MOREWEL IMPEX P. LTD, MUMBAI V. ITO 5(2)(3), MUMBAI

ITA 6992/MUM/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2943 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 08-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Keywords: Accommodation entries; Retraction
• Section: 133A; 131

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE HONBLE S/SHRI JOGINDER SINGH ( JM ) , AND B.R.BASKARAN (AM) , . . , ./ I.T.A S . NO. 6992 /MUM/ 2 01 0 , 7799/MUM/2011 AND 5640/MUM/2012 ( / ASSESSMENT YEAR : 2007 - 08 , 2008 - 09 2009 - 10 ) M/S MOREWEL IMPEX PVT.LTD., 7/C, SUPARI BAGH MANSION, 34 DR.AMBEDAKAR ROAD, PAREL, MUMBAI - 400012 / VS. INCOME TAX OFFICER, W ARD 5(2)(3), MUMBAI. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN : AAECM7577P / ASSESSEE BY SHRI VIMAL PUNAMIYA / R EVENUE BY SHRI O P MEENA / DATE OF HEARING : 4.9.2015 / DATE OF PRONOUNCEMENT: 14. 10. 201 5 / O R D E R PER B.R. BASKARAN (AM) THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A) - 9, MUMBAI F OR ASSESSMENT YEARS 2007 - 08, 2008 - 09 AND 2009 - 10. SINCE THE ISSUES URGED IN THESE APPEALS ARE IDENTICAL IN NATURE AND SINCE THEY ARISE OUT OF COMMON SET OF FACTS, THESE APPEALS WERE HEARD TOGETHER AND THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. IN ALL THE THREE YEARS, THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNT AND CONSEQUENT ESTIMATION OF INCOME. I.T.A. NO . 6992/M/2010, 7799/M/11 AND 5640/M/2012 2 3. THE FACTS RELATING TO THE ISSUE CITED ABOVE ARE ST ATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN DIAMONDS. THE REVENUE CARRIED OUT A SURVEY OPERATION U/S 133A OF THE ACT ON 07 - 07 - 2008 AT THE BUSINESS PREMISES OF THE ASSESSEE. THE REVENUE ALSO CARRIED OUT SURVEY OPERATIONS IN THE H ANDS OF OTHER CONCERNS NAMED M/S BASANT DIA JEWELS AND M/S MOX DIAM. CONSEQUENT TO SURVEY OPERATIONS, THE ADIT (INV) RECORDED A STATEMENT U/S 131 OF THE ACT FROM SRI BASANT JAIN, PROPRIETOR OF M/S BASANT DIA JEWELS, WHEREIN HE ADMITTED THAT HIS BUSINESS C ONCERN IS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES IN RESPECT OF IMPORT/PURCHASE AND SALE OF DIAMONDS. HE ALSO DESCRIBED THE MODUS OPERANDI FOLLOWED IN THIS REGARD. IT APPEARS THAT AN IDENTICAL STATEMENT WAS GIVEN BY M/S MOX DIAM ALSO. C ERTAIN SPECIFIC REPLIES GIVEN IN THE ABOVE SAID STATEMENTS ABOUT THE MODUS OPERANDI FOLLOWED WERE CONFRONTED WITH ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY NAMED SHRI RAMESH L JAIN AND HE ALSO CONFIRMED THAT THE STATEMENT GIVEN IN THE CASES OF M/S BASA NT DIA JEWELS AND M/S MOX DIAM. THE SAID REPLY GIVEN BY SHRI RAMESH L JAIN WAS ENDORSED BY HIM IN THE STATEMENT RECORDED FROM HIM ON 18.7.2008 AND THE SAME IS EXTRACTED BELOW: - I HAVE GONE THROUGH THE STATEMENT OF SHRI BASANT D JAIN RECORDED U/S 131 OF T HE INCOME TAX ACT, 1961 DATED 09 - 07 - 2008 DULY ENDORSED BY SHRI NITESH T JAIN PARTNER OF M/S MOX DIAM AND I REAFFIRM THAT THE MODUS OPERANDI REVEALED AND EXPLAINED AND DISCUSSED BY SHRI BASANT D JAIN AND DULY ENDORSED BY ME AND SHRI NITESH T JAIN, PARTNER O F M/S MOX DIAM WAS THE MODUS OPERANDI ADOPTED BY US FOR PROVIDING ACCOMMODATION BILLS TO VARIOUS INTERESTED PARTIES IN THE MARKET. I ALSO STATE FURTHER THAT IN TERMS OF OUR LETTER DATED 10/7/2008 WE VIZ., SHRI BASANT D JAIN AND SHRI NITESH T JAIN & MYSELF INDIVIDUALLY CONFIRMED THE STATEMENT GIVEN IN THIS REGARD ON 09/07/2008 AS BEING CORRECT AND TRUE AND WE STAND BY IT. ACCORDINGLY , THE ASSESSING OFFICER ENTERTAINED THE VIEW THAT THE PURCHASES AND SALES SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE HE REIN ARE NON - I.T.A. NO . 6992/M/2010, 7799/M/11 AND 5640/M/2012 3 EXISTENT AND ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT. ACCORDINGLY THE ASSESSING OFFICER ESTIMATED THE COMMISSION INCOME RECEIVABLE ON PROVIDING ACCOMMODATION BILLS AT 2% OF THE SALES REPORTED BY THE ASSESSEE FOR ALL THE YEARS UNDER CONSIDER ATION. AFTER ALLOWING DEDUCTION OF 20% TOWARDS ESTIMATED EXPENSES, THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME OF THE ASSESSEE AS UNDER: - ASSESSMENT YEAR RETURNED INCOME ASSESSED INCOME 2007 - 08 60,858 11,00,639 2008 - 09 1,69,571 1,34,11,231 2009 - 10 ( - ) 10,79,210 1,33,93,130 4. IN THE SWORN STATEMENT, SHRI BASANT D JAIN HAD STATED THAT THE DIAMONDS ARE IMPORTED IN THE NAME OF HIS CONCERN ON BEHALF OF SOME OTHER DEALERS AND SALES ARE MADE ON BEHALF OF OTHERS, I.E., THOUGH THE PURCHASES AND SALES ARE CARRIED OUT IN THE NAME OF HIS CONCERN, THEY ARE DONE ON BEHALF OF OTHERS. THE PAYMENTS MADE AND PAYMENTS RECEIVED BY WAY OF CHEQUES ARE COMPENSATED BY WAY OF CASH. IN THIS PROCESS, THEY WILL GET COMMISSION ONLY @ 0.2% IN RESPECT OF IMPORTED DIAMONDS AND @ 0,05% IN RESPECT OF LOCALLY SOURCED DIAMONDS. 5 . IT IS PERTINENT TO NOTE THAT THE SURVEY OFFICIALS DID NOT UNEARTH ANY INCRIMINATING MATERIAL DURING THE COURSE OF SUR VEY OPERATIONS NOR DID THEY FIND ANY DEFECTS IN THE BOOKS OF ACCOUNT. THE DIRECTOR SHRI RAMESH L JAIN RETRACTED FROM THE STATEMENT GIVEN BY HIM BY FILING AN AFFIDAVIT ON 20 - 08 - 2008, I.E., WITHIN ONE MONTH OF GIVING STATEMENT AFFIRMING THE MODUS OPERANDI E XPLAINED BY OTHER BUSINESSMEN. IN THE AFFIDAVIT, SHRI RAMESH L JAIN HAS STATED THAT SURVEY OFFICIALS ENTERED HIS OFFICE PREMISES AT 1.30 PM ON 07 - 07 - 2008 AND THEY LEFT THE OFFICE AT 3.00 AM ON 09 - 07 - 2008. HE WAS FORCED TO ACCEPT THE NATURE OF BUSINESS CA RRIED ON BY THE ASSESSEE AS THAT OF PROVIDING ACCOMMODATION BILLS ONLY. IT IS FURTHER STATED THAT HIS CONCERN I.T.A. NO . 6992/M/2010, 7799/M/11 AND 5640/M/2012 4 WAS NOT INDULGING IN PROVIDING ACCOMMODATION BILLS, BUT ACTUALLY CARRYING ON BUSINESS TRANSACTIONS. 6. SUBSEQUENTLY, ANOTHER STATEMENT WAS R ECORDED FROM SHRI RAMESH L JAIN ON 21 - 02 - 2009 DURING THE COURSE OF ASSESSMENT PROCEEDING FOR AY 2007 - 08, WHEREIN ALSO HE STOOD BY THE AVERMENTS MADE IN THE AFFIDAVIT. 7. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ISSUED COMMIS SION U/S 131(D) OF THE ACT TO THE ASST. DIRECTOR OF INCOME TAX (INV.), SURAT IN ORDER TO VERIFY THE PURCHASES AND SALES RECORDED BY THE ASSESSEE. HOWEVER, THE DEPUTY DIRECTOR OF INCOME TAX REPORTED THAT THE CONCERNED PARTIES ARE NOT AVAILABLE IN THE GIVEN ADDRESSES. WHEN THE REPORT GIVEN BY THE DEPUTY DIRECTOR OF INVESTIGATION WAS CONFRONTED WITH THE ASSESSEE, IT FILED THE LEDGER ACCOUNT COPIES DULY CONFIRMED BY THE CONCERNED PARTIES, COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME FILED BY THEM IN ORDER TO E STABLISH THE GENUINENESS OF THE PURCHASE AND SALES TRANSACTIONS. HOWEVER, THE AO CHOSE TO REJECT ALL THESE DOCUMENTS, BUT PLACED RELIANCE ON THE STATEMENT RECORDED FROM SHRI BASANT JAIN, WHICH WAS ORIGINALLY CONFIRMED BY SHRI RAMESH L JAIN. ACCORDINGLY, T HE ASSESSING OFFICER REJECTED THE BOOK RESULTS AND ESTIMATED THE INCOME @ 2% OF SALES VALUE AS STATED EARLIER, EVEN THOUGH THE COMMISSION FOR ACCOMMODATION BILLS WAS STATED AS 0.20% FOR IMPORTED DIAMONDS AND @ 0.05% ON THE LOCALLY SOURCED DIAMONDS. 8. THE LD CIT(A) HELD THAT THE DOCUMENTS RELATING TO CONCERNED PARTIES FURNISHED BY THE ASSESSEE ARE COOKED UP DOCUMENTS, SINCE THE DDI HAD REPORTED THAT SUCH PARTIES DID NOT EXIST AT THE GIVEN ADDRESSES. ACCORDINGLY HE HELD THAT THE ASSESSING OFFICER HAS R IGHTLY REJECTED THOSE DOCUMENTS. HE FURTHER HELD THAT THE DOCUMENTS FURNISHED BY THE ASSESSEE ARE EXACTLY AS PER THE MODUS OPERANDI ADMITTED DURING THE COURSE OF SURVEY OPERATIONS AND STATEMENT RECORDED U/S 131 OF THE ACT. ACCORDINGLY I.T.A. NO . 6992/M/2010, 7799/M/11 AND 5640/M/2012 5 THE LD CIT(A) HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN ESTIMATING THE COMMISSION INCOME AT 2% OF THE SALES VALUE. AGGRIEVED, THE ASSESSEE HAS FILED THESE APPEALS BEFORE US. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. A CAREFUL PERUSAL OF THE RECORD WOUL D SHOW THAT THE ASSESSING OFFICER HAS PLACED RELIANCE ON THE STATEMENT GIVEN BY SHRI BASANT JAIN, PROPRIETOR OF M/S BASANT DIA JEWELS, WHICH WAS ORIGINALLY ENDORSED BY THE ASSESSEE. THE AO HAS FURTHER PLACED RELIANCE ON THE REPORT GIVEN BY THE DDIT (INV.) TO THE EFFECT THAT THE SUPPLIERS AND CUSTOMERS OF THE ASSESSEE WERE NOT AVAILABLE IN THE GIVEN ADDRESS. APART FROM THIS, IT IS A FACT THAT THE AO HAS NOT BROUGHT ON RECORD ANY OTHER MATERIAL TO SUPPORT HIS CONCLUSIONS. 10. WE HAVE EARLIER NOTICED T HAT THE DIRECTOR OF THE ASSESSEE COMPANY HAS RETRACTED FROM THE STATEMENT OF CONFIRMATION GIVEN BY HIM EARLIER WITHIN A PERIOD OF ONE MONTH BY FILING AN AFFIDAVIT. IN THE SAID AFFIDAVIT, IT HAS BEEN CLEARLY STATED THAT THE SURVEY OFFICIALS ENTERED HIS OFF ICE PREMISES AT 1.30 PM ON 07 - 07 - 2008 AND THEY LEFT THE OFFICE AT 3.00 AM ON 09 - 07 - 2008. FURTHER, IT WAS STATED THAT HE WAS FORCED TO ACCEPT THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE AS THAT OF PROVIDING ACCOMMODATION BILLS ONLY. HENCE, IN OUR VIEW, THE ASSESSING OFFICER COULD NOT HAVE PLACED RELIANCE ON THE STATEMENT GIVEN BY THE DIRECTOR OF THE ASSESSEE FOR THE FOLLOWING REASONS: - (A) THE SURVEY OFFICIALS ARE NOT ENTITLED TO RECORD STATEMENT ON OATH DURING THE COURSE OF SURVEY OPERATIONS U/S 1 33A OF THE ACT. (SEE. DCIT VS. PREMSONS (2009)(ITAT MUMBAI) (B) THE STATEMENT RECORDED DURING THE COURSE OF SURVEY OPERATIONS DO NOT HAVE EVIDENTIARY VALUE AND HENCE THE SAME CANNOT BE USED AS EVIDENCE IN THE ASSESSMENT PROCEEDINGS. (SEE CIT VS. KHADER KHAN SONS (2012)(25 TAXMANN.COM 413)(SC) (C) THE ASSESSEE HAS RETRACTED THE STATEMENT GIVEN DURING THE COURSE OF SURVEY OPERATIONS WITHIN ONE MONTH BY FILING AFFIDAVIT. THE SUBMISSIONS MADE IN THE AFFIDAVIT HAS NOT BEEN FOUND FAULT WITH. I.T.A. NO . 6992/M/2010, 7799/M/11 AND 5640/M/2012 6 (D) THE AO EXAMINED THE DIRECTOR OF THE ASSESSEE U/S 131 OF THE ACT SUBSEQUENT TO FILING OF AFFIDAVIT, BUT THE ASSESSEE HAS WITHSTOOD BY THE AVERMENTS MADE IN THE AFFIDAVIT. THE AO COULD NOT CONTROVERT SUBMISSIONS MADE IN THE AFFIDAVIT AS WELL AS IN THE SWORN STA TEMENT. (E) DURING THE COURSE OF SURVEY PROCEEDINGS, THE OFFICIALS DID NOT FIND ANY INCRIMINATING MATERIAL AND THE ASSESSING OFFICER ALSO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, DID NOT FIND ANY DEFECT IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE AS SESSEE. (F) THE ASSESSING OFFICER DID NOT BRING ANY MATERIAL ON RECORD TO SUBSTANTIATE THE AVERMENTS MADE DURING THE COURSE OF SURVEY OPERATIONS. (G) THE DURATION OF SURVEY OPERATIONS SUPPORT THE CASE OF THE ASSESSEE THAT HE WAS CONSTRAINED TO GIVE AD MISSION. HENCE THE SUBSEQUENT RETRACTION MADE WITHIN A PERIOD OF ONE MONTH SHOULD BE GIVEN DUE WEIGHT, MORE PARTICULARLY IN VIEW OF THE FACT THAT THE SURVEY OFFICIALS DID NOT UNEARTH ANY INCRIMINATING DOCUMENTS DURING THE COURSE OF SURVEY OPERATIONS. 11 . THE ASSESSING OFFICER HAS ALSO PLACED RELIANCE ON THE REPORT GIVEN BY THE DDIT (INV.), WHEREIN HE HAD STATED THAT THE CUSTOMERS/SUPPLIERS OF THE ASSESSEE WERE NOT AVAILABLE IN THE GIVEN ADDRESSES. WHEN THE REPORT GIVEN BY THE DDIT WAS CONFRONTED WIT H THE ASSESSEE, IT HAS FURNISHED FOLLOWING DOCUMENTS TO THE ASSESSING OFFICER: - (A) LEDGER ACCOUNT COPIES DULY CONFIRMED BY THE CONCERNED PARTIES. (B) COPIES OF INCOME TAX RETURN FILED BY THEM. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER C HOSE NOT TO EXAMINE THOSE DOCUMENTS AND HE CHOSE TO PLACE FULL RELIANCE ON THE REPORT GIVEN BY THE DDIT. WE ARE NOT ABLE TO APPRECIATE THE SAID ACTION OF THE ASSESSING OFFICER. WHEN THE ASSESSEE WAS CONFRONTED WITH THE REPORT GIVEN BY THE DDIT, IN OUR VI EW, THE ASSESSEE CAN AT BEST CONTROVERT THE SAME BY FILING THE DOCUMENTS AVAILABLE WITH IT. FURTHER, WHEN THE ASSESSEE HAS FILED THE I.T.A. NO . 6992/M/2010, 7799/M/11 AND 5640/M/2012 7 COPIES OF INCOME TAX RETURNS FILED BY THE CONCERNED PARTIES, THE ASSESSING OFFICER COULD HAVE VERY WELL CROSS VERIFIED THE SAME. THE AO COULD HAVE ALSO ENFORCED THE ATTENDANCE OF THOSE PARTIES BY ISSUING SUMMONS TO THEM. WE ARE UNABLE TO UNDERSTAND AS TO WHY THE ASSESSING OFFICER COULD NOT CARRY OUT THOSE KIND OF EXAMINATION, WHEN THEY ARE WELL WITHIN HIS POWERS. HENCE, IN OUR VIEW, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN IGNORING THE EVIDENCES FURNISHED BY THE ASSESSEE IN ORDER TO ESTABLLISH THE GENUINENESS OF THE PARTIES. WE NOTICE THAT THE LD CIT(A) HAS ALSO DISMISSED THESE DOCUMENTS BY OBSERVING THAT THEY ARE COOKED UP DOCUMENTS BY MAKING GENERAL OBSERVATIONS, I.E., WITHOUT ACTUALLY ESTABLISHING THAT THE ABOVE SAID DOCUMENTS WERE BOGUS IN NATURE. IT IS NOT KNOWN AS TO HOW THE COPIES OF INCOME TAX RETURNS COULD BE CONSIDERED TO BE A COOKED UP DOCUMENTS. THUS, WE NOT ICE THAT THE SAID OBSERVATIONS MADE BY THE LD CIT(A) ARE BASELESS, NOT SUPPORTED BY ANY EVIDENCES AND ARE MERE SURMISES. HENCE WE ARE UNABLE TO SUSTAIN HIS CONCLUSIONS. 12. WE FURTHER NOTICE THAT THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS. THE PURCHASES AND SALES RECORDED THEREIN HAVE NOT BEEN FOUND FAULT WITH, I.E., NO DEFECT HAS BEEN POINTED OUT BY THE ASSESSING OFFICER. HENCE, WE ARE OF THE VIEW THAT THERE IS NO GROUND AVAILABLE WITH THE ASSESSING OFFICER TO REJECT THE BOOKS OF ACCOUNT. ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND CONSEQUENTLY, IN OUR VIEW, THE BOOK RESULTS SHOULD HAVE BEEN ACCEPTED. ACCORDINGLY, WE ARE OF THE VIEW THAT THERE IS NO JUSTIFICATION OR PR OPER GROUND WARRANTING THE ESTIMATION OF PROFITS IN THE ASSESSEES HAND IN ALL THE THREE YEARS UNDER CONSIDERATION. 13. IN VIEW OF THE ABOVE, WE ARE UNABLE TO SUSTAIN THE ORDERS PASSED BY LD CIT(A) IN ALL THE THREE YEARS UNDER CONSIDERATION. ACCORDING LY, WE SET ASIDE THE ORDERS PASSED BY THE LD CIT(A) AND DIRECT THE ASSESSING OFFICER I.T.A. NO . 6992/M/2010, 7799/M/11 AND 5640/M/2012 8 TO DELETE THE INCOME ESTIMATED BY HIM FOR ALL THE THREE YEARS UNDER CONSIDERATION AND ACCEPT THE BOOK RESULTS DECLARED BY THE ASSESSEE. 14. IN THE RESULT, ALL THE THR EE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. PRONOUNCED ACCORDINGLY ON 14TH OCT , 2015. 14 TH OCT , 2015 SD SD ( / JOGINDER SINGH ) ( . . , / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 14TH OCT , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / TH E CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI