2018 (9) TMI 2075 - AT - Income Tax

Tribunal rules on tax appeals: Partial win for Revenue, full win for assessee. AO to re-examine purchases.

M/s. Shantivijay Jewels Ltd. Versus ITO 11 (2) (2) Aayakar Bhavan Mumbai and  DCIT 11 (2) (2) Aayakar Bhavan Mumbai Versus M/s. Shantivijay Jewels Ltd.  

The Tribunal partly allowed the Revenue's appeals for A.Y. 2013-14, while dismissing all other Revenue appeals and allowing all assessee appeals. The ... Estimation of income - Bogus purchases - CIT(A) restricted the addition to 12.5% of the value of purchases - HELD THAT:- In the instant case has stated that Mr. Rajendra Jain, Mr. Dharmichand Jain and Mr. Anoop Jain have appeared before him. However, it is not made clear as to whether the above said three persons were partners/directors, all the suppliers belonging to Rajendra Jain. The purchases made from companies, where these three persons are either partner/director, shall be aware by the above said decision rendered by Coordinate Bench. The purchases made from other companies, however requires fresh examination. Accordingly, we restore the issue relating to addition on account of bogus purchases made in all the years under consideration to the file of the Assessing Officer with the direction to delete the addition relating to purchases made from companies, in which above said three persons are partner/director. In the respect of purchases made from other concerns belong to Mr. Rajendra Jain the AO may examine it afresh. Disallowance of interest - Assessee had advanced interest free amounts to some concerns and hence the AO disallowed interest expenditure - HELD THAT:- Since the co-ordinate bench has considered an identical issue in AY 2011-22 [2017 (10) TMI 160 - ITAT MUMBAI]and restored the same to the file of the AO, following the said order of the Tribunal, we restore this issue to the file of the Assessing Officer with similar directions given by the Coordinate Bench of the Tribunal in A.Y. 2011-12. Issues Involved:1. Addition made by the Assessing Officer in respect of bogus purchases.2. Disallowance of interest expenditure.Comprehensive, Issue-Wise Detailed Analysis:1. Addition made by the Assessing Officer in respect of bogus purchases:The primary issue in these appeals pertains to the addition made by the Assessing Officer (AO) in respect of bogus purchases made by the assessee. The AO added 12.5% of the value of bogus purchases for the assessment years (A.Ys) 2009-10, 2010-11, 2012-13, and 2013-14, which was later reduced to 3% by the learned Commissioner of Income Tax (Appeals) [CIT(A)]. Both the Revenue and the assessee have contested this decision.The assessee, engaged in the manufacture and export of gems and jewellery, was scrutinized for purchases made from entities controlled by the Rajendra Jain Group. During the course of assessment proceedings for A.Y. 2011-12, it was revealed that these entities were providing accommodation entries without actual supply of goods. Consequently, the AO disallowed the purchases and reopened the assessments for A.Ys. 2009-10, 2010-11, and 2012-13, and made similar additions for A.Y. 2013-14.The Tribunal, in its order for A.Y. 2011-12, noted that the suppliers had appeared before the AO and confirmed the genuineness of the transactions through affidavits. The Tribunal also observed that the assessee had exported the entire goods, with no local sales, and followed the decision in the case of M/s. Imperial Imp & Exp., thereby deleting the entire addition made by the AO.The learned Departmental Representative (DR) argued that the AO’s addition was based on specific information that the Rajendra Jain Group was providing accommodation entries. The AO relied on the decisions of the Hon'ble Gujarat High Court in the cases of Simit P. Sheth and Bholenath Poly Fab P. Ltd., asserting that the profit element in bogus purchases should be taxed.In rejoinder, the learned Authorized Representative (AR) contended that the facts of the present case differed from those in Simit P. Sheth, as the assessee had produced the suppliers before the AO, who confirmed the transactions under oath. Additionally, the purchases were exported, leaving no room for doubting their genuineness.The Tribunal, after hearing both parties and reviewing the records, noted that the issue was identical to that in A.Y. 2011-12. The Tribunal found that the suppliers had confirmed the transactions and the goods were exported, thus validating the purchases. Consequently, the Tribunal directed the AO to delete the additions related to purchases from companies where Rajendra Jain, Dharmichand Jain, and Anoop Jain were partners/directors. For purchases from other concerns, the AO was instructed to re-examine the issue.2. Disallowance of interest expenditure:In A.Y. 2013-14, the Revenue raised an additional ground regarding the disallowance of interest expenditure. The AO disallowed the interest expenditure, arguing that the assessee had advanced interest-free amounts to certain concerns. The assessee countered that it had sufficient interest-free funds to cover these advances, citing the decisions of the Hon'ble Jurisdictional High Court in CIT Vs. Reliance Utility and Power Ltd. and CIT Vs. HDFC Bank Ltd.The Tribunal, following its decision in the assessee’s own case for A.Y. 2011-12, restored the issue to the file of the AO for fresh examination, applying the ratio laid down by the cited High Court decisions.Conclusion:The appeals filed by the Revenue for A.Y. 2013-14 were partly allowed, while all other appeals by the Revenue were dismissed. All the appeals filed by the assessee were allowed. The Tribunal's order was pronounced on 24.9.2018.