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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI KULDIP SINGH
Per : Kuldip Singh, Judicial Member:
The appellant, M/s. Bugget Impex (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 10.12.2021 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] qua the assessment year 2014-15 on the grounds inter alia that:-
“Ground No. 1 : Addition of 3% of Bogus Purchases 1. The learned C1T(A) erred in confirming an addition of 3% of the impugned purchases of Rs. 2,62,21,909/- on the allegation that the Assessee has taken accommodation entries from the following parties
ITA No.1775/M/2022 2 M/s. Bugget Impex in AY 2014-15, on the basis of impugned information received from the DGIT, Mumbai :-
(i) M/s. Kangan Jewels Pvt. Ltd. (ii) M/s. Dharam impex (iii) M/s. Maniprabha Impex Pvt. Ltd.
Ground No. 2: Purchases in AY. 2014-15 is Rs.49,52,848/- and not Rs.2,62,21.909/-
2. The learned CIT(A) erred in holding that the purchases made from the abovementioned parties was at Rs. 2,62,21,909/- as against Rs. 49,52,8487- (purchases only from Dharam Impex), based on the impugned information received from the DGIT, Mumbai, which apparently is incorrect since it is without any basis and since it did not pertain to the assessment year in question. Sr. Name of the Partv Purchases Purchases wrongly adopted by AO No, as per Audited Books 1. Kangan Jewels Pvt. 11.99,223 2,09,330 AY. 10-11 Ltd. 9,89,893 AY. 11-12 2. Dharam Impex 49,52,848 69,84,522 20,31,674 AY. 12-13 49,52,848 AY. 14-15 3. Maniprabha Impex Pvt. 1,80,38,164 54,90,633 AY. 12-13 Ltd. 1,25,47,531 AY. 13-14 Total 1,92,37,319 2,62,21,909/-
3.The learned C1T(A) failed to take into consideration the details submissions filed and without application of his mind passed a perverse and an arbitrary Order, and erred in holding in Para 5.11 as under :-
"In the reply the appellant has stated that only purchases of Rs.49,52,848/- from M/s Dharam Impex pertains to A.Y.2014-15 and in support furnished same copies of bills and vouchers. But in the absence of proper explanation with further supporting evidence, it cannot be ascertained that the purchases do not pertain to A. Y. 2014- 15. Accordingly the purchase figures from bogus parties as considered by the AO are not disturbed."
ITA No.1775/M/2022 3 M/s. Bugget Impex
Ground No. 3 : Identity, genuineness and creditworthiness 4. The learned CIT(A) failed to take into consideration the facts of the case or the detailed submissions filed along with the all evidences supporting the claim of the Assessee. The learned CIT(A) erred in making an addition of 3% of the impugned purchase from Dharam Impex and failed to take into consideration that the Assessee had discharged its onus and proved the identity, genuineness and the creditworthiness of purchases by submitting the following documents:- (i) Ledger account (ii) Bills/Vouchers (iii) Bank statement to show that the payment was made by account payee cheques (iv) Confirmation from M/s. Dharam Impex (v) Stock Register (vi) Affidavit from M/s. Dharam Impex (vii) ITR Ack. of M/s. Dharam Impex for AY 2014-15 (viii) Sale Register (showing goods purchased from M/s. Dharam Impex is sold to M/s.Super Gems Pvt, Ltd., Mahendra Brothers, etc. (ix) Copies of the bank statement, of Parties to whom the goods were sold and copies of the bank statement of the appellant where such payments are received. Ground No. 4 : Opportunity for Cross Examination The learned AO and CIT(A) erred in not granting an opportunity to the Assessee to cross examine the Third Party, on wthe basis of whose statement, the Department alleged that the Assessee has made bogus purchases. Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.”
Briefly stated facts necessary for adjudication of the controversy at hand are: on the basis of search and seizure operation carried out on Bhanwarlal Jain and his group concern on 03.10.2013 by DGIT(Inv.), Mumbai whereby information has taken on record that Bhanwarlal Jain and his group company are providing accommodation entries in the forms of unsecured loans to interested parties, issuing bogus sale/purchase bills to various
ITA No.1775/M/2022 4 M/s. Bugget Impex parties and providing a bogus front to concerns who do not want to import diamonds in their own hands/books of the account. From the information it has come on record that assessee has obtained accommodation entries of bogus purchases from various concerns of Bhanwarlal Jain and others during financial year 2013-14 relevant to A.Y. 2014-15, the detail thereof is as under:
Sr.No. Name of the Entry Provider Amount (Rs) 1. KANGAN 209330/- 2. KANGAN 989893/- 3. DHARAM 2031674/- 4. DHARAM 4952848/- 5. MANIPRABHA 5490633/- 6. MANIPRABHA 12547531/- TOTAL 26221909/-
On the basis of findings given by the investigation wing, Assessing Officer(AO) show caused assessee who has furnished requisite details along with explanation. Declining the contentions raised by the assessee, the AO proceeded to hold that there is circumstantial evidences of obtaining bills from Bhanwarlal Jain concern, the benefit of which would not be more than 5% of the purchase cost and as such made addition of Rs.13,11,095/- to the business income equivalent to 5% of Rs.2,62,21,909/- qua the purchases made from M/s. Kangan, M/s. Dharam and M/s. Maniprabha and thereby made additions under section 143(3) read with section 147 of the Act.
Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has restricted the addition to 3% of the purchases made by the assessee by partly allowing the appeal. Feeling
ITA No.1775/M/2022 5 M/s. Bugget Impex aggrieved assessee has come up before the Tribunal by way of filing present appeal.
I have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Undisputedly, out of the entries pertaining to the bogus purchases contained in the table extracted in the preceding para No.2, purchases of Rs.49,52,848/- from Dharam Impex pertains to the year under consideration i.e. A.Y. 2014-15 and rest of the entries are qua earlier years. It is also not in dispute that both AO as well as Ld. CIT(A) have decided the issue on the basis of estimation and guess work without going into the argument addressed by the assessee that he has not made bogus purchases rather brought on record all the documents to prove the identity, genuineness and creditworthiness of the supplier from whom the alleged purchases were made.
In the backdrop of the aforesaid facts and circumstances of the case the Ld A.R. for the assessee contended that during the appellate proceedings the assessee has discharged the onus on it by proving the identity, genuineness and creditworthiness of the purchases made by submitting Ledger account, Bills/Vouchers, Bank statement to show that the payment was made by account payee cheques, Confirmation from M/s. Dharam Impex, Stock Register, Affidavit from M/s. Dharam Impex, ITR Ack. of ITA No.1775/M/2022 6 M/s. Bugget Impex M/s. Dharam Impex for AY 2014-15, Sale Register (showing goods purchased from M/s. Dharam Impex is sold to M/s. Super Gems Pvt, Ltd., Mahendra Brothers, etc., Copies of the bank statement, of Parties to whom the goods were sold and copies of the bank statement of the appellant where such payments are received along with audit report.
This contention is supported with the aforesaid documents available in the paper book from page 1 to page 37 of the paper book. When I examine the aforesaid contentions raised by the assessee in the light of the submissions made by the assessee extracted in para 4 of the Ld. CIT(A) the assessee has submitted before the Ld. CIT(A) all the aforesaid documents mentioned in the preceding paras to prove the identity, genuineness and creditworthiness of purchases made by the assessee. But CIT has not preferred to discuss the same on merits rather jumped to the decision by reducing the addition from 5% of non genuine purchases to 3%.
I am of the considered view that when assessee has come up with specific pleas that none of his alleged purchases are bogus and brought on record the entire details the Ld. Lower Revenue Authorities were required to examine the same on merits. To decide the issue once for all, I am of the considered view that AO is required to examine the issue threadbare by providing the opportunity of being heard to the assessee.
Resultantly, present appeal is remitted back to the AO to decide afresh after providing opportunity of being heard to the ITA No.1775/M/2022 7 M/s. Bugget Impex assessee by examining the evidence brought on record by the assessee, hence appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 20.10.2022.