ASST CIT 19(3), MUMBAI vs. VISHAL DIAMONDS, MUMBAI

राज�व क� ओर से/By Revenue : Shri Randhir Gupta, D.R. आवेदक क� ओर से / By Assessee : None सुनवाई क� तारीख/Date of Hearing : 03.08.2016 घोषणा क� तारीख/Date of Pronouncement : 08.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: All three appeals have been filed by Revenue against the common order of Commissioner of Income-Tax , 4545 & 4548/Mum/15 A.Y. 08-09, 09-10 & 12-13 [ACIT vs. M/s. Vishal Diamonds] Page 2 (Appeals)-29, Mumbai, dated 29.05.2015 for all A.Ys. i.e. 2008-09, 2009-10 & 2012-13. Since, these appeals pertain to same assessee and on similar issues, so they are being disposed of by common order for the sake of convenience.

“1. Whether the Ld. CIT(A) has erred on facts and in law in partly allowing the appeal of the assessee and by sustaining the addition to the extent of 12.5% of addition made by the A.O. in spite of concluding that the purchases are unverifiable.

2. Whether the Ld. CIT(A) has erred on facts and in law in partly allowing the appeal of the assessee and by sustaining the addition to the extent of 12.5% in spite of including that the assessee does not maintain any stock register.

3. Whether the Ld. CIT(A) has erred on facts and in law in relaying on the decision in the case of CIT vs. Simit Sheth(2013) [56 ITR 451(Guj.)] in view of the fact that the said decision may only be applicable in cases where the party has maintained a stock register and has matched its sales vis-a-vis its purchases, which the assessee has failed to do so.”

2.1 Assessing Officer on the basis of information received has found that assessee has shown hawala purchases in various years as under:

A.Y. Name of the hawala Purchases made dealer shown (Rs.) 2007-08 M/s. Mayur Exports 1,45,000/- 2008-09 M/s. Mohit Enterprises 4,72,650/- 2009-10 M/s. Mayur Exports 9,13,302/- , 4545 & 4548/Mum/15 A.Y. 08-09, 09-10 & 12-13 [ACIT vs. M/s. Vishal Diamonds] Page 3

2010-11 M/s. Prime Star 35,10,156/- 2011-12 M/s. Prime Star 6,04,440/- 11,29,050/- 2012-13 M/s. Mohit Enterprises 2.2 On enquires by the Assessing Officer, assessee has furnished copies of bills of supplier, ledger account of supplier and the bank statements showing payments for the purchases. Any discrepancy in these documents produced before Assessing Officer has not been noted in the assessment order. The Assessing Officer has noted that assessee failed to produce the following documents/ information.

“1) Any documentary evidence, substantiating receipt of material claimed to be purchased from the party,

2) He failed to link the purchases of these materials with sales made by him by stating that the diamonds once purchased lose their identity and are untraceable.

3) He failed to produce the party from whom purchases were made for verification.”

2.3 Assessing Officer considered that the supplier is a group concern of Shri Bhawarlal Jain and it was admitted by Shri Bhawarlal Jain before the Investigation Wing that he has not carried any genuine business and has given only accommodation entries. Shri Bhawarlal Jain was operating many such concerns for giving accommodation bills. It was also accepted by Shri Bhawarlal Jain that payments were 4545 & 4548/Mum/15 A.Y. 08-09, 09-10 & 12-13 [ACIT vs. M/s. Vishal Diamonds] Page 4 received through cheque in the bank account operated in the name of his bank employees and thereafter withdrawn in cash and routed in the hawala business. In this regard, the purchases made from the above firm was genuine. Howevr, he failed to produce the party or to furnish any fresh evidence address mentioned in the bills produced. Notice u/s.133(6) of the Act were issued to the suppliers but it could not be served. So, Assessing Officer concluded that these parties never existed, so, Assessing Officer rejected the contention of assessee by making addition disallowed the purchase made by assessee from Shri Bhawarlal Jain and it has also doubted further 20% of such purchases for reason that assessee has shown low profit to that extent.

2.4 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) partly allowed the appeal of assessee to the extent of 12.5% of the addition made by Assessing Officer.

2.3 Same has been opposed before me on behalf of Revenue inter alia submitting that CIT(A) erred on facts and in law was not justified in aprtly allowing the appeal of assessee and sustaining the addition to the extent of 12.5% of the addition made by Assessing Officer in spite of concluding that the purchases were unverifiable. , 4545 & 4548/Mum/15 A.Y. 08-09, 09-10 & 12-13 [ACIT vs. M/s. Vishal Diamonds] Page 5 Accordingly, the order of CIT(A) be set aside and that of Assessing Officer on the issue be restored. On the other hand, none appeared on behalf of assessee. Therefore, I proceed to decide the case ex parte on the basis of submission of ld. Departmental Representative and materials available on record.

2.4 After going through the submission of ld. Departmental Representative and perused the material on record, I find that as per tax audit report furnished by assessee, the books of accounts maintained by assessee are cash book, ledger, journal, sales and purchase registers. Assessee has relied before CIT(A) on the decision of Mumbai ITAT in case of Essem Global Exports P. Ltd. (2015) 43 CCH 0299, dated 13.03.2015 and argued that in view of evidence produced no addition on account of purchase is called for. In Essem Global Exports P. Ltd. (supra), wherein Tribunal held as under:

"8. The Ld. AO, in his remand report, has not controverted the evidence filed by the assessee before the Ld. CIT(A). We therefore, do not find any infirmity in the order of the Ld. CIT(A) while holding that no disallowance was coiled for in relation to the purchases made by the assessee from M/s. Zariba Fashions, The assessee has also produced before the Ld. CIT(A) the certificate from bank showing the transfer of the amount from the account Ms. Gauri Daswani and further the assessee has filed confirmation indicating the source of funds. The PAN number of said Ms. Gauri Daswani has also been submitted. The AD, in his remand report, has not controverted the said evidence also. We accordingly, , 4545 & 4548/Mum/15 A.Y. 08-09, 09-10 & 12-13 [ACIT vs. M/s. Vishal Diamonds] Page 6 do not find any infirmity in the order of the Ld. CIT(A) deleting the disallowance relating to both the issues in the quantum proceedings. This appeal of revenue relating to quantum proceedings is therefore dismissed."

2.5 In view of above, CIT(A) rightly observed that assessee has shown certain purchases which was unverifiable Payments are stated to be by account payee cheques. Purchase bills had been produced before the Assessing Officer. But admittedly, suppliers parties were not available at the address furnished. Assessee did not maintain any stock register as evident from tax audit report. On these facts, applying the decision of Hon’ble Gujarat High Court in the case Simit Sheth (356 ITR 451), CIT(A) directed to Assessing Officer to disallow 12.5% of the purchases made in respective years and he also directed the Assessing Officer to compute the income accordingly. Under facts and circumstances, the direction of CIT(A) is appropriate. Accordingly, same is upheld.

Pronounced in the open Court on this the 08th day of August, 2016.