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Income Tax Appellate Tribunal, “I”, BENCH, MUMBAI
Before: SHRI RAJENDRA, AM & SHRI RAM LAL NEGI, JM
सुनर्ाई की तारीख / Date of Hearing : 15/09/2017 घोषणा की तारीख/Date of Pronouncement: 20/09/2017 आदेश / O R D E R PER RAM LAL NEGI, JM These are the appeal and cross objection filed by the revenue and the assessee respectively, against order dated 17/06/2016 passed by the Ld. CIT (A)-20, Mumbai pertaining to the Assessment Years 2012-13, whereby the Ld. CO No. 148/Mum/2017 Assessment Year: 2012-13 CIT (A) has partly allowed the appeal filed by the assessee against assessment order passed u/s 143(3) read with section 147 of the Income Tax Act, 1961 (for short ‘the Act’).
Brief facts of the case are that the assessee company engaged in the business of manufacture and exporter of diamond studded, gold and platinum jewellery, filed its return of income for the assessment year under consideration declaring the total income of Rs. 1,05,23,000/-.
A survey action was carried out in the case of Sh. Bhanwarlal Jain and found the evidence collected during such action, it came to the notice that Sh. Bhanwarlal Jain and his group was engaged in providing accommodation entries regarding bogus unsecured loans, bogus share application and bogus sales etc., without carrying out any actual business. It was also revealed that the assessee in this case has been one of the beneficiaries of such accommodation entries from the concerns controlled and operated by Bhanwarlal Jain.
Accordingly, the AO issued notice u/s 142 (1) and sought explanation and details from the assessee. The assessee contended that the purchases’ made during the relevant year are genuine and in support of its claim, the assessee submitted ITR, balance sheet, Tax Audit Report and Banks statement of parties concern. However, the AO rejecting the contention of the assessee made addition of Rs. 1,35,15,546/- treating the same as bogus purchases.
Aggrieved by the assessment order, the assessee challenged the same before the Ld. CIT (A). The Ld. CIT (A) relying on the law laid down by the Hon’ble High Court of Bombay in Nikunj Eximp Enterprises Pvt. Ltd. 372 ITR CO No. 148/Mum/2017 Assessment Year: 2012-13 619 and other decisions relied upon by the assessee deleted the addition made by the AO. The revenue is in appeal against the said order.
The revenue has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):-
1. “Whether on the facts and in the circumstances of the case, the Ld. CIT (A) was justified in deleting the addition of Rs. 1,35,15,546/- made on account of non-genuine bogus purchases.”
2. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) was justified in allowing relief to the assessee merely citing the decision of the Hon’ble Bombay High Court in the matter of Nikunj Exim Enterprises Pvt. Ltd. and also on the decision of the Hon’ble ITAT in the case of M/s Say India Jewellers Pvt. Ltd. without appreciating the fact that the further appeal is filed in these cases by the Department.”
7. Before us, the Ld. departmental representative relying on the assessment order submitted that the Ld. CIT(A) has wrongly deleted the addition made by the AO on account of bogus purchases made by the assessee during the year relevant to the assessment year under consideration. The Ld. DR further submitted that since the assessee has failed to prove the genuineness of the transaction of purchase by producing the parties before the AO, the impugned order is not based on the evidence on record; therefore, the same is liable to be set aside.
8. On the other hand the Ld. counsel for the assessee relying on the order under challenge submitted that the Ld. CIT(A) has rightly deleted the addition made by the AO holding that the assessee has proved that entire the purchases in question are genuine. The Ld. counsel further submitted CO No. 148/Mum/2017 Assessment Year: 2012-13 that payments against purchase of gold and diamonds were made either by RTGS or A/c payee cheques to the suppliers. The assessee has produced affidavits sworn by the parties who sold the goods to the assessee, purchase bills confirming quantity of cut and polished diamonds sold and delivered to the assessee, confirmation of ledger accounts of the parties concerned as per the books of the assessee, copy of statement of bank account to prove the payments made to the parties concerned, copies of return of income filed by the parties from whom the purchases were made by the assessee. Audited balance sheet, profit and loss account, customs certified invoices, stock statement and other related documents which establish the genuineness of the transaction. The Ld. counsel further pointed out that retracted statement of Mr. Bhanwarlal Jain has no evidentiary value. The Ld. counsel further submitted that in the light of the aforesaid evidence on record, the Ld. CIT(A) has rightly deleted the addition made by the AO.
We have heard the rival submissions and also perused the material on record including the cases relied upon by the authorities below. The only grievance of the revenue is that the Ld. CIT(A) has wrongly deleted the additions made by the AO. We notice that the Ld. CIT(A) has deleted the addition by relying on the various decisions of the Tribunal and the judgment of Hon’ble Bombay High Court. The relevant portion of the order reads as under: “5.3 I have gone through the assessment order and submissions made by the appellant in this regard. It is noted that there is some merit in the contention of the appellant. The AO made an addition of this amount of Rs. 1,35,15,546/- and treated these purchases as non genuine since assessee could not produce these parties for verification. The AO had also noted that information from investigation wing that these parties belonging to Sh. Bhanwarlal Jain group used to give bogus bills. The AO appears to have received information in this case from the investigating wing. It is clear that this information was about the bogus sales made and CO No. 148/Mum/2017 Assessment Year: 2012-13 accommodation entry given by one Sh. Bhanwar Lal Jain. The A.O. seems to have received this information in general and not specifically in the context of the appellant. He had confronted the appellant by means of show-cause notice and asked for production of the concerned parties to establish genuineness of these purchases. As the appellant was unable to produce them, the A.O. simply went ahead and made the addition. 5.4 It is clear that the AO had insisted on production of these parties. The A.O. had however relied upon the information received from investigation wing and the statement of Sh. Bhanwarlal Jain. As such, he was bound to provide an opportunity to the appellant to cross examine this party. While the assessment order is silent on this matter, the appellant has forcefully brought this point out during its submission. In other words, the non- production of this party would not just be an issue against the appellant. It would actually strengthen the claim of the appellant as well. 5.5 It is noted that the principles of natural justice demand that the assessee should be provided with an opportunity to examine and counter the documents relied upon by the AO to decide an issue against the assesse. In the instant case, the assessing officer has also supported his view by placing reliance on the report given by the investigation wing and the statement of Sh. Bhanwarlal Jain. It is a matter of fact that the AO has not carried out any independent examination of Sh. Bhanwarlal Jain who has claimed to have given statement before the investigation wing. It is also not established that Sh. Bhanwarlal Jainand these five parties have implicated the transactions entered with the assessee before the investigation wing. In the instant case it is noticed that the assessee was able to link the consumption of materials and closing stock with the relevant purchase bills. It is noted that when the entire purchases made from these five parties was either consumed in the manufacturing process or were available as stock as at the year end, then the disallowance of purchases should result in corresponding reduction of the closing stock, the result of which would have NIL effect on profit and hence there was no requirement of making any addition. However, this proposition should be applied only if the purchases were held to be non-genuine. It is noted that the assessee has produced following documents to establish that the purchases made by it from these five parties were genuine:-
CO No. 148/Mum/2017 Assessment Year: 2012-13 A) The affidavits include the date when and by what Invoice No. goods were sold, amount of sale and the mode of receipt of amount towards such sale only through Bank. B) Purchase bills from five parties confirming quantity of Cut & Polished Diamonds sold and delivered to assessee. C) Confirmation of Ledger Accounts of five parties as per the books of the assessee confirming all the transactions with assesse. D) Copy of assessee's Bank Book for transactions recorded when payments were made to five parties. E) Copy of Bank Statement highlighting payments made to five parties on various dates. F) Confirmation of Ledger Account from the books of five parties, confirmingthe transactions with assessee and also contains its PAN Number. G)Copyof Bank Statements of five parties highlighting payment received in their bank account from assessee's bank account. H) Copy of Return of Income filed by five parties for the assessment year 2012-13, confirming that they are tax payers. I) Copy of Audited Balance Sheet, Profit And Loss with Schedules thereto, of five parties showing transactions with assessee and amount recoverable from assessee for assessment year 2012-13. J) Customs certified invoices. confirming exports of Cut & Polished Diamonds studded Jewellery to various parties outside India. K) Customs partywise stock statement/register of cut and polished diamonds studded Jewellery, which was exported. L) Retraction statement of Shri Bhanwarlal Jain along with claim that F statement recorded during search and seizure action, loses its evidentiary value. These evidences clearly establish that the assessee had made genuine purchases for which payments were made through banking channels and exports proceeds of part these diamonds during the year were also received through banking channels and the remaining were reflected in the closing stock summary. These evidences strongly support the case of assessee that there were genuine purchases made by assessee, which could not negated by the general statement of Sh. Bhanwarlal Jain which has since be retracted. In view of the foregoing discussions, there appears to be no reason to suspect the claim of purchases of goods from these five parties viz. M/s.Nice Diamonds, M/s Pankaj Exports, M/s. Malhar CO No. 148/Mum/2017 Assessment Year: 2012-13 Exports, M/s Minakshi Exports and M/s. Daksh Diamonds, particularly when the books of accounts of the assessee had not been rejected by the AO and the sales made during the year have been accepted. On similar facts in the case of ACIT Circle-9(3), Mumbai vs M/s Say India Jewellers Pvt. Ltd., the Hon'ble ITAT, Mumbai vide order dated 8th August. 2014 has held as under;-
We have carefully perused the orders of the authorities below and the relevant material evidences brought on record before us. The undisputed facts are that the purchases were supported by bills, the payments were made by account payee cheque and the payments were duly reflected in the bank statement of the assesse. A perusal of the statement of the diamond traded during the year under consideration shows that the assesse purchases 1358.54 carats from M/s ZalakImpex on 1.8.2005, the same was exported on 5.8.2005 and 871.57 carats were purchased on 2.8.2005 from M/s ZalakImpex and were exported on 12.8.2005. No adverse inferences have been drawn by the AO in so far as exports of diamonds are concerned. Without purchases there cannot be any sales. The entire additions made by the AO are based on assumptions and presumptions. We, therefore, decline to interfere with the findings of the Ld. CIT (A). It is also noted that in the matter of Nikunj Exim Enterprises Pvt. Ltd. (Income Tax Appeal No. 5640 of 2010), (2014) 107 DTR 69 (Bom), the Hon’ble Bombay High court has specifically held that in a case where sales are considered genuine and books of accounts have not been rejected, no addition, on account of bogus purchases can be made. In view of the above discussion and on the facts of the case the addition made by the A.O. on account of alleged bogus purchase cannot be sustained in appeal and is directed to be deleted. Accordingly this ground of appeal is allowed.
In our considered opinion the order passed by the Ld. CIT(A) is based on the evidence on record and the established principles of law. The Documentary evidence produced before the authorities below establish the genuineness of the transaction. The findings of the AO are based on mere uncorroborated statement of the third party. Moreover, the person whose statement was relied upon by the assessee has retracted from his statement made during the survey CO No. 148/Mum/2017 Assessment Year: 2012-13 action. The documentary evidence on record fully substantiates the contention of the assessee. Hence, there is merit in the contention of the Ld. counsel. On the other hand the AO has not pointed out any cogent evidence to falsify the contention of the assessee. The Hon’ble Bombay High Court in CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. 372 ITR 619 (Bom) has held that merely because the suppliers had not appeared before the Assessing Officer or the CIT (A) one could not conclude that the purchases were not made by the respondent/assessee. In the Light of the facts of the present case and the evidence on record, we are of the considered view that the findings of the Ld. CIT(A) are based on the principles of law laid down by the Hon’ble Bombay High Court and in accordance with the various decisions of the Tribunals relied upon by the Ld. CIT(A), therefore do not suffer from any infirmity either factual or legal to interfere with. Thus the Ld. CIT(A) has rightly deleted the addition in question. Hence, we uphold the findings of the Ld. CIT(A) and dismiss the sole ground of appeal of the revenue.
CO No. 148/MUM/2016 (Assessment Year: 2012-13)
The assessee has filed the cross objection against the impugned order on the following effective grounds:
I 1. The prima facie delayed appeal filed by the learned Assessing Officer is “without sufficient cause and therefore, time barred.
2. The Respondent prays that the prima facie delayed appeal filed be held “without sufficient cause” and liable to be dismissed.
Without prejudice to the above CO No. 148/Mum/2017 Assessment Year: 2012-13 II 1. The order of the learned Commissioner of Income-tax (Appeals) deleting addition of Rs. 1,35,15,546/- is based on merit, appreciation of facts well reasoned, in conformity with judicial pronouncements and CBDT Circulars.
2. The Respondent prays that the appeal of the department be dismissed and the other of the Commissioner of Income-tax (Appeal) be upheld for deleting addition to income at Rs. 1,35,15,546/-”
2. Ground No I (1)&(2) of the cross objection was found not maintainable as the present appeal has been filed within the period of limitation. Hence, this ground is dismissed as not maintainable. Vide ground No II(1)&(2) of the Cross objection the assessee has supported the findings of the Ld. CIT(A) Since, we have dismissed the appeal of the revenue and upheld the order passed by the Ld. CIT(A), the cross objection has become infructuous. Hence, we dismiss the cross objection being infructuous.
In the result, appeal filed by the revenue for assessment year 2012-13 and cross objection filed by the assessee for assessment year 2012-13 are dismissed. Order pronounced in the open court on 20th. Sept., 2017. (RAJENDRA) JUDICIAL MEMBER मुंबई Mumbai; यदनांक Dated: 20/09/2017 Alindra, PS आदेश प्रधिधलधप अग्रेधर्ि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आिकर आिुक्त(अपील) / The CIT(A)- CO No. 148/Mum/2017 Assessment Year: 2012-13