TaxTMI 
TaxTMI 
2022 (7) TMI 691
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....section 153 A of the Act. It is submitted that the Appellant had been assessed for the year under consideration and that no proceedings were pending as on the date of search. No addition can be made to the assessed income other than the income determined on the basis of incriminating documents/evidence found during the course of search. Implunged addition made in the proceedings under section 153A of the Act is without jurisdiction and bad in law. 2. The learned Commissioner of Income-tax (Appeals) erred in upholding the addition of Rs. 2,73,76,892/- made on account of labour charges paid to following parties: Rs. 1. M/s. Kamal Diamonds 1,18,15,767 2. M/s. S.R. Diamonds 24,77,128 3. M/s. Vishala Diamonds 1,30,83,997 TOTAL 2,73,76,892 It is submitted that the appellant had furnished full and complete details of labour charges paid to above referred parties. The expenditure is incurred wholly and exclusively for the purpose of business of the appellant as such no disallowance is called for. 4. Apart from that, assessee has raised following as additional grounds, which reads as under:- The learned Commissioner of Income-tax (Appeals)....
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....assessment u/s 153A, has to be based on incriminating material found during the course of search. 10. In so far as the addition on account of purchases are concerned, the AO has noted that information was received from the Investigation Wing, Mumbai that in the case of Rajendra Jain Group and other groups, a search and seizure action was carried on 03/10/2013, wherein it was found that certain concerns belonging to such group are engaged in providing accommodation entries in the nature of bogus sales. The AO noted that the assessee company has booked purchases from the following companies:- S.NO. NAME OF THE COMPANIES GROUP 1. Daksh Diamonds Bhanwarlal Jain Group 2. Mohit Enterprises 3. Mukti Exports 4. Nice Diamonds 5. Sun Diam Rajendra Jain Group 6. Aadi Impex 7. Vitraag Jewels 8. AVI exports 9. Moulimani Impex Pvt. Ltd. 10. Nayan Gems Sanjay Choudhary Group 11. Kangan Jewels Pvt. Ltd. Dharmichand Group 11. The AO has mentioned in his order that he issued notice u/s 133(6) to few of the purchase parties at the address provided by the assessee and the said party did not respond to the said notice. He then asked the assesse....
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....s/details. 1. Ledger accounts of parties referred to in your notice 2. Purchase invoices confirming purchases of cut and polished diamonds 3. Name, Address and PAN of the broker to these transactions 4. Bank statements reflecting payments made for the purchases 5. Extracts of Stock records to substantiate receipt of goods and corresponding sales 6. Our sales invoice with relevant bank statements confirming receipt of sale proceeds into our bank accounts 7. Statement giving details of Cut and Polished diamonds purchased from alleged parties together with its subsequent movement with reference to sales In view of the above facts it is submitted that the all transactions from alleged parties are genuine and cannot be treated as bogus. Without prejudiced to our submissions it is submitted that goods received under purchases from above referred parties were sold and the entire sale proceeds have been duly accounted for and included in the taxable income in respective years, disallowance if any shall be restricted to peak amount involved. A statement giving invoice wise details of purchases together with details of each payment mad against these purchases is enclosed whic....
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....oncerns after deducting TDS. Then the money is withdrawn and salary is given to all the employees. Even, books of all these concerns are maintained at this premise. Thus, AO deduced that it is evident that no contractual services are being rendered by the above mentioned concerns and yet payments are being made to these concerns without any service being rendered by them. The same has also been seconded by the statement of Mr. Nirav Shah taken during the course of survey on R.B. Cutters Private Limited. He also issued notice u/s 133(6) to the above mentioned 8 parties which according to him returned 'Unserved'. The assessee company had not made any transaction with Yash Enterprises, Divya Enterprises, Om Sai Enterprises, Shree Sai Baba Enterprises and S.V. Diamonds. The following payments have been made to the other three proprietary firms on account of labour charges:- Sr. No. Name. of the Party A.Y. Amount (In Rs.) 1. Kamal Diamonds 2006-07 1,18,15,767/- 2. S.R. Diamonds 2006-07 24,77,128/- 3. Vishala Diamonds 2006-07 1,30,83,997/- Total 2,73,76,892/- Thus, Ld. AO held that assessee has not discharge his onus and accordingly, disallowed the clai....
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....structions "to the bank to credit the same in the salary account of the employees." This fact stands confirmed in the aforesaid statement of Mr. Nirav Shah & Mr. Hitesh Mehta and forms part of the search material. Therefore, the Assessee would first make payment of labour charges after deduction of TDS to the bank account of the labour contractor and based on the cheque of the labour contractor, amounts would be transferred from his account directly to the employees account by the bank. Therefore, there was no involvement of cash at any stage and this is also not the case of the Revenue. Neither there is any dispute on the availing of services through the labour contractor nor has the Revenue alleged at any point of time that the payments from the said bank account were not made to the employee's account. The services of the said labour contractors had been discontinued from 2005-06 i.e., more than five years before the date of search. The aforesaid documents remained in the premises after the discontinuation of the arrangement with the aforesaid parties without any one paying any attention to the same. They were of no relevance after the discontinuance of the arrangement. For ....
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....ed information shows that the concerned labour contractors existed during the relevant period and they have provided the necessary services to the Assessee. Since the business with the aforesaid labour contractors have been discontinued from Financial Year 2005-06, their non-appearance before the AO after a period of 8 years thereafter should not lead to any adverse inference being drawn against the Assessee. The discontinuance of the said labour contractor is before the date of search and is independent of the same. 19. With regard to unapproved purchases, Ld Counsel submitted that assessee had purchased diamonds from Vitrag Jewels of Rs. 33,56,044/-. This is out of total purchases made during the year of Rs. 704,80,98,296/-. The said purchases are duly supported by purchase invoices (see page 137). Corresponding Export Sales has been accepted. Bank Statement evidencing Payment to said Vitrag Jewels is also at Page 140. On 03.10.2013, that is, after more than two years of the search action on the Assessee, a search and seizure action was carried out on the Rajendra Jain Group of Companies. Based thereon information has been received by the AO from CIT Central-IV and DIT(Investiga....
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....sment year 2013-14, has held that the addition on this issue should be restricted to 2.5% of the amount of purchases. 24. On the other hand, Ld. DR strongly relied on the observation made by AO and Ld. CIT(A) and submitted that, once the AO has made inquiry u/s 133(6) and none of the parties have responded or assessee could not produce these parties before the AO, then the addition /disallowance made by AO is justified in law. 25. We have heard both the parties and perused the relevant findings given in the impugned order as well as material placed on record. In so far as addition on account of unapproved purchases, it has been brought on record that only purchase which is in dispute is purchases made from Vitrag Jewels of Rs. 33,56,044/-, out of total purchases made during the year of Rs. 704.80 crores. Rest of the parties mentioned in the assessment order, no such purchases has been made, nor has been found from any material coming on record. For proving the genuineness of the purchases, assessee as noted above had filed purchase invoices, corresponding export sales, Bank statement evidencing Payment to Vitrag Jewels, copy of ledger account, extract of stock records to substant....
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....ame is outside purview and the addition made u/s 153A is unabated assessment. In view of the judgment of Hon'ble Jurisdictional High Court in the case of Murli Agro Products Ltd vs. CIT 49 Taxmann.com 172 and CIT vs. All Cargo Global Logistics Ltd. 374 ITR 645. Thus, on this ground also, the addition cannot be sustained. 27. In so far as disallowance made to the labour contractor, the assessee company which is engaged in the business of procuring rough diamond from abroad, cutting and polishing it and then exporting the same. For cutting and polishing, the assessee company engaged the labours through various contractors which work from the assessee's premises. The total payment made during the year is more than 45.28 crores. Out of this, the AO has doubted the payment made to three parties (as mentioned in earlier paragraph) aggregating to Rs. 2,73,76,892/-. Before us, Ld. Counsel demonstrated that the labour charges per carat was in consonance with the earlier years and in fact this year, the labour charges was much lower. In so far as the statement of Mr. Nirav Shah and Mr. Hitesh Mehta, they have confirmed that the labour coordinator was Shri Palande and the labour bills were p....
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....and closure of business: a. Letter dated 11-08-2006 filed with Labour Commissioner b. Letter dated 22-05-2006 filed with Director of Factories, c. Letter dated 12-06-2006 filed with Regional Director, ESIC d. Letter dated 10-06-2006 filed with Labour Welfare Fund e. Letter dated 07-03-2007 filed with Asst. Provident Fund Commissioner 3. Letter filed by the appellant dated 03-08-2006 intimating labour authorities for termination of labour contractors and cancellation of registration obtained under labour laws 4. Profession Tax challans paid during FY 2005-06 5. Profession Tax Assessment Order dated 18-05-2007 (Form VI) for FY 2003-04 to FY 2005-06 accepting the returns filed by the company and cancelling the registration Vishala Diamond: 1. Payroll Register for February 2006 2. Duly acknowledged letters intimating concerned authorities regarding fulfilment of compliances under respective laws and closure of business: a. Letter dated 11-08-2006 filed with Labour Commissioner b. Letter dated 22-05-2006 filed with Director of Factories, c. Letter dated 12-06-2006 filed with Regional Director, ESIC d. Letter dated 10-06-2006 filed with Labour Welfare Fund ....
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....date of search. No addition can be made to the assessed income other than the income determined on the basis of incriminating documents/evidence found during the course of search. Impugned addition made in the proceedings under section 153A of the Act is without jurisdiction and bad in law. 2. The learned Commissioner of Income-tax (Appeals) erred in upholding the disallowance out of Legal & Professional fees paid to Mr. Shreenijin P.V. amounting to Rs. 9,00,000/- and Ms. Soni K.B. amounting to Rs. 9,00,000/- both aggregating to Rs. 18,00,000/- for the services availed. It is submitted that the expenditure is incurred wholly and exclusively for the purpose of business of the appellant as such no disallowance is called for. 3. The appellant reserves the right to add to, alter or amend the Grounds of appeal. 33. Similarly, in AY 2008-08, assessee has raised the following grounds:- 1. The learned Commissioner of Income-tax (Appeals) erred in upholding the addition of Rs 6,27,385/- on account of Bogus Purchases made in the assessment proceedings under section 153A of the Act. It is submitted that the Appellant had been assessed for the year under consideration and that no pr....
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....THE COMPANIES GROUP 1. Daksh Diamonds Bhanwarlal Jain Group 2. Mohit Enterprises 3. Mukti Exports 4. Nice Diamonds 5. Sun Diam Rajendra Jain Group 6. Aadi Impex 7. Vitraag Jewels 8. AVI exports 9. Moulimani Impex Pvt. Ltd. 10. Nayan Gems Sanjay Choudhary Group 11. Kangan Jewels Pvt. Ltd. Dharmichand Group 36. However, the AO has given the same reasoning that these parties have not responded the notice issued u/s 133(6). The fact of the matter is that no addition has been made in respect of parties to whom notices u/s 133(6) had been issued by the AO and here in this case, the addition has been made with respect of the following parties for which assessee had given the following details with reference to documents appearing in paper book:- Assessment Year 2007-08:- Name of party Purchase invoice Bank statement Stock records Sales invoices Moulimani Impex Pvt. Ltd. 133 to 134 135 161 to 291 292 to 341 Nayan Gems 128 to 131 127 Nice Diamonds 138 to 154 155 to 160 Vitrag Jewels 46 to 103 104 to 125 Assessment Year 2008-09:- Name of party Purchase Invoice Bank Statement Stock records Sales....
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....s paid. The year wise break-up of the payment are as follows:- AY 2007-08 2008-09 2009-10 2010-11 Total Amount (in Rs.) 18,00,000/- 24,00,000/- 24,00,000/- 6,00,000/- 72,00,000 42. AO has also referred the statement of Shri Russell Mehta, Director of the assessee company recorded u/s 131 wherein he has stated that the said advocates has not provided any legal services to the company, accordingly he made addition for sum aggregating Rs. 18 lakhs claimed in the profit and loss account. The said addition has also been confirmed by Ld. CIT(A). 43. Ld. Counsel for the assessee submitted that assessee had entered into a retainership agreement for rendering services including drafting agreements/conveyance including verification of title, attending to customs, excise and service tax, IPR, VAT, profession tax, CST, Octroi and other related matters in the state of Kerala, Tamil Nadu, Karnataka and Andhra Pradesh. The Assessee had entered into the said arrangement as it intended to extend the scope of its business to those regions. However, unfortunately, its endeavour was not successful and hence, no substantial services have been rendered by them. However, since the....
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....es paid to Mr. Shreenijin P. V. amounting to Rs. 12,00,000/- and Ms. Soni K. B. amounting to Rs. 12,00,000/- both aggregating to Rs. 24,00,000/- for the service availed. Apart from this, assessee has raised following additional grounds:- The learned Commissioner of Income-tax (Appeals) erred in upholding that the purchases from (i) Nay an Gems (ii) Aadi Impex (iii) Sun Diam are 'accommodation entries.' It is submitted that appellant had purchased diamonds from these parties in normal course of business and the goods purchased were duly sold by the appellant. It is further submitted that the appellant had furnished full and complete details of purchases from these parties and there is no reason for the learned Commissioner of Income-tax (Appeals) to uphold that these are accommodation entries. Without Prejudice to the above it is submitted that the learned Commissioner of Income-tax (Appeals) erred in enhancing of income by Rs. 5,79,084/- being 5% of amount of Purchases aggregating to Rs. 1,15,81,684/- treating these as accommodation entries. 49. In so far as issue raised in additional grounds, we find that they are exactly on similar lines and reasoning given by the ....