×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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These are two appeals f led by the assessee against the respective orders of ld. CIT(A)-1, Jaipur dated 18.12.2018 for Assessment Years 2009-10 & 2014-15 respectively. Since the common issues are involved, both these appeals were heard together and are being disposed off by this consolidated order.
2. In ITA No. 190/JP/19, the assessee has taken the following grounds of appeal:
“1. Ld. CIT(A) has erred on facts and in law in upholding the validity of the order passed u/s 147 of I.T. Act, 1961.
2. The Ld. CIT(A) has erred on facts and in law in upholding the rejection of books of accounts u/s 145(3) of IT. Act, 1961.
3. The Ld. CIT(A) has erred on facts and in law in upholding the action of AO in treating the purchases of Rs. 11,22,000/- made from M/s Karishma Diamonds Pvt. Ltd. as bogus by not considering the various evidences filed by the assessee. He has further erred in confirming the addition of Rs. 2,80,500/- by disallowing 25% of alleged unverifiable purchases of Rs. 11,22,000/- u/s 69C of IT. Act, 1961.
4. The Ld. CIT(A) has erred on facts and in law inconfirming the addition of Rs. 22,440/- being 2% of Rs. 11,22,000/- on account of alleged commission paid for obtaining the accommodation entry.
5. The Ld. CIT(A) has erred on facts and in law in not accepting the contention of assessee to recomputed the deduction u/s 10AA after considering the trading addition of Rs. 2,80,500/- ignoring the CBDT Circular No. 37/2016 dated 02.11.2016.”
3. Briefly stated, the facts of the case are that the assessee firm is engaged in the business of manufacturing and export of gold, silver and base material jewellery plain & studded with precious & semi precious stones. It has set up its manufacturing and export unit/factory in Special Economic Zone at Sitapura Industrial Area, Jaipur and has started commercial production from 21.04.2008 and has claimed deduction u/s 10AA of the Act The assessee originally filed its return of income on 23.09.2009 at Nil income after claiming deduction u/s 10AA at Rs. 2,42,21,021/-. The assessment was completed u/s 143(3) on 07.12.2011 wherein the returned income was accepted by the Assessing Officer. Subsequently, basis the information obtained from Investigation wing, Mumbai that the assessee has obtained bogus entries in the form of bogus purchases amounting to Rs. 11,22,000/- from M/s Karishma Diamonds Pvt. Ltd., notice u/s 148 was issued on 30.03.2016. In response to such notice, the assessee filed its return of income on 15.04.2016 declaring the income at Nil after claiming deduction u/s 10AA at Rs. 2,42,21,021/-. The reassessment order u/s 143(3) read with 147 was passed by the Assessing Officer on 08.11.2016 wherein the assessee was found eligible for deduction u/s 10AA to the extent of Rs. 2,42,21,021/- as originally assessed u/s 143(3) of the Act. However, books of accounts were rejected u/s 145(3) and a sum of Rs. 2,80,500/- was added back to the total income of the assessee, being unexplained expenditure u/s 69C of the Act for the reason that the assessee was found indulging in obtaining accommodation entry of purchase of goods from bogus concern which was operated by Shri Gautam Jain without any physical deliveries and such purchases amounting to Rs 11,22,000 were treated as non genuine and 25% of such purchases were brought to tax as unexplained expenditure u/s 69C of the Act. Further, an amount of Rs. 22,440/- on account of commission paid for obtaining the accommodation entry was also brought to tax in the hands of the assessee. On appeal, the said findings have been sustained by the ld. CIT(A) and against the said finding, the assessee is now in appeal before us.
4. In Ground No. 5, the assessee has contested the findings of the ld. CIT(A) wherein he has not accepted the contention of the assessee to recompute the deduction u/s 10AA after considering the trading addition of Rs. 2,80,500/- ignoring the CBDT Circular No. 37/2016 dated 02.11.2016. The relevant findings of the ld. CIT(A) which are under challenge before us read as under:-
(i) The AO disallowed the amount on account of bogus purchase u/s 69C of the Act, the appellant contended that the section 69C is not applicable as it has provided all the information explanations details and supported documents to the ld. AO. As discussed in the preceding paragraphs, the appellant was found to obtain accommodation entries to inflate the purchase. The action of the AO was based on information collected and follow up actions taken. The details/ submissions regarding accounting of purchase etc. did not find support in view of investigation mace in this respect. The appellant relied upon number of cases but they are not directly linked to the case and are distinguishable on facts of the case. Considering this, it is held that the AO was justified in making addition u/s 69C of the Act.