DCIT 2(2)(1), MUMBAI vs. JIK INDUSTRIES LTD, MUMBAI

आयकरअपील सं./ (िनधा"रण वष" / Assessment Year:2008-09) DCIT-2(2)(1) M/s. JIK Industries Ltd. Room No.545, 5th floor बनाम/ 1-3, Gundecha Chambers Aaykar Bhavan, M.K. Road N.M. Road, Fort Vs. Mumbai-400 020 Mumbai-400 023. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AABCJ-2982-J (अपीलाथ"/Appellant) (""थ" / Respondent) : अपीलाथ" की ओर से/ Appellant by : Shri Sushil Kumar Poddar–Ld. CIT-DR ""थ"कीओरसे/Respondent by : Shri Sulabh Patel- Ld. AR सुनवाईकीतारीख/ : 09/10/2019 Date of Hearing घोषणाकीतारीख / : 13/11/2019 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member):- 1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2008-09 contest the order of Ld. Commissioner of Income-Tax (Appeals)-50,Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)- 50/IT-431/2013-14 dated 29/08/2016 on following grounds of appeal: - 2 M/s. JIK Industries Ltd. Assessment Year-2008-09 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below: Grounds of appeal

1. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the disallowance made by the AO which are as per the provisions of clause (b) to sub-section (1) of section 153A which clearly empowers the AO to reassess the total income of six assessment years immediately preceding the assessment year relevant to the A.Y in which the search is conducted without limiting the enquiries and addition to the incriminating document found during the course of search & seizure."

2. Whether on the facts and circumstances of the Ld. CIT(A) was right in allowing the appeal of the assessee when the language of the order suggests that assessee's ground of appeal is not allowed.

2. Opening the arguments, Ld. CIT-DR drew our attention to the impugned order to submit that the quantum additions have wrongly been deleted by Learned first appellate authority by relying upon the decision of Hon’ble Bombay High Court rendered in CIT V/s Continental Warehousing Corporation (Nhava Sheva) Ltd. 58 Taxmann.com 78 ignoring the fact that incriminating statement justifying additions for the year under consideration were recorded during search proceedings and the additions were made on the basis of incriminating statements and therefore, the reliance on the said decision was mis-placed. Our attention has been drawn to the assessment order to fortify the said submissions. The Ld. AR submitted that the impugned order would not require any interference. 3.1 Facts on record would reveal that the assessee being resident corporate assessee stated to be engaged in the business of manufacturing of crystal items and chemicals, was assessed for year under consideration u/s 143(3) r.w.s. 153A of the Act on 21/03/2013 wherein the assessee was saddled with aggregate quantum additions of Rs.503.12 Lacs as tabulated 3 M/s. JIK Industries Ltd. Assessment Year-2008-09 on page-60 of the quantum assessment order. The additions were made on three counts-(i)Addition on account of alleged bogus purchases; (ii) Addition on account of unexplained share premium; (iii) Addition on account of unexplained loans. 3.2 The assessee group was subjected to search proceedings on 04/02/2011 wherein various incriminating documents were found & seized from assessee’s premises and computer backups were taken. It was alleged that the assessee was involved in taking bogus bills of purchases and indulged in manipulation of account. In response to notice u/s 153A dated 30/04/2012, the assessee filed return of income for AYs 2005-06 to 2011-12. The return for AY 2008-09 was filed at Nil on 27/06/2012 with a delay of 27 days. The key persons of the assessee were its two directors viz. (i) Shri Rajendra G. Parikh; (ii) Shri Aditya G.Parikh. The assessee had floated various subsidiary companies and stated to be associated with many entities. 3.3 The original return of income was filed by the assessee u/s 139(1) on 30/09/2008 declaring loss of Rs.336.76 Lacs which was assessed u/s 143(3) on 25/11/2010 at loss of Rs.306.91 Lacs. 3.4 Upon perusal of assessee’s bank account, it was seen that the assessee routed heavy transactions along with its subsidiaries through bank accounts of non-functional / non-existent entities and ultimately cash was withdrawn from fictitious bank accounts. It was found that the assessee was indulging in obtaining large scale accommodation bills to inflate 4 M/s. JIK Industries Ltd. Assessment Year-2008-09 expenses so as to bring in its unaccounted black money into the books thereby reducing taxable income. 3.5 Simultaneous searches were also carried on the same date in case of some of entry providers, one of which was Shri Dilip Jayantilal Shah. The said person, in statement u/s 132(4), admitted to have given bogus bills to various entities as per the requirements. The relevant extract of the statement given by Shri Dilip Jayantilal Shah has already been extracted in the quantum assessment order. In response to question no.9, the said person, inter-alia, specifically confirmed that all the bills taken by the assessee from certain entities were bogus and there was no actual delivery of goods or services. Similar statement u/s 132(4) was recorded from another entry provider i.e. Shri Rajendra Jayantilal Shah who corroborated these facts. The aforesaid facts led Ld. AO for form an opinion that the assessee was in the practice of using bogus bills to siphon off the profit of the business thereby evading taxes. The details of transactions found during search operations were confronted to the assessee and the assessee was show-caused to prove the genuineness, identity, creditworthiness and capacity to handle such large volume of transactions in view of the statement given by Shri Dilip Jayantilal Shah. 3.6 The details of purchases made by assessee for various AYs has been tabulated on page no.9 of the quantum assessment order. The total purchases made for the year under consideration amounted to Rs.38.61 Lacs out of which purchases under doubt were Rs.35.84 Lacs.

5 M/s. JIK Industries Ltd. Assessment Year-2008-09 3.7 During search operations, it transpired that another entity namely M/s Sai Consultancy Services Pvt. Ltd., was being owned, controlled and managed by Shri Rajendra G. Parekh though proxy / dummy employees namely i.e. Shri Vicky Oswal and Shri Nilesh Pichule. The dummy directors had apparently no means to operate entity of such a magnitude. In his statement, Shri Vicky Oswal admitted that the said entity was created only with a view to manipulate the transactions of the assessee company. Similar statements were recorded from Shri Hemandra Choksi, director of another entity namely M/s Swiss Brain Systems (India) Private Limited who could not adduce evidences to prove that the transactions carried out by the said entity with assessee were genuine. 3.8 The statement of director of assessee company Shri Rajendra Parikh was also recorded u/s 132(4), wherein the director, inter-alia, contended that the transactions were genuine. However, the details could not be furnished readily and further time was sought for submission of relevant details and documentary evidences in support of the transactions. 3.9 In the above background, a detailed show-cause notice was issued to the assessee on 22/02/2013 asking for requisite information and documentary evidences with respect to the genuineness of the transactions. The assessee failed to furnish the requisite details and also failed to produce the books of account which led to issuance of another notice on 08/03/2013 wherein the assessee was again directed to file the requisite information and documentary evidences in support of the transactions. However, the assessee again failed to produce books of 6 M/s. JIK Industries Ltd. Assessment Year-2008-09 account and prove the genuineness of the transactions. Consequently, the copies of assessee’s bank statements were procured from different banks and summarized and upon perusal of these transactions, a conclusion was drawn that unaccounted money was routed back into the accounts of the assessee. It also transpired that some of the bank accounts were not reflected in the financial statements. Finally, the assessee was saddled with aggregate additions of Rs.503.12 Lacs viz. (i)Addition on account of alleged bogus purchases for Rs.38.61 Lacs; (ii) Addition on account of unexplained share premium Rs.162.81 Lacs; (iii) Addition on account of unexplained loans Rs.301.70 Lacs.

Aggrieved, the revenue is under appeal before us.