Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI SANDEEP GOSAIN & SHRI O.P.MEENA
Cr. Apl & (1): Pankaj Kanwarlal Jain (HUF) Vs. ITO, Ward-2(3)(8), Surat /ITA No’s.189 & 268 & 188/SRT/2019 for A.Y. 2014-15 &11-12 Page 1 of 9
आयकरअपील�यअ�धकरण,सुरत�यायपीठ,सुरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER आ.अ.सं./I.T.A No.189/SRT/2019 �नधा�रण वष�/Assessment Year: 2014-15 Pankaj Kanwarlal Jain(HUF), V The Income Tax Officer, Pro. of M/s.Mahek Diamond, s Ward-2(3)(8), Surat. 302, Santok Diamond, . Somnath Mahadevni Sheri, Haripura, Surat. [PAN: AAHHP 8601 E] अपीलाथ� / Appellant ��यथ�/Respondent आ.अ.सं./I.T.A No.268/SRT/2019 �नधा�रण वष�/Assessment Year: 2014-15 The Income Tax Vs Pankaj Kanwarlal Jain(HUF), Officer, . Pro. of M/s.Mahek Diamond, Ward-2(3)(8), Surat. 302, Santok Diamond, Somnath Mahadevni Sheri, Haripura, Surat. [PAN: AAHHP 8601 E] अपीलाथ� / Appellant ��यथ�/Respondent आ.अ.सं./I.T.A No.188/SRT/2019 �नधा�रण वष�/Assessment Year: 2011-12 Pankaj Kanwarlal Jain, V The Income Tax Officer, Ward-2(3)(8), Surat. Pro. of M/s.Madhav Gems, s 203, Nishit Diamond Complex, . B/H World Diamond Centre, Hat Falia, Hripura, Surat. [PAN: ACZPJ 5175 G] अपीलाथ� / Appellant ��यथ�/Respondent
�नधा�रतीक�ओरसे /Assessee by Shri Rasesh Shah – CA राज�वक�ओरसे /Revenue by Shri O.P.Singh – CIT-DR
Cr. Apl & (1): Pankaj Kanwarlal Jain (HUF) Vs. ITO, Ward-2(3)(8), Surat /ITA No’s.189 & 268 & 188/SRT/2019 for A.Y. 2014-15 &11-12 Page 2 of 9
सुनवाईकीतारीख/ Date of hearing: 05.12.2019 उ�घोषणाक�तार�ख/Pronouncement on: 13.12.2019 आदेश /O R D E R PER SANDEEP GOSAIN, JM: 1. This Cross Appeal by the Assessee and Revenue and Assessee appeal are directed against the order of Ld. Commissioner of Income Tax(Appeals)-1, Surat dated 26.02.2019 for the assessment year 2014- 15 and 2011-12 respectively.
Grounds raised by the assessee in ITA No.189/SRT/2019 read as under: “1. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(A) has erred in partly confirming the addition of Rs.47,91,415/- out of Rs.9,58,28,311/- made by Assessing officer by estimating the disallowance at the rate of 5% of the total alleged Bogus Purchase.. 2. It is therefore that addition made by the assessing officer and confirmed by CIT(A) may please be deleted.” 3. Grounds raised by the Revenue in ITA No.268/SRT/2019 read as under: “(i) On the facts and in circumstances of the case and in Law, the Ld.CIT(A) has erred in restricted the addition made by the AO of Rs.9,58,28,311/- on account of bogus purchases to 5%. (ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has failed to appreciate the fact that the entire purchase from alleged concerns were bogus and was only to suppress the profit of the beneficiaries which is substantiated by the statement on oath given by the entry provider. (iii) On the facts and circumstances of the case and in Law, the Ld.CIT(A), Surat ought to have upheld the order of the Assessing Officer, It is, therefore, prayed that the order of the Ld.CIT(A)-1 Surat may be set-aside and that of the Assessing Officer’s order may be restored.”
Cr. Apl & (1): Pankaj Kanwarlal Jain (HUF) Vs. ITO, Ward-2(3)(8), Surat /ITA No’s.189 & 268 & 188/SRT/2019 for A.Y. 2014-15 &11-12 Page 3 of 9
Brief facts of the case are that the assessee is engaged in the business of Import, Export, Trading in all kinds of diamonds in the name and style of his property concerns viz. M/s.Mahak Diamonds during the year under consideration. The assessee filed Return of Income on 29.10.2014 by declaring total income of Rs.13,83,770/-. The case was selected for scrutiny is CASS and accordingly notice u/s.143(2) of the I.T.Act was issued on 29.08.2015 and the ld.Assessing Officer(AO) completed the assessment u/s.143(3) of the I.T.Act vide order dated 13.12.2016 by making addition of Rs.9,58,28,311/- on account of bogus purchases.
Being aggrieved, the assessee filed appeal before the ld.CIT(A), wherein the ld.CIT(A) by relied on the decision of Hon'ble ITAT in the Gangani Impex and the disallowance was restricted to 5% i.e. on Rs.9,58,28,311/- worked out to Rs.47,91,415/- (Restricted to 5%).
Being aggrieved, the assessee filed appeal before this Tribunal. The ld.Counsel submitted that the issue is squarely covered by the Tribunal decision in assessee’s own case of Shri Pankaj Kanwarlal Jain, HUF v. ITO 2(3)(8), Surat in I.T.A.No.269/SRT/2017 A.Y. 2013-14 dated 27.08.2019 ( copy filed ) passed by Surat Bench of ITAT.
On the other hand, the ld.CIT-D.R. relied on the orders of Lower Authorities.
Cr. Apl & (1): Pankaj Kanwarlal Jain (HUF) Vs. ITO, Ward-2(3)(8), Surat /ITA No’s.189 & 268 & 188/SRT/2019 for A.Y. 2014-15 &11-12 Page 4 of 9
We have heard the Counsels of both the parties and we also perused the material placed on record and orders passed by the Revenue Authority as well as the judgments cited by the parties. From the records, we find that the issue is squarely covered by the decision Co- ordinate Bench of ITAT in Shri Pankaj Kanwarlal Jain, HUF v. ITO 2(3)(8), Surat in I.T.A.No.269/SRT/2017 A.Y. 2013-14 in which para 5 & 6 held as under: “5. We have considered the rival submissions and perused the material available on record. In the instant case, the A.O. simply relied upon the material collected during the course of search in the case of Shri Bhanwarlal Jain Group of cases for providing bogus entries to different persons/concerns including the assessee. The material collected during the course of search in their cases and statements recorded by Investigation Wing have been relied upon against the assessee for making the addition against the assessee. However, it is a fact that all the statements recorded by Investigation Wing at Mumbai and material collected in the entities of Shri Bhanwarlal Jain Group of cases have not been provided to assessee for rebuttal and no right of cross-examination have been given to assessee to cross-examine such statements. It is well settled Law that if any material is collected at the back of the assessee or statement is recorded, such material or statement cannot be read in evidence against the assessee unless these adverse material is supplied to assessee and right of cross-examination have been given to the assessee. We rely upon Judgments of the Hon’ble Supreme Court in the cases of Kishanchand Chellaram vs. CIT (supra) and Andaman Timber Industries vs. CCE (supra). Therefore, such material found during the course of search in the entities of Shri Bhanwarlal Jain Group of cases cannot be used in evidence against the assessee. The reliance of the authorities below of such material is of no use and basis. The other material available on record are the documentary evidences filed by assessee which are copies of the purchase invoices, stock register reflecting purchase and sales, bank statements highlighting payments made by assessee to these parties through banking channel, copy of bank statements of both seller parties along with their balance-sheet confirmations and copy of acknowledgment of filing of the income tax returns. The A.O. did not make any inquiry on the documentary evidences filed by assessee and did not doubt the explanations. Since the documentary evidences filed on record have not been doubted by A.O. and no adverse finding have been given and no inquiry have been made into the claim of assessee, therefore, there was no basis to treat such purchases as bogus. The ITAT, Surat Bench recently in the case of M/s. Shantai Exim Limited, Surat vs., DCIT, Circle-2(1)(2), Surat in ITA.Nos.273 & 436/SRT/2018 for the Assessment Year 2012-2013 has similarly deleted the addition on merits. The findings of the Tribunal in Para Nos. 7, 7.1 and 7.2 are reproduced as under :
Cr. Apl & (1): Pankaj Kanwarlal Jain (HUF) Vs. ITO, Ward-2(3)(8), Surat /ITA No’s.189 & 268 & 188/SRT/2019 for A.Y. 2014-15 &11-12 Page 5 of 9
“7. We have considered the rival submissions and perused the material available on record. The Hon’ble Gujarat High Court in the case of Pr. CIT vs., Tejua Rohitkumar Kapadia [2018] 91 taxmann.com 324 (Gujarat) held as under : “Where purchases made by assessee-trader were duly supported by bills and payments were made by account payee cheque, seller also confirmed transaction and there was no evidence to show that amount was recycled back to assessee, Assessing Officer was not justified in treating said purchases as bogus under section 69C.” 7.1. The aforesaid Judgment has been confirmed by the Hon’ble Supreme Court reported [2018] in 94 taxmann.com 325 (SC). The ITAT, Delhi Bench, in the case of Bhatia Diamonds Pvt., Ltd., vs., ITO, Ward- 4(4), New Delhi, vide Order Dated 24.06.2019 in para-8 following its earlier order in the case of same assessee, in which it was held in para- 8 as under : “8. We have considered the submissions of both the parties and gone through the material on record. It is an admitted fact that an identical issue have been considered by ITAT, Delhi SMC-Bench in the case of the same assessee in preceding A.Y. 2011-2012 and similar addition have been deleted on merits and this fact is also stated by the Ld. D.R. that facts are identical in assessment year under appeal as have been considered in A.Y. 2011-2012. In the present case also, two of the parties have denied making any sales to the assessee. No entries of such sales have been recorded in the books of account. Two parties have admitted to have made sales to the assessee and filed reply under section 133(6) of the I.T. Act, 1961, supported by bill and Affidavit, on which, no adverse inference have been drawn by the A.O. All the payments of purchases have been made through banking channel which have not been doubted by the authorities below. The assessee also filed the quantitative details of opening stock, purchase goods, manufacture, sales made and closing stock at Page-25 of the PB which also supports the explanation of assessee that he has made genuine purchases which have been sold later on. These facts clearly show that there was no basis for the authorities below to consider it to be a case of bogus purchases. It is also an admitted fact that statement of Shri Rajendra Jain was not provided to assessee nor statement was subjected to cross-examination on behalf of the assessee. He has also retracted from his earlier statement. Therefore, there was no basis to make any addition against the assessee. The issue is, therefore, covered by the Order of ITAT, Delhi SMC-Bench in the case of same assessee for the A.Y. 2011-2012 Dated 05.04.2019 (supra). In view of the above, we set aside the Orders of the authorities below and delete the entire addition. Ground Nos. 3 to 7 of the appeal of the Assessee are accordingly allowed.” 7.2. In the case of M/s. Nangalia Fabrics Pvt. Ltd., (supra), the Hon’ble Gujarat High Court confirmed the findings of the Tribunal in which the Tribunal accepted the submissions of the assessee that purchases are supported by bills, entries in the books of account and payments are made by cheque and quantitative details provided. The Hon’ble Gujarat High Court in the case of M.K. Brothers (supra), held that “amounts representing purchases could not be added as income as there was no evidence to conclude that the transactions were bogus.” Considering the facts of the case in the light of above decisions, it is clear that assessee made purchases from Damor family concerns which are duly supported by bills and vouchers. All the payments are made to Damor family concerns through
Cr. Apl & (1): Pankaj Kanwarlal Jain (HUF) Vs. ITO, Ward-2(3)(8), Surat /ITA No’s.189 & 268 & 188/SRT/2019 for A.Y. 2014-15 &11-12 Page 6 of 9
account payee cheques. The Damor family concerns have confirmed all the transactions with the assessee before the authorities below. The Damor family concerns have filed their income tax returns reflecting the transaction with the assessee, and also have got their books of account audited by an independent auditor. The assessee undisputedly made the exports of all the finished purchase goods which includes impugned purchases which have not been doubted by assessing officer. Without purchases, assessee could not have made the exports. The explanation of assessee as regards exports supported by all the documentary evidences which have not been disputed. The assessee filed confirmation statement of all the purchase parties. The assessing officer in the remand proceeding also examined the purchase parties and their auditor, who have confirmed the genuineness of the transaction. There is no evidence on record to prove that amount of purchases given to Damor family have come back to the assessee. In survey, no incrementing material was found to prove that assessee made bogus purchases. Whatever evidence was found during the course of survey i.e., bills and invoices of purchases have already been recorded in the books of account. The sellers are also assessed to tax and have declared the transaction in their returns which have been accepted by the Revenue Department. The seller party have also replied to the notice under section 133(6) of the Income Tax Act. The assessing officer did not reject books of account of assessee under section 145 of the Income-Tax Act. If the aforesaid addition is confirmed, according to explanation of assessee, it would give gross profit rate of 41.4 % which is impossible to earn in this line of trade. The assessing officer accepted in the remand report that assessee maintained stock quantitative details, in which, no deficiency have been pointed-out. The assessing officer analysed the KYC documents of bank statements of Damor family and their bank statements and nothing adverse was found against them or against the assessee. The assessee produced complete details before the authorities below in which no deficiency have been pointed-out. The assessee need not to prove source of the source i.e., purchase made by the purchaser parties i.e., Damor concerns. The assessee also established common practice in Textile Sector in Surat for supply of goods at door step of consumer. Thus, the initial burden upon assessee to prove the genuine purchases have been discharged by assessee. The assessee has fully discharged its onus of proving the purchases by giving names, addresses, confirmation, PAN, bills and invoices, details of payment by account payee cheques, ITRs and Audit reports of its suppliers. Merely because further suppliers to Damor family did not respond to the notice of the assessing officer is no ground to reject the explanation of assessee. Since in the case of assessee no incriminating material was found to prove bogus purchases, therefore, the decision in the case of M/s. M.K. Proteins Limited (supra), would not apply. It may also be noted here that in A.Y. 2010-11 the assessing officer accepted similar purchases in the scrutiny assessment order under section 143(3) of the Income Tax Act on the identical facts. Similarly, seized material was also considered in that year. The Ld. CIT, Surat, however, did not agree with the assessment order of the A.O. and initiated revision proceedings under section 263 of the I.T. Act. However, the Order of the Ld. CIT under section 263 of the I.T. Act for the A.Y. 2010- 2011 have been set aside and quashed by the ITAT, Ahmedabad Bench in the case of same assessee vide Order Dated 19.02.2016. Therefore,
Cr. Apl & (1): Pankaj Kanwarlal Jain (HUF) Vs. ITO, Ward-2(3)(8), Surat /ITA No’s.189 & 268 & 188/SRT/2019 for A.Y. 2014-15 &11-12 Page 7 of 9
issue is covered on identical facts in favour of assessee by the aforesaid decision of the Tribunal. Considering the totality of the facts and circumstances of the case and above discussion, we do not find it to be a fit case where even gross profit rate of 5% be applied against the assessee as per Judgment of Hon’ble Gujarat High Court in the case of Mayank Diamonds Pvt. Ltd., (supra). In view of the above discussion, we set aside the Orders of the authorities below and delete the entire addition. Ground No.1 of the appeal of Assessee is accordingly allowed.” 6. In view of the above discussion, we are of the view that the entire addition is wholly unjustified and even it is not a fit case where Gross Profit rate of 5% be applied for sustaining the part addition. In this view of the matter, we set aside the Orders of the authorities below and delete the entire addition. Ground Nos. 1 and 2 of the appeal of assessee are allowed.”
Therefore, keeping in view the decision of the Co-ordinate Bench in assessee’s own case the Hon'ble ITAT Surat Bench in the case of ITA No.269/SRT/2017 for A.Y. 2013-14 has allowed the appeal and deleted the 100% addition under the same set of facts and grounds. Therefore, in order to maintain judicial consistency and judicial discipline, we also deem it appropriate to allow the appeal and delete the 5% addition made by the Revenue, accordingly, the appeal of the assessee is allowed.
In the result, appeal of the Assessee is allowed and Revenue is Dismissed.
ITA No.188/SRT/2019 A.Y. 2011-12 (Shri Pankaj Kanwarlal Jain): 11. Grounds raised by the assessee in ITA No.188/SRT/2019 read as under: “1. On the facts and in circumstances of the case as well as law on the subject, the learned assessing officer has erred in reopening assessment u/s. 147 of the Act.
Cr. Apl & (1): Pankaj Kanwarlal Jain (HUF) Vs. ITO, Ward-2(3)(8), Surat /ITA No’s.189 & 268 & 188/SRT/2019 for A.Y. 2014-15 &11-12 Page 8 of 9
On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in partly confirming the addition of Rs.3,28,766/- out of Rs.65,75,335/- made by Assessing officer by estimating the disallowance at the rate of 5% of the total alleged Bogus Purchase. 3. It is therefore prayed that addition made by the assessing officer and confirmed by CIT(A) may please be deleted.” 12. Brief facts of the case are that the assessee is engaged in the business of Trading of polished diamonds during the relevant assessment year. The assessee filed Return of Income on 27.09.2011 by declaring total income of Rs.12,96,210/-. The ld.AO received information from DIT (Inv.), Mumbai that enquiries and investigations carried out by them on the basis of suspicious transactions made by certain parties. Therefore, the case was reopened and selected for scrutiny and notice u/s.148 was issued on 11.03.2016. Subsequently, the ld.AO completed the assessment u/s.143(3) r.w.s. 147 of the I.T.Act vide order 26.10.2016 and made addition of Rs.65,75,335/- on account of bogus purchases.
Since, the given facts and circumstances are identical as in the case above of Shri Pankaj Kumar Jain(HUF) in I.T.A.No.189/SRT/2019 for A.Y.2014-15. Therefore, our findings and directions contained therein shall apply mutatis mutandis to this appeal of the assessee. Accordingly, following the same, this ground is appeal of assessee is allowed.
Cr. Apl & (1): Pankaj Kanwarlal Jain (HUF) Vs. ITO, Ward-2(3)(8), Surat /ITA No’s.189 & 268 & 188/SRT/2019 for A.Y. 2014-15 &11-12 Page 9 of 9
To sum up, the appeal of the assessee in ITA No’s.189/SRT/2019 & 188/SRT/2019 are allowed and appeal of the Revenue in ITA No.268/SRT/2019 is dismissed.
Order pronounced in the open court on 13-12-2019.
Sd/- Sd/- (O.P.MEENA) (SANDEEP GOSAIN) (लेखा सद�यतथा/ACCOUNTANT MEMBER) (�याियक सद�यकेसम� /JUDICIAL MEMBER) सुरत/ Surat, �दनांक Dated: 13th December, 2019/S.Gangadhara Rao, Sr.PS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat