Income Tax Appellate Tribunal - Mumbai
Heerachand Gems Private Limited, ... vs Acit 5(1)(2), Mumbai on 2 January, 2019
1 ITA No.2490/Mum/2018 Heerachand Gems Private Limited Assessment Year: 2009-10 आयकर अपीलीय अिधकरण "एच" ायपीठ मुंबई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "H" BENCH, MUMBAI माननीय ी पवन िसं ह , ाियक सद एवं माननीय ी मनोज कुमार अ वाल, ले खा सद के सम ।
BEFORE HON'BLE SHRI PAWAN SINGH, JM AND HON'BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./I.T.A. No.2490/Mum/2018 (िनधा रणवष / Assessment Year: 2009-10) Heerachand Gems Pvt.Ltd. Asst. Commissioner of 102, B W ing, The Capital Income Tax-5(1)(2) बनाम/ Aaykar Bhavan G-Block Plot C-70 Bandra Kurla Complex Vs. 5 t h Floor, Mumbai-400 051. Mumbai थायीले खा सं . /जीआइआर सं . /PAN/GIR No. AABCH-9958-C (अपीलाथ /Appellant) : (!"थ / Respondent) Assessee by : Dharmesh Shah & Dhaval Shah- Ld.ARs Revenue by : Manoj Kumar Singh-Ld. DR सुनवाई की तारीख/ : 13/11/2018 Date of Hearing घोषणा की तारीख / : 02/01/2019 Date of Pronouncement आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. Aforesaid appeal by assessee for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income Tax (Appeals)-10, Mumbai [CIT(A)], Appeal No.CIT(A)-10/AC-5(1)(2)/331/16-17 dated 21/03/2018 qua confirmation of certain additions on account of alleged bogus purchases. The assessment for impugned AY was framed by Ld. 2 ITA No.2490/Mum/2018 Heerachand Gems Private Limited Assessment Year: 2009-10 Assistant Commissioner of Income Tax, Circle-5(1)(2), Mumbai [AO] u/s 143(3) read with section 147 of the Income Tax Act,1961 on 17/11/2016, wherein the income of the assessee has been determined at Rs.91.02 Lacs after certain addition on account of alleged bogus purchases for Rs.67.83 Lacs as against assessed income of Rs.23.19 Lacs u/s 143(3). During impugned AY, the assessee being resident corporate entity was stated to be engaged in the business of manufacturing / trading of gems, diamonds & jewellery.
2.1 The reassessment proceedings were initiated upon receipt of certain information from investigation wing of the department that the assessee made suspicious purchases of Rs.861.90 Lacs from five alleged hawala dealers, the details of which have been extracted at para 2 of the quantum assessment order. Consequently, notice u/s 148 dated 23/03/2016 was issued to the assessee which was followed by statutory notices u/s 143(2) & 142(1). The reasons recorded by revenue to trigger reassessment proceedings were duly supplied to the assessee. 2.2 The aforesaid entities were part of one Rajendra Jain Group, who was subjected to search operations by the department on 03/10/2013, wherein it was found that the said group, through web of numerous entities, was engaged in providing accommodation entries of bogus purchase/sales/Loans & advances to many parties. The statement of key person namely Shri Rajendra Jain & Shri Dharmi Chand Jain was also recorded during search operations, the relevant part of which has already been extracted at para 7.4 & 8 of the quantum order, the perusal of which revealed that the entities operated by the said group were not 3 ITA No.2490/Mum/2018 Heerachand Gems Private Limited Assessment Year: 2009-10 carrying out any genuine business activity and were carrying out only paper transactions as per the requirements. 2.3 The assessee defended the purchases vide submissions dated 17/11/2016 and submitted that the transactions were genuine, however, failed to produce any of the party to confirm the transactions which led the Ld. AO to doubt these transactions in the light of the investigation carried out by the department.
2.4 Finally, Ld. AO, upon consideration of factual matrix, came to a conclusion that the assessee made the actual purchases from the grey market and there was inflation of purchases in the books of the assessee which require estimation of true profits. The estimation has been done @12.5% of the alleged bogus purchases out of which allowance of Gross Profit Rate of 4.23% already declared by the assessee was provided. In other words, the assessee was saddled with net addition @ 7.87% amounting to Rs.67.83 Lacs against alleged bogus purchases of Rs.861.90 Lacs.
3. Aggrieved, the assessee contested the same before Ld. CIT(A) without any success by raising multiple contentions wherein the stand of Ld. AO got confirmed. Aggrieved, the assessee is in further appeal before us.
4. Although the assessee has raised multiple grounds of appeal as well as additional grounds of appeal challenging the validity of reassessment proceeding, however, the only plea raised during hearing before us by Ld. Auhtorized Representative for assessee [AR], Shri Dharmesh Shah concerns with fair estimation of income. The attention has been drawn to the fact that the goods purchased by the assessee 4 ITA No.2490/Mum/2018 Heerachand Gems Private Limited Assessment Year: 2009-10 were not subjected to VAT and the complete quantitative details of the goods being dealt by the assessee were available on record. Our attention is also drawn to the fact that the statements made by the key persons during search operations have subsequently been retracted and therefore, the assessee deserves fair estimation. The same has been opposed by Ld. Departmental Representative [DR], Shri Manoj Kumar Singh who submitted that the estimation was quite fair and justified under the circumstances.
5. We find the issue to be in a very narrow compass. It is undisputed fact that the assessee has already reflected a Gross Profit rate of 4.23%. The copies of purchase invoices as placed on record confirm the submissions of Ld. AR that the goods purchased by the assessee were not subjected to Value Added Tax [VAT] and no benefit accrued to the assessee on this account. It is also undisputed fact that the assessee has reconciled quantitative details of the goods being dealt with by him to a large extent. However, at the same time, the assessee reflected purchases from as many as five entities, all of which were being controlled by the aforesaid tainted group. The search / survey action on the said group on 03/10/2013 by DGIT (Inv.) revealed that the said group consisting of numerous business entities was engaged in providing accommodation purchases bills without carrying out any business activities. The assessee failed to produce even a single party to confirm the transactions. Therefore, in such a scenario, the action of lower authorities in estimating the profit element was quite justified. However, keeping in view the fact that the VAT was not applicable on the purchases made by the assessee and viewing the Gross Profit Rate 5 ITA No.2490/Mum/2018 Heerachand Gems Private Limited Assessment Year: 2009-10 of 4.23% already declared by the assessee, we find the estimation to be on the higher side. Keeping in view the overall factual matrix, we estimate the impugned additions on net basis @2% of alleged bogus purchases of Rs.8,61,90,755/- which comes to Rs.17,23,815/-. The balance addition stands deleted.
6. Resultantly, the appeal stands partly allowed in terms of our above order.
Order pronounced in the open court on 02nd January, 2019.
Sd/- Sd/-
(Pawan Singh) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member मुं बई Mumbai; िदनां क Dated : 02/01/2019 Sr.PS:- Jaisy Varghese आदे शकी"ितिलिपअ$े िषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. !"थ / The Respondent
3. आयकरआयु)(अपील) / The CIT(A)
4. आयकरआयु)/ CIT- concerned
5. िवभागीय!ितिनिध, आयकरअपीलीयअिधकरण, मुं बई/ DR, ITAT, Mumbai
6. गाड. फाईल / Guard File आदे शानु सार/ BY ORDER, उप/सहायकपं जीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुं बई / ITAT, Mumbai.