MINI DIAMONDS (INDIA) LTD., MUMBAI v. ITO 5(2)(3), MUMBAI

ITA 2679/MUM/2018 | 2012-2013
Pronouncement Date: 19-11-2019 | Result: Partly Allowed

Our System has flagged this appeal as eligible for Vivad Se Vishwas Scheme. If you are party to this appeal, get on a Free Consultation Call with our team of Legal Experts who shall guide you as to how you can save huge Interest and Penalty in VSV Scheme.


Apply Now
        
Try VSV Calculator

Appeal Details

RSA Number 267919914 RSA 2018
Assessee PAN AAACM5082D
Bench Mumbai
Appeal Number ITA 2679/MUM/2018
Duration Of Justice 1 year(s) 6 month(s) 17 day(s)
Appellant MINI DIAMONDS (INDIA) LTD., MUMBAI
Respondent ITO 5(2)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-11-2019
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted I
Tribunal Order Date 19-11-2019
Last Hearing Date 29-07-2020
First Hearing Date 29-07-2020
Assessment Year 2012-2013
Appeal Filed On 02-05-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH MUMBAI BEFORE SHRI RAJESH KUMAR ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH JUDICIAL MEMBER ITA NOS. 2678 TO 2680/MUM/2018 (ASSESSMENT YEARS: 2008-09 2012-13 & 2013-14) M/S. MINI DIAMONDS (INDIA) LTD. 7/A NUSSER HOUSE OPP. PANCHRATNA BUILDING OPERA HOUSE MUMBAI 400004 VS. INCOME TAX OFFICER - 5(2)(3) AAYAKAR BHAVAN M.K. ROAD MUMBAI 400020 PAN AAACM5082D APPELLANT RESPONDENT APPELLANT BY: MS. HEENA GANDHI RESPONDENT BY: SHRI DROP SINGH MEENA DATE OF HEARING: 11.10.2019 DATE OF PRONOUNCEMENT: 19.11.2019 O R D E R PER RAJESH KUMAR AM THIS APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGA INST THE ORDERS OF THE CIT(A)-10 MUMBAI DATED 27.03.2018 AND IT RELAT ES TO ASSESSMENT YEARS 2008-09 2012-13 AND 2013-14. 2. THE COMMON ISSUE RAISED BY THE ASSESSEE IN ALL THES E APPEALS IS AGAINST THE CONFIRMATION OF ADDITION TO THE TUNE OF 8% OF THE ALLEGED BOGUS PURCHASES BY THE LEARNED CIT(A) AS AGAINST THE ADDI TION MADE BY THE AO @12.5% OF THE BOGUS PURCHASES. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF CUT AND POL ISHED DIAMONDS. THE ASSESSEE FILED RETURNS OF INCOME WHICH WERE PROCESS ED UNDER SECTION 143(1) OF THE INCOME TAX ACT 1961 (HEREINAFTER 'TH E ACT') FOR ALL THESE YEARS. SUBSEQUENTLY THE ASSESSMENTS WERE REOPENED U NDER SECTION 147 OF THE ACT BY ISSUING NOTICES UNDER SECTION 148 OF THE ACT AFTER RECEIVING INFORMATION FROM THE DGIT (INV) THAT THE ASSESSEE I S BENEFICIARY OF HAWALA ITA NO. 2678/MUM/2018 M/S. MINI DIAMONDS (INDIA) LTD./INCOME TAX OFFICER- 5(2)(3) 2 PURCHASES FROM THE CONCERNS CONTROLLED BY SHRI BHAN WARLAL JAIN GROUP ON WHOM THE INVESTIGATION WING HAS CONDUCTED A SEARCH ON 03.10.2013. ACCORDINGLY THE AO CALLED UPON THE ASSESSEE TO EXPL AIN THE PURCHASES FROM THE CONCERNS RELATING TO BHANWARLAL JAIN GROUP AND PROVE THE GENUINENESS THERE OF. THE ASSESSEE DURING THE COURSE ASSESSMEN T PROCEEDINGS FILED VARIOUS DETAILS SUCH AS COPY OF PAYMENT DETAILS QU ANTITY OF DIAMONDS RATE OF CARAT VALUATION REPORTS WITH EVIDENCES OF DELIV ERY NOTES OF GOODS ORIGINAL BILLS RAISED BY THE PARTIES QUANTITATIVE TALLY OF PURCHASES AND SALES AND DETAILS OF PERSONS WITH WHOM TRANSACTIONS WERE ENTERED INTO. HOWEVER THE AO BRUSHING ASIDE THE CONTENTIONS OF THE ASSESS EE CONCLUDED THAT ALL THESE PURCHASES FROM THESE PARTIES WERE BOGUS AND A PPLIED A RATE OF 12.5% TO BRING THE PROFIT ELEMENT ON THE SAID BOGUS PURCH ASES TO TAX RESULTING INTO ADDITION OF ` 58 20 839/- IN A.Y. 2008-09 ` 97 18 979/- IN A.Y. 2012- 13 AND ` 59 53 464/- IN A.Y. 2013-14 IN THE ASSESSMENT FRAME D UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. 4. IN THE APPELLATE PROCEEDINGS THE LEARNED CIT(A) RES TRICTED THE ADDITION AT 8% OF THE BOGUS PURCHASE AFTER TAKING I NTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE. THE LEARNED CIT(A) WH ILE PASSING THE ORDER FOLLOWED THE DECISION OF THE MUMBAI BENCHES IN THE CASE OF M/S. DHADDHA GEMS LTSD. VS. ITO IN ITA NO. 7310 TO 7314/MUM/2016 . 5. THE LEARNED A.R. SUBMITTED BEFORE THE BENCH THAT SI NCE THE ASSESSEE IS IN THE TRADE OF MANUFACTURING AND DEALING IN CUT AND POLISHED DIAMONDS THE MARGIN OF PROFIT IN ASSESSEES TRADE IS VERY ME AGRE AND EVEN THE GOVERNMENT OF INDIA HAS RECOGNISED THE FACT BY BRIN GING OUT CIRCULAR TO THIS EFFECT THAT THE PROFITS RANGE BETWEEN 2 TO 6 P ERCENT. THE LEARNED A.R. SUBMITTED THAT THE ADDITION AS MADE BY THE AO AND C ONFIRMED BY THE LEARNED CIT(A) IS BAD IN LAW AND AGAINST THE FACTS ON RECORD. THE LEARNED A.R. SUBMITTED THAT THE ASSESSEE HAS FILED ALL NECE SSARY EVIDENCES NAMELY STOCK TALLY INWARD PURCHASES AND OUTWARD SALES EV IDENCE OF PAYMENTS THROUGH BANKING CHANNELS CONFIRMATION FROM PARTIES BILLS AND INVOICES ETC. ALONG WITH DELIVERY CHALLANS. UNDER THESE CIRC UMSTANCES SUCH A HUGE ADDITION AS CONFIRMED BY THE CIT(A) WOULD LEAD TO UNREALISTIC AND ITA NO. 2678/MUM/2018 M/S. MINI DIAMONDS (INDIA) LTD./INCOME TAX OFFICER- 5(2)(3) 3 HYPOTHETICAL G.P. IN THE CASE OF DIAMOND TRADE. THE LEARNED A.R. RELIED UPON THE FOLLOWING DECISIONS IN DEFENCE OF HIS ARGU MENTS: - I. TEJUA ROHITKUMAR KAPADIA TAX APPEAL NO. 691 OF 201 7 (SC) II. JITENDRA M KITAVAT HUF VS. ITO ITA NO. 3305/MUM/20 6 (MUM) III. SANGHAVI EXPORTS ITA NO. 3305/MUM/2017 (MUM) IV. SHANTIVIJAY JEWELS LTD. VS. DCIT ITA NO. 1045/MUM/ 2016 (MUM) V. DCIT VS. RONAK GEMS PVT. LTD. ITA NO. 3118/MUM/201 7 (MUM) VI. INDO UNIQUE TRADING PVT. LTD. VS. DCIT ITA NO. 634 1/MUM/2016 (MUM) VII. MARUTI IMPEX VS. JCIT ITA NO. 3823/MUM/2014 (MUM) VIII. ACIT VS. TRISTAR JEWELLERY ITA NO. 7593/MUM/2011 ( MUM) 6. THE LEARNED D.R. ON THE OTHER HAND HEAVILY RELIE D ON THE ORDER OF THE CIT(A) BY SUBMITTING THAT VERY REASONABLE ADDIT ION HAS BEEN MADE TO TAX PROFIT ON THE BOGUS PURCHASES AND THEREFORE TH E ORDER OF THE CIT(A) BE CONFIRMED. 7. AFTER HEARING THE RIVAL CONTENTIONS AND PERUSING TH E RECORD WE OBSERVE THAT THE ASSESSEE IS ENGAGED IN THE BUSINES S OF MANUFACTURING AND EXPORT OF CUT AND POLISHED DIAMONDS. THE ASSESSEE I S UNDOUBTEDLY BENEFICIARY OF HAWALA PURCHASES FROM THE GROUP RELA TED TO BHANWARLAL JAIN ON WHOM SEARCH WAS CONDUCTED AND IT WAS CANDIDLY AC CEPTED DURING THE SEARCH THAT THE WHOLE GROUP IS ENGAGED IN PROVIDING BOGUS BILLINGS. UNDER THESE CIRCUMSTANCES WE PARTLY AGREE WITH THE VIEW T AKEN BY THE AUTHORITIES BELOW THAT ONLY A RATE CAN BE APPLIED TO BRING THE PROFIT ELEMENT IN THE BOGUS PURCHASES TO TAX. PERTINENT TO MENTION THAT T HE ASSESSEE HAS FILED EVIDENCES TO PROVE THAT THE PURCHASES WERE MADE AND CONSEQUENT TO THIS THE AO HAS RIGHTLY APPLIED THE RATE ON BOGUS PURCHA SES. HOWEVER THE QUANTUM OF RATE APPLIED IS EXCESSIVE AND UNREASONAB LE IN VIEW OF THE TRADE OF THE ASSESSEE. UNDER THE PRESENT FACTS AND CIRCUM STANCES AND CONSIDERING THE RATE OF PROFIT PREVALENT IN ASSESSE ES TRADE WE ARE OF THE VIEW THAT IT WOULD BE REASONABLE IF A RATE OF 3% IS APPLIED TO THE ALLEGED ITA NO. 2678/MUM/2018 M/S. MINI DIAMONDS (INDIA) LTD./INCOME TAX OFFICER- 5(2)(3) 4 BOGUS PURCHASES. ACCORDINGLY WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO APPLY A RATE OF 3% ON BOGUS PURCH ASES. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH NOVEMBER 2019. SD/ - SD/ - (AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 19 TH NOVEMBER 2019 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -10 MUMBAI 4. THE PR.CIT - 5 MUMBAI 5. THE DR D BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.