DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, JAIPUR vs. M/S JK INTERNATIONAL, JAIPUR

PER BENCH. The present appeals have been filed by the Revenue against common order of CIT(A)-4, Jaipur dated 23.03.2018 for the assessment year 2010-11 to 2012-13 raising therein following grounds of appeal. DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

A.Y. 2010-11- Revenue

‘’1. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in deleting the addition of Rs. 2,25,68,600/- u/s 69C on account of bogus purchases ignoring the fact that assessee was involved in taking the accommodation entry from Rajendra Jain and Banwari Lal Jain Group.

‘’2. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in allowing the deduction u/s 10AA/10A of the Act ignoring the fact that provisions of Section 69C of the Act are applicable and as per provisions of Section 115BBE no deduction is allowable to the assessee as assessee purchased the material from grey market in cash.

A.Y. 2011-12- Revenue

‘’1. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in deleting the addition of Rs. 2,73,47,135/- u/s 69C on account of bogus purchases ignoring the fact that assessee was involved in taking the accommodation entry from Rajendra Jain and Banwari Lal Jain Group.

‘’2. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in allowing the deduction u/s 10AA/10A of the Act ignoring the fact that provisions of Section 69C of the Act are applicable and as per provisions of Section 115BBE no deduction is allowable to the assessee as assessee purchased the material from grey market in cash.

A.Y. 2012-13- Revenue

‘’1. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in deleting the addition of Rs. 3,23,21,845/- u/s 69C on account of bogus purchases ignoring the fact that assessee was involved in taking the accommodation entry from Rajendra Jain and Banwari Lal Jain Group.

2 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

‘’2. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in deleting the addition of Rs. 32,868/- made u/s 36(1)(va) of the Act (i.e. P.F. Addition) without appreciating the fact that it was made as per provision of section 36(1)(va) of the I.T. Act, 1961 .’’ ‘’3. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in allowing the deduction u/s 10AA/10A of the Act ignoring the fact that provisions of Section 69C of the Act are applicable and as per provisions of Section 115BBE no deduction is allowable to the assessee as assessee purchased the material from grey market in cash.

the ld. DR relied on the order of the AO whereas the ld.AR of the assessee relied on the order of the ld. CIT(A).

available on record. It is noted that the ld. CIT(A) has passed the common

order in respect of the above appeals raised by the Revenue. It is further

noted that the AO made the addition of Rs. 2,25,68,601/- for the Assessment Year 2010-11 depicting the case of the assessee as under:-

‘’24. Looking to the facts of the case of the assessee, it is clear that assessee has taken bogus purchases bills from Bhanwar Lal Jain and Rajendra Jain Group. Therefore, in the facts and circumstances of the case it is clear that assessee has rotated his cash money many time in a year to purchase the diamond from gray market by cash. Thus I am of the 3 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

view that it is reasonable and justifiable to treat 25% of the unverifiable / bogus purchases of Rs. S9,02,74,407/- which works out to Rs. 2,25,68,601/- as unexplained expenditure u/s 69C of the I.T. Act, 1961 which was incurred by the assessee out of its untaxed income so the same is added to the total income of the assessee. Deduction u/s 10AA/10A is not allowable in view of the proviso to Section 69C of the I.T. Act, 1961

Addition of Rs. 2,25,68,601/’’-

It is also noted that the ld. CIT(A) has concised the observation in respect

of the issue as under:-

Facts as summarized from the order of AO.

’’3. The AO had information from the investigation wing Mumbai that there are certain entities controlled by Shri Rajendra Jain who are providing bogus bills of purchases. As per the information, no actual goods were transacted from the said parties. A statement was recorded by the Investigation Wing which is reproduced by the AO in the order3. In this statement Shri Rajendra Jain explained the modus operandi and listed name of those concerns (Proprietorship, firms and Ltd. companies) engaged in providing the accommodation entries. The AO on the basis of the statement treated purchase made from these concerns as bogus and proceeded to make the addition of 25% of such purchases a bogus u/s 69C. The AO has taxed such disallowance u/s 115BE of the Income Tax Act.

4 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

Similar view point was expressed by the Hon'ble Delhi High The issue of additions made by the AO while framing the assessment u/s 143(3)/ 153A if no incriminating material is found during the course of search was considered by Hon'ble Gujarat High Court in the case of Soumya Construction Pvt.vs CIT 387 ITR 529.. In its order dated 14- 03-2016 Hon'ble Court has categorically stated that in casse of completed assessment if no incriminating material is found then no addition can be made in the assessment framed u/s 153A of the Act.

Similar view was also taken by the Hon'ble ITAT Jaipur in many cases (as mentioned ld. CIT(A)’s order at page 19)

Considering the above, I am of the view that as the additions made by the AO are without any reference to the seized material they are not legally tenable. The same are therefore, directed to be deleted. The legal ground taken by the appellant is hus allowed. Since appellant succeeds on legal it would be only academic to adjudicate the grounds on merits for the A.Y. 2009-10 to 2011-12. 5 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

‘’38. Fiftly, statement recorded u/s 132(4) of the Act don not themselves constitute incriminating materialas has been explained by this Court in Harjeev Agarwal (supra)’’

6 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

I have perused the order of the AO for respective A.Yrs and submissions made by the ld.AR. Ihave also gone through various case laws relied upon by the ld.AR . The AO has relied on the information passed on by the Investigation Wing Mumabi wherein statement of Shri Rajendra Jain was recorded under oath. In this statement Shri Jain has admitted managing few concerns which accommodation entries in the form of bogus purchase bill to various people. The modus operandi is explained and tabulated in the assessment order where in various entities are listed providing such bogus bills. The relevant portion of the statement is also reproduced in the order passed u/s 143(3) / 153A.

7 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

Delhi Hifh Court in case of Harjeev Agarwal 70 Taxmann.com 95) held thus …However, such statements on a standalone basis without reference to any other mater3ial discovered during search and seizure operation would not empower the Assessing Officer to make a block assessment merely8 because any admission was made by the assessee during search operation.

Though the above principle is laid down in relation to assessment of block period u/s 158B of the Act, the same was also applied in respect of assessment u/s 153A by Delhi High Court in the case of Best Infrastructure (84 Taxmann.com 287)……

8 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

Considering all the above, I am of the view that even if 25% of purchases from concerns are treated as bogus it has a revenue neutral effect and may be treated as such.

9 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

we found that the AO on the basis of statement treated the purchases

made by the assessee as bogus and proceeded to make the addition of 25% of such purchases as bogus u/s 69C of the I.T. Act, 1961. The AO

also taxed such disallowances u/s 115BBE of the Act. It is an admitted

fact that for the Assessment Year under consideration as well as for rthe

Assessment Year 2011-112, the assessment stood completed on the date

of search as the time period to issue the notice u/s 142(2) of the Act had also expired. Therefore, the year under consideration as well for the Assessment Year 2011-12, the addition could only be made with regard

to incriminating seized material found during the course of search. Thus

any addition made by the AO in the assessment without any reference to incriminating seized material was considered by the Hon'ble Rajasthan Hon'ble High Court was of the view that in case of completed assessment,

no addition can be made if no incriminating seized material is found

during the course of search. The ld. CIT(A) has also considered the judgement of Hon'ble Delhi High Court in the case of Kabul Chawala vs

10 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

ACIT 380 ITR 573 and other related judgements which are specifically

mentioned in his order and he had rightly concluded that the addition

made by the AO without any reference to the seized material is not legally sustainable. Thus this issue was rightly decided by the ld. CIT(A)

in favour of the assessee.

which was related in respect of assessment framed u/s 143(3) r.w.s.

153A of the Act. Thus the finding so recorded by the ld. CIT(A) is well

reasoned and judicious.

must be made relatable to material by subsequent enquiry/ investigation.

bogus purchases are concerned, in this respect, the ld. CIT(A) had passed

well reasoned detailed order in para 6 to 6. 8. In the present case, no 11 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

opportunity to cross examine said Shri Rajendra Jain was provided by the Revenue authorities. Thus it was rightly held that not providing cross

examination tantamount to denial of natural justice and does vitiate the assessment. In this respect, we also rely on the decision of Hon'ble that letter was issued to Custom Authorities SEZ-II, Sitapura Industrial

Area, Jaipur to verify the said purchases and the AO has recorded a finding that SEZ authorities have confirmed that said purchases are genuine as duly recorded in their records. This itself cast a doubt on AO’s

conclusion that purchases made by the assessee were bogus. More

particularly, when it is certificate from another Govt. Agency by certifying the genuineness of the purchases and it tilts preponderance of probability in favour of the assessee. It is pertinent to mention that the ld.

CIT(A) has explicitly dealt with the issue and deleted the addition made

12 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

by the AO giving full justification to the issue in question and we find no reason to interfere with the order of the ld. CIT(A) on the issue raised by the Revenue in Ground No. 1 and 2. Thus both the grounds raised by the Revenue are dismissed.

As regards the appeals of the Revenue for the Assessment Year

2011-12 and 2012-13 wherein the similar issue was raised by the Revenue as under:-

A.Y. 2011-12- Revenue ‘’1. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in deleting the addition of Rs. 2,73,47,135/- u/s 69C on account of bogus purchases ignoring the fact that assessee was involved in taking the accommodation entry from Rajendra Jain and Banwari Lal Jain Group. ‘’2. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in allowing the deduction u/s 10AA/10A of the Act ignoring the fact that provisions of Section 69C of the Act are applicable and as per provisions of Section 115BBE no deduction is allowable to the assessee as assessee purchased the material from grey market in cash. A.Y. 2012-13- Revenue ‘’1. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in deleting the addition of Rs. 3,23,21,845/- u/s 69C on account of bogus purchases ignoring the fact that assessee was involved in taking the accommodation entry from Rajendra Jain and Banwari Lal Jain Group. ‘’3. Whether on the facts and in the circumstances of the face, the ld. CIT(A) was right in allowing the deduction u/s 10AA/10A of the Act ignoring the fact that provisions of Section 69C of the Act are 13 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

applicable and as per provisions of Section 115BBE no deduction is allowable to the assessee as assessee purchased the material from grey market in cash.

We have heard the rival contentions and perused the materials

available on record. It is pertinent to mention that the issues raised by the Revenue in the Assessment Year 2011-12 and 2012-13 are similar to the issue of Assessment Year 2010-11 wherein the grounds raised in appeal

of the Revenue are dismissed taking into consideration the explicit and reasoned order of the ld. CIT(A). Thus the decision taken by us in the appeal of the Revenue for the Assessment Year 2010-11 shall apply

mutatis mutandis in the grounds of the Revenue for the Assessment Year

2011-12 and 2012-13. Hence, the grounds raised (supra) by the Revenue

on the issue in question in the Assessment Year 2011-12 and 2012-13

are dismissed.

contribution towards PF and ESIC but did not paid it within the due date

prescribed by relevant legislation to Rs. 28650/- and 79510/- respectively.

14 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

The AO asked the assessee to state its case in respect of provisions of Section 36(1)(va) of the I.T. Act, 1961 for which the assessee could not give proper justification to the assessee. The AO taking the resort of Hon'ble Gujarat High Court judgement in the case of CIT vs Gujarat

State Road Transport Corporation (ITA No 637 of 2013 dated

2601202913) made the addition of Rs. 32,868/- by observation as under:-

‘’therefore, Rs. 18160/- (i.e.28650 plus 79510/-) is treated as income u/s 2(24(x) and deduction u/s 26(1)(va) is declined das the amount had been paid after the due date as prescribed in the relevant legislation.’’

by the AO by observing as under:-

‘’9. I have gone through the assessment order as well as submissions made by the appellant including the judicial citations given therein and find that an addition of Rs. 32,868/- for A.Y. 2012-13)of employees contribution to ESI/employees contribution to PF/ESI have been made by the AO on account of delay in deposition of employees contribution towards ESI and PF u/s 36(1)(va) r.w.s. 2(24)(x) of the Act, AO has noted that payments have been deposited after few days of the due date and therefore, no deduction could be claimed under the provisions.

15 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

the due date of filing of return of income and therefore, no disallowance could be made on this account. Further, reliance has been placed on the decisions of Hon'ble Further, in view of the above judgements of the Hon'ble Supreme Court which has been subsequently followed by the Juri ictional High Court, I find that there is no justification in the action of the AO in making a disallowance on account of delay in depositon of ESI & PF. On the facts and in the circumstances of the cae, these payments have been made before the due date of filing of return and therefore, such additions are directed to be deleted. Appellant’s appeal on this ground for A.Y. 2012-13 to A.Y. 2014-15 is allowed.

We have heard the rival contentions and perused the materials

available on record. It is not imperative to repeat the facts of the case

concerning the issue in question as the ld. CIT(A) has deleted the addition

taking into consideration the decisions of Hon'ble Juri ictional High

16 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

Courts. The relevant observations of the Hon'ble Juri ictional High

Court in the above case are as under:-

CIT Vs. State Bank of Bikaner & Jaipur (2014) 363 ITR 70 (Raj) (HC) :-Where PF and/or EPF, CPF, GPF, etc., was paid after the due date under the respective acts but before filing of return of income u/s 139(1), it could not be disallowed u/s 43B or u/s 36(1)(va). (HC):- The assessee claimed payment of GPF, CPF and ESI u/s 36(1)(va) r.w.s. 43B of the IT Act on the ground that the same was deposited on or before the due date of furnishing the IT return u/s 139. The AO disallowed the payment on the ground that though the amount was paid by the assessee, but was not paid within the due date as given under the respective Acts of GPF, CPF and ESI. It was held that the employee’s contribution towards GPF, CPF and ESI deposited by the assessee on or before the due date of filing the return u/s 139, though beyond the due dates as given under the respective Acts, cannot be disallowed u/s 43B or 36(1)(va). ITR 163 (Raj.) (HC):- Payment of employee’s contributions towards PF and ESI made belatedly but within the due date of filing the return, cannot be disallowed u/s 43B. It is also pertinent to mention that Hon'ble Supreme Court has passed the judgemnet in favour of the assessee on the issue in question. In view of the facts, circumstances of the case and the judgements (supra), we

concur with the findings of the ld. CIT(A). Thus Ground No. 2 of the Revenue is dismissed.

17 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

Order pronounced in the open court on 03 /10/2019. ¼lanhi xkslkbZ½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (Sandeep Gosain) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 03 /10/2019. *Mishra

आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1.vihykFkhZ@The Appellant- The DCIT, Central Circle-2, Jaipur 2.izR;FkhZ@ The Respondent-M/s. J.K. International, Jaipur 3. vk;dj vk;qDr@ CIT vk;dj vk;qDr@ CIT(A) 4. 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. xkMZ QkbZy@ Guard File {ITA No. 716 to 7181/JP/2018} 5. vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेजज. त्महपेजतंत

18 DCIT, Central Circle-2, Jaipur vs M/s.J.K. International, Jaipur

19