Itxa/1135/2017 Of Pr Commissioner Of Income Tax Central-4 v. M/S. Shine Star Impex Pvt Ltd

Priya Soparkar 1 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (IT) NO.937 OF 2017WITHINCOME TAX APPEAL (IT) NO.1121 OF 2017ANDINCOME TAX APPEAL (IT) NO.1135 OF 2017 Pr.Commissioner of Income Tax, Central-4. … AppellantV/s. M/s Sunshine Import and Export Pvt. Ltd. … Respondent--- Mr.Sham Walve with Mr.Pritish Chatterji, Advocate for theAppellant.Ms.Aasifa Khan, Advocate for the Respondent. --- CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. DATE : MARCH 4, 2020 P.C.:- 1.This order will dispose of Income Tax Appeal Nos.937,1121 and 1135 of 2017. 2.We have heard Mr.Sham Walve, learned standingcounsel, Revenue for the appellant; and Ms.Aasifa Khan,learned counsel for the respondent-assessee. 3.This appeal under Section 260A of the Income Tax Act,1961 (briefly “the Act” hereinafter) has been preferred by theRevenue assailing the order dated 9[th] September, 2016 Priya Soparkar 2 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o passed by the Income Tax Appellate Tribunal, “B” Bench,Mumbai ("the Tribunal” for short) in Income Tax AppealNo.4347/Mum/2015 for the assessment year 2008-09. 4. Be it stated that Income Tax Appeal No.937 of 2017pertains to assessment year 2009-10, whereas Income TaxAppeal Nos.1121 and 1135 of 2017 pertains to assessmentyear 2008-09. All the appeals were disposed of by theTribunal vide the common order dated 9[th] September, 2016. 5.On the request of Mr. Walve, Income Tax Appeal No.937 of 2017 is taken up as the lead appeal. 6.This appeal has been preferred by the Revenueprojecting the following questions as substantial questions oflaw:- “(i) Whether on the facts and in thecircumstances of the case and in law, the Tribunalerred in holding that on the basis of thestatement of the director Shri Saurabh N. Gargalone, the AO cannot come to the conclusionthat the assessee has issued accommodationbills and reject the books of account of theassessee? (ii)Whether on the facts and in thecircumstances of the case and in law, the Tribunalhad failed to appreciate that the evidentiaryvalue of the statement given by a director of theassessee company could not be disputed and theassessment order was passed by the AssessingOfficer on the basis of various circumstantialevidence which has been brought out in theassessment order and the Tribunal ought to haveconsidered such circumstantial evidence whilemaking its decision? Priya Soparkar 3 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o (iii) Whether on the facts and in thecircumstances of the case and in law, the order ofthe Tribunal is perverse in the sense that theconclusion does not follow the facts found andthus, gives rise to a question of law?(iv) Whether on the facts and in thecircumstances of the case and in law, the Tribunalfailed to appreciate the evidentiary value of thestatement given by a director of the companyand circumstantial evidence brought out in theassessment order while holding that the interestincome is assessed as business income ignoringthe fact that the said business is only of givingaccommodation entries?” 7.Respondent is an assessee under the Act engaged inthe business of manufacturing and trading in precious andsemi-precious stones and jewellery in the name and style ofM/s Sunshine Import and Export Private Limited. Assessee isa company having two Directors-Shri Paras Jain and ShriSaurabh Garg. 7.Respondent is an assessee under the Act engaged inthe business of manufacturing and trading in precious andsemi-precious stones and jewellery in the name and style ofM/s Sunshine Import and Export Private Limited. Assessee isa company having two Directors-Shri Paras Jain and ShriSaurabh Garg. 8.A survey under Section 133A of the Act was carriedout in respect of the respondent/assessee. During the postsurvey proceedings, statement of one of the Directors i.e.Shri Saurabh Garg was recorded. In one of his statements hewas reported to have stated that respondent provided onlybill entries and there was no actual transaction of purchaseand sale. Subsequently, statement of the other Director-ShriParas Jain was also recorded. From the statement of ShriParas Jain Assessing Officer came to the conclusion that hewas a person of no means and drew the inference thatrespondent/assessee was engaged in the activity of issuingaccommodation bills for purchase and sale of diamonds Priya Soparkar 4 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-ocoupled with acting as a dummy for importer. Holding thetransactions as not reliable, Assessing Officer rejected thebooks of account of the respondent. By the assessment orderdated 6[th] March, 2013 the Assessing Officer assessed 2% asthe rate of commission of the respondent/assessee onaccount of import purchases i.e. for acting as a dummy. Thatapart, commission @ 0.75% on sales bills was assessed. 9.Aggrieved by the aforesaid order passed by theAssessing Officer, respondent preferred appeal before theCommissioner of Income Tax (Appeals)-49, Mumbai, alsoreferred to first appellate authority hereinafter. By theappellate order dated 29[th] May, 2015, the first appellateauthority confirmed the action of the Assessing Officer. 10.Continuing to be aggrieved, respondent preferredfurther appeal before the Tribunal. Similar appeals werepreferred for the other assessment years. By the commonorder dated 9[th] September, 2016, the Tribunal returned thefinding that assessee was not engaged in issuing theaccommodation bills and acting as a dummy for importingdiamond bills. Therefore, Assessing Officer was directed todelete the income as estimated by him and to accept thebook results declared by the assessee. 11.Aggrieved, Revenue is in an appeal before us raising theabove questions for consideration. Priya Soparkar 5 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o12.Submissions made by learned counsel for the partieshave been considered. 13.At the outset, we may reproduce relevant portion of theorder passed by the Tribunal which is as under:- 11.Aggrieved, Revenue is in an appeal before us raising theabove questions for consideration. Priya Soparkar 5 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o12.Submissions made by learned counsel for the partieshave been considered. 13.At the outset, we may reproduce relevant portion of theorder passed by the Tribunal which is as under:- “13. Further from the record we found that theassessee is mainly engaged in the imports ofdiamonds and sales in local markets to exporterswho export the goods. The import of diamonds isdone through customs authorities and bankingchannel in India. The import of diamondsundergoes appraisal process by the appraisersappointed by the custom authorities. The officersappointed by Government of India verifyphysically each and every parcel of diamonds inorder to ascertain the quality, quantity, rate,value and place of origin vis a vis declared by theimporters. Further all the transaction of purchase,sales import is made through cross accountpayee cheques and not a single payment madeto any party by way of cash. All the purchase andsales transactions are carried out with reputedparties of the diamond trade and all the paymentreceived from debtors are through cross accountpayee cheques and all payment made tocreditors are through cross account payeecheques. The Ld. AO cannot allegedly considertheimportsofgoodsasprovidingaccommodation bill in the market when physicaldelivery of goods were confirmed by the otherarm of government authorities I.e customauthorities. From the record we found that thesales were made to reputed exporters who areassessed to tax and their identities are known toincome tax department. The customers areregistered under state VAT laws. The companyhas received payments against sales proceedsby account payee cheques. The company hasalso purchased from local parties to whompayment were made by account payee cheques. Priya Soparkar 6 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o From the record we also found that to dischargethe onus of proving transaction as genuine andto substantiate that all purchases and salesmade are genuine the assessee have submittedfollowing documents and submissions on time totime which was ignored by A.O. while makingthe reassessment: a.Copies of bank statement for therelevant year.b.Ledger copies of variouspurchases parties for A.Y. 2008-09and 2009-10. c.The Xerox copies of purchasesinvoices of parties for A.Y. 2008-09and 2009-10. d.The relevant copies of thedaily stock Register. e.Confirmation from various saleparties. f.Details of interest receivedfrom various parties.g.Details of unsecured loanalongwith confirmation. These documents prove that the assessee isnot engaged in issuing accommodation bills andacting as a dummy for importing diamondsbills. Thus, the contention of the ld. AO that thebills issued by the assessee are allaccommodation bill is wrong. Just on the basis ofthe statement recorded he cannot come to theconclusion that the assessee has issuedaccommodation bills and reject the books ofaccount of the assessee.” 14.From the above, it is evident that on verification ofdocuments and other materials on record Tribunal wassatisfied that the respondent was mainly engaged in theimport of diamonds and sales in local markets to exporterswho export the goods. Import of diamonds by the respondent These documents prove that the assessee isnot engaged in issuing accommodation bills andacting as a dummy for importing diamondsbills. Thus, the contention of the ld. AO that thebills issued by the assessee are allaccommodation bill is wrong. Just on the basis ofthe statement recorded he cannot come to theconclusion that the assessee has issuedaccommodation bills and reject the books ofaccount of the assessee.” 14.From the above, it is evident that on verification ofdocuments and other materials on record Tribunal wassatisfied that the respondent was mainly engaged in theimport of diamonds and sales in local markets to exporterswho export the goods. Import of diamonds by the respondent Priya Soparkar 7 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-owas done through custom authorities and through regularbanking channels in India. The procedure governing tradingin diamonds was discussed. It was also noted that all thetransactions relating to purchase and sales were madethrough account payee cheques and that there was not asingle transaction by way of cash. Parties to the transactionwere reputed in the trade; sales were made to reputedexporters who were assessed to tax and their identities wereknown to the Income Tax Department besides they wereregistered under the state tax laws. Thus, Tribunal notedthat assessee had discharged the onus of proving thetransactions as genuine by furnishing relevant documents,such as, copies of bank statements, ledger copies of variouspurchases, xerox copies of purchase invoices, relevantcopies of daily stock register, confirmation letters etc. Onsuch basis Tribunal recorded a clear finding of fact thatassessee was not engaged in issuing accommodation billsand acting as a dummy for importing diamond bills. Inarriving at such finding Tribunal noted that the survey partydid not find any incriminating evidence and material thatcould establish the stand taken by the Assessing Officer.There was no dispute to the fact that no incriminatingevidence was found on the day of the survey. It was alsonoted that merely on the basis of statement of one of thedirectors i.e. Shri Saurabh Garg that too recorded after 20-25 days of the survey could not be a basis for bringing intoassessment and making any addition to the income withoutfurther supporting or corroborative evidence. Statementrecorded under Section 133A of the Act not being recorded on Priya Soparkar 8 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-ooath cannot have any evidentiary value and no additioncan be made on the basis of such statement. 15.In 300 ITR 157 (CIT Vs. S. Khader Khan Son), theMadras High Court surveyed the law relating to statementrecorded under Section 133A of the Act and culled out thefollowing legal principles :- “7. From the foregoing discussion, thefollowing principles can be culled out:- (i) An admission is extremely an importantpiece of evidence but it cannot be said that itis conclusive and it is open to the person whomade the admission to show that it is incorrectand that the assessee should be given aproper opportunity to show that the books ofaccounts do not correctly disclose the correctstate of facts, vide decision of the Apex CourtinPullangode Rubber Produce Co. Ltd. v. Stateof Kerala[(1973) 91 I.T.R. 18]; 15.In 300 ITR 157 (CIT Vs. S. Khader Khan Son), theMadras High Court surveyed the law relating to statementrecorded under Section 133A of the Act and culled out thefollowing legal principles :- “7. From the foregoing discussion, thefollowing principles can be culled out:- (i) An admission is extremely an importantpiece of evidence but it cannot be said that itis conclusive and it is open to the person whomade the admission to show that it is incorrectand that the assessee should be given aproper opportunity to show that the books ofaccounts do not correctly disclose the correctstate of facts, vide decision of the Apex CourtinPullangode Rubber Produce Co. Ltd. v. Stateof Kerala[(1973) 91 I.T.R. 18]; (ii) In contradistinction to the power undersection 133A, section 132(4)of the Income-taxAct enables the authorised officer to examinea person on oath and any statement made bysuch person during such examination can alsobe used in evidence under the Income-tax Act.On the other hand, whatever statement isrecorded under section 133Aof the Income-tax Act it is not given any evidentiary valueobviously for the reason that the officer is notauthorised to administer oath and to take anysworn statement which alone has evidentiaryvalue as contemplated under law, vide Paul-Mathews and Sons v. Commissioner of Incometax[(2003) 263 I.T.R. 101]; (iii) The expression "such other materials orinformation as are available with the AssessingOfficer" contained in Section 158BBof theIncome-tax Act, 1961, would include thematerials gathered during the survey Priya Soparkar 9 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o operation underSection 133A, vide-Commissioner of Incometax v. G.K.Senniappan[(2006) 284 I.T.R. 220]; (iv) The material or infomration found in thecourse of survey proceeding could not be abasis for making any addition in the blockassessment, vide decision of this Court in T.C.(A) No.2620 of 2006 (between Commissioner-of Incometax v. S.Ajit Kumar); (v) Finally, the word "may" used in Section133A(3)(iii) of the Act, viz., "record thestatement of any person which may be usefulfor, or relevant to, any proceeding under thisAct, as already extracted above, makes it clearthat the materials collected and the statementrecorded during the survey under Section133Aare not conclusive piece of evidence byitself.” 16.Thus, Madras High Court concluded that statementrecorded under Section 133A of the Act is not given anyevidentiary value and that materials or information found inthe course of survey proceedings could not be a basis formaking any addition; besides materials collected andstatement obtained under Section 133A would notautomatically bind upon the assessee. 17. The above decision of the Madras High Court has beenaffirmed by the Supreme Court by dismissing the civil appealof the Revenue in 352 ITR 480,CIT Vs.S. Khader Khan Son. 18.In view of the discussions made above, we see noreason to interfere with the order passed by the Tribunal.Consequently, the appeal fails and is accordingly dismissed.No cost. Priya Soparkar 10 5 to 5-2 itxa 937-17, 1121-17 and 1135-17-o 19.In view of the above order, Income Tax Appeal Nos.1121and 1135 of 2017 are also dismissed. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) ….