ACIT, New Delhi V. M/s K.K.Exports, New Delhi

ITA 6605/DEL/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5836 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 26-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C P SINGH
• Keywords: Bogus purchase; Accommodation entries; Onus to prove; Retraction
• Section: 143(3); 133A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D, NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI G.S. PANNU, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.6605/DEL/2016 (ASSESSMENT YEAR-2013-14) ASST. CIT, CENTRAL CIRCLE-29, NEW DELHI VS. M/S K. K. EXPORTS, 2601/4, BEADONPURA, KAROL BAGH, NEW DELHI-110005 PAN:AAAFK 5882G (APPELLANT) (RESPONDENT) APPELLANT BY SH. C.P. SINGH, SR. DR RESPONDENT BY SH.SALIL AGGARWAL, ADV. MR. SHAILESH GUPTA, CA DATE OF HEARING 14.08.2020 DATE OF PRONOUNCEMENT 30.09.2020 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE DEPARTMENT AND IS D IRECTED AGAINST ORDER DATED 26/10/2016 PASSED BY THE LD. CO MMISSIONER OF INCOME-TAX (APPEALS)-31, NEW DELHI [CIT (A)] FOR AS SESSMENT YEAR 2013-14. 2 ITA NO.6605/DEL/2016 ACIT VS. K. K. EXPORTS 2.0 THE BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF JEWE LLERY. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RE TURN OF INCOME DECLARING INCOME AT RS. 56,82,370/- UNDER PROVISION S OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE SCRUTINY ASSESSMENT UND ER SECTION 143(3) OF THE ACT WAS COMPLETED ON 31/03/2016, WHEREI N, INCOME OF THE ASSESSEE COMPANY WAS ASSESSED AT RS. 3,69, 28, 770/- AFTER MAKING CERTAIN ADDITIONS/DISALLOWANCES. THE ASSESSEE COMPANY PREFERRED APPEAL BEFORE THE LD. CIT (A), WHICH WAS PA RTLY ALLOWED BY LEARNED CIT (A) IN FAVOUR OF ASSESSEE. 2.1 AGGRIEVED BY THE SAID ORDER OF LEARNED CIT (A) , THE REVENUE IS NOW IN APPEAL BEFORE THIS TRIBUNAL AND HA S RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN LAW & ON FACTS IN DELETING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES AMOUNTING TO RS. 3,12,42,835/- MADE BY THE A.O. IGNORING THE FACT TH AT TE ADDITIONS WERE MADE ON THE FINDINGS OF SURVEY ACTIO N CONDUCTED BY THE INCOME TAX INVESTIGATION WING ON S H. SANJAY CHOWDHARY AND HIS CONCERNS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN LAW & ON FACTS IN NOT APPR ECIATING 3 ITA NO.6605/DEL/2016 ACIT VS. K. K. EXPORTS THAT SH. SANJAY CHOWDHARY' ACCEPED IN HIS STATEMENT RECORDED ON 03-10-2013, 04-10-2013 AND U/S 131 ON 1 0-01- 2014 THAT HE WAS NOT DOING ANY SALE/PURCHASE OF DIA MONDS AND PROVIDING ONLY ACCOMMODATION ENTRIES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW' & ON FACTS IN NOT APPRECIATIN G THAT THE AFFIDAVIT DATED 08-10-2013 AND 10-01-2014 REGARDING RETRACTION WERE FILED BY SH. SANJAY CHOWDHARY BEFOR E THE A.O. ONLY AND WERE NOT FILED BEFORE THE INCOME TAX INVESTIGATION WING DURING POST SURVEY ENQUIRY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW & ON FACTS IN NOT APPRECIA TING THAT NIL STOCK OF DIAMONDS WAS FOUND DURING THE COURSE O F SURVEY ACTION ON BUSINESS CONCERNS OF SH. SANJAY CHOWDHARY . 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW & ON FACTS IN NOT APPRECIATING THAT NO INSURANCE OF DIAMOND STOCK WAS MADE BY THE CONCERNS OF SH. SANJAY CHOWDHARY FROM WHERE PURCHASES WERE MADE BY THE ASSESSEE. 6. THAT THE ORDER OF THE CIT (A) IS PERVERSE, ERRONEOU S AND IS NOT TENABLE ON FACTS AND IN LAW. 7. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY/ ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F THE HEARING OF THE APPEAL. 3.0 THE LEARNED SR. DR RELIED ON THE FINDINGS SO RECORDED BY THE ASSESSING OFFICER (AO) AND ARGUED THAT THE AO H AS MADE AN ADDITION OF RS. 3,12,42,835/- ON ACCOUNT OF BOGUS P URCHASES MADE 4 ITA NO.6605/DEL/2016 ACIT VS. K. K. EXPORTS BY THE ASSESSEE COMPANY FROM M/S MAYANK IMPEX AND M/S NAZAR IMPEX (P) LTD. IT WAS SUBMITTED THAT THE ADDITION HA S BEEN MADE ON THE BASIS OF SURVEY CONDUCTED BY THE DGIT (INV) UND ER SECTION 133A OF THE ACT ON ONE SHRI SANJAY CHAUDHARY AND HIS CON CERNS NAMELY M/S MAYANK IMPEX AND M/S NAZAR IMPEX (P) LTD. THE L D. SR. DR FURTHER ARGUED THAT SHRI CHAUDHARY, IN HIS STATEMEN T RECORDED UNDER SECTION 133A AND UNDER SECTION 131 OF THE ACT , HAD ACCEPTED THAT HE WAS NOT CARRYING OUT ANY SALE AND PURCHASE O F DIAMONDS AND WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES O F SALE AND PURCHASE. THE LEARNED SR. DR FURTHER ARGUED THAT TH E AO HAS ALSO REJECTED THE AFFIDAVIT DATED 8.10.2013 FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN WHICH SHRI CHAUDHARY HAD R ETRACTED FROM THE EARLIER STATEMENTS RECORDED BY THE INVESTI GATION WING, MUMBAI ON THE PRETEXT OF BEING GIVEN UNDER DURESS. THE LEARNED SR. DR, ARGUED THAT SINCE THE SAID RETRACTION WAS NOT FI LED BEFORE THE OFFICE OF DDIT (INV.), MUMBAI, AS SUCH, THE SAME CO ULD NOT HAVE BEEN TAKEN AS A BASIS TO GIVE RELIEF TO THE ASSESSE E. HE FURTHER ARGUED THAT THE AFFIDAVIT SUBMITTED BY SHRI CHOUDHA RY IS A SELF- SERVING DOCUMENT AND CANNOT BE ACCEPTED AS CORRECT BECAUSE IN THE 5 ITA NO.6605/DEL/2016 ACIT VS. K. K. EXPORTS STATEMENT RECORDED DURING THE SURVEY HE HAS ACCEPTE D THAT HE WAS JUST PROVIDING ACCOMMODATION ENTRIES. 4.0 THE LD. AUTHORISED REPRESENTATIVE (AR) VEHEMEN TLY SUPPORTED THE ORDER PASSED BY LEARNED CIT (A) AND A RGUED THAT SIMILAR ALLEGATIONS WERE ALSO MADE IN THE CASE OF T HE ASSESSEE AMONG OTHER ALLEGATIONS IN EARLIER YEARS, WHEREIN, P URCHASES WERE MADE FROM THE AFORESAID PARTIES AND THE ASSESSEE HA D APPROACHED THE INCOME TAX SETTLEMENT COMMISSION (ITSC) AND THE LEARNED CIT (A), AFTER GOING THROUGH THE SAID ORDER OF ITSC, HA S RECORDED A FINDING AT PAGE 15, PARA 4.10 THAT ON IDENTICAL FACTS AND CIRCUMSTANCES PREVAILING IN EARLIER YEARS THE INCOM E TAX SETTLEMENT COMMISSION AT NEW DELHI WHICH AFTER DUE CONSIDERATI ON HELD IN FAVOUR OF THE APPELLANT WITH THE OBSERVATION THAT T HE APPLICANT CANNOT BE ASKED TO DISCHARGE THE BURDEN OF PROOF OF EXISTE NCE OR GENUINENESS OF THE ALLEGED SELLERS AS LONG AS PURCHASES ARE REC ORDED IN THE BOOKS AND PAYMENTS OF PURCHASE AND BROKERAGE HAVE BEEN MA DE THROUGH CHEQUES. IT WAS SUBMITTED BY LEARNED AR THAT IN VIEW OF THE AFORESAID FINDINGS SO RECORDED BY LEARNED CIT (A), THE IMPUGNED ADDITION HAS RIGHTLY BEEN DELETED BY LEARNED CIT (A ). 6 ITA NO.6605/DEL/2016 ACIT VS. K. K. EXPORTS 4.1 THE LEARNED AR ALSO RELIED ON THE ORDER UNDER SECTION 147/143(3) FOR ASSESSMENT YEAR (AY) 2007-08 DATED 2 5.6.2014 IN THE CASE OF A GROUP CONCERN NAMELY M/S KHANNA JEWEL LERS PVT. LTD, AND SUBMITTED THAT IN THE CASE OF GROUP CONCERN THE CASE WAS REOPENED ON SIMILAR ALLEGATIONS AND THAT TOO ON THE BASIS OF STATEMENT OF SHRI SANJAY CHAUDHARY. HOWEVER, THE DE PARTMENT IN THE SAID CASE ACCEPTED THE SAID RETRACTION BY SHRI SANJAY CHAUDHARY WHILE PASSING THE ORDER UNDER SECTION 147/ 143(3) AND NO ADVERSE INFERENCE WAS DRAWN AGAINST M/S KHANNA JEW ELLERS PVT. LTD. IT WAS SUBMITTED THAT THIS FACT HAS ALSO BEEN NOTED BY LEARNED CIT (A) AT PAGE 14 PARA 4.6, WHILE GIVING RELIEF IN THE INSTANT CASE. 4.2 THE LEARNED AR FURTHER STATED THAT PURCHASES A RE FULLY VOUCHED AND PAYMENTS HAVE BEEN MADE AGAINST THESE P URCHASES BY ACCOUNT PAYEE CHEQUES AND IT IS AN UNDISPUTED FACT THAT THE QUANTITY OF DIAMONDS RECEIVED BY ASSESSEE AGAINST T HESE PURCHASES HAS BEEN DULY ENTERED BY THE ASSESSEE IN ITS STOCK REGISTERS. IT WAS ALSO SUBMITTED THAT PURCHASES DEBITED BY THE ASSESS EE IN ITS PROFIT AND LOSS ACCOUNT ARE DULY REFLECTED IN INCOME AS AL SO SALES MADE 7 ITA NO.6605/DEL/2016 ACIT VS. K. K. EXPORTS AFTER PURCHASE OR THE CLOSING STOCK DECLARED BY THE ASSESSEE IN ITS AUDITED ACCOUNTS. 4.3 THE LD. AR ALSO ARGUED THAT THE LD. DR HAS NOT BEEN ABLE TO REBUT THE FINDINGS SO RECORDED BY THE LEARNED CI T (A) BY BRINGING ANY ADVERSE MATERIAL ON RECORD. RATHER, THE LD. DR HAS MERELY PLACED RELIANCE ON THE DOCUMENTS ALREADY DEALT BY L EARNED CIT (A). IN SHORT, HIS SUBMISSION WAS THAT IN THE ABSENCE OF REBUTTAL TO THE DOCUMENTARY EVIDENCE FURNISHED BY THE ASSESSEE EVID ENCING THE FACTUM OF PURCHASES, THE ADDITION CANNOT BE SUSTAIN ED AND HAS RIGHTLY BEEN DELETED BY THE LD. CIT (A). 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. AT THE OUT SET, WE NOTE THAT THE LD. SR. DR WAS NOT ABLE TO CONTROVERT WITH CONCR ETE EVIDENCE TO THE CONTRARY, THE FINDINGS RECORDED BY THE LD. CIT (A) WHILE DELETING THE ADDITION MADE BY THE AO OF AN AMOUNT OF RS. 3,1 2,42, 835/- AND WE NOTE THAT THE RELIEF GRANTED BY LEARNED CIT (A) IS BASED ON POSITIVE DOCUMENTARY EVIDENCES, WHICH WERE BROUGHT ON RECORD BY ASSESSEE. THE SAME ARE DISCUSSED BELOW: 8 ITA NO.6605/DEL/2016 ACIT VS. K. K. EXPORTS (I) THE SOLE BASIS OF THE AO TO HAVE MADE THE IMPUGNED ADDITION WAS THE STATEMENT OF ONE SHRI SANJAY CHOUDHARY WHEREIN HE HAS ACCEPTED PROVIDING ACCOMMODATION ENTRIES THROUGH HIS VARIOUS CONCERNS. WE HAVE GONE THROUGH THE ASSESSMENT ORDER, WHEREIN, WE NOTE THAT THE SAID PERSON WAS PRODUCED BEFORE THE AO ON 26.02.2016 AND THE SAID PERSON RETRACTED FROM HIS EARLIER STATEMENT GIVEN BEFORE THE DGIT (INV). THE SAID RETRACTION WAS ALSO BACKED BY AN AFFIDAVIT OF SHRI SANJAY CHOUDHARY. THIS RETRACTION REMAINS UNCONTROVERTED TILL DATE. THUS, IN OUR CONSIDERED V IEW, THE WHOLE BASIS OF THE REVENUE AUTHORITIES TO HAVE MADE THE IMPUGNED ADDITION BASED ON THE STATEMENT RECORDED BEFORE DGIT (INV) DOES NOT SURVIVE AND, THEREFORE, THE LEARNED CIT (A) HAS RIGHTLY DELETED THE ADDITION BY PLACING RELIANCE ON THE SAID RETRACTION . (II) WE ALSO NOTE THAT THE LEARNED CIT (A), WHILE GIVING RELIEF, HAS RELIED ON THE ORDER UNDER SECTION 147/143(3) FOR AY 2007-08 DATED 25.6.2014 IN THE CASE OF A GROUP CONCERN NAMELY M/S KHANNA JEWELLERS PVT. LTD, WHEREIN, ON SIMILAR ALLEGATIONS, THE CASE WAS REOPENED AND THAT TOO ON THE BASIS OF STATEMENT OF SHRI SANJAY CHAUDHARY. HOWEVER, THE DEPARTMENT IN THE SAID CASE ACCEPTED THE SAID RETRACTION BY SHRI SANJAY CHAUDHARY WHILE PASSING THE ORDER UNDER 9 ITA NO.6605/DEL/2016 ACIT VS. K. K. EXPORTS SECTION 147/143(3) AND NO ADVERSE INFERENCE WAS DRAWN AGAINST M/S KHANNA JEWELLERS PVT. LTD. THE SAID FACT HAS ALSO BEEN DULY NOTED BY LEARNED CIT ( A) AT PAGE 14 PARA 4.6, WHILE GIVING RELIEF IN THE INST ANT CASE. THUS, ONCE REVENUE HAS ACCEPTED THE TRANSACTION WITH SH. SANJAY CHAUHARY TO BE GENUINE IN GROUP CASE OF THE ASSESSEE, THE SAME CANNOT BE AGITATED OR DOUBTED IN THE ASSESSEES CASE AND, THEREFORE, IT IS OUR CONSIDERED OPINION THAT THE LE ARNED CIT (A) HAS RIGHTLY DELETED THE ADDITION BY PLACING RELIANCE ON THE ASSESSMENT ORDER IN THE CASE OF GRO UP CONCERN NAMELY M/S KHANNA JEWELLERS PVT. LTD. (III) THAT FURTHER, ON GOING THROUGH THE ORDER OF LOWER AUTHORITIES, AN IMPORTANT FACT THAT EMERGES IS THAT A SIMILAR ALLEGATION WAS ALSO MADE IN THE CASE OF THE ASSESSEE, AMONG OTHER ALLEGATIONS, IN THE EARLIER ASSESSMENT YEARS WHEN IT HAD MADE PURCHASE FROM M/S NAZAR IMPEX (P) LTD. (A CONCERN SAID TO HAVE BE EN CONTROLLED BY SHRI SANJAY CHAUDHARY) AND THE ASSESSEE HAD APPROACHED ITSC FOR SETTLEMENT OF ITS CASE AND THE ITSC HAS HELD THE SAID TRANSACTIONS TO BE GENUINE. THE FINDING OF THE ITSC IN ASSESSEES CASE VIDE AN ORDER DATED 27.5.2014 FOR AY 2005-06 TO 2012-13 IS REPRODUCED AS UNDER- 10 ITA NO.6605/DEL/2016 ACIT VS. K. K. EXPORTS ON THE ISSUE OF PURCHASE DIAMONDS FROM BOGUS CONCERNS, WE AGREE WITH THE SUBMISSION OF LD. AR THAT THE APPLICANT CANNOT BE ASKED TO DISCHARGE THE BURDEN OF PROOF OF EXISTENCE OR GENUINENESS OF THE ALLEGED SELLERS AS LONG AS PURCHASES ARE RECORDED IN THE BOOKS AND PAYMENTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES. THE APPLICANTS HAVE FURNISHED COPIES OF PURCHASE BILLS, BANK STATEMENTS, COPIES OF RETURN FILED AND COPIES OF LEDGER ACCOUNTS AND SALE TAX REGISTRATION WHICH ARE SHOWN AT PAGES 146-579 OF THE PAPER BOOK. 5.1 IN VIEW OF THE AFORESAID FACTS AND MATERIAL AV AILABLE ON RECORD, WE HAVE NO HESITATION IN UPHOLDING THE O RDER OF LEARNED CIT (A). WHILE UPHOLDING THE ORDER PASSED B Y THE LEARNED CIT (A), WE RELY ON THE JUDGMENT OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S SURENDRA BUIL DTECH PVT. LTD. IN ITA NO. 141/2012 WHEREIN THE HONBLE COURT H ELD THAT WHERE THE REVENUE FAILED TO REBUT THE FINDINGS RECOR DED BY THE LEARNED CIT (A) BY BRINGING ANY CONTRARY MATERIAL O N RECORD, THE FINDING RECORDED BY THE LOWER AUTHORITY BASED ON DO CUMENTARY EVIDENCES NEEDS TO BE UPHELD. 5.2 GROUNDS NO. 6 TO 8 ARE GENERAL IN NATURE AND D O NOT REQUIRE ANY ADJUDICATION. 11 ITA NO.6605/DEL/2016 ACIT VS. K. K. EXPORTS 6.0 IN THE FINAL RESULT, THE APPEAL OF THE DEPARTM ENT IS DISMISSED. ORDER PRONOUNCED ON 30/09/2020. SD/- S D/- (G.S.PANNU) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEM BER DATED: 30/09/2020 *DRAGON* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI