE PREVENTING THE FILING OF T HE APPEAL IN TIME, THE DELAY IS CONDONED. 3. ITA NO. 6435/MUM/2013, FOR A.Y. 2006-07 IS DEPAR TMENTS APPEAL AGAINST THE LD. CIT(A)S ACTION OF DELETION OF CONC EALMENT PENALTY OF RS. 11,94,545/- IMPOSED ON THE ASSESSEE IN THE AFORESAI D MATTER. 4. AS PER THE RECORD, THE COMPLETED ASSESSMENT OF T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, I.E. A.Y. 2006-07 WAS REO PENED ON THE BASIS THAT INFORMATION WAS RECEIVED FROM THE ITO -25(20(1), MU MBAI, THAT DURING THE SURVEY PROCEEDINGS CONDUCTED AT THE PREMISES OF M/S ZALAK IMPEX, A PROPRIETARY CONCERN OF ONE SHRI HITEN L. RAWAL. THE SAID ASSESSEE, IN HIS STATEMENT RECORDED U/S 136 OF THE ACT, HAD CONFESSE D TO HAVE PROVIDED ACCOMMODATION ENTRIES IN THE FORM OF SALES AND PURC HASES TO VARIOUS PARTIES, INCLUDING THE ASSESSEE, WHO HAD ALLEGEDLY OBTAINED BOGUS BILLS FOR NON- EXISTING PURCHASES OF RS. 4,09,12,718/- DURING THE YEAR. THE A.O. ADDED 25% OF SUCH ALLEGED BOGUS PURCHASES TO THE INCOME OF TH E ASSESSEE. THE LD. CIT(A) REDUCED THE ADDITION TO 7%, AMOUNTING TO RS. 35 LAC S. 5. BEFORE THE LD. CIT(A), THE ASSESSEE RAISED THE F OLLOWING GROUND OF APPEAL, AMONGST OTHERS:- 2(E) THE LEARNED ASSESSING OFFICER FAILED TO APPRE CIATE THAT APPELLANT HAS NOT GIVEN THE OPPORTUNITY TO CROSS-EXAMINE SHRI HITEN RAWAL, PROPRIETOR OF M/S ZALAK IMPEX. THE ADDITION THEREF ORE CANNOT BE SUSTAINED. 6. THE LD. CIT(A), HOWEVER, DID NOT ADJUDICATE THE SAID GROUND. PLACING RELIANCE ON THE TRIBUNAL ORDER DATED 8-8-2014, PASS ED IN ITA NO. 6735/MUM/2010 FOR A.Y. 2006-07, IN THE CASE OF ACI T VS. M/S SAY INDIA JEWELLERS PVT. LTD., WHICH IS ONE OF THE PARTIES, LIKE THE ASSESSEE, ALLEGED TO HAVE MADE BOGUS PURCHASES FROM M/S ZALAK IMPEX. THE LD. COUNSEL FOR THE ITA 7593/M/11,ITA 6435/M/13 & ITA 8292/M/11 4 ASSESSEE HAS CONTENDED THAT, IN THE PRESENT CASE, L IKE IN THE CASE OF M/S SAY INDIA JEWELLERS PVT. LTD., THE A.O. DID NOT DRAW A NY ADVERSE INFERENCE SO FAR AS REGARDS THE EXPORT OF DIAMONDS BY THE ASSESSEE A ND THAT THE ADDITION MADE WAS ONLY ON ASSUMPTIONS AND PRESUMPTIONS. IT HAS B EEN SUBMITTED THAT THE STATEMENT OF SHRI HITEN L. RAWAL, PROPRIETOR OF ZAL AC IMPEX WAS NEVER PROVIDED TO THE ASSESSEE AND NO OPPORTUNITY OF CROS S EXAMINATION OF SHRI RAWAL WAS AFFORDED TO THE ASSESSEE, THEREBY LEADING TO THE ILLEGAL ADDITION, WHICH WAS WRONGLY SUSTAINED IN PART BY THE LD. CIT( A), THOUGH IT OUGHT TO HAVE BEEN DELETED IN FULL. 7. THE LD. D.R., ON THE OTHER HAND, RELYING ON THE IMPUGNED ORDER, HAS CONTENDED THAT AS PER THE ASSESSMENT ORDER, THE A.O . HAD ASKED THE ASSESSEE TO PRODUCE SHRI HITEN L. RAWAL, WHICH THE ASSESSEE DID NOT DO; AND THAT THEREFORE, THE ADDITION MADE BY THE A.O. WAS PERFEC TLY JUSTIFIED AND IT OUGHT TO HAVE BEEN CONFIRMED IN ITS ENTIRETY. 8. HAVING HEARD THE PARTIES AND HAVING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE COMPLETED ASSESSMENT OF THE ASSESSEE WAS REOPENED ON THE BASIS OF THE STATEMENT OF SHRI HITEN L. RAWAL, THE PROPRI ETOR OF M/S ZALAK IMPEX. IN THIS STATEMENT RECORDED U/S 131 OF THE ACT, SHRI RA WAL CONFESSED TO HAVE PROVIDED ACCOMMODATION ENTRIES IN THE FORM OF SALES AND PURCHASES, TO VARIOUS PARTIES. THE ASSESSEE WAS STATED TO HAVE OB TAINED BILLS FOR NON- EXISTING PARTIES, AMOUNTING TO RS. 4,09,12,718/-, D URING THE YEAR UNDER CONSIDERATION. THE ASSESSMENT ORDER DATED 21-12-20 10 WAS PASSED PURSUANT TO THE SAID REOPENING. 9. IT REMAINS UNDISPUTED THAT THE ASSESSEE WAS NEVE R PROVIDED ANY OPPORTUNITY TO CROSS EXAMINE SHRI HITEN L. RAWAL, T HOUGH HE SPECIFICALLY ASKED FOR SUCH CROSS EXAMINATION. ON THE OTHER HAND , THE BURDEN WAS SOUGHT TO BE SHIFTED ON THE ASSESSEE BY THE A.O., BY ASKIN G HIM TO PRODUCE SHRI RAWAL, EVEN THOUGH IT WAS THE A.O. WHO HAD RELIED O N THE STATEMENT OF SHRI ITA 7593/M/11,ITA 6435/M/13 & ITA 8292/M/11 5 RAWAL, WITHOUT EITHER CONFRONTING THIS STATEMENT TO THE ASSESSEE, OR PROVIDING OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI R AWAL. THEREFORE, THE REASSESSMENT ORDER IS AS A RESULT OF VIOLATION OF T HE NATURAL PRINCIPLE OF AUDI ALTERAM PARTEM . A STATEMENT RECORDED AT THE BACK OF A PARTY CANN OT BE USED AGAINST SUCH PARTY WITHOUT CONFRONTING SUCH STATEME NT TO THE PARTY. HENCE, ON THIS SCORE ALONE, THE REASSESSMENT ORDER IS UNSU STAINABLE IN THE EYE OF LAW AND WE HEREBY CANCEL THE SAME. AS A CONSEQUENCE, TH E ORDER OF THE LD. CIT(A) IS ALSO CANCELLED IN TOTO. 10. FURTHER, EVEN OTHERWISE, BEFORE THE A.O., THE A SSESSEE HAD CONTENDED, BY WRITTEN SUBMISSIONS FILED ON 25-11-2010, INTER A LIA, THAT DURING THE YEAR, THEY HAD PURCHASED DIAMONDS WORTH RS. 4,09,12,718/- FROM M/S ZALAK IMPEX; THAT THE ASSESSEE BEING IN AN EXPORT PROMOTI ON ZONE, THE MOVEMENT OF ITS GOODS IS CONTROLLED AND CUSTOMS APPROVED; THAT THE PURCHASES BEING APPROVED PURCHASES, THERE WAS NO QUESTION OF THEIR BEING BOGUS PURCHASES. THE ASSESSEE ENCLOSED THE CUSTOM APPROVED INVOICES IN RESPECT OF PURCHASES FROM ZALAK IMPEX. THESE INVOICES HAVE BEEN PRODUCED BEFORE US ALSO, IN THE PAPER BOOK FILED BY THE ASSESSEE. AS PER THESE INV OICES, THE GOODS PURCHASED HAD BEEN VERIFIED AND APPROVED BY THE CUSTOMS AUTHO RITY. THIS CLEARLY SHOWS THAT THE GOODS HAD ACTUALLY BEEN PURCHASED AND RECE IVED BY THE ASSESSEE. AS SUCH, THESE PURCHASES COULD NOT HAVE, BY ANY STRETC H OF IMAGINATION, BEEN TREATED AS BOGUS PURCHASES. IT IS ALSO NOTEWORTHY T HAT THE PAYMENTS MADE BY THE ASSESSEE TO ZALAK IMPEX WERE THROUGH ACCOUNT PA YEE CHEQUES ONLY. NEITHER OF THE TAXING AUTHORITIES, HOWEVER, TOOK TH ESE INVOICES INTO CONSIDERATION AND WRONGLY HELD THE ASSESSEES PURCH ASES FROM ZALAK IMPEX TO BE BOGUS PURCHASES. NOTHING HAS BEEN BROUGHT ON RE CORD TO SHOW THAT THESE INVOICES WERE SELF MADE OR FABRICATED. MOREOVER, TH E COMPARATIVE CHART OF PURCHASES MADE DURING THE YEAR AND THE SELLING PRIC E (PAGE 141-144), AS FILED BEFORE THE LD. CIT(A) HAS NOT BEEN REFUTED AND THIS ALSO GOES TO PROVE THE THEORY OF BOGUS BILLS AND ACCOMMODATION ENTRIES TO BE WRONG. THEREFORE, THE ITA 7593/M/11,ITA 6435/M/13 & ITA 8292/M/11 6 ORDER UNDER APPEAL IS A RESULT OF COMPLETE MISREADI NG AND NON-READING OF COGENT DOCUMENTARY EVIDENCE BROUGHT ON RECORD BY TH E ASSESSEE. FOR THIS REASON ALSO, ALONG WITH THE REASON THAT THE SALES M ADE BY THE ASSESSEE WERE NEVER QUESTIONED, THE ADDITION IS DELETED IN TOTO. 11. ITA NO. 6435/MUM/2013 HAS BEEN FILED BY THE DEP ARTMENT AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE PENALTY OF RS. 11,94,545/-. 12. THE A.O. LEVIED THE PENALTY IN QUESTION QUA THE AFORESAID ADDITION MADE. THE LD. CIT(A) DELETED THE PENALTY, HOLDING T HAT THE PENALTY WAS NOT LEVIABLE ON ADDITION MADE ON ESTIMATION BASIS AND T HAT IT DID NOT STAND CONFIRMED THAT THE ASSESSEE HAD WILLFULLY SUBMITTED IN-ACCURATE PARTICULARS TO CONCEAL ITS INCOME. 13. WE HAVE, IN THE PRECEDING PORTION OF THIS ORDER , CANCELLED THE ADDITION MADE, IN TOTO. THEREFORE, THE VERY BASIS OF THE LEV Y OF PENALTY IN QUESTION NO LONGER SURVIVES. ACCORDINGLY, THE GRIEVANCE OF THE DEPARTMENT IS REJECTED AND THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY IS UPHELD. 14. IN THE RESULT, ITA NOS. 7593/MUM/2011 AND 6435/ MUM/2013 FILED BY THE DEPARTMENT ARE DISMISSED, WHEREAS ITA NO. 8292/ MUM/2011 FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JULY, 2015. , % ()*+ ' -. / 0 23-07-2015. ) % 1$ SD/- SD/- (RAJENDRA) (A.D. JAIN ) ACCOUNTANT MEMBER /J UDICIAL MEMBER - ' =$ MUMBAI ; / DATED 31-07-2015 [ ITA 7593/M/11,ITA 6435/M/13 & ITA 8292/M/11 7 #.../ R.K. R.K. R.K. R.K. , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. ' E& () / THE CIT(A)- 38, MUMBAI 4. ' E& / CIT- CENT. IV MUMBAI 5. H#I 1 &JK , ' JK+ , - ' =$ / DR, ITAT, MUMBAI E BENCH 6. 1 L M $ / GUARD FILE. ! ( / BY ORDER, ! H& & //TRUE COPY// )/(* + ( DY./ASSTT. REGISTRAR) , - ' =$ / ITAT, MUMBAI