ARVIND G. VALVI, INCOME TAX OFFICER, WARD-2(1)(3),SURAT, SURAT vs. SWEETY GEMS PRIVATE LIMITED, SURAT
Facts
The assessee declared income of Rs.4,71,040, which was assessed at Rs.10,07,848. Subsequently, information was received that the assessee received Rs.10,94,05,000 from M/s Sheetal Exports. The Assessing Officer (AO) added this amount under section 69A of the Income-tax Act, holding the transactions to be sham.
Held
The CIT(A) deleted the addition, finding that M/s Sheetal Exports was engaged in genuine business and that the transactions were normal business transactions. The Tribunal upheld the CIT(A)'s order, noting that similar proceedings against related parties were also accepted by the AO and that the revenue failed to provide evidence to rebut the findings.
Key Issues
Whether the addition of Rs.10,94,05,000/- under section 69A of the Act on account of alleged non-genuine business transactions with M/s Sheetal Exports was justified.
Sections Cited
69A, 153A, 143(3), 148, 148A, 147, 132, 68, 151
AI-generated summary — verify with the full judgment below
Before: SHRI PAWAN SINGH & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: These two cross appeals by the revenue and assessee emanate from the
order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the
Act’) dated 29.07.2024 by learned Commissioner of Income-tax (Appeal),
National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’], for the Assessment
Year (AY) 2014-15.
ITA No.975 & CO. No.29/SRT/2024/AY.2014-15 Sweety Gems Pvt. Ltd. 2. The grounds of appeal raised by the revenue are as under:
"(i) On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition from Rs.10,94,05,000/- made on account of section 69A of the Act as the assessee neither in the assessment proceedings nor in the appeal proceedings produced any cogent evidences to prove that the amount credited in the bank account pertains to its business receipts.
(ii) On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that during the assessment proceeding and during the inquiry of the STR as well during the assessment proceedings of the assessee it is clearly established that the entity Sheetal Exports is not into genuine business
(iii) On the facts and circumstances of the case and in law, the Id. CIT(A) ought to have upheld the order of the Assessing Officer.
(iv) It is therefore prayed that the order of the ld. CIT(A) may kindly be set aside and that of the Assessing Office be restored.
(v) The appellant craves leave to add, alter, amend and/or withdraw any grounds of appeal either before or during the course of hearing of the appeal."
Brief facts of the case are that assessee filed its return of income on
22.09.2014, declaring total income of Rs.4,71,040/-. The return was taken up
for scrutiny and assessment order u/s 153A r.w.s. 143(3) of the Act was passed
on 31.03.2016, determining total income of Rs.10,07,848/-. After the
assessment order, information was received through the Insite portal that
assessee had received huge fund of Rs.10,94,05,000/- from M/s Sheetal
Exports (Prop. Upendra Bajrang Lal Goyal). Notice u/s 148 of the Act was
issued on 04.06.2021. Subsequently, notice u/s 148A(b) of the Act was issued
on 25.03.2022 by treating the said notice dated 04.06.2021 as notice u/s
148A(b) of the Act. The assessee challenged the action of AO as time barred
vide reply dated 03.06.2022. The Assessing Officer (in short, ‘AO’) rejected
ITA No.975 & CO. No.29/SRT/2024/AY.2014-15 Sweety Gems Pvt. Ltd. contention of the assessee. He passed order u/s 148A(d) of the Act on
30.07.2022.
3.1 The assessee also filed various details and evidences regarding its
transaction of Rs.10,94,05,000/- with M/s Sheetal Exports vide letters dated
21.02.2023, 19.04.2023 and 21.04.2023. He submitted that total transactions
with M/s Sheetal Exports were of Rs.11,44,45,048/-. It received the said
amount out of sale of polished diamond worth Rs.3,08,18,637/- and other
transactions were on current account with the said concern. The AO observed
that transactions with Sheetal Exports are only sham transactions to
accommodate funds in the name of running business activities of cut and
polished diamonds. He issued show cause as to why the same amount should
not be taxed u/s 69A r.w.s. 115BBE of the Act. The assessee filed reply on
18.05.2023 which was not found satisfactory by the AO. He got field
verification conducted through the Verification Unit and found that M/s
Sheetal Exports was not carrying out any business from the address given by
the assessee. Accordingly, he added Rs.10,94,05,000/- u/s 69A of the Act to
the total income.
Aggrieved by the order of AO, the assessee filed appeal before CIT(A).
During appellate proceedings, appellant submitted books of account, ledger
account showing trading of diamonds with M/s Sheetal Export, invoices, audit
reports and assessment orders of the appellant and M/s Sheetal Exports for
AY.2014-15. It was submitted that the quantum of profit cannot be decisive of
ITA No.975 & CO. No.29/SRT/2024/AY.2014-15 Sweety Gems Pvt. Ltd. the genuineness of the transaction. The CIT(A) found that the ledger account
of M/s Sheetal Exports in the books of the assessee shows regular business
transactions and sales. The appellant had also submitted copy of assessment
order u/s 143(3) dated 31.03.2016 by the ACIT, Central Circle, Mumbai in case
of M/s Sheetal Exports for AY.2014-15. It was evident therefrom that M/s
Sheetal Export was covered in a search action u/s 132 of the Act in the year
2013-14 and books of account were seized from its premises. The entire
addition made in the search assessment was deleted by the CIT(A), resulting in
the assessment of the said party at its returned income. The CIT(A) also noted
that the case of M/s Sheetal Exports was reopened u/s 147 of the Act by the
ACIT, Central Circle on 30.03.2021 based on the same information. However, in
the order u/s 143(3) r.w.s. 147 of the Act, the returned income was accepted
by the AO. Hence, the CIT(A) concluded that M/s Sheetal Exports was actually
engaged in diamond trading during AY.2014-15. As Sheetal Export was actually
engaged in business during 2014-15, there was no reason to presume that the
bank transfer with the appellant was bogus. The CIT(A) also found that the
case of appellant for AY.2014-15 also assessed u/s 143(3) of the Act by the AO
of the Central Circle pursuant to a search conducted in the year 2013. After
verifying books of account, AO made addition of Rs.9,36,808/-. In the appellate
order, the CIT(A) held that there is no incriminating material which would
justify addition u/s 153A of the Act. Further, no defects were pointed out by
AO in the regular books of account. The bank transactions with M/s Sheetal
ITA No.975 & CO. No.29/SRT/2024/AY.2014-15 Sweety Gems Pvt. Ltd. Exports were also incorporated in the books of account. Though in the faceless
assessment proceedings, transactions with M/s Sheetal Export were added u/s
69A of the Act, but in the parallel proceedings by the Central Circle, the
transactions with M/s Sheetal Exports were not found to be accommodation
entries. Hence, the CIT(A) held that the impugned transactions were normal
business transactions. As a result, the appeal was allowed.
Aggrieved by the order of CIT(A), the revenue filed the appeal before
the Tribunal. The learned Commissioner of Income-tax – Departmental
Representative (ld. CIT-DR) for the revenue supported the order of AO. He
submitted that the assessee did not produce any credible evidence to prove
that the transaction with M/s Sheetal Exports was genuine. He submitted that
Sheetal Exports is not doing any genuine business activity.
On the other hand, learned Authorized Representative (ld. AR) of the
assessee relied on the order of CIT(A). He submitted that assessee made sales
to Sheetal Exports and did not make any purchases either from M/s Sheetal
Export or M/s Maniprabha Impex Pvt. Ltd. The assessee has shown revenue
from M/s Sheetal Export and has not claimed any expenses in relation to M/s
Sheetal Exports. The ld. AR also submitted that similar action u/s 147 of the Act
was undertaken in case of Shri Upendra Bajrang Lal Goyal (Prop. M/s Sheetal
Exports), who made purchases of Rs.1,17,96,48,994/- from M/s Maniprabha
Impex Pvt. Ltd. The AO accepted the returned income of M/s Sheetal Exports
and did not make any addition. Hence, addition cannot be made in case of the
ITA No.975 & CO. No.29/SRT/2024/AY.2014-15 Sweety Gems Pvt. Ltd. assessee. The ld. AR also relied on the decision of Hon’ble Gujarat High Court
in case of CIT vs. Vishal Exports Overseas Ltd., TA No.2471 of 2009, dated
03.07.2012.
We have heard both the parties and perused the materials available on
record. We have also deliberated upon the case laws relied upon by ld. AR. We
have also gone through various assessment orders and appellate orders relied
upon by ld. AR. The AO made the addition of Rs.10,94,05,000/- u/s 69A of the
Act on the ground that no business activities were actually carried out by M/s
Sheetal Exports from its premises. During field verification by the Verification
Unit in case of M/s Sheetal Exports during the assessment proceedings, it was
found that there were no business activities such as export and import of
diamonds from its premises. Hence, AO held that transactions with M/s
Sheetal Export are only sham transactions to accommodate funds in the name
of running business activities of cut and polished diamond. On appeal, the
CIT(A) deleted the addition because both the appellant and M/s Sheetal
Exports had undergone search action u/s 132 of the Act and were assessed by
the same AO in the Central Circle, Mumbai. In both cases, the appeals by the
assessee were allowed by CIT(A) and the returned incomes were accepted. We
find that similar re-assessment proceedings u/s 147 of the Act were
undertaken in case of Shri Upendra Bajrang Lal Goyal (Prop. of M/s Sheetal
Exports). A search and seizure action u/s 132 of the Act was carried out in his
case and assessment order was consequently passed. Subsequently, the case
ITA No.975 & CO. No.29/SRT/2024/AY.2014-15 Sweety Gems Pvt. Ltd. was reopened and order u/s 143(3) r.w.s. 147 of the Act was passed on
18.05.2021 wherein no adverse view was taken and the returned income of
Rs.2,41,220/- was accepted.
7.1 The CIT(A) has deleted the impugned addition made by the AO as per
the findings at para 4 and 4.1 of the appellate order. The findings of CIT(A)
have already been discussed at para 5 of this order. He found that the
additions made in the search assessment of M/s Sheetal Exports was deleted
in the first appeal. He observed that once the creditor is actually engaged in
business, the bank transactions with the appellant cannot be treated as bogus.
He also found that bank transactions with M/s Sheetal Exports are
incorporated in the books of account of the assessee. He also found that in the
parallel proceedings by the Central Circle, assessment was completed in case
of M/s Sheetal Exports where transactions by the said firm were found not to
be accommodation entries. After going through various details including the
assessment orders referred to by the CIT(A), we do not find any infirmity in his
findings. The finding of CIT(A) that M/s Sheetal Exports was actually engaged in
normal business during the year under consideration has not been rebutted by
the revenue by producing any details or evidence. Hence, there is no reason to
differ with the findings of the CIT(A). We also find that the Hon’ble Gujarat
High Court in case of Vishal Exports Overseas Ltd. (supra) has confirmed
upholding the deletion of Rs.70,00,000/- u/s 68 of the Act by observing that
when the assessee has already offered the sales realization and such income is
ITA No.975 & CO. No.29/SRT/2024/AY.2014-15 Sweety Gems Pvt. Ltd. accepted by the AO, addition of the same amount once again u/s 68 of the Act
would amount to double taxation of the same year. The ratio of the above
decision is applicable to the facts of the case because the assessee made sales
to M/s Sheetal Exports and did not make any purchases either from M/s
Sheetal Exports or M/s Maniprabha Impex Pvt. Ltd. In view of the above facts
and the decision cited supra, the grounds of the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
CO No.29/SRT/2024 (AY.2014-15):
The grounds of appeal raised by the assessee are as under:
"1. On the facts and circumstances of the case as well as law on the subject, the Id. Assessing officer has erred in issuing notice u/s 148A(b) on the basis of misconceived and wrong information.
On the facts and circumstances of the case as well as on the subject, the Id. Assessing officer has erred in initiating re-assessment on the basis of change in opinion.
On the facts and circumstances of the case as well as law on the subject, the Id. Assessing officer has erred in issuing notice u/s 148A(b) and passing order u/s 148A(d) when he was not having any jurisdiction.
On the facts and circumstances of the case as well as law on the subject, the Id. Assessing officer has erred in passing order u/s 148a9d) without obtaining proper approval u/s 151.
On the facts and circumstances of the case as well as law on the subject, the Id. Assessing officer has erred in issuing notice u/s 148 on the basis the judgment of Hon'ble Supreme Court in cased of UOI vs. Ashish Agarwal, Civil Appeal No.3005/2022, dated 4th May, 2022, when the judgment didn't suggest that income chargeable to tax has escaped assessment in assessee's case.
On the facts and circumstances of the case as well as on the subject, the Id. CIT(A) has erred in not adjudicating various issues concerning reassessment raised in the appeal before him.
ITA No.975 & CO. No.29/SRT/2024/AY.2014-15 Sweety Gems Pvt. Ltd.
Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal."
Subsequently, the appellant has raised additional ground which is as
under:
“On the facts and in circumstances of the case as well as law on the subject, the ld. Assessing Officer has erred in issuing notice u/s 148 on 30.07.2022 in contravention of the time laid down u/s 149 read with judgement of Honourable Supreme Court in case of Union of India vs. Rajeev Bansal and therefore proceeding initiated u/s 147 is time barred.”
Since the appeal of the revenue has been dismissed on merit, the Cross
Objection filed by the assessee becomes academic in nature and does not
require adjudication.
In the combined result, the appeal filed by the revenue is dismissed,
whereas the Cross-objection filed by assessee also dismissed as becomes in
fructuous.
Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on
13/05/2025.
Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat �दनांक/ Date: 13/05/2025 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File
By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat
