KUMBH GEMS, MUMBAI V. ACIT, CIRCLE-23(2), MUMBAI

ITA 767/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1562 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 11-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH LD
• Assessee Lawyers: DEVEN KAPADIALD
• Keywords: Bogus purchase
• Section: 143(3); 143(1); 201; 132

Judgement Text

M/S KUMBH GEMS ASSESSMENT YEAR: 2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.767/MUM/2019 ( / ASSESSMENT YEAR: 2010-11) KUMBH GEMS FW-3150, G-BLOCK BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400 051. / VS. A CIT - CIRCLE - 23(2) ROOM NO.122, MATRU MANDIR, TARDEO ROAD MUMBAI-400 007. PAN/GIR NO. - AADFK - 5586 G ( '# /APPELLANT ) : ( $%'# / RESPONDENT ) & ./ I.T.A. NO.1078/MUM/2019 ( / ASSESSMENT YEAR: 2010-11) ACIT - CIRCLE - 23(2) ROOM NO.122, MATRU MANDIR, TARDEO ROAD MUMBAI-400 007. / VS. KUMBH GEMS FW-3150, G-BLOCK BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400 051. PAN/GIR NO. AADFK - 5586 - G ( '# /APPELLANT ) : ( $%'# / RESPONDENT ) ASSESSEE BY : SHRI DEVEN KAPADIA-LD. AR REVENUE BY : SHRI GURBINDER SINGH -LD.SR. DR / DATE OF HEARING : 01/12/2020 / DATE OF PRONOUNCEMENT : 14/12/2020 M/S KUMBH GEMS ASSESSMENT YEAR: 2010-11 2 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THESE CROSS-APPEALS FOR ASSESSMENT YEAR (AY) 201 0-11 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEAL S)-33 [CIT(A)], APPEAL NO.CIT(A)-33/RG.23/48/17-18 DATED 12/12/2018 WHICH HAS RESTRICTED THE ADDITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES TO 30%. THE ASSESSEE IS AGGRIEVED BY CONFIRMATION OF ADDITI ON TO THE EXTENT OF 30% WHEREAS THE REVENUE IS AGGRIEVED BY PARTIAL DEL ETION OF THE ADDITION. 2. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING JUDICIAL PREC EDENTS AS CITED DURING THE COURSE OF HEARING. OUR ADJUDICATION TO THE SUBJ ECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3.1 THE ASSESSEE WAS SUBJECTED TO REASSESSMENT PROC EEDINGS FOR THE YEAR UNDER CONSIDERATION PURSUANT TO RECEIPT OF CER TAIN INFORMATION FROM DGIT (INVESTIGATION) THAT ASSESSEE OBTAINED ACCOMMO DATION PURCHASE BILLS AGGREGATING TO RS.206.01 LACS FROM AN ENTITY NAMELY M/S NAMAN EXPORTS. THIS ENTITY WAS IDENTIFIED AS ONE OF THE B ENAMI CONCERNS BEING RUN BY BHANWARLAL JAIN GROUP TO PROVIDE ACCOMMODATI ON ENTRIES TO VARIOUS BENEFICIARIES. THESE FACTS CAME TO LIGHT DU RING SEARCH OPERATION U/S 132 ON THE GROUP ON 03/10/2013. THE ASSESSEE IS STATED TO BE ENGAGED IN TRADING OF DIAMONDS. THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE ON 08/09/2010 WAS PROCESSED U/S 143(1) . 3.2 ACCORDINGLY, THE CASE WAS REOPENED AS PER DUE P ROCESS OF LAW AND AN ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 FOR THE YEAR UNDER CONSIDERATION ON 18/12/2017 WHEREIN THE WHOLE OF SU CH PURCHASES WERE DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSE SSEE. IN SUPPORT OF M/S KUMBH GEMS ASSESSMENT YEAR: 2010-11 3 THE TRANSACTIONS, THE ASSESSEE HAD SUBMITTED INVOIC E COPIES, BANK STATEMENT EVIDENCING PAYMENT TO THE SUPPLIER THROUG H BANKING CHANNELS AND COMPUTERIZED STOCK REGISTER. THE ASSESSEE ALSO FILED INCOME TAX RETURN AS WELL AS FINANCIAL STATEMENTS OF THE SUPPL IER. HOWEVER, THE ASSESSEE FAILED TO SUPPLY MANUAL STOCK REGISTER AND ALSO COULD NOT SUBSTANTIATE THE MODE OF TRANSPORT. THEREFORE, REJE CTING ASSESSEES SUBMISSIONS, LD. AO ADDED AGGREGATE PURCHASES OF RS .206.01 LACS TO THE INCOME OF THE ASSESSEE. 4.1 THE ASSESSEE ASSAILED THE STAND OF LD. AO BY SU BMITTING THAT THERE WAS NO EVIDENCE TO DISALLOW THE SAME. THE ASSESSEE HAD ALREADY PRODUCED RELEVANT DOCUMENTARY EVIDENCES AND DISCHAR GED THE PRIMARY ONUS CASTED IN THIS REGARD. THE ATTENTION WAS DRAWN TO THE FACTS THAT PURCHASED GOODS WERE EXPORTED AND ACCEPTED BY CUSTO MS DEPARTMENT. THE SALES PROCEEDS WERE RECEIVED THROUGH BANKING CH ANNELS AS PER RBI GUIDELINES. THE ASSESSEE PURCHASE 813.94 CARATS WHI CH WAS USED FOR THE PURPOSE OF EXPORT. THE ASSESSEE ALSO PLEADED TO RESTRICT THE DISALLOWANCE IN THE RANGE OF 2% TO 9% AS HELD IN NU MEROUS OTHER CASES LINKED TO BHANWARLAL JAIN GROUP. 4.2 THE LD. CIT(A) NOTED THAT THERE WAS A LONG GAP BETWEEN PURCHASE AND PAYMENT THEREOF WHICH WAS NOT CHARACTERISTICS O F NORMAL TRANSACTIONS. HOWEVER, WITHOUT MAKING ACTUAL PURCHA SES, EXPORTS COULD NOT HAVE BEEN POSSIBLE AND THEREFORE, THE ADDITIONS WERE TO BE RESTRICTED TO THE EXTENT OF 30%. THE SAID ADJUDICATION HAS GIV EN RISE TO CROSS- APPEALS BEFORE US. 5. UPON DUE CONSIDERATION OF FACTUAL MATRIX AS ENUM ERATED IN PRECEDING PARAGRAPHS, IT IS QUITE EVIDENT THAT THE SUPPLIER FROM WHOM THE ASSESSEE IS STATED TO HAVE MADE PURCHASES, WAS FOUN D TO BE A BENAMI M/S KUMBH GEMS ASSESSMENT YEAR: 2010-11 4 CONCERN BEING MANAGED AND OPERATED BY BHANWARLAL JA IN GROUP. DURING SEARCH OPERATIONS, IT WAS FOUND THAT THESE CONCERNS WERE NOT DOING ANY ACTUAL BUSINESS BUT ENGAGED IN PROVIDING ACCOMMODAT ION BILLS TO VARIOUS BENEFICIARIES. AS AGAINST THIS, THE ASSESSEE HAS MA DE EXPORT OF THE MATERIAL SO PURCHASED FROM THE SUPPLIER WHICH IS EV IDENT FROM THE SALE INVOICES AND SHIPPING BILLS AS PLACED ON RECORD. TH E ASSESSEE MAINTAINED COMPUTERIZED STOCK RECORDS. IT IS ALSO T RUE THAT THERE COULD BE NO SALE WITHOUT ACTUAL PURCHASE OF MATERIAL. THEREF ORE ON THE FACTS AND CIRCUMSTANCES, THE CONCLUSION WHICH COULD BE DRAWN WAS THAT THE PURCHASES WERE SOURCED OUT OF THE BOOKS WHEREAS THE PURCHASE BILLS WERE PROCURED FROM THE TAINTED GROUP. IN SUCH A SCE NARIO, THE CORRECT APPROACH WOULD BE TO ESTIMATE THE NET PROFIT EARNED BY ASSESSEE ON THESE TRANSACTIONS, WHICH LD. CIT(A) HAS RIGHTLY DO NE SO. HOWEVER, KEEPING IN VIEW THE FACT THAT THE ASSESSEE HAS ALRE ADY REFLECTED GROSS PROFIT AND NET PROFIT RATE OF 4.04% & 2.10% RESPECT IVELY, THE ESTIMATION AS MADE BY LD. CIT(A) WAS ON THE HIGHER SIDE. WE E STIMATE THE SAME @5% OF THE TAINTED PURCHASES OF RS.2,06,01,000/-. T HE SAME COMES TO RS.10,30,050/-. THE BALANCE ADDITION STAND DELETED. THE LD. AO IS DIRECTED TO RE-COMPUTE THE INCOME OF THE ASSESSEE I N TERMS OF OUR ORDER. NO OTHER ARGUMENTS OR POINTS HAVE BEEN URGED BEFORE US. 6. THE REVENUES APPEAL STANDS DISMISSED WHEREAS TH E ASSESSEES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED ON 14 TH DECEMBER, 2020. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 14/12/2020 SR.PS:-JAISY VARGHESE M/S KUMBH GEMS ASSESSMENT YEAR: 2010-11 5 '# $# / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. + ,$- , - , / DR, ITAT, MUMBAI 6. , ./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.