Income Tax Appellate Tribunal - Mumbai
Fancy Diamonds India P.Ltd, Mumbai vs Dcit 5(1)(2), Mumbai on 13 December, 2017
ITA.Nos.47/Mum/2017 & 167/Mum/2017 Fancy Diamonds India Private Limited Assessment Year-2013-14 आयकर अपीलीय अिधकरण "ए" ायपीठ मुं बई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI ी डी.टी. गरािसया, ाियक सद एवं ी मनोज कुमार अ वाल, लेखा सद के सम ।
BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./I.T.A. No.47/Mum/2017 (िनधा रण वष / Assessment Year: 2013-14) Assistant Commissioner of Income Fancy Diamonds India Private Ltd Tax 5(1)(2) 111, Prasad Chambers बनाम/ R.No.568,5 t h Fl oor Tata Road No.2 Aayk ar Bhav an M.K .Road Vs . Opera House Mum bai-400 020 Mumbai-400 004 थायी ले खा सं . /जीआइआर सं ./PAN/GIR No. AAACF-3325-J (अ पीलाथ" /Appellant) : (#$थ" / Respondent) & आयकर अ पील सं./I.T.A. No.167/Mum/2017 (िनधा रण वष / Assessment Year: 2013-14) Fancy Diamonds India Private Ltd Assistant Commissioner of Income 111, Prasad Chambers Tax 5(1)(2) Tata Road No.2 बनाम/ R.No.568,5 t h Fl oor Opera House Vs. Aayk ar Bhavan M.K.Road Mumbai-400 004 Mum bai-400 020 थायी ले खा सं . /जीआइआर सं ./PAN/GIR No. AAACF-3325-J (अ पीलाथ" /Appellant) : (#$थ" / Respondent) Assessee by : Reepal G.Tralshawala, Ld.AR Revenue by : Rajesh Kumar Yadav, Ld. Sr. DR सुनवाई की तारीख / : 03/11/2017 Date of Hearing घोषणा की तारीख / : 13/12 /2017 Date of Pronouncement 2 ITA.Nos.47/Mum/2017 & 167/Mum/2017 Fancy Diamonds India Private Limited Assessment Year-2013-14 आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. These are cross appeals by assessee as well as revenue for Assessment Year [AY] 2013-14 which contest the order of Ld. Commissioner of Income-Tax (Appeals)-10 [CIT(A)], Mumbai, Appeal No. CIT(A)-10/DCIT 5(1)(2)/558/2015-16 order dated 30/09/2016 qua confirmation of certain additions on account of bogus purchases. The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax-5(1)(2), Mumbai on 23/03/2016 u/s 143(3) of the Income Tax Act,1961. The registry has noted that the appeal of the revenue is delayed by 226 days. However, upon perusal of Authorization Memo dated 06/12/2016 as placed on record, it is noted that correct date of communication of the impugned order is 09/11/2016 which is inadvertently written as 23/03/2016 in Form No.36 and therefore, prima facie, the appeal is in order and moreover, the assessee has not raised any objection against the same.
2.1 Facts leading to the same are that the assessee being resident corporate assessee engaged as manufacturer & exporter of diamond studded jewellery was assessed for impugned AY u/s 143(3) on 23/03/2016 at Rs.2,24,76,960/- after sole addition of certain alleged bogus purchases for Rs.73,42,508/-. The original return was e-filed by the assessee on 30/09/2013 at Rs.1,51,34,450/-.
3ITA.Nos.47/Mum/2017 & 167/Mum/2017 Fancy Diamonds India Private Limited Assessment Year-2013-14 2.2 During assessment proceedings, it was noted that the assessee made suspicious purchases of Rs.5,87,40,062/- from seven concerns, who, as per information received from DGIT (investigation), Mumbai were engaged in providing accommodation / bogus bills. All the seven entities were being controlled by a person / group namely Bhanwarlal Jain. The party-wise details of purchases made from these seven concerns have been extracted by Ld. AO at Page No.-2 of the quantum assessment order.
2.3 The search / survey action on Bhanwarlal Jain Group on 03/10/2013 by DGIT (Inv.) revealed that the said group consisting of numerous business entities, numbering more than 70, was engaged in providing accommodation purchases bills & accommodation loans & advances. It was found out that the employees / their relatives etc. of the said group were merely name lending directors / partners / proprietors of numerous concerns which were operating under the control of said group. The statements of concerned persons revealed that the firms were indulging in accommodation bills without doing any actual business and those persons had no knowledge about the business being carried out by the said concerns.
2.4 Consequently, the assessee was called upon to substantiate the purchase transactions. The assessee defended the purchases made by him but could not produce any party for confirmation of the transactions which led the Ld. AO to disbelieve the said transactions. Finally, not convinced with assessee's submissions, Ld. AO estimated the additions @12.5% of alleged bogus purchases which came to Rs.73,42,508/- and added the same to the income of the assessee.
4ITA.Nos.47/Mum/2017 & 167/Mum/2017 Fancy Diamonds India Private Limited Assessment Year-2013-14
3. Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 30/09/2016 where the assessee reiterate the said contentions. The Ld. CIT(A) after considering assessee's submission & several judicial pronouncements, estimated the same to 3%. Aggrieved, the assessee as well as revenue is in further appeal before us.
4. The Ld. Departmental Representative [DR] drew our attention to that fact that the assessee made heavy purchases from seven entities, all of which were controlled by the same group and hence, the nature of transactions being made by the assessee with these entities was well within his knowledge. The Ld. DR further contended that the assessee was well aware of the operations of the group and procured accommodation bills to suppress the profits & to take advantage of VAT etc. and further the said group, during search / survey operations, in clear terms, admitted to be engaged in sole activity of providing accommodation bills with a view to defraud the revenue. The Ld. DR pleaded for restoration of the view taken by Ld. AO.
5. Per Contra, Ld. Counsel for Assessee [AR] drew attention to the fact that the assessee was in possession of sufficient documentary evidences to substantiate the said transactions and all the payments were through banking channels and goods purchased by assessee were duly accounted for in the books of account and additions were not justified. Our attention is drawn to the higher Gross Profit being reflected by the assessee against these purchases.
6. We have heard the rival contentions and perused relevant material on record. We are of the considered opinion that there could be no sale 5 ITA.Nos.47/Mum/2017 & 167/Mum/2017 Fancy Diamonds India Private Limited Assessment Year-2013-14 without purchase of material keeping in view the assessee's nature of business. The turnover achieved by the assessee has not been disputed by the revenue and the payments were through banking channels. The assessee reconciled quantitative details also. However, at the same time, the assessee reflected purchases from seven entities, all of which were controlled by the same group and the assessee could not produce any of the party for confirmation of the transaction. The search / survey action on the group revealed that the said group controlled more than 70 entities with the sole objective of providing accommodation bills to the interested person through network of agents. The entities were being managed by the employees / relatives of the said group who were merely name lender and had no knowledge about the business being carried out by these entities. All these factors cast a serious doubt on assessee's claim. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against alleged bogus purchases, which Ld.CIT(A) has rightly done. The assessee has placed reliance on several judicial pronouncements but we find the matter to be a factual one which requires estimation of income. Therefore, on totality of facts, we find the estimation made by Ld. CIT(A) to be on the lower side and hence, we enhance the same to 6% of alleged bogus purchases of Rs.5,87,40,062/- which comes to Rs.35,24,404/-. The order of Ld. CIT(A) stands modified to that extent.
6ITA.Nos.47/Mum/2017 & 167/Mum/2017 Fancy Diamonds India Private Limited Assessment Year-2013-14
7. Resultantly, the revenue's appeal stands partly allowed whereas the assessee's appeal stands dismissed.
Order pronounced in the open court on 13th December, 2017.
Sd/- Sd/-
(D.T.Garasia) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member मुंबई Mumbai; िदनां क Dated : 13.12 .2017 Sr.PS:- Thirumalesh आदे श की ितिलिप अ !ेिषत/Copy of the Order forwarded to :
1. अपीलाथ" / The Appellant
2. #$थ" / The Respondent
3. आयकर आयु,(अपील) / The CIT(A)
4. आयकर आयु, / CIT - concerned
5. िवभागीय #ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड/ फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai