M/S C MAHENDRA EXPORTS LIMITED,MUMBAI vs. DCIT 14(1)(2), MUMBAI
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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & MS. KAVITHA RAJAGOPAL, JM
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI
BEFORE SHRI PRASHANT MAHARISHI, AM AND MS. KAVITHA RAJAGOPAL, JM ITA Nos. 3851 & 3852/Mum/2019 (Assessment Years: 2008-09 & 2009-10)
M/s. C Mahendra Exports Limited DCIT 14(1)(2) Tower C Office No. 6011, Bharat Mumbai Diamond Bourse BKC, Vs. Mumbai-400 051
PAN/GIR No. AACCC 9633 L (Appellant) (Respondent) :
Assessee by : Shri Bharat Kumar Revenue by : Shri K. C. Selvamani
Date of Hearing : 31.07.2023 Date of Pronouncement : 23.08.2023
O R D E R Per Kavitha Rajagopal, J M:
These appeals have been filed by the assessee, challenging the order of the learned
Commissioner of Income Tax (Appeals)-21, Mumbai passed u/s.143(3) r.w.s. 147 of the
Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Years (‘A.Y.’ for short)
2008-09 and 2009-10.
The appeals are time barred by four days and the assessee had filed an affidavit for
condoning the said delay. We find that there was sufficient cause for the delay, hence, we
hereby condone the delay in filing the present appeal.
As the facts are identical, we hereby pass a consolidated order by taking ITA No.
3851/Mum/2019 as the lead case.
2 ITA Nos. 3851 & 3852/Mum/2019 (A.Ys.2008-09 & 2009-10) M/s. C Mahendra Exports Limited vs. DCIT ITA No. 3851/Mum/2019
The assessee has challenged the grounds of addition amounting to
Rs.42,30,72,132/- being 100% of the amount of alleged bogus purchase made from
various parties. The assessee had also challenged the ground of not giving sufficient
opportunity by the ld. CIT(A), thereby violating the principles of natural justice.
The brief facts are that the assessee company is engaged in the business of
manufacturing, trading and exporting of cut and polished diamonds. The assessee has
filed its return of income dated 30.09.2008, declaring total income at Rs.Nil under the
normal provisions of the Act after claiming deduction u/s. 10B of the Act amounting to
Rs.26,63,63,580/- and book profit of Rs.40,14,87,463/- u/s. 115JB of the Act. The
assessee’s case was selected for scrutiny and the assessment order dated 14.02.2002 was
passed u/s. 143(3) of the Act determining the total income at Rs.9,11,21,154/- under the
normal provisions of the Act and book profit at Rs.40,25,90,555/-. Subsequent to this, the
assessee’s case was reopened u/s. 147 of the Act vide notice u/s. 148 dated 25.02.2015
for the reason that the A.O. received information from DIT-II, Mumbai that the assessee
was one of the beneficiary of bogus purchase from the entities managed by Shri
Bhawarlal Jain who was an accommodation entry provider based on the search and
seizure action carried out in the case of Shri Bhanwar Lal Jain group on 03.10.2013. The
A.O. then passed the assessment order dated 28.03.2016 u/s. 143(3) r.w.s. 147 of the Act
determining the total income at Rs.51,41,93,290/-. The A.O. without rejecting the books
of accounts had made addition on the bogus purchase made by the assessee from around
8 entities managed by Shri Bhanwar Lal Jain.
3 ITA Nos. 3851 & 3852/Mum/2019 (A.Ys.2008-09 & 2009-10) M/s. C Mahendra Exports Limited vs. DCIT 6. The assessee was in appeal before the first appellate authority challenging the
impugned addition made by the A.O.
The ld. CIT(A), on the other hand, has held both the sales as well as the purchase
to be bogus and made 100% addition on the alleged bogus purchases u/s. 69C of the Act
as unexplained expenditure.
Further aggrieved the assessee is in appeal before us, challenging the order of the
ld. CIT(A).
The learned Authorised Representative ('ld. AR' for short) for the assessee
contended that the A.O. had not doubted the sales made by the assessee and only the
corresponding purchases were held to be bogus by the A.O. The ld. AR further stated that
the ld. CIT(A) has erred in holding both the sales and the purchases to be bogus. The ld.
AR also contended that the assessee has furnished the stock register, bank register, copies
of bills, affidavit, etc. during the assessment proceeding and the payments for the
impugned purchase was made by account payee cheques and the same was not
considered by the lower authorities. The ld. AR further stated that the A.O. has merely
relied on the statement of Shri Bhanwar Lal Jain and had not given an opportunity of
cross examining while making the impugned addition. The ld. AR relied on various
decisions to support the assessee’s claim.
The learned Departmental Representative ('ld.DR' for short), on the other hand,
controverted the said fact and vehemently opposed to the submission made by the ld. AR.
4 ITA Nos. 3851 & 3852/Mum/2019 (A.Ys.2008-09 & 2009-10) M/s. C Mahendra Exports Limited vs. DCIT The ld. DR stated that the assessee has not made any purchases from these bogus entities
and there was also no actual delivery of goods and the same was corroborated further by
the statement of Shri Bhanwar Lal Jain recorded u/s. 131 of the Act. The ld. DR further
contended that the ld. CIT(A) has rightly held both the purchases and sale transaction to
be bogus and the assessee has not discharged the onus cased upon it to prove the identity,
creditworthiness of the parties and genuineness of the transaction. The ld. DR relied on
the order of the lower authorities.
We have heard the rival submissions and perused the materials available on
record. It is observed that the Tribunal vide an ex parte order dated 24.03.2022 has
decided the appeal against the assessee and the same was recalled by miscellaneous
petition filed by the assessee. It is observed that pursuant to a search and seizure
operation carried out in the case of Shri Bhanwar Lal Jain where the statement of oath
u/s. 131 were recorded purportedly stating that the accommodation entries were provided
to various parties in the name of 68 entities tabulated in the assessment order which was
run by son-in-law of Shri Bhanwar Lal Jain namely Shri Nitin Amarchand Shah. The
A.O. has reopened the assessee’s case for the reason that out of 68 entities, the assessee
has obtained bogus purchase from 8 entities listed below:
Sr. Name of the concerns A.Y. Amount (Rs.) No. 1 Jewel Diamond 2008-09 Rs.10,29,52,557 2 Kothari & Co. 2008-09 Rs.2,20,83,208 3 Little Diamond 2008-09 Rs.6,60,36,587 4 Meridian Gems 2008-09 Rs.2,82,05,363 5 Minal Gems 2008-09 Rs.7,90,90,390 6 Mouli Gems 2008-09 Rs.8,07,79,442 7 Rose Gems Pvt. Ltd. 2008-09 Rs.28,06,751 8 Sankhala Exports P. Ltd. 2008-09 Rs.4,11,17,334 Rs.42,30,72,132
5 ITA Nos. 3851 & 3852/Mum/2019 (A.Ys.2008-09 & 2009-10) M/s. C Mahendra Exports Limited vs. DCIT 12. The statement of Shri Bhanwar Lal Jain explains the modus operandi of carrying
out these bogus transactions. The assessee contended that the same is not a bogus
transaction for the reason that for every purchase there has been a corresponding sale and
the payment made for such purchases were by account payee cheque duly reflected in the
bank statements and books of accounts. The payments for the sales were also made
through proper banking channels. The assessee further stated that the purchase and sales
are duly recorded in the assessee’s stock register and the books were also audited u/s.
44AB of the Act. The assessee further contended that the entire details of the purchase
made from these 8 entities were given to the A.O. which includes the name and address
of the party, confirmation from parties, copy of bills, mode of payment and other details.
The assessee contended that it had discharged the primary onus casted upon by it. The
assessee had relied on various decisions of the Hon'ble High Courts, wherein it was held
that if the sales are genuine then the corresponding purchase should have been made from
the grey market for which only the addition on the profit embedded in such profit should
be added and not the entire purchases.
In our considered opinion, it is observed that the A.O. has not rejected the books
of account and has held only the purchases to be bogus. On the contrary, the ld. CIT(A)
has held both the sales as well as the purchases to be bogus. The assessee without
prejudice ground has stated that if the purchase is held to be bogus, only the profit
embedded in the said purchase should be added as opposed to the entire purchase.
6 ITA Nos. 3851 & 3852/Mum/2019 (A.Ys.2008-09 & 2009-10) M/s. C Mahendra Exports Limited vs. DCIT 14. From the facts of the present case, we deem it fit to restore this issue back to the
file of the A.O. with a direction to verify both the sale transaction as well as the purchase
transaction made by the assessee during the impugned year. The A.O. has failed to
consider these during the assessment proceeding. It is also evident that the A.O. has
placed reliance merely on the statement of Shri Bhanwar Lal Jain which the assessee
alleges that no opportunity was given to cross examine Shri Bhanwar Lal Jain. It is
pertinent to note that the onus is casted upon the assessee to present the said party before
the A.O. to prove that the purchase transaction made with these entities are genuine, not
giving an opportunity to cross examine the parties whom the assessee has made purchase
does not cause prejudice to the assessee in any manner whatsoever may be. Hence, this
issue is remanded back to the file of the A.O. for verifying the facts specified above.
ITA No. 3852/Mum/2019
This appeal filed by the assessee for A.Y. 2009-10 is also on identical facts and
the observations held in ITA No. 3851/Mum/2019 holds good and apply mutatis
mutandis to this appeal also.
In the result, both the appeals filed by the assessee are allowed for statistical
purpose.
Order pronounced in the open court on 23.08.2023.
Sd/- Sd/-
(Prashant Maharishi) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 23.08.2023 Roshani, Sr. PS
7 ITA Nos. 3851 & 3852/Mum/2019 (A.Ys.2008-09 & 2009-10) M/s. C Mahendra Exports Limited vs. DCIT Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,
(Dy./Asstt. Registrar) ITAT, Mumbai
