DCIT 5(1)(1), MUMBAI V. ANTRIX DIAMOND EXPORTS P.LTD, MUMBAI

ITA 657/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9800 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 30-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Bogus purchase; Peak credit; Accommodation entries; Retraction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 657 / MUM/20 1 7 ( ASSESSMENT YEAR : 2007 - 08 ) DCIT 5(1)(1) R.NO.568, 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400 020 VS. M/S. AN TRIX DIAMOND EXPORTS PVT. LTD., FC - 4041, F TOWER BHARAT DIAMOND BOURSE, BKC, BANDRA (E), MUMBAI 400 051 PAN/GIR NO. AAACA3403G APPELLANT ) .. RESPONDENT ) REVENUE BY MS. ARJU GARODIA ASSESSEE BY SHRI ASHOK J PATIL DATE OF HE ARING 22 / 08 /201 7 DATE OF PRONOUNCEME NT 23 / 08 / 201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 10, MUMBAI DATED 31/10/2016 FOR THE ASSESSMENT YEAR 2007 - 08 IN THE MATTER OF O RDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN LAW, THE LD. CIT(A) HAS ERRED IN RESTORING THE ISSUE TO THE FILE OF THE ASSESSING OFFICER, WHIC H IS CONTRARY TO THE POWERS VESTED IN CIT(A) VIDE SECTION 251 OF THE INCOME TAX ACT 1961. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THE ORDER OF THE AO BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND O R ADD ANY OTHER GROUNDS WHICH MAY BE NECESSARY. ITA NO. 657/MUM/2017 M/S. ANTRIX DIAMOND EXPORTS PVT. LTD., 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING IN POLISHED DIAMONDS. IT FURNISHED ITS RETURN O F INCOME FOR A.Y. 2007 - 08 ON 25/01/2007 DECLARING TOTAL INCOME AT RS.3,47,44,900/ - . THE AO HAS COMPLETED THE FIRST ASSESSMENT U/S. 143(3) OF THE ACT ON 24/12/2009 DETERMINING TOTAL INCOME AT RS.5,36,39,370. SUBSEQUENTLY, THIS ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S.148 DATED 27/03/2014 WHICH WAS CONCLUDED U/S.143(3) R.W.S. 147 WHICH WAS SET ASIDE BY ITAT, MUMBAI. THE AO HAS COMPLETED THE ASSESSMENT U/S.143(3) R.W.S. 147 OF THE ACT FOR THE SECOND TIME ON 23/02/2015 DETERMINING TOTAL INCOME AT RS.7, 78,27,610/ - BY MAKING THE ADDITIONS / DISALLOWANCES. 4. THE ONLY ISSUE RAISED IN THIS APPEAL IS WITH REGARD TO ADDITION MADE U/S.69C OF THE ACT ON PEAK BALANCE DUE TO BOGUS PURCHASES AMOUNTING TO RS.3,73,05,819/ - . THE CIT(A) RESTORED THE MATTER BACK TO THE FILE OF THE AO AFTER HAVING THE FOLLOWING OBSERVATION: - 4.2. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE LD. AR. AS SEEN FROM THE RECORDS, ON EARLIER OCCASIONS THE ASSESSMENT WAS REOPENED TO BRING TO TAX THE BOGUS PURCHASE S MADE FROM ENTRY OPERATOR SHRI ANILKUMAR A. CHAHWALA BASES ON THE INFORMATION RECEIVED FROM DCIT, NAVSARI, GUJRAT. THE AO HAS ADDED THE ENTIRE SUCH BOGUS PURCHASES U/S 69C. ON APPEAL, THE CIT(A) HAS CONFIRMED ADDITION AT 25% AND GIVE RELIEF OF 75%. THE IT AT HAS SET ASIDE THE ASSESSMENT TO THE FILE OF THE AO WHILE DECIDING THE APPEAL FOR A.Y.2006 - 07 & 2007 - 08 IN A COMMON ORDER DATED 09/09/2016. WHILE SETTING ASIDE, THE ITAT HAS MADE REFERENCE TO A DECISION OF THE CO - ORDINATE BENCH OF ITAT, MUMBAI IN ITA NO. 142Q/MUM/2011 AND 145/MUM/2013 DATED 28/10/2015 FOR A.Y.2006 - 07 - 2007 - 08 IN SHUBH EXPORTS, ANOTHER SISTER CONCERN OF THE APPELLANT. THE RELEVANT PART OF THE DECISION OF THE ITAT IS REPRODUCED AS UNDER: - ITA NO. 657/MUM/2017 M/S. ANTRIX DIAMOND EXPORTS PVT. LTD., 3 '12. WE HAVE FURTHER NOTICED THAT IN CASE OF ANOTHE R SISTER CONCERN OF THE ASSESSEE VIZ. M/S. SHUBH EXPORTS, THE AO CONCLUDED THE ASSESSMENT FOR A.Y.2006 - 07 & 2007 - 08 BY MAKING ADDITION TOWARDS PAYMENT MADE TO THE SAME PROPRIETARY CONCERNS OF SHRI ANILKUMAR A. CHAHWALA TOWARDS LABOUR CHARGES. HOWEVER, THE CIT(A) DELETED THE ADDITION MADE BY AO. BEING AGGRIEVED OF THE ORDER OF CIT(A), REVENUE PREFERRED APPEALS BEFORE THE ITAT. THE ITAT AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES UPHELD THE ORDER OF CIT(A) VIDE ORDER PASSED IN ITA NO.1420/MUM/2011 AND 14 5/MUM/2013 DT, 28.10.2015 OBSERVING AS UNDER: - '3. 1 AS REGARDS THE LABOUR CHARGES PAID TO M/S. PADMAVATI GEMS & M/S. PARTH CORPORATION, PROPRIETARY CONCERN OF MR. ANIIKUMAR CHAHWALA, THE COPIES OF THE JANGADS IN RESPECT OF ROUGH DIAMONDS GIVEN FOR MANUFAC TURING, DULY MENTIONING THE REQUISITE DETAILS IN THE FORM OF ROUGH DIAMONDS GIVEN, REJECTION ROUGH RETURNED, QUANTITY MANUFACTURED POLISHED RECEIVED FROM MANUFACTURING, RATE OF LABOUR CARAT OF MANUFACTURED ROUGH AND TOTAL LABOUR CHARGES PAYABLE ETC. WERE P RODUCED BEFORE THE ASSESSING OFFICER. THE PAYMENTS WERE MADE DULY BY CHEQUES, COPIES OF THE BANK STATEMENT HIGHLIGHTING THE SAID PAYMENTS WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER. IT IS A/SO A FACT THAT SHRI ANILKUMAR CHAHWALA IS NOT RELATED TO THE ASSESSEE WITHIN THE MEANING OF SECTION 40(A)(2)(B) OF THE ACT. THE ASSESSEE HAD FILED COPIES OF THE CERTIFICATES DATED 6/10/2005 AND 15/7/2005 ISSUED BY THE /TO WARD - 1, NAVSARI ADDRESSED TO THE ASSESSEE BEFORE THE ASSESSING OFFICER PERMITTING THE DEDUCTION OF TDS AT A LOWER RATE TILL 31/3/2006 U/S 197 OF THE ACT ON THE LABOUR CHARGES PAID BY THE ASSESSEE TO M/S. PADMAVATI GEMS AND M/S. PARTH CORPORATION. IT REVEALS THAT THE SAID PROPRIETARY CONCERNS OF MR. ANILKUMAR CHAHWALA ITS TRANSACTIONS WITH ASSESSEE D EDUCTED TDS ON THE PAYMENTS MADE TO THE SAID ISSUED FORM 16A. THE QUANTITATIVE EFFECT OF THE LABOUR BILLS WAS ALSO REFLECTED IN THE STOCK REGISTER. IN VIEW OF THIS THE EXPENDITURE OF LABOUR CHARGES COUPLED WITH OUTWARD DELIVERY OF ROUGH DIAMONDS AND INWARD DELIVERY OF POLISHED DIAMONDS AND THE CONSEQUENT EXPORTS WOULD GO TO SHOW THAT THE LABOUR PAYMENTS WERE DONE IN ORDINARY COURSE OF THE ASSESSEE'S BUSINESS. THE CIT(A) VALSAD HAS ALSO HELD THAT MR. ANILKUMAR CHAHWALA HAS BEEN CONDUCTING LABOUR CONTRACT/JOB WORK BUSINESS REGULARLY. IN VIEW OF THE ABOVE, THERE WAS NO JUSTIFICATION TO CONSIDER THE LABOUR PAYMENTS MADE BY THE ASSESSEE TO M/S PATH CORPN. AND M/S. PADMAVATI GEMS, PROPRIETARY CONCERN OF MR. ANILKUMAR CHAHWALA AS BOGUS. 3.2 . NOW COMING TO THE ASSE SSMENT PROCEEDINGS IN THE CASE OF MR.ANILKUMAR CHAHWALA, THE DCIT, NAVSARI, IN HIS ASSESSMENT ORDER, NOTED THAT THE SAID ASSESSEE MADE ALL THE PURCHASES BY WAY OF CASH ITA NO. 657/MUM/2017 M/S. ANTRIX DIAMOND EXPORTS PVT. LTD., 4 FROM A LARGE NUMBER OF PARTIES AND IN TURN SOLD THE GOODS TO 31 DIFFERENT PARTIES. AS DC IT NAVSARI WAS UNABLE TO VERIFY THE PURCHASES AND LABOUR PAYMENTS MADE BY MR.ANILKUMAR CHAHWALA, HE CONCLUDED THAT ALL THE PURCHASES/LACE' PAYMENTS AS WELL AS SALES AND RECEIPTS BY WAY OF JOB WORK DONE BY THE SAID ASSESSEE FOR OUTSIDE PARTIES WERE BOGUS TRANSACTIONS AND ENTERED ONLY WITH A VIEW TO ACCOMMODATE DIFFERENT TRADERS IN THIS LINE OF BUSINESS, INCLUDING THE ASSESSEE. THEREFORE, THE DCIR IN HIS ASSESSMENT, DISALLOWED THE ENTIRE PURCHASES MADE/LABOUR CHARGES PAID BY MR. ANILKUMAR CHAHWALA. THE MATT ER WAS CARRIED IN APPEAL BEFORE CIT(A) VALSAD, WHO HAS EXAMINED THE FACTS IN DETAIL IN HIS ORDER NO. CIT(A)/VLS/462/08 - 09 DATED 27/2/2010. THE CIT(A) HAS TAKEN NOTE OF THE FACT THAT THE ASSESSMENT IN THE SAID CASE WAS MADE BASED ON THE STATEMENT RECORDED F ROM THE SAID ASSESSEE ON 24.12.2008 AND THE SAID STATEMENT WAS OBTAINED BY THE THREATENING THE ASSESSEE OF POLICE ACTION AND UNDER COERCIVE PRESSURE AND THE SAID STATEMENT WAS NOT GIVEN BY FREE WILL OF THE SAID ASSESSEE, CIT(A) HAS ALSO NOTED THE FACT THAT THE STATEMENT GIVEN BY MR. ANILKUMAR CHAHWALA ON 24/12/2008 WAS RETRACTED IMMEDIATELY BY WAY OF AN AFFIDAVIT DATED 27/12/2008 AND THEREFORE, THE STATEMENT RECORDED BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS ALONE CANNOT FORM THE BASIS OF A DDITIONS MADE BY THE ASSESSING OFFICER THE CIT(A) AFTER EXAMINING THE DETAILS, CATEGORICALLY HELD THAT THE SAID ASSESSEE MR. ANILKUMAR CHAHWALA HAS REGULARLY CARRIED ON THE BUSINESS ACTIVITIES. FURTHER, CONSIDERING THE RELEVANT FACTS OF THE CASE THE CIT(A) VALSAD FINALLY DETERMINED THE INCOME OF THE SAID ASSESSEE BY ESTIMATING THE GROSS PROFIT AS WELL AS DISALLOWING CERTAIN LABOUR PAYMENTS MADE BY HIM U/S 40(A)(IA) OF THE ACT. THUS THE FINDINGS GIVEN BY THE CIT(A) VALSAD COUPLED WITH THE FACTS ON RECORD DIS CUSSED AS ABOVE ESTABLISH THAT THE TRANSACTIONS BETWEEN THE ASSESSEE AND MR. ANILKUMAR CHAHWALA, PROPRIETOR OF M/S PADMAVATI GEMS AND M/S. PARTH CORPORATION WERE GENUINE AND THERE IS NO REASON TO CONSIDER THE SAID TRANSACTIONS AS BOGUS AND ACCOMMODATIVE IN NATURE. 3.3LN VIEW OF THE ABOVE DISCUSSION WE AGREE WITH THE LD.CIT(A)'S DECISION ON THIS ISSUE IS JUSTIFIABLE IN DELEING THE ADDITION MADE BY THE AO AMOUNTING TO RS.53,09,929/ - . WE UPHOLD THE SAME.' 13. THUS IN VIEW OF THE AFORESAID FACTS AS DISCUSSED ABOVE, WE ARE OF THE OPINION THAT THE MATTER HAS TO GO BACK TO THE AO FOR DECIDING AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE BY THE CO - ORDINATE BENCH AS REFERRED TO ABOVE IN CASE OF DCIT VS. M/S. SHUBH EXPORTS. WE FURTHER MAKE IT CLEAR THAT THE AO MUST AFFORD ADEQUATE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN HIS CASE AND THE AO MUST CONSIDER THE SUBMISSIONS OF THE ASSESSEE AND DECIDE THE ISSUE KEEPING IN VIEW THE OBSERVATIONS OF THE CO - ORDINATE BENCH AS REFERRED TO ABOVE. THIS DECISION WILL ALSO APPLY MUTA TIS MUTANDIS TO ASSESSEE'S APPEAL IN ITA ITA NO. 657/MUM/2017 M/S. ANTRIX DIAMOND EXPORTS PVT. LTD., 5 NO,7489/MUM/2011. IN VIEW OF OUR AFORESAID DECISION, THERE IS NO NEED TO SEPARATELY ADJUDICATE THE APPEALS OF THE REVENUE AS THEY HAVE BECOME INFRUCTUOUS 4.2.1. SINCE THE HONBLE ITAT HAS ALREADY DECIDED THE ISSUE I N APPELLANTS CASE FOR SAME A.Y. 2007 - 08 ON SIMILAR ISSUE OF BOGUS PURCHASES BY SETTING ASIDE THE MATTER TO THE FILE OF THE AO BY FOLLOWING THEIR OWN DECISIONS IN SHUBH EXPORTS, I HEREBY DIRECT THE AO TO FOLLOW THE SAME DIRECTION OF THE ITAT WHILE FINALISI NG THE BOGUS TRANSACTION HAD BY THE APPELLANT WITH GAUTAIN JAIN GROUP ALSO. WHILE DOING SO THE AO IS AT LIBERTY TO DISTINGUISH THE FACTS IN THE CASE OF ANILKUMAR A. CHAHWALA AND GAUTAM JAIN WITH REGARD TO INDEPENDENT INQUIRY, ASSESSMENT OF THE SELLER CONCE RNS BELONGING TO GAUTAM JIAN, VALIDITY OF RETRACTION ETC., 4.2.2. IN VIEW OF THE ABOVE DISCUSSION THE GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS. THE ONLY ISSUE RAISED IN THIS APPEAL IS WITH REGARD TO ADDITION OF R S.3,73,05,819/ - U/S.69C OF THE ACT ON PEAK BALANCE DUE TO BOGUS PURCHASES. INFORMATION WAS RECEIVED BY THE AO FROM DGIT (INV.) MUMBAI THAT THE ASSESSEE HAS TAKEN THE ACCOMMODATION ENTRIES FROM THE CONCERNS OPERATED BY SHRI GAUTAM B. JAIN. 6. IN RESPECT OF THE VERY SAME ASSESSEE, ASSESSMENT WAS EARLIER REOPENED ON THE BASIS OF BOGUS PURCHASES MADE FROM ENTRY OPERATOR SHRI ANILKUMAR A CHAHWALA BASED ON THE INFORMATION RECEIVED FROM DCIT, NAVSARI, GUJARAT. THE ENTIRE AMOUNT WAS ADDED BY AO U/S.69C. IN AN APPEA L FILED BY ASSESSEE, THE CIT(A) HAS RESTRICTED THE ADDITION OF 25% AND HAS GIVEN RELIEF OF 75%. THE ASSESSEE AND THE DEPARTMENT BOTH FILED THE APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL HAD RESTORED THE ENTIRE MATTER BACK TO THE FILE OF THE AO WITH CERTAI N DIRECTION TO DECIDE IN TERMS OF THE ORDER PASSED BY THE CO - ORDINATE BENCH OF ITAT, MUMBAI IN ITA ITA NO. 657/MUM/2017 M/S. ANTRIX DIAMOND EXPORTS PVT. LTD., 6 NO.1420/MUM/2011 AND 145/MUM/2013 DATED 28/10/2015 FOR A.Y. 2006 - 07, 2007 - 08 IN SHUBH EXPORTS, ANOTHER SISTER CONCERN OF THE ASSESSEE. 7 . WHILE DECIDING THIS APPEAL, THE CIT(A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL AND RESTORED THE MATTER BACK TO THE FILE OF THE AO WITH A LIBERTY TO THE AO TO DISTINGUISH THE FACTS OF THE CASE OF ANIL KUMAR CHAHWALA AND GAUTAM JAIN WITH REGARD TO INDEPENDENT ENQUIRY, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF CIT(A), SINCE ON THE VERY SAME ISSUE THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE FILE OF AO FOR DECIDING AFRESH IN TERMS OF DIRECTION GIVEN IN THE ORDER. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 23 / 08 /2017 S D/ - ( SANDEEP GOSAIN ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 23 / 08 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//