SHRI DINESH J LALWANI,MUMBAI vs. INCOME TAX OFFICER 22(1)(2), MUMBAI

11. The Paper Book furnished before me shows that assessee has furnished voluminous evidences to substantiate its claim that the purchases made from M/s. Kingstar are genuine purchases. The letter filed before the ITO–22(1)(2) dated 28.8.2016 in the course of the reassessment proceedings itself speaks of voluminous evidences enclosed by the assessee. Assessee also filed confirmation of accounts from the supplier M/s. Kingstar. The contents of the letter dated 28.08.2016 and the evidences furnished are as under: -

He has filed returns of sales tax for year ended 31/03/2012 and 31/03/2013 wherein he has also included the sales made to me for the year 31/03/2012 Rs.5637449/-(including VAT Rs.55816/-} and for 31/03/2013 Rs. 17765461 (including VAT Rs.175303) 7. I enclose herewith Form No. 704 being Audit Report of M/s King Star under Section 61 of Maharashtra Value Added Tax audited by M/s Nitesh Mahendra Kothari, Chartered Accountants for the years ended 31/02/2012 and 31/03/2013, which gives the entire summary of purchases, sales etc. for the above 2 years which is summarized as under: No. Particulars 31/03/2012 31/03/2013 1 Gross Turnover of Sales - 33,66,94,344 90,48,77,737 Table-2 2 Total amount of VAT (sales tax) 25,62,759 83,55,020 collected on Sales Part-3 of Schedule-1 3 Total turnover of Purchases - 35,21,78,905 94,50,83,402 Part-3 Schedule-1 4 Total amount of VAT (sales 11,57,834 36,29,231 Tax) paid/ payable on purchases Part 3 of schedule I 5 VAT paid as per Annexure —A 14,04,940 47,26,232 TOTAL 25,62,774 83,55,463

Please refer to Annexure J- Section I being part of form no, 704 as referred above, being customer wise sales made by M/s King Star for the year 31/03/2012 and 31/03/2013, wherein you will find in Annexure J section I, in serial item no.2 my VAT no. 27120552297V and the amount of sales and the amount of VAT and gross total amount of sales for each respective year is appearing in the said annexure.

Also enclosed herewith Annexure J-Section II being part of form no, 704 as referred above, being customer wise VAT purchase made by M/s King Star for the year 31/03/2012 and 31/03/2013, wherein you will find the TIN nos. of the suppliers from whom M/s King star has made purchases and the amount of purchases made from them, VAT amount paid and gross total amount of purchases for the years 31/03/2012 and 31/3/2013.

Also enclosed please find three VAT challans paid by M/s King Star for payment of VAT for the year ended 31/03/2012. ..... Pgs 154-156 12. Also enclosed please find seven VAT challans paid by M/s King Star for payment of VAT for the year ended 31/03/2013. ..... Pgs 157-162 13. Enclosed please find five purchase invoices for purchase made from M/s King Star for the year 31/03/2012 totaling to rs. 5637449(including Vat) Pgs l63-167 14. Enclosed please find nine purchase invoices for purchase made from M/s King Star for the year 31/03/2013 totaling to rs. 17705461(including Vat) ......Pgs 168-176 15. Enclosed please find five sales invoices in respect of sales made by me against the purchase of M/s King Star for the year 31/03/2012 totaling to rs.6054565 (including Vat) .....Pgs 177-181 16. Enclosed please find ten sales invoices in respect of sales made by me against the purchase of M/s King Star for the year 31/03/2013 totaling to rs.18857213 (including Vat) ......Pgs l82-191 17. Enclosed please find bank statements of M/s King Star having their bank account with ING Vysya Ltd for the year ended 31/03/2012 (Five statements),wherein you will find all the payments made towards purchases are appearing in their bank statement and the same are highlighted by yellow mark. .....Pgs 192-195 18. Enclosed please find bank statements of M/s King Star having their bank account with ING Vysya Ltd for the year ended 31/03/2013 (Twelve statements), wherein you will find all the payments made towards purchases are appearing in their bank statement as the same are highlighted by yellow mark. .....Pgs 196-207 19. You will observe from the bank statements of M/s King Star that all the payments made by me towards purchases are through cross account payee cheques.

I enclose herewith Statement of Accounts as appearing in the books of M/s King Star for the year ended 31/03/2012 & 31/03/2013. .....Pgs 208-209 21. Enclosed please find copy of affidavit dated 30/10/2013 of Shri Pramod Kumar Ranka proprietor of M/s King Star, wherein he has specifically mentioned in para 5 of affidavit that the statement recorded by income tax authorities u/s 131(1A) & 132(4) at the time of search was recorded under pressure, undue influence and coercion from Income Tax Authorities and furthermore he has denied the contents of statements recorded at the time of search and he has retracted the same by the said affidavit. Under the circumstances I submit that any addition made on account of statement given under pressure, influence and coercion is bad in Iaw and the same cannot be relied upon for the purpose of reassessment. Your attention is invited to the CBDT directive dated 18/12/2014 referred above wherein the above position has been clarified. ..Pgs. 2010-211 22. The transaction of purchases from M/s King Star and thereafter sales made by me against those purchases as referred above are genuine business transactions and during the course of business and all the payments are through cross account payee cheques only.

I once again reiterate that purchases made by me from M/s King Star are out of the purchases made by M/s King Star during the course of his business as referred above and he has furnished Vat number wise details of supplier in Annexure J-Section II of Form no. 704 filed with the sales tax authorities for the above two years as referred above and against those purchases he has effected the sales to me and other parties 9 & 4194/MUM/2018 (A.Ys: 2012-13 & 2013-14) Shri Dinesh J Lalwani as reported in form no. 704 of Annexure J Section I. On the basis of above I submit that the purchases made from M/s King Star and sales made against those purchases thereafter are genuine business transactions only.

For the year 31/03/2012 my gross profit ratio was 9.15% and for 31/03/2013 it was 13.07% which is more than the average GP in diamond trading business.

By virtue of powers vested in you under section 131,1 request you to kindly summon proprietor of M/s King Star so that I will cross examine him in connection with purchase transaction for the above 2 years 26. Moreover I refer to two judgements of Gujarat High Court as refered above wherein the additions made to total income was deleted since the additions was made on the basis of the statements recorded u/s 131 and which was later on retracted, since the statement was under pressure, influence, threat and coercion, in both the above high court judgments the above CBDT Directive has been referred to 27. In the said judgment of Ramanbhai Patel in para 5.2, a reference has been made to letter dated 10/03/2003 issued by the Central Board Of Director Taxes wherein it has been stated that if the confession is not based upon credible evidence and later on confession is retracted in that event the addition to total income is bad in law. Thank You.

None of these evidences were neither considered nor examined by the Assessing Officer. The Assessing Officer merely stated that as per the information received from Pr.DIT(Inv.), Mumbai that one Mr. Gautham Jain was providing accommodation entries and assessee is one of the beneficiaries. Ignoring all the evidences and contentions of the assessee that Gautham Jain has nothing to do with the purchases made by the assessee from M/s.Kingstar, Assessing Officer proceeded to estimate the profit element from such purchases at 12.5% merely relying on the statements of the Gautham Jain. The Assessing Officer has not even mentioned about the voluminous evidences furnished by the assessee nor made any sort of enquiries to disprove the evidences furnished by the 10 & 4194/MUM/2018 (A.Ys: 2012-13 & 2013-14) Shri Dinesh J Lalwani assessee. Since the Assessing Officer failed to rebut the evidences filed by the assessee nor he provided any details of the information which he said to have possessed from DIT(INV.), to the assessee, on this ground alone entire addition deserves to be deleted. However, accepting the alternative contention of the assessee that since the assessee has declared Gross Profit at 13.07% and 9.15% for the A.Ys. 2012-13 and 2013-14 a reasonable percentage should be adopted. Thus, taking the totality of facts and circumstances into consideration, I direct the Assessing Officer to estimate the profit element from the alleged bogus purchases at 2% as against 12.5% made while completing the assessments and recompute the income of the assessee. As I have decided the issue on merits, I am not inclined to go into the aspect of validity of reopening of assessment. All other grounds are left open.

In the result, appeals of the assessee are partly allowed.