KARP IMPEX LTD, MUMBAI V. ASST CIT 5(2)(2), MUMBAI

ITA 6654/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8773 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 11-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bogus purchase; Accommodation entries
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.6654/M/2016 ASSESSMENT YEAR: 2010-11 M/S. KARP IMPEX LTD., GE-3051, G BLOCK, BHARAT DIAMOND BOURSE, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI 400 051 PAN: AABCK1823F VS. THE ASSTT. COMMISSIONER OF INCOME TAX-5(2)(1), 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING : 16.08.2017 DATE OF PRONOUNCEMENT : 31.10.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 31.08.2016 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING, PROCESSING AND EXPORTING O F CUT & POLISHED DIAMONDS. DURING THE YEAR THE ASSESSING OFFICER (H EREINAFTER ITA NO.6654/M/2016 M/S. KARP IMPEX LTD. 2 REFERRED TO AS THE AO) FOUND THAT ASSESSEE HAD MADE BOGUS PURCHASES FROM FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. MOON DIAMONDS 6,87,23,794 2. SARANSH GEMS 3,37,63,895 3. SHEETAL EXPORTS 11,39,72,883 4. AADI 4,24,47,073 5. AVI 10,19,20,287 6. KALASH 6,95,96,005 7. KARNAWAT 9,53,54,201 8. KRIYA 3,25,06,770 9. SUN 7,82,54,433 TOTAL 63,65,39,341 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ESTIMATED A DDITION @9% ON ABOVE PURCHASES, WHICH CAME TO RS.5,72,88,541/-. . 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE CLAIM BY OBSERVING AS UNDER: 4.2.2 FROM THE FACTUAL MATRIX, IT IS SEEN THAT EVE N THOUGH THE APPELLANT HAS DISCLOSED GP MORE THAN 6% FOR ALL THE ABOVE THR EE YEAR UNDER DISCUSSION, THE BOARD'S ABOVE INSTRUCTION IS NOT AP PLICABLE STRAIGHTAWAY. SINCE THE ISSUE OF ACCOMMODATION ENTRIES IS A REALI TY, TO ARREST SUCH RAMPANT MALPRACTICES, A RESTRAINT IS ALWAYS INEVITA BLE AS WE CANNOT ENCOURAGE SUCH MALPRACTICE OF OBTAINING ACCOMMODATI ON ENTRIES TO AVOID THE IMPACT OF LEVIES AND DEFRAUDING REVENUE A S THE AO IS IN POSSESSION OF CERTAIN VALID INFORMATION IN THE FORM OATH STATEMENTS EVEN THOUGH HE COULD NOT PROVE CONCLUSIVELY AGAINST THE APPELLANT. WE CAN FIND SUCH A RESTRAINT ADVISED BY THE HON'BLE GU JARAT HIGH COURT IN THE CASE OF SIMIT P SETH (SUPRA) WITHOUT WHICH AVOIDING PAYMENT OF LEVIES AND DEFRAUDING REVENUE WILL CONTINUE UNABATED. HOWEVER, IN THE PRESENT CASE THE DECISION OF SIMIT P SETH IS NOT APPLICABLE IN A CAST-IRON STRAIGHT-JACK ET WAY EXCEPT THE THEORY OF RESTRAINT LAID DOWN BY THE M SINCE THE NATURE OF BUSINESS IN THE CASE BEFORE THEM WAS DIFFERENT FROM THE PRESENT CASE. KEEPING IN VIEW THE ABOVE INSTRUCTION OF THE BOARD ON THE ONE HAND AND THE SAVING GAINED ITA NO.6654/M/2016 M/S. KARP IMPEX LTD. 3 BY THE ASSESSEE BY INVOLVING IN ACCOMMODATION ENTRI ES TO THE EXTENT OF LEVIES ON THE OTHER, I FIND IT APPROPRIATE TO TAKE 3% OF THE REPORTED BOGUS PURCHASES FOR ADDING U/S 69C OVER AND ABOVE THE REG ULAR PROFITS DISCLOSED BY THE APPELLANT INSTEAD OF ADDING 9% AS WAS DONE B Y THE AO (1.5 TIMES OF 6%). THE AO IS DIRECTED ACCORDINGLY. IN VIEW OF THI S THE GROUND IS PARTLY ALLOWED. 5. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 5. NO ONE HAS APPEARED ON BEHALF OF THE ASSESSEE. ACCORDINGLY WE HAVE HEARD LD. D.R. AND LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHMEDABAD BENCH IN THE CASES OF SHWETAMBA R STEELS VS. ITO AHMEDABAD AND GANESH RICE MILLS VS. CIT (294 IT R 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM GOODS ARE STATED TO HAVE BEEN PUR CHASED. THE SUPPLIERS WERE FOUND TO BE ENGAGED IN PROVIDING BOG US BILL WITHOUT ACTUAL DEALING OF GOODS. IN THIS REGARD, THE ASSESS EE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WI TH RESPECT OF THE SALES WITH PURCHASES FROM THE PARTIES DURING THE AS SESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESPECT OF THE PURCHASE FROM THE SAID PART IES. AS MENTIONED ABOVE THE AO HAS NEVER DISPUTED OR EXAMINED THE ASP ECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RE CEIPTS OF THE ASSESSEE AS IT IS, THEREFORE, THE AO CANNOT DENY TH AT PURCHASES WERE NOT MADE BY THE ASSESSEE AND THE MATERIAL WAS NOT U SED FOR ITS SALES. WHAT IS UNDER DISPUTE IS THE PURCHASES FROM THE PART IES FROM WHOM BILLS HAVE BEEN TAKEN AND CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE BUT THE PARTIES FROM W HOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPUTED AND SUSPICIOUS . THE AO HAD ITA NO.6654/M/2016 M/S. KARP IMPEX LTD. 4 MADE THE ADDITION AS SOME OF THE SUPPLIERS WERE DEC LARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD R EASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAK E ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT O N SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE A ND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS A NY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAILED INVESTIGAT ION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN TH E BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAU SE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION L ETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THAT THE PURCHASES W ERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE DECISIO N OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TAXMAN 171 (BOM). TO THIS E XTENT, WE ARE OF THE VIEW THAT IF THE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRESUMED THAT SUPPLIER WERE BOGUS SIMP LY BECAUSE THE SELLERS WERE NOT FOUND AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN THE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEEDINGS. THE AO HAS NOT BROUGHT ANY MA TERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSION OF SALES. IT IS B ASIC RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS ITA NO.6654/M/2016 M/S. KARP IMPEX LTD. 5 CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PUR CHASE FROM SALES. ESTIMATION OF PROFIT RANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S SIMIT P SHETH 356 ITR 451 (GUJ.). WE FIND NO INFIRMITY IN THE OR DER OF THE LD. CIT(A). HENCE, WE HAVE NO ALTERNATIVE EXCEPT TO EN DORSE THE ORDER OF THE LD. CIT(A). 6. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31.10.2017. * KISHORE, SR. P.S. 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.