G S JEWELLERS & CO., MUMBAI V. ITO WARD 19 (1)(3), MUMBAI

ITA 6669/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3976 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 24-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T S KHALSA
• Keywords: Bogus purchase; Set aside
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.6669/M/2019 ASSESSMENT YEAR: 2010-11 M/S. G.S. JEWELLERS & CO., 62/68, RAJABAHADUR BANSILAL BUILDING, GIRGAUM ROAD, OPERA HOUSE, MUMBAI 400 004 PAN: AAAFG0872C VS. ITO WARD 19(1)(3), MATRU MANDIR, TARDEO, MUMBAI 400 007 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI FENIL BHAT, A.R. REVENUE BY : SHRI T.S. KHALSA, D.R. DATE OF HEARING : 15.07.2021 DATE OF PRONOUNCEMENT : 05.10.2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 30.08.2019 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) THE ADDITION OF RS.1,17,20,649/- TOWARDS THE BOGUS PURCHASES AS MADE BY THE AO. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 29.11.2017 DECLARING TOTAL INCOME OF RS.4 ,94,394/-. ITA NO.6669/M/2019 M/S. G.S. JEWELLERS & CO. 2 THE CASE OF THE ASSESSEE WAS THEREAFTER REOPENED BY THE AO UNDER SECTION 147 OF THE ACT AFTER RECORDING REASON UNDER SECTION 148(2) AND ACCORDINGLY NOTICE UNDER SECTION 148 OF THE ACT DATED 30.03.2017 WAS ISSUED AND SERVED UPON THE ASSESSEE. THE CASE WAS REOPENED AFTER RECEIPT OF INFORMATION FROM DGIT (INV.), MUMBAI THAT ASSESSEE IS BENEFICIARY OF HAWA LA PURCHASE ENTRIES TO THE EXTENT OF RS.1,17,20,649/- FROM M/S. KANGAN. THE AO CALLED FOR VARIOUS DETAILS AND INFORMATION F ROM THE ASSESSEE FROM TIME TO TIME DURING THE COURSE OF ASS ESSMENT PROCEEDINGS WHICH WERE DULY FILED BEFORE THE AO COM PRISING BILLS, VOUCHERS, BANK STATEMENTS EVIDENCING THE PAY MENT AND ALSO THE STOCK REGISTER SHOWING RECEIPT AND ISSUE O F STOCKS UPON PURCHASE AND SALE THEREOF. THE ASSESSEE ALSO FILED THE AFFIDAVIT OF THE SUPPLIERS STATING ON OATH THAT GOODS WERE IN FACT SUPPLIED TO THE ASSESSEE. THE AO FINALLY REJECTED THE CONTE NTIONS OF THE ASSESSEE AND TREATED THE PURCHASES AS NON GENUINE T HEREBY MAKING AN ADDITION OF BEING 100% OF THE PURCHASES O F RS.1,17,20,649/- TO THE INCOME OF THE ASSESSEE BY F RAMING ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 1 47 OF THE ACT DATED 29.12.2017 BY OBSERVING THAT IN THE PURCH ASE BILLS NO DESCRIPTION OF DIAMOND PURCHASED WHEREAS IN THE SAL E BILLS THE QUANTITIES AND CARETS WERE DULY MENTIONED. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ORDER OF AO . WHILE DISMISSING THE APPEAL OF THE ASSESSEE, THE LD. CIT( A) NOTED THAT M/S. KANGAN WAS IN THE LIST OF BOGUS COMPANIES WHIC H WAS STATED BY SHRI DHARMICHAND JAIN DURING THE COURSE O F SEARCH ON HIM. ACCORDING TO THE LD. CIT(A) SINCE THE SUPPLIE R WAS BOGUS THEREFORE ENTIRE PURCHASES OF RS.1,17,20,649/- WERE USED TO ITA NO.6669/M/2019 M/S. G.S. JEWELLERS & CO. 3 REDUCE THE PROFITS THEREBY REJECTING THE CONTENTION OF THE ASSESSEE THAT ASSESSEE HAS MADE CORRESPONDENCE SALE S OUT OF SO CALLED BOGUS PURCHASES. THE LD. CIT(A) ALSO REPROD UCED THE PURCHASE AND SALE INVOICES ON PAGE NO.15 TO 20 AND OBSERVED THAT SALE BILLS SHOW THE SPECIFIC DETAILS OF SIZE, SHAPE AND QUALITY OF DIAMOND WHEREAS NO SUCH DETAILS APPEARED IN THE PURCHASE INVOICE ISSUED BY M/S. KANGAN AND THUS DISMISSED TH E APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIAL ON RECORD. WE NOTE THAT UNDISPUTEDLY THE ASSESSEE IS BENEFICIARY OF HAWALA PURCHASE ENTRIES TO THE TUNE OF RS.1,17, 20,649/- AS BROUGHT OUT DURING THE COURSE OF SEARCH ON SHRI DH ARMICHAND JAIN & OTHERS. IT IS ALSO UNDISPUTED THAT ASSESSEE HAS FILED BEFORE THE AO THE COPIES OF PURCHASE BILLS, BANK ST ATEMENTS, STOCK TALLY SHOWING PURCHASE AND SALE OF DIAMOND ET C. ALONG WITH THE AFFIDAVIT FROM THE SUPPLIER TO THE EFFECT THAT THE DIAMONDS WERE IN FACT SUPPLIED. HOWEVER, THE AO RE JECTED THE CONTENTION OF THE ASSESSEE AND ADDED THE ENTIRE AMO UNT OF PURCHASES AS BOGUS PURCHASES. THE LD. CIT(A) UPHEL D THE ORDER OF AO FOR THE REASONS AS STATED HEREINABOVE, WHICH PRIMARILY INCLUDES THE LACK OF DESCRIPTION SIZE, SHAPE AND QU ALITY OF DIAMOND WHEREAS IN THE CORRESPONDING SALES BILLS SU CH DETAILS WERE DULY REFLECTED. WE NOTE THAT BOTH THE AUTHOR ITIES BELOW HAVE NOT DISPUTED THE EVIDENCES FILED BY THE ASSESS EE IN THE FORM OF PURCHASE BILLS, SALE BILLS, BANK STATEMENT AND S TOCK TALLY ETC. UNDER THESE CIRCUMSTANCES, WE ARE NOT IN CONCURRENC E WITH THE FINDING OF THE LD. CIT(A) THAT ENTIRE PURCHASES WER E USED TO REDUCE THE NET PROFIT OF THE ASSESSEE IN VIEW OF TH E FACT THAT THERE WERE CORRESPONDING SALE OUT OF THE SAID BOGUS PURCH ASES. IN OUR ITA NO.6669/M/2019 M/S. G.S. JEWELLERS & CO. 4 OPINION, IT IS THE ONLY PROFIT ELEMENT EMBEDDED IN THE PURCHASES WHICH CAN BE BROUGHT TO TAX AND NOT THE ENTIRE PURC HASES. DURING THE COURSE OF HEARING THE LD. COUNSEL OF THE ASSESSEE RELIED ON CERTAIN DECISIONS NAMELY; (I) POPATLAL N SHAH VS. ACIT (ITA NO. 5939/MUM/2016), (II) POPATLAL NATHALAL SHA H VS. ACIT (ITA NO. 6029/MUM/2018), (III) POLAR STAR VS. ACIT (ITA NO. 5877/MUM/2016) AND (IV) DIAGOLD DESIGN LTD VS. DCIT (ITA NO. 3519/MUM/2018). WE NOTE THAT THESE DECISIONS WERE RENDERED BY THE CO-ORDINATE BENCHES IN THE CONTEXT OF BOGUS PURCHASES BY DIAMOND TRADERS AND THE CO-ORDINATE BENCHES HAVE SU STAINED THE ADDITION EQUAL TO 3% OF THE BOGUS PURCHASES KEE PING IN VIEW THE NATURE OF ITEM AND THE MARGIN THEREON. ACCORDI NGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO APPLY A RATE OF 3% ON THE BOGUS PURCHASES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.10.2021. SD/- SD/- (RAVISH SOOD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 05.10.2021. * 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.