VIVEK SHYAM JOHARI,MUMBAI vs. INCOME TAX OFFICER 23(3)(6), MUMBAI

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ITA 1697/MUM/2023Status: DisposedITAT Mumbai25 July 2023AY 2013-20144 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found the 5% GP addition to be on the higher side, considering the assessee's declared GP. To meet the ends of justice, the GP on bogus purchases was restricted to 3%. The ground regarding the opportunity to cross-examine was dismissed due to no submissions.

What were the facts?

The assessee, a diamond trader, made purchases from Dharam Impex which the Assessing Officer (AO) treated as bogus. The AO made a 5% Gross Profit (GP) addition on these purchases. The assessee argued that their declared GP was much lower and they had provided documents to prove the genuineness of purchases.

What were the issues?

Whether the GP addition on alleged bogus purchases was excessive and whether the assessee was denied the opportunity to cross-examine adverse witnesses.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 132

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Hearing: 25/07/2023Pronounced: 25/07/2023

आयकर अपील�य अ�धकरण मुंबई पीठ “एस एम सी” , मुंबई �ी �वकास अव�थी, �या�यक सद�य के सम� IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER आअसं. 1697/मुं/2023 (�न.व 2013-14) ITA NO.1697/MUM/2023(A.Y 2013-14) Vivek Shyam Johari, 13/15, Madanji Mohanji Bldg, 4th Floor, Flat No.40, Anantwadi, Kalbadevi Road, Mumbai 400 002 PAN: AIDPJ-8746-K ...... अपीलाथ� /Appellant बनाम Vs. Income Tax Officer 23(3)(6), Mumbai Earnest House, Nariman Point, Mumbai. ..... ��तवाद�/Respondent अपीलाथ� �वारा/ Appellant by : Shri S.M.Bandi ��तवाद� �वारा/Respondent by : Shri Sunny Kachhwaha सुनवाई क� �त�थ/ Date of hearing : 25/07/2023 घोषणा क� �त�थ/ Date of pronouncement : 25/07/2023 आदेश/ ORDER

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 20/03/2023, for the Assessment Year 2013-14.

2.

Shri S.M.Bandi appearing on behalf of the assessee submitted that the assessee is engaged in the business of polishing and trading of diamonds. During the course of assessment proceedings information was allegedly received by the Assessing Officer that the assessee has obtained accommodation entries from Dharam Impex amounting to Rs.5,21,42,000/-.

The Assessing Officer made G.P. addition of 5% on the alleged bogus purchases. Against the assessment order dated 28/03/2016 passed u/s. 143(3) of the Income Tax Act,1961 [in short ‘the Act’], the assessee carried the issue before CIT(A). The CIT(A) dismissed the appeal of assessee and confirmed the addition, hence, the present appeal. The ld. Authorized Representative of the assessee submitted that the estimation of 5% G.P by the Assessing Officer and the CIT(A) is very much on the higher side. The assessee declared G,P of 0.116% for Financial Year 2012-13. In the preceding assessment years, the G.P of assessee was in the same range. He submitted that during the course of assessment proceedings the assessee had furnished various documents viz. copy of ledger of Dharam Impex, confirmation for purchase of transactions, copies of sale bills of Dharam Impex, copy of assessee’s bank statement, copy of bank statement of Dharam Impex, copy of stock register and copy of audited profit and loss account and balance sheet for financial year 2012-13 to show genuineness of purchases. However, the Assessing Officer failed to consider the documents furnished by the assessee. He submitted that though the assessee had discharged its onus to show genuineness of the purchases, however, to put an end to the litigation the addition may be restricted by estimating G.P as per market norm.

3.

Per contra, Shri Sunny Kachhwaha representing the Department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. Referring to the assessment order he pointed that Rajendra Jain in the statement recorded during search action u/s. 132 of the Income Tax Act, 1961 [ in short ‘the Act’], on 03/10/2013 has admitted the fact that he is in the business of providing accommodation entries through group concerns. He supported the impugned order and prayed for dismissing appeal of the assessee.

4.

Both sides heard, orders of authorities below examined. The assessee is a diamond trader and had made purchases from Dharam Impex amounting to Rs.5,21,42,000/-. The said purchases were stated to be bogus. The Assessing Officer made G.P addition of Rs.26,07,100/- by estimating G.P @5% on the bogus purchases. The assessee has declared G.P of 0.116% for the impugned assessment year on regular sales. The same has not been disputed by the Assessing Officer. Taking into consideration entire facts, I am of considered view that estimation of G.P at 5% on bogus purchases in the instant case is on the higher side. To meet the ends of justice, G.P on bogus purchases is restricted to 3%. The ground No.1 of appeal is partly allowed in the aforesaid terms.

5.

In ground No.2 of appeal, the assessee has assailed that opportunity to cross examine the persons on whose statements addition is made was not allowed to the assessee. No submissions were advanced on ground No.2 of appeal, hence, the same is dismissed.

6.

In the result, appeal of the assessee is partly allowed.

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