KAILASH BROTHERS,MUMBAI vs. ASST CIT 19(2), MUMBAI

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ITA 3793/MUM/2017Status: DisposedITAT Mumbai05 October 2018AY 2009-105 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the estimation of additions on bogus purchases, finding that the assessee failed to discharge the onus of proving the genuineness of the transactions. However, it agreed with the CIT(A) that the estimation at 3% was justified, reducing the addition from 8%.

What were the facts?

The assessee, a diamond trader and manufacturer, was subjected to reassessment proceedings based on information that it had obtained accommodation entries for purchases from seven parties. The Assessing Officer treated these purchases as bogus and made additions at 8% of the purchase value.

What were the issues?

Whether purchases from certain parties were bogus and whether the estimation of profit margin on such purchases was justified.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “H” BENCH, MUMBAI

Before: SHRI MANOJ KUMAR AGGARWAL, AM & SHRI RAVISH SOOD, JM

Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income Tax (Appeals)-30 [CIT(A)], Mumbai, Appeal No.CIT(A)-30/19(2)/857/15-16 dated 21/03/2017. The assessee has raised three grounds, out of which ITA.No.3793/Mum/2017 Kailash Brothers Assessment Year-2009-10 Ground No. 1 has not been pressed before us. The grounds as agitated before us read as under:- 2. Whether commissioner of Income Tax (Appeals) is correct in law and in fact in upholding assessing officer decision of purchases made by assessee from certain parties as bogus purchases without independent verification u/s 133(6)/131.

1.

3. Whether commissioner of Income-Tax (Appeal) is correct in law in and fact in upholding the additional profit margin of Rs.15,18,490/- on purchases of Rs.5,06,16,362/-. The assessment for impugned AY was framed by Assistant Commissioner of Income Tax 19(2), Mumbai [AO] u/s 143(3) read with Section 147 of the Income Tax Act, 1961 on 27/03/2015 wherein the assessee has been saddled with estimated additions of Rs.40.49 Lacs against certain alleged bogus purchases of Rs.506.16 Lacs computed @8%. The assessee was a resident firm and stated to be engaged as trader & manufacturer of diamond during impugned AY. 2.1 The reassessment proceedings were initiated pursuant to receipt of certain information from DGIT (Investigation) that the assessee took accommodation entries of purchases aggregating to Rs.506.16 Lacs from 7 parties, the details of which have already been extracted at para- 4 of the quantum assessment order. The said information sprung out of search & survey action in the case of Shri Bhanwarlal Jain Group on 03/10/2013 wherein it transpired that the said group, through web of numerous entities was engaged in providing accommodation entries of varied nature. The partners / directors / proprietors of these concerns were mere name-sake and well acquainted with the said group and the group was actually controlling all these concerns. 2.2 Accordingly, the assessee was required to substantiate the purchase transactions stated to be carried out with 7 entities. The ITA.No.3793/Mum/2017 Kailash Brothers Assessment Year-2009-10 assessee defended the same by submitting that the purchases were genuine and entered in stock register and the payments were through banking channels. At the same time, the assessee failed to produce any of the party for confirmation of transactions and also failed to substantiate the delivery of goods. Therefore, taking a contrary view, Ld. AO opined that the purchases as stated to be made from these parties were bogus whereas actual purchases were made from the open market. The Ld. AO also opined that the genuineness of the purchase parties was under doubt but the genuineness of purchase on a whole could not be doubted since the purchases were entered in the stock register. Finally, the additions against the same were estimated @8% which resulted into impugned additions of Rs.40.49 Lacs in the hands of the assessee.

3.

Aggrieved, the assessee agitated the same with partial success before first appellate authority. The Ld. CIT(A), after due consideration of factual matrix and several judicial pronouncements on the subject, primarily agreed with the approach & conclusion of Ld. AO. However, finding the estimation of 8% on the higher side, the same was reduced to 3% of alleged bogus purchases which restricted the impugned additions to Rs.15.18 Lacs. Aggrieved, the assessee is in further appeal before us.

4.

The Ld. Auhtorized Representative for Assessee [AR], Shri Bharat P.Shah, agitated the estimation by reiterating the contentions as raised before lower authorities. It was submitted that the confirmation of the suppliers was on record and therefore, the additions were not justified. Per Contra, Ld. DR submitted that no further relief could be granted to the assessee since the purchase transactions were under grave doubt.

ITA.No.3793/Mum/2017 Kailash Brothers Assessment Year-2009-10 5. We have carefully heard the rival contentions and perused relevant material on record including judicial pronouncements as cited before us. We are of the considered opinion that there could be no sale without actual purchase of goods keeping in view the assessee’s nature of business. The quantitative details were available on record and the sale turnover has been accepted by the revenue. The assessee was in possession of primary purchase documents and the payments were through banking channels. However, the stated purchases were under grave doubt since the assessee could not produce even a single party out of seven parties to confirm the transactions despite submitting their confirmations & affidavits and therefore, the authenticity of these documents could not be accepted on the face of these documents. The complete onus to prove the purchases beyond doubt was on assessee, which he has failed to discharge. It is worth noting that the assessee reflected purchases from as many as 7 entities, all of which were being controlled by Shri Bahnwarlal Jain Group. The search / survey action on the said group on 03/10/2013 by DGIT (Inv.) revealed that the said group consisting of numerous business entities was engaged in providing accommodation bills of varied nature. It was also found out that the employees / relatives etc. of the said group were merely name lending directors / partners / proprietors of these numerous concerns which were operating under the control of said group. The statements of concerned persons revealed that the firms were indulging in accommodation bills without doing any actual business and those persons had no knowledge about the business being carried out by the said concerns. In such a scenario, the action of Ld. CIT(A) in estimating the impugned additions ITA.No.3793/Mum/2017 Kailash Brothers Assessment Year-2009-10 @3% was quite justified keeping in view overall facts and circumstances and therefore, do not call for any interference from our side in any manner. So far as the reliance of Ld. AR on certain judicial pronouncements is concerned, we find that the same have been rendered on peculiar facts of each case and therefore, could not be relied upon blindly without considering the factual matrix of each case.

6.

The appeal stand dismissed.

Order pronounced in the open court on 05th October, 2018.

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