SHANTIVIJAY JEWELES LTD,MUMBAI vs. DCIT RG 8(3), MUMBAI

During the appellate proceedings, the assessee filed copies of the affidavits of the suppliers and relied on various decisions against the said additions on account ITA/1045/Mum/2016-A.Y.11-12 Shantivijay Jewels Ltd. of bogus purchases. On hearing the same and after obtaining the remand report of the AO on the said affidavits, he partly allowed the appeal of the assessee.In his order, CIT (A) held that the addition of entire purchases is not sustainable and relied on the jurisdictional High Court judgment in the case of Nikunj Eximp Enterprises (372 ITR 619).He further held that restricting the addition to 12.5% of the said purchases was reasonable.He relied on the Gujarat High Court judgment in the case of Simit P Sheth (356 ITR 451)in this regard.Thus, he confirmed the addition of Rs. 1,75,04, 222/- being 12.5% of Rs. 14,00,33,775/- and deleted the balance of Rs. 12,25,29,553/-. 4.Aggrieved with the said decision of CIT (A),the assessee filed appeal before the Tribunal with regard to bogus purchases.While deciding the appeal the Tribunal restored back the issue of bogus purchase to the file of the AO for fresh adjudication.As stated earlier,the issue of bogus purchases has been recalled by the Tribunal. 5.During the course of hearing before us,the Authorised Representative(AR)stated that the assessee was exporting jewellery,that it had no local sales during the year under consideration, that all the necessary documents to prove the genuineness of the transactions were produced during the assessment proceedings, that the payments were made through banking channels,that the supplier had confirmed the transactions during the remand proceedings,that they were assessed to income tax.He referred to pages 9, 24, 64 and 109 of the paper book. He relied upon the case of Smt. Romila M. Nagpal (ITA/6388/Mumbai/2016-AY.2009-10,dated 17/03/17).The Departmental Representative (DR) stated that one party did not appear. 6.We have heard the rival submissions and perused the material before us.We find that the assessee is engaged in the business of manufacturing of studded gold jewellery and plain gold jewellery,that during the year under consideration it had exported its manufactured goods,that it did not sell goods locally, that the AO had not doubted the sales, that the suppliers had appeared before the AO and admitted that they had sold the goods to the assessee,that they had filed affidavits in that regard.We find that DJ had admitted of issuing bogus bills.But,nowhere he had admitted that he had issued accommodation bills to the assessee.In our ITA/1045/Mum/2016-A.Y.11-12 Shantivijay Jewels Ltd. opinion,there is subtle but very important difference in issuing bogus bills and issuing accommodation bills to a particular party.The difference becomes very important when a supplier in his affidavit admits supply of goods.In this matter, the assessee had made no local sales and goods were exported,as stated earlier.So,as far as sales are concerned there is no doubt about the genuineness of such sales.It is also a fact that suppliers were paying VAT and were filing their returns of income.In response to the notices issued by the AO,under section 133(6) of the Act, the supplier had admitted the genuineness of the transaction.Here,we would like to refer to order of the Tribunal in the case of Romila M. Nagpal (supra),wherein in the similar circumstances,addition confirmed by the FAA were deleted. In that order,the tribunal had referred to the case of M/s. Imperial Imp & Exp.(ITA No.5427/Mum/2015 A.Y.2009-10).In Imperial Imp & Exp. matter,the assessee was exporting goods. The relevant portion of the order of reads as under: “2.Effective Ground of appeal is about addition made to her income with regard to purchases. The AO received an information from the investigation wing that the sales tax department, Govt.of Maharashtra had made enquiries about bogus purchases/hawala transactions.The sales tax authorities had forwarded the list of beneficiaries who had taken bills from the hawala dealers.The AO observed that assessee had purchased goods worth Rs.1.35crores from three parties namely Shri Garnesh Trading (Rs.27.73 lakhs); Kishna Chemical Works (Rs.27.85 lakhs) and Shreyas Marketing Agency (Rs.80.40 lakhs). The AO issued a notice u/s.148 of the Act .In response to the notice the assessee stated that return filed on 24/9/2009 should be treated as return filed in response to re-assessment notice.After considering the submission of the assessee and the various details filed by her the AO issued notices u/s. 133 (6) of the Act to above mentioned three parties.As per the AO,notices were returned back by postal authorities as same could not be served.He held that in absence of authentic confirmation from the parties the genuineness of the transaction was not verifiable. He directed the assessee to produce the parties.The assessee ,vide her letter dt.12.11. 2014,stated that parties were not available as on date.The AO held that purchases made by her were not verifiable in absence of proper and legitimate confirmations,that the assessee had not produced the suppliers ,that the onus was on the assessee to prove the genuineness of the purchases, that the profit element embedded in the purchases had to be brought to tax.Estimating the gross profit @ 12.5% of the unproved purchases of Rs.1.35crores, he made an addition of Rs.16.99 lakhs to the income of the assessee. 3.Aggrieved by the order of AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,the assessee made elaborate submissions and relied upon several case laws.Before him,it was argued that the assessee had filed ledger copies of the parties, sales details, that the purchases were fully backed by authenticated invoices, that she had made payment through banking channels,that the stock register and the consumption chart showed the nexus between the purchases and the sales made by the assessee,that details of closing stock were available on record,that there was no evidence to prove that assessee had received back the money in cash,that the AO had not rejected the books of account of the assessee,that ITA/1045/Mum/2016-A.Y.11-12 Shantivijay Jewels Ltd. the assessee was maintaining quantitative details of purchase and sales, that the AO had not pointed out any specific defects in the books maintained by her. After considering available material,the FAA held that the AO had made efforts beyond getting information from the investigation wing,that he had directed the AO to produce the parties,that the supplier were not found at the given addresses, that it was a case of purchases made form bogus parties rather than a case of bogus purchases,that without making purchases it was not possible for assessee to complete the sales, that the AO had rightly invoked the provisions of section 147, that he was justified in making the disallowance of Rs.16.99 lakhs. Finally, he dismissed the appeal filed by the assessee. 4.During the course of hearing before us the Authorised Representative (AR) submitted that the assessee had filed all necessary details before the AO, that stock register and quantitative details were made available to the AO, that payments were made through banking channels. He referred to the cases of Shri Mahesh Shah (ITA No.5194/Mum/2014 A.Y.2010-11); M/s. Imperial Imp & Exp. (ITA No.5427/Mum/2015 A.Y.2009-10); Shri Ramila Pravin Shah (ITA No.5246/M/2013 A.Y.10-11); Shri Deepak Popatlal Gala (ITA No.5920/Mum/2013 A.Y.2010-11,dated 27/3/2015); Ramesh Kumar and Co.(ITA No.2959/Mum/2014 A.Y.2010-11 dated 28/11/2014); Shri Rajeev G. Kalathil (ITA No. 6727/Mum/2012 A.Y.2009-10 dated 20/08/2014);Shri Ganpatraj A. Sanghavi (ITA No.2826/ Mum/ 2013 A.Y. 2009-10 dt.5/11/2 014 and Shri Hiralal Chunilal Jain (ITA No.4547/Mum/2014 dated 01/01/2016. The DR supported the order of the FAA. 5.We have heard the rival submissions and perused the material before us.We find that in the case of Imperial Imp.& Exp.(supra) identical issue has been deliberated upon and has been decided by the Tribunal .We are reproducing the relevant portion consisting the facts of the case, order of the FAA, arguments advanced by AR and DR before the Tribunal and the operative part of the order of the Tribunal which reads as under :- 2.In this appeal, although the assessee has raised multiple Grounds of appeal

, but the substantive grievance is against the action of the CIT(Appeals) in confirming an addition of Rs.4,19,356/- being estimated profit on unexplained purchases.