Commissioner Of Income Tax Circle-5 v. M/S. Antrix Diamond Exports Pvt. Ltd

ASN IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.5776 OF 2010WITHINCOME TAX APPEAL NO.5973 OF 2010 Commissioner of Income Tax Circle-5. v. M/s. Antrix Diamond Exports Pvt. Ltd. ..Appellant. ..Respondent. Mr. Abhay Ahuja for the Appellant.Mr. J. D. Mistri, Sr. Advocate with Ms. Aasifa Khan for the Respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATE : 15TH JANUARY, 2013 PC: In these two appeals filed by the revenue for assessment years 20001-02 and 2004-05 the following re-framed question of law has been raised for consideration by this Court. Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in upholding the decision of the CIT(A) only on the basis of confirmations sent by the parties and that the GP rate declared was comparable to the earlier year even though the parties were not found at the addresses nor produced by the assessee nor any convincing proof was given as to the genuineness of the transaction and that the parties were into Hawala as was held by CIT(A) Surat? 2)The respondent assessee is engaged in the business of manufacture and export of cut and polished diamonds. In its return, the respondent assessee had claimed expenses on account of labour charges paid to various parties for cutting of diamonds. The return of income as filed by the assessee was accepted under Section 143(1) of the Income Tax Act, 1961.Thereafter, the Assessing officer received information from the Income Tax Officer at Surat that the labour charges paid by the assessee to one Hasmukh Mehta Proprietor of M/s. Hardik Gems and to Shri. Haasmukh K. Mehta HUF Prop. of M/s. Sheetal Manufacturing were not genuine as the above two concerns were held to be involved in Hawala business during their assessment proceeding at Surat. On the basis of the above information the revenue reopened the assessment for assessment year 2001-02 and also sought to complete the proceedings for assessment year 2004-05 under section 143(3) of the Act, by making disallowances in that behalf. 3) In appeal, CIT (A) held that the respondent assessee was maintaining accounts which were duly audited and nothing adverse was found otherwise in the record of the respondent assessee. Similarly, the ratio of expenditure to income in the earlier year was not found to be so different/varied as to give rise to suspicion that the expenses claimed were bogus. Therefore, the CIT(A) held that making of dis-allowance simply on the basis of the order in case of a third party was not justified. The CIT(A) in his order placed reliance upon the statement of Hasmukh Mehta the Proprietor of the firms (one is an individual and the other as karta of HUF) was not confessional statement and on the contrary in the statement he did maintain that the transactions were genuine. In the circumstances the CIT(A) concluded that it could not be said that the expenses claimed by the respondent assessee are not genuine. Further, CIT(A) also states that the mismanagement of the third party in non maintenance of proper account could not lead to a conclusion, in the absence of any other evidence, that transaction entered into by the respondent assessee was not genuine. In the circumstances, the appeal of the respondent assessee was allowed. circumstances, the appeal of the respondent assessee was allowed. 4)The appellant revenue went in appeal to the Tribunal. The Tribunal by its common order dated 9/11/2009 upheld the order of CIT(A) for assessment year 2001-02 and 2004-05. Mr. Ahuja, the learned Counsel for the revenue states that the payments made by the respondent assessee being tainted with illegality will be hit by explanation to Section 37(1) of the Act. This is particularly so, as the payments made to M/s. Sheetal Manufacturing and M/s. Hardik Gems were held to be entities dealing in Hawala transaction by their Assessing Officer at Surat. The aforesaid finding was also upheld by the CIT(A), Surat. In these circumstances, the disallowance of the expenditure done by the Assessing Officer was in order and the Tribunal ought not to have interfered with the same. 5)We find that the Tribunal while upholding the order of the CIT(A) has recorded the fact that the finding given by CIT(A) that the statement of Mehta was not confessional has not been controverted before it. Further, the respondent assessee has maintained proper books of accounts and its GP ratio is ASN comparable to the earlier years. In any case no attempt was made by the revenue to summon the parties under Section 131 of the Act. In these circumstances, the Tribunal has upheld the order of CIT(A). 6) We note that the order of the Tribunal is based on a finding of fact upholding the findings of fact arrived at by CIT(A) . In view of concurrent findings of fact of the CIT(A) and the Tribunal we see no reason to entertain the proposed question of law. Accordingly, the appeals are dismissed with no order as to costs. (M.S.SANKELCHA, J.) (J.P. DEVADHAR, J.)