Income Tax Appellate Tribunal - Mumbai
Dhaval Exim Pvt. Ltd., Mumbai vs Ito 5(1)(3), Mumbai on 30 November, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "K", MUMBAI
Before Shri Shamim Yahya, Accountant Member
& Shri Saktijit Dey, Judicial Member
ITA No.6711/Mum/2016
Assessment Year : 2010-11
ITO 5(1)(3) Dhaval Exim P. Ltd.,
Mumbai 117-A, 1st Floor, Panchratna,
Vs. Mama Pandurang Marg,
Opera House,
Mumbai 400 004.
PAN AADCD0472B
(Appellant) (Respondent)
ITA No.6159/Mum/2016
Assessment Year : 2010-11
Dhaval Exim P. Ltd., ITO 5(1)(3)
Mumbai 400 004. Mumbai
PAN AADCD0472B Vs.
(Appellant) (Respondent)
For the Revenue : Shri Saurabh Deshpande
For the assessee : Shri K A Vaidyalingan
Date of Hearing : 22.11.2018 Date of Pronouncement : 30.11.2018
ORDER
Per Saktijit Dey, Judicial Member
These cross-appeals arise out of the order, dated 17.08.2016, of learned CIT(A)-10, Mumbai, for A.Y. 2010-11.
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ITA Nos.6711 & 6159/Mum/2016 Dhaval Exim Pvt. Ltd.
2. ITA No.6711/Mum/2016 This appeal is by the department. At the outset, learned counsels appearing for the rival parties submitted that the tax effect on the amount disputed by the Revenue is below the monetary limit of ` 20 lacs as fixed in Circular No.3/2018 dated 11.07.2018 of Central Board of Direct Taxes (CBDT). In view of the aforesaid submissions of the learned counsels appearing for the parties, the appeal is dismissed as withdrawn. However, the department is given liberty to seek restoration of appeal, in case, it is found to be covered under any of the exceptions provided under the above referred circular.
In the result, the department's appeal is dismissed.
3. ITA No.6159/Mum/2016 In this appeal the assessee has raised four grounds. Ground no.1 is against the validity of re-opening of assessment u/s. 147 of the Act. At the outset, the learned AR appearing for the assessee expressed his intention not to press this ground. In view of the aforesaid submissions of the learned AR, this ground is dismissed.
4. The common issue raised in ground nos. 2 to 4 is against the decision of the learned CIT(A) in sustaining the addition u/s. 69C of the Act to 3% of the alleged bogus purchases.
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ITA Nos.6711 & 6159/Mum/2016 Dhaval Exim Pvt. Ltd.
5. Briefly, facts are the assessee - a company is engaged in the business of trading in diamond. For the impugned assessment year, the assessee filed its return of income on 23.09.2010 declaring total income of ` 6,23,440/-. Though, initially the return of income filed by the assessee was processed u/s. 143(1) of the Act, subsequently, the Assessing Officer re-opened the assessment u/s. 147 of the Act on the basis of information received from DGIT (Inv) revealing that the assessee has availed accommodation entries from certain parties. In the course of assessment proceedings when the Assessing Officer called upon the assessee to prove the purchases made of ` 6,02,93,139/- from six parties by producing evidences, as alleged by the Assessing Officer, the assessee except furnishing the addresses of the parties could not produce copies of purchase bills, proof of payments made to the parties or the details of delivery of goods at its premises. Of course, the Assessing Officer observed that the assessee furnished details of corresponding sales. Further the Assessing Officer observed that in the course of search and seizure operation conducted in case of Mr. Pravin Kumar Jain, who is in control of various companies, from some of whom the assessee had shown purchases of diamond, has in course of statement recorded u/s. 131 of the Act admitted that the concerns controlled by him were only providing accommodation entries without actual delivery of goods. Thus, ultimately, the Assessing Officer concluded that though the assessee has failed to prove the purchases of diamond from the concerned parties, 4 ITA Nos.6711 & 6159/Mum/2016 Dhaval Exim Pvt. Ltd.
however, he agreed that the assessee could prove corresponding sales. Thus, the Assessing Officer concluded that the assessee must have purchased goods from third parties/grey market. On the basis of the aforesaid conclusion, the Assessing Officer estimated the profit @12.5% of the alleged bogus purchases, which worked out to ` 75,36,642/-, and added it to the income of the assessee. Aggrieved of the said addition, the assessee preferred appeal before the learned CIT(A). The learned CIT(A) after considering the submissions of the assessee in the context of facts and material on record, though, agreed with the Assessing Officer that the assessee has failed to prove the genuineness of the purchases made, however, he reduced the addition to 3% of the alleged bogus purchases.
6. The learned AR contesting the addition sustained by the learned CIT(A) submitted that the gross profit shown by the assessee in the preceding years is much less than 3% estimated by the learned CIT(A). Thus, he submitted, the estimation of profit on account of bogus purchases should be restricted to the average gross profit rate declared by the assessee in the subsequent assessment years.
7. We have considered rival submissions and perused the material on record. From the orders of the departmental authorities, it is evident that the Assessing Officer was having specific information/material in his possession revealing that the assessee for regularizing the purchases made from 5 ITA Nos.6711 & 6159/Mum/2016 Dhaval Exim Pvt. Ltd.
unknown sources/grey market has availed accommodation entries to regularize the purchases. Even, before us the assessee has not produced any evidence to demonstrate that the purchases made from the declared sources are genuine. The only submission made by the learned AR before us is, the estimated profit on account of alleged bogus purchases should be reduced to the gross profit rate declared by the assessee in subsequent assessment years. In our view, the aforesaid submission of the learned AR is not acceptable. It is a fact on record that the assessee has failed to prove the purchases from the declared sources, which in other words demonstrates that the assessee has purchased the goods/diamonds from unknown sources/grey market, thereby, avoiding payments of VAT and other taxes, as may be applicable to such transactions. Thus, to that extent the assessee has suppressed his actual profits. In these circumstances, the gross profit rate declared by the assessee under normal circumstances cannot be applied to unproved purchases. After considering the overall facts and circumstances of the case, we are of the considered opinion that learned CIT(A) is more than reasonable in estimating the profit on the bogus purchases @3%. Therefore, we are not inclined to interfere with the aforesaid decision of the learned CIT(A). Accordingly, the grounds raised are dismissed.
In the result, appeals is dismissed 6 ITA Nos.6711 & 6159/Mum/2016 Dhaval Exim Pvt. Ltd.
9. To sum up, both the appeals are dismissed.
Order pronounced in the open court on this day of 30th November, 2018.
Sd/- Sd/-
(Shamim Yahya) (Saktijit Dey)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated : 30th November, 2018.
SA
Copy of the Order forwarded to :
1. The Appellant.
2. The Respondent.
3. The CIT(A), Mumbai.
4. The CIT
5. The DR, 'K' Bench, ITAT, Mumbai
BY ORDER,
//True Copy//
(Assistant Registrar)
Income Tax Appellate Tribunal, Mumbai