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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 1049/Del/2018 (Assessment Year: 2007-08) SIL Gold, Vs. ITO, Prakash Sachin & Co, Ward-53(4), 13D, 13th Floor, Atma Ram New Delhi House, 1, Tolstoy Marg, Barakhamba Road, New Delhi PAN: AACFS1025P (Appellant) (Respondent)
Assessee by : Shri Prakash Sinha, CA Shri Sachin Sinha, CA Ms kavita Arora, CA Revenue by: Shri S.L. Anuragi, Sr. DR Date of Hearing 21/08/2018 Date of pronouncement 14/11/2018
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT(A)- 18, New Delhi dated 10.04.2017 for the Assessment Year 2007-08. 2. The assessee has raised the following ground of appeal:- “1. Because in the facts and circumstances of the case and in law the Ld. AO has erred in assuming the jurisdiction of reassessment based on the satisfaction note, which was mechanically drawn by the AO, on the basis of letter by the CIT dated 07.03.2014, (enclosed letter of Director General of Income Tax (Inv.) Mumbai), without proper investigation at his level and application of his mind for the escapement of income, which was the basic ingredient of invoking section 147. 2. Because the AO on the facts and circumstances of the case and by law has erred to assume the jurisdiction in the absence of proper investigation of the purchases by concluding it as a bogus purchase/ accommodation entry on the mere absence of telephone number and VAT number on the invoices.
Because the AO on the facts and circumstances of the case has erred in ignoring that the valid payment details were submitted for the above two purchase.” 3. The brief facts of the case are that assessee is a partnership firm engaged in the business of jewelers. It filed its return of income on 31/10/2007 declaring an income of Rs. 66513/–. The above return of income was processed under section 143 (1) of the income tax act on the returned income itself. 4. Later on, The learned assessing officer received the information from DDIT (investigation), Mumbai forwarded by the CIT, New Delhi by letter dated 14/3/2014 that search operation under section 132 of the income tax act, 1961 was undertaken on 1/10/2013 in case of Praveen Kumar jain group of cases. The statement of the Praveen Jain was recorded by the investigation wing revealing that the accommodation entry in all to the tune of Rs. 8897 crores has been provided. He was running a web of concern, which is engaged in providing accommodation entry in various forms like bogus unsecured loans, share capital, and sales. Further statement under section 132 (4) of the act of the directors and proprietors were recorded who admitted that they were merely the name lenders as directors and used to sign different papers for nominal consideration given by Sri Praveen Jain. 5. q It was found that during the financial year 2006 – 07 the assessee firm is reported to have received bogus purchase bills amounting to ₹ 568020/– from M/s Mohit international, Surat. Therefore, reasons were recorded under section 147 of the act on 26/ 3/ 2014 forming a belief that income of ₹ 568020/– has escaped assessment. The sanction of the joint Commissioner of income tax was also sought and granted. Consequently, notice under section 148 of the income tax act was issued on 28/3/2014, which was served on the assessee on 29/3/2014. The assessee by letter dated 16/4/2014 informed that the return of income originally filed on 7/11/2007 to be treated as return filed in response to notice under section 148 of the income tax act. Subsequently, notice under section 143 (2) was issued on 30/4/2014 in response to which the requisite details were filed. Page | 2
On examination of the detail the learned assessing officer found that assessee purchase polish diamonds from Mohit international, Surat vide bill dated 20/4/2006 for ₹ 501000 and ₹ 67020 vide bill dated 20/9/2006. The total of the purchase bill of the two bills is ₹ 5 68020/–. According to the learned assessing officer, these bills do not contain any telephone numbers of the seller and no sales tax registration numbers on the bills are provided. Therefore, he considered that these concerns are not genuine. Though assessee stated before him that the purchase consideration has been paid by cheques and the learned assessing officer stated that mere making payment by cheque does not go to strengthen the transactions, which are ingenuine. The assessee also did not provide any documentary evidence to suggest that the seller on the date of making of sales had the stock in trade. The statement of one of the partners of the firm was also recorded on oath under section 131 of the income tax act on 26/2/2015 and the assessee was required to prove the movement of the goods. In the statement, the partner of the firm stated that the proof of tickets, travel bill, boarding passes, and hotel accommodation bills in connection with purchases are not available with him. Therefore, the learned assessing officer held that the purchases made by the assessee are bogus. The assessee also did not produce the books of accounts on the plea that there was a sealing drive 2007 and the books of accounts were shifted in a hurriedly manner. In view of this the learned AO made an addition of ₹ 568020 on account of bogus purchase and added the commission of Rs. 11360/–. Accordingly the assessment under section 147 read with section 143 (3) of the act was passed on 18/3/2015 at ₹ 645893/– against the returned income of Rs. 66513/–. 7. The assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned commissioner of income tax appeals – 18, New Delhi. The learned commissioner appeals disposed of the appeal of the assessee vide order dated 10/4/2017 who held that the addition in the hands of the assessee should be restricted to around ₹ 90,000 on the basis of the gross profit percentage of sales in case of the assessee. He further upheld the addition of Rs. 11360 on account of Page | 3
commission paid on bogus purchases. Accordingly he confirmed the addition of ₹ 1 01360/– against the total addition made by the learned assessing officer of ₹ 5 68020/– on account of bogus purchases and commission of rupees 11360/–. 8. The assessee aggrieved with the order of the learned commissioner of income tax appeals has preferred an appeal before us. There was a delay of 234 days in filing of the appeal and therefore the assessee mood an application for condonation of delay in filing the appeal. In the condonation of the delay petition the assessee submitted that assessee is the partnership firm which was converted into the proprietor is from and due to the sealing drive going on in the locality of the assessee firm the therefore the delay in filing of the appeal. He further stated that during April 2017 to January 2018, the assessee was frequently engaged in international travelling and therefore the delay occurred. Therefore, it was prayed that the above delay may be condoned as it has a sufficient reason. 9. The learned departmental representative vehemently opposed the petition of condonation of delay filed by the assessee. He submitted that there is no sufficient cause shown for filing appeal belatedly. 10. We have carefully considered the rival contention and perused the reasons stated before us causing the delay in filing the appeal. On perusal of the reasons of the sealing and frequent international travel of the assessee, we are convinced that the delays caused for sufficient cause. Even there is no deliberate attempt shown on behalf of the assessee in not filing the appeal. Even otherwise we are of the opinion that assessee does not get any benefit in causing delay in filing of the appeal. In view of this we condone the delay and admit appeal of the assessee. 11. The learned authorised representative vehemently submitted before us that the a. reopening has been made merely on the basis of the statement of 1/3 party without any investigation made by the learned assessing officer he further submitted that that there is no connection
between the Mohit international and the entry operator shown by the learned assessing officer. b. He further submitted that there is no failure recorded in the reasons to furnish fully and truly the facts for the case. He submitted that unless there is such an allegation about what of failure is on part of the assessee the reopening could not be sustained. c. He relied upon the decision of the honourable Gujarat High Court in tax appeal number 691 of 2017 in principal Commissioner of income tax versus Tejua Rohitkumar Kapadia dated 18/9/2017 wherein an identical facts and circumstances the honourable Gujarat High Court has held that when purchases already made by the assessee duly supported by the bills and payments were made by account payee cheque and further the seller also confirmed the transactions. Further, as there was no evidence to show that the amount was recycled back to the assessee and particularly when it was found that the assessee that rendered also shown sales out of purchases made from Raj impacts, which were, also subject by the revenue there is no question of making any addition. It was further stated that the above decisions travelled before the honourable Supreme Court and the special leave petition is dismissed wide order dated 4/5/2018. He further stated that the facts of the case of the assessee are identical to the facts before the honourable Gujarat High Court. 12. The learned departmental representative vehemently stated that the assessee has purchased the bills from Mohit international, which are found to be bogus. Further assessee has not shown that M/s Mohit international had stock in trade is on the date of making sales to the assessee firm. He further is submitted that assessee has also failed to show any ticket/travel bill/boarding pass and hotel accommodation bills. The learned DR vehemently supported the orders of the lower authorities. 13. We have carefully considered the rival contention and perused the orders of the lower authorities. On the issue of the reopening of assessment we have carefully produce the reasons recorded by the learned assessing Page | 5
officer, which are placed at page number 33 of the paper book. The reasons recorded shows that assessee has received an accommodation entry from Mohit international for purchase of diamond. The income of the assessee was not assessed earlier under section 143 (3) of the income tax act. There is a tangible material available with the learned assessing officer to reopen the case of the assessee as it was found that Mohit international is operated by Mr. Praveen Jain who is an accommodation entry provider. Further the first proviso to section 147 applies only with respect to the assessment made under section 143 (3) of the income tax act and not otherwise. In view of this, we do not find any infirmity in the order of the learned commissioner of income tax appeals in upholding the reassessment proceedings. Hence, ground number 1 and 2 of the appeal dismissed. 14. On the merits of the case, we have carefully considered the contention of both the parties. We find that the assessee has purchased the goods from Mohit international, sold them as per sale price recorded in the books and result in profit thereon. The assessee also supported the purchases with the copies of the bill and payments were made by account payee cheques. There was also no evidence to show that the amount was recycled back to the assessee and particularly the assessee has shown that the sales have been made out of the purchases made from Mohit international which were also accepted by the revenue. Further, the assessee has shown from the copies of the travelling expenses with respect to travel from the early to Surat on various dates. Therefore the issue before us is squarely covered by the decision of the honourable Gujarat High Court in tax appeal number 691 of 2017 dated 18/9/2017 in case of Tejua Rohitkumar Kapadia against which the SLP has been dismissed by the honourable Supreme Court wide order dated 4/5/2018. In any case, the learned commissioner of income tax has also added the gross profit only with respect to the alleged bogus purchase of the goods. When the sales are already accounted for in the books of accounts then once again making an addition of the gross profit will amount to double addition. In view of this we hold that when the assessee has already Page | 6
shown gross profit in the books of account on sale of those goods which are allegedly purchased from an accommodation entry provider no further addition can be made on account of the gross profit as it would amount to double addition. Hence we reverse the finding of the learned commissioner of income tax appeals in upholding the addition of ₹ 9 0000/- . However with respect to the addition of rupees 11360 on account of the alleged commission on the accommodation entry provided by the Praveen Jain group, we do not find any infirmity in the order of the learned commissioner of income tax appeals in upholding the addition to that extent for the simple reason that there is no denial from the assessee that assessee has not purchased goods from M/s Mohit international which is part of Praveen Jain group. Accordingly, ground number 3 of the appeal of the assessee is partly allowed. 15. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open court on 14/11/2018. Sd/- Sd/- (AMIT SHUKLA) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 14/11/2018 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi
Date of dictation Date on which the typed draft is placed before the dictating member Date on which the typed draft is placed before the other member Date on which the approved draft comes to the Sr. PS/ PS Date on which the fair order is placed before the dictating member for pronouncement Date on which the fair order comes back to the Sr. PS/ PS Date on which the final order is uploaded on the 15.11.2018 website of ITAT date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the order