2019 (11) TMI 974 - AT - Income Tax

Bogus expenditure - HELD THAT - To accept the claim of the assessee bonafide, the assessee has not furnished any evidence as to which loose diamonds was converted into ornaments. Onus is always on the assessee to prove such claim. If at all to accept the submissions of the assessee as genuine then the onus was again on the assessee to furnish documentary evidences regarding transportation of such loose diamonds from the place of delivery to the business premises of the assessee. In this regard the assessee should have furnished the name and address of the person/employee who transported the loose diamonds, the ledger accounts of expenses incurred towards his/her lodging, boarding and travel from Chennai to the place of delivery and bank. No such details were ever furnished either before the AO or before the CIT(A) or even before the Tribunal. No infirmity in the order passed by the CIT(A) in treating the impugned transaction of purchase of diamonds from M/s. Nazar Impex Pvt. Ltd as only an accommodation entry resorted to by the assessee to reduce its taxable income. Accordingly, the ground raised by the assessee stands dismissed.

Issues:
Disallowance of expenditure as bogus - Assessment year 2012-13.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of a specific amount as bogus expenditure for the assessment year 2012-13. The assessee had admitted total income in the return filed, which was later processed under section 143(1) of the Income Tax Act, 1961. The investigation revealed that the assessee availed accommodation entries in the form of bogus purchases amounting to a significant sum. The investigation further uncovered that the accommodation entries were provided by a specific entity, and it was found that there was no actual physical delivery of the diamonds involved in the transactions. Despite the assessee's claims that the diamonds were converted into ornaments and sold, no concrete evidence was produced to substantiate this. The Commissioner of Income Tax (Appeals) upheld the addition of the amount as bogus expenditure due to the lack of documentary evidence regarding the transportation of the diamonds from the place of delivery to the business premises. The Tribunal proceeded with the appeal in the absence of the assessee and after hearing the Departmental Representative.

The Tribunal noted that the assessee was engaged in the business of manufacturing and trading in diamond and gold jewelry. It was observed that the accommodation entries were discovered during searches and surveys conducted in related cases. The director of the entity providing the accommodation entries confirmed that the transactions were only on paper, indicating a lack of actual physical transactions. The assessee contended that the diamonds were purchased and converted into ornaments, which were then sold during the relevant year. However, the Commissioner of Income Tax (Appeals) found the claim unsubstantiated, emphasizing that in accommodation transactions, efforts are made to give them a semblance of genuineness. The failure to provide evidence regarding the conversion of loose diamonds into ornaments and the lack of details about the transportation of the diamonds led to the dismissal of the assessee's claim. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to treat the transaction as an accommodation entry aimed at reducing taxable income, resulting in the dismissal of the appeal filed by the assessee.

In conclusion, the Tribunal dismissed the appeal, affirming the decision to treat the transaction as a bogus expenditure. The lack of concrete evidence regarding the transportation and conversion of diamonds, coupled with the nature of accommodation transactions, led to the rejection of the assessee's claims. The order was pronounced on the 19th of July, 2019 in Chennai.

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