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Income Tax Appellate Tribunal, “E”
Before: SHRI R. C. SHARMA, AM & SHRI SANDEEP GOSAIN, JM
आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The present Appeal filed by the revenue is against the order of Commissioner of Income Tax (Appeals)-21, Mumbai
Shikha Diamonds Pvt. Ltd dated 20.01.17 for AY 2007-08 on the grounds mentioned herein below:- 1. On the facts and in the circumstance of the case and in law, the Ld. CIT(A) haserred in allowing relief to the assessee despite the inability of the assessee to prove the geneuiness of the transactions by failing to produce the parties before the AO for cross examination.
At the very outset, it is noticed that none has appeared on behalf of assessee and even no application for adjournment was moved. On the other hand Ld. DR is present in the court and is ready with arguments. Therefore we have decided to proceed with the hearing of the case ex-parte with the assistance of the Ld. DR and the material on record.
As per the facts of the present case, the assessee is engaged in the business of manufacturing and trading of gold and diamonds. The assessee filed its return of income for the year under consideration declaring total income at Rs. 33,280/-. The return was processed u/s 143(1) of the I.T. Act, 1961. Subsequently, information was received by the AO from Shikha Diamonds Pvt. Ltd DGIT(Inv.), Mumbai related to bogus purchase entries received from the Sales Tax Department, Maharashtra. The AO had information that some of the parties from whom the assessee had made purchases were bogus and they are engaged in the business of providing bills without actual delivery of goods. The assessment was reopened and AO completed the assessment u/s 143(3) r.w.s. 147 of the I.T. Act determining the total income of Rs. 3,54,28,555/-.
Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties partly allowed the appeal of the assessee. Now before us, the revenue has preferred the appeal by raising the above grounds.
Ground No. 1. 4. The sole ground raised by the revenue is against challenging the order of Ld. CIT(A) in allowing relief to the assessee despite the inability of the assessee to prove the Shikha Diamonds Pvt. Ltd genuineness of the transactions by failing to produce the parties before the AO for cross examination.
We have heard Ld. DR and we have also perused the material placed on record as well as the orders passed by revenue authorities. After analyzing the orders passed by Ld. CIT(A) and hearing Ld. DR at length, we find that Ld. CIT(A) after appreciating the fact had categorically recorded its finding that the AO had issued notices u/s 133(6) of the I.T. Act for verifying the genuineness of the purchase and those notices were returned unserved by the postal authorities. The Ld. CIT(A) has also appreciated that Shri Praveen Kumar Jain, who was operating the four concerns from whom the assessee made purchases, has categorically admitted in the statement recorded on oath u/s 132(4) that they are not doing any genuine business. The assessee has failed to produce the parties for cross-examination by expressing his inability. The AO has liberally quoted in its order of assessment, the relevant part of the statement recorded from the key persons of Bhanwarlal Jain Group and the modus operandi of the transaction of the group in the assessment order. Hence in this way, the live link between the bogus concerns
Shikha Diamonds Pvt. Ltd floated by the entry operators on the one hand and the assessee company who accounted the purchase in the names of such bogus concerns on the other is established. Only because the amount has been routed through banking channel would not establish the genuineness of the transaction as held by Hon’ble Jurisidictional High Court in the case of Naresh K. Pahuja (2015) 54 taxmann.com 258. Therefore cosindering the peculiar facts and circumstances of the present case and while relying upon the following judgments:- 1) ClT vs Bholanath Poly Fab Ltd. (2013) 355 ITR 290 (Guj). (HC), 2. CIT v Simit D, Sheth (2013) 356 ITR 451 (Guj)-(HC) and 3. CIT vs. Sanjay Oil Cake Industries (2009) 316 ITR 274 (Guj) (1C) and taking into consideration the facts of the present case, and to account for the profit element embedded in these purchase transactions to factorize profit earned by assessee against purchase of material in the grey market and undue benefit of VAT against bogus purchases, we are of the considered view that restricting the additions @ 3% of purchases by Ld. CIT(A) is unreasonable. The ends of justice would be met in case the additions are restricted @ 6 % of bogus purchases. Consequently orders passed by Ld.
Shikha Diamonds Pvt. Ltd CIT(A) are set aside. Hence we direct the AO to restrict the additions to the extent of 6% of the bogus purchases for adding u/s 69C over and above the regular profits disclosed by the assessee. Accordingly this ground raised by the revenue is partly allowed.
In the net result, the appeal filed by the revenue stands partly allowed. Order pronounced in the open court on 8th Nov., 2017 Sd/- Sd/- (R.C. Sharma) (Sandeep Gosain) लेखासदस्य / Accountant Member न्याययकसदस्य / Judicial Member मुंबई Mumbai;यदनांकDated : 08.11.2017 Sr.PS. Dhananjay आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : अपीलाथी/ The Appellant 1. 2. प्रत्यथी/ The Respondent 3. आयकरआयुक्त(अपील) / The CIT(A) आयकरआयुक्त/ CIT- concerned 4. 5. यवभागीयप्रयतयनयध, आयकरअपीलीयअयधकरण, मुंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER,